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Bell Ladurantaye Houpt

Bell Ladurantaye Houpt

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Published by Steve Ladurantaye

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Published by: Steve Ladurantaye on Sep 09, 2012
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09/09/2012

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Questions from Globe and Mail’s Steve Ladurantaye and Simon Houptto Bell Media president Kevin Crull and VP MirkoBibic
Story ran September 1 
 So we have a pretty good idea of where everyone’s at. We’ve talked to lots of  people on this. One of the problems we have with this story is that it’s such a bigthing, with a thousand different voices. You’re so close now to the finish line,where do you see this going, what are you trying to accomplish? 
Kevin: Bell is very committed to the Canadian broadcasting system, to Canadianmedia, and to Canadian viewers, and we have been delighted with our experience with CTV, but owning CTV’s assets left some gaps in our portfolio. It definitely left a gap in Quebec, we looked at a number of strategies to fill that gap inQuebec, we looked at organically launching our own channels and growing in thatspace, we looked at other acquisitions - there was really nothing that even movedthe Richter scale of materiality. So the only way that we could become relevant inthe media space in Quebec was through an Astral transaction.But it also fills some other gaps in our portfolio that are also important. We’re nota big buyer of movies today. And they’re an important part, for us, strategically,going forward, of a full-service, full genre entertainment and television solution.The out of home services are really complementary, we’re very excited andadvertisers have told us that to have the opportunity of more flexibility in building advertiser solutions and moving commitments from one property toanother, and having package solutions that meet their needs, is good.The Astral management team was very appealing to us, we think it’s a very wellrun company, and we think they really complement the skills that we’ve builthere. We’ve had great success moving CTV’s content, doing 2 things. One: investing. When you go back 3 years before Bell really got into the industry, you had somepretty fragile broadcasting companies in Canada. You had CanWest, which was just bought out of bankruptcy, CTV which was violating bank covenants andrequiring cash infusions from its owners, and frankly I don’t think it’soverstepping to say Rogers was neglecting its media assets and not investingthere.So since we bought CTV, we made significant capital and operating expenseinvestments in the asset, which has been tremendous for the system. But we’vealso fulfilled our vision of going to 4-screen viewing. And really investing inacquiring multi-platform rights, in starting to build technology to deliver to fourscreens, and starting to build business models that are sustainable in that space.
 
 And so - we will bring all of that similar investment energy and the multi-platform, multi-screen to Astral’s assets as well.
 So - when you say you’re committed to the Canadian broadcasting system - anundoubtedly you are - this almost makes you the Canadian broadcasting system,is what the critics would say. If Astral’s the only thing you could buy, would youhave preferred to do a smaller deal if you could have? 
Kevin: It’s misguided and misleading and just erroneous to suggest this makes usthe broadcasting system. By no measure do we reach any logical, quantitativemeasure of dominance and control. This is an immensely competitive industry. Itis today and it will be after we complete this transaction. Scale is really importantin the media business.One is it’s unlike any manufacturing business and it’s even unlike a lot of serviceindustries, because the costs of operating a media business don’t change, whether you serve 100 households or 10 million households. When you’re producing aprogram, or buying a program, the costs - if you’re gonna create a quality hitshow - the costs are the same if you show it to 100 people or a million people. Soscale really matters in the media business.It also matters to have multiple properties to be able to develop content thatapplies to multiple properties, and use talent and production and things of thatsort on different mediums and different channels and different brands. So inCanada, scale is really important because we’re competing against global players.I think that everyone would acknowledge that the foreign-owned OTT players area factor in today’s business, and will be a much bigger factor in every month and year to come in the future. And they get their scale - the Netflixes and the Applesand the Amazons and the Google-YouTubes - they get their scale by buyingglobally. And so, if we want Canadian broadcasters frankly to survive against that kind of scale - where really there’s not obviously borders protecting our Canadianproducers and Canadian broadcasters against them, then the Canadian guys haveto have scale. And Canada’s a country of 13 million households, 33-34 millionpeople. I think it’s preposterous to conclude that 4 major broadcasters is tooconsolidated - 5 major ones w/ CBC-SRC - so 5 major broadcasters in a country of 33 million people, to say that’s too consolidated is ridiculous.Mirko: In English Canada, we’re acquiring 5 licenses - 2 of which are specialty. SoI don’t know how we go from where we are today - add 2 specialty licenses andsuddenly we are the system? And on the French-language side, we’re taking 8 Astral services and adding one - we only own one, RDS - and suddenly we’ve become the system? Still behind Quebecor. -Kevin: We have 29 specialty channels today, there’s a universe of English-language specialties of 230-240. We have 29 today, we’re adding 2, as Mirko says. And then we’re adding -Mirko: 2 pay and the PPV, which is a tiny business.
 
Kevin: I mean, I might as well - and then I’ll let you expand - I might as well kindof address the noise around the transaction. And the noise and the magnitude of the outcry of opposition, is coming for one reason only: I’ve been at Bell for 8 years now, and in the last 4 or 5 years, we have been driving a real resurgence of the competitiveness of this company. And our competitors don’t like it. And theoutcry overwhelmingly - almost unanimously, 100%, comes from a handful of competitors, and when you look at the 800 intervenors who wrote in support, it’s just virtually unanimous that independent producers, directors, actors, theadvertising community - both from a standpoint of the organizations that speak for advertisers and the agencies themselves, were - and as a matter of fact, severalindependent broadcasters were in support.Mirko: And telecom, like Shaw.Kevin: There’s almost unanimous support, other than two Quebec BDUs -Quebecor and Cogeco - who obviously just have self-interest to use the regulatory process to try and not have competition. One of them bid on this asset, I think it’s been reported, and so one of them bid on this asset and didn’t win the asset, sothere’s some sour grapes there.Rogers intervention - they, you know, they’d love to get the English channelscheap, so they say - ‘Hey, we like consolidation, we like vertical integration, that’sall good, but they should have to sell us the English channels.’ So the oppositionhas been using - first, false numbers, misleading propaganda, and obvious self-interest to make a lot of noise around a transaction that frankly didn’t deservenear this level of media attention.
 Are you surprised by the level of attention and opposition? 
I think if you’re a business operator and your business is threatened by competition and by competitors, that you do everything you can to try and defendit. If you can’t defend it in the marketplace, then you run to the regulators. So -am I surprised? I am very surprised by the tactics, there’s a level of misleadinginformation and a tone of the debate that I am surprised by.
You say that if we want Canadian broadcasting to survive - and that’s putting it into rather apocalyptic terms - the Canadian system has to be strong, and youneed this kind of scale. Would it then be good to have just 2 companies inCanada? 
Kevin: Well, I don’t know that I can speculate. I think that having strongCanadian broadcasters who can withstand - we’re in a cyclical industry as well,and you need to be able to withstand the cyclicality of our industry. So you needsufficient scale. I don’t know what that means, as far as the number of players.But I do think that sufficient scale, if you gonna be a mainstream mass-typeplayer who’s buying first-run content and in the mainstream genres. I still think though there’s plenty of room, and we see this in many industries when they goglobal, that you get a consolidation of the big players, and then you have apreponderance of niche players that are able to fill gaps left open by the big

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