TVA Sports defies CRTC, cuts off Bell TV customers as part of carriage dispute

Updated April 12 with court ruling and TVA Sports returning to Bell TV

Four days after it threatened Bell subscribers with on-air messages, TVA pulled TVA Sports from Bell TV on Wednesday at 7pm, as scheduled, the start time for the NHL playoffs.

Bell immediately announced that it would make Sportsnet, Sportsnet One and Sportsnet 360, which with CBC and City comprise all the channels carrying NHL playoff games, free for subscribers “temporarily.”

Quebecor, meanwhile, issued a statement saying it was disappointed it couldn’t reach a deal.

On Thursday, the CRTC announced that it was calling Groupe TVA to a hearing in Gatineau on April 17 to explain itself, and threatened to either issue a mandatory order (which would be enforceable in federal court) or even suspend TVA Sports’s broadcasting licence in light of the decision to ignore its warnings about pulling service during a dispute.

In court, as Bell tried to get a court injunction for TVA to stop what it’s doing, Quebecor lawyers offered a truce, to bring back the channel at 6pm and maintain it until April 23 as the two sides negotiate with the help of the CRTC. Bell accepted on condition that TVA Sports accept a court order requiring the re-establishing of the signal, but Quebecor refused that condition.

On Friday, the court granted Bell’s request for an injunction, ordering TVA Sports re-established on Bell TV by 6pm, but did not order Quebecor to cease its “Fair Value” campaign, which Bell says is false and defamatory. TVA complied with the request, and TVA Sports returned to Bell TV by 6pm.

In addition to ensuring Bell TV subscribers could get access to NHL playoff games, Bell Media acquired the rights to two additional Montreal Impact MLS games, another TVA Sports exclusivity, so they can be broadcast on TSN. That pushed the date of the next Impact game only broadcast on TVA Sports to April 28. Bell TV had said it would make TSN also available for free for Montreal Impact fans.

History

Bell customers got a pretty scary-looking message during the Canadiens-Maple Leafs game Saturday night on TVA Sports: The sports channel, which has the French-language rights to all NHL playoff games, will be removed from Bell TV as a way for Bell to “punish” those subscribers.

TVA also aired the graphic during La Voix, Quebec’s most popular TV show, on Sunday.

TVA airs a message attacking Bell during La Voix on Sunday, April 7, 2019.

Bell said not only is this message not true, it would be against CRTC regulations. The CRTC wrote to both parties twice to say that during their dispute, TVA is required to keep offering its channels to Bell and Bell is required to keep distributing them.

TVA said it doesn’t care, it’s pulling its signal anyway. Which means this dispute will quickly escalate in the legal and regulatory sphere.

Except it’s already escalated there, because this is a battle being fought on multiple fronts:

  • An existing CRTC process in which TVA complains of unfair treatment (currently in the reply phase)
  • A TVA lawsuit against Bell demanding compensation for its unfair packaging
  • A Bell request for injunction against TVA demanding the signal be returned
  • An emergency CRTC hearing called for next week in which TVA has been ordered to explain itself
  • Direct negotiations between Bell and TVA to reach a deal on carriage
  • TVA’s media campaign and Bell’s press releases in response, fighting in the public arena
  • Pierre Karl Péladeau’s lobbying of federal politicians to make changes to the CRTC’s dispute resolution process
  • Programming changes at Bell Media and packaging changes at Bell TV to mitigate the loss of TVA Sports for Bell customers

How long Bell customers will actually be without TVA Sports is anyone’s guess. But TVA says it’s prepared to do whatever it takes.

(You can read more about my interview with TVA chief operating officer Martin Picard in this story at Cartt.ca, but I have lots of details below about the conflict.)

The conflict

At issue is a long-standing Quebecor gripe about TVA Sports: Though it spends about the same amount of money on programming than RDS ($111,742,064 and $121,512,322 respectively in 2016-17, per CRTC data), it gets only 61% of the subscription revenue of its direct competitor, owned by Bell Media ($76 million and $124 million, respectively). If it had the same subscription revenue, it would be able to climb into the black, going from a -20% profit margin to a +22% margin, which would make a huge difference to the future of the service that Quebecor says is threatened.

