Quebecor Media Inc.
TSX : QBR.A
TSX : QBR.B

Quebecor Media Inc.

November 18, 2009 10:05 ET

Quebecor Media Believes System Must be Rebalanced if Conventional Television is to Survive

Quebecers support carriage fees for over-the-air stations

MONTREAL, QUEBEC--(Marketwire - Nov. 18, 2009) - The Canadian Radio-television and Telecommunications Commission (CRTC) must level the playing field for specialty channels and conventional television stations, without any increase in prices for consumers. The matter is urgent: more than ever, the survival of conventional television stations in Canada is at stake.

That is the case Quebecor Media will make at today's CRTC hearings on Canada's broadcasting system. "It is unfortunate that we had to wait for conventional broadcasting to reach the breaking point for some people to realize that the existing business model is in trouble," said Pierre Karl Peladeau, President and Chief Executive Officer of Quebecor Media (QMI). "The situation truly is cause for concern: conventional television is the cornerstone of our broadcasting system and plays a vital role in Canada's democratic, cultural, social and economic life."

Uneven playing field

At the present time, the specialty channels have two main revenue streams, advertising and fees, while advertising is the only source of revenue for private over-the-air (OTA) broadcasters. This is creating a dramatic imbalance in Canada's broadcasting system. The result is that in 2008, the specialty channels had a 24% profit margin (EBIT), compared with only 0.4% for conventional broadcasters. Yet, it is the conventional broadcasters that spend the most on the production of Canadian content that must make the largest capital investment in infrastructure, and must satisfy the most stringent regulatory requirements. "I don't see anything outrageous in the proposition that all players in the television broadcasting industry should have access to the same sources of financing," said Mr. Peladeau.

Therefore, QMI will again submit for the CRTC's consideration the idea that some of the fees for carriage paid by the broadcasting distribution undertakings (BDUs) to the specialty channels could be redirected to the private OTA broadcasters in order to resolve the crisis. Two conditions would be attached to the payment of carriage fees to conventional broadcasters: the fees paid by cable and satellite providers to private television stations or networks and to specialty channels and pay TV services should be negotiated on a free market basis, and the changes in fees must have no impact on the prices paid by consumers.

Quebecers support conventional television

The solution proposed by QMI is particularly worthy of consideration because it has the approval of Quebec consumers.

According to a Leger Marketing survey conducted between October 21 and 28, 2009, 71% of Quebecers consider it unfair that conventional television broadcasters do not have access to fees for carriage and think the fees should be divided equally between the OTA stations and the specialty channels (51% vs. 49%). The poll also found that Quebecers are deeply attached to conventional television: 80% of respondents said it plays an important role in preserving and spreading Quebec culture, and 76% said public authorities have a responsibility to protect Quebec's television industry.

"The rebalancing of the broadcasting system must enable consumers to watch the programs they are interested in when they want, where they want, on the platform of their choosing," said Pierre Karl Peladeau. "And it must let consumers decide which channels they want to pay for. Otherwise, audiences will hammer the last nail into the coffin of conventional television and of the CRTC by turning to the Internet and mobile devices to watch the content they want."

Quebecor Media Inc. is a subsidiary of Quebecor Inc. (TSX:QBR.A)(TSX:QBR.B), a communications company with operations in North America, Europe and Asia. Quebecor Media owns operating companies in numerous media-related businesses: Videotron Ltd., an integrated communications company engaged in cable television, interactive multimedia development, Internet access services, cable telephony and wireless telephone service; Sun Media Corporation, the largest publisher of newspapers in Canada; Canoe Inc., operator of a network of English- and French-language Internet properties in Canada; Quebecor Media Network, provider of flyer printing and distribution services; TVA Group Inc., operator of the largest French-language over-the-air television network in Quebec, a number of specialty channels, and the English-language over-the-air station Sun TV; Nurun Inc., a major interactive technologies and communications agency with offices in Canada, the United States, Europe and Asia; magazine publisher TVA Publishing Inc.; book publishers and distributors Sogides Group Inc. and CEC Publishing Inc.; Archambault Group Inc. and TVA Films, companies engaged in the production, distribution and retailing of cultural products; Le SuperClub Videotron ltee, a DVD and console game rental and retail chain; and Quebecor MediaPages, publisher of print and online directories.

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