Monthly Archives: March 2013

A New Co-Production Policy – What Do We Know?

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On March 7, 2013, during a speech by Parliamentary Secretary Paul Calandra to the CMPA Prime Time audience, the government announced that it would now be implementing its new film and television co-production policy.  Most of the audience went ‘huh?’ and a few directed the ‘huh?’ at me.

I don’t have all the answers but I’ve been able to dig up a few – sorry but it took me a while.

Here’s the context.  A new co-production policy framework  was released February 2011.   It basically said that after declining treaty co-production volume, the policy framework would set the big picture goal of making Canada a more desirable co-production partner.  Co-productions bring more foreign investment to Canada and make it easier for Canadian productions to get access to foreign markets.  The industry was asked to consult on the implementation of that new policy framework – the details of how it would be accomplished.  There were questions and possible solutions that we were asked to address such as lowering the minimum participation from Canada, a new set of minimum key creatives and frequency of review (I’m going on memory as none of the materials are on the Heritage site any more).   These details would inform the specifics of each treaty as it gets renegotiated or for the negotiation of new ones.   That was another question – should Heritage start implementing the new policy with new negotiations or by updating the existing treaties.

So when I heard that the new policy would now be implemented I went to look for the details of the implementation.  Perhaps there would be a report that said how the industry consultation had been considered, or not.   There is not.  Heritage staff advised me that details on the provisions of the proposed treaties (one of the more significant aspects of implementation) cannot be released as they could jeopardize or confuse negotiations.  Heritage did release today a document entitled:  “Selection Criteria for entering into negotiations or renegotiations for an audiovisual coproduction treaty with Canada” and it provides a little more insight.

A treaty agreement governs how the two countries which are party to the agreement will treat a co-production and what the minimum requirements are for a co-production to be eligible.  The primary benefit is that the co-production can be treated in each country as a domestic production, qualifying for support and meeting quotas.

The new treaty agreements will be more conceptual and less detailed than the existing agreements so that they can be more easily amended to adapt to changing production realities and to allow for more negotiation flexibility between co-production partners.  I honestly do not know what this means in reality.  In theory it makes sense because amending a treaty agreement between two governments is very time-consuming and complex but there is still a risk that too much has been left outside the agreement.  We just don’t know yet.

The new rules will not come into play until new treaty agreements are negotiated.  The Selection Criteria document says that the government will prioritize countries with a strong track record of co-production, with government support for co-productions, are good trading partners for Canada, are in a position to offer opportunities to Canadian productions and a variety of other factors.  In reality I think that means UK, France, Germany, Australia and Ireland to start but there are so many factors including ‘have a significant demographic presence in the Canadian population’ that they could throw India or China into the top list as well, even though there hasn’t been the same volume of co-production with those countries.

All we appear to be able do at this point is wait for new treaties and revised treaties to be announced and compare them to the old treaties.  Most (but not all) treaties follow the same format and terms and conditions.   If you are considering a co-production right now I would suggest checking in now and then with Telefilm (who administers the treaties on behalf of the government) to see if there is a new governing treaty that might change the rules that govern your project.   But it won’t happen any time soon – treaty agreements are notoriously slow to negotiate and ratify because they are agreements between two governments.

And for those of you who are wondering if this new policy or its implementation will have any impact on the number of minority co-productions on the CBC?  Wrong venue – that’s an issue for the CRTC which may end up being part of their upcoming licence renewal decision.

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OWN and its Fried Green Tomatoes

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There was a moment for me when Corus’ defence of its OWN programming made me wonder if I’d somehow slipped into an alternative universe where the laws of logic no longer applied.  Commissioner Peter Menzies asked Corus to defend the feature film “Fried Green Tomatoes” as educational and Corus Executive Vice-President Gary Maavara said that the film was part of a course that taught people how to fry green tomatoes.  Fry.  Green.  Tomatoes.

Well, it looks like the Commission thought that was as ludicrous as I did (and I know I wasn’t alone).  Not only did the Commission direct Corus to comply with OWN’s nature of service definition (formal and informal adult education programming) and comply with strict reporting and monitoring requirements to ensure that it is done, the Commission took the rare step of issuing a mandatory order:

In light of the licensee’s longstanding non-compliance and to ensure its future compliance with its nature of service definition, the Commission considers it appropriate to issue a mandatory order under section 12(2) of the Act requiring OWN Inc. to comply at all times with the nature of service definition for OWN.

