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Let’s Talk TV: The kids biz

Ahead of this fall's CRTC hearings, we take a look at what a pick-and-pay world could mean for the broadcasters and producers of kids content in Canada. In short, it's not a pretty picture.
August 18, 2014

This fall the CRTC (Canadian Radio-television and Telecommunications Commission) is set to hear talks from every side of the industry as it embarks on hearings associated with its Let’s Talk TV initiative. From simultaneous substitution to pick-and-pay, and terms of trade to set-top box measurement, we’ll be profiling different topics throughout August leading up to the hearings. This week a look at pick-and-pay from a children’s entertainment perspective, what the CRTC is proposing and how the major players in Canada have responded.

This issue:

When the CRTC embarked on probing the thoughts of Canadians with the “Let’s Talk TV” initiative, a Quantitative Research Report found that channel selection was a concern for half of those surveyed, including more than one-third of Canadians saying they are dissatisfied with its current flexibility.

The CRTC proposed looking into a scenario where subscribers could pick-and-pay for channels on a standalone basis, as well as build their own packages. The Commission says this approach could maximize “choice and flexibility” without leaving subscribers paying for channels they don’t wish to have.

But would Canada’s existing kids channels survive in a pick-and-pay world? The CRTC allowed that some discretionary services could have difficulty in a pure pick-and-pay world. The Commission also recommend as mandatory “skinny” basic package consisting of local Canadian TV stations, community channels and provincial educational services. But what would happen to channels like YTV and The Family Channel?

The players:

Corus Entertainment:

Corus didn’t hide its displeasure for the idea of a pick-and-pay system in its 65-page submission (not including the eight separate appendixes) to the CRTC. “[A] regulated à la carte is a recipe that will eventually lead to the obliteration of the Canadian broadcasting system as we know and enjoy today,” the company wrote. “The issue has never been about choice, but rather cost. ‘Choice’ has become a code for ‘give me half the channels at half the cost.’”

With assets that include YTV, Treehouse, Nickelodeon Canada, Teletoon and Cartoon Network Canada, Corus says if the aforementioned mandatory skinny package goes forward, it should be altered to include more programming for kids.  “Children’s services would be among the most threatened in such an environment,” Corus wrote. “Without the basic service carriage and the advertising pool that flows with it, the continued viability of these services is at stake.” The broadcaster argued that channels like Treehouse, which targets preschoolers, and YTV should be added to the basic package as it offers a public service for Canada’s youth.

And if CRTC’s new policy were to be implemented on September 1, 2016, Corus says the time frame is too short for a transition. “Kids programming would need a 36-month transition, as it often takes more than 12 months to get production rolling,” the company wrote. “Animation content is especially slow because of high lag time from concept to program production.”

Corus also took issue with the premise of a “Let’s Talk TV” forum while not forcing choice upon non-regulated services, calling it (sarcastically, one might say) “Let’s talk Cable and Satellite only and ignore the millions of Canadian Netflix subscribers.”

DHX Media:

After recently acquiring effective control in Canada for Family Channel, Disney XD and the Disney Junior channels, DHX Media also stated that a small basic service package and pick-and-pay programming would see specialty channels “undoubtedly experience a decline in penetration.”

The Family Channel, for example, is commercial-free and relies heavily on cable subscription fees for revenue. DHX says that that more focused channel theme packages have resulted in a 5% declined rate of subscription for Family Channel over the past four years. That drop in penetration levels would likely continue under a pick-and-pay scenario.

To provide a safeguard and ensure survival of the business model for services that aren’t as commercially broad, DHX says this would require guaranteed minimum penetration levels with penetration-based rate cards, which adjusts rates based on the number of subscribers.

Industry producers/distributors: 

The Canadian Media Producers Association (CMPA) wrote that pick-and-pay would trigger pricing and packaging disputes, while the negative impact on broadcasters’ revenues would in turn affect the level of funding directed at Canadian program production.

“How it hits us is a trickle down,” says Vince Commisso, president and CEO of animation studio and distribution company 9 Story Entertainment. “It means we have fewer eyeballs on our work and less ability for us to monetize our product.”

With less money available for production, there would be less content to produce. Commisso adds this would also have drastic effects on the current model for exporting kids content, just when shows like Wild Kratts and Peg + Cat are finding airtime on broadcasters abroad. “If there was a worse time to do this, I don’t know when it would be.”

The potential outcomes:

From Corus’ perspective, the company says a pick-and-pay scenario would be disastrous and would lead to a massive opting out of the Canadian broadcasting system. Corus maintains the unit costs for consumers would increase, and if consumers limit the number of channels they have for the sake of savings, this could decrease the diversity of content and make it difficult to launch new channels.

As pointed out by DHX, prices for Canadian families could increase under a pick-and-pay model, as fewer subscribers cause subscription fees to rise in order to maintain the status quo.

And, as many other submissions have pointed out, reduced revenue for Canadian broadcasters means reduced investment in domestic programming. The ripple effect would be fewer jobs in the production sector.

“We have 250 [employees] here now,” Commisso says. “If Corus’ numbers went down by half, so would ours.”

As Commisso pointed out, the US has already gone through this exercise. “If that economy, that has such a big market, thinks it’s a bad idea for its ecosystem, you can imagine what people think the impact would be for a market one-tenth the size.”


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