Merger mania and the harm to media diversity. Hearings start today.
CRTC's von Finckenstein: Tougher than TV moguls?
Media ownership consolidation in Canada has come in waves every decade or so, each followed by a round of public hand-wringing and one or more government inquiries. The outrage has always died down after a few years, however, with proposals for ownership reform ignored and soon forgotten. Will it be any different this time around with the CRTC's upcoming "media diversity" hearings?
The gabfest that starts this week in Ottawa was called to address concerns that have grown exponentially since the "convergence" of newspaper and television ownership in 2000. "Cross-ownership," as it is also known, is prohibited in many countries. In the U.S., a ban was quietly lifted by the FCC in 2003, but when Americans found out about it, they protested to the broadcast regulator in the millions. Senate stepped in to reinstitute the cross-ownership prohibition.
In Canada, however, such a safeguard was lifted way back in 1985. CTV was thus free to partner in 2000 with the Globe and Mail national newspaper, while CanWest Global Communications bought the giant Southam chain from Conrad Black for $3.2 billion. The CRTC's decision the following year to renew the broadcasting licences of the networks for a full seven-year term without significant restrictions on convergence was contentious.
"If we allow this convergence to happen without restrictions and it has unforeseen consequences," admitted CRTC spokesman Denis Carmel at the time, "everyone will blame us."
The ensuing assault on journalism resulted in not one but two federal media inquiries. As usual, however, nothing came from either. CanWest's owning Asper family of Winnipeg proved ardent political activists in their stewardship of the Southam dailies. In late 2001, CanWest ordered them to run unprecedented "national" editorials written at company headquarters, undermining local editorial independence. That brought protest from Southam journalists across Canada, many of whom withdrew their bylines or quit.
In mid-2002, Ottawa Citizen publisher Russell Mills was fired after his newspaper called for the resignation of Liberal prime minister Jean Chrétien, an Asper family friend. Later that year the Southam chain, which dated to the 19th century, was renamed CanWest Publications. While the national editorials were quietly dropped, news gathering became increasingly centralized.
'Too much power, too few hands'
Parliamentary hearings into broadcasting policy chaired by Montreal MP Clifford Lincoln called in 2003 for a moratorium on issuing television licences to newspaper owners pending a firm government policy on convergence. "The danger is that too much power can fall into too few hands," warned the Lincoln committee, "and it is power without accountability." Its report, perhaps not surprisingly, got little attention in Canada's converged mainstream media.
A subsequent three-year Senate investigation into Canada's news media issued proposals for ownership reform last year. "The media's right to be free from government interference does not extend," it observed, "to a conclusion that proprietors should be allowed to own an excessive proportion of media holdings in a particular market, let alone the national market."
Before 2006 ended, however, Conservative heritage minister Bev Oda officially dismissed even that modest reform attempt. "The government recognizes that convergence has become an essential business strategy for media organizations to stay competitive in a highly competitive and diverse marketplace," announced Oda, a former CanWest Global and CTV executive.
CanWest's latest gambit
The latest round of ownership consolidation and editorial centralization took off almost immediately. A week after the Senate report, CanWest announced it would pull out of the long-running Canadian Press news co-operative to save its $4.6 million in annual dues. The savings, it said, would be used to bolster its own news service. Two weeks later, CTV's parent company scooped up CHUM's 33 radio stations, CITY television network, and 21 cable channels, including MuchMusic and Bravo, for $1.4 billion. The purchase did not include the bulk of CHUM's news staff, however, which had been eviscerated the day before with 281 layoffs.
In early 2007, CanWest engineered an ingenious corporate expansion that flouted Canada's foreign ownership limits, which the Aspers had long opposed. It bought the 13 cable channels of Alliance Atlantis, including Showcase and History Television, in partnership with New York investment bank Goldman Sachs. CanWest contributed only $262 million for 36 percent ownership of the cable channels, but CEO Leonard Asper insisted Goldman Sachs would be a passive investor.
"In Canada, it's a control test," Asper argued, "and we are in control in every way, shape and form." CRTC watchers expect the regulator to rubber-stamp the deal in hearings that were recently delayed until November.
Can he save Canada's media?
