OTTAWA – Opponents and supporters of vertical integration faced off in a feisty debate during a session at the Canadian Media Production Association’s (CMPA) annual Prime Time conference in Ottawa on Thursday.
Representing the “prosecution” in the session, titled Vertical Integration on Trial, Telus argued that producers and independent broadcasters are going to be disadvantaged by having fewer outlets for distribution. As well, broadcasters would have to fight the vertically integrated company on issues such as channel placement.
A critical issue, according to Michael Hennessey, senior VP of government and regulatory affairs at Telus, is one of access where independent producers have a limited number of suppliers who have incentives to prefer their own business. Non-aligned broadcasters are also challenged in this environment because “as the vertical integrated company seeks efficiencies that their access to any reasonable channel placement is further compromised.”
Hennessey suggested that safeguards need to be put in place to protect against content exclusivity on alternate platforms such as mobile. And he insisted Telus isn’t asking for restrictions.
“It’s about ensuring openness, it’s about ensuring choice and it’s about ensuring that the monies that traditionally flow to the broadcast side of the Canadian system don’t now flow into the carriage side because that maximizes profits for shareholders,” he said. “To say we’re trying to restrict things by ensuring that broadcasters can maximize audiences and consumers can choose without paying extra rent to carriers in order to watch content, I don’t think is something called a restriction.”
Richard Stursberg, recently appointed senior advisor on media and entertainment strategy for Telus, added the reason BCE decided to buy CTV was to leverage the content on other platforms. Bell bought CTV so it could get “exclusive content that would advantage the real properties that actually count which is the wireless properties and ultimately the IPTV property.”
Appearing for the defendants of vertical integration, Rogers Communications and investment banking firm TD Newcrest argued that combining content with distribution is the only way forward.
Pam Dinsmore, VP of regulatory affairs with Rogers, countered Telus, noting that without vertical integration, the company wouldn’t have been able to launch new platforms such as video on demand. She explained how Rogers broke into VOD by convincing its own content affiliates to jump in, which then resulted in more broadcasters hopping on board. Dinsmore added that the same holds true with its online on-demand service.
“So the advantage of being a vertically integrated company is the ability to innovate and sometimes before the market is really ready for that innovation. It solves that chicken and an egg problem of incubating and launching new platforms,” Dinsmore argued.
With respect to the investor perspective, Scott Cuthbertson, VP and director at TD Newcrest, took a swipe at Telus during his opening remarks.
“If you’re Telus, who wants to be the last one to the party paying the top dollar for all the content for nobody wanted. That’s why they’re not playing,” he said. “And obviously going in front of the Commission, it’s got to be their mandate to somehow, as much as possible, disadvantage their competition with whatever regulatory freight they could add to the load so they can better compete with them.”
Cuthbertson defended his support for vertical integration by asking who is better placed to fund Canadian programming development. “A big strong integrated BDU or somebody who can barely make payroll? Who do you think is going to be able to defend against Netflix and all these other over the top [services]? It’s got to be the people with the balance sheet. It’s got to be people that can attract interest from capital markets,” he said.
