CRTC inches forward on broadcaster pleas for regulation relief

May 14, 2024

It may be moving forward at a funereal pace, but this week the CRTC granted modest regulatory relief to two major Canadian broadcasters, Corus and Québecor TVA.

Corus gets its scaled down request to reduce its obligation to produce “Programs of National Interest” from 8.5% to 5% of its annual revenues, effectively shifting the difference to spending on lower cost (and profitable) Canadian programming such as lifestyle or reality shows.

Corus is the operator of the Global News network of 15 local stations as well as several specialty TV channels. It is owned by the Shaw family who cashed out in 2022 by selling its telecom and media distribution assets to Rogers and Québecor.

Meanwhile, the Commission is allowing Québecor’s TVA network to cancel its weekend news casts in the Québec City region, where it runs third behind local Bell and CBC stations. TVA is now free to reassign, at least on paper, its five hours of weekend-news programming to weekdays where it is already operating north of regulatory requirements. The Commission’s benign confidence that the job impact on the station’s news staff will be “limited” may not square with the elimination of weekend shifts.

In both cases, the Commission insists that the regulatory relief is targeted to special circumstances and it is not offering sweeping regulatory relief to all Canadian broadcasters, especially Bell Media and Rogers Sports & Media, despite previous demands for urgent reductions in overall Canadian Programming Expenditures and news programming. That debate is put off to the Commission’s “Phase 2” implementation of Bill C-11 sometime over the next two years. The Commission sent a letter to Bell and Rogers telling them to cool their heels.

The Commission was satisfied that Corus finances are in worse shape than the media divisions at Bell and Rogers.

One of the reasons for that is the Shaw family cut Corus loose from its access to $13 million in supplementary news funding when it sold its cable division to Rogers, depriving Global News of about 10% of its annual news budget in one move. Cementing that loss of news dollars, the Commission has now decided that Corus will not get access to any share of the $18 million annual Independent Local News Fund that was set up by the Commission in 2017 without foreseeing that 15 Global stations would become “independent stations” overnight as an outcome of the Shaw family selling its cable division to Rogers.

The regulatory relief the Commission has given Corus is not earth shaking.

For historical reasons related to an overweight portfolio of specialty channels, Corus had a higher programming obligation (8.5% of revenues) than Bell or Rogers (5%) to produce the dramas and documentaries that make up the Programs of National Interest (PNI) regulatory category. The Commission had previously knocked down that higher requirement in 2016 only to be reversed by the Liberal cabinet in 2017.

The effect of this new Commission ruling is to redirect the 3.5% difference, about $33 million in annual programming dollars, from high-cost PNI to other lower cost shows that make money. The extra profit (as opposed to a loss on PNI) earned on that $33 million investment is not a game changer for Corus.

Even though the Commission was at pains to limit the justifications for the targeted regulatory relief to special circumstances —Corus’ poor balance sheet and TVA’s veiled threats to close its Québec station— the writing is on the wall suggesting much more difficult deliberations to come.

While the Commission has made a distinction between the hard luck of Quebecor and Corus on one hand and finances of Bell and Rogers on the other, the bottom lines of all large Canadian broadcasting operations have become ugly. The business model in which profits earned by specialty channels or cable subscriptions underwrote losses at network stations has run out of gas.

Take Bell as an example.

In 2022 Bell lost $85 million in “conventional TV” (network stations). But it made $310 million in specialty television. As for cable and satellite distribution, it lost $474 million. But for its accountants chalking off its annual depreciation of its fibre network investment it would have made a $177 million profit in distribution.

The picture changes in 2023. Bell lost $205 million in conventional television. Its specialty television profits fell to $121 million. Factoring out the fibre network depreciation, its distribution operations went from black to red with a $66 million loss. (And frankly, one can’t just “factor out” the normal depreciation of billion dollar networks).

There is an adult conversation coming. But who knows when.

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Correction: The capital equipment depreciation write-offs for Bell’s cable and satellite operations do not include fibre network construction, rather broadcasting related hardware such as set top boxes and satellite equipment.

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