Broadcasters don’t buy justification for ads on local avails

Amidst the backdrop of the global economic meltdown and dwindling ad revenues for the broadcast industry, Canada’s big cablecos are calling on the CRTC to allow advertising on local avails, arguing that the move will open up a new stream of income that will benefit the whole broadcasting system. But the move is getting little sympathy from the CBC and Canwest who argue that BDUs will reap the lion's share of these new revenues. Rogers Communications Inc., however, argues there will be a trickle down effect for the entire industry. For example, it says allow local avails will encourage BDUs to invest in advanced advertising infrastructure that will generate $100 million or more in annual ad revenues for Canadian broadcasting—increasing to about $150 million in five years. Additionally, Rogers says BDUs will contribute 5% of revenues from local avails advertising to Canadian programming. The CBC questions such commitments, saying BDUs have so far failed to develop plans to invest in advanced advertising platforms. “Indeed, many of the BDUs indicated that they have not developed the technical infrastructure, business models or timelines associated with deployment of advanced digital advertising platforms,” writes Bev Kirshenblatt, senior director, regulatory affairs. In addition, Kirshenblatt says several BDUs have indicated that cash from local avails advertising would be directed to other areas. Bragg Communications Inc., for instance, argues that BDUs should be allowed “flexibility” in deciding how to spend revenues from advertising on local avails. The CRTC has received a total of 47 comments in response to a call it issued last October for input on a proposed framework for the sale of commercial advertising on local availabilities of non-Canadian programming. The deadline for filing comments expired on April 2. Advertising on non-Canadian programs is known as local avails. It allows BDUs to place announcements or promotions in foreign programs. Current rules permit BDUs to use 75% of local availabilities for the promotion of Canadian programming, and 25% for promoting their own services, which sometimes may include non-programming services. BDUs like Rogers, Bragg, Shaw Communications Inc. and Cogeco have long argued that they should be allowed to sell advertising on local avails to generate more revenue for Canadian broadcasting. Six months ago, when the CRTC released a decision on BDUs, the commission postponed a ruling on advertising on local avails because of insufficient evidence and lack of credible information provided by BDUs. The CBC says that the CRTC should maintain the status quo on commercial advertising on local avails because the actions of BDUs don’t justify changing it. Kirshenblatt points out that apart from not providing reliable estimates for advanced advertising platforms, Rogers is still three to five years away from establishing these platforms. Shaw and Bell TV do not have the technical capacities to set up advanced advertising platforms, Cogeco has not provided a business model and Bragg has no plans to upgrade its facilities in anticipation of new advertising platforms, according to comments filed with the CRTC. “There is not a shred of evidence to support the view that selling interactive and or targeted advertising in local avails would result in any benefit except increasing the profits of the BDUs,” argues Kirshenblatt. But Natalie MacDonald, director, regulatory affairs at Bragg, suggests that the absence of such detailed plans right now does not necessarily mean it can’t be done. “We need to recognize that BDUs are often at the leading edge of new technologies and enhancements to platforms on which services can be provided,” she writes. Rogers dismisses opposition to advertising on local avails, saying it is based on “significant flaws and faulty assumptions.” The disagreement between BDUs and broadcasters over advertising on local avails is made worse by the global economic meltdown and the dire financial straits in which conventional television is now sailing. Some estimates from BDUs project that ads on 75% of local avails will raise about $45 million annually. Broadcasters fear ad revenues from conventional and specialty programming will be diverted to BDUs, contributing to more financial stress.

Broadcasters don’t buy justification for ads on local avails

Broadcast | April 16, 2009

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