Michael Hennessy Speech Prime Time 2015 – The Golden Age of Uncertainty

Welcome to the 20th Edition of Prime Time. I am delighted to welcome you all here today. A special thank you to the Canada Media Fund, sponsor of today’s breakfast and Grand Patron of the conference. Thanks to our lead government partner and patron sponsor, Telefilm Canada. And thanks to our platinum sponsor Bell Media.

I would also like to welcome those of you joining us today by LIVESTREAM, courtesy of the Canada Media Fund.

20 years is a long time for our industry to prosper and grow; particularly measured in digital time.

But that’s nothing. 40 years ago I was writing job descriptions for Pierre Juneau’s CRTC. That’s a very long time ago, dinosaur time. However it does give me a different perspective on all the negativity, particularly online, about broadcasting in Canada.

Sometimes we forget that communications in Canada is actually a success story. It may not seem that way if you follow the noise around the CRTC “Let’s Talk TV” proceeding. But it is; particularly when one looks back at the levels of innovation, private investment and the political will and fiscal incentives that have helped build a uniquely Canadian controlled communications system for both carriage and content.

Think of this–collectively our model not only resulted in networks based on principles of universality that connected us as a nation–but we have created a broadcast system with a built in preference for Canadian creative resources.

We’ve been monitoring that success for almost 20 years, through our annual economic report Profile. The latest numbers, being released today, show our industry generates nearly $6 billion in production and more than 125,000 full time jobs. Make it 260,000 jobs if we count the whole broadcast and film ecosystem.

Yet even as this success enabled us to reflect our unique cultures and stories, and created jobs for Canadian talent and crews, it still provided the opportunity for audiences to access the best content from virtually anywhere in the world, even before the Internet made it easy.

A short history lesson.

1975 meant 12 channels, no satellite, no cable for the North, no pay TV, no telecom competition, no digital TV, no APTN or broadband, no HD, no PVRs, no Google, no Netflix. Yet we were recognized as a world leader when it came to innovation in communications.

The Internet had not yet given the power to the consumer voice, because there was no Internet. In fact, even though the record of the long distance competition proceeding of 1992 was over 50,000 pages, the word “Internet” never appeared. I note that only because it’s probably harder for policy-makers to predict outcomes today than it was 20 years ago. Yet today, the stakes are so much higher.

Increased competition and choice have been a constant in our industry throughout the last 40 years and the pace of change has constantly accelerated, if incrementally. That was how change occurred prior to the Internet going video.

Even so billions of dollars were still being invested annually in digital infrastructure; and regulators kept increasing choices as new technologies and content appeared.

But over all that time policy-makers, even as competition and choice increased, did not lose sight of either, the principles of universal access, balance, nor the need to help create a space for Canadian creative voices and ideas, along with consumer choices.

Simply put, from both a business and consumer perspective, it worked, and Canadians got the best of both worlds.

As a result communications became both an economic engine and gained global respect for its level of connectivity and innovation.

It is hard to argue that this incremental approach has not resulted in many positives.

Let me name a few positives right now: Orphan Black. Lost Girls. Murdoch Mysteries. Income Properties. Motive. Map to the Stars. Mommy. Republic of Doyle. Continuum. Bitten. Book of Negroes. The Grand Seduction. Heartland. 19-2. Rookie Blue. Saving Hope. Vikings. Sensitive Skin. X Company. Mr. Dee. Rick Mercer. This Hour Has 22 Minutes. Dragons Den. W5. Masterchef Canada. Yukon Gold. The F Word. The Nature of Things.

Yet, for all our achievements, it seems that the principle of having the best of both worlds is under the gun. All in the middle of some of our greatest successes and on the cusp of bringing the infrastructure, talent and money in this country into position to prosper, both domestically and globally, in the golden age of television.

There is an argument Canadians don’t have choice. But consider this fact the next time someone tells you that.

Fact, we not only have already have access to the best the U.S. and other countries have to offer through our regulated system, but evidence consistently puts Canada along with the U.S., as the top consumers of online video in the world.

Simply put, you cannot have that level of online access to content if your mobile and broadband networks are sub-par. And you can’t have limited choice and still achieve that level of consumption.

We have found ways to foster an indigenous broadcast market that provides consumers choice of content from around the world, without sacrificing the opportunity to serve the needs of citizens, creators and unique communities for local content. That is an incredible success story but the balance required to achieve that is now in question.

Constantly adjusting to consumer demand is a prerequisite for success. And clearly consumers want, and deserve a better deal, on the price side of the equation. But I worry that as regulators work to rebalance the consumer/diversity equation we are going to lose that balance that took 40 years to find.

And losing the best choices Canada has to offer, to get more choice, would be a poor choice indeed. But that’s a real risk unless there are some sound business principles underpinning the Lets Talk decisions.

Today the foundation is still solid. New data from Profile and the CRTC is showing that the industry is still robust on the production side and overall profitable when you look at conventional, cable and specialty services results combined. But over time that may be illusionary, because the political or regulatory will to create a space for Canadian choices in a broadband world, just as it created space in the linear, is not apparent.

And no, I am not talking about a “Netflix tax,” but about measures around supporting growth, inward investment and trade in content creation– and about the protection of intellectual property and territorial rights. This so we have the opportunity to not just continue to “tell our stories to each other, but to sell our stories to the world.”

I want to see a policy framework that puts as much priority on creating jobs for our kids in the global digital economy, as it did in creating opportunity for content creators over the past 40 years.

