Galgary, Alta.: If the broadcasting year plays out as the majority say it should – wic with a licence to cover Ontario, Baton landing Vancouver, and CanWest in Alberta so the three major homegrown networks have equal distribution opportunities in Canada’s three biggest markets – the Asper net hasn’t made it easy to linchpin its place in the big picture.

It’s a week since the Alberta hearings wrapped in Calgary, a process that sounds like a simple exercise in adding one more broadcasting service to the Wild Rose province. It’s not. Call it precedent-setting, groundbreaking, a watershed crtc decision, the outcome of public notice 1996-7 will have a ripple effect impacting every element of the Canadian broadcasting and production industry.

As Keith Spicer said, nobody grows up wanting to be a crtc commissioner. It’s maybe more true this month. The two applications at hand – one from CanWest clearly focused on structural realignment, the other a regional production-centric effort from Craig Broadcasting – are grounded in markedly different philosophies, ‘more so than I’ve ever seen before,’ says David Colville, crtc vice-chairman, telecommunications.

Colville, alongside acting chairman Fern Belisle, vice-chairman, broadcasting, and commissioners Garth Dawley, Peter Senchuk and Claude Sylvestre, are faced with sorting through hair-curling creative accounting and a hornet’s nest of industry issues that clustered more execs in the Alberta Delta Bow View hotel mid-July than the specialty channels drew to Hull, Que.’s Promenade de Portage in May.

Whether the Alberta market can sustain another service, revenue impact on local broadcasters, the fallout on advertising rates, the variety of programming being offered up, all the usual fodder to consider before allowing a new player into a territory, are only part of the picture this time out.

What constitutes a network, how it should be licensed, and whether the benefits CanWest is proposing are enough to justify the 84% audience reach a green light would give it, are amongst the fundamentals on the agenda for wic, ctv, Baton, and the cbc, all rallying against giving CanWest, its 92% profits and its 16 of the top 20 programs, any more power in the market than it already has.

For producers, there is no one cohesive voice, although the majority of intervenors spoke in support the CanWest option. Nelvana ceo Michael Hirsh, Atlantis ceo Michael MacMillan, and Edmonton-based Andy Thomson of Great North Productions are the big players advocating the third national window access a CanWest licence would facilitate, joined by mid-sized Alberta indies Arvi Liimatainen of Arvi’s Production Company, and KJPI Film & Video’s Ken Beitel.

Smaller Alberta prodcos, including Illusions Entertainment’s Bruce Harvey and Douglas Munro of Douglas Munro Cinematography, backed by the Directors Guild of Canada, question what they call the inadequate CanWest investiture in Canadian production and lean towards supporting the Craig proposal and its for-Alberta-producers-only $14 million drama fund.

After three grueling 11-hour days of testimony, the irony is the whole thing may be null and void, with CanWest repeatedly accused of playing with the licensing process. crtc Rules of Procedure say applications may not be amended post facto, but the competition says CanWest, filing what it calls ‘one clarification’ and ‘two invitations’ a day before the intervention deadline, has broken with policy and opens what some say is a legal Pandora’s box should it be licensed.

For its part, CanWest argues that clarification of its national benefits was necessary since its application for Quebec, which would have put the package in clearer terms, is being heard in October instead of pre-Alberta in November 1995, as scheduled.

It’s a position which became arguably more difficult to defend after chairman Izzy Asper admitted to Belisle that CanWest management, doing damage control on a pack of virile interventions, came to the board of directors and said a clear financial committment to the underserved programming categories of drama, music, and variety (7,8, and 9) was necessary. It’s something Asper says they were willing to do, over and above doubling the Cancon primetime exhibition hours as per the application.

‘We didn’t really get to the numbers, to how much it cost, because we read the rules and thought the commission now had enough confidence in Canadian broadcasters to know that we weren’t going to go to air with second-class material, and we’re going to spend whatever that requires. We’re going to spend whatever it takes, whether it’s $14 million or $17 million or $20 million, to get it right.’

