Kirstine Stewart switched in April from running the CBC’s English service to leading Twitter Canada. Plenty of self-styled media critics interpreted Stewart’s move as a high-profile defection from stagnant traditional media to a shiny digital upstart. That assessment is not just wrong, it’s backward: Twitter hired Stewart specifically to court established, traditional media outlets because it wants to establish paid partnerships with content producers; meanwhile, CBC is a dominant digital player in Canada, competing hard—and successfully—against private news, music streaming, and video-on-demand providers.
The online success of the CBC should be laudable. Its website received an average of 6.2-million unique visitors last year, making it the most popular Canadian website. Around 4.3-million people visit the CBC News site each month, besting both The Globe and Mail and Huffington Post. Adding to this success is an ambitious five-year plan that will open digital-only news operations in cities like Hamilton and Kamloops and allocate 5% of the overall programming budget to digital content. Once upon a time, it was only private TV and radio broadcasters who had reason to grumble about competing with the Crown corporation; in building its online empire, the CBC is taking on everyone from newspapers to Netflix.
In doing so, the CBC has strayed a long way from its original purpose: to sustain Canadian culture when and where the market cannot. The problem is, the CBC’s traditional funding model now allows it to build its digital empire unfettered by economic reality. In its last quarter, 60% of the company’s expenses were paid by government subsidies while just 21% of its revenue comes from advertising. All media companies are struggling to adapt to shifting consumer and advertising patterns brought about by the digital age; only the CBC had $1.2 billion in government cash to fund its experiments and ease the transition.
Broadcasters would argue the CBC has always operated from an unfair advantage. But the current scenario is different in several respects. For one, the Corp.’s legislated mandate to be “predominantly and distinctly Canadian” arguably placed it at a commercial disadvantage. Further, capital and regulatory requirements made it implausible for commercial broadcasters to serve many areas of the country. But nobody needs to ask the CRTC’s permission to create a website, and the startup costs for a digital service are far less than those of a television or radio station. If small cities like Kamloops need a local digital news service, that’s a need that could be plausibly served by entrepreneurs. The CBC is increasingly no longer complementing the market, but instead meddling within it.
And the list of markets now distorted only lengthens as CBC’s digital operation grows in size. Consider Canada’s newspapers: The Globe and Mail, Toronto Star, Vancouver Sun and Vancouver Province are once again confronting layoffs. All have now either implemented or plan to implement paywalls to generate new revenue. But to the extent that newspapers’ survival depends on charging their readers for access, that effort is imperiled by free and plentiful content on the CBC News site.
That same content feeds heavily aggregated sites like Huffington Post. In the borderless Internet, Canadian taxpayers end up subsidizing foreign news sites while homegrown news sources flounder.
There is no clear solution to this dilemma, particularly if you see value in a public broadcaster— but not publicly funded Top 40 radio, publicly funded local blogs, or, for that matter, publicly funded newspapers. As its digital footprint has grown, the CBC has effectively become all of these things. It amounts to unintended government-funded intervention where it is either unneeded or destructive. As the traditional broadcasting model has become antiquated, so too has the CBC’s financing model. Its digital presence must grow in a way that is self-sufficient. The Mother Corp. has shown it can compete in the new media world; now it’s time it actually does.
James Cowan is deputy editor of Canadian Business