Fine-tuning CTV

The private national network reinvents itself

VICTOR DWYER February 10 1992

Fine-tuning CTV

The private national network reinvents itself

VICTOR DWYER February 10 1992

Fine-tuning CTV


The private national network reinvents itself

When he resigned as president and chief executive officer of Camp bell Foods PLC'S British division two years ago to take over the

same positions at Toronto-based CTV Television Network Ltd., John Cassaday made a passionate vow to “get the juices flowing” at Canada’s only national, privately run network. As it turned out, Cassaday, who had built a reputation as a marketing genius during his six years at the food company, had written himself a tall order. Ratings had tumbled 14 per cent the season before. Advertising revenues were flat. And the network, as a condition of a fiveyear licence with the Canadian Radio-television and Telecommunications Commission (CRTC), was locked into spending about $90 million on Canadian programming in each of the following two years—an 80-per-cent increase from the mid-1980s. Perhaps most significantly of all, conflict among CTV’s eight affiliate owners was threatening to tear the network apart.

By the end of last week, however, Cassaday’s efforts to forge a new, more effective and harmonious CTV corporate structure finally appeared to have paid off: at a climactic meeting that capped three months of intense negotiations, the eight members of the network’s traditionally fractious board reached a tentative agreement on a new power-sharing structure among five owners for the 31-year-old network. Said Cassaday, 39: “We’ve got a lot more work to do, but we’ve come further than any of us ever dreamed possible.”

Unlike the big American networks, which are centrally owned or controlled, CTV has operated as a co-operative, with its 25 member stations represented on its board by their eight owners—each with a single vote, and veto power, on network issues. That system has fostered cumbersome, often hostile debates on the direction of the network. As well, the network’s larger members, with several member stations, complained that the system gave

them only as much power as single-station members. Aside from the problems that those tensions created within CTV, they also caused considerable irritation among CRTC officials. Members of the watchdog commission have complained that the network lacked the unified focus required to concentrate on what they see as CTV’s major job: creating top-notch Canadian programming. Said Scott Stirling, president of Newfoundland Broadcasting Co. Ltd. in St. John’s, which owns the CTV affiliate there, NTV: “The commission has made it pretty clear that it wants this sorted out once and for all.” Under the proposed new structure, which Cassaday plans to present to the CRTC in May, the five members who will become the new owners will invest a total of $20 million in the network. The three biggest members, whose voting power will reflect the fact that each invested 30 per cent of the $20 million and absorbed the same portion of debt, are Vancouver’s WIC Western International Communications Corp., CFCF Inc. of Montreal and Torontobased Maclean Hunter Ltd. (which owns Maclean ’s magazine). The two smaller members, each of which will contribute five per cent, are Kitchener, Ont.-based Electrohome Ltd. and Moffat Communications Ltd. of Winnipeg. The three members of the current board that are not buying into the new structure— Baton Broadcasting Inc. and CHUM Ltd. (which operates the Atlantic Television System), both based in Toronto, and Newfoundland Broad-

casting Co. Ltd.—will remain as affiliates, running network programs on their stations for a fee, but having no influence on network affairs.

As in the current system, the new ownership agreement allows CTV to buy a portion of the affiliates’ broadcast time for network programming, and to sell advertising time in those shows. That revenue goes back to the network to pay for programming as well as operating and administrative costs. The balance will be divided up among the five owners, who can reinvest in the network as they—and the CRTC—see fit.

The departure of Baton, the network’s biggest member, from the CTV boardroom is in keeping with recent policy statements. Baton

president Douglas Bassett has twice made buyout offers to his co-owners—most recently at a dinner meeting in April—and he had said that he hoped to secure an absolute majority ownership in the current negotiations. But it was widely expected that Baton, whose 11 CTV-affiliated stations make it the network’s biggest owner, would not agree to be part of any new structure that involved power sharing. Before last week’s meeting, Bassett told Maclean’s: “CTV needs a 51per-cent control block.

You’ve got to have somebody in charge. It is not our position to be in a new, smaller co-op.”

Baton pledged last week to keep its stations as CTV affiliates, but other owners expressed regret at its departure from network

management. Said Ronald Osborne, president and chief executive officer of Maclean Hunter, which owns CFCN in Calgary and Lethbridge, Alta.: “I’m sorry that Baton is not a part of it, but that’s their call. It is too bad simply because, on balance, when the major affiliate is in Ontario, which is important to national televi-

sion from both a programbuying and ad-revenue standpoint, it’s not as good as having it as a shareholder.”

The new agreement, however, does solve the thorny problem of how to apportion responsibility for deficits.

