Meet the new convergence. It's a lot like the old version, with a major difference: It comes at half the cost.
The first round of deal making between media companies and distributors, spawned a decade ago and unwound in haste after the tech crash, was a bust for a number of reasons, but the single most important was that the prices made no sense. Time Warner's merger with AOL - more than $100-billion (U.S.) at the time it was conceived - became synonymous with the absurdity of the Internet bubble. It still stands as one of the worst corporate deals of all time.
In Canada, the copycat moves that followed AOL Time Warner weren't nearly as rich, but they still destroyed plenty of value. BCE's $2.3-billion purchase of CTV in early 2000, which it then rolled into a new company that included The Globe and Mail, was an example. When Ma Bell dumped most of its stake in the media company to a clutch of investors five years later, it got back $1.3-billion for its trouble.
That was then. What's changed now? In its second go-round, BCE is paying less (this deal values CTV's equity at $1.5-billion) for a broadcaster that's quite a bit bigger (it has the former CHUM specialty channels now), more diverse (it added radio) and is coming off a period during which it crushed the rival Global network in the ratings chase.
Including debt, BCE's cost is equal to 10 times CTV's earnings before interest, taxes, depreciation and amortization. That's a full price, but not a crazy one. But just as important: Technology is finally catching up with the theories that drove convergence in the first place.
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In 2000, there were no iPods, no iPads, no smart phones. "Streaming video" was your television set. The internet was taking off as an important medium for news, for information-sharing and for the written word. But for the vast majority of consumers, the home computer was still a long way from becoming a viable way of watching television and movies - unless your idea of a good time was sitting hunched over a laptop, squinting at grainy episodes of Seinfeld on a tiny screen. And watching TV on your cell phone? A fantasy.
But now television is edging closer to a new model, one in which viewers are no longer beholden to the clock or the programming schedule but can simply download what they want.
We've seen hints of what is to come. The Olympic broadcasting consortium drew terrific audiences to its website for the Winter Olympic Games in Vancouver; North American wireless users watched tens of millions of video clips of Olympic hockey or curling and skiing on their phones; CBC and Rogers Communications Inc. captured large "on demand" viewership for soccer's World Cup this past summer. Bell cited one recent survey showing that 20 per cent of Canadians with smart phones had used them to watch video in the previous month.
We are still a long way from the day when the masses watch all their TV on tablet computers or iPhones or BlackBerrys, thus cutting out the cable/satellite oligopoly. BCE's play for CTV - like Shaw's move to take control of the former CanWest television empire, also at a markdown price - is, arguably, a defensive move against that future.