Corporate Year in Review

CRTC decisions on mandatory carriage and broadcast licence

In September 2013, CBC/Radio-Canada’s new broadcast licence with the Canadian Radio-television and Telecommunications Commission (CRTC) came into effect, after the first full review of licences in 14 years. The new conditions of licence support CBC/Radio-Canada’s ongoing evolution into a modern public broadcaster, providing a streamlined regulatory framework that will aid the Corporation in its ongoing implementation of Strategy 2015, as well as the next strategic plan that will take us to 2020. A key element of the decision was to permit the introduction of ads on CBC Radio 2 and ICI Musique¹ to help the Corporation generate new revenue.

The CRTC also renewed the licences for CBC News Network and ICI RDI (formerly, Réseau de l’information) requiring that
CBC News Network be carried on basic service by distributors in French-language markets and that ICI RDI continue to be carried on basic service by distributors in English-language markets.

In August 2013, the CRTC also approved an application for a distribution order for ICI ARTV in English-language markets, which came into effect on January 1, 2014. This order requires that distributors serving English-language markets offer ICI ARTV to clients who wish to subscribe to the service. Because ICI ARTV already had “must-offer” rights in French-language markets, this new order makes ICI ARTV accessible throughout Canada.

Challenge and Change

Beginning in the third quarter of the fiscal year, it became clear that the Corporation was facing significant financial challenges on various fronts.

Commercial revenues in English and French Services suffered due primarily to a softer television advertising market, down approximately 5% for all conventional broadcasters. Other pressures were added in the final months of the fiscal year, including disappointing performance for some individual prime-time programs in the key 25-54 year-old demographic (a demographic that drives advertising revenue) on CBC Television, and the announcement by the NHL that it had chosen to deal exclusively with Rogers for the next 12 years. For 2014—2015, these factors, combined, represented pressures of approximately $47 million. As well, advertising revenues from CBC Radio 2 and ICI Musique were much lower than anticipated, for a shortfall of approximately $13 million.

Additional pressures of about $72 million came from increases in fixed costs, such as rent and property taxes ($42 million), and the government’s reintroduction of a salary inflation funding freeze for fiscal years 2014—2015 and 2015—2016 ($30 million).

These financial pressures came after the Corporation had absorbed almost $390 million in budget reductions and reallocations since 2009, largely due to the 2008—2009 recession; our cost reduction initiatives following Federal Budget 2012, which reduced our funding by $115 million over three years; the elimination of the Local Programming Improvement Fund (LPIF); and reduced funding from the Canada Media Fund (CMF).

We had to make the difficult decision to cut more than $130 million from our budget across the Corporation, including a workforce reduction of 657 full-time positions over the next two fiscal years, with 573 to be cut immediately to balance our 2014—2015 budget. This will result in one-time severance payments estimated at $33.5 million.

At the close of the fiscal year, we faced a two-part challenge. First, we managed to balance Budget 2014—2015. Second, we had to ensure our next strategic plan includes fundamental and far-reaching changes to position the public broadcaster for the future. This will mean making significant choices about what we can afford to do with a much different revenue base.

Over the course of 2014—2015, we will make further decisions about the breadth and depth of this shift. Our vision for the future is that CBC/Radio-Canada will be a more scalable and focused media company. Our new strategic framework will ensure that we evolve as rapidly as the media consumption habits of the audiences we serve.