Since Cassaday became chief, the network has lost about $3 million—primarily because of the dip in ratings that preceded his arrival and the high cost of complying with Canadian-content regulations (an estimated 55 per cent of CTV’s $ 160-million annual costs). Under the old system, no single owner or set of owners was responsible for as-

suming shortfalls. In the future, the five owners will benefit from profits or suffer from losses in proportion to their shares in the network.

Cassaday set the process for last week’s agreement in motion in September, 1990. In his first major effort to replace the troublesome co-op structure, he hired Toronto management consultant Heather Reisman, president of Paradigm Consultants Ltd. and a specialist in conflict resolution. But after four months of regular meetings between Reisman and CTV’s owners, Cassaday said that he decided that “there wasn’t the will to make real compromises.” Others agreed.

Then, last fall, Cassaday turned to Harvard law professor Roger Fisher, a pioneer of mod-

ern conflict resolution methods and co-founder of Conflict Management Group of Cambridge, Mass. Experienced in negotiation in many of the world’s hot spots, including South Africa, Yugoslavia and the former Soviet Union, Fisher also presided over two forums on constitutional reform that Maclean’s conducted last

year. CTV broadcast a special report on one of those forums on June 30. Fisher first met with CTV’s owners in a threeday session in November, which included meetings that went late into the night, resulting in tentative plans for a new division of powers. They met again in December, and then on Friday, in a continuing effort to forge a solution before the CRTC hearing.

The tentative ownership agreement has not specifically ruled out the possibility that the three owners of affiliates who have chosen not to be on the new board, as well as any future purchasers of

CTV stations, could at some point secure places in the network’s boardroom. The most likely contender in the past has been Winnipeg-based media mogul Israel H. (Izzy) Asper, owner of CTV’s biggest private-sector rival, CanWest Global Communications Corp. Last year, Asper announced that he was considering the purchase of CTV affiliate CFCN in Calgary and Lethbridge from Maclean Hunter. At the same time, he agreed to lend about $65 million to Montreal CTV affiliate CFCF in return for a future controlling interest in the operation. Both arrangements eventually fell through, but not before many of CTV’s owners expressed strong reservations at the prospect of having a major competitor at their meetings. For his part, Cassaday said that he would have “a

difficult time imagining Mr. Asper at the board table.”

Other difficulties also were unresolved in last week’s agreement— particularly those dealing with Baton’s concerns about the expansionary plans of WIC. It owns CTV affiliates in Vancouver and Victoria, as well as two CBC stations and three independent stations in Western Canada. And in March, it signed an agreement in principle to buy Hamilton TV station CHCH from Maclean Hunter—leading to a letter of complaint from Baton to the CRTC. The reason: CHCH’s biggest competitors in southern Ontario are Baton’s CFTO in Toronto and the CTV affiliate CKCO in Kitchener, owned by Electrohome. WlC’s position in CTV’s boardroom could give it inside information about those competitors and, Baton contended in the letter, that would place WIC in “unavoidable, serious conflicts of interest [in] virtually all areas of CTV’s operations.” Last October, the CRTC allowed WlC’s purchase of CHCH—but said that while WIC could

keep one of its CTV affiliates, it had to sell the other one. wíe executives plan to appear before the commission this month to ask for that condition to be dropped.

Still, Cassaday says that he is confident that the CRTC will find the new ownership arrangement acceptable. And as he and the CTV board put the finishing touches on their restructuring agreement, the president is also grappling with financial worries. Despite the losses of the past two years—and the industry-wide difficulties in attracting advertisers during a recession— CTV managed to increase its ad revenues by seven per cent last year. And since Cassaday assumed office, audience ratings have risen an average of five per cent for CTV’s prime-time Canadian programming and an impressive 18 per cent for its prime-time American fare.

With cost cutting, as well as aggressive programs to lure advertisers and market CTV to viewers, the new chief, who has three children with his wife, Mary, has managed to wring a profit out of the network in its last full quarter. And many experts credit that turnaround to Cassaday. Said Michael Nolan, professor of broadcast history at the University of Western Ontario’s graduate school of joumal-

ism in London: “With audiences being pulled in all kinds of directions, you need someone who is highly market-oriented. Cassaday seems to be that kind of person.”

When network executives appear before the CRTC this spring, Cassaday says that he intends to ask the federal regulator for what he calls “a bit of time to digest where we are”—in terms both of revenues and of ownership. Then, he says, he can begin dealing with the commission’s continuing concern about increasing the amount of Canadian-made programming. When the CRTC granted CTV its current fiveyear licence in 1987, the network’s owners had just developed a new profit-sharing system that allowed for more money to be channelled into

domestic programming. In response to that new flexibility, and pointing to several years of healthy profits at the network, the commission increased CTV’s Canadian-content requirements by almost 75 per cent, to $403 million in Canadian programming expenditures over the five years of the licence. But Cassaday says that during the recession, “those kinds of increases are just indigestible.”

