Source : Hollywood Reporter

OTTAWA - The recent launch by Craig Media Inc. of a new free, over-the-air station in Toronto has set the stage for Canada's broadcast sector to grow from two private national TV networks to four next year - if the country's broadcast regulator greenlights the move.

Craig Media, long based in western Canada, and Toronto-based Chum Ltd., a veteran player in the southern Ontario TV market, for years sublicensed U.S. network programming to each other as both competed against private national TV networks CTV Inc. and CanWest Global Communications Corp.

But recent industry expansion has Craig and Chum locked in a fierce battle for market share in their respective markets. And both are embracing ambitious expansion plans aimed at giving them a national reach.

In September, Craig Media expanded its reach from 18% of English-speaking Canadians to 41% by launching Toronto One, a free, over-the-air TV station that competes with Chum's flagship Toronto TV station, Citytv.

Chum unsuccessfully opposed Craig's bid to launch a TV station in Toronto on grounds that one more bidder would drive up the cost of acquiring U.S. network shows, which dominate the primetime schedules of private broadcasters here.

Craig Media president and CEO Drew Craig is eager to capture still more national market share and contends Canada can sustain two more national broadcasters.

"Absolutely, there is room in the market," he says. "When you look at the American example, they have five or six networks. Even though Canada has a smaller population base, on a relative basis, the size of the country is irrelevant because you're still serving large, robust markets, and there is definitely room within the Canadian system for that number of players."

For its part, Chum has expanded in western Canada, buying Global Television Network's second over-the-air station in Vancouver for CAN$125 million in 2001 and also snagging a new license for a TV station in nearby Victoria, British Columbia.

Looking to cut operating costs, Chum in November scaled down its west coast operations, cutting 34 positions at the two British Columbia-based stations for annual savings of CAN$2 million ($1.5 million).

And Canada's broadcast regulator will shortly rule on applications by Chum for licenses to operate new free, over-the-air stations in Edmonton and Calgary, Alberta - Craig Media's backyard.

Chum vp planning and regulatory affairs Peter Miller has no predictions on whether the Canadian Radio-television and Telecommunications Commission will agree that the Canadian market can support two more national broadcasters.

"First of all, these processes are market-by-market, and the commission makes its decision based on each market with some consideration to the national market system consequences," Miller says. "But at the end of the day, they are market-by-market questions. Until and unless we find out what the commission's decision is in Alberta, unlike Craig, we are not interested in speculating on either our next move or the commission's next move."

Craig Media is also eyeing further expansion into the Vancouver market, possibly Montreal and even smaller regional markets, perhaps through acquisitions.

"When you look at our grid (compared with Chum's), our hole is Vancouver," Craig says. "In the event that they do get licensed (in Alberta), we are going to need to be competitive. We're going to need to be on a level playing field."

Craig is not deterred from entering the British Columbia market, even though tough conditions there have forced Chum to restructure its operations.

Craig hopes to introduce local advertising buys into the Vancouver market, something that isn't possible now as the three other stations in the British Columbia market - Global Television, CTV Inc. and Chum - have other stations there and sell commercial spots for a wider market.

Craig says his privately run company has the capital to expand and believes additional national reach would help its ability to serve smaller markets.

Glenn O'Farrell, president and CEO of the Canadian Association of Broadcasters, which represents private Canadian broadcasters including Chum and Craig Media, argues that his organization will not urge restrictions on the number of stations licensed in major Canadian markets as a solution to market fragmentation.

But he stops short of voicing an opinion on whether Canada is large enough to support four national networks.

"I don't have those numbers," O'Farrell says. "You'd have to ask the CRTC. They have those numbers."

Ultimately, it will be the CRTC that decides if Craig and Chum will go national, as it will need to approve any new licenses that are applied for and greenlight any acquisitions that Chum or Craig plan in their bids to continue their respective expansions.

© Hollywood Reporter