Happy Birthday Sun News Network (and why it might not get another one after the CRTC hearings)
By Steve Faguy
April 18 marks Sun News Network's second birthday. But unless it gets some help from government regulators, it might not see a third.
The Quebecor-owned conservative news network is one of 16 existing or hoping-to-launch specialty services that are appearing at a hearing of the Canadian Radio-television and Telecommunications Commission starting April 23 to ask to mandatory carriage on cable, satellite and IPTV television providers. A further six are seeking renewals of that status.
This "must-carry" status is exceptional in Canadian broadcasting, and applies to channels the CRTC feel are so vital that all Canadians must subscribe to them whether they want to or not. In exchange, their wholesale rate (the price per subscriber that the broadcaster charges providers to distribute them) is set by the commission. It applies to channels like the Cable Public Affairs Channel, the Aboriginal Peoples' Television Network, The Weather Network, AMI TV (which airs programming with described video) and CBC News Network and RDI in their respective minority-language markets.
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For Sun News, which champions consumer freedom over government regulation, the request for this status is a "last resort" that it says is required because distributors owned by competing vertically integrated companies aren't giving it a fair shot. Sun News had 4.9 million subscribers at the end of 2012, far less than competitors CBC News Network (11.3 million) and CTV News Channel (8.7 million). It blames this mainly on unfair packaging by distributors like Bell (which owns CTV) and Rogers (which owns the recently-launched CityNews Channel), as well as the head start that CBCNN and CTVNC got with de facto mandatory distribution when they were on analog cable years ago. Even today the two channels remain part of many basic packages, and their wholesale rates are much higher than Sun News Network's.
Sun is asking for five years of mandatory distribution on analog and digital cable, at a rate of $0.18 per month in primarily English-speaking markets and $0.09 per month in primarily French-speaking markets. This would be higher than the $0.07 per month average it currently gets, but well below the $0.63 per month that CBCNN charges in anglophone markets.
But it would be enough, Sun News says, to pull it out of its budgetary hole. The network lost $13.4 million in 2011, and $18.5 million in 2012, about 50 per cent more than its original budget estimate when it applied for the channel's licence in 2010. This difference is mainly attributable to lower than expected subscription revenue.
Sun News is also asking for a special order to give it preferential treatment on cable dials. It argues that its competitors put it on high-numbered channels where it can't be easily found, and says Rogers yanked it off of a low-numbered cable channel and replaced it with its own CityNews Channel.
Will Sun News get its wish?
The CRTC set criteria in 2010 for services that should be given this special status. They are:
1. That the channel "makes an exceptional contribution to Canadian expression and reflects Canadian attitudes, opinions, ideas, values and artistic creativity";
2. That it "contributes, in an exceptional manner, to the overall objectives for the digital basic service and specifically contributes to one or more objectives of the Broadcasting Act, such as Canadian identity and cultural sovereignty; ethno-cultural diversity, including the special place of Aboriginal peoples in Canadian society; service to and the reflection and portrayal of persons with disabilities; or linguistic duality, including improved service to official language minority communities"; and
3. That it "makes exceptional commitments to original, first-run Canadian programming in terms of exhibition and expenditures."
Sun News argues that it fulfils all three criteria, providing a unique voice for conservative-minded Canadians that they can't see on other news channels that it accuses of having a left-wing bias. Thousands of comments from its viewers back up that claim.
There's certainly no argument that Sun News is committed to Canadian programming. It airs 92 hours a week of original programming, almost its entire schedule is original to the network, and 100 per cent of what it airs is produced in Canada.
The other two criteria will be harder to prove, and up to the commissioners to decide.
Probably the biggest hurdle Sun News will have to clear is that the CRTC recently deregulated mainstream news services, and the commission now being asked to re-regulate the genre.
In September 2009, the CRTC announced that it would move mainstream news and sports channels into a new category. Each service would follow the same conditions of licence (including the same Canadian content and spending requirements) and would negotiate their own fees and packaging with distributors, meaning they would lose their access rights.
CBC News Network, CTV News Channel, RDI, LCN and Sun News are all licensed this way. Giving mandatory carriage to all-news services that provide a unique perspective could not only open the door to each of them demanding it, but to regional news services like CP24, CityNews Channel and Global News BC1 also demanding the same, not to mention every other specialty channel that thinks it provides something unique.
There is, however, another set of criteria that could be used in this case. In 2008, commissioner Michel Morin proposed what he called the Morin Model to determine what specialty channels should have carriage on basic cable. The Morin Model is a points system, which objectively evaluates a service based on the amount and cost of Canadian programming, as well as its wholesale price per consumer.
Under the model, the percentage of the channel's programming that is Canadian-made is added to the percentage of its revenues that it spends on Canadian programming, and the wholesale rate in cents per month per subscriber is subtracted from that total. If the resulting score is above 100, the service would be considered important enough to be carried on basic.
Sun News airs 100 per cent Canadian programming, and currently spends 250 per cent of its revenues (or 64 per cent of its expenses) on that programming. With a proposed wholesale rate of 18 cents per subscriber in English Canada, the resulting score of 332 would easily qualify it for such a status. If its revenues rose to meet its expenses, its score would drop to 146, still enough to qualify.
But Morin, who is no longer a CRTC commissioner and now works as a journalist for Quebecor's TVA network, added another criterion to his model: 33 per cent of a service's revenues must come from advertising. Sun News gets 26 per cent of its revenues from advertising, a number that would surely drop if its wholesale rate went up and all Canadians were required to subscribe to it whether they watched it or not.
In any case, the commission has not embraced Morin's model. In 2008 and 2010 decisions that set policy over distribution of specialty services, Morin wrote dissenting opinions.
For these reasons, plus the recent pro-consumer slant of the commission's recent decisions under chairperson Jean-Pierre Blais, it's hard to see a positive outcome for Sun News in this case, unless the commission is truly convinced that it is "exceptional" in some way.
So if the CRTC says no, then what? Quebecor hasn't said what its Plan B is. When the channel first launched in 2011, the Quebec media giant said it was giving it a five-year commitment. But that was based on financial projections showing it would pull itself into the black in that fifth year. Revised projections sent to the CRTC show Sun News losing money well into 2020. While there has been no overt threat to shut the channel down if it doesn't get mandatory carriage, its survival potential is greatly threatened unless it does something drastic to its balance sheet.
The CRTC's hearing into Sun News and other requests for mandatory carriage will be heard over eight business days in Gatineau starting April 23. Live audio of the hearings will be streamed on the commission's website, www.crtc.gc.ca.