Broken Business Model sells for $3.2B

Remember all those ads boo-hooing about saving local TV and shutting down local stations because the business model was all broken and everything? Remember how networks went hat-in-hand to the CRTC three years running until they strong-armed some concession on carriage fee cash? Remember how they threatened to turn out the lights?
Well, turns out there was still a buck or three hundred million to be made in broadcasting. In a deal sure to change the Canadian media landscape, Bell just bought the 85% stake in CTV it didn’t already own for $1.3 billion. A bargain considering that’s about half what Bell paid to acquire CTV in 2000 and less than the $1.7B Rogers paid to acquire CHUM in 2007.
Bell buys control of CTV from the Thompson family (which will assume overwhelming control once again of The Globe and Mail), the Ontario Teachers Pension Fund and The Toronto Star’s minority interests. BCE put the total transaction value, including debt, at $3.2 billion.
You can read all about the proposed transaction, which it is estimated to take until mid-2011 to conclude, here. But one figure leaps out from the 19-page acquisition paper BCE released today: in the last 12 months ending Aug. 31, CTV showed a profit of $385 million, at a profit margin of 20.6%.
Now, TSN, MuchMusic, Discovery–all 30 CTV specialty channels–would account for plenty of that profit. But the notion that the mother ship was on its knees looking for nickles and dimes to just to keep the lights on at CFTO would seem to be put to rest.
The Bell move is all about content and the future and watching TV on-demand on various devises, hand held or otherwise, that Bell controls. Multi-platform on-line viewing is growing, as Bell’s report suggests, with 30% of Canadians surveyed saying they watched a 30-60 minute TV show on-line in the last month. (Not coincidentally, CTV announced earlier this week that virtually its entire TV lineup is now available for streaming at ctv.ca.)
Ironically, the show the Bell paper chose to illustrate this stat was Mad Men, an import the network dropped over a year ago due to what it said then was budget limitations. Don Draper, send Bell exes a carton or two of Lucky Strikes ASAP.
There’s a lot of back slapping in reports on the takeover about CTV being the dominant player in Canadian television. While that was certainly true for much of the past decade the network had a soft development slate the last couple of seasons and has slipped relative to Global year-to-year. The network, for example, had only three of the top-10 shows across Canada the week of Aug. 23-30 according to BBM Canada, including the top-rated Emmy Awards at nearly 2.5 million viewers.
Still, CTV does have the rights to the 2012 Olympic Games. Plus The Big Bang Theory, Jersey Shore and Vampire Diaries will play just fine, thank you, across several Bell platforms. Content may be King, but right now, the carriers have all the cash.

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