Angry in the Great White North

In April 2008, Leonard Asper of CanWest and Ivan Fecan of CTVglobemedia put aside their differences to jointly address the CRTC.  At the time, Leonard Asper described a situation that was slowly growing more serious every day:

CanWest CEO Asper compared his network's situation to a frog sitting in a pot of water that is approaching boiling point, saying the time has come for cable and satellite firms to pay CTV and Global for their signals.

''We want you to turn the boiler down,'' Asper said, looking at commission chairman Konrad von Finckenstein.

The problem is simply this.  Advertisers pay for time to peddle their wares on CanWest and CTVglobemedia broadcasts.  The money that goes to the broadcasters is a function of the ratings.  Logically, the broadcasters try to maximize their ratings, but they are constrained by rules imposed by the CRTC.  Those rules require that the broadcasters hand over a large portion of their revenue to fund Canada-content productions, which are then broadcast by these broadcasters.  Having forced to pay for these productions, the broadcasters suffer in the ratings fight against American broadcasts.  The broadcasters can't realize extra revenue through other revenue channels because they don't actually own the production they paid for -- it is effectively leased and returned to the original producers, as per CRTC rules.

Meanwhile, the cable and satellite companies get subscription revenues.  Those revenues are the same whether the customer is watching a Canadian production being broadcast on CanWest or CTVglobemedia as demanded by CRTC regulation, or is watching an American program.  The cable and satellite companies do not pay the broadcasters a dime for the content the cable and satellite companies use to fill out the channel grid, but the obligatory inclusion of CanWest and CTVglobemedia channels in the cable and satellite lineup allows these distributors to position themselves as meeting local TV needs, so enticing subscribers with the realization that they'll still get all of their "old channels".

Finally, the cable and satellite companies force the broadcasters to compete against themselves.  The cable and satellite companies routine time-shift the signal, meaning that the 8pm broadcast from a local British Columbia station is carried in Ontario at 11pm.  That allows subscribers to catch programming that they might have missed during the prime time Ontario broadcast.  Indeed, the subscriber can plan to watch the out-of-market signal.  This undermines the value of being the broadcaster in a given market, and dilutes advertising revenue.  Nevertheless, the cable and satellite companies to sell time-shifting as a value-added feature to potential subscribers, unaffected by the impact on the actual broadcaster.  The cable and satellite providers pay no compensation to broadcasters for pulling in broadcasts in different time zones and from profiting from the time shifting feature.

These are examples of the steady erosion of value that caused Leonard Asper and Ivan Fecan each to predict hard times for the broadcasters:

Broadcasters argue carriage fees a necessity

Fee-for-carriage have been one of the most contentious issues of the hearings and the two broadcasters reiterated their view that the fee is necessary just to maintain the current levels of local programming and Canadian content they offer.

"What we're saying is the foundation is cracking. We have to stabilize that first, before we put another floor on," Fecan said.

Whether it is the boiling frog metaphor or the cracking foundation, it seems clear now that Asper and Fecan were right.

But at the time, the excuse for not giving the broadcasters anything they asked for was simple: the frog wasn't dead yet, and the floor hadn't quite collapsed:

Rogers Communications Inc. vice-chairman Phil Lind, who sat in on the testimony, said the broadcasters have not proven their dire-need case, saying Canada's TV networks are profitable under the current conditions.

But Leonard Asper and Ivan Fecan wanted to avoid a crash down the road (sorry, yet another metaphor).

I guess it's too late for that.

But if there is a silver lining in all this, it is that Phil Lind ought to support the notion of carriage fees and other compensation to the broadcasters by the cable and satellite companies.  His major objection to carriage fees and other compensation was that the broadcasters were profitable.  Now that they are not, Phil Lind must be reconsidering his original position.

It only makes sense, right?