BCE Inc. is taking full ownership of CTV in a in a $1.3 billion deal that continues the recent trend of communications convergence in Canada.
The move announced this morning marks a realignment of the national media scene as BCE Inc. scoops up all of CTV and a majority stake in the Globe and Mail passes to the Thomson family, which has been involved in the national paper since 1980.
The deal comes a decade after BCE, under former CEO Jean Monty, acquired CTV in an all-cash transaction valued at $2.3 billion. That 2000 transaction was one of the early moves in which corporate Canada tried to cash in on a growing trend towards convergence of the Internet, telecom, newspapers and broadcasting.
However, BCE later sold off most of its CTV stake, retaining only 15%, as former CEO Michael Sabia decided to focus on the company’s core telephone business.
With the expansion of today’s advanced wireless networks and video services on the Internet, communications companies are now trying to expand the range of content they can offer their subscribers across all their communications networks.
The announcement of the CTV deal comes a day after Quebecor unveiled its wireless program for Videotron in Quebec, targeting Bell customers in that province. And in July, an Ontario Superior Court judge gave the go-ahead to the $2-billion sale of Canwest Global Communications to Shaw Communications.
CTV’s broadcasting assets, including Bell’s existing 15% stake, were valued at $1.5 billion. As part of the deal, Bell will assume $1.7 billion in debt, which puts the total transaction value at $3.2 billion.
In a conference call with analysts this morning, BCE’s president and CEO George Cope said the deal “extends our leadership in mobile video, premiere sports and music properties… hedges us against increasing programming costs and clearly levels the playing field with the integrated cable co’s as we compete for end customers.”
The deal, which awaits approval by the CRTC, includes CTV’s 27 stations across the country, 30 specialty channels, including TSN and RDS, online properties such as CTV.ca, TSN.ca, RDS.ca, MuchMusic.com, MTV.ca and TheComedyNetwork.ca, as well as CHUM Radio, which operates 34 radio stations throughout Canada.
In a separate transaction, The Woodbridge Company acquires ownership of the Globe and Mail, though Bell will retain a 15% equity position.
Much like Shaw’s acquisition of Canwest Global, a key factor for Bell’s purchase of CTV is the emerging importance of multi-platform video content consumption. Cope said TV and video is now a $1.7 billion business for Bell, as well as the company’s fastest growing cost.
“Our three largest cable competitors are fully integrated and clearly we are not prepared to buy all our content from our competitors,” said Cope. “The market has evolved completely in terms of use of video and TV, to all three screens [TV, online and mobile], and with the introduction of tablets, really four screens. This acquisition substantially strengthens our competitive position.”
The deal will also allow Bell and CTV to maximize marketing budgets by delivering more Bell advertising through CTV. Bell spends more than $200 million in advertising annually, and Cope expects the company to spend upwards of $900 million on advertising and content costs in 2011. “Clearly a benefit to CTV going forward is our advertising dollars can be directed to these leadership media assets in an integrated way,” said Cope. “From a Bell perspective, it represents a natural hedge against increasing cost.”
Zenith Optimedia president and CEO Sunni Boot said the deal doesn’t change anything for media buyers or their clients in the immediate future, but represents the kind of shift in consumption that will change how media is bought and sold in the not-too-distant future. “They are right to do this,” said Boot. “This is all about content and platforms. When you own the licence and copyrights, there is so muh more you can do–edit it, repurpose it, all kinds of things. They are now going to have original content for all their platforms but especially in mobile.” Cope said he expects the deal to close no later than mid-2011.
Chatter around Canadian media about the deal:
“Somewhere Jean Monty is smiling today.” — Steve Maich, editor Canadian Business magazine (via Twitter)
“Did Bell have to do this? It probably didn’t have to, but I think we can all look at this as an insurance policy. More of today’s content goes over the web and over wireless versus conventional TV. Owning content allows a carrier to have a seat at the table when negotiating access to other ‘non-owned’ content.” — National Bank Financial telecom analyst Greg McDonald in The National Post
“Like [Shaw Communications] buying CanWest, this deal secures key content. Validates [Shaw] strategy, Rogers already has media assets and Quebecor’s strategy in Quebec. While Telus may benefit from fund flows short term (yield investors moving out of BCE), this puts Telus at a strategic disadvantage when it comes to content negotiations in the future (ie: content costs may go up more for Telus than its competitors).” Jeff Fan, Scotia Capital, in the Globe and Mail
“Video – on the big and small screens – is where the firehoses meet in 2010. Just like Shaw saw this potential with Canwest and Quebecor [with] TVA, Bell is seeing it with CTV.” Kaan Yigit, president of consultancy Solutions Research Group, in The National Post
