GFC Bites TV: Canadian regulator considers one-year licence renewals

Canadian sources are reporting that the Canadian broadcasting regulator CRTC is considering issuing short-term one-year licences (rather than usual 7 year terms) when network licences come up for renewal in April. This follows release of CRTC data showing major private sector TV broadcasters profits fell by 93% in 2008. Elsewhere the union that represents many media employees is urging the regulator to protect local programming in smaller markets as broadcasters cut costs. Full story in the ChronicleHerald, with future looking even more dim for Canadian broadcasters:

The drop-off in advertising revenue for conventional broadcasters, including at CBC’s television operations, will likely accelerate due to a general slowdown in the Canadian economy.

At the same time, they face the expense of switching their systems to digital broadcasting by the end of August 2011, following the lead of American broadcasters who are to make the switch by this summer.

There is also concern about rising spend on imported vs. Canadian programming: CRTC data shows

Operating expenses increased to $2.1 billion in 2008, with the acquisition and production of programming representing 71.5% of all expenses. Investments in Canadian programming remained essentially unchanged at $619.6 million, of which $146 million was paid to independent producers. However, private broadcasters spent $775.2 million on foreign programming in 2008, up 7.4% from $721.9 million in 2007.

Canadian programming

Spending on Canadian programming included $88.3 million for drama, $90.4 million for general interest programming, $323 million for news programs, $67.2 million for other information programs, $24.7 million for musical and variety shows, $7.5 million for sports programs, and $16.6 million for game shows.

The CRTC also announced last week that it would reduce the scope of forthcoming public hearings to explore the following key issues:

  • the appropriate contributions to Canadian programming (local, priority and independently-produced programming), given the current economic conditions;
  • the terms of administration and delivery of the LPIF, including the method of establishing the base-level expenditures for the purpose of determining incrementality;
  • whether to impose a 1:1 ratio requirement between Canadian and non-Canadian programming expenditures, both on a trial basis during a short-term licence, and on a longer-term basis; and
  • consideration of the terms for the digital transition by August 2011, in light of an industry working group report being prepared for the current public process.

The one that seems to be garnering most immediate attention is the suggestion that broadcasters may be required to spend the same amount on local programming as they do on imported programming.

The financial difficulties of Canadian broadcasters may have ramifications in Australia.  The Sydney Morning Herald today reports on Channel 10’s efforts to raise $90 million through an institutional placing of 120 million new shares at 75c each. Channel 10 was placed in a trading halt yesterday, with shares trading at 93c at Monday’s close.

The fragile position of the media market and Ten’s specific situation was highlighted by the fact that the fund-raising issue was neither underwritten by a financial institution nor taken up by the Sydney-based broadcaster’s controlling shareholder, the Canadian CanWest Group.

CanWest, which is being squeezed by debt pressures in its domestic media operations and is currently selling TV operations to cut its financial exposure, will see its 56.6 per cent stake drop to around 50 per cent as a result of its decision not to put up more money.

“CanWest is supportive of the proposed capital raising but has elected not to participate,” said the group’s president and chief executive, Leonard Asper.

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2 Responses

  1. We have discussed this sort of trend for some time on the project (the decline in FTA capital and crisis for “local content”), and its interesting to see the financial crisis has exacerbated the trend (wild card effect).

    The situation developing with the Canadian and the Australian FTA sector would therefore seem to fit quadrant 2 of our scenario planning matrix (FTA loses value to short-term investors, Australian content rules challenged etc.). As Andy’s scenario described, this might lead to an overthrow of the traditional financing ecology between government supported project funding, the FTA’s, and the independent production sector.

  2. Well just a day later and the capital raising by Channel 10 has been cancelled.
    Ten Network Holdings’ majority owner Canwest is in BIG trouble, as this report from The Canadian Press makes clear:
    http://www.google.com/hostednews/canadianpress/article/ALeqM5jNkU3TdoD2wzj0GAC4Zg8lMHHFXA

    “A company once worth more than $2 billion years ago and about $600 million in early 2008 now has a stock market value of just under $40 million and faces an uncertain future.

    Apart from the recession, Canwest and other broadcasters have seen the profitability of conventional TV stations squeezed by competition for advertisers and viewers from specialty channels and the Internet.

    Analysts speculate that a major restructuring of Canwest or possible bankruptcy protection filing loom, which could see the company streamlined or split up into various pieces that could be sold to reduce debt.”

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