U.S. programs: their role in Canadian television
With few exceptions, the program schedules offered by Canadian television broadcasters in prime time have historically consisted of a mix of Canadian and foreign (largely U.S.) programs. Much of the Canadian programming is produced by the broadcasters themselves, particularly news, sports, local talk shows and documentaries. Publicly-funded entities such as the CBC and TV Ontario program a higher proportion of Canadian material than the private broadcasters, who depend largely on the revenues generated through the acquisition and broadcast of popular U.S. series, mini-series and specials (see separate article on Simultaneous Substitution) to pay for the prescribed amount of Canadian programming that they are required by legislation to broadcast.
The U.S program content is acquired either directly from the producing company, or, more often than not, via a Canadian firm that represents and sells the program output of one or more producers. Usually the firm is a Canadian office of a U.S. company: at one time, there were several independent Canadian firms representing US product, but with the advent of the 21st Century there were many U.S. mergers that resulted in Canadian representations being reduced in number, and becoming predominantly branches of the U.S. owners of the product. By the start of the 21st Century, only a very few of the popular US series were represented in Canada by independent agents.
With the advent of television in the postwar years, the major movie producers first saw this new medium as the enemy. But gradually, and with the passage of time inevitably, these same organisations began to realise that the two media could live together, and they were happy to sell their movie product to the highest Canadian bidder. Not only that, but they themselves began what was eventually to become a highly lucrative new business, that of producing series for television.
Canada’s adjacency to the U.S. had already given Canadians close to the border a wide range of American radio stations to enjoy, and freak late-night conditions had brought many of those stations much deeper into Canada. As would later happen with television, Canadian radio stations bought many of the popular US radio series for local broadcast (see various articles under Radio Programming). But the advent of U.S. television gave those same border-located Canadians something new to watch as well as listen to, and antenna trained to the south began pulling in these exciting new signals.
By 1951, the number of U.S. homes with TV had grown to 10 million, and along the U. S. border, 75,000 Canadian homes were watching U. S. stations.
The Government, through the CBC which was the appointed regulator of broadcasting at the time, had decided on an orderly development of television in
Canada, with just one station for each centre due to the high cost of establishing and operating TV stations. The first CBC TV stations came on the air in Montreal (CBFT) and Toronto (CBLT) in September of 1952 and by the end of that year there were 225,000 Canadian homes with television.
In 1958, the government created an independent body, the Board of Broadcast Governors (BBG), to take over from the CBC the responsibility for regulating broadcasting in Canada. In 1960 second television stations were licensed by the BBG in all major markets in Canada, and the CTV Network was launched on October 1st 1961. The BBG in turn was replaced by the Canadian Radio-Television and Telecommunications Commission (CRTC) in 1968.
Ray Peters, retired President and CEO of WIC Western International Communications (owners of then CTV affiliate BCTV Vancouver, of which Ray was CEO and Chairman of the Board)), and a former President of the Canadian Association of Broadcasters, who started in television in 1953 when CHCH Hamilton was about to launch as the third private affiliate to be licensed by the CBC, after Sudbury and London, Ontario, remembers:
"American programming has been used by Canadian TV stations since the start of Canadian television because that was what Canadian TV audiences wanted to watch.
This all started because Canada was about 5 years late in introducing television by licensing television stations. Early in 1950, CBC was the broadcast regulatory authority in Canada, as well as operating a national commercial public radio network and individual radio stations in every major market in Canada. In 1952, the CBC Broadcast Authority announced that they were going to introduce Canadian television in Canada by issuing a license to CBC in Montreal, Toronto and Vancouver, and establish a "Canadian standard" for Canadian television.
This was a great theory which at the time we all agreed with but by then Canadians were already exposed to American television which started in the 1940’s and introduced to Canadian viewers from US border stations in Buffalo, NY, Burlington, Vermont, Pembina, North Dakota and Spokane, Seattle and Bellingham in Washington. As a result, the Canadian standard objective never got off the ground. The standard for television was American and that was what Canadians wanted to watch.
I was with CHCH Hamilton when we put that station on the air in 1954. It was a CBC affiliate at that time and everyone in the Hamilton/Niagara Peninsula was watching WBEN Buffalo. The program buying at that time was through Canadian theatrical movie distributors who were just getting into distributing US television programs.
Between 1960 and 1965, Canadian private television stations did all of their buying of US programs individually, and as a result we found that the CBC were always buying the best shows first before we, as individual stations, started negotiating. That was the reason the (CTV) stations set up ITO (the Independent Television Organization) as a group to strengthen our buying power. The stations would meet in Toronto each Spring to view the new pilots that were brought in by the Canadian distributors and made available for screening. None of the shows were available until the American networks completed their buying and the shows went into production.
