ARCHIVÉ - Transcription, Audience du 15 avril 2011
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Abrégée de Shaw
TRANSCRIPTION DES AUDIENCES DEVANT LE CONSEIL DE LA RADIODIFFUSION ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUJET:
Afin d'étudier les demandes de renouvellement de licences par groupe de propriété pour les groupes de télévision de langue anglaise décrites dans l'Avis de consultation de radiodiffusion CRTC 2010-952, 2010-952-1, 2010-952-2 et 2010 952-3
TENUE À:
Salon Outaouais
Centre des conférences
140, Promenade du Portage
Gatineau (Québec)
Transcription
Afin de rencontrer les exigences de la Loi sur les langues officielles, les procès-verbaux pour le Conseil seront bilingues en ce qui a trait à la page couverture, la liste des membres et du personnel du CRTC participant à l'audience publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu textuel des délibérations et, en tant que tel, est enregistrée et transcrite dans l'une ou l'autre des deux langues officielles, compte tenu de la langue utilisée par le participant à l'audience publique.
Conseil de la radiodiffusion et des télécommunications canadiennes
Transcription abrégée de Shaw
Afin d'étudier les demandes de renouvellement de licences par groupe de propriété pour les groupes de télévision de langue anglaise décrites dans l'Avis de consultation de radiodiffusion CRTC 2010-952, 2010-952-1, 2010-952-2 et 2010 952-3
DEVANT:
Konrad von FinckensteinPrésident
Leonard KatzConseiller
Rita CuginiConseillère
Suzanne LamarreConseillère
Peter MenziesConseiller
Tom PentefountasConseiller
Stephen SimpsonConseiller
AUSSI PRÉSENTS:
Jade RoySecretaire
Joshua DoughertyConseiller juridique
Valérie DionneConseiller juridique
Sheehan CarterCoordonnateur de l'audience
TENUE À:
Salon Outaouais
Centre des conférences
140 Promenade du Portage
Gatineau (Québec)
15 April 2011
- iv -
TABLE DES MATIÈRES
PAGE / PARA
PHASE III
RÉPLIQUE PAR:
Shaw Media Inc. (Cont.)361 / 2735
Gatineau (Québec)
--- L'audience reprend le vendredi 15 avril 2011 à 1147
2729 THE CHAIRPERSON: Madame la Secrétaire, are we cut off from the internet? Has the room been cleared, just to make sure?
2730 THE SECRETARY: Yes.
2731 THE CHAIRPERSON: Okay.
2732 THE SECRETARY: We are now ready for the in camera session. We will just close the door.
2733 THE CHAIRPERSON: Okay. We will start now the in camera.
2734 Len, you have the floor
2735 COMMISSIONER KATZ: Thank you.
2736 You have before you two pages in pink which is a summary of the data that we have collated, your data, which has four years of actuals, one year of 2011, which is a hybrid, and then the forecast years. The second page is your forecast of CPE and FPE, foreign programming, historical as well as going forward.
2737 The question that I have -- the first question I have is actually on page 2, it's with regard to the cutover between 2011 and 2012. As you can see there, at that point your investment in foreign programming appears to ----------------------------------------- to $281 million in 2012, --------------------------------------------------------.
2738 I guess I would like you to comment on that from the perspective of you identifying that CPE investment is not making money for you and it appears under this data that you will be spending ------------------------------------------------------------, yet if you look at the previous page your PBITs ----------------------------------------------------------------------------------------------------------------------.
2739 Is there a correlation that I'm missing, or should I not be correlating at all?
2740 MR. FRENCH: Here, I will take this, Vice-Chair.
2741 So if we first take a look at the second page and just talk about what we are seeing in the foreign spend moving from 2011 to 2012, and then if you take a look at the foreign spend going throughout the forecast period, you know it's really growing at a 1 percent rate in the outer years.
2742 But what's happening between 2011 and 2012 is we have ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------.
2743 Again, if we look at 2012 onward from a foreign programming perspective, you do see marginal growth of about 1 percent. One could argue that that's a very aggressive assumption that it's only going to grow 1 percent over the forecast period, these forecasts were prepared prior to the increased presence of Netflix in the economic environment and in the industry. We all know that could put price pressure on our foreign spend. So the 1 percent growth in the outer years, you know, may be aggressive, we may see a bigger number because of that, which will erode our PBIT margin.
2744 From a CPE perspective you do see a ------------------------------------------------------------------------------------------------------------------------------------------------------.
2745 So we have created some ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------.
2746 If we take a look at page 1 and from a PBIT standpoint -- so what you do see from a specialty standpoint is you do see our specialty PBIT in the 41 range throughout the term of the license that we are projecting out. ---------------------------------------------------------------------.
