CBC Cuts: Does Mother Know How to Budget? (Part 2)

The CBC has been through a tumultuous period but it is only going to get more challenging.  The CRTC financial data on the state of CBC indicate that CBC’s planning and basic budgeting tools are not up to the task of the changes and priorities CBC must choose from as it enters a period of reduced government funding.  Part 2 analyzes CRTC financial data relating to CBC staff levels and advertising revenues.  The data reveal that CBC French TV accounts for an inordinate number of staff and that despite reductions in government funding CBC staff levels are the same as in the late 1990's.  The data also show that CBC TV ad revenues haven't increased in a decade and a half, lagging the rest of the conventional, over-the-air TV industry.

CBC Staff Numbers

·  according to CRTC financial data, there were just under 9,600 full time employees at CBC for the year ending August 31, 2010, excluding staff working in unlicenced activities such as cbc.ca; CRTC data show in the years 2006 to 2008 total CBC staff was just over 10,000 people, meaning that there has been only a small reduction in CBC staff in recent years, despite the financial crisis in 2008-09.  Preliminary data for the year ending August 31, 2011 show that the staff count was unchanged from the previous year.  CBC claims that its resources have dwindled under both Liberal and Conservative governments, yet CRTC data show that the CBC has basically the same number of staff as it had in 1999. The average annual CBC salary in 2010 was just over $87,000, about $9,000 more than in the 2006-08 period

·        the CBC, like any bureaucracy, can be an unmanageable hydra. CBC has announced layoffs in the past two years, yet the numbers do not reflect much of a net loss in staff positions.  Without proper management systems the president and the Board can authorize staff cuts one month but have little control over hiring in the following months. An example of the left hand not knowing what the right hand is doing: in 2007, the CBC’s VP of human resources contradicted the CRTC data and publicly claimed that his “records” showed there were some 2,000 fewer CBC staff than the Corporation reported to the CRTC. When CMRI shared some of these 2010 staff numbers with a CBC vice-president he expressed surprise because he couldn’t “match the numbers...with the reality that I observe…day-to-day,”  meaning that while many people have been laid off or left CBC in the past year, they seem to have been soon replaced, perhaps at lower starting salary

·        one anomaly in the salary data: while CBC TV (-11%) and CBC Radio (-13%) decreased salary expenses in 2010, CBC News Network increased salary expenses by 12%

·        CBC Radio had 2,500 employees in 2010, while all commercial radio stations employed just over 10,000 employees in that same year. In other words, CBC Radio employed roughly 20% of all persons working in Canadian radio.  The number of people employed in private commercial radio has been basically unchanged in the past 5 years (find details on commercial radio at this CRTC link)

·        CBC TV had 6,200 employees in 2010, which represented about 50% of all the persons working in Canadian TV broadcasting.  Commercial TV stations and networks (i.e., CTV, Global, CITY, TVA, V, etc.) had just under 6,300 employees that same year

·        one striking trend in the CRTC data is that commercial TV stations have reduced the number of persons they employ by approximately 2,000 in the past 5 years (find details on commercial TV at this  link to the CRTC data).  That is, private TV, facing a more competitive media landscape and a recession, reduced its staff by about 25%, while CBC seems to have maintained its staff numbers basically at pre-recession levels

·        one critical number not available anywhere publicly is the number of unionized vs. non-unionized (management) staff at CBC.  It is possible that if good management systems were in place, a large number of managers could be cut from the payroll and savings could be re-directed to creative, programming areas

·        another example of how for no apparent reason one area of CBC can swell in size compared to other areas is to be found in the different staff levels of the four major CBC program areas.  CBC English radio had 1,500 staff in 2010, while CBC French radio had 1,000, that is, the French service had roughly two thirds as many people as the English radio service, a ratio that on face value seems reasonable given the services provided by the two radio services across the country.  Yet that same year CBC French TV had more staff (3,200) than CBC English TV (3,100), which appears irrational given the services requirements of the two TV services, not to mention the staff ratio in radio.   In 2010 the CBC French TV service generated about $100 million less in advertising revenue and had a budget almost $200 million dollars less than its English counterpart, yet had more people on staff.  In my 40-year association with CBC I can't recall this discrepancy in staff levels having ever been discussed.  It is one of many indicators that CBC management lacks the necessary controls to manage the organization properly.  These CBC-specific data can be found at the CRTC web site.

