A balancing act?

Canadian producers hope a new deal with broadcasters gives them more to offer international partners.
October 1, 2011

On September 1, Canada made the switch from analog to digital signals, amping up the available broadcast spectrum for sale to private-sector media and mobile companies. The increase in signal space comes a year after several key Canadian broadcast players consolidated—Shaw Communications acquired CanWest, and Bell Media fully integrated CTV into its holdings—creating multi-platform broadcast empires that further diminished the number of competitors in the Canadian broadcast landscape. And after months of wrangling, July 1 saw the brand-new Terms of Trade agreement put into effect by Canada’s regulatory broadcast body, the Canadian Radio and Television Council (CRTC), to redress the disparity in power between the ever-growing media conglomerates and the independent producers that supply a good chunk of the content.

Playing against a stacked team
The Canadian market is now made up of fewer broadcasters that extend their reach across conventional TV, as well as pay and specialty television, internet and mobile platforms, which the Canadian Media Production Association (CMPA) saw as a major imbalance.

“When broadcasters all merge together, you have fewer doors to knock on, you don’t have a level playing field,” says Ira Levy, partner and executive producer at Toronto’s Breakthrough Entertainment, and is also a board member and co-chair of the regulatory committee at the CMPA. Levy has lobbied for a codified trade process on behalf of producers for several years. He explains that not only did license fees and rates drop in a market with fewer broadcast competitors, but the networks also began holding onto more and more broadcast and multi-platform rights.

“If the broadcaster, as part of the deal, insists on taking all TV rights for an extended period of time, as well as all the interactive rights, it lessens the value that a producer can get, even in their own country,” says Levy.

“The health and viability of independent producers was being fundamentally threatened by the increasing imbalance,” echoes Norm Bolen, president and CEO of the CMPA.

Bolen himself worked on the broadcast side as EVP of content for Alliance Atlantis, where he oversaw the programming of 13 Canadian specialty networks, including History Television, which launched in 1997. At the time, the upstart channel commissioned about 15 series from more than 1,000 submissions, for which Bolen says History negotiated a fair market license fee, a three- to four-year window, and limited or unlimited amount of plays.

Fast-forward to 2011 and Bolen says a channel like History (now part of Shaw) would acquire a license for seven to eight years with permission to air the program across as many Shaw channels as it wants. He says a commission deal struck before the new Terms of Trade went into effect in July would have also included digital rights and licensing rights that allow the network to license the program to another outlet outside of its corporate group.

“Terms of Trade is meant to claw back rights and is also an attempt to get broadcasters to significantly improve their business practices,” says Bolen.

Inspiration from abroad
Bolen and Levy say the CMPA looked to the UK, Australia and New Zealand as examples of territories that had faced similar issues and implemented their own terms of trade agreements.

In 2003, UK producers’ trade association Pact helped to institute a terms of trade agreement, monitored by media industry regulator Ofcom, which gave indies copyright to their programs, rather than the broadcasters. It also introduced codes that required broadcasters to set up rate cards for buying primary rights to programs and outlawed a broadcaster from getting merchandising and foreign sales rights when it purchased first-window domestic broadcast rights.

In Canada, the CRTC made signing a terms of trade agreement a condition of broadcast license renewal last year. Canadian broadcast heavyweights Bell Media, Rogers Media, Shaw Media, Astral Media (Family Channel, Disney XD Canada and Disney Junior Canada) and Corus Entertainment (YTV, Treehouse and Nickelodeon Canada) entered into negotiations with the CMPA.

“Those five broadcasters, which are fierce competitors among themselves, were able to get together and agree to a set of terms with us, which shows that there was goodwill and a willingness to come to an agreement,” notes Bolen.

The terms
The new agreement, which Bolen says is legally binding between CMPA members and broadcasters, calls for shortened license terms and a limit on the number of rights a broadcaster can obtain when it pays a basic license fee.

“The agreement has to be followed by the broadcasters under penalty of violating their condition of broadcast license,” says Bolen, adding that it’s the responsibility of broadcasters to write the terms into contracts, but it’s also up to producers to make sure the broadcasters live up to their commitments.

On signing a development agreement, Canadian broadcasters now must pay no less than 50% of the development fee, with no more than 10% of the full fee being tied to the delivery of final materials. The agreement also outlines timelines for producer and broadcaster approvals. Additionally, the Terms of Trade calls for broadcasters to buy a separate license to access ancillary digital media rights with the fee negotiated at the time the program is first licensed—this clause is meant to encourage producers to more fully consider digital extensions at the time the project is greenlit for development. Broadcasters are also required to post contact information for proposal submission on their websites and regularly advise producers on the kinds of projects they are interested in developing.

“You can’t mandate the length of time it takes to create something,” says Levy. “But from a practical point of view, it codifies and makes it simpler to go through the process so you can focus on the creative.”

Levy and Bolen both see the agreement as being pivotal, not only to the sustainability of Canadian producers, but also to their success as international players.

Though no Canadian kidcasters had responded to requests for comment by press time, an official statement from Astral states: “We believe this agreement will further strengthen the Canadian production sector and will ensure that opportunities are fully realized to everyone’s benefit.”

Global appeal
“The terms allow Canadian producers to retain more rights, and those rights become more valuable when you’re forming partnerships with indie producers or other broadcasters around the world,” says Levy. He adds that the agreement can be viewed as a maturation of the Canadian industry and hopes the country’s business will follow in the UK’s footsteps.

According to a report published by Pact this summer, the UK is now second only to the US in global exports of completed programs, with a 10% worldwide market share. Pact states that since the introduction of terms of trade for independent production companies, UK global TV exports have soared by 34%.

“The independent sector in the UK is now worth £2.3 billion [US$3.64 billion]. Ten years ago, pre-introduction of the legislation, the indie sector’s total value was about £800,000 million [US$1.26 billion],” says John McVay, CEO of Pact. Though domestic commissions for British producers have been flat for a couple of years, he adds that the demand for UK-produced content overseas kept the domestic indie sector busy. And keeping international rights in the hands of UK producers has allowed them to exploit their IP in foreign markets. “They are becoming more entrepreneurial and more adept at winning commissions in new markets,” says McVay.

Cautiously optimistic
“It’s early days,” says Mary Bredin, VP of development and acquisitions at Toronto’s guru Studio, who remains skeptical that the terms will effectively put more power in the hands of independent producers. As long as broadcasters have control of the funds, Bredin says, the business of the small producer will always be challenging.

“As a general structure, I think it’s a great idea. But union negotiations, for example, only work when the unions can walk away from the table. The producers can’t walk away from the table,” says Bredin. “It’s a brave attempt, but let’s review it in a year.”

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