LEONARD ASPER HAS been front-and-centre on the fight for regulatory change in broadcast television.
Of all the broadcast CEOs in Canada, he has stuck his neck out the farthest in demanding things as fee-for-carriage and increased advertising flexibility. As you’ll read, much is riding on his company’s submission and the eventual new policy emanating from the CRTC decision which will be announced in 2007.
During the hearing days, expect much hay to be made on CanWest’s request for an extra 50-cents per TV subscriber per month for each conventional broadcaster.
At the Canadian Association of Broadcasters annual conference in Vancouver earlier this month, Asper sat down for an exclusive interview with Cartt.ca editor and publisher Greg O’Brien. The edited transcript which follows is longer than our usual TIs, but we think it’s worth it.
Greg O’Brien: I wanted to start with a question I had sent to Kevin (Newman, the Global anchor who led the closing CEO panel at the CAB convention), but he didn’t get to it: How far are we away from a completely on-demand world, where I can get everything wherever, however I want, whenever I want it – and as the world moves in that direction, what do you think happens to linear TV?
Leonard Asper: I think we’re some time away. Nobody can tell you exactly what year it’s going to happen. It’s no less than five years because there’s a huge bandwidth problem. I mean, you just can’t shove all this stuff down the coaxial cable, even with its expanded nature. And digital WiMax through the cities is just starting to be done now. So I don’t know if that’s a five or ten year rollout.
It’s going to take a lot of time. It comes back to what I said (during the CAB session) about satellite TV, which was here in 1980, technically, but it only really became commercial in 1999. I don’t think (on demand) is going to take nineteen years, but five is too soon. I think it’s a long time before that’s available.
But, in snippets it becomes more and more real. I mean now, Kevin Newman is available on your cell phone.
GOB: Right.
LA: But how many cell phones are there that are video enabled? Plus, I don’t think everybody knows exactly what consumers want on demand. There’s a lot of experimentation going on and it would be about a five to ten year process of defining what it is people want. And you know what, I think there’ll be a lot of peer-to-peer part of that as well.
GOB: I moderated a session yesterday where I think the number was 3% of mobile phones are video enabled right now in Canada, but, but in three more years, something like 60% to 70% will be video capable.
LA: Well, that may be true, but video-capable doesn’t people use everything to their full (capacity), and it doesn’t mean that many people are going to watch an episode of Survivor on their cell phone. Some people will. There’s no doubt people will, over time, get used to a small screen. I watch music videos on my iPod.
GOB: In that session, I linked a Palm Treo via broadband to my Slingbox at home just to demonstrate to the crowd what can already be done, and asked why I need the rest of them – some telcos, some broadcasters – for mobile video and we went from there.
But, the panel made the point that not everyone is such an early adopter.
LA: It’s all there. It’s all coming… but I think it’s always overblown by the media because it’s exciting and new and it’s about the future. But if you look at the guy in the trailer park in Kansas, he ain’t using a Slingbox in the next five years.
GOB: In one of the other sessions yesterday, David Purdy of Rogers was pushing the broadcasters for more video on demand content, saying "give us all the on demand content you can." This is something where Global has felt a pinch, where Rogers and the other cable companies and ExpressVu have gone around Global to CBS Paramount to get the Survivor on demand rights in Canada for their platforms.
LA: Right.
GOB: Is there a danger in biding your time that you might disintermediate yourself from the whole process?
LA: I don’t think we’re biding our time. We are the guys who were the first to negotiate streaming rights for U.S. programming. That’s something where six months ago, people said nobody could do. I would get asked on analyst calls, "what’s going to happen when Fox doesn’t give you the rights to, you know, 24 or Prison Break, or whatever," and I said "I’m not sure they won’t yet."
It comes back to what I said on the panel, which is if you’re big enough, if you have enough credibility as an exhibitor, people will see that it’s better to give you their rights and share the revenue you can create, rather than try to go it alone. So we’ve been able to negotiate for Survivor, Deal or No Deal and One Versus 100 – and CTV has the O.C. We’ve got Falcon Beach and we had to negotiate with Disney for that because ABC Family has that show in the U.S. and they agreed to geo-filter and let us do it in Canada – and we can promote it with them.
I think you’ll see more collaboration between rights holders. There will be some breakdown of territory (rights) with some of these things, but with Rogers and video on demand, I think it’s more of an issue for people who have movies like The Movie Network, than it is for broadcasters. We’ve had lots of discussions with Rogers about VOD, but I’m not sure that is a window that’s going to necessarily be the wave of the future.
