Tom Pentefountas at the Ontario Association of Broadcasters' annual conference

Speech

Toronto, Ontario
November 10, 2015

Tom Pentefountas, Vice-Chairman, Broadcasting
Canadian Radio-television and Telecommunications Commission

Check against delivery

Let me start by congratulating you as you celebrate the Ontario Association of Broadcaster’s 65th anniversary.

It is fitting that my first official speech as Vice-Chair was before the Western Association of Broadcasters and my last is here today. As many of you have heard by now, I recently announced that after almost five years, the time has come for my young family and I to begin the next chapter in our journey. It has been an honour and a privilege to serve as the Vice-Chair of Broadcasting. This role has been one of the most rewarding experiences of my career.

Before I go any further, I’d like to take this opportunity to thank Commission staff. I was overwhelmed with their professionalism and dedication and continue to marvel at their sense of calling for the work they do. It has inspired and affected my own sense of work ethic – and that I will take with me as I go forward along with many fond memories.

Commission staff honoured me with their knowledge, professionalism and good manners. They make me and my fellow Commissioners look good.

With their tireless support, I have always tried to move the yardstick forward to create an environment where Canadian creators and entrepreneurs can shine on the local national and global stage. That continues to be my passion. As my time at the Commission has confirmed what I always suspected, you too share this passion.

I have enjoyed getting to know the broadcasters that play such a crucial role in ensuring communities large and small have access to news and other programs of interest from one corner of the country to the other.

Of course, because of the OAB’s longevity, you have witnessed numerous highs and lows in your industry over the years. 

The good news is that revenues remained fairly stable between 2013 and 2014, despite competition from satellite, online and streaming services.

Overall, total revenues for AM and FM stations fell about a half a percent (0.52%) to $1.614 billion last year. Interestingly, the gap between commercial radio and over-the-air television revenues was $500 million five years ago and is now under $200 million.

These steady revenues enabled you to offer a variety of programming, to support established and emerging Canadian talent, and to provide employment to thousands of Canadians.

I recognize, of course, that most firms’ profits were down due to increased expenditures in 2014.  But, relative to many other sectors of the economy, managing to make 18.5% profit before interest and taxes isn’t bad. 

Thanks to the Blue Jays’ incredible season, not to mention the longest federal election since the invention of radio, you likely enjoyed a bump in advertising over the past few months.  Let’s hope all this activity is reflected in improved financial results next year.

The recent findings from the 2015 edition of our Communications Monitoring Report were probably not unexpected for radio operators.  For the third consecutive year, the time spent listening to radio decreased across all age demographics in diary markets.

The same report also suggests that local TV stations continued to operate in a challenging advertising market. Private stations brought in $117.1 million less in advertising revenue.  That contributed to a 7.2% decrease in overall revenues last year, which came in at $1.8 billion.

Despite these challenges, TV broadcasters continued to invest in the creation of local news and drama series.  Investments by private local television stations in Canadian-made programs increased by 2.3% in 2014, to over $619 million.

As part of these investments, local television stations paid $138.6 million to Canadian independent producers.  Kudos for a job well done and the production community should be thankful.

Current Issues

I’d now like to bring you up to date on a few recent developments at the CRTC.

Local and Community Broadcasting

As you likely know, the CRTC has launched a review of the policy for local and community television programming to take the pulse of this sector.

During Let’s Talk TV, Canadians told the CRTC that they value local news and other types of local programming.  And so do we. Local and community programming leads to locally relevant programming, a diversity of voices and perspectives, and production by members of the local marketplace.

Because of this programming’s importance, our approach to the Commission’s policies for local and community programming needs to take into account the changing needs, interests and behaviours of Canadian viewers. 

It’s no secret that they’re embracing newer ways of consuming and discovering content on multiple platforms.

