Broadcasters, producers have different interpretation of specialty TV decision

The head of an organization representing film and TV producers believes that the CRTC’s decision to expand expenditures for the most profitable specialty TV channels and to allow the expansion of some of them into the drama genre is a positive future sign of commission support for Canadian production. But some broadcasters say that the licence renewals of the 22 specialty channels, which were issued January 21 by the CRTC, must be taken in context and don’t necessarily represent a new direction for the regulator. "What it reflects to me is obviously a priority being placed on increased Canadian programming expenditures," Guy Mayson, president and CEO of the Canadian Film and Television Production Association (CFTPA), tells Canadian Communications Reports. "I think it’s basically a signal to the broadcasters that there may be an increased expectation of higher expenditure on Canadian programming in the future." In granting licence renewals to the 22 specialty channels originally licensed in 1996, the CRTC tied increases in the amount broadcasters must spend on Canadian programming to each channel’s profitability. Those channels whose average profit margin before deductions for interest and tax earned (PBIT margin, or profitability expressed as a percentage of revenues) were in the 20% to 24% range are required to increase their minimum annual expenditures on Canadian programming by 3% above their current amount. Channels with PBIT levels between 25% and 29% have increases of 4% in their Canadian content spending and those between 35% and 39% have increases of 6%. The specialty channels with PBIT levels over 40% face a jump in Cancon expenditures of 7%. But Peter Miller, VP of planning and regulatory affairs of radio and television at CHUM Ltd, notes that the specialty channel renewals were "unique decisions for unique services" and are not necessarily an indication that the commission will make similar rulings in other circumstances. He points out that the specialty channels that were renewed were special because they were licensed as digital services, yet they all launched in analog. "Given that the circumstances (of the launch) changed, it is not unusual for the commission to have a look at whether the contributions are commensurate with the privileges of the licence," Miller notes. "I don’t believe that the commission intended to represent a whole new approach to regulating broadcasting services. I think the commission was just trying to come up with a rational way of getting services who performed a lot better than expected to (spend on Canadian content)." He also points out that same rationale could result in lower, not higher, Canadian content requirements for many of the struggling Category 1 digital channels. "We have digital renewals coming up in three years, and it may well be that the Category 1s performed a lot less well than people expected. So perhaps the commission might be open to more reasonable (Canadian content) obligations for them," he says. Rita Cugini, VP of regulatory at Alliance Atlantis Broadcasting Inc., agrees that it’s too difficult to predict what the commission will be thinking years from now. "It’s difficult to say what is going to happen in three, four or five years. Our next renewal, I think, is in 2006 and after that in the 2007 round. Anything can happen," she says. Mayson maintains that the specialty channel decision could be a sign that spending requirements will be re-instituted for over-the-air broadcasters as well. The CRTC’s 1999 TV policy eliminated expenditure requirements for the large conventional networks. "I think after the failure of the 1999 policy, it is interesting to see the commission coming back fairly strong on the need for expenditure requirements. Admittedly, they are doing it in the context of specialty services, where they were never eliminated," he adds. "But I think there needs to be real debate and a rethink of the value of expenditure requirements as we go down the road and licences of (conventional) channels come up for renewal. And you can read that into this decision, but maybe I’m reading too much into this." The CRTC also allowed some of the channels to add the drama category to their list of eligible programming provided that it is in keeping with their nature of service, and that it be used exclusively on Canadian content. Alliance Atlantis’ Home and Garden Television Canada (HGTV) was granted permission to air ongoing dramatic series, comedy series, specials, mini-series, made-for-TV feature films and game shows. All the proposed drama and game shows must have building, house remodeling, or decorating and interior design, or landscaping as a central theme, and all the new programming must be original Canadian programming. Cugini points to the possibility of producing a Canadian version of a movie, such as Money Pit or Baby Boom. Mayson sees this development as a positive sign for the production of more Canadian drama. "I think that it can only be good for Canadian drama. I think they have endorsed the principle of allowing more players (specialty channels) in the drama field," he says. "And given what’s going on and the difficulties in the drama production, we need more players." Wholesale rates The CRTC also granted wholesale rate increases to specialty channels CTV Newsnet and The Score, which could pump more money into production. The CRTC granted The Score a wholesale rate increase of 4 cents a month per subscriber - much lower than the 30-cent increase requested (Broadcasting Decision 2004-10), and an increase of 6 cents to Newsnet, which wanted an 11-cent increase (Broadcasting Decision 2004-8). The commission, however, stipulated that the incremental revenues generated from the rate increases must go toward new Canadian programming initiatives. No rate increase was granted to Rogers SportsNet, which was looking for a 29-cent increase in its rate to put it on par with CTV’s TSN (Broadcasting Decision 2004-11). "With respect to Rogers’ request to increase its wholesale rate, the commission notes that the licensee did not propose to allocate the revenues that would be generated by the proposed increase to initiatives that would improve the programming offered by SportsNet. Instead, the licensee’s request was based primarily on making SportsNet’s wholesale rate equal to that of TSN. The commission finds that the licensee’s argument that it needs to achieve parity with TSN does not justify an increase in SportsNet’s wholesale rate," reads the decision. The specialty channels contacted stated that they had not yet crunched numbers to see how much extra money would be injected into the production of Canadian programming as a result of the licence renewals. But so far, the specialty channel broadcasters are downplaying the effect of the decision on their bottom line. During a conference call on Astral Media’s first-quarter results, one analyst suggested that the decision could cost the company $4 million a year. "The decision we just received yesterday (January 21) from the CRTC and we are currently analyzing what the impact will be. As you know, we’ve been through similar issues before on our pay TV side and we’re comfortable that we’ll find a workable solution," said Astral president and CEO Ian Greenberg. "The number you mentioned, I presume, refers to Teletoon, but keep in mind that (Astral has only) a 40% investment (in that channel). (The increases to) pay was actually more significant. So I think our managers have proven they will be able to deal with it." Jay Switzer, CHUM Ltd. president and CEO, also downplayed the effect of the additional Cancon expenditures during a January 26 conference call on the company’s first-quarter results.

Broadcasters, producers have different interpretation of specialty TV decision

Broadcast | 01/30/2004 5:00 am EST

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