Posted in Media, Opinion

The convergence utopia

An updated chart can be found here.

It probably doesn’t matter to most people that Bell Canada’s parent company BCE announced on Friday that it was buying 100% of CTV. Bell already owned 15% of it, and had previously acquired CTV back in 2000 as part of a similar convergence play.

Ah, convergence. It’s been the buzzword in the big media companies for the past decade or so, with all the acquisitions that have taken place. Bell, a phone company, started up a satellite TV service, a DSL Internet service, and got into the broadcasting game in one giant swoop by acquiring CTV the first time, along with a growing number of TV specialty channels.

Rogers, which had a head start on the convergence business being a broadcaster, cable provider and wireless company, added a baseball team, other cable and wireless providers, and broadcasting assets including the sloppy seconds of the CTV/CHUM acquisition.

Quebecor, once a commercial printer and newspaper owner, bought a TV network, a cable and Internet service provider, and an entire newspaper chain.

Canwest, once a small television broadcaster, built up a national television network, bought a high-profile newspaper chain and a media company with a truckload of specialty channels. Now it in turn (minus the newspapers) has been bought up by Shaw, a cable provider that acquired a satellite TV provider.

With Shaw’s acquisition of Canwest and Bell’s acquisition of CTV, a pattern is emerging where each of the corporate empires has a TV provider, a wireless service, an Internet service, a national broadcast network, TV specialty channels, and maybe some radio and print assets on the side.

Shaw Quebecor Bell* Rogers
TV network Global TVA, Sun TV CTV, A Channel CityTV/OMNI
TV provider Shaw Cable/Shaw Direct Videotron cable/Illico Bell TV, Bell Fibe TV Rogers Cable
Internet Shaw Internet Videotron Bell Internet Rogers Internet
Wireless (Coming in 2011) Videotron wireless Bell Mobility, Virgin Mobile Canada Rogers Wireless, Fido, Chatr
Home phone Shaw cable VOIP Videotron cable VOIP Bell Canada Rogers home phone
Newspapers None Sun Media, Osprey Media Globe and Mail (15%) None
Other print None TVA Publications Report on Business Magazine Rogers Publishing (including l’Actualité, Maclean’s, Chatelaine, Canadian Business)
Specialty TV DejaView, Fox Sports World Canada, Global Reality, MovieTime, Mystery TV, TVtropolis, BBC Canada, BBC Kids, Discovery Health Canada, DIY Network, Food Network Canada, History Television, HGTV Canada, IFC Canada, National Geographic Channel Canada, Showcase/Action/Diva, Slice** LCN, Argent, addiktv, Yoopa, Les idées de ma maison, Prise 2, The Cave (51%) Business News Network, Comedy Network, CTV News Channel, TSN/TSN2, RDS, RIS, ESPN Classic, Discovery Channel (and related networks), BookTelevision, Bravo!, CP24, Comedy Gold (80.1%), FashionTelevision, MuchMusic (and related networks), Space, Star! Biography Channel, G4 Canada (66.67%), OLN, Rogers Sportsnet, Setanta Sports Canada (53.33%), The Shopping Channel
Radio None** None CHUM radio network (about 35 stations including CKGM Team 990 in Montreal) About 50 stations
Online publications None Canoe.ca Sympatico.ca 12 assets, including sweetspot.ca
Other TVA Films, Archambault, Super Club Videotron The Source Toronto Blue Jays, Rogers Centre

*For the purpose of this chart, we’ll assume that the Bell purchase of CTVglobemedia goes through as advertised.

**Many people point to the Shaw family’s control of Corus Entertainment to suggest that Corus is unofficially a subsidiary of Shaw Communications. But if you think that way, you can add a bunch of specialty channels and radio stations to the Shaw column.

Filling the holes

Rather than worry too much about a telecommunications company wanting to spend billions on media assets when just about all media assets are falling in value, the business world is wondering: What’s next? Where is the next big acquisition or merger that puts a fifth column on that table?

Telus is the big name on everyone’s lips, because they have the audacity to just be a telecom company at the moment and therefore have a “content gap”. But Telus says they won’t get in this game.

