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House of Commons CANADA Standing Committee on Canadian Heritage CHPC Ï NUMBER 052 Ï 1st SESSION Ï 39th PARLIAMENT EVIDENCE Friday, April 20, 2007 Chair Mr. Gary Schellenberger Also available on the Parliament of Canada Web Site at the following address: http://www.parl.gc.ca 1 Standing Committee on Canadian Heritage Friday, April 20, 2007 Ï (1430) economy as value added. Compared to most Canadian industries, [English] this is a very high level of domestic content. The Chair (Mr. Gary Schellenberger (Perth—Wellington, CPC)): Welcome. Advertising increases government revenues through the income We had some interesting sessions with witnesses this morning, tax derived from the jobs it creates and from the greater sales-tax and we welcome our afternoon witnesses. We'll try to stay on time. I base that results from it. In short, without the ability, via advertising, would just ask you, please, to try to keep your presentations to to communicate and establish strong brands, we would not be able to roughly ten minutes, if we can. That will give us some time for differentiate our benefits. questions. We welcome the Association of Canadian Advertisers, Corus Mr. Robert Reaume (Vice-President, Policy and Research, Entertainment Incorporated, and the Documentary Organisation of Association of Canadian Advertisers): Clearly, advertising makes Canada. a significant economic contribution to our country. It is the fuel for Canada’s economic engine. Furthermore, advertising makes it We'll start off with the Association of Canadian Advertisers, possible for the broadcasting system to fulfill the public objectives please. established by the Broadcasting Act. Without advertising revenues, Mr. Ronald Lund (President and Chief Operating Officer, Canada’s broadcasting system could not survive. Association of Canadian Advertisers): Thank you, and good afternoon, Mr. Chairman and members of the committee. It is because of this that advertisers favour universal access to We are very pleased to have this opportunity to participate, with media. We believe that all broadcasting, and print and Internet our comments, in your committee's important investigation into the services as well, should permit, and indeed would benefit from, role of the public broadcaster in the 21st century. commercial advertising. The Association of Canadian Advertisers is the only association solely representing the interests of advertisers in this country. Our members, over 200 companies and divisions, represent a wide range This extends to the CBC as well. Advertisers have always of industry sectors, including manufacturing, retail, packaged goods, supported the CBC, and we are proud of the role that we have had in financial services, and communications. They are the top advertisers its success. Advertising support of the public broadcaster allows in Canada, with estimated annual sales of close to $350 billion. governments to be fiscally prudent while still advancing public policy goals. Our organization is concerned, specifically, with the advertising function in our economy and the many different processes it can encompass. Your committee’s mandate for this investigation is quite CBC television, both English and French, currently supplies broad. It encompasses CBC’s role, the services it offers, and the substantial amounts of commercial inventory to the advertising emergence of new media. However, our comments will be confined marketplace, providing advertisers with opportunities to sponsor to the financial services area specified in the mandate. distinctive programming that delivers value to audiences. CBC Advertising is a significant economic force in the world. In audiences are particularly interesting to advertisers since they virtually all developed countries, advertising is considered an routinely run at diminished levels of commercial clutter compared important and necessary component of the communications infra- to private broadcasters. structure. It is estimated that total worldwide disposable advertising expenditures approached $2 trillion U.S. last year. Some have suggested that CBC-TV should reduce its reliance on Advertising, as you would expect, is also a significant economic commercial revenues. This is a non-starter for advertisers, since it force in Canada. Advertising expenditures in 2005 were projected at would take some $400 million—estimated—in commercial inven- $13 billion. Direct and indirect employment in this sector represents tory out of the market, significantly diminishing supply and about 250,000 jobs, or about 2% of all jobs in Canada. Importantly, inevitably leading to increased TV advertising costs that would about 79% of total advertising expenditures remain in the Canadian have to be passed on to consumers. 