By Oliver Kane, a media consultant based in Toronto, who was a former Corus employee for a little more than eight years before leaving in September 2023
On May 6, the CRTC published an update on the phased implementation of bill C-11. While I can appreciate that, in their words, “the changes needed to implement the modernized Broadcasting Act are substantial and complex, with many interconnected issues to be addressed,” this glacial roll out is completely out of touch with the current challenges affecting the industry.
Phase 2 includes an update of no less than 10 consultations expected to take place between Spring 2024 and Spring 2026, including a soon-to-be-released “What We Heard” report concerning the definition of Canadian content (expected in Summer 2024). And all this under the preliminary banner of “Building a new regulatory framework” – i.e., not implementing just yet. We will have to wait until late 2025 for the launch Phase 3 “Implementing a new regulatory framework” which will prioritize implementation. Specifically, contributions of online streaming services and traditional broadcasters (aka legacy media), including conditions of service in support of the goals of the broadcasting system.
Late 2025 — you cannot be serious!
If Phase 3 is expected to “launch” in late 2025, it’s probably safe to assume that any meaningful implementation of the Act will not occur before late 2026, even that might be generous – and that does not consider the potential impact of a leadership change following the next federal election, including mounting pressure from US Congress over fears of the Act’s impact on music streaming. If late 2025 is, in fact, the beginning of this third and final phase, that provides for an additional 2+ years of unregulated, direct-to-consumer competition on a tilted playing field, on top of the 14 years that have already transpired since unregulated streamers first breached the castle walls in 2010. Don’t get me wrong, I’m all for competition. But even with further cost cutting, shuttering of under-performing services and shifting focus to support revenue growth across non/less regulated aspects of the business, it’s hard to imagine how legacy media will compete under these conditions, let alone survive. Significant revenue declines, high cost of debt, Byzantine and one-sided regulations, among other challenges is a painful, likely impossible equation to solve. And we’ve yet to see the full impact of online streamers flipping the switch on their lower cost ad tiers in Canada.
Does anyone remember, “Let’s Talk TV: A Conversation with Canadians”? That was 2013. Alas, we can all reflect on the success of the $25 “skinny bundle.” Is the CRTC not mindful of the 11 years that have already passed since we started this so-called “conversation with Canadians” to eventually implement modernized legislation that has not been amended since 1991?
To say that the industry has cooled is an understatement. And to be fair, this is a global cooling. We will turn a corner at some point, but the future will look a lot different. The shift to digital is already here. Look for legacy media to prioritize their digital platforms to grow areas of the business not hampered by onerous and outdated regulations. Interest rate relief is not expected any time soon – at least not in any meaningful way, and certainly not at levels we enjoyed pre pandemic. Debt servicing will continue to put pressure on capital allocation – i.e., not much left in the tank to fuel growth. Advertising and subscriber revenues will continue to slide as consumers, media buyers and distributors question the value of legacy media. It’s no secret that as regulated revenues drop, so too does opportunity for independent producers to sell their concepts to domestic buyers. Canadian broadcasters will have less money to deploy for the foreseeable future. “Survive ‘til ‘25” is being thrown around a lot. It’s catchy and it rhymes. But like the seemingly endless waves we experienced during the pandemic, we can expect a very bumpy road for several quarters ahead, and then some. Batten down the hatches, folks.
This leads me to question the puzzling pace with which the CRTC is rolling out bill C-11. We are already so far behind. Remember, this bill was once C-10 until that one got snared in the last election cycle. The CRTC must prioritize swift implementation. Chasing perfection is a fool’s errand, unless the intended outcome is further erosion of our domestic industry. But that would fly in the face of a key tenet of the very Act it’s trying to implement – i.e., to support a strong and independent media industry in Canada.
Maybe this is the CRTC’s attempt to hold a pillow over the face of an aging legacy media business supporting the adage of “innovate or die.” Innovation really is the only solution. The problem remains, innovation requires capital, and right now capital is tied up in areas of the business that will not move the needle – e.g., adhering to onerous and outdated regulations.
Every media business in Canada has been impacted by significant layoffs over the last 12 months to contain costs against sliding earnings. A company like Corus Entertainment can be viewed as the canary in the coal mine, however no media business in Canada is immune. Corus just happens to be the only pure play media company operating in our domestic market which makes them more exposed than the competition who operate within a vertically integrated, diversified business model providing significant air cover for the overall health of their media business.
Corus was once a shining star, and still has a ton of potential. Launching in 1999, a result of a regulatory requirement that forced Shaw Communications to divest certain media assets, Corus has long been a force in the Canadian media industry. The company focuses primarily on safe family entertainment with series and formats that subscribers love to binge, and key demos that advertisers covet. At its peak, Corus stock was trading around $27 per share with a market cap north of $1 billion. After Corus bought Shaw Media in 2016, top line revenue for the consolidated company hit an all-time high around $1.6 billion in 2018 with healthy operating margins over 30 per cent and steady free cashflow. At last check, Corus stock was trading around 50 cents with a market cap hovering around $100 million. And if I had to guess, full year top line revenue should land around $1.2 billion for fiscal 2024. Sure, they’re not going out of business, and management is doing everything they can, but the Q1 and Q2 reports released thus far this year do not paint a pretty picture going forward.
So, it begs the question, does the CRTC really need more time to consult and gather information to eventually implement a more modern Act?
How are legacy media companies like Corus expected to compete with online streaming giants who continue to gain market share year over year? These are global-facing behemoths with a combined market cap in the trillions of dollars, and war chests of free cash that could swallow up a, comparatively speaking, minnow like Corus many times over. Worse, legacy media companies are expected to compete against these behemoths while the CRTC continues to seek industry input, and gather ever more information, all the while contributing 30 per cent of their prior year regulated revenues, among other obligations, towards the creation of Canadian content. And thanks to a 1999 digital media exemption decision, streaming giants continue fly above the confines of any such regulations.
But according to the CRTC, we’ll need to wait at least two more years — and likely sift through several more “What We Heard” reports — before we know what their contributions could look like. In the meantime, streaming giants will continue to enjoy unfettered access to the Canadian market on a playing field that is firmly tilted in their favour.
In a long-awaited decision released on May 13, the CRTC finally acknowledged an urgent request made by Corus back in October of 2023 by granting limited regulatory relief on PNI spending, and a longer tail to catch up on required CPE spending. While not a silver bullet, this is a step in the right direction, but we’ve still got a long way to go.
The CRTC is either unaware of the unprecedented headwinds currently affecting legacy media, or it simply chooses to ignore it. Regulatory relief during this years-long consultation period is appropriate, if not to briefly level a very titled playing field and give legacy media a fighting chance to reinvent itself for the future.
I’m reminded of the Black Knight scene from Monty Python’s “The Holy Grail.” Someone ought to tell the CRTC that this is not “just a flesh wound!”
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