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The CRTC will be holding a new public proceeding examining whether broadcast distribution undertakings (BDUs) may be allowed to insert ads into the two minutes per hour of local avails on U.S. cable channels. Comments were due last week and replies are due on April 2. This proceeding grew out of the Commission's BDU and Specialty hearing last year.
According to Cartt, "U.S. channels like CNN, A&E, Speed and the Golf Channel make two or three minutes per hour available for U.S. cable, satellite and telco carriers to sell ads on...That time is also available to Canadian carriers but they can"t sell it. Regulations say that 75% of the time must be made available to Canadian broadcasters and 25% of the time can be used to promote other carrier products (like high speed Internet and phones)."
The CRTC is looking into allowing MSOs, DTH, and telco TV companies to sell 75% of the time, but is thinking it will be just for "new forms" of advertising (i.e.- addressable ads aimed at specific demographics or even specific households). The remaining 25% would still go to Canadian broadcasters. Broadcasters are opposed to this because they would get a smaller piece of advertising pie, while BDUs would get around $65 million a year.
The cable company Bragg Communications, which operates EastLink and Persona, feels that " 'the focus of this proceeding should not be limited only to "new forms" of advertising. BDUs have paid for the right to use the avails and as such we should be entitled to access this inventory to the fullest extent' " If the CRTC mandates that avails can be sold, but only for new forms of ads, its unlikely that BDUs will invest in new addressable technology because they don't have any revenue to support the purchases.
Natalie MacDonald, director at EastLink, says that " 'by providing BDUs with some very basic opportunities to sell advertising, the Commission will enable BDUs to continue to invest in infrastructure while at the same time contributing to the health of the Canadian Broadcasting System.' "
According to Shaw Communications, " 'it is critical that BDUs be permitted to sell traditional forms of advertising in the local availabilities now in order to help generate the substantial capital needed to invest in the development of the platform for new forms of advertising, and to allow BDUs to build the necessary processes and relationships.' " It adds, " 'this would also provide valuable support in expanding capacity for the distribution of additional programming services in high definition.' "
The Association of Canadian Advertisers and the Canadian Media Directors Council support having local avails for new forms of advertising.
Pelmorex, meanwhile, is opposed to the local avails proposal because they feel that it will severely undermine the Canadian broadcasting system. Paul Temple, SVP of regulatory and strategic affairs for Pelmorex, says that with the CRTC starting to break down regulations so U.S. cable channels no longer have to be sold with Canadian ones, distributors can offer all-American tiers of channels. If BDUs are also allowed to sell ads on them, " 'by earning revenue from the sale of advertising in the local avails on foreign satellite services, BDUs will have an economic incentive to promote the broad distribution and viewership of these foreign satellite services at the expense of Canadian programming services, thereby giving priority to the carriage of foreign satellite services.' "
According to Pelmorex, the consequences of this policy change will lead to a wider distribution of foreign satellite services, more viewership for these services, and increased funds leaving Canada in the form of affiliation payments. Temple says that " 'this is contrary to the objectives of the Broadcasting Act.' "
Pelmorex wants 100% of the local ad avail time to be made available, for free, to Canadian broadcast promotion, something that was originally asked for by Rogers Cable back in 1993.
Temple explains, " 'the current ad avail rate cards of the four largest BDUs serving English-speaking Canadians, using the maximum rate discounts available, would generate over $45,000,000 if sold out.' " He adds, " 'however, making local avails available at no cost on an equitable basis to promote unrelated Canadian programming services is a solution that will strengthen the Canadian broadcasting system and encourage the distribution of Canadian services and viewership of Canadian programs. Such a proposal disadvantages no one, but offers significant benefits.' "
Source: Cartt, 03/05/2009
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