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Broadcasting Public Notice CRTC 2004-32
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Ottawa, 6 May 2004 |
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Proposed incentives for English-language Canadian television drama – Call
for comments
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The Commission seeks comment on a proposed
package of incentives designed to increase the expenditures on, and the
production of, high quality, original, Canadian drama broadcast by
English-language television licensees; and to encourage increased viewing to
such programming. |
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In another public notice to be released
shortly, the Commission will propose separate measures designed to ensure the
continued presence of high-quality, original French-language Canadian drama
in peak time. |
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Background |
1. |
In Support for Canadian television drama –
Call for comments, Broadcasting Public Notice CRTC
2003-54, 26 September 2003 (Public Notice
2003-54), the Commission sought comment
on the steps it might take to encourage the production and broadcast of more
high quality, original, English-language Canadian drama capable of attracting
larger audiences. The Commission also sought comment on possible measures to
ensure that high quality, original, French-language Canadian drama remains a
key component of peak time viewing. Specifically, the Commission asked the
following questions: |
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1. What are the most important elements necessary to ensure an
appropriate quantity of original Canadian drama on English-language
television, and to attract larger audiences to such programming?
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2. How effective are regulatory requirements, or regulatory incentives,
in achieving the objectives of increasing the amount of original,
English-language drama programming and attracting larger audiences to that
programming?
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3. If regulatory requirements, or incentives, can be effective tools in
fulfilling the Commission’s objectives, what specific proposals should the
Commission adopt?
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4. While it is generally considered that the most pressing problems
concern English-language drama, there are concerns that French-language
drama may not remain as healthy in the future. How can the Commission help
to ensure the continued production of popular, original, French-language
drama? What specific requirements, or incentives, designed to support
English-language drama, may affect French-language drama? Should the
Commission develop separate and distinct regulatory regimes, or incentive
programs, for the two language markets?
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2. |
In addition to the above questions, the
Commission indicated in the public notice that it was prepared to consider
the following specific matters: |
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- possible changes to the CRTC definition of drama where such changes
could further the objectives of this proceeding;
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- measures that may encourage specialty services to play a greater role
in the creation and presentation of Canadian drama;
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- the Nordicity Report’s analysis of certain incentives;
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- the fairest and most effective audience measurement tools that might be
used to determine the success of individual Canadian drama programs;
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- details concerning the financing of Canadian drama that would assist
the Commission better understand what can reasonably be expected of
Canadian broadcasters, given their own resources and the resources
available in the rest of the system; and
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- matters specific to French-language Canadian drama.
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3. |
In Public Notice
2003-54, the Commission noted that it might call for further submissions
if it considered that additional information was necessary. |
4. |
In this current public notice, the Commission
reviews the comments received in response to Public Notice
2003-54 and sets out for comment a
proposed package of incentives designed to fulfil the objectives of
increasing the amount of original, English-language Canadian drama and of
encouraging greater viewing to that programming. |
5. |
The proposals set out in this public notice
apply only to English-language licensees. More than a dozen comments focused
largely, or exclusively, on concerns relating to French-language drama. The
Commission will issue shortly another notice that will examine the
submissions addressed to the fourth question contained in Public Notice
2003-54, and intends to announce a second
set of proposals specifically designed to fulfil its objectives with respect
to French-language Canadian television drama. |
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Review of the comments received in response to Public Notice
2003-54
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6. |
The Commission received a total of 301
submissions in response to Public Notice
2003-54. A large majority of these were in agreement with the importance
the Commission places on Canadian drama and many suggested specific actions
that could be taken to support the production and broadcast of such
programming. A few comments argued that market forces should be permitted to
play a greater role in broadcasting policy. |
7. |
The Commission notes the large number of
comments filed by individual actors, writers and producers working in
Canadian television. These individuals provided insights, based on personal
and professional experience, with respect to how Canadian drama projects are
created, developed, produced and marketed, and offered suggestions for
improvement. A significant number of comments were filed by supporters of the
Canadian Broadcasting Corporation (CBC). They stated that they would support
any initiative, including increased funding, that would strengthen the role
of the public broadcaster. |
8. |
The Commission takes particular note of the
comments from 23 students at Holy Trinity Catholic High School in Simcoe,
Ontario. These students articulated their concern about the lack of Canadian
drama on television, and underscored the importance of that medium in telling
stories that provide young people with a greater appreciation of their
country. Some also emphasized that programs need not include themes or scenes
of violence and sex in order to find an audience. |
9. |
Finally, the Commission received substantive
comments from a variety of broadcasters, producers, industry associations and
unions. These comments are examined in the following sections of this notice. |
10. |
In the appendices to Public Notice
2003-54, the Commission provided certain
data with respect to viewing to Canadian drama, the hours of drama broadcast
and the spending by licensees on Canadian drama programs. The Commission is
now able to update this information with 2003 data. These tables, as they
relate to the English-language market, are appended to this public notice. |
11. |
The Commission appreciates the comments
submitted during the first phase of this proceeding. The submissions have
been helpful in assisting the Commission in the development of the policy
proposals that it now sets out for further public comment. In the following
sections, the Commission announces its preliminary determinations on those
issues that were central to the Commission’s analysis, including: |
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- the importance of drama programming;
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- the economics of Canadian drama;
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- defining "original" hours;
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- drama directed to children;
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- drama earning less than 10 Canadian content points;
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- the effectiveness of regulatory requirements; and
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- the effectiveness of regulatory incentives.
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12. |
Possible incentives examined by the Commission
to encourage and reward the production of more English-language Canadian
television drama include: |
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- granting time credits for Canadian content;
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- permitting additional advertising minutes; and
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- a reduction in Part II Fees.
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13. |
Effective incentive triggers considered by the
Commission and discussed below might also include: |
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- incentives for original hours;
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- incentives for attracting increased viewing to Canadian drama; and
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- incentives for increased expenditures on Canadian drama.
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The importance of drama programming
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14. |
As noted in Public Notice
2003-54, drama is the most popular
programming on television. English-language drama programs receive more than
twice the number of viewing hours received by any other type of programming.
According to Fall 2002 data collected by the Bureau of Broadcast Measurement
(BBM), prime time viewing of drama on private, conventional, English-language
television stations represented 70% of all viewing. This disproportionate
amount of viewing to drama relative to programming in other categories has
been recorded consistently since measurement of this type was introduced. |
15. |
The production of high quality drama programs
requires more creative, technical and financial resources than any other
genre of television programming. Drama production trains, develops and
employs Canadian writers, actors, directors, editors, technicians and other
key creative individuals. In 2003, the total value of Canadian drama
production exceeded one billion dollars. |
16. |
As has been frequently noted, however, viewing
to Canadian drama, as a percentage of all drama viewing on English-language
services, has been very low. It stands at only 5% of all viewing to drama on
Canadian English-language private conventional television stations, according
to Fall 2002 BBM data. |
17. |
None of the comments received by the Commission
in this proceeding argued that an emphasis on Canadian drama was misplaced.
Although a few expressed the view that regulatory action was unnecessary or
that too great a focus on drama could be to the detriment of programming in
categories such as documentary, there was a clear consensus that Canadian
drama was important and needed support. |
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Commission’s preliminary view
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18. |
It is the Commission’s preliminary view that
effective measures to increase the availability of, and viewing to, Canadian
drama programs are needed at this time and that such measures would further
the objectives of the Broadcasting Act (the Act). |
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The economics of Canadian drama
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19. |
In a 2003 report prepared for the Commission and
Telefilm Canada (Telefilm) entitled Dramatic Choices1,
Trina McQueen stated that "the achievements in drama have occurred against
all odds; and they conceal the central problem, which is financing". Many of
the comments submitted in response to Public Notice
2003-54 focused on the particular
economics of producing and distributing peak time drama in Canada. Producers,
broadcasters and unions all agreed that financing issues were at the heart of
the "problem" with drama. There was also agreement on the key role played by
production funds and other forms of public support in financing high quality
and distinctively Canadian programs. Serious concerns were expressed about
the decrease in the funding of the Canadian Television Fund (CTF) and the
complexity, for both producers and broadcasters, of the process for gaining
access to public funding. |
20. |
The Canadian Film and Television Producers
Association (CFTPA) noted that, while production budgets have increased
significantly in recent years, public funding has not kept pace.
