Public Hearing Broadcasting Notice of Consultation CRTC 2019-379 Address by Quebecor Media Inc., on its own behalf and on behalf of its TVA Group Inc. and Videotron Ltd. subsidiaries (Check Against Delivery) January 19, 2021

2 (Pierre Karl Péladeau) Mr. Chairperson, Madam Vice-Chairperson, Commissioners and members of staff, Good day, INTRODUCTION It has been close to eight years since the regulatory authority and Canadians looked into renewing the public broadcaster’s licences. While this may seem obvious today, when the terms and conditions of these licences were determined, the technological and industrial environment was very different from what it is today. Netflix was in its early stages and had approximately two million subscribers in Canada while the vast majority of the population was not familiar with streaming.

Facebook, Twitter and YouTube had only been around for a few years, and while this is not a merely anecdotal, their influence was not as enormous as it is today. In 2011, during the review of the regulatory framework relating to vertical integration, we stated that: [translation] There is no question that the emergence of new platforms is seriously detrimental to Canadian broadcasting and distribution undertakings.

An endless vicious cycle is coming to the fore: as competition from foreign actors becomes more fierce, broadcasting and distribution undertakings will lose more subscribers and their revenues will decrease. This trend will inevitably lower these undertakings’ contributions to funding the broadcasting system, which will no doubt be compromised.1 1 Review of the regulatory framework relating to vertical integration, Quebecor Media Inc.’s statement (Réponse à l’AC 2010-783 – Intégration Verticale.pdf), paragraphs 24 and 25, page 5.

3 Today, in Canada and throughout the Western world, a large number of these new platforms have emerged and have suddenly taken over the human race and provide a channel for distributing content without the approval of the regulatory authority and outside its supervisory and oversight reach, which was not conceivable a decade ago.

Canada has completely lost sovereignty over its audiovisual landscape, and each and every day, web giants, such as Google, Apple, Facebook, Amazon and Microsoft, with market capitalization in excess of trillions of dollars, take more and more space in the media and “cartelize” the advertising ecosystem. In the cable sector, between 2013 and 2019 the Canadian population grew by approximately 2.5 million while the number of Canadians subscribing to cable television fell by nearly one million.

As w e all know , the process of financing Canadian television production relies on our cable television system, and this exodus poses a threat to the production of content. When this Commission is called upon to determine licensing terms and conditions, it cannot ignore this landscape and this dynamic in the exercise that is incumbent upon it. And it is up to us, as a private broadcaster, to point this out, because since these hearings started, we have heard from CBC/SRC representatives who are disconnected from their public service mission, a part of which is manifested through pluralism.

Private broadcasters , whose sole source of revenues, as you will recall, consist of advertising revenues, are more weakened by this increasingly concerning environment and must capture the special attention of the C ommission when it is establishing licence conditions for CBC/SRC, the public broadcaster that is heavily funded by taxpayers and from several othe r source s. I would add that it is imperative to ensure that private broadcasters can continue to thrive and remain sustainable.

Now, more than ever, I must reiterate the statement we made before the Standing Committee for Canadian Heritage in 2007: I want to state that I personally believe in the existence of a strong public broadcaster.

4 This statement has always been accompanied by a plea for a balanced co-existence of the public and private sectors, with clear rules as regards sources of funding, an effective governance structure that makes management accountable and the elimination of conditions allowing the Crown corporation to create unfair competition for the private sector. There are few solutions to this path. Two of them must be implemented quickly, including the main one to refocus CBC/SRC’s mission toward a real public interest mission without advertising revenue.

The second one consists in sanctioning the commercial approach undertaken by CBC/SRC when it engaged in cable distribution of content and channels with the marketing of Tou.TV Extra. PUBLIC BROADCASTER’S COMMERCIAL APPROACH It is important to provide factual evidence about the commercial approach adopted by CBC/SRC. Again, allow me to quote from the statements we made in 2007: The Crown corporation’s unrestricted access to advertising income has been a key factor in its detraction from its mandate.

CBC/SRC competes fiercely for its share of advertising income and, as a result, often finds itself seeking an audience ‘at all costs’.2 Sadly, this multidimensional behaviour, which is becoming more competitive, can be seen across all its activities. We have given the Commission several examples of CBC/SRC anti-competitive practices, along with supporting evidence that was submitted today, and we hope that this will provide 2 Brief submitted by Quebecor Media Inc. to the Standing Committee on Canadian Heritage, page 5.

5 the Commission with a better picture of the dire the situation so that it can bring it to an end. We have repeatedly emphasized before this Co mmission that CBC/SRC should complement, rather than compete with, the private sector. The results of a recent survey conducted by Léger (Léger Survey), which we also submitted to the C ommission today, echo this sentiment. The results show that nearly 80% of Quebecers believe it is in the public interest for public and private channels to complement rather than compete with each other in the content they offer.

Once again, complementarity starts with ending competition for advertising revenue. We are all well aware that the private conventional television industry in Quebec is experiencing substantial earnings losses. Between 2014 and 2019, earnings before interest and taxes (EBIT) showed accumulative losses of $93 million. CBC/SRC does not face the same financial reality as private broadcasters because it is very generously funded from the Treasury.

