Tag Archives: Shaw

Rogers to buy Shaw for $26 billion — but will regulators agree?

There are days you think Canada’s media and telecom industries are about as converged as they can be. And then another megatransaction gets announced that you think couldn’t possibly be approved by the government. And then it is.

Transactions like Bell buying Astral Media, Bell buying MTS, Rogers buying Mobilicity, Postmedia buying Sun Media, and all the other transactions that brought us to this point.

So the news that Shaw has agreed to a $26-billion sale to Rogers maybe shouldn’t come as quite a shock. But as the government professes to be pro-consumer, particularly when it comes to wireless services, can we really expect this deal to be approved?

Here are the stumbling blocks the companies will have to get over:

  1. Freedom Mobile. In Ontario, Alberta and B.C., Freedom is the fourth large wireless carrier, the last surviving one from that era of increased competition after Mobilicity and Public Mobile were scooped up by the big three. Rogers, which is already Canada’s largest mobile provider, apparently believes it can just keep Freedom as part of the deal, with nothing more than a promise that it won’t raise prices for three years. If the federal government is to be taken seriously on wireless competition, it can’t possibly let that stand. It could force Rogers to sell Freedom to some other party (Quebecor? Xplornet? Cogeco? Some random rich guy?), or it could come to some agreement where Rogers sheds just enough Freedom customers to another party, like Bell did when it bought MTS.
  2. Corus. Shaw and Corus are separate companies, with separate boards of directors and different shareholders, but both are controlled by the Shaw family. The CRTC treats them as if they’re the same for competition reasons. The issue here is that, as part of the transaction, the Shaw family gets two seats on the Rogers board. That doesn’t give them control of Rogers, but does it present enough of a competition concern to warrant increased scrutiny?
  3. Cable and satellite. Because Shaw and Rogers have essentially split the country geographically, with Shaw serving western Canada and Rogers serving eastern Canada, there’s not much overlap in terms of wired coverage to deal with. But these are still big companies. Shaw has 1.4 million cable TV subscribers and more than 600,000 satellite TV subscribers, making almost $4 billion in annual revenue on TV services alone. Add that to Rogers’s 1.5 million TV subscribers and $3.5 billion revenue, and you get a company 30% larger than Bell on that front. That’s a change in dynamic in bargaining position when, say, negotiating carriage contracts with TV services. There’s also the fact that if Rogers buys Shaw’s satellite service, that’s one less TV service option for subscribers in Rogers territory. They go from having to choose between Rogers, Bell Fibe/satellite and Shaw Direct to having to choose between Rogers and Bell alone.
  4. Sheer size. Rogers has $15 billion in annual revenue. Shaw has $5 billion. Combined, they still fall short of Bell’s $24 billion, but not by much. No doubt Rogers will use the need to compete against Bell as an argument for approving the transaction, because the only way to fight ownership consolidation is more ownership consolidation.
  5. Jobs. Rogers has promised to create 3,000 “net new jobs” in western Canada as part of the deal. But it also says “synergies are expected to exceed $1 billion annually within two years of closing.” I’m curious what synergies can be achieved without cutting any jobs.

Mobile service seems like the only potential dealbreaker here, unless there are some minor assets that compete directly that would also need to be divested. Rogers would probably be fine ditching Freedom if that was a condition of approval.

Will political and regulatory forces accept such a deal? We’ll have to see. Recent experience suggests they probably will, and companies don’t go through this kind of trouble if they don’t think a deal can succeed. (At least that’s what I’d like to say, but Rogers’ proposed purchase of Cogeco fell flat, so…)

The new convergence utopia: Who owns what in Canadian media

A little under three years ago, I published a post with a chart of Canada’s media giants and what they own. Now that the CRTC has given a green light to a major acquisition by one of them, I thought it was a good time to revisit and update that chart.

The following represents who will own what once all the various deals go through, including related deals for asset acquisitions involving Corus, Shaw and Pattison Group.

UPDATE: I’ve moved the chart to this page, where I will be keeping it updated.

Shaw to buy Canwest

The big change for one half of the Canwest empire now has a roadmap: Canwest announced this morning that Shaw Communications would buy a 20% equity interest and 80% controlling interest in Canwest Global once the company emerges from creditor protection.

Coverage at The Globe and Mail (of course, with analysis and more analysis), CBCReuters, Canadian Press, Wall Street Journal and Financial Post. Though financial terms won’t be disclosed until after regulatory approval, Shaw is spending at least $65 million on this acquisition.

Canwest Limited Partnership, which owns the National Post, Montreal Gazette, Canada.com and other publishing assets, is unaffected by this. They will still be auctioned off as part of their restructuring.

Corus Cable Empire?

Assuming the deal goes through (and there’s no big reason to believe it won’t), the Shaw family will have control over a worryingly large number of specialty channels in Canada. They have a controlling interest in Corus Entertainment, a company spun off from Shaw to get around a CRTC rule about cable companies owning specialty services – a rule that no longer exists.

