Pay TV application by mystery party keeps industry guessing, unsure of how to respond

An unknown party that has applied for a national general interest pay television licence has the potential to cut into the multimillion dollar profits of the current regional pay monopolies, but many in the industry aren’t sure how to respond because of a lack of details about the filing. "I have very little to say about this. I mean there’s an application, and we don’t know where it’s coming from. It’s not coming from Astral," Alain Bergeron, VP of brand management and corporate communications at Astral Media Inc., tells Canadian Communications Reports. "What is the nature of the service that is applied for? Until we have more information, I won’t speculate on the impact of the outcome or what (Astral) would or would not do, etc. There is little to say at this point." Astral Media controls the pay TV market in the eastern Canada, through The Movie Network (TMN), which operates five pay-TV channels in English (M, Mfun!, Mexcess, Mescape and MFest), as well as Mpix and the French-language Super Écran. Corus Entertainment Inc., which has also denied being behind the application, operates six pay TV channels in western Canada under the Movie Central brand (Movie Central, Adrenaline Drive, Shadow Lane, Heartland Road, Encore Avenue and Comic Strip). At the moment, the CRTC isn’t releasing any information about the filing, other than issuing a call for applications from other parties interested in a licence for a national English-language general interest pay television service that would be distributed on a digital basis (CCR Update, Feb. 7/05). The commission often will issue a general call for applications after receiving a specific request for a licence. The CRTC, however, is under no obligation to grant any of the applicants a pay TV licence. "The applicant has raised a number of arguments that the current environment could absorb a new competitive English-language general interest pay service and that certain benefits would accrue to the Canadian broadcasting system from the licensing of the proposed service," states the CRTC in Broadcasting Public Notice 2005-6. "Applicants should address such matters as the capacity of the market and the benefits that may be derived from the licensing of one or more of these services." Interested parties have until April 15 to tell the CRTC they would be interested in such an licence. Bergeron says it’s too early to determine if Astral will express an interest in a national licence, or will fight the granting of such a licence to anyone. "The call for applications right now is very, very broad, and I think it raises some very important policy issues," he notes. "The one channel per genre (policy) is one of them." Under current CRTC policy, channels are not supposed to be "totally or partially" competitive with existing Category 1 digital channels or analog channels. In theory, that would mean that no new general interest pay movie channel should be licensed as it would be competitive with Movie Central and TMN. However, the CRTC has shown some flexibility in this area, particularly in the digital environment. In setting out the licensing framework for the licensing of digital specialty TV channels, it stipulated that Category 2 diginets, which don’t have mandated carriage, could be competitive with each other. The commission has also recently granted entry on a digital basis to non-Canadian channels such as Fox News, which some Canadian broadcasters had argued was partially competitive with CBC Newsworld and CTV Newsnet (CCR, Nov. 22/04), and Bloomberg TV, which CTV Inc. argued to no avail was competitive with Report on Business TV (CCR, Sept. 29/04). Astral and Corus currently make millions of dollars from their pay TV offerings. Quoting CRTC financial reports, CHUM Television in an unrelated July 2 filing noted that Corus’ combined profit before interest and taxes (PBIT) for its pay TV services was over $25.4 million, and the PBIT of Astral’s corresponding services was $25.5 million. The comments were made with regard to a request by Corus to amend the licences of Encore Avenue and Comic Strip to allow them to be carried on discretionary analog tiers rather than on an encrypted basis (CCR, June 4/04). The CRTC denied that request on January 31 (Broadcasting Decision 2005-30). "I haven’t crunched any numbers or anything but it’s definitely a threat," says Carl Bayard, a communications and media analyst with Desjardins Securities. "If it gets licensed, it would be a threat, but more of a long-term threat. Both Corus and Astral have output agreements with the likes of HBO and so on, and they have in excess of 1.5 million subs, so trying to get people to switch and providing content would be difficult for any new entrant. They’d probably have a rough go of it at first, but it would definitely be a long-term threat." Speculation was that Bell Canada, which has received two Class 1 cable distribution licences and owns direct-to-home (DTH) satellite TV distributor Bell ExpressVu could have applied for the pay TV licence. However, company representatives deny that it’s Bell. Sources also say that the Canadian Association of Broadcasters (CAB) has canvassed its members and none of them have admitted to filing the application. If true, that would rule out Alliance Atlantis Communications Inc. Others have speculated that it could be one of the telco giants that have launched or will soon establish their own TV services. TELUS Corp.’s name was thick in the rumour mill. But TELUS denies having filed for pay TV licence. "It’s not TELUS," says Bill Allen, senior communications business partner at TELUS. Manitoba Telecom Services (MTS) also denies having applied. "It’s not us. We haven’t applied for anything (in broadcasting) since our VOD licence, and we got that a year and a half ago," states Michelle Bailey Picard, MTS public affairs coordinator. SaskTel had not returned calls at press time. There’s another possibility, according to Mario Mota, Decima Research Inc.’s VP of broadcast and media research. "I suppose it’s possible that HBO could be trying to get into Canada with a Canadian partner," he points out. "But I don’t have any evidence to support that suggestion."

Pay TV application by mystery party keeps industry guessing, unsure of how to respond

Broadcast | February 25, 2005

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