Business

The CBC at the Brink

Anthony Wilson-Smith June 14 1999
Business

The CBC at the Brink

Anthony Wilson-Smith June 14 1999

The play for TSN

CTV’s bid shows the value of specialty channels

Business

John Geddes

Rick Brace, president and general manager of The Sports Network Inc., remembers the days before his channel emerged as a powerhouse franchise in the specialty television leagues. At TSN’s first little studio in downtown Toronto 15 years ago, the red lights on top of the cameras—the ones that tell on-air talent which lens to smile into— were cheap trailer lights bought at Canadian Tire. “There weren’t a lot of people back then who gave us much chance of succeeding,” Brace recalls with the satisfied air of a man whose detractors have long since fallen silent. These days, nobody is improvising equipment out of auto parts at TSN. Its sleek, state-of-the-art studios are housed in a gleaming suburban tower that might pass for the headquarters of a prosperous software company. And like many a profitable high-tech upstart, TSN is being swallowed in a takeover that television industry insiders say was inevitable for such a prized property.

Inevitable, maybe, but with a twist

that has also made it controversial. CTV Inc. is buying a controlling stake in TSN’s parent company, NetStar Communications Inc. of Toronto, which also owns the French-language sports channel RDS and The Discovery Channel. Toronto-based CTV announced its winning bid of $394 million for 68 per cent of NetStar in February, bettering the $370-million offer of Winnipeg’s CanWest Global Communications Corp. What has professional and amateur sports circles buzzing is the fact that CTV already owns Sportsnet—the only other English all-sports channel licensed by the Canadian Radio-television and Telecommunications Commission.

Detractors say the regulator must not let CTV grab a monopoly

in cable TV for armchair jocks.

The main issue is the money teams and leagues collect when they sell the rights to broadcast their games. Before going to air last year, CTV’s Sportsnet began bidding aggressively against TSN. Sports franchises, including some of Canada’s strapped National Flockey League teams, were offered more than they had ever seen for rights. Industry sources say Sportsnet paid $16 million to win a coveted contract—the national cable rights to air a Tuesday night NHL game—up from an estimated $10 million TSN had paid the previous season. For pro sports owners, the prospect of that bidding competition disappearing is bad news. Yet a rumoured united front against allowing CTV to own both sports channels has not emerged. Instead, sources say the competition bureau, the federal antitrust watchdog investigating the deal, is hearing a mixed message. The expected warnings against allowing CTV to own both TSN and Sportsnet are coming from major-league hockey, baseball and basketball. But surprisingly, the Canadian Football League, the Canadian Curling Association and the Canadian Interuniversity Athletic Union all told Macleans they are more than comfortable with CTV’s plan.

The split reflects the very different priorities of the North American big leagues and the s smaller-scale Canadian I games. When Sportsnet I and TSN bid up the f price of NHL rights, the I two channels also eng gaged in a bidding war I for CFL national rights,

The Top 10 Specialties

The percentage of weekly viewing time that cable subscribers spend watching English specialty channels:

TSN 4

YTV 2.7

msm&m Teletoon 1.9

CBC Newsworld 1.3

1.2

Showcase 1.1

Channel

The Discovery

1.1

Family Channel 1

CTV Sportsnet 0.9

Business

which TSN won. But the CFL commands a fraction of the fee for NHL, National Football League and National Basketball Association broadcasts. The CFL simply wants to get as many games on air as possible. CTV has persuaded the league that, if TSN and Sportsnet end up under one corporate roof, there will be more three-down football on TV. “We can see an opportunity for more regional broadcasts,” says CFL president Jeff Giles.

Canada’s university sports body echoes that optimism. “We see TSN and Sportsnet as complementary, not competitive,” says CIAU chief executive officer Kerry Moynihan. CTV is promising to emphasize Sportsnet’s mandate to air regional games, leaving TSN to concentrate on national events. The CIAU hopes this means Sportsnet will broadcast Canadian college matches that might not rate the nation-

Top 10 by Advertising

inv MuchMusic BIM-'i CBC Newsworld iTÖR Discovery Ad revenues fill Life in 1998 for Showcase English-language BSCMT specialty channels m WTN (in millions) 91 5.1* The Weather Channel ♦Includes earnings from the French-language MétéoMédia

wide audience of TSN. Similarly, the CFL hopes to round out TSN’s schedule of national games with a new package of regional broadcasts on Sportsnet.

Coaxing the CFL and the feisty CIAU onside is a tactical victory for CTV. But insiders remain skeptical the network will win over federal authorities. The competition bureau is studying

not only the issue of rights payments, but also the possibility that CTV might drive up advertising rates.

The TSN deal illustrates as never before the growing clout of the specialty channels. The specialties and pay TV have seen their share of all English-language TV viewing in Canada soar to 43.1 per cent this year from 13.8 per cent in 1989. And TSN attracts an industry-leading four-per-cent share of all TV viewing in households hooked up to cable. “SpecialtyTV will continue to fragment audiences at least for the next few years,” predicts Scott Cuthbertson, a media industries analyst for TD Securities Inc. That is why CBC, CTV and Global are vying for bigger slices of the specialty market.

There is little doubt that CTV will hold on to TSN. Even if the bureau directed the network to sell off one sports channel, CTV would likely shed the less-established Sportsnet. Or the competition cops might take the less decisive move of passing on their findings to the CRTC, which must ultimately approve the deal. If CTV gets past the bureau, it will face tough scrutiny at CRTC hearings expected in the fall. Friends of Canadian Broadcasting, the lobby group best known for its staunch support of the CBC, strongly opposes CTV keeping both sports services. “We care about sports just about as much as we do about drama programs,” says Ian Morrison, the group’s head. “It’s culture.”

Canadian culture it may be to some, but sports is an international business first. Despite its undisputed success, TSN’s name is disappearing: CTV plans to turn the channel into ESPN Canada. The U.S. sports network ESPN Inc., part of the Disney empire, has owned a minority share of NetStar since 1995. As part of the negotiations that saw CTV snatch TSN, ESPN pressed to extend its brand name into Canada. Brace can hardly disguise his regret at the thought of the old name vanishing. “TSN is recognized,” he says. “It’s something that will have to be looked at, just how that transition is going to be handled.” One way or another, Canadian sports TV will never look quite the same again. EH]