TORONTO – After combining what Canadian private conventional broadcasters had asked for in their license renewal applications in January with the number of layoffs in the sector and at least $3 billion in collective asset writedowns by the OTA companies, the CRTC slammed the brakes on full license renewal hearings in May for a smaller proceeding meant to more directly address the most pressing concerns of CTV, Canwest, Citytv, and TVA.
The current global economic crisis is making an already bad situation worse for conventional broadcasters. A fragmented ad market could be managed if General Motors, for example, was spending on ads on CTV and its specialties like TSN and its broadband portal. But with advertising stalwarts like the automotive companies in such dire straits, spending hardly at all on advertising, the structural hardships facing big traditional media companies have accelerated to frightening speeds, causing panic to filter into even their regulatory submissions.
Stations are being shuttered (CKX Brandon, CHWI Windsor/Wingham), placed up for sale (E!) or dramatically cut back (A Channels) and so far about 500 people have lost their jobs in broadcasting since the fall. Canwest wrote its broadcast assets down by $1 billion in the fall and CTV says it took a $1.7 billion hit on its own. Rogers wrote down its conventional stations value by $294 million.
With no clear market visibility even moment to moment, it seems, making Canadian conventional broadcasters outline a new seven year plan for their license conditions (when their advertisers are now waiting until the last minute to book so many of their commercial slots) seemed futile and the Commission on February 13th asked them to answer four new questions instead while delaying the full license renewal hearing until 2010.
The Commission wants to find out:
* the appropriate contributions to Canadian programming (local, priority and independently-produced programming), given the current economic conditions
* the terms of administration and delivery of the Local Programming Improvement Fund (a new BDU tax which would pay for local content production in small markets), including the method of establishing the base-level expenditures for the purpose of determining incrementality
* whether to impose a 1:1 ratio requirement between Canadian and non-Canadian programming expenditures, both on a trial basis during a short-term license, and on a longer-term basis
* consideration of the terms for the digital transition by August 2011, in light of an industry working group report being prepared for the current public process.
The companies’ answers were turned in last week and made public by the CRTC yesterday. The responses aren’t pretty for the most part (and also clearly underline why the Canadian Association of Broadcasters won’t lobby the Commission anymore since its members’ approaches no longer mesh).
All of them told the Commission that the 1:1 spending ratio it pondered could be studied, but there is no way any of them could comply this year, given their long-term programming deals that apply through 2009 and the fact that any new Canadian production would take many months to even be camera-ready.
CTVglobemedia – while not quite answering the four questions the Commission posed directly – has simply asked for a one year administrative renewal of its licenses, as is – saying it can manage to carry on until the full review in 2010.
But it still served notice that it intends to ask the Commission in April to lessen its local content requirements, alter the regs so that conventional broadcasters can be paid a fee for carriage – and that the requirement that 75% of its programming spend on Cancon be with independent producers be dropped.
Calling the dramatically lower local content requirements of TQS’s new owners “more realistic,” the CTV submission added that there is a “structural problem with conventional television,” evidenced by the company’s decision to close it’s A-Channels serving Windsor and Wingham, CKX-TV in Brandon, Man., and slashing local content in its remaining A-Channel territories.
“As a group, these stations were never profitable under CHUM ownership, when they routinely lost between $12 and $17 million annually. CTVgm has revamped the ‘A’ schedule and the stations have seen dramatic year-over-year ratings growth of 40% in 2008. As noted above, given the plight facing conventional television and the global economic crisis, we have not been able to monetize these viewers and the ‘A’ stations posted a loss in the tens of millions of dollars in 2008,” reads the submission.
The only way to ensure the survival of local broadcasting is having Canadians pay more for it. “In CTVgm’s view, the long-term viability of over-the-air television in Canada is contingent on the introduction of a fee-for-carriage regime,” reads its submission.
Canwest Global, on the other hand, says the burden of producing local content is far too high and must dramatically be cut back – at least for this year. It is proposing that in markets of a million or more people, it should only have to do a minimum of 10 hours a week of local content. Five hours in smaller markets.
For some stations, like CHCH (E!) in Hamilton, where its license calls for 36.5 hours a week, that would mean a cut of 86%. (In fairness to Canwest, some of its stations have very high local requirements – like Global BC’s 42.5 hour weekly minimum – in comparison to its competitors).
And when it comes to priority programming (like drama and documentaries)? “We propose the complete elimination of priority programming obligations in the short- and long-term, and no requirements for minimum amounts of original hours of specific types of programming such as drama or documentaries,” reads the Canwest submission.
“Priority programming represents a material and unsupportable opportunity cost.”
Canwest – and the others – also want the ability to own more of their own content. Right now, the broadcasters have to spend 75% of their Cancon production with independent producers, meaning they mostly own news and sports (and shows like ET Canada). Canwest wants that chopped to 50% so it can make, own – and then sell – its own dramas and comedies.
The contrarian of the big three of English conventional is Rogers Broadcasting, owners of Citytv. It is on side with the others wanting to cut spending on priority programming, but it also wants to be able to fortify its local content at 20 hours per week.
“Citytv plans to recapture a local voice in the urban markets we serve by focusing our programming priorities on locally relevant, locally produced programming,” reads its submission. “The Citytv stations occupy a distinct and unique place in the OTA sector. Unlike the other major English-language OTA groups, that are more nationally focused, Citytv’s core business is based on attracting local audiences and serving local communities in five urban markets.”
But all agree (including the French ‘casters) that regulatory change is needed – and soon. “(T)he current economic climate has exacerbated the challenges faced by over-the-air broadcasters like Citytv but is not the root of its troubled financial health,” reads the Rogers submission. “Fundamental regulatory changes are required for the Citytv group of stations in order for them to become financially viable over the long-term.
And, back to CTV, which recorded a $13.3 million loss on its conventional stations in fiscal 2008, ended August 31st, the first in its history.
This year, it’s predicting a loss in the $90- to $100-million range.
“Should the impairment of conventional television be permanent, with no regulatory relief in sight, we would have to seriously consider exiting the conventional business,” says the CTV submission. “However… we believe conventional television is worth fighting for and we are not prepared to walk away yet.”
The hearing begins April 27th.
