The Toronto-based empire of the cbc is facing a stiff new challenge.

The post-production community is asking some tough questions about what the cbc intends to do with the CBC Broadcast Centre and all the expensive equipment that’s in it.

Raising questions that have many parallels to the CTV Television Network’s complaint that CBC Sports overpaid for the rights to the 1998 Olympics, Toronto’s post-production companies are concerned that because the public broadcaster is not subject to the same kinds of bottom-line constraints as private business, the Broadcast Centre ended up overbuilt and overequipped.

Now that it’s here, with the cbc looking everywhere for new revenue streams, post-production people fear they may find themselves competing against a publicly funded powerhouse for business.

They say if the cbc begins to market its post-production facilities and services to the private sector, the effects on the industry won’t be felt for some time. And by then, the damage could already have been done.

Post-producers say if the cbc were to take business away from them, the results would be the closing of some of the smaller companies and the beginning of the erosion of the production/post-production infrastructure, especially in Toronto.

The Toronto chapter of the International Teleproduction Society, an umbrella group representing the Toronto post-production community, is spearheading a public investigation into how the cbc plans to use and market the wealth of post-production facilities housed in the new Toronto Broadcast Centre.

At the heart of the issue is a fear that the cbc is planning to use the Broadcast Centre’s excess capacity to service the private sector, says Doug McKenzie, a member of the its and president of Magnetic Enterprises.

‘In the opinion of the its, they’ve overbuilt, and the answer is to go to the broadcast market because there’s all these rooms to fill. We’re concerned that in one fell swoop, they’ll be marketing their facilities to our clients,’ he says.

Plans shelved

The its mobilized in the wake of cbc’s plans to install a film processing lab in the center last August, a move its says would have put some of the smaller Toronto film labs out of business. The plans were shelved in September after the cbc signed a long-term film processing agreement with Toronto-based Medallion*PFA.

But the incident pushed the its to take its fears public.

The group has hired lawyers to look at whether the cbc would be overstepping its mandate if it were to compete for business in the private sector, and, at the end of September, McKenzie detailed the industry’s concerns to the Canadian Heritage standing committee on the cbc.

The committee has since given the cbc a list of questions about its intended use of post facilities. Scheduled to respond in mid-November, the cbc is being asked to detail its current level of capacity, expected revenues generated through post-production of outside projects, and projected capital expenditures on new equipment over a five-year period, among other questions.

No challenge

For the past four years, the independent community has relied on former cbc chairman Patrick Watson’s assurances that the Broadcast Centre would not pursue business outside its own in-house needs. At a meeting of the its in 1990, Watson told an agitated group of industry representatives that the independent community would see no challenge from the cbc. The majority of the broadcaster’s in-house projects would be posted inside, otherwise the Broadcast Centre was simply an amalgamation of the 26 cbc buildings scattered throughout the city and posed no threat to the private community, he said.

The 10-story tower on Toronto’s Front Street is nearly fully functional, a year and a half after staff started moving in. To date, it is stocked with approximately $253 million worth of new broadcasting equipment, $118 million of which is allotted to television programming.

The short-term problem of the film lab may be solved, but the industry’s concern over the potential impact the Broadcast Centre’s services could have on private enterprise has increased, and with good reason, says Toronto film commissioner David Plant.

‘It would take less than 18 months for that scale of competition to have an effect. In that period, we’d see some of the smaller facilities having to shut their doors. Their market share is small enough that the loss of a couple of clients could take them out,’ he says.

Tertiary and secondary facilities would be affected first, says its president Norm Stangl, also president of Spin Productions. The industry’s overall cash flow would be eroded to the point where private companies wouldn’t be able to re-equip themselves. Consequently, their ability to capitalize on the environment and contribute to the economy would be minimized, he says.

Businesses will naturally succeed or fail due to increased competition, says Plant. But the level playing field that regulates this natural order would be destroyed if a newcomer the size of the cbc – with the benefit of public funding – was allowed into the game.

‘When you have a subsection that is important to the overall health of the private film and television production community that is threatened by an organization as large and well-financed as the cbc, then you have to say, what is the mandate here?’ says Plant.

There is nothing specific in the mandate about the marketing of post-production facilities, says Suzanne Steeves, cbc executive director, media operations.

Unregulated

cbc president Anthony Manera confirms the mandate doesn’t regulate how the cbc uses its equipment.

‘If we want to rent out those facilities, we have the power to do that now. In some instances we do engage in some revenue-raising using them, but they’re relatively modest in terms of the big picture,’ he says.

It would be absurd to have the mandate direct the cbc on how to use its facilities, says Watson.

‘In my view, it would be unthinkable that Parliament direct the cbc not to use its material to maximum financial advantage – particularly when it’s constantly telling them to do more with less.’

Tom McKee, a lawyer with Blake, Cassels and Graydon hired by the its, says while nothing in the mandate obligates the cbc to abstain from competing with the private sector, the its may have legal grounds to contest any bargain-basement pricing arrangements for services rendered on equipment that was partially funded by the taxpayer.

