Claims for Canadian Content Regulations

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7. Claims for Canadian Content Regulations

For 25 years, the Canadian-content rules laid down by the Canadian Radio-television and Telecommunications Commission have worked spectacularly well. They were classic infant-industry nurturing. Ask any fair-minded independent TV producer or anyone in the music business: They'll tell you their industries could never have existed without the CRTC's `Cancon' rules. And might not exist today.-Keith Spicer, then chair of the CRTC, 1993, p. A15.

Much is claimed

I suggest that far too much is claimed on behalf of Canadian content regulations in at least two senses. The first claim involves the great exaggeration of the threat posed by the consumption of US television programs. Collins (1990, pp. 42-43) puts it this way: "In Canada there is a pervasive belief that in the leisure habits of its population lies the key to the continued existence of the Canadian state; that Canadian television audiences' viewing of non-Canadian television drama is a deeply destabilizing political force" (Collins, 1990, pp. 42-43). This statement needs to be made more precise. It is English Canadians who are most strongly prone to this fear, and it is American TV programs that are of greatest concern. Collins also notes that Canada "has no natural symbolic culture.... But it has held together as a political unit for more than a century without one" (Collins, 1990, p. 253). In other words, some anglophones' fear that without a sufficient supply of Canadian-made popular television programs Canada will lose its identity has been refuted by some three decades of experience.
Too much is claimed in another sense, namely, that CanCon regulations have conferred large benefits on Canadians. For example, in its Competition and Culture report, the CRTC (1995c, p. 6) made an aggressive defence of its achievements, saying that, "Regulation and funding for program production have resulted in more real quality and diversity in the services on our television screens than anywhere else in the world."⁵⁷ In the same vein, the Canadian Content and Culture Working Group (1995, p. 8) argues that "much of the success of Canada's cultural industries has been a direct consequence of federal broadcasting policy. The Canadian music industry has achieved international recognition over the past 20 years, thanks primarily to Canadian content regulations in radio."

CanCon as a source of identity

How many Canadians really believe that their identity (or that national identity) stems largely from the consumption of cultural products (notably TV programs and music played on the radio) produced and distributed by Canadian citizens-even if there is nothing Canadian in the substantive or thematic content of such products? For the proponents of CanCon it is taken for granted that broadcasting (i.e., radio and particularly TV programs) "touches the very heart of Canada's national identity" (a phrase used by the Policy Review Panel, 1995). Are there no other important influences on our national identity? What about hockey, long, cold, dark winters, and a small population living in a huge land mass?⁵⁸ What about the national poll in which three-quarters of the respondents said that the way they view themselves (i.e., their identity) revolves largely around their work? (Wilson-Smith, 1995, p. 8). Nor is the entire educational system or all other media given any weight in shaping national identity. ⁵⁹

The formation of an individual's identity and the development of their allegiances appears to be more complex than the advocates of Canadian content imply. The journey toward a wider identity begins with the self: in seeking to answer the question, "Who am I?" "one establishes clues about one's identity on the basis of information given by those closest to oneself-parents, other relatives, or distinctively clad representatives of the religious and social communities within which one lives" (Gardner, 1995, p. 51). As individuals move beyond the home and family, the search for identity widens to include the leaders of wider social and political organizations-from the church, employers, even the nation (Gardner, 1995, p. 5). "Every individual's sense of identity is rooted largely in his or her place within various groups. Nearly every individual belongs to several groups, whose missions and memberships may or may not overlap" (Gardner, 1995, p. 53). "By the age of ten, the youngster can easily appreciate the existence of other groups and the possibility of overlapping memberships and conflicting loyalties" (Ibid). Identity is shaped by the wider world-from its physical characteristics, ideas and experiences direct or indirect of foreigners. This wider world also includes the person's imagination (dreams, fears, memories).

The media, particularly the electronic media, play a role in shaping people's beliefs and values, but they are hardly the dominant force in determining identity, individual or national.⁶⁰ There are just too many other factors. For example, Richard Collins (1990, p. 329) argues that "political institutions are more important than television and culture, or even language in producing and reproducing a solid sentiment of national identity among Canadians." To summarize, the claims made for CanCon are extensive and hard to believe. Paul Rutherford (1993, p. 270) puts it this way: "The onslaught of mass culture has not yet destroyed the Victorian imprint on the Canadian identity." US television programs have not altered Canada as a distinctive public entity "with its own brand of law, politics, and governance and a civic ethic" (Rutherford, 1993, p. 272). The claim that Canadian content regulations are a very important influence on individuals' or national identity are not credible.

