Broadcasters face end to U.S. gravy train by Eric Reguly
Source : Globe & Mail
Dec 06, 2001
by Eric Reguly
The Canadian television industry is the scene of a couple of fun little dramas at the moment. The first is the effort by Torstar, Alliance Atlantis and other rivals to launch a conventional TV station in the already overcrowded Toronto market. The second is watching Canada defend the subsidies that help to attract "runaway productions" – American entertainment made north of the border. Put the two together – applications for more TV stations, more made-in-Canada U.S. productions – and you would think that the Canadian TV industry isn't faring too badly, recession or not.
It had better enjoy things while they last because a big threat lies over the horizon: The end of the American programming gravy train. Jay Switzer, the president of CHUM Television, owner of CityTV, is one senior TV executive who thinks that the day will come when the American studios will stop licensing their programming in Canada. He sounded the alarm bell in a recent edition of Playback magazine and has been telling everyone who will listen that the business model that has worked so well for Canadian broadcasters for decades may not work in a few years.
American programming is the lifeblood of the private Canadian networks. The 10 most-watched shows on the national networks are American. Friends of Canadian Broadcasting, a pro-public-broadcasting lobby group, has argued that the conventional networks, dominated by CTV and Global, are using public funds to buy foreign programs. It also said that the conventional networks' spending on Canadian programming has declined over the past decade (CTV dismissed the data, noting that the Friends didn't include the amount spent on sports, news and public affairs, which certainly qualifies as well-watched Canadian content). While the Friends' conclusions are debatable, there is no question that Canadian networks profit enormously from U.S. programs such as The West Wing and Ally McBeal. Their profits help to subsidize the cost of Canadian content.
What would cause the American studios to cut off the pipeline? In a word: technology. Not long ago, the shortage of spectrum was the broadcasters' prime limiting factor. Now, there's so much capacity and so many outlets that absolutely anything that gets produced can find viewers anywhere. In effect, the border no longer exists. If you can't find what you want on Canadian TV, you go to American TV. If the Canadian regulator won't let you watch a U.S. service, you flip on your computer and watch it through a high-speed connection. The explosion of high-speed service will soon turn the regulator's job into a nightmare.
The American studios must already know that they soon won't need the Canadian networks to deliver their programs to Canadian audiences. With their own networks so easily available in Canada, all they have to do is keep the programs for themselves. Canadian viewers will come to them and the bigger audience will drive up advertising rates while building the brand in Canada. Of course, the Canadian networks could simply keep the status quo intact by paying more and more for U.S. programming. The problem is that the prices are already getting maxed out, partly because of the eternally sinking Canadian dollar. Throw in the enormous costs of upgrading transmitters and studios to digital technology, Mr. Switzer notes, and the Canadian broadcaster might have little left to buy hit American shows.
If this script plays out, the Canadian broadcasters will have to rethink their business plans. Some may sell out or form alliances with foreign media companies, a strategy that could not happen unless foreign ownership rules were relaxed. Heritage Minister Sheila Copps has signalled that the ownership issue might be open for debate, though changes are unlikely before the next federal election. Other broadcasters, notably CHUM, may decide that purely local programming is the best defence against the American onslaught in the digital world. Either that or the private Canadian broadcasters will have to spend fortunes on quality, home-grown productions. But where's the money going to come from for that? Will the government boost its subsidies to ensure a steady stream of Canadian content? In the past, home-grown productions have been seen as costly ways to reach relatively few viewers. There's nothing like a crisis, though, to find ways to made Canadian programming work as a business model. The era of simply renting American shows may be coming to an end.