Advertising Revenue

·        in 2010 advertising revenue for CBC TV increased by a seemingly robust 14%, above the industry average, with total ad revenue of $367 million.  This was partly accomplished and offset by the $20 million increase in sales and promotion expenses noted earlier.  Note that CBC TV sales and promotion expenses were a far greater proportion of ad revenues than was the case for private TV in 2010

·        advertising revenue for the industry in general rebounded after the recession by almost 10%, meaning CBC ad revenues, all else being equal, would have increased regardless.  The $367 million revenue figure is considerably higher than the ad revenue CBC reported in its 2009-10 annual report and seems an amount larger than can be explained by the different fiscal periods used by the CBC and CRTC reports

·        according to CRTC, ad revenue from the two main CBC TV services was some $338 million in 2010.  CBC has revealed to the CRTC in the past that in the mid-1990’s the two main CBC TV networks generated roughly $350 million in annual ad revenue, meaning that CBC sales has not grown revenues in well over a decade, not even keeping up with inflation. Canadianizing the schedule cannot be blamed because, if anything, there is less Canadian programming on CBC TV today than 15 years ago

·        Private conventional TV, which has been subjected to the same audience fragmentation and other economic pressures in the past decade and a half, has grown ad revenue by almost 30%, an indicator that CBC sales is not tightly managed and perhaps the strongest indicator that CBC management lacks necessary controls over the organization and is ill-equipped to deal with the $115 million-plus budget cut

·        a person knowledgeable about the ad business with whom I consulted believes that advertising “skews their mandate and in any case it costs them more than they make.”  If advertising is to be pursued by CBC TV, which is certainly arguable given past performance and the cost of sales and promotion, then Sales needs to be managed and be a central pre-occupation of senior managers.  The sales function within CBC can be the most perplexing and challenging for senior management.  Often no senior manager at CBC has had any sales or related experience and sales is treated as a difficult, arcane function best left to its own devices.  The head of sales must be involved in key executive meetings and decisions or risk being further isolated. Sales in most companies will go to great lengths to closely guard information that can be used to set their targets and evaluate performance.  Thus, controlling basic data and establishing effective systems to manage Sales should be a priority for senior managers.  The president at the push of a button should be able to monitor revenues on a daily basis and answer any query about which programs are producing revenues and which are not.  For example, how much revenue is generated by sports, especially the NHL?  If Sales cannot be tightly managed internally, then perhaps it should be outsourced, which would be a logical step if CBC were to only carry advertising in sports programming
 ·        the minuscule ad revenues for bold, ARTV and the Documentary Channel should lead CBC management to question why these channels are in the ad business and might be better re-positioned as ad free services. bold and The Documentary channel generated only about $100,000 each in ad revenue in 2010 yet had sales and promotion budgets roughly seven times that amount

·        the ad revenues of CBC News Network and RDI combined, while more substantial than the other specialty channels, accounted for less than 5% of all CBC ad revenues, which again should lead CBC management to question the relative value of this source of revenue in today’s multi-channel universe.  CRTC and subscribers could be convinced that in exchange for ad free news channels, a small increase in subscriber fees would be warranted which could make up for lost ad revenue

·        If advertising sales were a main pre-occupation of senior management, CBC could generate considerably more revenue from the main TV networks and improve CBC’s specialty channels by reducing or eliminating advertising

The CRTC financial data reviewed here are a valuable source of information about the CBC.  These CRTC data shed light on the underlying management processes within the CBC, permit macro-evaluation of management decisions and point to potential new strategies, new revenues and cost savings for CBC TV and radio. That is, analysis of the CRTC data can be used by policy makers and the CBC as a first, rudimentary step toward establishing improved management systems and controls at the CBC.   Such controls are essential if CBC is to deal with its $115 million budget cut.

 

CBC Cuts: Does Mother Know How to Budget? (Part 1)

“It must be remembered that there is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than a new system. For the initiator has the enmity of all who would profit by the preservation of the old institution and merely lukewarm defenders in those who gain by the new ones.”  -Machiavelli

The CBC is a complex organization.  It operates in both official languages on a national, regional and local basis and in several aboriginal languages in the north.  It has both TV and radio networks and stations, numerous audio and video specialty channels, a substantial internet presence, rents or owns dozens of buildings and hundreds of transmitters and equipment.  It has thousands of employees from a wide variety of disciplines.  It is more complex than most other large companies or government departments.  It is without question our most important cultural organization.   

However, CBC, like all public services, is facing budget cuts and the following analysis indicates that the CBC may not have the right management skills or systems for implementing cuts of the magnitude announced recently by the federal government. For years CBC has gone along without effective management systems and this could prove disastrous today as the CBC must cut millions of dollars in expenditures and maximize revenues.  Improved management would mean significant savings, along with increased revenues, and go a long way to meeting the Corporation’s need to cut $115 million (plus no inflation funding for salaries and no funds for severance payments) from its budget over the next  three years.

