Possible windfall to accrue to Bell Fund if ExpressVu application successful

The Bell Broadcast and New Media Fund could receive a small financial windfall if Bell ExpressVu’s application to change its contribution guidelines for its pay-per-view (PPV) service is approved by the CRTC. As part of its PPV licence renewal application (Broadcasting PN 2005-59), ExpressVu has asked the regulator to allow it to put all of its PPV-related programming contributions into the Bell Fund. The hit would be offset somewhat by its request to change its method of calculating those contributions, but the net effect could still see the Bell Fund grow richer by several hundred thousand dollars per year. Currently, Bell ExpressVu’s PPV operations contribute 5% of revenues to the creation of Canadian programming, with 80% of that tagged for the Canadian Television Fund (CTF) and 20% for the Bell Fund. The DTH provider is asking the regulator to change that to allow ExpressVu to put its entire contribution into the Bell Fund. But, it is also asking for regulatory symmetry with cable companies in changing how it calculates its contribution such that the gross annual broadcasting revenues would be deemed to be 50% of the total retail revenues received from customers. ExpressVu’s application notes: "Approval of this proposed change would result in a reduction of its financial contributions to support the development of Canadian programming." The change in formula would lead to a reduction of about 40% in the amount being contributed toward independent funds. Analysis of financial results for 2003 filed with the CRTC show that in that year, the change in formula would have led to a contribution to the Bell Fund of about $883,110 – more than double what was presumably a $294,370 contribution under the current method. What’s good news for the Bell Fund, however, is bad news for the CTF. Canadian NEW MEDIA’s analysis shows that the Canadian television would have been the recipient of around $1.18 million for the period in question. Under the new formula, that would be reduced to nil. Moving forward, assuming ExpressVu’s total subs will have grown by about 38% between the end of August 2003 and August 2006, with PPV revenues moving roughly in lock-step, the total contribution could be $1.25 million for the first year of the licence renewal. Readers are cautioned, however, that PPV has not proven to be as high a growth industry in Canada as DTH itself. ExpressVu VP Chris Frank wouldn’t discuss the financial impact on the Bell Fund of its CRTC request, except to say there would likely be an "uptick" in the DTH company’s contributions. He told CNM the financial considerations are "irrelevant" to ExpressVu’s request. He says the application was made in the interests of a level playing field and having the same rules apply to ExpressVu as those that currently apply to cablecos such as Shaw and Rogers. Those ground rules were set out in 2000 in Broadcasting PN 2000-172, with the 50% rule being adopted since many of the PPV services offered by cablecos are supplied through a distributor, though not always. Frank says it’s only fair that his company abide by the same, more relaxed, rules as cablecos. "There’s nothing radical here. It’s simply us indicating to the commission that we’re going to do like all of the other guys: we’re going to pick a single fund and it’s going to be the (Bell Fund), which is a very, very important fund. If you speak to any of the independent new media producers, they’ll tell you how key the Bell Fund is for the survival of that industry, and we just want to give them a little extra change. That’s all…We’re simply asking to be brought into symmetry. This is not radical. We’re just asking to have the same definition as the new VOD licensees, and, I think you’d agree, pay-per-view competes with VOD, and vice-versa." The deadline to comment on the application is July 15.

Possible windfall to accrue to Bell Fund if ExpressVu application successful

Broadcast | June 24, 2005

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