V I D E O • A G E Se p t e m b e r/ Oc t o b e r 2 0 0 9 36 BY JAY SWITZER To understand Canadian media, you first have to understand a little bit about Canadians: Journalists, politicians and comedians have spent much of Canada’s brief history trying to answer one question: What does it mean to be Canadian? Who are we? We are a people unable to escape our identity crisis. We lack confidence in our own success stories. And we have a self-defeating lack of confidence in our culture and our arts. Canadians don’t agree on very much, but we care passionately about our hockey, our heroes, our beer, and our pride in not being American. We have been afraid as a nation to brag about our successes: Canadian hockey outscores NFL football. Degrassi Street is a ratings champ and actually comes from a Degrassi Street in Toronto. Rick Mercer’s weekly rants generate not only laughs but serious national debate on our public broadcaster CBC. Entertainment Tonight Canada is an access hit for Global Television. The same applies to So You Think You Can Dance Canada on CTV. Canadians enjoy Flashpointon CTV not only because it is exceptionally well made, but because it is visibly set in Canada. Same for Roger’s Citytv hit Murdoch Mysteries , set in Victorian era Toronto. And E1’s The Bridge , Copper and others are yet to premiere. But the last 18 months has seen a Canadian media industry meltdown. Billions of dollars written off. Thousands laid off. How did we get here? Canadian production companies and broadcasters are in trouble. Stations are going dark. Budgets are being cut. Viewership is down. Advertising revenue for many is down. Cable and satellite companies are challenged with new regulated fees directed at helping local production and small market stations. Canadians enjoy hundreds of innovative, original Canadian national, regional and local television choices. This explosion of Canadian choice comes in addition to every home receiving all American networks delivered as part of basic service in Canada. Our Canadian broadcast regulator (the CRTC) tries hard to interpret our Broadcasting Act by balancing cultural goals against business imperatives. There are checks and balances in place that until recently worked well. Canadian stations enjoy some privileges but not at the expense of choice in the market. The Canadian system has prospered even though it grew in the shadow of the most powerful broadcast system in the world. Canadian stations and networks compete every day against major American networks available in every living room and bedroom in Canada. Standard Radio (51 stations) sold to Astral for more than C$1 billion. CTV was forced by the CRTC to divest the Citytv station group, quickly purchased by Rogers in 2007 for C$375 million. This should have resulted in a smaller number of stronger players. But the echo of the writers’ strike in the U.S., the lack of a return to previous tuning levels, together with panicked advertisers resulted in some of these newly beefed up broadcasters facing significant earnings and debt challenges. In 2009 pay-TV operator Superchannel announced they had filed for creditor protection. CTV sold their specialty channels Canadian Learning Television, Drive-In Classics and Sextv. Canwest, as of this writing, “continues to pursue a reorganization of its capital structure.” CTV announced the closing of a small Ontario station and the likely closing of another. Canwest sold pieces of its once mighty CHCH station group, and the pending closing of their local Victoria, British Columbia television station. The Canadian Television Fund — a major source of funding in Canadian television — was relaunched as the Canadian Media Fund (more than C$250 million annually) with no further board representation from Canadian producers or broadcasters and with changed rules that allow Canadian broadcasters to apply directly for inhouse funding for Canadian series. A crisis snapshot: It is Fall 2009. Canadian advertisers remain locked in cutback mode and broadcasters’ earnings have fallen to record low levels. Latest available numbers are for the year ending August 31, 2008 and show profit levels for Canadian conventional TV at a 30 year low, less than one percent margin before interest and taxes. Canadian producers are scrambling to find clients, and cable and satellite operators are extremely frustrated at the apparent new direction by the CRTC requiring them to begin paying for local over-the-air signals for the first time. Reasons for optimism: Broadcasters are lean and will be stronger when the N o w & T h e n How The TV Business Has Changed In Canada A crisis snapshot and reasons for optimism by an industry veteran Jay Switzer is the former president, CEO and Board member of Canadian broadcaster CHUM Limited and a 25-year veteran of the Canadian arts & media business community. Switzer holds an MBA from Ivey School of Business (Univ. of Western Ontario). He worked as a media research analyst at The Financial Post in the early ‘80’s and, through high school and university, as a cable television installer for Maclean Hunter Cable TV. A champion of independent Canadian feature film and TV production, Jay supported over 200 Canadian feature films in his role at CHUM over the past decades. Jay is a former Vice Chair of the Canadian Association of Broadcasters, is a Governor of the Banff Television Foundation, and a two time former board member of NATPE. Currently, he’s a board member of Canadian media companies Comweb Group Inc., Glassbox Television Inc., OUTtv and the Canadian Centre for Diversity. Jay is married to actress Ellen Dubin. eventual economic turn comes. Assuming capital structure and debt issues can be resolved, there is great potential for reaching Canadians and building value. Cable is well positioned with a growing VOD/SVOD offering that should be able to be commercialized separately. The future of Google as aTV platform partner for Canadian broadcasters, as well as the much anticipated partnership structure of an eventual Hulu.com launch in Canada could be a catalyst for future tuning and revenue growth if broadcasters are smart. Cable’s anticipated Canadian web portal play could be another positive factor ahead. The CRTC has to do a better job at regulation to improve structurally challenged industries. A minor fix won’t work. A fresh firm start with all stakeholders is required. I see much better days ahead. The business will evolve in exciting new ways connecting audiences with stories. I remain very optimistic about the potential for conventional and specialty TV in Canada in the years ahead. But then, I’m optimistic by nature – I’ve been waiting since 1967 for my Toronto Maple Leafs to win another Stanley Cup. “ The Canadian system has prospered even though it grew in the shadow of the most powerful broadcast system in the world. How could the worldwide perfect storm of deep recession and simultaneous explosion of broadband leave the Canadian media space so deeply damaged? The year 2007 saw ownership transition for three large Canadian media companies: CTVglobemedia bought CHUM Ltd. (and its 30+ television networks and stations and 30+ radio stations including Citytv, MuchMusic, Bravo!, Space, CHUMFM, etc.) for C$1.7 billion including debt. That same year, CanWest, together with Goldman Sachs, bought Canadian specialty broadcaster Alliance Atlantis for more than C$2 billion. And Canada’s
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