TVA says group-licensing model will hold back specialty channels from profitability

Requiring Groupe TVA Inc. to be part of the CRTC’s group-based French-language television licensing model would hold back the broadcaster as it tries to make its specialty channels profitable, officials from TVA and parent company Quebecor Media Inc. told commissioners at a licence renewal hearing in Quebec City Monday. A panel of eight executives from Quebecor and subsidiary TVA told the CRTC that although TVA has invested in its specialty channels, it will be a few years before they start to be profitable. The broadcaster is one of few that has invested in specialty channels within the past five years, the company told CRTC commissioners. Money would be lost for three to five years and some channels would never make money under the licensing regime, they said. Large, English-language broadcasting groups took part in the CRTC's group-based licensing model by the CRTC resulting from decision 2010-167 last year. The group-based licensing approach gave English broadcasters with conventional networks more flexibility for their Canadian content contributions. A similar process is now under way for French-language group broadcasters. TVA officials said its conventional network is experiencing more success than Quebecor’s specialty networks, and the company is not in favour of a group-based licensing model. Pierre Dion, president of Groupe TVA, told commissioners that only Astral Media Inc. would benefit from a group-based licensing approach. “Astral doesn’t have any conventional television networks,” Dion told the commission. “It would just bring its Canadian content contributions down to a global average for its specialty networks.” TVA would not benefit from offsetting its Cancon obligations, he said. TVA owns 11 specialized services operating under the titles of LCN, Argent, Casa, Prise2, Yoopa (a children’s channel), Mlle (a women’s channel), TVA Sports, Sun News Network, Mystery and The Cave. The company said it is trying to put out a competitive offer but, with millions of dollars tied up, it’s going to take time before it can compete. The broadcaster told commissioners that a group-based licensing model for TVA would give a major player like Astral, which holds 60 per cent of profit margins, more of an advantage. Astral could average out more of its expenses and revenues while being helped by another undertaking, TVA said. “On one hand, a group that tries to make it over the mountain pass and then you’ve got the other one that’s trying to keep it down and keep its head under water if you wish,” the broadcaster said. TVA said that, as part of the group licensing process, its specialty channels might not succeed. The broadcaster argued for more flexibility from the regulator in the form of a 75 per cent minimum requirement for Canadian content spending. TVA's 75 per cent rate would be a minimum and greater flexibility would enable it to increase that percentage to as much as 79 per cent or 88 per cent if possible, officials told the commission. Right now, it is competing in a fragmented market where market share and revenues are not easily acquired, the company said. Greater flexibility would allow TVA to compete with unregulated over-the-top services such as Netflix and Apple TV, the company said. The broadcaster said over-the-top services can impact content acquisition efforts as Netflix starts to negotiate for French-language content rights in Canada. Netflix has started to recruit new resources and staff because they have realized that they need to hire more francophones to expand in the province of Quebec, the broadcaster told commissioners. In its opening remarks to the commission this week, Astral asked the commission to designate its 13 services, of which 10 are English and three are French, as an Astral group, as it did for BCE Inc. subsidiary Bell Media, Corus Entertainment Inc. and Shaw Communications Inc. subsidiary Shaw Media in the English-language licensing regime. Commissioner Louise Poirier said Astral could not receive the same treatment as those companies unless it is ready to make the same contributions to the industry. Commissioner Suzanne Lamarre also noted that Bell Media holds 24 services, of which two are French. In an application to the CRTC, Astral has submitted a request for a bilingual group designation, arguing it is the only non-vertically integrated broadcasting group in the country. “Our revenues split in terms of those 16 services that are being renewed, and that’s pretty much the same thing for Astral as a whole,” Hugues Mousseau, Astral’s manager of corporate communications said in an October interview with The Wire Report. “It’s about 45 per cent for our English-language services and about 55 per cent for our French-language services.” Astral said this week it would not accept an individual French-language group or English-language group designation from the commission. In terms of Canadian programming expenditures, Astral submitted that it is prepared to increase its contribution from the current 29 per cent to 30 per cent on a group basis. Poirier asked if Astral would consider a 33 per cent contribution, but the broadcaster said it considered 30 per cent to be reasonable. Mousseau said Astral’s average Cancon spending has increased by 31 per cent over the last five years of its licensing term. Quebecor told the commission this week that, on local programming, it should be permitted to broadcast a general 18 hours of local programming per week. Its current licence requires it to broadcast nine hours of programming focused solely upon the local Quebec market. Company officials said 50 per cent of its viewers live outside Montreal and that it has invested millions of dollars to expand its reach by hiring journalists to work for TVA and the Sun News Network. Commissioner Michel Morin noted that Quebecor does not have journalists in Toronto, and suggested that a Toronto-based journalist and cameraman be added as a condition of the broadcaster’s licence. Company officials said it would oppose such a licence requirement but that it is aiming to hire more bilingual journalists who do television broadcasting as part of its strategic direction. The officials said the company is in the process of training several journalists. dgrenier@thewirereport.ca

TVA says group-licensing model will hold back specialty channels from profitability

Broadcast | December 6, 2011

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