DHX Approved for Family Channel Purchase

This one is no surprise.  The kids industry was very positive about DHX buying the Family Channel services and becoming an independent (i.e. non-vertically integrated) broadcaster.  DHX clearly knows the kids market.  So this is just a quick blog post about the highlights of the decision.

As usual, there was a slight increase in the purchase price from $170 million to $173.1 million to cover the value of assumed leases.  That will increase the benefits package from $17 million to $17.3 million.  The package was allocated 85% on screen and 15% social benefits as is now expected.  Specifically it goes to:

$8 million for drama and comedy production

up to $5 million for partnerships with public broadcasters and APTN for co-licensing

$1 million for associated digital media

$1.5 million for a Children’s and Family Development Fund for new entrants to the kids sector, regional producers, OLMC’s and French language producers.

$1.6 million to regional opportunities and training in children’s script writing (social benefits)

The package hit all the right notes and was approved.

There were a couple of other issues in the decision that are relevant.  By pulling the Family Channel services out of the Astral group, the group CPE had to be recalculated.  DHX proposed 21% based on the average spend in 2010, 2011 and 2012.  This was not consistent with the formula used for all of the other groups and the CRTC adjusted it to 22% based on 2009, 2010 and 2011.  DHX’s proposal also included 2012, the year that Astral stopped spending money because they were in the process of being bought, which is why the CRTC’s CPE went up even though it includes the 2009 recession.

DHX asked that the requirement to spend 75% of PNI CPE on independent production be reduced to 60% with the ability to fill up to 40% of the program schedule on their own production.  DHX has a substantial catalogue of Canadian children’s programming and that side of the business will continue.  The CMPA was ok with the proposal as long as CPE spent on independent production is to be spent on original independent production and not repeats.  The CRTC agreed.  This is interesting because it is the first time that the CRTC has specified that CPE needs to be spent on original programming.  The Group Licence Policy was supposed to prevent a reliance on repeats because of the sheer volume of spending required.  The independent production community all along thought that the levels for PNI were set too low and now reporting, to the extent that it is usable, suggests that broadcasters are in fact relying on repeats for their PNI CPE and spending their original dollars on incremental benefits spending.  As a result, CMPA is proposing in their Talk TV submission that PNI CPE should be spent on original programming.   The CRTC may be open to this.

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