While establishing ITO helped the individual stations’ negotiating position, the CBC always seemed to complete their buying first, or in other words, got first choice. That was the motivation for the ITO group to go LA to get ahead of the CBC. This started in 1965, and proved to be quite successful until the CBC started to show up in LA as well but by then the buying strength of the ITO/CTV group was very strong. By March 1966, the ITO stations group owned CTV, but the competition from USA signals coming into Canada remained a serious problem.
When I appeared before the CRTC in Montreal in 1972 with our legal counsel, Gowan Guest, we suggested then that Canadian broadcasters' rights in US programs could be protected if the Commission were to require cable operators to substitute the Canadian signal where an American program on a U.S. channel was being broadcast at the same time in Canada. We were very pleased when the CRTC announced the simultaneous substitution regulations later that year."
Within a few years, program buyers from both CTV and CBC, as well as from CHCH, were regular Spring visitors to the Los Angeles studios and production companies, timing their visits to coincide with the U.S. networks' announcement of their fall schedules, and staying initially for about two weeks. The buying groups would each go out to the major producing studios - Warner, Twentieth Century Fox, Columbia, Paramount, Universal, MGM, Worldvision and Viacom were among the largest - to screen the new season pilots, and later to be appropriately wined and dined.
It obviously made good business sense for the U.S. program distributors to take advantage of the rivalry for viewers between the CBC and CTV, and to sell their product to the highest bidder. The CBC carried less U.S. programming than the private stations, and for a while was able to cherry pick the strongest programs, sometimes out-bidding CTV for shows that the private network had made popular. But soon the CTV affiliates expanded the total number of hours of network-delivered programming they carried, and the group was then able to buy more hours of U.S. shows in packages.
The network had eight hours of U.S. programming to sell in prime time, and the affiliates were generally co-operative in letting the network have the highly popular U.S. shows they needed to attract national advertising dollars. The remaining U.S. shows that the network group bought were delivered by the network microwave (later satellite) service, for the stations to schedule wherever it would be most beneficial in each market.
CHCH Hamilton was always in the market for U.S. series, but to be competitive it would have to offer to acquire full national rights, and hope that the respective distributors could sell those programs to enough other Canadian markets so that CHCH wasn't left with heavily overpriced product to sell to Toronto/Hamilton advertisers. Where CHCH was very successful was in establishing itself as a player in the market for theatrical movie packages, which did well in the Toronto/Hamilton area as well as invariably being attractive acquisitions for markets across Canada.
In time, CHCH was also able to be more competitive for national rights by making deals with some CBC and CTV affiliates for local rights to those series, and as new Canadian stations were licensed, this resulted in further demand for U.S. series, and with it a further increase in the cost of U.S. programming because of the enhanced level of competition for the top shows. Those prices escalated still further with the licensing of the Global Network in 1974.
There was constant pressure from the Canadian creative community, and hence from the CRTC, for the private broadcasters to produce and schedule more Canadian programming, particularly drama. Yet the fact remained that there was increasingly strong competition from distant signals becoming more and more available via cable and eventually satellite.
As a result, the private broadcasters could not schedule Canadian drama - which had to be produced using revenues generated from advertising to a population less than one-tenth the size of the U.S. equivalent - against U.S. Series with any hope of generating viewing figures that would be attractive to advertisers. This resulted in a negative swing of tens of thousands of dollars each time Canadian programs were scheduled against strong U.S. competition.
For a brief period in the 1960s, Canadian broadcasters who acquired British or other Commonwealth programming were permitted to count a small number of those hours as 100% Canadian content. This was soon reduced to 50%, and within a few years even this content allocation was denied. But during those 'content years', Lord Grade's Independent Television Corporation (ITC) in the UK was one company that did very good business in Canada with series like The Saint, Thunderbirds, The Prisoner and Danger Man. The Avengers, a series from Associated British Corporation, also did very well internationally, and especially in Canada.
American programs therefore continued to be a vital part of Canadian private broadcasters' schedules, even though with the advent of Global, competition among Canadian broadcasters for U.S. product was to generate a tenfold escalation of the cost of an hour of a top U.S. program series, over only a very few years.
With gradual amalgamations of several major U.S. production companies, some Canadian program distributors were beginning to own significantly larger packages of new and returning program series, all of which they were expected to sell. Canadian content requirements meant that only a certain number of U.S. hours could be scheduled in prime time; this meant that Canadian networks and stations with more hours to fill through series cancellations were in a better position to negotiate for new - and returning - product.
However, in order to secure the product they felt they had to have, Canadian buyers would sometimes buy more hours that they needed, and either hold on to those hours to fill as series were cancelled, or have the distributor sell off local rights in individual markets where stations had space for more product.
