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 email@example.com or online at www.michaelgeist.ca.