BDU packaging, fee for carriage dominate panels on upcoming reviews

Considering its theme – "New Realities, New Rules" – you’d expect the dialogue at this year’s Canadian Association of Broadcasters convention to reflect the siege mentality in the industry today. Indeed, much of the attention was on the upcoming policy reviews, and what effect they might have on already-strained relations between broadcasters, producers and distributors. In a session titled "New Realities in Specialty and Pay: Gearing Up for the ’07 Discretionary Services Review," communications lawyer Peter Miller led a lively panel discussion that featured input from a senior CRTC staffer and a VP at Rogers Communications Inc. as well as from CAB members. In his opening remarks, Miller referred to the next pay and specialty review – more or less guaranteed to commence sometime next year – as "unprecedented," pointing specifically to the disruptive impact the commission’s framework for migration to a digital broadcasting environment has had on the process and its players. "We are pushing very aggressively to migrate because of looming capacity issues," said Pam Dinsmore VP regulatory, broadband and video at Rogers, adding that the company sees "a need to migrate at least Tier 3 as soon as we can." She said that in the case of Tier 3, one to three years would be a realistic timeframe to hit the 85% digital customer threshold which would allow Rogers to drop analog versions of channels in the tier and only offer them in digital (CCR, March 13/06). Martine Vallee, director of English pay, services and social policy in the CRTC’s broadcasting unit, defended the commission’s decision to maintain the tier structure in both the analog and digital worlds during the transition. She said the CRTC examined a variety of scenarios in crafting the Digital Migration Policy and discovered that "moving from the current tier-based environment to a "pick-and-pay" scenario would have a very significant impact," likely even more profound than the phenomenon of BDUs offering theme packs. In Quebec, specialty and pay programmers are even more beholden to BDUs than in English Canada: just one cable distributor accounts for 81% of the subscriber base for Astral Media Inc.’s The Movie Network pay TV service, according to Sophie Émond, VP of regulatory and government affairs at Montreal-based Astral. "When we move to an environment where a BDU can decide how it packages our services, it has a very big impact….It is a preoccupation," she said, referring to the ability of BDUs to dispense with tiers and just offer theme packs and even à la carte single channels in a digital environment. However, Dinsmore refuted the assertion, saying it wouldn’t be in BDUs’ best interests to offer consumers a multitude of individual channels and small packages. "We, as a cable company, have no intention of blowing up the tiers," she said. "They’re a huge revenue generator for the company." Rogers signed a memorandum of understanding (MOU) on April 8 last year with six specialty channel operators, which laid out how thorny issues such as securing programmer consent before switching off analog signals might be addressed. But when Miller asked Dinsmore if the MOU still stood or whether it had been superseded by the CRTC’s Digital Migration Policy, the Rogers VP characterized the MOU as a joint submission rather than a binding business arrangement. Émond of Astral reiterated a fear that many other pay and specialty programmers – most notably Alliance Atlantis Communications Inc. president and CEO Phyllis Yaffe – had voiced in the past. "I actually do have concerns with the timing to embark on a review of specialty and pay," she said, explaining that aspects of the over-the-air TV review currently underway, such as the discussion around fee-for-carriage, could have a sizable impact on the pay and specialty business model. However, the analysis and determinations of the former won’t be available before the pay and specialty review gets underway. Those concerns emerged in a subsequent panel the following day, "The CRTC Review of Commercial Television: What’s at Stake?" Former CRTC vice-chair and current Blake Cassels & Graydon LLP lawyer Andrée Wylie asked the assembled panel of big and small market television programmers, a consultant and a Quebec cableco-cum-conventional broadcaster about their wish lists for the OTA television review. René Guimond, president and CEO of Québecois broadcaster TQS Inc., said his firm would press for "equity in the financial rules for our industry" and expressed support for fee-for-carriage. His comments about a "two-tiered system where some can draw money from two separate markets" referenced the pay and specialty business model of subscription and advertising revenues. Those views seemed to find some favour with Rick Arnish, president of small-market broadcaster The Jim Pattison Broadcast Group, which operates three CBC affiliates in western Canada. He noted that past regulation generally managed to strike a balance between the various competing interests in the broadcast system, but that "it’s no longer business as usual for conventional television in Canada." He noted that the conventional system’s current reliance on one source of revenue – advertising – is even more troublesome for the Pattison group, since it’s bound by conditions of licence to fund local independent production, but unlike larger-market broadcasters, can’t access the Canadian Television Fund to do so. And, if fee-for-carriage is potentially in the cards for major broadcasters, "we’re starting to think that way too," he said. As expected, the sole distributor representative on the panel argued that less, not more, regulation should be the guiding principle in the CRTC’s conventional TV review. While he said the idiosyncrasies of the Quebec market generally govern broadcasters within the province, Québecor Média Inc. VP of institutional relations Pierre Lampron also asserted that specific regulations should be revisited and adapted to intervene as little as possible. That scenario made TQS’ Guimond nervous. "The CRTC…allowed the creation of big consortiums in communications," he said, adding that such consolidation has increased the likelihood of undue preference being exerted by BDUs who also own broadcast outlets. A fee-for-carriage arrangement, he concluded, would help offset any potential revenue loss due to rate and remittance disputes. But Lampron vigorously refuted the likelihood of such an event coming to pass: noting that TQS now has a 14% share of the viewership in Quebec, he asserted that "it will never be in a distributor’s best interest" to discriminate against unrelated broadcasters in such a fashion. Meanwhile, CanWest MediaWorks Inc. president of television and radio Kathy Dore questioned the prevailing wisdom that the remuneration collected under a fee-for-carriage regime would be reinvested in programming, as some broadcasters assert. Rather, she said, "we are very happy with the incentive system the commission put into place some time ago and would like to have that expanded." "Any program that Canadians enjoy and watch is priority programming," Dore continued. However, she qualified her statement by saying that some aspects of priority programming, such as the imperative to produce local content, are "just not economically viable" in certain markets. When asked by Wylie if there were mechanisms that could be put into place to ensure producers do indeed benefit from broadcaster carriage fees, there was some skepticism. Peter Fleming, president of Peter Fleming Consulting, noted that the fastest-growing production category in terms of spending at English-language networks is still US programming. In Quebec, however, homegrown content is given more pride of place, Guimond and Lampron said. "For us, Canadian content is a matter of survival, so yes, we would absolutely be prepared to commit" to investing some or all of any carriage fees TQS might receive in Canadian productions, Guimond said. For his part, Lampron argued that private broadcasters should be recognized as "an essential service" in Quebec for their contributions to the province’s cultural identity and their heavy reliance on Canadian programming, saying that 90% of Quebecor Media’s revenues in the province are derived from Cancon.

BDU packaging, fee for carriage dominate panels on upcoming reviews

Broadcast | November 22, 2006

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