"REGULATORY APPROVAL" are the two stock words every media sale announcement made in Canada has attached to it. As in: "Agreement XYZ will close after the required regulatory approval."
Wednesday’s big buy is no different as it will have to pass under the Competition Bureau’s and CRTC’s magnifying glasses, smudged and cracked as they appear to be sometimes. In the official release, Bell Globemedia and CTV CEO Ivan Fecan said: "With regulatory approval, we intend to serve Canadian audiences with both CTV and Citytv stations."
This time, though, that particular sentence means regulatory approval will only be able to come if there is a policy change. The 1999 CRTC TV policy framework (i.e.: the current, existing ones) still say that broadcasters are only allowed to have a single conventional TV stick in each market.
That policy is now under review – as reported numerous times by Cartt.ca throughout 2006 – with hearings scheduled for November 27th, just after the Canadian Association of Broadcasters annual convention.
"The Commission will continue its current policy which generally permits ownership of no more than one over-the-air television station in one language in a given market," says paragraph 17 of the 1999 framework. "This policy ensures the diversity of voices in a given market, and helps to maintain competition in each market. Most of the participants indicated that the Commission’s current approach worked well and did not recommend any change," says paragraph 18.
But it looks as though CTV will be recommending changes this time around because there are both CTV stations and Citytv stations in Vancouver, Edmonton, Calgary, Winnipeg and Toronto. Bell Globemedia said it wants to keep those and sell off the A-Channels in Victoria, Barrie, London, Wingham, Windsor and Ottawa.
BGM did not return Cartt.ca’s request for an interview.
CanWest Global has been able to serve the Southern Ontario market with its Global and CH brands for example, because CH in Southern Ontario serves Hamilton and Global serves Toronto. Each station has separate newsrooms, too. Same goes for CHUM with A-Channel Barrie and Citytv Toronto. All are available across Southern Ontario and are meant to gather as many Toronto eyeballs as possible, but are all technically different markets.
Also missing from the CHUM/BGM announcement was any mention of tangible benefits, another precursor to every broadcast deal in Canada. The rule is that 10% of the purchase price when broadcast assets change hands would go towards programming. When Bell Canada purchased CTV for $2.3 billion in 1999 (this was before Bell Globemedia existed. That came some months later), it immediately announced a $230 million benefits package that, among other things, let CTV open a number of foreign news bureaus, for example.
The Commission "will generally expect applicants to make commitments to clear and unequivocal tangible benefits representing a financial contribution of 10% of the value of the transaction, as accepted by the Commission,"’ says paragraph 22 of the ’99 TV policy.
None of today’s releases say anything about such potential benefits (which could be as high as $170 million, depending on how the deal’s value is set. With debt: $1.7 billion. Without: $1.4 billion). Should anything be read into the missing benefits mention? Perhaps, given that some broadcasters believe that portion of the Commission’s policy is an unwanted sales tax. They want the condition dropped.
That’ll come up during the TV policy review, too. "In the Ripley’s Believe It or Not exhibit, you will find that the CRTC requires the purchaser in any transaction for the acquisition of a licensed television broadcasting operation, to commit to industrial benefits expenditures equivalent to at least 10% of the transaction value. Clearly this policy is nothing more than a tax on transactions and is not designed to encourage a stronger Canadian media industry facing intense global competition. It had its time and place but that is long gone," said CanWest Global CEO Leonard Asper in a speech to the Empire Club last month.
But now, let the speculation begin on just what will happen next. Who will purchase the former "New-nets", CHUM’s A-Channels? The six stations in Victoria but also serving Vancouver; Barrie but also serving Toronto; and in London, Wingham, Windsor and Ottawa would be affordable for just about every sizeable Canadian media company.
Some will already have had a recent look at CHUM and passed on making a bid. However, we don’t know how the sale process went for sure because no members of the Waters family (which owns 90% of CHUM’s shares) were made available for today’s conference call. Company founder Alan Waters died late last year and at the time, his sons, Jim and Ron, said they weren’t interested in selling right away.
From this chair, best guess at a front-runner would be Quebecor. It badly needs some scale in English TV and to spread some costs around from its money-losing SUN TV in Toronto. Quebecor CEO Pierre Karl Péladeau is on record wanting to obtain more English Canadian TV assets. Corus Entertainment has some broadcast assets too and its not inconceivable that it would buy the A-Channels. However, those in the financial community pine for a Corus-Alliance Atlantis marriage instead.
The same analysts are predicting (hoping for?) an Astral Media purchase of Standard Broadcasting, as has been rumored, and then perhaps turn itself into an income trust.
Rogers Media could be a player, too, or maybe the A-Channels will be sold off piecemeal, with Pattison Broadcasting taking Victoria, for example.
CanWest Global has enough on its plate in terms of debt and other pressing issues at home and abroad and most suspect they won’t be a player. In fact this new, huge, CTV and the buying power it will have relative to CanWest has to be very worrisome for the ruling Asper family.
Whatever happens, look for the CRTC to have a very open mind when it comes to the hearings into additional TV stations in Calgary and Edmonton, for example. With so many existing stations looking like they may be in the hands of just two players, the sometimes-activist Commission just might want to add more transmitters in the growing economy out west.
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