OTTAWA – CanWest Media Works Inc. is arguing CRTC approval of its $2.3 billion acquisition of Alliance Atlantis Communications would “create a viable and healthy competitor for CTVglobemedia in the domestic broadcasting television sector.”
The Winnipeg-based broadcaster also tells the CRTC to view the purchase as “both a reflection of, and response to, changing dynamics, trends and technologies in the domestic and international media industry (esp. a rapidly fractured media landscape; changing viewing patterns and erosion of media boundaries).”
The comments were made in CanWest’s application seeking CRTC approval of the acquisition. The documents were made public Friday, when the CRTC announced it would hold a public hearing on the matter on September 5 in Gatineau, Quebec. Written submissions on the application are due by August 10.
In Broadcasting Notice of Public Hearing CRTC 2007-11, the commission indicates that it could grill CanWest on the potential impact of the merger on the TV market (i.e. the market power that CanWest could enjoy and the potential to adopt anti-competitive behaviour), cross-ownership issues (horizontal integration), licence trafficking, programming overlap and the value of its proposed benefits package.
CanWest has ascribed a value of $1.369 billion, based on an Ernst & Young valuation, to the regulated broadcasting properties it plans to acquire from Alliance Atlantis, and is proposing a $136.9 million tangible benefits package. About 90%, or $123 million, will go to on-screen and programming initiatives and the remaining 10%, or $13.69 million, will be allocated to social and industry initiatives.
The broadcaster proposes paying out most of the benefits over 10 years. The majority of the on-screen money will go toward scripted drama and priority programming, including $13.5 million over ten years for pilot projects, $55 million for incremental scripted drama production for Alliance Atlantis’ specialty TV channels (e.g. Showcase, History Television, IFC Canada, Showcase Action, Showcase Diva), $4 million for new media projects tied to the new programming, $2 million for drama productions with APTN, and $3 million for programming and new media initiatives related to Canadian history.
Half of the money for history programming would go to complete a funding gap in the Rhombus Media-produced feature film Passchendaele and the remaining $1.5 million to a Canadian history project that includes a web/video or other new media component.
The benefits package also includes $4 million over ten years for the third-party promotion of priority programming on non-televised media, $9 million to documentary production, $13.5 million to support a Canadian star system, and $19 million over seven years to news and public affairs.
CanWest says that in the current and foreseeable media landscape, it is difficult for a company to “go it alone,” and it looks forward to building on relationships Alliance Atlantis has with such partners as independent producers, BBC, National Geographic, Scripps, Discovery, Score Media, S-VOX, Astral and Corus.
The Winnipeg-based broadcaster tells the commission that Alliance Atlantis’ well branded and well-defined specialty TV stations specialize in the genres of drama, documentary and lifestyle, while its specialty channels fall under the nostalgia banner and non-traditional sports. It vows to maintain those distinctions and thus there will be no decline in the amount of diversity of programming on the dial, CanWest tells the commission.
Moreover, CanWest notes that until its deal to buy Alliance Atlantis, it was “largely absent from the fastest growing segment of Canadian television” – specialty TV. It points out that the eight specialty channels it currently owns, only one of which is on analog, generated about $49 million in total revenue in 2005 – less than the revenues of individual specialty TV channels such as TSN ($174 million), Rogers Sportsnet ($109 million), YTV ($83 million), Discovery ($81 million) and a number of others. The purchase will open the doors to more subscription revenue.
CanWest adds the acquisition brings together two of the “most creative and responsible broadcasting companies in Canada” and the combined company will “support the Canadian broadcasting system in ways that would be difficult to continue, or certainly to expand upon, on an individual basis given the structural and erosive changes occurring in the industry…”
It says viewers will benefit from the transaction because the merged company will be better able to shield the TV channels from cyclical and structural downturn and audience erosion, and be able to ensure greater awareness of domestic programming in an increasingly cluttered landscape.
CanWest notes Alliance Atlantis’ specialty services could benefit, for example, from the added exposure and promotional strength of its print properties: “The local daily and weekly newspapers, and the National Post, provide tremendous opportunities for audience building.” The over-the-air broadcaster also states it plans to combine and expand on online offerings and other new media.
As well, the Winnipeg-based broadcaster tells the CRTC by picking up more specialty TV channels, it will be able to provide a “laboratory or nesting ground” for new and riskier Canadian programming.
“In short, this important transaction will help CanWest and the former AAC specialty services remain relevant and competitive in this new media landscape – and that will benefit participants across the Canadian broadcasting industry,” concludes CanWest in its CRTC application. “Canada needs strong integrated media companies; and this transaction clearly enables that possibility going forward.”