Consequently, producers have been required to assume a greater portion of the
financial risk. The CFTPA also noted that, while broadcasters pay licence
fees of 20% to 25% for CTF-funded dramas, licence fees drop to between 5% and
10% for non-CTF funded projects. In the CFTPA’s view any incentive based on
licence fees should exceed the minimum requirements of the CTF. |
21. |
The Canadian Association of Broadcasters (CAB)
pointed out that there is no marketplace incentive to commission Canadian
drama. At an average cost of $1.85 per viewer, an original Canadian drama
costs roughly ten times as much per viewer as a comparable U.S. program. CTV
Inc. (CTV) and CHUM Limited (CHUM) noted that, while an average U.S. drama
series costs from $3 million to $4 million per hour, an average of only $1
million per hour is spent on Canadian series drama. They added that this
figure has not changed significantly for the past decade despite increases in
costs. The CAB stated that a private, conventional broadcaster can expect to
lose at least $100,000 per hour on Canadian drama, while an episode of U.S.
drama will typically earn $275,000 for that broadcaster. |
22. |
The Coalition of Canadian Audio-visual Unions
(CCAU) submitted comments representing the views of the Alliance of Canadian
Cinema Television and Radio Artists (ACTRA), the Directors Guild of Canada
(DGC), the National Association of Broadcast Employees and Technicians
(NABET) and the Writers Guild of Canada (WGC). The CCAU argued that it is
crucial that private conventional broadcasters increase their financial
support of Canadian drama. In the view of the CCAU, the largest broadcasters
should be required to spend at least 7% of their gross revenues on Canadian
drama. The CCAU noted that broadcasting in Canada is still a profitable
business activity and that Canadian drama should be a part of a licensee’s
obligations even though it may not contribute to that profitability. |
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Commission’s preliminary view
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23. |
The Commission recognizes that English-language
Canadian drama faces economic pressure from a number of sources. First,
Canadian broadcasters have ready access to the most popular U.S. programs at
a relatively low cost. The CAB noted that an original Canadian drama series
costs roughly ten times as much per viewer as a comparable U.S. program.
Second, the simultaneous substitution rules, which protect Canadian
broadcasters’ program rights, make the acquisition of U.S. drama more
attractive and may negatively affect the scheduling of Canadian programs.
Third, Canadian dramas with average production budgets of approximately
$1 million per hour must compete with U.S. programs whose budgets are at
least three times greater. Finally, in recent years the international market
for Canadian programs has declined significantly. |
24. |
In light of this, the Commission agrees that the
lack of funding is a key contributor to the difficulties facing Canadian
drama. Drama is generally expensive to produce and English-language Canadian
drama programs have not, as yet, attracted audiences in the numbers that U.S.
drama attracts. Those peak time Canadian programs that have garnered
audiences of more than one million viewers have generally required
significant public funding and, even then, have not earned a profit for the
broadcaster. |
25. |
The Commission also recognizes the important
role of public funding in the production of Canadian drama. Public support,
whether in the form of tax credits, equity investment or grants from federal
and provincial governments, makes possible the production and broadcast of
drama programs that the market simply cannot support on its own. In this
respect, the Commission notes favourably the new emphasis placed by the CTF
and Telefilm on broadcasters’ audience track records. In the Commission’s
view, public policy designed to support Canadian television programming
should, wherever possible, seek to attract larger audiences to such
programming. |
26. |
Although the government, not the Commission,
determines the level of public funding that is set aside for Canadian drama,
the Commission is cognizant of the role it plays in the creation of private
production funds and of the important contribution that broadcast
distribution undertakings make to the CTF as a result of the Commission’s
regulatory requirements. |
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Defining Canadian drama
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27. |
In Public Notice
2003-54, the Commission set out its definition of drama (Category 7) and
indicated that it would consider proposals to change the current definition
if such changes could further the objectives of the proceeding. |
28. |
Almost all of those who commented on the current
definition said that it should be retained. The CFTPA, however, considered
that the definition has become too broad and recommended the elimination of
sub-categories 7(f) Comedy sketches, improvisation, unscripted works,
stand-up comedy, and 7(g) Other drama. In the CFTPA’s view, these
sub-categories lack certain essential components of traditional drama
programming, "…such as scripted storyline, characterization, dialogue and
action, gesture, costume and scenery." In addition, the CBC submitted that
the definition of a drama program must "explicitly exclude programs such as
reality television productions". |
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Commission’s preliminary view
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29. |
Based upon the widespread support in the
comments received for retention of the current definition of drama, the
Commission does not propose to make any change. With respect to the CFTPA’s
comments, however, the Commission notes that sub-categories 7(f) and 7(g) do
not qualify for the dramatic time credit incentive set out in
Implementation of TV Policy, Public Notice CRTC
1999-206, 23 December 1999 (Public Notice
1999-206). In the Commission’s view, any
other incentives designed to support Canadian drama should continue to apply
only to those programs in sub-categories 7(a) to 7(e). |
30. |
Regarding the CBC’s concern that "reality
television productions" should be excluded from the definition of drama, the
Commission notes that reality TV is included in the description for Category
11 General entertainment and human interest. While reality television may
raise questions of overlap with other program categories, it has never been
considered as Category 7 Drama. |
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Defining "original hours"
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31. |
One of the Commission’s objectives identified in
Public Notice 2003-54 is to increase the
amount of original hours of English-language Canadian drama. The Commission
tracks original programs and repeats through its logging requirements.
Licensees must identify whether a given program is: |
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- an original broadcast – i.e., a live program;
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- a recording of a live program (first play) or other recorded program
(first play); or
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- a repeat broadcast of a program.
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32. |
For the last decade, most licensees have not
been required, either by regulation or by condition of licence, to broadcast
specific quantities of "original" or "first run" programming. The regulatory
requirements for Canadian content and current conditions of licence with
respect to priority programming make no distinction between original and
repeat hours. With respect to Canadian drama, the Commission has taken the
view in recent years that broadcasters are best positioned to determine the
appropriate balance between original and repeat programs. |
33. |
A number of comments proposed that the
Commission return to the practice of regulating original hours. For instance,
the CCAU proposed a modified version of the Australian system, whereby points
would be awarded for each original hour of Canadian drama, varying according
to the licence fee paid. David Barlow, a writer of television programming,
supported the idea of "making original Canadian drama a Canadian content
priority." |
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Commission’s preliminary view
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34. |
The Commission is of the view that there should
be an increased emphasis on original hours of Canadian drama. However, it
considers that there is a need for greater clarity in the definition of
"original". In "First Run" Television Programming, Public Notice CRTC
1988-197, 30 November 1988, an original,
first run program was defined as a "program which has never before been
distributed by any licensee of a broadcasting undertaking and which will be
distributed for the first time by the licensee." |
35. |
The Commission seeks comment on whether the
above definition is appropriate in the context of regulatory action to
support the production of more original, English-language, Canadian drama.
Parties may wish to propose alternative definitions and should provide
reasons for any different approach. |
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Drama directed to children
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36. |
A number of comments focused on the need for the
Commission to provide support for Canadian drama that is directed to children
(i.e., those aged 2 to 12). Some noted that, prior to the publication of
Building on Success – A Policy Framework for Canadian Television, Public
Notice CRTC 1999-97, 11 June 1999 (the 1999
TV Policy), children’s drama broadcast during children’s viewing hours could
claim a 150% time credit. In 1999, the policy changed so that only qualifying
drama programs broadcast between 7:00 p.m. and 11:00 p.m. were entitled to
the new credit. As a result, most children’s drama programs were no longer
eligible for the time credit. |
37. |
The Shaw Television Broadcast Fund supported
Trina McQueen’s recommendation that children’s drama receive a 150% time
credit for the purpose of calculating Canadian content. Corus Entertainment
Inc. also supported this approach for all children’s drama, including
animation. The CFTPA proposed that the credit be given only to live action
children’s drama. Global Television Network Inc. (Global) proposed that the
credit be capped at one hour per day. |
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Commission’s preliminary view
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38. |
The Commission recognizes that drama directed
towards children continues to be an important and successful genre of
Canadian programming. High quality children’s drama contributes as much to
the fulfilment of the Act’s objectives as any other type of drama. If
children are exposed to attractive television drama programs that reflect
their own values and realities, it is reasonable to expect that they will be
more likely to continue as viewers of adult Canadian drama. The Commission
also recognizes that animation, an area in which Canadians have excelled, is
a sub-genre of drama with particular appeal to children. |
39. |
In light of the above, the Commission proposes
to include, as part of any incentive to support Canadian drama overall,
original Canadian drama directed towards children in sub-categories 7(a) to
7(e) when such programs are broadcast at times appropriate for children. |
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Drama earning less than 10 Canadian content points
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40. |
In Certification for Canadian Programs – A
revised approach, Public Notice CRTC
2000-42, 17 March 2000, the Commission announced that it had revised the
point system it uses for the certification of Canadian programs. Conditions
of licence with respect to Canadian drama programs are not limited to
programs that achieve the full 10 Canadian content points. Licensees are able
to fulfil conditions of licence by broadcasting Canadian drama programs that
earn a minimum of 6 points. The 150% time credit for Canadian drama, however,
is limited to 10-point drama programs. |
41. |
Most of those who commented on this subject
proposed that incentives should apply only to 10-point drama programs. Global
proposed that, if an incentive based upon extra advertising minutes were to
be considered, dramas earning a lower number of points should be included,
although with a reduced benefit, such as 30 seconds of additional advertising
rather than a full minute. Global noted that these dramas, "… provide
valuable experience and international track records for Canadian creative and
craftspeople without creating additional pressure on public funding
mechanisms." |
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Commission’s preliminary view
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42. |
In the Commission’s view, the primary focus of
any action to support Canadian drama should be on those programs achieving 10
points. It is these programs that are most likely to tell Canadian stories
and reflect Canadian values and realities. Nevertheless, the Commission finds
merit in the proposal that the production of some lower point count dramas be
encouraged. Further, the Commission considers that any regulatory incentives
should minimize pressure on public funding mechanisms. Providing modest
support for 8- and 9-point dramas, as the Commission proposes in this public
notice, may provide producers with an alternative to CTF funding. |
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Effectiveness of regulatory requirements
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43. |
In Public Notice
2003-54, the Commission asked interested parties to comment on the
effectiveness of regulatory requirements, such as regulations or conditions
of licence, and on regulatory incentives, in achieving the Commission’s
objectives. |
44. |
Broadcasters opposed any return to the
regulation of drama hours or expenditures. The CAB noted that the 1999 TV
policy, which removed requirements for drama hours and expenditures, was
established following an extensive public process. In the CAB’s words, "…
this policy framework is still relatively new, and should therefore be given
more time to have an impact before substantive evaluation is undertaken."
