Pelmorex, Star Choice reach temporary agreement, negotiations continue

Pelmorex Communications Inc. will take "every means possible" to preserve The Weather Network’s and Météo Média’s status on Star Choice’s basic tier in the wake of a temporary agreement, warns Pelmorex head Pierre Morrissette. Pelmorex has come to a temporary agreement with satellite TV distributor Star Choice that will see the two specialty channels remain on the basic tier until at least August 15. But president and CEO Morrissette tells Canadian Communications Reports that it’s possible the direct-to-home (DTH) satellite distributor could move ahead with plans to shift the two weather channels to the discretionary Your Life package after that date. Morrissette is tight-lipped about whether Pelmorex would again resort to the courts to preserve its current packaging arrangements if that were to occur. "Without going into any details at this stage, we’re obviously not in agreement with this proposed change and we plan to attempt every means possible at our disposal to achieve a solution, which is in the best interest of Star Choice subscribers. Our view is that the loud and clear message is that they want these essential services to remain on the basic tier," he says. Pelmorex senior VP of corporate development Paul Temple expresses similar sentiments. "I don’t want to get into what we’re going to do at all. But we’re certainly going to do our utmost to be on basic and accessible to all our subscribers," he tells CCR. The Weather Network/Météo Média was moved to Star Choice’s Our Life package for four hours on June 7, when a court injunction issued by the Ontario Superior Court of Justice prevented the DTH distributor from going ahead with its re-packaging. The injunction was in effect until June 16. At the request of Pelmorex, the Ontario Superior Court has withheld its judgment on an extension to the terms of the injunction to allow the two parties to come to terms. Pelmorex was forced to turn to the courts after the CRTC dismissed on June 4 the broadcaster’s request for an order under Section 9(1)(h) of the Broadcasting Act requiring Star Choice to continue to carry the weather channels on basic (Broadcasting Decision 2004-197). On that same day, the CRTC also dismissed a request by CTV Inc. for an order that would have prevented Star Choice from shifting the packaging of The Sports Network, Talk TV and Le Réseau des sports (Broadcasting Decision 2004-198). The CRTC indicated that it would release the reasons for the decisions at a later date, while announcing that it plans to conduct an inquiry into measures that may be required to ensure negotiations between distributors and programmers are conducted in accordance with good commercial practices (CCR Update, June 9/04). No one at CTV had returned phone calls at press time to answer questions on whether it plans to follow Pelmorex in turning to the courts. Star Choice switched the packaging of CTV’s three channels on June 7. Morrissette says he would "rather not comment" on the CRTC decision, but welcomes the announced upcoming regulatory process. "I think it’s an appropriate process," he notes. "I can’t recall any other exception to the orderly and professional business-like, respectful negotiations we’ve had with distributors whereby there has been plenty of advance warning, plenty of discussion, plenty of opportunities to influence the outcome (of a decision). But none of these elements were present in this arbitrary and quite frankly bullying approach that was used in this case (by Star Choice)," he adds. "For that to be reviewed and pre-empted for the future is good. It’s unfortunate that one exception in the industry triggers this kind of process." No one at Star Choice had returned CCR’s phone calls at press time, but the packaging changes are believed to have been made to save money. In the Our Life package, The Weather Network/Météo Média would cost subscribers up to $6.99 plus taxes more a month. More significantly, Star Choice would see the wholesale fees it currently pays Pelmorex for distributing its channels decline drastically under the new packaging. On basic, The Weather Network/Météo Média reaches about 800,000 subscribers. Only about 200,000 people subscribe to the discretionary Our Life package. The monthly per subscriber wholesale rate for the Weather Network/Météo Média is 23 cents, which translates into Star Choice currently paying Pelmorex $184,000 each month when the channels are distributed on basic. If only 200,000 people get the weather channels in the Our Life package, Star Choice would only have to pay Pelmorex $46,000 per month in wholesale fees, assuming that the wholesale fee didn’t rise. "Our licence conditions preserve the rate (23 cents) at that level through to when our licence term ends, which is Aug. 31, 2008. So that’s 17 years basically of distribution at a rate that’s fixed, with which inflation represents a decline from year to year. Our whole focus has been to preserve a low rate, and maintain wide distribution and to basically use the appeal of our services to attract growing audiences that we translate into ad revenues," notes Morrissette. "Star Choice’s assumption is that (the wholesale rate would remain the same on the discretionary tier), but that obviously is clearly not our assumption and it’s an important issue. Notwithstanding that, our goal clearly is to maintain the network on the basic tier." He adds that even in the unregulated environment of the United States, the Weather Network’s cable TV counterparts are primarily carried on basic because "that is the natural position for an essential service." In Canada, the Weather Network/Météo Média is a dual status service, which means that it must be carried on basic by cablecos unless Pelmorex agrees otherwise. Linkage and distribution rules are different for DTH distributors, and such a requirement is not made of DTH distributors. After a fight several years ago, Bell ExpressVu LP agreed to carry Pelmorex’s two weather channels on basic.

Pelmorex, Star Choice reach temporary agreement, negotiations continue

Broadcast | June 21, 2004

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