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Quebecor’s soaring profit fuels NHL ambitions

Quebecor Inc.’s   plan to revitalize its media division has little to do with newspapers and television stations and everything to do with the National Hockey League.

While the Montreal-based media, cable and telecommunication company’s plans to lure an NHL team back to Quebec City is hardly a secret, the extent of its ambitions were laid bare Thursday as the company released earnings that blew past analysts’ expectations.

Read the story in the Globe and Mail

While the day’s focus was on the blowout numbers, chief executive officer Pierre Karl Péladeau couldn’t help slipping in a mention of the company’s NHL ambitions in the press release. And while the past year may have been difficult – the company cut 400 jobs in its Sun Media division – much of the restructuring has been done to prepare the media division for an NHL bid.

“Quebecor Media now has all the tools it needs to pursue its goals, which are to manage a world-class multipurpose centre and to bring a National Hockey League team to Quebec City,” he said.

Earlier this month, the company reached a deal for the naming rights of a yet-to-be-built $400-million arena in the city. Terms of the deal vary depending on the eventual tenant, but Quebecor could pay as much as $65-million for the rights. It would like to see a setup similar to that enjoyed by Rogers Communications, which owns both the Toronto Blue Jays and the rights to broadcast the team’s games on its specialty sports channels.

For the city to get a team, the league would need to uproot a franchise from an existing city, likely Phoenix.

“It’s good for them to be involved in sports,” Desjardins Securities Inc. analyst Maher Yaghi said. “They can use hockey games as a tool to bring in more cable subscribers. The idea is to use the team as leverage for their new TV channel [TVA Sports] and use the team as a tool to get the ancillary benefits of being involved in hockey for your marketing and in your publications.”

The company’s swagger has everything to do with its strong cable and telecom business, whose gains helped push the company’s profit to $85.4-million, or $1.34 a share, compared to $46.6-million, or 72 cents, a year ago. Analysts expected a per-share profit of 89 cents.

It’s been a year of transformation at Quebecor’s media division. The job cuts at Sun Media are expected to save the company $20-million a year. It’s already spending some of that money, having announced plans to launch four new community weekly papers in Ontario to compete more directly against Torstar Corp.’s rival Metroland Media Group.

It also added non-traditional holdings to the media group. It bought an interest in the Quebec Major Junior Hockey League team the Blainville-Boisbriand Armada, whose games will be made available across the company’s media holdings. It also bought a digital agency in San Francisco that specializes in brand promotion, and a video game company that focuses on the “occasional player” using mobile devices.

The company acknowledged in a conference call that the media division hasn’t figured out a way to take advantage of this broadening empire, which includes 36 daily newspapers across the country, 198 more weekly papers and the recently launched Sun News Network and TVA Sports, which the company would like to see broadcasting NHL games out of Quebec City.

It hopes to solve the problem by refining its advertising approach, bringing in new executives tasked with assuring advertisers the company can service all of their needs across the country, in any medium.

“We are convinced that we now have in place industry leaders who combine the experience, capability and track record to significantly improve our sales performance, and successfully combat the declining industry trends with major wins on the national front where we have yet to get our fair share of the global pie,” Mr. Péladeau said.

And while the company’s telecom division posted near-record subscriber growth and saw its operating income increase by $50-million, the news division saw its operating income fall by $40-million over the past year to $150-million. The broadcast side saw operating income drop by $24-million to $50.5-million, largely due to startup costs for the Sun News Network and TVA Sports.

Over all, the company posted $1.15-billion in revenue in the fourth quarter, up $59.8-million from last year’s quarter. Adjusted income from continuing operations was $55.6-million, or 87 cents per share. That compares with $58.2-million, or 90 cents, in the fourth quarter of 2010.

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Online house listings expose sellers to assault, break-ins, TREB says

Tens of thousands of homeowners are at risk of break-ins and assaults if their personal information is made available online when they sell their homes, the country’s largest real estate board charges in a blistering attack against the country’s competition commissioner.