With respect to the effectiveness of regulatory requirements, the CAB noted
that a volume-centred approach is "unlikely to succeed in building audiences
for English Canadian drama". CHUM argued that, "in the long run, regulations
in and of themselves can never create a successful Canadian dramatic
production industry. They can only create an environment that will allow and
nourish success". |
45. |
Certain parties proposed a regulatory minimum
requirement for either drama hours or expenditures, or both. Friends of
Canadian Broadcasting (Friends) proposed requiring a minimum of two hours per
week of Canadian drama broadcast between 8:00 p.m. and 10:00 p.m., Monday to
Wednesday. The Province of British Columbia stated that the Commission should
set a minimum requirement on the amount of drama to be broadcast, but did not
propose a specific number of hours. The CFTPA suggested that the major
conventional broadcasters be required to spend 7% or 8% of their revenues on
drama, and that those unwilling to commit to appropriate expenditures be
required to meet higher levels of priority programming. No minimum hourly
requirements for drama programming were proposed by the CFTPA. The CCAU
presented a detailed proposal for regulatory requirements. With respect to
drama hours, it proposed a variation on the Australian model whereby the
major station groups would be required by regulation to achieve a minimum
number of points based upon the licence fee paid for each hour of original
drama broadcast. In addition, starting in 2006, the CCAU proposed imposing
conditions of licence requiring expenditures of at least 7% of a licensee’s
gross revenues on Canadian drama. |
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Commission’s preliminary view
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46. |
The Commission notes that regulatory measures
are effective in ensuring minimum performance levels by licensees. The
Commission’s Canadian content regulation is an example of a necessary and
effective quantitative requirement. These measures work best when the
regulatory requirement is clear, measurable and within the direct control of
the licensee. Prior to the 1999 TV policy, conditions of licence have been
used to require major conventional television licensees to broadcast minimum
hours of Canadian drama during peak time and to spend minimum amounts on
Canadian programs. |
47. |
The Commission has reviewed its past experience
regulating both hours and expenditures on Canadian programming, including
drama, through conditions of licence. While this approach provided a minimum
"floor" that licensees must achieve, it did not necessarily motivate
licensees to invest in the success of that programming. In the time since the
1999 TV policy came into effect, there has been no significant change in
viewing to Canadian drama, in expenditures on Canadian drama, or in the total
hours of Canadian drama broadcast in peak time. |
48. |
The English-language conventional broadcaster
groups have recently received licences that do not expire until 2008 and
2009. The earliest time that the Commission could amend their conditions of
licence would be 2006 and 2007. While the Commission could introduce
amendments to the Television Regulations, 1987 (the Regulations) in
order to require minimum hours of drama, the Commission is of the view that
imposing regulatory requirements at this time would be inappropriate and
unlikely to fulfil the objective of increasing the quantity of and viewing to
Canadian drama programs, and that alternative mechanisms need to be
attempted. |
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Effectiveness of regulatory incentives
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49. |
Public Notice
2003-54 sought comments on the effectiveness of regulatory incentives in
general, as well as comments on the specific incentive proposals contained in
Trina McQueen’s report. The Commission also made public a report prepared by
Nordicity Group Ltd. entitled Evaluation of the "Dramatic Choices" Report:
Economic Considerations of Certain Audience-based Incentives (the
Nordicity report2) which set out a
model to assess the financial impact of Trina McQueen’s major proposals.
These proposals were to reinstate the 150% time credit against Canadian
content requirements, to permit an additional minute of advertising time for
qualifying drama hours, and to offer a 200% credit for drama programs that
achieve "hit" audience levels. |
50. |
Almost all of those who commented on incentives
supported Trina McQueen’s proposals. However, a number of parties proposed
modifications or clarifications, and one party, Alliance Atlantis
Communications Inc. (Alliance Atlantis), opposed all incentives. In the view
of Alliance Atlantis, incentives that translate into less Canadian content
are counter-productive to the creation of successful drama that attracts
audiences and advertisers. Alliance Atlantis also stated that the extra
minute of advertising, "may only serve to discount advertising rates and
increase the reliance conventional broadcasters have on programs they can
simulcast because the revenue generating potential has increased by one full
minute on their most popular shows." |
51. |
The CFTPA, Friends, the CAB, and individual
broadcasters all supported the restoration of the 150% time credit for
Canadian drama. Prior to 1999, the Commission awarded a 150% time credit
against Canadian content requirements to licensees who broadcast qualifying
Canadian drama programs in peak viewing periods. The additional advertising
minute incentive was supported by the larger broadcasters and the CCAU. CHUM
noted that this incentive would favour the larger broadcasters and could
negatively impact the sale of advertising time by medium and smaller
broadcasters. CHUM proposed a cap of 22 extra minutes per year. Craig Media
Inc. (Craig) opposed the advertising incentive. Virtually all broadcasters
supported an incentive based on the amount of viewing that a program
receives, but suggested that further research was needed to determine how a
"hit" would be calculated. |
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Commission’s preliminary view
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52. |
Incentives, by definition, act as an
encouragement for licensees to take appropriate action. They are flexible
regulatory tools that permit an individual broadcaster to determine first,
whether to utilize the incentives proposed and second, to do so in a manner
tailored to the broadcaster’s own programming strategy. Incentives, if
properly calibrated, would encourage broadcasters to work cooperatively with
producers in order to ensure the production of high quality programming that
is promoted and scheduled in a manner that attracts and retains the largest
possible audience. The Commission considers that existing regulatory
requirements, coupled with new regulatory incentives, should fulfil the
Commission’s objective of increasing the number of original hours of
English-language Canadian drama and the number of viewers to those hours. It
has therefore determined that additional regulatory requirements would be
inappropriate at this time. |
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Incentive rewards
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53. |
Two main incentive rewards were proposed in the
submissions of interested parties. The first of these, time credits, would
permit licensees to air an additional amount of non-Canadian programming. The
second, extra advertising minutes, would permit licensees to broadcast more
than 12 minutes of advertising in a given hour. In addition, a few parties
proposed that another reward could be a reduction in the Part II licence fees
payable pursuant to the Broadcasting Licence Fee Regulations, 1997.
The Commission has analysed each of these potential incentive rewards. |
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Time credits against Canadian content
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54. |
The 150% drama time credit noted above
effectively permitted licensees to replace Canadian programs with more
profitable non-Canadian programs. As part of the 1999 TV Policy, the
Commission removed the application of the 150% time credit from all
programming other than the eight hours per week of priority programming
required by condition of licence. Accordingly, since 1999, while licensees
have been able to reduce the minimum amount of priority programming they
broadcast through the use of dramatic time credits, they have not been able
to use such time credits to reduce their Canadian content below the minimum
levels set out in the Regulations. |
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Commission’s preliminary view
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55. |
In the Commission’s view, an incentive that
would permit the use of drama time credits to reduce required Canadian
content levels raises a number of serious concerns. First, there is the
fundamental contradiction that, by granting a time credit to encourage more
Canadian drama, the Commission would be permitting licensees to broadcast
less Canadian programming overall. Second, the Commission considers that the
likely result of a time credit for drama would be to encourage licensees to
schedule Canadian programs at off-peak times or in low viewing periods of the
year. In addition, the ability to schedule more profitable non-Canadian
programs would likely drive licensees to make even more use of simultaneous
substitution, thus creating greater scheduling problems for the remaining
Canadian priority programs. |
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Additional advertising minutes
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56. |
The proposal to use additional advertising
minutes as an incentive was first raised by Trina McQueen in her report
Dramatic Choices. As noted above, the concept received broad support from
those who submitted comments, with only a few parties expressing concern.
