OTTAWA – CTVglobemedia may have declined all comment today on the CRTC’s decision to approve its takeover of Chum Limited – without CHUM’s key TV assets, the Citytv stations in Toronto, Winnipeg, Calgary, Edmonton and Vancouver – but some observers and commissioners have said much of what CTV CEO Ivan Fecan and colleagues must be thinking.
As first reported on cartt.ca yesterday, the regulator approved the transfer of effective control of CHUM Ltd. to CTVglobemedia Inc., but the collection of new assets CTV would obtain is significantly different than what it proposed in its application. (With the public hearings taking place in late April and the decision released today, the process has taken a mere six weeks, mightily accelerated from the norm.)
In short, the decision says CTV can acquire: seven A-Channel stations, serving Vancouver/Victoria in B.C. and Pembroke, Ottawa, London, Wheatley/Windsor, Wingham and Barrie/Parry Sound in Ontario; CBC affiliate CKX-TV, serving markets in northwestern Ontario and in Manitoba; ACCESS: The Educational Station in Alberta; analog specialties Canadian Learning Television, MusiMax (50%) and MusiquePlus (50%); most or all of 16 other analog and digital specialties, including Bravo!, Space, Book Television and Court TV; 20 FM and 14 AM radio stations in B.C., Alberta, Manitoba, Ontario, Quebec and Nova Scotia; and sundry other assets.
But CTV applied to keep the Citytv stations and sell off the A-Channels – which Rogers Communications had agreed to buy if CTV agreed to the entire deal offered by the CRTC – along with CKX, ACCESS, SexTV: The Channel, CLT and its share of MusiquePlus. Faced with tough questioning at the April hearing, CTV later offered to divest the City stations in Winnipeg, Edmonton and Calgary; however, by then the hearing was over and the commission would not consider it.
The June 8 CRTC decision “has created more questions than it’s answered…and has the potential to completely re-open the deal,” says Guy Mayson, president of the Canadian Film and Television Production Association, which represents hundreds of independent producers. “We actually thought the (proposed CTV-CHUM) deal held together and was good for the Canadian production industry.”
The takeover terms approved by the CRTC may well extend uncertainty about Chum’s future, he says, and that uncertainty will continue to delay or dilute orders for new series or movie production from CHUM’s commissioning editors. Although CHUM is being managed by a trustee until CTV is approved to take control, and the two companies are still separate entities, Mayson adds, his members are telling him the commissioning process has “bogged down.” Episode orders are smaller, for instance, and multi-year deals unlikely.
Common Ownership Policy (COP) central tenet of majority ruling against CTV
The majority decision from the commissioners asserts that if CTV acquired the five City stations, it would then own more than one conventional, English-language station in each of those markets and that’s “inconsistent with the Commission’s common ownership policy.”
“The purpose of this policy is to maintain diversity of voices within the Canadian broadcasting system,” says CRTC Chairman Konrad von Finckenstein, in a news release. “Some exceptions to the policy were granted in the past for failing stations in secondary markets. (CTVglobemedia) asked for the exception using arguments based upon competitive equality and the impact of new media. However, the Commission was not convinced by CTVgm’s arguments.”
In the decision, the commission says it “concurs with the CBC’s position that CanWest’s situation with its CH stations is significantly different from that proposed by CTVgm” because the Ontario station, for instance, is located in Hamilton and has many commitments to meet in Hamilton.
The Commission also agrees with “the CBC’s submission that the proposed transaction would result in a concentration of ownership that would have an unacceptable impact on the plurality and diversity of voices in the English-language market….Further, the Commission does not consider that CTVgm has provided any persuasive rationale as to why the Commission should allow the acquisition of the Citytv stations on any other basis.”
In dissenting opinions two commissioners contend the majority decision is fatally flawed. First, argues Stuart Langford, the majority worries about unfair competition “despite the fact that after a…six-month-long investigation, the Competition Bureau found no grounds for such a conclusion. Second, the majority has adopted a strict literal reading of the one-market-one-station provisions first adopted in a 1963 Board of Broadcast Governors (BBG) decision and reaffirmed both in subsequent Commission decisions as well as the 1999 Television Policy. In doing so, the majority appears to have confused the means suggested in the policy with the end the policy was intended to achieve.
“The end, legislated by Parliament in the Act, is diversity of voices; the prohibition against owning more than a single station in a given market was the BBG and Commission’s suggested means of achieving that end. It is not, however, the only means imaginable.”
He says CTV was willing to accept conditions-of-licence that would require it maintain a strict separation between “the management and programming elements of CTV and CHUM….”
While Langford accuses the majority of “inflexibility” in applying the COP provisions, he acknowledges the boldness of CTV’s application. “No doubt, the scope of the exception to the Commission’s common ownership policy, requested by CTVgm in seeking to acquire the five Citytv stations is unprecedented. Equally unprecedented, however, are the safeguards guaranteeing true diversity of voices that CTVgm has agreed to accept.
