Media @ McGill

CanWest lands Alliance-Atlantis (with help from big friends)

Submitted by Susana on

By Greg Taylor

Can west









The first great wave of Canadian media consolidation happened in the late ‘90s, largely as a reaction to massive mergers taking place south of the border. Despite the problems encountered after that round of buy-outs (AOL Time Warner is again Time Warner and Bell went back to phones, so BellGlobeMedia is now CTVGlobeMedia), it is clear that Canada is now in the midst of another enormous wave of corporate media convergence.

CanWest Global Communications Corp. has agreed to the purchase of Alliance Atlantis with the substantial financial help of Goldman Sachs Capital Partners, a private equity affiliate of Goldman Sachs & Co. of New York, for C$2.3 billion. As the number of media players shrinks, the risks for both Canadian media companies and the Canadian public intensify.

This merger has particularly interesting implications for the CRTC, which must give approval before the deal is finalized. Despite the photos of the Trailer Park Boys that seem to be accompanying this story in much of the mainstream press, Goldman Sachs is not interested in Bubbles, Showcase or the Home Gardening Channel. The real prize here is half a stake in the “CSI: Crime Scene Investigation” franchise which Alliance Atlantis shrewdly acquired at the show’s inception. CSI, CSI: Miami and CSI: New York rank among the most successful TV franchises of all time, with CSI: Miami now holding the title of most watched television show on the planet. Horatio Caine, not Bubbles, is the reason CanWest sought financial back-up.

But herein lies the problem: Goldman Sachs is putting up the lion’s share of the financing, potentially running afoul of Canadian foreign ownership restrictions. The CanWest press release following today’s proposed deal offers some clues as to how the deal will address the foreign ownership issue: “A CanWest-controlled company will be the controlling shareholder of Alliance Atlantis following the closing of the transaction”. It also appears Goldman Sachs gets what it wanted: “GS Capital Partners will own 100% of Alliance Atlantis' financial interest in the highly successful CSI franchise.”

There are legitimate questions to be asked as to how a company like CanWest Global, still smarting from its ill-advised purchase of the National Post, can be part of such an enormous purchase. Details of the financial arrangements are sketchy but the Globe and Mail reported just this morning, before the deal was announced, that “Alliance is considering an offer that would see the New York-based investment bank pay the majority of the purchase price, with CanWest making a cash contribution of less than 20 per cent of the value of Alliance's specialty TV channels”.

Does this constitute actual ownership remaining in Canadian hands?

Leonard Asper, President and CEO of Canwest, said the right things today to appease any concerns of Canadian nationalists: "The combined expertise of CanWest and Alliance Atlantis will enable us to produce even better Canadian content, promote it more effectively, and provide greater access to more viewers across more platforms.”But are concerns about media mergers in Canada really so ill-founded?

Canwest is the company which attempted to consolidate editorial content in its recently purchased Hollinger newspapers in 2001, only to withdraw the decision after enormous protest. In another famous case, Ottawa Citizen editor Russell Mills was fired in 2002 after his critical views of then Prime Minister Jean Chrétien, ran contrary to the beliefs of CanWest ownership, in particular Chrétien’s friend and CanWest founder Izzy Asper. For the Canadian television viewer, this proposed deal will mean less diversity on Canadian television as Canwest inevitably seeks synergies between Global and its new specialty channels.

The exhaustive 2003 Report from the Standing Committee on Canadian Heritage, “Our Cultural Sovereignty”, expressed great concern at the seemingly limitless accommodation of media mergers in this country and recommended “that the Government of Canada issue a clear and unequivocal policy statement concerning cross-media ownership before 30 June, 2004” (recommendation 11.3). No such statement has since materialized.

The 2006 Senate Report on the Canadian News Media echoed these concerns about media concentration: As for media concentration and cross-media ownership, the current regulatory system offers little protection against particular adverse effects of ownership concentration on the diversity of voices.

Again, there was no shift in policy.

In 2005, the U.S. Federal Communications Commission (FCC) sought to ease ownership restrictions on American media. There was a strong backlash in Congress from both Democrats and Republicans and the FCC was forced to retreat. The US has also kept its foreign ownership restrictions on domestic media while simultaneously pressuring other countries to ease their restrictions. Despite a clear preference for a market-based media system, the US considers ownership issues to be of great relevance to all its citizens.

Given the recent flurry of mergers (the Torstar/Thomson purchase of BellGlobeMedia, the ensuing GlobeMedia purchase of ChumCity) it seems likely that the CanWest-Alliance/Atlantis deal will also be approved by the CRTC. The decision is expected in the summer of 2007.

As the pool of media players diminishes, each new corporate merger wave seems to arrive with more force.