But future achievements need to build off a strong foundation. And it is not rocket science to conclude that while the market for content is increasingly global and digital, traditional broadcasting is still the dominant revenue source for commissioning high value original content.

We all increasingly know that much of the growth in our businesses will come from addressing the digital market and that requires a global perspective because digital is gutting borders.

But there is a big question mark about how to achieve that. Because, and for many enterprises, there is a big “opportunity gap” between the erosion of traditional sources of revenue to reinvest in growth and the payouts currently available in the digital space for traditional film and TV. Yet it is still traditional film and TV that continues to excite consumers.

This opportunity gap adds to uncertainty.

Right now we have significant uncertainty for TV producers around their ability to hold onto, and exploit the intellectual property, in the content they produce.

Yet that is essential to building sustainable companies with international reach. That is why our number one priority at the CMPA is a strong Terms of Trade regime, like that in the U.K. Because without it, there will be no independent production sector.

It is also why we worry constantly about the details, or manner in which the CRTC unbundles, because it’s always those details that make or break a policy.

And we can’t forget, therefore, that in terms of revenues, broadcasters must have the opportunity to exploit their own territorial rights in order to earn an adequate return on investment.

The Internet is a huge source of disruption and uncertainty, but so is regulation and policy. And that is what has the industry nervous.

We are engaged in a debate about choice when choice has never been greater. As I said, in my view, the debate is really about consumer price not choice, as well protection of the ability of businesses to legitimately exploit rights to intellectual property.

For others it’s about limits on market power arising from vertical integration or for broadcasters and distributors, the absence of scale relative to global players that have a free pass to compete in broadcasting on their terms. Our “Getting Ahead of Change” panel with industry leaders can fill you in on that a little later this morning.

But whatever your point of view it is hard not to argue that we start with a broadcasting and telecommunications system that is both world class and incredibly open.

Collectively we have created the capacity to compete on a global stage.

So what are some of the key things we need to get right in order to leverage the types of successes we achieved in the last 40 years in order to survive and grow?

  • We need to look closer at export opportunities in global markets because local models are fragmenting due to shifts to content on demand and going global affords scale
  • Leveraging, funding and tax incentives can create a huge opportunity to produce leading-edge shows, not just for local markets, but for platforms and studios around the world–just as we have done over linear platforms for the last 20 years
  • But that opportunity shrinks if we are relegated to service producers with no IP, relegated to producing to meet the obligations on broadcasters to deliver certain minimum and declining, amounts of local content. That is not to say the next Terms of Trade deal won’t be different. It will, but there is a risk in a vertically integrated market, that the demands to share in more of the IP to serve global platforms, will not be commensurate with the willingness to invest more in the marketing and promotion to exploit the global opportunity
  • We need to rethink what we mean by and how we measure Canadian content in a global world where scale often requires global partners. That is a hard but necessary debate; particularly if, as expected, regulation significantly fragments demand and revenue in the domestic space. The greater the fragmentation the faster we need to think global and to achieve sustainability as producers.
  • We need to get serious about protecting territorial rights because the exploitation of rights supports the creation of content whether you are a producer, broadcaster, film-maker or distributor.
  • We need to rethink support for public broadcasting if we really believe in the value of local content and diversity because unbundling will almost certainly reduce diversity in the commercial space.
  • If broadband TV and Apps are going to be the primary way of distributing broadcast content, perhaps we need to rethink restrictions on foreign ownership, particularly when it comes to carriage. A primary reason for restricting foreign ownership in the past was to ensure a place for Canadian voices and choices in the broadcast ecosystem. Yet it seems clear in the future broadcast milieu, public policy will be hands-off when it comes to how the largest online providers in the world operate in Canada. And if the largest content providers in the world can broadcast and distribute in Canada, without license or obligation, we need to ask why we are still concerned with protecting our carriers from foreign takeovers. Perhaps we would be better if there were fewer restrictions on foreign takeovers in return for such carriers and distributors committing to greater investment in and use of Canadian resources to create Canadian IP for sale around the world.
  • That may seem radical but if we are looking at net neutrality as being the new rule for broadcasting we might want to consider how to ensure there is a level playing field that supports indigenous productions across all platforms. After all the principle of maximum use of Canadian creative resources is still a priority under the Broadcasting Act and jobs in the sector remain a priority for the government.

15 years ago the public policy mantra around broadcasting was all about “telling our stories to each other”, now in my view the goal should be “selling our stories to the world” because that is where the market is heading and because that is the way to achieve scale in a fragmented, unbundled and on-demand world.

So we have to look beyond our borders if we hope to prosper and that requires scale in terms of libraries to sell, scale in terms of capacity to produce and partner on original productions, and the opportunity to leverage the intellectual property in the content we produce.

 

The capacity is in place to do that but will there be a policy framework to support that opportunity?

The devil is in the details.

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2 thoughts on “Michael Hennessy Speech Prime Time 2015 – The Golden Age of Uncertainty

  1. Tree says:

    You forgot to mention the 3 top players were all given free access to the airwaves in the beginning. Free. Yes they’ve invested in the infrastructure. They also charged monopolistic prices while offereing reprogramming on. Other stations and almost 50% of broadcasting of informarmation commercials and channels. Most of the shows you mention pale in conparison to the BBC for example. All 16000 of CBC’s taxpayer funded repeaters and broadcast stations have been junked. Public broadcasting has been marginalized. Canada used to be respected but the CBC is a joke. even the documentary division is near the cliff. And you’ve heard the joke about the sales and marketing bufget? Dream world…

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