Section 11 of the Regulations sets a limit of 12 minutes of advertising
material in any clock hour in a broadcast day, except as provided in the
Regulations or by a condition of licence. Where a program occupies two or
more consecutive hours, the minutes may be averaged over the length of the
program. Promotions for Canadian programs and for Canadian feature films do
not count as advertising material. |
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Commission’s preliminary view
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57. |
In contemplating an incentive based upon extra
advertising minutes, the Commission’s first concern is the impact that this
may have on the viewing public. In this regard the Commission notes that the
most valuable advertising time for English-language broadcasters is that
placed in popular U.S. programs – particularly those with extraordinarily
high ratings such as the Super Bowl, the Academy Awards and popular dramas or
reality shows. U.S. broadcasters have no regulated limits on advertising.
Typically, the U.S. programs that Canadian licensees acquire have between 14
and 16 minutes of commercial breaks in each hour. Canadian broadcasters can
only use 12 minutes of these breaks for advertising material and, therefore,
fill the remaining two to four minutes with promotions for Canadian programs,
public service announcements or newsbreaks. This means that viewers are
already experiencing program breaks that cumulatively exceed 12 minutes per
hour. If Canadian broadcasters were permitted to sell a limited amount of
additional minutes, there would still be time available for the promotion of
Canadian programs without increasing the number of minutes of program
interruptions per hour. |
58. |
The sale of advertising time is, of course, the
life blood of commercial broadcasters. Advertising minutes, particularly
those placed in the most popular programs, have significant value. Thirty
second spots broadcast during the Super Bowl or Academy Awards can reach
$90,000, while those airing during games of the Stanley Cup Finals or during
the Grammy Awards cost in the $50,000 range. Nordicity, in its report
prepared for the Commission, submitted that an average value for 30 seconds
of advertising aired during peak time U.S. programs was $40,000. Of course,
advertising time on smaller conventional stations, or on specialty services,
has a lower value. |
59. |
Financing is at the heart of the drama issue.
English-language Canadian drama rarely represents an opportunity for business
success. With little opportunity for profit, broadcasters may be less willing
to invest in the promotion and scheduling of Canadian drama in order to
maximize audiences. An incentive approach that seeks to make Canadian drama
at least a break-even proposition should encourage broadcaster investment in
drama programming. Moreover, such an approach would also provide another
source of funding to complement public funding. |
60. |
Additional advertising time may be an effective
incentive for a number of reasons. It has significant commercial value,
particularly for the major television broadcasters who are in a position to
attract the largest audiences to Canadian drama. In addition, the amount of
the reward can easily be adjusted to take into account the nature of the
dramas broadcast, the size of the audience attracted or the financing
structure and/or licence fees. Finally, an advertising incentive would not
result in any reduction of Canadian content or any increase in program
interruptions. |
61. |
The Commission acknowledges the concerns raised
by certain specialty broadcasters and smaller conventional television
licensees. These concerns related to the possible negative effects of
increasing advertising inventory, particularly in the most popular programs.
In formulating its detailed proposals, the Commission has attempted to
balance the concerns expressed by smaller broadcasters against the benefits
that it expects would result from an effective incentive to broadcast more
original Canadian drama and to attract larger audiences to these programs. On
this basis, the Commission has decided to propose incentives that would
permit the broadcast of extra advertising minutes as the reward. |
|
Reduction in Part II Fees
|
|
Commission’s preliminary view
|
62. |
The Commission notes that section 11(2)(b) of
the Act gives the Commission the ability to provide for lower fees if, for
example, licensees fulfil certain programming objectives set by the
Commission. However, any such proposal would require a change to Commission
regulations and approval by Treasury Board. Further, the Commission notes
that the Standing Joint Committee on the Scrutiny of Regulations reported on
the matter of Part II licence fees on 27 October 2003. This Committee and the
Standing Committee on Canadian Heritage both made recommendations with
respect to Part II fees. |
63. |
On 25 March 2004, the government provided a
preliminary response to the Standing Joint Committee on the Scrutiny of
Regulations. The government stated that it was continuing its examination of
this issue and noted that, because of ongoing litigation, it was premature to
comment further. |
64. |
In the Commission’s view, it would be
inappropriate to propose an incentive reward based upon a reduction of Part
II fees in the absence of an announcement of government policy in this area. |
|
Incentive triggers
|
65. |
In Public Notice
2003-54, the Commission identified increases in original hours of
Canadian drama and increased viewing to those hours as its primary
objectives. The CCAU and other parties in the process identified increased
spending on Canadian drama as a further important objective. The Commission
considers that a package of incentives that addresses these three objectives
will be most effective. Accordingly, it proposes for public comment
incentives that are based upon three different triggers: first, the broadcast
of qualifying drama hours; second, an increase in viewing to Canadian drama
overall; and third, an increase in spending on Canadian drama. The proposed
incentive rewards for increasing viewing and expenditures are based upon the
reward for qualifying drama hours broadcast in a given year. |
|
Incentives for original hours
|
|
Commission’s preliminary determination
|
66. |
As discussed earlier in this notice, the
Commission considers that the focus of any drama incentive program should be
on the broadcast of original hours only. Encouraging licensees to broadcast
more original hours of Canadian drama would have a direct and positive impact
on the independent production sector and the employment of Canadian creative
talent and crafts persons. In the Commission’s view, more original hours
would also attract more viewers to Canadian programming. |
67. |
In order to determine the level of incentives
that would encourage the production of more original English-language drama,
the Commission used data from the Nordicity report, the CTF Activity Reports
and the submissions received in this proceeding. The Commission proposes a
three-part incentive model developed for the purpose of differentiating
between high cost drama productions having CTF funding, other high cost drama
productions that do not have CTF funding, and low cost drama productions that
are also produced without CTF funding. In addition, the Commission proposes a
mechanism for utilisation of additional advertising minutes earned through
the broadcast of all three of these types of drama productions. |
|
High cost, CTF-funded drama
|
68. |
The first part of the incentive model would
apply to original 10-point drama to be broadcast in peak time (7:00 p.m. to
11:00 p.m.) with production budgets of $800,000 per hour or more and with a
minimum licence fee of $240,000 per hour, the current CTF threshold.
