Ratings, revenues never enough to make Sun News Network worthwhile: experts

Quebecor Inc. said it took Sun News Network off the air early Friday morning due to “a series of barriers to carriage,” while some experts said the long-struggling channel’s challenges from the beginning were a result of its flawed blueprint. Quebecor said in a press release the company had not been able to find a potential buyer after months of trying, and given the financial losses involved had no alternative but to shut down the channel. “Over the past four years, we tried everything we could to achieve sufficient market penetration to generate the profits needed to operate a national news channel,” Julie Tremblay, president and CEO of Sun Media and Quebecor’s media group, said in a press release. “Sadly, the numerous obstacles to carriage that we encountered spelled the end of this venture.” Christopher Waddell, an associate professor and former director of the School of Journalism at Carleton University, said in a phone interview that Sun News Network was designed on the assumption the CRTC would approve the channel's bid to be a part of the basic channel package for millions of Canadians. “The whole thing was a flawed design in the first place,” he said. “When they were unsuccessful in getting mandatory carriage, it made the economics of it not worth very much.” Sun executives told the CRTC that the channel had run into carriage issues with some TV distributors, and that the channel’s average wholesale carriage fee of 9.7 cents was a “death sentence," after Quebecor had applied for mandatory carriage on basic TV packages, with a wholesale fee of 18 cents per month per subscriber. The CRTC rejected Sun News’ application in August, though it launched a consultation process on the general question of carriage for news channels. In its December 2013 decision in that process, the CRTC granted “must offer” status to Canadian all-news specialty channels, meaning that the channels had to be offered to all subscribers, and available on a standalone basis. The regulator also said that if distributors choose to put channels together on the dial they must include all news channels in relative proximity to one another, though they did not go as far as mandating the creation of “news neighbourhoods.” Following that decision, Quebecor said it would renegotiate its existing carriage agreements with broadcast distributors and attempt to reach carriage agreements with television providers that didn’t carry the channel previously. Kory Teneycke, vice-president of Sun News Network, told The Wire Report at the time that he expected the commission’s decision would allow the channel to negotiate higher carriage rates from distributors. In the following months, Sun News was made available by TV providers Telus Corp. and Manitoba Telecom Services Inc., as well as BCE Inc.’s Bell Fibe and satellite TV service and Bell Aliant Inc.’s FibreOP TV. Those efforts, it seems, weren’t enough to save the channel. Waddell said that Sun had trouble finding an audience and increasing subscribers even after the CRTC’s must-offer ruling. “You can make money in specialty channel television in Canada as long as your subscriber revenue is greater than your programming costs, even if nobody watches your channel,” he said. “Their whole model was based on the assumption that they could force anyone to have to carry it, and then they would get a certain amount of revenue a year, and as long as they kept the programming costs below that revenue, they would make money, even if nobody watched. “In the end result, they didn’t get the revenue they needed to continue to operate,” he added. Waddell noted that Sun was also at a disadvantage as likely the only news channel in North America with no affiliated TV stations and “no real access to any sort of video,” like CBC/Radio-Canada and CTV have from their local stations. Broadcasting consultant Peter Miller said in a phone interview that news channels are among those most expensive to operate. “You need a lot of staff, you need a lot of equipment, it’s a live channel,” he said. “There’s a lot of channels that launch with very little revenue. They acquire programming, they play it back. A news channel, obviously, you can’t do it that way.” “The reality is, in that area, because they’re expensive to run, the market cannot accommodate too many of them,” he added. He noted Sun was also late to the market, which already had a number of Canadian and foreign all-news channels. “It was hard for them both to get distribution and it was hard for them to get audiences,” he said. Miller pointed to the $316-million sale of Quebecor’s English-language Sun newspapers to Postmedia Network Canada Corp. proposed in October 2014 as another factor, adding that when Sun “lost the synergies with the print division, they lost the ability to cut their costs that way.” Reports had indicated ZoomerMedia Ltd. was at one time in talks to buy the channel, though the two companies failed to strike a deal. Rob Dilworth, a partner at DILigent Marketing Solutions who previously served as vice-president of research at Bell Media, said in a phone interview that Sun never got the amount of viewers they had aimed for. “As a result, while they were making decent subscription revenue, the ad revenue never came to them,” he said, adding they also had a large staff, no other news departments to get content from, or a major household name to draw people into the network. He noted that though Sun was available in almost five million homes, its ratings were below its competitors. According to the CRTC’s latest Communications Monitoring Report, in 2013 Sun News Network lost $14.8 million, compared to the profits of $5.5 million earned by CTV News Channel and $20.4 earned by CBC News Network. During that year, CTV News Channel brought in revenues of $26 million, with 8.4 million subscribers, while CBC News Network revenue was $86.8 million and 11.3 million subscribers; Sun News Network had $7.9 million in revenue with 4.9 million subscribers. In the French-language market, RDI had 11.1 million subscribers, $54.6 million in revenue and profits of $10.5 million, while Quebecor’s LCN had 2.5 million subscribers, $32.2 million in revenues, and $8.6 million in profits. At least one other new channel is set to launch in Canada, as Shaw Communications Inc. applied for a licence for a news channel in September. Rogers Communications Inc. and Vice Media Inc. are planning to launch a specialty channel part of their $100 million joint venture, though spokespeople at both companies did not respond to questions about whether it will be classified as an all-news channel. Miller said we might see more projects like the Vice deal in the future. “A brand that people are aware of and instantly get some recognition, and has a position in the marketplace that people understand,” he said. “I think we’ve seen a trend in the last decade of more and more top U.S. brands coming to Canadian television, and that’s a trend that’s going to continue.” Waddell said Sun’s demise comes at a challenging time for subscription television in general, noting that the CRTC is dealing with the public’s reluctance to pay for channels they don’t watch by considering a pick-and-pay system as part of its proceeding on the future of television. “I think the problems that Sun TV faced in terms of consumer resistance to paying for something they may not want to watch is increasingly going to be a problem that is going to affect all specialty channels,” he said. Another problem for news channels is that because people can access so much news online, they may be not feel the need to watch a news channel on TV, he added. Waddell noted that Shaw’ proposed new channel, which will combine a national newsfeed with local news segments, will be a different position than Sun was because it has local stations across the country, meaning it has facilities across Canada and access to a lot of material produced by those stations. “Sun had none of these things,” he said. Dilworth said an all-news channel has to have a broad appeal, “whereas Sun News was a pretty narrow appeal.” The audience for news channels in Canada are not growing, so they have to “steal viewers from one of the existing channels,” he said. “And that’s a tough, tough thing to do. So you need some kind of hook or some kind of major attraction to draw people over.” He added: “I’m not sure the Global news team can do that across Canada. But in Calgary, Edmonton and Vancouver, I think they can.” While there are millions of people watching news on traditional TV, the number of people who watch all-news channels is relatively small, he said. “For a new entrant, they’re going to be fighting for a piece of a pretty small audience. So to make that a commercially successful venture is a big challenge.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Peter Henderson at phenderson@thewirereport.ca

Ratings, revenues never enough to make Sun News Network worthwhile: experts

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