Source : Globe & Mail

For now, firm will focus on radio stations

VANCOUVER -- Vancouver billionaire Jim Pattison's business empire is rumoured to be a potential buyer of several television stations being sold off in the takeover of CHUM Ltd., but the B.C. group says it has serious concerns about the future of Canada's conventional TV sector.

Although flush with cash -- Jim Pattison Group is Canada's third-largest private company with $6.1-billion in sales last year -- the advertising and automotive leasing giant is a reluctant investor in television.

Pattison has looked at the TV assets being sold by Bell Globemedia in its pending takeover of CHUM, but is instead focusing on expanding its radio operations, said Rick Arnish, president of Jim Pattison Broadcast Group.

"They're definitely [a consideration]," Mr. Arnish said of the TV stations Bell Globemedia is selling to address concerns about media consolidation as it seeks regulatory approval for the $1.4-billion CHUM deal.

"But what's the price at the end of the day . . . Jimmy wants his payback model. He's the investor."

Pattison owns 26 radio stations across Canada, and three small-market TV stations in B.C. and Alberta, and has been mentioned as a possible suitor for some of the CHUM assets being shed. Bell Globemedia is selling A Channel stations in B.C. and Ontario, including Victoria and Barrie, as well as an educational channel in Alberta.

While some of those assets would tie in with Pattison's three stations in Kamloops and Prince George, both in B.C., and Medicine Hat, Alta., Mr. Arnish said the group is concerned about the outlook for conventional TV, which is dominated by major players such as Bell Globemedia's CTV network and Global Television, owned by CanWest Global Communications Corp.

Those networks spend millions acquiring U.S. programs that drive ratings and advertising revenue back in Canada. That leaves little room for small, independent players that may want to get bigger, but don't want to pursue a major takeover that would reshape the industry.

"The question is where do you get your programming," Mr. Arnish said in an interview yesterday at the Canadian Association of Broadcasters conference in Vancouver.

"We're very concerned about where is the future of small market television in Canada. We want to get bigger, but we're getting bigger in radio."

The concerns come just weeks before the federal broadcast regulator is set to launch a sweeping review of the rules governing the television industry. Mr. Arnish said independent broadcasters have seen their advertising dollars flow to specialty cable channels in recent years, which is crippling the local outlets.

CHUM chief executive officer Jay Switzer raised similar concerns this summer prior to the Bell Globemedia takeover, when he said the profit picture for local television in Canada is particularly bleak.

Analysts and industry executives say the television industry is becoming dominated by bigger players that can amass enough of a national network to spend on programming, while drawing more lucrative national advertisers.

"I think you're going to see fewer, larger companies with tougher business models and generally lower margins," analyst Scott Cuthbertson of TD Newcrest told the conference.

Among the biggest concerns for Pattison's broadcasting group heading into the regulatory review is whether conventional broadcasters -- those lower on the dial -- can charge fees to cable companies for carrying their feeds, as the specialty networks such as TSN and MuchMusic can. Pattison's stations already tap into similar payments from satellite carriers, which it wants to see continue.

Worries about those issues could keep Pattison from becoming a significant acquirer of conventional television assets.

"If the right opportunity came along in television, we would certainly look at it but that's really not our focus at this point in time," Mr. Arnish said.

"We're just trying to keep our head above water in the markets that we're in."

© Globe and Mail