Shaw PPV given green light to coast-to-coast terrestrial service

Calgary-based Shaw Pay-Per-View Ltd. will soon be coming to eastern Canada, and Astral Media Inc. will just have to learn to share. On January 31, the CRTC approved the Shaw Communications Inc. division’s request for a licence amendment, allowing its well-established terrestrial pay-per-view (PPV) service to branch out from its western base and offer Ontarians and Quebecers general interest programming (Broadcast Decision 2006-23). For several years, Astral Media has been the dominant terrestrial PPV provider from Ontario east, while Shaw enjoyed the same monopolistic stature in the western provinces. Although competition from satellite and digital television is brisk, basic cable remains Canadians’ primary choice for television services. More than 6.6 million Canadian households are holding on to their basic cable subscriptions; consequently, terrestrial PPV services continue to play an important role in the pay TV market, with national revenues exceeding $371 million in 2004 according to the CRTC’s 2005 Broadcasting Policy Monitoring Report. Shaw’s stature as Canada’s second-largest cable television company with 28% of the cable television market makes terrestrial PPV a necessary – and profitable – market for the Calgary-based broadcaster and its subsidiaries. Perhaps, then, this is why Astral Media Inc. is going to such great lengths to defend its stronghold in eastern Canada. Astral has a 20.4% stake in the national French-language terrestrial and direct-to-home (DTH) PPV Canal Indigo service and also owns 50.1% of the regional English-language terrestrial and DTH PPV service known as Viewer’s Choice. Since Shaw distributes Viewer’s Choice in the west and Astral in the east, Shaw’s expansion into the eastern region would understandably be cause for concern at Astral. The Montreal firm’s spokespersons declined to comment on their new competition. Nevertheless, Astral’s apprehension is evidenced in their multiple interventions filed in connection with Shaw’s licence amendments. Astral argued to the CRTC that Shaw did not make a commitment to the ratio of French- to English-language channels that would be offered on its terrestrial PPV service – Shaw merely proposed to make French-language PPV services available to those affiliates wishing to provide such programming. Arguably, this could result in a greater ratio of English- to French-language channels than the 3:1 currently imposed on Shaw. Astral further noted that Shaw’s ratio of Canadian to non-Canadian French-language events was much lower than that imposed on its Canal Indigo. The CRTC disagreed, and Shaw’s proposal to offer a minimum of 20 Canadian feature films in French (or dubbed French), with a minimum of 8% of feature films and 20% of all other programs derived from French Canadian productions, was approved. Astral also tried to claim "financial hardship," telling the commission that Shaw’s terrestrial PPV expansion would have a detrimental effect on the bottom line at Astral’s Viewer’s Choice and Canal Indigo services. Astral filed a similar opposing intervention in Bell ExpressVu’s application for a national terrestrial PPV service (Broadcasting Decision 2000-737). Again, Astral couldn’t offer detailed financial projections, and once again their cries fell on deaf ears. It is not entirely clear whether Shaw will attempt to use Viewer’s Choice as their PPV service in Eastern Canada, as several calls to Shaw representatives were not returned. It is, however, safe to assume that Shaw Communications will find itself in some sticky situations with regards to BDUs. Astral has developed long-standing relationships with most BDUs in Ontario eastward, and usurping these agreements may prove to be a monumental feat. While Shaw has its own BDUs in place such as Thunder Bay ON and Sault Ste. Marie ON, it may face difficulties here too. Section 6.1 of Pay Television Regulations (1990) prohibits licensees from giving preferential treatment to any BDU, including itself, or subjecting any person to an undue advantage. Any move to provide PPV services to its own BDUs at a discounted rate or mandate that they offer Shaw’s PPV services instead of their competitors’ will likely backfire on Shaw and result in potentially costly and damaging CRTC hearings and judgments. In 2003, SaskTel and Manitoba Telecom Services Inc. filed a complaint with the CRTC, alleging that Shaw had not offered Viewer’s Choice to them on terms comparable with its arrangements with other BDUs. In essence, Shaw was demanding hefty guaranteed payments from SaskTel and MTS, as well as their participation in a revenue-sharing scheme where 80% of gross income went to Shaw. Shaw claimed that the differences were justified because of requirements imposed by US rightsholders and costs associated with distributing programming through DSL providers. The Commission found little merit to Shaw’s arguments, and ordered Shaw to provide PPV services to SaskTel and MTS at rates comparable to those charged to other BDUs (Broadcasting Decision 2003-408). With this history, Shaw PPV will have to tread carefully but, if properly executed, a countrywide expansion will result in a genuine revenue boon for Shaw shareholders. While these extra funds may prove to be a windfall for the company, they aren’t likely to find their way into the Canadian production industry’s coffers. The Alberta Motion Picture Industries Association (AMPIA), the Director’s Guild of Canada (DGC) and the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA) filed interventions in connection with Shaw’s application to expand its terrestrial PPV services nationally. Shaw Pay-Per-View had been required to invest the greater of $2.4 million or 30% of Shaw’s share of the gross revenues from the broadcast of films and events distributed by its PPV services in Canadian film production. However, comparative services such as Canal Indigo and Look Communications were only required to contribute a comparatively meager 5% of their gross revenues to Canadian programming. Shaw has long tried to change this apparent inequity with its competitors. In 1998 WIC Premium, now owned by Shaw-affiliated Corus Entertainment, made an application to amend their funding formula for contributions to the productions of Canadian films. The terrestrial PPV service sought to reduce its annual expenditure on Canadian production from 30% to 5% of gross revenues, aiming for parity with other PPV and VOD services (as with its PPV services, Shaw currently devotes 5% of gross revenues from VOD services to Canadian cinema). Canadian artists were outraged at the proposal, fearing the reduction would impede the growth of Canadian productions, and the CRTC rejected the proposed change (Broadcasting Decision 99-43). Armed with previous CRTC decisions and arguing on the basis of competitive equality as opposed to financial harm, Shaw lobbied yet again to reduce their mandatory contributions. Once again interveners from the Canadian production industry spoke out against Shaw’s proposal. The DGC was the most vocal in their discontent, and filed a robust opposition in which national executive director and CEO Pamela Brand argued that "A broadcast licensee should not be granted more privileges, while at the same time be permitted to reduce its contribution to the system." According to the DGC, such a change would result in $1 million less per year for Canadian programming. Much to the dismay of Canadian artists, this time the CRTC relented and allowed Shaw to reduce their contributions by 25%. With the door now open for Shaw to offer terrestrial pay-per-view services from coast to coast, Astral will have to come up with a creative solution to combat the potential erosion of its competing PPV offerings. The Canadian film industry may not benefit from Shaw’s added scale and reach, but Shaw shareholders will likely see more change in their pockets.

Shaw PPV given green light to coast-to-coast terrestrial service

Broadcast | February 10, 2006

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