Rights holders seek to double royalties for distant TV signals

OTTAWA — Rights holders of programming shown over distant TV signals are seeking to at least double the amount of money they receive from TV service providers, on a per subscriber basis, for providing that content to their customers. A hearing before the Copyright Board of Canada — scheduled to run two weeks with final arguments in January on top of that — got underway on Tuesday. David Kent, a lawyer for the Canadian Broadcasters Rights Agency (CBRA), told the hearing that the various collectives with an interest in this case are looking for the royalties paid by medium and large broadcast distributors to rise from 98 cents to $2 immediately for each subscriber who gets one or more distant TV channels, and gradually increase to $2.38 by 2018. The new rates would apply for the years between 2014 and 2018, and apply retroactively. He explained how a rate of 70 cents was first established more than 20 years ago, and has increased to 98 cents as a result of settlements between the TV service providers and the collectives. He said this currently represents about $100 million in revenue a year. Kent said TV service providers will argue that 98 cents is "fair value" based on the fact the figure was negotiated between the parties involved. "I think that notion has to be nipped in the bud as quickly as possible so it does not take root," he said. He said royalties on which collectives and broadcast-distribution companies agreed do not necessarily reflect the true value of distant TV signals. Incidentally, the collective Kent is acting on behalf, the CBRA, represents TV stations that are part of Shaw Communications Inc.'s Global network, BCE Inc.'s CTV and Quebecor Inc.'s TVA, according to a description on the Copyright Board's website. These companies' broadcast-distribution arms, along with Rogers Communications Inc., Telus Corp. and Cogeco Cable Inc., are all objecting to the collectives' royalty proposal. Information presented by Carol Cooper, CEO of the Canadian Retransmission Collective (CRC), indicated that these six companies represent about 94 per cent of royalties large- and medium-sized distributors pay for distant signals. Witnesses for the collectives are scheduled for the first week of the hearing, and the TV-service providers' witnesses are scheduled for the second week. John Callaghan, a lawyer for the Copyright Collective of Canada, which represents distributors and producers of U.S. TV shows and movies, said economic evidence that has not been available before will be presented during the hearing that shows distant-TV signals are much more valuable to TV service providers in comparison to what they pay. For example, he said Gerry Wall, president of telecommunications consulting company Wall Communications Inc., will show how Canadian service providers take in, on average, $4.97 per subscriber each month for the provision on distant TV signals. Callaghan added that University of Calgary economics professor Jeffrey Church will say that, when using U.S. specialty channels as a benchmark given the similar viewership numbers of distant over-the-air channels, $2 a month per subscriber is a more appropriate level for service providers to pay for distant TV signals. On the hearing's first day, Peter Grant, a lawyer with McCarthy Tétrault LLP and an expert in broadcast policy, testified on behalf of the collectives. He discussed how advances in broadcast-distribution technology have significantly increased the number of distant-TV signals available to viewers over the last 25 years. He said the average number of out-of-market, over-the-air channels has gone from an average of 4.5 per subscriber in 1990 to the mid-50s now. He said the "most significant change" causing this proliferation was the introduction of direct-to-home satellite-TV service in 1997, the technology behind which allowed for the transmission of many more out-of-market channels than cable had allowed for. This was followed by the adoption of digital technology by cable companies in the early 2000s, which used it to carry more distant-TV signals to compete with satellite providers, Grant said. This trend continued when IPTV providers came on the scene later that decade, he added. Grant said the value TV service providers can provide to customers with distant signals includes time shifting, which allows people to watch TV shows that have a scheduling conflict with another program they want to watch. He added that it also creates more options, allowing viewers to watch unique programming that is not available on local TV signals, such as sporting events involving certain teams. He said consumer research has shown that time shifting is among the things consumers value most about their TV subscriptions. Under cross-examination, Ariel Thomas, a lawyer for the broadcast distributors, asked Grant if he agreed that the growing availability of features such as video-on-demand and online streaming services could affect the value viewers place on distant signals for time shifting. "It could," he replied, while adding: "I don't think in the next few years it will change materially." In an exchange with Thomas about using PVRs capabilities to watch TV shows at more convenient times, Grant said most viewers are "couch potatoes" who don't plan far enough ahead to set up recordings and therefore must depend on time shifting to watch what they want. He described himself as a "veteran PVRer" and added that most of the content he records comes from distant-signal channels. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Rights holders seek to double royalties for distant TV signals

News | November 24, 2015

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Rights holders seek to double royalties for distant TV signals

News | November 24, 2015

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