Montreal: Canada’s pay-per-view programming companies have applied to the crtc for important changes in their direct-to-home conditions of licence, saying the same conditions are prohibiting the rollout of their businesses.

Canal Indigo, Viewer’s Choice Canada and WIC Premium Television (formerly Allarcom Pay) are asking for the removal of the condition stipulating the licensee shall purchase non-proprietary exhibition rights for feature films from Canadian distributors, as well as the condition requiring a film’s gross ppv revenues be split equally between the programmer, the dth distribution undertaking and the rights holder.

According to the broadcasters, the u.s. studios are applying intense pressure in negotiations by refusing to supply feature film product for dth distribution in Canada. The Canadian services say the ‘imposed’ regulatory hot points are effectively making their business untenable.

According to Ric Davies, vp, WIC Premium Television, the studios see the current licensing conditions ‘as a severe restraint of trade.’

‘The issue is very simple, I believe,’ says Davies. ‘With these two conditions of licence in place we have no business. It’s that straightforward.’

The issue has the potential to impact beyond the supply of ppv movies and affect the growth of the Canadian dth businesses in general. Per Davies, ppv programming has been vital to the growth of dth in the u.s.

The Canadian Association of Film Distributors and Exporters says it intends to file a submission in opposition to the broadcasters prior to the Dec. 9 deadline.

‘We are going to look for support from all other (Canadian) organizations that are tired of being told what to do by the major American studios,’ says newly named cafde president Richard Paradis.

Paradis says wic and Astral Communications (the operating partner for vcc and the French-language Canal Indigo service) both supported the initial late 1995 crtc decision.

‘What we’re asking ourselves is if they [the broadcasters] felt courageous enough to confront the American studios last time, why are they not doing it this time?’ he says.

The real sticking point in the negotiations with the majors is principle, as opposed to ppv-generated dollars, which Davies says are minuscule and will remain so in the midterm.

At least three of the studios, Fox (Motion), Columbia (Media Group International in Toronto) and Universal, already subdistribute programming in Canada. In Universal’s case, a ‘theoretical’ ruling from Industry Canada indicated the studio is, at least within the terms of the defining test, an officially (Seagrams-owned) Canadian company. ‘As such the issue doesn’t technically apply to them,’ says Davies.

The majors, the big winners in the $1.7-billion Canadian home-video market, the main ‘alternative to ppv movies, are well positioned to hold out against the ‘highly irritating’ licensing conditions.

On the revenue split issue, the imposed percentage (one-third) may in fact end up being workable, says Davies, pointing to the existing one-third gross revenue split for ppv movies delivered on cable.

The real problem

The real problem is the ‘imposed’ nature of the split, compounded by other negotiation issues such as the overall number of films to be acquired in addition to the obvious blockbusters, and how much marketing investment can be leveraged, says Davies

‘Almost always, by its very nature, pay-per-view is a partnership,’ he says.

Paradis says cafde currently has no proof the studios are actually withholding movie product because ‘the ppv stations that are on the air right now [are programming] big-time American films. So it is for them [the broadcasters] to demonstrate and to prove product is being refused.’

And while cafde plans a strong defense of the non-proprietary subdistribution condition, Paradis says the distributors are not opposed to the removal of the revenue formula.

cafde expects other Canadian craft and professional associations to support its position.

‘We are certainly working on it and we’re not going to let it be known right away who is going to be with us because we don’t want them [the broadcasters] doing a number on them,’ says Paradis, adding:

‘We find it very peculiar that they are doing this. Sometimes they carry the flag, and other times they seem to have trouble carrying it. As true Canadians you either carry the flag or you don’t.’

According to Davies, broadcaster invention was limited to the rebuttal stage of the crtc hearings. Both contested terms of licence were confirmed at a subsequent spring ’96 review by the federal Cabinet and at a later June ’96 Federal Court of Appeal hearing.

According to cafde, the broadcasters initially supported the revenue-split formula, while professional associations like the cftpa and the dgc were also onside. Lawyers representing the Canadian Motion Pictures Distributors Association, representing the majors in Canada, vigorously opposed both conditions at the Federal Court of Appeal hearing.

The separate ppv licensing conditions essentially grew out of the larger debate as to whether satellite broadcasting heralded the end of regulation in the domestic market. The focus was the growing opposition to a Power DirecTv licence bid based on delivering the ppv component via an American satellite.

According to Davies, the studios receive between 45% and 50% and higher of the ppv movie receipts in other countries.

‘Government probably cannot legislate the Hollywood studios to sell us their movies,’ he adds.

Meanwhile, he says, the ‘predetermined’ licence conditions are putting the lid on the country’s satellite ppv industry.