Ted Kelterborn is a partner in the Toronto law firm of McMillan Binch LLP and a member of the firm’s KNOWlaw Group. This article was prepared with the assistance of Julie Beeton.

‘SONJA, Cynthia, Megan, Jackie, Gordon, Paul, Colm, Bruno, Al – we all know their last names.’ So says Trina McQueen’s long-awaited report to the CRTC and Telefilm Canada on English-language Canadian TV drama, entitled Dramatic Choices. Ironically, perhaps the biggest challenge facing Canadian television drama is the fact that most Canadians don’t know these people from Adam.

Although there have been some successes over the years, the truth is that even the most popular Canadian television drama, shows like Degrassi, Beachcombers, Traders and Anne of Green Gables, have rarely been able to attract mass audiences the way American drama does.

In Dramatic Choices, McQueen concludes that the key to making successful Canadian television drama is getting people to watch it. What makes McQueen’s report worthwhile reading (in addition to its merciful brevity) is her suggested approach to ensuring that Canadian drama captures the ratings Holy Grail.

McQueen reminds us of the ‘double-whammy’ facing Canadian drama as far as broadcasters are concerned. First, the cost of producing drama is much higher than the cost of producing other genres of programming (read ‘more money up front’). Second, Canadian drama has historically lost more money than other genres (read ‘less money overall’).

Not surprisingly, McQueen concludes that without some form of regulatory ‘incentive,’ broadcasters will continue to be reluctant to invest in Canadian drama.

Regarding regulatory incentives for broadcasters, McQueen’s report contains a few truly innovative recommendations. Among these are:

Allowing an exemption from the 12-minute limit on advertising for airing original 10-out-of-10 drama.

The proposed exemption is equal to one minute for each original hour (and one repeat) of 10/10 Canadian drama aired in any broadcast year. The number of minutes earned by each broadcaster (conventional and specialty) would be totaled at the end of each broadcast year and could be used in the following broadcasting year in any program the broadcaster chooses.

One caveat to this credit is that it would only be available in respect of programming for which the broadcaster has paid a licence fee of at least 25% of the budget. Curiously, this 25% threshold is 5% higher than the current licence fee threshold for dramatic programming under the existing Canadian Television Fund guidelines, although there is no suggestion in McQueen’s report that the existing licence fee threshold should be raised.

McQueen does not specify whether there would be any limit on the use of these bonus minutes in any one broadcast hour. However, if a broadcaster could combine all the extra minutes of advertising received for airing Canadian drama and use those minutes during ‘big ticket’ broadcasts like the Super Bowl, this particular proposal could go some distance to turning original 10/10 drama into a moneymaking proposition for broadcasters.

Allowing a 200% credit against Canadian content for each hour of ‘hit’ drama that draws one million viewers on conventional or 500,000 on specialty.

Only one hour per week of ‘hit’ programming would be eligible for this credit. Although McQueen does not specify that ‘hit’ programming must be original and 10/10 in order to qualify, in the overall context of the report one might reasonably assume that she intended this to be the case. In addition, as with the advertising credit mentioned above, the 200% time credit would only be available in respect of programming for which a broadcaster has paid a licence fee of at least 25% of the budget.

The report does not indicate whether the 200% credit can be combined with other available time credits. If not, particularly given the inherent uncertainty in predicting ratings for most programming and the costs involved in producing and promoting big-ratings dramatic programming, this proposal would appear to be a much less interesting incentive.

Allowing all at-risk equity investments to count towards program expenditure requirements.

As of September 2000, all requirements for conventional broadcasters to make minimum annual investments in the production or acquisition of Canadian-content programming were eliminated. However, these expenditure requirements continue to be applicable to speciality services. McQueen’s report does not suggest reinstating expenditure requirements for conventional broadcasters, so it appears that this proposal is intended to relate only to specialty broadcasters.

Currently, Canadian specialty services are only permitted to count equity investments as Canadian programming expenditures to the extent of their losses on such investments and only where such investments are made with arm’s-length third parties.

McQueen recommends revising the current CRTC policy such that all ‘at-risk’ equity investments count toward program expenditure requirements. McQueen offers no guidance as to the meaning of ‘at-risk’ although presumably it is intended to exclude any investments where repayment is somehow guaranteed to the investor.

Interestingly, the report does not specifically address whether an ‘at-risk’ investment would include an investment in a program produced by a non-arm’s-length third party. There are more than a few specialty broadcasters with affiliated production companies that would be eager to take advantage of such a policy change.

Although McQueen has developed some truly interesting and innovative regulatory ‘carrots’ to encourage broadcasters to come to the aid of Canadian drama, at least one of her proposals would simply reinstate a long-standing CRTC policy that existed prior to the implementation of its Policy Framework for Canadian Television in September of 2000.

Restoring the 150% credit for 10/10 (distinctly Canadian) drama, so that it applies against overall Canadian content.

This is ‘deja vu all over again.’ Until September 2000, all conventional broadcasters were given a 150% time credit for 10/10 Canadian drama against their overall 60% (50% during the evening period) Canadian-content requirements.

For what the CRTC terms the ‘largest multi-station ownership groups’ (i.e., CTV, CanWest Global and TVA Group), the old 150% credit was eliminated and replaced with a similar credit, but effective only against the eight hours per week of so-called ‘priority programming’ (including drama, documentary and several other genres) they are required to air each week between 7 p.m. and 11 p.m.

It is not clear if McQueen is suggesting that the existing priority programming credit be eliminated or (more likely) that both credits be available to broadcasters. In the latter case, each hour of 10/10 Canadian drama would not only count as an hour and a half of priority programming, but would also count as an hour and a half of required ‘Canadian’ programming.

Although producing drama costs significantly more than producing the other genres of ‘priority programming,’ clearly the hope is that the reintroduction of this credit would help tip the balance for broadcasters in favor of satisfying their priority programming requirements with Traders II rather than Popstars III.

It should be noted that the recommendations contained in Dramatic Choices, are in summary form only at this point. The devil is in the details and this will certainly be the case as these recommendations evolve into draft regulations and/or formal policy statements.

(This article contains general comments only. It is not intended to be exhaustive and should not be considered as advice in any particular situation.)

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