for growth

If the strength of a broadcasting company is measured in acquisitions, the competition is killing the CTV Television Network. Rival Chumcity has a piece of the Argentina market. CanWest Global’s stakes in Australia and New Zealand keep adding to the profit margin. On the surface, the newest investment ctv can lay claim to are three floors of new office space overlooking the downtown core.

ctv’s expansion plans are kicking off later than some, but president John Cassaday is typically sanguine at any suggestion the 34-year-old network is starting out behind the eight ball.

‘We’re ready in plenty of time. The work we’ve done in the last half-decade got us off our knees and has given us a chance to succeed. If we hadn’t done that, we wouldn’t be here now.’

Lack of expansion is no reflection of a deficiency in visionary thinking at ctv, nor a dearth of growth and change. On the contrary, under Cassaday’s leadership, the network today bears little resemblance to the crippled company that was close to collapsing when he came on board in 1990.

Case in point: in 1990, despite revenues of $145 million, ctv didn’t make enough money to pay its 25 affiliates for their airtime. By year’s end, the network had lost $2.5 million, and in the process created a corporate nightmare of shareholder and affiliate unrest.

Forward to 1994 when revenue was a healthy $173 million, due in large part to broadcast rights to the Winter Olympics in Lillehammer. Tom Peddie, ctv senior vice-president operations and chief financial officer, won’t reveal net gain, but says the network is operating at a marginal profit and was able to pay shareholders a total $14.8 million for 40 hours of airtime per week.

On the programming end, ctv’s nightly newscast leapt ahead of CBC Prime Time News in the first half of the year when the public broadcaster began running its evening news in a 9 o’clock time slot. cbc has regained some territory since moving the broadcast back to 10 p.m. in May. But December’s average audience of 1.13 million viewers still lags behind CTV News’ average 1.5 million audience in the same period. Ratings on signature properties like W5 and Due South are staying strong at just over one million and 1.8 million viewers respectively, with Due South getting 14 nominations for Gemini Awards this year, more than any other Canadian program.

In multimedia, ctv was one of the first networks to open up on the Internet, and in December signed an agreement with Southam and McGraw-Hill Ryerson to publish a series of educational cd-roms.

Without making a demigod of Cassaday, it’s accurate to say the angry affiliates, jumpy shareholders, and the board of directors, which were paralyzed by conflict of interest when he took over, are no longer.

Hard-nosed journalists may have tut-tutted to see a businessman take over as president of a television network, but they’re saying little now. John Cassaday, 41, former Campbell Soup exec, has turned ctv around.

In his first two years as president, Cassaday made two business decisions that proved the foundation of ctv’s resurrection: first, affiliates were to be paid $20 million per year by the network in return for 40 hours of airtime every week; second, ctv would begin running its operations like a business instead of a co-op so that majority instead of unanimity would be all that was required to pass a motion.

Affiliates were immediately appeased by the compensation package, paid by ctv on a stepped-up scale which amounted to $12.5 million in 1993 and $14.8 million in 1994.

Engineering structural changes within a large group that was barely communicating proved more difficult. But with the help of a mediator from Harvard University, ctv was set up as a business acting under the Canadian Business Corporations Act in 1992, a move which clearly separated the roles of the shareholders and affiliates and cleared the way for change.

In layman’s terms, going under the cbca meant unanimity was no longer required to get an idea in motion, says Cassaday.

‘In the past, we probably couldn’t have applied for a specialty service because the idea would have been opposed by at least one shareholder with aspirations for his own application. Logically, why would he approve one he had 15% ownership in when he could apply for one he owned 100%?

‘I can’t overemphasize how important it was that we began operating like a business. It gave us the autonomy we needed to be successful. If we don’t make it now, we’ve got no one but ourselves to blame,’ says Cassaday in his office in the new maple-trimmed, open-concept environment ctv moved into last year.

While those early years have been eclipsed by the network’s current vibrant profile, last year wasn’t a completely smooth ride. ctv’s $15 million bid for the 1996 Atlanta Summer Games was overshadowed by the cbc’s record $29 million offer. The competition led to a still-raging battle between the private and public broadcasters that escalated last July when ctv released a report claiming cbc was losing $60-$70 million a year on its sports programming.

Attempts to expand the network in Canada were quashed by the crtc’s rejection of ctv’s applications for a 24-hour headline news channel and a regional sports network in the first round of hearings for specialty services last February.

On top of that, revenue is projected to drop to about $145-$150 million in 1995 from $173 million in 1994, owing to the loss of rights of the Summer Games and the contract for regular season coverage of Blue Jays baseball, which used to bring in about $10 million a year, says Peddie.

Discouraging to some, but Cassaday isn’t fazed. True to form, his reputation for being doggedly optimistic is evident in his reaction to the crtc’s decision on his specialty services.

‘The way I see it, no one else got what we applied for. We didn’t lose, we just didn’t get it yet.’

Getting the licence for three new specialty services will be part of phase two of ctv’s turnaround, which swung into motion early in December after phase one was deemed complete. Relationships between the network and the shareholders have improved; the corporate culture has been revamped so, as Cassaday says, everyone’s rowing in the same direction; finally, the bank is no longer the enemy and ratings have improved.

‘Now we’ve got to grow,’ says Cassaday.

The push towards growth is already in gear. Gary Maavara, officially vice-president development and public affairs, should technically be called vice-president of growth, but he thought it was a little hokey, says Cassaday. Maavara is charged with sussing out prospective opportunities for the network to expand and lead it towards the 21st century.

