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culture

Historicist: Post-Mortem of a Pay-TV Channel

The brief life of C Channel, Canada's arts and culture pay-TV service.

On the cusp of the 1980s, Toronto viewers were occupying a 16-channel television universe when the Canadian Radio-Television and Telecommunications Commission (CRTC) introduced pay-TV to Canadian airwaves with two national pay-TV services and numerous regional pay channels.

To bureaucrats, industry observers, and cultural nationalists, pay-TV offered astounding promise for a renaissance of Canadian content by diversifying the programming available to Canadians, elevating its quality, and fostering the development of an industry of independent Canadian television and film producers enthusiastically supplying the content.

C Channel, which took to the airwaves on February 1, 1983, best exemplified these lofty ideals, broadcasting ballet, theatre, opera, and orchestra performances. But after a few short months of corporate mismanagement, bureaucratic bungling, uncooperative cable companies, and an indifferent public, the Toronto-based arts channel was bankrupt and was off the air by June 30.

“It wasn’t one single thing,” C Channel president Edgar Cowan reflected on the accumulation of factors leading to its demise to Cinema Canada (November 1983). “It’s only when you put them all together that you say, ‘Oh my God! What’s going on here?’”

Origins

Almost a decade after pay-TV had been introduced south of the border, the CRTC’s Therrien Commission had finally recommended the initiation of a competitive, Canadian pay-TV industry in Canada in 1980. Among the broadcast and film industry associations and entrepreneurs who presented to the Therrien Commission was a fledgling company, Lively Arts Market Builders Inc. (LAMB), seeking to establish a pay-TV network dedicated to the arts in Canada. Excited by the potential of emerging technologies—like video cassettes and particularly pay-TV—for providing arts groups additional revenue and increased marketing reach at home and abroad, arts administrator Louis Applebaum assembled a group of arts industry veterans to form LAMB. The company was incorporated in July 1979. (Left: article from the Toronto Star; January 20, 1983.)

The founders included former National Capital Commission chairman Douglas Fullerton, philanthropist Arthur Gelber, former NFB administrator and filmmaker Bob Anderson, and lawyer Howard Beck. G. Hamilton Southam, former diplomat and founder of the National Arts Centre in Ottawa, used his considerable personal resources as a member of the wealthy newspaper family to become a primary investor in the new venture. By autumn 1979, the group attracted Edgar Cowan, former publisher of Saturday Night magazine, to head the company’s operations. Having been one of the founders of Citytv, Cowan was the only one with significant experience in the television industry.

In October 1981, Cowan and Southam presented to the CRTC’s pay-TV licensing hearings, outlining their vision for a pay-TV service showcasing contemporary and classical arts—dance, opera, music, theatre, and film—as well as children’s progamming. Although they stressed that their venture, C Channel, would not consist solely of “‘pure culture’ nor ‘high culture,’” right from the start they would have difficulty shaking the perception of elitism.

“They are a group that is perhaps a little better educated and with a somewhat higher disposable income than the average viewer,” Cowan and Southam haughtily described C Channel’s anticipated audience of arts aficionados. “They are also a group that tends to be more bored with conventional television and more dissatisfied with the programs to which their children are exposed.”

Cowan and Southam readily acknowledged that their niche venture would be “undoubtedly more fragile than a more mass-appeal oriented service.” But, with either naiveté or arrogance, they predicted C Channel would turn infrequent television viewers into regular watchers, emphasizing that their proposal was “most innovative” and “would add the greatest measure of diversity to the Canadian broadcasting system.”

The CRTC agreed, granting C Channel one of two national pay-TV licences on March 18, 1982. The second national service was First Choice; four regional licenses were also issued, resulting in a maximum of three pay-TV channels available in any given market.

Programming

C Channel launched on February 1, 1983, with a performance of Swan Lake by the Royal Ballet, followed by the acclaimed French film from 1980 The Last Metro. First Choice and Superchannel, the two other pioneering pay-TV services available in Ontario both launched the same day by screening Star Wars.

For the first few months, C Channel’s broadcast day was just eight hours—a fact which, it later emerged, made subscribers feel short-changed. While programming was repeated throughout the day on the other premium channels, C Channel had coloured bars on the screen until the broadcast hours were expanded in mid-May.

