Péladeau’s quest for exclusive Nordiques content

When Quebec City Mayor Régis Labeaume announced plans to build a $400-million hockey stadium in the city in September, Pierre Karl Péladeau looked on, the NHL on his mind. It’s hard to know precisely what competitive strategies Péladeau has been thinking about lately. But to take an educated guess, the CEO of $3.8-billion media empire Quebecor Inc. has been thinking a lot about hockey and media content. Given BCE Inc.’s announcement in September that it reached an agreement to wholly purchase CTVglobemedia Inc., and Shaw Communication Inc.’s completion last month of its acquisition of Canwest Global Communications Corp.’s broadcasting assets, there are now four communications empires in Canada providing broadcasting, television distribution, telecom, and wireless services. Quebecor is one of them—next to BCE, Shaw, and Rogers Communications Inc.—and in a game this competitive, any edge matters. One edge, it appears, is owning an NHL hockey team. Péladeau is moving in that direction, having set his sights on returning the long-lost Quebec Nordiques to Quebec City. NHL representatives have held separate meetings with Labeaume and the Quebecor CEO to discuss the possibility of establishing a team in Quebec, and in an encouraging sign for Nordiques fans last June, NHL commissioner Gary Bettman expressed a willingness to correct “past errors”—a reference to the departure of NHL teams from Winnipeg and Quebec in the 1990s. Péladeau appears to be smarting from a rather bitter defeat last year when the Molsons outbid him for the ownership of the Montreal Canadiens—a team for which the Molsons, and a consortium including none other than Bell Canada, paid about $575 million. The Financial Post reported this fall that Péladeau has assigned some Quebecor officials to look at the value of bringing the Nordiques back to Quebec. Péladeau is thinking about hockey because owning a team would give him broadcasting rights to exploit across several platforms. Although national, league-wide broadcasting rights are negotiated with the NHL, Péladeau, if he were the owner of a new team in Quebec, would control its exclusive regional broadcasting rights. Brian Schecter, a media analyst with Puddle Duck Productions in Vancouver who has four decades’ experience in sports broadcasting, estimates the regional television broadcasting rights to a Quebec City team would be worth about half as much as the Canadiens, or roughly the same as a small-market, Canadian team like the Calgary Flames. TSN, owned by CTV, pays $20 million per year for the regional broadcasting rights to the Canadiens. That would put the value of broadcasting regional Nordiques games somewhere around $10 million. Péladeau would also draw a few more million through his share of the national broadcasting deals reached with the NHL. But overall, broadcasting doesn’t pay for a professional hockey team in a city the size of Quebec. So where’s the value? It’s no accident that, when Quebecor subsidiary Videotron Ltd. launched its wireless network in September, Péladeau said the company’s mobile subscribers may someday have the ability to watch, “perhaps, a Nordiques hockey game.” For Péladeau, the real value of a hockey team would be exploiting the content across several distribution platforms, creating a synergy: The team increases the value of the media assets and the media assets increase the value of the team. “There’s all kinds of promotional stuff that can be tied to a team,” says Richard Paradis, a communications professor at the Université de Montreal. Paradis points to Péladeau’s extensive media operations, including over-the-air television network TVA and specialty channels; the Sun Media chain of French and English tabloids and community newspapers; the Canoe.ca media portal; and more than 50 English and French magazines published under TVA Publishing Inc. (it accounts for 49 per cent of total magazine sales in Quebec, the company says.) Quebecor’s French-language specialty licence, TVA Sports, which the CRTC approved in February, would almost certainly come into play. “He’d probably exploit it to a maximum,” Paradis says of Quebecor’s media assets. “Let’s not forget that he owns newspapers, and the major, French-language, private broadcaster, TVA. He publishes God knows how many magazines and weeklies. He’s very well equipped.” In an age of on-demand television, live sports has emerged as some of the most valuable content on video. The rights to live sports can increase the value of television distribution systems. It can also increase the value of other content. Broadcasters and distributors regularly sit down with one another to negotiate carriage rights, and in Canada, where hockey is supreme among professional sports broadcasting, throwing NHL content into the mix makes the chips more valuable at the bargaining table. “If Quebecor ended up owning an NHL team in Quebec City, clearly they would own the rights to that, and hockey in Canada is highly important,” says Greg MacDonald, an analyst at National Bank Financial. “It’s got big value so your negotiating opportunity for all other content—that perhaps you don’t even own—automatically goes up.” Owning a hockey team may not affect Quebecor’s cellphone sales, MacDonald says, but it could boost the company’s broadcasting assets in a French-language market where audiences are more attracted to local content. It would also help Péladeau compete