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Friday May 11, 2012 |
As is the case with all mergers involving Canadian broadcast companies,
the proposed Bell Media purchase of television and radio giant Astral
immediately generated interest in the Canadian television production
community, who anticipated yet another huge payday that follows from
each of these deals. The Canadian Radio-television and
Telecommunications Commission, which must approve the transaction,
requires purchasers to "make clear and unequivocal commitments to
provide tangible benefits representing 10 percent of the value of a
transaction" (the percentage for television assets is typically 10
percent and 6 percent for radio assets).
Given the rapid pace of consolidation in the Canadian broadcasting
industry, the size of these tangible benefits packages, which often
provide funding for new Canadian productions, has grown dramatically in
recent years. In 2007, Astral’s
purchase of Standard Radio led to a $12
million benefits package, Rogers
acquisition of five CITY-TV stations
resulted in a $37.5 million benefits package, and CTVglobemedia’s
purchase of CHUM netted over $100 million. In 2010, Shaw’s
purchase of
Canwest Global generated a $180 million benefits package. The Bell
purchase of CTVglobemedia in 2011 topped that with a $239 million
benefits package and now the Bell Media - Astral deal could be even
bigger.
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Friday May 11, 2012 |
Appeared
in the Toronto Star on May 6, 2012 as CRTC's '10 per cent' rule leads
to questionable expenditures and conflicted policy
As is the case with all mergers involving Canadian broadcast companies,
the proposed Bell Media purchase of television and radio giant Astral
immediately generated interest in the Canadian television production
community, who anticipated yet another huge payday that follows from
each of these deals. The Canadian Radio-television and
Telecommunications Commission, which must approve the transaction,
requires purchasers to "make clear and unequivocal commitments to
provide tangible benefits representing 10 percent of the value of a
transaction" (the percentage for television assets is typically 10
percent and 6 percent for radio assets).
Given the rapid pace of consolidation in the Canadian broadcasting
industry, the size of these tangible benefits packages, which often
provide funding for new Canadian productions, has grown dramatically in
recent years. In 2007, Astral’s purchase of Standard Radio led to a $12
million benefits package, Rogers acquisition of five CITY-TV stations
resulted in a $37.5 million benefits package, and CTVglobemedia’s
purchase of CHUM netted over $100 million. In 2010, Shaw’s purchase of
Canwest Global generated a $180 million benefits package. The Bell
purchase of CTVglobemedia in 2011 topped that with a $239 million
benefits package and now the Bell Media - Astral deal could be even
bigger.
With over $750 million from these deals alone, the benefits policy has
clearly succeeded in generating new capital for the creation of
Canadian programming. Yet with so much at stake, it is worth asking
whether the current approach optimizes what has emerged as one of the
largest sources of media funding in Canada.
The benefits system typically involves a two-stage process. First, the
purchaser starts by arguing that its contribution should be lower than
the CRTC’s 10 percent standard. For example, Shaw argued that it faced
additional uncertainties since it was purchasing Canwest Global out of
bankruptcy protection. The CRTC agreed and used a lower figure for a
portion of the transaction.
Once the CRTC settles on the value of the transaction and the
percentage of benefits, the second stage involves a battle over how to
allocate the money. The purchaser invariably wants to direct funding
toward its own projects. In 2010, the CRTC allowed Shaw to allocate $23
million toward new digital transmitters, while Bell’s 2011 benefits
package included $60 million for its satellite service and $30 million
for its newly acquired A Channel stations.
Meanwhile, producers simply want millions allocated toward new
programming and other groups are happy to scoop up whatever is left. In
the 2011 Bell deal, $3 million was marked for a new Canadian Broadcast
Participation Fund, which will allow public interest groups to
intervene in broadcasting cases before the CRTC.
While the beneficiaries welcome the benefits payments, the entire
system leads to questionable expenditures and conflicted policy. Groups
that might otherwise raise concerns about unprecedented marketplace
consolidation mute their criticisms for fear of being shut out of the
benefits payday. The purchasers build the ten percent contribution into
their transaction cost, direct much of the money to projects that
further their own self-interest, and use the system to deflect broader
policy concerns.
The CRTC is ultimately called upon to adjudicate this mess, yet it has
no real expertise in determining how to spend $750 million. A far
better approach would be to separate stage one (the size of the
transaction and the amount of the benefits package) from the stage two
specific allocations. The CRTC could determine the total size of the
package during its review of the transaction, but could take the
specifics of how to spend the money out of the hands of purchasers and
producers by shifting toward a more conventional peer-reviewed granting
process.
While no one wants to rock the boat, the current system leads to
dubious proposals and primarily benefits established players who know
how to navigate the system. If Canada wants to encourage new media and
new entrants, a new system is needed.
Michael Geist holds the Canada
Research Chair in Internet and E-commerce Law at the University of
Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online
at www.michaelgeist.ca.
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Monday April 30, 2012 |
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The government has announced
plans to shift the costs of CRTC enforcement of the do-not-call list to
industry. The CRTC will conduct a consultation this spring with plans
to implement the new structure by next April.
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Wednesday April 18, 2012 |
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The CRTC has written to
participants
from the last "fact finding exercise" on over-the-top video services to
advise that it believes that no further studies are needed as this
time. The Commission notes that "over-the-top programming services have
not had an impact sufficient to warrant another fact-finding exercise
at this time." I wrote about the CRTC
exercise last year along with posts on the submissions it received (1, 2).
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