Stephen B. Simpson to the annual conference of the British Columbia Association of Broadcasters - 2016

Speech

Penticton, British Columbia
May 19, 2016

Stephen B. Simpson, Regional Commissioner for British Columbia and the Yukon
Canadian Radio-television and Telecommunications Commission

To the annual conference of the British Columbia Association of Broadcasters

Check against delivery

Thank you for inviting me back to your annual conference and for giving me the chance to update you on the CRTC.

Before filling you in on our recent activities, I first want to congratulate the British Columbia Association of Broadcasters (BCAB) for nearly 70 years of service to your members. Your Association has consistently done an excellent job of promoting the interests of BC’s private broadcasters and contributing to community enhancing programs throughout the province.

Because of vertical integration, there is virtually always some matter before the Commission that involves some part of the large companies. That makes it difficult for individual licence holders to engage with Commissioners without compromising something either on our end or theirs.

It is important that radio and television broadcasters have strong and effective national and regional associations that can engage with the Commission and its staff.

That said, I can assure you that the CRTC remains fully committed to private sector radio and television and cognizant of the issues related to smaller operators. A number of the things I’ll talk about this morning underscore this point.

Radio

Let me start by focusing on radio. Congratulations to station owners in this region you’re your performance over the past year—quite the achievement, given the changes in the broadcasting industry of late.

So much has changed since the turn of the century, starting with the launch of the iPod in 2001. Satellite radio arrived in Canada a few years later and has grown ever since. In quick succession, Internet radio’s appearance sparked innovators like Pandora and Spotify. That happened around the same time that smartphones began to make their mark as source of information and entertainment. With these phones in their purses and pockets, Canadians suddenly had access to all sorts of online content on the go.

As if the technological revolution were not enough to contend with, the perfect storm really hit in late 2008 with the “Great Recession,” from which our country is still slowly recovering. No question, it has been a tough period for many in media.

So the fact that the 2015 financial results for Canadian radio stations, released by the CRTC a few weeks ago, show radio revenues remained stable over the last five years is a major accomplishment.

Revenue from local and national advertising hit $1.58 billion last year. And profits before interest and taxes increased by almost half a percent, rising to $303.4 million. Ethnic radio stations did even better, recording a 1.5% rise in revenues for the period.

Looking at the breakdown for British Columbia and the Territories, total revenues for 2015 were down about three-quarters of a percent over the previous year. But pre-tax profits were up by $2.5 million. That compares to a decline of $7.5 million in 2014. And overall profitability remained almost the same at 8.3%.

I realize these figures don’t compare with the “golden days of radio.” But I bet many other industries in Western Canada would be thrilled to report revenues and profits like these for the past year. So kudos to you for a job well done.

Radio advantages

Probably the biggest reason for this success is that you play such a crucial role at the local level, serving your individual communities. You have a huge advantage in that your stations—and your program hosts—are trusted curators of local content. Listeners turn to you not only for music they like, but also for news, weather, traffic, sports and community events.

The other big thing going for you is content made by Canadians, which you are experts in cultivating. Your businesses connect Canadians as consumers and as citizens to Canadians as creators.

Radio stations play a pivotal role in defining Canadian culture and identity by developing and promoting new talent. And Canadian content offers a prime opportunity to carve out a distinctive brand in a world that’s always on the hunt for new talent.

Half of the top 10 artists on the U.S. Billboard recently were Canadian. That’s an incredible accomplishment for our music industry.

Another important niche is cultural diversity. For instance, the Lower Mainland is one of the most multilingual and multicultural areas of the country, welcoming more than 20,000 new immigrants every year. This presents a tremendous business opportunity.

The CRTC will soon review its policy framework for ethnic radio services. As part of the review, we will ensure that the policy is responsive to changes in the demographic make-up of multicultural communities in Canada.

A further indication of this appetite for diversity is the fact that the CRTC has received 12 applications to operate radio stations serving urban Indigenous Canadians in major markets – including two applications to serve Vancouver.

We’re also pleased to see that some of you have taken advantage of our flexible approach and started to experiment with HD Radio. This technology enables a radio station to broadcast up to three additional stations of new local content on the same channel as its main signal. HD Radio has the potential to increase the diversity of radio services that Canadians receive.

All of this activity reflects both our changing society and the strength of BC’s economy, which is set to lead the provinces in economic growth again this year.

Radio’s challenge

As I see it, your issue isn’t access to world-leading talent or audiences, but the fact that music can now be packaged and delivered in countless ways. Online audio streaming services are opening the world to all kinds of new business models, rapidly changing the rules of the game for traditional broadcasters.

Regulators can’t stop this tsunami, especially when the apps driving the music world are everywhere—from the kitchen to the car.

Because it’s impossible, and not advisable, to try to protect the cultural sector from these trends even if we tried.

We recognize that creative content creates economic opportunity. And we understand that our job at the CRTC is to create the conditions that enable people like you to create—empowering you to introduce pioneering programing and business models that ensure your continued success.

The face of Canada—and its music—is changing, opening doors to new audiences and new markets, not only here at home but worldwide. Broadcasters need to be adaptable and versatile to stay ahead of the game.

For example, 60.1% of new vehicles around the world are expected to be equipped with Internet-connected systems by 2017, an increase from 11.4% just four years ago. And penetration in the US and Western Europe is projected to exceed 80% by next year.

How will you ensure that your brands stand out among the nearly limitless options out there?

National and regional associations like the BCAB have an important role to play in representing your interests—not only to government organizations like the CRTC, but also to the auto industry, device manufacturers and wireless service providers. Your associations are in the best position to ensure that over-the-air radio is easy to find on the connected car’s dashboard or that FM chips in smartphones are activated.