I see people using a PVR and recording a show. Why, if I like a show, just not use my PVR? Do I want to pay for an on demand package where I have to pay for things I don’t want to get?
GOB: I’d like to come back to content, but you mentioned before about growing bigger. I’m not going to ask you about the Australian stuff because I know you’re in the middle of a process with that. But once that settles down, do you envision yourself getting bigger and looking for a purchase in Canada?
LA: I think we have to grow within Canada, yes.
GOB: And the missing piece of your portfolio is a large stable of specialty channels.
LA: We would like to have that. (But) the issue right now is there are a lot of buyers and no sellers, so how we deal with that is maybe just a matter of time. I think we can be creative and we’re certainly going to keep our eye open to get bigger… but maybe a slower route than we’d like.
We need lots more services, but in the meantime, I think we’ve got enough to work with, with Global and CH, TVTropolis and the digitals – just getting better ratings, moving stuff out onto more platforms, re-branding some of our specialties, rolling with the digital platform, and exploiting that.
Even with those alone, I think we can do well, but it would be neat to have more specialties at some time.
GOB: With all of this swirling around, the CRTC’s TV Policy Review is this month. Is the subscriber fee, "fee-for carriage," the number one thing that you’re aiming for?
LA: That and advertising deregulation. I think those are the two major things that would be the best way to re-balance the system, create equity among the players and allow us to exploit the opportunities that new media presents, and that new advertising mechanisms present.
GOB: But how do you sell that fee to Canadians? To me, it’s going to say to Canadians that this is a new TV tax for us to support Global, CTV, or whomever else.
LA: The fact is with cable, you’re paying for television now. Our research shows that most Canadians, a majority of Canadians, think they’re paying for Global and CTV already… as well as CBC and everything else – and those are things they’re not paying for. Further research shows that they believe they should pay for Global, CTV and those (stations) because they feel they get value from them: The local newscast, all the other things that local stations provide, such as community support.
Finally the research shows cable, and satellite, have consistently raised prices with one excuse or another. They’re adding new services, they’re adding high definition, they’re doing this or that. Sometimes there is no excuse, it’s just, "it’s time to raise prices again." And so your basic package that was $16 a number of years ago is anywhere between $25 and $35.
I think if cable markets (fee-for-carriage) properly, and they can, there should not be a disruption to this in the marketplace. We’ve survived many, many other price rises.
GOB: What happens if the Commission tells you "no, you can’t have this revenue stream?" Where does that leave the conventional over-the-air broadcasters?
LA: Well, it leaves us in an unfair position and it keeps us struggling… It leaves us in a disadvantaged, inequitable position vis-à-vis our competitors. It doesn’t mean it’s the end of the world, but it’s going to be something that I have to factor in as an investor, as a deployer of capital at CanWest, I have to say to myself: "Is this is worth investing more?"
In other words, is it better to invest in newspapers. Is it better to invest in digital signage? Should I spend all my money in Eastern Europe? Should I build Australia where there’s maybe better opportunities.
GOB: Would you consider selling CanWest Global then? Would it get to that?
LA: I’m not saying we’d consider selling.
GOB: Just the Global Television over-the-air asset is what I’m really considering.
LA: I don’t think I’m at that point yet. But, if this industry becomes a 6% margin business and there’s no hope for the future, and all it is, is more expenses on things like high definition – and we sit there with a set of regulatory rules that disadvantages us against specialties and against cable, or against distributors, and against American services, and against Internet and unregulated providers – at some point, you have to look at throwing in the towel.
GOB: I’ve got a bit of a smart-alecky question for you based on your presentation, where you showed the Blackberry TV version of Kevin Newman’s broadcast.
LA: Right.
GOB: You said that particular service was more profitable than owning a TV station in Halifax. If that’s so, why not tear down the transmitter at Halifax, get rid of a bunch of people and just broadcast from a computer server over broadband or be a podcast, or is it way too soon?
LA: If we don’t get our compensation for carriage, that may be something we have to look at. You know, we are running six to seven TV stations at a loss right now, and I’m sure CTV is running more. At some point that ain’t going to happen. Something has to change… local TV does not pay off now unless there is some other compensatory factor, which could be a combination of a fee that’s charged so people pay to get their television, and/or a freer advertising environment to monetize the audience you do have.
