‘‘Cowboy of Cable,” “redneck,” “industry bad boy,” Jim Shaw’s been called a lot of things. The common portrait is that of a brash, burly, biker-type who just happened to find himself sitting at the helm of a $12-billion enterprise. And while every article about Shaw seems required to mention his penchant for schoolyard pugilism as a youngster (check!), when Shaw Communications agreed to pay $2 billion for Canwest Global’s broadcast assets–including 11 Global TV stations across Canada and its quiver of profitable specialty channels like HGTV, Showcase and Food Network–Shaw instantly added “media mogul” to his collection of titles. The deal may have also been the best possible move for his company to succeed in the 21st Century.
The most significant outcome of the acquisition is that Shaw gets quality content to help increase sales and subscribers of its cable, digital and, as of 2011, mobile offerings. “We believe the combination of content with our cable and satellite distribution network, and soon to be wireless service, will position us to be one of the leading entertainment and communications companies in Canada,” Shaw said when the deal was announced.
And while the benefits of acquiring the content to deliver to its customers seems straightforward, the deal–assuming the allimportant approval of the CRTC–also raises some interesting questions. As media convergence makes a comeback after a decade-long walk in the investment wilderness, more than one analyst wondered if Shaw will be able to leverage these new properties to boost its overall business? And what about Shaw himself? Can the man who’s famously clashed with the CRTC as a distributor use the same playbook as a broadcaster?
Overall, the move has been met with widespread applause. Media buyers see healthy, popular content properties now backed by a financially stable support system, and one that is looking to enhance digital and mobile capabilities (and thus, ad opportunities). “It’s a positive thing from our perspective for a number of reasons,” says UM Canada vice-president, director of broadcast investments Dennis Dinga. “It provides stability to our business and it’s a hell of a lot better than the alternative, which would’ve been Canwest broken up into a whole bunch of little companies.”
Media consultant and former Canwest executive Jack Tomik agrees. “It’s always good news to have stable ownership and financing, which is good for the business,” he says. “Now what are they going to do with them once they have them? Shaw is a really well-financed, stable company and seems to me they like winning quite a bit. They’re very competitive, so from a Global television standpoint, I think we’ll see much improvement in the resources behind the product.” While Shaw becomes one of the top media companies overnight, theirs is a story decades in the making. Jim’s father JR Shaw moved to Edmonton in the 1960s to expand the family business providing polyethylene coating to protect steel pipes from corosion. Then along came plastic piping for natural gas and JR knew the days of demand for his service were numbered.
Taking a queue from his father Francis, who had started a cable television business in Ontario, JR made a deal to bring CBS and PBS north of the border. As Grant Robertson wrote in a 2009 Globe & Mail profile of Jim Shaw: “It was a revolutionary move: JR had won in Ottawa by arguing that consumers deserved choice.” Providing consumers with choice seems the underlying motivation of the Canwest deal as well. Acquiring a successful and profitable collection of content puts Shaw in the position to offer consumers more choice in what they watch, when they watch it and on which platform–TV, computer or mobile. So, on top of adding $1 billion a year in revenue to Shaw’s top line at the outset, many see those content assets becoming even more valuable as consumers’ viewing habits increasingly shift to include more smartphones and video-on-demand.
“We see that customers are really trending towards watching and purchasing content across a variety of media platforms, both broadband and mobile devices,” said Jim’s younger brother and executive vice-president Bradley Shaw when the deal was announced. “We believe a greater percentage of traditional programming will be viewed on video on demand, and we’ve seen that certainly firsthand in our own business where video on demand is becoming (an) ever more important way of monetizing programming.”
“The number one driving force for us in this strategic acquisition has been this notion of content,” said Shaw’s president Peter Bissonnette, during a conference call (according to a Canwest news report). “Over the next decade, to be successful as a distributor over many platforms we will require strong content capacity.” (Shaw declined to comment for this article.) The prospect of making more digital content from popular channels like Showcase and HGTV available even makes one of Shaw’s competitors happy. Phil Lind, vice chairman of Rogers Communications says he’s glad to see a fellow telecommunications company have control over content.
Rogers has had an amicable relationship with Shaw since Ted Rogers and JR Shaw essentially split up the country into two cable domains while enabling Rogers to take over Maclean Hunter back in the mid 90s. The more choices consumers have online, the more time they spend cruising the information superhighway, which is good news for anyone selling Internet access. “We, of course, believe that it’s important that Global makes its content available online,” says Lind. “I think they were moving on the right track, obviously Shaw will hurry them up a bit because cable companies generally want broadcasting content available not just on linear or by-appointment, but any time anywhere. I think it will certainly spur Global on.”