Background: When new employees join CBC it takes a few years to understand where they fit in the vast and byzantine organization.  When a new CBC president is appointed, which tends to happen every five years, it takes the better part of the five years to grasp the scope and complexity of the Corporation.   What most new presidents fail to understand is that the organization is so complex, it is all but impossible to manage, unless state-of-the-art management systems are in place. 

Over the years efforts have been made to implement better ways of managing resources but an organization made up of so many competing interests tends to undermine those efforts, especially when it is known that the president will be replaced in a few years.  One technique that two presidents have used is to put one person in charge of all CBC English and one responsible for all CBC French services.  This can have the effect of favoring one area over another, e.g., TV over radio, and may not solve the basic issue of developing effective management systems and controls. 

This is especially true when the senior people involved have little or no experience working in or managing a large broadcasting organization.   The senior management team of CBC should have a healthy mix of seasoned broadcasters, who have actually made radio/TV programs, and people familiar with the business tools for managing and overseeing the human, technical and financial resources of a large broadcaster. 

Appointing a president every five years, who in reality can be no more than a figurehead, but who has the power to hire or promote inexperienced people into senior roles, has led to a situation where the senior management team may have less actual broadcasting experience today than ever before in CBC’s history.  The Prime Minister has traditionally appointed CBC presidents to a fixed 5-year term but the president is not accountable to the CBC Board of Directors, only to the Prime Minister.  The Prime Minister should appoint the president to a no-fixed term and make the president answerable to the CBC Board.   The president is effectively answerable only to the entity that appoints him or her so the PM should delegate the selection of the President to the Board, or agree to ratify through an OIC the choice of the Board.

Current Situation: Richard Stursberg’s new book about his time at CBC, The Tower of Babble, is rife with factual errors but it does confirm the hodgepodge of management systems and lack of business planning at CBC. 

When management finds an organization difficult to manage, a first response is to issue snap-shot reports on financial and other performance.  Performance reports, however, can just be papering over the fact that there are no real management systems in place.  In addition to the above mentioned reports, CBC issues an annual corporate plan, numerous reports on corporate policies, reports on transparency and accountability, reports on corporate bylaws, reports on official languages, environmental performance reports, reports on Access to Information requests and it just began issuing quarterly reports on revenues, expenses and programming achievements.

Reports from consultants are another technique to try and establish independent “facts.”  In 2011 CBC hired Nordicity to do a report on how Canadians compared to other countries in terms of financing their public broadcaster.  The report supported the idea that CBC is under funded relative to other countries.  Nordicity was also asked in 2011 to write a report defending TV advertising on CBC, using some unconvincing arguments and repeating much of the first report.  Seemingly independent of its work for CBC, Nordicity took the comparative international analysis much further and presented the findings to a U.K. audience last summer.  In this report Canada (CBC) is the worst performing public broadcaster on the basis of audience ratings, an element missing in their reports for CBC.  The entire thrust of the U.K. study seems philosophically at odds with their CBC studies.  All of these reports are available on the CBC’s or Nordicity’s web sites.  Reports can serve many useful purposes, including conveying the impression, especially externally, that management is in control and on top of all issues facing the Corporation.  Reports on performance are a necessary (sometimes even legal) requirement but they are not a replacement for good management systems. 

One small window we have on the CBC labyrinth is the annual financial reports of the CRTC.  For the first time in 2011 the latter contained more complete data on CBC revenue, expenses and staff. It is the only public source for information about the number of staff employed by the CBC. 

CBC’s Finances:  All the reports issued by CBC are woefully lacking information about CBC staff.  The CBC’s annual report and the corporate plan report the number of visible minority staff but do not contain data on staff in total or by medium.  This is unusual since CBC staff account for a majority of CBC expenses, as much as 60% according to CBC president Hubert Lacroix. The CRTC financial reports provide year-over-year comparisons of CBC staff numbers, revenues and expenses, as well as comparisons with private TV and radio.

The CRTC financial reports contain data on all the licenced broadcasting outlets of CBC/Radio Canada, including five specialty channels.  CRTC reports do not contain any information about unlicensed CBC activities, such as cbc.ca or satellite radio channels.  The latter accounted for approximately $100 million in annual expenses and an estimated 500-1,000 additional staff in 2010.  This is basically the difference between the total expenditures shown in the CBC’s April 1- March 31, 2009-10 annual report, and the results in CRTC’s September 1-August 31, 2009-10 financial report. The staff and expenses of CBC Head office may also be excluded from the 2010 CRTC data. The CRTC data we review here deal only with licenced activities of CBC.  It would be beneficial if the CRTC reports were to provide data on cbc.ca and other such services and breakout data on all English and French radio and TV separately. The CRTC financial reports, including a more detailed breakdown of major private station groups and CBC English and French finances can be found here.