with other vertically integrated players, namely Bell, in the Quebec market. Adding a team would take away TSN’s virtual monopoly on broadcasting the only NHL hockey team in the province. “Right now, Quebecers have the choice of watching the Montreal Canadiens, which play at the Bell Centre, and that’s something Quebecor would rather not promulgate,” says Iain Grant, a communications industry analyst with the SeaBoard Group in Montreal. What’s more, BCE’s Bell Mobility has reached an exclusive partnership with the NHL that gives its subscribers access to more than 1,000 games on their mobile devices, including the Stanley Cup Playoffs. The deal provides Bell with exclusive mobile rights to NHL Centre Ice games, highlights, audio feeds and text message alerts. (Games broadcast by TSN, RDS and CBC are not exclusive to Bell; Videotron offers RDS and TSN’s NHL content via mobile.) If Péladeau has designs on an NHL team, he must ensure he’s getting the right price. The push for a team in Quebec can’t be successful unless it coincides with a push for a stadium to house it—hence Péladeau’s support for an arena in Quebec. But $400 million may be a little steep. The Air Canada Centre, where the Toronto Maple Leafs play, was built in 1999 for $175 million US and can seat 18,800 people. The Canadiens’ Bell Centre opened in 1996 at a cost of $190 million US, and can seat 21,273. Labeaume is pitching the 18,000-seat stadium in Quebec as a way to win a Winter Olympics bid and create the home for an NHL team. But cost appears to be one reason why the federal government has steered away from it. The City of Quebec has committed to invest $50 million into the arena, and the provincial government $180 million. The federal government was asked to contribute $180 million. But after some questions about whether the federal government would get involved, and controversy over spending federal public dollars on a professional sports facility, the government indicated: not so much. Quebec MP and Foreign Affairs Minister Lawrence Cannon has said there are demands for sports infrastructure in municipalities across the country, and that the private sector has primary responsibility for financing new facilities. “We’ll see with the different political authorities, but we don't control the file,” Péladeau acknowledged following a speech to the Canadian Club of Ottawa on Oct. 5, after the federal government signalled it will not meet the request for cash. But the same day, Péladeau also suggested he is not against helping to finance the arena. “We’re open. We’re not inflexible. We have the right to be creative and imaginative—and we will be—so that we can bring in an arena through which we will bring in a hockey team,” he said. Péladeau’s ambitions will be tested by how much he is willing to pay and what kind of financial partners he can draw, and financing an arena would be only one cost among many. There is also the cost of a team. Forbes’ 2009 NHL team valuation list estimated the most valuable hockey team in the NHL, the Leafs, at $470 million US, including the arena. Forty-nine per cent of that value was attributed to the size of the Toronto market. Montreal Canadiens were valued at $339 million, 47 per cent of which comes from its market size, 30 per cent from the stadium, 14 per cent from brand management, and nine per cent from revenues shared among all teams. But Péladeau would be looking at a much smaller market, something akin to the Calgary Flames, which Forbes values at $200 million US, including a $64-million US stadium. Léo-Paul Lauzon, the chair in socio-economic studies at the Université du Québec à Montréal, says a $400-million arena isn’t a viable business project—unless it’s paired with an NHL team. If it is, he doesn’t think Péladeau will have any trouble filling the hall. “If the Quebec Nordiques eventually become a team, that’s an investment that has no risk. Even if the Nordiques have zero wins and 82 losses in a year, the stadium will still be full,” he says. But costs will not be the only challenge ahead for Péladeau. If an NHL hockey team is headed back to Quebec, he could face competitors for team ownership. Lauzon says the City of Quebec and the province’s Caisse de dépôt et de placement, which owns about 45 per cent of Quebecor’s share capital, should not necessarily be willing to “hand over” the initiative to Quebecor. The Caisse, on it’s own, could lead its own bid with financial backing from outside the province. “We can find other buyers, not necessarily in Quebec, but in the United States, etc., that would be interested in partnering with the Caisse to build a stadium and own a hockey team,” Lauzon says. Another thing: Content exclusivity is not turning out to be the golden egg it was seen to be even eight weeks ago, when Bell announced its agreement to purchase CTV. The CRTC announced last month that it is looking into the question of content exclusivity in a country dominated by large, vertically integrated communications companies. Péladeau may find that exclusivity is less valuable to media giants if the regulatory framework is changed. As the commission said in its notice of consultation, it “prefers to see distribution of programs on a non-exclusive basis, as this enhances consumer choice and furthers a competitive workplace.” news@thewirereport.ca

Péladeau’s quest for exclusive Nordiques content

News | 11/15/2010 4:06 pm EST

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