Super Channel, the upstart movie network that launched two years ago to challenge a geographic monopoly in Canada's pay-television sector, has filed for court protection from its creditors.
After struggling to build a subscriber base, the channel is expected to announce Thursday that it will restructure under the Companies' Creditors Arrangement Act (CCAA).
The channel's owners, Allarco Entertainment Inc., said the service will continue operating despite the restructuring.
"We want to make it clear to our customer base that Super Channel is not bankrupt or in receivership. Operations continue without interruption," says a statement from Super Channel president Malcolm Knox that will be made public Thursday.
Allarco is backed by Edmonton's wealthy Allard family, which launched Super Channel in November, 2007, after winning a licence a year earlier to start the service.
Though several broadcasters applied to launch pay-TV channels to compete with the country's only two players -Astral Media Inc.'s Movie Network in Eastern Canada and Corus Entertainment Inc.'s Movie Central in the West - Allarco was chosen for its financial stability at the time.
However, stiff competition from the incumbents hurt Super Channel's early growth. The rivals secured many of the top movie studio deals in advance of Super Channel's arrival, but the company suggests it faced bigger hurdles with cable carriers, alleging that the distributors have been reluctant to promote the new service to customers, which has hindered its business.
The cable industry disputes these claims.
Problems began to emerge in recent months when Super Channel became the only specialty channel in the Canadian broadcasting sector to not file its financials with the Canadian Radio-television and Telecommunications Commission (CRTC).
In its statement, Super Channel points a finger at the cable carriers, which it suggests hold too much sway over the TV channels they carry and promote.
"Our biggest challenge has been accessing consumers through distribution undertakings that have become increasingly powerful vertically integrated companies which no longer take CRTC decisions seriously," Mr. Knox said.
The Allard family, who co-founded the Edmonton Oilers, have been in the broadcasting industry for decades. In addition to producing the Canadian comedy series SCTV , the Allards ran a pay-TV channel in the 1980s, also called Super Channel.
It was among the first pay-TV services to emerge in Canada, but the original Super Channel was swallowed up in a round of consolidation, which saw the business divide itself into geographic monopolies in Eastern and Western Canada.
The consolidation was prompted by several pay-TV services undercutting each other on price, which drove several out of business.
Today, Astral and Corus charge about $15 to $20 a month, depending on the cable carrier, for a variety of movie channels and HBO Canada.
Super Channel has attempted to price its service at slightly less than its competitors, and has worked to secure deals with international suppliers for programs such as British television series that aren't available in Canada.
The privately owned company does not make its subscriber numbers or financial information public. However, early last year, Allarco told the regulator it had a $12-million revenue shortfall after six months of operating due to its struggles with the cable sector.