Posted in Opinion, TV

What if we stopped subsidizing local TV?

One of the arguments used against conventional television broadcasters in Canada – CTVglobemedia and my corporate overlord Canwest especially – in this whole fee-for-carriage debate is that they’re both giant megacorporations and own a slew of cash-cow specialty television channels.

The broadcasters counter that they can’t take profits from one part of the business and subsidize another.

As much as the knee-jerk consumer reaction might be that this is exactly what they should do, they’re right. It makes no business sense for a profit-generating enterprise to not be generating profit. If conventional television doesn’t make money, then subsidy or no subsidy, it will eventually be shut down.

CTV and Canwest purchased their specialty arsenals knowing the conventional model was going down the toilet. If it came down to it, neither would have any trouble shutting down their entire conventional network and moving completely to specialty channels. But conventional TV is still making money (only just) and they’re betting on a fee-for-carriage solution to get them more.

But as much as the broadcasters are arguing against subsidizing their own operations, they have no trouble demanding exactly that from cable and satellite broadcast distribution companies. Not only do they benefit directly from the new Local Programming Improvement Fund in small markets, but their expensive Canadian dramas and comedies get large subsidies from the Canadian Media Fund, formerly the Canadian Television Fund. Both of these funds get their income from cable and satellite companies.

And cross-subsidization is what the conventional broadcasters do for local programming. In fact, even though they constantly whine that the “model is broken”, the basic premise of using profits from reselling U.S. programming to fund Canadian and local programming remains. This isn’t done because CTV and Global have hearts of gold and see the value in homegrown television, it’s because the CRTC forces them to air this kind of programming as conditions of license.

The result is that the broadcasters see a negative value in original programming. They juggle the schedule to just barely pass CRTC-imposed minimums. They match U.S. networks for as many popular shows as possible to take advantage of lucrative simultaneous substitution rules that put their ads over the U.S. feeds. Original Canadian programming is left to fill the less desirable holes. CTV’s Flashpoint, considered a huge success in Canadian drama, is thrown into the TV dead zone of 10pm Fridays. Most other programming consists of cheap Canadian franchises of U.S. or other foreign formats (usually reality shows). ET Canada, Project Runway Canada, Cash Cab, So You Think You Can Dance Canada, Canadian Idol, Canada’s Worst Driver/Handyman, the list goes on. They’re cheap and low-risk and don’t require any original thought.

Local minimum

For local programming, it’s the same deal: cheap and formulaic. Most stations outside of the huge markets produce the absolute minimum of local programming, even at the recently reduced levels of 7 or 14 hours a week depending on market size. And in most markets, there is zero local programming outside of local newscasts.

In Montreal, Global’s CKMI produces only 7.5 hours of local programming a week, all of it with an anchor in a small green room and computer-generated set. It adds 7 hours of repeats of local news to fill the rest of its mandate. CBC’s CBMT isn’t much better, with 500 minutes (8h 20min) of news each week (a 90-minute newscast that repeats the same stories over and over again, and a 10-minute late-night newscast that includes 75 seconds of advertising). CTV’s CFCF has just over 16 hours a week of local programming, all of it newscasts.

It gets worse. Those local newscasts aren’t all local. As I studied previously, much of the local newscasts for all three networks consist of prepackaged reports from national reporters in Ottawa, Toronto and elsewhere. Only about half an hour of an hour-long newscast is local news. That, combined with the fact that newscasts repeat the same story during the day, means each station might produce only a handful of stories each day (figues based on the same newscasts studied this summer):

  • At CFCF, an average of 7-8 reporters producing about 15 minutes of local news packages a day
  • At CBMT, 4-5 reporters producing about 10 minutes of local news packages a day
  • At CKMI, 3-4 reporters producing about 8 minutes of local news packages a day

Perhaps these numbers are unfair. They don’t include sit-down interviews during CFCF’s news at noon. They don’t include sports news and weather. They don’t include special features on the weekend that CFCF used to replace Entertainment Spotlight and SportsNight 360. And they don’t include CKMI’s half-hour Focus Montreal show.

But let’s set those aside for a moment (we’ll get back to them). When we focus on the actual news part of those local newscasts, which we’re told is the most important part of local TV (since it’s the only thing they really have left), I’m tempted to ask: What would we lose if these stations simply disappeared from the airwaves?

