CHUM ate Craig: Now what?

Canada's 'third net' pledges to keep selling regionally while bringing A Channel ratings up to par

While CHUM patiently awaits a CRTC ruling that will decide the fate of its $265 million Craig buy-out, it’s understandable if the rest of the industry has a hard time not talking about the elephant in the corner, sunglasses or not.

With a reach that will encompass some 85% of English Canada (save poor Saskatchewan), CHUM is set to become what many consider to be the nation’s third network. As might be expected, that has set off a frenzy of media speculation over programming, pricing and the fate of now-orphaned Toronto 1.

With a near-national reach and a regional disposition, look for Toronto-based CHUM to follow something of the Global model when it comes to sales – but try not to use the word network. As long as the demand for CHUM’s new western stations remains strong, there is little need for CHUM to cut rates in order to give people the incentive to buy nationally.

Notes David Kirkwood, EVP of marketing and sales, CHUM will keep selling regionally even though some of its programming will be available cross-Canada. It is a situation, he observes, not unlike what currently happens on the New Nets – buy one or buy them all, it depends on a client’s needs. Kirkwood maintains that CHUM will continue to responsibly respond to market conditions.

But it remains to be seen whether simply having another player on the national stage will disrupt the balance and influence pricing. Observes Florence George, VP and group media director at Toronto’s PHD Canada, ‘when it comes to Calgary and Edmonton, you need those stations because they represent a different price point, and I think it was part of many people’s execution in that marketplace…. I’m hoping [that if the A Channels'] numbers come back to where they were, [CHUM] won’t be terribly aggressive this fall with its cost per point.’

The recent performance of Craig’s western outlets was an unpleasant surprise to many. Sherry O’Neil, managing director at OMD in Toronto, notes that Craig suffered a 40% drop against some demographics, and she hopes the sole result of the buy-out will be a return to better ratings in the west.

‘I hope it doesn’t impact us other than that the performance of those stations will improve,’ says O’Neil. ‘It was a shocking year for all of us – the Craigs and the people who put money on the Craigs. We would hope that there is stability and rebuilding of the schedule so that we can continue to buy those stations in a significant way and deliver our clients’ plans.’

Kirkwood says CHUM intends to begin providing that programming assistance as soon as possible, and should be able to make an immediate impact by adding New Net programming that is not currently available on the A Channels.

With the prospect of CHUM’s financial wherewithal only increasing at the Craig acquisition, much ink has been spilled over the prospect of the broadcaster slipping out of its traditional skin and embracing the role of the quirky third network – the Canadian version of WP or UPN.

Notes Andi Kupersmith, SVP and director of Canadian media at Active International in New York, ‘I think CHUM will be able to get some better programming now, so it may affect what the Globals of the world might be able to buy…. At this point CTV is so dominant that they get first crack at things, and Global gets second, but I think there may be a vulnerability now with CHUM.’

Kirkwood doesn’t see CHUM wrestling for tier-one programming any time in the immediate future. And, he notes, while ‘CanWest and CTV play very hard in that ballpark,’ they miss a large and important percentage of the population. Kirkwood sees, now more than ever, a strong need for diversity and stability within the sked.

Please sir, may I have some more programming?

Toronto 1 remains the biggest what-if of the Craig buy-out. Six months into its launch, observes MPG/Maxxmedia media buyer Cathy Murray, ‘Toronto 1, to some degree, is a solution looking for a problem.’ Toronto is a market already served locally by City, Omni, Rogers Community Television and the nets, and that won’t change with new owners.

What’s needed, observes Sarah Ivey, VP strategic planning at Toronto’s Initiative Media, is a mission statement. ‘I think [new owners] would have to have a very clear idea of what Toronto 1 was trying to achieve as a brand,’ she notes, ‘and not be afraid to take some risks with it…. You have to invest in the content, invest in the time to build it, and be able to sustain that investment over a longer period. It’s something that if you have a clear idea of where you are going, it could be rewarded.’

The Toronto media have suggested Torstar as the most likely candidate for a purchase, a logical choice given that Torstar’s more stripped-down pitch for the new outlet came in second to Craig’s. But, given that scenario, T1 might still remain in a tough place, as Torstar doesn’t have access to the library the station is so desperately lacking, and the players in the industry who do have such a library have indicated that they are not interested in the single-stream revenue model of conventional television.

Buyers recommend that any potential suitor’s first call should be to the CRTC for a discussion about T1′s conditions of licence. Unless the playing field gets altered, warns Bruce Claassen, CEO of Toronto-based Genesis Media, T1 might never become a viable proposition. ‘I don’t know that anybody could make them work because of the extent to which Craig had to cover the universe. He had to do everything as well as solve the Middle East crisis… Assets very quickly turn into liabilities.’

OMD’s O’Neil says new owners should put far more of a priority on marketing, and suggests that they might consider transmitters in Ottawa, Kitchener, Ont. and London, Ont.

CHUM: We’re not for sale

Some have speculated that the sale of T1 could set off another round of media mergers and acquisitions, but most buyers are dubious. ‘The industry is good,’ notes Initiative’s Ivey, ‘but it has reached that point where it has to sort of catch up and pay the bills.’ But, as the old adage goes, never say never. Everyone is for sale, given the right price.

Rumours that CHUM itself is using the acquisition to bulk up for a buyer have become rife, a supposition seemingly supported by the fact that a company which has traditionally been debt-shy just took on a massive debt.

Kirkwood laughs at the suggestion: ‘I keep thinking every move [we make] will prove to people that that’s not what’s happening. The thinking here was one of the side benefits of [the Craig deal] would be: ‘Well, that will show anybody who thinks we are for sale.’ Now we have half the people out there saying: ‘You see. They just fixed themselves up so they will be better to buy.’

‘Every indication I get from this company is that we are in for the long haul. I think that this was inevitable. If we weren’t in for the long haul it would be better to just sell it now, because this is an investment. It’s $265 million and that’s not going to turn around tomorrow. It’s key to stay in business a little while on this one.’

And the waiting is the hardest part. It’s commonly known that the CRTC moves in mysterious ways, and only at its own pace. ‘It’s human nature, if not good business, that once you’ve made a decision to go a certain way, you would like to get moving,’ notes Kirkwood. ‘For us, the industry and for the Craigs, I think there is a sense of urgency to get it done as soon as possible, but again I say that with respect for the process.

‘But, ‘If it were done when ’tis done, then ’twere well it were done quickly’,’ says Kirkwood, quoting Macbeth.