Now what? Industry reaction to the big Bell-Astral deal
March 16, 2012 | Chris Powell | Comments
From the CRTC to ad rates, industry experts weigh in
Last September, Astral Media celebrated its 50th anniversary with a blowout party at Toronto’s Roy Thomson Hall that attracted the likes of former Prime Minister Brian Mulroney, director Norman Jewison and actor Jason Priestly. Few knew it at the time, but it was also something of a farewell party for the company.
It was announced Friday that Bell is acquiring Montreal-based Astral for $3.38 billion, further consolidating its already considerable strength in the Canadian broadcast sector with the addition of Astral’s premium specialty channels including TMN and HBO Canada, 13 specialty services including Teletoon and Canal Vie, 84 radio stations in 47 markets, and one of the country’s premiere out-of-home advertising companies.
The acquisition marks the end of the line for yet another of Canada’s family-run media companies, preceded by the likes of the Asper family’s Canwest, the Slaight family’s Standard Radio, the Craig family’s Craig Media and the Waters family’s CHUM Limited.
It will also doubtless fuel the fiery debate about how much media consolidation is too much, provoke discussion about the potential impact on ad rates, and lead to speculation about what, if anything, Bell’s bitter rival Rogers Communications will do in response.
Jay Switzer, former CHUM Limited president and CEO and the current chair of specialty TV broadcaster Hollywood Suite, said that he had seen signs – cost cutting measures, letting itself get outbid by Netflix for the rights to Paramount Pictures films – that Astral might be readying itself for a sale.
“A cynic would say they were goosing their EBIDTA, while a manager might say they were doing the smart thing in getting their costs in line, but looking at all the tea leaves, I bought some Astral shares earlier this year,” he said. “Seeing all these pieces on the chessboard, it was pretty clear to me.”
Switzer told Marketing that he had taken to joking at business lunches that Astral president and CEO Ian Greenberg – who he described as “one of the finest managers in the country ” – was once known for his reticence to appear on live TV, yet had appeared on the Bell Media-owned business news channel BNN several times in the lead-up to the sale. Something, he frequently joked, was afoot.
Astral is a well-managed company with some of the best profit margins in the media business, said Switzer, but getting bigger was never part of its DNA. “It’s a great business with fantastic returns, extremely well run and very good industry-leading margins in most of their businesses, but it’s kind of kept them in a box,” he said.
Bruce Neve, CEO of Starcom MediaVest Group Canada in Toronto, said that Astral was an attractive acquisition target not only because it has been consistently profitable, but because it also features an attractive mix of media assets.
While there are some concerns about consolidation and its impact on advertising rates, Neve believes the Bell/Astral alliance isn’t as significant an issue for media buyers today as it would have been 10 or 15 years ago. The media landscape has undergone a profound transformation during that time, said Neve, and the power of mass media like TV and radio has diminished somewhat.
“Look at how much money we spend now with Google and YouTube and MSN and Facebook,” he said. “With all the options we now have to get reach, it’s not like [mass media] is the only place we can go. The digital world has unlimited capacity, with literally millions of channels.”
If approved by the CRTC, the deal does considerably strengthen Bell’s position in the TV and radio industries, however. According to the most recent CRTC Communications Monitoring Report, five companies account for 67% of the $1.5 billion in advertising placed with Canada’s commercial radio stations, with Astral controlling an industry-leading 21%.
A Bell/Astral alliance would control an estimated 31% of all radio ad revenue in the country, nearly twice that of nearest rival Corus Entertainment, although the CRTC’s ownership limits would likely force Bell to divest some of its radio assets.
The deal also further consolidates Bell’s strength in the TV sector, where it accounts for approximately 31% of all ad revenue according to the most recent CRTC reports.
The addition of Astral Media would place roughly 40% of all Canadian TV ad revenues in Bell’s hands.
Jim Thompson, a spokesperson for the Ottawa-based broadcast watchdog Friends of Canadian Broadcasting, said the proposed deal raises “very serious concerns” about market dominance in Canada. “It’s a proposed transaction that’s going to give the CRTC a very important opportunity to engage on this file. It’s going to have its hands full.”
However, even outspoken critics of consolidation like Friends agree that the deal will provide some benefit by loosening Quebecor’s stranglehold on the Quebec market.
“It gives us an even stronger competitor to Quebecor in putting together programs not just with TV, but now radio and out-of-home,” agreed Neve. “It will give Bell options… to look at eroding Quebecor’s cultural advantage and go after internet and wireless subscribers with [French-language] content.”
But while acknowledging that Quebecor is a “dominant player” in the Quebec market, Karine Courtemanche, president of Montreal media agency Touché! PHD, said she’s also somewhat leery of the increased consolidation created by a Bell/Astral merger.
“From an advertiser standpoint, the more the merrier,” she said. “The more concentrated the market gets, the less flexibility and negotiating power our clients get. I would rather deal with 10 media vendors than deal with two huge vendors.”
What the deal does, she said, is reinforce the importance of large media buying groups. “Media vendors are getting bigger and bigger, so for our clients it’s very important to have access to huge buying power of the consortiums. I wouldn’t want to be a small media shop these days.”
Courtemanche said the true impact of the deal likely won’t be felt until next year, since the CRTC won’t approve the Astral sale until after next season’s TV upfront deals are completed. “We’ll cross that bridge once we get there,” she said. “It’s probably going to polarize the market, and the small, independent clients are likely going to see their negotiating power go down.”
The deal came as no surprise to buyers in the Quebec market, all of whom were expecting a “big move” by Bell – with independently owned conventional channel V (formerly TQS) and Astral the most likely acquisition targets.
Neve said that with the exception of CBC/Radio-Canada, Canadian advertisers have traditionally been unable to assemble a national marketing program with a single media entity, forcing them to pull together disparate companies to achieve their objectives.
“We potentially have the ability now to go to Bell and do something from coast to coast in both official languages across TV, radio, and internet,” he said. “That’s not for every client, but the opportunity is there to do some pretty compelling, big, cross-channel campaigns.”
And while the out-of-home assets tend to get overlooked in the transaction, Neve said that the increasing relationship between mobile devices and digital out-of-home could enable Bell to create some “interesting” marketing solutions.