February 25, 2002
The connection between licences and flag waving
Telling the CRTC what it wants to hear may aid Torstar bid
by Matthew Fraser
In the Canadian media industries, all roads lead to Toronto.
That assertion may be Toronto-centric, but it's nonetheless a hard fact. Canadian media companies, even if their head offices are located elsewhere, cannot shun the lucrative Toronto-area market with its population of some five million.
In local television, the Toronto advertising pie is carved up among TV stations owned by major players: CTV Inc., CanWest Global Communications Corp., CHUM Ltd. and Rogers Communications Inc.
But that could change. Ottawa regulators will soon decide perhaps this week whether to grant new TV licences for Toronto and its environs.
Manitoba-based Craig Broadcast Systems is in the running. Other potential market entrants are Torstar Corp. and Alliance Atlantis Communications Inc. Rogers, for its part, wants to launch a second CFMT ethnic station. Global TV also put in a bid.
But why, at present, would anyone want to make a foray into the Toronto television market? Advertising spending is flat. What's more, conventional over-the-air television is a declining business.
Let's look at the numbers. From 1996 to 2000, the Toronto-area television market boasted revenue growth from $456-million to $588-million. But according to Television Bureau of Canada estimates, revenue plummeted to roughly $520-million last year.
In truth, the tactical jockeying for a Toronto TV licence is part of a larger strategic battle whose outcome could have far-reaching consequences.
Alliance Atlantis, a TV production behemoth, covets a Toronto television station as part of its transformation into a vertically integrated broadcaster. Craig badly needs to extend into Ontario from its base in Western Canada. Without a foothold in Ontario, Craig is doomed to be swallowed by a bigger rival possibly CTV, probably CHUM.
But neither Alliance Atlantis nor Craig will win. Nor will Global TV.
Torstar, which owns The Toronto Star, has a better chance thanks to its over the top, patriotic pitch to the Canadian Radio-television and Telecommunications Commission. Torstar promised to launch three local TV stations in Ontario with slap-up business plans: extravagant programming budgets, high Canadian-content levels, 300 jobs and convergence synergies between print and TV outlets.
"In this era of globalization," declared Rob Prichard, president of Torstar Media Group, "it's more important than ever to celebrate local community and culture."
Over at CHUM, which owns Toronto's Citytv, Moses Znaimer must have been incensed while listening to Torstar upstarts steal his slogans about local TV.
Not so long ago, trendy CHUM and stodgy Torstar were discussing a possible merger. Today, Torstar is muscling in on CHUM's local television patch.
The good news for CHUM is that Torstar's big-spending television gambit, if faithfully implemented with 85% Canadian content, would almost certainly go broke. Torstar is promising to broadcast a prime-time Canadian movie and TV series every week, plus compelling documentaries on such issues as "the real story behind Hurricane Hazel."
Yet Torstar's flag-waving cultural nationalism is just the sort of thing the CRTC loves to hear.
Indeed, according to reliable industry buzz, the CRTC favours granting two Toronto licences. Rogers would get one for a second ethnic TV station. The other would go to Torstar.
Before casting their votes, CRTC commissioners might consider a telling historical precedent, whose ominous echoes will provide them with timely guidance.
In 1987, the CRTC awarded a new TV licence for the Ottawa area. A number of well-known broadcasters had jumped into the race, including CHUM and Baton Broadcasting Inc.
In those days, Ottawa's local CTV affiliate, CJOH, was owned by Allan Slaight's Standard Broadcasting Corp. Mr. Slaight was understandably enraged that his CTV partners at Baton which owned the network's Toronto flagship CFTO were attempting to invade his Ottawa franchise.
Undeterred, Baton pulled out all the stops with a nationalistic pitch to the CRTC. Baton's proposed "National Capital Television" would be a patriotic showcase for new Canadian series and ambitious documentaries, including The History of Canada. Waving a Canadian flag with one hand and brandishing a chequebook with the other, Baton chief executive Doug Bassett promised to pour countless millions into local programs.
Predictably, Baton won the Ottawa licence.
Allan Slaight angrily appealed the decision to the federal Cabinet. But Baton made Mr. Slaight an offer: Instead of launching a competing Ottawa station, Baton would buy his CJOH for a premium price: $85-million. Mr. Slaight said uncle.
Result: Baton never launched "National Capital Television."
With CJOH in its pocket, Baton promptly handed back its Ottawa licence to the CRTC. The regulatory spectacle had been a travesty. Its only purpose had been to arm Baton with the means of extorting terms of surrender from Allan Slaight. The CRTC blunder also set the stage for Baton's takeover of CTV.
What are the lessons for today?
A triumphant Torstar, armed with a Toronto licence, could put the squeeze on CHUM. The threat of launching a rival TV station would bring CHUM back to the table to renegotiate their aborted merger. In time, a Torstar-CHUM combination could buy Craig to forge a Canadian convergence giant.
Here is the question for regulators: If Torstar wants to force a shotgun wedding with CHUM, should the people of Canada through the CRTC be obliged to pay a dowry?
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