Claiming its OMNI Television service is in the midst of a “financial crisis,” Rogers Media is asking the CRTC for a series of amendments to the conditions of license for the 35-year-old ethnic broadcaster.
“Let me be clear, OMNI is not a viable business unless something can be done to reverse its financial situation,” Rogers Media president Keith Pelley told the CRTC on the first day of hearings to renew the licenses of 17 of its services, including the conventional OMNI and City channels, as well as specialty channels Sportsnet, Sportsnet 360 and The Biography Channel.
Pelley said that changing market conditions, including increased competition from over-the-top services such as Netflix, have contributed to a significant drop in revenues for OMNI, from more than $80 million in 2011 to less than $35 million this year.
He said that where U.S. shows like The Simpsons and Two and a Half Men have traditionally accounted for up to 70% of OMNI’s revenue and subsidized its ethnic programming, their widespread availability on services like Netflix has significantly lessened their desirability among both viewers and advertisers.
Pelley also said that OMNI has been “hit hard” by the extension of CTV 2 in Toronto, which has pushed it “well down” advertisers’ buying list in the key market. OMNI is also facing “intense competition” from other ethnic services, he said, with Canadian BDUs currently carrying more than 130 Canadian and foreign ethnic specialty services.
Another factor in OMNI’s inability to attract ad dollars, said Pelley, is BBM’s failure to measure viewing among the 55-to-64-year-old demographic, which he said makes ratings for OMNI lower than actual tuning.
Rogers is asking the CRTC for several key amendments to OMNI’s conditions of license, including deleting the condition that it devote no more than 16% of its programming to programs in any one foreign language during each broadcast month, deleting the condition that it broadcast a minimum of 75% ethnic programming between 8 to10 p.m., and a removal of the requirement that ethnic and third-language programming cannot be shared between City and OMNI.
Asked by CRTC chairman Jean-Pierre Blais what would happen to OMNI if none of the requests were granted, Pelley pointed to the broadcaster’s long history of serving Canada’s ethnic communities. “We’ve been involved in it so long and we’ll continue to look for other solutions. We believe this service is necessary, but we also believe every part of our business has to make a contribution, and it’s not making a contribution at this point,” he said.
OMNI’s problems are part of a broader set of challenges for conventional TV in general, said Pelley. “Just like Blockbuster [Video] was wiped out by online VOD, there is a very real risk that [over-the-air] TV will become obsolete,” he said.
Advertising on conventional TV declined 6% last year and a similar trend-line is emerging this year, said Pelley. The change is not merely cyclical but structural, he told the Commission, as ad dollars continue to migrate to digital opportunities.
City has faced a “constant financial struggle” since Rogers acquired the service for $450 million in 2007, said Pelley. The service has accumulated losses of $238 million since then, including $42 million last year and $38 million in 2012.
Pelley said Rogers’ competition in this new environment is no longer traditional rivals like Bell Media and Shaw, but online media companies like Google that are aggressively trying to capture not just a share, but the entirety of advertisers’ media budget.
“All agencies, all advertisers are doing down to Silicon Valley,” said Pelley, noting that while leading broadcasters like CTV and Global Television aren’t yet facing the same pressures as Rogers, industry trends will eventually catch up to them. “The people who are number three or number four are the ones who are going to face it first,” he said.
Asked by Blais what regulatory play would benefit Rogers and other conventional broadcasters, Pelley said that an easing of restrictions on pharmaceutical advertising and caps on election advertising would be a major boon. “Those are two pretty big categories we don’t have access to in Canada,” he said.