Table 2 – Revenues of private and public stations in Quebec, 2014–2019 Source: CRTC, 2014–2018 Conventional television, 2015–2019 Conventional television: statistical and financial summaries, Quebec. FR EN En M$, Québec In $ million, Quebec

6 Revenus Société Radio-Canada Revenue, Canadian Broadcasting Corporation Revenus totaux des stations généralistes privées Total revenue, private conventional stations Crédits parlementaires Parliamentary appropriations Revenus publicitaires des stations généralistes privées Private conventional stations’ advertising revenue Furthermore, in an effort to increase its sources of revenue, CBC /SRC has continued to double down on its anti-competitive practices in advertising revenue.

For example: • it makes advertising offers to advertisers that are completely outside market standards; and • it takes advantage of its OHdio digital radio service to sell advertising on programs that have already been broadcast on its radio stations, and we wish to reiterate that they cannot include advertising. There are more examples in our evidence book , which only illustrate that this fierce competition for advertising revenue inevitably leads to mistakes, which further weaken private broadcasters.

The Crown corporation’s digital activities have an adverse impact on the private sector CBC/SRC has attempted to abrogate the role of paid content aggregator when it comes to digital activities . However , there are no legislative measure s that allow it to usurp the mission of Canadian cable distributors. Furthermore, and we should not be embarrassed to sa y this, CBC/SRC intends to more than double its subscription revenues for its digital services within five years, from nearly $11 million (2018–2019) to more than $23 million (2022–2023).

It is projected that advertising revenue for its services will be in excess of $42 million in 2022 –2023, which corresponds to growth of nearly $10 million within five years. All of this revenue is taken away from Canadian broadcasting and distribution undertakings. Based on these revenue growth targets, we can deduce that the public broadcaster does not intend to stop its across-the-board competition with the private sector, even though it

7 is publicly funded. There is legitimate fear that given its position, it will make further use of its digital services in future to unduly disadvantage private broadcasters. CBC/SRC's activities on digital platforms should only serve as additional tools for Canadians to consume the public broadcaster's content and should not be a replacement tool for conventional platforms. CBC /SRC’s programming should always be free , regardless of the digital platform.

This obsession with further weaken ing private broadcasting and the existence of its participants has been manifested once more with the recent and highly controvers ial addition of Tandem, a new branded content division. CBC/SRC’s new “dedicated service for the creation of unique and distinctive branded content” is another example of the public broadcaster’s long list of anti-competitive actions. The creation of this new internal content marketing agency is one more example that CBC/SRC is acting entirely outside its mandate. We are not the only ones who think so.

Last fall, more than 70 former CBC/SRC employees filed a complaint with the Commission and asked it to investigate the new service. The Canadian Media Guild was critical of the “aggressive inclusion of CBC/SRC in the branded content arena.” Friends of Canadian Broadcasting launched a petition calling on CBC/SRC to abandon Tandem. This public outcry confirms the concerns related to Tandem and the need to end its activities. CBC/SRC’S REQUESTS We will now turn to CBC/SRC's requests, which were put forward as part of this licence renewal.

These requests are simply not consistent with the Crown corporation ’s public mandate.

8 In our opinion , it does not make sense that CBC/SRC is currently subject to fewer regulatory requirements than private broadcasters. It is therefore inconceivable that it is seeking to evade its obligations. In its proposal , CBC/SRC wants to transfer some of the number of hours per week devoted to programs of national i nterest (PNI) and original Canadian programs for children and youth to the exempt area of digital media and in so doing, it wants its traditional platforms to be subject to less regulation than private broadcasters.

This is unacceptable , especially because private broadcasters have been subject to more requirements than CBC/SRC since 2017. With regard to CBC News Network and RDI, there is currently no justification for these services to continue to enjoy a mandatory distribution order and to be granted wholesale rate increases as requested. The media environment has evolved considerably since these orders were last renewed in 2013.3 Viewing habits have changed. Furthermore, since 2016, broadcasting distribution undertaking s (BDUs) must offer channels on an individual basis.

Consumers therefore have the choice of whether or not to subscribe to a channel. We cannot stress this enough: adding channels to the basic service will accelerate the decline of the Canadian broadcasting system. CONCLUSION Lastly, the time has come for CBC/SRC to re-evaluate a culture of public service and set aside commercial performance objectives. After all, is its raison d’être not to work in the public interest? To do so, its mandate must be refocused.

The C ommission has the jurisdiction and the power to intervene in this matter and to impose licensing conditions that will restore the image of our state television so that it can adequately fulfill its public role. In our view, CBC/SRC must henceforth: 1. stop advertising on all its platforms; 2. stop contravening the regulatory and legislative framework by ending TOU.TV Extra, its paid distribution service; 3 Distribution Order CRTC 2013-264 and Distribution Order CRTC 2013-265.

9 3. provide free access to its content on all its digital platforms; 4. be forced to take the impact of its actions on private broadcasters into consideration; 5. ensure the best international, national, regional and local news coverage; 6. stop buying new foreign show concepts, American shows or blockbusters; 7. have higher spending thresholds on Canadian shows by supporting the development and promotion of emerging producers and artists and reflecting regions outside Quebec; and 8. comply with requirement for public reports on the management of its activities.

A commercial and competitive strategy does not align with the public service mandate entrusted to the public broadcaster, and so it is important to refocus its mandate through more targeted regulatory requirements, including the ones we have proposed. The future of our television and the diversity of its offering depend on a balanced ecosystem where each broadcaster has a role to play.

That is why we are calling on the Commission to ensure that CBC/SRC reverts to its true role of a stronger public broadcaster so that it can promote Canadian and Quebec cultural expression in a manner that is complementary and distinct from private broadcasters. Thank you for the opportunity to provide input on these important issues. We are now ready to answer your questions.