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Category Television Date 9/28/2006 |
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CanWest MediaWorks Inc. Calls for Regulatory Reform to Address Structural Issues Impacting Conventional Television
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TORONTO, Ontario, September 28, 2006 – CanWest MediaWorks Inc. yesterday responded to the Canadian Radio-Television and Telecommunications Commission (CRTC) call for comments in the context of a review of policies and regulations governing local television stations in Canada.
In its submission, CanWest stresses the need for regulatory reform in order to address structural imbalances within the broadcasting system. These include the impact of new technology and competitive pressures from an increasing number of regulated and unregulated programming choices available to Canadians. CanWest comments that local broadcasters do not operate in a vacuum, and that regulations must be crafted in a way that addresses financial and technological challenges that impact their ability to remain healthy and grow in an increasingly competitive environment.
“This review is long overdue given the rapid pace of change within the media landscape and its impact on our business. We applaud the CRTC’s initiative in examining certain aspects of its regulatory framework to address these issues,” said Peter Viner, President and CEO of CanWest MediaWorks Inc.
“Broadcast regulation was made at a time when consumers had access to just a few channels and the bargain was that a complex set of rules and obligations would be put upon broadcasters in exchange for their use of scarce spectrum on the airwaves. Today, with hundreds of channels in cable and satellite homes and unlimited competition from the Internet, which is unregulated, one side of the equation changed while the other did not. We seek to remove or reduce unnecessary costs and limits on revenue generation in order to rebalance the equation and to untie broadcasters’ hands to allow us to meet the competition head on,” added Mr Viner.
“Our submission filed today puts forward a number of concrete proposals to address each of the key areas under review,” said Mr. Viner. “Together, these proposals are designed to suggest a regulatory road-map that will enable us to compete more effectively in an increasingly challenging media landscape.”
The Company’s key proposals include the following:
- Establishment of a subscription fee for local TV stations, to ensure that local stations get a portion of the cable and satellite fees paid by subscribers;
- Easing of the restrictions on advertising and product placement, so that in-show product placement, promotions for non-Canadian programs, and virtual advertising are not considered part of the regulated maximum 12 minutes of advertising time each hour;
- Requiring satellite companies (Direct-to-Home) to carry all of CanWest’s local stations to ensure that viewers everywhere have access to the local programming designed to meet their needs;
- Changes to the definition of what counts as prime-time “priority” Canadian programming, to ensure that broadcasters have the flexibility required to respond to consumer evolving tastes and demands for different types of programming;
- Enforcement of the rule requiring cable and satellite companies to provide simulcast over U.S. distant signals that are broadcast into Canadian markets to protect copyright and advertising revenue;
- Easing of requirements to build high definition (HD) over-the-air transmitters in every market, since most HD viewers are already cable or satellite subscribers.
“We look forward to this review,” said Kathy Dore, President of Broadcasting for CanWest MediaWorks Inc. “It is our hope it will result in recalibrating the balance between the significant contributions we make to the Canadian broadcasting system and ensuring the financial health of conventional television in the future.”
FACT SHEET ON KEY POSITIONS
Subscription Fees for Local Stations
Conventional broadcasters currently receive no portion of the money Canadians pay distributors to receive local television signals, yet consumer research conducted by Pollara Research on our behalf shows that 65% of Canadians believe we do and 24% do not know. Conventional broadcasters have the highest regulatory burden of any sector in the broadcasting system and also make significant contributions to meet social and cultural goals, including high price Canadian programming. While both Canadian and U.S. specialty networks like TSN, Bravo, A&E and CNN receive a portion of Canadians’ cable and satellite bills, local television stations that provide local news and other programming of relevance to Canadians do not get compensated for the use of their signals. When informed that local broadcasters actually receive no subscription fees, 80% of consumers surveyed said they thought local broadcasters should receive payment for carriage of their signals.
Since the early days of cable policy in Canada, and in fact, in a policy pronouncement from 1971 addressing the issue of subscription fees, the CRTC concluded that cable companies should compensate conventional broadcasters for the use of their signals. In that document, the CRTC concluded that “one should pay for what he uses to operate his business”. Despite this pronouncement, the CRTC has not adopted a subscription fee regime for conventional television to date.
