GATINEAU – They compete aggressively for U.S. programs, audience share, and advertisers, but in an exceptional show of unity, executives from CTVglobemedia Inc and CanWest Global Communications sat shoulder-to-shoulder Thursday to persuade the CRTC to open up new sources of funding.
Together, the two networks argued the economic viability of conventional television is “under threat”, because of lack of fair access and fair compensation. They attacked cable and satellite distributors, saying that if their vision were adopted, they and not consumers would control television programming.
“The outcome of this review will decide who will program the remote controls of the nation,” said Ivan Fecan, President and CEO of CTV Globemedia and CEO of CTV Inc.
Throughout their five-hour appearance before the Commission, which is in the middle of a three-week review of the broadcasting system, executives of the two competing networks maintained their unified front.
As he began his presentation, CanWest Global President and CEO Leonard Asper joked: “Seated next to me, and I can’t believe I am going to say this, is Ivan Fecan”.
“The stakes are high,” Fecan said. “That is why we have set aside our fiercely competitive differences to come before you with a unified vision – a vision that promotes diversity of ownership, a diversity of voices, consumer choice and, most importantly, a pride of place for Canadian programming and services.”
In their joint written submission, the networks said three factors have combined to make the over-the-air sector vulnerable: regulatory obligations, the small size of the Canadian market, and dependence on U.S. programming.
“The OTA sector is declining at a far more precipitous rate than could have been imagined even a year ago,” they said. “Advertising revenues are flat, margins have declined, and forecasts for the next several years predict rapidly shrinking profitability.” Asper later specified that forecasts for ad revenue growth are between 0-2%.
In their oral presentation, they sharpened their focus, saying distributors must start paying compensation for carrying local signals and that the CRTC should not bend to the BDUs’ position that genre protection and access rules be eliminated.
In one camp, said Asper, are the broadcasters, guilds, and unions, who are advocating “an evolution and not a revolution in the regulatory framework”.
“Then there is another camp, almost singularly populated by BDUs, who claim that local reflection is not important, the system is too complicated, and that essentially, the system should be dismantled.”
Yet BDUs have profited, he said, by being able “to expropriate our local signals and sell them to consumers without fair compensation for carriage”. As well, he said they’ve been able to raise cable rates, afforded distant signals without consent, and given the right to own programming services.
“Given BDU dominance and regulatory advantages, we think the least they should be required to provide is fair access and fair compensation,” Asper said.
The networks’ fee for carriage proposal, which would exclude CBC/Radio-Canada, would amount to 50 cents per channel per month per subscriber, producing $295 million a year for the whole industry.
Their submission supports the Commission’s proposal for a uniform or “lifeline” basic service for all BDUs, limited to Canadian private local and regional OTAs and the CBC, educational services, and any other mandatory services.
“In our view, this would guarantee that all Canadians have access to a range of essential Canadian services at an affordable price,” said Charlotte Bell, CanWest’s senior VP, Regulatory Affairs.
“We also believe that existing analog and Category 1 digital services must be categorized as core to the system and maintain their access rights, given the significant contribution to the production and exhibition of Canadian programming these services make,” she said.
“Removing such guaranteed access would have a significant impact on the revenues of these services and hence, the ability to fund high-quality Canadian programming,” Bell said. “We also fail to see why removing the access rules is necessary. Rogers and most other cable companies have commented that their systems are robust and there are no capacity constraints. If they have seemingly unlimited capacity, why would the elimination of access requirements for Canadian discretionary services be necessary?”
Noting that Bell ExpressVu doesn’t carry a Montreal local TV station, Asper said: “They don’t have room for Montreal local TV, but they have room for porn.”
The two networks also rejected the BDUs demand for an elimination of genre protection, saying that all but one of the top 100 U.S. OTA programs are licensed to Canadian broadcasters, and that 194 of 200 U.S. cable programs are available here.
Eliminating genre protection will not lead to innovation, they said; instead there will be less diversity, as everyone rushes to the middle, “taking the specialty out of specialty”.
They also asked the Commission to strengthen its approach to authorizing the distribution of foreign services in Canada, because they can easily change their programming focus once here. These services now draw $250 million in subscription revenue a year, Bell said. “They are squatters, and pay no rent and make no direct contribution back into the system.”
In their questioning, the commissioners insisted on knowing if the networks’ financial situation is a “blip or a trend”.
In response, they cited forecasts indicating further fragmentation of advertising dollars, through the internet, specialty channel growth, and potentially VOD. On the cost side, they said, are increases in domestic programming costs, higher costs for U.S. programs, and the estimated $300 million for digital transition.
Asper said CanWest has already taken steps to reduce its costs, which have included 400 job cuts. “But we’re kind of out of tricks,” he said.
On carriage fees, CRTC Chair Konrad von Finckenstein wanted to know what viewers would get in return for a higher monthly bill.
Research conducted for the network by Nanos Research, said CTV’s Ivan Fecan, shows viewers already think they’re paying for it and agree with the idea, because “they value their local TV”.
As to whether the money would go to local programming, Fecan said most of it would, though he preferred to wait until next year’s licensing hearings to be specific.
Asper was also asked if he would find acceptable a temporary, three-year carriage fee. “If another input changed, that’s possible,” he replied. “I don’t see that. But we’re open to being open, if other changes are made.”
On the issue of distant signals, the networks referred to an impact study conducted for them by Armstrong Consulting, which estimates the “damage” to them at $93 million, including both U.S. and Canadian distant signal carriage.
Fecan pointed out that in the U.S., this practice simply not allowed. That’s not what the networks want here though, he said. “We just want the right to have decent negotiations” with the BDUs, he said.
