CRTC fee for carriage in plain English Cheryl Binning
Industry Centre > Blogs > CRTC fee for carriage in plain English | Cheryl Binning
Posted by Cheryl Binning
on Tuesday, December 09, 2008.
Categories: Articles
It’s doom and gloom on the Canadian television landscape. In recent weeks there have been a series of lay-offs, hiring freezes, and program cuts. A few companies even cancelled their Christmas parties.
As the axe fell, broadcasters such as CTV and Global pointed to the economic downturn and falling ad sales as the culprit. But they also lay part of the blame on the Canadian Radio-television and Communications Commission (CRTC) for refusing their fee-for-carriage proposal.
Now I know some of you are yawning already.
CRTC rules and regulations aren’t exactly the most exciting read. But if you haven’t heard about fee-for-carriage, well, you better get up to speed because this contentious issue is far from over - in fact it’s going to crop up again over the next few months.
Here’s the background: At the end of October the CRTC announced a series of rulings that resulted from a three-week review of TV distribution in this country.
Some of the highlights included:
- Beginning August 31, 2011 distributors (cable and satellite companies) can offer channels to customers in an a la carte fashion (instead of the current system where subscribers buy a basic cable package and then purchase themed bundles of additional channels). This gives viewers more direct choice in the channels they watch.
- Effective Sept. 1, 2009, a new fund will support the creation of local content (i.e. TV news) by conventional broadcasters in markets with fewer than a million people. Broadcast distributors currently provide 5% of their revenues to fund production of Canadian programming. This will be increased to six percent, with the extra 1% benefiting this new Local Programming Improvement Fund. The CRTC said it expected the cost of the fund - totaling around $60 million annually - not to be passed to subscribers (i.e. our bills wont go up to pay for the fund). However, cable and satellite TV operators aren’t happy about the increase and have indicated to the press that anytime their expenses go up, the consumer pays one way or another.
- Currently a U.S. channel that offers similar programming to a Canadian specialty channel can be barred from entry into our broadcast market. However, the CRTC has decided that Canadian news and sports services are financially healthy and already face competition so new foreign services will be allowed. As a result, expect more American sports and news channels on your TV program guide once this ruling takes effect in 2011.
And now for the biggie that has the conventional broadcasters up in arms.
During the hearings CBC, CTV and Global proposed that they should be able to receive fee-for-carriage which means that cable companies should pay them a fee for the right to carry their signal. They suggested 50-cents-per-subscriber.
Cable companies currently pay these subscriber fees to specialty and pay channels and the conventional channels argued that they require the same deal in order to survive. The broadcasters say that the conventional TV revenue model no longer works. Their advertising sales are declining and they are losing audiences to specialty channels and the Internet, so they need a new revenue stream beyond advertising.
The CRTC, however, didn’t buy it.
They said conventional networks failed to prove they have enough economic need for the higher revenues - especially since the networks have all gone on buying sprees of late to purchase specialty channels and radio stations in order to diversify their revenues.
Of course the cable and satellite companies don’t want to increase their expenses by paying fees to over-the-air channels. And it probably didn’t help the broadcasters case when the cablecos told the CRTC that if they had to start paying fee-for-carriage, they would pass this cost on to consumers, resulting in as much as a $10 increase in monthly cable bills.
One of the pros of fee-for-carriage is that if approved by the CRTC, broadcasters would likely be forced by the regulator to put some of this new revenue towards creating Canadian TV programs. This, of course, would be welcome news for the production community across Canada.
But how would the average Canadian sitting at home react to paying an extra ten bucks a month for their cable or satellite subscription? I have a hunch that the typical family faced with the choice of more Canadian TV shows or keeping their cable bill at the current rate would probably choose the latter.
The CRTC did offer a carrot to the conventional broadcasters. They will now permit broadcasters to negotiate payment for time-shifting, which allows viewers to watch programming from different time zones. This could net $70-$90 million in revenues for the broadcasters annually.
Still, CTV and Canwest aren’t happy about losing out on their fee-for-carriage bid and have blasted the CRTC in recent weeks, stating that in these hard financial times, this additional revenue could have been the saving grace.
In an internal CTV memo leaked to the press several weeks ago CTV CEO Ivan Fecan blamed both the global financial downturn and "the ongoing structural issues affecting conventional television" for the layoffs. Canwest president Leonard Asper said pretty much the same thing when announcing his company was cutting five per cent of its workforce.
The private conventional broadcasters will face the CRTC again in April for license renewal hearings, where their commitments to Canadian broadcasting for the next seven years are set.
Expect the bitterness over the failed fee-for-carriage proposal to make its way into these hearings.
CTV and Global will likely cry poor and argue that faced with declining ad revenues and fewer eyeballs, they just can’t afford to put as much money into the system. That is, unless they are granted a new revenue stream beyond ad sales.
Asper has already indicated in media interviews that at the license renewal hearings CanWest will ask for reduced financial obligations. He said the Broadcasting Act states that the CRTC has a responsibility to ensure Canadian TV players are sufficiently financed and if the regulator isn’t going to give them new revenue opportunities then they can’t fulfill their spending obligations.
This request will have the production community up in arms. The unions, guilds and producers association are expected to ask the CRTC for the exact opposite: they want to increase the conventional broadcasters’ financial commitment to Canadian production. In particular they are looking to the CRTC to introduce drama expenditure requirements on the channels in order to increase levels of indigenous production, which have fallen drastically over the past decade.
So with the battle lines drawn, sparks will no doubt fly at the upcoming license renewals. There is a lot at stake for both the production and broadcasting community, so these hearings promise to be among the most heated in recent years.
Who said CRTC hearings are dull?
Do you think conventional broadcasters should be granted fee-for-carriage or was the CRTC right in refusing their bid? Let me know your thoughts ...
Other posts by Cheryl Binning
Views expressed here are the views of the author and do not necessarily reflect the views of the National Screen Institute - Canada (NSI).
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The views expressed here are the views of the author and do not necessarily reflect the views of the National Screen Institute - Canada (NSI).