Cinema Canada (Nov 1981)

‘ qaet The CRTC’s pay TV hearings were carried by cable operators live to their subscribers, and generated an unprecedented amount of coverage in the press and on air. Over the next months, Cinema Canada will reprint parts of the verbal presentations made, especially as they pertain to the Canadian production industry. In this issue, Joan Schafer of First Choice and Jack McAndrew from performance comment, each outlining their commitment to Canadian production. The tables on this page were prepared at the National Film Board of Canada in an effort to tabulate the differences between the various proposals. Because no standard measure was used in the original applications (some amounts were calculated in constant dollars, others in inflationary dollars), figures have been adjusted to render them uniform. They are offered as a ‘best efforts’ calculation, carrying no official sanction. NFB -in the public interest OTTAWA — James Domville, Government Film Commissioner at the National Film Board, told the Canadian Radio-Television and Telecommunications Commission (CRTC) pay-television hear-..ings that the new pay-TV system must be designed to support Canadian interests. “The entire subscription television system should be more effectively structured to support high quality Canadian program production,” said Domville. “I do not believe the purpose of Canadian pay-TV should be to retool cable system hardware or to export profits to the U.S. entertainment industry.” He also recommended the CRTC restructure the entire cable TV system, including pay-TV, to allow several tiers of programming. The first channel would be reserved for Canadian. services, with the costs of new programming coming from the basic cable fees, with a second tier of channels for the U.S. networks at a separate fee, revenues from which would support in part new Canadian programming. Other channels providing mass entertainment, sports, and cultural events not carried on the basic service, would form a third tier. Videotex and other interactive services could be added later as the technology developed. Domville concluded that “Pay-TV should not be introduced unless it is demonstrably in the public interest and is capable of meeting the objectives of the Broadcasting Act. Its purposes should be the creation of high-quality, popular, Canadian programming in both languages... it should generate the maximum possible revenues for program production.” CFDC should be universal OTTAWA — The independent production industry in Canada must be given priority access to any pay-television system licenses in this country, said Canadian Film Development Corporation (CFDC) Chairman David Silcox before the Canadian Radio-Television and Telecommunications Commission (CRTC) hearings on pay-TV licensing applications. “Pay-TV represents the last chance Canada may have to capture its own place in its own market by providing maximum access for both creators and consumers to Canadian film and video,” said Silcox. Commenting that the CFDC’s representation “does not constitute an intervention related to any one applicant, but to all,” Silcox added that the revenues from payTV should lead to a stable, vi 10/Cinema Canada-November 1981 able production industry benefitting both English and French producers across the country. Silcox stated that the CFDC Boad recommends that a payTV service be made available on a universal basis, mandatory to all Canadian cable subscribers, in order to meet Canada’s unique cultural and economic needs. “It is the responsibility of all Canadians — not just those who choose to pay — to ensure the survival of cultural expression through films and video, and to support the industrial activity which this involves.” Silcox said that traditional distribution systems had been closed to independent production in Canada, and that pay-TV represented a last chance for the federal government to help rectify the situation. Table 1 FORECASTS PROVIDED BY THE MAJOR NATIONAL PAY TELEVISION APPLICANTS AS GAZETTED BY CRTC ee ee a RS CAMADSAN FURST PERFORMANCE 4 ASTRATEL CTVA L.A.M. Sey TELECANADA CHOICE SHOWPLACE,, 3 PREMIE ASSUMPTIONS AS STATED IN APPLICATIONS RE: epee hee ature ( = 0 fey agrilens TART Se 330 5,650 1,050 ‘1,250 1,500 1,500 1,460. 