Potential buyers for CTV Sportsnet started lining up yesterday, minutes after the federal broadcast regulator announced that CTV will be required to divest Sportsnet as a condition to the acquisition of NetStar Communications and its top property, TSN.
CTV's $490-million NetStar deal was approved by the Canadian Radio-television and Telecommunications Commission, but the regulatory body told the company to sell Sportsnet within the year, a ruling that stops CTV from controlling both Canadian sports cable channels.
According to sources, groups interested in acquiring Sportsnet include:
CanWest Global, which owns the Global Television Network and specialty channels. CanWest tried to buy NetStar last year, but lost out to CTV's bid.
Is CanWest Global interested in Sportsnet?
"Absolutely," said Kevin Shea, Global's president. "I think we've been fairly public on the notion that we're interested in adding to our relatively small specialty container. We'd be interested in buying Sportsnet or trading assets."
The most likely swap would involve Global's Montreal station, CFCF. CTV, at this point, does not own a station in Quebec and is keen to establish a base in Montreal.
"They have a situation that needs to be sorted out, which is the disposition of Sportsnet," Shea said. "And we have a regulatory issue in Quebec. We each have issues that need to be addressed and we each have something that somebody else wants."
The CBC, a surprise entry in the Sportsnet sweepstakes. Sources say the CBC is seeking to line up an investing partner. The CBC would own a small equity position in Sportsnet, but would be involved mostly in production, management and providing on-air people.
"The CBC would be happy to work with another over-the-air partner or anybody," a source said. "The network could probably find a way to take a very small equity position in Sportsnet in return for all kinds of things. The CBC could house Sportsnet, supply the channel with equipment, staff, trucks, expertise --all kinds of things."
"We have to look at any opportunity that helps strengthen us," said Michel Tremblay, the chief planning and business development officer for the CBC. "It is a significant opportunity."
The current Sportsnet ownership. CTV, although it is managing partner of Sportsnet, owns only 40 per cent of the company. Fox Sports Net, Molson Cos. Ltd. and Rogers Communications each hold a 20-per-cent share and have a right of first refusal on shares that come available.
Fox Sports Net could increase its ownership to 32 per cent, but no more, because it is a U.S. company. Rogers would like to buy Sportsnet, but is limited to a maximum of 30 per cent because it's a cable company. However, Fox and Rogers together could absorb 22 per cent of CTV's 40-per-cent interest.
That leaves Molson, which earlier tried to sell its interest in the channel to Rogers, but now may aspire to take over Sportsnet. Molson is already in the sports TV business with its production company, Molstar Communications.
Alliance Atlantis is rumoured to be interested in Sportsnet, as is Corus, a division of Shaw Communications. John Cassaday, the head of Corus, declined to come to the telephone yesterday.
It was rumoured last year that Maple Leaf Sports and Entertainment, owner of the Toronto Maple Leafs and the Toronto Raptors, was interested in Sportsnet, but Tom Anselmi, senior vice-president for business, ruled it out.
Although yesterday's CRTC announcement was bad news for CTV, which was reasonably confident the regulator would approve what amounted to a sports cable monopoly, it was good news for just about everyone else: for sports viewers, because competing channels will produce better products; for employees at TSN and Sportsnet, because a merger would have caused significant job losses; and for Canadian sports club owners, because joint ownership of TSN and Sportsnet would have eliminated competition for cable rights.
"This is a positive development for us," Anselmi said. "We made no bones about that early on. As the seller of rights fees, we like a competitive environment."
The Toronto Blue Jays also favoured separate ownership of the sports channels, said Sam Pollock, the club's senior chairman.
The decision will also be lauded by those concerned about a company's Canadian identity. As part of the CTV-NetStar deal, TSN was to be renamed ESPN Canada, for the U.S. sports cable giant that owns 32 per cent of TSN. But the CRTC has told CTV that before allowing the NetStar purchase, it must approve the final trademark agreement.
Not only does the title ESPN Canada make TSN, which was founded by Canadians and prospered under Canadian ownership, sound like ESPN's Canadian affiliate, but the CRTC also has concerns about the amount of control ESPN will hold over the sports channel, despite its minority interest.
According to the agreement, ESPN can terminate its partnership with CTV, without cause, after three years. Not only would CTV be forced to buy out ESPN to the tune of about $200-million, it would need to rename the channel and effectively start all over again in branding its product.
In its decision, the CRTC wrote: "Under these circumstances, it would appear that CTV, even though it would be the majority shareholder, would have a very strong incentive to satisfy all of ESPN's concerns in order to minimize the possibility that ESPN would terminate the agreement. This could give ESPN more influence over NetStar than would normally be the case for a minority shareholder."
The commission also told CTV and ESPN to scrap the agreement that gave ESPN the power to suspend for three months an offer by a Canadian company to NetStar's shareholders to purchase their shares so that ESPN could find an offer from another party.
Reaction to the CRTC decision at CTV and TSN was muted, to say the least.
Said one executive, anonymously: "I'm a little shocked, really. I thought it would go through. But even without Sportsnet, TSN is in a very strong position, aligned with CTV and BCE." BCE Inc., a telecommunications giant, is poised for a $2.3-billion takeover of CTV.
CTV executives declined to comment. Instead, CTV released a statement saying they are studying the decision.
But among employees at Sportsnet, the ruling was met with relief. A merger would have meant consolidation and redundancies. In addition to office staff and production people, on-air people would have been among the job losses. It would have been unlikely, for example, that lead anchor Mark Hebscher's career lasted any length of time at Sportsnet, given that TSN's star sportscaster, Jim Van Horne, could appear on both channels.
As it is, Sportsnet, when it is sold, will lose some personalities such as host Rod Black and sportscaster Suneel Joshi, both of whom are employees of CTV.
In another CRTC ruling yesterday, Headline Sports was granted a licence to provide limited live programming.
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