Group-licensing rules an obstacle to profitability for Citytv stations, Rogers says

Rogers Communications Inc. says the CRTC’s new licensing framework for large broadcasting groups could hurt its business and that the commission shouldn’t take a one-size-fits-all approach to regulating the industry. The CRTC launched a public hearing on the licence renewals Monday, and in its presentation to commissioners Tuesday morning, Rogers officials said the commission’s new group-based licensing framework is a step in the right direction because it enables large broadcasters to share Cancon expenditure requirements across multiple stations. But it added that the requirements the CRTC is imposing hinders the company as it tries to recover from a couple of poor performing years. The requirements also hurt broadcasting groups like Rogers that use more conventional television than specialty channel programming. Shannon Valliant, Rogers’ vice-president of financial operations and strategic development, said that large broadcasters with mostly specialty programming benefit most from the framework. In the past, the companies had to spend 25 per cent of conventional programming revenues on Canadian shows, and 35 per cent of specialty revenues on Cancon. It’s a different story for broadcasters heavier on conventional broadcasting, Valliant said. Under the new system, they have to spend substantially more money on Cancon. Valliant said that, under the previous requirements, a company earning $900 million in revenue from conventional broadcasting and $100 million from specialty services would contribute $225 million to Canadian programming on the conventional side and $35 million on the specialty side, amounting to a total of $260 million, or 26 per cent of revenues. Under the new licensing requirements, the same broadcaster would spend $300 million on Canadian programming, or 30 per cent of revenues and $40 million more than before. “If you’re a company like Rogers, you’re justifiably concerned,” Valliant said. Rogers’ main conventional programming group, Citytv, is struggling, Rogers said, saying that it lost $72 million in 2008 and 2009. In broadcast decision 2010-167, the CRTC established a new group-based licensing system. Specifically for large, private broadcasting groups (organizations those that generate more than $100 million in annual revenues and have at least one specialty or pay programming service), the commission said it designed the new framework to ensure continued funding for Canadian programs and support the viability of broadcasting companies. The policy applies to Rogers, Shaw Communications Inc., Bell Canada Enterprises Inc., and Corus Entertainment Inc. It requires the broadcasters to spend 30 per cent of revenues on Canadian programming and five per cent of revenues on programs of national interest, such as scripted dramas, documentaries and awards shows. The policy allows the companies to spread programming requirements across their conventional and specialty stations. “We need to change the financial model and we need to do it quickly,” Keith Pelley, president of Rogers Media, told the commission Tuesday. He added that Rogers plans to launch more specialty channels. Earlier this year the CRTC approved several specialty channel licence applications for the company, including a licence for a French-language sports channel. Rogers officials told commissioners that if the company faced a slightly lower Canadian programming expenditure level—25 per cent—the broadcaster could focus on rebuilding Citytv. The company says it aims to bring Citytv into profitability by 2014, and that it hopes to do this by building up stations in Vancouver, Edmonton, Calgary, and Winnipeg so that their local brands are as strong as that of its Toronto station. That would entail better coverage of local events, such as the Calgary Stampede by Citytv in Calgary. It’ll take some work to make Citytv into a better branded, profitable organization, the company acknowledged. “We are not even remotely close and this is going to require some serious attention,” Pelley said. If Rogers spent 25 per cent of revenues on Cancon, Rogers would contribute an additional $100 million to Canadian programming over its licence term, but it would also be in a position to rehabilitate City, Pelley said. Rogers added that it wants the commission to reconsider the expectations for spending on programs of national interest. The company said the five per cent requirement is too high, especially for a company that has next to no experience creating the programs. Rogers said its only Canadian drama is Murdoch Mysteries and it has limited access to money from the Canada Media Fund. The company’s CMF envelope was $3.7 million in 2010, well below the $29 million Shaw received and below the $37 million BCE received, Rogers officials said. The company is instead proposing a program of national interest expenditure target of 2.5 per cent of revenues, rising to three per cent over the course of the five-year broadcast licence, to enable the company to focus on nursing Citytv back to health. “We can’t win the PNI game,” Pelley said. “We have a chance to be competitive and win the local game.” But CRTC chairman Konrad von Finckenstein wondered whether the commission should reconsider its group-licensing system simply because Rogers is having trouble swallowing the numbers. “How can I as a regulator justify that?” he said. Commissioner Tom Pentefountas, the vice-chair of broadcasting, suggested Rogers is asking the commission to make way for a profitable Citytv “on the backs of Canadian programming.” The whole concept of group licensing falls apart if each broadcaster can make a unique deal with the commission, he said. But Rogers’ representatives said the company isn’t looking for a handout—just an acknowledgement that the new licensing framework in fact hurts broadcasters with a particular mix of conventional and specialty programming. Rogers said the commission should remove the word “exclusivity” from its specialty program licences for the company’s OLN, G4 and Biography Channel, allowing the company to offer a wider variety of programming on the services. “We believe the genre exclusivity policy is no longer a useful or relevant tool for promoting program diversity,” Valliant said, adding that Rogers wants the CRTC to “set the course” for the next five years by reconsidering the genre exclusivity rule. On Monday CTV argued for similar changes to some of its specialty channel licences. In the afternoon, Corus told the commission that the company plans to spend more on Canadian programming in the coming years. But the company is asking the CRTC to for some changes, including an elimination of obligations to broadcast non-North American programming on its W Network and YTV; amending the targeted programming other scheduling requirements for YTV; changing the amount of music video clips on CMT; and retaining its 150 per cent time credit for Canadian feature films. Corus officials said the company seeks to reduce the amount of video clips on CMT because research indicates country music fans often watch music videos online and CMT should shift its focus towards more country lifestyle programming. Corus proposed to establish a group Canadian programming spending requirement of 29 per cent, one per cent below the CRTC’s requirement. Corus said it arrived at the 29 per cent number after calculating contributions across its stations. But the company added that it is open to 30 per cent, and that it would spend spend five per cent on programs of national interest. The hearings continue Wednesday with an appearance by Shaw Media Inc. news@thewirereport.ca

Group-licensing rules an obstacle to profitability for Citytv stations, Rogers says

Broadcast | April 5, 2011

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