Trebilcock and Howse (1995, p. 13), after celebrating Canada's multi-cultural mosaic, assert that "Canada is and will remain a profoundly different society [than the US] as a comparison of daily life in Windsor and Detroit or Toronto and Buffalo should convince the doubtful reader. There are surely deeper measures of a society's evolution than how many minutes are occupied by which country's soap operas on local commercial television networks."

CanCon as industrial policy

As noted above in section 4, the key policy objectives of the Broadcasting Act are "maintaining and enhancing Canada's national identity and cultural sovereignty." Yet recent Heritage Canada documents provide descriptions of the economic importance of cultural industries (which are said to account for 4 percent of the GNP) and assert that government policies, including Canadian content regulations, have greatly stimulated the growth of cultural industries.

The idea that cultural policies are a tool for industrial development⁶¹ can clearly be seen in an Industry Canada document (a briefing note for the Minister) that actually claims the following benefits for Canadian content regulations:

The regulations have led to the establishment of strong independent film and TV production houses including: Alliance, Atlantis, Cinar, Nelvana and Paragon.

The output of the Canadian independent production sector on the Canadian economy has increased from $385 million in 1985/86 to $2.2 billion in 1994/95.⁶²

Total spending of Canadian companies, including service productions, increased from approximately $1.4 billion in 1991 to $2.9 billion in 1995.

Broadcaster in-house production was approximately $703.6 million in 1995.

The television market accounted for over 53 percent of independent producers' revenues in 1993-94.

In all areas of film and television production including the service sector, employment increased almost 100 percent: from approximately 15,000 jobs in 1991 to over 30,000 jobs in 1995.

In essentially the same vein, a Heritage Canada (1997) document claims the following benefits are attributable to the CanCon regulations applied to radio stations since 1972:

There has been an increase in air-play for Canadian records from 3 to 7 percent in the late 1960s to 30 percent.

In 1994, over 700 Canadian content recordings were released and revenues amounted to approximately $90 million.

] The industrial policy justification for Canadian content requirements (and subsidies) can also be found in an Information Highway Advisory Council working group report: "Canadian content is the key to providing long-term, meaningful jobs for Canadians. Canadian content is our one invaluable, renewable resource, and it will continue to hold tremendous export potential" (Canadian Content and Culture Working Group, 1995, p. ii).

Pevere and Dymond (1996, p. 168) describe the CanCon quotas for radio introduced in January 1972 as "one of the single most important pieces of legislation in the history of Canadian popular culture." They continue:

initially the system was like a shot of pure adrenaline to a national recording industry that had otherwise barely registered a pulse.... Consider the chain reaction the regulations set off almost overnight: instantly, more Canadian songs were heard on radio, more stars stayed in Canada, more people went to see bands they'd heard on radio, more recording studios were built to meet the radio demand, and, of supreme importance, there were more Canadian hits at home and abroad than ever before.

Perhaps, but after over two decades, Canadian recordings accounted for only 11.3 percent of new releases in 1993/94 (Canadian Association of Broadcasters, 1998c). This means that there was only a tiny increase in the percentage since the policy began. If the effects were so benign, why did one of Canada's biggest recording artists, Bryan Adams, give the following advice to young Canadian artists in 1992:

stay away from the Canadian music business. It's full of politics and bureaucracy. It's trouble. Don't sign to a Canadian company. Don't sign to a Canadian publisher. Go south of the border. You'll get a better deal. (quoted in Pevere and Dymond, 1996, p. 3) Critics of Canadian content policies should welcome the emphasis on the industrial policy approach for several reasons:

1) It helps to expose the mercantilist-type thinking of public officials and their private sector allies in the cultural industries. They are implicitly saying that "anything that delivers economic benefits to certain cultural industries is good for the nation." Thus, the rent-seeking nature of the entire policy is made clear.

2) The logic of the industrial strategy approach is well illustrated by the boarding house reach for more direct and indirect subsidies in recent reports on cultural industries (see Chater and Robertson (1996) and Nordicity Group (1997)).

