Bell says 16 local stations unprofitable without local TV funding

GATINEAU—Sixteen of Bell Media’s local TV stations are unprofitable without subsidies and face closure if they don’t continue to receive funding from the CRTC’s $100-million local television fund, Mirko Bibic, BCE Inc.’s executive vice-president and chief legal and regulatory officer, told CRTC commissioners at a hearing Monday. The CRTC is holding hearings this week to review the Local Programming Improvement Fund (LPIF), created during the 2008 global financial crisis to help support local stations amid declining advertising revenues. The $100-million annual fund draws contributions to support local programming from broadcast distributors like BCE, Shaw Communications Inc. and Quebecor Media Inc. During the last broadcast year, BCE paid $25.1 million into the fund and received $23.6 million in support of 19 of its 27 CTV stations across the country. Bibic said 10 of those stations would have been unprofitable without LPIF funding and that six were unprofitable last year after receiving the funding. He said the company would consider closing some stations if the LPIF is discontinued and other sources of revenue, such as carriage fees from the CRTC’s proposed value for signal regime, do not come to fruition. “Basically, what we’re saying is, rather than close them all right now, let’s wait if distant signal compensation, value-for-signal, hits, and the impact that it has. Or if they don’t hit or doesn’t have the impact that we had hoped, then the outcome is likely going to be closure,” he said. “Not all 19 will close, but without value-for-signal, without distant signal compensation and/or, without LPIF funding, some of those will close,” Bibic said. The CRTC’s proposed value-for-signal regime is now being reviewed by the Supreme Court to determine if it's within the commission's jurisdiction. Jacqueline Michelis, a BCE spokeswoman, declined to say which Bell stations might be affected. The list is confidential, she said in an emailed statement. At the hearing Monday, Bell reversed an earlier position and pledged its support for continued funding for CBC/Radio-Canada stations in small markets. “The future of local TV continues to be troubled and we’re increasingly concerned that private sector station closures are likely. In that event, the CBC will become the only local TV option for viewers in a growing number of smaller communities,” Chris Gordon, president of local TV and radio at BCE subsidiary Bell Media, told commissioners. “We believe those communities deserve to receive quality local programming for as long as possible and this requires sufficient funding,” he said. In documents submitted to the commission in February, BCE had joined integrated vertically broadcasters Shaw and Quebecor in asking the commission to revoke LPIF funding from CBC stations, which amounted to about $40 million of the total $106-million value of the fund last year. The CBC collects from the fund without paying into it because it is not a TV distributor. BCE had argued that CBC should not be permitted to draw from the LPIF because its $1.1 billion in parliamentary appropriations allows the public broadcaster “a level of financial stability that far exceeds that of private conventional broadcasters.” On Monday, Bibic said an LPIF that supports local programming in small markets should take the approach that a “viewer is a viewer, wherever they live, whoever serves them.” “Let’s make that the number one policy priority, and in that event it ought not to matter who serves you,” Bibic said. “That’s our guiding principle.” Bibic said the Conservative government’s budget reductions to the CBC contributed to Bell’s change in position. “You’re not going to hear BCE cry a river for the CBC, but it is a factor and that had an impact as well,” he said. Bibic called on commissioners to adopt a new formula for determining how LPIF funds should be allocated, urging the CRTC to break with a current formula that rewards stations that spend more on local programming in favour of one that would reward stations’ viewership levels in local markets. If the new model is adopted, he said, the commission should review the program again in two-to-three years to see if advertising revenues and other factors stabilize to the point where the LPIF could be discontinued. Shaw, which paid $31.8 million into the fund last year and collected $8.1 million for seven stations, called on commissioners to scrap the program entirely. Troy Reeb, Shaw’s senior vice-president of news and station operations, said the program is no longer needed because advertising revenues have rebounded and because over-the-air broadcasters no longer face cost pressures associated with converting their signals from analog to digital. He pointed to the Halifax market as evidence that the LPIF allocation model “will simply reward inefficient local news operations, deter innovation and distort the market.” Reeb said two local CBC stations in Halifax received $5.7 million last year, a sum that is “five times more than Shaw’s station in Halifax, which produces almost the same amount of local news.” He added: “Stations like CBC Halifax are not increasing the local programming audience, which on conventional TV is flat at best … They are simply taking audience share away from other stations and making the sustainability of private broadcasters even more challenging.” Jean Brazeau, senior-vice president of regulatory affairs at Shaw, told commissioners that if the CBC wants to prioritize local programming “as a strategic objective, this should be funded entirely within its existing budget.” The CBC is scheduled to appear at a hearing Tuesday morning. Also Monday, independent broadcasters Channel Zero Inc., CHEK Media Group, and Jim Pattison Broadcast Group argued in favour of maintaining LPIF funding at its current levels. Channel Zero and CHEK, which receive LPIF funding for their stations in Hamilton, Ont. and Victoria, B.C. respectively, argued that LPIF funds allowed them to undertake a new business strategy focused on driving local ad sales. This helped them rebound from the tenuous financial circumstances they faced in 2009, they said, but they could not say when their stations will be profitable without LPIF funding. "We've changed the model of local television and it's a work in progress," John Pollard, president of CHEK, said. “At some point, we would agree with you that you can’t have a subsidy for forever," Cal Millar, president of Channel Zero, added when asked why consumers should continue to foot the bill for the LPIF. “But we’re not sure that the time is now.” Cogeco Cable Inc., Corus Entertainment Inc., CBC, and other broadcasters and independent producers, are scheduled to present Tuesday. nkyonka@thewirereport.ca

Bell says 16 local stations unprofitable without local TV funding

Broadcast | April 17, 2012

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Bell says 16 local stations unprofitable without local TV funding

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