Only Imagine conceives a world with paid ads on local avails

For the third time in nearly as many years, an application has been put forward to commercialize the free local advertising time granted to Canadian BDUs by US satellite-delivered programming services. The application by Only Imagine Inc. – a creation of former Craig Media Inc. CEO Drew Craig and Jeff Thiessen, ex-senior VP at Winnipeg-based religious programmer Trinity Television Inc. – proposes to use all two minutes per hour of local avails incorporated into US services. Under its proposal in Notice of Public Hearing 2006-13, OII would ensure 70% of those two minutes would be accessible to advertisers, while 30% would be reserved for BDUs and priority 9(1)(h) services, a similar breakdown to the current treatment of local avails. In order to perform the ad insertion, OII would require a relay distribution undertaking licence. The company would also have to set up a master control centre, and install equipment in each cablesystems’ headend that would locally substitute commercials during local avail time. All the advertising would be nationally bought spots, however, negating any competition for local advertising dollars between OII and smaller-market broadcasters. In their comments on the OII licence application, producers and advertising industry groups lined up in favour of the application, while broadcasters and BDUs stood squarely opposed. "I think that Craig has cracked the code on this, and is proposing a very workable way to do this, finally," Robert Reaume, VP for policy and research at the Association of Canadian Advertisers (ACA), tells Canadian Communications Reports. The ACA filed comments supporting the OII proposal, telling the commission that as much as a third of all viewing by Canadians is of services inaccessible to advertisers here, and that OII’s proposal would repatriate some of the advertising dollars flowing around those services. "Up to now, the regulatory policy up here has kind of been steadfast about separating BDUs from the commercial aspect of television," notes Reaume. "That could change any day, of course – it all depends on the regulator." Indeed, that change has already begun to some extent. Last year, Rogers Communications Inc. and Shaw Communications Inc. received permission to use 25% of their local avail time to promote non-programming services – such as their ISP operations, home and mobile telephony, and other businesses – as requested by the two BDUs in Public Notice 2006-69. Both had their conditions of licence amended to that end in Decision 2006-205 and Decision 2006-206, respectively. The ACA, however, was as unqualified in its condemnation of the decision to grant BDUs more control over local avails as it is in its support of OII’s plan. "Our argument was that these are valuable minutes of airtime, and why should Rogers be able to access it at no cost?" Reaume says. The CRTC has ruled on other past bids from businesses hungry to tap the potential of local avails. In 2003, a company named 49th Media Inc., founded by broadcasting veteran Kevin Shea, put forward an application to create a system of inserting paid advertising in local avail minutes. However, despite a dissenting opinion from commissioner Stuart Langford, the CRTC denied 49th Media’s licensing request. Reaume points out that although the ACA backed 49th Media’s application, it was flawed from the outset: it relied on securing consent from US programmers to substitute new ad content in all 12 minutes of advertising per broadcast hour allowable under Canadian law, instead of just the two minutes of local avail time. But US programmers approached by 49th Media were loath to grant that consent without CRTC approval, while the regulator wanted to see proof of consent from US programmers before giving the scheme the green light. The OII application tries to avoid that programmer consent quandary by proposing a "negative option" which banks on US programmers quietly agreeing to local insertion of ads out of eagerness to stay in the CRTC’s good graces. The application asserts that agreeing to ad insertion in local avails might win those programmers some goodwill from broadcasters and advertisers here, many of which have expressed hostility toward US services that draw subscription revenues here without giving anything back to the Canadian broadcasting system in return. More recently – but before the separate applications from Rogers and Shaw – the now-defunct Canadian Cable Telecommunications Association, in conjunction with Vidéotron ltée, put forward its own proposal in 2005 on behalf of its BDU membership (Public Notice 2005-88). Michael Hennessy, the last president of the CCTA and current VP of broadband and video policy at Telus Corp., says the OII application is essentially the same as the CCTA’s effort, except for the fact that a third-party – and not the cablesystems themselves – will operate the system. However, he says, that distinction is a big one, and along with the loss of control over local avail time, it’s likely a chief source of BDUs’ objections to the OII proposal. "I would think the idea of anybody coming into your headend and messing around with your signal is going to have all the distributors up in arms," Hennessy says, adding that resolving co-location arrangements, liability in case the system malfunctions and other contentious issues will prove difficult. For its part, however, OII says in its application that it will compensate BDUs for co-location space taken up by its system in BDU headends, and that a system malfunction would merely mean BDU subscribers would see the raw unaltered US content. But given that the CRTC has deliberated the issue of monetizing local avails several times already, Ken Stein, Shaw Communications Inc.’s senior VP of corporate and regulatory affairs, says OII’s proposal shouldn’t even merit a second glance from the commission. "Why would we need a middle man?" he asks. "We already applied to use it before, the CCTA applied to use them before, and they got turned down. And, they turned down the Shea one, so why are they considering this one?" In order to curry the commission’s favour, OII is also offering to contribute half of the revenue it receives from selling advertising on the proposed 70% of local avail time to a new fund, dubbed the Canadian Drama Initiative Fund in its application, which could mean as much as $170 million in financing for independent Canadian drama productions over the seven-year licence term. Additionally, OII commits to donating $5 million of advertising time over seven years for promoting Canadian drama and theatrical feature films in local avails, as well as an additional $5 million of ad inventory for promoting digital specialty services. But Hennessy says those sweetened terms for Canadian funding won’t likely cut it with the commission, noting that the CCTA application in 2004 proposed a $10-million annual stipend over seven years to the Canadian Television Fund, an entity that even then was in distress (see story on p.3-4 for more on the CTF’s current situation). "If they felt there wasn’t a big enough contribution they could have said, ‘Well, it’s a good idea, just kick more into the pot,’" he says. "But that wasn’t what they turned the down on."

Only Imagine conceives a world with paid ads on local avails

Broadcast | January 31, 2007

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