“And it is vitally important to remember that these safeguards will be cut in stone, will forever form part of the five Citytv licences and obligations, unalterable without a full public process followed by Commission approval. The Commission has granted any number of exceptions to its one-station-one market policy in the past, but has never gone to such lengths to ensure that the goal of diversity of voices is permanently and inalienably guaranteed….
“I would not have penalized them, as I am afraid the majority decision does, for finding another route to the goal of ‘diversity of voices.’ I would have granted their application in full subject to the alterations in valuations and benefits set out in the majority decision.”
Commissioner Elizabeth Duncan also wrote a dissenting opinion. The best way to rejuvenate the City stations, replenish their resources and give them back their “edge,” she asserts, is to recognize CTV as the best candidate to buy them.
She points out CTV could send excess programming to its City stations rather than shelving it. Like Langford, she says the COP, which “generally permits ownership of no more than one” OTA station in one language in a given market, includes the word “generally”, which contemplates exceptions.
Decision pleases cluster of industry groups
The Association of Canadian Advertisers likes the decision because the fewer the broadcast owners out there, the more control they exercise over the cost of advertising time. Given the CRTC recently announced an eventual deregulation of advertising on Canadian TV, broadcasters will soon be pitching more inventory to advertisers.
According to its statement, the ACA had argued before both the CRTC and the Competition Bureau that if CTV picked up the City stations, the regulator “would have given undue competitive advantage to the same owner of two local stations. This would have significantly diminished advertisers’ ability to leverage purchases of TV time, resulting in excessive market cost increases for commercials in five key TV markets.”
The ACA does not extend its logic to imply that higher marketing costs might well be passed along to consumers, but it is implied.
The performers’ union, ACTRA, sees the CRTC’s refusal to let CTV own two stations in multiple markets as “a step in the right direction.”
In a statement, ACTRA National president Richard Hardacre said, “Keeping more broadcasters in the system means more windows for Canadian shows. So this is somewhat positive, however, is it enough to indicate that the CRTC is moving in the right direction to save Canadian drama?”
The union insists the next step should be regulations requiring minimum spending by broadcasters on Canadian content, and requiring that home-grown drama be scheduled in prime time.
The Communication, Energy and Paperworkers Union also liked the decision – in part. It says the CRTC’s refusal to let CTV own the City stations is one push-back against concentrated media ownership, but doesn’t guarantee Canadian audiences will see more Canadian news or long-form content.
“Giving CTV new revenue streams worth hundreds of millions of dollars each year obviously benefits CTV," says Peter Murdoch, CEP VP, Media, “but what Canadians will get is more concentrated media control without any evidence that pyramiding ownership leads to more high-quality Canadian programs, more diversity in news and information, or even more employment opportunities.”
The Canadian Media Guild, representing about 4500 journalists, producers and others working at CBC, news agencies and other media companies, says the decision is a victory against ownership concentration, but only one battle in an ongoing war.
Says CMG president Lise Lareau, in a statement: “What people may not realize is that with this deal, a private media company in Canada will now have significant radio and television networks and become a much bigger media force. This very issue of cross-media ownership is being hotly debated in the United States. The impact on communities across Canada, especially when it comes to local programming and news, needs serious attention.”
Broadcast “watchdog” Friends of Canadian Broadcasting was also pleased with the decision, because it also feared undue ownership concentration if CTV picked up the City stations. Friends spokesperson Ian Morrison says if the CRTC agreed to CTV’s requests, Canada would face a broadcasting duopoly with CTV and CanWest Global the duo.
CRTC takes new view on benefits calculation
In its decision, the commission also indicated it would re-calculate the benefits payable by CTV. The decision says “CTVgm’s purchase price for the shares amounts to $1,365 million. CTVgm determined this value to be the value of the transaction on which they proposed a tangible benefits package of $103.5 million.”
But the CRTC says the cost of the purchase should provide for assumption of Chum Ltd.’s long-term debt, operating leases and other commitments. Then, after factoring in various financial assessment models, it concludes the benefit package should be $147.6 million, with $95.2 being directed toward retained TV assets, $33.7 million towards radio assets and $18.7 million towards assets to be divested.
At the end of the day
If CTV wants to go ahead with the deal under the CRTC’s proposed terms, transaction approval is conditional on the Chum Limited trustee presenting the commission with an “acceptable plan for the sale of the Citytv stations” within 30 days.
Industry commentators suggest, however, that CTV is more likely to start over, reformulate its takeover application, and re-apply to the CRTC. The theory goes that CTV might work together with Rogers Communications, since Rogers had offered to buy the A-Channels if CTV was satisfied with the deal terms approved by the regulator.
