Local TV Matters? WTF is this Save Local TV Campaign in Canada All About?

If you’re Canadian, and you watch TV, you’ve likely noticed the advertising war going on between the signal carriers (Cable, Satellite, and some Phone Companies now offering Video on Demand) and the broadcasters (Individual tv channels like CTV, CBC, CityTV, etc.). How can you miss them. And as we get closer to the Novemeber 2nd deadline for the CRTC review, that battle is heating up with both sides spinning their own vague propaganda. It has for months left me confused as nobody is really saying anything other than the other guy is a big evil corporation and blah, blah, blah. At least that’s all it boils down too from what I see and hear.

Where are the objective news reports about the issues? I’ve not seen a one, just those highly spun attack ads. Maybe I missed it but as a voracious consumer of media it strikes me as odd I’ve not seen it.

Could it be the obvious conflict of interest and inherent bias of one party trying to report it via their network that’s keeping their mouths shut? Or both parties fear that spilling the beans on the truth of the real details may sway public opinion in the opposite direction, so instead they hide behind the knee jerk fear tactics? I don’t know.

Well, I decided I would try to investigate by Googling around to see if I could find some real info. Being directly tied to the internet marketing industry, and following it closely I do have some initial thoughts as to what it might be about. And being that my specialty is local search marketing the local aspect of all this intrigues me.

This all sounds like some of the same issues that are plaguing other forms of traditional media (newspapers, radio, print magazines, even yellow pages, etc..). The internet has created a marked shift in consumer media consumption and, with that, changes in allocations of advertising dollars. It’s been going on for years now but it’s now reaching a level significant enough to force real change in the market place. This has also been quickly exasperated by last years global economic collapse (internet advertising see’s this too, though at a lower rate of decline).

But there’s more.

The Canadian Television Business Model

First some background on how things have been working up till now and what appears to be at the heart of the issue, “Who pays who?”. Or as it’s officially called, the “fee-for-carriage”.

As average TV consumers we subscribe to access to distribution networks via our Cable companies, Satellite TV companies, etc… Through this we have access to a wide range of individual TV networks and we can choose to watch whichever ones we want. We pay the signal carriers, the cable and satellite TV companies, and that’s where they make their revenues. The TV channels broadcast various shows and receive revenues from the advertising displayed.

Some of the specialty TV networks like the Discovery Channel, Food TV, History Television, etc… do get paid by the signal carriers, the cable/satellite companies, for the privilege of having that network within their monthly subscription packages. From the cable companies perspective it makes their monthly service more attractive. “Look, you can watch these too”. They also have up-sell packages where you get access to even more networks for a higher monthly fee. Those specialty networks are also pulling in their own advertising dollars.

Not so for the normal, local, Canadian TV networks. They provide their signal to the cable companies for free and have done so for years. Why? On the surface it’s a good business model for the Canadian networks as it allows them to have their signal carried across the nation, unencumbered, thus allows them to ensure they have eyeballs to feed advertising too. But now that advertising revenues alone are not producing profits, as they once were, they feel they should get paid a fee like the other networks do to be part of the cable companies package.

Maybe it’s fair for the Canadian TV networks to be getting a small piece of the cable companies revenues like the other networks do. But wait there’s an inherent problem with that, government mandated Canadian content rules.

Canadian Protectionism - This Market is not a Free for All

In Canada we have this government body known as the CRTC, Canadian Radio-television and Telecommunications Commission, who’s mandate is “to ensure that both the broadcasting and telecommunications systems serve the Canadian public”. What it boils down to is that we are a small market and we have to the south of us a capitalistic behemoth. We love American culture, from music to movies, as well as television. However, if that market were left to it’s own devices the fact of the matter is that our Canadian networks, production facilities, talent, etc… would be swallowed whole and some essentially Canadian aspects of our culture, as well as raw dollars, would leave the confines of our own borders. The purest of capitalists hate these rules, but the majority of us wee citizens appreciate it. So there are some rules in place to help ensure a piece of us remains intact.

Here lies part of the current dilemma. If the CRTC demands that cable networks carry a certain percentage of Canadian content, including local TV networks and programing, which on it’s own most of us deem fair enough, it becomes something else if the mandated portion of the market must also get paid by the carrier forced to include them. So perhaps that inherent conflict was why, up till now, the Canadian TV networks, who were running profitable anyways, up till now, saw fit to forgo that potential revenue. But now sitting deeply in the red they are trying to claw at it.

