Angry in the Great White North

Good news from CanWest Global: 

The media company, against the ropes with $3.9-billion owed to creditors, has kept its bankers happy by halting interest payments to its bondholders.

Now, CanWest and the bondholders, who are working with the law firm Goodmans, are discussing several options to rework the company's loans. Among the options are potentially replacing old debt with new paper and guaranteeing bondholders cash generated from the future sale of some CanWest holdings, sources said yesterday.

The next four weeks will be taken up with talks aimed at pulling the company back from the brink.

I had little doubt that the Aspers could make this work.  That must be grating to people who only a couple of weeks ago were writing CanWest off, and preparing the corporate obituary.  Still it won't be easy:

Unclear is whether chief executive officer Leonard Asper and his family would retain ownership of the company founded by his father.

"Asper is bending over backwards to appease creditors," said one source working with CanWest's creditors. "But this is not a typical restructuring, because the family's goal is to keep control of the company."

Mr. Asper is considering the sale of newspapers or television stations to win over investors, but both sides recognize that shedding assets in the midst of a recession is a difficult proposition.

"Asper is basically willing to offer some of his potential upside, in a recovery, to creditors," said one source working with creditors.

The bondholders are motivated to work with the Aspers, since the Aspers have already made positive and concrete moves in the right direction:

CanWest is turning its attention to bondholders after taking steps to win over its bankers, the most senior of its lenders. In addition to holding back the payment to more junior creditors, the company made a serious dent in its bank debt yesterday when a long-awaited cheque for $34-million (Canadian) arrived from former partner Hollinger Inc., now known as Sun-Times Media Group Inc.

CanWest collected on a payment that was long in dispute, dating back to the company's acquisition of Canadian newspapers from Conrad Black's Hollinger nine years ago. An arbitrator ruled in CanWest's favour in January, and awarded $50.7-million; the two companies subsequently agreed to settle for $34-million

CanWest set aside $30.5-million of this sum as collateral against its bank debt.

All of this means that everyone involved is working towards success:

"Talks with creditors are often acrimonious, but here there's a fair amount of goodwill on both sides," said one source close to CanWest.

Of course, this wouldn't be a silver lining without a big dark cloud behind it, and that cloud is the CRTC.  The CRTC has arranged the Canadian television industry to be a big social program, dedicated to subsidizing independent Canadian producers.  Like most social programs, there is an attitude that the funding will always be there.  That has twisted effects.  In this case, content producers can produce Canadian content without too much concern for ratings or popularity, since broadcasters like CanWest have no choice but to purchase and air that content.

Did I say "purchase"?  No, the broadcasters don't even own what they pay for:

There has been heavy lobbying by the broadcasting industry and its associations related to the fee for carriage, delay of implementing digital transition (currently, the deadline is August 2011 to shut down analog broadcasting and move completely to digital) and lowering Canadian content rules which are often expensive for networks. Mr. Sparkes said CTV will continue lobbying for those issues as well as content ownership issues.

He said currently stations are not allowed to own the content it helps produce.

"We basically do what we do with American content, we rent Canadian content," [CTVglobemedia executive vice-president Paul Sparkes] said. "Content is king. If you don't own your own content, then you'll never be able to move forward in terms of providing content for other avenues."

So CanWest puts out cash to produce content, but they can't own that content and realize future revenue?  I checked with a friend at CanWest:

We are required to commission I think 75% or more of our production from independent producers in order to prop up that industry.we just license it from them.

This is insane.  Who would pay for something they can't own (or at least have the option to own)?

The answer is no one would, but then the CRTC is forcing broadcasters to play by these twisted rules.

The banks and bondholders of CanWest are trying to be as positive as possible in a difficult situation.  They are doing that because the Aspers are able to convince them that CanWest can get through this and be profitable in the future.

That puts the CRTC in a unique situation.  Any moves made by the CRTC to recognize that CanWest and CTVglobemedia are not to be treated as bottomless pits of funding to be raided for cash for content producers could dramatically help these negotiations.  Change the rules (or even just promise to review and adjust the rules -- the banks and bondholders sound like they are willing to grab on to any reason to declare success) to incorporate the principle that with funding comes ownership.  It ought to apply to TV content as much as it does to anything else in life.  If someone pays me to write a piece of software, that person owns the finished product.  It's that simple.

Why should content producers get special treatment?  Especially since that special treatment is putting the industry itself at risk.

Like I said before, I wonder if the people who run the CRTC even like television.