In 1972, as Ray Peters recalls above, the CRTC approved "simultaneous substitution", an arrangement whereby Canadian rights-holders who scheduled their US programs in "simulcast" with the local incoming US network affiliate's signal could require the Cable and Satellite operators to substitute the Canadian station's signal, containing the Canadian commercials, in place of the US version. This aided Canadian broadcasters by helping to protect their ownership of those programs, though frequently those broadcasters found they owned two or even more U.S. programs that were scheduled in the same time period in the U.S., and could only simulcast one of them. This usually resulted in the other program(s) being pre-released, i.e. scheduled in advance of the U.S. broadcast, to give the Canadians at least some advantage.
Meanwhile, ever since its launch as a UHF station in the Toronto market in 1971, CITY-TV. had been a competing customer for U.S. product, though initially it was unable to compete for U.S. prime time series with the national buying power of the competition. It did however manage to acquire movie packages, which were scheduled in prime time, late night and on weekends.
Later, in 1978, CHUM Limited acquired a majority shareholding in CITY-TV.
In 2004 CHUM received approval to acquire the assets of Brandon-based Craig Media. Included were A-Channel stations in Calgary, Edmonton and Winnipeg, and CKX in Brandon. The following year these were rebranded as CITY-TV stations in their respective markets, and with CHUM's existing independent stations in Barrie, Ottawa/Pembroke, London, Windsor, Wingham and Victoria being re-branded as A-Channel stations., the CHUM group became even competitive for national rights to U.S. programming.
The CTV Network suffered particularly from the problem of too much U.S. inventory to schedule in simulcast, or even at all, , but having acquired in 2007 what was then a group of "A" stations from CHUM Ltd., CTV was able to schedule some of this programming on those stations. In 2011 the "A" stations were rebranded as CTV Two, and offered a valuable second channel on which the Network could schedule the balance of its US acquisitions.
By 2014, the number of major Canadian television groups in a position to buy major packages of U.S. programming had stabilized at five: Bell Media, which owned CTV, Shaw Communications, which owned Global, Rogers, which by now owned the former CHUM-owned CITY-TV stations in Toronto, Winnipeg, Calgary, Edmonton and Vancouver and the Omni stations in Toronto, Calgary, Edmonton and Vancouver, and a group of independents that included CHCH Hamilton, Corus, Blue Ant and Netflix. The fifth group was the CBC, but as of 2015 the Corporation was not competing for any major U.S. series, but still remained as a potential competitor.
The competing groups would still go to Los Angeles in the late spring, usually early to mid-May, to screen new product, but for the most part they would screen the pilots at their hotels, and would complete those screenings over about eight days. By this time, the acquisition over the years of additional stations and specialty channels by the major buyers had given them the ability to absorb and use much more product than could have been handled by just one station in each market.
The advent of and ownership of these broadcast properties by these groups had created the need for buyers to acquire rights to many more platforms than simply linear (over the air broadcast) television rights. Linear cable and satellite rights were needed for plays on specialty channels, and the introduction of AVOD, or Advertiser Supported Video on Demand and SVOD (Subscription Video On Demand) offered viewing options that enabled audiences to watch episodes of US series on different platforms.
The need to cover all these platforms had also resulted in long-term relationships developing between specific buyers and specific U.S program producers: "volume agreements" would be developed whereby the buyer undertook to take at least a certain number of program hours from a given distributor.
Another new source of high quality U.S. series programming had developed during the early years of the 21st Century, namely the programming being broadcast on U.S. specialty and free and pay-per-view channels like Home Box Office, Showcase and AMC, and digital sources such as Amazon, Hulu and Netflix.
Increasingly these programming sources were being tapped to strengthen Canadian broadcasters' schedules, often in the summer, which were no longer having to accommodate the U.S. networks' repeats of their major series. These repeats had become less popular with the viewers, with so many alternative choices becoming available from non-Network sources, and with so many of the U.S. Network series moving to serialized formats that did not hold their audiences on repeat. As a result, a non-simulcast of an original program began to be a much better prospect than a simulcast of a repeat.
As the 21st century moved along, and while pressure continued to come from both the CRTC and the creative community for there to be more and better Canadian drama produced, all parties continued to recognize, some albeit reluctantly, that U.S. programming had to continue to be a part of private broadcasters' schedules. The fact continued to be that the quality of the series programming that the U.S. economy could afford to finance would always make it a priority for Canadian viewers, and therefore had to be in Canadian broadcasters' schedules.