What’s at stake?

I watched the evening and late-night newscasts from all three networks on Friday night (flipping between them, so I might have missed a story or two), and I struggled to find any original journalism that would not have been done had it not been for that particular TV journalist. There were stories on swine flu and the Agence métropolitaine de transport, which are being heavily covered by all local media. There was the crime and justice reporting that everyone else has too. One story was clearly re-reported from the morning newspaper (without credit, of course).

It’s not that the journalists are lazy, or that they’re not doing their jobs. They all work very hard. Newspapers have no more claim to a government press release than the TV station does. More journalists means more voices, more eyes, hopefully more angles. And there is plenty you get from video that you can never get from audio or print.

But if the TV stations disappeared tomorrow, these stories would still get reported. We’d still find out how to get our swine flu vaccinations. We’d still find out what the weather is, or how the Habs did in their last game, or who’s been arrested in what cold case. Exclusives on TV are few and far between (CFCF’s special reports during sweeps notwithstanding). It’s a direct result of the lack of editorial staff. There’s just so much you can do with fewer than 10 reporters in a newsroom.

Those sit-down interviews, at least, are a bit more interesting. They’re not as hard-hitting as a two-minute package done by a reporter on deadline, but sometimes you can learn something from them that the newspapers and radio might have missed.

But is that glimmer of information worth being forced to pay for? Is protecting this a national crisis that the CRTC has to step in to stop?

Local TV to care about

It’s not that I want local TV to disappear. It’s that I want the networks to care about them. And it’s clear that they don’t. No matter what happens, so long as local news is a negative-profit proposition, the networks will reduce their influence on the balance sheet as much as possible. This, I argue, is a broken model, and one the “Local TV Matters” proposal does nothing to fix.

Perhaps I’m being naive and idealistic, but I think something would come in and fill the gap if CFCF and CKMI were to shut down tomorrow. (I leave out CBC since it’s not a private broadcaster and hence shouldn’t be concerned with making money in the first place.) Print publications (which, as David Olive points out, don’t get government subsidies) are increasingly using video to report stories that they think have a strong video angle. Most of those videos are God-awful, but they will start improving. Small independent video production houses could step up production and move into more serious journalism. And local cable access channels like VOX (which, by the way, are also subsidized by the cable companies) could become a destination for people looking for local news on television.

If the entrepreneurial spirit, instead of CRTC mandates, drove local news, we might see a lot of changes for the better. They might stop chasing the same stories that are being reported by everyone else and look to contribute something original to the conversation. They might value long-form original journalism over two-minute packages repeating what they read in the newspaper. They might have more interviews and less stock footage B-roll. And they might look seriously at having their product available on multiple platforms (neither of the three anglo stations have all their newscasts available for streaming online, none provide the choice between watching the entire newscast or individual stories, none have newscasts available for podcast download, and none are available on Videotron’s video-on-demand service). They might see outside the constrictive box of what a newscast is supposed to look like. And they might try to produce inexpensive but watchable local programming.

Sure, it would suck balls at first. A lot of good TV reporters would be out of work (or forced to take low-paying jobs with no benefits or union protection), and the community would have a void of voices before someone stepped in to fill it (unless an existing station decided it really wanted to produce a local newscast for profit). A lot of the professionalism would be gone, replaced by young ambitious people with no clue what they’re doing.

Maybe the result would look like VOX, a channel nobody watches. Maybe the result would be similar to the online local video productions that nobody watches either. Or maybe it might be interesting enough, different enough, to catch people’s attention and make someone modestly rich.

In Hamilton, the new owners of CHCH are betting on the power of local news, expanding local newscasts far beyond what the CRTC requires. I certainly wouldn’t put any good money on their chances of success (even if they are ultimately successful they’re going to lose a lot of money at first), but even that slim chance of a workable business model is reason for hope, because if they do by some miracle turn a profit we could see that model quickly replicated across the country (and maybe around the world).

On the francophone side, Quebecor has its LCN all-news cable network, which is supported through subscriber fees and advertising, but is discretionary on digital cable and satellite. Though I’m sure TVA would protest otherwise, it’s heavily focused on Montreal, the centre of the francophone media universe. And it obviously shares resources with the conventional TVA television network and news team. But it’s a private enterprise, and one Quebecor thinks can make a profit.

