Lockout economics: Is there a link between the CBC's labour dispute and the hockey season that wasn't? by CBCUnlocked

A new story line is being proposed as people try to make sense of what is happening at Canada's public broadcaster.

Synopsis: The CBC lockout is paying for the NHL lockout.

The theory is that the CBC is recouping the millions of dollars in ad revenue it lost while there was no Hockey Night in Canada by not paying millions of dollars in wages and other costs while it keeps 5,500 employees on the street.

One observer who's heard the theory is Ian Morrison, who speaks for Friends of Canadian Broadcasting, a group that advocates more and better Canadian content and keeps an eagle eye on the CBC.

It is "at the very least plausible," he says, that the employee lockout will cover the CBC's NHL-lockout losses. "People I trust have told me the corporation is saving in the range of $3 million to $4 million a week," he says.

In testimony before a House of Commons committee 10 months ago, CBC president Robert Rabinovitch said the hockey lockout would mean "a minimum $20 million loss" for the corporation even after it salvaged what revenue it could by showing aging Hollywood movies on Saturday nights.

Doing the math, Morrison concludes: "It would take about six weeks before one lockout would pay for the other." The CBC lockout is now in its sixth week.

Crunching the numbers

CBCUnlocked has done some calculating of its own. Here are some figures to think about:

The Canadian Media Guild says total wages of the 5,500 locked-out employees come to about $4.8 million a week.

CBC annual reports show that revenue from advertising and program sales averaged about $5.4 million a week before the hockey lockout.
The corporation won't bank all the unpaid wages (it has to pay security guards, and give managers extra money and put them up in hotels to keep them trying to maintain a semblance of programming) but it may be saving quite a lot. And with program production paralysed and offices and bureaus closed, it may also be saving a bundle on non-wage costs.

Nor is it losing anywhere near all of its ad revenue. When audience numbers falter, advertisers pay less or demand make-good commercials, but cash flow doesn't suddenly dry up.

"The fact is," says Bob Reaume, vice-president of policy and research at the Association of Canadian Advertisers, "we're quite mercenary. If you can show an audience, we'll buy it, but we'll only pay fair value for it."

When they launched the lockout in mid-August, CBC executives may have calculated that:

Summer is the slowest season for ad revenue.
They were bound to take a hit in September as viewers drifted off to watch the premieres of heavily hyped American shows.
In other words, there wasn't much to lose.

Anyway, ad revenue has never supported more than a fraction of the CBC budget. The big dollars - upward of $17 million a week in parliamentary operating grants - continue to roll in, regardless of how much the taxpaying viewer gets for the money.

The NHL lockout lasted 301 days but clearly cost the CBC most at Stanley Cup playoff time, when hockey audiences and ad rates would have been highest. That means the loss is not ancient history; it affects the corporation's current bookkeeping year, which began April 1.

By accident or design, management may have found a way to get the money back.

Profit? What profit?

CBC publicist Jason MacDonald told CBCUnlocked that the hockey-lockout losses were indeed $20 million, but he dismissed the idea that the CBC is recovering them by keeping workers off the job.

"To suggest that the CBC is profiting from the lockout is seriously misguided," he said. "We are a not-for-profit."

He said money not spent on wages goes to pay for a replacement schedule and eventually the cost of luring back audiences when programming returns to normal, he said.

Among shows delayed because of the lockout is the miniseries Trudeau II: Maverick in the Making, originally scheduled for September 25 and 26. The CBC will have to double its promotion efforts to win back viewers who have strayed because they "are not getting the CBC they know and love," MacDonald said.

He also suggested there will be costs when the dispute ends just to get the machinery of the CBC up and running. "Systems don't always wake up happy," he said of the reopening of locations across Canada.

Questions, but few answers

As the lockout drags on, other questions arise:

How much is CBC management spending to stay operational?
How much are individual managers reaping in bonuses for replacement work they are doing?
How much pressure do executives feel to end the dispute?
The corporation's full board of directors was meeting Wednesday, for the first time since late spring, under tight security at Hotel Place d'Armes in Old Montreal. CMG President Lise Lareau sought status for two Guild representatives to address the board. She was told there is no precedent for that.

But she did work the hallways.

"You do feel like a child and the grown ups won't let you in," Lareau said on her cellphone. "There is not a tradition of the union sharing information at board meetings."

She said she is arguing that these are crisis times and an exception should be made.

The problem, she said, is the sense that the CBC is not hurting financially. "It sounds legitimately possible that the CBC has an incentive to lock us out," she said.

There have been calls from Conservative MP Bev Oda to have the president, Robert Rabinovitch, appear before the House of Commons Standing Committee on Canadian Heritage to answer questions about how the lockout is affecting the CBC's bottom line. The committee chair, Liberal MP Marlene Catterall, was out of Canada and unavailable for comment.

