CRTC advised to take cautious approach to introducing competition to pay TV sector

Members of Canada’s creative community are urging the CRTC to proceed cautiously as it considers licensing four new pay TV services. The Canadian Film and Television Production Association (CFTPA) states it neither supports nor opposes any of the applications, but nonetheless raises some red flags. "We would be extremely concerned if the licensing of additional general interest pay television services were to weaken the ability of the incumbent services to maintain their current commitments or diminish their capacity to commission original production," writes the CFTPA to the CRTC. "From our perspective, the entry of additional players must result in a significant amount of new money available to fund original Canadian independent production. We will not have accomplished anything if we merely fragment the contribution that pay television makes to the funding of the same amount of programming." The CFTPA also notes that if the commission licensed all four applicants, many of which have expressed an interest in providing programming in HD, and mandate carriage of all of them, then the largest distributors would have to make about 30 channels available. But, the association adds, if the commission doesn’t mandate it, the new entrants might not be able to secure sufficient carriage and there could be a repeat of the situation in the early 1980s. At that time, pay TV was competitive but financial troubles caused a reorganization which resulted in the Shaw Communications-owned Corus Entertainment having a monopoly in western Canada, and Astral Media in the eastern part of the country. The producers’ association asks the CRTC to question the applicants on their planned expenditures on Canadian features and drama series in terms of development, program financing and promotion. These conditions should become conditions of licence, according to the CFTPA, which states the new licensees, should at a minimum meet the highest existing expenditure levels of the incumbent pay TV services – 32% of revenues for English-language and 24% for French-language pay TV services. It would also like to see the CRTC spell out that the existing pay TV operators and any newly licensed ones have to negotiate terms of trade agreements with the producers’ association. While the CFTPA attempted to remain neutral, several of its members – mostly those doing business with Astral’s The Movie Network and Corus’ Movie Central – demand that the CRTC retain the status quo. Toronto-based Barna-Alper Productions opposes the licensing of any new pay TV operators because it feels that in adding new players, specifically new pay services, government subsidies such as the Canadian Television Fund (CTF) will be stretched too thin. A lot of the productions financed by Corus and Astral also tap into the CTF. "The resources that support production, namely Telefilm Canada and the have been stretched paper-thin by the increasing demand which has resulted from the proliferation of new channels," writes Barna-Alper president and CEO Laszlo Barna. "It is my opinion that the licensing of new pay TV outlets would hurt the system by further taxing the subsidies that support most Canadian productions." Toronto-based Shaftesbury Films Inc.’s senior VP Scott Garvie notes, "We would be reluctant to support any initiative that would splinter the current system and reduce the ability of TMN and Movie Central to be significant players in commissioning Canadian drama without ensuring that the actual incremental benefits of the new competition would achieve a significant increase in Canadian content production." The existing regional pay TV players have supported numerous Shaftesbury productions, such as Camilla, Conquest, Painted Angels, Long Life Happiness, , and Mrs. Ashboro’s Cat. But criticism of the existing players was also harsh from some producers. For example, Insight Film Studios president Kirk Shaw claims the "current pay TV set up is not working." While Insight produces more than 15 made-for-television movies a year with the support of Movie Central, Astral "won’t even return our phone calls," he says, wondering if Astral has a bias against western producers. Saskatchewan Film and Video Development Corp. (SaskFilm) also expresses concern about regional productions, and urges the CRTC that any new pay TV licensees proclaim their commitment to regionally produced programming. It wants any new pay TV service to ensure that development executives are readily accessible by producers in the regions, and annual reporting of the programming it has licensed broken down by province. In a joint submission, the Writers Guild of Canada (WGC) and the Directors Guild of Canada (DGC) state that if the CRTC issues more pay TV licences than it must do so in a way that ensures "the highest possible contribution to dramatic programming written and directed by Canadians." Some of the risks of a competitive environment, the guilds note, are heavy marketing expenditures, bidding wars for foreign product and lower wholesale fees from distributors – all of which could lead licensees to seek regulatory relief from their Canadian content obligations. If it proceeds with licensing new pay TV services, the two guilds want the CRTC to permit exclusive arrangements on both foreign and Canadian programming, increase the amount of revenues spent on Canadian content to 40% from the current 32%. The guilds argue that allowing exclusive foreign, mostly U.S., programming deals would stimulate the Canadian pay TV market because it would create options. "If pay TV operators are able to acquire Canadian movies on an exclusive basis, some movies would benefit and others suffer," says the submission. "Pay TV operators might compete for a "hot" Canadian movie property, thus paying more for the rights. If the title were exclusive to their service, they would likely undertake heavier promotion of it." Federal funding agency Telefilm Canada also says it "neither supports nor opposes" any of the applications, but it does raise two concerns: One, it feels there should be greater coordination and collaboration between Telefilm and the pay TV services, and second, it questions the equity investments of the service, stating they were not truly at risk. Thus, Telefilm urges the CRTC to explore their intended equity investment policies with each applicant to ensure that the applicant is actually in need. The Canadian Association of Film Distributors and Exporters (CAFDE), which represents the interests of Canadian owned and controlled feature film distributors and exporters, also raises a number of concerns about the practices of the incumbents. The CAFDE says that the existing pay TV services did not claim any "top up" credits until after their licences were renewed in 2002. Since then, they have claimed more than $10 million in top up credits, thus reducing their required expenditure on Canadian content by that amount. The association also charges that it has had complaints that "the existing pay services have, on a number of occasions, as a condition of their investment in Canadian films, required the producers to guarantee the recoupment of a significant percentage of that investment, effectively making that percentage a loan instead of an investment." The CAFDE concludes, "…The existing licensees are no longer supporting the Canadian feature film sector to the same extent as was the case in the past. The introduction of a new pay TV service with a significant commitment to support Canadian films will be in the public interest."

CRTC advised to take cautious approach to introducing competition to pay TV sector

News | 10/24/2005 4:00 am EDT

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