THE BLOG

Would You Pay More Tax For Your Cable TV?

05/05/2014 01:00 EDT | Updated 07/05/2014 05:59 EDT

The president of CBC, Hubert Lacroix, gave his support to the idea of a "cable tax" that could be used to improve CBC TV programming. CBC is reeling from a $115 million dollar annual reduction in funding from the federal government, which fully kicks in this year.

The CBC has cravenly not brought much attention to the fact that its financial problem is caused mostly by funding cuts from the Harper government. Instead, CBC recently told the government it is "grateful" for the money its gets. CBC is reluctant to discuss that not only has the government cut the budget, it won't provide any money for staff severance payments or inflation on salaries for those remaining employees at CBC. This is the first government in history that has not only cut the budget but treated CBC employees so poorly.

CBC has also lost all future advertising revenue from NHL hockey, although Mr. Lacroix has admitted that CBC was in recent years at best breaking even on the NHL. Yet Mr. Lacroix points to the loss of hockey and a downturn in TV and radio advertising revenues generally as the culprit for CBC's financial problems rather than government cuts. He at least has adopted the idea of a cable tax, or what might better be called a "Canadian programming fee."

A cable tax seems an easy target for the cable and satellite companies to attack and the media would pile on, since no one likes a new (or old) tax. But what do Canadians think about paying a little bit more for better quality Canadian TV programming?

In a previous article it was pointed out that the entire Canadian English TV industry generates revenues from advertising, subscription fees and government of about $5 billion annually. The BBC alone has more funding than our entire TV industry. The U.S. TV industry, with which Canada's broadcasters must compete, had annual revenues in 2011 of $165 billion or 33 times that of Canadian broadcasters. Lots of critics bemoan the lack of quality in Canadian TV compared to the U.S. but they offer no real solutions other than to suggest Canadian TV (CBC) needs to be "cool" and make do with less money! These critics have scant knowledge of how TV is financed or produced.

What Canadian TV has always lacked is adequate funding, to allow for experimentation and expensive failures, and the occasional hit program. That is how the industry works in the U.S. and elsewhere. In Canada we have starved both CBC TV and private conventional networks of funds and neither CBC nor the privates can produce high quality TV drama that compares with HBO and other U.S. networks. Canadian TV will never produce a Six Feet Under, The Sopranos, The Wire or Big Love with the budgets given to Canadian writers and producers.

CBC can afford to broadcast (in a good week) only 2 hours of original prime time drama while Canadian private networks mostly buy U.S. programs and air them at the same time as the U.S. networks. This allows cable and satellite companies to unplug the U.S. channel and replace it with the Canadian channel. The effect is that Canadian commercials are carried on both the Canadian and U.S. channel. That's why you can't see the Superbowl commercials; the same Canadian commercial replacement is done every night on TV without your knowing it.

CMRI tracks public opinion about Canadian TV and for over a decade we have asked Canadians if they would be willing to pay for better quality TV. Surprisingly, on average, about 4 in 10 have agreed to paying $5 more per month. That would be enough, almost $1 billion, to dramatically improve the drama and other programming of CBC TV and private networks. Readers should visit CMRI's blog for methodological details on the annual survey.

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Cable and satellite subscribers are far more willing to pay an extra $5 a month for better quality TV than people who watch TV off-air via an antenna. This makes sense. They have always been used to receiving TV for "free."

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Not shown in any of the accompanying charts is that willingness to pay for better quality TV is highest among those who voted Conservative in the last election, something Brian Lilley and the folks at Sun Media should take note of.

One of the great ironies in Canadian TV is that a large majority of Canadians think that a high percentage of their monthly cable bill already goes to CBC and other local stations. In our most recent survey less than a third thought that none of the money from their monthly bill went to local stations, almost 1 in 2 thought it was 10 per cent of the bill and about 1 in 4 thought that 25 per cent or more went to local stations. In other words, Canadians already think there is a cable tax!

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On average Canadians think that about 20 per cent of their bill goes to CBC and other local stations, when it is actually zero. Specialty channels, the majority of which are owned by cable and satellite companies, such as TSN and Sportsnet, receive a percentage of what you pay to Rogers, Bell, etc. but CBC and private TV networks that have local stations receive nothing. They can only benefit indirectly from a small fund that underwrites some of the cost of independent programming. If CBC, CTV, etc. were to get even 10 per cent, it would amount to almost $1 billion per year and change Canadian TV overnight.

The trend has been remarkably consistent over the past decade and provides a clue as to how such a tax or programming fee could be introduced. Perhaps it should be a direct corporate tax on cable and satellite companies rather than on consumers. If cable companies chose to pass the tax on and bring it to the attention of their subscribers, many might be very surprised to learn that Rogers, Bell and others have not been giving some of the monthly fee to the CBC all along.

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