Why Local TV is the Fall Guy in the Fee for Carriage Debate

The major Canadian TV networks are both a national and local television station at the same time. Certain time slots are for the big entertainment programs we all want to watch and those get broadcast across Canada at the same time, with some shifting here and there to account for time zone differences. Other portions of the day are sectioned off for local programming. That’s the local news, often just before or after the national news, as well as some locally produced shows in some markets. Portions of the advertising space are also allocated for national and local advertisers.

With the decline in television advertising, due to shifts in the market place such as the flow of advertising dollars to the internet, dilution due to more choices for obtaining TV signals (Satellite, Video on Demand, Direct to TV, etc…), and the current economic environment making many advertisers spend less, the local portion of Television feels that impact the most. The local portion of Canadian television networks has long been the smallest contributor to their revenues. If accounted for separately their profit margins have probably been smaller locally. So when times get tough this portion of the market goes into the red first, and deepest. When it comes time to cut costs, as with any organization in need of cost cutting, you cut the least profitable parts first. So local TV is finding it’s head under the guillotine.

But local TV matters to many of us. Sure it does. Hence the name of the co-operative campaign conjured up by the major networks, localtvmatters.ca. They even have their own twitter account. They argue, and rightly so, that local stations in small and medium markets will need to be closed if revenues do not pick back up.

The Broadcasters (Cable Companies) Role in This

The major broadcasting networks, formally know as Broadcasting Distributing Undertakings (BDU), that’s the cable satellite and phone companies, are required to commit 5% of revenues to the Canada Media Fund, which is to be a combination of the Canadian television Fund and the Canada New Media Fund. As well they must contribute 1% to the Local Programming Improvement Fund.

The Local Programming Improvement Fund in particular is relatively recent, created in 2008, and against the direction set by the CRTC the cable companies have decided to pass that extra cost on to the consumers.

In light of the performance levels of the BDU sector and the benefits accruing to BDUs as a result of other changes being made to the regulatory framework, the Commission is of the view that there is no justification for BDUs to pass along any increased costs relating to the LPIF - estimated to be on average approximately $0.50 per month - to their subscribers.

See, the broadcasters are not feeling the economic pinch that the networks are. Ad revenues are way down, but most of us continue to spend $50-$60 per month for our cable TV. Many of us are even upgrading to the bigger packages. So the cable companies are flush with cash, but they would rather keep it all, versus giving up 1% of it.

What’s this $10 TV Tax?

I don’t know, I’m scratching my head over this one. The cable companies are spinning this as though it was a tax, as high as $10 per month, each cable TV subscriber will need to pay. They too have their own website to push their point of view at stopthetvtax.ca along with their own Twitter account. Yes, I’m following both of them.

From what I can see that’s a pretty huge markup of the 50 cents the CRTC claims it would cost the cable companies. Maybe they are including the 5% to the Media Fund as well, but if 1% equals $0.50 then 5% is $2.50, for a total of $3. But they have already been paying into the Media Funds all along, I believe, which brings us back to $0.50. So where does the $10 come into play? I can’t tell.

What To Do? What To Do?

Frankly I can’t decide. I would like to see local TV survive. The Local Programming Improvement Fund I’m sure will help contribute to that, but maybe it’s not enough. I’m not a fan of the cable companies wanting to jack monthly subscriptions by $10, nor do I really see a justification for that. In fact, in a competitive market environment you cannot simply tack on each and every expense that comes up on to the consumers bill. You need to charge the market price for a service or commodity and any new expenses simply cut into your profit margins. Unless however all the market players colluded together to fix prices, which is illegal. But, by the sounds of their propaganda in all this, that may be exactly what they are trying to prime the market for, except this kind of media transparency method of doing so saves them from the legal ramifications had they done so in a back room deal. I don’t know, that’s pure conjecture on my part, I admit that.