The Toronto Real Estate Board will launch a major public relations campaign on Tuesday against a Competition Bureau demand to include more detailed information in online listings, arguing that making information such as a seller’s name and phone number available to casual browsers endangers lives.

Read the story in the Globe and Mail

While competition commissioner Melanie Aitken has levelled charges against several high-profile organizations such as Air Canada and Visa since assuming the job in 2009, this is the first time one of her targets has launched a public counter-attack rather than wait for its day in court.

“Easy access to information online is a huge safety issue,” said Von Palmer, the real estate board’s chief privacy officer. “There is a real possibility of break-ins and assaults; you only have to read the headlines to imagine what might happen. You hear stories about realtors getting attacked and killed. Can you imagine if we put that information out there about consumers? You can only imagine the headlines.”

A spokesman for the Toronto Police Service said he wasn’t aware violence against real estate agents was a problem in the city.

At the heart of the fight are websites launched by real estate agents that allow their clients to browse homes on their own. These listings are enhanced versions of what they’d find on Realtor.ca, the industry’s main national site for listings that saw 456,749 homes listed and sold in 2011.

These personal micro-sites are password protected, and are accessible only to clients. Anyone who wants the detailed information can still get access – but they must ask an agent.

Ms. Aitken argues this model perpetuates the traditional real estate model in which customers interact with agents at a time when competing services are trying to offer lower prices by eliminating the middle man. She wants any consumer to have access to the information, which includes prior selling prices, whether they have an agent or not.

The case is expected to be heard at the competition tribunal in the fall. But TREB – the largest of the country’s real estate boards, representing about 32,000 real estate agents – is going on the offensive with a website (protectyourprivacy.ca) warning consumers that the Competition Bureau “is trying to dismantle the safeguards for consumers’ personal and private information.”

It also hired polling firm Angus Reid Vision Critical, which undertook a phone survey of 800 Ontarians to gauge their views on privacy. It found 75 per cent of Ontarians don’t want their name and the sale price of their home made public, and 70 per cent don’t want their contact information provided to prospective buyers.

“Commissioner Aitken wants to release this information,” TREB states in a draft release of the poll obtained by The Globe and Mail.

The Competition Bureau bristled at the suggestion that it wants to force information into the public domain. Spokesman Greg Scott said TREB is trying to “distract from its anti-competitive conduct” in a bid to hang on to its market share.

“TREB is trying to have it both ways as the identical information is routinely provided today by real estate agents to consumers, either by hand, mail, fax, or e-mail,” he said. “TREB has for years permitted member agents to share this same information with their customers and they continue to do so today.”

The details are also available to anyone who visits an open house. A phonebook would provide the same information, as would a visit to any land records office in most cities. Mr. Palmer said it’s more dangerous to have all of the information online, because criminals would be “one-stop shopping.”

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Sun Media launches four new Ontario weeklies

Sun Media Corp. will launch four new weekly papers in Ontario in a bid to compete more effectively with rival Metroland Media Group.

The newspaper chain – which owns dozens of weekly and daily newspapers across the country – said it would close its advertising-focused Smart Shopper papers in Ottawa, Windsor, Kitchener-Waterloo and Guelph and replace them with publications that also have news stories in them.

Read the story in the Globe and Mail

While all newspapers have suffered a loss of revenue from a shrinking advertising market, weekly newspapers are less dependent on large national advertisers than dailies. The move by Sun Media, a wholly owned subsidiary of Quebecor Media Inc.(QBR.B-T37.301.213.35%) , is expected to lead to fierce battles to lock up both flyer distribution and advertisers in each market.

Sun Media said it decided to make the change to “respond directly to the needs of our valued advertising partners, delivering access to an even stronger flyer distribution in the highly desirable Ontario markets.”

“The expansion of our community newspaper network is a bold statement of our commitment to the newspaper industry,” said Julia Kamula, executive vice-president for Central Canada. “Adding editorial makes them a quality offering for advertisers.”

