The annual cost to RDS to retain the Montreal Canadiens’ French regional rights tripled to $60-million from $20-million, wiping out what was a steady profit of $30-million to $40-million, according to one broadcast industry source.Graham Hughes/The Canadian Press
Rogers Communications Inc. was not the only group to have a rocky first year in its $5.2-billion broadcast contract with the NHL – so did one of its competitors, French-language sports television network RDS, along with Montreal Canadiens fans across Central and Western Canada.
While Rogers recently blamed lower quarterly profits on the NHL contract, which failed to produce the anticipated advertising and subscriber revenue in the 2014-15 regular season, RDS took a major hit to its bottom line because it was forced to match an offer for the Canadiens' French regional rights from TVA Sports in order to hang on to the package of 60 games it has had for 25 years. This, according to one broadcast industry source, tripled the annual cost to RDS to $60-million from $20-million, wiping out what was a steady profit of $30-million to $40-million.
RDS president Gerry Frappier declined to discuss the details of the Canadiens regional contract but insisted the network remains profitable. However, he admitted profits are down substantially because of the deal. BCE Inc., Rogers' main competitor in the communications industry, is the majority owner of RDS through its subsidiary Bell Media, which also owns the English-language sports network TSN. BCE owns 15 per cent of The Globe and Mail.
"It was a significant profit reset," Frappier said. "This is where I was extremely thankful to be part of a large integrated company that could accept a profit reset and was able to see long-term the strategic value of having a strong healthy sports service in this market."
Also feeling the pain this season were thousands of Habs fans who live outside the Canadiens' regional broadcast area of a small slice of Eastern Ontario, Quebec and the Maritimes. Those fans, from Ontario west to British Columbia, were no longer able to watch all 82 Canadiens games on RDS because once the NHL signed the deal with Rogers and TVA Sports, which is owned by Quebecor Inc., the league decided it would no longer let RDS and the Canadiens ignore the blackout restrictions followed by the other six Canadian-based NHL teams.
Even though the Rogers deal allows more games than ever to be shown nationally – on Wednesdays, Saturdays and Sundays this season – the NHL continues to enforce regional blackouts in order to preserve the value of each team's regional broadcast packages. Between 44 and 60 of the 82 regular-season games of each of the seven Canadian teams are designated as regional games. The league believes allowing too many of one team's games to be broadcast in another team's market would diminish the value of the host team's regional rights.
The only way around this for the viewer is to buy a specialty package such as NHL Centre Ice or Rogers GameCentre LIVE, a streaming service, which are not subject to most blackouts. The league and Rogers share the revenue from those packages, which cost about $200 each for the season. The prospect of selling more of these services undoubtedly played a role in the NHL's decision to enforce the Canadiens blackouts.
Keith Pelley, president of Rogers Media and the driving force in the NHL negotiations, is hailed by both his competitors and his colleagues for bringing his company a maximum return for the French broadcast rights. Pelley declined to comment.
Initially, TVA Sports landed both the national rights to 22 Canadiens games and regional rights to 60 games with a bid of $125-million a year through Rogers. But RDS had the right in its NHL contract to match any other regional bid, so it decided to pay $60-million annually for the 60 regional games. TVA Sports received the 22 national Canadiens games plus other NHL games and the playoffs for $65-million.
Quebecor's motivation in paying that much was twofold. It wanted NHL content for its fledgling sports network and putting a substantial amount of money in the league's coffers might have a happy effect on the company's efforts to land an NHL franchise for the new arena in Quebec City.
Since the early 1990s, Habs fans outside of the Canadiens' designated broadcast area benefited from the fact there was no competitor to RDS and that francophone audiences in Central and Western Canada were relatively small. For those reasons, even though RDS's contract was officially for French-language broadcasts of 60 regional games plus a national package, the NHL allowed RDS to show all 82 Canadiens games across the country. The league did enforce the blackouts for English-language regional broadcasts, as there were competing networks in TSN and Rogers's Sportsnet.
"It was a unique situation," Frappier said. "As a result, we never had to black out a game anywhere across the country in our history. Even the Hab regional games would go across the country, which technically they shouldn't have.
"A French broadcast of the Habs going into Alberta wasn't bothering anybody. Given there weren't two competing players sharing rights, there was no reason for anyone to enforce the rights. So they gave us a free ride."
But when Quebecor formed TVA Sports in 2011 and then became a partner with Rogers in its bid to wrest the Canadian national NHL broadcast rights away from TSN and the CBC, RDS was no longer alone in the field. And that spelled the end of a loophole that allowed thousands of francophone and anglophone Canadiens fans across the country to see their favourite team's games in French as long as they bought a cable or satellite package that included RDS.
Naturally, Frappier was disappointed to lose a package his network held for so long, but he does not feel slighted. "All they're doing is enforcing the existing rules," he said, although he believes RDS will be better off in the long run given the cost of the package.
In March, Quebecor chief executive officer Pierre Dion admitted it would take at least five years before TVA Sports' NHL deal is profitable. But he said the network's subscriber base increased 25 per cent in one year, growing to two million.