The night before propelling the Canadian media industry into what is widely expected to be a period of major upheaval, Bell Globemedia (BGM) president and CEO Ivan Fecan was simply trying to catch up on his sleep. The next day-Wednesday, July 12-BGM (now known, as of Jan. 1, as CTVglobemedia or CTVGM) would announce a $1.4 billion takeover offer for CHUM Ltd. that had newsroom punsters in a frenzy (“Bell Globemedia Getting CHUM-y,” “A new CHUM for Bell Globemedia” etc.).
The deal (which is currently awaiting regulatory approval) was already in place on that early summer evening, but it had taken “an awful lot of day and night work” by BGM management and its legal team to reach that point, says Fecan.
In early June, Jim and Ron Waters-the sons of late CHUM founder Allan Waters and chair and vice-chair of the CHUM board respectively-quietly invited BGM and Astral Media Inc. to bid on the company, whose stable of TV and radio assets (including Citytv stations in five major markets, 21 specialty channels including MuchMusic and Bravo!, and 33 radio stations) had long been rumoured to be on the move.
Prior to that, Fecan had been anticipating a period of relative tranquility: BGM’s main CTV network was coming off its fourth consecutive No. 1 finish; the presentation of the new 2006-07 TV schedule to agencies and advertisers was complete, and what he describes as the “major agency D-Day stuff” was being wrapped up.
“We were all kind of thinking ‘This is great; we’re coming up to the July 1 holiday and we can just relax now,'” Fecan laughs. “Not the case-but we’re grateful that they called us.”
The CHUM overture was a complete reversal from just six months earlier, when the Waters publicly stated that the company was not for sale. Now, assets that had long been high atop Fecan and BGM management’s wish list were available.
The timing, however, was lousy. At the time, BGM was “distracted” by the June 12 death of Ken Thomson, the Canadian business icon who was chair of the company’s soon-to-be chief shareholder, Woodbridge Co. Ltd. Complicating matters further, BGM and its stakeholders were still awaiting regulatory approval of its December, 2005 restructuring.
Ironically, that deal-which saw Bell Canada Enterprises (BCE) cede majority interest of BGM to Woodbridge, with Torstar Corp. and the Ontario Teachers Pension Plan each ponying up $283 million for a respective 20% stake in the company (Teachers subsequently acquired another 5%, with BCE reducing its stake to 15%)-had been undertaken with an eye towards future media purchases. Now, with the deal in regulatory limbo (the CRTC finally blessed the union in August), it was a potential hindrance.
It was up to Fecan to get buy-in for the CHUM deal from BGM shareholders who, at that juncture, didn’t even know what stake they would have in the company. He presents the scenario jokingly: “Hi, welcome to the company; you don’t own us yet because that’s still in regulatory approval, but by the way we need $1.4 billion and kind of need it in the next few days.’
“It was a lot more involved than that,” he stresses. “But the bottom line is that’s what they were being asked to do; put a heck of a lot of money into something that they didn’t necessarily even own in the proportion they were going to if the re-organization didn’t get approved.”
What ultimately spurred BGM on was a call from CHUM-about a week after Thomson’s death-that it was going to sell to Astral. “That got our attention, and the only choice at that point was ‘Do we want to go for it or not?'”
“Going for it” has been something of a hallmark for Fecan since his days as president and CEO of Baton Broadcasting, where he oversaw the creation of the national CTV network and the 1999 purchase of NetStar (TSN, RDS and Discovery Canada). This year, Variety magazine labelled him the Canadian TV business’s “ultimate dealmaker”-an appellation with which the genial executive says he’s profoundly uncomfortable.
“Probably a lot of enterprises are like this, but a media enterprise in particular is completely a team thing,” he says. “There’s no one person here that deserves to be singled out. We’ve been together a long time and everybody’s pretty close to, if not at, the top of their game.”
