TORONTO – SCN was a publicly-owned educational broadcaster which the Saskatchewan provincial government decided to shutter in 2010. After some local complaints, the politicians instead made the decision to try and sell it.
After hearing mostly crickets, the only offer that didn’t include any ongoing government financial support came from Bluepoint Investments, a private company backed by a former advertising executive from Toronto, Bruce Claassen. Bluepoint’s $350,000 offer was accepted by the provincial government mere days before the plug was to be pulled on the broadcaster. Then, in approving the sale months later in early 2011, green-lighting the sale of advertising on the station, the CRTC also happily okayed a series of programming and expenditure promises from Bluepoint totalling $2.75 million over five years for programming and original digital content.
That spend was never made conditions of license nor were they enshrined as official tangible benefits, so both Rogers and SCN believe the promises (regarded then by most – and now by all – as unrealistic) can be set aside in exchange for more reasonable promises which Rogers is willing to write into its new conditions of license for the station.
However, the panel of CRTC commissioners Monday morning did not seem in the mood to let those promises slide. They aggressively questioned Rogers executives on why that level of expenditure should be abandoned in favour of the company’s proposal of an annual 23% CPE (to be 100% spent with Saskatchewan independent producers) and, more surprisingly, even asked the seller, Mr. Claassen, why the $3 million Rogers is paying to buy SCN shouldn’t just be distributed to the producers in Saskatchewan who will now miss out on those prior promises.
Back in 2010-11, many in the industry thought Bluepoint’s programming promises a staggering amount of money to commit to spending on a provincial pubcaster with an educational mandate, even with the change in license that allowed SCN to pursue ad dollars during nine hours of each broadcast day. The early morning and afternoon hours has remained (and will continue to remain under the ownership of Rogers) educational and commercial-free.
Bluepoint has struggled mightily, for a number of reasons, since taking control of SCN less than two years ago. It didn’t earn anywhere close to the revenue it hoped for, making it difficult to pay the bills, let alone live up to the additional programming spending it promised the Commission, which amounted to nearly $14 million over five years. (As a comparison, the official tangible benefits when CHUM purchased Craig Media and its stable of stations back in 2004 was just $22 million spread over seven years. When Corus Entertainment purchased Canadian Learning Television (now OWN) in 2008, its seven-year benefits package was $7.3 million, for a specialty channel that was earning $17 million in annual revenue then).
Right after the sale, Claassen said he approached Rogers to ask about becoming a Citytv affiliate and at the time, he was rebuffed. “That was a different time and a different strategy,” Rogers Media president Keith Pelley told commissioners Monday.
Since then, however, a “light went on,” said Pelley. “Citytv’s lack of a national reach is a huge competitive challenge to our stations,” he added, saying that two large, national advertisers declined to purchase an ad campaign with Citytv’s Canada’s Got Talent because the station group does not reach a national audience (that’s when the light illuminated). So, with this move to acquire SCN and its bid for CJNT Montreal, Citytv is getting closer to that, even though SCN is an educational broadcaster (and will be maintaining that mandate through this purchase) and CJNT is a multicultural broadcaster.
But, what if Rogers was asked to keep even part of the $2.75 million worth of promises, Pelley was asked? “If we had to meet those commitments, we would sadly decline this purchase,” said Pelley. “We have learned those expectations are unrealistic.” Claassen said if Rogers walks, the station will have to be shuttered and he will be bankrupt.
When questioned by CRTC acting chairman Len Katz how the companies came to a $3 million purchase price – especially when “this business isn’t viable right now,” Katz said – Pelley explained that the value is not as a stand alone station, but an important gap-filler for Citytv. “We looked at it holistically,” he added. “As part of a national business strategy, it makes sense.” SCN has been airing Citytv programming since January under an affiliate deal, and ad revenues to the station have risen from about $100,000 in January to $150,000 in March, Pelley said.
However, it was commissioner Candice Molnar (who’s from Saskatchewan and is the Prairie regional commissioner) who plainly raised the Commission’s policy against “license trafficking”, wondering why on earth Rogers is willing to pay $3 million for a TV station that sold for just $350,000 less than two years ago, while noting the only change from the station’s prior condition was that it was now allowed to sell advertising. So, did something the Commission grant “based on the promise of delivering value back to the people of Saskatchewan,” just increase the value of a TV station by a factor of 10, she asked?
Claassen noted that he has spent more than $3 million of his own money since launch of SCN on personnel and new technology (ad sales systems, traffic, satellite transmission, are some of the items he outlined) and stands to come away from the purchase with about $2 million. Claassen said his investment and work on the station has built it into a valuable asset, but he will still be losing a considerable amount of money with the sale. “This is a net loss for the investor and that investor was me,” he said.
Claassen said he and his team and his hired consultants believed the programming expenditure promises were do-able but just “fell exceedingly far below our expectations,” mostly due to the fact few local advertisers or even provincial politicians during an election, chose to spend ad dollars at SCN.
Besides, added Rogers VP regulatory Susan Wheeler, the Commission’s policy against license trafficking applies only if the license in question is in its original form, which the SCN license no longer is, given the change the CRTC granted when it modified the license to allow for the sale of advertising.
“One might argue it is in its first license term as a commercial educational broadcaster,” responded Molnar.
What threw the panel of Bluepoint and Rogers for the biggest loop was the question CRTC vice-chair broadcasting Tom Pentefountas posed. After joking he hoped the experts advising Claassen on the programming commitments “were no longer in business,” Pentefountas asked him how Claassen would feel about having the $3 million purchase price for the station distributed to the independent producers who won’t see the original promises kept?
“Why shouldn’t that money go towards those commitments,” asked the vice-chair. “Why should we save your bacon?”
Both Pelley and Claassen seem stunned by the very question and needed a few minutes of quiet time to come up with an answer. Claassen said to do such a thing would be like giving to Rogers a classic car he purchased as a junker and spent money and time to fix up and then getting nothing in return. “I have invested considerable amounts of my money and have made a considerable contribution to Saskatchewan,” said Claassen. “For me to give up all my money and put me in bankruptcy for one year of payments to producers, or for the station to go black, I don’t see how this benefits broadcasting in this country.”
The Commission will have a decision on the sale in the coming months. The hearing continues through this week at the Allstream Centre in Toronto as the CRTC plows through 22 applications for the use of the 88.1 FM radio frequency in Toronto. We’ll have a report on that tomorrow.
