Whistler, British Columbia
May 30, 2014
Stephen Simpson, Regional Commissioner for British Columbia and the Yukon
Canadian Radio-television and Telecommunications Commission
Check against delivery
Thank you very much.
Well, here we are in another year of dynamic change. And another year of outside voices telling you need to be ready for the challenging road ahead. In the meantime, your inside voice is saying “so when does the easy part happen?”
Before I get down to business, I'd like to first offer special congratulations to the nominees who will be honoured tonight at the Awards of Excellence.
So here is my annual industry update and a little on what’s on our plate at the Canadian Radio-television and Telecommunications Commission (CRTC)...
Radio sector
In a few days, we will be publishing the 2013 financial results for the radio sector. Today, I can give you a preview of some of those numbers.
Revenues for all AM and FM radio stations across Canada held steady at $1.6 billion in 2013. Stations reported a 5% increase in revenues from national ads, which more than made up for a marginal decline in local ads.
In British Columbia, station revenues went up slightly in 2013. Revenues from local ads held steady at $149.5 million, while those from national ads increased by 4% to $58.5 million.
In Vancouver, both local and national ads were down slightly, with radio revenues dropping $2 million to $124 million in 2013. However, thanks to reduced expenses, profits before interest and taxes (PBIT) improved from $28.8 million to $29.9 million, with a 24.1% margin.
In Victoria, a drop in local ad sales, which was offset by an increase in national ads, and total revenue remained virtually unchanged. PBIT was up from $2.38 million to $3.02 million, and the PBIT margin for 2013 was 17.3%.
In Kelowna, local ad sales also declined again and overall revenues were only partially offset by a gain in national sales. This meant an overall decline in total revenue from $11.2 million to $10.7 million. You might recall that 2012 PBIT was minus-$1.09 million, but with reduced expenses in 2013 PBIT loss was lessened to minus-$257,000.
Radio continues to make an important contribution to the Canadian economy, and our culture as well by showcasing Canadian artists. Yet, growth has clearly slowed over the last few years. At the CRTC, we want to ensure our policies foster an environment where you can be creative and experiment with innovative business models.
Commercial radio policy review
On the theme of radio policy, as you know, the Commission is currently conducting a targeted review of our commercial radio policy. The Canadian radio sector is generally in good shape and we have seen no need for a major overhaul of the policy, which was last reviewed in 2006.
However, there are some areas that could use some updating.
We have asked for comments on a number of issues, including:
- the Commission's approach to calls for applications and to small markets
- the processing of applications for the conversion of low-power, unprotected stations to protected status
- the review of definitions for local and national time sales, and the need for a definition of regional advertising
an update of the rules which specify how licensees must maintain and submit their logs and records
- the possible adoption of new compliance mechanisms to encourage licensees to comply at all times with regulatory requirements and conditions of licence, and
- the possible implementation of Hybrid Digital Radio technology in Canada, along with the need to adopt a regulatory framework.
You are understandably eager to know what changes may emerge from this process. But you will also understand that it is still underway, so there’s nothing I can tell you at this point. However, I do want to thank those who participated in the review. Rest assured that we are carefully reviewing your comments.
Fundamental issues in radio
But there are fundamental issues in the radio industry that are more important in the long run than the specific policy adjustments we're currently considering.
Canadians still rely on radio for much of their music. According to Nielsen, 61% of Canadians tune to traditional terrestrial radio to hear music that is new to them. And they find 42% of their new music on radio. That's the highest share among all sources, including YouTube, iTunes and social media.
Canadians also rely on radio for news and information, especially at the local and community level where people live their daily lives.
Radio is a great product! And it's free to the consumer.
But there are new products out there. All of them attractive…and many of them free (or nearly free).
Rdio, Slacker, Songza and Google’s Play Music. It is only a matter of time before Apple also enters the Canadian market now that the Copyright Board of Canada has released its decision on streaming rates.
These services are delivering content to digital mobile devices that already vastly outnumber portable radios outside the home. The most enthusiastic adopters of digital media are the young.
And it's precisely among younger Canadians that radio listening is in decline.
If you look at Canada's five major metropolitan markets, people between 18 and 24 are tuning in about 30% less than the general population 12 years old and up. The 12 to 17 group tune in about 50% less. The habits that people build up in their youth are likely to persist as they grow older. And new technologies will become even more pervasive.
And this is happening just as the battleground is shifting to the radio’s sacred ground – the automobile.
The connected car is coming. This new generation of vehicles will feature Web-based entertainment systems in the dashboard that will provide easy access to all sorts of content. For example, Pandora planned to make its Web service available to a third of new vehicles sold in the U.S. by the end of 2013.
