Business

The widening rift at CTV

JOHN SCHOFIELD February 24 1997
Business

The widening rift at CTV

JOHN SCHOFIELD February 24 1997

The widening rift at CTV

Business

JOHN SCHOFIELD

Bill McGregor scoffs at the very notion. Shouting, he says, was never the way they did business around the boardroom table at the CTV Television Network in Toronto. Now sulking—that was a different story. Tension? Most definitely, says McGregor, a director of the company from 1965 to 1993. In fact, the internal dissension that has plagued the loosely knit network of 25 stations for much of its history would be enough to get anyone down. Twice in the past five years, the Canadian Radio-television and Telecommunications Commission has given the network provisional licence renewals while its shareholders hammered out new ownership agreements. “We used to have some pretty good go-rounds,” says McGregor, currently a consultant with Kitchener, Ont.-based Electrohome Ltd., a CTV part owner. But through it all, decorum was the order of the day: “We were a civilized group.” Relations in the CTV boardroom are about to become less cordial. A flurry of CRTC decisions over the past six months has radically reshaped Canada’s television landscape and could fracture CTV’s already-disjointed board beyond repair. The changes promise to bring the private network’s major shareholders into direct conflict, and in all probability will spell the end of CTV or force it into the hands of a single owner. “It’s been teetering on the brink of disaster for several years,” says David Ellis, a Toronto media consultant and author of Networking, a 1991 book about Canada’s English-language TV broadcasters. “There have been many attempts to perform surgery on the basic structure of the network, but the inherent conflicts of interest have never been resolved.”

Far from resolving anything,

A NETWORK DIVIDED

nications Ltd., which owns British Columbia’s most popular channel, BCTV. WIC and Baton already compete head-to-head in Alberta, with WIC’s two independent stations, ITV in Edmonton and CICT in Calgary, going up against Baton’s two CTV affiliates, Edmonton’s CFRN and Calgary’s CFCN.

A similar duel is shaping up in Central Canada. Last summer, the CRTC approved a bid by WIC’s independent station in Hamilton, CHCH, to broadcast its signal across most of Ontario. That puts CHCH into competition not only with Baton’s CFTO in Toronto, but also CFPL in London, CJOH in Ottawa and 12 other Baton stations in the province. The battle claimed its first victims last week when Baton cut 154 jobs at its Ontario stations. “The advent of new competitors places great pressure on our airtime revenues,” explained George Lund, a senior Baton vice-president.

In spite of the intensifying rivalry with Baton, WIC moved last October to double its share of CTV to 28.48 per cent by buying Montreal’s CFCF from Groupe Vidéotron Ltd. for $70 million. Regulators are expected to approve that deal in March. Baton, meanwhile, is awaiting approval of its $117-million merger with Electrohome, which will increase its stake in CTV to 42.72 per cent.

In its lofty role as a guardian of Canadian culture, the CRTC is expanding each broadcaster’s potential market in order to raise ad revenues and encourage more original programming. The latest moves leave English Canada’s three major private broadcasters roughly tied in terms of market share. Once its Vancouver station is operating, Baton will reach about 76 per cent of the country’s English-speaking audience. WIC’s empire, with the acquisition of CFCF, will encompass 75 per cent of the market, while Can West Global already reaches 72 per cent. CanWest could increase that to 76 per cent if the CRTC approves its bid to crack the Montreal market by purchasing CKMI, a moribund station that now serves Quebec City’s small anglophone community.

The freshly levelled playing field could quickly turn

ed tensions at the network. In late January, the federal agency awarded a hotly contested television licence for Vancouver to Baton Broadcasting Inc. of Toronto, CTV’s principal shareholder. The decision brings Baton, controlled by Toronto’s Eaton family, into direct competition with the network’s second-largest shareholder, Vancouver-based WIC Western International Commu-

ing behemoths slug it out for the most popular new shows. Both Baton and WIC—along with Global and CTV—now vie for the national rights to Canadian and U.S. programs, in some cases reselling those rights outside their own broadcast areas. In practice, both Baton and WIC tend to avoid bidding against CTV, but the increasing competition between the two nevertheless threatens to poison the air at the network, suggests Stuart Craig, the president of Craig Broadcast Systems Inc. of Brandon, Man., one of the losing applicants for the Vancouver licence. Says Craig: “Definitely there’s conflict there as far as purchasing of programming and going after advertisers.”

Vancouver promises to be one of the toughest battle-

grounds for WIC and Baton, which has long coveted a piece of the city’s lucrative ad market. “Not to be in Vancouver was an enormous competitive disadvantage because our competitors in Vancouver are very much in our markets,” says Ivan Fecan, Baton’s president and CEO.

