Re: Budget 2024 Recommendations to Provide Immediate Assistance to Canada’s Local Radio Sector

Stingray Radio
Re: Budget 2024 Recommendations to Provide Immediate Assistance to Canada’s Local Radio Sector

The Honourable Chrystia Freeland, P.C., M.P. The Honourable Pascale St. Onge, P.C., M.P.
Deputy Prime Minister and Minister of Finance Minister of Canadian Heritage
Department of Finance Canada 15 Eddy Street
90 Elgin Street Gatineau, Quebec
Ottawa, Ontario J8X 4B3
K1A 0G5

Dear Ministers:
Re: Budget 2024 Recommendations to Provide Immediate Assistance to Canada’s Local Radio

As the Government prepares the 2024 budget, the undersigned companies (the “Companies”), all of
whom are independent broadcasting companies not affiliated with larger communications
conglomerates, are putting forward a series of recommendations designed to assist Canada’s struggling
local radio sector.

The Current State of Canada’s Radio Sector
Canada’s radio industry is over one hundred years old. While the industry is facing significant financial
challenges brought on by new competition and advances in technology, radio continues to be highly
relevant to millions of Canadians in communities large and small from coast to coast to coast. Each
week, local radio stations inform, entertain, and enlighten Canadians. It is the largest promoter of the
Canadian music industry. It is central to our democracy as it provides a platform for local leaders to
reach the community. Moreover, radio is a critical resource, not only for information like traffic and
weather, but also during times of crisis, especially natural disasters such as storms, floods or the
wildfires that have impacted so many in recent years. In fact, the Government of Canada continues to
include a wind-up or battery-powered radio on its basic emergency kit checklist. And it is free to use.
Over the last decade, the radio sector, like much of the Canadian broadcasting industry, has been
undergoing a period of structural change. The emergence of subscription music streaming services
like Spotify and Apple Music, which are generally available for a monthly subscriber fee, have
significantly fragmented audiences in the Canadian audio market. Furthermore, there has been a
general shift of advertising away from traditional media to online giants such as Google and Meta. Less than twenty years ago, Internet advertising represented less than six per cent of the total market. Today, that number is closer to 70 per cent and is in the range of $12 billion.1
While the radio stations operated by the Canadian Broadcasting Corporation have been shielded from these trends as they are advertising free and wholly supported by the public broadcaster’s Parliamentary appropriation, private radio has been dramatically impacted, as it relies solely on advertising to fund the essential service is provides. In 2013, at its height, Canada’s private radio sector had advertising revenues of $1.604 billion. By 2019, that number had declined to $1.429 billion. However, the COVID-19 pandemic decimated the radio industry as companies slashed spending on advertising. In 2021, revenues had declined by more than $400 million to $1.021 billion.2 Although revenues are marginally higher today than in 2021, they are still hundreds of millions below pre-pandemic levels and are likely to never recover to that point.
The radio industry has attempted to maintain service levels by looking to realize efficiencies wherever possible. However, profitability for the sector has declined precipitously. In 2019, profit before interest and taxes (“PBIT”) for private radio industry was 17.1 per cent. In 2022, the most recently available data, that number had declined to 5.4 per cent.3

Notwithstanding the precarious financial position of the industry, in its late 2022 Revised Commercial Radio Policy, the first full scale review of its policies for the radio sector in 14 years, the Canadian Radio-television and Telecommunications Commission (the “Commission”) determined that virtually no changes to its regulatory frameworks were required.4 Given that the majority of the Commission’s radio policies date to 1998, it effectively concluded that these antiquated rules – established in an era before streaming services and smartphones – continue to be relevant for an industry facing an existential threat to its survival.

In addition, following the passage of Bill C-11, the Commission, the quasi-judicial administrative tribunal tasked with supervising Canada’s broadcasting and telecommunications industries, announced that it would be delaying the consideration of any applications or complaints relating to radio undertakings for a period of two years given its ongoing review of how to implement the Online Streaming Act.5 Many of these applications are technical in nature and essential to improving both the performance of a given station and the service it provides to listeners. The Commission did not restrict applications for any other type of broadcasting undertaking.

Unfortunately, the radio industry cannot sit idly by as the Commission engages in a multi-year process to update its regulations. To this point in time, the focus of the Commission’s deliberations has been on requiring online streaming services to help support the creative community. While the Companies support and understand the Commission’s efforts in this regard, they, in and of themselves, will not change radio’s financial outlook, either today or in the future. Ultimately, to realize the public interest benefits the broadcasting industry and, more specifically, radio can deliver, there needs to be a financially healthy industry. That is not the case today and operators have been forced to make the difficult decision to lay off staff to stay afloat.

