OMNI troubles could be ominous sign for other conventional TV: Pelley

GATINEAU, Que. — Other conventional television stations in Canada could soon be affected by the same factors that have led to a “financial crisis” for Rogers Communications Inc.’s OMNI multilingual ethnic television stations, Rogers Media president Keith Pelley said at a CRTC hearing Tuesday. Pelley told commissioners that both Rogers’ City TV and OMNI stations are facing “very serious financial challenges” due to “rapidly” falling advertising on conventional television. “I am very worried about the long-term health of the conventional-television sector. Some of the trends and shifts I have witnessed over the last couple of years I would have never imagined possible,” he said. “Just like Blockbuster was wiped out by online video-on-demand, there is a very real risk that over-the-air TV will become obsolete.” Pelley told The Wire Report after his appearance at the committee that OMNI is “the first to be hit.” He said conventional advertising is under threat, and will continue declining in coming years, due to the “plethora” of choices advertisers now have, including online and specialty channels. “OMNI, being the fifth or sixth conventional network, it’s the first one that advertisers tend to not spend because it’s not a must-have. You always buy your No. 1 or No. 2 and then buy 3, 4, 5 and 6,” he said. Pelley told commissioners that the challenge is one faced by conventional television as a whole, and predicted similar comments will emerge during the CRTC’s review of television services in Canada from other broadcasters, such as BCE Inc., which owns CTV. “It’s a tough time in the media business as it’s changing, and it’s changing so quickly,” he said, adding that CTV and Global, owned by Shaw Communications Inc.,will face the same reality “soon.” Pelley said during his testimony that OMNI, which is “in a financial crisis” due to a fall in revenues of more than $45 million since 2011, to a total of less than $35 million this year, is “not a viable business unless we can do something together to reverse its financial situation.” He said the main reason for this fall is that OMNI’s business model depends on revenues from reruns of U.S. programming to subsidize ethnic and third-language programming, with 70 per cent of OMNI’s revenue coming from the sale of U.S. programming. Those American TV shows are now increasingly available on specialty services, border stations and over-the-top (OTT) services, and OMNI’s revenue from U.S. programming has fallen 62 per cent, or $40 million, since 2011. Other reasons why OMNI is struggling financially include competition from other sources of ethnic media, both from Canadian and foreign ethnic specialty services carried by Canadian distributors and online consumption of content, Pelley said. Susan Wheeler, vice-president of regulatory at Rogers Media, said the company would like the CRTC to remove licence conditions on its OMNI stations, including limits on the amount of programming OMNI can offer in one language, quotas for ethnic programing between 8 and 10 p.m., allowing for the sharing of ethnic and third-language content between OMNI and City, and “a reduction in Canadian content levels to those comparable with Canadian ethnic specialty services.” “While we can’t give you evidence that proves beyond a doubt that the changes we are asking for will increase revenues and succeed in stabilizing OMNI’s financial situation, we know for a fact that OMNI’s current licence conditions make it very difficult to experiment with alternate models,” she said. Pelley said that Rogers’ City conventional stations lost $42 million last year and $38 million in 2012. “Last year, it became pretty clear that we needed to do things differently or we would continue to see a steady decline in City’s profitability,” Pelley said. He said the company’s decision to expand City nationally was “probably five to seven years too late,” and that as the company expanded to regions such as Saskatchewan, the British Columbia Interior and Montreal, “we haven’t reaped the benefits in terms of stealing advertising share as we did that.” Pelley said Rogers would address City’s losses —totaling $238 million since Rogers acquired the stations in 2007 — by leveraging the National Hockey League content the company announced it acquired in November in a 12-year deal for exclusive national rights to broadcast NHL games on television and digital platforms. “Our purchase of the NHL rights provides a plethora of benefits for City including promotion, revenue and, perhaps most importantly, a chance to reduce our reliance on U.S. programming,” he said. He said U.S. programming is not “where we’re going to make our money long-term,” and that notion represents a change in “philosophy” for Rogers. “The reduction in U.S. programming and Hollywood programming is a result of our NHL and it’s a change in strategy for us.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

OMNI troubles could be ominous sign for other conventional TV: Pelley

Broadcast | April 8, 2014

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OMNI troubles could be ominous sign for other conventional TV: Pelley

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