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Ï (0855) [English] The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): Good morning. I declare open this meeting of the Standing Committee on Canadian Heritage, le Comité permanent du patrimoine canadien, which meets today to continue its study of the Canadian broadcasting system. For us, today's meeting is very important. It goes without saying that our first witnesses, CanWest Global, are some of the most important players within the broadcasting system—indeed, in the media world in general, not only nationally in our country but also internationally. We are most grateful for your presence here and the fact that your most senior people have chosen to attend. We are most grateful for this. We look forward to hearing from you and to questions from our members. Mr. Asper, we welcome you here. I turn the floor over to you. Ï (0900) Mr. Leonard Asper (President and CEO, CanWest Global Communications Corp.): Thank you, Mr. Chairman. I just wanted to make you all aware, those of you who aren't from Winnipeg, that it is a dry cold outside, so it is not as bad as it seems. Mr. Chairman and members of the committee, we were pleased to have presented our written submission to you last September. While it is not my intent to read that submission into the record, I will refer to it in my oral submission today since it contains a number of important recommendations about the future of the Canadian broadcasting system. At the outset, however, there are three points we want to highlight and stress to you, because those three points form the framework for our submission, they form the framework for our corporate strategy, and we hope they would form the framework for the committee's consideration of the future of the Canadian broadcasting system. The first point is simple to express, but it's fundamental and far-reaching in its impact on all of us. That first point is this: in the media world of the first decade of the 21st century, fragmentation is the new “normal”. The second point is that every recommendation CanWest has made, whether it's to enhance its revenues or to streamline regulation, can be seen as a necessary ingredient to achieve the goal I'm sure we all share with the members of the committee, which is to create better and more popular Canadian programming. The third point deals with the development of sustainable Canadian media business models for the future. Public policies must encourage and support development of Canadian media companies that can compete successfully in a fragmented and global world. If we're going to be able to bring a Canadian perspective to information and entertainment, our media companies will have to have economies of scale to compete with media companies from all over the world that will have access to the Canadian market. In 2000 the total combined revenue of all media companies in Canada, from all sources, was just under $18 billion. Let me put that into perspective; $18 billion Canadian is equal to about three to four months' revenue for AOL Time Warner and about five to six months' revenue for Viacom. You might be interested to note that those companies already have a significant presence in our system. For example, here in Winnipeg on the analog part of the cable dial there are two CanWest channels—Global Winnipeg, formerly CKNB, and Prime, a specialty service. On the same dial there are three services owned by AOL Time Warner—CNN, CNN Headline News, and WTBS, a Warner Brothers network affiliate. Through AOL Canada they are also competing against Canadian online services—and competing quite vigorously, I might add. Viacom and NBC are also increasingly competing in Canada, with others not far behind. Our competitors used to be CTV and CHUM. Now, our competitors are still CTV and CHUM, but there are also competitors who are much bigger than those companies. That's a glimpse of the broadcasting reality of the future and the reason we think Canadian media companies will need economies of scale if we are going to be able to compete in that future. Indeed, that's why Canadian media companies have been consolidating—to re-aggregate the fragments in the market into more efficient and effective economies of scale. Notwithstanding that consolidation within Canada, it should be stressed that the data show clearly that there is, in fact, more diversity in Canadian media and less concentration than there has ever been in the past. We have included those data with our submission. The main purpose of the committee's work, of course, is looking at Canadian broadcasting—where the industry is and where it's going. As you know, our principal broadcasting operations in Canada are in conventional television. Last summer the CRTC renewed Global's conventional television licences for a seven-year term, a seven-year term in which we projected spending more than $1 billion in Canadian programming, including more than $600 million on Canadian news programming. -41 4 Let me be very clear on the significance of that kind of spending control over our schedules and to build Canadian program on Canadian programs. Unlike specialty services, private conven- franchises. tional broadcasters do not receive subscription revenues. This is a serious handicap. While private conventional broadcasters are A second operating imperative for CanWest relates to conver- expected to make the major commitments to spending on high-cost gence. We know the word has been much used, probably overused, original Canadian drama and programs, compared to specialty but let me tell you what convergence means to CanWest. In fact, services we do so with one hand tied behind our backs. there are at least five convergence things going on. There's integration of back-office functions; there's a new convergence of Indeed, not only do Canadian specialty services receive subscrip- customer relations and customer relationship management that tion revenues, but American specialty services also receive relates to call centres and other marketing and research tools we're subscription revenues from Canadian cable and satellite companies, developing; cross-promotion; cross-media integrated advertising to the tune of $217 million in 2000, probably going to $250 million sales; and fifth and finally, sharing and re-purposing of content. in 2002. That's $250 million that leaves the Canadian system untaxed and does nothing whatsoever for Canadian programming. We can discuss any of these initiatives, but let me say just a few words about the last point, sharing and re-purposing of content. It's Contrast that with Canadian conventional private television not about doing less storytelling; it's about using resources services that have to rely primarily on a single source of revenue, effectively to do more storytelling. Let me give you just four recent advertising. examples between television stations and newspapers: from Victoria, a joint project on the economic future of Vancouver Island; from Just to give you an example of a Canadian specialty service Edmonton, a joint project on violent street gangs; from St. against whom we bid for rights, TSN will have roughly $120 million Catharines, a joint project on the future of tourism in the Niagara of subscription revenue this year, and that's what they use to bid Peninsula; and from Montreal, a joint project on the impact of against sports rights. A company like Global TV does not have a municipal amalgamation on the citizens of that community. What chance in bidding against a company like TSN for rights to Canadian these kinds of cooperations do between newspapers and television is sports programs. In fact, Global's $1 billion spending projection was to create much more awareness and reach of a particular news story made in the face of a continued flatness in advertising revenues for and provide much more resources on the coverage of that news story. conventional television, a not surprising result of the fragmentation that has taken place in the Canadian television market and the With cameras linking all of our newsrooms in television, print and narrower targeting the specialty services provide to advertisers— online we're able to extend storytelling not only across media but which is why the specialty service segment is growing at 25 percent also across Canada. If we can take an experienced television and conventional television is flat. journalist like Peter Kent and have his insights appear in print as well as on TV, that means more people will have more sources of Nevertheless, we stepped up to the plate and we made some information, not the other way around. significant programming commitments. We are now in the first year of that seven-year licence term. We said we would start a national Young adults graduating from journalism schools today and in the newscast, based in Vancouver, scheduled at suppertime, and we did. next decade will demand these opportunities to report events and tell The response from Canadian viewers has been significant. Over stories across multiple media, because that's how they will be three-quarters of a million people were watching the program as of accustomed to receiving information. Indeed, that's already happen- January 2002, and the numbers are still growing. ing within our organization. Over time we see tremendous advantages as these initiatives evolve and we believe we are well Ï (0905) positioned to serve the changing media market for two important We have launched a new news and information programming reasons. hour in Ontario to match those we already have in other markets. In our licence renewals we committed to maintain the already First, our approach to convergence means that we will be able to significant local news commitments at each of our local stations better serve the emerging multimedia consumer.

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