Even under the best of scenarios, a deregulated local television landscape would probably have at most one local news operation, a reduction from the current three. But at least it would turn a profit, whether from advertising, subscriber fees or both, without any taxes, handouts or subsidies.

And we would care about it. And advertisers would care about it. And its journalists and producers would care about it. And its owners (and their shareholders) would care about it.

Because it would matter.

22 thoughts on “What if we stopped subsidizing local TV?

  1. Guillaume Theoret

    “The broadcasters counter that they can’t take profits from one part of the business and subsidize another.

    As much as the knee-jerk consumer reaction might be that this is exactly what they should do, they’re right. It makes no business sense for a profit-generating enterprise to not be generating profit. If conventional television doesn’t make money, then subsidy or no subsidy, it will eventually be shut down.”

    I think Google begs to differ.

    Reply
      1. Guillaume Theoret

        Because it’s not their market and they have no expertise there but Google’s model has a lot this case could learn from. And it’s what’s going to hurt them most.

        Google leverages its monopoly on search (and therefore relevant ad placement which actually makes the money) to build high quality products in tangential sectors that drive more traffic and more money to Google. Emphasis on high quality. More on this later. Convergence still works, but big media seems to have forgotten why it works in the first place. They’re completely focused on economies of scale, driving quality way down, rather than what convergence should really be about: driving people to your profitable sectors. Their current strategy will simply make it easier for new entrants to beat them on both cost *AND* quality.

        Local TV, I believe, still has major profit potential. It’s possibly the only traditional media sector outside specialty channels that does, simply because they still have leverage there. But they’re losing it.

        Google actually is their enemy, but not just yet which is why they still haven’t clued in. Large companies can rarely see past the next quarter, which is why companies with a long term plan such as Google and Apple trounce them regularly whenever they enter a new market. A very likely scenario I see panning out is that big media continues their race to the bottom, cutting costs anywhere and everywhere, driving quality terribly down. This drive to cut costs suddenly makes it economical for independents to start up and start reporting on their local situation. Imagine Spacing Montreal TV for example. It’ll be an online podcast you can stream and subscribe to on any mobile device (in a few years most new mobiles will be internet-enabled) or internet-enabled TV (some are already coming out and expect a lot more in the future).

        In the meantime, Google’s been working on Android. The real reason Google develops the Android mobile phone OS and licences it to any company that wants it for free is that they end up with expertise in and hopefully, eventually, a near monopoly on localized search. And Android isn’t a bare-minimum effort to do just enough as necessary. Android is very young (only just this month have decent hardware phones started coming out with Android (in the US obviously, Canada is a mobile backwater but that’s a topic for another time)) and already it’s trouncing Windows Mobile and Symbian. It’s a high quality product that Google invests a lot in and doesn’t return a dime. And yet, because it’s driving so many more phones to have decent browsers and decent web accessibility (Windows Mobile’s web browsing is bad, RIM’s is terrible and Symbian is excruciating), Google is poised to make a lot more revenue off their loss leader. It isn’t a big leap to imagine Spacing Montreal TV teaming up with Google’s now-location-aware adsense network and using them for advertising.

        Local advertising is the last cash cow Google hasn’t grabbed yet. And big media is going their best to ignore it.

        Finally, the reason why local advertising could be, but isn’t yet, a cash cow is because if a local restaurant wants to promote its new launch it has to deal with the marketing and advertising departments of everywhere it wants to advertise along with dealing with all the bureaucracy that entails. It’s too expensive. An automated self-serve tool such as adsense local that will broadcast on all “Google Local News” affiliates (or just those you pick, or just based on certain types of content and lots of other customizations big media doesn’t allow you) brings the costs of advertising way down but Google makes even more profit and this is where Google wins again.

        I don’t know anyone my age that watches the news. I know lots that follow local blogs however. And that’s actually quite surprising because on the whole, we’re a pretty lazy bunch. Even so, we’d rather manually fish out the best sources of information than deal with the spoon-fed, incredibly dumbed down, unoriginal and boring easy way out of just flipping on the TV. If there were an online “channel” catering to different types of local news (local tech news that you don’t yell at every time they “explain” the tech, local community news, etc), a large majority of us would tune in.

