CBC’s ad-free proposal shakes up heritage discussion

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At 4:29 p.m. last Tuesday, CBC News pushed out an e-mail alert notifying Canadians that they could watch Prime Minister Justin Trudeau announce his historic pipeline decision on cbcnews.ca. But in a ritual familiar to frustrated consumers of online video everywhere, viewers who clicked on a link in the alert were taken to the website – and promptly shown a 30-second ad for Tim Hortons before being granted access to the news conference feed.

Ads have been embedded in CBC programming since its radio network came into existence in the 1930s, but this week the public broadcaster made a blockbuster proposal: It would happily leave the commercial sphere to its privately owned competitors. All it wants is for Parliament to jack up its annual funding by a whopping 34 per cent, from $1.215-billion (in 2017-18) to an unprecedented $1.633-billion.

At a parliamentary hearing on Tuesday, Conservative MP Kevin Waugh said the proposal "blindsided everyone." And while critics were agog at the broadcaster's perceived chutzpah, CBC/Radio-Canada insisted it was only responding to Heritage Minister Mélanie Joly, who said last spring that "everything was on the table" in a massive review of the country's $48-billion broadcasting, media and cultural industries.

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"This proposal really focuses our work back to being a strong public service broadcaster who is completely different in its content and programming from everything else you have out there," said Hubert Lacroix, CBC/Radio-Canada's president and chief executive officer, in an interview with The Globe and Mail this week.

The Canadian Heritage review comes as media organizations are in turmoil: Ad revenues are plummeting for traditional broadcasters and news organizations, while audiences are flocking to foreign-based online offerings that funnel relatively little money into domestic production. With a friendly government in office that has already increased annual funding by $150-million after years of cuts by the Conservatives (and their Liberal predecessors), CBC/Radio-Canada has sniffed the wind and determined that now is the time to make its move.

The public broadcaster argues going ad-free will allow it to take bold creative risks akin to its well funded U.K. counterpart, the British Broadcasting Corporation, and create high-quality flagship TV programs for Canadians that can be exported to the rest of the world. But while the Platonic ideal of an ad-free CBC has its champions, even among some of its most dependable critics, the size of the proposed bill has many doing a double-take. And some are warning the unintended consequences could be disastrous, particularly in Quebec.

Advertising on CBC has a long and prickly history. A Senate report last year noted that, in the 1930s, the chairman of the then-new Canadian Radio Broadcasting Commission (which preceded the CBC) realized his "budget was far less than the $2.5-million that had been recommended [by the government] and he reluctantly turned to advertising to help make up the difference." Decades later, CBC executives still argue they do not get enough government support to fulfill their mandate.

This has led them to beat the drums for their ad business. In 2007, former CBC/Radio-Canada president Robert Rabinovitch told a parliamentary committee that "advertising plays a very important role in keeping your nose to the grindstone in terms of your relationship to your audience." In 2011, Mr. Lacroix said there "is no good public policy reason to eliminate or seriously reduce advertising on the TV services of CBC/Radio-Canada. It does not detract from its public-broadcasting mandate."

But in recent years, with the business models of traditional media cratering and CBC expanding aggressively into online news and other digital services, executives at CBC's competitors have renewed calls for it to get out of the ad business. (Last month, Globe and Mail publisher Phillip Crawley, among others, told a Canadian Heritage committee that CBC's online news business amounted to unfair competition for a struggling sector.)

So, this week, Mr. Lacroix adjusted his long-time position on ads, noting that he made his 2011 comments at a time when the political landscape precluded additional government funding.

Now, he says the pursuit of advertising is a corrosive influence. "Even if it's not the major driver of decisions we make, with respect to programming, initiatives, partnerships, there is a genuine concern that everything we do has a commercial aspect to it and has to contribute to the revenue line of CBC/Radio-Canada in order for us to balance our budget and reinvest in the content we create every day."

Over the phone this week, Mr. Lacroix painted a picture of a public broadcaster that would be free to experiment in new forms – to be a leader in technological and creative innovation for the country's media sector.

(CBC is asking for an extra $418-million annually: $253-million in current ad revenue minus the $40-million it currently spends on ad sales, $105-million for content to fill the time currently taken up by ads and $100-million to fund what it calls "new investments to face consumer and technology disruption.")

