Last week’s $2.65 billion proposed mega-merger of the Corus Entertainment and Shaw Media assets rocked the media industry and Canadian business community at large.

While further consolidation was largely expected, bets had Shaw Communications bringing Corus in house or even Rogers taking over Corus. But with Rogers’ balance sheet bogged down by Vice and NHL rights, the move seemed unlikely. And as it turns out, Shaw Communications had its eye on a different prize: Wind Mobile.

However, if it had been Rogers, Bell Media or any other major company with an interest in Shaw Media’s assets, one outcome would have been fairly clear: a tangible benefits package would have been on the table as a condition of sale.

In its most recent update to the policy, in September 2014, the CRTC wrote that it “finds it appropriate to require that tangible benefits generally be provided for changes to the effective control of all radio and television programming services…Where a request for an exception is sought, the onus will be on the applicant to show that the exception is in the public interest and meets the criteria for an exception set out in this policy.” The commission does not explicitly define (quantitatively or qualitatively) what constitutes a change and refers most often to a standard reference of “changes to the the ownership or effective control of broadcasting undertakings.”

With tangible benefits worth 10% of the purchase price, the total in this case would have been $265 million.

However, whether or not tangible benefits will be associated with this particular realignment of assets is murky at best. At the heart of the matter is the question of ownership and how it has changed. The Shaw family is a majority shareholder in both companies, so it can be argued that a change in ownership – the trigger for tangible benefits – has not taken place.

The CRTC is so far silent on the matter as it takes the deal under review. “The transaction announced shows that Corus believes strongly in the future of broadcasting in Canada. The CRTC will follow its usual practice, which is to examine transactions closely to ensure they are in the public interest,” a CRTC spokesperson told Playback in response to a query on tangible benefits.

There are several viewpoints from which to consider whether or not Corus would be compelled to provide tangible benefits in the terms of the deal.

Michael Hennessy, media consultant and past president and CEO of the CMPA, argues one view is that because the companies’ stocks are traded separately, and, more significantly, that the deal is subject to approval by Corus’s minority shareholders exclusive of the Shaw family, that the companies are in fact distinct entities and as such, warrant consideration of tangible benefits.

“The fact that there is a separate set of shareholders making that decision would clearly indicate to me that there’s a strong argument to be made that this is not simply a transfer of assets within an integrated holding company… [it] would suggest that there is a significant difference here,” he told Playback.

Long-time Canadian broadcast exec Jay Switzer, co-founder and chairman of Hollywood Suite, on the other hand, argues that from a regulatory perspective, Corus has long been treated as part of Shaw Communications. Acknowledging the plight of Canadian producers in a difficult landscape made even more difficult by the deal, Switzer said it would simply be contradictory for the CRTC to start treating Corus as a separate company now.

“I have watched while Corus has been saddled with the disadvantages of being considered a related party to Shaw for 15 years. It has hurt them in many ways: in terms of linkage rules, channel counts with other BDUs and so on. So for that reason, even just speculating, I think it’s fair, with what little I know, that if they make the claim that there is no change of control and it was controlled by the Shaw family and it will be controlled by the Shaw family that no tangible benefits be paid.”

“I’ve got no skin in this game,” he continues. “It strikes me as a Canadian, and a stakeholder in the [TV] business, that if you’ve suffered for 15 years you should be able to enjoy the other side of those advantages. I say that while I have great sympathy for those who will say this is the last great chance for producers to get help in a very challenged space.”

A key concern in the deal for independent producers is, of course, what the effects of further consolidation will be, especially regarding a company that has plainly stated its desire to produce, own and distribute more of its own original content. Vancouver entertainment lawyer Arthur Evrensel of Michael, Evrensel & Pawar LLP, which has handled a significant number of M&A deals in the Canadian production sector, said he believes the CRTC should be compelled to generate the tangible benefits package as part of its mandate.

“I would argue that one of the consequences of [consolidation] will be to slowly eliminate the independent producers on which [broadcasters] rely to create the productions for their networks. A strong and independent production community is an essential element for the Canadian landscape in the globally competitive television industry…The CRTC should be promoting policies which enhance the production landscape to improve the content being produced and broadcast.”

As Playback contributor Mark Dillon reported in 2014, tangible benefits have racked up significantly in volume over the last 10 years. Bell’s Media’s CHUM and Astral deals and Bell’s CTVglobemedia deal, were worth $267 million in benefits; Shaw’s commitment from its CanWest purchase (factoring in Alliance Atlantis) was $21 million and Blue Ant Media was on the hook for $8.6 million for its GlassBOX, High Fidelity HDTV, Travel + Escape and Bold acquisitions.

All of that, according to a 2014 Boon Dog Consulting report, comprised 22 packages totalling $416 million for programming-related initiatives to be spent by 2021. DHX’s 2014 acquisition of Astral assets (purchased from Bell Media) added another $17.1 million to the pile, to be paid out over seven years. In 2013-2014, Canadian broadcasters spent $138.7 million in tangible benefits, according to 2015 Boon Dog numbers.

Corus’s acquisition of Shaw Media considerably strengthens the company’s presence in the Canadian landscape and may offer it a fighting chance in the post-pick-and-pay world. But the deal is sure to further shrink opportunities for Canadian producers to pitch their wares in their home market, disappointing even for the well-capitalized companies to which Jean Pierre Blaise has so often referred in his Let’s Talk TV talks. Is that loss of opportunity worth $265 million? The CRTC should take a hard look to find out.

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