AM and FM distribution of your content is now being challenged by WiFi, satellite and cellular. But these are new channels of distribution. It is your programming and relevance in your markets that has created the strong patterns of listener loyalty with the communities you serve.
As experienced programmers you have the ability to lever your libraries of Canadian music and on-air talent to connect and interact more strongly with Canadian listeners than a music service can ever accomplish.
Radio broadcasters face many of the same challenges as their TV colleagues in adapting to the new digital world. They will have to move aggressively to claim their share of that new marketplace. We at the CRTC will do all we can to maintain a supportive environment for a forward-looking radio industry.
Television
I'd now like to turn to television.
Earlier this month, the CRTC released its statistical and financial report on local television stations for the 2013 broadcast year.
Revenues have slipped. Local private stations saw their overall revenues drop by more than $100 million to $1.94 billion, a 4.6% decrease. Of that decrease, $74.7 million came out of advertising revenues.
Although private stations have tried to cut expenses, their PBIT has declined from $22.9 million to minus-$2.3 million, and the PBIT margin declined by 1.1% to minus-0.1%.
So there's no doubt that local television, like most parts of the broadcasting industry, is facing some challenges as technology, the marketplace and audience behaviours are changing.
People with an Internet account and a digital device can now access a wide choice of information and entertainment, most of it free. There's a range of consumer choice available that we've never had before. And that brings huge consumer benefits to Canadians.
It also means that the CRTC is doing its regulatory work in a vastly changed environment. How can we make sure that the television system is meeting the needs of Canadians, now and in the future?
Let's Talk TV
Unlike past CRTC processes, this time we have chosen to start with the Canadians who watch TV. We launched the first phase last October. We asked about the programs they watched and how they received them. Whether they had enough information to make informed choices, and where to turn if they weren't satisfied.
We got an immediate and enthusiastic response via their comments, online discussions and even "Flash!" conferences.
The second phase was launched in February, where we used their input to publish a Choicebook – an interactive questionnaire designed to present various scenarios. This gave Canadians an opportunity to consider how the needs and interests of other viewers relate to their own. The respondents were then asked to make difficult choices about their television system.
So far more than 10,000 people have taken part in Let's Talk TV, and the results of the first two phases have been made public.
We have also published the report the government asked us to prepare on maximizing viewers' choice in television programming, as well as the results of a telephone survey we conducted in December.
The third phase
Last month we launched the third phase of Let's Talk TV. In light of what we've heard so far, we're proposing a number of changes to the TV system.
We're inviting members of the public to share their views on these proposals. Then, on September 8, we will begin a public hearing on the future of the television system. During the hearing we will also host an online discussion forum for Canadians.
Our proposals have three aims:
- to foster choice and flexibility in selecting programs
- to encourage the creation of compelling and diverse content made by Canadians, and
- to empower Canadians to make informed choices.
Choice and flexibility
First, fostering choice and flexibility. We're proposing that all subscribers have the option of receiving a slimmed-down, all-Canadian basic package. It would consist of local stations, channels of public interest that currently must be distributed to all subscribers, such as CPAC and APTN, provincial educational channels and the services operated by provincial legislatures.
Subscribers would have three options for adding other services of their choice:
- Pick-and-pay, choosing individual channels.
- Build-your-own-package, composed of pay and specialty channels, or
- Choose from packages pre-determined by the cable or satellite company.
Promoting Canadian-made content
We will also be exploring possible future business models for television stations and looking at various ways of supporting programs made by Canadians.
Another area of discussion is the possible elimination of simultaneous substitution — the replacement of the signal of an American channel by that of a Canadian channel broadcasting the same program at the same time. We've received many complaints from Canadians about substitution errors that cause them to miss parts of live events like National Football League games.
Simultaneous substitution can lock Canadian broadcasters into the schedules set by American broadcasters. Abolishing it could free them to schedule and promote Canadian shows.
The industry needs accurate knowledge of the changing interests of viewers to help it respond to them more effectively. We will therefore consider the usefulness of an audience-measurement system using cable set-top boxes, a system designed in such a way as to protect viewers' privacy.
Empowering Canadians
During the Let's Talk TV process, Canadians have said that they want more accurate and understandable information about the terms of the television service they are buying. We'll be asking whether guidelines are needed to promote greater clarity in contracts and more transparency in defining how subscriptions may be cancelled.
We'll also consider the introduction of a code of conduct for cable and satellite companies, and the establishment of an ombudsman to help subscribers resolve disputes with their provider.
We need to hear from Canadians before we make any final decisions. We are inviting people to share their views on the proposed changes to their television system by June 25.
Conclusion
I’m grateful for being invited to your conference every year.
I hope today’s overview gives you a better sense of how we are also responding to the ever-changing technologies and consumer behaviours that drive your industry.
Thank you very much.
