OTTAWA - In an application made last fall, the Canadian Cable Television Association asked the CRTC to allow its members to sell ad time on American specialty channels' so-called local avails.
Last week, the CCTA added an amendment to its application (originally reported by www.cablecastermagazine.com "Canadian cablecos want to sell U.S. local avails," 11/19/2002), saying that if the Commission allowed cable companies to sell ads on the U.S. cable channels, it would give 25% of that revenue to the Canadian Television Fund.
U.S. analog cable channels (A&E;, BET, CNBC, CNN, Golf Channel, Headline News, Speed Channel, TLC, TNN and TBS) provide two minutes per hour of "local availability" ad time. In the U.S., cable operators sell that time to advertisers - it's a lucrative business, generating millions for MSOs there. In Canada, the time is mostly devoted to promoting existing Canadian specialty services since CRTC rules prohibit cable companies from selling the ad space - and tell them what can actually be shown during those 120 seconds.
Saying it's "a significant source of economic value for distributors and for the Canadian broadcasting system, which is not fully realized under the current rules," the CCTA's October 2002 submission cited competitive pressures from both legal and illegal satellites, the rising costs of wholesale fees from the U.S. services themselves, the fact that specialty services already benefit from being on the same tier as the U.S. channels, and "costs associated with expanding regulatory obligations," as reasons to provoke the rule change.
The CCTA estimated that the full economic value of the ad time if sold by its members would be in the $20 million to $25 million range annually, which is a rather low estimate, a fact addressed by the amended application. "Using the more recent advertising revenue figures and taking into consideration the gains in average minute audience of certain U.S. services, CCTA has revised its estimate of the potential economic value of the local avails to be in the range of $35 to $40 million," says yesterday's application.
Broadcasters have always fought this idea, which has risen from time to time (the last time it was addressed was in 1997 - CRTC Public Notice 1997-25, where the Commission decided to ignore a similar cable request). "We strenuously support the policy as it now stands," a Canadian Association of Broadcasters spokesperson told www.cablecastermagazine.com in November 2002.
Since the CCTA's application, however, former broadcaster Kevin Shea, who has held senior executive positions with CanWest Global and CTV, has applied to the Commission to start his own company which would sell ad time on the U.S. local avails. The key to his application, which wasn't a part of the original CCTA application (which only called for a 5% contribution), was that he would give up 25% of the revenue to the Television Fund.
The CCTA's now amended application addresses that shortcoming.
As well, notes the association's amendment, "broadcasters now have multiple windows to promote their services and, in terms of penetration and financial performance, awareness is high. The overall strength of programming services stands in stark contrast to the challenge of producing high quality distinctive Canadian television programming. CCTA submits that its modified proposal addresses this challenge without materially impacting programming services."
"They're kidding themselves if they think this will grow the ad pie," a broadcaster who spoke on condition of anonymity told www.cablecastermagazine.com last fall. Such a move would just "give everyone else a smaller slice."
However, said the CCTA amendment, "the impact of the proposed change would be minimal. Even at $40 million, the value represents less than 2 percent of the total revenues earned in 2002 by private television stations and specialty services."
Plus, the extra $10 million is needed rather badly, given the government's cuts to production funding and the ongoing over-subscription of the Television Fund by producers. For more on that issue, click here.
In its original submission to the Commission, the CCTA called the requested change in policy "a matter of considerable urgency." It pointed to the fact that BCE can use seemingly limitless cross-promotional ad time on affiliated channels such as Bell Globemedia's CTV, TSN or Comedy Network to promote Bell ExpressVu and Sympatico DSL, for example.
The Commission has yet to utter a peep on what it might do with either the CCTA application or Mr. Shea's.
In its original application, the CCTA said it at least wants the Commission to change the policy enough to allow cable companies to promote non-programming products and services such as high speed Internet, wireless or value-added bundles. "Irrespective of arguments on the economic impact of using avails for commercial advertising, there are no compelling broadcast policy arguments to support restrictions on distributors using the avails they have acquired to promote affiliated non-core products, such as Internet, telephony or wireless services," says the submission.
Looking out east, BCE and its subsidiary Aliant, can use all the ad time it wants on Bell Globemedia channels to push its high speed Internet, telephony and ExpressVu options while Halifax-based MSO EastLink. "is restricted from promoting telephony on the avails it paid for as part of its compensation to U.S. services. Any potential advantage associated with the avails pales by comparison to the advantages a competitor like Aliant has from the synergies of BCE's integrated organization - many of which derive from the Commission's determinations," says the submission.
"It is unfair for the Commission to permit joint-marketing and bundling of telephone, broadcast and Internet services, particularly when it includes access to leading television and print media entities and ubiquitous local telephone services and billing, yet prohibit the use of a much smaller advantage of integration by distributors."
Right now, 75% of the local avail time must be made available for promotion of Canadian specialty services or unpaid public service announcements. The other 25% of the time can promote cable services, but only if they are related to programming.
Cable companies are allowed to recoup their costs from the programmers for running the promos which, sources told www.cablecastermagazine.com, are in the $225 per 30-second spot range. Those same sources say an "average" priced spot bought on popular Canadian analog specialty channels would cost around $1,000 per 30-second ad.
"Given the current market conditions, it is no longer necessary or appropriate to require distributors to extend to broadcasters such significant discounts on the cost of using these availabilities. Many broadcasters have access to availabilities on their own properties," says the CCTA's October submission.
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