IN-DEPTH: Blue Ant's Michael MacMillan says original content will lead ambitious plans by by Greg O’Brien

Feb 6, 2012


MICHAEL MACMILLAN HAS timed things pretty well in his career.

A film and TV producer whose former company has an Academy Award to its credit (short film Boys and Girls, in 1984), MacMillan saw a law change Stateside that he knew would hurt Atlantis Films, so he got into broadcasting (with Life Network) as specialty channels were growing in number and popularity. Later, knowing that bigger would be better thanks to cross-promotional and content sharing possibilities, among other things, his Atlantis Broadcasting took over Alliance Communications in the 1990s to become a Canadian powerhouse in Alliance Atlantis.

Not long after that, however, MacMillan says he turned bearish on the TV business. Technology was changing things in ways executives couldn’t understand then and still can’t be sure of now – and making content for others became more difficult and less profitable. Alliance Atlantis stopped making shows for other people, except for one title, that is – and it was a blockbuster – CBS crime drama CSI. While the company did cease producing for others, it began to make more and more of its own shows for its own channels as the company transformed itself into an almost pure-play broadcaster with numerous strong brands, finally selling to Canwest Global at the absolute peak of the market in 2007, just before the financial meltdown of 2008.

Selling the stable of popular specialty channels (History, HGTV, Food, Showcase, etc.) and the rights to ratings leader CSI at that peak brought a sale price of $2.3 billion and left company founders Michael MacMillan and Seaton McLean with the means to do whatever they liked. MacMillan thought he was walking away from the business for good.

Turns out that after doing all sorts of other things [like establishing a vineyard and winery (Closson Chase), working on various community projects (such as with The Stop Community Food Centre) and launching a clever charity (Samara) that studies engagement Canadians have with democracy] MacMillan got the itch for media again, launching Blue Ant Media with McLean in 2011, investing, and then buying control of, Glassbox Television during the year– then agreeing to buy High Fidelity HDTV just before Christmas (bringing Providence Equity Partners and Torstar in as investors, too).

And Blue Ant isn’t done yet. It has also invested in Quarto Communications, the company which owns Cottage Life Magazine and which also holds a license for digital channel Cottage Life TV (rumoured to be coming in 2012) and is interested in more acquisitions, says MacMillan.

MacMillan (right) recently sat down with editor and publisher Greg O’Brien to chat about Alliance Atlantis, what he’s learned and what he hopes for Blue Ant. What follows is an edited transcript.

Greg O’Brien: Let’s start with the easy stuff. Perhaps a recount of what you’ve been up to since the Alliance Atlantis sale in 2007?

Michael MacMillan: I left the business at the moment we sold Alliance Atlantis in ’07 and thought I would not go back into the business world or the media world. So I spent the past four, almost five, years co-developing and co-founding a Canadian charity called Samara, which is really a think-tank that tries to encourage greater citizen engagement in our politics, in our democracy. So we’ve been doing things like the first-ever exit interviews with former MPs to get their collective narrative and their collective advice of what ails the country and what might be done – and other research projects into public affairs journalism and citizen engagement… all to the purpose of trying to create better and more engaged politics.

GOB: Good buy-in from the exiting MPs to do the interviews?

MM: Yeah.

What sort of things are you finding out?

Well, the obvious stuff that you’d imagine, but the most curious thing is that as well as answering the questions, almost all of them had another topic they wanted to talk about that wasn’t on the list – and it was their topic over and over again, not ours. They wanted to tell us that they never intended to be an MP. They never planned to run for office, but they were dragooned into it and that they considered themselves outsiders and anti-politicians. And it turns out that they’re not stupid people. They know in what bad odour parliamentarians are held by the general public, so they find themselves being MPs and at the same time trying to distance themselves from it. The metaphor that I often use is it’s kind of Maple Leaf fans who go to the games with paper bags over their heads. They can’t help themselves but they don’t want anyone to know. It’s the same thing.

So, I spent a lot of my time on that, some time with our vineyard and winery that we have in Price Edward County called Closson Chase where we make pinot noir and chardonnay, and in a variety of other community not-for-profit projects in the food area and other areas.

