GATINEAU – Looking around the CRTC hearing room Tuesday in Gatineau many of the exact same faces were in the exact same places making the exact same cases as they were 12 months ago.
Last year it was the combined BDU and specialty policy review hearing while this year it’s the license renewals hearing for conventional broadcasters. Same concert hall. Same tune. Same singers. Sung with more urgency though, this time around.
Despite the passage of a year and the new name of the hearing, the central issue is the same: broadcasters want more money for their signals and cable doesn’t want to pay it – or, more precisely, have their customers pay it.
The primary, pressing, difference is that the economy, especially traditional advertising, is in shambles right now. Ad revenues at conventional stations have shrunken as key media buyers such as retailers and car manufacturers cut huge chunks from their marketing budgets. So, the desperation in the words from the broadcasters – and even some of the commissioners – is evident.
“We are concerned about the survival of the broadcast sector,” said CRTC chairman Konrad von Finckenstein.
The desperation from the other side of the “more revenue” argument is also apparent because from what we hear out of Ottawa, politicians are warming up to the fee-for-carriage idea. It’s gaining strength on Parliament Hill, and the cable companies know it.
In fact, Rogers Communications representatives maintained their suspicion about the motives of broadcasters’ recent cutbacks and threats of more cutbacks at local stations. “They are engaged in a government relations, public relations, exercise,” said RCI SVP regulatory Ken Engelhart. “And I think it’s working.”
Indeed, the CRTC is just one front of this lobbying battle. As Cartt.ca has reported, broadcasters have been in front of MPs repeatedly to push their position, insisting the future of OTA TV is precarious and that, by extension, will hurt Canadian society. Canadian broadcasters, said Canwest Global CEO Leonard Asper, “provide the support for the democracy in which we live.”
Broadcasters insist that their traditional OTA business “model is broken” and that the only thing which will solve it is more money in the form of an expanded Local Programming Improvement Fund (from 1% of BDU revenues to 3%, beginning in September) and a fee for carriage from BDUs.
Asper told the seven-member panel that broadcasters are under siege from all sides, U.S. studios demanding ever more for their content, fragmenting audiences further impacted in Canada by myriad foreign channels, BDUs who won’t pay for their signal, regulators that regulate too much, an impending and expensive digital transition and the severe economic downturn we are battling through.
As reported by Cartt.ca, the company has cut quite a bit, axing staff last fall, placing the E! Network up for sale and overhauling its news production so that its more centrally and efficiently distributed. But it’s not enough.
“There aren’t many more rabbits to pull out of this hat,” said Canwest Broadcasting interim president Peter Viner.
So the company says it needs to cut local content production, too, (dramatically for some stations, from 37.5 hours a week to 5-10 in Hamilton, for example) and be able to produce some of its own priority programming while gaining the new revenue outlined above and keeping the current regs that call for simultaneous substitution of its ads over the American feeds of the same programming, mandatory carriage and basic channel placement.
As he did Monday with CTV CEO Ivan Fecan, CRTC chairman Konrad von Finckenstein asked Asper if he could envision Global as simply a national specialty service whose genre was a general interest channel with local news – but with a mandated CPE (Canadian Programming Expenditure) level as Canadian specialties all have.
Asper and Viner both answered around the question, suggesting it was possible, but they required more facts to properly answer.
Commission vice-chair, telecom, Len Katz was direct, saying that Canwest was not asking for structural change for its broken model so much as asking to “throw money at” the existing system. “Isn’t this just a band-aid that may have to be reapplied again in a short period of time?” he asked.
Asper and Viner insisted that fee for carriage (and an increased, loosened, LPIF) was, in fact, a restructuring and that it had to happen soon. The fact that its smaller E! network is up for sale and CTV has decided to close some of its tinier stations (in Windsor and Wingham, ON and Brandon, MB) are just the canaries in the coal mine.
“The smaller markets are just at the vanguard of this,” said Viner, and without more money, and soon, the big broadcasters “will also be in trouble in the very near future.”
“We’re very concerned about subsidies and bailouts,” said Rogers Communications vice-chair Phil Lind earlier in the day. “Where does it all end for the paying subscriber?”
One of the other sectoral issues the Commission is looking at is expenditures on U.S. programming, which BDUs say is at the heart of the Canadian broadcasters’ challenges. Some believe that at $775 million in 2008, Canadian OTA stations pay too much for Hollywood fare so the CRTC asked if there should be a strict ratio of spending in Canada and elsewhere set at 1:1. Canadian OTAs spent $620 million in the 2008 broadcast year on Cancon (more than half of which is for news).
A ratio is too risky, said Canwest programming chief Barbra Williams (who also noted that including its specialty channels, Canwest is close to a 50-50 spending ratio already). “The unintended consequences are impossible to judge,” she said. American studios could well balk at paying far less for hit shows than they are used to from Canadian broadcasters and instead sell those shows to cable VOD – or just make them available on other unregulated platforms, she said.
“We just don’t see the need for any more regulation,” added Viner.
On that score, Canwest and Rogers are in agreement. But, as noted, Rogers wants no further fees included in that “no more regulation” motto. Plus, Rogers Media head Tony Viner has a far different opinion on the prospects for OTA TV than his bother Peter, who helms Canwest broadcasting.
The Rogers exec says that the economic downturn is temporary and that structural changes should not be attempted when the economy is busy recessing and not dead permanently. “We think… the over-the-air model works,” said Rogers’ Viner. “There is still a place in the system for a free, over-the-air mass-audience platform.”
The other aspect the two companies agreed on was a role for the government in the digital transition. If the 700 MHz spectrum is to be auctioned off to wireless companies (potentially raising $4 to $5 billion) “certain portions of that could be dedicated to digital transition so that the sticks of private and public broadcasters could be paid for at least in part by the government,” added Lind.