According to the Nordicity study, the larger conventional television
ownership groups can expect to receive approximately $75,000 in advertising
revenue from the broadcast of two plays of such programs. This would result
in an estimated net loss of $165,000 per hour (the licence fee of $240,000
less advertising revenues of $75,000). |
69. |
As an incentive, the Commission proposes to
allow the broadcast of an additional two-and-a-half minutes of advertising
for each hour of original 10 point drama broadcast in peak time, having a
production budget of at least $800,000 per hour and a licence fee of at least
$240,000 per hour. Using the Nordicity estimate of $80,000 of
advertising revenue per minute for the large television broadcasters, this
incentive could result in an additional $200,000 in advertising revenues for
the broadcaster for each original hour of high budget Canadian drama
broadcast. This would result in such drama programming potentially earning a
profit of $35,000 per hour for the broadcaster. This economic model is based
on the assumption that the production is supported by the CTF. |
|
Other high cost drama, produced without CTF funding
|
70. |
As explained earlier in this public notice, the
CAB and others indicated in their submissions that CTF funding has not kept
pace with the demand for funding for English-language Canadian drama
programming. The CAB noted that, even were the Federal Government to restore
its contribution to the $100 million level, the funding gap would continue to
be a serious problem. The Commission notes that, although the government has
confirmed that it will contribute $100 million to the CTF in 2004/05 and
2005/06, a funding gap would likely continue, as evidenced by the fact that
the CTF drama envelope has been over-subscribed in recent years. |
71. |
In order to address the limited funding
available from the CTF, the Commission proposes, as the second part of its
incentive model, to permit four minutes of advertising in addition to the
two-and-a-half minutes noted above for productions that do not receive CTF
funding. The revenue from these advertising minutes could serve as a
replacement for funding that would otherwise be provided by the CTF to
support qualifying drama with budgets of $800,000 per hour or more. In
2001/02, the CTF provided an average of 37% of the funding for
English-language drama productions. The average production budget in that
year was $800,000 per hour. Preliminary data from the CTF for 2002/03
indicates that both the average CTF percentage contribution and the average
production budgets for English-language drama have increased. The Commission
estimates that an additional four minutes of advertising per hour would be
required in lieu of CTF funding in order to complete the financing for high
budget drama productions. The additional four minutes would be available only
for productions that do not receive CTF funding. |
72. |
The Commission expects broadcasters to work
creatively with producers to ensure that the advertising revenue that
broadcasters receive from the additional four minutes of advertising flows
through to the production. The intent of the proposal is that the revenues
associated with the four additional advertising minutes be used to compensate
a producer for the absence of CTF funding. Revenues earned under this
provision and passed on to producers would not to be counted as Canadian
programming expenditures on CRTC annual returns. |
73. |
The broadcaster would still benefit by receiving
two-and-a-half minutes of additional advertising per hour for airing the same
original production. Furthermore, drama productions financed without CTF
funding would facilitate the attainment of the rewards for achieving a
minimum group viewing threshold, as described below. The associated licence
fees for the production would also assist a broadcaster to obtain a proposed
drama expenditure reward, also described below. |
|
Low cost drama
|
74. |
The third part of the incentive model would
apply to 8- to 9-point drama programs, and 10-point drama programs having
production budgets of under $800,000 per hour. The Commission considers that
the production of lower point Canadian drama would benefit the system by
developing creative talent and production infrastructure. In order to provide
a continued incentive for broadcasters to license these productions, the
Commission proposes to permit broadcasters who air 8- to 9-point drama
programs, and 10-point drama programs having production budgets of under
$800,000 per hour, an additional half minute of advertising beyond the
regulatory limit for each original hour broadcast. |
|
Utilizing additional advertising minutes
|
75. |
The Commission proposes that, under the
incentive model for the three types of drama productions described above, the
additional advertising minutes would be available for each conventional
television station that broadcasts the original drama production. The
Commission proposes that there would be no carry-over of advertising minutes
from one broadcast year to the next. |
76. |
The incentives for the broadcast of original
Canadian drama productions would also be available to individual specialty
services. The additional minutes could be aired in any program broadcast by
the specialty service that has broadcast the qualifying original drama
program (provided that the extra minutes are aired in the same broadcast year
as the qualifying drama). The Commission recognizes that this incentive model
is generally based on the economics of the larger conventional television
systems, but is of the view that some specialty services, as well as smaller
conventional television licensees, may be able to take advantage of the
incentives available for lower budget drama productions. |
77. |
No additional advertising minutes would be
available for original drama productions that received funding as part of a
transfer benefit or a commitment given at the time of licensing. |
78. |
In determining production budgets, the
Commission expects parties to follow the business policies of the CTF, in
particular, the Accounting and Reporting Requirements and the Producer’s Fees
and Corporate Overhead Policy. |
|
Incentives for attracting increased viewing to Canadian drama
|
79. |
Increased viewing to Canadian drama programs is
one of the key objectives identified by the Commission in Public Notice
2003-54. In her report, Trina McQueen
proposed incentive rewards for "hit" drama, which she defined as an episode
drawing one million viewers to a conventional television station, or 500,000
viewers to a specialty service. An incentive trigger based upon viewing
received strong support in principle in the comments received, although most
parties considered that more work was required to develop an appropriate
trigger point that would take into account the varying reach of individual
licensees. Several parties recommended that any assessment of viewing to
Canadian drama should measure the cumulative audience to all drama, not just
the size of the audience for the original broadcast. The CAB also recommended
setting a specific goal for the industry to achieve over a defined period of
time. In the view of the CAB, a demanding but attainable objective would be
to increase viewing by Anglophones to Canadian drama, as a percentage of
viewing to all drama, from the present 11% to 15%, over a period of five
years. |
|
Commission’s preliminary view
|
80. |
The Commission sees merit in establishing an
industry goal. Having an industry goal would not only provide a clear overall
objective, but would also provide a means to measure the effectiveness of
regulatory incentives. However, the Commission notes that the measurement
proposed by the CAB would be based upon BBM fall diary data, and would
represent a percentage of all the drama available to Canadians – including
drama on non-Canadian services. In the Commission’s view, it would be more
appropriate to base an incentive on the viewing to Canadian drama as a
percentage of viewing to all drama on Canadian services. This would give
licensees a greater degree of control than they would have if the viewing to
non-Canadian services were included in the base. BBM diary data for 2002
shows that viewing to Canadian drama, as a percentage of viewing to all drama
on Canadian English-language services, was approximately 14%. |
81. |
The Commission also proposes that the viewing
percentages that would serve as the basis for any incentive model should be
calculated using metered data throughout the entire broadcast year, as
opposed to the BBM fall diary data. The Commission is currently working with
the CTF, Telefilm, Mediastats and interested government departments to refine
a methodology that will facilitate the addition of country of origin and
program genre for each program captured by both the BBM Canada and Nielsen
Media Research people meter databases. These two additional data fields will
be available for programs broadcast beginning 1 September 2003. The
Commission proposes to review the results of the project for the 2003/04
broadcast year, as they become available, with a view to setting an overall
industry objective early in the 2004/05 broadcast year. The viewing incentive
would be based on the viewing to Canadian drama as measured against the
viewing to all drama aired across all the conventional television and
specialty services that form part of an ownership group3.
The targets for each of the ownership groups would also be established in the
fall of 2004 for the 2004/2005 to 2009/2010 broadcast years. The Commission
would review the results with broadcasters on an annual basis to determine
whether their targets have been achieved. |
82. |
To establish the objectives for each of the
individual ownership groups, the Commission would first compare the current
level of viewing to Canadian drama across the industry to an overall industry
objective. To qualify for a viewing incentive reward, each ownership group
would be required to increase the percentage of viewing to Canadian drama
across all of the conventional television and specialty services in the group
to the percentage of viewing to all drama aired by those services. The
required annual increase could be set at a level of 20% of the difference
between the current industry level and the industry objective. For example,
using the current BBM fall diary statistics to explain the model, the
Commission could establish an objective for an increase in the viewing to
Canadian drama on English-language Canadian services over a five-year period,
from the current industry average of 14% to 20%. In this case, to qualify for
an incentive, an ownership group would be required to increase its viewing by
six percentage points over 5 years, or by 1.2 percentage points per year. The
Commission expects that it will be able to propose the precise viewing
objective for the industry in the Fall of 2004, once the metered viewing data
becomes available. |
83. |
The Commission proposes that the incentive for
meeting the viewing targets would be additional advertising minutes that
could be used in the following broadcast year. For example, if an ownership
group increased its viewing by 1.2 percentage points in year 1, it would
receive additional advertising minutes in the following year. In year 2, the
group would be required to achieve an increase in the ratio of viewing to
Canadian drama, as compared to total drama viewing, of 2.4 percentage points
over the initial base in order to receive the incentive reward of additional
advertising minutes in year 3. In order to receive the reward in year 6, the
ownership group would be required to increase its viewing percentage in year
5 by six percentage points from the 2003/04 base level. |
84. |
The Commission proposes that a conventional
station or a specialty service would be entitled to an incentive reward equal
to 25% of the additional advertising minutes accumulated by the station or
service for the broadcast of original hours of drama programming in the same
broadcast year. For the purpose of the viewing incentive, each conventional
television station within an ownership group would be permitted to air the
additional minutes in the broadcast year following that in which they are
earned. The additional minutes could be inserted in any program broadcast by
the stations that broadcast the original drama hours. Each specialty service
within an ownership group would also be entitled to an incentive equal to 25%
of the additional advertising minutes accumulated for the broadcast, on the
service, of original hours of drama programming in the same broadcast year.
