Our take on the Bell-Astral transaction

A new coalition mobilized this week opposing the $3.38B sale of Astral Media to Bell Canada. The timing is obvious—interventions by interested parties are due by tomorrow, leading up to the CRTC public hearings on the transaction on September 10th. But the logic is not as clear.

Quebecor, Cogeco Cable Inc., and Eastlink took out full page ads in national newspapers and launched a website to “warn the public of the risks to them as consumers and of the potential harm to the Canadian television industry if this unprecedented deal is approved.” They argue the sale adds to media concentration and for the potential of increased costs for consumers from advertising rate hikes and new kinds of fees across multi-platforms. Arguably these considerations are very important, but can be largely monitored.

However, buried in the news release is a point the Canadian Media Production Association (CMPA) believes is at the crux of the matter. In the coalition’s own words “the deal could result in the creation of fewer original Canadian programs, and fewer jobs in Canada.”

Astral, through its ownership of TMN, Family Channel and Teletoon, is a major exhibitor of Canadian produced film and children’s programming. Rather than kill the deal outright, the CMPA’s submission supports the transaction, but only if the concrete suggestions we put forward are adopted on how to better allocate the “public benefits” that stream from this sale to create new and improved Canadian programming. We believe in a clear, unequivocal and appropriate television benefits package that puts as much money on-screen as possible.

A contentious part of Bell’s proposal is the allocation or transfer of $40m in benefits to support wireless broadband expansion in Northwestel’s territory. While we agree with the independent ISPs and competitive carriers which contend that this is an anti-competitive allocation, we also submit this allocation is inappropriate since a significant amount of benefit money from a broadcast transaction under the Broadcasting Act is being proposed to be used to cross-subsidize an ISP business regulated under the Telecommunications Act.

It is more than a little ironic that mere months after the Supreme Court upheld a legal decision that ISPs in their role as carriers cannot be required to contribute to the objectives of the Broadcasting Act – which Bell supported – Bell now proposes to transfer contributions associated with broadcasting to the telecom world.

As we have stated, it is the position of CMPA that the large majority of public benefits associated with this transaction should flow to on-screen productions not to carrier infrastructure. It is based on this premise and our position below that we are prepared to support this particular increase in concentration.

It is our view that in circumstances where a significant and independent exhibitor is removed from the market that the public benefits that flow from this deal accrue to independent on-screen productions to maintain a reasonable level of diversity in terms of content. It is also critical that a majority of the benefits monies be allocated to the types of content that Astral was licensed to provide.

Second, we consider that these on-screen benefits could be substantial if appropriately valued and allocated. In our view in addition to reallocating the Northwestel transfer of $40M back to broadcasting, BCE must also be required to include the value of its acquisition from Astral of a 50% interest in Teletoon and other services.

Third, we believe it is critical that Bell increase the amount of benefits flowing on-screen from 69% to 85% which is more in line with CRTC requirements. A full allocation of benefits is particularly critical in these circumstances where a large independent exhibitor has been taken over and the level of concentration increases yet again.

Based on the more appropriate valuation and allocation proposed above the Commission could ensure an additional $62M would flow through to the most under- represented categories of film and kids which is fully consistent with the programming mandate of the assets being acquired by Bell Media.

While the CMPA has concerns that the disappearance of a large independent buyer of Canadian productions like Astral will increase the market power of vertically integrated carriers in acquiring content, we do not oppose this transaction outright. While the loss of a major buyer can leave the few remaining broadcasters to squeeze producer margins, requiring their adherence to the CMPA’s Terms of Trade Agreement will govern their business practices and prevent the expropriation of producer rights. Accordingly, we call on the CRTC to make Bell adhere to the Terms of Trade Agreement in respect of the Astral properties by attaching to them the same Terms of Trade Condition of Licence Bell already adheres to for its CTV properties.

In making these proposals, the CMPA notes that the reason for requiring public benefits in the first place was to ensure that the advantages of the transaction, and any resulting increased concentration of ownership, clearly outweigh the disadvantages, and that the transaction is in the public interest. Given the massive degree of concentration permitted so far in Canada the need to meet these objectives has never been higher.

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2 thoughts on “Our take on the Bell-Astral transaction

  1. This skirmish over Astral is just about how to divide the pie between self-interested parties. CMPA is just another party that wants to ensure its rents are protected at the expense of the public. You would have to be a Pollyanna to think that consumers will benefit by what this crowd does. What I find interesting is how those that at one time were fierce defenders of consumers are now equally fierce defenders of the special interests.

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