The CTV Network and Englewood, co.-based investment company LMC International are first in line to scoop The Molson Company’s 20% of CTV Sportsnet in the wake of the crtc denying the voting interest transfer between Molson and Rogers Broadcasting.

Since foreign ownership rules dictate lmc’s share must cap at 33.3%, sources say ctv is the most obvious candidate to pick up Molson’s 20%, which is reportedly worth between $7 million and $10 million.

The ownership agreement dictates that if one of the owners wants to sell its share, the remaining owners have first right of refusal. Molson will be talking to both parties and then will look to other potential buyers if the partners walk away, says Barry Joslin, senior vp of corporate affairs for Molson Breweries.

Joslin says he can’t speak for the other shareholders, but ‘I would suspect that there’s a more than reasonable chance that the existing owners would want to take up our share one way or another. And if they didn’t, we would certainly be interested in talking to outside buyers, but [we] have to get over this internal hurdle first.’

ctv’s vp communications Tom Curzon says the network is still reviewing the recent decision and hasn’t yet discussed it with other Sportsnet shareholders.

Joslin adds that there’s no question Molson remains committed to selling a piece of its ownership. ‘What motivated us [to take an ownership stake] five years ago is different than what motivates us now,’ Joslin says.

He explains that in terms of holding the rights to or being a major sponsor of significant properties (such as the Molson Indy), as well as owning Molstar Entertainment, being involved in a regional sports network would have provided an outlet for regional properties that would not normally interest a national network.

The ongoing business demands and investments are also a factor in divesting. ‘Like with most new businesses, you go through a period of at least two or three years where what you pay out exceeds what you take in,’ Joslin comments.

Molson also wants to maintain an equal relationship with all broadcasters. ‘We recognize that having an ownership stake in one particular broadcasting network – be it a regional sports network or not – would probably cause some degree of difficulties in dealing with other broadcasters,’ Joslin says. ‘It was not unanticipated that once this [network] got up and running that it might be appropriate for us to step out.’

Undue preference

Rogers spokesperson Jan Innes expressed disappointment in the crtc’s Oct. 23 decision, but says Rogers is committed to the regional sports network and is also reviewing its options, which include legally owning up to 30% of Sportsnet, reapplying or appealing the decision.

Because Baton submitted the application, Innes says, Rogers has to discuss the options with Sportsnet management first.

In its decision, the crtc said its denial is not based on control but undue preference: ‘The Commission agrees that this potential is present in any situation where a cable distributor has an ownership interest in a specialty service, regardless of the nature of that ownership interest.’

Commissioner David McKendry, on the other hand, filed a dissension saying, ‘Rogers Cablesystems and other cable companies are doing what the Commission allows the companies to do. Denying Sportsnet’s application to allow Rogers to increase its ownership from 20 per cent to 40 per cent does not change Rogers’ ability to distribute the service.’

Canadian Association of Broadcasters president Michael McCabe agrees with McKendry’s assessment.

‘We think that it’s quite proper that distribution companies. . . own programming services,’ McCabe says. ‘I think [the crtc is] sending a message, but I’m not really sure that the fact of Rogers going up from 20% to 40% changes anything.

‘In some sense, I’m not surprised by the decision, but I’m sure it was essential to turn them down in order to deal with the issue of undue preference,’ says McCabe, adding that there is ‘a real need to work out these undue preference rules.’

Earlier this year, the crtc denied a similar request by Scortscope Television Network – the operator of Headline Sports specialty channel – to transfer 683,000 (48%) of its common shares to Shaw Communications.

‘This is another message that they want this issue addressed,’ says Scott Cuthbertson, equity analyst, TD Securities, ‘and until the issue is properly addressed, they’re not going to allow cable companies to increase their ownership because they feel there’s a conflict of interest here.’