Shaw Communications Inc. SJR.B-T is making a $2-billion bet that it can succeed where the Asper family failed, acquiring full ownership of the CanWest television empire in a move that radically alters both the company and the domestic broadcasting industry.
After buying a controlling equity stake in the struggling CanWest business in February, Calgary-based Shaw said Monday that it will dig deep to buy out both CanWest’s creditors and the private equity arm of Goldman Sachs Group, which owned a majority stake in coveted specialty cable channels like HGTV, Showcase and the Food Network.
Shaw believes it can fix the ailing broadcast operations, which include the Global TV network, and can use their content to help build a multimedia and wireless empire that would in many respects rival Toronto’s Rogers Communications Inc., the country’s largest cable operator.
“It makes us a major player in the communications industry and television industry in Canada,” Shaw founder JR Shaw said in an interview Monday.
As technology increasingly shifts toward mobile devices, the Calgary-based cable giant plans to use the programming from CanWest channels as a key selling point for the wireless service it plans to launch next year. Shaw is betting that consumers will put increasing value on the ability to watch TV on their mobile phones, laptops and portable devices such as the iPad.
Shaw purchased 20 per cent of Global Television and a few of CanWest’s smaller specialty channels in February.
However, Goldman’s 65 per cent share of the most important specialty stations remained, the residue of a 2007 deal in which the New York firm bankrolled CanWest’s purchase of those channels from Alliance Atlantis Communications. Shaw executives realized in recent months that they wanted to control the entire business and have domain over any content agreements the TV stations reach.
“We have never been really one to have sort of minority control,” Shaw president Peter Bissonnette said on a conference call with analysts on Monday. “The opportunity to have 100 per cent, to us, is absolutely a blessing.”
“We have a total flexibility in how we apply content over the various platforms and that is a huge, huge advantage for us when we look to the demands that we are seeing from our customers for every type of content.”
When questioned by analysts Monday why the company would spend so heavily – including $700-million to buy out Goldman – chief executive officer Jim Shaw responded: “We’re not great partners, but we’re good operators.”
Shaw and Goldman had appeared headed for court in a fight over the specialty channels. Monday’s deal came after four days of meetings in Toronto in which Shaw and Goldman met in with a mediator to work out their differences.
The deal shakes up the media landscape in Canada. With the announcement, Shaw has served notice to rival broadcasters such as CTV that Global Television and the specialty stations such as Showcase and HGTV will get new investment, rather than slashing costs as they were doing under CanWest. It also sends a message to Shaw’s future telecom competitors, such as Telus, Bell and Rogers, that when it launches wireless service in 2011, its products will offer substantial broadcasting content on smart phones.
Shaw’s acquisition of Global now poses a threat to the country’s No. 1 broadcast network, CTV, which cemented its popularity in the ratings by outbidding CanWest for the rights to popular new shows from Hollywood each year. Many of the top new shows in the past decade, such as Grey’s Anatomy, went to CTV, allowing it to charge more for advertising.
Now that the CanWest broadcast assets have new money behind them, Global is in a stronger position to negotiate with U.S. studios for the most prized prime-time fare. Shaw said it has hired Paul Robertson, former president of Corus Television, who will oversee CanWest and the CW Media Group units.
