Media execs weigh in on fee-for-carriage

Don't forget about consumers in battle over fee-for-carriage, execs say; research indicates any fee hike would meet 'opposition and pushback,' especially with new viewing options like iTunes cropping up.

The deep rift between Canada’s conventional broadcasters and cable companies over fee-for-carriage was again underscored at this week’s CRTC hearings in Gatineau, QC. Neither side appears ready to blink, although on Wednesday Quebecor Media president and CEO Pierre Karl Péladeau suggested a way for the federal regulator to ‘rebalance’ revenues by redirecting a portion of the fees cable currently pays specialty channels to conventional stations.

It’s an approach endorsed by Mark Sherman, founder and CEO of the independent media services company Media Experts.

‘It doesn’t seem right that consumers should have to pay more for television, it doesn’t seem right that cable operators should be able to sell something that they don’t pay for, and it doesn’t seem right that the CRTC demands that operators pay some channels, but not those upon which the Canadian TV ecosystem was built,’ Sherman told MiC yesterday.

Redistributing subscription revenue between conventional and specialty stations, he says, would ensure that consumers incur no extra charges on their cable bill, traditional broadcasters get paid for their product and the ‘previously advantaged’ specialty stations – which derive their revenue from both advertising and subscription fees and have been the engine of Canadian television in recent years – share the wealth.

‘The solution is neutral to CTV, Canwest, Rogers and CBC, all of whom own properties on both sides of the dial,’ Sherman said. ‘But it works well for Quebecor, which is heavily weighted on the traditional side. No wonder Pierre Karl Péladeau suggested it.’

But others say the idea isn’t enough to solve the economic woes of an industry that has been knocked silly by recession. ‘To my mind, it’s not really addressing the core issue, because redistributing money is distinct from increasing top-line numbers – which is really what the broadcasters are looking for,’ said Hugh Dow, chairman of Mediabrands Canada, the holding company for Interpublic Group’s Canadian media assets.

Dow says that since broadcast groups like CTV and Canwest own a broad array of specialty assets in addition to their conventional stations, revenue redistribution is merely the equivalent of shifting the money from one pocket to another.

He added that consumer opinion has been notably absent from the fee-for-carriage debate. An online survey of 1,000 Canadians conducted by media agency M2 Universal in April indicated that 42% of Canadians would cancel their conventional channels rather than pay more for them. An additional 26% of respondents said they would cancel other channels to keep them, while only 16% said they would pay more to keep them.

‘Certainly our research shows that there would be a considerable amount of opposition and pushback to any fee increase,’ said Dow.

Both the cable companies and broadcasters have been vigorously courting public support through their respective initiatives, Stop The TV Tax and Local TV Matters, but Dow suspects that rather than aligning themselves with one camp or the other, consumers are merely confused.

‘I’m sure they would have a very hard time articulating what the issues are,’ he said. ‘I think anyone who’s in the business clearly understands what the story is behind all the propaganda, but I’m sure consumers look at those full-page ads and say ‘Oh God, not another one.”

But any audience defection, he cautioned, would be a huge blow for an industry already reeling from the twin forces of audience erosion and a rise in alternative viewing options.

Ironically, at the same the two sides were gearing up for another day of combat in a cramped meeting room in Quebec, Warner Home Entertainment quietly announced that it was making several of its shows, among them Two and a Half Men, The Big Bang Theory and Gossip Girl, available for download through iTunes.

And while devices like the iPod and iPhone aren’t yet close to supplanting the 36-inch TV screen in the family room, Dow said they provide compelling evidence of an impending change in how this type of content is consumed.

‘There’s no question that technology is changing the whole viewing experience, but there’s still live television, particularly sports, that consumers want to see when it happens,’ he said. ‘You couldn’t say that all programming would lend itself to second-window [viewing], but there are an increasing number of access options out there.’

Earlier in the week, CTVglobemedia president and CEO Ivan Fecan warned that if the cable companies continue to ignore broadcaster demands for fee-for-carriage, some of its local TV stations would go dark. Again, opinion seems divided as to whether this is a real threat or mere posturing.

‘I suppose there is evidence to show that some stations are prepared to walk,’ said Dow. ‘It’s more than posturing.’

‘Of course he won’t,’ countered Bruce Claassen, chairman of Aegis Media Canada.

But interested parties shouldn’t expect to see any kind of resolution when the meetings conclude next Friday. ‘There is not going to be a solution that comes out of these meetings in Gatineau,’ said Claassen. ‘There are a lot of issues on the table, and a lot of initiatives taken and a whole bunch of other stuff, but there’s not going to be some magic formula where everybody’s going to walk away with a smile on their face.’