Monday, April 18, 2011

Media: TSN angling for bigger fee haul

By Jamie Sturgeon | Canada.com | Jan. 20, 2011

The Sports Network appears to be seeking massive increases in the price it charges television distributors for access to the popular specialty channel, sources said Wednesday.

It is perhaps an early indicator that vertical integration of broadcast assets under telecom companies will stoke customer television bills higher.

Sources said TSN, which is owned by CTV Inc., has indicated it will ask for between 50% to 60% more money for continued access to the channel during coming renewal negotiations with distributors.

"They've given us a heads-up that it's coming," said a source within one of the major distributing companies, asking for anonymity.

As with other specialty channels, TSN charges television carriers like Rogers Communications Inc., Bell Canada and Shaw Communications Inc. a fee per subscriber. Exact figures are not disclosed.

However, costs for "competitive genres" have increased since the category was deregulated in late 2008.

TSN, one of the top-performing channels on the dial with revenue of $220-million in 2009, commands an already hefty price for carriage. Estimates across carriers are well north of $2.00 per subscriber per month. The requested hike would add potentially another dollar or two to the tab in some cases.

The added expense is usually flowed directly onto the TV carrier's customer but masked through general rate increases. But a hike of the magnitude TSN is said to be seeking is "well beyond what's reasonable," the same source said.

A potential cause could be the $1.3-billion Bell bid to acquire CTV on Sept. 10.

In recent months, industry observers have speculated the deal and others like it will see broadcast content aggressively used by parent carriers to drive subscriber growth for their telecom products while weakening rivals by potentially withholding it or inflating prices.

Asked about whether Bell, which must gain regulatory approval ahead of a summer closing date, could influence the price, several Bay Street analysts said it was possible.

While Bell does not control CTV yet, operating changes have taken place, including the appointment of Kevin Crull as the broadcaster's chief operating officer. Mr. Crull is the former chief of Bell's residential services.

CTV declined a request for comment.

Bell's bid followed Shaw's $2-billion acquisition of the Global network and specialty channels of Canwest Global Communications Corp. last year. The deals cemented the so-called "vertical-integration" model among the country's major telecom firms.

There are exceptions to the new norm, however, notably Telus Corp. and Cogeco Inc., which own no broadcast assets. Analysts suggest this group, which also includes MTS Allstream in Manitoba, are particularly vulnerable to rate hikes or service disruptions if aggressive content strategies are pursued by their media-wielding rivals.

"All the cable providers that own content have leverage in negotiations. Those who don't have less," analyst Jeff Fan of Scotia Capital said. "[It means] content costs are probably rising faster than their competitors."

Still, TSN is also bargaining with carriers from its own strengthened position. In an on-demand world where sitcoms and other programs are increasingly liberated from the traditional boundaries of linear TV, live events like professional sports are climbing in value.

"They probably feel they can bear more in the marketplace," one media lawyer suggested.

"It seems like the drivers for subscriptions are more and more this idea of 'must see' content, and sports is pretty high up there."

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