There are a few reasons why TVA Sports’s subscription revenues aren’t the same as RDS’s. Age is a big factor — RDS started in 1989, while TVA Sports only started in 2011. RDS is carried on analog cable (for what few systems still have it) and is in many grandfathered cable packages that people haven’t changed for years.

That historic head start, and various consequences of it, mean that TVA Sports had only 66% of the number of subscribers of RDS in 2017, the last year we have CRTC data. It’s much better than the 46% it was in 2013, but it’s not enough to keep TVA Sports profitable.

This is the basis for an ad campaign that Quebecor started recently, calling on Bell to recognize the “fair value” of TVA’s specialty services.

$5 a month

The specifics of carriage negotiations are supposed to be confidential. Documents released by the CRTC are redacted to take a lot of these details out. But in an interview with Gérald Fillion on RDI Économie, Quebecor CEO Pierre Karl Péladeau says Bell is paying $3.59 a month per subscriber for TVA Sports, and TVA is asking everyone to pay $5.06.

Péladeau says “all” the other Quebec TV distributors have agreed with the new price. That seems impressive until you remember that the others are Videotron (owned by Quebecor), Cogeco and a bunch of smaller distributors who don’t have nearly the same number of subscribers or the same bargaining power as Bell.

A wholesale rate of $5.06 would be higher than the average rates of other sports channels, which are between $3 and $4 a month, but TVA points out that sports channels in both languages have different prices in Quebec and outside Quebec, to account for the different language markets. TSN and Sportsnet are less expensive in Quebec, and RDS and TVA Sports are less expensive in other provinces.

In the RDI interview, Fillion notes (and Péladeau doesn’t deny) that Bell repeatedly increased its offer for TVA Sports’s wholesale rate, but Péladeau says the gap between what Bell is offering and what TVA Sports is worth is coming nowhere near closing.

Bell says TVA is asking Bell to pay more for TVA Sports than Videotron pays for RDS.

“Bon” isn’t good enough

Another one of TVA’s gripes with Bell, which is the subject of a CRTC complaint, is that Bell TV, which is available in large cities in Quebec and Ontario, includes RDS in its most popular package in Quebec (“Bon”, the equivalent of the “Good” package in the rest of Canada), but not TVA Sports, which is relegated to the higher tiers. Bell subscribers can add TVA Sports as an add-on, but only about half of those with the “Bon” package choose to do so, according to Quebecor’s calculation. Those with the “Meilleur” and “Mieux” packages, which include TVA Sports, represent less than 2% of Bell’s TV subscribers, who vastly prefer either the “Bon” package, a grandfathered package (which may or may not include TVA Sports) or the CRTC-mandated skinny basic package, on which services can be added.

Bell implemented the Bon/Meilleur/Mieux or Good/Better/Best large-package tiers in 2016. Since then, while TVA Sports has seen its subscription numbers go up overall, its subscribers with Bell have slowly gone down as customers replace grandfathered packages with new ones.

Now, only about half of Quebec Bell TV subscribers overall subscribe to TVA Sports. Quebecor’s news channel LCN, meanwhile, which is included in the “Bon” package, has a penetration closer to 90% in Quebec.

Quebecor calculates that if Bell included TVA Sports in the “Bon” package, it would be making half a million more dollars a month. That wouldn’t completely close the gap, but it would take a big chunk out of it.

Bell responded to TVA’s CRTC complaint on Monday. saying dictating packaging of TVA Sports like this “would be a reversion to micro-regulation of packaging and significantly impact consumer choice and flexibility,” and that the issue of packaging was dealt with in previous carriage agreements.

‘Historic rates’

According to CRTC data (2016-17 is the latest year published), RDS and TVA Sports (each of which has two channels) have about the same average per-subscriber wholesale fee — $3.46 per month for TVA Sports and $3.73 per month for RDS, a difference of 7.2%. But TVA Sports has far fewer subscribers — 1.8 million versus 2.77 million for RDS.

TVA Sports has previously complained about not being able to charge as much as RDS, and Quebecor continues to complain that Bell gets more subscription revenue than it does for French-language services. One of the reasons for this is also age — Bell’s specialty channels (all but RDS were acquired through the Astral Media purchase) are much older than TVA’s, and not only does that mean they’re in more grandfathered packages, but it affects their wholesale fees. The CRTC has “historic rates” as one of its criteria for establishing a wholesale fee when it’s asked to arbitrate a carriage dispute. That, argues Quebecor, introduces a bias in favour of older services for no other reason than their age, and means that even if RDS and TVA Sports have equivalent programming and equivalent audience, RDS will still get more money from subscribers.