The new newspapers – the Ottawa Capital City News, K-W Review, Windsor This Week and Guelph Review – will have original editorial content, making them more direct competitors to Metroland, which is owned by Torstar Corp..

Together, the four new papers will account for about 440,000 copies a week.

Metroland bought its main competitor in Ottawa last year, and then folded most of its local newspapers into its own. It also expanded into the Kitchener market, where it has about a one-year head start on Sun Media.

“It’s not like they are new to the market,” Metroland president Ian Oliver said. “This is really a sign that it’s tough to make shopper publications successful and community papers continue to be strong. We just plan to continue to provide the best local news coverage and we are quite confident in our talent.”

It’s been a busy month for newspaper companies in Canada. Torstar also announced plans to bring its daily commuter newspaper Metro into Saskatoon and Regina. It also announced plans for digital-only papers in Kitchener, Hamilton, Windsor and Victoria.

Metro considered launching paper versions in Kitchener and Windsor, but decided the market likely couldn’t justify the additional costs associated with newsprint.

“We’ll test the water with the concept, but our feeling is long-term we can only go to a certain number of cities with a full portfolio of products,” said Bill McDonald, president of Metro English Canada. “But maybe we’re able to go to additional markets beyond those core markets for digital-only products. It’s a model that’s meant to grow.”

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Corus cements home base with land deal

Corus Entertainment Inc. will remain a tenant in its state-of-the-art offices on Toronto’s waterfront until all of the ultra-modern fixtures look quaint and dated, after it engineered a deal that saw it buy the building and then flip it to one of Canada’s biggest REITs.

The Corus Quay building was built by Toronto Port Lands in 2009, and is a central piece of the city’s waterfront redevelopment strategy. The city-owned agency opted to list the property for sale late last year, and Corus had first right of refusal.

Read the story in the Globe and Mail

The building drew considerable interest over the past two months, Port Lands spokesperson Eva Varangu said, with several bidders hoping to own the environmentally friendly building.

But Corus used its contract to push the bidders aside and then immediately sold the building to H&R Real Estate Investment Trust(HR.UN-T24.380.090.37%)for $186-million, which is what it paid to buy the building from Toronto Port Lands. The deal was announced Monday.

It’s more than a home to the broadcaster, it’s an operations centre. The broadcast station must transmit 24/7, so there’s a two-megawatt backup power generator on the roof that sucks up 600 litres of fuel per hour when operational.

It also features radio studios, allowing street-level interaction for stations such as The Edge 102.1.

The main digital library can store two million gigabytes of data (the rough equivalent of 500,000 iTunes movie downloads). Everything is digital – the computer system alone takes up 8,000 square feet.

As part of the deal, Corus negotiated a new lease that will extend its original 20-year agreement and provide it with an option to renew for another 20 years.

Terms of the lease were not released.

However, when Corus signed a lease with Toronto Port Lands in 2009, the broadcaster signed for half the going rate for the Toronto market because the builder was keen to sign a large lead tenant to the project. H&R said it negotiated for some “rental escalations” as part of the deal.

The building is among the most advanced in Canada, and is home to most of the television and radio broadcaster’s 1,100 Toronto-based employees. It features a five-storey wall of plants in the lobby, “green” rooftops and a lighting system that knows when someone is at their desk and how much light is appropriate given the amount of sunshine coming in through the tinted windows.

It also has a three-storey slide from the lunchroom to the main floor.

At $186-million, Toronto Port Lands turned a tidy 24 per cent profit on the sale. The building was constructed for $150-million.

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Music industry wants more royalties from CBC

Music publishers want more money out of the Canadian Broadcasting Corp. for the rights to play their music, after the broadcaster launched an online streaming music service that allows listeners to hear thousands of songs a day on their computers and phones for free.