Specialty services within the ownership group would be permitted to air the
additional minutes, in the next broadcast year, in any program broadcast by
the service that broadcast the original drama hours. |
|
Incentives for increased expenditures on Canadian drama
|
|
Commission’s preliminary view
|
85. |
A number of parties, including the CFTPA and the
CCAU, proposed a return to expenditure regulation. For the reasons noted
earlier, the Commission does not consider it appropriate to regulate
expenditures at this time. However, it does consider that, in order for its
objectives to be fulfilled, spending on Canadian drama must be maintained and
should be increased. Accordingly, the Commission is proposing an incentive
that would be triggered by an increase in spending on Canadian drama. |
86. |
The Commission proposes to establish an overall
objective for expenditures on Canadian drama that would represent 6% of the
total revenues earned by the Canadian private television industry, to be
achieved over a five-year period. Each ownership group would be encouraged,
through the incentive of additional advertising minutes, to increase its
Canadian drama expenditures, as a percentage of revenue earned by its
conventional television services, by an amount equal to the difference
between the current industry average and the 6% industry objective. |
87. |
As an example, in each of 2002 and 2003,
English-language private conventional television licensees expended a
combined average of 4.0% (excluding the CTF top-up) of their total revenues
on Canadian drama. In order to be entitled to the incentive reward, each
ownership group would be required to increase the spending by its
conventional television stations on Canadian drama, as a percentage of total
revenues, by 0.4 percentage points per year, or by two percentage points over
a five-year period. The Commission notes that, for the purpose of this
incentive, CTF "top-up" funding would be excluded from the calculations. |
88. |
The Commission will review the financial results
for the 2003/04 broadcast year for each of the ownership groups before
setting the incentive triggers for each group for 2004/05 to 2009/10. The
annual reporting of broadcast year financial results, including program
spending, is not usually provided to the Commission until the end of November
following the end of the broadcast year. The Commission would expect each
ownership group wishing to take advantage of the incentives to provide, in
the annual returns filed by its licensed undertakings, the calculations
necessary to demonstrate that the group has met the expenditure target. If an
ownership group has met the target, its members would be entitled to use the
additional advertising minutes commencing on the date that their annual
return is filed with the Commission. Broadcasters would have the remainder of
the broadcast year to broadcast the additional minutes. |
89. |
Broadcasters would not be permitted to include
expenditures on Canadian drama programming undertaken to fulfil transfer
benefits or commitments given at the time of licensing in the calculations
used to determine whether the incentive targets have been met. They would be
required in their annual returns to clearly identify and separate program
expenditures used to fulfil transfer benefits and new licensing commitments
from on-going program spending. |
90. |
The Commission is currently reviewing the annual
returns for specialty services with a view to determining how best to monitor
their spending on individual program categories, as is now done in the case
of the annual returns filed by the licensees of conventional television
services. At this time the Commission does not collect information with
regard to expenditures by program category for specialty services. The
potential qualification of specialty services for the drama expenditure
incentive model will be reviewed at a later date. |
91. |
The Commission proposes that each conventional
television station within an ownership group that has met its expenditure
target would be entitled to an incentive reward equal to 25% of the
accumulated minutes earned through the broadcast of original hours of drama
programming in the same broadcast year as the expenditures were made. The
stations would be permitted to air the additional minutes in the next
broadcast year in any program broadcast on the station. |
|
Impact of advertising incentives
|
92. |
As noted earlier, the Commission considers that
any additional advertising minutes are likely to be placed by most licensees
in high-value non-Canadian programming. The average English-language
conventional television station broadcasts approximately 14 hours per week of
U.S. entertainment programming in peak time. The U.S. programming purchased
by Canadian conventional television broadcasters normally contains between 14
and 16 minutes of advertising material per hour. Because conventional
television stations are limited by regulation to a maximum of 12 minutes per
hour of advertising, there would be a minimum of two minutes per hour of
potential additional advertising time available to Canadian broadcasters.
Over a year, this would represent a potential of at least 1,456 minutes of
advertising available to each Canadian conventional television licensee for
insertion in non-Canadian programming broadcast during peak time. |
93. |
Based upon the Commission’s proposed incentive
package, a station that broadcasts approximately 65 hours of qualifying
original Canadian drama per year, and obtains both the 25% viewing and
expenditure incentives, could broadcast approximately 200 additional minutes
of advertising in a year. The dollar value of these extra minutes would be a
significant contribution to the production of Canadian drama. |
|
Implementation and monitoring
|
94. |
The Commission proposes that any incentives
based upon additional advertising time would be implemented by way of
condition of licence. Conventional television licensees that wish to
participate in the incentive program would apply for a condition of licence
permitting them to broadcast additional minutes of advertising material, in
addition to the 12 minutes per hour permitted by section 11 of the
Regulations. Specialty licensees would apply to amend the advertising limits
set out in their conditions of licence. |
95. |
The Commission expects that applications seeking
the conditions of licence necessary to implement the new incentives could be
approved early in 2005. Licensees would be able to accumulate advertising
credits from the beginning of the 2004/05 broadcast year. However, licensees
would not be permitted to broadcast the additional advertising minutes until
the appropriate conditions of licence have been approved. |
96. |
The Commission would monitor the performance of
those licensees participating in the incentive program through a combination
of the annual returns and annual reports submitted by the participating
licensees, and the Commission’s logs. The details of the monitoring plan are
set out below. |
|
Evaluation of the incentive package
|
97. |
The Commission has proposed viewing and
expenditure targets to be achieved by the industry over a five-year period.
Nevertheless, the Commission would evaluate the industry’s progress towards
these targets on an annual basis. The results of this evaluation would be
made public in the Commission’s Broadcast Policy Monitoring Report. If the
annual results do not demonstrate sufficient progress towards the targets,
the Commission could introduce necessary changes to its policy at any time. |
|
Summary of the proposed incentive package
|
98. |
Based upon the comments received in response to
Public Notice 2003-54 and on the
available economic data, the Commission proposes, for comment, the following
package of incentives designed to increase the broadcast hours of original
Canadian drama, increase viewing to Canadian drama, and increase expenditures
on Canadian drama. Appendices 4 and 5 summarize the criteria for qualifying
dramas and how the incentive package could work for an ownership group. |
|
Incentives to broadcast original hours of Canadian drama
|
99. |
These incentives have, as their objective, an
increase in the broadcast of original hours of Canadian drama. There are
three different triggers, each with a different reward. |
|
- Trigger: the broadcast of 10-point, original, CTF-funded drama
in peak time (7:00 p.m. to 11:00 p.m.) with a production budget of at least
$800,000 per hour and a minimum licence fee as established by the CTF.
|
|
Reward: two-and-a-half minutes of additional advertising for each
original hour broadcast.
|
|
the broadcast of 8- to 10-point, original drama at
any time or 10-point original drama broadcast in peak time, having a
production budget of less than $800,000 per hour.
|
|
Reward: half a minute of additional advertising for each original
hour broadcast.
|
|
: the broadcast of 10-point, original drama, broadcast in
peak time (7:00 p.m. to 11:00 p.m.) having a production budget of at least
$800,000 per hour and a minimum licence fee as established by the CTF, but
without having CTF funding.
|
|
Reward : A total of six-and-a-half minutes of additional advertising
time for each original hour broadcast – i.e. the two-and-a-half minutes
earned under the first trigger described above, plus four minutes for not
accessing CTF funding.
|
100. |
In the case of each trigger, hourly production
budgets would be determined on the basis of CTF business policies.
Implementation of the triggers and rewards would be by condition of licence. |
101. |
Licensees would be required to submit a report
to the Commission at the end of each broadcast year, specifying the
following: |
|
- the number of qualifying hours broadcast including titles, episode
number and date and time of broadcast on each conventional television or
specialty service;
|
|
- the production budget of each qualifying hour broadcast and an
identification of those productions financed with revenues derived from the
additional four minutes of advertising provided in lieu of CTF funding; and
|
|
- the name, time and date of broadcast of the programs in which the extra
advertising minutes were placed.
|
102. |
As required, the Commission will cross-check a
licensee’s reports against the Commission’s logs data. |
|
Incentive to increase viewing to Canadian drama
|
103. |
The objective of this incentive is to increase
the viewing to Canadian drama on Canadian English-language services, as a
percent of all drama viewing on Canadian services. |
|
- Trigger: an annual increase in the ratio of total viewing to all
Canadian drama compared to total drama viewing by all stations and
specialty services within a broadcast group. The increase would be measured
using metered data throughout the broadcast year.
|
|
Reward : 25% of the additional advertising minutes earned by the
broadcast of qualifying original Canadian drama programs.
|
104. |
Licensees taking advantage of the incentive
would be required to submit a report to the CRTC at the end of each broadcast
year providing the same information as that specified above in paragraph 101.
Implementation would be by condition of licence. |
|
Incentive to increase expenditures on Canadian drama
|
105. |
This incentive has as its objective an increase
in the spending on Canadian drama by the English-language conventional
television industry, as a percent of total revenues, from 4% to 6% over a
five-year period. |
|
- Trigger: a total increase by all conventional television
stations within a broadcast group of 0.4 percentage points in annual
expenditures on Canadian drama.
|
|
Reward : 25% of the additional advertising minutes earned for the
broadcast of qualifying original Canadian drama programs.
