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It’s too soon to tell how the five new Canadian specialty channels will fare as a tier without the padding of established services. But if the survival rate of new services in the u.s. is used as a gauge, odds are less than 2:1 against a channel’s success.

In the States, new networks have little chance of being added to basic cable packages, and fewer than one-third are expected to break even, says John Mansell, a senior analyst covering broadcast regulatory and technology developments at Paul Kagan Associates, California.

Granted, there are some fundamental differences between the American and Canadian broadcasting systems. u.s. cable networks reach 63% of the 243 million households with tvs, or about 153 million homes, compared to a significantly smaller Canadian audience for cable, which reaches 73% of the 28 million Canadian households with televisions, or about 21 million homes, according to 1994 A.C. Nielsen statistics provided by the Television Bureau of Canada.

Also, the u.s. market is governed by many large and small cable companies instead of being dominated by a conglomerate. As compared to the eight services launched in Canada Jan. 1, more than 75 are expected to try their luck in the u.s. this year.

But federal regulations and economic concerns governing the addition of new services to basic cable in the u.s. are creating a situation similar to what Canadian broadcasters are experiencing, says Mansell.

In the States, new service owners want their channels added to basic cable that normally hosts popular channels like mtv and cnn and draws viewership numbers the newcomers can use to bait advertisers. But it’s rare for a new service to be added to basic cable for two reasons, according to Mansell.

First, technology is lagging behind theory. The current cable systems aren’t capable of broadcasting unlimited channels. On average, they are capable of broadcasting about 50, and many of those are reserved for major networks, their affiliates, and pay-per-view channels.

‘With the competition from direct broadcast satellite, cable operators are expanding their capacity as fast as possible, but until they’re finished there isn’t going to be sufficient channel capacity to house everyone,’ says Mansell.

If there is room for additions on the bandwidth, regulators limit rate increases on basic, meaning cable operations can’t charge viewers more when they add new services. So they charge the new network a fee based on the number of viewers the established services draw, which is normally high enough that few channels can manage to cover it through advertising.

That leaves the option of lumping new services into separate tiers or offering them a la carte. If the services are offered either of these ways, the government doesn’t regulate the fee structure and the cable companies charge anywhere from $2.50 to $10 extra a month for tiers or individual services.

It’s difficult to sell people on extra costs, and it creates an unhealthy environment in which to launch a network, says Mansell.

‘For a channel to survive in this environment, it needs the ability to operate with a lean agenda for a year or so, meaning not having much programming, advertising, or airtime.’

Services supported by big companies like Labatt Brewing are more resilient to this kind of cutthroat environment, Mansell concludes. The U.S. Discovery Channel remains popular 10 years after it launched in 1985. Another service that crosses state borders and cultural barriers is the vastly popular Cartoon Network, says Mansell.

Other criteria for success may be services that offer something not found on regular networks covering a subject that attracts a group large enough to sustain it, like the Golf Channel, offered a la carte for $6.95.

Whether the consumer protest against Rogers’ marketing of channel packages translates into fewer subscribers will be evident when it comes time to pay for the new services March 1.

In the meantime, the first set of ratings for Canada’s Discovery Channel has been released. The first night of regular scheduling on Discovery reached 1,191,000 viewers, and 888,000 the second night, garnering a 1.7 share of Canada’s English cabled households, according to A.C. Nielsen overnight ratings. Ratings for Bravo!, Showcase, Life Network, and ncn were not available at press time.

Jeff Osborne, group vice-president for Media Buying Services in Toronto, says advertisers aren’t particularly interested in early audience numbers. They will be looking closely at the numbers about three weeks after the free run, he says.

While January’s consumer protest hasn’t had much effect on advertisers, Osborne hopes it has drawn the crtc’s attention to the need for licensing services according to market demands.

‘One thing I found most surprising about the first round of services licensed was that they weren’t the most consumer-friendly services. The crtc built in the issue of Canadian content and diversity. I’m not convinced that all the ones licensed are the most marketable.’

A regional sports channel and a comedy channel may have sold well, Osborne advocates. People are in favor of sustaining Canadian productions and maintaining a unique culture, but the question begs, who pays for it and how much, he adds. ‘We’re seeing consumer backlash right now.’

Undeniably, the crtc has concerned itself with the larger issue of funneling money into the Canadian production industry and maintaining Canadian content, but it also factored in product viability when it licensed the services, says Bill Allen, spokesman for the crtc.

But Allen admits that regulation and opening the doors to competition are mandates somewhat at odds with each other. The commission is looking at how to adapt to an evolving industry.

‘The crtc is in the middle of a transition period where the industry is becoming more market-oriented. If we’re pushing for competition, then we also have to look at the regulatory framework. It can’t be the same as when you have a monopoly,’ he says.

Allen won’t say if recent events have given the trend towards prioritizing marketability over regulation a push.

‘I’m not in a position to answer that. The commission is looking at the public’s reaction, what kinds of changes Rogers will make, and how it all works out,’ he concludes.

Newspaper editorials may have called for the end of the crtc’s regulating what services Canadians can watch, but Atlantis Communications president and ceo Kevin Shea says it’s absurd to see recent events as the beginning of the end for protection of Canadian programs.

People didn’t react against Canadian programming, or the execution of Canadian content regulations, says Shea. They reacted against having to pay more to keep services they’ve become attached to like Newsworld, MuchMusic, and a&e, those same services they revolted against in 1988.

‘Cable has historically picked channels. There’s a bunch of u.s. services they could carry, but they don’t. Someone has to make packaging and pricing decisions. That’s been happening for 15 years,’ he says.

What is even more absurd is the idea that the crtc wasn’t paying attention to the marketability of the channels when it made its choices, says Shea, who was part of the Atlantis team pitching for Life Network. He says the priorities were consumer interest first, then how to meet cultural objectives and goals.

‘Everybody was forced to conduct extensive consumer research on the audience when it applied for a licence. It was incredibly comprehensive. Did I walk into that process thinking Canadians had said no to Canadian content? Absolutely not.’

Gary Maavara, vice-president, development and public affairs at the CTV Television Network, is similarly skeptical that the consumer revolt against the packaging of the channels will force the crtc to throw the market open and soon leave Canadian programming and services to fight for themselves.

However, it will mean that ctv will have to market its three new specialty service applications even more vigorously, Maavara says. ctv will apply for a history network, partnered with Molson Breweries, Rogers Communications, and Liberty Media Corporation, a regional sports channel and a 24-hour news channel in the next round of specialty application hearings, scheduled to begin several weeks after the June 30 deadline for submissions.

Maavara is not convinced recent events mean the end of negative option marketing or upping basic cable fees to include new services. The processes have worked in the past, he says.

‘I don’t see a lot of people still revolting against the previous negative option, the tsn/MuchMusic roll up. And those services never would have made it without the packaging. Offered as discretionary packages, they got into 1.8 million to 1.9 million households. When they went on extended basic, they went over five million.’

While the protected environment may be tried and true in Canada, the open market system in the u.s. effectively weeds the weak from the strong, says Mansell.

Some u.s. cable companies make the selection of the few new channels that make it onto the basic service, but more often, they’ll throw them on the open market and leave it to the viewers to decide what survives.

Many have a trial run, complete with a number subscribers can call to comment on the network. If response is scant or negative, they’ll pull it.

The advantage is the weak services go quickly. But expect to anger some of your subscribers every time a service, no matter how temporary, is taken away, Mansell says. For example, one cable operator trained a camera on an aquarium for 30 days between the end of one service and the beginning of another. When it was removed a barrage of furious viewers called to protest losing ‘the aquarium program.’