The Commission was fed up.  You could hear it in the questions and the tone of the Commissioners and Chair.  If you read the decision you can read about the many times that Corus was told to comply but didn’t.  Keep in mind, OWN was originally licensed as the Canadian Learning Television service and in its most recent incarnation became the Oprah Winfrey Network Canada.  BIG difference in programming.  As many broadcasters have done over the past few years (see CBC and Bold), Corus ignored the rules and waited for the CRTC to come after them.  The CRTC does not have a lot of penalties available to them but the mandatory order is one of them.

What is a mandatory order?  Unlike a regular compliance order from the CRTC, this one is filed with the Federal Court.  The significance is that if the mandatory order is not complied with then the penalties of the Federal Court come into play rather than the CRTC and that includes options like seizing goods of the corporation or an officer or director of the corporation.  Much more serious.

If the broadcasters haven’t all woken up to this Commission being tougher about the rules and regulations of the system – they’re going to learn the hard way, like Corus just did.

Bell-Astral2 – Part 2

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Ah yes, my long-awaited post.  The clamouring can stop now.

I’m not going to go through the whole application (you know what you have to do if you want that service) but highlight some of the issues, with context.  I know that most of you won’t read the 63 pages of the Supplementary Brief or the appendices or the deficiency letters.   If you are only interested in English Television (as I tend to be), then the only Astral assets that Bell is acquiring are TMN and TMN Encore, 50.1% of Viewer’s Choice and local stations in Terrace and Dawson’s Creek, BC.

As you remember from Part 1, though the Competition Bureau has agreed that if Bell-Astral sells off certain television and radio services then it will not be overly competitive, the CRTC has its own review with its own issues.  They have been identified in the public notice as:

  • Concentration of Ownership and Vertical Integration (Television)
  • Common Ownership Policy (Radio)
  • Value of the transaction
  • Proposed Benefits Package
  • Other issues pertaining to radio

While a number of these issues were thoroughly discussed in Bell-Astral1 in September and Bell-Astral feels certain that this new structure addresses them, the issues will be discussed again in the Bell-Astral2 hearing.

Bell hopes that it has addressed concentration of ownership (or the “Diversity of Voices” policy) by agreeing to sell off those assets co-owned by Corus to Corus (Teletoon and more) and by selling the Family Channel services to unknown (at this time) bidders.  [Note that Bell expects to announce the new owners of Family Channel in April, after the submission deadline.  There will be other hearings for the Teletoon services and the Family Channel services]  The concentration is definitely much less than at the first hearing but the Commission will still want to review the facts and the thoughts of intervenors.

Vertical integration is the often messy question of whether Bell, as a vertically integrated company (BDU-broadcaster) can use its market power in an anti-competitive way to impose excessively high rates on smaller BDUs who want to carry Bell-owned services.  There may also be vertical integration issues with independent broadcasters who want to ensure that Bell is not favouring its services over the independent services.  At the last hearing there were many allegations of improper behaviour by Bell but at times it felt like a case of ‘he said – she said’ (though in this context ‘he said – he said’ is more accurate).   If there are real issues to be dealt with here, those intervenors are going to have to come to the table with specific evidence of anti-competitive behaviour that needs to be protected against.

As the big issues were so big last time, very little time was spent on valuation of the transaction.  Valuation has become increasingly complex and variable – and redacted due to claims of confidentiality – so intervenors have come to rely on Commission staff to ask the necessary questions during the deficiency process and at the hearing and adjust the valuation as necessary.  The impact of the valuation of the divested assets (ie those not yet purchased) will be dealt with by an adjustment so that if the buyer pays less than those assets were valued, Bell proposes that it will make up the difference in the calculation of benefits.