Counting the eyeballs

As managers scramble to avoid going to black, the CBC's Nielsen ratings paint a mixed picture:

The flagship television newscast, The National, was drawing about 700,000 viewers during the seven weeks before the lockout. In the first three weeks of the lockout, the replacement news show from the BBC drew a respectable 450,000.
On Sept. 16, the manager-created CBC news at 10 p.m. drew 239,000. (The lead-in program, a special about Terry Fox, drew 222,000.) CTV News had 842,000 viewers at 11 p.m. the same night.
Michael Moore objected to the CBC's decision to air his film  Bowling for Columbine during the lockout, but 717,000 Canadians were interested enough to watch it on Sunday, Sept. 18. On Monday, Sept. 19, the documentary Sex Slaves drew 479,000 and the news at 10 p.m. drew 492,000.
A face-off without familiar faces?

The NHL regular season opener is on Wednesday, Oct. 5. Hockey Night in Canada's season debut is on Saturday, Oct. 8: the Montreal Canadiens visit Toronto Maple Leafs, followed by the Ottawa Senators versus the Buffalo Sabres. CBC management has said it will go ahead with the broadcasts even if Don Cherry, Ron MacLean and others who make it hockey night are still on the sidelines.

Advertisers for the NHL season include Ford, Subway, Canadian Tire, Home Deport, Tim Hortons, Gillette, the Royal Bank, Kraft, Moores Clothing, GM, Sony Entertainment, Kia, Wendy's, MasterCard, Toyota, Universal Films, IBM Canada, CIBC, DaimlerChrysler, Telus Mobility, Wal-Mart and Casino Rama.

Quantifying the lost ad revenue would be tricky even for a CBC sales manager because so much will be resolved by a process known as "make-goods." If a program fails to draw the projected audience on which a rate was charged for minutes of advertising, the CBC can offer advertisers free time on its schedule. Many ads running during the lockout may be make-goods as CBC uses up its available inventory of commercial slots.

A river of money

Apart from the unpaid wages and whatever ad revenue is still coming in, the CBC has a great deal of cash to play with. Its parliamentary operating grants include about $11 million a week to keep it afloat outside Quebec and Moncton, which are not affected by the lockout because employees there have a separate union.

The CMG last month urged the government to withhold the grants during the lockout, but so far nothing has happened.

Federal NDP leader Jack Layton, who has joined picket lines across the country, said: "It is completely inappropriate to use public funds to help CBC management undermine public broadcasting."

Also on the savings side of the ledger, the CBC is not paying many of the usual costs of full programming - long distance, transportation for reporters and crews, materials for sets and so on.

On the cost side, it has had to spend money on supplemental news services and royalties to make up for lost content. There is extra security around CBC buildings across the country, all closed except for Toronto and parts of the Ottawa headquarters. And all those managers aren't working all those extra hours for free.

A confidential memo leaked least month outlined how managers would be compensated for doing the work of union employees. Some highlights:

Meal allowances
An extra 15 per cent of an individual's hourly rate for each hour of "struck work." 
$52 for each hour worked beyond eight hours on a regular working day and all hours on scheduled days off and statutory holidays.
Lump-sum payments of $100 to $700 week, depending on the extra hours of "strike-related duties."
Wayne Easter, a Liberal MP from Prince Edward Island, says the extra money managers are getting has removed an incentive to reach a settlement.

Easter, a former federal solicitor-general, has written to the cabinet, asking for legislation to prevent Crown corporations such as the CBC from offering bonuses to managers during labour disputes and urging that the payments made so far be rolled back.

"They're gaining financially on a daily basis and there's inherent interest on their part to keep the lockout continuing," he told the Canadian Press this week. "If managers had to go to work every day and had to work double the hours and were paid the same salary as before the lockout there'd be a heck of a great incentive for them to settle this thing quickly."

MacDonald, the CBC, spokesman, responded: "It would be misinformed to say that managers who are working around the clock to keep our services online want the lockout to last one second longer than it has to," he said.

Welcome to the Hotel InterContinental

The corporation has called in managerial forces from across the country to sustain minimal operations at the CBC Broadcasting Centre in Toronto.

The InterContinental Toronto Centre Hotel, across from the Broadcasting Centre, confirmed Tuesday that it was expecting an influx of CBC bookings from clients said to be dissatisfied with a hotel adjacent to the Rogers Centre stadium.

InterContinental's director of business travel sales, Maria Chung, said that she is preparing for between 25 and 45. They were unhappy at Marriott's Renaissance Toronto Hotel Downtown, on Blue Jays Way, where there were noise complaints and grumbles about the housekeeping staff not respecting Do Not Disturb signs, she said.

"They are moving here as we speak," said Chung. "The individuals are making their reservations, they are just starting to switch."

The hotel's corporate rate for CBC is $183 a night, including taxes. This would bring the nightly totals from this hotel alone to between $4,575 to $8,235 depending on how many managers book in. The Renaissance rates for CBC managers ranged between $160 and $224, including taxes.

If there are, say, 35 out-of-town managers at the $183 rate, the cost is $6,405 a night. Over the 38 days of the lockout so far, this suggests a hotel tab exceeding $240,000.

Per diems and flight costs to shuttle managers to and from Toronto are anyone's guess.
 
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