An analysis of CBC’s financial history from 1937 to 2019 We tried to follow the money. Frodo had it easier. A research paper by the Forum for Research and Policy in Communications (FRPC) February 2020 If referring to this research, please cite as follows: Forum for Research and Policy in Communications (FRPC), An Analysis of CBC’s financial history from 1937 to 2019: We tried to follow the money; Frodo had it easier, Research paper (Ottawa, February 2020). Synopsis As the CRTC prepares to hold a licence renewal hearing for the CBC, the Forum for Research and Policy in Communications (FRPC) believes it would be useful to provide interested parties with a contextual and historical analysis of the funding of this key component of the Canadian broadcasting system. The CRTC last renewed the Corporation’s licences in 2013, for a standard five-year period. The licences have now been extended administratively several times by the Commission. As the Commission itself observed in the public notice calling the CBC to the renewal hearing, the landscape of the broadcasting environment has changed considerably since the last time the CBC appeared: “The way in which Canadians consume and create content is changing. Online services and platforms are increasingly being adopted across the country.” This makes the May 2020 hearing a pivotal one for the CBC and for its future role in the national conversation. This paper uses financial data collected from 80 of the 83 Annual Reports published by CBC since 1937 to analyze public funding granted to and received by CBC for its operations. Apart from numerous inconsistencies in presentation, the Forum found the following: • Parliamentary funding for CBC’s operations has decreased (in real, 2002 terms) by 36% since 1985 • CBC’s commercial income has decreased by 40% since 2014 • total public and commercial funding of CBC’s operations has decreased by 28% since 1985 • when considered in terms of daily life in Canada, the funding received from Parliament by CBC for its operations has decreased 54%, from 14 cents per person per day in 1985, to 6 cents per person per day in 2019 • funding for CBC’s operations has not kept pace with economic growth: since 2009 Canada’s Gross Domestic Product has increased by 21% while public funding for CBC’s operations decreased by 11% • CBC has operated at a loss in 35 of the 79 years for which data were available, in more than half the years since 2000 and in each of the 7 years since 2013 • decisions by Parliament not to fully fund the building of Canada’s national broadcasting system required CBC to borrow more than $1 billion for capital projects and to pay private broadcasting affiliates just over $1 billion to carry some of CBC’s programming • the Federal government’s requirement that CBC operate Radio Canada International used just over $1 billion of the Parliamentary appropriations allocated for CBC’s domestic operations. The paper draws several conclusions from the data: • the degree to which CBC remains a public service broadcaster is unclear as its reliance on commercial revenue means, by its own words, that it is “committed to supporting” advertisers • it is difficult to determine whether the 36% decrease in public funding for CBC's operations is affecting CBC's programming, as its Annual Reports do not provide the data needed to measure CBC's expenditures per original hour of produced or purchased programming, or the types of complaints it receives regarding programming quality Forum for Research and Policy in Communications (FRPC) (February 2020) • Parliament’s sovereignty over CBC's funding has been weakening, not merely because CBC's Annual Reports no longer acknowledge Parliamentary appropriations but ‘government appropriations’, but also because the process through which CBC's budget is determined and/or later changed is not transparent • non-transparent reporting means that CBC's legislated independence from government is difficult to evaluate and the current Broadcasting Act does not clearly establish where responsibility for identifying breaches of such legislative requirements lies, and • CBC’s Annual Reports provide too little objective information about its fulfillment of its legislative mandate from Parliament to permit its role in the broadcasting system to be understood, and provide so little consistent historical financial information that Parliament’s support for Canada’s national broadcasting service cannot easily be assessed. It is unclear why CBC’s annual reports do not currently provide accurate historical overviews of its finances in a consistent format. The result, however, is that CBC today provides little, if any, detailed information about the availability of its services in Canada and their use by the public, or about