Isn’t There a Better Way to Spend $750 Million?

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, my weekly technology law column (Ottawa Citizen version, homepage version) asks 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.


  1. pat donovan says:

    self-serving crapola
    the last time i looked, all the the money on canadian content was spent on news services.

    the 6pm newscast.

    and i have a LONG long list of crapola delivreed as news there.

    quebec film makers were next, i think. Or student (offically biling sons+ daugthers) on roving ENG crews were next.

    NOT cable companies prioviding air time to residents for local events.


  2. crapola
    Too much Crapola indeed…

    I don’t want any more crappy ” Canada” shows and yet more newscast full of nonsense junk. (seems everyday is a slow news day for Canadian newscasts)

    As much as the CBC sucks, at least there’s still a bit of original Canadian content floating around there, unlike all the drivel being aired on Global, City and CTV…. (CTV being the absolute worst of the bunch)

  3. off topic says:

    ? double dealing lawyers ? Access Copyright
    from the the-bad-deal-looks-worse dept

    “…U of T’s advisor Casey Chisick was retained at the end of 2010 to advise Access Copyright on copyright reform legislation…”

  4. Jean-Francois Mezei says:

    Canadian Content
    CTV/Global/City are essentially BDUs that retransmit US programming. Ironic that they are owned by BDUs.

    Current regulation forces them to fill X hours with canadian content. There is no incentive for them to actually survive on their own unique content because, by buying exclusive rights to the US shows, they prevent canadians (through channel substitution) from watching the original feed (often with better image and sound quality than the canadian retransmission).

    In other words, they write off the costs of producing that token canadian show for prime time as a necessary expense and base their survival/profits on retransmission of US shows.

    Forcing them to fill 1 hour of prime time with a canadian show (with therest of canadian content regulation achieved with news and current affrais) will not change their business model of depending on US shows.

    But preventing them from having exclusive distribution of canadian shows, removing channel substitution and perhaps reducing deductions for canadian advertising on US shows would provide far greater incentive for the canadian networks to start to produce their own unique content and spend the money needed to make those shows highly succesful, perhaps even for export.

    It is time to sour the milk from the US shows so that canadian networks start to produce their own.

    Until this happens, the vertically integrated companies will just pretend to be spending money on canadian content when in fact they’ll be spending it to better distribute their US shows (such as investing in transmitters).

  5. So who are the reviewing peers?
    My guess is any bureaucratic “peer review” will result in the Stursberg inspired stupid but self-delighting “banter” between forgettable manufactured “celebrities” we’re getting on CBC, and the “quirky” but unwatchable Canada Council documentariesd of yesteryear. That’s not to say anything good about what the privates come up with on their own, only to say the public mandate of “Canadian content” is a vexed issue.

  6. Ted Moorings says:

    Canadian TV stations, like ALL other TV stations around the world are entitled to secure the broadcast rights to US programming. Canada is unique however in that we are the only country that has to deal with the same day amd time airdates and border towns. I think CTV, etc do a good job, considering these unique constraints.