The table in part 2 provides a summary of the information contained in CRTC financial reports per the CBC. CMRI has compiled the data from the original CRTC reports. 

Some highlights in the CRTC financial data, comparing 2010 to 2009:

     Revenues and Expenses

·        CBC revenues declined by 2% in 2010 to $1.767 billion; the Parliamentary grant represented $1.14 billion (65%) of total revenues

·        despite the reduction in revenues, total CBC expenditures actually increased very slightly to $1.663 billion in 2010; program expenses increased modestly by 3%

·        but one area, sales and promotion expenses, increased by 15% overall.  Sales and promotion accounted for $136 million in 2010, with increases of 17% at CBC TV and almost 40% at CBC News Network and RDI; an explanation as to why sales and promotion expenses of the CBC’s main TV services increased so markedly seems in order. Combined these increases in TV sales and promotion budgets accounted for roughly $20 million, which seems to have been taken from CBC radio budgets (see below)

·        CBC administration expenses accounted for $210 million in 2010, a decline of 18% from the previous year, led by a 34% reduction in CBC radio administration expenses.  This begs the question as to how this was accomplished in a one year period.  It would be useful if CRTC were to provide more details on this large $200-plus million expense category

·        CBC reduced salary expenses by almost $100 million in 2010 to $837.6 million (-10%), a remarkable achievement for one year and one needing some explanation

·        overall expenses of CBC TV (+3%) increased in 2010, as did the expenses of CBC News Network (+13%), ARTV (+7%), bold (+16%) and the Documentary Channel (+4%). Reseau de l’Information had a modest decline of 3% but CBC radio decreased expenses by 9% or by almost $35 million, meaning that radio services took a major financial hit in 2010 and appear to have been singled out, inadvertently or not, to bear the brunt of CBC cost cutting.  The result was noticeable on air as mid-day local programming was reduced by half and many daytime time slots consisted of repeat programming. 

·        Just weeks ago CBC filed limited 2011 financial data with CRTC and it shows CBC radio suffered an additional $27 million dollar reduction (-10%) in 2011.  Both CBC English and French TV services increased their expenses in 2011, meaning that radio has been sacrificed to fund CBC TV.  Does anyone at CBC other than the VP in charge of the books realize this?

Part 2 reviews 2010-11 staff numbers and advertising revenue....

Who Subscribes to Netflix?

Netflix and Apple TV (second version) launched in Canada in September 2010.  Both services are delivered via the internet, bypassing traditional cable/satellite companies as well as threatening the sale of DVDs.  Together they are in part responsible for the closing of video rental stores in your neighbourhood.   

Apple has been very low key in its marketing of Apple TV and only those who have purchased an iPad have likely ever been approached to mate their iPad with the Apple TV gadget. It is about the size of a hockey puck and provides on demand access to the latest Hollywood movies and TV programs and offers a vast library of older movies, TV shows, podcasts and sports. Apple TV also allows one to wirelessly “throw” music or video from an iPhone, iPod or iPad to your TV and surround sound system, so that one doesn’t have to walk around with ear buds or dock their iPod to a small player with poor sound. The small Apple TV device is remarkably easy to hook up to your TV and has one hidden advantage over cable and satellite: there is no HST on any content you order. 

Netflix on the other hand has been very aggressive and advertised extensively and today about 1 in 12 Canadians report that they are subscribers to Netflix.  Netflix offers on demand access to a large library of older movies and TV shows and some exclusive programming and costs only $8/month.  Various devices allow one to access Netflix, including some Blu-ray players. Ironically, I access Netflix through my Apple TV gadget.

CMRI's Media Trends Survey for the first time this year asked Canadians what they thought of the new ‘channel’, Netflix.  Netflix has found a sweet spot with middle aged adults as shown in the first chart.  The channel also skews toward women.  Who better to target than women aged 35-54 who are too busy at home with the kids and at work to go out to the movies?

What else do we know about Netflix subscribers?  Well, we know they are much more likely to own an HDTV set; over 50% have an HD set, which means they use a lot of bandwidth to watch movies in HD.  They are also much more likely to use Facebook, visit the CBC’s web site and almost three times more likely to order a pay-per-view movie once a month or more from their cable/satellite company.  So, these Netflix subs do not appear to be canceling their cable any time soon. However, they are too busy to use Twitter, being just like the average person when it comes to tweeting.