But the number of subscribers seems to be the bigger concern here than the per-subscriber fee. And it’s not just for the subscription revenue. You can’t sell advertisers on people who aren’t subscribed to your channel. TVA Sports has a little under half the ad revenue of RDS.

The standstill rule

So can Bell or TVA unilaterally decide to remove TVA Sports from Bell TV right before the NHL playoffs as a pressure tactic against the other?

Not according to the CRTC. While Bell in theory does have the right to drop TVA Sports if it wishes, and TVA Sports in theory can similarly end its relationship, during a dispute both parties are bound by a “standstill rule” in the regulations that is specifically designed to prevent services from being cut in situations like this:

15.01 (1) During any dispute between a licensee and a person licensed to carry on a programming undertaking or the operator of an exempt programming undertaking concerning the carriage or terms of carriage of programming services or concerning any right or obligation under the Act, the licensee shall continue to distribute those programming services at the same rates and on the same terms and conditions as it did before the dispute.

It’s this rule that Bell is referring to when, in responses to people on Twitter, it says removing the service would be against broadcasting regulations.

Bell also takes issue with the wording of TVA’s warning, which implies Bell is the one pulling the signal when in fact it’s TVA that has taken this drastic action.

In a statement issued on Monday evening, as news of this dispute spread around the media, Bell pulled no punches, using the term “illegal” to describe Quebecor’s actions, and saying it has gotten the CRTC to issue a “directive” to keep TVA Sports on Bell TV:

“Quebecor’s reckless campaign and illegal actions are all about our negotiations over pricing for its TVA Sports channel and Bell’s Media’s RDS sports network,” said Martine Turcotte, Bell’s Vice Chair, Québec. “Quebecor actually wants to charge Bell more to access its TVA Sports channel than Quebecor/Videotron is willing to pay for RDS. However, the reality is that RDS is the leading French-language sports network by far, consistently outpacing TVA Sports in both content and viewership, and Bell Media will not devalue the clear fan favourite.”

In 2018, the latest period for which audience figures are available, RDS viewership was on average 67% higher than for TVA Sports.

Assuming Bell’s statements are correct here, it seems to be justifying paying more for RDS than TVA Sports, but also pointing out that Videotron doesn’t pay as much for RDS as it wants Bell to pay for TVA Sports.

Turcotte says Bell will continue to negotiate with Quebecor in good faith for a new deal.

On Wednesday, Bell announced it has written to the CRTC to formally request final offer arbitration in its dispute with TVA Sports. This more directly puts the standstill rule in play.

What does “required” mean?

The CRTC said it’s aware of the issue and “monitoring the situation very closely.”

In response to Bell’s emergency plea, CRTC executive director of broadcasting Scott Hutton issued a letter to both parties reiterating regulations and stating that “Commission staff is of the view that the parties are engaged in such a dispute and therefore the standstill rule applies.”

CRTC letter to Bell and TVA requiring them to play nice during their dispute.

“Accordingly,” the letter reads, “Groupe TVA is required to provide the services and Bell is required to distribute these services, at the same rates and on the same terms and conditions as it did before the dispute, until the parties resolve their dispute or the Commission issues a decision concerning this unresolved matter.”

TVA refusing to do so would seem to be in direct defiance of the CRTC, which will give it no other choice but to escalate the matter.

On Wednesday, the commission wrote again to both parties, reiterating its determination, making it even clearer that it applies to this case, and suggesting how it might deal with non-compliance to the rules:

The Commission also advises parties that it is prepared to use the means at its disposal to enforce its regulations, including holding a hearing on an expedited basis to issue a mandatory order under section 12 of the Broadcasting Act.

Open defiance of the commission is very rare, so we don’t have much precedent, but the Broadcasting Act says that a company that defies a broadcasting regulation can be fined up to $250,000 if convicted.

The other option, which the commission alludes to above, is to call a hearing and issue a mandatory order (which could be enforced by the court) requiring TVA to comply. A failure to do so could be prosecuted as a contempt of court offence. The hearing called Thursday for next Wednesday does exactly that, but also threatens to suspend TVA Sports’s licence.