The independent television production community is most interested in benefits.  There are intangible benefits and tangible benefits.  Bell-Astral has spent a lot more time on describing the intangible benefits this time than last time as there really were no identifiable intangible benefit to the industry (i.e. other than to Bell and Astral’s shareholders).   While some of these intangible benefits will cost money, that cost will be outside the tangible benefits package.  They include:

  • Maintain Astral and Bell local stations open till the end of their licences in 2017 and 2016 respectively
  • Maintain French media headquarters in Montreal, English in Toronto and set up new regional development offices in Vancouver and Halifax
  • Two executives who will be “Canadian programming champions” in Montreal and Toronto (not clear where they sit in the org chart or if they are required to wear capes).
  • Adhering to CMPA and APFTQ terms of trade

The tangible television benefits are primarily French.  The English benefits (31% based on value of the assets) proposed are:

On Screen Benefits

  • $5 million to the Harold Greenberg Fund
  • $3.25 to Telefilm’s Private Donation Fund
  • $24.56 to ‘Other Programming of National Interest’

Social Benefits

  • $9.15 million to film festivals, a CAFDE Promotion Fund for distributors, Media training programs (Banff, NSI etc.), the Academy of Canadian Cinema & Television and Canadian Women in Communications
  • $5.23 to Consumer Education, the Canadian Broadcasting Participation Fund and the Canadian Broadcast Standards Council

Unlike the first hearing (and many other hearings recently), there was no attempt to increase the social benefits beyond the standard 15% or to direct the benefits to self-serving projects (such as the Northwestel project during Bell-Astral1).  A lot of the arguments made by the English independent production community have been addressed but that doesn’t mean there won’t be concerns.  One issue will be the timing of the on-screen benefits as Bell has proposed that they would be paid out over seven years but would not start till the existing pool of benefits (BCE-CTV and Shaw-Global) expire in 2017.  In the last hearing the independent production community generally opposed this schedule.

Finally, an editorial comment.  I like this Supplementary Brief much more than the first one.  It is easier to read, has much less hyperbole and sets out clearly the various aspects of the transaction.  Bell seems to have listened to the objections of the stakeholders and the CRTC and tried to address almost all of them in their application.  It remains to be seen whether it is enough and whether other issues get raised at the hearing.  My big hope is that we do not see another case of negotiation throughout the hearing, with stakeholders, Commission and applicant scrambling to deal with new, half-thought out, proposals in a comprehensive way.  That didn’t work for any of us.

Submission deadline is April 5 and the hearing will take place starting May 6 and probably last the week.

For some additional insight (including more on radio and French services) check out Fagstein and Carrt and coverage by the Globe and Mail‘s Steve Ladurantaye – these were my hearing buddies during Bell-Astral1 (and of course my wonks – not nerds – wonks).

Prime Time 2013

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I won’t go through the whole two days – that’s what the tweets are for (search #PTiO).  I just want to share some impressions of the CMPA Prime Time 2013 conference with you.

First, I think this was the most tweeted Prime Time.  Sure, I was tweeting up a storm and so were a number of the usual suspects but there were a lot more newbies including, I was pleased to see, a number of producers.  (Self-promotion aside – if you would like to become active in social media yourself, I have developed a Social Media for Media Executives workshop that I am currently making available to companies.  Contact me if you are interested.) So you may be thinking – is it possible to just stay home and read the tweets?  In my opinion, no.

Tweets are good if you can’t make it to Prime Time but you miss out on a lot if you’re not there.  Prime Time is half panel discussions and half networking.  There is no facilitation of the networking (see my earlier CrossmediaTO post) but it is a great place to build relationships with most of the top television producers, broadcast executives, funders, guilds and associations and a smattering of government people in attendance.  And of course a number of independent consultants such as myself.  There also seems to be a growing number of digital producers.  One year soon, there will be no such distinction and we’ll be talking only about screens.  (And on a personal note, if you’re going through another transition in a fairly long career, Prime Time is a great place to spread the word and feel the love.)

There were two big buzzwords from this year’s conference – disruption and destruction.  Disruption of business models (is international licensing dead?) and outright destruction of markets (video game rental certainly is).  Panelists sometimes disagreed (is it a disruption or just a challenge – does that distinction matter?) but the theme of the conference was that the world has changed and we all – from cable companies to broadcasters to producers to talent – better start thinking creatively if we hope to ride the wave.  Some in attendance already know this and are out in front but there were plenty in the room who need to hear this message oh, a few more times probably, before it sinks in.