        I think the future of local news is actually pretty good in the long term but in the short term we’re going to hit a rough patch when big media goes into its death throes and, being so large, tries to capture the government to keep it alive (pretty much what’s happening now) when really, we’d be better off with a quicker death and a gaping void that entrepreneurs would rush into and innovate in very quickly.

        Reply
  2. Kevin

    “(neither of the three anglo stations have all their newscasts available for streaming online, none provide the choice between watching the entire newscast or individual stories, none have newscasts available for podcast download, and none are available on Videotron’s video-on-demand service).

    Not entirely true. The CTV Montreal website’s video player clearly has the news block online as one item, along with individual stories.

    The archival section is non-existent, but that’s what Google is for.

    Reply
    1. Fagstein Post author

      The CTV Montreal website’s video player clearly has the news block online as one item, along with individual stories.

      The block only shows the first 11 minutes of the newscast, up until the first commercial break.

      Reply
  3. Chris

    I find it amazing that people STILL watch television. It seems almost archaic to pay however much cable costs to have television stations dictate what you watch and when, while subjecting you to 11 minutes of commercials for every 30 minutes of programming when you can download entire seasons online, watch whichever episode you want, whenever, and wherever you want (if you have a laptop) and commercial free.

    Reply
    1. Guillaume Theoret

      I’m convinced that the people who still watch TV are simply the ones who don’t know any better. I haven’t had cable in at least 4 or 5 years. I don’t miss it. The only thing I miss is Habs games and I just go watch those at a friend’s place or at a bar with friends which is much more fun anyway. Everything else isn’t live and I can just torrent if I care about it. (Though I usually don’t, the only TV stuff I torrent is anime and I haven’t found a good new one since death note.)

      Reply
      1. Tim

        I mean no disrespect to anyone, but people who laugh at people who still watch conventional tv remind me of people who insult car drivers, but ask their car-owning friend to take them to their truck-supplied Ikea every two months.

        Without getting into the whole stealing aspect of the conversation, you have to concede that conventional television viewers, with their subscriptions fees and–yes, advertising–make that episode of Battlestar or Lost you just downloaded possible. They basically paid for it, with sufficient enough a profit to make production companies and distributors willing to put it out there.

        So, in summary, thank your lucky stars there STILL ARE people watching television.

        Reply
        1. Guillaume Theoret

          While I don’t actually watch any of those shows, (The only show I’ve watched this year is Dexter which you wouldn’t get on regular cable anyway) I agree that most people that don’t watch cable can only manage it because the shows are available on torrents.

          On the other hand, I think it’s companies like Roku that are truly innovating and that are the future for that market of people. For example, their recent announcement of the Roku Channel Store: http://www.boygeniusreport.com/2009/11/23/roku-channel-store-launches-with-10-new-channels-available/

          Reply
        2. jean.naimard

          Without getting into the whole stealing aspect of the conversation,

          Let’s.
          How is picking up a signal on rabbit ears and videotaping it to watch it later any different from downloading it and watching it later???
          To hear some, it would seem the former is kinda okayish, whilst the second if bringing the whole universe on it’s knees and has to be absolutely eradicated, civil liberties be dammned!!!

          Reply
  4. ATSC

    A watched a good part of the CRTC meetings this week on the CPAC website. I believe there is another week of these meetings.

    Yes, CTV, CBC/SRC, Global and the rest of them complained about a lack of fee for carriage. But, this was not the only voice in the matter. The Corus group mentioned that their Over-the-Air (OTA) stations where doing fine. They have three stations. One of them is in Kingston,ON. This caught the CRTC by surprise. The Corus group mentioned something about being focused on local needs of advertisers, and the local audience. So, just goes to show you that what CTV and friends are complaining about is not universal. Just their way of operating their stations.

