CHUM-CTV merger will impact TV policy review

Last week’s surprise announcement that CTV Inc. parent Bell Globemedia is buying Toronto-based broadcaster CHUM Ltd. for $1.7 billion shocked many industry-watchers in Canada. But after the initial reaction wore off, most set to work analyzing the deal and the potential regulatory concessions that will inevitably result. Of course, it seems likely that CTV will have to divest some stations currently belonging to CHUM if the deal is approved. "They’ve said that they’re going to be selling A-Channel, so it looks like five stations are on the block," notes Carl Bayard, media analyst for Montreal-based Desjardins Securities Inc. But although Bell Globemedia president and CEO Ivan Fecan has made statements about Bell Globemedia selling CHUM’s A-Channel stations and its Access Alberta educational broadcast property, Friends of Canadian Broadcasting spokesperson Ian Morrison notes that the company may receive dispensation to keep the existing CHUM and CTV stations in markets like Vancouver/Victoria and Toronto. He points to a precedent set when CanWest Global Communications Corp. acquired WIC Western International Communications Ltd. in 2000, but was granted permission by the CRTC to keep certain stations in overlapping markets (CCR, July 19/00). "Ever since the WIC transaction was completed in 2001, CanWest has had…two networks," Morrison says. "They’ve been able to twin programming…so that in the market of Ontario, with 12 million people, and British Columbia with four million people – 16 is getting up to like 70% of English-speaking Canada – they’ve had, effectively, this second network." Morrison says he believes the deal will eventually be given the blessing of the CRTC, but key issues will have to be addressed before the regulator does so. The duplication of CHUM and CTV stations in some markets may not be an obstacle, however. "What I see happening is that they’re going to keep their second windows in Ontario and British Columbia, and they’re going to get permission from the CRTC to do it, because how can the CRTC say no to them when they said yes to CanWest five years ago?" Morrison notes. Any fallout the merger might have on the specialty programming side at the two broadcasters is less clear. During a conference call discussing the bid last week, CHUM president and CEO Jay Switzer referred to the company’s Bravo arts channel as the "most challenged" of CHUM’s specialty undertakings. "We knew it was going to be soft," Switzer said. "MuchMusic, on the other hand, where we had suggested I think back in the first quarter some softness, is doing better than we’d expected." Desjardins’ Bayard concurs that MuchMusic will probably weather any post-merger realignment of broadcast properties, despite the appearance of competition with CTV’s recently introduced MTV Canada service. "MuchMusic is probably the strongest brand CHUM has in its stable, so I don’t think anything will happen there," he says. As for MTV, he says "conceivably the two could continue running side by side, but it’s too early to tell really. They haven’t said what their intention is there, but I would think that BGM would not do anything to compromise the MuchMusic franchise." One issue that will inevitably rear its head is what the deal will mean for Canadian producers – an issue made all the more interesting since CRTC chairman Charles Dalfen told the audience at last month’s Banff World Television Festival that Canada’s television industry couldn’t count on consolidation to provide the kind of production benefits it had in the past (CCR, June 20/06). Dalfen also hinted that the commission will review a move back to a yearly mandated minimum expenditure on original Canadian productions, especially in the all-important but flagging English-language drama category – something that might be even more likely with this latest merger. However, the 1999 television policy is still in place – the review currently underway notwithstanding – and as such, Canadian programmers stand to reap as much as $170 million worth of benefits from the transaction, both from the initial transaction and from whomever might acquire the CHUM properties that will be sold off. Additionally, CHUM VP of communications Mary Powers confirmed that the benefits package agreed to as a result of CHUM’s takeover of Craig Broadcast Systems in 2004 will continue, regardless of whether CHUM’s ownership changes hands. It’s unclear who might emerge as a bidder for those A-Channel and Access Alberta assets. There were certainly others besides Bell Globemedia interested in CHUM as a whole: during an earnings call last week, Montreal’s Astral Media Inc. revealed it too had tendered a bid for the Toronto broadcaster, but has since bowed out of the running. Morrison says he also heard rumours weeks ago that the Waters family was also in talks with US broadcaster Fox Television Co. "I don’t think Fox could buy them under existing law, but is thinking about changes in ownership rules and all that," he says. "So yeah, if they were talking to Fox they had to be talking to Ivan Fecan." Another point of concern will likely be the concentration of news and public affairs programming in the hands of just two broadcasters, CTV and CanWest Global. It’s a fear that might be exacerbated by CHUM’s plan – announced the same day as the acquisition – to cut $12.2-million from its local newscast production efforts in 2007. However, CHUM’s Switzer defended the move on the day’s conference call, saying it should allow CHUM to "serve many of our markets in ways that connect us locally without necessarily the overhead and cost that goes along with trying to produce a competitive official newscast." Preserving the diversity of opinion in news and current affairs programming will be crucial, Morrison says, but could be easier than it appears since CTV and CHUM have such different approaches to the genre. Regardless, he says, it’s a decision that will require some careful thought on the part of regulators, especially since it could have an impact on the private television policy review currently underway. "If the CRTC rises to the occasion they have the opportunity to cause certain long-range improvements in the broadcast system," he says. Revenues of English-language private conventional services, by ownership group (in millions) CanWest GlobalBGM/CTVCHUMCraig2001$585$539$125$502002$629$559$167$492003$672$637$194$512004$622$684$191$562005$623$761$223n/aNOTE: Craig’s TV assets were acquired by CHUM and Quebecor Inc. in November 2004.SOURCE: 2006 Broadcasting Policy Monitoring Report, CRTC

CHUM-CTV merger will impact TV policy review

Broadcast | July 20, 2006

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