If nothing else, there seems to be general agreement that the traditional revenue and regulatory model for conventional television is broken.
Now we’ll see how that translates into a solution for what troubles broadcasters like the local branch of A Channel (formerly CKVR and The New VR).
Comments earlier this year by CRTC chairperson Konrad von Finckenstein could be interpreted as a sign the federal regulator is in a mood to listen to the tales of woe now coming fast and furious from conventional broadcasters.
Addressing the Canadian Film and Television Production Association, he acknowledged the problems besetting the broadcasters, and hinted at solutions, including a rethink of the regulator’s refusal to approve the broadcasters’ love-to-have item: fee-for-carriage.
He seemed to, however, attach a condition, saying that conventional broadcasters had never explained how the fee would further the objectives of the Broadcasting Act.
That might be a bit of a chasm to bridge, as conventional broadcasters seem to be thinking more in terms of survival than ‘furthering regulatory objectives.’
Broadly speaking, the act is a big-picture set of principles and regulations governing broadcasting in Canada. It seeks to preserve and promote Canadian-owned and operated stations. It gives the CRTC authority to develop and enforce ownership regulations and content standards, such as the amount of Canadian and local content required to meet licensing criteria.
A loosening of requirements to carry Canadian and locally-produced content has been identified by conventional broadcasters as a means to the end of becoming financial stable, but it’s fee-for-carriage – receiving a fee from cable and satellite companies to carry the signal – that has been pegged as the cure to declining revenues.
“Fee-for-carriage is absolutely number one. We believe we can make it work if we have that extra revenue stream,” Peggy Hebden, station manager for Barrie’s ‘A,’ told me recently.
Push is turning to shove as far as the broadcasters are concerned, as insiders like Hebden worry about the ability of local television to survive. Earlier this month the station let go 24 of its 74 employees.
“In our heyday, we had 135 employees. We could make a profit at that time but now we can’t.”
The station has been a fixture in the community since 1955. It has undergone a number of name and ownership changes, including CKVR, The New VR and now ‘A’ channel. It has been independently owned, a CBC affiliate, and is now part of CTVglobemedia.
At the time of the Barrie layoffs, CTV also announced the closing of stations in Windsor and Wingham, and the cancellation of local content, including Barrie’s morning show. Instead of that show, early-morning viewers are watching a repeat of the suppertime news program; later-morning viewers see the 11 p.m. newscast. Across the ‘A’ network, 118 jobs were eliminated.
It’s an indication of how dire the situation is for conventional television in smallish markets like Barrie, said Hebden.
“If we sold every 30-second spot on our channel, we still couldn’t make money.” The station, and others like it, has not been profitable for years. “We can’t continue to do what we were doing. We were losing money anyway, we’re just losing it faster now.”
Unlike specialty channels, which receive fee-for-carriage payments, conventional television has one revenue stream: advertising.
“We need to come up with a new way. They (licensing regulations) need to be revised,” said Hebden, adding the regulations governing conventional broadcasting are 50 years old.
During his address to the film and television association, the CRTC boss pointed to four challenges facing conventional broadcasters.
1) The global economic crisis: “It accelerated much more quickly than expected and caught everybody by surprise, including us.”
2) Advertising: “One of the first casualties of such an economic crisis is – inevitably – advertising. The broadcasting industry as a whole depends heavily on a strong, steady flow of advertising dollars … advertising placement is down sharply. The conventional TV broadcasters, who must depend entirely on advertising for their revenue, are obviously the sector most heavily affected by this downturn.”
3) Audience fragmentation: “A shrinkage of viewership of conventional TV has already been in progress because of the fragmentation of the audience. Specialty and pay channels have siphoned off many viewers … a lot of eyeballs have migrated to the discretionary sector and they have taken profitability with them.”
4) Challenge of New Media: “ … especially its on-demand capability and its attraction to advertisers. Younger Canadians in particular are turning to Internet-based and mobile media that hardly existed as entertainment sources ten years ago.”
5) Diminished role of conventional television: “What is also clear is that a lot of people are watching less conventional television than before.”
The chairperson went on to identify four unresolved issues that need to be addressed in the drive to fix the ‘broken model.’