In addition, the revenues generated thereby continued to be the major source of revenue for private broadcasters, not only to cover overhead but to produce all of the Canadian elements of their schedules, including such programs as drama, sports, news, documentaries and children's programs. After a series of CRTC hearings under the umbrella title "Let's Talk TV", the Commission on January 29th 2015 reaffirmed its support for the continued implementation of simultaneous substitution. In announcing this, the Commission again underlined the importance of U.S. programs in private Canadian broadcasters' program schedules, when it gave the following reasons for its
- to allow Canadian broadcasters to maximize audiences and advertising revenues for the non-Canadian programs for which they have acquired the Canadian market rights. When broadcasters buy programs from American producers or networks, they pay to have broadcast rights in certain markets. Even though out-of-market and out-of-country signals are widely available to Canadians, simultaneous substitution supports these broadcast rights and allows TV stations to draw more advertising dollars since without signal substitution, the audience for a TV program would be split across several stations, reducing the size of the audience for each station. With that smaller audience, the TV station couldn’t charge as much for advertising. In the 2012-2013 broadcast year, the estimated revenue impact of substitution was approximately $250 million.
- to promote local broadcasting and local creation. By helping local stations keep their local audiences and the advertising dollars that go with those audiences, simultaneous substitution enables them to continue to operate and to offer their viewers local as well as international programming.
- to keep advertising dollars in the Canadian market. A lot of the time, an American signal is replaced with a Canadian one. Since the Canadian signal features Canadian ads, advertising money is generated in the Canadian market, creating jobs and economic activity.
However, the Commission included measures to penalize broadcasters and distributors for errors in the substitution process, and - to the annoyance of some and the delight of others - announced that, effective in 2017, :
- given the comments received from Canadians and the fact that the non-Canadian advertising produced for the Super Bowl is an integral part of this special event programming, distributors will no longer be allowed to perform simultaneous substitution for this event as of the end of the 2016 NFL season (i.e. for the January/February 2017 broadcast of the Super Bowl).
Bell Media, the Canadian rights-holder for the Super Bowl through 2017, called the decision unfair, and announced that it had filed a motion with the Federal Court of Appeal seeking leave to appeal, saying the Canadian Radio-television and Telecommunications Commission acted in error.
On August 1st 2017, with there still having been no decision handed down by the Federal Court of Appeal on BCE Inc's appeal against the CRTC's Order prohibiting simultaneous substitution of the CTV Superbowl coverage, BCE filed a new application with the CRTC, asking it to overturn its January 2015 Order rescinding Superbowl simulcast rights. BCE Inc said that the loss of simulcast rights on the Superbowl had reduced its audience by 40%, and its advertising revenue by $11,000,000.
In January 2018, Bell Media again asked for leave to appeal the federal court ruling that upheld the CRTC policy in respect of disallowing simultaneous substitution for the Super Bowl, and for a stay of the regulator's decision, but on Friday January 26th the Supreme Court declined to take immediate action that would have allowed simultaneous substitution for the 2018 Super Bowl on February 4th. The Court however undertook to expedite the hearing of Bell Media's leave to appeal, although it appeared unlikely that there would be any action in time to permit CTV to substitute its own commercials in the February 4th broadcast. This proved to be the case, and Bell subsequently said they had lost very significant revenus as a result.
On May 10th 2018, the Supreme Court of Canada announced that Bell Media and NBC's application for leave to appeal from the judgment of the Federal Court of Appeal dated December 18, 2017, in respect of Simultaneous Substitution of commercials in the Super Bowl, had been granted with costs. The hearing of the appeal would not be expedited, but the Court statement said that it was of the view that these appeals would provide an opportunity to consider the nature and scope of judicial review of administrative action, as addressed in Dunsmuir v. New Brunswick,  1 S.C.R. 190, 2008 SCC 9, and subsequent cases. To that end, the appellants and respondent were invited to devote a substantial part of their written and oral submissions on the appeal to the question of standard of review, and that they would be allowed to file and serve a factum on appeal of at most 45 pages.
On October 1st 2018, as part of the newly negotiated USA-Mexico-Canada Agreement (USMCA) that replaced the North American Free Trade Agreement (NAFTA) after thirteen months of hard negotiations between the three countries, Annex-15 in the USMCA included this wording in reference to the television broadcast of the Super Bowl:
“Canada shall rescind Broadcasting Regulatory Policy CRTC 2016-334 and Broadcasting Order CRTC 2016-335. With respect to simultaneous substitution of commercials during the retransmission in Canada of the program referenced in those measures, Canada may not accord the program treatment less favorable than the treatment accorded to other programs originating in the United States retransmitted in Canada.” This meant that, once Broadcasting Regulatory Policy CRTC 2016-334 and Broadcasting Order CRTC 2016-335 were no longer in effect, the Canadian rightsholder (CTV) in the television broadcast would once again be entitled to have the Canadian signal, with Canadian commercials, substituted for the incoming US signal.
However, the prohibition of simultaneous substitution for the Super Bowl in 2019 was maintained.
By Pip Wedge
With grateful thanks to Ray Peters, Peter Hughes
and Ron Suter, for their very helpful input.