I've said it before, but I see the networks, the BDUs, the CRTC, and the government as all being engaged in an elaborate, decades-long dance, intertwining with each other, stepping on toes, embracing, dipping, pirouetting, always hoping that the song will never end, with consumers as nothing more than the floorboards.
This is a fascinating time, but I don't have any favourites in this latest episode of Canadian broadcasting's "So You Think You Can Outdance" competition.
If the networks build out DTV across Canada I'd be delighted, and the competition would make the BDUs go back home and really sharpen their pencils, resulting in (hopefully) better options for consumers.
A broadcasting executive commented to me the other day that the
egos involved are
huge.
Here's another of my interminable posts, which I'm copying over from another forum. I promise, I'll start doing short barks in the future.
****** said:
It's hard to tell the exact profits since BDU's include them in packages with specialty channels, but the ratings say that conventional channels are the most watched (CTV is Canada's #1 Network) How can BDU's say that the most popular channels they carry don't help their profits?
This is what truly baffles me about this whole sorry mess. It seems to me that the broadcasters have simply made the wrong proposal. Why propose a fee-for-carriage, which they must have known would meet virulent resistance from the CRTC, the BDUs and Canadian viewers, when they could have asked simply to be re-licensed as specialties, something that the BDUs, the CRTC and viewers apparently could have accepted?
It feels to me like somebody high up made a bad strategy decision years ago and, ever since, they have been backed into a political corner supporting that flawed decision.
Here's what I mean:
1) Let us accept your point that the conventional broadcasters are "the most popular channels" with the top viewer ratings in Canada.
2) They also have the rights for the major US prime time series. They have rights to major sports event programming and to the big reality TV properties.
3) They say that the foundation of the advertiser-supported conventional model is "broken" and that fee-for-carriage, as proposed will not fix that problem but will only "fix the cracks in the foundation".
4) They say that the specialty services are doing very well. The specialties are doing well, with PBIT percentage margins ranging between the high teens and low twenties. That's a very good ROI.
5) The sports specialty service, TSN, has a regulated maximum rate for distribution on a BDU's basic service, of $1.07. TSN can and does charge substantially higher wholesale fees for discretionary tier distribution. Typically, TSN is carried on a tier with 80% or greater penetration of the BDU's entire subscriber base.
6) For the sake of argument, assume TSN gets a very conservative ten cent premium for discretionary tier distribution. That gives a rate of $1.17.
7) 80% of subscribers * $1.07 is WAY more dollars than 100% of subscribers * $0.50. It's an effective per-subscriber rate of $93.6 versus the $0.50 effective rate that FFC would give. Even on a 65% penetrated tier, the specialty gets an effective per subscriber rate of $0.76. Even if the networks can't get TSN's rates, I bet they can do better than a $0.50 effective per-subscriber rate.
8) The broadcasters do not WANT to do over-the-air transmission in the digital environment. They want the BDUs to do the distribution. So what is the advantage of OTA broadcasting?
So, CTV, given its top viewer ratings and wealth of rights to US prime-time content, should be able to do EXTREMELY well as a specialty service - far better than it would do under fee-for-carriage as proposed.
As points of comparison, Outdoor Life Network had a 2007 PBIT margin of 31.14%. CTV's own Animal Planet, a Category 2 digital service with no carriage rights at all, had a 2007 PBIT margin of 20.30% - for "animals outdoors" programming content.
Sure, local news is expensive to produce but there's SERIOUS coin to be made here.
Surely then, these networks could compete as specialty services on the strength of their content, their ubiquitous, established brands and the depth of their corporate promotional pockets.
What I do not understand, then, is why the broadcasters do not LEAP at the chance to be licensed as specialties.
I am all the more perplexed when I consider that licensing these services as specialties and allowing them to compete as such could actually fix the fundamental problem that has been placed before Canadians - that the "advertiser only" supported conventional television model is "broken".
NOBODY is saying that FFC will fix that problem for the long term. Instead, the FFC proposal is laden with opportunities for acrimony and endless, unproductive debate with no prospect of truly fixing anything at all. And that's right where we are.
It seems to me that an alternate approach of licensing these networks as specialties has a strong prospect of success, including preservation of "local" television. These networks have everything they need to compete and succeed - so why won't they do it?
Would the commercial negotiations for affiliation agreements with the BDUs be tough? You bet they would. They could hardly be tougher than the FFC negotiation and they could hardly cost as much. I wonder how much the cross-country, cross-media publicity campaign, complete with station-hosted "open houses" across Canada, has cost these folks. Add to that, of course, the costs of showing up time and again at the CRTC and before parliamentary committees, fully briefed, with a team of 20 lawyers and executives each time. It's got to be millions by now.
I have to believe that the broadcasters have crunched the numbers on the specialty service option but I just can't see where the problem could be with competing that way. The only other answer I can come up with, other than being wedded to a bad strategy from the outset, is that the broadcasters are so deeply immersed in their own long tradition of regulatory guarantees that they simply cannot think outside of that box.
In my experience though, money always talks louder and make no mistake: it's about the money.
So here's my honest question out to the forum: "What the heck am I missing here?"
