A day after the CRTC ruling that could pave the way to fee for carriage, media agency executives were still deciphering the possible implications for the Canadian media landscape, while more cable companies were voicing their displeasure.
As reported yesterday in Marketing Daily, the CRTC has increased the amount cable and satellite companies must contribute to the new Local Programming Improvement Fund, created to support stations and programming in local markets with a population of less than one million.
The companies were previously expected to kick in 1% of gross revenues, but that number was increased to 1.5% as per the CRTC’s decree that the overall value of the Fund be upped to $100 million from $68 million.
Perhaps more significant than the LPIF increase, however, was the apparent reversal of the Commission’s stance against fee for carriage. Broadcasters such as Canwest and CTVglobemedia have for several years lobbied for the right to charge cable and satellite companies for carrying local stations, but until yesterday they had been rebuffed by the CRTC.
While the Commission stopped short of instituting fee for carriage outright, it did give broadcasters “the right to negotiate the terms under which their distant signals will be retransmitted. The Commission is now of the view that a negotiated solution for compensation for the free market value of local conventional television signals is also appropriate.”
The CRTC was saying little about how it envisions those negotiations taking place, but will hold a public hearing starting Sept. 29 in Gatineau, Que., to discuss the development of a new regulatory framework for Canadian television.
Cable companies have consistently opposed fee for carriage, arguing that it would force them to pass on additional charges to consumers.
Hugh Dow, chair of M2 Universal, said the decision could dramatically affect advertisers and media agencies if consumers are asked to make up for the additional costs imposed on cable and satellite providers. Dow warned that if enough consumers respond to higher bills by cancelling their subscriptions, broadcasters may regret getting what they wished for.
“There is inevitably going to be some consumer backlash, particularly if there are substantial fee increases,” said Dow. “That backlash could lead to cancellations of subscriptions or revisions of the types of packages that consumers are taking, and that could in turn lead to reduced audiences.
“If there is any impact on audience levels, that will have a direct correlation to advertising revenues.”
Dow referred to research conducted by M2 earlier this year to support his point. According to the survey, 42% of respondents said they would cancel their conventional broadcast channels if asked to pay more, an exodus that could potentially result in enough lost advertising dollars to offset the $352 million revenue boost the CRTC expects broadcasters will receive as a result of fee for carriage.
“It’s a huge issue as far as advertising,” said Dow. “Advertisers are concerned because it could very well have a direct impact on audience levels.”
Not all media executives share Dow’s concern, however. Carol Cummings, director of television services at Media Experts, said she has followed the fee for carriage story with interest but doesn’t believe its implementation will significantly affect her business.
“I don’t really see how it affects our buying and planning procedures, other than if it came to the point where no stations were producing local news and we had a client that was looking for that type of environment,” said Cummings.
Cummings also expressed doubt that Canadians would abandon their television packages in droves as the result of any extra fees.
“I really can’t see [consumers] cancelling it on that basis.”
Paul Sparkes, executive vice-president, corporate affairs for CTVglobemedia, said his company does not expect a major drop in viewers or the advertising dollars they attract. Sparkes also said fee for carriage should not necessarily force cable and satellite companies to raise their rates.
“We believe the cable companies should not increase bills as a result of us being able to negotiate fair market value for the retransmission of our local programming,” said Sparkes. “Our argument is that they’ve already been charging the consumer for local television stations.”
Sparkes added that cable and satellite providers already raise rates on a regular basis, and suggested that government regulation may be required to ensure these companies do not pass on additional costs to consumers.
After Rogers and Bell voiced their opposition to the CRTC changes on Monday, Videotron and MTS Allstream joined the chorus on Tuesday.
“In the current economic climate it is indecent to increase the burden on consumers,” said Videotron chief executive Robert Depatie in a release. “In the name of our customers, we strongly oppose this situation and we intend to fight.”
MTS Allstream Inc. said the CRTC decisions could represent a “tax on TV customers of at least $50 to $100 per year.”
“These decisions represent a serious setback for consumers—reducing the possibility for innovation and increasing costs without providing any real benefits. Indeed the obligations for broadcasters are being reduced as the tax on customers is being increased,” said MTS Chris Peirce, chief corporate officer, referring to another part of the CRTC decision that could mean more fewer hours of local programming in smaller regions.
