Speeches and Interviews

November 14, 2000

The CBC…at a Time of Major Media Mergers

Speech by Michel Tremblay, Chief Planning and Business Development Officer, CBC/Radio-Canada, to the Canadian Club of Toronto

Ladies and Gentlemen,

It is with great pleasure that I have accepted your invitation to talk about something near and dear to my heart, that is, the future and the role of the CBC in an increasingly complex — and ever-changing — media environment.

The timing is most appropriate, given that the debate surrounding the importance of the national public broadcaster is heating up, in view of the current context of globalization and the emergence of large Canadian communications conglomerates.

By way of introduction, therefore, I'd like to give you an overview of the profound changes that have marked the industry in the past twelve months. I'll then talk about the transformation taking place at the CBC and its impact on the way we do things. I'll conclude by telling you my point of view on the role of the CBC in this particular environment.

A media environment in the midst of upheaval

These mergers and acquisitions are occurring at such a fast pace that few people are fully aware of the scale and significance of all the changes.

For instance, in Canada alone, transactions in the world of communications accounted for the record figure of $30 billion in the past 12 months. Furthermore, the least predictable transactions are an indication of the push towards technological convergence and the quest to dominate the market.

Thus, Canwest Global, a major broadcaster at home and abroad, has made a breakthrough in the daily press with the acquisition of the hundreds of English-language newspapers belonging to Hollinger, at a cost of over $3 billion. This Canadian concern now shapes the destinies of more than a dozen nationwide television stations and daily newspapers, in addition to holding 50 per cent of the National Post. Canwest thus becomes an imposing force in the advertising market, not to mention the synergy that such a situation will foster concerning local and national news.

We should also mention the dazzling breakthrough by BCE in the area of content. The acquisition of the CTV television network, its 25 television stations and numerous specialty television services, and the amalgamation of its media assets with Thompson Corporation, are also precedent-setting.

These transactions worth close to $7 billion sanction the BCE vision: a vision focused on connectedness, content, e-commerce and multiple distribution platforms. They also entail a redefinition of power relationships in the television market. No doubt the juxtaposition of these content engines with the major Sympatico-Lycos portal make BCE a leading player in the new media order.

Far from being spared, the francophone market has also been shaken by deep and unexpected changes that have begun to redefine this small-scale market. We first witnessed the expansion of the TVA group into magazines with the acquisition of Trustar; production with Motion International; and participation in the major francophone portal Netgraphe. Then followed the merger plan between Rogers and Videotron, Quebec's largest cable distributor, which also controls TVA. This saga finally reached a conclusion following countless dealings leading to the acquisition of Videotron by Quebecor at the cost of nearly $5 billion, with the financial support of Quebec's Caisse de dépôt. Quebecor, already a major player in the print media, now owns TVA, the most watched television network in Quebec, with a 30 per cent market share of hours tuned. To pave the way for CRTC authorization, Quebecor has already indicated that it plans to sell the Quatre Saisons TV network. By doing so, the company is trying to allay any fears concerning too great a concentration of news sources within the francophone market. This expected transaction, which seems to be well received by interested stakeholders, may well result in a rebalancing of Quebec's television market.

Does the future hold other major changes for us?

No doubt the future holds many major changes. Indeed, from experience we know that these mergers and amalgamations are not always feasible or durable, since they do not necessarily produce the synergies or benefits expected. Furthermore, in spite of a shrinking arena and the growing scarcity of available properties, speculation continues apace. The reputable publication The Economist earlier this year published a series of articles on the generalized craze for mergers and acquisitions. In 1999, such types of activity accounted for over US$3 trillion worldwide.

In one of these articles, the magazine metaphorically compares the risks inherent in these financial operations to a second marriage, where hope triumphs over experience. But in the end, as several studies have shown, business mergers have a greater failure rate than relationships between Hollywood stars.

Nevertheless, the merger and acquisition market will remain active, with companies disposing of activities deemed non-strategic or exchanging assets designed to facilitate geographical consolidation. I also expect ongoing pressure for liberalization of foreign ownership rules, which currently limit the participation of foreign investors and the value of Canadian broadcasting and telecommunications businesses.

CBC dealing with two major facts

In this new context, the CBC must deal with two major facts. The first is that fulfilling its mandate is proving to be increasingly complex because of growing competition for content, audience retention and access to promotional vehicles. Increasingly, it is clear that the advertising market will also become more competitive, and this will make access to revenue still more uncertain for the CBC, which generates some $300 million annually from advertising.

