The CRTC’s July 16 decision on DTH distribution of out-of-market stations in smaller TV markets redirects millions of dollars away from several key private Canadian production funds, including the Bell Broadcast and New Media Fund, the Shaw Television Broadcast Fund, The Harold Greenberg Fund and the Canadian Independent Film and Video Fund.

The CRTC has directed Bell ExpressVu and Star Choice Television Networks to contribute 0.4% of their annual gross revenues to a new fund to be used by independent local broadcasters, excluding stations owned by the multi-station groups, namely Bell Globemedia (CTV), CanWest Media (Global), CHUM Ltd., Cogeco Radio-Television (TQS), Quebecor Media (TVA), Craig Media, Corus Entertainment and Rogers Media.

The private funds are taking the hit because the CRTC decision says the DTH services may not reduce their 4% of gross annual revenues contribution to the Canadian Television Fund.

The new local station fund is compensation for the suspension of DTH obligations for carrying out simultaneous and non-simultaneous program deletions in local markets.

ExpressVu’s funding of the Bell Fund is effectively reduced 40%.

This year’s initial fund estimate of between $7 million and $7.5 million is being reduced to $6 million, and the 2004/05 fund resource could be reduced by as much as $3 milllion, to $4.5 million.

Star Choice’s reduced contribution (1% of annual gross revenues) to the Shaw Television Broadcast Fund, The Harold Greenberg Fund and the Canadian Independent Film and Video Fund is expected to have less of a total impact than the cuts to the Bell Fund.

In a July 23 letter to CRTC chair Charles Dalfen, acting CFTPA president Guy Mayson says the July 16 decisions ‘will be devastating to the new media sector of our industry.’

‘These independent production funds [including those supported by Star Choice] play an essential role in helping to finance the development and creation of Canadian new media and interactive content, as well as drama, documentaries and programming targeted to Canadian children, youth and families.’

In interviews with Playback and in submissions to the CRTC, both the CFTPA and APFTQ strongly opposed proposals by both DTH operators to support programming initiatives of private Canadian broadcasters.

The CFTPA recommends that ‘the issue of funding support for local and regional programming should be considered separate and apart from the proposed carriage and compensation issues.’

There are a few small-market TV stations that are not affiliated with larger corporate groups.

The CRTC decision states it is ‘inappropriate to permit the diversion of DTH contributions from the Canadian Television Fund to provide financial assistance to small market stations.’ ‘However,’ says the CFTPA, ‘there is a logical inconsistency in the Commission’s approach if this same principle – of not robbing Peter to pay Paul – is not also extended to protect the DTH operators’ existing contributions to the independent production funds.’

CAB strongly disapproves

The Canadian Association of Broadcasters has also expressed strong disapproval of the CRTC decisions, predicting even tougher times ahead for small-market TV stations.

The negotiated proposal filed jointly by ExpressVu/CAB called for a new local station programming fund to be supported by 50% of ExpressVu’s contribution to the CTF, not from funds allocated to the Bell Fund. The joint submission also called for all local stations to share the new fund.

‘The original [ExpressVu/CAB] application explicitly stated that the proposal, which in fact was a negotiated agreement submitted by CAB and ExpressVu, kept the Bell Fund whole and the proposal was not to reduce that 1% [contribution],’ says Sheridan Scott, Bell’s chief regulatory officer and vice-chair of the Bell Fund. ‘But a number of requests made in the applications were not upheld by the CRTC, including the multi-station exclusion.’

The original ExpressVu/CAB proposal sought to redirect 2% of DTH’s gross annual revenues from CTF to a new local station fund.

The proposal was strongly opposed by both the CFTPA and APFTQ producer associations. Star Choice made a similar but separate application.

‘We’re very disappointed that one of the implications of this decision would be to decrease the resources that are available to the Bell Fund,’ says Scott.

Scott says the Bell Fund also ‘enables broadcasters to think about the future.’ She says the Bell Fund is an important part of broadcasters’ early efforts to move into interactive programming, identified as a potential growth strategy for broadcasters.

In his letter to Dalfen, Mayson says the CFTPA also takes issue with the CRTC’s calculation of the level of the proposed DTH contribution to the small-market fund.

The CRTC says the appropriate level of DTH compensation should not exceed 50% of the amount the small-market stations spent on station-produced programming in the year 2002. That total amount was $7.3 million. Accordingly, Public Notice 2003-37 stipulates that the DTH operators should contribute $3.6 million annually (which equates to 0.4% of gross revenues earned from their broadcasting activities during the same year) to a new independent production fund.

Growing DTH revenues

The CFTPA notes that from 2000 to 2002, DTH and MDS revenues increased from $52 million to $277.8 million, with the number of subscribers increasing from 964,000 to two million.

The association says it is ‘concerned that establishing a percentage of revenue formula to compensate small market broadcasters may not be the most appropriate mechanism, particularly as the contribution level would increase proportionate to revenues, despite the fact that these amounts could well exceed the level of programming contribution to small TV stations that the Commission has deemed appropriate.’

The CFTPA wants the CRTC to ‘review the revenues and subscriber numbers of the two DTH operators for the 2003 year…and establish a dollar cap on the level of contribution to be split proportionately between ExpressVu and Star Choice on a pro-rata basis based on subscriber numbers.’

‘To be fair, the level of station-produced programming should also be set at the 2003 level,’ says CFTPA.

-www.crtc.gc.ca

-www.cab-acr.ca

-www.cftpa.ca