By Greg O’Brien
THERE ARE NO WALLS at Corus Quay. Not even in the CEO, John Cassaday’s office. Anyone working there and not in a board room or studio can stand up, look across the building and see outside. It’s open and airy. Work spaces are flexible and unique. There’s a beach.
One of the design principles behind the building which has only been open about a year, is something Cassaday calls the “democratization of light” where “everybody has equal access to light, so there's no floor-to-ceiling walls except for meeting rooms,” he said.
That principle, one could say, is in Corus’ blood nowadays. Cassaday’s push for consumers to be able to see and hear the company’s programming could be termed a “democratization of content.” He wants to drive radio and TV content for consumption on as many devices as possible, believing new media to be additive to traditional media channels. He isn’t afraid of the new over-the-top video services and believes the more ways consumers can watch TV, see movies or listen to radio, the better for everyone.
And the new building and it’s state-of-the-art technology actually helps enable that. Until Corus Quay, the company was spread out across a dozen buildings in Toronto with old, legacy systems making content conversion difficult. And now?
“When we had Rogers in here, we said we now we can get you whatever you want on whatever platform you want in whatever language you want, so if they would like us to deliver a version of Treehouse in Spanish? No problem. You want it for your mobile phones? Monday or Tuesday good?”
But in order to let Corus battle best for eyeballs and ears, some changes are required. Regulatory ones. For example, it needs the ability to spend money on what it does best he said – both to us and to the CRTC during last month’s group-based licensing hearing. Actually, the engaging CEO said quite a lot during our chat. What follows is an edited transcript of a recent conversation Cartt.ca editor and publisher Greg O’Brien had with Cassaday (pictured).
Greg O’Brien: What did you take away from the group-based licensing hearing? Are there any sort of hints or clues where you see the CRTC headed? It’s a very confusing time right now… there's just so much coming at you and we’re looking at a group-based licensing regime where you're looking to renew for five years? How can that be done, given what might change over that time?
John Cassaday: Well, we started talking about group-based licensing several years ago, the Commission responded to that and I think there were some very compelling ideas that came out of it. In our minds, there was a consensus that emerged around certain things. First of all, there was a recognition on everyone's part that broadcasters need flexibility to compete effectively, and secondly, that broadcasters are critically important to the success of the system. If broadcasters don't prosper. The other participants in the system, i.e. independent producers, can't prosper.
I think there was a general buy-in to the notion that focusing on quality versus quantity is worthwhile… and that there's merit in being able to allocate programming expenditures strategically like we do with other capital that we deploy in our business.
Those were the key points that there was consensus around. It was a very complex hearing. There were a lot of nuances but when you cut through the noise… I hope and expect the Commission responds by giving us the flexibility that we need to compete in return for commitments to continue spend on Canadian content, which I think is a win-win because, quite frankly, there's considerable uncertainty.
GOB: But when you talk about this push for quality over quantity along with PNI and CPE, predicting a hit is still very difficult to do. You know that you can have quality directors, actors, production, script, where everything is great and then it comes to screen – and it's happened a million times before – where that show or whatever it is falls flat. How do you get better predicting what quality is going to be?
JC: Well, I think if you're doing less, you've got more time to focus. We have shows that are on the air right now that aren't as good as they could have been because we had certain conditions that related to the number of independent hours and number of new hours. I'd rather focus on making sure that what we do put on air is done only after we put the right time and thought into the positioning and the script development, and casting that's required to make it successful. There's no panacea. This may ultimately turn out to result in no more programming that Canadians want to watch than we've had historically. My feeling is, however, that it will.
One of the other things that will lead to a better chance of success is our ability to be strategic in how we spend the money. Take the case of (classic movie pay channel) Encore Avenue. The requirement to spend dollars on Canadian programming there when, in effect, all we're doing is spending on a library and not advancing the system at all made very little sense to us. We want to reallocate some of those dollars to other forms of programming, likely new drama on HBO Canada or Movie Central, possibly in concert with HBO U.S. or a Starz. I think you'll see more co-production because we'll be able to allocate more significant dollars to those initiatives.
