FINANCIAL SUSTAINABILITY

OUTLOOK

On March 22, 2016, the Government of Canada announced an important reinvestment in Canada's public broadcaster: an additional $75 million in 2016-2017 that will grow to $150 million per year in the following years. This is an important vote of confidence by government and by Canadians in our programs, our people and our vision for the future. It is also recognition that CBC/Radio-Canada faces some significant financial challenges.

We are also continuing to monitor and assess the broadcasting industry following decisions made from the CRTC's Let's Talk TV review of the television industry in Canada. Changes resulting from these regulatory decisions will affect our specialty channel revenue.

Our revenue continues to be exposed to the industry-wide softening of advertising markets and the shift of advertising away from traditional television to digital platforms. We are closely monitoring the situation, as we expect the advertising market to remain challenged.

These revenue uncertainties threatened some of the content creation and digital initiatives planned under Strategy 2020. As such, about 23% of the new funding will go to ensuring our momentum and the work underway in order to continue moving forward with the transformation of CBC/Radio-Canada into the digital space.

The government launched public consultations to develop a modern cultural policy framework for the digital age. In November 2016, CBC/Radio-Canada issued its submission, A Creative Canada: Strengthening Canadian Culture in a Digital World, in the context of the government's public consultation. Potential changes to CBC/Radio-Canada's business model and/or mandate could have a profound impact on the future of the organization. Without a solution for declining advertising and subscription revenues, program spending in future years will have to be reduced to match available resources.

On May 13, 2016, SiriusXM Canada Holdings Inc. announced its intention to recapitalize the company by way of a go-private transaction. The transaction results in the sale of CBC/Radio-Canada's 10.15% stake at $4.50 a share, generating proceeds of approximately $58 million. On April 26, 2017, the CRTC approved this transaction. The programming partnership with SiriusXM will continue through 2022. Most of the proceeds from the sale of the shares will be used to implement the Maison de Radio-Canada project, which was approved by the government in April 2017. The remainder will be allocated to general corporate purposes.

The resumption of salary inflation funding in 2016-2017 is a critical component of our financial strategy. However, since the government had not yet reached compensation agreements with its major unions in 2016-2017, the receipt of this funding will be delayed to 2017-2018.