While seven new specialties prep to hit the screens next September, startup plans for the remaining 15 are coming together like a handful of mercury.

Three weeks behind the crtc specialty decision which left the majority without guaranteed distribution and free to wrangle with the cablecos for carriage, licensees on the record are doggedly optimistic that Rogers and Shaw, the only two cable companies in the country with subscriber bases large enough to facilitate a viable service, will find the means to launch the whole pack.

Off the record, the initial licence euphoria is waning.

‘All we really have is a licence to ‘negotiate,’ whatever that means,’ says one licensee. ‘Now we spend the next few months prostrating ourselves in front of the gods of cable.’

Getting a direct answer from either Rogers or Shaw on how many analog parking spots are available is an ongoing challenge, but according to the licence decision, commission wisdom has it there is room for six to eight new services on 80% of the class-one cable systems in the country.

teletoon, Baton Broadcasting’s The Comedy Network, Alliance Communications’ The History & Entertainment Network and ctv’s N1 Headline News will take four, theoretically leaving two to four spots open, although the cablecos aren’t required to add any but the four to their existing systems.

Licensees in turn have until 1999 to get their respective services up and running or the licence expires. (The option to negotiate an extension is built in.)

With less than a month to digest the decision, the cablecos are mum on exactly what the negotiating process consists of. Details of carriage and packaging strategies are equally up in the air, leaving even those guaranteed a parking spot unsure of what licence fee threshold they can commit to (see teletoon, Specialty Channel Report, p. 17).

Given the lack of information, the rumor mill is in full swing. Rogers president Ted Rogers, Shaw Communications’ Jim Shaw Jr., and Videotron president Andre Chagnon reportedly gathered mid-month to talk. Scuttlebutt has it that Rogers has canceled its order for 190,000 digital boxes (Paul Temple, vp regulatory and public affairs for Rogers Cablesystems, says, ‘No. Our agreement with General Instrument stands,’) and speculation is running that Baton’s Comedy is destined for the second tier to bump up the old/new specialties.

A series of cross-country meetings held by the regional cable associations (the next in Toronto Oct. 24), has become the new services’ first ear to the cablecos. Potential new service reps are being given a chance to pitch for distribution, while licensees do the math on whether a conglomeration of the smaller cablecos could add up to a magic subscriber base number.

ytv vp programming and production Dale Taylor, TreeHouse tv licence in hand, says it’s doubtful.

‘There may very well be some services that just won’t launch if the smaller systems are the only option.’

It’s more matter of fact than that, says another: ‘Once you get past the monster boys, it’s game over.’

But three years is a lot of time, say many, adopting the chum licence mantra: ‘We can cope. We can adapt. We can make it work.’

If carriage is an option a couple of years down the road, ctv will be as able to launch then as it is now, says Gary Maavara, vp development and public affairs counsel for ctv and point man on ctv’s licences.

‘If it takes one year, two years, we’ll manage. I have no illusions that it will be easy to attract viewers if we have to wait. But our projections were very conservative so our business plans will hold and I’m optimistic and realistic. This is no time for pessimism. We’ve been given a great gift.’

Some apprehensive

But others are concerned. Business plans greenlit were based on best-guess projections for September 1997, and if some of those services are up in 1999, they may not be worth the paper they’re written on, says Taylor.

‘Viewing habits could be established over that two years, and if we haven’t established a beachhead by the time pick-and-pay is a reality and there are more foreign options are available, the economic viability of the services could be lost.’

The transition period ­ these next three years when the broadcasting system moves from cable monopoly to competition, from analog to digital distribution ­ is key, agrees another source.

‘That decision was a terrible day in Canadian history because the crtc admitted it has failed in its policy objectives to manage the realities of transition, which is a shortage of bandwidth. You set a course for the next stage by what you do in the transition, and essentially they’ve ceded a whole lot of territory to the Americans. Some of these services will never see the light of day.’

But while in theory the cablecos could sit tight and add no more than the first four, most licensees are convinced they won’t do that. Rogers’ bottom line is queasy right now, and the cablecos as a whole are wary of a huge increase in their fee-for-service expenditures, but there are incentives in place to compel a greater specialty uptake than what’s crtc-mandated in public notice 1996-120.

First there’s the cablecos’ on-the-record desire to add more u.s. services, with the latest specialty decision in tandem with the call for additions to the Eligible Services List essentially blocking them from adding foreign services ‘totally or partially competitive’ with Canadian licensees, which covers a vast range of genres.

