It’s not official yet, but a decision released by the CRTC this week will likely lead to Videotron subscribers soon finally getting access to RDS GO and being able to stream Canadiens games on smartphones, tablets and online.

The decision, released Tuesday, is what’s called a final offer arbitration between Videotron and Bell Media over the distribution of RDS and RDS2. The companies couldn’t come to an agreement over renewing the distribution contract, which expired last August, and so Videotron asked the commission to intervene.

In final offer arbitration, both parties present complete contracts to the commission, and it chooses one in its entirety (or, exceptionally, can refuse both).  This method of conflict resolution has the advantage of rewarding whichever side presents the most reasonable-seeming offer, and so encouraging both sides to be more reasonable in those offers.

In this case, the CRTC sided with Videotron, judging that its offer was better. The supporting documents in the case are heavily redacted to protect commercially sensitive information, so we don’t know any of the details of the contract, including what wholesale per-subscriber price Videotron will pay for RDS, what kind of volume discount it will get on that price, how long the term is or even how many RDS subscribers Videotron has.

But the documents do give plenty of insight into the relationship between Bell and Quebecor, and the tone of the many letters to the CRTC suggests there’s no love lost between these two organizations.

Videotron wants streaming

According to the documents submitted, Bell and Videotron managed to work out most of their differences on the new contract, including multiplatform rights, which Videotron has been trying to get a deal on since at least 2014. And it made it clear it sees these rights as essential:

Il est très important de souligner l’urgence de la situation puisque tant et aussi longtemps que le tarif multiplateforme n’est pas réglé, les abonnés de Vidéotron n’ont pas accès à ce contenu et sont désavantagés vis-à-vis les abonnés de Bell Télé. De plus, en retardant l’accès à ce contenu, Bell Télé continue de jouir d’un avantage concurrentiel important tout en désavantageant Vidéotron.

Though Videotron initially wanted to put multiplatform rights to arbitration as well, after failing to get the issue resolved in mediation in 2014, the companies solved that issue on their own, leaving only the wholesale price for the channels up to the commission.

With the CRTC’s decision, there’s now a new contract with RDS, one that includes multiplatform rights and will allow Videotron to meet new packaging requirements set by the CRTC to come into effect by Dec. 1.

So when do we get RDS GO?

Not quite yet, it seems. While the company told me in a statement that it’s happy with the decision and that there’s “agreement in principle” on multiplatform distribution, some aspects of the deal are still in discussion. “It’s impossible for us to make an announcement on this subject today,” the company said.

Hopefully this will be resolved by the time the Canadiens season begins again this fall.

Multiplatform distribution, and in particular “TV anywhere” apps, still have plenty of holes, particularly where they involve large vertically integrated companies. Few Bell services are available to Videotron customers this way, and few TVA services are available to Bell customers.

 

These issues will eventually be resolved as new distribution contracts are signed (in many cases probably involving a quid pro quo to avoid giving one distributor a competitive advantage), but they’re taking forever.

Because this deal concerns only RDS, it doesn’t affect distribution of other Bell Media services on Videotron (not even TSN). But hopefully this will help speed up discussions about getting those services on board as well.

The arguments

Since the CRTC arbitration in the end concerned mainly just the wholesale fee for RDS, the arguments presented by Bell and Videotron mainly concerned trying to set a higher or lower value on the channels. Though both offers increased the wholesale fee for RDS, Bell’s increased it more than Videotron’s did.

Much of those arguments centred on comparing RDS to TVA Sports, which of course is owned by Videotron’s parent company Quebecor.

Bell’s arguments for a higher fee included:

• RDS maintains higher overall ratings than TVA Sports, even after losing national NHL rights.
• RDS is more respected by viewers than TVA Sports.
• RDS’s production and acquisition costs have increased dramatically.
• Outside of hockey, RDS is by far more popular than TVA Sports, with many more marquee events.
• Though Saturday night Canadiens games are popular, many more Quebec francophones are choosing to watch the games in English on CBC or Sportsnet than watch TVA Sports (they don’t say why, but this probably has to do as much with the fact that some people just don’t feel the need to subscribe to the channel as it may with people not liking its broadcasts).
• Videotron is changing its packaging rules to come into compliance with the CRTC’s new rules. A higher per-subscriber wholesale fee should be expected when there are fewer subscribers.
• RDS needs to compete not only with TVA Sports but with online sources of sports programming.
• Bell’s offer is more in line with what other distributors in Quebec pay for RDS.
• Videotron has done nothing in its packaging of RDS to warrant a “special discount”.
• Videotron is treating RDS more harshly than TSN, because its goal is not fair market value but to punish RDS in order to support TVA Sports
• Quebecor started TVA Sports and is aggressively bidding for sports rights, which is why RDS’s acquisition costs have increased so much in the first place

Videotron’s arguments for a lower fee (one closer to that for TVA Sports) included:

• TVA Sports has higher peaks in ratings thanks to NHL playoffs and Canadiens Saturday night games
• RDS has lost other important sporting events to TVA Sports, including some MLB, NFL, QMJHL and tennis rights
• Bell offers RDS and TVA Sports at the same retail price, suggesting equivalent value to consumers
• RDS lost a third of its ratings due to the loss of Saturday night NHL games, NHL playoffs, NHL special events and non-local NHL games
• RDS’s subscriber revenues have already gone up considerably faster than its expenses, particularly jumping from 2011 to 2012, when it went from 44% of revenue to 62%. (This is mainly because until 2011, RDS’s wholesale rate was regulated by the CRTC.)
• RDS’s profits continue to increase (though they were cut in half in 2014-15 after losing NHL rights).
• There’s also RDS Info, which isn’t part of this contract but also collects subscriber fees while adding little original content
• Television subscribers are already beginning to unsubscribe from some services or eliminate pay TV all together, citing cost as a major factor.
• Comparing Videotron to other distributors in Quebec isn’t appropriate both because of Videotron’s high market power as a distributor and Bell’s high market power as a broadcaster. (Plus, of course, Bell TV is one of Videotron’s main competitors in Quebec.)

Comparing ratings is tricky, especially for this past season, since no Canadian teams made the NHL playoffs. TVA Sports’s overall numbers would have been much higher had that happened. There were a lot of other issues with arguments on both sides, and of course plenty of other arguments were presented that were redacted in the public documents.

The decision

The CRTC found Bell’s offer reasonable on several points, like packaging, volume discounts, and how it compares to other rates. But it found RDS could not justify the rate increase it wanted when you look at historical rates, which it found more relevant to this case.

The other factor that swayed the commission was the variability of the rate. Instead of a fixed per-subscriber rate, both offers proposed a scale where the larger the number of subscribers overall, the lower the per-subscriber rate. But the CRTC found that Bell’s offer was too flat, and “would have the effect of insulating the programming service from the impact of subscriber choice at an unreasonable level.” In other words, if people dropped RDS from their packages, Bell would see only a small drop in their subscriber revenue and Videotron would be forced to pick up an unreasonable amount of that loss.

As a result, the CRTC picked Videotron’s offer. This may be good news for Videotron subscribers wanting to get RDS, particularly as a standalone service, but more importantly good news for Videotron’s bottom line.