The fight will be closely watched by other online music providers, who charge subscribers a fee and are operating in a new industry with few parameters in place. Popular American music sites such as Pandora and Spotify are avoiding setting up in Canada until a clearer royalty picture emerges.

Read the story in the Globe and Mail

CBCMusic.ca has attracted hundreds of thousands of listeners since it launched last month, offering dozens of channels tailored to specific tastes. Unlike its competitors, it doesn’t pay a per-song royalty. Instead, it pays a flat-fee because it technically doesn’t earn any profits.

That has also attracted the attention of the country’s artists, who feel the broadcaster is taking advantage of its current royalty scheme by unexpectedly launching a service that plays thousands of songs a day on the site’s 40 genre-based channels.

The Society of Composers, Authors and Music Publishers of Canada (SOCAN), which handles royalties for more than 100,000 music publishers in Canada, said when it set a flat fee for the broadcaster, nobody envisioned a constant stream of free music flooding the Internet.

“The CBC is licensed and we need to look at the use they are making [of content] under their new service,” said Paul Spurgeon, vice-president of legal services at SOCAN. “We’re looking at that right now … the key is whether CBC is paying their fair share.”

Singer-songwriter Jim Cuddy, from the Canadian band Blue Rodeo, said all bands are seeing their royalties drop as music increasingly moves online.

“As there is a new format [live-streaming] and the CBC is currently paying a nominal fee, it only seems fair that a new rate be negotiated,” Mr. Cuddy wrote in an e-mail to The Globe and Mail.

Younger musicians, in particular, would struggle to survive in a flat-fee, online streaming environment, he said, adding, “The CBC is a valuable ally for Canadian musicians to have, and I hope an equitable solution can be found.”

The stakes are high – music sales are estimated at about $500-million a year in Canada. Digital sales account for 34 per cent of the market, and that share is growing at about 15 per cent per year, trade group Music Canada estimates.

Competitors suggest CBC is undercutting them using taxpayer money.

Listeners of the CBC site have streamed 1.6 million hours of music. At three minutes a song, that’s some 32 million tunes. If it were forced to pay per song like other online services, the service could become very expensive to operate.

“What concerns private industry is that in the face of massive cutbacks CBC sees fit to launch a new service that won’t generate meaningful revenue,” said Rob Braide, vice-president of regulatory affairs at Stingray, which charges users $4.99 a month to use its Galaxie music app. “I’m not sure how that makes any sense.”

SOCAN charges businesses tariffs to play music, and the money goes back to those who own publishing rights. It has dozens of categories – adult entertainment establishments pay 4.4 cents multiplied by their seating for the right to play music each day, for example – but the CBC has a special flat-rate deal.

Any businesses playing music must also reach a deal with the Audio-Video Licensing Agency Inc., which represents the record labels who own reproduction rights. The CBC reached a new deal with the agency earlier this year, but financial terms were not disclosed.

Jazz bassist and producer Roberto Occhipinti said he never thought of the broadcaster as a big revenue generator for artists, and doesn’t think people expect to make more from the CBC playing their music than they already do.

“They have supported Canadian music, obviously, for an awful long time, to a level that no one else has, so I don’t think they should be so hard on the CBC,” he said.

Chris Boyce, CBC’s executive director for radio and audio, said SOCAN’s move isn’t unexpected, and the CBC acknowledges it will need to revisit its arrangements at some point. In the meantime, CBC plans to sell display advertising and sponsorships to “make the service sustainable.”

“We do find ourselves in a different position than a private broadcaster because the kinds of questions I’m asking don’t necessarily depend on profit margins,” he said. “As the same time, we need to look at building a sustainable business here. We need to look for revenue.”

They aren’t the only ones – companies such as Stingray Digital and Sirius Satellite Radio Canada have similar offerings that they charge customers to access. It’s a tough business – Pandora Media Inc., one of the only publicly listed online music services, recently reported a 62-per-cent increase in users in the U.S. but said its content acquisition costs more than doubled as it was forced to pay more royalties because of the service’s popularity.