GOB: PVR and time-shifting plays into CanWest’s argument for the CRTC as well. What are your thoughts on time-shifting and what do you think has to happen with that service, along with PVR, which I think are kind of related for broadcasters. I’ve got two PVRs and I’ve got all the time shifted channels, so on Sunday for example, I don’t see The Simpsons at 8 p.m. on Global Toronto. I watch at 11 on Global Vancouver, or record it.
What has that done to your business and do you think that needs to change? Can it change? Is the barn door already closed on that?
LA: It costs us several million dollars because the people in Vancouver can’t sell the eyeballs of a person watching in Toronto.
GOB: I can’t really buy a car from a dealer there.
LA: This wipes out local advertising for those programs. And you know, it’s even worse because you hear people like Hugh Dow from M2 Universal, one of the biggest (media buyers) in the country, saying he’ll buy CJON Newfoundland to get Global. And it’s even worse because we don’t even own CJON Newfoundland.
It’s all part of the same thing I said at the panel: This is the abuse of the rights we own… it’s the stealing of those rights and the exploitation of them without compensation. So can the genie be put back in the bottle? Maybe not, but at least compensate us for the genie you took out of the bottle. That’s what we’re really asking for when it comes back to compensation.
GOB: Don’t you get compensated though from the satellite companies who pay for the out-of-market market signals and carrying them?
LA: Yeah, but it’s probably less than a million dollars a year. The concept is there, but the rate is not… The deal was made with satellite years ago which the CAB struck, and I think it is way past it’s due date for revisiting.
For months and months Rogers and Bell were marketing their time-shifting packages and selling them for $6.99 and $7.99 and $12.99, and of course when we started raising a fuss about that, they eliminated the advertising of a special package, but they’re still charging for it. That one may be tougher to put back in the bottle than just passing on, you know, waking up one day and saying, hey it’s $28, not $24 for your cable.
GOB: Global is now moving a bit more into its own content with Falcon Beach, with the Canadian Deal or No Deal coming up. How much more of your schedule needs to be CanWest Global’s own content? With all the moves to repurpose content, you need to own it first. How much more of your own content do you need to start producing?
LA: I don’t think there is any specific percentage, but I would say a lot more. Wherever we can, we’re looking at it.
GOB: And I’m talking beyond news.
LA: Yes, going beyond that. But, there’s a cost prohibition. There are only so many Falcon Beaches you can do with the current rules with all the other costs we have. I’ve always said I think if we could put a lot of our money into two or three big shows, it would be a lot more productive and useful – and more socially relevant – than having a lot of shows with a little bit of money into each that nobody watches.
GOB: And would you change your programming strategy, where perhaps, that Canadian show would air Thursday at 8 p.m., and you would promote the hell out of it during the NFL broadcast on the weekend, like a lot of the U.S. programming is?
LA: I think so. You’ve seen us do that, where we really believe in a show like Falcon Beach… and The Jane Show too. We have promoted it and put it in good time slots.
But as long as we’re tied to simulcast, Falcon Beach, for example, moved around a lot because there’s nothing you can do. When Survivor moves, you’ve got to go with it. Or if Heroes moves, you go with it. That’s the model we’re in today and I think that’s the model we’ll be in for some time. But we need to solve some of the other issues like compensation, so we can then have other revenue streams, and changing (the advertising) regulations – and also prescription drug advertisements, which is not a CRTC issue.
GOB: Are you allowed to expand on that case yet? I reported on it back earlier in the year. Has that case gone anywhere yet?
LA: It’s moving. The federal government is resisting it, and it’s moving how a trial process would move.
GOB: Is it on the docket yet anywhere?
LA: It’s at a point where they’re getting expert opinion, or too many expert opinions, and it’s in that pre-trial phase.
GOB: Alright. I’ve got one more question for you because it was something that your father often railed about: the CBC. As we come to the TV Policy Review, and after that a likely CBC review as they get to renew their license, what do you feel needs to change about our public broadcaster?
LA: I have often said our biggest problem is not the CBC and I haven’t focused on the CBC. The inequities in the system and the ones we will focus on in these hearings coming up are far more damaging to us than the CBC. It would be nice, and I think again more equitable, if we didn’t have to compete against subsidized companies for advertising revenues.
I think what the CBC should be is a producer of programming that is otherwise unprofitable, that no one, no private commercial broadcaster would do. That would mean arts programming, and may or may not be news programming. Certainly, it shouldn’t be major sports programming.
They should provide a service that is otherwise not being provided to Canadians, that some, but not all Canadians want.
