Broadcasters likely to seek lower CanCon requirements for struggling diginets

Fearing the demise of yet more digital specialty TV channels, broadcasters will likely soon be pushing the CRTC to lower Canadian content requirements for the diginets. The Category 1 digital services, which have higher Canadian content requirements but are guaranteed carriage, in particular, are expected to appear before the commission seeking licence amendments. "We look forward and look at the growing Canadian content obligations and there may be an area of concern there. Some of the services need to be revisited in terms of the increases in Canadian content expenditures because that will become a financial challenge if the performance doesn’t improve on the revenue side," says Brant Kostandoff, Vision TV general counsel and director of government and regulatory affairs. "We wonder if the (Canadian content requirements) are manageable based on the challenges that the digital channels faced in the early years." Top 10 Diginets by Number of Subscribers(Year Ended Aug. 31, 2003)Animal Planet917,321Showcase Action884,937CourtTV821,979Scream775,494Showcase Diva766,248One: The Body, Mindand Spirit Channel745,040Independent FilmChannel Canada726,258BBC Canada695,265Mystery686,919Deja View668,687Bottom 10 Diginets by Profitability(Year Ended Aug. 31, 2003)WTSN*$-3,173,238Discovery Health$-3,246,697MTV Canada (Connect)$-3,300,297Showcase Diva$-3,313,295NHL Network$-3,342,340BBCKids$-3,664,153Independent FilmChannel Canada$-4,133,459National Geographic$-4,417,896LeafsTV$-5,016,062Woodbine Racing $-9,380,289* This channel has been shuttered. Source: Individual Pay and Specialty Statistical and Financial Summaries , CRTC, 2004Kostandoff says that Vision TV is seriously considering applying to the CRTC for a licence amendment that would lower the Canadian content requirements for its Category 1 channel One: The Body, Mind and Spirit Channel. He adds that the next step is to discuss with other broadcasters a possible united approach in asking the commission for such a change. For months now, there have been rumours circulating within the industry that the diginet owners plan to go to the CRTC for amendments to their Canadian content requirements. "We look at the recent CRTC decisions on the (licence renewals for the 1996) specialty services, where the commission is tying, to a certain extent, Canadian programming expenditures to profit performance. So perhaps where services are underperforming, there needs to be an accommodation there by the commission," says Kostandoff. Similar sentiments were expressed by CHUM Ltd.’s Peter Miller. He told Canadian Communications Reports earlier this year that the approach used in renewing in January the 22 specialty channels initially licensed in 1996 could mean that many struggling Category 1 channels could see lower, not higher, Canadian content requirements (CCR, Jan. 30/04). CTV Inc.’s Category 1 WTSN has already been shuttered (CCR, Sept. 4/03), as has Corus Entertainment Inc.’s Category 2 music channel EdgeTV (CCR, June 20/03). "You look at some of the numbers of the other services and the struggles that they are already facing, and continuing to face, and either there needs to be some adjustment or even more services are going to be shutting their doors," adds Kostandoff. "I think it is a concern to the industry that some of the Category 1s are underperforming on a financial basis and are struggling to achieve anything close to a break even point. There is question as to whether or not the type of losses that are being shown here can be sustained for a period of time before those services, as we have already seen with others, close down. That has an impact on the industry as a whole and doesn’t look favourably on any of us, when television channels are suddenly going dark," he notes. Kostandoff made the comments after reviewing statistics released this month by the CRTC. That commission’s annual Individual Pay and Specialty Statistical and Financial Summaries revealed that the 48 Category 1 and 2 digital TV channels included in the report generated about $100 million in revenues, but still lost about $85 million last year before interest and taxes (CCR Update, March 4/04). The $85-million loss in the broadcast year ended Aug. 31, 2003 represented a 40% improvement over losses of $140 million in 2002. But the improvement comes mostly from drastic cuts to programming and staff as well as by slashing promotional budgets. Nevertheless, almost half of the digital channels continue to record losses in the millions. Recording the greatest losses were Woodbine Racing, which lost $9.38 million before interest and taxes, and LeafsTV, which lost $5.02 million before interest and taxes, according to the CRTC statistics. Despite the heavy outlay of capital, John Shannon, executive producer of LeafsTV, professes to be undisturbed. "We are actually right on budget. In our five-to seven-year plan to be on track, we haven’t missed a beat," he says. The regional digital channel hopes to expand on last year’s subscriber base of 85,495 by introducing some regular season live Leafs games on the channel. So far, it has only broadcast live exhibition games and padded out its schedule with programming that includes classic Leafs games, and interviews with past and former Leaf players. LeafsTV has a lower subscriber base, partly because it has been licensed regionally and cannot be carried in the Ottawa Valley due to the presence of the Ottawa Senators as stipulated by NHL rules. The Category 2 digital service Animal Planet tops the list of diginets in terms of subscribers with 917,321, followed by Showcase Action with 884,937 and CourtTV with 821,979. Although it rests near the bottom in terms of subscriber numbers, Shannon is quick to point out that the channel’s ad revenue has outperformed its share of the market by a huge margin. According to the CRTC statistics, LeafsTV generated $551,400 in local advertising revenue. Only Showcase Diva, which generated $586,231 in national advertising, and Showcase Action, which generated $586,231 in national advertising, had higher revenues for advertising. Most of the other digital channels didn’t come close in terms of revenue from ad dollars, relying instead upon subscriber fees. According to the CRTC statistics, two digital services - both third-language services - actually turned a profit before interest and taxes. These are Odyssey II, which indicated it earned $32,699 before interest and taxes, and SSTV, which recorded $15,730 before interest and taxes. However, Odyssey II has not yet provided all its data to the CRTC, including subscriber numbers. SSTV is a Category 2 digital service licensed to Ravinder Singh Pannu for a national ethnic service dedicated to programming that focuses on Punjabi religious teachings and religion; music, dance and video based on Punjabi culture; and news and information on East Indian countries and Punjabi communities in Canada. It had revenues of $402,293 and just 6,061 subscribers. Movieola’s owners have told CCR that their independent digital channel has turned a profit (CCR, Dec. 10/03). But figures for that Category 2 short film channel are not included in the CRTC report because the owners indicated in an email to the regulator that they were not on the air at Aug. 31, 2003, despite launching in September 2001. Movieola has filed programming logs with the CRTC, which since the release of the report has asked the channel to submit its figures.

Broadcasters likely to seek lower CanCon requirements for struggling diginets

News | 03/11/2004 5:00 am EST

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