the programming that it produces each year – this includes data about the original and repeat hours of programming that it broadcasts on its conventional services and which it already collects, as well as reliable audience data to indicate how its programming is serving different groups within Canada – matters that are at the core of CBC's mandate from Parliament. Forum for Research and Policy in Communications (FRPC) (February 2020) Acronyms BBG Board of Broadcast Governors (established by the 1958 Broadcasting Act) CBC Canadian Broadcasting Corporation CRTC Canadian Radio-Television Commission (from 1968 to 1976) Canadian Radio-television and Telecommunications Commission (1976 - ) Forum for Research and Policy in Communications (FRPC) (February 2020) Contents, page 1 Contents Synopsis 1 Executive Summary 1 I The purpose of this report 1 A. Historical context of CBC 3 B. CBC|Radio-Canada in 2020 7 1. Canada’s ‘national public broadcaster’ 7 2. Services provided by CBC 8 3. Licensing and regulation of CBC 11 4. Financing CBC 13 5. Independence of CBC 14 C. What does “funding” mean in the context of CBC? 15 D. Purpose of this research note – historical funding of CBC 19 E. Research method and challenges 20 1. Finding CBC’s Annual Reports 21 2. Layperson vs accounting approach 23 3. Dataset 30 II Public funding of CBC’s operations since 1937 32 A. Total operational funding, 1937-2019 33 1. Total public funding and commercial income 33 2. Changes in the kinds of public funding provided for CBC’s operations 35 a) Radio licence fees – 1937 to 1959 38 b) Excise taxes – radio and television, 1953-1959 41 c) Parliamentary funding – fixed grants set by statute: 1952 to 1956 42 d) Parliamentary funding – annual operating operations, 1960 to the present: 43 3. Changes in public funding for CBC’s operations over time 45 a) Percentage changes in funding over time 46 b) Changes to the public funding granted for CBC’s operations 48 (1) Additions 52 (2) Reductions 57 4. Public funding of CBC’s operations, in context 59 a) CBC public and commercial funding in historical context 60 b) CBC’s public funding and national economic performance 60 c) CBC income relative to private radio and television services 65 5. Other sources of income: 1937-2019 66 a) Investment income 67 b) Pension fund 70 c) Sale of assets 72 B. CBC’s ‘net results’ 72 Contents, page 2 III Debt and the CBC 83 A. Loans and advances from Canada 85 1. Loans – capital works 86 2. Advances – working capital 92 3. Repayable advances – operating requirements 97 B. ‘Frozen allotments’ – operating requirements 97 C. Loans from the private sector 104 IV Expenses not directly related to CBC’s mandate 107 A. Relationship with private sector 107 1. Payments to affiliate and purchase of private stations 108 a) Affiliated stations 108 b) Private stations purchased by CBC 109 2. Payments for advertising 110 3. Payments to Telesat Canada 111 B. Leader in technology 112 C. RCI 113 V Summary of results and conclusions 119 A. Summary of results about the funding of CBC 119 1. Challenges in finding historical information about CBC’s funding 119 2. Public funding of CBC 122 3. Context of public funding for CBC’s operations 124 4. Other sources of income for CBC 124 5. CBC income less CBC expenses: ‘net results’ 125 6. Costs that have reduced funding available for programming 126 B. Conclusions about the funding of CBC 127 1. Is CBC a public service broadcaster? 127 2. Is CBC’s programming of the high quality expected from a national public broadcaster? 134 3. Is Parliament in control? 135 4. Is CBC sufficiently independent of government? 140 5. Do CBC’s Annual Reports enable its legislative mandate to be evaluated? 146 VI Suggestions for further empirical study regarding CBC 155 Appendices 156 Contents, page 3 Tables Table 1 Services offered by CBC over time 8 Table 2 References to “funds” in CBC’s 1984/85 Annual Report 16 Table 3 59 types of income earned by CBC 30 Table 4 40 ways CBC described its financial position at the end of the year 31 Table 5 Types of supplementary public funding from 1937 to 2019, by statute 38 Table 6 Transfers that have supplemented or reduced CBC’s public funding for its operations 38 Table 7 Changes announced to public funding granted to CBC for its operations 45 Table 8 Annual percentage change in public funding received by CBC for its operations, 1959/60 to 2018/19 47 Table 9 Additions and reductions to CBC’s public funding ($ million 2002) 51 Table 10 Number of years with additions to and reductions in the appropriations granted to CBC for its operations, by decade 51 Table 11 Additions to public funding of CBC’s operations 52 Table 12 Types of additions to public funding of CBC’s operations 55 Table 13 Transfers to and from CBC’s public funding for