Corus owns or has a majority interest in (copy-pasted from Wikipedia):

It also has a 50% share with Astral of the Teletoon channels.

Canwest owns – and Shaw would get:

And the former Alliance Atlantis channels through a deal with Goldman Sachs:

Add to all this minority stakes in mentv, One, Historia and Séries +, and you’ve got a pretty huge specialty empire here, 31 channels. That would put it ahead of CTVglobemedia’s 29 channels, and way ahead of other specialty players Astral Media (9 plus The Movie Network and Super Écran), Quebecor Media (8) and Rogers (6).

It should go without saying that the specialty assets – and not the Global Television Network – are why Shaw is interested in this acquisition.

The release says that Shaw would operate Canwest as a standalone company (instead of, say, just taking its assets and giving them to Corus), but you have to think that some sort of consolidation is going to happen if they can get it past the CRTC.

Another (albeit minor) question is what happens to the few conventional TV stations that Shaw and Corus own. Shaw owns CJBN in Kenora, Ont. (a station with the distinction of being Canada’s lowest-powered non-repeater, at 178 Watts), which is currently a CTV affiliate. Corus, meanwhile, owns CKWS Kingston and CHEX Peterborough in eastern Ontario, both of which carry CBC programming. None of the three stations are in cities with Global stations, so it’s conceivable they could all become Global affiliates or even sold to Canwest and become Global owned and operated stations.

Shaw’s second chance to prove its point

My favourite part of this story comes out of a quote from Canwest chairman Derek Burney (emphasis mine): “We look forward to benefitting from Shaw’s participation in a reinvigorated Canwest, as it is a strong business partner with a proven commitment to the Canadian television broadcasting industry. This significant investment in conventional television should be seen as a big vote of confidence in the industry and its future.”

Of course, Shaw and Canwest have been on the opposite side of the ugly fee-for-carriage debate, with each side spouting half-truths at each other in a bid to scumsuck public support.

Remember those “cable company cash cows”? Funny how useful one of them has suddenly become now that the TV company needs a bailout.

But as much as this is ironic for the Local TV Matters people, it also forces Shaw to prove its point about how conventional television isn’t in need of financial support from cable and satellite companies.

Last year, after Shaw sarcastically offered to buy three stations from CTV for $1, and CTV sarcastically accepted, it later pulled away from the deal, claiming that due dilligence showed the stations were hollowed out shells and work had been outsourced to other stations.

Shaw can’t make that excuse this time. While many Global stations are little more than a newsroom, a couple of editing suites and a green screen, Shaw gets the broadcast centres that control them, and can do with them as they wish.

So will Shaw back down from its tough talk about fee for carriage? Will Canwest pull out of the Local TV Matters group, stuck in the same awkward position as CityTV and TVA where the parent company cares more about protecting cable profits than local television?

We’ll find out within the next few months. (Though by the time Shaw’s acquisition is final, the fee for carriage debate might be over.)

UPDATE: The Financial Post explores a big thorn in the side of this deal: Goldman Sachs, which is still fighting with Canwest over the company that owns the former Alliance Atlantis channels.

Shaw renegs on promise to save TV stations

Hey, remember a couple of months ago when Shaw said it would buy three endangered CTV-owned stations for $1 each in what seemed like the most insincere offer in the history of mankind?

Yeah, turns out it was a giant bluff. After going over the books for the three stations, Shaw determined that they are, indeed, losing quite a bit of money and it’s not worth the CRTC brownie points and good PR to sink more cash into the stations. CTV issued a brief statement Tuesday afternoon saying Shaw reneged. Media outlets have repeated the statement, but Shaw and CTV aren’t commenting further yet, and the stations can’t comment because they don’t know what’s going on.

This comes (coincidentally?) on the same day Canwest announced it will offload two stations onto Channel Zero.

So CKX-TV in Brandon, Man., CHWI-TV in Wheatley (Windsor), Ont., and CKNX-TV in Wingham, Ont., go back to being endangered and unless another buyer can be lined up they won’t last past the summer.

The optimism they had when the deal was announced now flies right out the window.

UPDATE: Canadian Press is the only outlet that finally tracks Shaw down to get comment. They say they expected real television stations but saw hollowed-out shells where much of the work was done in London and Toronto. Meanwhile, CTV says it will keep CHWI running for another year after getting more money from the CRTC.

Rogers et al pissed at CTV “Save Local Television” campaign

One-sided ad from CTV Atlantic

One-sided ad from CTV Atlantic

If you haven’t caught CTV’s “Save Local Television” ads recently, you haven’t been watching television. CTV has blanketed its stations, the A television network as well as specialty channels like the Comedy Network and Space with these advertisements that predict a doomsday scenario for local television and demonize the cable and satellite companies for “taking our programming” and “giving nothing in return” (as if this arrangement benefits solely the cable companies at the expense of local broadcasters, and as if the cable companies are selling DVDs of Corner Gas).

