SPEAKING NOTES FOR
GLENN O'FARRELL
PRESIDENT AND CEO
CANADIAN ASSOCIATION OF BROADCASTERS
ADDRESS BEFORE
THE BOARD OF TRADE
OF METROPOLITAN MONTRÉAL
November 27, 2003
Check against delivery
Mr. President and CEO of the Board of Trade of Metropolitan Montréal,
Distinguished head table guests,
Ladies and gentlemen,
I would like to extend my warm thanks to the Board of Trade of Metropolitan Montréal for this prestigious forum giving me the opportunity of addressing an audience of select business people. Your presence this morning speaks volumes about your interest in our industry.
First of all please allow me to give you a brief overview of the Canadian Association of Broadcasters, which I have had the privilege of heading for two years, and to tell you a few things about our industry.
Founded in 1926, the Canadian Association of Broadcasters is the national voice of Canada's private broadcasters. We represent the vast majority of Canadian programming services, including private radio and television stations, networks, and speciality, pay and pay-for-view services.
Our Association has 106 members in Québec out of a total of 583 members throughout Canada.
Private broadcasting plays a major role in this country's economic prosperity in its annual investment of one billion dollars in Canadian programs, thereby generating over 40 000 direct and indirect jobs.
Throughout the country, Canadians can rely on broadcasters who are passionate about their community and dedicated to producing Canadian programs. The broadcasters are proud contributors to the promotion of Canadian and Québec culture, whether in sports, culture, information or other areas.
Through such very popular shows as Star Académie, Phénomia, Flash and Canadian Idol, as well as newscasts, local broadcasts and shows focussing on Canadian affairs, we are forging a Canadian identity in the broadcasting sector, making voices heard and respecting the choice of Canadians.
History clearly demonstrates the willingness of private Canadian broadcasters to make the necessary investments, adapt to new circumstances and challenges, and take the initiative in building our broadcasting system. Our will to succeed has not diminished.
In this period of transition toward a new government in Ottawa, we must convince elected officials and decision makers to recognize our challenges. We must also convince them to work together with broadcasters to develop the regulatory system toward conformance with reality.
And we must also enter into dialogue with the new Québec government to make it aware of the contrary budgetary measures that it has inherited from the previous government.
Private broadcasters are the pillars of the system
This reform process must take into account the new realities as its starting point. In 2003, private radio and television broadcasters are the main actors in the Canadian broadcasting sectors. Private radio occupies over 80% of the radio market. Private television, including Canadian specialty and pay-for-view television, holds over 80% of the Canadian television market and over 70% of the market for Canadian broadcasts.
These shares in the market are not the fruits of chance. They are the result of decades of hard work, major investments and the willingness to create Canadian stars, to tell Canadian stories and promote the diversity which defines Canada.
This willingness is heralded by private radio stations from one end of the country to the other that air Canadian songs over 50 000 time a week.
This willingness is also heralded by private radio stations that continue to finance FACTOR, Musicaction, the Radio Starmaker Fund and le Fonds RadioStar, which aim to air new music and create new stars.
Canadians in all parts of the province count on private broadcasters to inform them, inspire them, and entertain them.
More than ever, there is a call for programs reflecting Canadian voices and choices to fulfill a national mission. Our voices must remain strong, pertinent, and committed to linking Canadians in their homes, towns, regions, provinces and within their country.
By maintaining listening habits, private Québec broadcasters are contributing to strengthening the cohesiveness of Québec society and the sharing of common values, promoting our creators and artists and encouraging the development of our cultural industries as a whole.
This vocation that the media hold was unequivocally highlighted by a Decima survey that was recently carried out on behalf of our Association and the Canadian Newspaper Association.
This unique survey reveals the dependence on the Canadian media: 57% of Canadians believe that maintaining a solid Canadian media is an important element that the new federal government should integrate into its program.
In fact, 7 out of 10 Canadians would accept devoting more public funds to ensure the longevity of Canadian content well into the future.
It is obvious that people want the Canadian media to stand on solid ground. In this perspective, the government must ensure that it will not increase the obstacles in this area.
And it is important to remember that the audio-visual producing and broadcasting sector is not only significant because of its cultural purpose. It is a sector with major knowledge-based economic importance, which offers excellent remuneration to the young and dynamic people who work in it.
Nonetheless over the last few years, every initiative taken by both levels of government had the effect of penalizing this sector.
Yet the story in Québec had a happy beginning with the establishment in 1990 of a refundable tax credit program for cinema and television production.
Initiated by Gérard D. Lévesque, who was then Minister of Finance, this program stimulated audio-visual production, contributed to the creation of quality jobs and offered excellent cost/benefits relationships.