The C Channel day started around supper time with its block of critically acclaimed children’s programming, including the Kid Bits shorts that demonstrated the secrets behind magic tricks or featured a jester doing stand-up with a puppet. Prime-time programming included concerts or musical documentaries by guitarist Liona Boyd, Bob Marley, and from Canadian jazz festivals. Fine arts content included stage opera performances of Samson and Delilah, La Boheme, and Rigoletto, as well as a ballet starring Veronica Tennant called The Newcomers. And among the films C screened: classics like David Lean’s David Copperfield, Out of the Past, Canadian movies like 1982′s Ticket to Heaven, international favourites like La Cages Aux Folles or King of Hearts—although some critics complained of sloppy dubbing instead of subtitles on such films—and even a marathon of Charlie Chaplin films. The highlight of the schedule in March would be an 8.5 hour marathon showing of the Royal Shakespeare Company’s staging of Nicholas Nickleby.

“For those with more discriminating tastes and those who appreciate the finer things in life,” Helmer Biermann, writing in the St. John’s Times Globe, echoed the critical praise heard across the country, “a blend of classic movies, recent quality movies and the arts, it seems that the best, and perhaps the only choice is C Channel.” Others critics, however, questioned whether videotape recordings of on-stage performances made for ideal viewing on the small screen. “For all of Cowan’s insistence,” the Star‘s Jack Miller argued, “it’s hard to brush off a suspicion that the kind of entertainment that thrives on the audience feeling almost close enough to touch living and breathing performers just doesn’t work as well in the clinical envelope of a TV tube. Not night after night, at least.”

(Advertisement from the Toronto Star; March 7, 1983.)

Like the other pay licenses, the C Channel license carried strict Cancon conditions. The specific requirements included that 30 per cent of total air time (and prime time) be dedicated to Canadian content for the first three years of operation and 40 per cent thereafter. Furthermore, the station had to dedicate 20 per cent of gross revenues to the acquisition or production of Canadian content. C Channel hoped to exceed these mandated minimums in their first year.

“You see,” C Channel programming executive Audrey Cole explained to Cinema Canada (May 1983), “we didn’t consider the restrictions that were put on us by the CRTC about Canadian content in production as cumbrous. The fact is that is why C Channel exists in the first place.” C Channel intended to spend almost every penny of its production budget—projected to be $37 million in the first five years—on independent productions of Canadian performing arts.

“We are a commercial network,” Cole added to highlight their emphasis on quality work, “and what goes on that screen is going to the most discriminating audience there is in this country and it has to be the best.” She underscored that the channel would not fund something just because it fit the channel’s mandate: “We aren’t the Canada Council. We aren’t a grant-giving body.”

This approach didn’t go over well with arts groups. Fuelled by impossible expectations of what could reasonably be achieved in C Channel’s first year, the Canadian Opera Company and others in the artistic community were irate that they’d endorsed LAMB’s CRTC submission but had not yet received television production funds.

Money Troubles

For all the protestations of pickiness by C Channel spokespeople, the reality was the channel was severely under-capitalized for its business model. Independent producer Jack McAndrew, who recorded Bach’s The Passion According to St. John at Montreal’s Notre Dame Cathedral for C Channel, admitted that he had to defer his fees because C Channel couldn’t absorb cost overruns. Other producers eventually didn’t even bother pitching because they knew C Channel couldn’t match their asking price.

Buoyed by overly optimistic projections, C Channel had drastically overspent on productions in their start-up phase. “Instead of spending 20 per cent of revenues,” Cowan later admitted, “we spent about 200 per cent.” While First Choice and Superchannel could maintain a healthier cash flow by relying on “off the shelf” Canadian films rather than new programs, in the absence of a similar back catalogue of performing arts video recordings, C Channel had to start from scratch. (Left: article from the Globe and Mail; June 11, 1983.)

Despite their early optimism, C Channel brass soon realized that they’d underestimated the seriousness of their license restrictions. And, in unison with the other pay services, by the mid-spring they complained of overly strict Canadian content regulations.

Cowan vented in the months after C Channel’s collapse:

The present situation has got to be a terrible frustration to producers who want to create quality programs that Canadians will watch. It’s simple. Producers want to create them. The government wants to encourage them. So why can’t we? Because nobody’s prepared to talk about the untalkable. We never talk about the sacrosanct system of Canadian content that was set up years ago, and we never talk about how we’ve got to scrap it and start all over.

Cowan argued that the CRTC should have instead nurtured the nascent networks lower but then ever-increasing Cancon requirements as viewership stabilized.

First Choice’s practices illustrate how other pay-TV stations exploited loopholes in regulations. At the same time as First Choice was turning down countless proposals from independent Canadian producers in the winter of 1983, the station signed a co-production deal with Playboy whereby the resulting adult films were certified as Canadian content.

