While everyone’s attention here was naturally focused on what Bell’s plans are for CKGM, the bigger issue up in front of the CRTC on Sept. 10 is the overall $3.38-billion purchase of Astral Media by Bell Media.
The deal would be a straight purchase, gobbling up everything owned by Astral including non-broadcast assets like its outdoor billboard advertising business. Bell would sell off only those things it is required to.
It’s a deal that has prompted a lot of worries about media concentration (though you could say it’s far too late to worry about that). Quebec’s Option consommateurs has already come out against it, generating some media buzz, but otherwise there hasn’t been much organized opposition.
10 radio stations to be sold
As I noted in the post when the deal was announced, a look at the combined assets of both companies shows they would be over the limits (two AM, two FM, and no more than three total in markets with fewer than eight commercial stations) in six markets, and would need to divest itself of 11 stations to meet the limit. In its application, Bell says it plans to sell 10 stations, and convert CKGM to French.
Bell’s application indicates it has provided the CRTC with a list of the 10 stations it plans to sell, but it wants that kept confidential so that those stations don’t become lame ducks, losing staff and morale. Knowing what markets it needs to sell stations in (two FM in Ottawa, one FM in Calgary, two FM in Toronto, two FM in Winnipeg, and two FM and one AM in Vancouver) and what the ratings are for those markets, it wouldn’t take a rocket scientist to find the likely castaways.
Because most of those markets have many English FM stations and multiple independent players, the concern about market concentration isn’t as high there as it is for Montreal’s English market.
Two calculations for TV viewing share
On the TV side, the CRTC’s concern isn’t so much the number of TV services (cable channels are a dime a dozen these days), but viewing share. Specifically, it says it will not allow any one player to control more than 45% of the overall viewing share in either language, and will closely scrutinize any purchase that gives a player between 35% and 45% of the viewing share.
Where Bell fits in depends on how you calculate that share. If you include Canadian viewing of American and overseas TV channels (like PBS, CNN and Spike TV), it falls just under that 35% threshold (33.5%). If you include only Canadian services, it’s just above (38.7%). Naturally, Bell believes U.S. services should be included in the calculation (they represent about 10% of Canadian viewing hours), which makes sense, but also means that one player could own 100% of Canadian television channels so long as 65% of Canadian television viewing is of foreign services. In addition, Bell argues that part of that share is its CTV Two network, which it has agreed to keep operating even though it loses money as part of a commitment made in the purchase of CTV by Bell.
There are also qualitative arguments that Bell uses. For one, Astral has no news or public affairs departments at its TV properties, so there would not be a reduction in diversity of voices here. (Bell conveniently ignores the fact that Astral has many radio newsrooms, and in a market like Montreal it means controlling the biggest TV newsroom and the biggest radio newsroom.) And Astral’s English-language television is limited mainly to its pay TV services like The Movie Network and Family Channel. It doesn’t own many specialty channels in English.
On the French side, because of the dominance of Quebecor and Bell’s virtually nonexistent presence (aside from RDS), combined they would represent only 24.4% of the overall TV viewing share.
Two B.C. stations
It’s a footnote in any discussion of Astral, but it does own two conventional television stations in tiny markets in northern B.C. – CJDC in Dawson Creek and CFTK in Terrace. Both are CBC affiliates with local newscasts. Bell’s application says they would remain that way “for the immediate term” but that this could change. “Following closing, we will determine if, when and how these stations will be integrated into the broader Bell Media conventional television group.”
Disaffiliating from CBC requires a separate CRTC application. But it’s hard not to see them eventually being converted into CTV network stations. Neither is anywhere close to an existing CTV station.
Tangible benefits
Aside from CKGM and other concerns about concentration of ownership, the biggest debate over this acquisition is probably going to be over what’s called the “tangible benefits” package. When ownership of a television service or radio station changes hands through a purchase, the CRTC requires that what can best be described as a sales tax be spent to improve the broadcasting and cultural system in some way. Usually (and particularly for radio stations), this means giving money to an organization that develops Canadian music talent. Or it could be some increase to Canadian programming beyond the minimum requirements of broadcasting licenses.
Tangible benefits packages are usually calculated as 6% of the purchase price for radio and 10% for television. In cases where the purchase price is effectively negative (such as when Channel Zero bought CJNT and CHCH for $12), tangible benefits packages don’t apply.
Bell’s proposal is for $200 million in tangible benefits, breaking down as $140 million for television (based on a $1.4-billion value), and $61 million for radio (based on a $1-billion value). The latter is to be adjusted based on the value of radio assets it will be forced to divest in the deal. Both, bell proposes, would be paid over 10 years instead of the usual seven, mainly because Bell is still paying off the tangible benefits packages from CTV’s acquisition of CHUM and Bell’s acquisition of CTV.
In case you’re doing the math in your head, the two purchase prices add up to about $2 billion. The rest of the acquisition price includes non-broadcast assets like outdoor advertising, as well as 50% stakes in Teletoon, Teletoon Retro, Historia and Séries+, which Bell feels should be exempt from this calculation because it would not mean an effective change in control of those channels. (Judging by correspondence on this matter, the CRTC might not accept this argument at face value.)