In recent months, the president has been meeting officials at the federal communications department, as well as various cabinet ministers—including National Revenue Minister Otto Jelinek and International Trade Minister Michael Wilson—to get that message across. “We are more than just a cultural institution,” Cassaday said. “We’re a business, too. We export product, we employ a large number of people and we’re important to this country.” The main concern for any network is ratings. Among Cassady’s greatest successes on that front have been the morning news show Cana-

da AM and the Thursday-night prime-time dramatic series E.N. G. Soon after taking office, Cassaday ordered a stylish new set for Canada AM and hired J. D. Roberts, previously an anchorman at Toronto’s CITY TV and at WCIX in Miami, to “breathe life” into the morning news program. Since then, the show’s audience has grown 16 per cent. At E.N.G., viewership has jumped 28 per cent since Cassaday’s arrival— a success that he credits to new dramatic directions suggested to the show’s writers by a series of audience surveys. Said the president: “In today’s increasingly fragmented TV world, you’ve got to find out exactly what viewers want—and give it to them.”

Meanwhile, in order to bring advertisers to CTV, Cassaday’s promotional department has

designed several campaigns intended to jointly promote network programs and the companies that sponsor them. Typical was last November’s sale to General Motors Corp. of every commercial minute of the two-hour movie When Harry Met Sally. In return, the car company placed advertisements for the movie in magazines and newspapers. The racy ads encouraged viewers to “see Saturn and feel the earth move,” references to GM’s new car and to a scene in the film in which actress Meg Ryan’s character fakes an orgasm in a restaurant.

At the same time, in an effort to achieve what he calls “cost improvement,” Cassady has trimmed news budgets and eliminated 70 staff positions from a total of 450, mostly through attrition, as well as closing news bureaus in Winnipeg and St. John’s. Some CTV employees say that the reductions have created morale problems and diminished the network's news-gathering capabilities. Declared one senior staff member, who requested ano-

nymity: “It makes for less investigative news. Good news is an investment and sometimes a gamble, and when you don’t have the bodies or the money, it suffers.” Meanwhile, Cassaday says that he is always on the lookout for other savings. Among his most recent decisions: trimming 30 primarily early-morning hours of about 230 hours of Olympic programming from the network’s coverage of this year’s Summer Games in Barcelona.

Despite those actions, Cassaday is quick to point out that his vision of CTV in the future is not only leaner and meaner—but bigger and better. On March 9, with the help of syndication specialists Polar Productions of Charlottetown, the network will begin producing 3lhand 10-minute evening radio newscasts, to be presented by CTV News anchorman Lloyd Robertson, for AM stations across Canada. Robertson’s anchoring of those clips, says Cassaday, also reflects his determination to market CTV’s better-known personalities more aggressively.

He added that he is also considering the creation of a suppertime TV newscast to be sold on a syndicated basis to CTV and independent stations. As well, Cassaday says that he is exploring the possibility of launching a 24-hour specialty news channel modelled after Atlantabased Cable News Network’s Headline News channel, owned by Ted Turner—and that he intends to submit a formal proposal for the service to the CRTC. He is also negotiating with officials at other networks, including the youthoriented YTV, to swap programming and share facilities.

But the past 24 months have had as many disappointments as triumphs for Cassaday, who holds what many industry analysts consider to be one of the toughest jobs in broadcasting. Said Derrick Leach, a Toronto-based investment analyst: “I wouldn’t have Cassaday’s job for all the tea in China—the problems with constraints, with the operators, with how the whole thing is operated, and the fact that every time I made a dollar, I was going to be branded as anti-Canadian.” But the CTV president has definitely made progress—most notably on the ownership front.

Broadcasting experts say that the new system will make CTV more effective in a highly competitive and fragmented industry. Said Nolan: “If you’ve got a group of affiliates struggling like they did, with that curious structure, it’s got to be debilitating. They’ve got to have a structure where they’re not going through these internal struggles—there’s enough to look out for externally.”

Referring to last week’s agreement, Cassaday said: “We’ve moved the ball another 10 yards down the field. We’re definitely near the end zone, but not over the goal line.” As he looks ahead, Cassaday says that he intends to be versatile. “What I want to ensure above all,” he added, “is that CTV does not get locked into the formulas that have worked—and sometimes not worked—for the past 30 years.” Determined to galvanize a troubled network, John Cassaday is tuning in to the future.