BCTV will feel the unwelcome presence of Baton almost immediately. The city’s No. 1 channel, with nearly double the market share of its closest rival, BCTV currently buys the Vancouver rights to 11 programs from Baton, including such hits as Melrose Place and Home Improvement. Come next fall, all of those shows will appear on Baton’s new Vancouver channel, CIVT, putting a huge dent in BCTV’s ad revenues, says Bill Fitch, associate media director in Vancouver for BBDO Canada, a Toronto-based advertising agency. “I’ve got Melrose Place booked for B.C. Tel right to the end of the year,” he says. “But if it moves to [Baton’s] CIVT, I’ve got to look to see if BCTV will have comparable programming. Otherwise, I’ve got to renegotiate.”

Some of those programs will be impossible to replace, admits Jim Macdonald, the president of Toronto-based WIC Television Ltd. “There’s no question that there will be some impact on BCTV from the loss of those shows,” he says. But much of the damage, he argues, will be offset by the fact that Vancouver is the country’s fastestgrowing television ad market. “Costs have basically doubled in the past five years,” says Fitch.

It will take more than healthy ad rates, though, to mend the cracks

in CTV’s management structure. Not surprisingly, both Macdonald and Fecan are at pains to play down their potential differences. Fecan, a former CBC and NBC executive who was once touted as the boy wonder of Canadian broadcasting, maintains that Baton’s Vancouver licence changes nothing as far as CTV is concerned: “I can’t imagine why it would complicate things.” And both men profess their commitment to the network. With about 80 per cent of Baton’s revenues coming from its CTV-affiliated stations, “CTVs health is very important to us,” says Fecan.

Even so, Baton and its fellow shareholders forced the network three years ago to reduce its broadcast time by a third, to 40 hours a week. (CTV retains the ad revenues for that time and pays its affiliates an annual fee, which totalled $17.5 million in 1996.) For their part, the CTV board members agreed to surrender their right as individual shareholders to veto CTV initiatives, opting instead for majority rule. The deal restored an uneasy peace to the boardroom, but how long it will last is open to question. “August, 1999, is the end of the current agreement, and there is the opportunity at that time to make all kinds of changes,” says Macdonald.

While most of the sniping takes place behind closed doors, differences occasionally break into the open. Last season, for example, WIC bought the rights to Suddenly Susan, aTime Warner show starring Brooke Shields, and aired it on some of its stations during a prime-time slot normally set aside for CTV—angering the network’s other shareholders. Another sore point for Baton is that it

BUSINESS_

rarely succeeds in selling its own productions to CTV, including a two-hour drama last year about rower Silken Laumann.

Those frustrations can only get worse now that WIC and Baton are competing almost entirely on the same turf. ‘WIC and Baton have worked themselves into such a competitive position that one or the other of them should step out,” says Can West Global chairman Izzy Asper. Another broadcasting executive, who has close ties to the CTV board, says that Baton’s success in acquiring a Vancouver licence has fundamentally changed the dynamics within CTV. Now that they have roughly equal shares of the English market, each of the two principal partners has the power to strike out on its own. “Certainly, I don’t see how CTV will remain in its current form,” the executive says. “You may see CTV disappear and in its place have three television networks—CanWest, WIC and Baton.”

Even WIC’s Macdonald says he believes the CRTC’s decision in Vancouver was a thinly veiled order to CTV shareholders to get the network’s house in order. “I think it’s pretty clear that by giving Baton a licence in our flagship market,” he says, “there is an expectation, and clearly an invitation, to sort out the ownership of CTV once and for all.” Macdonald adds that WIC’s shares are likely worth more to Baton than they are to WIC. Translation: the most likely outcome is that Baton will eventually buy out WIC and assume majority control of CTV.

Fecan does not dispute that interpretation. He points out that Baton is as eager as it ever was to take control of CTV: “There’s no secret to it. We’ve been saying it for 30 years.”

But others question why Baton or WIC would even want to remain part of the network. “I can’t see any advantage in maintaining CTV now that they have distribution in all the major markets,” says a former CTV board member. Baton has already positioned itself for possible independence by launching the Baton Broadcast System, a service apparently modelled on Asper’s highly profitable Can West Global System. Paul Taylor, a communications specialist at the University of Washington in Seattle who has studied Can West’s approach, says that by forgoing a network licence, broadcasters avoid certain Canadian content requirements and reduce their programming costs. Asper says his experience shows that conventional networks are a thing of the past. “I can’t argue with his profits,” says Fecan.

Meantime, Fecan is holding his cards close to his chest. “A deal’s a deal, and we’re happy to be part of it,” he says of the existing CTV partnership. “But the world evolves and changes, and I think nothing is forever. For a whole bunch of reasons, it makes sense now. Will it make sense tomorrow? I don’t know.” As they say in the business: don’t touch that dial. □