Thursday, April 24, 2008

FEE FOR CARRIAGE - CONSIDER THE POSSIBILITIES

I watched the Shaw Cable presentation to the CRTC Wednesday and have to confirm that I remain a fan of Jim Shaw and his company. Now, I admit my viewpoint is blinkered since I don't reside within the Shaw Cable semi-monopoly and don't have to deal with the boneheaded program packages I'm sure they offer, idiot billing minions who'd drive me nuts or greed-centric net throttling like I get from my own broadcast delivery unit.

No, I'm sure if I had to deal with Shaw on a daily basis, I'd detest them as much as all my friends and neighbors detest Rogers and Bell Expressvu.

And as I've said right from the start, Jim Shaw is just another puffed up and self-important "Al Swearengen" born on third base and figuring he got there on merit. And like his foul mouthed brothel owning and saloon keeper fictional twin, our pal Jim isn't above shooting off his mouth and then hiding behind some paid muscle (or a Prime Minister) who'll do his dirty work.


I also know we don't have similar programming tastes and that he's a little less than forthright about programming services either competitive to his own or that don't share his societal views.

But I admire Jim and his gang because they very clearly speak some important truths to power and seem far more wrapped in the mantle of what it means to be "Canadian" than any of the broadcasters, including our own Government mandated public one, who all preceded Shaw in speaking at this latest regulatory round.

Despite what the hearings are supposed to be about, we all know they're really about "fees for carriage", the desire of broadcasters to start charging cable and satellite companies for what have to date been "free to air" services.

Broadcasters have been very clear that they won't improve or enhance current programming, nor do they feel they should have to add more Canadian drama or comedy to get this perk.

Nope, they're in big financial trouble if this doesn't happen. Just like they're always in big financial trouble if the CRTC doesn't see things their way.

Mostly, they're in trouble because of their own inability to read the changing TV landscape which has left them non-existent libraries with which to access the new online revenue streams. In other words, they forgot that their core business was creating programming instead of re-broadcasting somebody else's stuff.

They've also fallen victim to the pro-sports malady of paying far too much for their franchise players (ie: American series) in order to make sure the competition doesn't get them. And of course, they needed to gobble up the competition, CTV with CHUM and CanWest with Alliance, (acquisitions and the inevitable downsizing that follows always hide poor profit numbers) discovering too late that the cost of becoming and remaining a bigger dog was more than the new assets can generate.

No matter how much the broadcasters claim the cable/satellite guys could cover the "fee for carriage" costs if they were good corporate citizens, we all know this is really just another opportunity to charge TV viewers an additional $5 or $6 a month to watch the exact same programming they're watching now.

Here's how Shaw phrased that in their presentation...

"The CBC already receives $1 billion from Canadians in annual Parliamentary appropriations. It also enjoys nearly another $100 million from Canadians every year from the CTF... The large private broadcasters have made it absolutely clear during this hearing that the demand for a fee is about only one thing: increasing their profitability. They have strongly resisted making any commitments to incremental spending on local programming or drama.

It is unacceptable for these large, well‑financed and profitable conglomerates to demand a fee from consumers that will subsidize their own costs of doing business, their increasing expenditures on U.S. programming and their recent multi billion dollar acquisitions."

It's amazing how similar that last bit is to what the creative guilds and unions argued before the commission last week. Like I've always said, Jim Shaw and us creative types are on the same side when it comes to forwarding the cause of Canadian drama.

As a result of past hearings, the CRTC has already granted our Broadcasters:

Free spectrum
Simultaneous substitution
Mandatory carriage
Additional commercials in prime time
License fee subsidies through the CTF
Tax credits that further support Canadian production
And freedom from drama expenditures granted in the 1999 Policy Review

Now they want to be paid simply for being on the air.

Okay -- so, imagine for a moment that you're Jeff Zucker at NBC. Easy for me, tough for those of you with a discernible waistline or a conscience.

Jeff's had a tough year. Profits are down. Audiences are disappearing. Those internet billions are still a couple of years distant. The Z-man's ass is in trouble! Surfing the net for ideas, he happens on CPAC and sees what Global and CTV are wringing from the same BDU's who carry two different time zones of NBC.

Well if they can get paid for rebroadcasting his shows -- how come Jeff can't ask for the same?

The identical local broadcast arguments the private broadcasters are using apply to NBC. So Jeff calls Jim Shaw and Ted Rogers because he also could use 50 cents per subscriber per local station to help his bottom line. That's a buck a subscriber in total and suddenly Shaw is sending $3.3 million per month to NBC and CBS and ABC and Fox, not to mention anybody else who might want in on the action.

Even if it's only the Big 4, that's another four or five bucks on your cable bill and $13.2 Million a month going South to assist the profitability of the competition for CTV, CBC and Global and also $13.2 Million a month that doesn't get "taxed" as a share of profit paying into the CTF, further reducing the funding for Canadian drama.