Also… let's take CMT for example; a very successful service. We may not need to spend as much historically on CMT as we have. We may find that allocating some of those dollars into programming for W has a bigger impact for us than is possible. So as I said to the (CRTC) chairman, the most important job that a CEO has is allocating capital and quite frankly in the past that has not been an area we have been able to really use our muscle on because it's been proscribed.
Clearly we have a major commitment to children's programming, we have a major committing to women's programming, and we have a commitment to building our pay business with proprietary dramatic series programming, and those are the three areas that we really want to put the bulk of our dollars against.
GOB: Those programming areas would seem to be the best place to sink your resources to protect yourself from the likes of Netflix and other over-the-top services, which leads into talking about the letter to the Commission, (the industry’s) request for an over-the-top proceeding. What are your thoughts on that?
(Ed note: This interview happened prior to the CRTC’s May 25th OTT fact-finding call.)
JC: It starts with understanding what the interests and needs of our viewers are.
GOB: It seems to me that the pay services or the movie services might be the most under pressure when you look at the Netflix library and some other things that out there.
JC: I think the Rogers Video store is the most under pressure, and Blockbuster.
JC: …If you look at the time spent viewing between 2000 and 2010 in the United States, where we've seen an explosion in alternative video choices and platforms, the time spent watching television has increased in every demographic in both genders.
So what's the conclusion? We have far from satiated people's appetite for content, so in my view, it's not a zero-sum game. We are going to see new choices for viewers, and Netflix is going to contribute to that, and there will be dozens of others.
JC: You may have been among those that came and talked to me about how satellite radio was going to destroy our interest in the radio business, and it didn't. I'm not one of those who believes – and there are some in our industry that believe – Netflix will be very damaging to our business. I just don't believe that. I believe that like every other category, there will be alternatives. We just did a feature on OWN on Smart Cars, and there will be people that buy Smart Cars, and there will still be people like me that buy SUVs. I don't want to buy a Smart Car.
In the case of our business, it will segment, and the key is are we delivering enough value in the segment that we're in to continue to increase the number of people that subscribe to our service as we did in Q2 as we're going to do in Q3? We've already signaled we've gone over a million subscribers (on pay TV) in Q3 and what's the secret sauce? HBO programming exclusive to our service, great shows that no one can see anywhere else.
GOB: And you've got some of those locked down for pretty long contracts, too, right?
JC: A long period of time. Jeffrey Bewkes (CEO) of Time Warner is of the view, like we are, that we need to support the current ecosystem. We need to make sure that our customers have access to our content on whatever platform whenever they want it, and that's the TV Everywhere model, which I think is the solution… It’s about segmentation, about having an alternative, which is TV Everywhere, which will allow people to get segmented offerings like HBO Go on their iPad, on their Playbook, on their home computer, on their laptop; whatever source they want it; in their dorm, at the cottage.
So we have a solution. It all revolves around authentication, but once you've paid the toll, you can get on the highway. It's like a Sunpass in Florida. You buy it and you've got access to their whole system of highways.
GOB: But there still is the difference where a lot of money is harvested and diverted to the production of Canadian content where you have to spend it, distributors have to collect it, and the Canadians pay more for TV for it, but with Netflix, or if you rent a movie through Facebook or anywhere else you can get stuff online, there's no contribution to Canadian content. So, how do you tackle that aspect, because doesn’t that make it a little unfair?
JC: Sally (Tindal, head of Corus communications) has heard me say this: "A problem well-defined is a problem half-solved," so we really need to find what the problem is. Some people are suggesting that we impose some kind of Canadian culture tax on Netflix. So, let's say we ask them to contribute 30%.
JC: So now all of a sudden, their price is $10 a month? What difference is that going to make? It's going to make no difference. It's going to put some money into the hands of independent producers, but it's not going to change the value proposition. That's still going to be a relatively inexpensive way of streaming movies, but it doesn't give them access to more movies. It doesn't give them access to live sports. It doesn't give them access to HBO content. It doesn't give them access to all of the real time water-cooler shows like The Good Wife that people talk about the next day; like Survivor, all of that.
They are still not part of that value proposition, so it's a different offering. It's an attractive offering. It's a well-priced offering with some desirable content, but it's just another segment of the program offering available to people, and you know, there’s much more to come in my view.