1) Digital transmission: Most Canadians get their broadcast signals from cable or satellite. About 10 per cent get their signals over the air (OTA) using old-style antennas. The CRTC has set a deadline of Aug. 31, 2011, for the switching of analog signals to digital, however the industry is balking, saying it would be too costly to invest in OTA digital transmitters, when only a small number of households would use this service.
The commission says it’s unacceptable that those households now relying on free OTA signals would lose them, or be forced to pay for them through broadcasting distribution undertakings (BTUs).
Discussions are underway to arrive at a solution, with some sort of hybrid system probable, he said.
2) Local programming improvement fund: “Stations in smaller markets have been having difficulty in maintaining adequate levels of local programming, especially news … the fund’s objective is to provide incremental funding for local programming,” said von Finckenstein, who added, “ … terms must be set for administration of the fund, including eligibility to access it.”
3) Distant signals: “For some time, broadcasters have been asking for compensation for the retransmission of their signals outside their priority carriage market … the commission recognized the legitimacy of their claim … we believe that market-based negotiations between the parties will arrive at a fair price.”
4) Terms of trade: “The industry needs to have a template for agreements on rights, just as there are standard forms for the sale of a house.”
OK, so there is general agreement the industry is in trouble. So what now? The CRTC boss outlined a three-phase approach.
The first phase is to hold the scheduled licensing hearings in April, but with a dramatically reduced focus with the objective being how to help conventional broadcasters weather the immediate storm. Instead of seven-year licenses, one-year licenses will be granted.
A review of the entire licensing system over the summer will constitute the second phase. The commission will look at “the reality of large ownership groups controlling both conventional and discretionary broadcasting services – with some of them also being major distribution undertakings.”
According to the CRTC chairman, “The intent is to design a framework for licensing broadcasters – both conventional and specialty – on the basis of these ownership groups, not on the basis of the types of service they deliver. Such a framework would reflect the industry reality.”
The third phase, in April 2010, involves “… a combined hearing for specialty and conventional television and assign privileges and obligations on that new ownership basis.”
Sounds like quite the plan. Broadcasters hope fee-for-carriage lies somewhere amid the details.
“This is not a selling problem or performing problem,” said Hebden. “We have great performance, but it doesn’t seem to matter.”
The loss to Barrie and region of its local television station would hit the community hard, she predicted.
“We’re very important and we need to have a local television station tell our stories. We don’t need our stories told from Toronto, and that’s what would happen.”
To tell those stories, ‘A’ is required to produce 14 hours of local content per week, said Hebden. “Barrie is exceeding it with 20.5, including our repeats.”
To a layman, it seems a balance needs to be struck between profit and local content. The station is, after all, a business. But without local content, there wouldn’t be any of “our stories” Hebden speaks of, and without those, little value to the community from a station merely based in Barrie, but carrying content readily available elsewhere.
Many in the community are rallying to the station’s side, including MP Patrick Brown. “The majority of residents … adore having the ability to learn about local news, cultural activities and charitable events through the ‘A’ station.”
“The CRTC must allow local television stations to add a second stream of revenue, a fee-for-carriage, which would be paid for by local cable providers.”
Ultimately though, it would be the consumer who paid, as cable and satellite providers can be expected to pass on the costs. The CRTC has already rejected the fee-for-carriage request twice, with cable and satellite providers among the most vocal opponents.
There’s no argument the industry is in trouble. The numbers speak for themselves. The CRTC recently reported that the profits of conventional broadcasters dropped by more than 90 per cent last year; the industry’s 2008 profits, before taxes, were a miniscule $8 million, compared with $112.9 million in 2007 and $233.4 million in 2004.
Debt load, particularly with Canwest ($3.7 billion), compounds the problems facing local television, as the media giants struggle to service debt amid declining revenues.
The industry is being assailed from a number of fronts, and, is “at a crossroads that people need to pay attention to. “It’s serious,” said Hebden, adding she doesn’t see how the CRTC could ignore the call for fee-for-carriage.
The alternative is a stark one, she said. “We are so important and vital to this community and we could very easily shut down if something doesn’t change.”