2 CHPC-52 April 20, 2007 In our opinion, there are not enough existing conventional outlets, year. We need to grow our advertising opportunities in Canada, not especially at the local level, to safely replace this market inventory. restrict them. Without replacement inventory that does not add to clutter, and without adequate competition, the cost of TV advertising would be In summary, it is our opinion that advertising plays an essential driven up, and advertisers would naturally divert some portion of role in the continuing economic and cultural viability of the their spending to other, less costly media and be forced to raise broadcast medium. The CBC has been a terrific partner with prices to consumers. This would only serve to diminish overall advertisers over the years. We believe that advertising revenue on the advertising funding, add consumer costs, and ultimately end up CBC only enhances its ability to achieve the special responsibilities weakening the broadcasting system. given to it under the Broadcast Act. Restricting commercial access on CBC would result in a no-win situation for all concerned. It Canada's advertisers have had to cope over the years with would undermine the quality and variety of television programming; increasingly restricted access to Canadian audiences. Approximately remove an important supply of commercial inventory for advertisers, one-quarter to one-third of all TV viewing in this country is to especially in local markets; and lead to an increase in costs that signals that cannot be commercially accessed by advertisers in would ultimately have to be borne by consumers. Canada. A non-commercial CBC would only exacerbate this problem. We appreciate the opportunity to participate, and we wish your An independent third-party researcher engaged by ACA to committee well in its deliberations. It is our hope that the results will examine the effects on advertisers of a non-commercial CBC has be of benefit to all Canadians. estimated that advertiser costs in English Canada would rise Thank you. approximately 10%, and in French Canada, where SRC is more dominant, by 24%. And this estimate was done before the current The Chair: Thank you very much for that. round of staggering consolidation that has occurred in Canadian broadcasting, such as the CTV-CHUM merger, and the competitive Now we'll go to Corus Entertainment and Mr. Maavara. and cost implications that flow from this. Mr. Gary Maavara (Vice-President and General Counsel, There is also the question of how to fill the time that would be left Corus Entertainment Inc.): Good afternoon, Mr. Chairman, ladies open by the elimination of commercials, and of course how to pay and gentlemen. for it as well. Taking commercials off CBC-TV, for instance, would necessitate the production or purchase of over 1,000 new hours of My name is Gary Maavara, and I am vice-president and general programming per year, obviously at significant cost. Advertisers counsel of Corus Entertainment Inc. Joining me today is Sylvie believe that a commercialization policy should also be extended to Courtemanche, who is our vice-president of government relations. CBC's radio service. CBC radio listeners are already quite used to commercial content in the form of free public-service-type We thank the committee for the opportunity to appear and provide announcements for cultural and community events, as well as many our thoughts on your investigation of the role of the CBC in the 21st program promotion spots, a practice that is essentially, in our century. Corus filed a written submission on February 26. In it, we opinion, discriminatory. described how we see the broadcasting sector evolving over the coming years, and how the CBC should be part of our collective Many unique, desirable, and commercially viable audiences are future. generated by CBC radio, audiences that could easily be monetized to help contribute to the achievement of a public broadcaster's goals. Corus has three operating divisions: television, radio, and content. This need not necessarily be traditional 60- or 30-second intrusive It is Canada's largest TV broadcaster to children. We operate the advertising, but rather corporate recognition spots as employed, for YTV and Treehouse specialty networks, and we have an ownership instance, by the National Public Radio service in the United States. interest in Teletoon. We also own Nelvana, which is one of the Corporate sponsorships currently account for a substantial part of world's largest producers of children's animation programming. In NPR's revenues, derived from an average of only one minute and the last five years, Nelvana alone has spent hundreds of millions of thirty seconds per hour of sponsored commercial time. dollars on the production of top-quality Canadian animation Ï (1435) programming. Mr. Ronald Lund: Advertising in general—and certainly advertising in the television medium—is and continues to be quite The Corus books subsidiary, Kids Can Press, is Canada's largest underdeveloped in Canada. Per capita total ad spending in the U.S., publisher of books for children. Our movie networks, such Movie for instance, is three times that of Canada, and in the UK it is 50% Central, and services such as the W Network and CMT, establish us higher. For television, per capita U.S. ad spending is two and a half as an important provider of programming targeted to adults as well.

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