But, by 2011, four, almost five years had gone by and a couple of things occurred to me. One was that technology was continuing its ever-sure advance and with the new technological changes that have happened in the past handful of years, I noticed the obvious – which everybody else already knows – that through greater interconnectivity, through the creation of the tablet, through the continued enhancement of the internet, through a variety of things, it’s gotten easier and easier for you and I and everybody to listen to what we want, read what we want and watch what we want, how, and when…

GOB: Or where.

MM: Or where – and also to relate to it in a variety of different ways than before. So as a result of this, listenership, viewership and readership is going up. Overall consumption is increasing. To use a much-overused metaphor, the pie is expanding. And if you’re a citizen or a consumer, it’s a pretty good time. If you’re a content creator, it’s a pretty good time. If you’re in between, it’s a nerve-wracking time. And those people who have historically been in the business of creating, delivering, marketing, being intermediaries… some of those will have a tough time in the future, but others will have a glorious future.

GOB: Which people, which companies, do you see caught in the middle?

Anybody with a massive vested commitment to the status quo. Almost anybody who has a lot invested and for whom it might be financially risky because there’s a lot at stake. Or who might be disintermediated, or who might – because they’re larger – find it difficult to move quick to make the changes. I’m not saying all the big players will find that. They can adapt, but… the pie is growing and for consumers and creators, the next 15 years or 20 years should be very exciting.

The second thing which, again, is patently obvious in Canada and elsewhere too, the horizontal consolidation and vertical integration which we were part of by selling Alliance Atlantis, has continued apace. Certainly in the English language market in Canada… there are three very large players and they dominate. So there’s an opportunity, I think, a bit of a gap, between the great large, integrated players and the smaller ones.

The third thing was it turns out that old dogs like to learn new tricks, but also go back to old things. I did miss the adrenaline of business and the camaraderie of the media world. So those three factors combined made it sensible to me to see about getting back and jumping into this opportunity. So my long-term business partner, Seaton McLean – I started Atlantis with Seaton in 1978, and we’re partners in this building – thought it’s a good time to see what could be done. As you know, the first step was to acquire an initial stake in Glassbox and then all of Glassbox.

GOB: Why did you pick them first? Did they approach you? Did you approach them?

MM: They approached us, so that was the unscientific reason. But what was interesting about Glassbox was that they started, as you know, on the digital side and not as a traditional broadcaster. They moved backwards into that.

At the start it was just this weird Bite TV channel that was on the dial that people would look at and ask “what is this?” And you’d go online to sort of explain it and that was really where it worked better.

MM: But they gained expertise and experience in that area. They moved back into the linear, structured TV area with Bite and Aux as channels and then buying Travel & Escape. When they bought Travel & Escape that really had caught my eye and then they were looking for finance. Travel & Escape for me was very interesting because I could see it living effectively in the digital world, but I could also see it as a traditional linear channel in the lifestyle category. It reminded me a lot of some of the appeal that we found at Home & Garden and Food had, two lifestyle categories that we were acquainted with. So those were the key things that drew us to Glassbox.

What made you want to add High Fidelity HDTV to your portfolio?

MM: Couple things. One is that HiFi is a well-run, effective company so it gives Blue Ant a greater platform. So now with seven small channels, it’s a bigger platform to build on. It’s a bigger platform to recruit people to and capital to and it’s a different business model. Theirs is subscription-based and by comparison… take Travel & Escape because that’s the most fertile of the Glassbox channels, is subscriber fee paid for, but the real growth and appeal in Travel & Escape is not in the subscriber fees per se, but it’s in the possible advertising dollars.

Inherently, it is a category of content that will appeal to advertisers across a wide range of categories for all the obvious reasons that I don’t need to tell you about. So the nice thing about the HiFi channels is that they’re a different model. It’s subscriber fees, maybe some sponsorships, but not regular ads, whereas Travel & Escape, our goal is broad delivery, appealing to advertisers.

We’ve got some expansion ideas which I’m not going to tell you about for the HiFi channels and the Glassbox channels, and they’re different tactics. I like that because of the old adage “don’t put all your eggs in one basket.”… Even with these seven little channels, plus our stake in Cottage Life and the other magazines, we’re still small. We’re just a little outfit trying to get along in the world, so having different success factors for each of the products, if you will, I think is a strategically a helpful thing.