Any hope of taming media ownership in Canada may lie with the CRTC's new chair, Konrad von Finckenstein, a career civil servant with a reputation as a cagey mandarin and an ardent free marketeer. Then head of the federal Competition Bureau, von Finckenstein made news at the height of the CanWest controversies in 2002 by suggesting the CRTC oversee the newspaper business as well. "Right now, they are talking only about broadcasting," he said. "But there's no reason you couldn't extend that to print media if you wanted to. It would require legislative change but it is certainly possible."
The remark perhaps revealed von Finckenstein's unfamiliarity with the concept of press freedom. As the only industry with the constitutionally-enshrined freedom to operate without government regulation, howls of protest would rightly emanate from editorial pages across the land under such a scenario.
There is only one way the CRTC can assist press freedom in Canada, and that is by disentangling it from television ownership. That may require a federal political will that is lacking these days, however. After all, Stephen Harper was personally endorsed in his 2006 bid for the prime minister's job by CanWest Publications head David Asper.
The odds would also appear against von Finckenstein in his faceoff with Big Media due to recent moves by the networks to undermine what little authority the CRTC has been able to exercise over them. A lawsuit launched by the Canadian Association of Broadcasters in 2003 saw the regulator's levy of 1.365 per cent on television revenues ruled unconstitutional late last year in federal court. That meant the $790 million collected for Canadians by the CRTC since 1998 would have to be returned to the networks. Earlier in 2006, new owners at CTV balked at making payments of $68 million under the CRTC's long-running "public benefits" program, which required 10 per cent of the purchase price be devoted to worthwhile initiatives. Most just happened to be newspaper owners.
Television gold rush
The Toronto Star's parent, until then one of the few major Canadian newspaper companies not also in the television business, bought 20 percent of CTV from Bell Canada Enterprises in late 2005, as did the Ontario Teachers Pension Fund. That not only established Torstar as a player in the convergence game, it also put it in partnership with its long-time newspaper rival, the Globe and Mail. Media giant Thomson, which had married off the national daily to CTV in 2000, bought another 10 percent from BCE. That increased its stake in the convergence conglomerate, since re-named CTVglobemedia, to 40 per cent. The buyers argued no change in control had taken place because no majority shareholder had resulted.
The CRTC caved in, but not without one of its members issuing a sharp dissenting opinion. Stuart Langford blasted his fellow commissioners for being "distracted from the simple facts ... by a virtual avalanche of legal documents and legal opinions." Langford, a lawyer and former journalist (and one-time editor of mine), has gained a reputation in Ottawa for refusing to be co-opted by industry lobbyists. Known as "the man who won't do lunch," he may prove the next most important obstacle, after von Finckenstein, to Big Media's continued consolidation.
Luckily, the new CRTC chair may have just gained the bargaining chip he needs for such a task. In April, von Finckenstein commissioned a report by lawyers that last week suggested revamping television's lucrative "simultaneous substitution" rule. For the past 30 years, the rule has allowed Canadian stations to insert their own commercials into programming on U.S. networks carried here on cable at the same time. The report has enraged Canadian broadcasters by threatening the estimated $200 million that flows into their pockets annually as a result. Simultaneous substitution has proven so lucrative over the years for CanWest Global in particular that it vaulted the smaller network over CTV as the country's most profitable broadcaster in the 1980s. Its proceeds helped finance CanWest's international expansion into New Zealand, Australia, the UK, and South America in the 1990s, not to mention its acquisition of Southam in 2000.
The last media critic
But while the fur may be flying at the CRTC this week and the hearings should be of interest to all Canadians, don't expect to see much coverage in the country's converged news media. Their vested interest is simply too enormous to allow them to even consider rolling back the clock on media diversity. (You may, however, read the submissions of intervenors here and even listen in on the proceedings here.)
In particular, don't expect to read much commentary critical of convergence in the nation's press, almost all of which has now bellied up to the television trough. Torstar's foray into convergence recently saw the last media critic at a major Canadian daily simply disappear.
For the past few years, Antonia Zerbisias was the only journalist in the mainstream press willing and able to hold Big Media's feet to the fire, and her raucous online blog allowed readers to vent their rage as well. "Media concentration has landed plop plop plop like a steaming pile of bad news on my very own front stoop," Zerbisias quipped in her Star column when the CTV deal went down. "Which makes me worry that things might get very slippery for a media critic, if you get my drift." She now writes lifestyle features. Oh, to have her in that hearing room.
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