Ending simultaneous substitution could be ‘huge financial hit’: analyst

If the CRTC ends the practice of simultaneous substitution, as it has suggested it could as part of its review of television, conventional broadcasters would be in for a “huge financial hit,” said Barry Kiefl, president of Canadian Media Research Inc. “This has been estimated to be worth anywhere from $200 to $300 million in additional advertising revenue that private broadcasters receive, and a lot of that would just basically be cut off because the audience would no longer be watching the Canadian ads,” he said. Currently, CRTC simultaneous substitution rules require service providers, at the request of broadcasters, to replace television signals from distant Canadian or U.S. stations with those of a more local station when the same program is being shown at the same time. In its notice of consultation, the CRTC asked for comment on whether simultaneous substitution should be maintained, as well as about alternatives to the practice, including non-simultaneous substitution, among other questions. It noted that “errors made in performing substitutions and other problems as well as special events, such as the Super Bowl, have made an irritant to consumers and a frequent source of complaints,” adding that of the 458 complaints it received last year regarding the practice, 20 per cent were related to Super Bowl commercials. The CRTC noted that there are no up-to-date estimates of the value of simultaneous substitution to Canadian broadcasters, though it has previously been estimated at about $200 million annually. It said “the actual value of simultaneous substitution may be relatively small.” Phil King, president of sports and entertainment for BCE Inc.’s CTV network, told the Wire Report in January that simultaneous substitution remains “necessary” and “crucial” to the very existence of conventional broadcasters in this country. Kiefl said that the CRTC could have decided to include the discussion about simultaneous substitution as a “carrot” to the public “to make it seem as if they’re going to allow Canadians to look at the Super Bowl ads, and then they’ll take back the carrot and say it’s not possible, it’s just too expensive or something.” He said it “looks good from a PR point of view that they’re at least considering allowing these American stations.” Kiefl added that putting the end of simultaneous substitution on the table could also be a way of “fending off” the broadcasters who have asked for the non-simultaneous substitution — the running of Canadian feeds of U.S. shows on U.S. channels, with Canadian commercials, even if Canadian broadcasters schedule the same shows at different times. “CTV and Bell have for a long period of time wanted to have non-simultaneous substitution,” he said. “This is something that the commission has shied away from for many years.” While the commission allowed Rogers Communications Inc. to experiment with the practice in the 1970s, he noted, “it’s never really taken hold.” Once they are faced with the prospect of losing any kind of substitution, broadcasters who are asking for non-simultaneous substitution may be more likely to be satisfied with the status quo, said Kiefl. He added that if the CRTC does eliminate simultaneous substitution, one option the broadcast distributors would have is to move the American channels off basic service and either sell them individually or package them into a new bundle. “They could start charging for access to the American channels,” he said. “That would be one way of doing it because a lot of people wouldn’t bother to pay for the channels just to see the commercials. So it would take away some of the problem.” Simultaneous substitution is only one of a number of issues the CRTC plans to tackle in the hearing it will hold this fall during Phase 3 of its ongoing review of television services. It announced the hearing in a notice Thursday, along with a report to the federal government looking at the feasibility of a pick-and-pay regime. The hearing will also look at making it easier for non-Canadian TV services to enter Canada, fostering local programming and funding mechanisms for Canadian content, as well as implementing a set-top box audience measurement system and fostering a more dynamic marketplace for broadcast distributors, among other things. Of the 80 questions the CRTC asked for comment on as part of the consultation, none dealt with the possibility of regulating online, over-the-top (OTT) services such as that provided by Netflix Inc. In Phase 2 of the TV review earlier this year, the CRTC released a questionnaire which asked Canadians to comment on the possibility of regulating Canadian content and programming standards for online services, implying that the regulator was reconsidering its previous stance not to regulate OTT services. Kiefl said Friday that not including that topic in the review “must have been deliberate on their part.” “ has shied away from regulating these services for the longest time,” he said. “Maybe it’s legal advice, that they feel they’re not in a legal position to do it, so they’ve come to that conclusion and don’t want to talk about it. That’s the only thing I can think of.” In 2009, the CRTC upheld the exemption from regulation for online content, though it said at the time it would review that policy in 2014. In 2011, it opened a “watching brief” on the issue following a consultation about OTT services, which concluded regulation was not necessary. In an emailed statement Friday, CRTC spokeswoman Patricia Valladao said the commission does not “currently have any plans to review the digital-media exemption order as part of the Let’s Talk TV review or any other proceeding.” While the hearing will not deal with online services, Kelly Lynne Ashton, an independent TV consultant in Toronto, said proceedings will nonetheless be “gigantic.” “I think stakeholders are going to have to choose what issues they’re going to focus on. It’s going to be difficult to address all of them,” especially in a 15- or 10-minute appearance at the hearing, she said. “It’s the future of television; there’s a lot at stake. But I guess we’ll all just have to do our best.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Ending simultaneous substitution could be ‘huge financial hit’: analyst

Broadcast | April 25, 2014

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Ending simultaneous substitution could be ‘huge financial hit’: analyst

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