CRTC proposes more benefits dollars to Canada Media Fund

The CRTC's proposed changes to its tangible benefits policy would provide the Canada Media Fund with financial stability and allow it to expand its programs, industry experts said. Under CRTC rules, companies that acquire broadcast assets must pay benefits to support the Canadian broadcasting system, with benefits dollars typically matching 10 per cent of the value of TV assets involved in the deal or six per cent for radio assets. In a notice of consultation posted on its website Monday, the CRTC proposed to to direct 64 per cent of all future benefits to the CMF directly. It proposed directing 80 per cent of tangible benefits to independent production funds, most of that going to the CMF. “It’s very good news,” Valerie Creighton, CMF president and chief executive, said in a telephone interview Monday. “This would allow more money for more content to be made in Canada.” The CMF, which now receives funding from the federal government and broadcast distributors, runs programs to help independent producers develop and produce broadcast and new media content. The organization receives more than half of its annual funding from broadcast distributors, which are required to contribute up to four per cent of their gross annual revenues to the CMF, and is threatened by the decline in those distributors’ revenues due to cord-cutting and competition from over-the-top service providers like Netflix Inc. According to the CMF’s most recent year-end financial report, its funding from broadcast distributors fell to $216.7 million in 2013, down from $218.2 million in 2012, while funding from parliamentary appropriations remained the same at $134.1 million per year. Creighton said the commission’s proposal to redirect tangible benefits to the CMF could help the organization maintain its funding contributions going forward if broadcast distributors’ revenues continue to decline. She said a new source of direct funding could also potentially help the CMF expand its existing funding programs, which receive more applicantions than they can provide funding to each year, though she noted that the organization does not yet know how much extra funding it could receive through tangible benefits allotments, or how exactly it would use any additional funding. “We’d look at where the need is, where the demand is, where the growth is, and make recommendations when the time comes,” she said, adding that all of the CMF’s programs “are significantly over-subscribed, both on the television and digital media fronts.” Mario Mota, a partner at media consulting firm Boon Dog Professional Services, said in an interview Monday that the commission’s proposal could “stabilize” CMF funding, if the commission continues to receive applications from companies seeking to acquire other broadcasting companies. He said that the broadcast industry has already completed a phase of consolidation in recent years, adding that there may not be that many more sales of broadcast companies in the years ahead that would produce tangible benefits payments “An influx of new money there is absolutely necessary for the CMF … my guess is there’s not many left so this may not have a very significant impact,” he said. “There’s very little consolidation left to be had." Michael Hennessy, president and CEO of the Canadian Media Production Association (CMPA) said he believes the commission’s proposal would cause tangible benefits spending to better support independent players in Canada’s broadcasting system. Currently, he said, broadcasters are given a great deal of flexibility to determine where their tangible benefits spending is directed, resulting in funding plans that predominantly serve the broadcasters’ own interests, such as by producing programs that only they can air. The CRTC’s current tangible benefits rules require that 15 per cent of tangible benefits spending support “on-screen” initiatives, though they provide little other criteria, aside from the requirement that benefits support the broadcasting industry. Hennessy said the CMF and other independent production funds could benefit from a more stable funding model to help “offset erosion” of the broadcast distributors’ contributions. “I think it’s really timely to ensure that monies from consolidation flow through to independent production and independent production funds and don’t get lost in-house,” he said. The proposed changes reflect some of the benefits plans from large broadcasting transactions in the past few years, such as BCE Inc.'s acquisition of Astral Media Inc. and CTV, and Shaw Communications Inc.'s purchase of Global Television. In its notice of consultation, the CRTC said it also wants to prevent broadcasters from using tangible benefits funds for “self-serving” initiatives, such as technological upgrades, “improvements to existing programming,” and on-screen initiatives that are “produced by and exclusively for” the company making the payment. It said broadcasters would be allowed to use their discretion to allocate the 20 per cent of their tangible benefits requirements that don’t have to go to an independent production fund, though it laid out a series of proposed restrictions on the types of activities that money could be used to support. “When proposing discretionary initiatives as a part of tangible benefits, the onus would be on the applicant to demonstrate to the Commission, at the time of filing its application, that its proposals are not self-serving,” the commission said. As part of its consultation, the CRTC said it is also considering reducing benefit exemptions for smaller acquisitions, and considering whether to change its formula for determining asset values, in an effort to make the process more predictable. The commission is also consulting on the timing of companies’ tangible benefits payments, and has proposed that benefits payments be completed at the time a deal closes, as opposed to being paid out over five to ten years, as is the case under the current system. The deadline for comments is Dec. 5, with reply comments due Dec. 20. —With reporting by Nicholas Kyonka at nkyonka@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

CRTC proposes more benefits dollars to Canada Media Fund

News | October 21, 2013

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CRTC proposes more benefits dollars to Canada Media Fund

News | October 21, 2013

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