THE LEADERS OF SHAW Communications took a look at the media landscape around us and decided that if they’re going to be a player in the new always on, video on demand culture, one which is expanding by the second, they had better own some hit shows. Some good brands.
And Monday it announced a $2 billion deal to purchase the TV assets of Canwest Global outright – a move that will cement it as the leading media and distribution company in Canada. The prior deal Shaw announced earlier this year was to purchase just 20% of the company.
Rogers Communications, Quebecor Media and Comcast (buying NBC Universal), all share the same vision – to serve up popular content in many ways. Shaw, just a distributor of television, provider of home phone and internet service and soon-to-be-provider of wireless, is now in that game
But what does it mean? Here’s our top 10 list of the first thoughts we had on the acquisition.
1. When Shaw talks video on demand, it doesn’t just mean cable VOD. The company has struggled (as many operators have) in gaining the rights to popular TV programming from broadcasters just to add to its cable video-on-demand platform, let alone a potential broadband portal or its coming wireless services, and having popular U.S. fare is a key to that. That won’t be a problem now. “We are getting not a lot of co-operation in our requests for content from broadcasters, especially for VOD,” Shaw Communications president Peter Bissonnette told me in an interview Monday afternoon. And with looser rules on ads in cable VOD, Shaw’s opportunity there is better owning Canwest than not.
2. Shaw will likely launch its own “TV Everywhere” option once it has control of Canwest. Something modeled after Rogers On Demand Online or Comcast’s Fancast, where a Shaw Cable, Internet or wireless subscription will gain customers’ entry into a gated online portal filled with popular TV shows, accessible via computer or mobile handset. “Certainly part of our plan is to have our programming available to anyone who has access to any of the platforms that are out there,” said Bissonnette. “I do see something like that happening. There are endless possibilities, only limited by our imagination.”
3. CTV will now face something it hasn’t in a long time – an extremely well-financed, cutthroat competitor for content. Global was once the ratings leader in Canada, but CTV has held that title for quite some time now (Global has been building recently, however). Shaw won’t want to be #2 so CTV will be severely challenged to maintain its ratings strength. Watch for Shaw to ramp up its buying in Hollywood like Rogers did with Citytv this past TV season – and for the company to boost local news in order to increase revenue from local advertisers. Both of those moves will hurt CTV.
4. Another distributor could take a run at buying CTV. The easy pick here is Bell Canada, since it already owns a 15% stake in the broadcaster. But Bell CEO George Cope is on record saying he doesn’t need 100% ownership of content to offer it across multiple platforms. Don’t count out Rogers (even though it would be a messy merger, given its Citytv ownership and it’s thought that CEO Nadir Mohamed doesn’t really want to purchase any more media assets) or Telus. If Shaw is going to own content and use it online and to sell wireless handsets out west, perhaps exclusively, Telus may start to believe it needs its own media play, too. Telus and Bell have been able to work together on a new wireless network, so perhaps Telus could join Bell, Torstar, Woodbridge and the Ontario Teachers Pension Plan as CTVgm owners.
5. Of the $2 billion purchase price for Canwest, about 15% was said to be applied to the Global Television over-the-air conventional television division, or about $300 million. Who could have predicted that in 2010, a small cable company serving about 40,000 people in Hamilton, Ont., Mountain Cable (for which Shaw paid $306 million in 2009), would be worth more than a national TV network?
6. Despite the troubles at Canwest over the past number of years, the company’s problem was always the debt it had to service. In the 2009 broadcast year, ended August 31, 2009, Canwest and the specialty channels in the former partnership with Goldman Sachs earned close to $900 million in revenue. Now, while the conventional broadcast side lost $52 million on revenue of $483 million, according to CRTC figures, the Canwest specialties, along with its Canwest Media Holdings partnership specialties earned $158 million in profit before interest and taxes on $401 million in revenue. With some channels posting very healthy margins (such as History Television’s 55%) it’s easy to see why 85% of the purchase price was applied to those specialties.
7. Expect a ton of Shaw promos on Canwest stations and do not underestimate the promotional power of these traditional media outlets. Shaw will be able to run – at virtually no cost – targeted local promotions for its Shaw Cable offerings in its cable areas on the Canwest specialties. It will also be able to blast out national ads for DTH service Shaw Direct, which has languished at around 900,000 customers for years while market leader Bell TV closes in on two million subs. Done right, owning Global will dramatically boost the sub numbers for Shaw Direct especially, which will be great timing for the addition of the DTH company’s new transponder space coming in 2012. “The value for us is not just having the content… but also for us, branding is really important too,” added Bissonnette.
8. Just because we think it’s funny, we’d like to highlight how company CEO Jim Shaw told CRTC Commission Tim Denton just in November that when it came to a potential purchase of Canwest Global by Shaw, the answer was: “Not a chance.” Wonder what that’ll mean when the CRTC convenes a public hearing on the transaction.
9. CRTC commissioners will give Shaw executives a tough ride when they face them sometime this summer on a multitude of competitive issues and concentration of ownership queries but in the end, approval of this deal looks likely. “I think the CRTC is going to be very very supportive,” said Bissonnette. “There was nobody else as a strategic investor that had the wherewithal” to pay off the creditors as well as Goldman Sachs and others. “Nobody else was putting their hands up.” One of the next questions is how much the CRTC’s benefits package will be and who or what will get it?
10. Shaw won’t yet say what this purchase will mean for Canwest’s slow rollout of digital over-the-air transmitters in its markets. One wonders that given the coverage its cable and satellite divisions have, if Shaw would make the case that building digital transmission facilities would be a waste or resources. Either that or, since they’re a distribution company which knows spectrum is their lifeblood, they’d envision digital OTA as a competitive advantage over CTV and a requirement for the future of television. “That’s going to be part of our discussions with the Commission,” is all Bissonnette would say.
11. As a bonus #11, don’t expect Shaw to change its tune on fee-for-carriage/value for signal. But, if the new regime does go ahead, expect the new Canwest Global to be very tough negotiators when it comes to in-kind and other arrangements with distributors not named after JR Shaw.
