Len Cochrane, Part 2: Regulation
Interviewed by Fil Fraser at Banff World Media Festival on June, 2011
Fraser. Your history in broadcasting implies that there is no escape from regulation, from the CRTC principles that set the ground rules that allowed you to do this. Can you discuss how you navigated those regulations?
Cochrane. The way that the pay-TV regulations were written, it did not say that we could not do it. But no one had actually thought of it. So when I wanted to move to a different distribution method, we reduced our wholesale rate substantially. It gave us an ability to sell in an extended basic tier. We sat down with the Commission and said, “Here's what we want to do.” We gave them some paper from the lawyer that said, within the regs it's allowed, and we just went ahead and did it.
F. Today in the business many young people would not understand the terms “basic” and “extended basic” tiers that existed then.
C. Over time, the tiers have collapsed into one, especially with companies like Rogers, and Shaw, which have a big basic service. Those companies don't tend to sell tiers 1, 2, and 3 separately; they tend to sell you the tier package.
F. That was tied to the available bandwidth.
C. Sure. As time went by, when most specialty channels came along, there could be 10, 12, 14 of them bundled into a tier. That's what happened with Teletoon and when we came along with Showcase - we were actually the nucleus of tier 3.
F. So, comparing with those days when you were really making it up as you went along, please talk about where we are today.
C. I think that the pendulum has swung to the consumer. What I think we have to do is to offer our service 24/7, but streamed to mobile devices. Today, for instance, if you are a subscriber to Shaw in Edmonton and you buy their product, Shaw has to have software that authenticates you to get it on your mobile device. That is what's going to save the Canadian system. One day, we'll open our TV screens and there'll simply be a bunch of icons. And we’d better be there. This must be top of mind. Personally, I'm not looking for more money because you're already paying me for that service and you can watch it 24 hours a day in your armchair if you want to. But if you want to go out and watch it on your mobile, be my guest. As long as you pay the original fee.
F. How are we doing?
C. One of the things that will make that a reality is LTE [Long Term Evolution], which is the new mobile platform that is actually leapfrogging G4. It's going to give us a huge amount of bandwidth; next summer, Rogers is going to build a pilot in Ottawa. They will likely spend $1 billion changing from G3 to LTE.
F. What is the role for government in this environment with all these technologies exploding and expanding around us? It's almost like trying to herd cats, or contain water in something that is full of holes. How do you see government as a regulator and supporter for this environment?
C. The government and the CRTC have been very important partners in what we have built. It has taken over 50 years to build this system with a lot of very talented people. There is an excitement when you come to something like the Banff Television Festival. Everyone really wants to do business; my feeling is that we have to get everyone inside the tent. And we've done that up till now. I have no problem with Netflix coming in, Fil. The problem I have is how they are going to join the system.
F. Will the CRTC be able to regulate them?
C. In my opinion, it doesn't matter. Video is still video; no matter where you watch Hawaii Five-O, for example, it's still the same content. It's just that the audience chooses to see it in a different way. The hockey game is coming up on Wednesday night; you may choose, because you're here, to watch that on your laptop. CBC has the rights and the streaming in order to be able to do that. But before going to how these over-the-top services come in and compete, it has to be on a level playing field. If I was Netflix, and the CRTC came in next week, I would offer to give 5% of my total revenue to Canadian content: with 4% to CMF, add half a percent to the Rocket Fund, and so on. So he builds this 5%. If they want to be in the tent, they have to contribute.
F. Are you optimistic that this is what is going to happen?
C. I have no idea. This is only me.
F. I thought you knew something!
C. No. I always feel that there is a bogeyman in our world. When DTH [Direct to Home Television] started, people thought the sky was falling; and when the cable guys were allowed to sell telephony, Bell and Telus thought the world was ending. We all find a way to compete. But one thing the playing field must be level. In Teletoon, 47% of my revenue has to be spent on CanCon. I have to have 60% or near. So their model is different because they're asking people to come and get it. So, they can contribute in another way, by helping us make better Canadian content.
F. So you need the CRTC.
C. We will always need the CRTC; as the vertically integrated companies get bigger, their baseball bats get bigger. When it comes to launching channels, there is a much bigger chance that they will launch their channel than we would.
F. The head of CRTC was here yesterday talking about the need for a new Broadcasting Act, recognizing the vertical integration, that people who used to be in the delivery business are now in the content business. But the industry is totally integrated. Some think that the present system is not able to handle it.
C. I agree that the present legislation does not cover the Internet or digital. The last Broadcasting Act was drafted in the late 80s, I think. It really has to be redone, rethought and brought up to date.
F. What would that act look like if you were writing it?
C. We have to put Canada first; particularly in the animation industry, we have spent since we launched in 1997, $250 Million at Teletoon on Canadian animation. That 47% of our gross revenue is a huge chunk of money; we're quite happy to do it because we’re helping the system and that's the cost of doing business. That's the cost of having the genre protection. We really need to have this brick wall; everyone has their own brick. If you start taking bricks away, eventually the wall will fall down. That's why we need the referee; that’s why we need the CRTC: to make sure that everyone is in balance. The small independent guy can be really pushed around otherwise. If we were a vertically integrated company, we would be doing the same thing. That's the way it is.