Writing this, and researching it, has been rather time consuming. I’m much more informed than I was, but even more confused in my opinions. I’m pissed at the networks for some of their bonehead moves that got them into this situation (consolidation moves to buy up other networks and some specialty networks at the peak of the market, thus overpaying). I’m pissed at the cable companies for what sounds to me like they are merely trying to protect their profits as well as position themselves to profit even more in the future through higher fees. I’m pissed again, I think, at the networks for forcing the CRTC to erode some of their protections by decreasing Canadian content restrictions. I’m pissed at the media in general for not really bringing this to light in a wider manner. I’m pissed at local TV networks for the piss poor advertising products they sell locally which if they were better they could sell more of and make better local revenues, but that’s a whole other blog post.

What will you do? What do you Think? Leave your comments below.

Or, if you do have a more solid opinion than I do, you can submit them to the CRTC by Fax at 819-994-0218 or online with this form here

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9 Comments to “Local TV Matters? WTF is this Save Local TV Campaign in Canada All About?”

Wayne A on November 10th, 2009 wrote:

Steve, the actual LPIF fund contributions was increased to 1.5% from 1% in July (by the CRTC). I’m fairly sure that the letter I received from Rogers Cable at the time implied strongly that they were being required to pass this on to consumers by the CRTC - now an obvious lie. I’m going to take a look for it later to see how carefully worded it was.

I’m also not that happy with the networks stating that they just want to negotiate and don’t see why the costs should be passed on. Given that history is the best predictor of the future, they have to know that the consumer is going to be stuck with the bill - they just don’t care.

Sadly, I can also see that the lions share of any extra revenue will go to CTV who will just buy American programming that we’re paying for anyway.

I’m Canadian - Tax Me (and toss in some price fixing as well)!

Gail-Marie Linger on November 14th, 2009 wrote:

I think we are paying too much for CABLE T.V. I thought the air ways was free to everyone. It seems the more people use the TV the more we have to pay.I guess that the cable and satellite RULES all the airways, The price for t.v. basic satellite is $100.00 a month then if you want to look at some channels it cost more.They give you over 600 channels on satellite dish but really you only get about 100 as 2/3 are all the same things. We really don’t get anything except if we pay for the channels. Gail P.S. I am 69 years old pay all my own Dish as well as have to pay to watch the few channels they offer nothing free.

Chris Craig (1 comments.) on November 18th, 2009 wrote:

I remember when cable TV first started being offered, and of course the cable companies were spinning the idea that pretty soon there wouldn’t be a need for any advertising on any station, since we would now be paying for the delivery service. That certainly didn’t come to pass, did it?

Jamie on November 21st, 2009 wrote:

Cool that you took the time on this. I learn more about this issue every day as I scour the net and tune into the CRTC hearings on CPAC. The broadcast proceeding is a definite “blood-letting” across the key camps.

First, there is no “TV TAX” and its not “$10″. That’s scare tactics. Totally.

Before jumping to any conclusion on the issue, I think we Canadians need to first think about the ‘value’ we get for what we pay every month. I pay over $100 for cable and have 4 digital terminals (including a PVR) in the house. My cable line-up includes multiple theme packs and multiple affiliate channels of the same network (E.g. CTV Vancouver, Calgary, Toronto, etc.) I have every theme pack on the line-up - because I wanted at least one of the channels in the “pack” I had to take them all. OK, I can live with that. But…all of the “specialty channels” I have in these packs get a monthly fee as a result of my subscription. So, I unwittingly fund channels and programming that I am completely not interested in watching.

In the meantime, the local channels I watch (I live in a smaller city that has a small CTV affiliate - I watch local news) are going broke because their advertising model is shattered. How? Aside from the fact that ad revenues are down, when I watch CTV, I can watch a number of different channels from different regions that show the same program (time-shift). I can watch a CTV show on a CTV station or a simulcast on a US station. The CTV “mother-ship” places their national ads on all of them (through ad insertion). But the affiliate (my local station) ads are only on the local channel (E.g. my local car dealership advertises on the local channel). If I am not tuned into my local channel because I time-shift, for example, I will not see the local ads. Or maybe I’m PVR’ing my shows and skipping the ads entirely (whoo hoo!) It is a fact in my area over 60% of local viewers are not watching CTV on the local channel - but are tuning in to another broadcast from another area. To make matters worse, my local CTV station is not carried on Satellite. Thousands of area residents with Satellite cannot watch the local CTV station (unless they have an antenna - more on that below). Hence, the local station has a harder time selling ad space to local businesses because they are not reaching the audience as they once were.