Besides, there are other options. Just connect the dots as you like:

Telecom

  • Telus (wireless, home phone, TV, Internet)
  • EastLink (cable, Internet)

Publishing

Broadcasting

Telecom and broadcasting

There’s also plenty of regional telecom companies, small newspaper publishers, book publishers and specialty TV channel owners that can be scooped up and disappear into the large conglomerates.

How this screws us over

“Today our three largest cable competitors are fully integrated and clearly we are not prepared to buy our content from our competitors”

That quote comes from a conference call that Bell had shortly after announcing the deal to buy CTV. The basic premise behind this deal isn’t that CTV is going to make Bell a lot of money by being a profitable business unit, but rather that CTV’s content will be a bargaining chip to get people to use Bell’s services.

Recently, Rogers launched a new TV channel called Sportsnet One. Even though it’s only available on Rogers cable (it hasn’t negotiated carriage on the other providers yet), Rogers decided to move Toronto Blue Jays games to Sportsnet One in order to get people to subscribe to the new channel. Since Rogers owns the baseball team, the television channel and the cable provider that carries it, it’s the ultimate convergence play.

And it’s royally screwing over Blue Jays fans.

Analysts don’t think Bell will be using blackmail to get people to switch over to its services. But they could. Want to watch NHL games on your mobile phone? You can’t unless you’re with Bell. Want TVA shows on demand? You can’t unless you have Videotron illico. Anything these companies can buy exclusive rights for, they will do it. The only things keeping them from forcing you to subscribe to a particular telecom in order to get some content are the CRTC (which doesn’t regulate mobile or online content) and business models that see more profits in maximum exposure than short-sighted consumer blackmail.

It’s not out of the realm of possibilities for one of these companies to pull some move that, like Sportsnet One, requires using a particular service to get something that used to be widely available. And if one company does that (and it’s successful), the others would probably follow. We could be a couple of years away from a country where you need to buy redundant services in order to get the content you want.

Save our local TV from … us?

Remember that “Save Local TV” campaign by the broadcasters who wanted us to convince the CRTC to force the cable and satellite companies to give money to TV broadcasters? And the corresponding “Stop the TV Tax” campaign from the cable and satellite companies to pressure the CRTC the other way? Well, since that campaign, Shaw took control of Global TV and BCE is about to take control of CTV. Quebecor, which owns both TVA and Videotron, didn’t participate in either campaign.

Bill Brioux remembers those campaigns, and is particularly pissed that a TV network with a “broken business model” just sold for billions.

They’re still arguing against each other at the moment, but how long can we expect that to last?

And there’s other concerns too. John Bowman points out that there’s little incentive to invest in quality broadcast equipment. And Iain Marlow suggests this may make it easier for the government to relax foreign ownership restrictions.

This kind of stuff will come up at the CRTC hearings into the takeover, though I’m doubtful that the commission will put up a major roadblock to it, despite opposition from opponents to media concentration.

It won’t work … or maybe it will

The biggest negative opinion about this deal is the simple argument that CTV won’t be a profitable venture for Bell any more than it was a decade ago. That’s what David Olive says, it’s what Howard Bernstein says, and Torstar (which sells its stake in CTV) is playing this up as a win for them, as is the Globe and Mail, which is breaking off (mostly) from the empire.

To be fair, some like the Globe’s Derek DeCloet believe this might make sense, pointing out that the price isn’t as ridiculously high as it was 10 years ago. Other analysts agree.

One of those sides will be proven right in a few years. Let’s hope, for the sake of consumer choice and healthy corporate competition, that bigger isn’t better.

10 thoughts on “The convergence utopia

  1. AlexH

    If nothing else, this post perhaps more clearly exposes the whole stupidity of the “local channels matter” mantra, mostly because it ends up being cable and sat companies arguing with themselves about how much to pay themselves to carry their own channels. Funny stuff.

    Just as interesting, it shows that, considering the large “variety” of channels that the CRTC has licensed, the reality is that they have licensed the same few companies over and over again, where they can use and re-use programming to make it appear that the public has choice and options, when in fact they don’t.