Benefits package

While the intent may be there, what the commission has to weigh are the commitments contained in the application, including the incremental benefits to production specific to the Alberta proposal. A would-be simple process, but one which the CanWest Alberta application – so vague and confusing that at one point it had commissioner Dawley searching for how much of a wayward $30 million investment commitment would go to independent production (none; it’s the capital costs for an Alberta startup) – made complicated, and had a terse chair Belisle spending quality time trying to decipher.

Post tussle, CanWest lays the numbers out like this: the national benefits package is a seven-year, $124 million proposition of which $56.8 million will go to the production of programming in the underserved categories of drama, music and variety. Script and concept development money is included in that number at $600,000 per year. The rest of the pack is made up of $57.5 million in news production, $8 million for Kids Club, and $1.3 million for closed captioning.

Incremental spending in in categories 7, 8, and 9 in exchange for a national licence – the investment put forward over and above what CanWest is required to spend on drama, music and variety via Global, the only station in its group for which drama spending is a condition of licence – is $7 million in year one of which $1,489,000 is new money for Alberta and will pay out proportionatly according to the revenue formula over the licence term.

While the numbers arguably laid out clean, the methods by which the competition says CanWest calculated both the overall package and the drama commits specifically, were enough to send them apoplectic.

‘In dollar terms, CanWest is promising no new incremental benefits at all,’ says Grant Buchanan, wic’s vp corporate affairs, who along with Craig says the math consists of Global’s Ontario licence commitments ($9.339 million for 7,8, and 9) added to what it projects spending will be in the normal course of business for its nine other stations over the next seven years.

‘Aggregating what CanWest already told you it would do, then saying it is now prepared, post facto, to turn those statements into a commitment, is hardly the type of quantum improvement for the Canadian broadcasting system that should be expected from CanWest in exchange for the privilege it seeks,’ says Buchanan.

Following that logic, CanWest still has a ‘problem’ Buchanan adds, since it’s setting spending conditions based on its old exhibition requirements and not proportionate to the increased Cancon hours promised in the application.

The $17 million drama commit drew equal fire, with CanWest justifying the spending projection using ctv as the benchmark.

The logic runs that since ctv covers 96% of English Canada and spends $18 million on 7,8, and 9, CanWest, which would cover 84% with Alberta distribution, is therefore promising $17 million. Or, on the basis of revenue, since ctv and affiliates gross $600 million and CanWest grosses $300 million, CanWest should therefore be contributing to the Canadian broadcasting system 50% of what CTV contributes.

But Buchanan, cbc vp Jim Byrd, and ctv president John Cassaday, say coverage isn’t an adequate gauge. ctv only controls 40 hours of airtime, 96% of the market or not, whereas CanWest controls 100% of its sked cross-system, says Buchanan. That 84% would cover the key markets national advertisers want, adds Byrd. Particularly in light of the fact CanWest owns 16 of the top 20 programs, ‘what the applicant suggests is a disadvantage is in fact a tremendous advantage.’

Whether the commission feels the benchmarks play out is anybody’s call, but Asper made a point of saying CanWest will commit to whatever formula for network contribution to Canadian content the commission chooses to impose.

‘We accept, howsoever you like, our pro-rata commitment to audience or revenue share. Period. End of story. Provided they meet one or the other of those two tests, in terms of what CanWest Global should be spending on the aggregate on Canadian programming, fine. We’re prepared to meet our pro-rata share.’

But the lack of clarity on criteria for network commitments prompted several to challenge the idea that the Alberta hearings are the place to carve industry benchmarks for a national network, with Cassaday, Craig Broadcasting’s Drew Craig and Buchanan echoing CHUMCity president Moses Znaimer: if Canada is going to have a third national network, a hearing is necessary to hash out what a network is and how to balance benefits and commitments ‘not this piecemeal ad hoc process offered by CanWest so they can cherry pick several markets.’

Market impact

While the Craig application came across as embryonic with no programming supply arrangement in hand and the details of the application called ‘a tall order’ and ‘challenging’ by commissioner Dawley, the incumbent’s Chicken Little numbers measuring market impact put Craig clearly up front if minimizing the impact on the established broadcasters were the only criteria.

cbc’s independent study pegs the loss of commercial revenue to the pubcaster at $125 million over seven years, $16 million from the main net, $2 million from Newsworld in year one.