    CTV and friends are centrally run business out of Toronto. They have no idea what their local markets need. And so, they focus on a across the board network programming. This attitude has destroyed the local TV stations they own. The french media does the same only they do it with Montreal. I don’t believe any of these stations will recover until the CRTC forces them to be limited to owning 40% of all the stations in their network. Just like the FCC puts limits on US networks owning no more than about 40% of their affliliates. And also to imposing what when the networks can provide network programming. Example, the US networks prime time is 8pm-11pm. The hours just before are local, so that the local stations can provide local news, and earn money from syndicated programs etc. The CRTC should force CTV, and Global, plus all Canadian networks to do the same. 4pm – 8pm should be local. 8pm-11pm is network with 50% of the shows being original Canadian shows. 11pm-midnight local. The only exemption would be a 30min network news in either the 4pm-8pm slot or the 11pm-midnight slot. This will allow local stations to operate much as the local US stations do. And, anybody that watches local US stations can see the amount of local news, those stations do.

    CTV and friends have been allowed to own all of their stations. The day this happened, they no longer operated as networks with local affiliates. It is at this point that local newsrooms, and local master controls where shut down. The CRTC needs to look at this as a way to correct the problem.

    Also, for those interested on the CRTC hearings, they can follow them at the CPAC site. I believe you can even see last weeks meetings on their site as well.

    As for this site, please keep up the good work on covering this subject matter.

    Reply
  5. Heather H

    I agree, let’s cut all protections to Canadian cultural institutions and TV networks. CNN, NBC, FOX, CBS would then open Canadian bureaus uising their power and money, and would provide news coverage for all of us.

    Reply
  6. Lloyd

    Excellent post Steve. I agree that the whole model needs a re-think and the stance that the two major players (content providers/networks vs distributors/cable+satellite) is just a lot of steam being blown about more money that they want from our pockets for not a heck of a lot, if any more product or service. Someone has to start thinking outside the box to provide that local content which we all ultimately like to watch or hear !

    Reply
  7. Fassero

    Nicely written. I’ll disagree about the cheapness of licensing a Canadian version of a US reality show. I bet CTV and Global pay through the nose for Canadian Idol, Project Runway Canada, SYTYCDC, etc. In fact I suspect that’s why Canadian Idol has not aired in more than two years and probably will not be returning any time soon – namely, the audience numbers had fallen to the point where they couldn’t afford to keep up the costs and the ad revenues that would flow with it (and I’d bet that number was a minimum of about 1.5-2 million viewers a week which, in any other case (including a U.S. drama or comedy series) would be quite good).

    The next great innovative local channel or network (mini-network?) is going to come from an individual or family-run operation and it will start via internet streaming. The cost of getting network broadcast bandwidth (if you can even get it) combined with Global and CTV stockpiling every American show around makes even a start-up cost prohibitive if not impossible. Just a gut feeling.

    I’d love the CRTC to do nothing. CTV will file for bankruptcy if they don’t extract a penny out of this and Global is already in a restructuring mode that practically hinders on getting an extra handout (serves Izzy’s boys right for selling their souls to Goldman Sachs). And, yes, these monoliths certainly CAN use their specialty profits to subsidize their deadweight. I seem to recall it was just a couple of years ago when CTV overpaid the Waters family to get the CHUM assets – a deal they wanted so badly that, to get the CRTC onside, they switched their side deal with Rogers and sold off the CITY stations instead of the A channel stations (in other words, fully accepting a less lucrative OTA parcel because they so badly wanted the other assets.)

    Reply
  8. jean.naimard

    “Conventionnal” TV stations take their revenues from advertising. They complain about decreased profitability.

    Well, either they are getting too greedy (like 99.99999% of the businesses out there), or they do not charge enough for their commercials (a variation of the point above).

    And if they want to air US TV programmes, they should be allowed to air as much as they want. However, they should not be allowed to have commercials while they air them.

    This way, they’ll get back into producing “canadian” programmes (oh, those will suck, compared to US programmes, yes, but hey! that’s what happen when you live next to a 900 pound gorilla).

    Or they’ll shut down, and leave their market to someone else who can live with that.

    Reply
    1. Fassero

      It’s not how much they can charge for commercials as much as advertisers, due to the recession (especially in the U.S.), are cutting back their ad spending, period. This has affected all areas of media – TV, radio, print, etc. The bankruptcies of GM and Chrysler were huge because North American car companies are huge players in the Canadian ad market (along with banks, telcos, governments, and beer companies.) That being said, this has been on the horizon for a few years and the Canadian broadcasters tried to deal with it by massive consolidation (mainly through way overleveraged buying) and ridiculous bidding wars for U.S. programs to the point where that area is largely a duopoly (CTV, Canwest) that even buys shows just to leave them in storage so nobody else can try to run them.