|
106. |
Licensees taking advantage of the incentive
would be required to provide the appropriate calculations with their annual
returns in order to enable the Commission to monitor performance. Again,
implementation would be by condition of licence. |
|
The regulatory framework
|
107. |
The Commission considers that, if the proposed
incentive package is implemented, the regulatory framework with respect to
Canadian content and priority programming requirements should remain
unchanged until there has been sufficient opportunity to evaluate the effect
of the new incentives. Accordingly, licensees will be required to continue to
fulfil conditions of licence relating to priority programming. The existing
150% and 125% dramatic time credits against priority programming will remain
in effect. There will be no change to the Canadian content regulations. |
108. |
The proposed package of incentives would apply
to the licensees of all conventional, private, English-language television
stations, as well as to the licensees of those English-language specialty
television services that are permitted by condition of licence to broadcast
Category 7 programs. The proposed incentive package would also apply to the
English-language television services of the CBC. The Commission recognizes
the vital role that the CBC has played in developing, broadcasting and
attracting audiences to Canadian drama. The Commission also notes that, in
its submission, the CBC underlined that stable and predictable financing is
what the CBC needs most. |
109. |
In the CBC’s view the audience-based incentives
proposed by Trina McQueen would not be of benefit to the CBC. The Commission,
however, notes that the CBC carries certain types of programming that has
significant value to advertisers – in particular, sports and foreign feature
films. Further, advertising revenues make up a significant portion of CBC’s
overall budget. Accordingly, the Commission considers that the proposed
incentive package may, in fact, have some value to the CBC. |
|
Licence fee top-ups
|
110. |
A number of parties submitted that the practice
of allowing money received from the CTF to count towards Canadian program
expenditure (CPE) obligations for specialty services lowers the amount of
money a service must invest in Canadian programming. Parties also argued that
the practice puts pressure on the CTF as it gives licensees an additional
incentive to seek CTF funding. In this regard, it was suggested that services
are often willing to pay higher licence fees in order to increase the
likelihood of receiving CTF funding. |
111. |
The Commission notes that the existing CPE
requirements were partly based on the projected CTF licence fee top-ups for
each service. If the licence fee top-up was deemed to be ineligible in the
future, fairness would require that a public process be held to re-calculate
the CPE requirements for each service. The end result would likely be a
similar amount of money spent on Canadian programming, only calculated
differently. Accordingly, the Commission does not propose any change to the
way in which licence fee top-ups are claimed at this time. |
|
At risk equity
|
112. |
At risk equity refers to equity investments in
drama productions that have no guarantee of a return. Currently, licensees of
specialty services may only claim the losses on equity investments as
Canadian program expenditures. Conversely, pay services are authorized to use
equity investments to fulfil their CPE obligations. |
113. |
In recent years very few equity investments in
Canadian programming have been undertaken by Canadian specialty services. In
contrast, pay services have traditionally financed Canadian feature films by
way of equity investments. The Commission considers that permitting specialty
services to count at risk equity against CPE requirements could result in the
increased willingness and ability of those few specialty services that
commission original Canadian drama to make equity investments. |
114. |
The Commission agrees with the positions of
Telefilm and the CCAU who submitted that an equity investment is not truly at
risk if it has some return that is guaranteed. In these cases, it is more
akin to a loan or advance. In accepting equity investments to count against
CPE requirements, the Commission would require that the investment be
demonstrably "at risk". The Commission seeks comment on the most appropriate
means to ensure that broadcaster investments are truly at risk and do not
replace appropriate licence fees. |
|
Reflecting Canada’s diversity
|
115. |
Drama is an important way to reflect and share
culture. Public Notice 2003-54 emphasized
that "drama can and should reflect Canadians of every background and culture
to each other". While few comments raised the issue of diversity in Canadian
drama programming, the Commission considers that it is a crucial element that
must be taken into account by producers and broadcasters alike in the
development of new drama projects. |
116. |
The Commission has taken a number of measures to
meet cultural diversity objectives. In the 1999 TV policy, emphasis was
placed on the role and responsibility of television licensees to accurately
reflect the cultural diversity of Canadians in their programming. To aid this
objective the Commission, in the same public notice, indicated its support
for an industry and community task force to examine the issue of cultural
diversity. The creation of the Task Force on Cultural Diversity was announced
in Representation of cultural diversity on television – Creation of an
industry/community task force, Public Notice CRTC
2001-88, 2 August 2001. The task force is
expected to publish its report shortly. In addition, most licensees are
required to file annual cultural diversity plans which describe how each is
meeting the cultural diversity objectives within its corporate organization
and in its programming. These reports are available for public consultation. |
117. |
In the Commission’s view, the mechanisms are in
place to encourage licensees to ensure that the original Canadian drama they
broadcast reflects Canada’s diversity. |
|
Call for comments
|
118. |
The Commission seeks comment on its proposals
for the incentives described in this public notice. Specifically, the
Commission seeks comment on the following questions: |
|
1. For the purpose of the proposed incentives, please comment on the
following definition for an original program:
|
|
An original program is a program that has never before been
distributed by any licensee of a broadcasting undertaking and that will
be distributed for the first time by the licensee.
|
|
2. The Commission proposes incentives for Canadian drama programs
directed to children when such programs are broadcast at times of the day
that are appropriate for children. Should the Commission define these time
periods? If so, what specific hours of the day should be considered as
appropriate for television viewing by children?
|
|
3. Is two-and-a-half additional minutes of advertising for each original
hour of high cost, 10-point Canadian drama broadcast in peak time an
appropriate incentive reward? If not, what would be the appropriate
incentive?
|
|
4. Is thirty seconds of additional advertising for 8- and 9-point
Canadian drama, or for 10-point drama broadcast outside peak time, an
appropriate incentive reward? If not, what would be the appropriate
incentive?
|
|
5. Will the proposed incentive of an additional four minutes of
advertising for drama programs that are not funded by the CTF help reduce
pressure on the CTF, while still encouraging broadcasters to acquire new
Canadian drama?
|
|
6. How can the Commission best ensure that revenues derived from the
additional four minutes of advertising for drama programs that are not
funded by the CTF flow through to Canadian drama production?
|
|
7. Is an increase of 0.4 percentage points in annual spending on
Canadian drama an appropriate trigger for an incentive reward? If not, what
would be the appropriate increase?
|
|
8. Is the reward for achieving the viewing or expenditure targets (25%
of the minutes earned through the broadcast of original hours of drama)
appropriate? If not, what would be the appropriate incentive?
|
|
9. Is it necessary, or appropriate, to place a cap on the number of
extra advertising minutes earned? If so, what should that cap be?
|
|
10. Will the proposed incentive program for drama impact negatively on
other program categories such as documentary? If so, what could be done to
minimize any negative impact?
|
|
11. Please comment on the Commission’s proposed five-year viewing and
expenditure targets. Should such targets be established for a shorter
period of time, such as three years? If so, what would be appropriate
viewing and expenditure targets over a three-year period?
|
|
12. How should the Commission ensure that broadcaster equity investments
are demonstrably at risk investments? Are any other safeguards necessary or
appropriate?
|
119. |
The Commission will accept comments that it
receives on or before Monday, 21 June 2004. |
120. |
The Commission will not formally acknowledge
comments. It will, however, fully consider all comments and they will form
part of the public record of the proceeding, provided that the procedures for
filing set out below have been followed. |
|
Procedures for filing comments
|
121. |
Interested parties can file their comments to
the Secretary General of the Commission by using ONE of the following
formats: |
|
- Intervention/Comments form
available from the Commission’s web site by indicating and selecting
the public notice number under the Decisions, Notices and Orders
section
|
|
OR
|
|
|
|
OR
|
|
- by mail to
CRTC, Ottawa, Ontario K1A 0N2
|
|
OR
|
|
|
122. |
Submissions longer than five pages should
include a summary. |
123. |
Please number each paragraph of your
submission. In addition, please enter the line ***End of document***
following the last paragraph. This will help the Commission verify that the
document has not been damaged during transmission. |
124. |
The Commission will make comments filed in
electronic form available on its web site at www.crtc.gc.ca but only in the
official language and format in which they are submitted. Such comments may
be accessed in the Public Proceedings section of the CRTC web site.
Copies of all comments, whether filed on paper or in electronic form, will
also be placed on the public examination file. |
125. |
The Commission encourages interested parties to
monitor the public examination file and the Commission’s web site for
additional information that they may find useful when preparing their
comments. |
|
Examination of public comments and related documents at the following
Commission offices during normal business hours
|
|
Central Building
Les Terrasses de la Chaudière
1 Promenade du Portage, Room G-5
Gatineau, Quebec K1A 0N2
Tel: (819) 997-2429 - TDD: 994-0423
Fax: (819) 994-0218 |
|
Metropolitan Place
99 Wyse Road
Suite 1410
Dartmouth, Nova Scotia B3A 4S5
Tel: (902) 426-7997 - TDD: 426-6997
Fax: (902) 426-2721 |
|
405 de Maisonneuve Blvd. East
2nd Floor, Suite B2300
Montréal, Quebec H2L 4J5
Tel: (514) 283-6607
Fax: (514) 283-3689 |
|
55 St. Clair Avenue East
Suite 624
Toronto, Ontario M4T 1M2
Tel: (416) 952-9096
Fax: (416) 954-6343 |
|
Kensington Building
275 Portage Avenue
Suite 1810
Winnipeg, Manitoba R3B 2B3
Tel: (204) 983-6306 - TDD: 983-8274
Fax: (204) 983-6317 |
|
Cornwall Professional Building
2125 - 11th Avenue
Room 103
Regina, Saskatchewan S4P 3X3
Tel: (306) 780-3422
Fax: (306) 780-3319 |
|
10405 Jasper Avenue
Suite 520
Edmonton, Alberta T5J 3N4
Tel: (780) 495-3224
Fax: (780) 495-3214 |
|
530-580 Hornby Street
Vancouver, British Columbia V6C 3B6
Tel: (604) 666-2111 - TDD: 666-0778
Fax: (604) 666-8322 |
|
Secretary General |
|
This document is available in alternate
format upon request and may also be examined at the following Internet site:
http://www.crtc.gc.ca |
|
Appendix 1 to Broadcasting Public Notice CRTC 2004-32
|
|
Number of Drama and Comedy Program Hours Scheduled During Peak Viewing
Hours (7 p.m. to 11 p.m.)