2747 Really what we are seeing there is that the growth within our specialty ad revenue, you know if you take out our projections they are growing at about 5 percent, so growing nicely, we have our Canadian growth modelled in the current 29 percent, which will increase if we land on a 30 percent, and we have good cost control going throughout the term of our forecast, thus maintaining the PBIT margin in the 39 to 41 percent, so a good projection.
2748 Again, these projections were done before Netflix arrives and we do have some risk in the revenue number, that revenue number may come down, and we have some risk in the foreign spend number as well, too. So we will do our best to manage costs to ensure that this business can deliver a PBIT in that range.
2749 From a conventional standpoint, we take a look at the growth rate that we have in our projections going out to 2016 and we are projecting that conventional is going to be flat and it's not going to grow.
2750 You take a look at historical performance, you take a look at our competitors, you take a look at what's going on in the industry, you take a look at what is going on from an OTT perspective and one could argue that again that flat growth rate could be aggressive.
2751 If you take a look at some of the third party statistics that are out there, looking at where they see conventional going and I believe we are realistic and we are in the range of what their projections are.
2752 From a margin perspective, you do see the margin going down and again all that is tied to the fact that our foreign costs are going up. We have a flat revenue stream and we have our foreign costs increasing, and again we have an increase of 1 percent in our 5-year projections and one could argue that that 1 percent may be low, which would put more pressure on our PBIT margin going outwards. But we as a business and a management group will continue to take a look at costs to ensure that we can protect the PBIT percentage within the conventional business, but as we look at increased spend within this side of the business it is putting pressure on a very thin margin business.
2753 As you see there, we have a very strong PBIT in specialty and conventional, it's in the mid single digits dropping.
2754 COMMISSIONER KATZ: If you look at the CAGR, the Cumulative Average Growth Rate, on the CPE page for the first four years there, 2008 to 2011, ---------------------------------------------------------------------------------------, and when you go over to the forecast years the foreign is only growing by 1.7 percent, almost the same as the Canadian.
2755 So there is a radical change in your plans obviously when it comes to purchasing of foreign programming. Am I to assume that you are not going to be as aggressive in purchasing foreign programming?
2756 MR. ROBERTSON: I will take that one, Vice-Chair.
2757 We look forward to the May screenings and future years of transacting business in Hollywood and it is our believe -- and hopefully it's not just wishful thinking -- that the amount that we spend on U.S. programming can be kept within a reasonable range and this thinking really reflects that.
2758 You know, things change from a competitive standpoint. Michael, in his comments, mentioned Netflix a couple of times, that's not just thrown in for effect. It does have the potential to really change the competitive pressure in the market when a new entrant comes in and can take out a deal that you thought was only between the kind of major players.
2759 So things can change, that can put more pressure on the U.S. spend side, but based on the competitive profile that we have been dealing with to date and when we put these projections together, we thought that it was reasonable to reflect kind of a slow growth in terms of the U.S. spend.
2760 The only other thing I would comment on in terms of the shape of the curve that's before you on the CPE chart is that if I was in the production community or was in your shoes, I would feel awful good about the shape of the orange bar that has shown some variation in the past and now it's firmly fixed at the 30. I mean, you must say wow, that's what we were looking for.
2761 COMMISSIONER KATZ: Right.
2762 I asked this question of the other parties as well. When you purchase programming for your OTA and the historical long tail kicks in and you start to show that on your specialties, how do you account for the revenues and is it consistent with your expenses, because you expenses are incurred when you purchase that program, it's an OTA program and then it shows up in, I don't know, history or wherever it shows up.
2763 MR. FRENCH: Sure. When we purchase a program for Global and actually it airs on History, so first there will be a cost on the Global network and there will be an agreement between Global and History on the number of runs and when the runs could happen. We have a transfer price agreement in place which actually transfers part of the costs over from Global onto history, and so there is a fair market value in effect transaction that happens that moves the costs over to History and then once History starts playing the program we start amortizing it.
2764 So it is amortized on a systematic basis, on a per-play basis. So every run that happens on History, History will get a charge to their P&L from an amortization standpoint. Errol who was here last week will go out and look at the audience and sell the audience on History and that's how the revenue comes through.
2765 So you will have a cost sitting on your conventional side and as you play your product on conventional you will incur that cost in your P&L and you will actually receive revenue as you sell that audience.
2766 Again, when you transfer over the piece that's going to be played on specialty you transfer it over at a fair market value and you start taking the costs when you play the program.
2767 MR. ROBERTSON: If I could just add one other thought on that. We have a lot of minority partners on these channels and so the test of fair market value is really crucial in those relationships so we spend a lot of time developing a sophisticated model that reflects the fair market value because it has to -- you know, we have the fiduciary responsibility to make sure our partners are fairly dealt with.