The biggest chunk of Bell’s proposed benefits package is $96 million that will go to “programming of national interest” (comedy, drama, documentary and certain awards shows), the majority of which will be spent on French-language programs because of Astral’s French-language skew. Then there’s the $61 million in radio benefits that will go to developing Canadian music talent and community radio funds.
It’s the other two chunks that are causing some consternation, though. About $40 million is being pledged to “support Canadian programming by making it more widely available in Canada’s North through the extension of next-generation broadband wireline and wireless service.”
That sounds fantastic, doesn’t it? The problem, aside from how odd it is that Bell associates upgrades to 4G wireless service as somehow helping the television broadcasting system, is that this is essentially a network upgrade for Northwestel, the main telco in the territories. And as if we need to point this out, Northwestel is a subsidiary of Bell.
This has not gone unnoticed for Northwestel’s competitors, who call the blatantly self-serving investment “shameful,” particularly since Northwestel has been heavily criticized for failing to modernize its system. The fact that the CRTC has just opened up local phone service to competition only makes such an investment in one company seem even more anti-competitive.
Another chunk of the package getting noticed is $3.5 million over seven years that would go to Bell Let’s Talk Day, which is an annual campaign to raise money and awareness for treating mental illness. I’ve written before about how Bell seems fine with ordering its assets (and even local news departments) to participate in and cover this campaign.
It’s hard to come out against such a charity campaign, but what does this have to do with broadcasting? The CRTC’s goal with tangible benefits is pretty clear, and though such causes are laudable, there’s no provision for essentially donating part of this package to a favourite charity.
The CRTC asked Bell to justify this expense, and here’s their response:
The proposed benefits initiative will be used to help raise money and awareness to help battle mental health issues through the development of PSAs and educational materials, among other things, and will yield measurable improvements to the communities served by BCE and by Astral by contributing to the earlier identification and better management of mental illness in those communities. That is why so many municipalities and provincial governments devote significant funding to pursuing exactly those goals. This multi-platform media initiative will leverage the merging parties’ unique expertise in broadcasting, a different sphere of endeavour than that in which municipalities and provincial governments work.
These improvements are also significant and unequivocal benefits to the Canadian broadcasting system itself. Parliament left no doubt as to the importance of this policy goal, which it required the Commission to pursue, when it declared that the Canadian broadcasting system should strengthen the social fabric of Canada; serve the needs and interests, and reflect the circumstances and aspirations, of all Canadians; provide information and enlightenment; and expose the public to differing views on matters of public concern. As a result, we respectfully submit that making space in the Canadian broadcasting system to address key social issues, which include mental health, and that raise both money and awareness in support of those issues, is the very epitome of the significant and unequivocal benefits to which the tangible benefits policy was directed.
I don’t know about that.
As the Globe and Mail’s Simon Houpt explains, all this stuff might be boring financial policy stuff, but it’s important. We’re talking about hundreds of millions of dollars being injected into Canadian broadcasting. It’s the CRTC’s job to ensure Bell is spending it properly to benefit the system more than itself.
Correspondence between the CRTC and Bell that forms part of the public record on the application makes it clear that the commission is challenging Bell on all of these matters. Expect them to get discussed in depth at the September hearing.
The CRTC hearing into Bell’s proposed purchase of Astral Media is scheduled to begin Sept. 10 at the Palais des congrès. People wanting to file comments with the CRTC or appear at the hearing can file an intervention here (the application number is 2012-0516-2: Astral Media inc.). The deadline is Aug. 9. Note that comments – including names and contact information – are on the public record.
UPDATE: In a somewhat unrelated press release about winning an old lawsuit against Bell related to its ExpressVu satellite service (now Bell TV satellite), Quebecor CEO Pierre Karl Péladeau made it very clear he and his company are against the Bell-Astral merger, using language you don’t usually see from bosses of big companies:
Bell puts forth considerable efforts to obtain a virtual monopoly of French specialized channels through the acquisition of Astral Média, that would give it 8 of the 10 most popular French specialized and pay TV channels, as well as 67% of the audience and 80% of ad revenues in this market. In the Canadian market, in both languages, over 41% of monthly subscription fees paid by specialized channel viewers would go to Bell, as would 45% of these channels’ advertising revenues. Of the 51 specialized and pay channels that would be controlled by Bell as a result of this transaction, 28 are genre-protected and 30 are must-carry channels in their respective markets. The situation is equally problematic in radio, where Bell would own 117 radio stations across the country, while also exerting total control over all specialized music television channels.
“We call on the CRTC to refuse to approve this transaction on the basis that Bell’s business practices do not meet the ethical standards expected from a company that has the privilege to exploit broadcasting services through licences granted by the CRTC for the benefit of all Canadians. If such practices were to go unsanctioned, Canadians’ slowly eroding confidence in its regulatory authorities would only be further undermined. It is essential for anyone concerned with a healthy and competitive TV industry to take a look at these judgments and oppose Bell’s takeover of Astral. Only by staying vigilant and by denouncing Bell’s unacceptable practices by all possible means will we be able to prevent it from recreating the monopolistic model it relied on for so long,” concluded Mr. Péladeau.
Despite this rather inflammatory statement, Quebecor has not, as of July 25, filed a formal intervention with the CRTC about this case.