Budget 2024 Recommendations
During the COVID-19 pandemic, the Government stepped up to help business across Canada, including the radio industry. The Companies acknowledge this support and do not take it for granted. However, the current situation facing radio stations across the country is dire. While we would welcome the opportunity to discuss the challenges facing the sector, including how to fix the Commission’s radio policies, with the Minister of Canadian Heritage and her department, there are more immediate ways the Government can assist the industry through the upcoming budget, including:

Dedicate 70 per cent of the Government of Canada’s advertising expenditures evenly across local radio, television, print and Canadian-owned digital media; and

Establish a minimum 20 per cent tax credit to encourage advertisers to purchase advertising with Canadian-owned print and broadcast media.
Each of these proposals are discussed in detail below.

Government Advertising Spending
In 2021-22, the Government of Canada spent nearly $141 million on advertising, making it one of largest advertisers in the country. However, in recent years, the Government of Canada has directed the majority of these expenditures online, with the bulk benefitting tech giants Google and Meta. At a time when Canadian media and, more specifically, local media, are struggling, the Government should be looking to support domestic companies when it purchases advertising.

In addition, local media have a wide reach and advertising placed on these platforms is often more impactful. A spot in morning drive on a radio station can be much more effective in communicating a particular message than a pre-roll spot online that the user skips through.
For these reasons, the Companies respectfully request that going forward, the Government commit to spending a minimum of 70 per cent of its total advertising spend evenly across Canadian-owned local radio, television, print and digital media.
Using Tax Credits to Encourage Spending on Canadian-Owned Print and Broadcast Media
As noted above, Internet advertising now represent nearly 70 per cent of the total advertising market. Most of this spending is with two foreign companies, Google and Meta, which dominate the Internet advertising space.

Decades before the development of the Internet, the Government of Canada introduced policies to encourage Canadian businesses to advertise on Canadian media. More specifically, Section 19.1 of the Income Tax Act was introduced to discourage advertisers from purchasing time on U.S. broadcasters located near the Canadian border, which people living in southern Canadian cities could receive over-the-air. Section 19.1 prevented businesses from deducting advertising as a business expense if purchased on foreign media.
A more straightforward concept that could be applied in today’s media environment would be to incent Canadian businesses to support domestic media by giving them a tax credit equal to a minimum of 20 per cent of their advertising spending when they direct those expenditures to Canadian-owned print and broadcast media. Governments often use tax credits to encourage citizens or companies to spend on specific industries (i.e., travel-related tax credits during the pandemic or tax credits for home renovations). This measure would reward Canadian businesses for supporting Canadian media, a vital domestic industry.

These recommendations can be implemented quickly, administered easily, and impose no new burdens on Canadian taxpayers. Indeed, Canadians from coast to coast to coast will appreciate that their Government has acted swiftly and deliberately to help ensure the radio personalities they trust can continue to deliver them timely information and entertainment. All of which is available at no cost to radio listeners.
The Companies would like to thank you for the opportunity to make these recommendations. We would be happy to provide any additional information you require on request.

Ian Lurie
Stingray Radio
Independent Radio Companies in Support
Chris Pearson Sylvain Chamberland
President President
Acadia Broadcasting Limited Arsenal Media
Kevin Brown Ron Dann
Managing Director President
Bayshore Broadcasting Blackburn Media Inc.
Chris Byrnes Doug Bingley
President President
Byrnes Communications Inc. Central Ontario Broadcasting
Hector Dougall Douglas Kirk
President President
Dougall Media Durham Radio Inc.
Paul Evanov Christopher Grossman
President President
Evanov Communications Local Radio Labs Inc.
David Pace Rod Schween
Chief Operating Officer President
MBS Radio Pattison Media Ltd.
Bill Morton Gord Rawlinson
President Chief Executive Officer
Quinte Broadcasting Co. Ltd. Rawlco Radio
John Sherratt Ed Torres
President President
Starboard Communications Inc. Torres Media
Bryan Edwards Matt Caine
President President
Vista Radio Whiteoaks Communications Group
Elmer Hildebrand
Elmer Hildebrand
President & CEO
Golden West Broadcasting Ltd.

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