Will Rogers buy Quebecor? Will Shaw and Rogers join forces? Will Corus and Shaw become one? Industry watchers speculate on the next big moves in media following Bell’s acquisition of Astral.
At some point it has to stop, right?
Going back 15 years or so, the roster of Canadian players in the media game has been steadily shrinking as every 18 months (it seems) someone smaller is swallowed by someone bigger. The pace of consolidation has picked up since 2007 while new media players enter the national market online (Google, Facebook etc.).
The most recent, Bell’s acquisition of Astral—a deal worth $3.38 billion that gives the former a whole lot more radio (some of which will be sold off), some high-quality and highly valued premium TV content, including HBO Canada and The Movie Network, and puts Bell in the outdoor business for the first time. All that, plus the transaction significantly improved Bell’s position in la belle province, where Pierre Karl Péladeau reigns as the media king of Quebecor and Quebec. For now.
If recent history has taught us anything it’s that such deals bring other deals as the dwindling number of power players jockey for position. But how far can this go? Will the giants like Rogers or Shaw, or indeed Quebecor, feel compelled to make moves in response? Are there many deals left to be made? What does this mean for advertisers?
To get a broad look at what could happen next in Canada’s media mix, Marketing polled a group of influential media agency executives and industry watchers about what kind of pressure the Bell/Astral deal puts on Canada’s other media players.
Pros and cons and content, oh my!
Maxus Canada president Ann Stewart says the major benefit of the acquisition—“a true multi-channel player that gives 360 solutions”—outweighs the cons of having fewer players in the marketplace, which she admits can reduce agencies’ negotiating power.
If the Bell/Astral deal happened a couple of years ago, ZenithOptimedia Canada CEO Sunni Boot would have hated that there were fewer sellers. But her outlook has changed: “Today I think strong, large, consolidated Canadian media owners are critically important to fight Google and MSN and Facebook, so I’m keen on that.”
The deal will continue the trend of content acquisitions, predicts Cathy Fernandes, president and chief operating officer at Zoom Media. “The Rogers and Shaws will look for additional content possibilities and the Quebecors of this world will try to organically build their own content products. As we all say, content is king and distribution is power.”
But not everyone gives content as much clout—at least when it comes to the telcos’ handling of it. Amit Kaminer, a research analyst who covers the telecommunications sector at the SeaBoard Group, asks: “Who said content is necessarily a king?” While he agrees there can be advantages to content ownership, SeaBoard “likes the fact that Telus is sitting this content arms race out.” Instead of paying premiums for content, which some have suggested Bell has done (more than $7 billion in the past two years), Kaminer says Telus is investing the money in its infrastructure. Rogers, Shaw, and Quebecor may all choose to be more cautious than Bell and sit tight.
The Quebecor Factor
Bell’s acquisition of Astral may seem like a lunge for Péladeau’s throne. Fernandes says the deal “gives Quebecor specifically a run for their money” since Bell’s newly acquired French content will be added to its primary assets—wireless and internet—to “build a worthy proposition” for consumers in a marketplace in which Quebecor is the leading player.
Boot adds that Bell’s strengthened presence in Quebec also “gives them a content play on their mobile which is going to be big.” Plus, the deal will help Bell with its national reach. “They will be, for content production, for everything, truly national and maybe amortize all those costs,” she says.
However, while Bell will soon boast part-ownership of the Toronto Maple Leafs and Maple Leaf Sports and Entertainment (in addition to its 18% stake in the Montreal Canadiens), Péladeau may well have a hockey team of his own that will play in Quebec City (The Quebec City Coyotes?) and provide many new content integration opportunities for his company.
Rogers Media on the Hunt?
Deborah Coyne, the newly appointed managing director of trading at Maxus Canada, was previously a senior manager for media at Rogers. She expects Rogers will respond to the Bell/Astral deal. While Rogers has been expanding its conventional television reach—most recently adding Saskatchewan to the stable—and radio and magazine holdings, she notes that newspaper is a hole in its portfolio. “But I guess the question is, ‘Is newspaper an area they want to really invest in?’ And it’s funny, because newspaper readership is quite strong; more and more people are going online and consuming.”
Rather than look to buy a TC Transcontinental or Postmedia Network, though, Coyne says it’s more likely that Rogers would eye Quebecor. “The Quebec market is probably the greatest opportunity for them,” she says, since it’s one of Rogers’ weaknesses. Rogers could fortify its overall portfolio by getting into regional television in Quebec—both specialty and network.
The obvious advantage in picking up Quebecor, adds Boot, is Rogers would be No. 1 in Quebec conventional, “but it would not add much to their asset base in English Canada outside of newspapers.” It’s only been 12 years since Ted Rogers tried to buy his way into Quebec and was rebuffed. It’s hard to imagine PKP would be willing to give up his empire now. If Rogers were to get into the newspaper business, Boot believes Postmedia would be the best partner because of its strong brands in the major markets—specifically in Western Canada, the region of the country she says “is seeing strong opportunity and investment by advertisers.”
Options for Shaw
While Shaw may look to fill its hole in radio with some of the Bell or Astral properties almost certainly put up for CRTC-mandated sale, what may be even more interesting is what would happen on the TV side if the two Shaw entities—Shaw and Corus—became one. Shaw may prefer to take Corus private and keep Shaw a family business rather than sell to, say, Rogers anytime in the near future, anyhow, says Fred Forster, CEO of PHD Canada.
Boot says there may be a greater move to put Shaw and Corus “together not just in the back room, but in the front room.” Why would that be a concern? Two words: children and women. The united entity would be very dominant in those key demographics and the CRTC might not approve.
Even if the merged company did become too aggressive within those demos, Boot is more Zen about it these days. “We have alternatives in the digital landscape and as that grows and becomes a bigger part of our clients’ portfolio, I’m less concerned than I would have been a few years ago.”
And what would happen if Rogers and Shaw joined forces? That would give both companies incredible competitive strength against Bell Media, says Boot. “Very strong conventional on two tiers and excellent cable—not to mention wireless and distribution,” she says. National coverage for Citytv, a priority for Rogers, could become a reality.
But a deal between Rogers and Shaw may be tough. As Kaminer puts it, “that might smack of concentration—even the CRTC might wake up.” He could only see a Rogers/Shaw deal getting the go-ahead if the CRTC allowed Bell and Telus (or, “Bellus,” as Kaminer calls it) to join up.
As Boot sums up, “I definitely see additional mergers; there is nothing like an acquisition in an industry to get the merger and acquisition ball rolling.”
But at some point it has to stop, right? Right?