GOB: There could be some programming synergies there as well, given what you see on Oasis and EQ HD and Travel & Escape.

You’re right. They’re distinct channels, but all are in about the same quadrant, if you will, of channels. They’re not drama. They’re not major sports. They’re not news, current affairs… There is some alignment of content.

Given what we talked about with the ongoing growth of technology and digital and mobile and the rest of it, do you regret selling Alliance Atlantis and instead maybe have taken that company to where the technology has gone?

MM: Nope, not at all. I was a bear from the late 90s, maybe 2000 on. I felt very negative about the economy, about the stock market, about geopolitics, about the competitive threat of technology which was clearly changing, but we didn’t know how or what it meant. And from about 2000 onwards, I was worried about what that was going to mean. And so we went about our business of simplifying our company, of strengthening our balance sheet, of paying down debt, selling off certain parts of the business, and eventually selling the whole company. But we had taken the right steps to strengthen it, so we sold it at a good price at the top of the market. So that, for the employees, for the shareholders, for me, and for the business itself, I think it was the right thing. I don’t regret it at all.

It let me, to speak very personally, be away from the business world for the past four-and-a-half years. There hasn’t been a better time in probably 50 years to be sitting on the sidelines. I was very negative from 2000 onwards, but I didn’t specifically imagine that the market was going to crater as it did in ’07-’08. I expected bad things, but not quite that bad.

I think it was a happy choice and now we get to start again. The disadvantage of being small is you don’t have the resources of a big company like Alliance Atlantis, but the benefit of being small is you can make quick moves, you can adapt more quickly, you have less to lose… A small, nimble little engine has its advantages, especially in an environment that clearly is changing.

Just because I could claim that I have a point of view 10 minutes ago about evolving technology and growing viewership, readership, we don’t know where all this is going to go. We know it’s changing, we know it’s exciting. Do we know exactly what it means? No. So this is a good time to be nimble.

GOB: I’m often frustrated when I talk with some people who are so certain where the future’s going to be and –

God bless ‘em, that’s great, because I’m not, let me tell you. We don’t know. So we want to keep our options open, keep ourselves nimble, and at the same time, build a big enough platform that we have the resources and the people to get it done. We have another theory, which is we should be in content categories that we can be excellent at, that we can be the best at or among the very best at; categories of content that we can own and not just be the temporary renters of in a fixed geography for a fixed time period. We want to be in the content business, to get to use that content in whatever ways you can imagine, so that takes you back to what categories you want to be in. From our point of view, categories that we can afford, that we credibly believe we can be very good at, categories where we can attract the appropriate terrific people to lead and make decisions. And that’s where things like the cottage category or the travel category are ones that we’re pushing, because we can be the leaders in that.

GOB: One of the times I wrote about you returning, I think I said something along the lines of “rebuilding an empire” or something like that. Is that a mistake to say? Is that really what you’re doing?

MM: I don’t know if we did that in the first place. It did grow big, but I learned a long time ago never to presume what will happen next… It’s fair to say that we have ambitions to grow Blue Ant. As you might imagine, we probably wouldn’t have bought seven small TV channels and invested in a magazine and brought in Torstar as a 25% shareholder and brought in Providence as a capital supplier also if we didn’t have ambitions to build up beyond what it is now.

GOB: I know you don’t want to give away all of your thoughts, but what are your more immediate plans? When will Cottage Life TV come to market? How will the mobile, digital aspect of it all work?

I don’t know and I don’t know. We’re working on it.

GOB: I found it interesting when I was going through my notes prior to this. I’ve been covering this industry since 1997, so I wrote a lot about Alliance Atlantis, how it grew, how it sold. One of my first interviews when I came to industry was with Juras Silkans (Life Network’s first president). You grew as a production and broadcasting house over the years and then later, cut the production arm loose, except for CSI, which you sold in the end. You say now though that this is a great time to be a producer, so can you articulate the differences then and now and why it’s a good time to be a content producer and why it wasn’t then? And, why is it a good time to be a Canadian content producer?

