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Convergence Is Key to Merging Canadian Media

TORONTO — Canada's leading media players have been jockeying for position in a fluid media marketplace in recent months, and the buzzword behind the deals is “convergence.”

“The sum of the parts is going to be vastly larger … than the parts,” Ken Thompson, chairman of information-services provider Thompson Corp., said of the this month’s merger of his company's Globe and Mail newspaper and related broadcast and Internet properties with national broadcaster CTV Inc. and Internet portal Sympatico-Lycos Inc., both owned by telephone giant BCE Inc.

The properties, to be controlled by BCE and 20 percent owned by Thompson, will have a combined worth of $2.6 billion (US). The next part to be added, said the owners, could be a major-league sports team, with all signs pointing to Maple Leaf Sports & Entertainment Ltd.

Earlier, when BCE snapped up CTV for $1.56 billion (US), Jean Monty, BCE's president/CEO, said the deal “will squarely place BCE as a leading player in the converging broadcasting and new media industries.”

Leonard Asper, president/CEO of Canadian broadcaster CanWest Global Communications Corp., used similar words to describe his firm's July 31 purchase of Hollinger Inc. “This merger is the ultimate convergence transaction,” he said.

Under the terms of the arrangement, CanWest will pay $2.38 billion (US) for the domestic publishing giant's print assets plus its extensive online properties, including Canada.com.

Convergence also drove printer Quebecor Inc. to shell out $3.29 billion (US) for cable provider Groupe Videotron Ltd., both of Quebec.

Quebecor plans to bundle its new cable assets with its Sun Media newspaper chain, the TVA broadcasting group, a raft of magazines and its Internet portals, Canoe.ca and Netgraphe.

Rogers Communications Inc., which lost out in the bidding for Groupe Videotron, has just finished paying $112 million (US) for 80 percent of the Toronto Blue Jays major-league baseball franchise. The company now has its sights set on an NFL franchise, possibly the Buffalo Bills or the Arizona Cardinals.

In addition, Rogers, Canada's largest cable provider, is lobbying the Canadian Radio-Television and Telecommunications Commission to relax its restriction on cable companies owning specialty TV channels. This would clear the way for the company to take an ownership position in Sportsnet as part of its move into professional sports.

As in the US, where deals such as AOL's purchase of Time Warner are being touted as bold and necessary, the view in Canada seems to be that consumers want increased media interactivity.

“Certainly, there are many new possibilities that arise when you bring together a major newspaper publisher with valuable Internet assets and a major television broadcaster,” Bruce Claassen, chairman of Toronto's Genesis Media, said in assessing the CanWest-Hollinger merger.

Claassen said CanWest, which has been slow to develop Internet properties of its own, will be in a position to leverage its broadcast might to build Canada.com into a household name. “That's the sort of upside you get,” he said.

But the potential downside, he cautioned, is that the formation of cross-media colossuses makes it difficult for smaller players to survive and offer competition.

One reason for Rogers' purchase of the Blue Jays is that it would give the communications firm access to the team's season ticket buyers. But as Terence Corcoran, a senior business editor at Canada's National Post newspaper, pointed out, professional sports teams are invariably financial sinkholes.

“Why,” he wrote, “do you have to own the team, and take on a major management headache in an industry prone to financial and personality craziness, to extract more advertising revenue out of it?”

The reason, of course, is that you might be shut out of any revenue possibilities whatsoever if a rival media company bought the team. In addition to cable TV and sports, Rogers is into high-speed Internet access, wireless, broadcasting and publishing. That puts it in direct competition with just about every other large media player, and potential Blue Jays owner, in the country.

Meanwhile, ExtendMedia, a Toronto production house specializing in interactive content, recently reached out to Hollywood for expertise in creating convergence programming for the television, Internet and wireless markets.

The company has hired veteran producer Fred Fuchs, formerly the head of director Francis Ford Coppola's film production company, American Zeotrope.

Fuchs said his primarily role is to support the development of programming that spans multiple interactive media, but he will also work closely with advertisers to help them use interactive media to communicate with consumers one on one.

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