TORONTO – After reading the internal memo sent to the employees of Canwest’s broadcasting division on Wednesday – which explained the job cuts – a few times, one thing is certain: The company has only just begun its battle with the CRTC.
The memo – from the desk of imminently departing Canwest Broadcasting president Kathy Dore – adds much more color to the announcement that 210 people will be let go from the division (part of 560 being terminated by the company as a whole). It’s worth noting that this is in addition to 200 who were terminated just over a year ago by Canwest Broadcasting.
The company is facing financial pressures of heavy debt and a share price down 90% over the past year (closing at $0.85 Wednesday), and serious first quarter fiscal 2009 stresses on TV advertising thanks to the weakening economy. This bad news goes along with the recent “no” the company was told two weeks ago by the CRTC over getting a new subscription fee from Canadian cable and satellite subscribers. Add to that the changing media consumption patterns of Canadians, and the status quo is a no-go for Canwest, says the memo.
These new job cuts will save the company about $61 million a year and will include the shuttering of long-form editing (post-production) at 121 Bloor E. in Toronto and outsourcing almost all of its closed captioning.
While final word on exactly where the cuts are going to happen were not specified in the employee communiqué, most of the job losses are happening on the local news front. Toronto-based morning show Global Ontario is being cancelled and replaced with a simulcast of Hamilton-based CH Morning Live, for example. Hamilton’s noon-time show is being cut to 30 minutes from an hour.
Global Ontario, said the memo, “has remained significantly unprofitable since its launch five years ago,” as a competitor to established brands Canada AM (CTV) and BreakfastTelevision (Citytv).
The Hamilton station (part of the company’s E!) network, is losing 13 positions, including some reporters and anchors. Word came in from out west too that most of the local programming on the CHBC station in Kelowna will soon emanate from CHEK in Victoria, although local news gathering will remain.
“Locally, our Global and E! stations have made impressive strides in the last few years, reducing their losses by growing revenue and decreasing local station costs. In a number of our local markets, our connection to the community and our dominant news brand are key success factors for the entire schedule,” says Dore’s memo.
“Despite this progress, local programming remains significantly challenged and in most markets there is no clear path to profitability. For many years the profit we made from foreign programming supported the losses on local programming. Due to the declining profitability of foreign programming we cannot support local programming losses at current levels,” she writes.
“These are not simply cyclical problems arising from the soft economy, though the current economic conditions have heightened the challenges. These challenges are deep-rooted and structural.”
The way people consume media is changing, and with it is the way media buyers purchase media as advertising migrates from conventional over-the-air stations to specialty and the Internet, which Canwest is investing in.
Overriding all of this, however, is the company’s significant regulatory complaints.
“A key component of our future success is an aggressive regulatory agenda which includes advocating for changes to existing structures and policies to reflect the needs of the evolving marketplace. The current regulatory environment makes it very difficult for us to be successful. And while there were some positive elements from the CRTC’s BDU policy review two weeks ago, the decisions rendered do not go far enough to address the structural challenges faced by the Canadian conventional television sector. We must continue to work with the Commission to pursue regulatory changes that better reflect the competitive environment that we are in today,” reads the memo.
If we were to guess we’d figure this means fee-for-carriage will be back on the company’s agenda as a part of the 2009 license renewal proceedings for the Canwest conventional stations. Submissions are due in January for an April hearing. CTV’s renewal application will be heard then, too.
Despite these cuts, Canwest insists that it will maintain its local programming license obligations in all of its regions.
“We will continue to have local news gatherers and editors who will provide local news and context. In some markets, we will also be adding positions to support online local news,” reads a Q&A for staffers which was circulated with Dore’s memo.
“Many of our conditions of license regarding local programming unfortunately don’t reflect the reality of consumer needs nor today’s marketplace and we simply have to adjust what we do to reflect these changes… We’ll continue to produce local newscasts at all our local stations.
“The current regulatory environment makes it very difficult for us to be successful. And while there were some positive elements from the CRTC’s BDU policy review two weeks ago, the decisions rendered do not go far enough to address the structural challenges faced by the Canadian conventional television sector,” it continues.
“It’s fair to say the outcome of the BDU Review is one of the factors behind the decisions we’re announcing today.”
The document also insisted that none of the changes announced Wednesday are due to the deal to buy the Alliance Atlantis specialties Canwest put together with Goldman Sachs.
But what of the $60 million Local Program Improvement Fund that the Commission announced alongside the new BDU and specialty services policies on October 30th? Canwest doesn’t think it will be able to access those monies anyway.
“Based on the CRTC’s initial scope for the fund, eligibility for stations, including the CBC, would be calculated based on average news spend over the last three years. Essentially, a station must maintain spending levels on news averaged over a three-year period before becoming eligible to access this funding. Unfortunately, the spending level requirement would seem counter-intuitive to the fund’s objective to support ailing small-market stations in order to ensure continued local programming. The fund does not represent "replacement" funding to address the challenges faced by conventional broadcasters, but rather, incremental spending on local news,” continues the memo to employees.
“Based on this model, the current baseline will make it difficult for Canwest to access the fund, though we will continue to advocate changes to the accessibility criteria.”
So what will Canwest be spending on? More online. More VOD. Mobile experimentation and new specialty channels it plans to launch in 2009.
As we like to say in the TV biz: Stay Tuned.
