OTTAWA – You can’t sell what isn’t yours.
That, in a nutshell, is what some of the interveners into Mediadenovo’s application for a broadcast license have said about the company’s plans to sell the local availability advertising time on American specialty services to national Canadian advertisers. The concept will face the commissioners in a non-appearing hearing on February 22. Comments closed Wednesday. (A prior version of this story suggested this would be a traditional public hearing. At this time, that is not the plan.)
In 2009 Mediadenovo, a re-branded Only Imagine (which had a similar submission shot down by the CRTC in 2007), applied for a broadcast license for a new, carriage-mandatory programming service whose content would be only advertising. (Former Canadian Association of Broadcasters CEO Glenn O’Farrell is leading Mediadenovo, backed by the former Only Imagine’s owners Drew Craig and Jeff Theissen.)
The ads would be inserted into the so-called “local availability” time of up to two minutes per hour left open by American cable channels – and 70% of Mediadenovo’s revenue would be returned to the system, directly to broadcasters or to production funds, or both.
(Stateside, the local avail business is a multi-billion-dollar one for American MSOs. Mediadenovo figures it can take in $100 million over its first three years.)
All that doesn’t matter, says Turner Broadcasting. The local avail time it grants is something that is part of a commercial contract between it’s channels and the carriers who sell them and Mediadenovo has no right to do anything with those minutes. “TBS does not believe that any party has the right to curtail or alter the programming signal of any of our programming networks, other than with the express prior consent of TBS,” wrote its senior counsel, Kerri Clarke.
“For reasons of signal integrity TBS would not allow a third party which is not a TBS network affiliate and with which it has no contractual relations, to curtail or alter our network programming signals, or to ask another party (i.e., a Canadian BDU) to curtail or alter our network programming signals.”
“As the Commission is aware, it is the non-Canadian programming services that create the local availabilities in their network programming signals. They assign by contract, in their respective network affiliation agreements with some BDUs, the right to access and use those local availabilities, subject to prescribed terms and conditions,” reads the joint Rogers Communications/Cogeco Cable submission on the file.
Not so, says O’Farrell. There have been regulatory rules applied to these avails for years. Right now, Commission policy says 75% of the time must be given away to promote Canadian specialty services and the other 25% can be used to promote carrier products and services.
“It’s the system’s time to sell,” he said. “We would be nothing more, or less, than instruments of the Commission designed to produce benefits for the system. We see ourselves very much as an undertaking designed – and with a 70% condition of license tied to our revenue, it would be hard to think of yourself as anything other than – largely as an instrument of regulation, an instrument designed to produce public policy benefits.”
“How else could you look at it when you’re 70% of your revenue is being set aside for a fund?”
We first reported on the company’s plans in November (and have followed up on some more developments since) and at least one BDU, Telus, is supportive – with a great big “but”.
“The monetization of the local availabilities in U.S. stations is long overdue,” reads the Telus submission. And while the big western telco which has over 100,000 digital TV customers says it can support Mediadenovo’s plan, it will only maintain that support if the CRTC denies local conventional broadcasters the right to be paid a value for their signal (or a fee-for-carriage), something readers might remember was a bit of an issue two months back…
Telus’ SVP regulatory and government affairs Michael Hennessy wrote Mediadenovo’s idea “provides an excellent means of monetizing the avails without threatening or causing any market and/or regulatory distortions,” and it supports the plan bringing more cash to broadcasters “but only on the condition that such monetization be in lieu of any new subsidies to support Canadian broadcasters.”
Broadcasters don’t care for the idea either. “While it is certainly true that the conditions for a healthy Canadian Broadcast System have deteriorated dramatically since the CRTC heard previous applications to sell local avails in U.S. cable network programming, we fail to understand how injecting additional commercial inventory into an already depressed marketplace can directly help conventional television broadcasters become or remain profitable,” reads Crossroads Television System’s intervention.
“The total size of the overall advertising pie will not grow as a result of the addition of U.S. avails. Instead, the consequence is likely to be a dilution in the value of advertising as new unsold inventory comes onto the market. The reality is that a significant influx of new national advertising inventory, inventory that is tied to ratings-proven programming will drive down rates and directly impact the national advertising revenues of conventional and specialty services,” adds the Corus Entertainment submission.
And given the fact the Commission opened a proceeding into the local avail issue way back in 2008 that is still an open public process, even considering Mediadenovo’s application is off side, say some.
“On October 30, 2008, after the completion of an extensive review of the regulatory frameworks for BDUs and discretionary programming services, the Commission published Broadcasting Public Notice CRTC 2008-100… initiating a specific review of its policy relating to the future use of the local availabilities, and issued on the same date Broadcasting Public Notice CRTC 2008-102, Call for Comments on the proposed framework for the sale of commercial advertising in the local availabilities of Non-Canadian services,” reminds the Rogers Communications/Cogeco Cable joint submission.
With that public proceeding still without a decision of any kind, the CRTC should not be taking Mediadenovo to a hearing next month.
O’Farrell sees it in the opposite direction. “Everyone had their chance to put their oar in the water to say what should be done. On one side, you have the BDUs who said we will sell the avails and will return 6% of the revenue to Canadian programming,” he noted. “But here is a tangible proposal for licensing that (the CRTC) should consider before it makes its determination on where this goes, because we can produce 70% for the system.
“This is a territory where there are vested interests and vested interests will do everything they can… to protect their turf. And often times that is done without much regard to the big picture or the public interest,” he continued. “But this is a regulated industry with objectives that flow from legislation, so the public interest does matter.”
“And what we have is a sensible and very progressive public policy solution.”