      Realistically, nobody will force the networks to run American programming commercial free. American shows run about 21 minutes per half hour and they are bought so the gap time is the place to finance it. Personally, since the Canadian broadcasters claim to want a model similar to the US, I’d tell them to replicate it completely. Let each network only be allowed to own an affiliate in the two or three largest cities in the country and dump their licenses for everything else. Then, like the US, they have to dedicate at least 90 percent of their primetime programming to domestic shows. And simultaneous signal substitution is history (if CTV wants to show “Dancing with the Stars”, either make a Canadian version or run it at 2 in the afternoon. If they don’t like it, tell ‘em to buy every Canadian a PVR if they’re so worried about ratings decline.) After all that……give them their fee for carriage. It says here that they’d run and say they’ll manage just fine thank you.

      Reply
  9. mike

    Why do we need local Tv stations beside news? National Tv station can just insert 15 min of local news in their main show. In this way a local studio is more than enough.

    Reply
  10. Shawn Peterson

    This is just a ploy to get more money to air even more American programming, because these shows aren’t enough:

    All My Children
    30 Rock
    Jimmy Kimmel
    America’s Got Talent
    Kilmora: Life in the Fab Lane
    America’s Toughest Jobs
    Cold Case
    Grey’s Anatomy
    Supernanny
    Eli Stone
    Parks and Recreation
    Gossip Girl
    Battlestar Galactica
    Dirty Sexy Money
    High School Musical
    Fringe
    The Simpsons
    Tonight Show with Conan O’Brien
    Jimmy Fallon
    60 Minutes
    Mad Men
    Missing
    One Life to Live
    America’s Next Top Model
    Private Practice
    Pushing Daisies
    Samantha Who?
    Supernanny
    Terminator: Sarah Conner Chronicles
    The Big Bang Theory
    The Ellen DeGeneres Show
    The Mentalist
    The Jay Leno Show
    TMZ
    TMZ Weekend
    Two and a Half Men
    Whose Line is it Anyways
    Who Wants to be a Millionaire
    Wife Swap
    Live with Regis and Kelly
    The View
    The NFL
    The PGA
    America’s Funniest Home Videos
    Bold and the Beatiful
    Oprah
    General Hospital
    Dr. Phil
    Access Hollywood
    The Amazing Race
    Law and Order
    Law and Order: CI
    Law and Order: SVU
    CSI
    CSI: New York
    CSI: Miami
    Don’t Forget the Lyrics
    NCIS
    NCIS: Los Angeles
    The Daily Show
    The Colbert Report
    So You Think You Can Dance
    American Idol
    Ghost Whisperer
    Hole in the Wall
    Numbers
    Prison Break
    Heroes
    My Own Worst Enemy
    House
    90210
    Kitchen Nightmares
    Bones
    Survivor
    The Office
    Kath and Kim
    Life on Mars
    Life
    The Ex-List
    King of the Hill
    Family Guy
    American Dad
    Brothers and Sisters
    ‘Til Death
    How I Met Your Mother
    Do Not Disturb
    Worst Week
    Boston Legal
    Knight Rider
    Deal or No Deal
    E! Ture Hollywood Story
    My Name is Earl
    Are You Smarter than a 5th Grader?
    Dateline NBC
    Eleventh Hour
    20/20
    Snoop Dogg’s Father Hood
    Forbes Specials
    Extreme Makeover: Home Edition
    The Real Housewives of Orange County
    Cougar Town
    Modern Family
    Curb Your Enthusiasm
    The Biggest Loser
    Judge Judy

    I knew it was bad, but I didn’t think it was this bad. This list is longer than my grocery list for a full year.

    Reply
  11. Pepper Boxer

    I think we should stop subsidizing local TV and Canadian content altogether.

    Karl Peladeau recently stated that consumers should be able to choose the channels that they want. That is a great place to start. If the CRTC would de-regulate on basic cable packages, the entire debate would be moot.

    Reply
  12. Peter

    Shawn:

    Wow. Just wow. It look me like 5 scrolls on my mouse to get through that damn list. I think they may air more American programming than American networks!

    Reply

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