GATINEAU – The demise of Shomi has raised a number of questions regarding the future of domestic streaming services in the face of competition from global competitors such as Netflix, including some from CRTC chairman Jean-Pierre Blais today. But for Rogers Media, it means that partnering with global giants might be the best approach going forward.
Rick Brace, president at Rogers Media, noted during the company’s appearance before the CRTC’s major English language broadcasters licence renewal hearing, that while shomi was a response to Netflix, it quickly became apparent that the cost to acquire programming was escalating quickly and the company wasn’t going to see any profits from the streaming service.
“What’s really turned around is we’re finding now that maybe it’s better to partner with those services, maybe it’s better to understand you’ve got global players that have the scope, have the scale and rather than trying to maybe push water uphill in a small market,” he said.
Partnership opportunities could include Netflix, Amazon Prime, the US studios as well as Canadian independent producers. Rumours have persisted for months that Rogers has been working on something with Amazon, which Brace has earlier denied.
Arrangements like this could also be a boon to Canadian programming, added Brace, noting that content could get domestic and international exposure. He also noted independent producers going it alone in this environment, will find it difficult to prosper.
“The ability to deliver that content not just within Canada but on a global scale or in the U.S., Europe needs some muscle behind it and I think in a partnership where we would have skin the game, that makes some sense,” he said.
OMNI 9(1)(h)?
Rogers Media is also requesting some considerable changes to its OMNI channels. The company wants to create a secondary OMNI Regional service that would operate as a discretionary service with 9(1)(h) mandatory carriage in basic cable packages. Other ethnic broadcasters have opposed the plan.
Susan Wheeler, VP of regulatory affairs at Rogers Media, noted in the company’s opening remarks that it wouldn’t make sense for broadcast distributors to carry many third-language ethnic channels on the CRTC-mandated skinny basic package of must-carries. Offering one does, however.
“$3 million, Mr. Chair, for OMNI is like putting a band-aid on a hemorrhage.” – Colette Watson, Rogers Media
“But, we do believe it would make sense to authorize one channel that would serve multiple third-languages and ensure that almost all ethnics Canadians can access programming as part of the basic service in their language of comfort,” she said.
Under questioning, CRTC Jean-Pierre Blais wondered why the Commission’s local and community TV decision didn’t provide Rogers Media any additional flexibility to divert money to support OMNI. Colette Watson, senior VP of television and broadcast operators at the company, said the $3 million in added flexibility from that decision wasn’t enough to stop the bleeding at the OMNI stations.
“$3 million, Mr. Chair, for OMNI is like putting a band-aid on a hemorrhage,” she said, adding the company would also have to choose which newscast to do and besides it wouldn’t be enough to do anything well. It was then decided that the money would be better spent on expanding newscasts outside of the Toronto market, which would deliver better financial returns.
Rogers executives said OMNI lost $8.3 million in the past year and that ad revenues have fallen 74% since 2010. It is asking for $0.12 per sub per month as a 9(1)(h) and executives said the company could commit to plowing all of that money (about $15.8 million in annual revenue, based on all subscription TV households) back into the channel. Wheeler likened it to operating a not-for-profit within Rogers.
Rogers Media acknowledged that the CRTC may find itself in a tough position by allowing OMNI Regional to go forward. Wheeler said the company would shut down its over the air transmitters if ordered by the Commission to do so.
Corus
The much larger, from a broadcasting point of view, Corus Entertainment also appeared before the Commission on Monday, where the company argued it needs to rationalize its Canadian Programming Expenditures (CPE) to 27%, and Programs of National Interest (PNI) to 5%, of revenues across the board.
Barbara Williams, executive VP and COO, noted that prior to the rise of digital and alternative viewing platforms, the broadcast business was pretty simple. These added elements such as streaming, advertising technology, audience measurement and such require additional investment which all fall on the cost side of the business without any corresponding revenue lift. This means CPE has to be shared between the legacy business and the new world. “Some of our existing conditions of license were established in an environment that's gone forever, so they need to go,” she said.
“We have to stop relying on our legacy business for our future.” Barbara Williams, Corus Entertainment
“That’s why as a percentage of that whole cost side, CPE needs to come down a little bit from where it was,” she said.
Stephen Simpson, commissioner for British Columbia and the Yukon, wondered what the company would do if the 30% CPE remained in tact.
Williams responded that decisions would have to be made regarding the legacy broadcast business. She added that there may even come a time when the company could no longer depend on it for revenue. Eventually, she explained, "We have to stop relying on our legacy business for our future.
“We want to do the very best we can with it for as long as possible. Believe me we are going to wring every dollar out of it that we can find,” she said. “We aren’t running away from that business, but we’ve got to be in the new business and we need some money to play there.”
Just as Corus wants a lower CPE, it does for its PNI spend as well. The company argued that the 5% level has served the industry well, just look at Bell Media and its programs. Shaw Communications also had a 5% PNI and it produced some quality programming. The situation has changed at Corus after acquiring the media assets from Shaw. It has exited the pay TV business and genre exclusivity no longer protects is children’s programming.
“How does one keep a unique story of a unique PNI around a unique genre and content when there is no longer genre exclusivity? So we would argue that the system has proven itself well in the last five years to have been well served by 5% and that’s what we too should have in this standardized world.
The hearing continues tomorrow with Bell Media appearing. Tuesday will also see interveners arguing in support of or against licence amendments.
Photo of last night's view of Ottawa from the Alexandra bridge over to Gatineau by Greg O'Brien