Netflix subs are also heavily into mobile media.  Almost all have a cell phone and many have smartphones.  The great majority text message and large proportions send photos, surf the net and download music or video with their mobile device, eclipsing the average person in the population on all these measures.

Netflix subs are, naturally, much heavier users of the internet but listen to slightly less radio than average and watch about the same amount of TV. The latter finding runs counter to research sponsored by the CBC.  The CBC research employs an impressive number of respondents and adheres to many good principles of survey research but is it slanted by internal politics?  For example, would CBC’s surveys ask which network is best at various categories of programming and report the results?   You can purchase all the CBC survey results for about $25,000, a bargain given that the CBC pays something like $400-500,000 each year to undertake the surveys.

When we asked Canadians which network had the best movies, Netflix finished second only to TMN/Movie Central among Netflix subs, a notable marketing feat given the limited time the channel has been available to Canadians. Showcase also fared well among Netflix respondents but not a single Netflix sub in our survey said the CBC had the best movies, despite CBC's continued reliance on Hollywood movies in the summer and over the Christmas holidays.

The 2011 survey results are from CMRI's Media Trends Survey conducted November-December 2011 among a representative national sample of approximately 900 Anglophone respondents aged 18-plus.  Margin of error +/-3.3%.  The Media Trends Survey has been conducted for ten consecutive years and has surveyed over 15,000 Canadians in total in this period. It is the only survey to have measured media use and attitudes continuously over this decade. The Media Trends Survey is not sponsored by any one industry or affiliated with a media company.  Therefore, the surveys are scrupulously designed not to bias respondents into favouring one medium or media outlet over another.

CBC's 5% Audience Target

When Richard Stursberg was the head of Telefilm he established an audience target for Telefilm.  Canadian films were to achieve a 5% share of the box office, which they never did during his term (or afterwards).  Telefilm has since adopted other measures to judge its performance. 

When Mr. Stursberg left Telefilm to become head of CBC English TV he once again made audiences a primary goal, as detailed in his book, The Tower of Babble.  Ironically, he achieved his 5% target at the CBC.  The following chart was presented by CBC to Parliament in 2009 and is based on CBC's analysis of its audience in the 2007-08 broadcast year.  By Mr. Stursberg's fourth year at CBC, CBC TV had exactly a 5% audience share.  Inexplicably, Mr. Stursberg claims that he achieved the highest ratings in CBC's history but in truth 5% is probably the lowest audience share in CBC TV's history and perhaps explains why the federal government had few qualms about cutting CBC's budget this year. Mr. Stursberg was fired by the CBC about a year after this information was presented to Parliament.

As CBC grapples with its current budget problems, it should pay more attention to its analysis of the broadcasting environment and recognize and understand the varied options audiences have today.  Programming as if it is still 1970 with a schedule that tries to capture the largest audience share is not a winning strategy. 

(Taken From CBC Submission to Parliament)

Note to readers: the preceding observations on audience are based entirely on CBC's published analysis of its audience performance. 

The CBC, ex-CBC Executives and ‘Factortion’

Moynihan famously said: “Everyone is entitled to his own opinion, but not his own facts.”  Something very unsettling has been happening in society; facts are no longer cold, hard and indisputable.  Instead, they are being distorted and falsified by politicians, businessmen, journalists, economists and even scientists.  To win an argument, gain an advantage or influence policy, people in respected positions throughout society are willing to fabricate data and statistics, contort and distort the facts (factortion), to a degree previous generations of professionals would never have considered.  There are skilled practitioners in factortion on both the left and right of the political spectrum. The world of polling and research has, unfortunately, been on the cutting edge of the phenomenon.

A recent example of distortion of research facts is the claim by the publisher of Richard Stursberg’s new book that “He enjoyed the best radio, television and online ratings in CBC’s history.”  Mr. Stursberg, a former CBC Vice-president, reinforced these supposed facts in the Globe and Mail recently: “Nearly every year since the 1970s, CBC’s television audiences declined.  By 2004, its ratings were the lowest in its history. Almost nobody was watching.…Starting in 2006, the CBC began to re-invent itself...The results were startling.”  He went on to say, “For the last four years, CBC’s overwhelmingly Canadian prime-time schedule has beaten Global’s overwhelmingly American one.” 

For good measure Mr. Stursberg added, “(CBC) Radio is enjoying the highest ratings in its 75-year history.” Another trait of our times is to ignore history: CBC radio once dominated Canadian airwaves, providing an invaluable service to Canada leading up to, during and after the last great war, and as far as we can tell attracted mass audiences in that era.  Mr. Stursberg says he is concerned about the CBC and wants a review of its future role but are his facts and understanding of CBC correct?