First Choice and Superchannel also relied on an accounting trick called “scaffolding.” If an American network was willing to provide $80,000, the payment to producers would flow through the Canadian channel (which might add $20,000 of its own money) so that the project appeared on the books as a $100,000 investment in Canadian content. (Right: C Channel President Edgar Cowan from Cinema Canada; November 1983.)

But for Canadian independent producers, often signed on by well-funded American companies to help fulfill bare minimum compliance for certification as Canadian content, co-productions could be less than ideal. McAndrew recounted with regret his own experience in co-production of Romance, a soap opera serial, to Cinema Canada‘s Lucie Hall in May 1983:

I have since decided that I would no longer work as a producer on these types of productions because it is too demeaning to be used that way. It’s demeaning for the same reason that whoring is considered a necessary service in some quarters but is ultimately demeaning to the participants….It’s all very self-defeating and demeaning and I don’t like being treated as a serf on my own turf.

From all accounts, C Channel avoided such financial sleight of hand and dealt with producers fairly and honestly. As a result, McAndrew argued, most producers preferred working with C Channel. The only problem, it seemed, was the promising venture had been woefully under-capitalized.

Article from the Globe and Mail (May 10, 1983)

By mid-May, the company could no longer hide the troubles. They had burned through almost $6 million of initial investor money as well as a $3.5 million loan from the Toronto-Dominion Bank. The Globe and Mail reported: “the company desperately needs new equity to get it over the financing gap created because initial programming and marketing costs of a pay service are very high, but revenues grow slowly as subscribers join.”

C Channel had monthly revenues of about $225,000 from an estimated 28,000 subscribers. It was a far cry from the company’s expectation of at least 70,000 by that point and the 200,000 necessary by year’s end to break even. The miniscule revenues weren’t even enough to cover basic operating expenses, and the channel had to back out of commitments to a Leonard Cohen special and the Montreal International Jazz Festival.

Last-Ditch Efforts

Part of the problem, Cowan later diagnosed, was that from the start the company had been wholly unable to attract the right equity investors. The founding investors with personal wealth to match their passion for the arts—and thus willing to suffer short-term pain for C Channel’s long-term vision—clashed at the boardroom table with investors expecting profitability in the short-term.

And C Channel found little success attracting new investors due to a variety of factors. Industry insiders and journalists blamed the CRTC’s bungling of the pay-TV file by approving too many stations at the same time—without ensuring enough differentiation between the likes of First Choice and Superchannel—and basing Cancon expectations on the overly rosy predictions of applicants. Moreover, the federal government then established a Broadcast Fund in the spring of 1983 to subsidize the Canadian independent producer industry but specifically excluded pay-TV productions from accessing the fund. Finally, pay-TV was subject to cost volatility because rates with Telesat—which transmitted pay-TV signals through the Anik C3 satellite—and with individual cable companies were left unregulated by the CRTC.

Just when the troubled C Channel did begin making headway with potential investors, federal Minister of Communication Francis Fox undid it all. “I wish he’d stop being such a blowhard on this issue,” Cowan raged to the Globe and Mail‘s Stephen Godfrey in late June. “How many times have we listened to him say he’s not giving money? Who asked him?”

He elaborated further in an interview with Cinema Canada (November 1983): “[Fox] made statements about how the government was not prepared to help the pay licensees. Now, I hadn’t asked for anything, but when the government tells me that they are not prepared to set up structures or agencies to insure that a license they have granted is going to be successful, it had the effect of scaring the hell out of our investors.” (Left: article from the Toronto Star; June 23, 1983.)

To make matters worse, the pay-TV services couldn’t sell directly to their customers but had to rely on cable company salespeople, who made easy sales to existing customers to upgrade to pay packages—at $16 per channel—but didn’t reach out to new customers. C Channel discovered that the arts and culture station had not, in fact, lured occasional viewers to heavier viewing as expected. “We’re still seeing the heavy TV watcher being the only one to take pay-television,” the Globe and Mail quoted Cowan in June. “So far, the rest of the country hasn’t moved.” He blamed the cable companies.

C Channel’s own abysmal marketing efforts were also a culprit. The few advertisements that did appear put such an emphasis on arts and culture that many viewers didn’t even realize C broadcast movies. At the same moment, the pay-TV competition was spending an astronomical $500,000 per week for television ads.

“The name says it all,” Star critic Rick Groen bemoaned in June. “C Channel, with the heavy emphasis on C, was out to woo the culturally elite back to the plebian tube….They were after the ‘up-scale’ crowd, the folks with a large propensity for the arts and a fat wallet to match.” Groen questioned whether the niche viewers ever existed in sufficient quantity to sustain a pay network, no matter how high the quality of its programming.

