The Score, Sportsnet seek wholesale rate increases to remain competitive with TSN

Sports specialty television channels The Score and Rogers Sportsnet are claiming economic need in requesting unprecedented increases to their regulated wholesale rates in their licence renewal applications. Sportsnet, owned by Rogers Media Inc., is asking the CRTC to hike its wholesale rate for carriage in basic packages from the current rate of 78 cents per subscriber to match TSN's $1.07. Comparing the three sports specialty channels based on what it calls subscriber revenue per average minute audience, The Score, owned by Headline Media Group Inc., wants an increase to 40 cents from its current 10-cent rate (CCR Update, March 19/03). TSN had its licence renewed on Nov. 29, 2001 until 2008 with no change to its wholesale rate (Decision 2001-734). Both The Score and Sportsnet argue that without larger subscriber revenues, they won't be able to provide the programming required to remain competitive with TSN. The Score and Sportsnet are among a slew of specialty channels initially licensed in 1996 that are up for licence renewal. The applications were filed last fall and gazetted on March 21 (Broadcasting Notice of Public Hearing 2003-3). Comments on all the applications are due May 1 and a public hearing has been set for May 26 in Gatineau QC. CTV Newsnet, which is up for licence renewal as well, is also asking for an increase to its regulated wholesale rate of 11 cents to 19.5 cents, and English-language national audio programming service VoicePrint wants to increase its wholesale rate to 4 cents from 1 cent. The CRTC notes in its notice that "it will examine the criteria to be used in setting wholesale rates." When Vision TV was recently granted a 2-cent raise in its wholesale rate, dissenting commissioners complained that there were no criteria for determining whether rate increases were justified (CCR, Jan. 30/03). Both The Score and Sportsnet claim that their services won't be able to remain competitive without the rate increases and that cuts to programming and staff would be inevitable. The Score outlines in greater detail than Sportsnet the reasons why it needs a wholesale rate increase and is offering more new programming. In its licence renewal application, Sportsnet states that it needs a rate increase because "competition between TSN and Sportsnet is not sustainable while Sportsnet has higher costs and lower revenues." A lower basic wholesale rate than TSN, Sportsnet argues, also means that distributors believe that its rate should be set at "an appropriate discount in relation to that of TSN" when negotiating carriage on a discretionary basis. But Rogers Media president and CEO Tony Viner recently stated that Sportsnet's discretionary wholesale rate is on the rise (CCR Update, Feb. 19/03). In addition to higher subscription fees, TSN is at an advantage because it is distributed to more Canadian homes and can thus command higher advertising rates, Sportsnet further points out. The specialty channel also notes that its requirement to have four regional feeds, four satellite uplinks and four sets of programs results in much higher costs than TSN, which is a national sports channel. Sportsnet also says that conditions have changed since it requested a maximum basic wholesale rate of 78 cents in its 1996 licence application. It notes that in "developing those projections, Sportsnet did not consider the effect of TSN being able to offer a split feed and acquire regional sports programming rights." In its 2001 licence renewal, TSN applied for and received CRTC approval to distribute regional programming simultaneously to two markets with a national feed to the rest of the country for up to 10% of its quarterly schedule. In 1997, it received approval to distribute regional programming on one regional feed (Decision 97-290). For its part, The Score argues that there "is a serious economic need to bring The Score's wholesale fees more in line with its value." The specialty channel calls the gap too large between what it gets in wholesale fees and what is paid for Sportsnet and TSN, and notes that its rate is even below the average specialty channel basic wholesale rate paid in Canada, even for channels with less costly operating expenses. The Score says that "a telling new statistic called 'subscriber revenue per average minute audience'…demonstrates graphically how underpaid The Score is in terms of subscriber revenue." Marrying audience data from Nielsen Media Research and subscriber revenue data released by the CRTC, The Score points out that its subscriber revenue per average minute audience is $321 compared to $1,115 for TSN and $1,568 for Sportsnet. The problem for The Score is not with advertising, where it claims to be among Canada's leaders, but on the subscriber side. The Score gets 66% of its revenues from advertising, while advertising revenue as a percentage of total revenue for TSN is 37% and for Sportsnet is 28%. "Only 31% of The Score's revenues come from subscribers ($4.8 million), while the industry average is double that. TSN at 62% ($106.4 million) and Sportsnet at 72% ($59 million) are far ahead of The Score in terms of the percentages of revenues that come from subscribers," The Score points out. But while its wholesale rate remains low, its audience numbers have increased, it adds. "…BDUs (broadcast distribution undertakings) should be able to negotiate price reductions for other services whose audiences, unlike The Score, have shown declines or no growth." Also in its bid for a higher wholesale rate, The Score commissioned consumer research, which asked 1,000 cable and satellite TV subscribers the relative value they would assign to the three sports channels. Asked to divide up a hypothetical $2 per month per subscriber, the respondents on average would give 88 cents to TSN, 60 cents to Sportsnet, and 52 cents to The Score. If granted the rate increase, The Score is proposing a slew of new initiatives, including opening bureaus in Edmonton, Montreal and Halifax, and adding over 383 hours of new programming per year at a cost of close to $13 million. To expand its programming options, The Score is also asking for an expansion in the categories it can broadcast to include analysis and interpretation, long-form documentaries, informal education/recreation and leisure, and music videos. All programming in these new categories would be sports related. The Score was granted the right to air live event programming during 15% of its quarterly schedule by the CRTC in March 2000 (CCR, Dec. 8/99). That type of sports programming is significantly more expensive to acquire and thus a wholesale rate increased is needed, The Score states. Addressing the consumer sticker-shock concern of increased wholesale rates, The Score notes in its application that higher prices are bound to happen with basic cable deregulation. "There will be more rate increases to subscribers, regardless of The Score's rate. Thus the only question is how much of those increases will be passed on to the services that draw the audiences and create and exhibit the Canadian content programming…," it notes in its licence renewal application. The Score concludes, "If a new rate is not approved, The Score will suffer dramatically. The Score would try to survive by decreasing both staff and coverage. The live updates would be cut back and we would only be able to afford to add more 'wheel' (i.e. repeats) to our schedule."

The Score, Sportsnet seek wholesale rate increases to remain competitive with TSN

Broadcast | March 27, 2003

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