BCE Inc. has in one fell swoop remade Canada's media landscape and set the stage for a fierce battle between the phone and cable companies over watching TV shows on something other than a television.
The telecommunications giant on Friday struck a $1.3-billion deal to take full ownership of CTV Inc., a move that breaks apart CTVglobemedia, gives control of The Globe and Mail back to the Thomson family and marks the exit of Torstar Corp. from the group, further shaking up an industry that is constantly being reshaped.
The marriage of the country's biggest phone company and largest broadcaster is the latest move in a new era of convergence among media companies and those who distribute their content. Cable and phone carriers have moved to control content that can be seen on a growing array of devices such as computers, smart phones and iPads. That content can often be viewed for free, other than data costs on a phone, but the carriers hope to be in a position to charge for it.
Friday's deal means that the Thomson family, through holding company Woodbridge Co. Ltd., will hold an 85-per-cent stake in The Globe, Canada's largest circulation national newspaper, and its related websites. BCE will hold 15 per cent, which will allow Bell to put Globe content on its smartphones.
The Thomson family, Canada's most enduring media dynasty and the controlling shareholder of global information provider Thomson Reuters Plc, has a long history with The Globe. The family first owned the newspaper in 1980, and Woodbridge chairman David Thomson told Globe employees on Friday of the deep affection his family has long held for the newspaper and their commitment to investing in the paper's future.
He remembered how The Globe was central to conversations he had with his grandfather, Roy Thomson, when he was a child.
"The pleasure for me is immense today," he said, referring to the paper as the "soul" of his family. "The Globe really matters to the family. We are now ready to put teams together to innovate and implement. We are the premier content provider in this country and we only seek to become better."
For BCE, there's a déjà vu aspect to the deal. The company spent $2.3-billion in 2000 to acquire CTV and later combined it with The Globe to create Bell Globemedia, in which it held a 70-per-cent stake. In 2005, it reversed course and sold the bulk of its stake to Woodbridge, the Ontario Teachers' Pension Plan and Torstar. Torstar and Teachers both cashed out their stakes on Friday.
The deal, which still requires regulatory approval and isn't expected to close until mid-2011, gives Bell 27 television stations and 30 specialty channels, including sports network TSN and the Comedy Network. Bell is counting on those assets as it prepares to fight for market share against other smart-phone providers. Increasingly, wireless carriers are marketing exclusive-content arrangements to make their wireless devices appear more attractive.
Driving convergence this time, the Internet-enabled mobile devices such as smart phones and computer tablets are threatening home television's lock on viewers. Bell, like its rivals, wants to offer more content to its subscribers, however they receive the signal. Viewers are increasingly interested in watching their favourite shows on their phones while they ride the bus or sit in the park, and the cable and phone companies that have served as middle men between viewers and broadcasters were in danger of being marginalized.
Friday's deal led Ican Fecan, CTV's long-time CEO, who is widely credited with reshaping the network into the country's No. 1 private broadcaster, to announce his retirement. Mr. Fecan, 57, had been planning to stay on until the 2012 Olympics, but in what was apparently a surprise to BCE, he said he would step down as soon as the deal closes so that "a new leader can have a fresh start with a new ownership structure."
Consolidation between media and telecom is picking up speed. Earlier this year, Shaw Communications Inc. bought Global TV for $2-billion, and Quebec-based Quebecor's Vidéotron launched its wireless business just last week. Rogers Communications Inc. has already transformed itself into a convergence company with broadcast and print media properties feeding content to its cable networks.
Similar deals are being done outside the country. In the United States, cable giant Comcast Corp. is in the midst of a $30-billion (U.S.) acquisition of NBC Universal.
"The top-three cable competitors to Bell have increased their media ownership and all are, or will be, in the wireless business," BCE chief executive officer George Cope said as he unveiled the deal. "Clearly, we're not prepared to buy all our content from our competitors."
Now that carriers own the television networks that produce shows, the rush is on to find a way to make money from them in ways other than traditional home subscriptions. Earlier this week, for example, Vidéotron said it would allow its smart-phone subscribers to access 1,000 hours of free content generated by its 28 television channels.
It's all about attracting consumers with programming, and then selling them the devices they like to watch them on and the data plans they need to download the shows.
"The adoption of mobile TV is set to accelerate rapidly," Mr. Cope said, adding that by 2015, Bell will have more than 15 million customers watching video on their televisions, computers and/or phones.
"Video is going to be an integral part of Bell's product offering and key growth driver going forward. In fact, we generate more revenue from TV today than we do from our home phone access business, which is quite a statement when you think of the history of Bell Canada."