AAC confirms CanWest is wooer; media pundits weigh in

The worst-kept secret in the Canadian broadcasting world is finally out of the bag. But media strategists are wondering this: Will the impending deal create too many 500-pound gorillas at their bargaining tables?

While it’s not a done deal, Alliance Atlantis Communications’ rich portfolio of assets will likely be acquired by CanWest Global – just as M2 Universal president Hugh Dow speculated in MiC before Christmas. AAC confirmed it’s in exclusive talks with CanWest and Goldman Sachs Capital Partners. The probable purchase price? A cool $2.1 billion Canadian bucks.

But if this new 500-pound gorilla is counting on paying off its debt by boosting advertising rates, several media strategists say the beast has another think coming. ‘This is happening right on the heels of the CTVglobemedia consolidation of ownership,’ says Theresa Treutler, SVP/media director at Toronto’s Doner Canada. Her primary concern is that if more power is concentrated, suppliers will become more dominant and that will spell inflated ad prices.

‘But there’s just not much more advertisers can be pushed into paying,’ Treutler adds. ‘In fact, conventional television is one of the few mediums where audiences are declining but prices are going up. Some television advertisers are already just about at a [price] threshold where they may turn away from television and go into other media, where their money goes much further. And even large advertisers who still feel that television is a key component of their communications strategy – and we’re seeing this with some of our clients – will reduce the television share and divert those funds to other media.’

Fred Forster, Toronto-based president of PHD Canada, agrees it would amount to killing the golden goose if a broadcast giant results from the Alliance Atlantis-CanWest deal and that new entity attempts to raise ad rates. ‘This deal is not a good thing for advertisers. It’s going to make it more difficult to keep prices in line because another round of consolidation will likely create less ability for advertisers and their agencies to negotiate fair prices. We want more media owners, not less.’

Happier about the impending deal is Sherry O’Neil, managing director at OMD Canada. ‘If Alliance Atlantis is going to sell, I’d say CanWest is definitely the best choice,’ she says, adding that she doesn’t see the sale as a potentially negative consolidation. ‘The result would balance out the mix of stations [at CanWest]. In the last number of years, CanWest has been somewhat disadvantaged because they didn’t have a pool of specialty channels to help them deliver revenue growth numbers for their shareholders. So (this acquisition) would take some of the pressure off.’

What does O’Neil think will happen to ad rates? ‘I’m not saying they won’t increase, but certainly the company would have other avenues to explore to build their revenue, and that would make it hopefully better for agencies and our clients. Specialty is a stronger property than their existing conventional assets because the growth in specialty has been significantly stronger than in conventional in terms of inflation and audience growth.’ Bottom line in her opinion? ‘I think CanWest would be acquiring a blue-chip product and a blue-chip sales organization, and they shouldn’t mess with it at all.’

What effect further consolidation might have on what she terms ‘accountability’ is top of mind for Annette Warring, president of Toronto-based Genesis Canada. ‘I’m hugely concerned that the level of accountability broadcasters have shown to date with regard to both measurement and general accountability won’t be improved. This would give them maybe even less concern about working with media agencies and clients who are looking for greater accountability because they might have too much control. When we’ve got so few broadcast partners, it makes our job that much more challenging – not impossible – but more challenging. So we’ll have to be that much smarter, that much more nimble, and try that much harder to stay one step ahead of everybody else.’

If there is an up side to the impending deal, however, Warring believes it is the potential for added depth of convergent platforms. ‘There’s a huge opportunity for [the resulting company] to really understand how their stable of assets could make them be a better partner with agencies and marketers in providing deeper solutions than just the GRP solution. So I prefer to be optimistic and maybe think that they will potentially wear a marketer’s hat and come up with more full-service solutions across all the properties, versus just wearing a big media conglomerate hat.

‘I have positive things to say about working with both Alliance Atlantis and CanWest, which I’ve always found to be very forward-thinking,’ Warring adds. ‘CanWest has gone through some growing pains, but I think they’ve really tried to understand how to work with agencies with regard to more integrated solutions. And I find Alliance Atlantis very similar to work with, so I can see how synergy could result from this in taking that to the next level.’

Whatever else comes from CanWest’s acquisition of AAC, Treutler points out, ‘it will create a level playing field between CTVglobemedia and CanWest. There will be a more equitable offering on the television front – a healthy conventional component and a rich specialty component – and that would be a good thing.’

Toronto-based Jeanne Northcote, SVP of The Media Company/MBS, says the buy is a smart move on the part of CanWest. ‘With limited attractive Canadian-produced properties, CanWest has not been able to offer opportunities for local promotional tie-ins, product placement and integration, or non-traditional means for advertisers to connect with Canadian audiences. HGTV, Food, Fine Living, Life, Discovery Health and National Geographic offer CanWest opportunities for many potential product categories.’

But although the buy is good for CanWest, the advertisers’ only potential gain is one-stop shopping, she says. ‘If the sale goes through, CanWest will be pressured to offer combination packages with attractive pricing if they want to increase share of revenue for the combined station group.’

And if that happens, Northcote predicts that Alliance-Atlantis’ non-broadcast assets, including film distribution and CSI rights, will be sold off. ‘CanWest will need to focus on improving its core strength of reaching the audiences advertisers want, not diverting efforts to develop new areas of competence.’

Adds Forster, ‘We have good relationships now with both CanWest and Alliance Atlantis as media partners, and I don’t expect that to change – because at the end of the day, it’s all about creating opportunity and value for clients to sell product. So if (the new entity) doesn’t continue doing that, they would do themselves a disservice. I have to believe that we’re all trying to achieve the same thing in the end, which is to promote a healthy broadcast business.’