GOB: It's just an explosion in choice. Choice of access, choice of platforms, choice of screens. I was in Las Vegas at NAB, and my wife called me and said “I missed Modern Family, how does this Boxee thing work?” So I started telling her about how the Boxee remote works, because it's not super-intuitive, but I thought for a minute and told her “put that away, take the iPad out to get to the Citytv iPad app. You'll see Modern Family.” It took ten seconds and she could watch it.
JC: Now what we have to do in Canada –because they're further ahead in the U.S. – is figure out how we capture that audience, how we measure that… and then we have to figure out how we combine all of the Modern Family viewing on City and then over, say 72 hours after (its initial airing on linear TV, which is how it is measured in the States) on multiple devices; how we capture all the devices it is watched on, and how we give that value to our advertisers going forward. I think what we're going to end up doing is increasing our viewing… I think the way I differ from most is that a lot of people view this as a zero sum game, that if people choose to subscribe to Netflix, they are not going to choose to subscribe to something else on traditional television. I don't see it that way at all.
I don't know anyone, not one person who said to General Motors when they were buying a car, "Because I have XM, please take out my AM and FM radio. Because I have my iPad playing my iTunes, please take out my AM and FM radio." It's additive. It's all about different mindsets, different times, different occasions, and people choosing to consume more media. In the kids' business, look at all the time spent playing electronic games, and yet, the amount of time that kids are spending watching YTV is continuing to expand. So yes, there's multitasking and all that going on, but people are not choosing to just go into a single vertical.
We're in the entertainment economy where there are, huge, huge opportunities still to make available media program offerings and build the pie.
GOB: And the measurement of the viewership, and bringing that data to the advertisers is getting more and more sophisticated as well, where there are opportunities down the road to sell targeted ads at a higher rate and monetize it further. Are you experimenting with any of that at all?
JC: There is no question that one of the keys to this is to be able to improve measurement. We are very market-oriented and the biggest single thing that we have to deal with right now with our advertisers is return on investment. They want to know that they got what they paid for and that it contributed to them selling more stuff.
GOB: That consumers saw their ad, and they went out and bought Rice Krispies.
JC: So we've got to continue to do a better job in measuring audiences and linking those audiences to particular performance, and the capability is there, but this is going to involve linkages ultimately between electronic data that we acquire as to viewing choices, and linking into scanning data (at retail). All of that capability is there and will occur. As I said, the U.S. is already much further advanced than we are in measuring viewing on alternative screens, and we've gotta get there.
One of the theories that we've put forward is that we need to see the creation of larger Canadian media companies, and one of the reasons that we believe that that's necessary is because we are going to need to have the financial capability to finance this research that is required to ensure that we're successful in the future.
Right now, research in Canada is funded in a tripartite way by advertisers, agencies, and media companies – largely by media companies. It's very expensive and if we want to get to the next level, we've got to have more meters in more people's hands, and we've got to have the technology in place to link all of these multiple devices. It is technically doable, but it requires money… better financed companies.
GOB: So are you in the acquisition trail?
JC: We've acquired the rights to Oprah (OWN), after recently acquiring CLT, so our most significant commitment right now is to build that brand. We are still trying to get W movies and Sundance up to speed. They were just recently launched. Our focus right now is on developing these brands that we just recently launched and taking advantage of the technology that we have in the building and getting a return on our investment here, which was in the neighborhood of $150 million.
GOB: You talked earlier about the cars where people didn't take their AM/FM radio out if they got Sirius Satellite for example. With that in mind, how would you assess the state of the radio business right now especially with all of the impending change in in-car media that's coming? Where do you see radio’s position in the future, because right know you still have a pretty captive audience in the car. I have an iPod dock in mine but I have 680News or Q107 on more often than the iPod, but with what is, and is going to be, available with the Ford Sync and the Chevy MyLink, and the Toyota's Entune and so on, where do you see regular radio fitting into all of that?
JC: Terrestrial radio success is entirely dependent on doing a great job being local. Being able to stream a radio station from New Orleans might be interesting on occasion, but if I really like jazz, I probably don't necessarily listen to that radio station. I probably can just load my iPod with the music I want. We've looked closely at internet radio and I really don't see the benefit of streaming a hundred radio stations from remote markets. I think that most people with Pandora and other things can program their own radio station… and then the alternative is going to be local, and why do you listen to 680 or 640? You want to understand what the important issues are.
