Submissions to CRTC review shows Quebecor wants into radio, too
By Steve Faguy
TROY REEB DOESN’T THINK this story will be controversial.
Reeb, executive vice president broadcast networks at Corus Entertainment, which owns 39 radio stations, is one of several radio executives who believe the Canadian commercial radio industry needs more consolidation and is calling on the CRTC to reduce or even eliminate restrictions on how many radio stations an owner can control in a given market.
“I don’t know if there are a lot of opponents to further consolidation of radio. I haven’t heard who they are. I haven’t seen an argument put forward against it,” he told Cartt.ca in an interview.
In its submission Monday to the CRTC as part of its wide-ranging review of the commercial radio policy, the Canadian Association of Broadcasters paints a pretty sombre picture: “It is clear that radio has now reached a tipping point and the situation is only going to worsen,” reads the CAB submission. “All indications are that many of the habits formed during the pandemic are not going away.”
One of many regulatory easements it proposes is to relax the Common Ownership Policy to increase the number of stations an owner can control in individual markets.
Under existing policy, in markets with fewer than eight commercial stations, one owner can control up to three stations, and in markets with eight commercial stations or more, the limit is four. In either case, no more than two stations can be owned on one band (AM or FM), and stations in different languages are considered to be in different markets.
Under the CAB’s proposal, the limit for markets with eight or fewer stations would be four; for markets with nine to 16 stations, the limit would be six, or half the stations in the market, whichever is lower; and for markets with 16 stations or more, the limit would be eight. Different languages would still be considered different markets, and the band-based limitations would disappear.
This would mean, for example, where Toronto has 23 non-ethnic commercial radio stations, owned by 11 different owners right now, under the CAB’s proposal, there could be as few as three owners for those radio stations.
In Ottawa, which has 18 non-ethnic non-specialty commercial stations in both languages, there are currently eight owners, but under the CAB’s proposal, all but one of those 18 stations could theoretically be consolidated under only two ownership groups.
Eliminating band-based limitations would allow more AM stations to move to FM, too, broadcasters argue, providing better quality services at lower cost. We recently covered the challenges AM radio faces here.
“Local news-talk programming is right now being ghettoized onto AM, and part of that has to do with the regulations,” Reeb says. “If you’re only allowed to own two FM stations and you’re allowed to own two AM stations then clearly you’re going to use your AMs to use spoken-word programming and FMs for music.”
The CAB argues that policy “must shift from finding room for new stations to furthering the survival of existing stations, under current or new ownership. It must position incumbent stations to take advantage of greater operational efficiencies.”
“Further consolidation will be highly beneficial for the sustainability of the radio sector.” – Bell Media
The association says its recommendations have the broad support of the industry, but some want to see the CRTC go further.
“We submit that this policy should be eliminated in its entirety,” Bell Media, Canada’s largest radio broadcaster by both revenue and number of stations, argues in its submission. “An analysis of financial data confirms that further consolidation will be highly beneficial for the sustainability of the radio sector.”
Bell argues consolidation has “increased operating efficiencies and improved financial performance” in the industry as large broadcasters cut overhead and put a larger share of their spending into programming, but more needs to be done as indicators like revenue per employee flatten. “Another wave of consolidation might help to restore the industry’s financial sustainability,” it says.
What about competition, though?
“Diversity of ownership must be balanced with ensuring that Canadian radio is given effective tools to complete with global providers,” Bell writes. “Now is not the time to mandate diversity through regulation but rather, it can be achieved through a greater reliance on market forces.”
Bell argues commercial radio competes with foreign online audio services like Spotify, and in such an environment, “ownership limits no longer make sense.”
To ease a future wave of consolidation, Bell is also proposing to eliminate tangible benefit payments for radio station ownership changes. The 6% tax on buying radio stations is no longer necessary as “there are now very few barriers to market entry” and existing artist funding programs are sufficient.
The CAB agrees that the policy is “counterproductive” but only calls to cut it in half, to 3%.
The benefit to such changes for larger broadcasters is obvious — it would allow them to get bigger. But for smaller broadcasters, there is an indirect benefit: If more larger companies are in a position to be able to buy their stations, the value of those stations increases.
CAB president Kevin Desjardins argued in an interview with Cartt.ca that some smaller owners are looking to sell their stations but the policy “creates a situation where they’re just really aren’t a lot of potential buyers for those licenses that should have at least some value.”
“Do we have a lot of confidence that the big guys are doing it so well that we should give them more? I don’t have any proof of that.” – John Pole, My Broadcasting
Jon Pole, president of small-market broadcaster My Broadcasting Corporation, has a healthy skepticism about the motivations of the major broadcasters. “Do we have a lot of confidence that the big guys are doing it so well that we should give them more? I don’t have any proof of that,” he tells Cartt.ca.
He also isn’t crazy about their arguments of declining revenue, arguing some of that damage is self-inflicted.
“We compete against Bell in Pembroke, Ont.,” he says. “They had five sales reps. Now they have two. Now their sales are probably down, but I can do math in my head. Five people sell more than two. So are your sales down or do you just have a shitty sales plan?”
But, he’ll take a loosening of the restriction for the benefit of his pocketbook.
“If they say you can own three FMs in a market, who does that benefit? It benefits me because in Peterborough, Bell is going to call me up and say ‘Jon sell me one of your FMs.’ Corus is going to call and say ‘sell me one of your FMs, so we can each have three.’
“Do I think that benefits Peterborough? No. I think Peterborough is more benefited with me, Corus and Bell competing against each other. However, for Jon Pole’s retirement fund, hey, let those guys have three.”