Robert Rabinovitch, ex-president of CBC and the man who hired Mr. Stursberg, also wants a review of CBC and weighed in recently with this peculiar comment in the Toronto Star: “Richard is extremely bright…he’s super-intelligent...and he increased audience share dramatically.”  A few days later Mr. Stursberg repeated in the Star that in 2004 CBC TV had its lowest ratings in history.  Toronto Life also regurgitated these claims about audiences in its last issue.

Stop the presses!  Has anyone verified these facts?  Have the publishers and editors asked the CBC for a comment or visited the CBC web site to see if these claims are true? 

The CBC is required to prepare a corporate plan, which is available on its web site.  It is submitted to the government and therefore must adhere to high standards of truthfulness.  The most recent corporate plan contains an analysis that states: “While the shares of other conventional broadcasters in North America have been declining in recent years, CBC Television’s audience share has grown.  In the 2009-2010 broadcast year, CBC Television’s prime time share of 8.7 per cent was its highest in five years.”  Oddly, an accompanying chart compares the share to 8 years previously.  CBC corporate plans and other official documents from recent years show that the share has been steady at about 8-9% but there was a temporary dip 5-6 years ago caused by two factors discussed below.  CBC's quarterly performance report, another report the Corporation is required to file with the government, confirms that in 2011-12 the audience share is in the same range, between  8-9%, all according to CBC's analysis. 

Note that the CBC's analysis in the corporate plan refers to the full 52-week broadcast year.  Another way of distorting audience performance is to cherry pick and only examine certain weeks of the year. The corporate plan is provided to Treasury Board, who provide funds to CBC 52 weeks a year, not selected weeks.

There is nothing wrong with an 8-9% prime time share, maintaining market share today is an accomplishment, but why keep repeating every few years that it is the highest in history or its highest in five years?

Let’s take a look at what the CBC said its TV audience share was just as Mr. Rabinovitch  took the reins at CBC, that is about 10 years ago.  (He hired Mr. Stursberg at the start of 2004.)

  

It’s true that 2004-05, Mr. Stursberg's first year, was a very poor year for CBC TV, according to CBC's analysis shown at bottom.  The following year, 2005-06, wasn’t much better.  Both years the audience share was under 8%.  Why?  Very simply, because in 2004-05 the NHL locked out its players and in August that year Mr. Rabinovitch and Mr. Stursberg locked out their employees.  Since CBC depends heavily on the NHL to maintain its audience share and on its employees in news, public affairs, etc. for much of the remaining audience, only someone very naive or determined to distort the data would compare CBC’s performance to 2004-05.   The CBC's analysis shows that the year before the NHL lockout its audience share was 8.9%, more or less what CBC says it has been in recent years. In 2001-02, early in Mr. Rabinovitch's term as president, the share according to CBC's analysis was 10.0%, higher than the share of any subsequent year.   In other words, it has taken these past few years just to get within hailing distance of the audience levels CBC had at the beginning of the Rabinovitch/Stursberg reign.

In some of those earlier years CBC aired the Olympics, which gave a slight boost to its annual share but CBC lost the Olympic rights to CTV in 2010.  On the other hand, CBC's share is given a mathematical boost by a new audience ratings system, introduced in 2009, which doesn't measure the audience to many U.S. stations, so they can't be counted in share calculations today.

In essence, CBC TV audiences were never at historic highs during or following Mr. Stursberg's era.  According to the analyses CBC submitted to Parliament, CBC had as large or larger prime time audience share in 2001-02 and 2003-04, beating Global in those years with Canadian programs, equaling the results boasted about by Mr. Stursberg.  

Mr. Stursberg never refers to CBC’s 24-hour audience share, which CBC's submissions to Parliament indicate is much lower, in the 5-6% range.  What would it be without hockey and U.S. game shows (which CBC began airing under Mr. Stursberg in 2008)? Think PBS. 

Then, why is it that CBC seems to have more viewers for some individual programs today than a few years ago? Well, and this is a fact that few in the TV industry want to address, it turns out that three years ago, in fall 2009, the definition of who was to be counted as being in the audience was changed dramatically by the ratings system.  The majority of programs on all networks for the past three years have had a much larger audience as a result.  Audience share wasn't much affected because almost every station's audience went up. But audiences really didn't increase, just as the temperature is not affected when one switches from Centigrade to Fahrenheit degrees.

Mr. Rabinovitch and Mr. Stursberg both began their careers as Ottawa bureaucrats and learned, as so many in Ottawa have, that if you repeat something often and loud enough, the press (and their readers) will come to believe that it must be true. 

