Making Connections: Chris MacDonald at the Ontario Association of Broadcasters Connection 2016 Conference and Awards

Toronto Airport Marriott Hotel
Toronto, Ontario
Thursday, November 10, 2016

Mr. Chris MacDonald,
Commissioner, Atlantic Region and Nunavut
Canadian Radio-television and Telecommunications Commission

to

Ontario Association of Broadcasters
Connection 2016 Conference and Awards

Check against delivery

Thank you for that kind introduction. It’s a pleasure for me to participate in Connection 2016, my first Ontario Association of Broadcasters conference.

In today’s world, I think we all struggle to keep pace with rapid technological and social change. Indeed, technological advances have changed our world, but more importantly they have also changed the expectations of the Canadians I serve and the consumers you serve.

As a teenager in New Brunswick during the late 90s, thinking about what I wanted to study in university and about what I wanted to be when I grew up, I failed to appreciate the wave of technological advancement that was about to overtake us. I failed to see both the opportunities it would enable and the challenges it would create.

Indeed, I mistakenly or perhaps naively thought that the wave of innovation and technological advancement had already hit us. Life was good. I had a cellphone, clunky as it was, a Discman that I paid extra for so I could get one with a new feature that prevented songs from skipping, and I had a computer with my very own dial-up connection…how could things possibly get better than that?

My answer at the time was simple – they couldn’t get any better.

Oh, a phone might get smaller, but it will still be used just for talking to people. CDs might someday hold 40 songs instead of 20, and perhaps in the future when I log on to the information superhighway I won’t have to listen to that annoying and loud dial-up sound. But nothing will really change.

I once even joked that my goal in life was to find a career that didn’t require me to use technology. Today, given the career I have chosen, that concept makes me laugh.

So, let’s rewind even further for a moment.

More than nine decades ago, a young man by the name of Edward S. Rogers Sr. developed a solution to a technical challenge and, in the process, helped create the broadcasting industry in this country. He designed a vacuum tube that could run on alternating current, making it possible to operate a radio in the home.

This technological advancement from one of Canada’s radio pioneers changed an industry forever.

The common theme of all of this is that times change, innovation happens, and technology marches forward. We can’t stop it, we certainly shouldn’t ignore it, so our only choice is to adapt to it.

Ontario’s broadcasting industry has followed a similar path to success ever since that first residential radio was introduced. Unafraid of technology and change, you identify a challenge, then you meet it by finding ways to apply and leverage the latest technologies. Today, the industry faces new challenges. I’m confident that the men and women here in this room will find and implement appropriate solutions and embrace innovation, as you have done throughout your history.

At its core, broadcasting involves using technology to connect with people. And each new wave of digital technologies opens up new possibilities.

Later this morning, delegates will get a fresh perspective on these possibilities from Daniel Anstandig of Futuri Media. One of his fundamental beliefs is that success requires building stronger and deeper connections with audiences. I could not agree more, and I look forward to his presentation.

Leveraging radio’s brand

As someone who spent more than 10 years in sales, I believe that you never lose business by doing what’s right for your customers. The same holds true for your listeners.

The ongoing success of the radio sector demonstrates the importance of building and maintaining strong connections with audiences, and you have not lost sight of that.

Over the years, critics repeatedly predicted the demise of radio due to a string of emerging technologies. Decades ago, these technologies included LP records and 8-track tapes, then, more recently, cassettes and CDs. Today, these technologies include Internet radio, streaming services and podcasts. Nevertheless, radio continues to fend off these challenges, and it does so by creating powerful bonds with listeners. Revenues for Canadian radio stations have remained relatively stable for the last five years, although they did decrease slightly between 2014 and 2015. Last year, advertising revenues exceeded $1.5 billion.

As you well know, the growing popularity of streaming services and satellite radio among Canadians continues to erode listenership. And cars with Internet-connected systems – what some are calling the connected car – are here to stay. 60.1% of new vehicles around the world are expected to be equipped with Internet-connected systems by 2017, an increase from just 11.4% four years ago. And penetration in the US and Western Europe is projected to exceed 80% by next year. Among other things these remarkable changes tell me that it may be time to update my ageing Grand Cherokee.