Leclerc Communication, which entered the broadcasting space in 2012 by buying two radio stations in Quebec City that Cogeco had to divest when it acquired Corus’s Quebec stations, doesn’t agree with eliminating the common ownership policy. In fact, it wants it strengthened.
In Quebec City, for example, where there are only four commercial players with two stations each (plus an independent classical music station), a lessening of the rules could bring that number down to two.
“We would be powerless against the rise of giants,” the company writes in its submission. “A large broadcaster could always offer a higher price than an independent player for the same radio station, because it would undertake less risk, would pay a lower interest rate on financing and would more easily draw profits because of its larger synergies.”
Leclerc agrees the band should not make a difference but proposes to keep the three- and four-station limits and increase from eight to 11 the number of stations a market can have for it to have the lower limit. (It argues the number of stations has grown by 45% nationwide, so the size threshold of local markets should increase by a pro-rated amount.) And regardless of language, in bilingual markets like Montreal and Ottawa-Gatineau, one owner would not be able to control more than four or six stations, depending on the size of that market.
Leclerc also argues an owner should not be able to operate more than one talk station in the same language in a market (unless the second had no news or public affairs programming).
“We cannot see how the broadcasting system could draw any benefit from this.” – Leclerc Communication
“Loosening common ownership rules, if not accompanied by measures to allow existing and new small broadcasters to adapt and prosper, will make large broadcasting companies even more dominant and add barriers to entry that would become downright impassable for anyone who isn’t already a giant,” it writes. “We cannot see how the broadcasting system could draw any benefit from this.”
It says large companies have stronger negotiating positions with ad buyers, offer package deals for ads on multiple platforms, and even demand exclusivity on ad spending in a market in exchange for a lower rate. Independent broadcasters would struggle to compete with that.
Among the special benefits for small broadcasters, Leclerc also proposes they pay lower rates on tangible benefits when sold.
While Leclerc focuses on the radio industry in isolation, others argue a more wide-ranging view of competition is needed.
“I think a lot of the regulations are built in a time when radio’s main competitor was radio,” says Rod Schween, President of the Jim Pattison Broadcast Group. “Sure, there were newspapers and magazines and other forms of media, but … the local ownership policy and local sales agreements and licensing and markets and all these things were really all about the fact that our primary competitor was a radio station that was down the street.”
For Schween, the CRTC’s focus on diversity of voices can have negative impacts in smaller markets.
“I would argue that diversity of ownership has led to a lack of diversity of voices in some of these markets.” – Rod Schween, Pattison Broadcasting
“We on a couple of occasions have argued that some markets could not support another radio station and the Commission has gone ahead and decided to license those markets,” he says. “In Kelowna for example, our stations lost money from 2008 until this year. Never had a profitable year… The Commission overlicensed that market. They thought they did it in the public interest, and I get that. It looked like it was a license to print money. But you look back at what happened in the Kelowna marketplace, and that market overall is still in a negative EBITDA situation … and there are fewer on-air people and news people on the air in Kelowna today than there were in 2008 with fewer radio stations on the air.”
Schween doesn’t see the public interest in that. “I would argue that diversity of ownership has led to a lack of diversity of voices in some of these markets.”
For Reeb and the larger broadcasters, it’s clear the CRTC must look beyond radio when considering competition.
“Any radio station is a tiny fraction of the overall media consumption in any given market, so it has no monopoly on being able to offer advertisers any reach anymore,” Reeb says. “Radio needs to be able to offer a larger grouping to be able to reach a meaningful enough segment of the market.”
Without being able to expand to four, six or even eight stations, Canadian broadcasters won’t be able to compete “and eventually foreign companies like Spotify and Apple Music will dominate the market,” he says, calling policy changes urgent.
“Absolutely there needs to be a consolidation of players, because we can’t look at things in isolation, this is an open system,” Reeb says. “Our main competitors aren’t other terrestrial radio broadcasters, they’re streaming services. And they’re streaming services that often have nothing to do with Canada, have no Canadian content, are coming into the market from other countries, and either you’re going to have Canadian local viable competitors or you’re not.”
Consolidation would also benefit listeners, Reeb says, by increasing diversity of formats.
“I actually think there’s the opportunity you would see with further consolidation, more experimentation and more differentiation in radio formats and not competitors all trying for the mushiest middle of the market.” – Troy Reeb, Corus Entertainment
“Right now, when you can only own two stations, you have to always go for the middle of the market, to ensure one of those stations is a big breakthrough station or you’re going to have a money-losing radio cluster, whereas if you had the ability as an owner to segment the market a bit differently, you can achieve reach for your advertisers through a combination of smaller stations… So I actually think there’s the opportunity you would see with further consolidation, more experimentation and more differentiation in radio formats and not competitors all trying for the mushiest middle of the market.”
Another proposal for changing ownership rules comes from Quebecor, which doesn’t own any CRTC-licensed radio stations because the cross-media ownership policy prevents one owner from controlling a television station, radio station and local newspaper in a market. Quebecor owns newspapers and TV stations in Montreal and Quebec City, and other TV stations in Quebec’s largest markets.
Besides being out of date due to the declining importance of newspapers, Quebecor argues this policy is discriminatory against it because it excludes things like national newspapers (like the Globe and Mail) and digital-only news outlets (like La Presse).
“With the proliferation of media and online platforms, diversity of voices is not threatened by consolidation in broadcasting,” it writes. “The CRTC’s cross-media ownership policy is therefore superfluous and even indefensible.”
Replies to the comments provided as part of the radio review are due April 28. So far, the Commission does not plan to hold a public hearing with parties appearing to explain their views, but that could change.