MM: In 2003, we got out of producing drama programming for other people. We didn’t get out of the production business, we got out of producing drama for third-party customers, except CSI. But we stepped up our production of content for our own channels and most of that was not drama. Most of that was programming for Life, (now Slice) or History or Home & Garden or Food or the other channels.

Therefore going ahead now as a content company, we want to be the creator, the producer, the curator, whatever noun you want to put on it – the organizer and the marketer, the founder, the nurturer, all those things, of terrific content. And we want to be able to own it or co-own it, or control it in a long-term way in Canada and outside of Canada. We want to be able to use it, deliver it around our brands, not just on linear channels, but other ways, too.

In 1971, the U.S. passed a law, the Financial Interest and Syndication Rules, a law that forbade the U.S. networks from having any economic interests in a program that telecasts in prime time. In the grand old American tradition of trust busting, they split apart producing and broadcasting. So CBS, that afternoon, sold off its internal little production department called Viacom and ABC did the same thing with Worldvision and so on.

In 1992 approximately, the FCC rescinded that law and I remember thinking at the time when I read that “uh oh.” They rescinded it because you got a proliferation of broadcast outlets in America and around the world in the intervening 20 years.

GOB: It wasn’t just three companies anymore.

MM: So they logically thought they could get rid of that forced separation. I recall reading that thinking, “hmm, so the producing business, the content owning business and the telecasting, the broadcasting business in America are going to come back together into the same corporate containers. And if it happens in America, it’ll happen in Canada and the U.K. and in Germany. And we, a tiny little producer, are going to be road kill.” It did happen. ABC and Disney came together, and NBC and Universal… CBS and Viacom.

It happened in Canada, too. So we decided to become a broadcaster, applied for Life Network and we got into that business realizing that – as a producer – we had to link our production business and our broadcasting business together. That’s how the world was going to move. Just about that time though, we didn’t have that exact ban like the U.S. had, but a system of carrots and sticks as organized by Telefilm and the CRTC and others that forced independent production, which is a good thing if you’re an independent producer. So, we couldn’t immediately bring together our content and our broadcast business. For Life Network we said we won’t produce anything of our own for that channel, it’ll all be independent.

So we had a production drama business producing for other outlets and when we built a broadcasting business – originally Life and then Home & Garden and Food and then History and Showcase and so on – it was mostly acquiring other producers’ content. But as those channels changed, we got the right to increasingly add some of our own content in there. Rules changed and newer channels came along.

So what was happening in ’03, in getting out of the drama business, was partly a reflection of the economics of that industry, but also a reflection of a more fundamental desire to be a content creator where we also could be the broadcaster.

In 2003, I didn’t give that long of a speech but the punch line was, “we’re getting out of the drama business,” apart from a few exceptions, but the belief never faltered that we were a content company, because by that point our broadcast business actually was a content business.

GOB: That really is the way you still need to be now. It used to be enough to rent the content. Now, if you want people to visit your channel, visit your brand, you have to provide them with content that is unavailable elsewhere, or that you have the best place to get travel content or the best place to get comedy content.

If you want to have the best content, ideally, you’d populate your organization with people who know about that, who can nurture talent, who can respect talent. Who can understand the inherent uncertainty of the creative process. But through that, come up with great content on a regular basis. That’s what the editors at Cottage Life do, online and in print form, and that’s what we want our commissioning editors to do also in our linear channels and in all of our output, as opposed to simply having the biggest wallet and outspending everybody else and spending more this month than you spent last month, than you spent last year. Just having the biggest wallet isn’t the recipe for success in the long run. It might be temporarily.

Well, when you’re a large public company and the market only lets you look three months out at a time, having the biggest wallet is a good way to keep it happy in three-month increments.

MM: It has its positive sides, but we don’t want to base our success on thinking “gee, we’ll get a bigger wallet and outbid everybody else for the simulcast Hollywood hits.” That’s a very expensive way to run, and ultimately doesn’t create a content company that can thrive as borders become blurrier and as technologies proliferate.