GOB: Has Global Television emerged from the down cycle it was in, where the ratings are now turning around? I mean I see House, I see Prison Break as leaders. Did you suffer with all the baseball playoff pre-emptions?
LA: That happens every year, so it’s factored into our planning, but House and Prison Break are bona fide top ten shows, as well as Survivor, so that’s three right there. Apprentice and 24 are at different times of the year. Apprentice is in the spring, so Prison Break will be gone, but we’ve got a legitimate four that are… mostly in the top ten. And, I think Heroes is sharp and Brothers and Sisters is really showing promise. But, I don’t think we’ll ever have ten of the top ten again.
GOB: It’s a bit of a unprecedented period you’re emerging from right now where your ratings were down quite a bit and you went through a real purge of people and programming. It’s taken a little while to what I think you said during your last analysts call: "we’re not at the corner, but you can see it off in the distance," or something like that.
LA: I can see it from where I’m standing.
You know it’s only two months of television programming, but House and Prison Break are proven shows. We have had the disruptions, even in our sales organization, where we didn’t have a head of sales for a period of time because we were slow in having to replace him.
A number of things all happened at once. I wouldn’t want to use the old perfect storm clichés, but as I said on stage today, it’s a difficult path. It’s not like you can be number two, sit back and have some big top twenty shows and top thirty shows, but no top ten shows and just try to manage your cost base accordingly.
You have to be in the game investment-wise. You have to buy enough lottery tickets so to speak, so that you’re going to get somewhere between three and seven of the top ten shows.
GOB: I think it would be interesting to see those top ten rated TV shows, and figure out if number eleven is even a TV show. Is it a MySpace page, or is it FaceBook or YouTube, you know? If you could do that, how does that effect your business?
LA: You have to go back to look at "what is a TV show?" and "what do advertisers want?" They want people, they want to know who they are. And they want to know are they interested in the environment in which people are watching the show in which their advertising appears. For example, bull fighting is the most highly-rated show in Spain, but nobody advertises in bull fighting, because no one wants (to be associated with) bulls goring people on screen.
Public hangings, if they could be on TV would be 100% ratings.
YouTube and MySpace and the others are aggregators and they may have a hundred million people a day, but maybe they go to a page and they spend only a second there. And then they start clicking around to find their videos.
With broadcasters, you have three million people sitting and watching these shows for an hour, very engaged in that program, and it’s a quality program, and the advertisers know what they’re getting, what environment their ads are seen. They’re still willing to pay way more for that and that’s why it’s $35 to $40 a CPM, where it’s just two or four cents (online).
GOB: Right. But then you have the president of the TVA, (Pierre Dion, who said in the CAB session) that he PVRs everything and doesn’t watch ads.
LA: Yeah, but he’s making half a million bucks a year. Not everybody has a PVR. Three percent have PVRs.
GOB: I’ve got two of them, but no one else in my neighbourhood I know has even one.
LA: Right. And when they get it, they’ll use it a bunch and they’ll tape shows they never watch. It’s all about Law and Order freaks, or House freaks, who will tape every episode and watch it. I personally tape every 24 episode and I watch it.
And, I do fast-forward through the ads. I have to stop at the last one (in each break) because I don’t want to skip over (the show). I sort of catch the last ad right before so maybe that one will actually sell at a premium… Look at our in-program advertising. Our sponsorship of closed-captioning is in a twelve-million-dollar category. That’s not peanuts.
Our virtual advertising, when you’re watching an NFL game and you see a Pizza Pizza ad in Dallas on your screen…
GOB: When I PVR a game, those are the ads I see. When I notice the crowd come back, I stop, and there’s Canadian Tire, Pizza Pizza, whatever it is, I see it.
LA: Baseball is a great one, because every time there’s a pitch, you’re staring at that ad behind home plate.
GOB: And they’re much father along this way in Australia. I’ve seen Aussie Rules Football, but with digital on-field ads that switch.
LA: We have the property too.
There’s a lot of experimentation going on… So I think you have to treat every program you have as a brand. Never mind the Global or TVTropolis brand. Every show is a brand. Kevin Newman is a brand. And… you monetize brand. The thing nobody knows is where that revenue will go from the core, versus all the new stuff in the next five years. That’s what we’re all struggling with.
I’ve given a speech saying anybody who says they know where it’s going to be in five years is full of it. You’ve got to experiment. Stuff won’t work. Stuff will work. Latch on to the stuff that’s working and put some capital behind it, and invest in it.
