Broadcasters are all facing darkest of days

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Canwest's Leonard Asper (left) and Peter Viner at the CRTC hearings Wednesday. CTV is also suffering financially. (SEAN KILPATRICK / THE CANADIAN PRESS)

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The timing of the battle raging in the CRTC boardrooms in Gatineau, Que., this week is rich in ironies.

Fundamentally, the hearings are about whether the CRTC should compel the cable and satellite (and, in the case of Manitoba and Saskatchewan, the telephone) companies to pay a fee to conventional television stations for carriage of their signals on the television service it sells to subscribers.

There is an awesome volume of documents and sophisticated arguments pro and con presented by both sides to the CRTC hearings.

One of the primary ironies to those familiar with Canwest's rise and fall from glory is that Canwest Global officials argued for fee for carriage for years, dating back to the days when it was one of the most profitable media companies in the country and a dividend-paying darling of the stock market.

Canwest coveted the subscriber revenue stream that speciality cable channels have enjoyed since the days when there was just TSN, MuchMusic and a few others.

Sadly, as we know, Canwest is now under court protection from creditors. But that doesn't take anything away from its argument that the system is broken.

At this point, few would argue there was much economic prudence deployed by Canwest now that it has crumbled under a debt load that once topped $4 billion. But in some respects that doesn't have much to do with the current CRTC debate, one that may be crucial to the future of Canadian television viewing options.

In a column in the Toronto Star on Wednesday, Thomas Walkom discussed the preposterous proposition of choosing sides between the evil cable companies and the evil television networks.

But one of the ironies in the debate is that most of the interested parties are so diversified they often find themselves as competitors and partners at the same time.

Even Walkom and the Star get snagged up in that.

Walkom blames Canwest's irresponsible debt load for its problems, claiming the Canadian television networks are still rolling in dough, citing year-old data on CTVglobemedia's profitability as evidence.

But in fact, CTV has lost an impressive amount of money this year and Walkom might know that because the company that owns his paper, Torstar Corp., also owns 20 per cent of CTVglobemedia, a private company.

Torstar's own financial statements (available on the Torstar website) note that CTVglobemedia has lost $240 million for the nine months ending Aug. 31 and carries its own hefty $1.9 billion in debt.

While it could sound self-serving, in its presentation to the CRTC this week, Canwest points out, "Debt... has nothing to do with the fact that all major broadcast groups have had to take massive write-downs on their local TV operations in the last year. The financial markets take a dim view of this sector, in part because our only source of revenue, advertising, is in decline, and we operate in an unfavourable regulatory environment."

Canwest, CTV and Rogers have written down the value of their conventional television assets by a combined $3 billion over the last 12 months.

"In fact," the Canwest presentation states, "Both auditors and stock market analysts now attribute little or no value to our conventional operations."

Again it may be self-serving, but the Canwest presentation is saying it's not just Canwest that has become a basket case. And clearly, CTV's $240 million loss on revenues of $1.5 billion with close to $2 billion in debt is not the rosiest balance sheet around.

According to CTV's own presentation to the regulator, it's in just as sorry a state as Canwest.

".... structural challenges have seriously impacted investor confidence in the sector," the CTV presentation says. "...(E)ven the most optimistic forecasts have our conventional television group losing tens of millions of dollars through 2011... Our investors are not prepared to continue to underwrite massive losses..."

It was the CTV presentation that underlined the shift in value from conventional television to the cable companies, noting that Shaw Communications recently paid $300 million for Mountain Cablevision, a small Hamilton, Ont., cable and telephone company, while Canwest sold the Hamilton television station, CHCH, for $6.

Canwest was often castigated for its weak performance on Canadian content and because of that won few friends over the years in its battles with the regulators while it was a money-making machine.

Now those same arguments about the economics of Canadian content are being hashed out in an even more fevered pitch, where it's not just Canwest that is fighting for survival.

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition November 19, 2009 B5