Article from the Globe and Mail (May 13, 1983)

The C brass launched a “Survivathon” of continuous 24-hour programming—interspersed with on-air pleas from the likes of Karen Kain, Sylvia Tyson, and Andrea Martin—on Thursday May 12 at 5 p.m., ending on Sunday at midnight. The pitch was to encourage existing subscribers to each convince one friend to sign up, thus doubling subscriptions to 50,000 by weekend’s end.

By special permission of the CRTC, C’s signal was allowed to be unscrambled so customers without converter boxes could sample the service. At one point in Toronto, Rogers Cable was showing C Channel simultaneously on four separate television channels. Some cable systems, on the other hand, refused to even staff their telephone lines over the weekend to accept new subscription requests.

But the estimates of new subscribers were discouraging, ranging from 2,000 to 5,000. A stock offering to coincide with the “Survivathon” proved similarly disastrous. Instead of an anticipated $5.5 million, it raised only $810,000.

The End

By early June, Cowan had met with 75 groups and individuals (by his own estimation) about investing in C Channel. Most, like The Disney Channel (not yet available in Canada), wanted to rebrand and reformat the network. The CRTC, however, was unwilling to accept that possibility. CRTC chairman John Meisel was asked at a public forum: “Are you prepared to see a pay-TV channel go under, if it can’t meet its original program promises?” His quick and decisive reply: “Yes.”

Talks with potential investors came to nothing. On June 17, 1983, C Channel went into receivership. “We’ll take care of all staff salaries that are owed and all taxes owed the government,” Cowan announced. “After that, the bank is next in line. There are a number of creditors but the bank is the only one that’s secured.”

With the option of keeping C Channel afloat, maintaining subscriber revenue while continuing to broadcast programming it had paid for but hadn’t yet used, or ceasing operations to sell off assets, receiver PriceWaterhouse chose the latter. On June 30, it went off the air. The last program broadcast the Tracy-Hepburn comedy Pat and Mike.

“I thought that C Channel was a good service, an interesting service and I, personally, would have hoped that more Canadians would have subscribed to it,” Minister Fox said upon hearing the news. “But the ultimate test is the market test for C Channel and the other pay-TV services.”

C Channel’s studio, offices, and other production assets were sold to Crossroads Christian Communications, producers of 100 Huntley Street and aspirants to a national religious television network. Rogers purchased the pay-TV licence for $12,500 a few months later in December 1983, but the deal was thwarted by the CRTC and fell through.

Article from the Toronto Star (June 25, 1983)

Other pay-TV services that went on the air in 1983 fared little better than C Channel in the first year of business. Star Channel, in the Maritimes, eventually shut down; and Quebec’s TVEC merged with First Choice, which itself lost a staggering $21 million that first year. They all suffered the same cost volatility and half-hearted salesmanship from the cable companies, as well as the rising popularity of VCRs.

In 1984, First Choice and Superchannel reorganized themselves into two monopolies, dividing the country on the Manitoba-Ontario border, and survive today as The Movie Network and Movie Central, respectively.

The two found success by being bundled by cable companies with newly licensed specialty channels—The Sports Network and MuchMusic—which seemed to provide a greater value for the consumer than individual fees for service. The industry and the CRTC seemed to have learned the lessons of C Channel’s demise. The way new channels were introduced to the market was adapted, particularly by forcing consumers to opt out of the costs of new services rather than opting in. As a result, when Bravo!, a more populist take on arts and culture, took to the air in 1995, it succeeded where C Channel failed.


Sources consulted include: Ian Anthony in Broadcaster (October 2002); Tom Perlmutter, “A Woobly Picture for Pay-TV,” Report On Business Magazine (April 26, 1985); Walter Pitman, Louis Applebaum: A Passion for Culture (Dundurn, 2002); Ben Viccari in Performing Arts & Entertainment in Canada (Summer 1997); Cinema Canada issues from February, April, and May 1982, January, May, and November 1983, March and May 1985; as well as articles from the Globe and Mail of January 7 & 30, May 10, 13, 14, 18 & 27, June 10, 11, 18 & 30, July 29 and December 8, 1983; Postmedia News of December 27, 1994, and January 8, 1995; and the Toronto Star of January 6, 19, 20 & 26, February 2 & 25, March 7, April 19 & 20, May 10, 12, 13, 16, 17, 18 & 24, June 18, 23 & 25, and July 29, 1983, December 2, 1986, and December 18, 1993.

Every Saturday, Historicist looks back at the events, places, and characters that have shaped Toronto into the city we know today.

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