You’ve likely heard that the Department of Canadian Heritage has begun a significant review of Canadian content and the legislation governing the broadcasting industry. Your associations can also ensure your views are heard during this review.

Clearly, Minister Joly is looking towards the future, just as we have been at the CRTC. We have conducted major reviews to adapt our policy framework to new and emerging realities. These are linked to disruptive technologies and how Canadians are embracing them. There seems to be good alignment between the questions raised by the Minister and our own work over the last few years.

TV

What’s true for radio applies to TV too.

Putting additional pressure on broadcasters, television ad revenues have fallen sharply in recent years—in part due to competition from online businesses. According to the latest financial results, private television stations across the country brought in 2.6%, or nearly $50 million, less in revenues last year.

These shifting circumstances notwithstanding, the Commission believes profoundly that the Canadian television system should encourage the creation of compelling and diverse Canadian programming.

The importance of TV for Canadians was made abundantly clear during the Let’s Talk TV conversation. The CRTC engaged with 13,000 Canadians during the course of the review. It was during this process that we identified a number of challenges faced by television broadcasters at all levels—locally, regionally and nationally—in an increasingly fragmented media world.

More and more, Canadians are utilizing digital platforms to consume information and entertainment content—and even to broadcast their own. Canadians now have access to hundreds of television channels and countless online options, using almost any device, anywhere and at any time.

While there are diverse sources for news and information, journalists are trusted to gather and interpret the facts into coherent stories and in-depth analysis. They keep us informed and help us make sense of the world outside our doors.

Local television

Last September, we launched a review of local and community TV programming to ensure that:

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

More than 2,600 Canadians provided their views on these issues, either through formal interventions or by leaving comments on our online discussion forum. This has reinforced that they care deeply about the news and information provided by the more than 85 private conventional stations and 160 community channels in their towns and cities.

Peoples’ attachment to their local TV stations was equally apparent during eight days of hearings from January 25th to February 3rd. Canadians told Commissioners they value local news for its capacity to connect them directly with their communities. Local news also helps them make sense of world events and enables them to participate in Canada’s political, economic and cultural affairs. These are strong selling points that broadcasters should be capitalizing on.

We’re still putting the final touches on our local TV decision, so I don’t have more to say on this issue for the moment. We expect to be able to announce the results in the coming weeks.

Consumer choice

Another major change on the television front as a result of Let’s Talk TV is the new basic package that costs no more than $25 per month.

Since March 1^st, cable and satellite companies have been offering this package, which prioritizes locally-produced news and information programs that Canadians told the CRTC they value, along with public interest channels, like CPAC, and popular Canadian and American television shows, such as drama and comedy series.

They can then subscribe to other channels either individually OR in packages of up to 10 channels.

As of December 1^st this year, channels will be offered BOTH individually AND in packages of up to 10 channels.

Canadians are pursuing these options. In the first five weeks, more than 66,000 Canadians signed up for the new basic television package. Of them, roughly one in three took advantage of the new packaging options by subscribing to individual channels, small packages or both. Some Canadians have told us that they have made changes to their television services that will enable them to save hundreds of dollars annually.

Some companies are also taking advantage of the new rules to offer consumer-friendly options that include the basic package at less than $25 per month.

The CRTC recently issued a notice inviting cable companies to submit their licence renewal applications. Part of the application process involves answering a series of questions related to the composition and pricing of basic service packages. We’re asking them to provide details on any additional products or services that consumers have to purchase to receive the basic service. They also have to include any additional terms, costs or conditions that differ from regular subscribers and explain why they’re being applied. The same questions apply to their services offered to subscribers either on a small-package or a stand-alone basis.

Despite criticisms and some media coverage to the contrary, the CRTC’s goal was never to ensure that subscribers would get more and better channels for free. We wanted to give Canadians the tools and options to find the value proposition that best meets their needs. It was a matter of offering greater choice.

The onus will be on the licensees to demonstrate how their plans comply with the CRTC’s directive. We are actively monitoring how the industry as a whole is implementing the new rules.

Adapting to change

Of course, the challenge in an age of content abundance and a world of choice is how to stand out. That’s the topic we tackled in collaboration with the National Film Board of Canada. You will likely remember that the conversation began last fall with two pre-events, one of which was held in Vancouver.

The Discoverability Summit was held over two days in Toronto last week. This event brought together experts from a variety of fields, including content creators, academics, policy makers and innovators. It gave us the opportunity to hear thought-provoking discussions and ideas on a variety of topics related to the discoverability of audiovisual content. There were a number of interesting sessions, such as on the behaviours of millennials, marketing and advertising, algorithms and viewer engagement.

I’m sure these exchanges will spark further discussions among creators in the months ahead, and possibly even new strategies, tools, business models and approaches.

Canadians create world-class content that can compete with the best that’s out there. Audiences are hungry for new and compelling shows to watch. Discoverability is all about making connections between content and audiences, and between audiences and content, in this age of abundance.

Conclusion

As I’ve noted repeatedly this morning, the options to listeners and viewers are nearly limitless today.

It’s not the 60s, the 80s, or even the new millennium anymore. The radio and TV world most of us grew up with no longer exists. Tastes and platform choices are constantly changing. So it’s now up to you to determine how best to address this 21st century reality so your businesses not only survive, but thrive.

For all the changes, the one thing that seems constant is local audiences’ loyalty to, and dependence on, local radio and television stations. So, I’m feeling optimistic for your industry. If you continue to maximize your creativity and remain responsive to the needs and interests of your local audiences, you will succeed in keeping your industry growing.

I wish you every success as you do. Thank you.

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