Source : Globe & Mail
CHUM's purchase of Craig Media last month was supposed to trigger the industry's last great consolidation spasm. Astral, Alliance Atlantis, CanWest , Shaw, BCE and others would shuffle the few media remaining assets one more time to empower the big and obliterate the small. So far, nothing has happened. Blame it on Paul Martin.
It's not that the Prime Minister has killed the expected deal-making frenzy. On the contrary, he's expected to give the deal makers his blessing, but only after the election (assuming the Liberals win). So why make a takeover offer now when, in a few months, prospective buyers could have an entire catalogue of companies from which to choose?
By now, it's an open secret in Ottawa that the Liberals have bought into the idea that foreign ownership restrictions should be eased, or lifted entirely, for the phone and cable companies, even though there is little evidence Canadian status is hurting their business plans. The management and owners of these companies argue that ending the restrictions will give them access to cheaper capital so they can upgrade their networks to compete in the zillion-channel universe. Wires are wires, they say; it doesn't matter whether they are owned by Canadians, Americans or Albanians. To remove some political sensitivity from the argument, the companies, for the most part, are not lobbying to have ownership restrictions lifted on the content side of the equation -- their media divisions.
If the phone and cable companies have to cut loose their media investments before they are allowed to erect "For Sale" signs on their lawns, look what would happen. BCE would have to unload its majority stake in Bell Globemedia, owner of CTV and The Globe and Mail. Shaw would have to sell Corus, owner of Nelvana, YTV and Mojo Radio. Rogers would have to sell Rogers Media, home of Maclean's and Chatelaine. The tidal wave of deals could engulf Astral, Alliance Atlantis, and put content-hungry CanWest, owner of Global TV and the Canada's largest newspaper chain, back into the acquisition game.
This scenario is probably only a matter of time. Last year, a House of Commons industry committee recommended that Ottawa lift the effective 47-per-cent ownership ceiling on telecom companies. Competition Commissioner Sheridan Scott has said the same thing. Mr. Martin, meanwhile, has been removing obstacles to his bring-on-the-foreigners campaign. He ejected uber-nationalist Sheila Copps from his cabinet. Mr. Martin's principal secretary is Francis Fox, formerly the in-house lobbyist at Rogers Wireless.
The problem with giving in to the cable and phone bosses is that the issue won't stop with them. If Ted Rogers and JR Shaw can sell to the Yanks, won't the media bosses eventually demand equal treatment? Already, CanWest is crying foul. In a recent speech, CEO Lenny Asper said he was "bitterly opposed to opening it up for cable, satellite and telecom without opening it up for broadcasting."
The other media barons have not said the same thing, at least publicly. But they will. They will argue that content machines have to be North American in scale. They will argue that carrying TV channels over the Internet will eventually render the notion of Canadian broadcasting meaningless. And they will argue that selling to American buyers will create the most shareholder value.
Their arguments may be sound. They are also largely bogus. Canadian media companies seem to have little problem raising capital in Canada. Media properties seem to have no problem finding buyers or getting fat prices. Note that CHUM paid $265-million for Craig Media, even though CHUM itself described Craig's financial condition as "urgent." Some specialty channels go for outrageous prices.
Furthermore, Canadian investors don't seem to be begging for an end to foreign ownership restrictions. This might be because Canadian media companies no longer trade at substantial discounts to their U.S. counterparts. The level-playing-field argument also falls flat. American media companies cannot be foreign owned. The idea of CBS or NBC being controlled by the French or a Saudi billionaire is unimaginable. This is because ownership can determine political biases.
Nonetheless, the Liberals seem intent on tossing ownership restrictions out the door, first for the cable and phone companies, and then for the broadcasters (because they will demand equal treatment). If the Conservatives win the election, the outcome would probably be the same.
You have to wonder whether the Liberals are about to succumb to the big con game. Is lifting ownership restrictions about giving Canadian companies access to cheaper capital? Or is it really about estate planning for Mr. Rogers, Mr. Shaw and, down the road, the media families like the Aspers?
© Globe & Mail