THE CEOs ARE IN AGREEMENT. Canadian media companies must get bigger in order to still matter. The problem is that those companies also agree on one other thing: They’re all buyers.
With Bell Globemedia’s deal to acquire CHUM Limited now complete but for the opinion of the regulator, we’ve had a summer marked by an irresistible spasm of speculation of who might be next. The CTV-CHUM combination will be a big media company by Canadian standards – while remaining a pretty modest operation compared to the U.S. giants.
Will Astral Media buy Standard Broadcasting? Will Corus Entertainment and Alliance Atlantis get together? Will it be Astral and Corus? Astral and AA? Maybe Astral will become an income trust? Does Rogers Communications want its media division to keep growing? Can CanWest Global afford to get into the game? Will the numerous other smaller broadcasters (like Score Media, MBS Radio, Newcap, for example) be folded into a larger entity?
All are questions that have been asked. Repeatedly. There are answers to none of them (except maybe that last one, as financial analysts don’t think CanWest can afford to make a big purchase).
Everyone says they’re a buyer. No one claims on the surface to be a seller. I asked Corus CEO John Cassaday Tuesday if the cuts to its TV division announced that morning is a harbinger to an upcoming merger or perhaps a sale of the company. "No," he said.
Later that same day he, CanWest CEO Leonard Asper and Rogers Media president Tony Viner had a similar message for a media and telecom conference hosted by BMO Capital Markets: Canadian media companies must merge in order to thrive. In order to matter. To be able to do their own thing.
A couple of announcements this week really exposed how the media landscape has shifted, maybe even buckled, under the feet of conventional broadcasters. The first was Apple’s announcement that iTunes will begin to carry movies along with the TV programs it already offers – and that it will bring to market in 2007 a $300 set top box that will link iPods and PCs wirelessly to consumer televisions.
While most of the premium iTunes video content (this week’s announced Disney movies and the existing TV shows already there) are only available to Americans accessing it from America – and no one knows the specifics on the set top box yet – a company the size of Apple with the consumer friendly credibility it owns making a move into the living room will have major implications on the broadcast and cable system here.
When Apple finally opens up its iTunes video portal to other countries, perhaps next year, Canadians will be able to watch, say, Desperate Housewives on their iPods with ABC commercials rather than on TV with ads from CTV. And if the Apple set top functionality reported on widely this week lets consumers place-shift those same shows or movies and watch them on their televisions, the existing broadcast system – complete with cash-cow simultaneous substitution ad revenue – is bypassed.
The second important announcement was the addition of popular reality series Survivor to the Rogers Cable video on demand platform. The Canadian MSO signed a deal with CBS Paramount to get the show and will air commercial-free episodes immediately after it is shown on Global Television on Thursdays. In this instance, the Canadian broadcaster is clipped right out of the U.S. content equation altogether and is left with only one advantage after paying millions for the rights – the ability to show Survivor 60 minutes before it’s freely available on demand to Rogers digital subscribers.
The two announcements remove a bit of the Canadian broadcasters’ ability to choose their own destiny. Apple and Rogers are dealing with the larger media entity (Disney and CBS, respectively) which owns the content which will more and more slip past our conventional broadcast stations altogether in this and many other ways.
If Canadian media companies are to have a place in the developing North American landscape, they simply must join together and get bigger because to fully be a part of the new electronic media market, broadcasters must own their own content. They need shows viewers can’t get anywhere else. And since the good stuff is expensive to make, bigger companies can better afford it and better market it.
Does anyone really think that if Apple wants to make House available to Canadians on iTunes that they’re going to buy it from Global and not Fox? But, if they want Falcon Beach (Global) or Corner Gas or Canadian Idol (CTV) or Life & Times (CBC), they have to come to the source.
To demonstrate the pure size differential, adding together the revenue line from the last available quarterly results from each of Corus, CanWest, Alliance Atlantis, Astral and Rogers Media is telling. Those companies collectively took in $1.655 billion in revenue. A big number to be sure. However, that’s less than half of the US$3.5 billion that CBS Corp. pulled in, in its third quarter of 2006
Apple’s third quarter revenue was US$4.37 billion.
To find a Canadian company with results of similar magnitude, one has to look at Bell Canada Enterprises, with a Q2 ’06 revenue line of $4.8 billion.
But, as did Cassaday, Asper also indicated Tuesday his company is not for sale. And Viner’s boss, Ted Rogers, is not known for selling much of anything. One figures that if Alliance Atlantis CEO Michael MacMillan and Astral founder Ian Greenberg were at the same conference, they’d have said they were buyers, not sellers, too, as they have during their quarterly presentations this year.
Rest assured though, one or more will eventually make the decision to sell their company – and it is their decision as all are family or majority-controlled – but I’m not going to try and predict who will leap first.
The CHUM sale doesn’t mark the end of an era or anything dramatic like that, it’s just part of the maturation of a rapidly changing market where being big means having the ability to make your own content and your own destiny.
And to matter to Canadians.
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