Is There a Future for Canadian TV?

Is There a Future for Canadian TV?

In late August, employees at CHEK-TV in Victoria gathered in the parking lot for one last goodbye. After 53 years on the air, CANWEST GLOBAL COMMUNICATIONS was about to pull the plug on the money-losing television station in a desperate and ultimately futile attempt to stave off collapse. Then, with just hours to go before the final fade to black, general manager John Pollard announced a last-minute reprieve. He'd reached an agreement with Canwest CEO Leonard Asper that would see the station's 40 employees, along with a handful of Vancouver Island residents, buy CHEK and run it themselves. But if Pollard, now a media proprietor in his own right, is at all nervous about betting his life savings on an industry that just saw one of corporate Canada's most spectacular flame-outs, he's not showing it. "We get to call the shots now," he says. "We're going to make this work."

The daring experiment at CHEK is just one example of the way the media landscape is being forever altered. A perfect storm of the recession, new technologies and shifting tastes has threatened the way conventional broadcasters like Canwest, CTV and the CBC have operated for decades. Now, with Canwest's move to put itself into bankruptcy protection, a wave of speculation has been unleashed about who will buy the Global Television network. More importantly, questions are being asked about how those stations can once again be made viable.

For some, the answer lies in a return to local programming, like that pursued by the employees-cum-owners at CHEK. For others, it's still a guessing game. "We're in the middle of such a fundamental sea change, you'd need a crystal ball to know what will and won't work," says Alan Sawyer, with media consultancy Two Solitudes in Toronto. "It's incredibly easy to see things are broken, but the fix is much less obvious." Even so, there are small local groups trying desperately to salvage their stations, while a host of deep pockets are waiting in the wings for the chance to perhaps snap up what are still potentially valuable assets. This isn't the death of Canadian TV, as some have suggested, but it is the death of TV as we've known it and the future will be scarcely recognizable.

Given Canwest's desperate situation, analysts say the company will have little choice but to separately sell its chain of newspapers and conventional TV stations to raise funds. Canwest has been labouring under $4 billion in debt, which led it to place assets including Global's network in creditor protection. (Canwest's remaining 15 specialty channels, owned jointly with Wall Street investment bank Goldman Sachs, and the newspaper division Canwest LP, weren't included.) But if some recent deals are any indication, the value of the Global TV network will be just a shadow of its former self. When Canwest sold CHCH in Hamilton and CJNT in Montreal to a small specialty TV operator called Channel Zero in July, the company pocketed just $24. In Victoria, the sale price for CHEK was $2. And when CTV tried to sell off three small-market stations this summer, Shaw Communications, the potential bidder, ultimately balked at the deal. The asking price: a buck each.

The price tags don't tell the full story, of course. "The reality is you can buy a station for a dollar, but immediately you'll start incurring heavy costs," says Sawyer. For instance, in the case of CHEK, employees have commited $500,000 to keep the station on air, with another estimated $2 million coming from outside investors. But broadcasters have already admitted the value of their conventional stations is plunging. Last year CTV and Canwest took a combined writedown of $2.7 billion on their conventional TV stations.

For one thing, growing numbers of people are opting to download TV programs over the Web, either illegally through file sharing sites, or directly from a broadcaster's website. Thanks to personal video recorders, those who do tune in can skip commercials with the push of a button. And with the explosion in specialty channels, which are only carried over cable and satellite and earn revenue through subscriber fees, the traditional audience that might have tuned in en masse to a program 15 years ago is now scattered all over the dial. As such, audiences are tuning out and advertisers have slashed spending.

But what's also clear is that the decline in audiences hasn't been the sheer cliff-drop it's sometimes made out to be. According to a CRTC report prepared by the Nordicity Group, a communications research firm, the number of people in the all-important 18-to-34 age group who tune in to conventional television fell just 2.4 per cent between 1998 and 2007. "It's remarkable how stable TV audiences have been," says Peter Lyman at Nordicity. For all their problems, conventional stations still have a lot going for them. The CRTC forces cable and satellite providers to carry their signals and give them preferential treatment on the dial. The agency has also increased its funding for small, local TV stations to more than $100 million this year. Those realizations are part of what's driving some to take a fresh look at making conventional TV work. At CHEK that's meant returning to its roots as a community station.