"The radio environment could change substantially," Mr. Lacroix suggested, citing experiments in podcasting and other storytelling forms.

Though CBC programs dozens of TV, radio and online services, the greatest changes would likely be to its traditional TV networks, where it spends the bulk of its money.

"When you do a story on a 30-minute window, a 60-minute window, you need crescendos, ups and downs, you need these peaks and valleys because you have ads and you have to exit and come back to it," Mr. Lacroix noted. Freed of those requirements, CBC can "challenge the authors to tell more complicated and different stories."

The binge-watching phenomenon has been driven by shows that rarely conform to the old models. Episodes of HBO's popular Game of Thrones, for example, run from 50 to 68 minutes rather than the conventional 44 minutes an hour, while Aziz Ansari's Netflix comedy series Master of None runs as long as 33 minutes, giving creators 50-per-cent more time to develop story and character. "I think we can actually move storytelling," Mr. Lacroix said.

Still, not even CBC's supporters are uniformly in favour of the new proposal.

Last month, a group of long-time former CBC employees calling themselves Public Broadcasting in Canada for the 21st Century submitted a report to Canadian Heritage with a series of recommendations that includes a ban on ads. But this week, one of the members said CBC doesn't need any additional government money. "They need to figure out what their priorities are, make some hard choices, learn to live within their budgets and then provide the programming that serves Canadians as citizens, not just as consumers," said Jeffrey Dvorkin, formerly the managing editor of CBC Radio News.

And the Association of Canadian Advertisers, an industry group representing companies that buy ads, has long opposed the notion of CBC going ad-free. Its position has not changed.

"It is a no-win situation. It's no-win for taxpayers, and it's not a win for advertisers," ACA president and chief executive Ron Lund said. Like Mr. Rabinovitch, he believes advertising keeps CBC accountable for producing quality programming, since attracting ad revenue depends on people actually watching the shows. "If they don't have the eyeballs, those programs die. They wouldn't die if the money just comes from taxpayers."

Mr. Lund also praised CBC's sponsorship activities, such as Kraft Hockeyville, which integrate advertisers within programming.

The ACA expects that some revenue would flow to other media companies, but not all. "If there is not programming that is going to give you incremental reach – just taking that money and putting it into more ads on the same programs [where advertisers are already investing] on other broadcasters' channels – all you're doing is increasing frequency [of ads seen by the same people], you're not actually increasing reach [to more people within the targeted audience,]" Mr. Lund said.

Judy Davey, a former media buyer and long-time marketing executive at Molson Coors Brewing Co., is concerned the impact would be particularly acute in Quebec, where media companies would suddenly face less competition in selling their airtime. "You're taking away the second-largest [audience] share advertising vehicle," said Ms. Davey, who is now vice-president of media policy and marketing capabilities at the ACA. "That would have a significant impact."

Broadcasting in Quebec is already more concentrated than in the rest of Canada. French-language TV stations owned by Quebecor Media Inc. accounted for roughly a third of the francophone TV audience in Quebec in 2014-15, according to the CRTC's latest Communications Monitoring Report. Bell Media Inc. has about an 18-per-cent share through its French specialty stations, but CBC/Radio-Canada is the second-largest conventional network by audience share, with also close to 18 per cent. The closest competitor after that is Remstar Corp., which owns the French-language network V as well as MusiquePlus, with an 8.7-per-cent share.

Not only would advertisers miss out on big-ticket shows such as Bye Bye – an annual satirical year-in-review show on Radio-Canada that drew almost four million viewers last year – but also the unique local and regional reach across the network. "An advertiser could only get the certain reach through some of the programs that they have in Quebec," Ms. Davey said.

Mr. Lacroix, though, is bullish. Asked to rate how essential the proposal is, on a scale of one to 10, he said simply: "It's the most important piece of strategy and vision that we've put out in a very long time."

And if the government doesn't go along with that vision? "Then we will continue pushing for the public broadcaster, supporting it and trying to bring everybody back to the funding model for conventional broadcasters in this country – not only ours, CTV, TVA, V, Global, City – everybody has the same challenges right now. And unless you bring a solution to the whole of the market, Canadians are not going to be as well served as they are now."