Second, there’s the u.s. moving towards selling direct-to-home satellite dishes along the same lines as cel phones ­ distributing the hardware for free and consumers pay for the programming ­ which could, particularly given the paralytic state of a Canadian dth industry, exponentially expand the gray market and mean real competition sooner than anticipated.

Last but not least, there’s the anti-cable sentiment that lingers despite almost two years of pr following the launch of the tier-two specialties.

Changing cable’s image before the competition materializes, combined with the technical and financial headaches of launching a third tier may be the ‘digital’ services’ best shot at early entry, says Life Network president Juris Silkans.

‘It’s a great opportunity for them to remarket. Cable hasn’t raised prices now for about a year and there’s the option of selling the whole whack of them for one price and re-establishing the price/value relationship with subscribers.’

Selection process

But working with the idea that Rogers and Shaw aren’t prepared to drop home shopping, barker channel, and pay-per-view services on analog to launch all the new licensees simultaneously, the process then moves to a selection of 14 (ctv’s Sports/Specials ppv is greenlit only for digital). It could be a messy hybrid of politics and practicalities dictating the chosen ones, say licensees.

If the criteria is more entertainment services, the likes of chum’s Star tv and Space: The Imagination Station, TreeHouse, HGTV Canada, and Prime tv are thought to have an edge.

Individual market considerations could also play a role. For example, speculation has it Rogers will want the Globe & Mail/wic property Report on Business Television for distribution in the Toronto market, despite Rogers asserting that the Southern Ontario system is packed to capacity.

But besides the marketing difficulties and penetration conundrum inherent to piecemeal distribution, of more concern right now is how the incestuous mix of cablecos and broadcasters behind the licences will play out in the selection process.

Case in point: Baton, with Comedy on guaranteed analog, has two in the negotiating stack. ctv has S3 regional sports to barter. teletoon is 40% owned by Family Channel and 20% by ytv, which in turn owns 100% of TreeHouse. then is 88% owned by Alliance Communications, which owns 55% of Showcase. hgtv is controlled by Life.

The potential leveraging capabilities are escaping no one, but of particular note is chum, owner of MuchMusic and Bravo!, with five new properties on the English-language digital tier.

‘Who knows exactly how this is going to work, but if I’m chum, I might have all kinds of strategies up my sleeve. Discounts, package dealsŠthe potential is there to have this be about far more than what consumers want,’ says one licensee.

The cable side is potentially equally problematic, with Rogers and Shaw owning a piece of five of the new services.

Besides teletoon and TreeHouse, Shaw has a 14.8% stake in Comedy. Rogers has 20% of ctv’s S3 regional sports and an indirect slice of chum’s Pulse 24 Ontario regional news service through Toronto Sun Publishing’s 29.9% interest. Also in the key Toronto/ Hamilton market, Western Co-Axial Cable, the Hamilton-based operator which tussled with Discovery Channel over payment earlier this year, has a 27.6% stake in SportsScope Plus through its holding company, First Control.

Although Rogers, Shaw and the ccta were on the blocks throughout the specialty hearings promising no preferential treatment, licensees are wary, echoing crtc commissioner Gail Scott, who filed a dissension on the TreeHouse licence.

‘The potential for preferential treatment of a distributor-owned service within the system is significant.

Looking ahead

Other interesting scenarios potentially kick-started by the cablecos’ selection of the digital tier revolve around Canadian content contribution inequities between the new and existing specialties. Conservative projections in this batch, buoyed by the digital distribution directive but now eligible for analog delivery, have put, on paper, the old/new broadcasters at a disadvantage.

Life, Discovery, Showcase and Bravo! are sallying forth with Canadian content commitments between 45% and 70% in primetime and spending 65%, 45%, 42% and 33% of gross revenues per year respectively on Canadian programming.

If the likes of Space (25% Cancon in year one, 40% of previous year’s gross) and Star (30% Cancon in year one, 39% of gross) are selected for analog distribution on the other side of the current packaging and distribution limbo, a regulatory rejigging of Canadian requirements may be requested.

In the interim, the cbc and tvontario resumes pebbling the new licensees are being filed accordingly until negotiations with the cablecos wrap. The Globe & Mail’s Duncan McEwan says he has no idea how many employees rob tv will hire.

‘Until we know how we’re going to be carried, I can’t be specific about how many people we’re looking for.

‘The way the decision is laid out is a surprise and I’m not sure the cable companies are any more prepared than we are.’