This morning, we celebrated the 10th anniversary of the Dean Blundell Show, and hundreds of people came down to celebrate… It was a party, and that was local. If Ryan Seacrest was celebrating his 10th today in Los Angeles, would anybody in Toronto fly there? I don't think so. So, it's all about maintaining our real strong local presence.
Secondly, what radio does that really no other media can do as effectively is provide a voice for local retailers, and what you can't get on satellite radio is sufficient audience locally to justify the expenditure of advertising.
We know that we can aggregate an audience for a local clothier or restaurateur, or even lottery or hospital, whatever it is, and generate sufficient audience that they can actually measure what they do. A friend of mine, Steve Gunn, the president of Sleep Country and probably the most sophisticated radio buyer in the country, knows pretty much exactly how many feet are going to walk into his store after (the ads) he runs this weekend. Satellite radio… is just as not as relevant (as local). Once the novelty wears off, you're back to wanting to hear what Dean had to say because that's what they’re going to be talking about at work, or listening to Bill Watters talk about the Leafs.
Two years ago, we did a massive strategic plan on radio, and we said we need to comfort ourselves that what's happening in the U.S. is not going to happen in Canada and that what we're experiencing is a cyclical and not a secular downturn in radio. We concluded that the reasons U.S. radio was suffering were reasons that we could avoid: A) They took costs out by nationalizing and regionalizing their programming offers; B) They over-commercialized their radio stations, and that turned people off.
We didn't do that in Canada, and we felt that when the economy turned around, so would radio. As a result, what we're seeing right now is ongoing, month-after-month growth in the four, five, six percent range for radio, which is outstanding. The newspaper guys would declare a national holiday if they had that kind of growth.
Here in Toronto, we've been looking at double-digit growth, and we have been for a year, so we're very bullish. Now, we're also moving radio on to digital platforms. We have iPad applications, BlackBerry applications, so we certainly recognize that we need to make sure that our programming is available to people on multiple platforms and in different locations.
GOB: You've now got about two years of PPM data. Have you changed the way you program your stations because of what that has told you?
GOB: I remember looking at some of the top line data, where some things were a little shocking, like how much listenership there was on the weekends compared to the diaries and how perhaps the drive show wasn't completely all mightily important.
JC: You're right. We found out that people were listening to more radio stations than they were reporting previously. We found out that they were listening more throughout the day than we previously thought, and we found out that younger people are listening to the radio more often than what was being reported.
So those were all positive, and what were the implications of that? Well, number one, with the meter, you know on a minute-to-minute basis when you've lost your audience, so in most of our markets, particularly outside of morning drive, we have cut down on the amount of chatter. Bits are shorter. People's attention spans are shorter. We've adjusted our commercial formats… going shorter breaks so that we don't lose people through those time periods.
We have a lot of "appointment programming." You mentioned Q107, so Little Stevie's Underground Garage on Sunday night is now something that actually is measurable (with PPMs) where before it probably wouldn't have appeared in the radar screen. We've got Jeff Woods at noon right across the system as appointment listening for all classic rock fans. We're now exerting more influence over our programmers in terms of some of the programming that we think needs to be heard across the system.
And there 's no downtime anymore. I remember talking to (CKNW morning man) Phil Till in Vancouver, and he was concerned about meters and the fact that it might force us to do things that weren't necessarily good broadcasting, and I said, "Well, Phil, if you decide you're going to do 12 minutes on the local political scene, and people demonstrate on the meters they're not interested and move somewhere else, and then you're back on Tuesday because you're sure it was an anomaly – and they again move away from you – maybe they're telling you something."
When I used to be at CTV, where of course we were measuring TV audience on a minute-by-minute basis, during the Meech Accord when Lloyd would simply utter the word Meech, we could see people would turn the TV off and go to bed. So we just kept moving Meech further and further back in the telecast. We couldn't ignore it, but we knew that people were fed up and didn't want to hear about it anymore, and now radio is the same way. We have minute-to-minute report cards on what is funny versus what we thought was funny; what is topical versus what we thought was topical.