That’s why our goal with this review is to ensure that:

  • Canadians have access to locally produced and locally reflective programming in a multi-platform environment;
  • Both professional and non-professional independent producers and community members have access to the broadcasting system; and that
  • Locally relevant news and information programming is produced and broadcast within the Canadian broadcasting system.

Canadians had until October 29, 2015 to submit comments.  A public hearing will begin on January 25, 2016.

Public alerting

While I’m on current topics, I should also mention public alerting.

As you are all aware, earlier this year Pelmorex launched a new, faster national-emergency alert system – called Alert Ready – to keep Canadians safe. 

The CRTC has supported the establishment of this system, which allows government agencies across Canada to quickly issue public-safety messages on television and radio stations. Earlier this year, broadcasters and television service providers began relaying emergency alert messages to Canadians.

This means that you are able to help deliver immediate warnings about extreme weather, natural disasters, biohazards, terrorist threats and other life-threatening events, including the zombie apocalypse. This is critically important since getting messages out quickly will help protect lives in the event of an emergency.

The Public Alerting Governance Council – which includes broadcasting representatives – is working to make improvements based on lessons learned so far. 

While we’re not involved in the operation of the alerting system, the Commission is watching closely to ensure the system functions properly.  And everyone’s collaboration is needed to ensure this happens. We will need your help in improving the system and thank you for your support with this process.

Radio licensing

Last year, we completed a targeted review of the commercial radio policy. One of the outcomes of the review was a new process to streamline licensing for commercial radio. 

Today, there is a much tighter competitive environment within the majority of Canadian radio markets, most of which are experiencing spectrum scarcity. And our former call process for small markets was onerous and inefficient.  This led to significant delays in processing applications. We would like to speed that process up because time is still money.

Given the increased competitiveness of the vast majority of markets, we’ve adopted a more efficient approach to calls for applications across all market sizes. It’s meant to better understand the marketplace before issuing a call, to be sure that new entrants have a good chance of success and to avoid over licensing.

When applying for a new station, the onus is on applicants to make a strong business case that the local market can bear increased competition.  It is up to you to demonstrate that the local community needs what you have to offer and how your applications meet CRTC policy.  

That being said, we are very conscious of the potential to over-license.  There’s no question that, if you add more players in markets experiencing limited growth, this reduces the size of each portion of the pie as well as the quantity and quality of local content, especially of news and information.

In turn, this may mean that stations no longer have the leeway to contribute to the community as they traditionally have.

The reality may be that some communities are already well served and may not require an additional radio station.  Sometimes, less is more.

Future for private broadcasters

This is not to suggest that there isn’t room for future growth in the sector. In fact, I’m a big believer that radio, and broadcasting in general, has a tremendous future. 

If, that is, broadcasters step up and take on the challenges of the day.

The CRTC is laying the groundwork for that promising future.  The Commission has introduced a flexible approach to HD Radio technology that supports innovation and experimentation. There is no requirement to obtain a licence; we only ask that you inform us of your experiments with the format.

HD Radio permits a radio station to broadcast multiple digital audio signals in addition to the station’s main signal.  This has the potential to increase the diversity of radio services that Canadians receive.  It also increases the number of platforms at broadcasters’ disposal to reach consumers.

HD Radio broadcasts a digital signal over traditional radio frequencies and allows for up to three additional stations of new local content to be accessed on the same channel. Listeners with HD Radio can receive greater access to programming with a higher quality sound, and new information such as the artist, song title or traffic information. And it is a possible solution to downtown coverage issues.

You don’t need to take it from me.  Just look at what Corus Entertainment has been doing.  It’s the first multi-market radio operator to offer HD Radio in Canada.

Listeners with access to HD Radio can tune into the digital signal of Toronto’s Talk Radio AM640 (CFMJ AM) – found under Hamilton’s 95.3 Fresh Radio (CING FM).

With car manufacturers upgrading their dashboards with HD Radio capabilities, more and more listeners will have the means to capture clear and interference-free signals.