2768 COMMISSIONER KATZ: So these PBITs are as pure as they possibly can be?
2769 MS WILLIAMS: Yes, they are. But I would just add for clarity that when we purchase a show from a U.S. network for prime time on Global, we don't automatically have that right to decide to run it on History or Showcase or somewhere else, that's a unique and separate right that needs to be negotiated and usually in the deals it's acknowledged what the cost is of that, if you are going to take a cable play.
2770 So Mike is right, if for some reason the deal is all inclusive, we have a right to play it but without a specific cost attached, then we have our own transfer policy that deals with that. But in many of our agreements it's laid out for you in the deal because you don't just get to run it wherever you want. Those are very specific individually negotiated rights.
2771 COMMISSIONER KATZ: No, I understand that from a foreign perspective, I was more concerned about a Canadian because you are paying for it upfront presumably, you are financing, you are paying for it, you are buying it for Global, and then you decide there is an opportunity there to use that long tail opportunity and put it on specialty channels.
2772 MS WILLIAMS: Canadian, you're right then, that's the transfer policy that kicks in to be sure that the costs are appropriately spread.
2773 COMMISSIONER KATZ: Okay.
2774 Those are all my questions, Mr. Chairman..
2775 THE CHAIRPERSON: Thank you. Tom...?
2776 COMMISSIONER PENTEFOUNTAS: Thank you.
2777 I'm probably educating myself more than educating anyone else, but what happened between -- what is going to happen between maybe -- Vice-Chair Katz spoke to this issue. ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2778 MR. FRENCH: Yes, Vice-Chair --
2779 COMMISSIONER PENTEFOUNTAS: Besides spending 30 percent on CPE?
2780 MR. FRENCH: What we see is, given the uncertainty in the marketplace for the new competitors, again being Netflix, being Google, being Apple, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2781 --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------.
2782 MS BELL: Just one point on the specialty side, and it was mentioned earlier today, the digital migration that is going to happen in September. We assume it is going to have an impact on specialty revenues, but we don't know to what extent when we all become discretionary services, as you heard earlier.
2783 COMMISSIONER PENTEFOUNTAS: Yes.
2784 MS BELL: So it's difficult for us to predict what that impact is going to be, but we know there is going to be an impact, there is no doubt about it, it's just a matter of what will it be and where will it happen.
2785 COMMISSIONER PENTEFOUNTAS: So it's just cost management, because your PBITs are quite healthy.
2786 MR. FRENCH: Yes, definitely. We are managing costs as tight as we can.
2787 COMMISSIONER PENTEFOUNTAS: Can you also explain to me what happened between 2009 and 2010? --------------------------------------------------.
2788 MR. FRENCH: Yes, definitely.
2789 So I think if you go back and you think about the economic environment that we were living within --
2790 COMMISSIONER PENTEFOUNTAS: It's strictly recession?
2791 MR. FRENCH: Yes, exactly.
2792 THE CHAIRPERSON: Well, how come you see that and everybody else shows a gross. I don't get this?
2793 MR. FRENCH: I'm sorry, can you repeat the question?
2794 THE CHAIRPERSON: I have your numbers --
2795 COMMISSIONER PENTEFOUNTAS: The aggregate numbers for the group show --
2796 THE CHAIRPERSON: The aggregate number for all the groups show a 3.7 percent growth from 2011 to 2012; you show ---------------------------------------------------------------------.
2797 -----------------------------------------------------------------------------------------------------------------------------------------------
2798 MR. FRENCH: ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------.
2799 -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------.
2800 THE CHAIRPERSON: -----------------------------------------------------------------------------------------------------------------------------------------
2801 MR. ROBERTSON: ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2802 -----------------------------------------------------------------------------------------------------------------------
2803 COMMISSIONER PENTEFOUNTAS: --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2804 MR. ROBERTSON: -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2805 COMMISSIONER PENTEFOUNTAS: Okay.
2806 MR. ROBERTSON: -----------------------------------------------------------------------------------------------------------
2807 COMMISSIONER KATZ: ------------------------------------------------------------
--- Rires
2808 THE CHAIRPERSON: Okay. This didn't have to be in camera, but just kind of going back for one second to the terms of trade.
2809 Couldn't we just make it very simple and straightforward in saying that Shaw will adhere to the terms of trade agreement with CPE through the license term.
2810 You have one, if you want to amend it you amend it, if they agree to it, that's fine. Basically you have that deal. That deal has a lifetime, so why don't you agree to adhere to it?
2811 MS BELL: Could we think about that --
2812 THE CHAIRPERSON: Sure.
2813 MS BELL: -- and provide a response?
2814 THE CHAIRPERSON: Actually, let me repeat that question to you when we are out of camera so the others can reflect on it as well.
2815 MS BELL: That would be great.
2816 THE CHAIRPERSON: So there are no more in camera questions, let's turn the internet back on.
--- Suspension à 1206
STÉNOGRAPHES
Johanne Morin
Jean Desaulniers
Monique Mahoney
Sue Villeneuve
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