MONTREAL – Interveners told the CRTC Tuesday that just because Bell Canada has decided it will spin off a few TV assets with this latest attempt to purchase Astral Media, that doesn’t make the deal any better for Canadians, or for them.
“This second application raises the very same concerns in the English-language television market,” Rogers SVP regulatory Ken Engelhart told commissioners on Tuesday morning. “The acquisition of Astral’s premium pay television services will threaten diversity and endanger the ability of distributors to deliver programming to Canadians at affordable rates and on reasonable terms on multiple platforms.
So for Rogers, the company doesn’t want the deal killed completely, but for the Commission to force the new combined company to sell TMN and TMN Encore (which would include HBO Canada, too) as a condition of approval (yes, Rogers execs did admit they would “take a look” at a TMN which was for sale). Bell Media would just be too big in the English TV market with those assets, says Rogers.
What worries the big wireless and cableco the most is that it will suddenly lose access to the Astral content it currently is able to show to customers on a variety of online and mobile platforms. Astral was an early and often partner with Rogers as it experimented with online video offerings and TMN is a major component of Rogers’ TV Everywhere strategy.
But, Rogers non-linear offerings feature very little Bell Media programming because the two can not come to terms on much of anything in the non-linear realm. “Prior to its first application, Bell Media refused even to offer us content from its specialty services for distribution on our VOD and online platforms,” said Engelhart (pictured below with Rogers’ Pam Dinsmore and Cogeco CEO Louis Audet). While it has changed tactics recently and offered to provide content to Rogers’ TVE service, “contrary to Bell Media’s suggestion, it is pricing that content at five to 10 times normal market rates, and well above what we currently pay other domestic and foreign suppliers,” he continued. “Bell Media used a similar approach for wireless content. It offered its BDU customers that content for a fee of $8 million. Then, it distributed it to its own Bell Mobile customers on an exclusive basis, while it engaged in protracted negotiations with Rogers and Telus and eventually offered it for a minimum guarantee of $3 million.”
CRTC chairman Jean-Pierre Blais asked Bell executives about those rights and negotiations on Monday as well – and whether or not the company was less than eager to offer non-linear content to other companies. Since the complaints about withholding content and favouring Bell’s BDU and online ventures over others permeate several of the written submissions on this proceeding, Bell was ready with their responses.
Bell CEO George Cope was direct. “That is a 100% incorrect accusation in any way, shape or form,” he said Monday afternoon. “Our model fails if we don’t distribute this content through every one of those channels. It does not work. Our stock will be hammered, the business will fail and the $6 billion dollars (the company has spent on media acquisitions) will have to be written off.
“This is a ridiculous question that people are asking, trying to get as much leverage from you on price negotiation and you don’t need to get in the middle of that,” Cope told Blais.
The chair pressed on and asked what its practises are, then, with non-linear rights and Bell Media president Kevin Crull said yes, for a while after it bought CTVglobemedia, it did not have a business model worked out for non-linear rights to the programming offered by the broadcaster and 29 specialty channels it came to own and so it chose not to offer the non-linear rights until October of 2012.
Since then, however, the company has decided that an authenticated, TV Everywhere solution is the way to go (either theirs or the BDUs’) and it has been negotiating with a number of Canadian distributors. “The price discussions are just under way,” said Crull.
“These rights do have a cost,” he added, about the non-linear portions of his content contracts, “so we do have to have a business model both to recognize that additional cost, and we have to have a business model as an industry that captures all of the viewing that’s moving there – the ad measurement has to move, and dynamic advertising insertion and targeted advertising and as many things that require us to work together as programmers and distributors.”
There are myriad other issues to work out, too. For example, what if a BDU’s TVE service offers a Twitter feed and within that on-screen feed are promoted Tweets from Pepsi while CTV has sold ad time to Coke. That’s a no-no, for Bell Media and is in the contracts it is hammering out.
For Rogers and other competing companies, all these hurdles are nothing more than delays, where each day’s head start provides a tremendous advantage to Bell, which now offers all sorts of non-linear Bell Media content on its phones and via its own apps while the other BDUs are forced to wait – and potentially lose customers.
Tuesday morning, Rogers senior vice-president video content David Purdy likened the past 24 months of trying to get non-linear rights from Bell a “content Cold War.” That said, Purdy added he and other Rogers executives determined Bell was not behaving badly by looking to advantage its businesses as best it can, but acting rationally in its own self interest – so it believes that problem for Rogers and others will only grow worse if Bell is allowed to own all of Astral. “It would be irrational not to exploit the rights in the way we predict they would,” said Purdy, meaning TMN is the last straw that makes Bell too big and should be spun off.
TELUS, HOWEVER, WANTS the entire deal killed. It said that Bell can do content and distribution deals with the other vertically integrated companies, which reach over 80% of the TV subscription homes in Canada, while giving the butt-end of the hockey stick to the independent carriers, because of their smaller size. “The current vertical integration framework is insufficient to handle any significant increase in market power by any of the vertically integrated players,” said SVP federal government and regulatory affairs Ted Woodhead.
“The gaps and weaknesses of the current VI framework will need to be fixed regardless of the outcome of this hearing but in the event that the Commission considers it appropriate to approve this revised transaction, it must address the concerns with the VI framework through additional conditions of licence specific to Bell,” he added. Telus even wrote out what it thinks should be those COLs, under Appendix A here.
Telus also accused Bell of bad behaviour by denying it TV signals and non-linear content, despite assertions the company’s executives made to the contrary. “We heard the Bell panel again yesterday contend that it just doesn’t make business sense for them to withhold content and therefore, if one believes this contention, no additional safeguards are necessary. Bell’s arguments… relate only to the economics of full foreclosure of content,” said Woodhead.
“While the economics of foreclosure of content or advertising may not support denial of access to everyone all of the time, they most certainly support holding out for unreasonable prices even if it means denial of access of some content to some competitors some of the time. Independent distributors are particularly vulnerable to being forced to pay supra normal fees or face foreclosure of content because when Bell secures carriage agreements with the other VI companies through trading-off content carriage arrangements, it reaches nearly 80% of the subscriber market. There is no real need for Bell to secure content deals with independent distributors.”
The hearing continues Wednesday morning with independent distributors Cogeco Cable and EastLink facing the panel of commissioners.
