Why Shaw wants a piece of Canwest

Shaw's intent to take a 20 per cent stake in Canwest, which would bring with it 80 per cent of the votes of the company built by Winnipeg's Izzy Asper, is taking place just as the digital revolution is poised to radically alter how we all get our filmed entertainment.

For Shaw it's a gamble that, by taking Canwest out of bankruptcy protection, it gets a bargain that will make it the key player in the future of Canadian television.

All that is known about the deal is that Shaw has to put up a minimum of $65 million, on the face of it, a small sum for a company that still has billions of dollars of assets, even if it also has billions of dollars of debt.

The risk would appear small. If Shaw fails to make a go of it, then it will lose its stake, but it will not be risking either the Shaw family's cable empire or its stake in the Corus television company that owns the "W" network and the pay TV-channel Movie Central.

For viewers, though, the move is at least intriguing and possibly revolutionary. As television viewing has fragmented among many different channels and the big old networks like CBC, NBC, CTV and Global have lost audiences, the big beneficiaries have been the cable companies like Shaw. Once cable just brought a better quality picture than rabbit ears. Now, cable delivers a huge variety of programs to most households. As cable companies' grip on the delivery of a wide choice of television programming has increased, so have their profits. Cable has become the method of choice in television watching.

Not that cable is without competition. The telephone companies like MTS and Bell are in the same game. Competition is spreading across the board for delivery of television, Internet and phone services.

No one quite knows where all of this is going to end up. One intermediate step though, is that the cable companies are becoming more and more like the broadcasters.

Cable companies like Rogers and Shaw as well as MTS and Bell, now offer broadcast programs "on demand." You want to watch the Lost or Flashpoint episode you missed? Just go to your cable company's "on demand" site and there it is to be watched well after it was first broadcast. Of course, you can record the program on your PVR, also provided by you cable or telephone company.

Alternatively, you can watch programs (this is particularly true of the Olympics) streamed directly onto your computer. If you really know what you are doing, you can link up your computer to programs delivered both by the Internet and your cable television. Many Blu-Ray receivers have Internet access, as do the more advanced game consoles.

This is the new convergence and so far, it is in its infancy. As time goes by, it's going to be dead simple. You're going to have a box that receives both from the Internet and from old-style cable seamlessly.

If you can get any programming any time from a menu of choices, then why does the traditional broadcaster even exist? If the cable company has access to the delivery of all content, what is the purpose of a broadcaster?

The answer so far has been that the cable companies don't have expertise in buying, assessing and developing content and selling the advertising that goes with it. If they buy the broadcaster, though, they do.

That's why, in the United States, the cable company Comcast in a complicated transaction is buying NBC/Universal. The Shaw deal is a smaller step in the same direction. The crucial difference is that for success in Canada, companies like Canwest rely on purchasing programs that have been developed by broadcasters and studios south of the border. That arrangement is protected by a wealth of licensing deals and government regulation

The world of television, however, is changing faster than the regulators can keep up. And it is far from certain as programs are increasingly delivered through multiple channels that they will continue to be delivered on a country-by-country basis as they are today.

The day may come when you can simply order up any program you want from anywhere in the world.

Shaw is positioning itself for that world. For a world in which the broadcaster and the cable company are essentially the same thing and the money that supports the content comes as much from your cable subscription as from the advertising that now supports most network programs.

The competition for your eyeballs then, will be not between broadcasters, but between which cable or telephone company can give you the best choice of all programs available, anywhere.

Nicholas Hirst is CEO of Winnipeg-based television and film producer Original Pictures Inc.

Republished from the Winnipeg Free Press print edition February 18, 2010 A15