Rogers hoping to improve national ad sales with SCN purchase

Rogers Communications Inc. is hoping its acquisition of the Saskatchewan Communications Network (SCN) will help increase national advertising revenues across its Citytv network, Rogers Media president Keith Pelley said at a CRTC hearing Monday. “In order to get on network advertisers’ radar, and even get the chance to compete with CTV or Global for these dollars, we need to extend our reach and establish a national presence,” Pelley said in opening remarks during the first of nine days of CRTC hearings in Toronto. To do that, he said, the company needed to “fill in gaps” in locations where its Citytv service isn’t currently available, such as in Saskatchewan. Rogers currently operates local Citytv stations in Toronto, Vancouver, Winnipeg, Calgary and Edmonton. The company has also arranged for affiliate stations to carry Citytv programming later this year in Kamloops, B.C., Prince George, B.C., and Medicine Hat, Alta., and has reached a deal to acquire another affiliate in Montreal, Que. In January, Rogers announced that it had reached a deal to acquire SCN from current owner Bluepoint Investments Inc. If the deal is approved, the company said it would continue to respect licence conditions requiring SCN to broadcast commercial-free educational programming between 6 a.m. and 3 p.m. daily. The rest of the station’s broadcast schedule would mimic its Citytv programming in other regions, the company said. On Monday, Pelley told commissioners the acquisition would allow the company to build its Citytv brand “into a larger and more competitive network.” He said the network’s “lack of national reach has been a huge competitive challenge” for the stations. “It has essentially shut us out of network advertising buys, which represent almost 50 per cent of conventional television advertising revenue or ... close to $1 billion,” he said. Pelley said national ad sales represented “only a small fraction of Citytv’s advertising revenue.” Rogers purchased the Citytv chain of stations in 2007 with an eye to compete with the other national networks for popular American shows rights and advertising dollars. Its primary national competitors now include CTV, which is owned by BCE Inc., and Global, which is owned by Shaw Communications Inc. In quarterly financial information released last month, Rogers said a shrinking advertising market caused the company to lose $14 million across its Rogers Media division in the first three months of this year. Pelley told commissioners that Rogers initially entered into an affiliate agreement with SCN in December 2011, but moved to purchase the broadcaster after realizing it was in poor financial health. Bruce Claassen, president of Bluepoint, said SCN had financial problems due to poor local advertising sales. “Even during the campaign period, we received incredibly small amounts of funding and it became extremely difficult,” he said. Claassen said the station’s national advertising revenues met the company’s projections, but annual local ad revenues were about $1 million lower than they had predicted. “When you’re running a station with a $3 million top line, $1 million is a fairly significant amount of money,” he said. Claassen said SCN’s history as a commercial-free educational broadcaster was partly to blame for the sluggish advertising revenues. Pelley said Bluepoint was now in a position where it either had to sell the station or shut it down. “If in fact we don’t buy it, then Mr. Claassen will not be able to sustain it,” Pelley said. In separate documents filed with the CRTC in March, the company estimated it would lose up to $4 million annually to keep SCN running. If the deal is approved, Pelley said Rogers would spend 23 per cent of the station’s revenues on Canadian programming expenditures, the majority of which would be funneled to independent content producers from Saskatchewan, he noted. “Twenty three per cent of our entire revenues will go back to Saskatchewan independent producers,” he said. Pelley said those expenditures would be in addition to SCN’s mandated contributions to the Canadian Media Fund, and that Rogers intends to invest $300,000 over three years into the province’s digital production sector through the Rogers Digital Development Fund. He said Rogers would spend five per cent of SCN’s revenues on educational programming. If allowed to purchase the station, Rogers would also invest about $1.4 million to offer SCN in high definition and to update its traffic systems, Pelley told commissioners. “We believe these commitments are significant and consistent with the size and nature of the transaction and will yield long-term benefits for both Saskatchewan viewers and its cultural community,” he said. Rogers added that it would retain four of nine staff positions at SCN in Regina, Saks. During the hearing Monday, commissioners noted that Bluepoint failed to meet a licence condition that required SCN to spend $1.75 million on tangible benefits last year. Commissioner Stephen B. Simpson asked Pelley if Rogers would pursue the transaction if it were required to pay back that money. “If in fact we had to meet those requirements, we would sadly decline this purchase,” Pelley said. Jay Thomson, vice-president of broadcasting policy and regulatory affairs at the Canadian Media Production Association (CMPA), was one of four interveners that appeared at the hearing in support of Rogers’ takeover bid. Thomson said it was “bad news” that Rogers would refuse to complete the deal if it was required to pay off Bluepoint’s tangible benefits debt. He said approval of Bluepoint’s acquisition of SCN in 2010 hinged on the company’s annual tangible benefit requirement, which included $1.75 million per year to support independent productions in Saskatchewan, and another $1 million per year for the development of station production and content. “These commitments were fundamental to the commission approving that application in a decision less than a year-and-a-half ago,” he said. “Under the commission’s policy, Rogers is obliged to honour Bluepoint’s benefits … To allow Rogers to escape this obligation would be to grant them an exception to that policy.” Pelley responded that the company’s acquisition of SCN “is in the public interest as it will maintain educational programming and cultural investment in the province.” dgrenier@thewirereport.ca

Rogers hoping to improve national ad sales with SCN purchase

Broadcast | May 8, 2012

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Rogers hoping to improve national ad sales with SCN purchase

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