Michael’s Hennessy’s Opening Address at Prime Time in Ottawa

Good Morning Ladies and Gentlemen I am delighted to welcome you all to the 23rd annual Prime Time in Ottawa Conference.

It is hard to believe I have only been part of the CMPA team since last June. So much has happened since then.

I was asked to come in June, to act as a change agent.  And I’ve discovered that’s the easiest thing in the world to do. Every week I look out my window and everything changes. Mission accomplished.

Seriously though, change is now the new status quo. In fact this week the CRTC, just to keep things topical at Prime Time, not only announced BCE/Astral Phase 2, but as part of the fallout of that proceeding, we are also confronted with a pending sea change in children’s programming and animation in this country.

At the CMPA our job is to help our members navigate change. These days that’s a bit like racing an avalanche down a ski hill.

Global market demand for video seems almost insatiable. That should be great news. Unfortunately in a digital market, the linkages between insatiable demand and revenue are often as unrelated as they can be broken. This is creating huge uncertainty, including, as recently reported in media, tensions between broadcasters and producers when it comes to Terms of Trade. No big deal, everyone is a bit tense these days.

Two weeks ago, an analyst commenting in The Economist, on the huge pressures on the film industry, stated that “People are still watching the same amount of movies they did a few years ago. They are just spending $6 billion a year less to do it.”

And that is the nub of the problem going forward. Insatiable demand is the fresh snow but digital is the avalanche.

Because in a world of global competition and the disintermediation of suppliers through digital platforms, revenues can drop like a stone even as consumption rises.

MPAA Head Senator Chris Dodd, our luncheon speaker today, probably has a few thoughts on how to manage this change.

The solution for all of us in the content business is to follow the money and to grow the pie beyond traditional markets. But how?

The formula is easy. Deliver to the audience what they want, on the platform they want, when they want it.

But the execution is not so easy, because broken as it may be in parts, the status quo remains the only familiar terrain we know. It’s just a lot less friendly today.

Luckily our keynote speaker this morning, Robert Tercek can share his views on how to realign strategies in a world of disintermediation.

There is still lots of good news, and in 2012 there was a lot to celebrate in terms of value creation.

The latest numbers from “Profile “show that the industry generated 5.9 billion dollars in production volume last year, and generated 132,500 full time jobs and almost $2.2 billion in export value.

That is proof positive that we have become an engine that is going to help drive the digital economy.

More good news. Domestic TV production showed over a 20 per cent increase in production expenditure as Canadian shows proved they could punch above their weight. This fall eight out of the ten most popular Canadian drama series were produced by CMPA members and many shows like Flashpoint, Murdoch Mysteries, Saving Hope, Arctic Air, Bomb Girls, Rookie Blue, Republic of Doyle, Mr.Dee and the Listener have become audience staples. And new hits like Cracked and Motive keep adding to the inventory.

Canadian children’s and youth programming perform strongly with shows like Spatalot, Mr. Young, Johnny Test, and Joe and Jack selling worldwide, and scoring well on major US networks.

Lifestyle too had broad international audience appeal with winners like Property Brothers, Top Chefs, Income Property, Eat Street, Ice Pilots, Love it or List it, and Design DNA.

And it seems at times that the Scify Network in the US looks like it was made in Canada.

Canada is the new cool in the creative market.

Last year, 85 Canada Media Fund supported shows gained international distribution, including 31 sales into the US market.

That is tremendous audience validation for the quality of our collective works.

Quality and recognition extends to film as well— from Oscar Nominee Rebelle, or War Witch, which took 10 Awards at the Canadian Screen Awards, to Take This Waltz, Monsieur Lazhar, A Dangerous Method, and Screen Award winners, Midnight’s Children and Blackbird.

But don’t run out to the theatre to catch these films. You may get lost looking for them.

In 2010-11 Canadian films won a total of 133 prizes and mentions at festivals— including 61 at the international level.

The problem is that this news is sometimes a secret in Canada, in part, because we don’t promote our success well enough. And, without marketing and promotion and distribution you simply can’t reach an audience no matter how good the product. That is why promotion will be another big topic at Prime Time and priority for the CMPA.

Compounding film’s problems are shifting demographics as Canadians are increasingly spending more time in the theatre at home, than in the theatre down the street. And this is happening at a time when broadcasters are pulling back in terms of financing and exhibiting feature films in favor of dramatic series which provide longer promotional cycles and involve less risk.

On top of that, the DVD market, a principal source of revenue, has all but collapsed due to a shift to on-demand services and the persistent issue of piracy.

This revenue implosion sucks, because research shows people still love to watch movies. So if the audience won’t go to the theatre, our products better be readily available to the audience on the screens they watch at home and increasingly carry on the go.

But that requires new TV, streaming and on-demand strategies that increase not just the monetization and financing of, but also the promotion and exhibition of Canadian features.

So hang around because film and its future from financing to exhibition on TV will be a big topic at Prime Time this year, as well as at a couple of CRTC hearings this spring.

