As Craig Media Inc. prepares to fade to black, CHUM’s purchase of the Calgary-based broadcaster is being viewed as an opportunity to bolster Alberta’s television scene.
With the $265-million acquisition of Craig Media, CHUM Ltd. not only gets the chance to enter the coveted Calgary and Edmonton markets it was seeking when it appeared before the Canadian Radio-television and Telecommunications Commission (CRTC) last year, it also obtains Craig properties in Manitoba and additional specialty channels.
Craig’s broadcast empire, which includes three A-Channel stations – Calgary, Edmonton and Winnipeg; CKX, a CBC affiliate in Brandon, Man.; the MTV, MTV2 and TV Land digital specialty channels; and the Toronto 1 television operation launched late last year has been widely reported to be in financial difficulty.
“The stations in Alberta have done a pretty good job of serving local viewers. It is fair to say that the company (Craig) has been challenged in terms of capital, or maybe unfair, that its resources were stretched by Toronto 1,” said Jay Switzer, president and CEO of CHUM Ltd. “We have a stronger balance sheet, deeper pockets and believe in a strong and vibrant situation locally. We will continue to build on what the Craigs have been doing.”
Industry analyst Mario Mota also feels the sale will help stabilize the market and may even improve the on-air product.
“They’re a very strong broadcaster committed to local programming, they’re known for doing it well,” said Mota, president and publisher of Ottawa-based Decima Publishing. “Perhaps it might even give those stations a little bit better of a TV experience than they had before.
“It also provides a bit more certainty, as I don’t see any more new players entering the market on the local side. That’s a good thing for the broadcasters as the market is not going to be segmented further.”
“We were certainly disappointed when we didn’t win the new licences (in Calgary and Edmonton),” added Switzer, who was born in Calgary and spent part of his youth in Edmonton. “But we understand the context of that decision.”
The CRTC had turned down CHUM’s application, stating concern over the potential negative impact a new player could have on the Alberta broadcast landscape. It felt adding new stations in Calgary and Edmonton would outweigh the potential benefits of CHUM’s commitment to the production of local and regional programming as well as drama.
Fuelling this concern, the CRTC pointed to advertising revenues for conventional television broadcasters in Alberta that only increased by 6.5 per cent between 1998 and 2002, while the average profit margins earned by these stations, before interest and taxes, decreased significantly from 1997 to 2002.
For Switzer, this meant CHUM was left with two choices: Begin discussions with the Craigs to buy the 56-year- old western broadcast outfit, or start the application process once again.
“It was a tough decision, but we decided there was more value and a better fit, and that we could better serve the viewers, if we explored the situation with the Craigs,” Switzer told Business Edge.
“The Craigs are specialists in local programming and we are too. It just fits like a glove. We’re very respectful of what they built in the last eight years.”
As the deal is just freshly completed, Switzer said it’s too early to say what it will mean for the future of the Alberta stations.
CHUM is just in the process of crafting a new game plan, he added. That could include bringing in the Citytv brand CHUM made famous in Toronto, which is known for its intensely local, urban-oriented, culturally diverse style.
However, another option that will be looked at is extending the A-Channel label.
“The A-Channel brand has great value, it has great equity and there’s great staff running these stations,” said Switzer. “It’s all about serving the viewers and serving our advertisers, and we have not yet had any discussions about brand. We think there may be an opportunity to take the A-Channel brand across the country. Our first meeting is in about two weeks and we’ll be looking at every opportunity.”
The deal, which came about after the Craigs retained investment banker RBC Dominion Securities, still requires CRTC approval. “We make a very big deal about CRTC approval,” said Switzer. “While we see no issues that can cause complications, the deal is still subject to the approval of the CRTC.”
Mota, on record as expecting the CHUM purchase to be a slam-dunk, sees no reason to change his opinion, especially since Toronto 1 will be sold off to eliminate any potential conflict with CHUM’s Citytv Toronto and The New VR in Barrie, Ont.
“CHUM alleviated the biggest concern – buying another station in southern Ontario – and very smartly put that station up for sale. Certainly from a regulatory perspective, it’s an absolute must. But even if the rumours are true that Toronto 1 is losing as much money as it is, then clearly from a business perspective it makes sense to sell that station,” said Mota.
Toronto 1 could well have become a case of being careful what you wish for. After being awarded a broadcast licence and getting the station on air, rumours began circulating in 2004 Craig was hemorrhaging because of Toronto 1.
“I understand that Craig was not forthcoming with the commission (CRTC) regarding their financial crisis, but that the commission knew from other industrial and research sources that Craig was losing a reported $1 million per week on Toronto 1,” said Ian Morrison, spokesman for the Friends of Canadian Broadcasting.
Morrison sees the sale as good for advertisers, as they will now have a fourth choice for national placement – in addition to CBC, CTV and Global.
Adding Alberta and Manitoba to CHUM’s existing eight local TV stations gives it coverage in most major Canadian markets.
But Switzer emphasized that the purchase does not turn CHUM into a potential fourth private network. “We’re a system of strong local stations. We’re not going to become a network.”
CHUM expects to be in a position to file an application with the CRTC for transfer of ownership and control of Craig Media’s broadcasting assets by mid-May.
For the moment, the stations remain in Craig’s hands. “Until this is approved these are not our channels, we can’t run them nor should we,” said Switzer. “We have offered to help, to make additional programs available to them and we’ve had indications that they’re interested.”
CHUM also owns and operates 18 specialty channels.