We must therefore be innovative. We have to transform the ways we do things and forge new partnerships so that we can evolve in an environment which is less and less predictable. Above all, we have to remain faithful to our public service mandate and our roots. This is the only way we will continue to distinguish ourselves, to stand out from the crowd.

Still, we must not lose sight of the fact that the CBC is already a major player. We still have an impressive menu to offer Canadian audiences: four television networks, four national radio networks, plus some 100 radio and television stations across the country, the unique ability to produce select programming for large language groups, not to mention a noted and noteworthy presence on the Internet. The major challenge now facing the CBC is to manage to maximize its ability to create synergies among all these elements.

Now we arrive at our second fact — and we are not the only ones to acknowledge it — namely that the role of the CBC as a national public broadcaster will grow in importance within a world marked by globalization and homogenization of content. We will come back to this. Let us look first at the various initiatives undertaken by the CBC to fulfil its mandate and deal with the new situation.

In this new competitive context, the CBC has to demonstrate creativity to find the resources necessary and strengthen its capacity to invest in distinctive high-quality programming, which is the sole guarantee of its relevance in a multiple-choice broadcasting system. Although the CBC will enjoy stable government funding for a few years yet, it is fixed, and this forces us to innovate to make up for the lack of financial flexibility and reinvest in our programs.

As our first initiative, last December we announced the creation of a Reengineering Task Force to examine the repositioning of English Television. Task Force members also had to find ways of generating additional sources of revenue by promoting our large capital assets and our transmission facilities. The purpose of promoting our assets was to enable us to redirect more money to our programming.

Ten months later, we initiated the transformation of English Television into a public service television network capable of setting itself apart from other networks. The key measures taken are clear: more national news, less advertising in several time slots, more schedule time for children and youth programs, and more cultural programs. This redirection, based on bringing public television back closer to its roots, will be phased in up to next fall.

Though English Television is a priority action area, a spirit of renewal is also motivating CBC French Television. Accordingly, it is important to consolidate its leadership role during prime time and to help it distinguish itself by delivering high-quality products which pay off with successful ratings. CBC radio is in a class by itself and already offers very distinctive services. Our radio services are a focal point of innovation, both on the air and in the new media, which constitute a new platform for distributing our content.

The second major initiative I should mention is the current operation by the CBC of 2,500 radio and television transmitters over 600 sites across the country, which reach the large majority of Canadians. Though under our mandate it is our responsibility to guarantee the full availability of services, we feel that the management of transmitters is not in itself a key activity. This led us to seek solutions that might promote these assets and create new sources of revenue. Last summer, following a RFI, we were able to gauge the level of interest for these assets among business people, both at home and abroad, and the promise of increased financial versatility that would result.

The CBC is not the first broadcaster to consider such an initiative. The British Broadcasting Corporation(BBC) has already sold its domestic transmitters and made Can$550 million from the sale. The agency responsible for broadcast transmitters in Australia embarked on the same course and made Can$400 million. We will go ahead with a more formal process enabling us to seek proposals from interested parties.

A third noteworthy initiative is optimization of CBC real estate. The need to guarantee greater financial flexibility led us to create a new division to manage and optimize the millions of square feet occupied by the CBC in some 100 buildings throughout the country.

What must be retained from all these efforts is that CBC reengineering is not set in time. It is a state of mind that enables us to deal with all our activities so as to optimize management of the Corporation and its resources with a view to redirecting resources to our programs.

Spotlight on our partnerships

There is another key indicator of the profound changes affecting the way the CBC does business, that is, the increased use of partnerships to optimize our resources.

It is clear that the CBC cannot escape the market forces pushing for a greater offer of new specialty services, in both traditional areas and the new media. Our development in this area must be founded first of all on our key programming skills. It must allow the building of viable partnerships, while maximizing the effect of levering our resources.

This new way of doing business affects all our areas of activity, whether specialty television services, the new media or new content distribution platforms. From now on, partnerships are part of our daily lives.

Télé des Arts, the newly licensed French-language specialty service dedicated to arts and culture, will go on the air in the fall of 2001. This is a perfect example of the new order whereby the CBC can proudly team up with four prestige partners: Télé-Québec, BCE Media, television network Arte-France and Groupe Spectra, the largest producer of shows in Quebec. On the strength of its partners' experience, this new venture will make it possible to meet a need and broaden the broadcasting choice of francophones across the country. Furthermore, it will create a new stage for artists from all parts of the country.

