Selling CTV

Was it Casey Stengel or Yogi Berra who said it was déjà vu all over again? Well here we go with BCE buying CTV again and the inevitable and recurring attempt to create convergence in the Canadian media. What a crock. My best advice: if you own shares in BCE, sell.

Ever since Izzy Asper died and left his media empire to his embarrassing offspring, CTV has dominated the Canadian TV market. On any given week they have as many as eighteen of the top twenty viewed programs in Canada. Based on those numbers you have to ask yourself why CTV has been for sale since long before the current recession hit. The answer of course is simple. CTV manages to lose money no matter how well they do on air. You can blame the internet. You can blame the 500 channel universe. You can even blame the economic downturn. I’m sure all of these play a role. But that doesn’t account for the fact that CTV was losing a bundle before the huge growth in cable and specialty channels. CTV saw no profits before we could watch television on our telephones and computers. CTV was hurting financially before the great recession of 2008. That’s why BCE ran away from CTV almost a decade ago when their first foray into the Utopian world of convergence took place. They ran away almost immediately selling large portions of their shares to the Ontario Teachers’ Pension Plan and Torstar. In fact I could make the argument that the only thing keeping CTV going today are the terrific profits it makes from the 500 channel universe through its own cable stations.

How did this situation come to pass? In my view you can lay much of the failure of CTV directly at the feet of the man who has made his reputation from running CTV, Ivan Fecan. Sure, if you are reading all the bunk that’s been plastered all over the newspapers for the past two days you have to believe the man’s a genius. His programming acumen supposedly made CTV the great success it is today. But what about the facts? They have been buried in the myth of the boy genius.

When Fecan came to CTV, Global was king of the Canadian TV hill. He understood quite correctly that he had to knock off the champs by adding new audience. He then went on a buying spree. He bought up dozens of stations across the country. He wanted his fingers in every market that Global was reaching. That sounds like a good idea on the surface but he missed the point. Global was beaming across Canada with a minimum of stations. Global reached all of Ontario with just one station in Toronto. The Maritimes were served from Halifax. Manitoba was served from Winnipeg. Ivan didn’t, in my view, understand this. He bought stations all through northern Ontario, he bought Kitchener and Ottawa. It wasn’t his money. He added bricks and mortar and a huge workforce. He also added millions, maybe billions in debt that had to be serviced. He brought 1950’s and 60’s style entrepreneurship to a business that had to face up to new realities of a changing media scene. (In the process he helped to kill or at least badly wound local television and especially local news, but I’ll leave that for another blog.)

Ivan Fecan also got a lucky break or two. Global’s ownership feud resulted in the loss of its best programmers, men like David Mintz who continually outsmarted the people at CTV and to this day has never been adequately replaced; and Izzy Asper, whose death resulted in the loss of anyone with a clear vision to run the network. While Global floundered Fecan took advantage by buying some of the best Hollywood properties. Okay he gets credit for that, but when you look closely, the insiders say, he spent way too much money for the shows, especially considering, and he didn’t get this, Global could not afford to pay much for programming so he was in essence bidding up the prices against himself. Some genius.

Now Ivan Fecan is leaving CTV. He’s taking his multi-millions in salaries and stock options into retirement. The network is still a money loser and even after lots of cutbacks, still has too many stations and too many people. So why the heck does BCE want in? According to their boss, George Cope, it’s all about convergence and “captive” content. If you missed David Olive’s excellent column in the Saturday Toronto Star on September 11th, I have a few juicy tidbits for you:

As a captive supplier, CTV will not be able to command top dollar for its highest rated programs, instead fetching only what owner BCE is willing to pay.
As for BCE, it will be obliged to broadcast CTV’s flops and hits alike.
It’s worth noting that Shaw is not looking to Global as a convergence play, and will retain the ability to buy programs elsewhere for its smartphone and other “platforms.”
…The only clear winners I can see in this deal are the Ontario Teachers’ Pension Plan and Torstar Corp….

Convergence is a neat idea that has never worked. It’s like Communism and the Toronto Maple Leafs, it looks far better on paper than in reality. Somehow real people and real life situations always bring it down.

In any case I have trouble believing George Cope’s reasons for buying CTV. I believe that it has more to do with keeping up with the Jones’. In this case the Jones’ are Shaw, Quebecor and Rogers. They are all buying broadcast platforms, so we have to have our own too. It seems to me to be one of those situations where it is more important to the prestige of BCE than it is to their bottom line, but you can never admit this to your shareholders. So while the deal is fresh and investors are drinking the Kool-Ade, get out. Sell your BCE stock. You will thank me later.

Filed under: Media Commentary, Political Commentary, BCE, CTV, George Cope, Global, Ivan Fecan, Izzy Asper, Quebecor, Shaw, Toronto Star, Torstar Corp.