WE COULD WALK through the various undertakings and final replies filed by the many contributors to the CRTC’s TV Policy Review, but we’ve done more than 40 stories on the whole proceeding. The issues are well known and have been dismantled and well-explained repeatedly here – but it’s the final brief filed by American broadcaster Viacom which has set tongues wagging.
(Ed note: Yes, the filings and oral presentations of both Netflix and Google have been stricken from the record as threatened since neither company responded to the October 2 compliance deadline set by the Commission)
In its final reply to the CRTC, filed Friday, Viacom (whose brands include the likes of Spike, BET, Comedy Central and others) warned the Regulator it is not likely to stand for a forced a-la-carte packaging model, as envisioned by it and the federal government. Besides the fact the company doesn’t like that the Commission may impose the Vertical Integration Code of Conduct and dispute resolution onto American channels as well as Canadians, “to effectively regulate the commercial terms between BDUs and non-Canadian services,” which “has the potential to alter the economics of the Canadian distribution of non-Canadian services,” its final brief offers a serious warning about the drive towards pick-and-pay:
Viacom will probably go over-the-top, where the federal government says it won’t regulate, rather than stay in a regulated system in which the same federal government happily meddles and regulates.
“In today’s competitive market, broadcasters, BDUs and programming services are adapting to subscriber demands for more choice without putting quality and value at risk,” reads the submission signed by Keith Murphy, senior vice-president government relations and regulatory counsel. “For foreign services, a decision to impose mandated pick and pay will force a complete re-examination of the business rationale of the services being distributed in Canada as such services will have to weigh the costs of continuing Canadian distribution against the uncertainty of subscriber numbers and corresponding lower revenue.
“In fact, for Viacom this re-examination commenced when the Commission issued its initial mandated pick and pay proposals and our efforts have only intensified following the release of the Commission’s amended proposals to now include the imposition of the VI Code and dispute resolution process on non-Canadian services,” continues the Viacom document.
“This re-examination will include a consideration of all options available to Viacom including foregoing Canadian distribution through BDUs,” wrote Murphy.
“Due to this lack of regulation, Viacom is seriously considering distribution in Canada through OTT or the Internet as a possible solution if traditional distribution becomes uneconomical due to new rules being imposed by the Commission.” – Viacom
“Recent statements by the Canadian Prime Minister and the Canadian Heritage Minister make clear that the Canadian Government is not interested in taxing or regulating OTT or Internet services such as Netflix. Due to this lack of regulation, Viacom is seriously considering distribution in Canada through OTT or the Internet as a possible solution if traditional distribution becomes uneconomical due to new rules being imposed by the Commission. The threat of heavy regulation and government intervention in private contracting are disincentives to investment that will inform all future Viacom investments in Canada.”
The submission does not speak to what the company might do with its Canadian licensing deals (such as Corus’ with CMT and Bell Media’s with MTV), should it follow through on this threat.
“Packaging of programming services has been a long standing valuable element of the Canadian broadcasting system, especially in the case of non-Canadian services,” adds the submission. “Foreign services, and more particularly US services, have been used as valuable packaging partners for Canadian services since the first non-Canadian services were authorized. The inclusion of US services in packages allowed the Canadian services to gain needed subscribers and to grow.
“As confirmed by a study commissioned by Rogers for this proceeding, US services remain valuable as ‘a substantial proportion of cable subscribers report that they would either cancel or downgrade their current cable subscriptions should one of the [US] channels tested no longer be available to them with their subscription.’ It is the combination of the US services and Canadian services in packages that primarily creates this value. The Commission’s mandated pick and pay proposal will destroy this value to the detriment of Canadian subscribers.”
So, the federal government has its hands all over the TV business in Canada forcing pick and pay, which may drive popular American brands to the over the top space, where the same federal government has told everyone it’s hands off.
“In today’s competitive market, broadcasters, BDUs and programming services (Canadian and foreign) alike, operate at their peril if they ignore subscriber demands for more choice,” wrote Murphy.
“Broadcasters already have incentive to give their customers the best possible services at affordable, competitive prices. Leaving the market to decide how services are packaged and the commercial terms between BDUs and programming services is simple, proportionate and certainly adaptable to change.
“Viacom submits that there is neither a need for a mandated pick and pay system or regulations to be imposed on foreign services and both proposals should be rejected by the Commission.”
