Canada's major television networks travel to Hollywood this week on their annual sojourn to buy prime-time shows for fall, but the broadcasters will be packing much lighter wallets than in past years.
The recession, and an accompanying steep decline in advertising dollars, is expected to crimp their buying power. The networks are keeping tight-lipped on strategy, but CTV and Global acknowledge a different mood unfolding as broadcasters from around the world gather in Los Angeles to screen the new U.S. pilots.
“Every broadcast company around the world that's coming to the screenings will be more strategic, thoughtful and careful about their spending than maybe has happened in the past,” said Barbara Williams, executive vice-president of broadcasting content at CanWest Global Communications Corp. CGS-T “The economy has been brutal,” added Susanne Boyce, CTV's president of creative, content and channels. The network's goal is to pick shows carefully rather than buy specific “trends or timeslots,” Ms. Boyce said.
The buying strategies at Canada's big networks have become increasingly controversial in recent years.
Spending reached record heights for shows such as House, Grey's Anatomy, The Office and Fringe, in order for the networks to win the ratings wars. The broadcasters have told the Canadian Radio-television and Telecommunications Commission that these U.S. shows drive the bulk of their advertising dollars in Canada, and are needed to subsidize Canadian programming.
In response, a consortium of TV writers, producers and actors tabled a report in Ottawa recently arguing that Canadian television shows can be profitable on their own, if funded and promoted.
Amid the debate, the CRTC has been looking at ways to curtail foreign spending, which hit a record $775-million last year across several networks, including CTV, Global, CITY-TV and others. One proposal – a formula that would require networks to spend one dollar on Canadian productions for every dollar of foreign programming they buy – could be implemented next year.
However, the Hollywood buying process is a risky trade, the CRTC recently found out in discussions with the networks.
When the Canadian networks bid on U.S. shows, they rarely know exactly how much they are spending, due to the way the U.S. studios structure the bidding process.
If CTV and Global want to buy a highly touted new show, they are often forced to also buy several other programs along with it, including some that have a lower chance of drawing big audiences.
Regardless of whether they air those shows themselves, the Canadian networks are billed by the U.S. studios each time the show airs on U.S. television, meaning they have no control over what the final tally comes to at the end of the year.
In some years, the budget ends up being higher than expected in Canada.
This process, detailed in recent private discussions with the CRTC, was not known to the regulator. The details were divulged by CTV and Global during closed-door meetings – the regulator has recently made portions of the transcripts public.
Though some of the transcripts are blacked out, much of the conversation remains intact. The payment system “was news to everyone” at the regulator, a surprised CRTC chairman Konrad von Finckenstein told CTV and Global.
“When you buy those big shows, you don't know how much they are going to cost you,” Mr. von Finckenstein said.
“It is very, very hard to manage the budget as it is,” Ms. Williams responded, according to the transcripts. Similarly, CTVglobemedia Inc. chief executive officer Ivan Fecan told the regulator that the system has always been an issue for the networks.
“This has been true for conventional [networks] since the beginning of time – you pay by the telecast,” Mr. Fecan said.
With CTV and Global both projecting a loss at their main networks in 2009, and CanWest in a cash crunch with its lenders, both broadcasters have signalled to the CRTC in hearings that U.S. spending could soften this year. (CTV is owned by CTVglobemedia Inc., which is the parent company of The Globe and Mail.) Canadian networks such as CTV, Global and CITY-TV insert their commercials into the U.S. broadcasts of shows they purchase as compensation for the rights they buy in such deals. American networks see more financial gain by selling the rights to the Canadian broadcasters, rather than letting their shows stream into Canada over the Internet or via network affiliates in the U.S.
The U.S. television sector is also forecasting a drop in revenue this year amid the recession. The networks begin unveiling their programming slates to advertisers today in a bid to drum up ad sales in advance. Forecasts suggest the U.S. broadcasters will see declines of between 10 and 20 per cent from the $9.2-billion (U.S.) worth of commercial time sold a year ago.