GOB: Really, once you’re producing your own content and nurturing your own people and focusing on as much online as you do on air – you can take that internationally. You can go global and then you can think about even increased opportunity, especially for something like a travel brand.

Now, getting carriage from the big, vertically integrated –

MM: It’s a lot of fun.

GOB: Is it really? How do you approach that as a smaller, independent broadcaster?

MM: Our position has a couple of aspects to it. One is we know that we’ll get the best or better carriage and marketing from those integrated carriers as we invest more heavily and effectively in content and marketing for ourselves. Ultimately, great content, well marketed and supported, will attract the attention of viewers, and that’s our first job in dealing with our cable, satellite and phone carriers.

Secondly, we’re not their competitor. We’re not trying to sell wireless subscriptions or home phone subscriptions or whatever. Our only interest in dealing with them is to deliver a product that’s interesting, that’s good for their customers and therefore good for them. We’re a non-competitive Switzerland and our first priority is commercially appealing programming.

GOB: You’ve been in this business for a long time, originally a filmmaker. What do you make of our Canadian content, regulations, rules, laws as the media world changes around us?

MM: Overall the Canadian content system, writ large, has worked relatively well. We have a broadcasting system that has brought more choice for viewers than anywhere else in the world. Lots of Canadian options, lots of American, international options, whether it’s individual programs on different channels or other channels imported in whole. But there is a great choice for viewers and happily included in that choice are a lot of Canadian options. So it’s working fairly well.

I remember being at an industry meeting in, I want to say ’82 or ’84. when Francis Fox was the Minister of Communications. He was laying out the long-term view of what interventions, what carrots and sticks would be available to Canada as it sought to continue to support this industry and encourage this industry. Very interestingly, he said that in the future the only effective interventions were going to be supply-side support. In other words, subsidies. He said it’s going to become harder and harder and less and less appropriate to enforce Canadian content quotas as technology changed.

We were thinking back in those days of satellites and not the internet, but that has been the main intervention over the past 30 years – the creation of Telefilm Canada in ’84, the creation of tax credits, the Canadian Media Fund, the tax contributions from the cable companies… All those things have been on that side. I was reading an interview with Konrad von Finckenstein…

We had ours as did a couple of other media outlets, too.

MM: I think the one that you did with him, he pointed out the main intervention possible is going to be the supply side support. He’s right and Francis Fox was right those years ago. And luckily that’s been the main tool over the years. There are other tools including ownership, including content quotas and rules of behavior amongst different players – a panoply of things. But… we know that supply side support is probably the most effective way to continue and luckily that’s the main lure.

GOB: But how do you, or can you, encourage or force outside factors like Netflix, like Google, to contribute to the same supply side help, the same subsidies?

MM: It’s easier than putting some kind of content quota on them, which I can’t see happening. There’s a variety of ways of doing that through the Broadcasting Act, through the Income Tax Act, lots of ways. And the good news is that those don’t restrict choice, those don’t force change of behavior, those create opportunities, we would argue. I’m not advocating a specific thing here, I’m just saying that there are a lot of things you can do there. On the other side of putting content quotas on the internet, how ya' doing that? I just don’t see it.

GOB: There is just so much Canadian content available on the Internet, whether it’s professional or not. There’s tons of stuff you can find made in, made by, made for Canadians all over the place. One of YouTube’s featured channels is Corey Vidal’s who is in Burlington. He just started by himself with no help from anybody, except his own creativity. So there are opportunities there. There’s lots of Canadian content available online but to try and apply quotas or Canadian content quotas to whoever’s coming in or bringing video entertainment from elsewhere to Canada would be utterly impossible.

I’ve run through all the questions I had.. What I really want to know is your strategy and what you’re going to be doing soon and all about potential mergers and what’s coming up next, but…

MM: We have ambitions, but I already made the point that we think it’s an exciting time. We don’t claim to know exactly what’s going to happen next. We have theories about what general part of the playing field we should be on and what kind of categories we can be effective in. Just because we think we can be effective in these categories doesn’t mean that there’s other categories of content that others are better at doing too. It’s not that everyone should be doing what we’re doing. It’s probably the opposite. This is our specific strategy just for us, a little player.

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