    We won’t even get into how easy it is now for these companies to muzzle the press and keep anyone from looking at or reporting bad things happening at these companies.

    There are enough assets left to create maybe one more media giant, say by putting Telus, Astral, Post Media, and a few other pieces together. That would sew up the loose ends.

    …. and everyone wonders why those DirecTV dishes are so popular in Canada.

    Reply
    1. Fagstein Post author

      We won’t even get into how easy it is now for these companies to muzzle the press and keep anyone from looking at or reporting bad things happening at these companies.

      Where does this come from? What evidence do you have that these companies are somehow immune from press criticism?

      …. and everyone wonders why those DirecTV dishes are so popular in Canada.

      DirecTV’s popularity has more to do with regulations than corporate culture. You can get HBO and Comedy Central on DirecTV, but have to settle for their Canadian equivalents on our satellite services.

      Reply
      1. AlexH

        The evidence is clear: When there are only a certain number of players, and they each own their own little pieces of the media, they are unlikely to be very critical about the businesses they are involved in. Could you picture BNN doing an in depth report on how overpriced sat tv is, or how bell and other players in the cell market do “marketing by name”, but end up giving us the some highest rates for service in the world? Nope. They don’t shoot at the other guy either, because in the end, it would just lead to more shots back. Think of it as the media version of “mutually assured destruction”. Nobody wants to say anything, because the other side can bring almost as much public exposure back if it gets started.

        The only sources at this point for “third party” opinion would be blogs like this, or news sources that are independent of the big three.

        DirecTV’s popularity has to do with the people getting what they want, rather than what is profitable for the big three. The public realizes that they are getting an inferior “Canadian” product. Corporate culture within the big three coddles and pushes the CRTC to “support Canadian content” by blocking US channels, by allowing the majors to create the Canadian versions of these channels – where they profit from them as both the channel operator and the distributor (cable or sat). DirecTV cuts out the middle man, and the people get the programming they wanted to start with. It is painful as heck to watch year old programs on the Canadian versions of these channels, more so because there is little or no pressure on these companies to offer a better product.

        Reply
  2. Sammy Con

    I don’t get it at all. What about CTV makes it worth any more than it’s technical assets. It has no worthy original programming, nothing I would spend a cent on buying. It is merely a reseller of American programming, and, really, how much longer can that model last? I haven’t watched anything on CTV for years.

    Reply
  3. silhouette

    ” forcing you to subscribe to a particular telecom in order to get some content ”

    This sounds similar to net neutrality online…. ISP providers controlling how content reaches its users, screwing some people over. This is the same thing but with channels.

    Reply
  4. Fassero

    The trendy play here is wireless delivery of content to smartphones that are now technologically equipped to handle it versus 10 years ago. In 5-10 years, we’ll see if people care enough to want it (and pay dearly for it.) If a fifth wheel materializes, I doubt most of that list will be part of it – especially the publishing outlets. From what I understand, Telus is hoping the CRTC will force the lifting of “exclusive” video content and I would guess if nothing happens quickly, Telus itself will push for it.

    CTV was pretty much headed down the Canwest path (and I’m pretty confident that none of the owners wanted to keep injecting money into an investment that wasn’t making them a nickel – especially the Ontario Teachers Pension Plan, as the Post already surmised) so this is really more of a bailout than a purchase. It basically allows the “save local TV” tax negotiations to die completely and, now, I’ll bet the farm that “local TV” will once again be bludgeoned in the next five years to “pay” for these purchases.

    Ultimately, if consumers want some salvation, best thing they can do for a start is rally the CRTC to allow some more foreign penetration into the whole thing. Otherwise, the entire communications industry is headed toward a four or five-headed oligopoly.

    Reply
  5. Pingback: Warnings from Quebec « Kai Nagata

    1. Fagstein Post author

      Would be great to see an update on this piece – a post for your back pocket maybe?

      I’ve been thinking of updating this chart. Maybe after the Bell/Astral deal is dealt with. That would add a lot of assets to the Bell column.

      Reply
  6. Pingback: The new media convergence utopia – Fagstein

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>