To meet these and other emerging challenges, I believe that radio stations must build on their strengths. They must leverage the competitive advantages provided by the intimacy they foster with listeners and the connections they forge with the local community. Radio stations remain trusted curators of local content. Listeners tune in not only for music, but also for local news, weather, traffic, sports and community information.

Radio stations must also leverage the remarkable successes of Canadian recording artists. From pop and rock to jazz and rap, Canadian musicians continue to shine. Three Canadians, for instance, were among the five musicians nominated for Top Artist in the 2016 Billboard Awards. Last December, Canadian artists held seven of the top ten spots on Billboard’s top-ten list. Canadian broadcasters help drive this success by featuring domestic content. If it wasn’t clear before, it is now. As Canadians we can hold our own and create the best content in the world.

The success of Canadian artists provides radio with an opportunity to create a distinctive brand in a world that’s on the hunt for new music, and access to top talent is clearly not an issue in Canada.

Associations like the OAB have a critical 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. In this regard, the CRTC encourages broadcasters to team up and to continue working with smartphone manufacturers and wireless service providers to increase the number of models that have the FM chip activated. We also welcome awareness initiatives and outreach campaigns on this matter.

Online audio services, however, continue to change the rules of the game for traditional broadcasters. They enable users and curators to create their own playlists and share them among friends and social networks. In 2015, 20% of Canadians streamed music from online services, a 2% increase over 2014.

Some wireless service providers have taken note of this shift. Quebec’s Videotron, for example, now offers cellphone packages that include access to music-streaming services without additional data-usage fees. The practice is known as differential pricing.

The Commission recognizes that this may give some streaming services an unfair advantage over other services. Rather than tackle differential pricing on a case-by-case basis, the CRTC prefers a clear and transparent regulatory policy that provides greater certainty to consumers, application providers, and Internet and wireless service providers. We took a step in this direction earlier this month with a public hearing on the issue. For those of you who like to watch CPAC in your free time, you likely know that I am a member of this particular hearing panel, so I must choose my words carefully.

But regardless of the outcome of the CRTC’s proceeding, broadcasters must continue to adapt to—and capitalize on—technological advancements and novel ways to do business. The CRTC’s role is to create the conditions that enable broadcasters like you to produce innovative programing and implement successful business models.

The transition is already happening and some traditional broadcasters have started to adapt to the new digital era. iHeartRadio, announced in October, is a good example. This free app from Bell Media streams 105 licensed English and French radio stations, plus more than 100 additional curated streaming music channels. Another is Radioplayer, a free digital radio streaming service based in the UK and expected to launch later this year in Canada. It will give online listeners access to nearly 500 stations from some of Canada’s biggest broadcasters including Cogeco, Rogers, Corus and many more.

I do want to mention that we’re pleased to see some Ontario broadcasters introducing HD Radio. Although the technology remains in its infancy, it has the potential to increase the diversity of radio services available to Canadians and to create new connections with listeners and new revenue streams.

Supporting local TV news

Television, of course, faces similar types of challenges: audiences—particularly millennials and younger Canadians—are increasingly drawn to online options, negatively affecting ad revenues. Canadians now have access to hundreds of television channels and countless online options, using almost any device, from anywhere and at any time. The CRTC believes that building and nurturing deep connections with audiences remains key to long-term success. And the best way to do this is by offering compelling and diverse Canadian programming that is available on all platforms.

Canadians have told us, during both Let’s Talk TV and our recent consultations on local and community TV programming, that they particularly value local news because of its capacity to connect them with their communities. Local news helps people make sense of what’s going on around the corner and around the world. It enables them to participate in Canada’s political, economic and cultural affairs. And, I would suggest that this gives local TV stations a strategic advantage much like the one radio enjoys: the ability to be hyper-local with content and connect more closely with consumers.

