Starlight says ‘market failure’ warrants the public paying for better access, content

Filmmakers and producers backing a proposed all-Canadian film channel faced questions from CRTC commissioners about why the Canadian public should fund their channel and whether they considered launching the service on an online platform. A 19-member panel of backers for the service, called Starlight: The Canadian Movie Channel, a 100 per cent Canadian film channel that has applied for carriage on basic cable, appeared at a CRTC hearing Thursday, saying it would fill a need for a public “deprived” of affordable access to Canadian films. “What we have is a form of market failure, not because of a demand problem, but because of a supply problem,” Norm Bolen, who would serve as chief executive of the channel, told commissioners. “We will address the supply problem, and the demand that’s there will grow and show itself in a myriad of ways.” The panel of filmmakers, producers and officials appeared for the CRTC’s two-week hearing to consider 22 broadcasting applications for mandatory distribution of channels on basic TV packages. On its opening day Tuesday, CRTC Chair Jean-Pierre Blais warned of consumers’ concerns about affordability and choice if new channels are forced through regulation onto basic service with additional costs. Starlight has proposed the CRTC award it a mandatory distribution licence on basic cable with a wholesale fee of 45 cents per subscriber per month paid by broadcast distributors. Questions from commissioners focused on why the channel should effectively receive a public subsidy, because broadcast distributors are expected to pass on any new mandatory wholesale fees, plus a markup, onto their TV subscribers. CRTC commissioner Louise Poirier said Canadians pay about $60 million annually in taxpayer dollars for Canadian film through Telefilm Canada, and that broadcast distributors could be expected to add about $1 per month to each subscriber’s basic service TV bill to cover Starlight’s wholesale cost and a profit. “That’s $12 per year to see these films. So why would they have to pay a second time?” Poirier asked. “The irony is that, yes, it is the public who pays for the films, but the public doesn’t get to see the films,” said Quebec filmmaker and four-time Academy Award nominee Denys Arcand, who appeared on the panel. “Films worldwide are mostly seen on television, finally, and our television system, for various reasons, doesn’t provide this service. That’s why we’re here,” Arcand said. The channel, in its application, said it would earn $40.75 million in revenues in its first year of operation, including $250,000 in advertising revenues and $40.5 million in carriage fee revenues from about 7.5 million TV subscribers. Advertising would play in between films but not during them. The channel said about 70 per cent of its annual budget would go to programming, licensing, and production, and that it would finance about eight to 12 new Canadian films per year. Grant Buchanan, a broadcasting lawyer with McCarthy Tetrault, said on the panel Thursday that Starlight would not receive carriage revenues from all 11.5 million Canadian TV subscribers because the primarily English-language channel would not be distributed in most of Quebec. Buchanan said consumers’ cable bills could rise at any time, and if that’s the case, it would be better for that increase to happen with the new film channel on basic service. Blais and commissioner Stephen Simpson asked Starlight whether it would consider an online model or licensing its content online. “Some might look at this application as, rather than looking at the forward- platforms and seeing what might be down the road in four or five years, of looking too much at the past,” Blais said. “There are great, creative minds here.” “We will embrace every opportunity we have going forward, as these opportunities emerge, to distribute these films in new ways if those opportunities are available and financially viable,” Bolen said, adding that Starlight’s content would also be available on online and mobile platforms for basic service TV subscribers. “But television is still the dominant medium of our time. It is the way most people want to consume audiovisual content,” Bolen said. Ian Capstick, a consultant for Starlight, added that an online model would not generate the same level of subscriber revenues, and that online, over-the-top services tend to have less “second screen” interaction from viewers using social media platforms while watching. Michael Geist, the Canada research chair in Internet and e-commerce law at the University of Ottawa, criticized the possibility of awarding new mandatory carriage, or 9(1)(h) licences, this week on his blog, saying channels seeking the special licences should be required to meet a market demand for their product, not win a decision from commissioners. In a blog post Thursday morning, Geist pointed to a speech by Blais last fall that said the chair recognizes consumers want more control. Geist predicted the CRTC will reject the 9(1)(h) proposals it has heard so far in the hearing, and said Starlight would be “better suited as an Internet-based Netflix competitor.” Starlight says it would keep the exclusive television rights to the films it produces as well as video-on-demand rights. Officials with the channel said they would also accept a condition of licence to prevent shareholders from accessing Starlight’s film fund for producing content. “Canadians are deprived of easy, inexpensive, thematically curated access to our product,” Canadian film producer Robert Lantos said on the panel. “You will never stumble onto a Canadian film on an over-the-air, conventional network.” In a brief interview with The Wire Report following the presentation, Lantos said a Canadian broadcast distributor recently licensed about 300 Canadian films for its video-on-demand service. He would not say which company licensed the films, adding that the action may have been inspired by the Starlight application. Aboriginal Peoples Television Network Inc. also appeared Thursday for its proposal to renew the channel’s mandatory carriage licence with a 15-cent wholesale fee increase, from 25 to 40 cents per subscriber per month. The channel said it needs the fee increase to deliver more programming over its next licence term, including additional programming, aboriginal-language content and multiplatform distribution. “APTN is very much aware of the pressures facing the Canadian broadcasting industry and the consumer interest in a low cost, basic level of service,” Jean LaRose, CEO of the channel, said in his opening remarks. CBC/Radio-Canada also appeared seeking a “must offer” licence for its arts and culture specialty channel ARTV in anglophone markets, which would require broadcast distributors to make the channel available to its subscribers. CBC made the same argument for ARTV as part of its licence renewal hearing held last November. The channel currently receives mandatory distribution in francophone markets. Canadian Punjabi Network Inc. made its case Thursday for mandatory carriage on basic service for a new specialty channel called Canadian Punjabi Network. The company has not asked for a mandated wholesale fee. The channel said it would broadcast more Canadian content than similar channels in Canada. “Canada will have an even stronger voice and programming from Canadians for Canadians,” Tarsem Dhillon, chief executive of the proposed channel, told commissioners, and suggested more coverage of the Canadian prime minister than the Indian one. “Less of Manmohan Singh, more of Stephen Harper,” Dhillon said. Zoomer Media Ltd. was also up Thursday to ask for mandatory distribution on basic for Vision TV: Canada’s Faith Network. Interveners are scheduled to start appearing Friday. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and editing by Nicholas Kyonka at nkyonka@thewirereport.ca

Starlight says ‘market failure’ warrants the public paying for better access, content

Broadcast | April 25, 2013

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