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CRTC subscription radio hearing fractures the industry
11/16/2004
Laurel Hyatt

 
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CRTC - Radio
GATINEAU, Quebec - No one ever wants to second-guess how the CRTC will rule on an issue, but if there were ever a time to own a crystal ball, radio broadcasters wish it were now.

Rarely has the industry waited with such anticipation over how commissioners will make a decision; in this case, how to handle the three applications for subscription radio services in Canada. The new services could be moneymakers or money pits, and could reinvigorate the medium or harm traditional radio.

In short, this is a big one.

Heated scenario

Befitting its stature, the issue has reputedly caused unprecedented backroom deals, arm-twisting, and verbal jousting.

"More is at stake in these hearings than probably has ever been at stake before," says radio analyst David Bray, Senior Vice-President of Hennessy & Bray Communications in Toronto. "Radio is searching to find its next incarnation. And we don't know what that is."

That uncertainty is causing tempers to flare, where once there was a healthy rivalry among comrades-in-arms. "Behind the scenes this is just such a heated scenario right now, it's bringing out degrees of hatred that have never been seen before in Canadian radio," Bray contends.

Before the four-day hearing into the subscription radio applications, held earlier this month in Gatineau, the applicants were "jockeying for position" to bring influential intervenors on board, such as the record companies and musicians, through letters of support or attending the hearing, says Bray, who himself appeared as an intervenor in favour of all three applications. Country artist Bruce Good of The Good Brothers even admitted to the commissioners that he was asked by SIRIUS to appear before them in favour of both satellite proposals.

Now the applicants (bids to bring in XM and SIRIUS from the U.S. via satellite with Canadian partners, and the all-Canadian terrestrial service proposed by CHUM) may have to wait up to six months -- or more, though that seems unlikely -- to see if they get the green light. "Do I think that all three are extremely eager to succeed and extremely nervous about the possibility of failure? Without question," Bray says.

Yes to all three?

All bets seem to be on the commission approving all three applications, but with some conditions.

The two satellite services clearly don't meet the existing Canadian content rules requiring at least 35% homegrown music. (XM, under the name Canadian Satellite Radio or CSR, is promising to make 5 of its 101 channels Canadian-produced; SIRIUS vows to have 5 Canadian channels out of 75 in total. Neither satellite service would have more than about 10% Cancon on any channel. CHUM would produce all of its 50 channels in Canada and play 35% Cancon.)

Precedent suggests the commission will require the satellite services to boost the number of channels emanating from this side of the border, which could cause an interesting crack in the cross-border relationships: the Canadian partners say they've already negotiated as many Canadian channels as they can from the U.S. services, which had to cut out some of their own American channels to make room on their satellite bands.

From a cultural perspective, CHUM's application is much more solid. But commissioners may not like the business plan to only have the service available in large centres. Serving smaller communities is an apple pie radio policy in Gatineau.

But if the commission does impose any conditions on the CHUM service, it may be a moot point. The company has already said it won't launch if one or both of the satellite services does. It says it can't compete with a U.S.-based service.

More problems

Subscription radio is also causing rifts between applicants and traditional broadcasters, and even in one bizarre case, within a prominent company. John Cassaday, president and CEO of Corus Entertainment, appeared on the first day of the hearing at the table with key players in the CSR bid. He explained how Corus would provide CSR with news, talk, or music programming from its Quebec stations. On day three, the head of Corus's radio division, John Hayes, appeared as one of three Corus intervenors who expressed several concerns about subscription radio, including the possibility of "siphoning" listeners from conventional stations. "In some ways, commercial radio may be open to experiencing death by 100 channel cuts," Hayes said.

This head-scratcher didn't get by the CRTC. Commissioner Stuart Langford asked the Corus intervenors repeatedly why their boss appeared in favour of the CSR application. The answers were rather vague. It could be that Corus is hedging its bets, hoping that being on both sides of the coin will soften the blow no matter which side it lands on.

Even more problematic is how subscription radio will affect the faltering digital audio broadcasting initiative. If CHUM launches, using its DAB technology and transmitters, it would "kickstart" DAB as consumers would have a better reason to buy the receivers, Bray says. Instead of merely getting higher-quality terrestrial signals, listeners would get DAB-exclusive programming in the form of CHUM's subscription service.

But if CHUM doesn't launch subscription radio, "DAB in Canada will die, almost certainly," Bray says, as the company is a leader in the DAB initiative, which requires industry consensus and big bucks. Another problem: if the SIRIUS application is approved and launches, there would be little incentive for co-owner Standard Radio to invest in DAB on the ground when its money is in the sky.

Future of radio

Still, the industry must do something, Bray says. "For the medium to stand still as an analog force and not consider digital options would be suicide. It would be the end of radio."

The fears of Hayes and some other conventional radio people that subscription radio will draw away listeners "is very premature," Bray contends. He predicts that no more than 10% of Canadians will shell out from $10 to $13 a month for the services, and from $100 to $300 or more for the required receivers. In fact, he thinks subscription radio will reduce listening to MP3s and CDs, but not necessarily to conventional radio.

The commission may very well agree. Few questions were posed by the panel on the effects the services might have on the traditional medium. The CRTC may be guided by two main factors: the desire not to allow the grey satellite radio market (which is already three years old) to grow in Canada and thus not repeat the fiasco of its inability to curb illegal television satellites, and its precedent decision to license dozens of digital TV channels and let the market decide which ones succeed.

No matter what the commission decides on subscription radio, it will have to keep an eye on next fall, when it holds its review into radio policy. "This decision is absolutely going to dictate what that review of radio is going to say," Bray says. "Once you see the decision for this set of hearings, you will know what the future of radio is going to be."


 
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Broadcaster Poll
When it comes to the three subscription radio applications to be heard by the CRTC November (see this site for stories explaining it), should the Commission:
Approve all three?  
Approve the CHUM "Canadian" option?  
Approve one or both of the satellite options?  
Approve none?