OK, so then there is over the air. Free, right? I can put up an antenna and get all these signals for free! Sounds excellent. The only problem is, it is not free for the broadcasters to maintain the system (in fact, upgrading to digital and HD transmitters is very costly). How do the broadcasters pay for this? Through ad revenues! At this point, the local stations do not bring in enough revenues (on their own) to fund this kind of huge operating expense. They are operating at a loss. Well, one option then is to close the station and kill local news. Oh…I will still see CSI, no worries there (whew..losing locals news is one thing, but to lose such a big US show..OMG..yes, that was sarcasm) I can always watch my community cable station’s news, right? No one has mentioned that many of the “professionals” that work on community programming are volunteers, co-op students, interns, or other. Very few are paid as bona fide journalists. Some good programming, sure. But, should that become the fabric of local news broadcasting in smaller towns? Is that to become the new standard? This should matter!

I find it strange that Canadians do not see this as a problem. If you live in an urban area, rest assured you will keep your local station and your local news. But, in my area, if the local station closes, my local news disappears. The stories of interest locally just do not make the cut on a national broadcast.

What is my solution? Well, first, it’s not about how much CTV paid to secure rights to CSI. That’s not the issue. The issue is whether small local stations can pay their own way.

Simplest answer I think is to force the cable companies to unbundle their packages and allow Canadians to buy the stations they want. At the same time, I think subscribers should be getting their local TV stations as part of a basic package and that part of that package fee should include compensation to the local broadcasters - under condition that the fees are earmarked to fund the local stations only. Satellite should be required to carry the local stations that broadcast in any area they are selling in. I would also like to see local ad insertion done on all non-local affiliates (E.g. I should be seeing my local car dealership ads and not those of the car dealership in another city, regardless of what channel number I am tuned into).

The net effect…..of my pseudo-educated solution…
- Canadians stop paying for the “speciality” stations they do not want
- Canadians start paying to support local stations
- My bill should go down
- Local news and programming should go up

We should care about value. And we should care about the value that local news provides to communities. We must be well informed and we must be able to trust our sources of information. We can get information from the internet, local newspapers, local news, or other. One does not render another useless.

That is my thinking. I hope this made sense.

Stever on November 21st, 2009 wrote:

Wow Jamie, thanks for your great comments!

I love the idea of local ad insertion across all networks. As everything goes digital this should become technically possible, I would think.

I’m not an avid TV viewer, I’m an internet junkie, so am happy with a fairly basic cable package. I do often choose to watch some of the big American shows on the local network simulcast. Being in the local advertising/marketing industry, of sorts, I want to see the local ads. But I am very biased there, since I wrote and appear in this one. :)

You’re spot on on how your cable fees are paying carriage fees to those specialty networks you didn’t want but must take in the bundled package. I hadn’t thought of that and now that I do it is swaying me more towards the Canadian networks getting that fee the cable companies don’t want to give them.

cityguy on December 4th, 2009 wrote:

Who do you think has control of the bundled packages? I’ll give you a hint, it’s not the cable companies.

Network contracts dictate whether services can be offered a la carte or as part of a bundle, with bundling being a material condition of the contract.

Jamie on December 4th, 2009 wrote:

I’d like to know more about the bundling rules…any idea where to get more info on this?

Ed Shaw (no relation to shaw cable ) on December 19th, 2009 wrote:

I also live in an outlying area and use shaw direct for my tv. reception.
As for local tv I do not care if it lost or not because No. 1 the salaries being paid to the on air people is way to much, some anchors are making over 100,000 dollars plus. No. 2 I do not watch that much local tv as it is boring and below par in most cases No. 3 I find that the specialty channels even if they are bundled ( by network contracts and not the cable or sat. co.) are far more interesting and informative to watch. No. 4 Also do not kid yourself the local tv stations are not hurting at all, have you watched how much the commercial time during one of your shows has increased.
If the crtc wants to impose this tax then they should force the cable and sat co. to eat it and leave us pensioners alone.

Peter Fry (1 comments.) on February 21st, 2010 wrote:

Seems a small amount to me! In Ireland a TV licence is about $200 and its compulsory….this year I didn’t pay on time as I was away for a while —when I came back about a month later there were 4 letters from them one more threatening than the other. I hate stealth taxes, they shouldn’t be allowed

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