‘Political review’

‘This is a political review process at the moment and we’re not alleging any illegalities on the part of the cbc. But to give you a flavor of what may happen down the road: I don’t know what their plans are, but to the extent that they would use this facility, which was funded on taxpayers’ money, to compete with the private sector and it resulted in unreasonably low selling prices or exclusive arrangements with producers, there may be problems under the general law. We would want to make sure that whatever they’re doing is appropriate under the Competition Act,’ McKee says.

It’s unclear whether a disproportionate budget for new equipment would be grounds for legal action. But if the entirety of the $20 million increase in the capital appropriations budget awarded the cbc by the Mulroney government several years ago were allotted to English television services, the private sector would be at an uncanny disadvantage, says Plant.

‘If the cbc has an equipment budget of $20 million, that’s $100 million over five years. Who can compete with that?’

The annual amount the Broadcast Centre will have to spend on new equipment has yet to be decided, says Bruce McKay, cbc director of planning and policy development for English television.

The Broadcast Centre has worked with a $118 million budget for new television operations equipment for the past several years, says McKay. That sum includes the news budget, current affairs, satellite dishes, cblt, and all other network operations facilitated inside the new building.

An annual allotment for new equipment will be decided in the next budget. But, says McKay, given the amount of investment already poured into the Broadcast Centre, now fully stocked with new equipment, there won’t be a lot of money for equipment coming in the near future.

‘Drought’

‘There will be a drought in Toronto for a while as the other regions catch up. There’ll be a lot less money coming to Toronto,’ he says.

The its may have a long wait for official numbers from the cbc in terms of how much money has been invested in post-production facilities in the Broadcast Centre.

According to McKay, since some equipment is used to serve both production and post-production purposes, it would take months to carve out a total expenditure on post equipment.

‘What we would have to do is go through the machines and say what percentage of the time are they doing production and what percentage are they doing post.’

A similar problem renders an accurate count of capacity and number of suites difficult to decipher.

‘Same puzzle’

‘It’s part of the same puzzle. Here’s a room with a bunch of equipment in it. Do we count it as post or production? There’s a bunch of facilities in here that do both. If we had deliberately gone about it in a way to make answering these kinds of questions difficult, we couldn’t have done a better job,’ McKay says.

Despite the equity poured into expanded facilities, cbc’s Steeves says there are no plans to place any more emphasis that usual on agreements with producers in which post-production services are part of the licence fee.

It has happened seldom in the past, only in the odd situation where the cbc is bowing to pressure from a producer who can’t get the film made without certain facilities, says Steeves. ‘It’s clearly an investment on our part. We look at it as equity – we don’t give it away.’

According to Steeves, there is no projected revenue figure for services rendered through out-of-house projects post-produced at the cbc.

‘I know that some of our regional operations do some business on the side, but their operations’ fluctuations seem to be greater. For the network here, it’s not a big focus. In terms of going out and actively soliciting business, that’s not what we’re doing, so there’s no projection made on an annual basis,’ she says.

Manera says the cbc has a proven record of not competing with private industry, but won’t rule out the possibility of using the production and post-production equipment to generate revenue.

‘The space is very much utilized right now, but if there is excess at some point in the future, I don’t want to close any doors. If we do have excess capacity, we’re going to allow usage to generate revenue, but we’re not going to act in any unfair way in competing with the private sector. That’s our track record. And I don’t want to leave the impression that we see that as a solution to our problems.’

As for whether the center is operating over capacity, McKay says the building was designed to avoid excess space and idle facilities.

‘One of the things we tried to do was build below what we thought the load was. We didn’t want to get into the situation where we’re competing with the private industry.’

For example, three studios were built with the thought that any needs for extra space could be easily accommodated out-of-house, says McKay. ‘The problem now is there’s a little less on the outside than we thought.’

Steeves says the center was outfitted to facilitate the needs of cbc’s minimum continuous demand. ‘But as with any facility, especially in this business, there is fluctuation,’ she says.

Watson, stipulating that his expertise is more towards production than post, says a facility of the Broadcast Centre’s proportions and capabilities was unnecessary given the state of the industry.

‘The view I held privately and the view I hold still is that the cbc was wrong to develop as much of a television facility as it has. With a vigorous private sector and the availability of studio floor space and skills in the private sector, the cbc was ill-advised to accumulate the kind of overhead that is entailed in the Front Street building.’

The its is asking the cbc to halt capital expenditures in terms of increased post capacity and capabilities and to form an agreement to work with the independent community. It is also asking how the amount of cbc funds being channeled into the private sector today stacks up against numbers for the previous decade.

Both the its and cbc emphasize they don’t want a war. It’s been a relief to be able to go to the private sector when post-production problems arise, says McKay. ‘There is no percentage to be gained for us in creating unnecessary problems for the outside.’

For its part, the its wants to improve the working relationship between the cbc and the independent community. The resolution to the September film lab situation may have opened the door to further dealings between the independent community and the cbc, says Andy Sykes, a member of the its and a partner at Command Post and Transfer.

‘The cbc has to realize that what is available in the community is a high-quality level and one they could take advantage of. That’s our point: the private sector has been offering world-class facilities for decades and the cbc has not taken advantage of that.’

Plant says if it weren’t for the cbc, there wouldn’t be a lot of the independent film and television activity that there is.

‘But it’s grown to be such a huge operation that I don’t think people look beyond the Corporation to how it can affect the rest of the industry. They’re a thing unto themselves.’