The cable and satellite companies have responded with a giant STFU, and issued a press release saying they’re complaining to the CRTC that CTV is breaching the public trust with this one-sided campaign that is a “blatant violation of journalistic principles.” (More coverage from CTV-owned Globe and Mail, Canwest/Global-owned Financial Post, CBC-owned CBC.ca and non-profit cooperative Canadian Press)

You see, not only is CTV running these ads all over the place, it’s enlisting the help of its journalists to spread its message. Ridiculously one-sided news reports from CTV Atlantic, CTV Winnipeg, CTV Toronto and A Barrie simply throw journalism out the window. In all but the one case, no attempt whatsoever is made to get comment from cable and satellite companies. The exception, in the CTV Atlantic report, includes a 10-second clip in a two-and-a-half-minute report whose bias is evident when the reporter talks about broadcasters wanting “equal treatment”.

CP24 (which is owned by CTV) has a fluff interview with CTV Executive Vice-President of Corporate Affairs Paul Sparkes in which he crosses the line from misleading to outright lie, saying cable and satellite companies are “taking our programs, repackaging them, selling them to the consumer, making a profit, and paying us nothing.” Local television feeds are not “repackaged”, but passed through directly to consumers. Sparkes also dismisses an actual question about fee for carriage lobbed at him from his reporter.

This report from Graham Richardson is a bit more balanced, in that he actually talked to a Rogers VP without systematically picking apart everything he says. It is the exception, unfortunately.

CTV Montreal enlisted the help of the premier, although Jean Charest doesn’t specifically state that he supports a mandatory fee for carriage. (He also talks of how important local television is to his home town of Sherbrooke, even though it has no local anglo television station.)

Right of response

In response to the complaint, CTV issued a press release blasting Rogers as “underhanded” (at the same time arguing that discussions shouldn’t happen via press release).

Its only comment about the attacks on its journalistic integrity came from this paragraph:

Indeed, consistent with CTV’s efforts to provide balanced coverage of the issues surrounding the crisis in local television, CTV once again invites representatives from Rogers, Bell, TELUS, Cogeco, Eastlink and the CCSA to participate in tomorrow’s nationwide events.

I can only assume this means CTV reporters will only talk to cable and satellite companies about this issue if they send a representative to CTV’s political rallies on a Saturday to be heckled by a public that has only been told one side of an issue. That doesn’t sound particularly “balanced” to me.

Despite this, Shaw once again called CTV’s bluff, and Ken Stein, the senior vice president of corporate and regulatory affairs at Shaw Cable, agreed to an interview with CTV NewsNet’s Jacqueline Milczarek. Milczarek argued with him (politely) for more than six minutes, a huge contrast from the softball questions given to CTV executives.

Stein also appeared opposite CTV’s David Goldstein to debate the issue on an Alberta program, which went on for a respectable 14 minutes. Sadly, the debaters weren’t as respectable, accusing the other of misleading people. In short, Shaw says it produces local programming through cable access channels, while CTV argues (correctly) that those channels are financed entirely out of a CRTC-mandated fund. CTV argues that Shaw et al are stealing their programming and pirating it to viewers, and incredulously accuses Shaw of using “scare tactics” in this campaign (you know, the one in which CTV is using a heart monitor metaphor to say local TV will “disappear forever” if fee for carriage isn’t enacted).

The network also finally got some smart analysts on. Eamon Hoey looked at the larger picture, taking a dim view of fee for carriage, and got hounded by Milczarek. Carleton University’s Christopher Waddell also pointed out how CTV isn’t telling all sides of this story, and also got treated with skepticism.

Don’t get me wrong, these interviews with Milczarek are what journalists are supposed to be doing: getting people to answer tough questions. But compared to the fluff interviews about open houses with CTV executives, it seems clear that CTV is using its journalists to advocate for a cause, being soft on their bosses and tough on their competition.

Breach of trust

CTV is grossly abusing its public trust by forcing its journalists to participate in what is essentially a political campaign. Television viewers have the right to be fully informed about all sides to this issue and CTV is systematically denying them that right.

Of course, the fact that local CTV stations are owned by a giant conglomerate that puts profit above everything else and is pretending to care about local television to manipulate the public is the problem in the first place, isn’t it?

What’s even sadder is that it takes another group of giant corporate conglomerates protecting their own bottom lines to bring this problem to light. If a solution was proposed that benefitted both private broadcasters and cable and satellite companies at the expense of television viewers, who would be there to look out for us?

I’m going to CTV Montreal’s open house today. I’m pessimistic about their chances of convincing me to accept their corporate manifesto, but it’s a good chance to explore the station.