According to the numbers Shaw presented to the Commission, the final number paid to American broadcasters alone could be $570 Million a year.

Given the Canadian apetite for American Prime Time shows, this could mean subscribers would opt for the US services rather than paying twice for virtually the same program schedule. So there's a chance that winning "fee for carriage" could put CTV and Global out of business for good.

Now, go to the other end of the scale. You're a guy running the Rogers cable Community channel in Mississauga or the Shaw Cable Community channel in Red Deer. If the truth were told, you're delivering more "local programming" than CTV, CBC and Global combined.

I travel a lot and can honestly not see much difference (beyond weather and traffic) between the local broadcasts of any of our big guys. Test it out for yourself. Watch the six o'clock CBC news from Halifax, watch it again from Toronto and then catch the same supper hour broadcast from Calgary. Upwards of 60% of the stories will be identical right down to the wire service copy, the video and the graphics. Sometimes all that changes are the bad ties on the newscasters.

But those guys in Mississauga and Red Deer are broadcasting junior hockey the network affiliated locals won't touch even at the National championship level. They're talking to anti-gang crusaders about what parents need to do at specific local malls and schools or producing a gardening show about vegetables that'll actually grow in their part of the country.

How about we give all of them 50 cents a month for actually producing "local" programming? Seems fair. Unlike the network locals, they're not allowed into the ad market. And to be honest, they offer the only real alternative in the early prime hours when your network choices are Global's Cheryl Hickey shoe-horning one or two Canadian references into the American celebrity gossip that couldn't make it onto the A-team version of "ET" -- or Ben Mulroney doing the same damn thing on CTV.

Let's face it, this play by the broadcasters has nothing to do with local programming. This is a problem of mismanagement by companies who had it so good they never really had to figure out how to best run their operations. Now, like the guys who used to drive stagecoaches and sell DDT, their salad days are over. It's not up to us to keep their companies in profit.

And if they can't do the job they're licensed to do, there are plenty of people waiting in the wings who can.

4 comments:

Brandon Laraby said...

Like so many things in this country I just don't get how people can run multi b/million-dollar companies and not have a goddamn idea of how to do it right.

Even if you're the guy at the top, you've got a responsibility to hire people who know what they're doing. (The old adage that you just have to be smart enough to hire smart people...)

Like the Oil and Food markets that are currently going to shit the world over, this is another example of unmitigated greed run rampant. :S

Ken said...

Jim,
I get that with a nuanced view of the situation, as you seem have, one could see Jim Shaw as the class of the herd in this fight, but he's still a bull, and I think he's full of shit. Additionally I think Shaw's made an error in judgement. Konrad von Finckenstein is the perfect guy for his problem. Von Finckenstein has said out loud that he doesn't want to stand in the way of the market. So why doesn't the bull show up to his stud party? Who knows.

You are right though that the broadcasters have been existing in some oblivious twilight zone for the last twenty years while things like internet streaming, VOD, PVRs, and peer to peer sharing were being invented. Compared to them, Shaw's a genius...but he's a genius shouting from a bully pulpit, and that don't make him my friend. No siree.

Just because what he has to say for these five minutes somewhat aligns with what I'm thinking doesn't suddenly make him my champion. He just flexing because he's got control of the pie right now. It's like what Jack Valenti used to do until UNESCO went to bat against him at the WTO.

What I do know is that in spite of Shaw's playground behavior, with von Finckenstein at the helm he's is in the best position to win...and his argument makes the most sense from a corporate standpoint: 'if you don't know how to do business you have no business being in business.' That, essentially, is his beef with the broadcasters.

What scares me about him (and von Finckenstein) is that with control of the pie Shaw and his colleagues stand on the verge of controlling content too, or at least what content is available. Whether it be via bandwidth throttling of sites with streaming feeds, or basic cable, he can control with price and presumably with availability. I don't get to pick what's in my cable package; I only get to pick the package. And if the day ever came where I could choose each and every channel I wanted on an individual basis, Shaw stands to win again with higher fees.

So while his arguments may make sense, for the moment, the day will come when he'll once again become public enemy number one to people like us.

James Goneaux said...

Brandon: its because they either inherited the company (Graspers, Peladeaus) or got in on the ground when radio was the future (Rogers).

Ever see "Greatest American Hero"? Its the classic, "dog caught the car, now what" syndrome.

As for oil and food, they are mostly conglomerates now, and they know about as much about those industries as they do about the other 300 industries in the company: i.e., if the stock goes up, good. If not, bad, fire people, sell.

Jim: good points. As someone has said about how newspapers can actually survive: go local. I have 800 hits on Google News on "China Olympic torch" and none on why the building down the street from me on Danforth collapsed. Why not send even an intern out to find out?

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