OTTAWA – The biggest challenge the Canadian broadcasting industry is facing is a subset of distributors who are seeking lower rates for specialty services, Kevin Crull, president of Bell Media, told the Canadian Media Production Association’s annual Prime Time 2012 conference in Ottawa on Friday morning.
Crull spoke about this issue and other challenges Bell Media is facing in a interview style session with former CTV president, former head of CBC News and current professor, MBA program in arts and media administration, Schulich School of Business, Trina McQueen. Crull said this issue is more important than the group licensing regime or terms of trade because these distributors (Cogeco, Telus, the Canadian Cable Systems Alliance, EastLink and MTS Allstream, representing about 2.8 million TV subscribers) want to break away from a tried and proven system. What he referenced are the large channel packages with broad distribution that allow specialties, particularly Category As, to reach a large number of households because they are part of large channel packages.
“Right now there is a small subset of distributors in Canada who are demanding to break that model and demanding to pay less than the rest of the market by not [committing] to the volume part. They want the rate part but they don’t want to commit to the volume part. And we are in a pretty serious commercial dispute that has repercussions,” explained Crull. (As Cartt.ca has reported, the dispute is headed to mandatory mediation at the CRTC.)
McQueen noted though Bell Media tends to ink deals with only vertically integrated providers. Crull said this isn’t true. Bell Media has done deals with 150 distributors, representing 97% of distributors in Canada and 80% of households.
While the specialty channel business is performing quite well – Crull said it generates 110% of revenue because CTV loses money – conventional television is struggling as a result of viewer fragmentation, growth in the number of specialty channels and the online boom. “Advertising is absolutely no longer sufficient as the sole source of revenue to support the great content we’re producing and the great content we’re delivering to our viewers,” Crull argued.
Sounds like a value for signal campaign is coming, quipped McQueen.
“No, I’m in the eye of the storm right now waiting for the Supreme Court to tell us about value for signal,” he said, adding that CTV could have found itself in bankruptcy protection just as Canwest was if it weren’t for the deep pockets of the Thomson family and Bell. The Court will hear the case in April.
Crull raised the value for signal issue because he believes Bell Media is delivering “unbelievable value to viewers,” and to understand that value one only has to look at the viewing time for Netflix, which is about five hours per week. CTV generates about 25 hours per week, he added. “Just think about the value of Netflix’s five hours a month times 1.2 million people and CTV over 25 hours a month times 31 million viewers,” Crull said.
While Crull took a shot at Netflix, he acknowledges that the broadcasters need to follow the online distributor’s path. Netflix has created an on-demand product with a superior user interface. “Our industry has to do that,” said Crull. “We have to move to that on demand viewing with everything we have and a superior interface for delivery. And we’re not moving there because we’re arguing about terms of trade.”