On that point, the evidence is compelling. While the CHUM deal garnered the bulk of the headlines, 2006 also saw BGM’s flagship network CTV maintain its leadership position (it finished the fall 2006 season with eight of the top 10 and 16 of the top 20 programs); its homegrown sitcom Corner Gas get a two-year, 88 episode U.S. distribution deal with Chicago-based Superstation WGN; a foray into the nascent but rapidly emerging digital broadcasting space with the launch of the CTV Broadband Network, and the (re)launch of a Canadian version of the iconic MTV brand. At press time the Canadian Football League was expected to announce that its broadcast rights will move from CBC to CTV/TSN, and it has been rumoured for months that CTV will be mounting an aggressive bid to wrestle the NHL broadcast rights away from CBC.
It’s that combination of business acumen, ratings success and industry leadership that makes CTVGM Marketing’s media player of the year for 2006-our first ever repeat winner and a testament to the company’s continued dominance.
“I don’t think that Bell Globemedia is simply the player of the year; I think they’re the player of the decade,” says Mark Sherman, founder and CEO of Media Experts. “Look at where CTV was as a network 10 years ago versus where they are today-the turnaround’s amazing. You have the acquisition of TSN and all those properties, you have the balance of conventional and specialty; you have what was once kind of an ad hoc network of affiliates converging into one real network and practically destroying Global (Television)-which was once the program ratings leader.”
Unlike last year, when BGM’s successful co-bid with Rogers Communications (Marketing’s owner) for the 2010 Vancouver Olympics and CTV’s astounding ratings performance made the company a virtual slam-dunk for the honour, 2006 produced a bevy of compelling media stories.
The re-christened CTVGM’s chief rival, CanWest MediaWorks, added a much-needed jolt to its prime time lineup and launched both a new mobile TV service for BlackBerry users and its own broadband service; Montreal’s Transcontinental Media, with an eye towards generating $50 million in Internet revenue by 2010, made significant inroads in the digital space with the acquisition of Quebec recipe site Zoupla Communications, a content agreement with the Canadian version of popular men’s site askmen.com and the launch of its online classifieds site Merkado, while Rogers launched two high-profile consumer magazines in Chocolat and Hello!
Ultimately, however, they were all overshadowed by a BGM/CHUM deal that has been variously described as a “mega-merger” and “blockbuster.” Although it still requires approval from the Competition Bureau and CRTC (a point Fecan stresses numerous times during our hour-plus interview), the CTVGM that ultimately emerges stands to be a major player in conventional TV, as well as the buoyant specialty TV category (currently driving practically all revenue growth in the TV industry), newspapers, and, for the first time since its creation, radio.
For now the speculation is left to the analysts and media experts, with the consensus being that the deal will spur another wave of media consolidation akin to that of the late 90s and early 2000s. The scenarios are numerous: CanWest, which is keen to expand its specialty TV presence, acquiring Alliance Atlantis Communications-which announced in late December that it was up for sale; an Astral/Corus Entertainment merger; a Rogers/CanWest alliance.
The CHUM deal “is huge, and the ramifications for the broadcasting industry, both radio and television, are absolutely enormous,” says Hugh Dow, president of media services firm M2 Universal. “Not only will there be properties available, but also it will stir up the competitive juices and raise issues about critical mass and purchasing leverage and selling leverage and all of those scenarios.
The CTVGM/CHUM deal “is probably the biggest development that we’re going to have on our plates for at least the first six months of 2007.”
Others, likeMediaedge:cia president Bruce Grondin, have “reservations” about the deal, yet still profess their admiration for CTVGM.
“If I have a client issue that I have to resolve, the first company I’ll call is Bell Globemedia,” says Grondin, whose major clients include Ford, Sears and Molson. “They’re pro-active, they listen, they’re understanding and they want us, our clients and them to win. With that, why beat around the bush?”
The CHUM deal served to overshadow several other noteworthy developments within BGM in ’06, including the multi-platform re-launch of the MTV brand in Canada after an ill-fated turn with the now defunct Craig Media, and the rollout of the CTV Broadband Service.
Both services provide a rudimentary map to a future destination where TV-type content will no longer consumed solely in front of a 36-inch screen.
