Is Local TV Dying in Canada?

Smaller Stations Close While CanWest Could go Bankrupt

Sep 13, 2009

The current economic climate hasn't been kind to the Canadian over-the-air television stations. But are there things that could have been done to prevent this?

CanWest Global Communications Corp., one of Canada's biggest broadcasters, could be on the verge of bankruptcy. The company has been given another extension from creditors, until September 25th 2009, to reorganize some of its debt. Meanwhile CanWest has sold most its E! Network stations and shut down its Red Deer, Alberta station on Monday, August 31st. They were to shut CHEK TV in Victoria as well, but the employees of that station were able to buy it at the 11th hour.

CanWest isn't the only one with problems. CTV also shut down a couple of its non-CTV Network stations in Brandon, Manitoba and Markham, Ontario. (Although the Markham station was at least converted into a retransmitter for CFPL London). In other words, it has come to the point where some of Canada's smaller stations feel that it is not worth the hassle of renewing their broadcast licenses. Other stations have seen cuts to local news. For instance, CTV Montreal stopped airing local news segments during Canada AM.

It is widely believed that the entertainment industry is immune to the effects of a recession. While this may be true of the movie industry, the same is not true of local television. The difference is that movies rely mainly on revenue from box office sales, while local television must rely on revenue from advertising . So, while the number of people who watch local television doesn't actually decrease in an economic slump, the number of people willing to pay for local television does.

Massive Media Concentration Also Part of the Problem

But another angle to this story that you won't see in the media is that there's maybe more to what's going on than just the economy. Many argue that the level of media concentration has grown incredibly high in recent years and that maybe the media and the CRTC also have themselves to blame.

Part of the reason why broadcast TV is running out of money is that CanWest and CTVglobemedia Inc., the Coke and Pepsi of Canadian Television, were able to go on spending sprees buying pretty much everything in sight. Case in point, the CTV Television Network used to be a network of independently owned affiliates. Now almost all CTV stations are owned directly by CTVglobemedia itself, with the exception of three of its smallest stations.

Canadian Media Concentration Higher Than The United States

The levels of concentration are even higher than in the United States where the FCC rules stipulate that no one single broadcasting company is allowed to own enough local broadcast stations to reach more than 39 percent of all US TV households. This is why networks like ABC, NBC, etc, still rely on independent affiliates to reach most of their viewers.

However, in Canada, sky's the limit. CanWest was able to build a national network and an international media empire in a short period of time. CanWest also took advantage of cross ownership by buying newspapers across the country, building a second broadcast network as well as cable networks, and investing in TV stations around the globe. Not bad for a company which didn't even exist until the 70s.

Facts about CanWest Global

CanWest Global has Spent Too Much Money

It was in 2000 when they spent $3.2 Billion for the Hollinger Newspaper chain that things went too far. This event marks the point when CanWest's debt load grew to an unhealthy level, not to mention that today's economy has been especially brutal to newspapers. But it didn't end there. In 2007, they then spent another $2.3 Billion for Alliance Atlantis and its cable channels. And then the economic crisis hit.

To be fair, there are advantages to owning multiple outlets: it allows owners to cut down on costs, cross-promote and increase buying power. Plus, the investments did make sense from an economic standpoint given that very few people were actually predicting a recession at the time. But moderation is also important to any healthy growth, and Global had been spending too much.

Essentially, CanWest has the personality of someone who can't stop using their credit card. This person may have no problem making payments until one day his boss announces sorry business is not so good and I'll have to lay you off for a couple of months and all of sudden he doesn't know what to do.

What Can Canadian TV Learn From This?

No one at the CRTC ever seemed to question whether or not allowing our television broadcasters to spend, spend, spend so that only a small handful of owners controlled everything was a healthy practice. Sure there were a few protests from citizens about concentration of media ownership. But for the most part, those protests fell on deaf ears.

So perhaps the lesson that Canadian TV and the CRTC could learn from this experience is that it is not just the stock brokers on Wall Street who need to develop healthier spending habits, but them as well. Maybe then, Canadians can get back to more diversity in content and more local ownership. Most importantly, no one will have to worry that the industry will disappear every time the stock market drops and the one person in charge can't pay the bills.

The copyright of the article Is Local TV Dying in Canada? in Film/TV Industry is owned by Steve Hatton . Permission to republish Is Local TV Dying in Canada? in print or online must be granted by the author in writing.