GRANT
ROBERTSON
Globe
and Mail Update
June
8, 2007 at 12:27 PM EDT
Canada's
broadcast regulator approved the $1.4-billion takeover of CHUM Ltd. by the owners
of CTV Inc. Friday, but attached a key condition to the ruling — requiring that
the network sell off five CITY-TV stations.
The
Canadian Radio-television and Telecommunications Commission (CRTC) said it was
concerned CTV would gain too much of the local TV market in several cities, and
approved the deal, only on condition that the CITY-TV stations in Vancouver,
Calgary, Edmonton, Winnipeg and Toronto are sold.
The
decision will also lead to the collapse of a deal CTV struck in April to sell
CHUM's other conventional network, A Channel, to Rogers Communications Inc.
[RCI.B-T] That sale, worth $137.5-million, was based on the CHUM deal being
approved with no major changes.
CTVglobemedia,
the parent company of the CTV network and The Globe and Mail, bought CHUM last
summer, acquiring 33 radio stations, 21 specialty cable channels — including
MuchMusic and Bravo — and two conventional TV networks under the CITY-TV and A
Channel banners.
The
CHUM - City TV building in downtown Calgary will be one of the assets CTV will
have to sell to comply with the conditions set out by the CRTC in its ruling
Friday. (The Globe and Mail)
CTV
will be allowed to keep the A Channel stations, which include one in Victoria
and six in Ontario – in London, Ottawa, Barrie, Wingham, Wheatley and Pembroke.
The
21 specialty channels, which include some of the most profitable cable channels
in Canada, were the plum of the deal, which CTV will add to its stable of 15
specialty networks, such as TSN, BNN, CTV Newsnet and Discovery Channel. Rising
growth in digital cable subscribers in Canada has made specialty networks,
which are allowed to charge per subscriber, sought-after assets in the
industry.
However,
CTV's other strategy in the CHUM deal was to build a second national network
targeted at younger viewers, using the CITY-TV networks across the country.
Under
CRTC rules, no network is allowed to own more than one station in any given
market, unless a station is under financial duress and needs a bigger owner to
survive.
“The
purpose of this policy is to maintain diversity of voices within the Canadian
broadcasting system,” said Konrad von Finckenstein, chairman of the CRTC.
“Some
exceptions to the policy were granted in the past for failing stations in
secondary markets. CTVgm asked for the exception using arguments based upon
competitive equality and the impact of new media. However, the Commission was
not convinced by CTVgm's arguments.”
CTV
is allowed to acquire the seven A Channel stations in smaller markets, because the
regulator considers them to be stations that would benefit from a stronger
owner. The A Channel stations in Barrie and Victoria are carried in Toronto and
Vancouver respectively, still giving CTV a second entry into those big markets
along with two stations now in Ottawa, but they are smaller and less
established than the CITY-TV stations.
In
arguments to the CRTC, the network argued its main rival, CanWest Global
Communications Corp., [CGS-T]has been
granted concessions in the Vancouver and Toronto markets. CanWest's secondary
network CH has stations in Victoria and Hamilton that are carried in those
cities, where its Global stations already operate. CanWest was given that
concession several years ago after it argued those stations were on the brink of
shutting down.
Knowing
that the regulator had concerns about CTV owning two stations in five markets,
the network proposed last month to sell off CITY-TV stations in Winnipeg,
Calgary and Edmonton, to ease the concerns about dominating local television markets.
However,
CTV executives attached one key decision to their proposal, which was rejected.
CTV wanted the CRTC to also halt the expansion of CanWest's CH network in Red
Deer into Calgary and Edmonton. The station is currently carried as a distant signal
— meaning it is further down the digital dial and can't solicit local
advertisers in the bigger cities — however CanWest has applied for better
placement in the channels.
CTV
has argued that effectively gives its rivals two stations — known within the
industry as “twin sticks” — in Alberta's two biggest cities, which are among
the best advertising markets. The CRTC rejected CTV's proposal because it was
made after hearings into the CHUM deal were held in late April.
In
a separate decision issued Friday, the CRTC allowed the expansion of CH to put
transmitters in Calgary and Edmonton for its Red Deer station. Adding
transmitters in the two nearby markets is different than owning a local station
in each city, the regulator said. CH Red Deer is struggling financially and
allowing it a higher profile on the TV dial in Calgary and Edmonton would keep
it from being threatened as a local broadcaster, the CRTC believes. However, CH
won't be allowed to solicit advertisers in the bigger cities.
“Given
the strong health of the Calgary and Edmonton television markets, the
Commission considers that these markets could sustain further competition from
the addition of new transmitters of the signal of [CH Red Deer] without undue
negative impact on incumbent services,” the CRTC said.
For
the past year, the CHUM assets have been held by a trustee awaiting the CRTC
decision. The trustee, lawyer John McKellar, will now be in charge of finding a
buyer for the CITY-TV stations.
The
trustee must submit a plan for the sale of the CITY-TV stations in the next 30
days.
While
executives at Rogers have told The Globe and Mail they have no deal to buy the
CITY-TV stations instead of the A Channels, Rogers is considered the favoured
buyer for those assets, given that a deal must be done in the next few weeks.
Other
names have been mentioned as potential buyers, including The Jim Pattison Group
and Quebecor Inc., [QBR.A-T]however
sources have said Rogers has already entertained the idea of buying the CITY-TV
stations.