Advertisers advocate reverse carriage fee approach

The Association of Canadian Advertisers believes it has found the fix for Canada's carriage fee woes: reduce them for speciality channels and don't introduce them for conventional broadcasters. The result, the ACA claims, is that broadcasters will make more money from advertising and consumers will pay less for cable and satellite services. "Advertising money is flowing away from conventional broadcasters to specialty channels because they offer better rates. They offer better rates because they are over-subsidized. (Advertisers) would put more expensive ads on specialty channels if the CRTC reduced those channels wholesale rates," the ACA's VP of policy and research Bob Reaume told the CRTC Friday at the BDU and specialty hearing in Gatineau. Reaume's suggestion is not only original and innovative, but it cuts straight to the heart of the carriage fee debate. Specialty channels have higher profit margins than conventional broadcasters because they have high carriage fees and a healthy amount of advertising. And because of this subsidy, they can sell ad time for less. In short, if carriage fees drop, advertising rates will go up. Reaume confirmed that it's the lower ad rates that are driving advertisers to specialty channels and not some perceived niche audience. "Large companies with multiple brands are buying tonnage; they want lots of advertising time," said Reaume. "To them, TV is TV. They don't differentiate between conventional and specialty. They look at the size of the audience and the price of the advertising time." Since 1995 television advertising has accounted for 23% to 25% of the total Canadian advertising. Despite continued audience fragmentation, Reaume said he was willing to bet the commissioners that television would maintain that ratio for another decade. But as Reaume told Canadian Communications Reports last month, advertisers want to protect their investment in the broadcasting system. This includes protecting against advertising clutter by not increasing the 12 minute per hour advertising limit on specialty - one ad in 24 is more effective than one in 40, said Reaume. While advertisers will always buy time on live programming like news and sports, Reaume warned that drama, movies and comedy will lose their value because more viewers are using PVRs to bypass commercials. "There will come a time when advertisers will not support those shows that have a high instance of being recorded because it will not be economical," said Reaume. " that same machine can help us." Reaume said advertising needs to be a part of any new technology platform, including video-on-demand or during local avails. Technology, he said, can also be exploited to increase the effectiveness of targeted advertising. He added that community channels should also be open to advertising. "I think there would be a number of advertisers, like local and small businesses, that would want to take advantage of that time," he said. "We're all about universal access for advertising." Attendance declines as week one draws to a close What a difference four days makes. CRTC commissioner Rita Cugini joked to Reaume that because of advertisers' importance to the entire broadcast system he must have felt like the belle of the ball. But if that was the case, Reaume would have had a hard time finding a date in the Outaouais Room on Friday morning. Not only did Reaume buck the large-panel intervener trend by appearing as the lone ACA representative, but the hearing audience had dwindled from standing-room only on Tuesday to the single digits by the end of the week. MTS Allstream Inc. followed Reaume, and similar to previous intervening BDUs, it asked the commission to reduce the mandated size of basic cable packages. But MTS went one step further than its distribution brethren by also making the borderline shocking request that services with the 9(1)(h) designation also lose their must-carry basic status. "These are services that have been deemed by us to have a benefit to all Canadians and therefore all Canadians should be receiving them," CRTC chair Konrad von Finckenstein told MTS. "Aren't you running counter to what we decided last year?" MTS responded that like any other channel, 9(1)(h) services should be subject to customer choice. Although, MTS's VP of regulatory affairs Teresa Griffin-Muir acknowledged that one of those services, CPAC, is broadcasting these very hearings to all Canadians who have a BDU subscription. So maybe if the commission eliminated the 9(1)(h) services' must-carry basic status the audience in Gatineau would be more robust? Something tells me it's not an experiment the commission is likely to undertake. Rather, with Canada's two largest private broadcasters, CTV and Canwest, appearing this Thursday, attendance, and panel sizes, are likely to increase once again this week.

Advertisers advocate reverse carriage fee approach

Broadcast | April 14, 2008

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