But these things take time. Even if the CRTC issues an order at the hearing, that’s still a week away. Bell is also trying to convince a court to order an injunction, forcing TVA to comply that way.

Denis Carmel, who used to work at the CRTC, laid out a probable scenario in this Cartt.ca story. He said Bell proving irreparable harm would be difficult to prove to get a court injunction.

The CRTC and “undue preference”

Quebecor’s CRTC complaint against Bell, which is ongoing at the same time, alleges what’s called “undue preference”. That’s a CRTC rule that essentially says a vertically integrated company can’t give preferential treatment to a service it owns compared to a service it doesn’t own unless it has a very strong reason to do so. Quebecor argues that by putting RDS but not TVA Sports in the “Bon” package, there’s undue preference. In the English market, Bell puts both TSN and Sportsnet in the “Good” package.

Bell has said in a letter to TVA that there is no obligation for it to put TVA Sports and RDS in the same package. In a reply to the CRTC, it argues that the complaint is “a veiled attempt at reversing not only two Commission decisions but also that of the Federal Court of Appeal.  In 2015, TVA Sports lost a final offer arbitration (FOA) to Bell TV. In 2018, they lost a second FOA to Bell TV.  Subsequently, the Federal Court of Appeal denied their application for judicial review.  With this current Application and an accompanying claim for damages in the Quebec civil court, TVA Sports has demonstrated a blatant disregard for due process.”

It says the initial affiliation agreement signed between Bell and TVA required Bell to package TVA Sports with RDS2, which it did. And it says TVA was aware of packaging and tacitly accepted it in previous arbitration processes, which it is de facto trying to overturn now.

Quebecor will have a chance to respond to Bell’s response before the CRTC renders a decision.

Also in court

Besides the carriage dispute and the CRTC complaint over packaging, TVA is also suing Bell in Quebec court, claiming $20 million in damages because of the packaging issue.

Plus, lobbying

Péladeau even went to the point of lobbying the federal government directly to intervene. After speaking at the Canadian Club in Ottawa, Péladeau met with politicians including Conservative leader Andrew Scheer, NDP leader Jagmeet Singh and Heritage Minister Pablo Rodriguez. Martin Picard, TVA’s chief operating officer, tells me TVA wants the government to understand the scope of the problem and convince the CRTC to change its rules to use more “objective” criteria when arbitrating disputes, with less of a focus on historic rates.

But opposition parties have no power to act here, and Rodriguez told Le Devoir he will defer to the CRTC on this.

It will be a while until all these battles are settled. And I’d say it risks burning bridges between Bell and Quebecor, but those bridges were torched long ago. The two sides have already started taking pot shots at each other. Bell’s Martine Turcotte told Presse Canadienne that “it’s not true that because the Canadiens didn’t make the playoffs, we should pay more for TVA Sports to compensate them one way or the other. That’s not our responsibility.”

Picard, meanwhile, said Bell “paid too much” for Astral Media in 2013 and “the bad acquisition decisions of Bell shouldn’t impact the whole system as we see currently.”

In the meantime, don’t worry too much about missing the NHL playoffs if you’re a Bell customer. You can get most of the games you want to see for free on CBC TV, or subscribe to Sportsnet. Or you can subscribe to TVA Sports directly for $20 a month ($15 for the first month) and watch it online.

One thought on “TVA Sports defies CRTC, cuts off Bell TV customers as part of carriage dispute

  1. Dilbert

    My previous apparently deleted comment is even more relevant given all of this.

    PKP is being a bell end here (play on words, okay?). Basically, he is proving why media concentration is a terrible, terrible thing in Canada, harming consumers on every level.

    The most insulting point is the idea that “all of the other Quebec distributors have agreed”. Do you honestly think that Videotron as a stand alone service would be interested in just blindly passing along a massive (20% or more) increase to their subscribers just to make PKP happy? It only happens because of the concentration of ownership in the whole discussion.

    Time to bust the gilded towers these people live in. Time for the Canadian government to put on it’s big boy panties and work on breaking up these massive concentrations of ownership and power. Time to separate broadcasters and distributors, cable channel owners from those who distribute them, and time to plow down many of the farcical “protect Canada” rules that have allowed these companies to create hordes of useless, space filling channels that exist only to pad out your cable subscription bill every month.

    Reply

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