“IN A DIGITAL CONTENT world, all stakeholders must accept greater risk,” is a single line from the final reply to the CRTC by Telus to the Commission’s policy review of broadcast distribution undertakings and specialty services.
Final replies from stakeholders were due into the Commission last Thursday.
It’s a key line, because it lies at the heart of what’s at stake for every media company in Canada – heck, in the western world, really, and certainly for Canadian specialty channels, OTA broadcasters and BDUs. With the digital media world comes new opportunities, but also more risk than the tried and true analog business models many are fighting to protect.
The regulatory alterations requested by the various interested parties reflect the challenges presented in our new digital world, which is still a jumble of ongoing transformations. Fee for carriage, the primary issue in this hearing, is all about responding to change. Broadcasters say they need the fee to continue to provide what the Broadcasting Act calls for (i.e. Canadian content, local expression). Distributors and many others call it a tax proposed by broadcasters too lazy or frightened to try new things aimed at earning new revenue.
Broadcasters say that the fragmentation of the TV viewing audience who are increasingly consuming content online, or on cable VOD or on niche digital specialties, necessitate the CRTC mandating a new fee to be paid by Canadians through their video distributors.
The positions on this issue, unsurprisingly, haven’t changed since the first submissions were handed in to the Commission last fall. Canwest and CTVglobemedia “are huge, profitable corporations that do not need a subsidy,” reads the Rogers Communications submission.
And despite broadcasters claims that the system is broken, revenue is falling and local news needs more money, distributors find it distressing that the broadcasters want no conditions tied to any new money, should it come. As well, OTA revenues have been growing at the rate of one to two percent a year and Canadian programming expenditures have been relatively flat.
So, “fee for carriage is about finding an offset for the impact on profits resulting from CTVgm and Canwest’s ever-more aggressive spending on foreign programming,” says Rogers. “In other words, consumers are being asked to pay a fee not to offset the cost of local programming, but to offset the price of U.S. programming.
There were many dollar amounts tossed around too, with some saying FFC would add an extra $5 to $10 a month to cable and satellite bills. Not so, say the idea’s proponents, CTVgm and Canwest. At $0.50 per signal per month, it works out to an average increase of about $2.40 per month.
“Enabling local broadcasters to receive compensation for carriage will ensure that we can continue to fulfill our fundamental role in the provision of local programming to communities large and small across the country,” says the CTVgm/Canwest joint submission.
Despite the fact the distributors are calling any new such fee a tax, the Commission must also consider compensation already received in terms of simultaneous substitution, Income Tax Act measures that make it more compelling to advertise on conventional stations in Canada rather than the States, CTF license fees, and signal clarity and extension thanks to distributor carriage.
“CanWest claims that BDUs ‘have been given the right to expropriate our local signals.’ ‘Expropriate’ means to take property away from its owner, especially for public use. The BDUs are doing no such thing. They are distributing signals which are already in the public domain, transmitted over the publicly-owned airwaves, and which have always been made available by broadcasters at no charge to those members of the public interested in receiving them,” reads Bell Canada’s submission.
“BDUs are making these OTA signals much more widely available to substantially greater numbers of viewers than would ordinarily be the case, and with improved picture quality and signal reliability. The result has been a 23% boost to Canadian OTA viewing via DTH alone. Thus, BDUs are enabling OTA broadcasters to realize much larger advertising revenue streams, because local OTA signals and the additional eyeballs they attract are now more valuable to advertisers. There is, in other words, much greater monetization of these signals than had previously been possible without BDU participation in the system.”
For CBC, it’s a matter of symmetry, that since specialties get subscription and ad revenue, so should OTA broadcasters, who play “the cornerstone role in the Canadian broadcasting system.”
However, even the Canadian Film and Television Producers Association, because the broadcasters don’t want to tie any strings to new money that would see more priority programming made, “the CFTPA must conclude that implementing fee-for-carriage for OTA television signals is unwarranted and will not further the objectives of the Broadcasting Act,” reads its submission.
When it comes to distant signals, this seems like an issue that had traction towards change during the hearings – which would be a far greater problem for DTH than for cable. Bell strenuously objected to the broadcasters’ demands for higher fees for distant signals and the right to retransmission consent (the broadcaster could deny carriers the right to offer signals from certain jurisdictions without an agreement in place.
“The ability to view distant signals is integral to the Canadian DTH programming offer,” reads the Bell submission, which also noted that bell ExpressVu has never shown a profit in its 11 years of existence. “Any material change to their availability, or significant increases in compensation or bandwidth requirements to maintain the current offer, would have a material negative impact on DTH’s competitive position.”
Claims of harm by broadcasters over time-shifting or station-shifting customers are exaggerated, added Bell. “Given the more than $1.6 billion in net new revenue that DTH has delivered to the specialty and pay sector, the 23% increase in viewing to Canadian OTA services (relative to analog cable) that DTH delivers, and the substantial contributions that DTH provides to programming funds, it would be untenable to put these benefits at risk over a dispute which by our evidence ranges from marginally positive to a worst case of a $20M impact on local broadcasters (for which they are fully compensated).”
While Bell says distant signal viewers are already recognized and paid for by advertisers, CTVgm and Canwest have other opinions and what time-shifting or station shifting customers are costing them.
“(T)ime-shifting accounted for approximately two-thirds of the adjusted impact in 2006/07 at $62.2 million ($34M U.S. and $28.2M Canadian), while station-shifting accounted for about one-third of the adjusted impact at $30.9 million ($8.6M U.S. and $22.2 Canadian),” says the CTVgm/Canwest submission.
One of the other issues that seemed to grow during the hearing was that of video on demand. Some broadcasters are worried that cable’s VOD platform is changing into de facto specialty channels that compete with Canadian linear services.
Some believe that VOD needs its own hearing and more stringent policy direction, especially since MSOs want to include advertising with VOD.
“The focus of the hearing on VOD has centered on emerging technologies, but the current regulatory approach to VOD is upside down,” reads the submission from Channel Zero, which owns category two digital specialties Movieola and Silver Screen Classics.
“Video on-demand is a distribution platform, not, as currently licensed, a Programming undertaking. Unless licensed as a type of Distribution undertaking the Commission will not be able to ensure a predominance of Canadian content and control foreign programming,” reads the Channel Zero submission.
“BDUs should not be allowed to serve as their own programming undertakings. On-demand programming should be acquired exclusively from licensed Canadian programming undertakings. Changes are required to the regulatory framework to address the increasingly likely prospect that on-demand services owned by BDUs will become substitutes for licensed linear programming services.”
While the Commission has much on its plate, and there are many more issues to be satisfied than discussed in this story (search Cartt.ca for terms like access, preponderance, dynamic ad insertion, dispute resolution and so forth to see our coverage of those challenges), look for a policy release this summer.