CanWest has put forward a proposal to ensure that privately-owned local television stations receive subscription fees in order to offset some of the economic challenges the sector is facing and to ensure parity with other sectors of the broadcasting system.
More Flexibility in Advertising
CanWest calls for deregulation of non-traditional advertising, product integration and sponsorships to enable Canadian broadcasters to make use of commercial opportunities in this growing revenue area. While the U.S. does not regulate advertising, Canadian broadcasters are limited to 12 minutes of advertising per hour. When broadcasters air U.S. prime-time programming, those programs arrive with up to 16 and even sometimes 18 minutes of available air-time that has to be filled. The company proposes changes to advertising regulations that will allow broadcasters to more fully make use of the additional minutes of air-time allotted within U.S. prime-time programming to otherwise have access to new opportunities for revenue generation.
Mandatory Carriage for Local Stations
For years, mandatory carriage of all local television stations on cable systems has ensured that Canadians receive their local stations, including local news and other programming that is relevant to them. This rule also ensures that local broadcasters can protect their revenue base and subsidize programming costs. However, Canada’s satellite policy (DTH) does not mandate carriage of local stations by either Canadian satellite provider. CanWest currently operates five (5) stations in Canada that are not carried by either satellite provider, yet we continue to provide high quality local programming in those markets. For example, 31% of English-speaking Montrealers and 47% of residents in Red Deer do not have access to their Global Television signals.
We are urging the CRTC to mandate carriage of all local stations in Canada to ensure that Canadians have access to their local stations in all markets whether they subscribe to cable or satellite services.
Addressing the impact of Distant Signals
Broadcasters buy and pay for programs on a market by market basis. Policies that enable cable and satellite providers to distribute local signals into distant markets throughout Canada allow consumers to time-shift – that is, to watch programs at different hours on a number of stations. The impact of distant signals has been a leading detrimental force on the conventional television sector because it disrupts viewing patterns, infringes on copyright – consequently, viewing of local stations is lower when viewers watch our programs on out-of-market stations – this in turn, reduces advertising revenues, however, program costs continue to rise. Our research shows that last year alone, the impact of distant signals on CanWest was $29.9 million in lost revenues. This problem is unique to Canada – this is simply not permitted in the U.S. or for that matter, to our knowledge, in any other country
We are asking the CRTC to take a lead role in helping us find technical and other solutions to this problem by mandating negotiations between distributors and broadcasters to establish and implement a concrete plan of action that will address the impact of distant signals by September 1, 2007.
Transition to High Definition
The company also urges the CRTC to establish a cut-off date for analog over-the-air transmission in Canada in order to facilitate an orderly transition to digital television that will enable Canadians to receive High Definition television. CanWest proposes that broadcasters should develop their own plans for the conversion to digital transmission using the most appropriate and cost-effective technology available for that purpose. The company believes that the requirement to install digital transmission towers across Canada is not necessary and will prove uneconomic and of limited value to consumers.
The company also proposes the establishment of a working group between broadcasters, distributors, consumers and the government to manage various issues related to Canada’s conversion to High Definition television and to ensure that consumers are well informed of the changes coming and how this might affect them.
About CanWest MediaWorks Inc.
CanWest MediaWorks Inc. is a wholly-owned subsidiary of CanWest Global Communications Corp, (CanWest) (NYSE: CWG; TSX: CGS and CGS.A, www.canwestglobal.com). CanWest, an international media company, is Canada’s largest media company. In addition to owning the Global Television Network, CanWest is Canada’s largest publisher of daily newspapers, and also owns, operates and/or holds substantial interests in conventional television, out-of-home advertising, specialty cable channels, Web sites and radio networks in Canada, New Zealand, Australia, Singapore, Indonesia, Malaysia, Turkey, the United States and the United Kingdom.
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For further information, contact:
Betsy Chaly
Director, Corporate Communications
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