Média de Novo plans next steps after commission denies application

Média de Novo Inc. says there is still hope to move forward with plans to collaborate with distributors on a strategy to sell commercial advertising during local availability times despite the CRTC’s rejection of the company’s application to do so. “We are obviously disappointed that our application was not approved … however we anticipated that outcome somewhat,” Glenn O’Farrell, Média de Novo chairman and CEO, told The Wire Report in an interview. “What we are doing now is examining our options going forward ... In the decision there is what I would call encouragement, if not direction, from the commission for consideration to be given to some collaboration between Média de Novo and BDUs to find a way to collaborate and make a targeted advertising local avail solution available for the market.” On Thursday the CRTC denied Média de Novo’s application to sell commercial advertising during local availabilities, also known as local avails, or the commercial time spots on American foreign channels carried by distributors in Canada. Right now, the regulations for local avails stipulate that Canadian distributors can advertise their own offerings--such as television programs or TV and Internet services--but they cannot insert commercial advertising. In its application, Média de Novo sought a broadcasting licence to operate a national Category A programming undertaking that would allow it to sell and insert commercial advertising during local availabilities. The company proposed to direct 70 per cent of its revenues into a new fund for Canadian programming initiatives and “advanced media research activities.” The commission said Média de Novo failed to demonstrate that the proposal would provide sufficient benefits, but added that the company could position itself as an advertising aggregator if changes are made to the local availability policy. “In the event the Commission were to change its policy regarding the sale of commercial advertising for insertion in local availabilities in the future, nothing would preclude MdN from offering its services as an aggregator of advertising material to Canadian BDUs that might wish to insert commercial advertising in local availabilities under any such new policy,” the commission wrote. O’Farrell said his company will be taking steps in the coming weeks to seek out collaboration with distributors. Média de Novo had estimated its proposed service would create a funding stream of $285 million over seven years for Canadian programming and $2.85 million over the same period for media research. A portion of those funds would be used to offset the company’s capital costs to expand its advertising capabilities. In its decision Thursday, the CRTC said the value of the company’s proposed financial contributions was unclear. “There are a number of uncertainties contained in MdN’s proposal that make it difficult to ascertain the value of the financial contribution that MdN would be able to make to the Canadian broadcasting system,” the commission wrote. But Bob Reaume, the Association of Canadian Advertisers Inc.’s (ACA) vice-president of policy and research, said in an interview that he found the commission’s findings surprising. “The ad revenues Média de Novo were estimating were really quite conservative, so I’m quite sure those targets would have been hit,” he said. “Broadcasters were to be the beneficiaries of 70 per cent of those revenues. I guess 70 per cent of that pie is not good enough for them. I guess they want 100 per cent.” Several broadcasters, including Astral Media Inc., Corus Entertainment Inc., Canwest Global Communications Corp., CTVGlobemedia, Quebecor Media Inc. and the CBC, expressed their opposition to Média de Novo’s application during the proceeding. Jan Innes, a spokeswoman for Rogers Communications Inc., told The Wire Report in an email that Rogers is also pleased with the decision. The CRTC said Média de Novo’s projected revenues could have been reduced if distributors did not make use of the availabilities, or if U.S. cable services stopped offering distributors the rights to use the time spots. “Since the consent of U.S. programming services is essential to use local availabilities and some U.S. programming services have stated that they would not permit a party not contractually bound to them to alter or curtail their signals as would be the case under MdN’s proposal, the Commission is of the view that MdN has not demonstrated that it would be able to access all of the local availabilities it proposes,” the commission said. Reaume said several American companies were waiting on the commission to approve the application before agreeing to participate. “As soon as the commission would have given their blessing to this sort of initiative, that would have changed the mind of many U.S. broadcasters. They were shy about it because they knew they didn’t have the regulator’s yet,” he said. Reaume said he hopes the commission will eventually take a different stance on local availabilities, which he says is a “wasted resource.” Local availabilities represent about one fifth of all commercial viewing that takes place in Canada, he said. “It’s a shame … When one fifth of our potential goes wasted in this country, it just does not make any good sense for anybody.” The commission also said it was unclear how much of the contributions would go to offset Média de Novo’s capital costs. Ian Collins, founder and CEO of digital media company Fifteen Degrees Ltd., said the CRTC should not have arrived at such a decision for a lack of detail. “I would have expected the process to probe further into those important factor questions,” he said. “In a decision of this importance, it’s in everybody’s interest to find out what the real facts and projections are ... This is an important policy decision for the Canadian public, and it should not be treated as a civil court claim matter.” The CRTC also expressed concern about the potential impact the selling of local availabilities could have on broadcasters’ bottom lines. “The Commission is concerned that it is not clear what proportion of the revenues generated by the sale of commercial advertising in local availabilities under MdN’s proposal would be derived from the advertising revenues of other players in the broadcasting system, such as conventional television broadcasters, specialty services and radio broadcasters,” the commission wrote. “The Commission remains concerned about any decrease in advertising revenues for conventional broadcasters at this time given the severe financial constraints under which such broadcasters currently operate.” O’Farrell said he disagreed with the CRTC. “We don’t share the conclusion that the commission came to, nor do the experts in the field. It’s taking two views of the same thing and coming to different conclusions,” he said. The CRTC also denied Média de Novo’s request to hold a Category A licence, saying the company made no commitment to produce, purchase and exhibit Canadian programming—a typical requirement for Category A licence holders. kfournier@thewirereport.ca

Média de Novo plans next steps after commission denies application

Broadcast | August 12, 2010

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