Source : Globe & Mail

CRTC sets bar higher for future media deals; TV audience share capped at 45%

New rules on media ownership in Canada have put a cap on how much of the national television audience one company can command, a move that could make future deals difficult for the country's biggest broadcasters.

Guidelines made public yesterday by the Canadian Radio-television and Telecommunications Commission call for mergers and acquisitions in the TV industry to be treated with a "green, amber and red" coloured approval system, the regulator said.

If a company's TV assets attract more than 45 per cent of viewing hours across the country, based on statistics from ratings service BBM Nielsen, it will be blocked from buying more channels. If that company has more than 35 per cent of the national TV audience, the deal will be flagged as a potential problem by the CRTC and may not proceed.

CRTC chairman Konrad von Finckenstein said he decided upon the 45-per-cent threshold as a suitable number for the TV industry, since that is the figure used by the federal Competition Bureau to determine market dominance in other industries.

"The rule is really borrowed from Competition ... we want to make sure there's not one single group which in effect dominates the Canadian broadcasting scene," said Mr. von Finckenstein, who headed up the Competition Bureau from 1997 to 2003.

The changes have implications for Canada's two biggest media companies, CTVglobemedia Inc. and CanWest Global Communications Corp. CTVglobemedia, which owns broadcasting assets ranging from the CTV network to specialty channels such as TSN, Bravo and MTV, holds a 37.4-per-cent share of the English-Canadian TV audience, based on the regulator's calculations.

CanWest, owner of Global Television and specialty channels such as Showcase, HGTV and the Food Network, has 26.3 per cent.

Should those companies decide to buy more cable channels in a major deal, they could find themselves raising alarms with the regulator. "We clearly say that after 35 per cent, the warning light goes on," Mr. von Finckenstein said.

The rule changes come after the CRTC called hearings on media consolidation in the fall, following a spate of takeovers that began with CTVglobemedia's $1.4-billion takeover of CHUM Ltd. in 2006.

That deal was followed by CanWest's $2.3-billion buyout of Alliance Atlantis Communications Inc. and Astral Media Inc.'s $1.08-billion purchase of Standard Broadcasting Corp. Ltd. last year.

The regulator also introduced two other new rules, including a prohibition against any one company owning all three of radio, TV and newspaper outlets in any local market. For the purpose of this rule, The Globe and Mail, owned by CTVglobemedia, and CanWest's National Post are considered national publications by the regulator and not subject to this rule.

That change was considered inconsequential by critics of media consolidation who said it will have little effect since CanWest doesn't own radio assets across Canada and CTVglobemedia isn't invested in local papers.

"There are no cases in Canada where somebody owns all three," said Lise Lareau, president of the Canadian Media Guild. "It doesn't change anything."

In another new rule, the CRTC won't allow any company to control all of the forms of TV delivery to homes in any market, such as cable and satellite TV. The regulator does not consider new TV services provided by phone companies in some markets to be a big enough competitor yet.

The decision to cap TV audience share at 45 per cent, not including any ratings gain a broadcaster can make on its own without buying assets, angered the Canadian Association of Broadcasters.

"We're going to encourage the commission to reconsider their approach and perhaps call for comments," said Glenn O'Farrell, president of the association. "What makes this a useful rule that is going to make the system better? If there's evidence of that, we didn't see it at the hearings."

Advertising agencies said the changes were necessary. Scott Stewart, director of Toronto-based Genesis Vizeum, said consolidation has made for an uncompetitive commercial buying market, particularly in Quebec.

The rules will not apply to completed deals. Mr. von Finckenstein said that had the new rules been in place two years ago, the recent spate of media deals would still have been approved by the CRTC.

MEDIA OWNERSHIP IN CANADA

THE NEW RULE: No company can control more than two of types of media in one market, including TV, radio and a local newspaper.

How it will play: This won't have much of an impact. Aside from national newspapers, which aren't counted as a local media outlet, Canada's big media companies don't dabble in all three media at the same time. CanWest isn't a player in radio, while CTVglobemedia is unlikely to get into local newspapers.

THE NEW RULE: No company can control more than 45 per cent of the total television audience.

How it will play: This one will have the bigger impact and may slow a trend of recent media consolidation driven by a rush to acquire specialty channels. CTVglobemedia (owner of CTV, TSN, MTV and others) already has 37.4 per cent of the English TV audience. CanWest (owner of Global, Showcase, HGTV and others) has 26.3 per cent.

THE NEW RULE: No company can own all delivery methods for TV in one market.

How it will play: This means Shaw Communications, owner of Shaw Cable in the West and the StarChoice satellite service, could not buy the Bell ExpressVu satellite service. The CRTC says TV delivered by phone companies is not yet a big enough competitor.

© Globe and Mail

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