It was such an effective measure that it inspired practically all the Canadian provinces and the federal government to create their own refundable tax credit programs. Some provinces are even in the process of improving it.
But then the last government budget, brought down a few days before the provincial election, without prior opinion or consultation, took a step backwards by attacking the Québec tax credit program.
The challenge for the new Charest government, which has inherited this situation, will be to recognized the importance of the fallout of this during its next budget.
The changes to the Québec tax credit, characterized by general reductions of the refundable tax credit level and the per-production ceiling, are endangering the production industry here.
These measures also reconfirm the ineligibility of the private Québec broadcasters' affiliated stations for access to the tax credits and a number of broadcasting categories. And this is so even when foreign production companies still have access. We find this strange, inappropriate, and unfair.
In total, the volume of production that will no longer benefit from the refundable tax credit is estimated at 68 million dollars. It may happen that certain programs will never see the light of day. This represents 43.5 million dollars in salaries for the industry's artisans, or the equivalent of
1 200 jobs/year.
It will destabilize the private French language television industry and provoke a spiralling shrinkage in this sector. It will also dismantle the independent and affiliate Québec television production industry, with all the negative consequences that this will have on their ability to invest in new program concepts and to develop new markets.
It will prevent us from maintaining the high proportion of total Québec television viewers who are dedicated to Québec programs.
We are therefore asking the new Québec Minister of Finance to reconsider most of the exclusionary measures to eligibility to the Québec refundable tax credit. I would like to stress that these credits bring a revenue to the treasury that exceeds their cost.
And now the situation has become even more complex since two weeks ago, with the announcement by the federal government that it will raise the ceiling from 48% to 60% for labour expenses which give entitlement to the tax credit for total production cost. It is a favourable decision for the entire production industry.
However, in light of the budget inherited from the preceding government, this announcement by the federal government risks creating a disadvantage for the Québec production industry, because the other provinces are maintaining or improving their tax credit systems. Production outside of the province might become more advantageous or attractive. We are counting on the new Québec Minister of Finance to be aware of the implications this has.
On the federal level there are other problems that must be corrected. Two initiatives occurring over the last year are causing serious difficulties to television production.
The first initiative involves the decision, as of 2003-04, to reduce the Canadian Heritage contribution to the Canadian Television Fund by 25 million dollars annually over a period of two years.
This withdrawal of support to Canadian content is very alarming; we want Ottawa to review its position and stabilize the Fund at 100 million dollars per year.
In February 2003, CAB and almost the entire industry strongly denounced the reduction of the federal contribution to this Fund. We believe that this shortfall represents a loss of approximately 200 hours of programming for Québec and several hundred direct and indirect jobs.
It is our intention to ask the new federal government to recognize the reality that these funding measures designed for production support are only a fraction of what broadcasters are asking for. This is why we are recommending that the time has come for broadcasters, producers and other actors in the sector to meet with officials from the Ministry of Finance and Canadian Heritage to develop an action plan that will ensure funding for television broadcasts.
Beyond these issues, the industry faces other daunting challenges.
Another daunting issue: signal theft
I would like to mention one particular issue which in my opinion merits immediate priority attention equal to its growing importance. I am speaking of the theft of signals.
According to the most informed sources, there are in operation in Canada today approximately one million illegal satellite systems. According to research carried out earlier this year by Cogéco Vidéotron, one Québécker in five knows at least one person who pirates satellite signals. The impact of these thefts as a whole on the Canadian broadcasting system is estimated at 400 million dollars per year. The consequences are extremely frustrating because everyone loses.
The new government must find solutions to combat the stealing of signals. The United States have addressed this issue by adopting the Millenium Act. In Canada the solutions must include new laws with teeth.
Conclusion
The broadcasting system's successes must continue. The cultural growth of this country asks for nothing less. In a context of fragmentation and an explosion of choices, the private sector cannot succeed alone. The two levels of government must bring this about.
Let us be clear on the fact that our industry is not out looking for free handouts. A good number of Western countries recognize the importance of maintaining a cultural identity through support mechanisms. And what is more, while the governments are doing their all to develop mechanisms for attracting foreign investment in other sectors, it is difficult for us to understand the fact that our two levels of government are imposing reductions and restrictions to support in our sector.
For this reason the industry is asking:
first, that the Québec government review most of the exclusionary measures to eligibility the refundable tax credit;
and secondly, that the federal government create an action plan to address the television funding situation.
The cutbacks in this sector endanger not only thousands of jobs in a young and dynamic industry, but also the reflection of our identity.
Thank you for your attention.