3) Making the industrial strategy approach open makes various types of protectionism more vulnerable to attack by the US, for example, in the Sports Illustrated magazine case in June 1997, the Appellate Body of the World Trade Organization used such documents to strike down most of Canada's policies aimed at helping domestic magazines.⁶³ I turn now to a claim on behalf of CanCon that is worthy of more serious consideration.

The best case for subsidizing (certain) Canadian programs

There appears to be a reasonable case to be made for subsidizing the production of certain types of TV programs made by Canadians and which have recognizable Canadian themes. It is based largely on the relative costs of making Canadian drama programs versus renting foreign ones (notably from the US), the size of the US and Canadian markets for TV programs, and the apparently limited export market for "distinctively Canadian" TV dramas.

It must be emphasized that what follows outlines the case for subsidizing the production of certain types of Canadian programming. This case must be distinguished from the case for imposing any type of CanCon quota on the distribution (i.e., showing) of such programs by a TV station or BDU such as a cable TV company. It is the latter which threatens freedom of expression and its "flip side," freedom to view any TV program or to listen to any musical selection on radio for which there is a market.⁶⁴

The Canadian Association of Broadcasters estimates that drama costs $1.2 million to $1.5 million per hour to produce, while variety costs $150,000 or more. By comparison, news costs $50,000 to $100,000 per hour; sports, $10,000 to $100,000; children's programs (animation), $50,000 to $100,000. Imported programs (largely from the US) can be rented at a cost of $10,000 to $150,000 per hour. The upper end includes the popular US drama programs (Brehl, 1998a, p. A2). The fact that US-made TV programs can be rented for one-fifth to one-tenth the cost of somewhat similar Canadian-made ones ⁶⁵ is attributable to (a) the large US market over which US producers can recover high production costs, (b) the fact that the marginal cost of distributing US-made programs in Canada is nearly zero, and (c) US-made programs are in English and the sensibilities of English Canadians are sufficiently similar to those in the US that they can attract at least as large an audience as a Canadian-made program.

Almost by their nature, programs which are "distinctively Canadian" or "identifiably Canadian" will have a limited audience outside Canada-far less in both absolute and proportionate terms than do most US-made programs.⁶⁶ This is why legally defined "Canadian" programs (hence eligible for existing subsidies and which can help fulfil CanCon quotas), but which are also aimed at export markets, are produced in such a way that they will not be recognized as Canadian. For example, they take place in an unidentified, generic North American location which most viewers will infer is in the US. It is usually argued that the more "distinctively Canadian" the production (e.g., the series on the Arrow fighter plane) and the more it is likely to resonate with Canadians as a "Canadian story," the less likely it can generate much money in the export markets, of which the US is the largest (see Collins, 1990). ⁶⁷ Therefore, an hour-long, high quality (including strong production values) and "distinctively Canadian" drama costing about the same as its US (or UK) counterpart, will cost much more per viewer (domestic plus foreign) than its US (or UK) counterpart. Even if the average revenue per view for the Canadian program is somewhat above its foreign counterpart, the Canadian production will still require a large subsidy (direct or indirect). Without such a subsidy, it will be necessary for the regulator to mandate a certain volume of Canadian drama programming.⁶⁸ Indeed, in practice, both approaches are used. Why do the CRTC (1995c) and Canadian TV producers place so much emphasis on increasing the supply of Canadian drama? First, the economics mean than Canadian broadcasters have little or no incentive to produce drama (unlike Canadian news programs, for example). And so it is "under represented."⁶⁹

Second, drama programs appear to be perceived as more powerful in terms of the values they convey to viewers.⁷⁰

Third, by forcing an increase in the supply of drama, the CRTC will create a more than proportionate increase in spending which will benefit Canadian citizens and businesses. At present, the bulk of Canadian broadcasters' spending on foreign programs goes to obtain US-made drama (see table 4).

It is not necessary to subsidize Canadian news programs (or sports or public affairs).⁷¹First, Canadian viewers have a taste for news occurring in Canada or abroad as seen through Canadian eyes. In other words, Canadian-made news programs attract large audiences, hence comparable advertising revenues (recall table 5). Second, foreign-made news programs may be inexpensive to rent, but they are poor substitutes for those made in Canada by Canadians. In any event, the US networks' news programs are already available in Canada. Third, and most importantly, Canadian news programs cost $50,000 to $100,000 per hour to produce (Brehl, 1998a), or less than it would cost to rent an hour of US-made drama. In summary, market forces make news programs profitable for both networks and local stations to produce in the number and variety Canadians want.

