OTTAWA – If former Craig Media CEO Drew Craig wants back into broadcasting, he’s going to have to go about it some other way, says the Canadian Association of Broadcasters.
The association submitted a strongly-worded letter to the CRTC on Friday opposing Craig’s plan (as first reported by Cartt.ca) to create a company called Only Imagine Inc. to sell local ad avail time on U.S. cable channels and turn over a chunk of the profits to a new fund to create Canadian television content.
"OII’s application would have the effect of irrevocably altering the Commission’s current local avails policy, transforming foreign services from complementary packaging partners into vehicles for national advertising," reads the CAB submission.
"This would drastically alter the Commission’s policy regarding the role of foreign services in the Canadian broadcasting system. Foreign services have been granted authorization for distribution in Canada."
The Commission has already been down the road within the past 24 months, ruling that cable companies can not sell the two minutes per hour American cable channels like CNN, Golf Channel and A&E make available for local ad sales in the States, where it is a multi-billion-dollar business.
In Canada, 75% of the avail time must be given at cost to Canadian broadcasters with the remaining time for the BDUs to promote their own services.
Former CanWest Global executive Kevin Shea attempted a similar application with a company he called 49th Media, but the Commission refused to consider his application because he did not have permission from the U.S. cable nets to sell the ad time. However, Shea wanted his middle-man company to sell Canadian ads not just during the avail time, but throughout the commercial breaks in the American channels.
OII, if allowed to go ahead, would pull in hundreds of millions worth of revenue and Craig’s application estimates that the company would contribute $170 million to the new programming fund over the seven-year license term.
But such a company would be a low-cost middleman adding nothing of value to the system, says the CAB. "OII would enjoy all the benefits of a broadcasting licence without any of the accompanying obligations to produce and exhibit Canadian content. Indeed, without programming obligations, OII will have minimal operating costs, giving it both the incentive and flexibility to deeply discount advertising rates, further undermining the business models of licensed broadcasters, further reducing their ability to produce and exhibit Canadian programming," reads its submission.
And any such profit wouldn’t be accretive to the system, but instead would draw needed cash away from Canadian broadcasters. "The true impact of OII’s proposal is far greater than stated in its application," says the CAB.
"Because it employs flawed methodology and inaccurate, out-of-date, numbers, OII’s revenue projections significantly understate its potential impact on conventional television and specialty licensees. OII projects a cumulative total of $355 million over seven years. Applying more consistent methodology and up-to-date numbers to the actual number of foreign services implicated by OII’s proposal, the revenue impact is actually some $434 million over seven years."
– Greg O’Brien