|
|
The following tables (Tables 1.1 to 1.4) set
out the number of drama/comedy (category 7) Canadian program hours scheduled
for the 1998/99 to 2002/03 broadcast years during the peak viewing period of
7 p.m. to 11 p.m. for the following conventional television stations: |
|
|
|
|
|
|
|
Note to tables: |
|
-2 Tables in hours and minutes (hh:mm). |
|
-3 Calculation of the Estimated Average
Weekly Hours of Canadian Drama/Comedy: Total Hours of Drama/Comedy divided by
365 days times 7. |
|
-4 Source: Information taken from the logs
data filed by the station with the CRTC. Information on file January 8, 2004,
for CBLT and March 29, 2004 for CFTO-TV and CIII-TV stations. |
|
Table 1.1: CFTO-TV CIII-TV and CBLT Station Totals
|
|
(hh:mm) |
Total Hours per Broadcast Year |
Estimated Average Weeekly Hours |
|
98/99 |
99/00 |
00/01 |
01/02 |
02/03 |
98/99 |
99/00 |
00/01 |
01/02 |
02/03 |
CFTO-TV, Toronto (CTV) |
291:51 |
263:34 |
270:59 |
247:32 |
255:18 |
5:35 |
5:03 |
5:11 |
4:44 |
4:53 |
CIII-TV, Toronto (Global) |
290:38 |
324:02 |
338:28 |
310:50 |
298:36 |
5:34 |
6:12 |
6:29 |
5:57 |
5:43 |
CBLT, Toronto (CBC) |
293:47 |
359:37 |
282:30 |
248:38 |
264:44 |
5:38 |
6:53 |
5:25 |
4:46 |
5:04 |
Total |
876:17 |
947:15 |
891:58 |
807:01 |
818:39 |
16:48 |
18:09 |
17:06 |
15:28 |
15:42 |
|
|
Table 1.2: CFTO-TV Toronto (CTV)
|
|
|
(hh:mm) |
Total Hours per Broadcast Year |
Estimated Average Weekly Hours |
CFTO-TV, Toronto (CTV) |
98/99 |
99/00 |
00/01 |
01/02 |
02/03 |
98/99 |
99/00 |
00/01 |
01/02 |
02/03 |
07a |
Ongoing dramatic series |
220:47 |
198:06 |
158:12 |
171:09 |
157:27 |
4:14 |
3:47 |
3:02 |
3:16 |
3:01 |
07b |
Ongoing comedy series |
0:00 |
9:55 |
0:59 |
7:25 |
20:21 |
0:00 |
0:11 |
0:01 |
0:08 |
0:23 |
07c |
Specials, mini-series, etc. |
55:41 |
47:45 |
72:04 |
48:31 |
31:16 |
1:04 |
0:54 |
1:22 |
0:55 |
0:35 |
07d |
Theatrical feature films |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
07e |
Animated TV prog. |
1:00 |
0:00 |
7:00 |
1:27 |
1:00 |
0:01 |
0:00 |
0:08 |
0:01 |
0:01 |
07f |
Comedy sketches, etc. |
13:23 |
7:48 |
32:43 |
18:59 |
45:13 |
0:15 |
0:08 |
0:37 |
0:21 |
0:52 |
07g |
Other Drama |
1:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:01 |
0:00 |
0:00 |
0:00 |
0:00 |
|
Total Drama |
291:51 |
263:34 |
270:59 |
247:32 |
255:18 |
5:35 |
5:03 |
5:11 |
4:44 |
4:53 |
Source: CRTC Logs – PGM 21 Report run March 29, 2004 |
|
Table 1.3: CIII-TV Toronto (Global)
|
|
|
(hh:mm) |
Total Hours per Broadcast Year |
Estimated Average Weekly Hours |
CIII-TV, Toronto (Global) |
98/99 |
99/00 |
00/01 |
01/02 |
02/03 |
98/99 |
99/00 |
00/01 |
01/02 |
02/03 |
07a |
Ongoing dramatic series |
195:14 |
216:37 |
232:01 |
184:37 |
203:05 |
3:44 |
4:09 |
4:26 |
3:32 |
3:53 |
07b |
Ongoing comedy series |
70:23 |
61:32 |
45:44 |
2:30 |
5:59 |
1:21 |
1:10 |
0:52 |
0:02 |
0:06 |
07c |
Specials, mini-series etc. |
6:55 |
23:24 |
23:49 |
35:17 |
14:27 |
0:07 |
0:26 |
0:27 |
0:40 |
0:16 |
07d |
Theatrical feature films |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:00 |
07e |
Animated TV prog. |
17:02 |
22:23 |
36:53 |
88:25 |
74:03 |
0:19 |
0:25 |
0:42 |
1:41 |
1:25 |
07f |
Comedy sketches, etc. |
0:00 |
0:00 |
0:00 |
0:00 |
1:00 |
0:00 |
0:00 |
0:00 |
0:00 |
0:01 |
07g |
Other Drama |
1:01 |
0:04 |
0:00 |
0:00 |
0:00 |
0:01 |
0:00 |
0:00 |
0:00 |
0:00 |
|
Total Drama |
290:38 |
324:02 |
338:28 |
310:50 |
298:36 |
5:34 |
6:12 |
6:29 |
5:57 |
5:43 |
Source: CRTC Logs – PGM 21 Report run March 29, 2004 |
|
Table 1.4: CBLT Toronto (CBC)
|
|
|
(hh:mm) |
Total Hours per Broadcast Year |
Estimated Average Weekly Hours |
CBLT, Toronto (CBC) |
98/99 |
99/00 |
00/01 |
01/02 |
02/03 |
98/99 |
99/00 |
00/01 |
01/02 |
02/03 |
07a |
Ongoing dramatic series |
104:52 |
135:00 |
89:00 |
66:59 |
45:59 |
2:00 |
2:35 |
1:42 |
1:17 |
0:52 |
07b |
Ongoing comedy series |
17:30 |
21:00 |
40:18 |
14:30 |
43:00 |
0:20 |
0:24 |
0:46 |
0:16 |
0:49 |
07c |
Specials, mini-series etc. |
40:00 |
48:12 |
26:20 |
50:46 |
54:46 |
0:46 |
0:55 |
0:30 |
0:58 |
1:03 |
07d |
Theatrical feature films |
11:25 |
12:39 |
4:00 |
4:00 |
12:46 |
0:13 |
0:14 |
0:04 |
0:04 |
0:14 |
07e |
Animated TV prog. |
2:00 |
2:06 |
6:30 |
1:30 |
1:30 |
0:02 |
0:02 |
0:07 |
0:01 |
0:01 |
07f |
Comedy sketches, etc. |
111:30 |
137:10 |
113:52 |
108:53 |
106:09 |
2:08 |
2:37 |
2:11 |
2:05 |
2:02 |
07g |
Other Drama |
6:30 |
3:30 |
2:30 |
1:59 |
0:32 |
0:07 |
0:04 |
0:02 |
0:02 |
0:00 |
|
Total Drama |
293:47 |
359:37 |
282:30 |
248:38 |
264:44 |
5:38 |
6:53 |
5:25 |
4:46 |
5:04 |
Source: CRTC Logs – PGM 21 Report run January 8, 2004 |
|
Appendix 2 to Broadcasting Public Notice CRTC 2004-32
|
|
Programming and Production Expenses Category 7 Drama
|
|
English
Language |
(000000 $) |
Annual % Growth |
Growth
'97 to '03 |
|
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
98 |
99 |
00 |
01 |
02 |
03 |
|
Private Conventional Television* |
45,0 |
73,0 |
57,8 |
60,4 |
62,6 |
58,6 |
64,7 |
62% |
-21% |
5% |
4% |
-6% |
10% |
44% |
CBC Television |
35,9 |
35,3 |
62,0 |
62,4 |
46,2 |
60,7 |
66,7 |
-2% |
76% |
1% |
-26% |
31% |
10% |
85% |
Total |
81,0 |
108,3 |
119,8 |
122,9 |
108,8 |
119,3 |
133,4 |
34% |
11% |
3% |
-11% |
10% |
10% |
62% |
*Includes ethnic stations
Source: CRTC Financial database. |