Wednesday, May 05, 2010

We Only Spend What We Have To or See Rule #2

Welcome to Canadian TV Network Club.

The first rule of Canadian TV Network Club: You only spend what you have to on Cancon or homegrown programming.

The second rule of Canadian TV Network Club: You don't talk about Rule #1.

As reported in The G&M and Hollywood Reporter, the CRTC recently released HERE the 2009 financial results for Canadian Specialty, Pay, Pay Per View, and Video on Demand (VOD) channels and services. And much like when financial results for conventional Canadian broadcasters were released in March HERE, there was a lot of hullabaloo on the Internets and the Twitter with people wondering why spending on foreign (primarily US) was up so much while spending on Canadian programming stayed pretty much the same (and in the case of drama on the conventional networks spending actually dropped).

From the CRTC Conventional Nets report:

The acquisition and production of programs represented 75.2% of all expenses, which came down from $2.1 billion in 2008 to $2 billion in 2009. Private broadcasters invested 3.3% less on Canadian programming last year, or $599.4 million compared to $619 million. In 2009, broadcasters paid $176.2 million to independent producers to acquire programming, which amounted to an increase of $30.2 million in one year.

Meanwhile, spending on foreign programming reached its highest level yet at 59% of all programming expenses, or $846.3 million. This total represented a 9.2% increase over the $775.2 million that was spent in 2008.

And from the CRTC Specialty/Pay Nets report:

In 2009, these services spent $1.08 billion on Canadian programming, which was roughly the same amount as the previous year. Of the overall programming expenditures, $357.1 million was paid to independent producers to acquire Canadian programs.

Although investments in Canadian programming were essentially at the same level, these services directed $521.8 million to foreign programming. This represented an increase of 36.7% from the $381.6 million reported in 2008.

So to recap...Canadian programming spend in both reports: flat or same as year before. Foreign programming spend, mostly U.S.: an increase from almost 10% to a whopping 37%!

And people were asking Why? How? WTF??

It's kind of simple really, and I assumed more people already knew this...the Canadian networks don't spend anymore on homegrown programming because they don't have to.

You see, there are these things called conditions of license. They are rules, or conditions, that are placed on a broadcaster when the CRTC grants them the permission and privilege of owning and operating the license of a television channel. And one of those rules, or conditions, include minimum Canadian content spend requirements. And I will make a huge, or not so huge, leap here and say the amounts spent by Canadian broadcasters each year on Canadian content = their minimum Cancon spend requirement, and probably not one penny more.

The truth is once they've doled out that minimum spend they're pretty much done in the Cancon department for that year. Of course, you won't hear it phrased like that exactly - more likely you'll hear: "We have something like this already." or, "We're not looking for new programs at this time." or even, "We've run out of money for development or program licenses for this year." But as the above reports reveal, they may have spent their minimum for Cancon, but they certainly haven't run out of money to spend.

And here is the kicker: you may walk in with the coolest slickest most totally accessible massively entertaining sure-fire winner concept for a movie or TV series ever...but if they've already spent their Cancon minimum required spend as per their conditions of license, they ain't buying. Believe it...I've asked why and have been told (I'm paraphrasing): "If it's 100% Canadian, there's nothing you could bring us, no matter how good, that could make us more money and do more for us as a network than buying an American show or movie can."

So there you go.

This is why I was a big fan of the "dollar for dollar spend" proposal put forward by many of the Canuck artist and craftspeople guilds and unions last year during the TV policy hearings - as in, requesting that for every dollar a broadcaster spent on foreign or US programming they had to spend the same amount on homegrown Canadian programming.

Not surprisingly the broadcasters lobbied against that, and won.

This is a problem...because no matter how many ways you try to spin it, Cancon always ends up being a loss leader of sorts - the necessary evil cost of doing the business of operating a television network in Canada. But maybe we're not supposed to be talking about this 'club'.

In many ways the problems of our indigenous TV industry mirror many of the problems facing our English language feature film biz (as outlined recently in a very even-keeled and informative post by Uncle Jim at The Legion of Decency HERE), or at least a reoccurring theme seems to be emerging, which is....we have a system set up in Canada that handsomely rewards a chosen few in some select clubs, but they're rewarded for doing the bare minimum required with little or no expectation of return.

And that's kinda screwy.

(PS - you don't wanna know what Rule #3 is...)


ron oliver said...

" may walk in with the coolest slickest most totally accessible massively entertaining sure-fire winner concept for a movie or TV series ever.." COULD. but then why would you walk into a canadian broadcaster with it?

it's the difference between doing a really great show at your local college theater or doing a really mediocre show on Broadway. you're always going to do better on Broadway.

Alex Epstein said...

Various people have told me that the Canadian broadcasters actually make more money on Canadian shows than they do on US shows, because the Canadian license fees are so derisory. Can you support that argument?

wcdixon said...

Ron: You *would* because you have to, or because you want to.

Alex: I can't really buy into that notion. If what people are telling you is true our channels would be chalk full of homegrown shows, especially during primetime. But broadcaster profits are still driven by ad revenue. High profile and heavily promoted US shows in simulcast receive the highest ad revenue. The Canadian shows we see in primetime are because the networks *have* to air some Cancon in primetime, another condition of license. But only the required minimum is shown in primetime...the rest are dumped to off-prime with little or no promotion. I doubt this would go on if broadcasters were actually making more money on Canadian shows.

Peter said...

I think it was a WGC report that said Canadian broadcasters were making money of off Canadian shows. The assumption behind it though was that the broadcaster would have to re-air each episode twenty odd times across all of their holdings. In other words it's theoretically true, but only in an ideal world.

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