CRTC denies CAB application for regulatory relief

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In its decision, the Commission granted large broadcast groups until Aug. 31, 2023 to make up any CPE shortfalls incurred during the pandemic-hit 2019-20 broadcast year.

Thirteen months after the Canadian Association of Broadcasters (CAB) requested pandemic-era regulatory relief from the CRTC, the Commission has denied the application.

CAB, which represents the majority of Canada’s privately owned TV and radio broadcasters, asked for relief on the grounds that the pandemic had precipitated a significant revenue downturn for TV and radio broadcasters, reducing their ability to meet programming expenditure requirements as a result of show cancellations and delays.

In its July 2020 request, CAB asked that the Commission deem all broadcasting licensees to have met their regulatory obligations for the broadcast year running from Sept. 1, 2019 to Aug. 31, 2020, regardless of how much they had actually spent. TV broadcasters argued that the production shutdown – which started in mid-March and continued until the summer – made it impossible for them to meet their regulatory obligations, and put their future financial stability in jeopardy.

Industry groups including the CMPA, DGC and WGC pushed back against CAB’s proposal, arguing it would effectively write off any shortfalls that may or may not have arisen from the economic impact of the pandemic, and unfairly disadvantage the creative community.

The Commission ultimately took the same view, denying CAB’s proposal and ordering that large TV broadcast ownership groups make up any expenditure and contribution shortfalls by Aug. 31, 2023 – or risk being found in non-compliance.

According to the CRTC, Canada’s large broadcast groups incurred Canadian production expenditure (CPE) shortfalls of $138.3 million in the 2019-20 broadcast year. Of that total, $12.9 million was for programs of national interest (PNI).

At the same time, the Commission said it will provide 10% flexibility (compared to the usual 5%) for TV broadcasters in regard to their CPE and PNI expenditure requirements, meaning they can underspend by up to 10% in a given year provided they make up the shortfall before the end of the licence term. The flexibility will allow “broadcasters to adjust to market fluctuations as the pandemic continues and… as the industry concurrently adapts to increased competition from foreign platforms,” noted the CRTC.

“We are pleased that the CRTC’s decision accounted for the fact that the pandemic has had a negative impact on all players across the entire broadcasting system, including independent producers,” CMPA president and CEO, Reynolds Mastin, told Playback Daily. “By maintaining contribution requirements, while also granting extensions for when those contributions must be made, the commission has wisely safeguarded policy objectives that will ensure the continued creation of independently produced Canadian IP for Canadian audiences.”

WGC’s director of policy, Neal McDougall, said: “We are generally pleased with the decision. Everybody has been impacted by this pandemic, including Canadian screenwriters, who were already hurting due to broadcasters commissioning ever-fewer hours of Canadian programming. In fact, the number of hours of scripted content produced under the WGC’s jurisdiction by the major broadcast groups has declined by 70% since 2014, from 715.42 hours to just 214.38 hours in 2020.

“CPE obligations already adjust to revenues – they are based on a percentage of the previous year’s broadcasting revenues, so the downturn broadcasters saw in 2020 is automatically reflected in lower spending obligations for 2021. The CAB was essentially seeking two years of regulatory relief for one year of depressed revenues. We are very glad that the CRTC and saw through those arguments to deny this application.”

A request for comment from CAB had not been returned at press time.

According to data provided by the Commission, the TV and radio broadcasting sector experienced significant declines in revenues for the 2019-20 broadcast year, following four years of gradual declines from 2015 to 2019. For the TV sector specifically, revenues for private conventional TV stations declined 14.3% to $1.33 billion in 2019-20, compared with $1.55 billion the prior year. The discretionary services business wasn’t hit quite as hard, with revenue falling by 7.2% to $3.93 billion in 2019-20, from $4.23 billion the year before.

In addition to CAB’s proposal, Canadian broadcast groups including Corus Entertainment, Rogers Sports & Media and Bell Media separately argued that the obligation to pay shortfalls for the 2019-20 broadcast year, with Bell Media saying it “disregards the significant impacts of the pandemic on revenues” and Corus noting that carrying forward the shortfalls incurred during that broadcast year will have a “significant and discriminating impact on broadcasters.”

Elsewhere within the submissions filed last year in reaction to the economic impact of the pandemic, Corus requested a change in the method of calculating expenditure. Under its proposal, CPE requirements for the 2019-20 broadcast year would be based on revenue from that broadcast year, rather than revenue from the previous broadcast year, as is customary under current broadcasting policy. The Commission denied Corus’ request, noting that “even prior to the pandemic broadcast year, [Corus] appeared to struggle with revenue volatility and managing its debts,” yet was “the most profitable group in the 2019-2020 broadcast year, in both linguistic markets.”

The Commission’s decision also noted that Corus “already benefits from additional flexibility relative to the other groups as it has 10% under-expenditure flexibility, as opposed to 5% for the other groups.”

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