Worldwide, connected car system penetration is expected to reach 60% of new models in 2017. And penetration in the US and Western Europe will exceed 80% by that same year.

I know that people in the Canadian broadcasting business are divided on the impact of streaming. Some view it as an important source of revenue for the future, while others expect streaming to continue eroding advertising revenues.

I suggest they consider the results of an Internet Radio Advertising Impact Study prepared for the Radio Advertising Bureau and the Interactive Advertising Bureau. 

The White Paper concluded there are powerful synergies when radio and its digital platforms are used simultaneously, because of their multiplier effects. The researchers found that, far from being a threat, radio and the Internet have complementary roles.

They discovered that ad recall drastically improves when radio and digital platforms are used in tandem.  This has a positive impact on both brand preference and purchase behavior. 

The study also demonstrated increases in visits to the advertised brand’s website.

Most interesting, it found that the addition of Internet radio listening impacts broadcast radio ad response rates more than an increase in time spent with broadcast radio alone. The addition of Internet radio boosts ad response rates by 15 times or more. 

Those are the kinds of numbers your advertisers like to hear!

For years, many of you have heard me discuss the virtues of step-top box data because I think it is important for conventional radio and television broadcasters to tool-up. There are no regulatory impediments to competing with stand-alone online audiovisual offerings with the added advantage of your conventional base, but you need to use their techniques to beat them at their own game.

As you can see, the impact for advertisers is largely dependent on the platform. One platform may be more effective for one advertiser as opposed to another. One size does not fit all. Multi-platform fragmentation requires multi-platform segmentation and targeting. And combining the platforms could potentially represent an explosion of advertising revenues.

More to the point: at the end of the day, there’s no holding back time – or technology.  It’s impossible, and not necessarily desirable or even advisable, to try to protect the sector from this new reality.

We are living through a transformational time that calls for new ways of doing business.  

Now, I’m not here to tell you how to capitalize on these opportunities.  There are all kinds of music and social media and advertising experts who have that market cornered.

Advantages

However, I will say that you have remarkable advantages to build on.

Some might say people listen to radio stations, not radio programs.  They become big fans of your on-air personalities – local celebrities representing your businesses in the area marketplace.

You also have the advantage that your stations are trusted curators of local content. 

You offer up-to-date curation based on decades of experience in the business.

Listeners turn to you not only for music they like.  You are their ‘go to’ destination for news, weather, traffic, sports and community events, as well. 

Even more valuable, you have well-established ‘brands’ because you were first-to-market more than six decades ago. 

The brands you’ve created in your marketplace translate into the attachment listeners feel toward your stations. Once you have that loyalty, I’m convinced your listeners will follow you anywhere, using any platform or app.

Something else I can say, unequivocally, is that regulators cannot stop this tsunami.  It’s not the ’60s, the ’80s or even the new millennium anymore.  The radio world most of us grew up with has changed.

Here’s the other important thing to consider:  there is absolutely nothing standing in your way if you want to capture new audiences using digital technologies.  There are no impediments to you competing with online services. 

In reality, you have the upper hand, given all the advantages I just mentioned. 

If anything, there’s currently an uneven playing field – one that works in your favour!

Your industry’s experience, expertise and brand recognition are huge assets. To paraphrase a quote by the late U.S. President, Ronald Reagan – when he was running against younger political opponents – you have the benefit of being able to exploit your competition’s youth and inexperience.

Ultimately, it is up to each of you to determine what you will do to keep pace with these technological innovations. It is radio’s opportunity to win or lose, depending on how – and how quickly – you respond to this reality.

Conclusion

Given your track record in capitalizing on near constant change in your sector over the decades, I’m confident that today’s broadcasting leaders will make a successful transition to the digital future.

I am sure you will adapt to a rapidly-evolving environment and carry on your tradition of impressive profitability.

I encourage you to continue to call upon your creativity and dynamism to keep this one growing. I wish you every success as you do just that.  Thank you.

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