While we have seen significant growth in domestic production of Canadian content in television, the service industry has experienced a big decline over the last year. This is particularly true in Quebec, Nova Scotia, and as we have followed closely, in British Columbia.

This should be troubling for proponents of a digital economy for Canada. Troubling because the investment and jobs associated with our position as Hollywood North create the very infrastructure, scale and talent that is also required to support the creation of Canadian intellectual property across the country. And it is ultimately that intellectual property that creates value and drives the digital economy.

To think this is merely a regional issue is flat-out wrong – it is a global battle. Increasingly governments realize that economic growth and high value jobs are going to be driven by the digital economy. And the countries or jurisdictions that get there first may build lasting economic advantage.

One of the CMPA’s priorities to is to promote the economic value of our industry in terms of its contributions to the digital economy, through innovation, investment, job creation and exports. Why? Because to remain competitive we need to ensure that our financing incentives and rules are modern, efficient and competitive. However to justify any change in policy you have to first demonstrate value.

That begins by demonstrating how we have already created economic value out of intellectual property. Intellectual property after all is the most valuable currency there is in a digital economy.

But economic arguments alone are not sufficient. We also need public support which begins by creating buzz about content.

That’s why I was so pleased at the success of the Canadian Screen Awards. The combined awards attracted a broader audience and took celebrating Canadian content to a new level.

Our Public Affairs teams have a mandate to tell that story in Ottawa and the provinces on your behalf.

But they need our support because it’s the creative talent and the content you develop that are the stars of the digital economy. Our shows and our stars are our best ambassadors we have.

I submit collectively, we have all done a mediocre job in selling the audience and influencers on just how good and increasingly popular our content is. That we have had so much recent success with so little marketing at times is remarkable. Just imagine what we could accomplish with more promotion.

Later today we will hear from the CMF and Telefilm along with a panel of experts on how to better promote the success and increase access to and discoverability of Canadian content.

Now navigating change can be a nightmare. I wake up some nights struggling to sort all these challenges out, and I have discovered that it helps to try to put the end game into simple perspective. We have a New Business Model’s Committee at CMPA making the end game a priority. While it is not easy to define our future, we know this. It will be built on a growth strategy that begins with serving the audience on their terms and their turf.

Why the focus on growth? Because the Achilles heel for Canadian success in production has always been a lack of scale. Because growth floats all boats.

Growth is about defining a new future not fighting over the status quo. The status quo is already the past.

While we may be hitting the saturation point in traditional Canadian markets like linear TV, there is lots of room for growth.

The market for content is clearly exploding and the demand for story-telling through multiple platforms is only going up. And this is as true in terms of international sales and distribution as it is for new production opportunities in the digital and branded entertainment markets. Growth means more pie and more pie means less tension.

Collaboration works. Our success at home is evidence of that.

And partnerships are already working in international markets on these principles. Consider the success of international co-productions like The Borgias and The Tudors or Copper. Maybe domestically we could discuss how to replace value lost in conventional TV by partnering to create more value in the interactive realm by leveraging audience engagement at the story creation stage.

Or by working with sales teams at some broadcasters to better integrate brand and creative into lifestyle programming.

Talking of collaboration, we welcome our delegation from Australia. And we will be getting an international perspective on best practices tomorrow from our luncheon keynotes—Matthew Deaner from the Screen Producers Association of Australia, and Will Evans, from the British Film Institute.

Collaboration and revenue sharing are, and will always be, fundamental elements of the production business. But here is something critical to understand about independent producers as we discuss new opportunities.

We simply cannot sustain our business without the opportunity to not only control,  but also share in the exploitation of the intellectual property we create. Share is the critical word. This is not merely an observation but it is gospel to us.

And it is the gains that we have achieved in controlling and licensing our IP through Terms of Trade that we are now so passionate about protecting. Being able to exploit, and share, with our partners, what we create is what makes us independent.

And in a world of consolidation independence becomes a critical element in ensuring diversity. This is a good thing to remember. And it will be foremost in the arguments we will present in the growing number of regulatory proceedings we will attend this spring.

So let me try to summarize what the vision we will be pursuing at CMPA this year. First and foremost we start from the premise that the audience is ultimately all that matters, whether we are thinking domestically or internationally. Because if intellectual property is currency in a digital economy, it is still the audience that determines the value of that currency.

Second, we need to promote the value of our products and increasingly engage consumers in the creative process through tools like social media to grow. That creates buzz and promotion at the grassroots.

But success also requires more promotion through the traditional broadcast and distribution windows because what gets promoted and exhibited on screen gets consumed on screen.

Third, we need to grow our business substantially by focusing on new markets for video storytelling like digital and branded entertainment, as well as building on our successes to date by leveraging the quality of our domestic product and talent in even more countries.

Fourth we need to change the political perception of our business from that of a cultural contributor to that of an economic engine that contributes to innovation, creates export opportunities and high value jobs and most important a future for our children to excel on a world stage.

That’s all we have to do. Not an easy task but as long as we follow a basic formula based on audience engagement, innovation and the  control of IP through collaboration with all of our partners from broadcasters, to talent, to governments and investors, then we have a course to follow for navigating through change.

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