Regulatory protection for content producers expected in DHX-Bell deal

DHX Media Ltd. will ensure other independent children’s TV producers maintain access to four former Astral Media Inc. channels after reaching a $170-million deal to purchase those channels from BCE Inc., DHX president Steven DeNure said. Halifax-based DHX said in a release Thursday that it had reached a deal to acquire Family Channel, Disney XD, and the English- and French-language versions of Disney Junior from BCE’s Bell Media subsidiary in a deal that will give the independent children’s TV producer its first broadcast stations. In an interview Thursday, DeNure said DHX will use the channels to air the most popular Canadian children’s TV shows and not just those shows produced by DHX, which include Yo Gabba Gabba, Caillou, Teletubbies, In the Night Garden, Inspector Gadget, Johnny Test and Super Why. “Our intention is to make sure that independent creators, the best independent creators from across Canada, continue to have the same access that they had to sell shows into Family,” DeNure said in a phone interview. “Ultimately, what’s important to us is to make sure that the channels continue with their appeal to kids, and that means ratings, and they’re among the highest rated shows in the kids’ space.” Toronto-based media consultant Kelly Lynne Ashton said in an interview that the CRTC, which must approve the transaction, will likely raise concerns about DHX’s plans for the channels, and whether it will use them to unfairly strengthen its own content's position in the market. “I think there will be questions at the CRTC about DHX content going on the Family channel and Disney Junior, because that has been a concern of the CRTC whenever there has been content creation and broadcast in the same company, that there becomes fewer outlets for third-party producers, for independent producers,” she said. She said the CRTC could impose requirements that a certain amount of access for other content producers is secured on the channels DHX is buying. Such a requirement, she added, could also help ensure DHX shows continue to be available for competing children’s channels as DHX could end up with too much material for its own channels. DeNure said he believes the CRTC will require the company to maintain access for outside content creators on the four channels as a regulatory requirement. DHX will also continue to provide content to other Canadian broadcasters if the demand for DHX-produced shows remains high, he said. “I think that the other kids’ broadcasters in Canada continue to do the same thing that Family Channel does, which is seek out shows that they think are going to be great shows and rate well, and our development-, creation- and production-side of the business has some really smart, creative people that other broadcasters want to be in business with.” DHX, Denure added, has the largest library of children’s programs in the world, outside of major studios such as Walt Disney Co. and Viacom International Inc.’s Nickelodeon. DHX said it would pay $170 million for the four channels and that the deal is expected to close in 2014, subject to CRTC and Competition Bureau approval. BCE, which acquired the channels in July as part of its $3.38-billion deal to purchase Astral Media Inc., said in a separate release that the deal was part of regulatory requirements that it divest some broadcasting assets as a condition of its Astral acquisition. RBC Dominion Securities analysts Haran Posner and Drew McReynolds said in a research note Thursday that the $170-million price tag for the stations was “very attractive,” adding that it was probably the result of there being “a limited pool of buyers for the assets” that Bell Media was required to sell. The RBC analysts said the acquisition “strengthens DHX's core content businesses, providing the company with a distribution channel to promote its own family and kids brands” and “provides DHX with a recurring and stable stream of mostly subscription-based revenue.” DHX said the Family Channel is the most-viewed children’s network in Canada with 5.7 million subscribers, and that it had an English market share of 29.6 per cent among viewers aged two to 17 in the 2011-12 broadcast year, according to BBM Canada data. It said Disney Junior’s English network has 4.9 million subscribers with a market share of 13.4 per cent among viewers aged two to seven. Disney Junior French has about 500,000 subscribers, DHX said, though no market share was given, while Disney XD has about 4.5 million subscribers and a market share of 3.5 per cent among its primary market of boys aged six to 12. The deal comes as the CRTC is consulting on changes to the TV regulatory system, and—at the urging of the federal government—looking into how to implement a “pick-and-pay” system that would allow consumers to subscribe to the individual channels they want, as opposed to larger bundles of channels. DeNure said it’s unclear how the four stations the company is buying would perform under a pick-and-pay system, where customers might be choosing one children’s network over another. “It remains to be seen what pick-and-pay will actually look like, so we’re not too concerned about that scenario at this point because there’s a lot of different ways that it will evolve,” he said. “All I can say is that if it does get to a point where a family is going to pick only one kids channel, all the more reason why we want to continue to compete and make sure we have the best programming.” Ashton added that the current strength of Family would bode well in a pick-and-pay environment, though it’s unclear how the Disney channels—which she said “have benefitted from being packaged and bundled”—would fare. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Nicholas Kyonka at nkyonka@thewirereport.ca

Regulatory protection for content producers expected in DHX-Bell deal

Broadcast | November 28, 2013

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