BGM announced the launch of its CTV Broadband Network, Canada’s first, during its June up-front presentation to agencies and advertisers. The service launched with a handful of shows including Corner Gas and eTalk Daily, plus content from the specialty channel Discovery, and has subsequently added high-profile U.S. shows including The O.C. (which attracted 120,000 downloads of its season premiere), Studio 60 on the Sunset Strip and the cancelled Ray Liotta drama Smith. Advertising is being sold on the service, although Fecan is under no illusion that the broadband play will make a major contribution to CTVGM’s bottom line anytime soon.
“It’s a very, very small business,” he says. “But we’re not doing it for the small business it is now. I’m sure on the whole it’s not profitable today, but we are staying close to our customers and our audience, and they’re telling us they’d like to see this kind of stuff.
“Just a little over a year ago, we weren’t even thinking of doing it, and now we’re doing a lot of it,” says Fecan, pointing out that CTVGM’s sports specialty channel, TSN, recently launched its own TSN Broadband highlights service.
M2’s Dow says this is a space broadcasters need to be in. “It’s a necessity, because there’s little or no growth overall in conventional television,” he says (ZenithOptimedia projects Canadian conventional TV advertising to grow only 1.9% between now and 2009). “It’s an opportunity for a new revenue stream, although many of them have not been totally monetized yet. That’s really what the challenge is.”
Fecan acknowledges that there are challenges ahead for the conventional TV industry, a subject that’s been much in the news in the wake of the CRTC’s TV Policy Review hearings in Ottawa. The hearings saw broadcasters and cable and satellite companies clash repeatedly over issues including distant signals (otherwise known as time-shifting) and, in particular, fee-for-carriage.
One of the more memorable exchanges of the hearings occurred when Shaw Communications CEO Jim Shaw, who controls Shaw Cable and the direct-to-home satellite service Star Choice, said that if broadcasters were unable to make their conventional channels work, he’d be happy to take them off their hands.
Coincidentally, depending on what happens with the CRTC, CTVGM is planning to unload CHUM properties including the A Channels, Sex TV, Canadian Learning Channel and Access Alberta, as well as CKX Television, a CBC affiliate in Brandon, Man.
“I think this is great news,” says Fecan with a hearty laugh. “The timing couldn’t be better and we’re looking forward to his cheque.” There’s also no rest, it seems, for the quick-witted.
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Mighty media moguls still | ||
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At one time Canada’s largest newspaper company, the Thomson Corp. has abandoned traditional media for the less sexy but more lucrative information business. Over the past decade, Thomson radically transformed itself into an enormously successful distributor of information for the legal, financial and medical communities. The notoriously publicity-shy Thomson family has, however, maintained traditional media ties through its holding company Woodbridge-which last year paid $120 million to increase its ownership stake in Bell Globemedia (now CTVglobemedia) from 31.5% to 40%. At the time, the late Woodbridge chair Ken Thomson (who died of a heart attack in June), said: “We strongly believe that Bell Globemedia has a tremendous future in the rapidly changing media sector.” The deal, he added, “positions the company to seize those opportunities.” Earlier this year, The New York Times called Thomson “the biggest media company most people have never heard of.” “If you think about what they’ve done, it’s brilliant,” says Alan Middleton, assistant professor of marketing and executive director of executive development at York University’s Schulich School of Business in Toronto. “They’ve moved substantially from traditional media…to a sector that is not only up to date technologically, but to a series of industries that aren’t very sexy, so there’s not huge competition, and are really quite price-insensitive.” In other words, customers in sectors like law and medicine aren’t averse to paying top dollar for high-end information. Which explains how Thomson Corp.’s revenues increased 8% to $8.7 billion in 2005 and how a newspaper company valued at about $500 million at the time of founder Roy Thomson’s death in 1976, is now worth an estimated $29.3 billion. Middleton, however, believes traditional media isn’t part of Thomson’s main strategy and that last year’s move to acquire a bigger piece of BGM may have been done merely out of “personal family pride.” Plus, he theorizes, it could be a “build it and sell it move” for Thomson. CTVGM is already the country’s dominant media player, and depending on how the Competition Bureau and CRTC rule on its $1.4-billion deal for CHUM Limited, it could emerge with a lengthy list of assets in conventional TV, plus extensive properties in radio and the booming specialty TV industry. Why, you might even say it’s something to shout about. Just don’t expect to hear anything from the Thomsons. | ||