Program directors who are now playing the song they love from some obscure album? Wrong. We have to meet the needs of our listeners, and yes, we have to introduce new music, and often times, we are going to be mistaken on that. You said you listen to Q107. You're hard-pressed now to find a song on Q107 that you don't like that really truly wasn't a classic hit.
GOB: And if I'm listening to Q107, I’m probably not looking for new music anyway.
JC: We had a Town Hall yesterday (at Corus HQ), and one of the questions asked was what my favorite band was, and I said Supertramp. Why? Because the night before I was laying in bed listening to Q107, and they played Crime of the Century – and we had just had Roger Hodgson in here a few weeks ago. So, I was really interested in hearing because I thought Roger sounded great and I was reminded how great it sounded.
…That's another great thing about radio; that Roger Hodgson interview we had. I mean, we had Kim Mitchell on the air at Q107. Now Kim Mitchell is a Canadian rock icon – Max Webster – and he gets guys into the studio to talk to him that you wouldn't get if it was Greg O'Brien and John Cassaday. So it was Roger Hodgson and Kim Mitchell, and they were jamming, and Roger was singing a Beatles song and it was fabulous.
GOB: What did your minute-by-minutes tell you about that?
JC: I haven't seen the ratings. I would be shocked if we didn't hold everybody because it was really, really interesting. If I had been in the car and stopped, I would have stayed in the car until that segment finished.
GOB: This next question I've been asking of a lot of the media executives I've been interviewing because radio and TV, even the specialty side, are mature. There are only so many people here; there are only so many listeners; there's only so many viewers. Where do you envision the future growth will keep coming from? You know, you can't really add a whole lot more subscribers to W for example. I mean, that's pretty well penetrated across the country. Where do you see the growth coming from the more mature aspects of the business?
JC: Good question. I'm working right now on a new investor presentation, and it's themed “Built for Growth”, which was the theme of our investors conference. Look at the kids' business for example. Even though we see the demography of kids flattening out, the big opportunity for us is to grow what we call the co-view audience, and that's parents watching programming with their children. In the old TV media measurement system where you had to come in and qualify yourself as a viewer; if mom or dad came in to watch SpongeBob with their kids, they typically didn't qualify themselves because they said, "This isn't really for me." Well, now of course, that audience is picked up (on the PPM unit).
And parents do watch with their children. We have now gone deeper in programming. What's the behavior when watching television with your children? You flip the channels less frequently. You talk about the content. Parents view watching television with their children as quality time. It's not a sin; it's a virtue, so we're really capitalizing on that.
JC: Secondly, we're committed to expanding our business internationally, so we're involved in an international network called KidsCo, which is through Europe and Asia. It's the largest distribution of any service that we have. It's a nascent service, and we're working now with NBC who co-owns that with us to try to figure a way to really take that to the next level.
JC: Then, of course, through the production business, we're involved in international broadcasting in a big way, so we see tons of growth potential in kids. On our women's business, we now have four great brands, the Oprah Winfrey Network, Cosmo TV, W, and W Movies, but we have a relatively small share of the total women pie. You're right. Our subscriber base is probably at or near the limit but our share of women's viewing is single digit, so as we continue to develop programming, and as Oprah develops, and Cosmo is on a really huge growth spurt right now, we'll accumulate more of that women's pie.
So my message to investors is that, yes, we've had a great run. We've taken this company from nowhere to almost $900 million in sales in just ten short years, but there's still tons of growth potential for us left.
In pay… we're still only at about 25% digital penetration, so now it's going to move into a pure marketing game, and what we've got to do, and we'll work with Astral on this is to begin to spend more money against the consumer talking to them about programming successes. The new HBO show, Game of Thrones, I was just looking at the ratings from it. It’s a huge hit and how many Canadians haven't even heard of it yet? Probably 95%.
How many would choose to subscribe if they knew that it’s, I think, the most successful or at least No. 2 most successful show ever launched by HBO? “Bigger than Sopranos? I better have a look,” they might say. I said to Ian (Greenberg, CEO of Astral Media) the other day – man, we've got these huge radio networks. You've got outdoor, I've got national TV, let's just pound the living heck out of HBO and start trying to move that 25% household penetration of digital subscribers up to 27, 28.
So yes, there are other ways of watching some premium movies, but there is no other way to watch HBO than on the Movie Network or Movie Central.