CBC has just suffered the biggest budget cut in its history.  CBC managers argued their case to maintain its funding but members of Parliament and Ottawa bureaucrats recognize factual contortions and distortions and cut the budget.  They are past masters in the art of distorting the facts and presumably didn't believe, rightly so, what the CBC said about how Canadians use its services.  If  CBC is to right the ship and define its role in the years ahead, former and current CBC management must put an end to statistical factortion and present their strategies to the government based on the real environment the CBC faces.

I agree with Mr. Stursberg that somebody should review the role of the CBC, somebody with a deep understanding of public broadcasting, and who is equipped with clear, unadulterated facts, especially facts about what CBC programs and services Canadians use.

Note to readers: the preceding observations on audience are based entirely on CBC's published analysis of its audience performance. 

Update: Stursberg's program scheduling strategy for prime time, 7-11pm, was  quite simple.  He de-Canadianized the schedule.  In his first year he moved Coronation Street into prime time at 7pm.  In his fourth year he added Jeopardy to the prime time schedule at 7:30pm, meaning that 1 in 4 hours every weeknight was foreign programming that would attract large audiences; in the case of Jeopardy he was able to simulcast against U.S. stations, meaning that much of Jeopardy's audience wasn't actually watching a CBC station and couldn't be a 'lead-in' audience for CBC Canadian shows at 8pm.  In his fifth year he moved Wheel of Fortune to the 7pm time slot, hoping for even bigger audiences.  He aired more Hollywood movies in prime time than ever.  When it came time to reporting performance he would use the 7-11pm share numbers, which included the foreign shows, but say that "real" prime time was 8-11pm, suggesting that it was his Canadian shows that were responsible for his performance.  In his book he erroneously states that 7-11pm was defined as prime time for regulatory purposes but that it isn't real prime time.  The CRTC actually defined 6-midnight as prime time decades ago to allow broadcasters to count news in calculations of Canadian content.  The Commission today refers to 7-11pm as "peak viewing time", the hours when audiences are at their highest levels.  

Cutting the Cord: How Many Canadians are Going to Cancel Rogers?

Netflix and Apple TV launched in Canada in September 2010.  Both services are delivered via the internet, bypassing traditional cable/satellite companies and threatening the sale of DVDs and are largely responsible for the closing of video rental stores in your neighbourhood.   

Apple has been very low key in its marketing of Apple TV while Netflix has been very aggressive and advertised extensively and today about 1 in 12 Canadians report that they are subscribers to Netflix.  Netflix offers on demand access to a large library of older movies and TV shows and some exclusive programming and costs only $8/month.  Some fear that Netflix, Apple TV and other Internet TV services will lead Canadians to cut the cord, cancel their traditional cable/satellite subscription, or at least reduce the number of channels they pay for.

CMRI's Media Trends Survey for the first time this year asked Canadians what they thought of the new ‘channel’, Netflix, which will be the subject of a future post.  We also asked Canadians if they plan on cutting the cord or reducing the channels they receive.

Only about 2% of Canadians say they are very likely to cancel cable/satellite in the next year.  I suspect that had we asked the same question in previous years, i.e., before Internet TV, the results would have been similar.  However, the 7-8% of Canadians who say that are likely to cancel may be higher than before the introduction of alternatives, such as Netflix.  Results are similar for both cable TV and satellite TV subscribers.

Outright cancellation may not be the route most people take if they decide to spend more time and money on Internet TV.  Some may simply cancel some of the channels they currently pay for, such as The Movie Network. 1 in 6 Canadians say that in the next year they will decrease the number of channels they receive via cable/satellite; satellite TV subscribers are more likely to decrease their channels.  A smaller number of cable and satellite subscribers say they will increase the channels they receive, which would offset some of the loses that Rogers, Bell and others would lose to the internet.

What do we know about potential cord cutters, other than their conventional demographic features?  First, we know that cord cutters watch somewhat less TV than the general population, which no doubt is related to decisions about cable/satellite subscription.  Surprisingly, potential cutters tend to use the internet no more or less than others.  They do, however, listen to less radio.

When it comes to Internet TV, potential cutters are more likely to subscribe to Netflix and far more likely to download video from the internet.  Not shown in the chart is that those who are considering reducing channels are twice as likely to be Netflix subscribers.

Clearly, the primary motivation for cutting the cord is dissatisfaction with TV generally and with cable TV and satellite TV in particular. 4 in 10 of those who are very likely/likely to cancel their subscription in the next year are dissatisfied with TV and roughly the same numbers are dissatisfied with cable TV. Over 1 in 2 of those planning to cancel are dissatisfied with satellite TV.  Bell, Shaw and the CRTC should make a note.

