Dear Editor,
Re: “New Pay TV Apps are a Luxury No One Can Afford”, September 22, 2005.
I AM RESPONDING ON BEHALF of The Canadian Film Channel (one of the applicants) to a recent article published in www.cartt.ca. I am writing to correct a glaring error that appeared in the September 22nd article. However, I am aware that the error was made by the Credit Suisse First Boston Equity Research (CSFB) in their report and not by www.cartt.ca.
On September 19, 2005, CSFB published a report on the impact of additional pay television channels on the pay television industry. In this report they stated that:
“TCFC proposes that, with mandatory carriage, it will distribute an all-Canadian channel to current and future pay television subscribers at no extra fee. TCFC proposes a unique revenue model: rather than collecting a subscriber fee it will collect 12.9% of the total revenues from the existing pay television services (representing roughly $48 million in 2004, or 52% of industry EBITDA). (emphasis added) The 12.9% figure is stated as the number calculated to meet their commitment to broadcast 100% Canadian films,” says the report
This information is inaccurate. The Canadian Film Channel application clearly states that the expected revenue in Year 1 (based on published CRTC reports for 2003) is $23.6 million, which is a significant difference from the $48 million claimed by CSFB. We can only speculate as to how an internationally respected investment bank could have arrived at such a distorted number. I hope that this clarifies any confusion created by the article.
Aside from this discrepancy, The Canadian Film Channel found the information in the report to be reassuring as it reiterated many of the same conclusions that we have drawn regarding the risks of introducing wide open competition to the pay television sector virtually overnight.
We agree that TMN and Movie Central offer “gold plated” pay TV services and have done an excellent job over the years. In fact, it’s true that they do show many great Hollywood features, interspersed with Canadian content (slightly less than one third of their respective schedules). Secondly, I believe the report is correct in its analysis that the success of the U.S. pay television market is overstated in the three competitive applications and this overstatement leads, we believe, to unrealistic projections, making these services, should they be licensed, risky ventures at best.
To reiterate, The Canadian Film Channel does not believe that instant and unfettered competition in the pay television market is necessarily good for the Canadian broadcasting system nor is it required in order to add diversity of voice. It is for this reason that we have proposed to launch a unique and much needed service that is complementary (not competitive) to the existing pay television services.
One thing the report did seem to miss, however, is that The Canadian Film Channel is proposing to inject over $120 million into the Canadian film and television industry over the first license term – new money that will fully fund productions and not add further strain on the current funding sources.
We look forward to presenting to the Commission, the other applicants and the current licensees at the hearings in October.
Sincerely,
Cal (C.J.) Millar
Channel Zero Inc.
Toronto, Ont.