Jean-Pierre Blais, Chair of the CRTC, continued the theme with his keynote speech.  It was quite a surprising speech.  Blais told producers that they need to be creative  in their business approach.  He told them to be discontented with the status quo in order to be truly entrepreneurial.  Find new partners and new markets.  He coined a new word when he told the room that under his watch the CRTC would not be ‘protectionist but promotionist’.

There were some key messages here that I think we all should keep in mind over the next little while.  The Canadian independent production industry is very well funded right now with the BDU contribution to the CMF,  the hard won CPE (Canadian Programming Expenditure) requirement and a rather large amount of benefits money.  Benefits will expire and the walled garden that is regulated broadcasting is being disrupted.  I think Blais is telling us here that we need to find new business models and new partners or five years from now we will wake up and find ourselves without CPE or CMF or benefits and there will be no way to finance Canadian television.

The other key message revolved around another buzzword of the conference – discoverability.  In a regulated world with scheduled programs and a TV guide, the audience can find our programs, if they aren’t moved around too much.  But when content is available on multiple platforms without regulation to protect and ensure access then ways to enable the audience to discover Canadian content becomes key.  I am not sure what tools are at the CRTC’s disposal to allow it to be ‘promotionist’ but the message is an important one, and one that carried through to several other panels that day.

‘So think big.  Give us WOW.  Help us discover what we want to watch.’ – Jean-Pierre Blais

P.S. I’ve been asked to finish my Bell-Astral2 post now that the PNI is out and I will get on that shortly.  There’s also a request for a post on the new co-pro policy framework and I’ll get on that one too soon.  But first – some work that pays the bills!!

Bell-Astral2 – Part 1

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I was going to wait until the CRTC Public Notice was released later this week before I posted, but thought some of you might be wondering about how the Competition Bureau decision fits into this transaction in the meantime.

Separate and apart from the CRTC review of the Bell acquisition of Astral’s assets, the Competition Bureau also had to review the transaction.  It is required to review all mergers or acquisitions when the value of the assets being acquired are more than $50 million.  As you will recall Astral is somewhat over that threshold at $3.38 billion.  The purpose of the review is to ensure that the transaction is not anti-competitive.  This is similar to the CRTC’s review but not as complex, as consolidation is only one of the issues that the CRTC looks at when reviewing an acquisition (e.g. valuation, ‘twin sticks’, benefits policy among others).  The Competition Bureau also looks at the transaction from a commercial perspective:  would the transaction provide Bell with enhanced market power in negotiating terms for its broadcast services with other distributors.  The CRTC reviews that issue but as well looks at the impact on the consumer should a broadcaster dominate viewing share.  The Competition Bureau review is also different from the CRTC’s in that it is a private investigation and not a public hearing.

We do not know anything about the discussions between the Competition Bureau and Bell but we know the end result so we can guess.  Bell had talked to the CRTC last fall to find out what it would take to get the transaction approved and it looks like the Competition Bureau had similar concerns.  An acquisition of all of Astral’s assets would put too many television and radio services in one company’s hands.  Bell would dominate the market.  Despite Bell’s very public disagreement with that assessment after the initial decision to reject Bell-Astral1, Bell management have agreed with the Competition Bureau to sell off certain Astral assets in order to maintain a reasonable and not dominating share of the viewing audience.

In the Consent Agreement Bell agreed to divest itself of 6 English specialty television services and 7 French.  On the English side Bell is getting rid of Astral’s kids services (I’m only going to say this here – called it!) and hanging on to TMN.   As you may recall from Bell-Astral1 the largest part of the transaction was for French television services and radio, so Bell will still be acquiring a substantial chunk of Astral.  We will not know the exact valuations of what is being kept and what is being sold until we see the detailed material that will be part of the CRTC Public Notice.

Corus has agreed to buy Astral’s share in Teletoon and Cartoon Network and become the sole shareholder in those services (along with French specialty services and two radio stations).  They would have had a fight at the CRTC if they had picked up Family/Disney XD/Disney Jr. because then they would have monopolized private broadcasting for children.  Those services are being put out for bids.  There has been much speculation as to who might be interested in those services as there is no natural home for them.  It will be very interesting to see who ends up buying them and moving into the kids space.

So when we see the CRTC Public Notice (please not when I’m on the train to Prime Time) we will get more information on the Bell-Astral2 transaction, might also see an application for approval of Corus-Astral and will see benefits package proposals for one or both.  I am assuming that we will have to wait to see the Public Notice on the acquisition of the Family Channel services but that could have been happening behind closed doors all along.

