CRTC revamps tangible benefits policy for broadcasters

New rules will see 80% of benefit dollars from acquisition deals go to the Canada Media Fund or other indie production funds.

Tangible benefit packages are some of the most contentious issues acquisitive broadcasters deal with during CRTC hearings on merger deals.

The broadcasters want to minimize the coin they must hand over to show tangible benefits from their corporate deals, while the CRTC wants money to go onto TV screens via indie producers.

Now the regulator has revamped its policy to dedicate 80% of tangible benefit dollars to independent productions funds, and 60% of that funding will go directly to the Canada Media Fund (CMF), the CRTC announced Friday.

Under the previous policy, consolidating broadcasters had to set aside 10% of the transaction cost for tangible benefits, with 85% dedicated to programming. The remaining funds went to social initiatives, such as training and industry organizations.

While broadcasters previously could invest their tangible benefits dollars in any of their own television programs that qualified as a program of national interest (PNI), the vast majority of that money now must now go to the CMF or other independent production funds, including the Bell Fund or the Shaw Rocket Fund.

The remaining 20% can be dedicated to other initiatives, such as digital media content production and grants to schools that offer broadcasting-related programs.

Although broadcasters expressed objections to the pooled funds, expressing concerns about funding competitors, the CRTC said in its comments that it believed the new policy leveled the playing field.

“…the Commission finds that there is little evidence to conclude that the funding of innovative and diverse programming would be hindered by directing tangible benefit contributions to the funds. Additionally, the Commission notes that the funds are independent managers of contributions from various sources whose objective criteria would permit for a transparent and public allocation of the contributions to support the creation of Canadian programming,” the decision reads.

“Consequently, while directing tangible benefits to the funds would mean that the contributions would potentially become available to a purchaser’s competitors, the purchaser providing the benefits would also be in a position to take advantage of any contributions provided by its competitors. The result is that the broadcasting system as a whole benefits from these contributions.”

The CRTC’s comments also indicated it is looking to minimize initiatives by broadcasters that they would have done anyways in the absence of a tangible benefits directive.

As to how the funds will be allocated through the CMF, Maurice Boucher, the fund’s marketing and communications director, says that given the newness of the policy, to start, broadcaster tangible benefits dollars flowing to the CMF will be directed into the fund’s existing streams.

“At this time, the CMF does not have plans to create a new stream,” he told Playback via email. “So it is likely that revenues from tangible benefits would be allotted to the CMF’s current Convergent and Experimental streams.  However, how revenues are spent, including revenues from tangible benefits, will be determined by the CMF’s board as part of our budget planning process for next fiscal year.”

Under the new framework, however, a broadcaster can request the funds be allocated to sources outside the CMF if it can make a compelling case that the alternative would better meet the public interest.

In addition to changing how broadcasters distribute tangible benefit dollars, the CRTC also eliminated exemptions that applied to certain ownership transitions. Previously, television stations with revenues under $10 million or unprofitable radio stations were exempt from creating tangible benefits packages. Now, no companies will be exempt from the tangible benefits policy. Companies can still apply for exemption from the tangible benefits policy, however, at the time of the transaction.

The decision follows the CRTC notifying broadcasters of their decision to review the tangible benefits framework in 2012. The CRTC put out a call for submissions from broadcasters to provide their thoughts on restructuring the tangible benefits system in October 2013.