Allarco’s pay TV application gets green light from CRTC

In the competition for new pay TV licences launched last year (CCR, Aug. 9/05), one applicant has finally emerged victorious. Edmonton-based Allarco Entertainment Inc.’s proposed pay TV offering, simply titled Allarco Entertainment, won over the CRTC with its commitments to original Canadian productions, including script and concept development funding, regional outreach initiatives, and a fund that would allow producers to access some of their future licence fees before shooting is complete. The launch of Allarco will break up the duopoly of service that has existed since 1984 between Corus Entertainment Inc., which operates The Movie Central and Encore Avenue, and Astral Media Inc., which operates The Movie Network and Moviepix as well as the French-language Super Ecran service. But after more than two decades of an east-west monopoly on pay TV service, Canadian viewers will have to wait a little longer for choice. Malcolm Knox, president and COO of Allarco, says the all-HD service won’t be ready to launch until early in 2007 at the earliest. "In a perfect world I would have loved to have had the decision earlier and done the launch before Christmas," he says. In terms of funding Canadian production, Allarco Entertainment will earmark $4 million for homegrown programming in its first year, with future years seeing 32% of the previous year’s revenue – up to year seven of its licence – allocated for Canadian producers. In addition, Allarco committed to a $7 million regional outreach program through which it will set up representatives in each province to work with and commercialize independent productions, and $7 for promotion of productions. Finally, the Albertan firm will create an Accelerated Fund for paying out advances on licence fees to producers, to aid them with up-front costs. The other applications submitted last July (CCR, Oct. 24/05) were: sports-heavy French- and English-language services from Quebecor Media Inc.-owned Archimbault Group Inc.; Canadian Film Channel (CFC), the brainchild of Channel Zero executives Cal Millar and Roman Podzyhun, which would have featured 100% Canadian cinema drawn from both original and existing productions; and the George Burger-controlled Spotlight Television Ltd., whose application may have been hampered by a reliance on US movies to create an audience and a Cancon policy that drew heavily on existing productions. Burger’s Premium Entertainment Group Ltd. had initially proposed sharing 25% of Spotlight with Insight Sports Ltd. and Kilmer Enterprises Inc., but later amended the ownership plan to include a provision allowing Bell Canada to take as much as a 20% stake in the pay TV service. Surprisingly, of those three the commission appeared to have most favoured Spotlight’s proposal, noting that it committed to increasing the production and distribution of Canadian content to a greater extent than Archimbault’s submission. Despite CFC’s proposed 100% Canadian programming lineup, its proposed business model called for a 12.9% cut of both Corus’ and Astral’s pay TV revenues in order to operate. That suggestion seemed to spark some concern not just from Corus and Astral, but also on the part of the commission, which said it wasn’t convinced that the benefits of the new channel would offset the financial burden on the two incumbents. However, Channel Zero’s Millar defends the proposed business plan. "I don’t think it was quite as revolutionary as people made it out to be, because our 12.9% revenue transfer is no different than a cable company being mandated to pay a specialty channel a specific wholesale rate," he says. Millar also says that while the three other applications were competitive with Corus and Astral, he positioned CFC and its 100% Canadian content policy as being complementary, rather than at odds with, the incumbents’ offerings. "We put a lot of work into it – obviously we were disappointed," he says. Alain Bergeron, VP of brand management and corporate communications at Astral Media, says that The Movie Network and Super Ecran have just concluded a round of talks with their US suppliers. "We have agreements with almost every major US studio, we have just renewed our contracts with HBO and Showtime," he says, adding that in most cases those agreements are exclusive for the Canadian market. In a move aimed squarely at negating some of that incumbent advantage both Corus and Astral possess, Spotlight and Allarco had asked the commission to place limits on the ability of pay TV providers to enter into exclusive arrangements with programming providers. However, the commission rejected the idea, saying it was "not convinced that it would be appropriate to intervene in private contractual relations," and that "an unregulated market for the acquisition of non-Canadian programming is a more effective approach for introducing rivalry to the pay television industry." However, while Knox admits such a proviso would have made Allarco’s entry into the pay TV market "smoother," with 44 pay TV providers in the US offering content to Canadians, he says the new channel will inevitably find programming. " don’t have enough shelf space to take all the programming, they don’t have enough money to buy all the programming, but at the moment I know they’re in a position where they can take what they deem to be the best," he says. "You have to respect the business savvy of the studios, because they aren’t likely to let themselves be tied up for a long period of time when a new entrant was about to enter the marketplace." Tale of the Tape: How the four pay TV proposals stacked upProposed ServiceProduction PlansCancon ConcessionsBoom TV(by Archambault Group Inc.)$28.9M in first year for both English- and French-language services as proposed; 32% of previous year’s gross revenues thereafter; $1M to Fonds Quebecor30% of prime-time (6:00 p.m. to 11:00 p.m.) programming devoted to Canadian content; 25% for the rest of the day; no more than 30% of content coming from related entitiesSpotlight TV(by Premium Entertainment Group Ltd.)$4M on Canadian productions in year 1 and 32% of previous year’s gross revenues thereafter; also $10.5M for script development30% of prime-time (6:00 p.m. to 11:00 p.m.) programming devoted to Canadian content; 25% for the rest of the dayAllarco Entertainment(by Charles Allard)$4M in year 1 and 32% of previous year’s revenues in years 2-7; $7M for regional initiatives; $7M on promotion; $14M for script development30% of prime-time (6:00 p.m. to 11:00 p.m.) programming devoted to Canadian content; 25% for the rest of the dayCanadian Film Channel(by Cal Millar, Romen Podzyhun)50% of revenues on Canadian productions; 5% of gross revenues on promotion100% Canadian content

Allarco’s pay TV application gets green light from CRTC

Broadcast | May 19, 2006

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