Acquisitions in Canada and abroad are being scrutinized, as are alternative methods of distribution through satellite broadcast and the telcos, says Cassaday. Criteria for international buys are properties that leverage the network’s strengths: expertise in marketing, news gathering, sports production and packagers of content. Buying another broadcast operation is a possibility, Cassaday admits, but adds there are many ways to grow.

For example, 15 months ago, ctv bought syndication on over 140 radio stations in Canada from Rogers Communications, with Telemedia acting as the distributor. The amount of the original investment is undisclosed, but the service is bringing in about $750,000 a year, and there’ll be more opportunities on am radio as it moves progressively towards talk programming, Cassaday says.

Delving into new-media applications last year, ctv partnered with Southam and McGraw-Hill in December on a cd-rom ethnicity project aimed at the education market, and logged on the Internet with General Electric’s online service, GEnie, in October (ctv-drew@ genie.geis .com).

Cassaday is thinking about how to use multimedia to market – and profit from – the 30 years of newscasts ctv has on tape. In the meantime, the network’s forays into new applications are purely experimental and quite likely not for profit, he says.

The cd-rom applications will use material from a series of documentaries on foreign places including Beijing and Hong Kong, with production costs starting around $500,000 each. The online service currently has minimal penetration of less than 6,000. But reaching huge numbers of people isn’t the point of the multimedia experiments, says Cassaday.

‘We want to be able to offer our advertisers a window into any area they might be interested in. Are we going to make a lot of money on cd-rom? Probably not. But if you’re a media buyer and all I have to tell you about is last year’s news, you’re not going to be as interested in listening.

‘We’re trying to be as forward-looking as we can, using the network as our core and flanking ourselves with a number of multimedia applications to ensure we can continue to grow into the future,’ he adds.

With an eye to the future, you will nevertheless not find Cassaday buying into futurist Don Tapscott’s theory that the death of television and advertising as we know it looms ominously on the not-so-far horizon.

Cassaday’s vision dictates that the communications industry will be divided into two streams: active and passive. Television will be the predominant market, while a smaller active stream will use the pc for a number of different applications, he says.

Cassaday points to Fox Television mogul Rupert Murdoch as an example of someone who shares his belief that a strong network will be a fundamental piece of the new-media empire. Last year, Murdoch acquired the broadcasting rights to nfl football, bought major affiliates, the rights to a golf tour, and is reportedly looking into baseball.

While he advocates the stability of the medium, Cassaday believes the little guy doesn’t stand much of a chance.

‘Would I want to operate a small independent station in this new environment? No thank-you. Would I like to be part of a powerful network that had access to Olympic Games, major documentaries, and a top-rated newscast? Of course. Like every other consumer market in the world, this one will polarize, but I don’t for a minute think there won’t be someone from your newspaper talking to someone running ctv in a few years.’

The near future will take the form of at least three applications for new specialty services when the second round commences next fall.

With partners Molson Breweries, Rogers and Liberty Media Corporation, ctv will bid again for a regional sports service. It will also reapply for another headline news channel, this time bilingual, and will submit a new application for a history channel. ctv will have a 40% stake in the sports channel, 100% in the news channel, which will include its French-language counterpart, the TVA Network. Partners on the history channel have yet to be determined, so ctv’s investment hasn’t been established.

The history channel is a commodity that could conceivably travel, says Cassaday.

It’s the increasing number of outlets for programming and the uniqueness of Canadian productions that lead Cassaday to believe there will be a ‘cross-fertilization’ of history-related programs if his service competes on the international market with material from the u.s.-based History Channel.

‘Each country tells its own stories its own way. A complementary relationship would evolve between our programming and theirs.’

The potential leveraging of product becomes more important as you look at broadcasting as a world-market opportunity, he adds.

‘We have to start positioning ourselves more as a software company as opposed to simply a provider of programming to affiliated stations.ÉOne of the things networks can do because of their clout and size is deliver this new software to the largest amount of people.’

Two revenue streams

According to Cassaday, the financial support structure for broadcasters will take two forms: selling software and selling advertising, and ctv is taking an active interest in both. The direct marketing of programs to both advertisers and the audience is becoming a network trademark.

The latest partnership, signed in December, sees ctv originating its weather broadcasts from Canada Post’s national control center in Ottawa in return for a substantial amount of ad mail ctv will offer to its clients. ‘We want to be able to offer our clients an integrated campaign based on tv exposure and backup by direct marketing,’ says Cassaday.

The commercial production industry is warily eyeing a growing trend among broadcasters producing in-house spots for their clients at cheap rates. Producing 15-second spots for Tim Horton’s last year and barbecue reports in the summer that featured chicken-based dishes sponsored by the Canadian Chicken Marketing Board and recipes using Hidden Valley Ranch salad dressing, ctv might be seen as a threat to the private producers, but Cassaday says no.

‘The opportunity we see for the future is with non-traditional advertisers who, in the past, wouldn’t have dreamed of television advertising. Like a bagel maker, who, with the inexpensive airtime on the specialty services and our low-end in-house production, could run an ad.

‘The threat to the commercial production industry is zero. Do we have a unit focusing on commercial production? No. Do we intend to? No. But we’re in the business of satisfying customers, and if we have to help them produce a commercial to do that, we’ll do it.’

Other new marketing ventures include taking on sales responsibilities for the New Country Network and the Women’s Television Network.

For the network as a whole, the year ahead will be one of expansion. To date, its single foreign project has been to form an alliance with Televisa of Mexico, a Spanish-language broadcasting company, to share news material. No money changed hands, although today, there’s money to spend.

‘Three years ago, I couldn’t have rolled the dice and risked losing because the network would have been at risk. We had a massive bank debt, which has been eliminated, and shareholder uncertainty, also eliminated. We’re now in a position to take prudent risks and grow the business.’