Lind says other Canadian broadcasters, and specifically CTV, have been a bit slow in putting content online. “CTV will ultimately do it too because NBC’s doing it, ABC’s doing it, everybody’s doing it, it’s just a matter of speed and time. We want it as quickly as possible and broadcasters are slower off the mark, considering all the implications and not wanting to make any quick decisions in case it’s the wrong one. So [the Canwest] acquisition just speeds up the process as far as I’m concerned.”
But others have wondered if spending $2 billion on a content play may have been premature when Shaw still has to launch its wireless service–the future of content delivery. “Shaw is using up a lot of its money here and a number of analysts have said from the get-go that they’d hoped Shaw had launched the wireless first, because it’s got more margin and gross profit, before making a move for strategic content,” says Ken Hardy, professor emeritus at the University of Western Ontario’s Richard Ivey School of Business.
“It’s a big question. To what degree do we think that, in this world of convergence, people will be watching The Hills or House on their laptops and mobile devices, rather than on their TVs? I don’t argue that the number of people doing that is increasing, but the notion that significant numbers will be watching TV programs on their cellphones is fairly advanced and could even be extravagant in terms of prediction.”
Despite the relatively slow adoption of digital, online and wireless options compared to the U.S. and other parts of the world, Tomik says Lind is right for wanting to spur the growth of digital content availability in this country.
“Mobile content is happening now, even if it’s very rudimentary in the scheme of things,” says Tomik. “But if you look at the roll-out of the Internet, it was almost 13 years until it was really something. Mobile is moving quicker than that but it’s going to be a little while before it’s really used on a mass scale for content. But you better be there and you better be offering content because people build brand associations early. And if they get hooked on someone else’s product you’re going to have a tough time winning them over. You better have the buffet hot, ready and open when they want it, otherwise they just go next door. That’s probably got a lot to do with why Shaw bought those assets.
And frankly, those assets are really good ones.” All this talk of convergence and how it offers consumers more choice, however, sounds eerily reminiscient of the most famous of media convergence failures: AOL and Time Warner in 2000. The deal was worth a reported $350 billion, but fast-forward a decade; after countless job losses, a revolving door of executives and investigations by the U.S. Securities and Exchange Commission and the Justice Department, and the New York Times estimates the company’s worth at about one-seventh that value.
Closer to home we had BCE’s acquisition of CTV and Canwest’s purchase of Hollinger’s newspapers and Alliance Atlantis. Times have changed. The word “convergence” is no longer dirty. BMO Capital analyst Tim Casey recently told Canadian Business magazine that what makes the Shaw/Canwest deal different is were done at the top of the cycle and based on over-aggressive profit expectations. On a conference call with analysts when the Canwest deal was first announced, Jim Shaw referred to the deal that could see U.S. cable giant Comcast own a majority stake in NBC-Universal when calling his own company’s move an example of “forward thinking in Canada.”
The Comcast/NBCU merger, first announced back in November 2009 and still subject to FCC approval, is being talked about in the industry as a move by Comcast to stake out a frontrunner position in the race to modernize advertising for new-media consumers. In an article in Advertising Age, Bernstein analyst Craig Moffett said teaming distribution services with content creation could provide “better windows for videoon- demand and faster development of addressable advertising.”
Similar opportunities should exist for Shaw with Canwest’s TV assets in the fold, though one of the other big question marks is how will Shaw affect the content being produced by the Canwest Global assets? To run the new Canwest Global division, Shaw is bringing in Paul Robertson, former president of the television division at Shaw’s Corus Entertainment Inc. Bruce Claassen, former chair of Aegis Media Canada and current CEO of Bluepoint Investment Corporation, expects operations at Canwest to stay relatively calm for the time being.
“I don’t think they’ll do anything to hurt the current product,” says Claassen, whose company recently purchased Saskatchewan Communications Network (SCN) from the Government of Saskatchewan. “In fact, perhaps they’ll have the wisdom to invest in and improve the product. I don’t think operationally there should be any significant changes.” One area Claassen does see a potential for conflict though is with Shaw’s “cowboy” CEO who once called the Canadian Television Fund a “wastebasket.”
“There will be a few issues because the business model for running a distributor is much different than running a broadcaster, and your ability to control those issues are quite a bit different as a broadcaster,” says Claassen. “As a distributor you control how many poles go up, how many trucks are on the road, prices you charge, all kinds of things. As a broadcaster, there are more regulatory constraints. This will undoubtedly create some frustration. Jim Shaw has a reputation for thumbing his nose at some of the issues and he may have been able to get away with some of that as a distributor, but it’s a lot more difficult to thumb your nose at the [CRTC] when you’re a broadcaster.” Clearly, the discussion around just how Shaw will make its newest shiny content toys its own is ongoing and not about to let up anytime soon.
But with new money behind Canwest Global, the Canadian television industry just got a good shake. And Jim Shaw’s competitive streak aside, with momentum growing for increased digital content, advertisers and consumers may emerge as the real winners of the deal.