Stay tuned!

CRTC S.9(1)(h) etc. Hearing

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That’s what I’m calling this hearing for now. It’s a grab bag of renewals of mandatory carriage, applications for existing services to get mandatory carriage, new services to get mandatory carriage and a few independent specialty services to get renewal.  The full hearing notice is here.  All 13,018 interventions are here (though most have to do with wanting or not wanting Sun News Network).  Warning – this post is pretty wonky!

First – what exactly is mandatory carriage?  Under s. 9(1)(h) of the Broadcasting Act, the CRTC can require a satellite or cable company to carry a service, rather than leave it to the service to negotiate carriage.  If a service has mandatory carriage then its revenue stream and its audience is certain.  A service has to make an exceptional contribution to Canadian expression, contribute in an exception manner to the overall objectives of the Broadcasting Act and make exceptional commitments to original, first-run Canadian programming.  As mandatory carriage adds to the basic cable or satellite package and therefore increases the cost of those packages to consumers, there has traditionally been a very close review of that ‘exceptionality’ and few services have passed the test.  Examples of existing s.9(1)(h) services in English are CPAC, The Weather Network, APTN and CBC News Network.

The industry intervenors on this public hearing (submission deadline was February 27, 2013) are lining up on two sides of the mandatory carriage issue.  The cable and satellite companies do not want to add any new services to the basic package.  They are arguing against increased costs to consumers.  Generally cable and satellite companies argue from a place of great self-interest but in this I suspect that they are also reflecting the general mood of the marketplace.  Telus filed a public opinion study by Strategic Counsel that demonstrates a distinct lack of interest in increasing the basic package.  Our cable bills are high.  Consumers have a great reluctance to increase them at all for anything.

Generally, the English content creators (i.e. producers, talent unions) are only weighing in on the services which broadcast or might broadcast independently produced drama and documentaries:  Vision TV, APTN and the proposed new service Starlight.  There are a few concerns which some of the stakeholders would like to see addressed at the hearing but in general the content creators would like to see Vision TV given mandatory carriage, APTN get its increased rate and the new service Starlight launch with mandatory carriage.   All three services will support the independent production community in Canada and this is important.  Starlight is proposing a new solution to the problem of underfinanced and underbroadcast Canadian feature film.

The issue that the CRTC will have to grapple with is whether the support that each of these services provide to the independent production community, and the programming that they offer to Canadians, is exceptional enough to require Canadians to pay more to their cable company.  While the media is going to be most interested in the kerfuffle that is Sun News Media’s request for mandatory carriage, the Canadian independent production community will be more interested in the Starlight application.  As a new service aimed at solving a problem that the CRTC has itself identified – Canadians do not have enough access to Canadian feature films – has Starlight met the test necessary to require Canadians to pay for it?  I anticipate an interesting discussion.

But let’s not forget the independent specialty service renewals.  The CMPA has pointed out that a number of these services have asked for relief from their Canadian programming obligations (CPE) on the basis that the 2010 Group Licence Policy granted a reduction in CPE for the large corporate groups but contrary to that policy’s explicit statement that the policy would not apply to independent specialty services.   That policy balanced greater flexibility to broadcast group with specific obligations to Canadian programming and PNI.  It is very difficult to apply it to an individual service.

It also appears to be sliding under most people’s radar that Blue Ant (Travel + Escape, Bold, Bite, Aux and more) is asking to be treated as a group for the purposes of its CPE obligations and to be able to count in-house production for the purposes of calculating its obligations to independent production.  That last bit is pretty nervy and I’m confident that the CMPA is all over it.  So let’s go back to the concept of a ‘group’ under the 2010 Group Licence Policy.  The concept of Broadcast Groups was created to allow groups to air programs across their various services and count them towards a pooled obligation.  Bell could decide to air a program on CTV, CTV2 and/or Space in any order.  This regulatory framework was consistent with how the large corporate groups were licensing programming.  But does it make sense for a much smaller group of services, some of which are quite different from each other?   That will be the discussion.

The Public Hearing on these applications will start April 23, 2013. I’m experimenting with the hashtag #91hetc.  What do you think?