Wednesday, June 15, 2011

CBC prepares to defend its finances

When Jim Flaherty's ministry released the federal budget in Ottawa last week, the Finance Minister was resolute in his belief that about $4-billion in savings from program spending should be easily found.

It was, Mr. Flaherty told reporters packed into a steamy room in Centre Block, kind of odd that something as massive as the federal government -"the largest enterprise in Canada," he called it -had not undergone a thorough spending review in several years. Private-sector companies have all done it, he said. Now Ottawa will do its part. The savings "shall be found," he said, in a tone that sounded a lot like a decree.

No one from the CBC gulped or gasped audibly. But they might have. If Reaper Jim is sharpening his scythe, could the public broadcaster possibly avoid a swipe?

It is in this environment that the CBC on Wednesday released a study on the economic impacts of the CBC (and its French-language counterpart, Radio-Canada). In what will not come as a shock to anyone, the study the CBC commissioned found that the CBC has a significant positive impact on the Canadian economy.

Deloitte & Touche, the study's authors, estimate that the CBC contributed $3.7-billion in "gross value added" to the Canadian economy in 2010, based on expenses of $1.7-billion, of which $1.1-billion was direct government funding. The good news goes even further: the study estimates that the CBC contributes an additional "net value added" of $1.3-billion, a figure at which it arrives by estimating the economic benefits of spending the CBC's $1.1-billion on alternative government measures. Ten per cent on health, 30% on social services, 0.2% on gazebos in Muskoka, that kind of thing.

The general conclusions are fairly obvious -not only does every dollar invested in the CBC generate significant positive dollars worth of economic activity, but spending it elsewhere would have less of an impact.

As Hubert T. Lacroix, the president and CEO of the CBC, said in a conference call with reporters yesterday, he's often asked about that $1.1-billion figure wherever he goes.

These takeaways, though, come with a couple of boulders of salt. First is the very nature of a study like this. The economic impacts are essentially an elaborate piece of guesswork that measures both the direct impact of investment and the indirect impact "across CBC's supply chain and more widely as money continues to flow through the economy." So, the authors take a dollar spent in one area, add something called a Type II output multiplier, and end up with a larger number. A dollar spent on television programming in British Columbia, for example, has a multiplier of 2.3. (The authors use Statistics Canada multipliers; they aren't plucked from the air.)

The projected impacts are just that, in other words: projections. It's not unexpected that they would be rather rosy, especially when it is the CBC that paid for the study. (Mr. Lacroix said the cost of the study is confidential.) When Quebec City commissioned a study last year into the economic impact of a government-funded arena, the report (also from Deloitte) found that such a stadium would be profitable even in the absence of an NHL franchise. It also assumed, rather optimistically, that the "surrounding region" of Quebec City, from which it would draw attendees to Disney on Ice and the like, includes Charlottetown and Moncton.

The rather large assumption in the CBC study is the two scenarios it assesses: one with the current funding model, and one in which the CBC is solely financed by commerical revenues. This anti-CBC, the study suggests, "makes commercially motivated decisions regarding its content, target audience, regional presence," and other factors. In that world, it would abandon businesses that are not commericially viable, and it would compete with private broadcasters in areas where it does not currently do so. If it, say, dumped the CBC-produced Republic of Doyle, filmed in St. John's, and replaced it with NCIS: Los Angeles, it's easy to see how the latter scenario wouldn't be as good for the Canadian economy.

But the "counterfactual" CBC that the study presents is simply a straw man. The CBC may not be beloved within the Harper government, and a chunk of the Conservative base will rail against it at the first opportunity, but only those few Canadians who believe the "state broadcaster" is run by Maoists truly want to see its subsidy eliminated. What the CBC might have to confront is not a world without public funding, but with less of it. Is it possible that a Tory spending review will determine an easy way to trim $100-million is to drop the CBC's direct funding to $1-billion? Does Don Cherry look like he's wearing drapes?

The public broadcaster conducts a perpetually tricky dance. When it announces a new show aimed at a broad audience and commercial advertisers, critics sniff that it's drifting from its public-service mandate. Give us interpretive dance, not hockey players! But if it directs too much programming into the nether regions of public interest, it will make less money and require more from Ottawa.

But $1.1-billion is a lot of money to protect. The CBC will have to erect some battlements. This study reads like a first shovel in the ground.

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