Canada Ending Substitution of U.S. Commercials During Super Bowl

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By Peter Menyasz

Aug. 19 — Canada’s broadcasting regulator is ending the substitution of U.S. commercials during Super Bowl broadcasts despite concerns by the National Football League and the U.S. Trade Representative that it would hurt the league’s revenues from broadcasting the game in Canada.

Simultaneous substitution of U.S. commercials during broadcasts of U.S. programs in Canada is an important source of advertising revenue for Canadian broadcasters, but Canadians viewers are more interested in watching the often creative and high-profile Super Bowl commercials aired in the U.S., the Canadian Radio-television and Telecommunications Commission (CRTC) said Aug. 19.

Canadian viewers have also complained that mistakes in the timing of the substituted Canadian commercials interferes with their enjoyment of the game, as the Canadian commercials sometimes run over small portions of the actual game broadcast, it said.

“The potential negative advertising impacts have been recognized by continuing the simultaneous substitution regime as a whole. However, for the Super Bowl, these impacts are outweighed by other policy objectives and concerns,” it said. “Simultaneous substitution for the Super Bowl is not in the public interest.”

Simultaneous substitution is when your cable or satellite dish company temporarily replaces the entire signal of one TV channel with another channel that's showing the same program at the same time, according to the commission. Usually, an American signal is replaced with a Canadian signal. Sometimes, a Canadian signal from outside your area is replaced with a local signal, the commission said.

The agency, however, accepted an amendment proposed by a Canadian broadcaster that limits the prohibition against simultaneous substitution during the Super Bowl to only the game, not pre- and post-game programming.

NFL Rejected

The latest policy decision rejected the NFL's arguments that the policy change was discriminatory, violated copyright law and violated Canada's commitments under the North American Free Trade Agreement (NAFTA) and the predecessor Canada-U.S. free trade agreement.

Trade agreements don't apply directly to the CRTC without specific legislation, and even if the treaties did apply directly, they wouldn't limit the agency's ability to modify or even eliminate the simultaneous substitution regime, it said.

In a Sept. 11, 2015, submission to the regulator, the NFL argued that Article 1705(3)(b) of NAFTA entitles copyright holders to “enjoy the full benefits derived from those rights” and prohibits Canada from unduly limiting those rights. It also argued that Article 2006(3) of the bilateral trade deal provided that the simultaneous substitution regime would enable local licensees of a copyrighted program to “fully exploit” the commercial value of its license.

“This provision is a clear reference to the CRTC's simultaneous substitution regime, and was designed to align it with Canada's trade obligations,” it said.

And Section 27 of Canada's Broadcasting Act specifically references Article 2006(3) and indicates that any exception to the simultaneous substitution regime must be on a general basis and cannot target a single program such as the Super Bowl, it said.

USTR Raised Issued

The U.S. Trade Representative's 2016 report on foreign trade barriers, in its chapter on intellectual property, raised concerns that the policy change would end the benefit to Canadian broadcasters of overriding U.S. ads and selling the resulting advertising space.

“U.S. suppliers of programming believe that the price Canadian networks pay for Super Bowl rights is determined by the value of ads they can sell in Canada, and the CRTC's decision reduces the value of their programming,” the report said. “The United States is seeking clarity from the Canadian government on the CRTC's position in this matter.”

The regulator announced after public hearings in 2015 on its television broadcasting policy that it would maintain simultaneous substitution, except for the Super Bowl. That was based on 20 percent of Canadians who complained about simultaneous substitution saying they preferred to see U.S. ads during the broadcast. The agency held consultations on the issue in late 2015 and early 2016.

The NFL and Fox Sports, which will broadcast Super Bowl LI on Feb. 5, 2017, did not respond to Aug. 19 requests from Bloomberg BNA for comment on the CRTC's decision.

To contact the reporter on this story: Peter Menyasz in Ottawa at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

For More Information

The CRTC policy is available at http://www.crtc.gc.ca/eng/archive/2016/2016-334.htm.

The USTR 2016 National Trade Estimate Report is available at https://ustr.gov/sites/default/files/2016-NTE-Report-FINAL.pdf.

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