SKY RADIO MAY ULTIMATELY CLIP CANCON AIR PLAY Terrestrial rivals may press CRTC to lower quotas Paul Brent and Paul Vieira – Financial Post The Canadian Radio-television and Telecommunications Commission's decision to allow U.S. satellite radio companies to operate in Canada could have a silver lining for conventional radio operators and listeners alike -- potentially less Loverboy and Glass Tiger littering the airwaves.
The granting of licences to groups allied with two U.S. satellite broadcasters requiring just 10% Canadian content will spur conventional radio operators to seek a reduction on 35% Canadian-content rules, analysts said.
Although the groups allied with U.S.-based Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. plan to charge subscribers about $13 a month, requiring them to create eight Canadian channels in a proposed 80-channel package gives the space-based groups a distinct advantage over their terrestrial rivals.
"That provides a compelling product that will be incredibly differentiated from commercial radio in Canada unless the CRTC loosens Canadian-content requirements," wrote Scotia Capital analyst Andrew Mitchell in a recent report.
The analyst contends the 35% Canadian-content rule has created a homogenous group of Canadian radio stations compared those in the United States.
"Commercial radio stations have a small group of current hits at any point that qualify for the 35% Canadian-content restriction," wrote the analyst. "That results in clutter and overplaying of Avril Lavigne, Sarah McLachlan, Shania Twain, The Tragically Hip, etc."
In the wake of the CRTC decision, which also licensed a land-based proposal from conventional radio operators CHUM Ltd. and Astral Media Inc., analysts said it is all but certain radio companies will push for lower Cancon rules. "We expect incumbent radio operators will lobby aggressively in the upcoming regulatory review for less onerous domestic content requirements," wrote BMO Nesbitt Burns analyst Tim Casey.
But the CRTC, looking at two years of healthy radio profits that continued to rise in 2005, might be leaning the other way.
Charles Dalfen, chairman of the CRTC, said that as part of the regulator's review of radio this year, it will consider raising the content levels to 40%. "We are in a state of flux and [radio operators] face challenges," he said in an interview in April. "On the other hand ... when you look at their financials, they had as good a year in '04 as '03 and '03 was a great year."
In Ottawa, the federal Heritage Minister, Liza Frulla, is under pressure from the Bloc Quebecois to overturn the CRTC's satellite radio ruling because CSR and Sirius will produce "insufficient" and "unacceptable" content for French-speaking Canada. Of the eight Canadian-produced channels, three must be French.
Bloc MPs have hounded Ms. Frulla for two straight days in the House of Commons, saying federal law allows her to intervene in CRTC rulings if she believes it's in the country's best interests.
Ms. Frulla said she expects certain parties to appeal the ruling. Once the appeals arrive, Ms. Frulla said the Cabinet would review them to see if they are of merit. |