Not that the new CHEK looks anything like the flashy broadcasters of the past. After months of on-again, off-again talks between Canwest and station employees, the last-minute agreement at the end of August touched off what must surely be one of the zaniest weeks in Canadian TV history. In the span of just four days, the two sides scrambled to hammer out a mammoth licence-transfer agreement, numbering in the hundreds of pages and covering every transmitter, camera and chair in the place. And the day the station opened under new ownership, it didn't even have a bank account.

Things have stabilized since then and the new broadcast model is taking shape. For starters, CHEK won't enter bidding wars for high-priced American TV shows. Under the old regime, the cost for a season of programing had spiked from $10 million to $25 million over the last five years, making it unprofitable. Instead, CHEK is banking that it can return to profitability with a mix of less expensive, locally produced news programs during the day, and movies at night. "We're not a charity, but we don't have corporate shareholders demanding huge returns," he says. Pollard estimates CHEK's revenues will be just 25 to 35 per cent of what they used to be. The flip side is that the station's programming costs will also be just 20 per cent of what they were under Canwest.

A similar approach is under way in Hamilton, where Channel Zero has overhauled CHCH, formerly part of Canwest's failed E! network. Cal Millar, Channel Zero's president, says the highest ratings at the station have always come from news, so the station has added 15 new jobs and broadcasts live from 5:30 a.m. to 7 p.m. Then, during the evenings, CHCH becomes a movie channel featuring what Millar calls "comfortable favourites" - popular movies from the last five to 20 years. In short, both CHCH and CHEK believe there's a large enough number of viewers willing to re-watch movies they may already have seen and enjoyed to make a business out of it.

This isn't to say the two stations have stumbled upon a magical fix for the industry. It will take time before either can show clear results. Nor will a hyper-local model necessarily be the right fit for those considering a run at Canwest's remaining conventional stations. A lot will depend on who does the buying. For one thing, there's a chance the company's creditors will decide to hold on to the stations themselves, at least until the economy improves, says Christopher Waddell, director of the School of Journalism at Carleton University. And if a single buyer can't be found for the whole lot, creditors might decide to sell them one at a time to avoid flooding the market.

Canwest's lenders might also wait to see how the CRTC rules on a highly public dispute between broadcasters and TV service providers. CanWest, CTV and Global want cable and satellite providers to pay to carry their network signals, which are now picked up for free, while the cable companies have fought back, saying any fees would amount to a bailout on the backs of TV viewers.

Amid all that, several names are floating around as potential buyers. Specialty TV providers like Corus Entertainment or Astral Media, both of which would be eager bidders if Canwest sells its own basket of specialty channels, might jump in if they could get the conventional stations at "fire sale prices," says Sawyer. "It wouldn't be part of their 10-year corporate success strategy, but they could run them for a few years and make some profit."

Meanwhile, Onex Corp., whose CEO Gerry Schwartz was an early partner to Izzy Asper, has been suggested. So too have other wealthy individuals in cities across the country, such as Jimmy Pattison in Vancouver, who already owns three small-market stations in B.C. and Alberta. Other private investment funds have also poked around in the industry. Bluepoint Investments considered buying a CTV station in Brandon, Man., last month, but backed out at the last minute.

Waddell says the current economic and media climate offers huge risks, as well as potential returns for anyone bold enough to step up. "This isn't really the time for people who don't know anything about the media to suddenly decide they want to become media moguls," he says. Still, he adds, investment funds could team up with smart media executives to explore new broadcast models. "There is a great opportunity for anyone with a sense of innovation who's willing to take some risks to experiment."

One thing is certain: almost any combination of deals will be certain to brush up against the CRTC's Byzantine media ownership rules, not to mention the sensibilities of nationalists. The regulator's foreign ownership restrictions all but guarantee the same old names will likely be at the table, while its policies aimed at curbing media concentration will mean other potential bidders such as Rogers, which owns CityTV stations in some major markets, might be shut out.

But as CanWest struggles through its restructuring, and the TV industry battles to remain relevant, perhaps it's worth taking a page from history, say media watchers like David Tucker, at Ryerson University's School of Radio and Television. When many of these very stations were launched, they were said to be the death of movie theatres. And in the same way TV and the movies instead came to exist lucratively side by side, media watchers say it's too soon to write off conventional TV. "There's a lot of hand-wringing out there, and it will take time to settle out," Tucker says. "But a new era is going to arise." It's just that, for now, the picture is too fuzzy to make out.

See also BROADCASTING, RADIO AND TELEVISION.

Maclean's October 26, 2009