2,000 (In 000s) peeves price to $8.00 $2.50 $7.50 to $7.00 oe to $10.00 $8.00 $6.50 eral li pnice to hone $12.95 $2.75g $12.00 se to 33:00," pee! to $13.00, $13.00 oem eee age seo oe aa TOTAL FIVE-YEAR REVENUE 6 EXPENSE PROJECTIONS: (in 000 ,000s) I Total retall revenue, $ 198 $910, $1,224 § 528 $ 635, $ 906 $ 845 $964 Total wholesale revefiue $ 122 $ 832 $ 768 $ 308 $ 452, § 647 $520 § 482 Total program expense $ 46 § 679 $ 594 $ 230 $ 351 $ 536 $ 351 $ 392 Total Cenadlan program $ 25 $ 593 $ 403 $ 131 $ 152 § 290 $ 183 $ 210 expense & ; Average annual Canadian $7. 5 $ 119 $ 81 $ 26 $ 30 $ 59 $ 37 $ 42 program expense j Profit projection $ )7 Non$ 20.2 $ 6.8 $ WW $ 7.4 § 40 .§ 24.8 (cumulative total) Profit SR Table 2 ASSUMED RESULTS BASED ON 25% PENETRATION LEVEL OF CABLE HOUSEHOLDS PROJECTED FROM FILINGS TO THE CRTC FOR PURPOSES OF COMPARISON LE CANA’ LiALM.B. TELECANADA -FIFST. — SHOWPLACE, PERFORMANCE, ASTRATEL TVA ported : PREMIERE ASSUMPTIONS AS FORECAST 74% 100% 25% 25% 25% 25% 24.2% 25% Number of Pay subscribers 330 4,800 7 1,130 920 1,500 1,250 1,460 1,500 (in 000s) , Wholesale price to the s i 0.0 8.00 J Exhibitor $ 8.00 $ 2.50 $ 7.50 $ 7.00 aie to $10.00 $ $ 6.50 Retall price to the $12.95 $ 2.75 $12.00 $12.00 $13.00 to $14.00 $13.00 $13.00 Subscriber $18.00 SA an Sas Py SAS I a aN SE a Sa nn TOTAL FIVE-YEAR REVENUE & EXPENSE PROJECTIONS AS FORECAST (in 000,000s) Retall revenues $ 198 $ 773 $ 746 $ 388 $ 635 $ 755 $ 845 $ 722 Wholesale revenues $ 122 $ 707 $ 468 $ 226 $ 452 $ 539 $ 520 $ 361 Program expenses $ 46 $ 577 $ 362 $ 169 $ 351 $ 446 $ 351 $ 308 Canadian program expenses $--25 $ 504 $ 246 $ 96 $ 152 $ 242 $ 183 $ 178 Average annual Canadian 5 5 5 101 5 49 $ 19 $ 30 5 48 $ 37 $ 35 program expense, Table 3 A COMPARISON OF FORECASTS PROVIDED BY THE MAJOR NATIONAL PAY TELEVISION APPLICANTS IN FILINGS TO THE CRTC AS GAZETTED — FIRST CANADIAN L.A.M.B. TELECANADA CHOICE SHOWPLACE PERFORMANCE ASTRATEL CTVA PREMIERE SA A PN CHANNELS OF SERVICE: 2 2 2 5 1 2 2 2 2 Hours of English : 6 8/12 24/12 8 8.3/24 6.5 o Hours of French 6 8/12 12 n/a 8.3/24 8.5 8 Hours of Dual Audio n/a n/a n/a n/a n/a 10/6.5* n/a LEVELS OF CANADIAN CONTENT ACHIEVED: Year 1, total hours Year 1, total titles AS RECOMMENDED IN.THE CRTC's 1978 GUIDELINES THIS SHOULD REACH A MINIMUM OF SO3 TOTAL HOURS 37.5% 60% 50% 30% 34% 31% 25% 33% 45.6% 50% 673/58 40% 39% 308 35% 50% PROGRAMMING: COSTS AS A PERCENTAGE OF REVENUES Total programming cost as percentage of Wholesale 38% 62% 773% 15% 783 33% 67% 81s revenuc Total Canadian production as a percentage of Whole20% 71% ‘ 523 42z 34% 45% 35% 43% sale revenue Total Canadien production AS RECOMMENDED IN THE CRTC's 1978 GUIDELINES THIS SHOULD REACH 35% OF RETAIL REVENUE as a percentage of Retall revenues 133 653 33% 25% 24% 322 22% 21x MODE OF MARKETING; Discretionary : x x x x x x x Universal x —_—————— * Movie Channel A 10 hours and Cultural Channel 8 6.5 hours, ge FOOTNOTES 1. Figures given for L.A.M.B. in the application were inflated dollars at the “Expenses” level, but constant dollars for the “Revenue” obtained through a constant $8.00 per month fee. The “E " fj 1981 dollars and costs were pro-rated to reflect a full five years. ov Expense! Ooures wereiela aa 2. Final year repeated to provide for five full operating years. 3. Based on English market only. 4. Since revenue projections are based on an increase in the real subscriber fee ch . ; arged from $9.00 to $13.25, both revenue and expense projections have been adjusted by a deflator to reflect eonseant aohere with a 1981 base. 5. The Feral revenue has been estimated since no figure other than wholesale was stated. A mark-up of about 60% 6. An attempt was made to reflect the total Canadian pr i iti funds and equity participation over the fiveAe Te eee wich Ineluces acquisitions. <esqa aaa ear peri : administrative costs were included. year period plus start-up, pre-operational investment. No program 7. TeleCanada is based on 100% penetration in brief. In Table 2, total subscribers were redu total cable universe. 8. NFB staff estimate. 9. Includes French and English program expenses except Showplace which is English only. year 1 and not a gradual increase as outlined in Appendix Aof their ced to 4,800,000 to better reflect other applicants’ estimates of the é