TV networks want new rules

GRANT ROBERTSON
Globe and Mail Update

A federal review of the television sector that begins Monday in Gatineau, Que., is being called one of the most crucial meetings of the Canadian industry since TV made the leap from black and white to colour.

Operators of the conventional national networks, including CanWest Global Communications Corp., CTV Inc. and CHUM Ltd. (which is in the process of being acquired by CTV's parent, Bell Globemedia, which also owns The Globe and Mail) want the federal broadcast regulator to let them charge cable and satellite companies for their signals.

They also want the Canadian Radio-television and Telecommunications Commission (CRTC) to loosen the restrictions on TV advertising, allowing more commercial minutes per hour and putting fewer limits on product placements and infomercials.

CanWest Global, whose TV business has slumped in recent years, is expected to take the most vocal stance.

New technology — such as streaming Internet broadcasts and Personal Video Recorders that allow audiences to skip ads easily — have the networks worried about eroding fortunes.

“In the face of increasing and accelerating fragmentation from regulated and unregulated competitors, we require access to this [fee for carriage] revenue source,” CanWest told the CRTC in a filing prior to the hearing.

While the networks are expected to paint a bleak picture of their futures, National Bank Financial analyst Adam Shine said the industry is by no means dying.

“One still can't write the obituary for conventional TV for the foreseeable future,” Mr. Shine said in a research note. “Though steadily eroding, the power of the medium to draw large audiences and offer advertisers unparalleled reach remains.”

However, analysts say regulatory changes are needed to ensure its viability in the future.

The proposed changes could mean a significant increase in revenue.

Mr. Shine estimates CanWest could get $20-million to $30-million in additional advertising dollars if the rules governing advertising are loosened.

The introduction of subscriber fees could mean another $13-million to $17-million.

The debate has splintered the industry.

Cable provider Rogers Communications Inc. calls the networks' bid for subscription fees a cash grab. It argues they could add from $3 to $7 to monthly cable bills, potentially angering consumers.

Cable and satellite providers say they will instead back the networks in their bid to have ad rules changed.

“If you're concerned about Canadian broadcasters, cut them some slack on advertising, cut them some slack on product placements,” said Ken Englehart, Rogers' vice-president of regulatory affairs.

Simply allowing more commercials won't likely fix the problem in the eyes of the major networks though, who argue cable specialty channels have an advantage.

Specialty channels — those higher up the dial such as HGTV and Showcase — were granted the right to collect subscription fees when they began broadcasting. That money was intended to make up for the lower ad revenue that came from not being carried on primary cable packages.

But the proliferation of digital cable and satellite into Canadian homes has brought specialty channels to larger audiences, CTV president Rick Brace said.

“If subscription fees are good for specialty and they're also getting advertising minutes per hour as well, then maybe the commission also has to look at the conventional TV business being treated equally,” he said.

The last TV policy review of this magnitude concluded in 1999. Those hearings focused largely on funding for Canadian productions.

This time around, subscription fees, advertising rules and the cost of switching to high-definition television (HDTV) feeds will dominate the discussion.

Should the CRTC give the networks what they want, the regulator will likely seek a tradeoff that would require them to pump more money into Canadian productions, while increasing the amount of on-air promotions for domestic television programs, observers say.