We are hopefully awaiting the CRTC decisions concerning two new specialty television services in English, namely The Documentary Channel and Land and Sea, specially designed for Canada's rural populations. The first project represents another prestige partnership in the area of documentary, bringing together the National Film Board, the Corus group, various independent producers and the CBC.

We also know how to take timely advantage of the economic potential of partnerships. For example, earlier this year, the CBC sold the USA Networks two television services which we had been operating on the American market for several years, in partnership with Power Broadcasting, for more than $150 million.

Innovation serving success

The transformation of the CBC also involves accelerated innovation in the area of new media such as the Internet, a cutting-edge area in which we are leading the pack among Canadian broadcasters. In fact, even before the explosion of Internet access, the CBC was already making efforts to reach Canadians by means of this emerging platform.

CBC.ca and radio-canada.ca today reach a large number of surfers who access our content through the Web. According to our estimates, over two million people have visited our sites in the past year and up to 25 million pages a month have been consulted. The content distributed is drawn from all our programming schedules and many of our sites are designed to improve regional services. The efforts we deploy to meet Canadians' needs on the Web have attracted a lot of positive attention, since the "news" component of our sites won the title of Meilleur site de nouvelles (Best news site) awarded by Mediametrix. In addition, CBC news is available on several wireless communication platforms, including cell phones, Palm Pilots and Blackberrys. These measures position us on the leading edge of the new information consumption vehicles.

The CBC: a key role to play

All these initiatives contribute to the vitality and transformation of the CBC. Moreover, it seems to me increasingly clear that the breakdown of conventional models and the increased fragmentation of audiences help strengthen the key role of the national public broadcaster.

The Canadian Broadcasting Corporation was created nearly 70 years ago. At that time, it was supposed to act as a benchmark for a Canadian population spread out over a huge territory. It was also supposed to constitute a bulwark against American invasion of our radio airwaves. But in a new media environment broken up into hundreds of television channels from countless sources and access to content on broadband Internet, recourse to protectionist measures seems less and less effective for safeguarding our interests.

We also note that globalization, which implies a new openness towards the world, will necessarily result in greater homogeneity of the available content. The best way of guaranteeing Canadians a select media space that reflects the country and its values is to make sure that the CBC can maintain high-quality service that stands out from the crowd of programs available and offers them a unique experience.

Fall 2000 will have provided, both intentionally and unintentionally, a special opportunity to demonstrate how public television plays a unique role — presenting or creating determining and uniting events that speak eloquently to Canadians from coast to coast.

The television series "Canada: A People's History" is a proud example of the large undertakings typical of the public broadcaster, which distinguish us from other broadcasters. Since October, this series has been simultaneously airing on our English and French television networks. Few broadcasters would have become involved in such a project or would have dared to invest over $25 million in a series produced in both official languages, without conventional advertising, out of respect for t he content. This is the CBC way of affording audiences a unique experience. This experience goes along with a vision of identity rooted in rigourous historical research and bringing to life the major players in our history. Canadians have responded well and allowed us to record substantial audience shares and viewership on our television networks.

Another example of the public broadcaster's strength and the synergies at work between our media and other partners is the exhaustive coverage of the Sydney Summer Olympics. Thanks to the live coverage provided by all our television networks, combined with the key role played by CBC Radio and our Websites, Canadians were able to experience some unique, high-intensity moments. This coverage was the envy of American audiences, which had only delayed access to the Games through NBC.

Barely a few weeks ago, we distinguished ourselves from the other networks again by offering exhaustive coverage of the various events surrounding the passing of the Right Honourable Pierre Elliot Trudeau. Supported by the wealth of our visual archives, the quality of information and appropriateness of the comments, our media were able to focus on another page in our collective history.

All these events help illustrate and confirm the unique role played by the CBC within the Canadian broadcasting system. It is this ability to do things, to reflect the world, to promote our past and passing history… that must be preserved. We have to transmit to future generations a sense of belonging to our country and its values.

In a media sea awash with choices and means of communication, the CBC has to resist the temptation to espouse all the trends and keep its sights set on its fundamental public service role, while innovating, to ensure that there continues to be a distinct voice for Canadians to hear.

Thank you very much for your attention.