What about the case against subsidizing Canadian drama? The first argument against doing so is that no one has documented in any rigorous or persuasive way that drama is the most potent format for promoting Canadian identity and cultural sovereignty. The fact that dramatic programming may hold greater interest for many people than other forms of programming is not the same thing as saying that it makes the greatest contribution to Canadians' sense of identity or cultural sovereignty. Second, why is it that strong regional cultures survive (even flourish) in the US, e.g., those of Texas, the Deep South, and New England, when most TV programs are made in New York or Los Angeles?⁷² The same near zero marginal cost of distributing these programs applies to these three regions of the US. Further, how has Newfoundland retained its distinctive culture and identity despite the large amount of Toronto-produced programming distributed there at near zero marginal cost? These counter-examples raise the question as to whether the purpose of the Canadian content requirements and subsidies is to try to create a distinctive national identity and culture. According to Collins (1990, p. 110), "English Canadian nationalists are trying to establish something new in terns of national identity (not to preserve and maintain an antecedent national culture and community as are Quebec nationalists)." A key tool used by these nationalists is Canadian content requirements.

There is another argument against more subsidies for Canadian drama. It is that there is considerable disagreement within the so-called creative community about the important characteristics of the content of such programs. For example, Daryl Duke, a former TV director (e.g., "The Thorn Birds"), has said that "Drama was essential for the CBC and for the citizens it served. It touched our hearts, stirred our imaginations and told us who we are as a people" (Vancouver Sun, September 21, 1996, p. D10). However, in its effort to "Canadianize" and become more commercial, CBC-TV altered its drama policy. Duke argues that the new approach "removed from CBC drama the cultural programming of our civilization. It erased the great treasures of the past" (Ibid., p. D11). The result has been that drama for English Canada is derived from American commercial program models.

Gone was Oscar Wilde, the classics, the novels from Poland or Greece, the plays from Brazil. Now it was Street Legal, Mom: PI, Urban Angel, Material Word and movies-of-the-week based on crimes and court cases of today's Canada. Now the corporate chests of CBC swelled with pride as sales were made to NBC and CBS, and The Road to Avonlea went into production with Disney. (Duke, Vancouver Sun, September 21, 1996, p. D11)

Finally, once one accepts the case for subsidizing Canadian drama programs, three critical questions are raised: (1) How will the government define a "distinctively Canadian" program? (2) How will the government decide on the total amount of the subsidy or volume of such programming that will be subsidized? (3) To whom should the subsidies be paid? With respect to the first point, it must be recognized that a substantial fraction of "Canadian" TV programs (about 60 percent) would be produced and distributed in Canada because of ordinary commercial considerations. The best examples are news, public affairs, and sports programs (table 5). Canadians' taste for these types of programs mean substantial audiences, hence advertising revenues. Further, they have moderate to low production costs. Thus it is likely that the category which most needs subsidization is drama, because it is the most costly and said to be the most potent in transmitting values contributing to national identity.

It would appear that large subsidies for "distinctively Canadian" drama will mean going beyond the present definition of a Canadian program which is based only on the citizenship of key suppliers of inputs to the program. But once one moves beyond that definition, matters necessarily become much more subjective. For example, any list of approved themes or criteria for approving a theme or substantive content will be fraught with unavoidable controversy.

With respect to the second point, I note that the high cost of producing high quality drama in Canada will require large subsidies per hour of programming. Thus even adding a few hours of drama every week for each network will require some $200 million annually. This is the entire amount spent each year by the Canada Television and Cable Production Fund.

With respect to the third question, who should get the subsidies, presumably taxpayers want Canadian drama to be produced and distributed by those able to do so at least cost. Recent research indicates that the CBC is a very inefficient supplier of CanCon compared to private TV broadcasters. A study by SECOR for the Canadian Association of Broadcasters (1998d, p. 81) indicates that CBC's cost of English-language Canadian drama programs per viewer hour was $1.35 in 1997. For conventional broadcasters it was 7 cents. For French-language drama, CBC's cost was 28 cents per viewer hour, while private broadcasters' cost was 6 cents.

Some of my criticisms of Canadian content regulations have been touched upon or alluded to. The focus of the next section is my critique of CanCon.

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Last Modified: Wednesday, October 20, 1999.