How Channel Zero plans to make a go of CHCH-TV

[Guest post from karenatcmg]

The buyer of CHCH-TV in Hamilton figures they can start making money at the station by 2011 by running local programming all day and "popular movies" in prime time.

"It would be exceedingly naïve, if not arrogant, for our company to assume that we can succeed where Canwest did not with the same strategy. Canwest is an experienced broadcaster dealing with the same systemic issues facing all OTA broadcasters that the Commission is well aware of," says Channel Zero's application to the CRTC.

That application finally provides a little peak into the local station's financial affairs. Channel Zero's projection suggests that CHCH will spend about $8 million this year on local news and sports programming. However, it will be charged more than $51 million by Canwest for the (mostly Hollywood) programming that airs across the E! network, including on CHCH. The station will also be charged more than $4 million for "broadcast network support" provided by Canwest (master control, sales support, programming ops). With a forecast of only $44 million in revenue for the year, you can see why the local station was no longer able to prop up both the network's Hollywood shopping spree *and* local programming. There's your broken model: the station is expected to be $32.7 million in the red at the end of the year.

But, starting next year, Channel Zero plans to boost the budget for local news and sports to about $9 million with the help of the CRTC's new Local Program Improvement Fund. On the other hand, the budget for buying shows will be slashed to $2 million. And the new owner will provide its own "broadcast network support services" at a cost of about $1.3 million, or one-third of what Canwest is apparently charging CHCH for the same services. They do forecast a sharp drop in revenue for next year to about $18 million, but an overall loss of only $3.2 million. By 2011, they forecast net income after tax to be nearly $1.8 million.

The Channel Zero proposal means as much or more local programming as is now broadcast on CHCH. In fact, the programming grid in their application suggests they will broadcast 85.5 hours of local programming per week next year. However, they only say they are "likely" to broadcast more than the 36.5 hours per week that used to be a condition of licence for CHCH. It appears to depend on whether the CRTC lets them off the hook on another key condition of licence.

"[W]e would be prepared to accept ... the same license conditions as currently apply... It is our view, however, that such terms of approval would hinder our plans to revitalize and focus the stations [CHCH and CJNT in Montreal], as we have outlined in our application. Among other things our ability to provide the extent of local programming that we have contemplated in our application, and to provide long-term employment for the existing complement of staff at CHCH and CJNT could well be jeopardized." (Emphasis added.)

What licence condition do they want eliminated in Hamilton? The requirement to broadcast Canadian drama, variety, documentary and/or entertainment magazine shows in prime time. And the jobs of the existing staff are the bargaining chips.

Another hitch is that they want to be exempt from paying any monetary benefits from the purchase of the station, which are typically set at 10% of the value of the transaction and often get spent on the production of original Canadian programming. (Channel Zero claims the deal is worth $500,000 and the benefits, if they had to pay them, would therefore be $50,000.) The company argues that keeping the station open, the existing staff in place and the local programming on the air is a very tangible benefit of this deal and that having to pay out fifty grand would hamper their efforts.

The CRTC will hold a hearing on the purchase starting on August 24. Channel Zero has asked for the green light by August 31.