As CBC’s ad sales fall, the taxpayers step in

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About an hour into her January appearance at a parliamentary hearing, Catherine Tait, the top executive at the Canadian Broadcasting Corp., tried to explain the global landscape for broadcasters.

“We have a crisis in the media sector,” she said. “People have turned from traditional media and towards the digital giants. And that is fundamentally undermining the financial health of the private media and also our own ability to keep Canadian consumers attached to our services.”

In her own questioning, however, Rachael Thomas, the member of Parliament for Lethbridge, Alta., said “you outlined some challenges that the CBC faces. I should also outline, though, that every other media outlet in this country doesn’t start off with 1.4 billion taxpayer dollars at the start of the year.”

As with many things, both things can be true. A long-term look at the CBC’s numbers reveals the awkward balance between private-sector sources of revenue, which are falling, and the government subsidy, which is rising.

To analyze the financial state of the CBC, The Globe and Mail reviewed more than two dozen annual and quarterly financial reports from the corporation, as well as federal data from the Canadian Radio-television and Telecommunications Commission. The public broadcaster, which is a federal Crown corporation, has an English-language unit, branded as the CBC, and a French-language unit known as Radio-Canada. The corporation’s financial statements cover the performance of both entities.

The corporation declined to make executives available for interviews for this story. However, its spokespeople responded to a number of financial queries.

https://asset-boost.pro/arts/article-cbc-stars-speak-their-minds-on-the-spectre-of-cuts-at-the-public/%3C/a%3E%3C/p%3E%3Cp class="c-article-body__text text-pr-5">In that parliamentary hearing, Ms. Tait says that unless the corporation’s “structural deficit” is addressed – by more public funding – it could cut up to 800 jobs in the next fiscal year and eliminate $40-million in production spending. (The corporation says its structural deficit is derived from the rising cost of goods and services above its budget allocation and its falling private-sector revenue. Spokesperson Leon Mar declined to provide a more specific calculation.)

“As I have said, many times, the public broadcaster faces chronic underfunding compared to other public broadcasters around the world ... Until that situation changes, we must continue to manage with what we have and do our very best to stretch limited resources to meet our mandate,” Ms. Tait told Parliament.

The corporation, which pulls in a little under 30 per cent of its roughly $1.8-billion in annual revenue from private-sector sources such as advertising and subscriber fees, has seen the sum of those line items remain essentially flat over the last two decades.

Its costs, however, have risen over time. The corporation recorded just more than $1.9-billion in expenses in its most recent year, about 37 per cent above the $1.4-billion in 2001. Inflation over those two decades was a cumulative 64 per cent, according to the Bank of Canada, so the corporation’s expenses have grown at a slower rate than the overall cost of goods and services in the Canadian economy.

Flat revenue and rising costs would force most companies to cut. But the corporation, of course, has a sizable public subsidy that has grown markedly over time.

Private-sector revenue covered 37 cents out of every dollar of the corporation’s spending in 2001 and as much as 41 cents as recently as 2014. But it has fallen to cover 27 cents of every dollar of expense in the corporation’s most recent fiscal year. That’s the lowest level in two decades.

Unfortunately, the trends identified by Ms. Tait are getting worse for the corporation. For the first nine months of its current fiscal year, a period from April through December, 2023, the corporation’s private-sector revenue dropped 4.8 per cent when compared to the prior year, according to recently released financial statements.

The decline was broad-based: Both advertising and subscription revenue dropped for English and French services. Television ad revenue fell 10.6 per cent. Only digital advertising – which makes up a little more than a quarter of ad sales – increased.

For a number of years, the corporation’s financial statements showed its private-sector revenue, then total expenses. The result was an “operating loss before government funding” – which began to top $1-billion annually in fiscal 2003. The corporation removed the line item from its income statements in 2017 as part of what spokesperson Emma Iannetta called “a streamlining exercise ... The goal is always to make our statements as readable to the public as possible.”

The number can still be calculated, however: It was just under $1.4-billion in the most recent fiscal year ended March 31, 2023, and it was just under $950-million in the past nine months. The government subsidies were $1.27-billion and $938-million, respectively, in those periods.

While Ms. Tait told Parliament “we must balance our budget each and every year,” the audited financial statements, prepared per accounting rules, show some years with net income, and many years with net losses. The $125.1-million net loss in the most recent fiscal year was the 16th loss in the past 23 years.

The corporation has suffered, like the private sector, from the decline in broadcast television revenue. Advertising revenue in its most recent fiscal year was 18 per cent below levels in 2001. That’s essentially in line with trends in Canada’s private-sector television industry, as CRTC data (which includes the corporation) shows a 17-per-cent decline over roughly the same period.

Ottawa adds funding to CBC, despite executives’ claims it was asked to cut its budget

It is the long-term explosion in pay television, however, where the corporation pales. The corporation has owned and operated several cable channels over the years, including CBC News Network, and launched a streaming service called Gem in 2018. But the efforts still yield a fraction of the revenue of the legacy broadcasting operations.

The CRTC shows advertising on specialty TV and on-demand programming is up 254 per cent in the past two decades-plus. The entire advertising pie, then, is up 34 per cent.

When subscriber fees are included in the calculation, the television industry, broadly defined, had a 77 per cent gain in total revenue, including subscriptions and advertising, between 2000 and 2022.

The corporation, however, had total revenue from non-government sources – advertising, subscriber fees and other revenue – of $515.6-million in the year ended in March, 2023. It’s slightly below the $518.4-million in those types of revenues the corporation recorded in the year ended in March, 2001.

In addition to the industry-wide move from conventional advertising to digital, Ms. Iannetta said the stagnant sales number is caused by “the appearance of new digital actors and further fragmentation of the advertising market by increased competition; our pivot to amateur sports programming and away from professional sports; and the adverse impacts of cord shaving and cord cutting on our subscriber revenue.”

The government subsidy of $1.27-billion in the most recent fiscal year was up 33 per cent from $957-million in the year ended March, 2001.

Kaan Yigit, the president of consumer research firm Solutions Research Group, says 2024 marks the 25th anniversary of The Sopranos, an HBO series that represented a turning point for creativity on conventional television – but also likely the peak of its fortunes. “That just feels like the pinnacle. And since then it’s been gradual erosion, there’s no mystery to it.”

Mr. Yigit, who has previously done work for the corporation (and The Globe and Mail) says we are now moving from the rise of streaming to the ascension of short-form content, such as TikTok. “There was a slogan the CBC had, ‘everyone, every way’ – it implied we’re trying to reach everybody in every way possible, we don’t want to leave anyone behind. But if I gave you that as a mandate, good luck in fulfilling that with finite resources when you have to operate so many different lines of business.”

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