Baton, new owner of cfcn-tv, projects seven-year revenue loss of $73 million, with proportionate Canadian spending reduction of $22 million. Craig’s impact would be $3.1 million.

Electrohome-owned cfrn-tv Edmonton, estimates loss of airtime revenue at $8 million in year one, $75 million over the licence term, a revenue slap which will force it to review all ‘extraordinary’ expenditures, including the $7 million cfrn independent production fund, says Fred Filthaut, vp and gm of cfrn.

Summing up simply, Byrd echoed the incumbents: ‘If you have to license one, the impact of the Craig application is more manageable. The impact of a CanWest licence is immediate and hits us in a big way.’

But CanWest maintains the incumbents are well prepared to absorb the competition. Population in Alberta has doubled since the last regional broadcasting licence was awarded 21 years ago and the incumbent broadcasters are amongst the most profitable in Canada, with 1997 private television revenues projected at $186 million.

Its revenue projections – $21.9 million in year one, although the competition insists it’s lowballing – will be 38% made up of $8 million from the incumbents’ coffers and $8.2 million in repatriation ad dollars from the four u.s. stations in Spokane, Washington, crossing the Alberta border.

Ah, Spokane. In amongst the rates impact, selling practices, and general advertising jumble pebbling the hearing, the issue of exactly how much Canadian cash is flowing south of the border to kayu and kvos became yet another surface-simple issue that grew legs through the week.

Projected at $12 million to $15 million the last round, a number fully supported by incumbents and applicants, everyone but CanWest and the Craigs are now backpedaling with cmi president Ken Goldstein, who sat on panel with wic and Baton and played dueling bia statistics with CanWest, and said the total potential repatriation dollars from Spokane cap at $2 million.

CanWest’s overestimation of the growth rate for the Alberta television market at 8% above inflation, combined with the non-existent cash flow that can be expected from Spokane, means the vast majority of CanWest’s first-year revenues will really come from the current private television stations in Alberta, says Buchanan. It’s a more serious situation for wic than for any other intervenor, he concludes.

‘We can’t look to our Toronto station to cross-subsidize the rest of our stations. We look to Alberta to cross-subsidize chch. This is our breadbasket. We’re the ones who are totally reliant on Alberta to do everything.’

But Cassaday insists the impact is equally as big for ctv, which opted for the high road instead of dire revenue dip projections, but says nevertheless that a CanWest national licence, giving it the ability to sell local, regional and national advertising, makes it clear that operating as a ‘system’ has benefits over a network. ‘Are you saying that one of your options is not to stay as a network?’ Colville asked.

‘Let’s put it this way,’ said Cassaday. ‘We spend $500,000 on script development; our affiliates spend about $400,000. Global will spend about $550,000. What do you think would happen if that imbalance existed at every point in the profit and loss equation?’

Canadian production

How the cumulative revenue fallout plays out on Canadian programming expenditures is the final red flag number making the rounds. According to wic’s cmi/Armstrong study, the cumulative net loss in the amount of spending on Canadian programming from the established services, using the percentage of revenue formula, is $25.9 million over seven years with a CanWest licence, $5.4 million with the Craig station.

CanWest maintains that a third national network will strengthen, not weaken, the system and, according to CanWest president Jim Sward, will contribute ‘almost $300 million in tangible and identifiable benefits to the Canadian broadcasting system which otherwise would not be spent in Canada.’

A national CanWest voice has other benefits, Asper surmises. ‘We will be able to commit in the future even more dollars than we do today, if a number of international developments currently under consideration by us are realized, thus creating more certain markets for our Canadian drama programming.’ (for producers, there’s the rub. See sidebar, this page)

At the end of it all, what’s left behind are few people who think CanWest won’t get a licence. National and international programming buy and sell realities dictate the outcome, say observers, although many agree the application isn’t the slam dunk it was going into the process. With the approach CanWest has taken, late additions to the application, a benefits package difficult to sort through, and the general state of the Alberta production community, one player sums up: ‘It’s theirs to lose.’

The fun continues Sept. 23 in Vancouver as CanWest, Craig, Baton and chum knock heads in the quest for another regional licence with national implications.