The new model introduced by the CRTC will make it easier for broadcasters to capitalize on this demand. As of September 2017, large integrated companies will have greater flexibility in how their television service providers allocate their contributions for local expression. As much as $67 million in additional funding can go toward the production of local news for their TV stations.

We are also introducing a new fund for independent local stations. The fund will distribute approximately $23 million annually to support the creation of news and information that reflects local communities.

The new model is part of what inspired CHCH Hamilton to announce the re-launch of weekend TV-news programs. A couple of weeks ago, CHCH began to air half-hour live newscasts on both Saturdays and Sundays at 6pm and 11pm. Local news programs like these help build a broadcaster’s identity and audience.

To implement the changes in our new policy, we must establish new conditions of licence for television broadcasters. We are holding a licence-renewal hearing for French-language ownership groups in a couple of weeks, followed by a hearing for the English-language groups.

Giving Canadians a greater choice

The introduction of pick-and-pay next month represents another opportunity to connect with audiences. For years, consumers have complained to the CRTC about limited choice and the bundling of channels. I even heard about it at my office in Dartmouth, Nova Scotia. Starting on December 1, Canadians will have the option of choosing channels on an individual basis or in small packages once they subscribe to the basic package.

In September, we held a public hearing to discuss the implementation of these changes with certain television service providers. While we heard from many satisfied Canadians, others shared their concerns and frustrations about the way some providers had implemented the affordable basic package and the smaller packages.

We had discussions, frank discussions, with television service providers during the hearing, and Canadians watched closely via our Facebook page.

We have already seen some changes in the industry as a result of our hearing, and we will continue to monitor the full implementation of pick-and-pay as of December 1.

Set-top boxes

As I mentioned, viewers have more choice than ever before. Online video services make extensive use of big data to tailor their offerings to each viewer, to keep them in their ecosystem. As you know, many of the set-top boxes already in the homes of TV subscribers have the capacity to collect data about viewership.

During Let’s Talk TV, there was a broad consensus among all sectors of the industry to form a working group that would develop a set-top box audience-measurement system. In December 2015, the Chairman asked me to take on the role of the CRTC’s champion for the development of this system.

The work of the industry working-group on set-top boxes is important because the potential value of the data generated by these boxes is tremendous. If the industry can find a way to share data, everyone stands to benefit. Sharing data would help to better monetize advertising, which would increase revenues flowing to program creators. It would also help Canadian broadcasters to better understand the diverse needs and interests of Canadians and compete with data-rich online platforms.

There are limitations and challenges associated with set-top box data, of course. There is little demographic information about exactly who is watching at any given moment. And appropriate firewalls and security features are needed to respect the terms of the Privacy Act.

In June 2016, a technical feasibility test demonstrated that set-top box data can be collected and integrated from multiple broadcasting-distribution undertakings. While this is a significant step forward, we must keep the momentum going. The working group must increase the pace of development so that the full potential of set-top box data can be realized.

I note that the working group’s most recent progress report included a schedule and that the deadline for the structure of the aggregation system is December 1. As the CRTC’s champion for this initiative, I intend to closely follow its development. I fully expect that the group’s timelines will be met and I remain confident that everyone involved will rise to the challenge.

Conclusion

I’ve touched on a lot of topics, but if there’s a common theme in what I’ve said this morning, it’s that the evolution of technology over the last few years has been rapid, and Canadians are embracing digital technologies. As you know, the Department of Canadian Heritage has begun a formal review of Canadian content and the legislation governing the broadcasting industry. Given the rapid evolution of technology in recent years, I believe the review is timely.

The CRTC, of course, responds regularly to changes in the industry and in technologies with policy adjustments. There seems to be good alignment between the focus of our work and the review by Canadian Heritage. As I mentioned earlier, industry groups such as the Ontario Association of Broadcasters can play an important role in these processes through their participation.

The broadcasting industry will continue to change, as it has throughout its history. Success, as always, will come to those best able to adapt, and to leverage and incorporate new technologies.

Ultimately, the future will belong to the broadcasters who best satisfy the demand of Canadian audiences.

Thank you.

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