If Rogers, Shaw or Bell would like to know the intentions of their subscribers to cancel or reduce service, please contact CMRI.

In the meantime, please enjoy this attempt to get you to cancel cable:

The 2011 survey results are from CMRI's Media Trends Survey conducted November-December 2011 among a representative national sample of approximately 900 Anglophone respondents aged 18-plus.  Margin of error +/-3.3%.  The Media Trends Survey has been conducted for ten consecutive years and has surveyed over 15,000 Canadians in total in this period. It is the only survey to have measured media use and attitudes continuously over this decade. The Media Trends Survey is not sponsored by any one industry or affiliated with a media company.  Therefore, the surveys are scrupulously designed not to bias respondents into favouring one medium or media outlet over another.

CBC Radio Already Cut 20%

A little known fact: about 4 years ago CRTC implemented a new policy that required all broadcasters, including CBC, to submit annual financial reports on their individual networks.  The intention was to get more information into the hands of the public and it worked, although searching the Commission's web site requires IT training. 

The CRTC financial reports are useful for understanding the revenues, expenses and staffing of CBC and other broadcasters.  All the reports issued by CBC are woefully lacking information about CBC staff.  The CBC’s annual report and the corporate plan report the number of visible minority staff but do not contain data on staff in total or by medium.  This is unusual since CBC staff account for a majority of CBC expenses, as much as 60% according to CBC president Hubert Lacroix.  The CRTC financial reports provide year-over-year comparisons of CBC staff numbers, revenues and expenses, as well as comparisons within industry sectors.

The CRTC financial reports contain data on all the licenced broadcasting outlets of CBC/Radio Canada. No where can one find the total staff numbers and a breakdown of CBC expenditures as a whole, which is extraordinary for a publicly owned company.  CRTC reports do not contain any information about unlicensed CBC activities, such as cbc.ca, satellite radio or internet music channels.  The latter probably accounted for approximately $100 million in annual expenses and an estimated 500-1,000 additional staff in 2010-11.  This is basically the difference between the total expenditures shown in the CBC’s April 1- March 31, 2010-11 annual report, and the results in CRTC’s financial reports. Clearly, it would be beneficial if CBC or CRTC reports were to provide data on cbc.ca and other such services.

One series of reports issued by the Commission contains a breakdown of CBC English and French radio and TV finances and the trends in the past 3 years reveal much about decisions that CBC management and the Board of Directors have made.

In chart form here are some CBC English highlights in the CRTC financial data 2009-2011:

-CBC English radio has had its expenditures cut by some $45 million between 2008 and 2011, which is a 20% cut; CBC English TV expenditures were basically unchanged in this period.  CBC French results are similar

 -non-staff expenditures have been reduced by almost 40% at CBC radio, whereas there has been little change at CBC TV; cuts in administration (see discussion below) account for most of the reductions. As a result staff in 2011 accounted for 74% of CBC radio expenditures

-CBC TV increased its expenses on sales (and promotion) by some $15 million to $80 million in 2011.  Could this $80 million be saved if CBC TV only carried advertising in programs specifically designed for advertising, such as NHL hockey, which don't require sales promotion?

-Both CBC English radio and TV have drastically cut administration expenses.  Radio has cut admin by 61% and TV by 37%.  Only my dyslexic accountant, who worked for Enron, would believe that you could cut admin expenses to this degree in such short order.  I would suspect him of shifting admin expenses into other categories; CBC management should offer an explanation to the CRTC and the public when it files its financial data, so that the data can fully be understood 

CRTC financial reports reflect the 'official' position of the CBC's financial state.  If the CBC data provided to CRTC are correct and not some illusion that has not been properly explained by the Corporation, then here is my take on what has occurred over the past three years:  the programming changes that have occurred in CBC radio, including the transformation of Radio 2 from a classical music format to an eclectic mixture of music (which seems to have failed to meet Hubert Lacroix's objectives), the 50% reduction in midday local programming, the numerous same week repeats of network programs, the cancellations of talent contracts for theatre critics, etc., the long periods in summer when regular programs consist of nothing but repeats, the subtle reductions in the depth of radio news and reporting have presumably all been done for one over-riding reason: to save money, money which is being used to support the CBC's television service.  Contracts for NHL hockey and U.S. game shows can't be re-negotiated mid-stream, so money has to come from somewhere to pay for them.

Postscript: Forensic accounting on the difficult to navigate web site of the CRTC is not the way the public should learn about the way the CBC is spending its resources. CBC management and its Board should provide detailed financial data in CBC's annual and quarterly reports and fully explain the fiscal strategies being followed and their effects on CBC services.