Sunday, February 15, 2009

 

DAMN NEAR PERFECT STORM...

When the stock markets began their downward spirals late last summer, a good friend who's opinion I frequently seek and value reminded me that predictions about market collapse are often "self-fulfilling prophecies".

The bearers of the bad news it seems are now caught-up in the financial storm they may have helped create. Within a wickedly competitive media market, in efforts to outdo each sanguinary headline, the media not only panicked the panicky, but may have panicked their own investors...namely the advertising dollars they count on for survival.

To be fair, the media fed panic is but one of the many reasons for the evaporation of advertising dollars available to conventional newspapers, television and radio. But, it is not because the number of users is going down. Just this past week, the Radio Marketing Bureau reported healthy numbers in Canadian use of the media. Eighty-one percent of us listen to radio every day. Compared to the previous year, the 2008 statistics show that 82% used more (or the same) of radio, 79% of newspapers, and 76% of television. On average, every one of us 33-million Canadians listen to radio or watch TV more than 5 hours a week.

The upswing in numbers is not surprising. During difficult times people retrench their discretionary spending and seek cheaper forms of entertainment closer to their home. The movie theatre business and radio listening exploded during the dirty thirties of the "Great Depression."

Seems there's a whole different business perspective though. Credit Suisse advised its business clients last week that Winnipeg based, "Canwest" is on the verge of bankruptcy. The diagnosis was also confirmed by CIBC. The Asper family controlled media empire is staggered by a $3.7-billion debt fueled by rising costs and departing advertisers for its newspaper, television and radio operations in Canada, and TV stations in Australia and New Zealand. A year ago Canwest shares traded on the TSX for $6.11 - Last week they were 49 cents.

South of the border, the 20-million subscriber satellite radio Sirius Corporation, formed just last October in a merger with competitor XM, was expected to default on $175-million in obligations this weekend...and could file for bankruptcy in a few days. Sirius is an equity partner in Sirius Canada, owned by the CBC and Standard Radio; and XM Canada, a publicly traded Toronto based company chaired by John Bitove Jr.

Pretty much everyone in the "biz" is jittery: There are no clear signs when the bleeding will stop. Writing this weekend in the Canwest owned "National Post", Columnist Robert Fulford notes, somewhat like Mark Twain's - "Rumours of my death have been greatly exaggerated" - that the demise of the print medium has been predicted before, and that sensational stories such as recent suggestions by competitors that the venerable "New York Times" is near collapse from the weight of its own debt are hardly helpful to a struggling industry. Surely though the signs of a problematic are there. Another venerable newspaper, the century old Boston based "Christian Science Monitor" will stop publishing as a daily this spring.

As Fulford points out: Adverting in the pages of newspapers is plunging and readers believe that it is their right to receive information free over the Internet. Meaning the magic pot at the end of the rainbow is damned near empty.

Just this week the CRTC announced it plans to shorten the licensing terms from the normal seven years to as little as one year for conventional television broadcasters. It claims that they are facing a severe economic crunch. Canwest's "E-Channel" stations in Victoria, Kelowna, Red Deer, Hamilton and Montreal are for sale...CTV's "A-Channel" stations in small and medium markets like Barrie and Pembroke, Ontario are also draining resources and money from CTV's core operations. There do not appear to be any buyers for any, or all, on the near horizon.

Down south, the much promoted and anticipated switch to digital television (DTV), has come off the rails less than one week before the February 17th changeover. It's now been pushed back to June 12 because at least 6-million American homes would have permanently lost their signals on Tuesday had the change gone ahead. Money, $250-million, allocated for the $40 home coupon to help ease the cost of the DTV changeover has run-out, as has the supply of converter boxes on store shelves.

It seems it is not only our Canadian economy which is at the mercy of our southern neighbour; it's our culture as well. Faced with the financial constraints, Canadian Television Networks have spent more than $775 million in the past year buying foreign programs to crank-up audiences. That's about $150 million more than they spent on all Canadian programming.

Oh what a mess!

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