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Caught in the high beams of debt, CanWest stood paralyzed

CanWest's Winnipeg headquarters


Izzy Asper created a multibillion-dollar media business around a simple idea. He and his heirs ultimately destroyed it by straying too far from the formula.

Not long before his father's death, chief executive officer Leonard Asper showed up one day in the newsroom of the National Post to talk to the staff. As he spoke of the direction of the paper and the company that owned it, he mentioned CanWest's image as a reseller of cheap American TV shows. The Asper family resented that reputation, Leonard told his employees, and thought it was unfair.

Maybe that helps explain why and how CanWest went so badly off the rails. Why be ashamed of something that works? Why not embrace it? To heck with the culture snobs: In the 1980s and 90s, when CanWest was all about "the business of selling soap," as Izzy is alleged to have said, it was a highly profitable broadcaster and a Bay Street starlet. Once it became about convergence and "synergies" and financial engineering and building a conglomerate on which, like the British Empire, the sun would never set - well, that's when the rot began to set in.

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It's important here to distinguish between the events that can be fairly blamed on the controlling family, and Leonard Asper in particular, and those that can't.

It's not the Aspers' fault that many traditional media around the world are caught in the grips of a shift toward online media and away from conventional television and newspapers. When they closed their infamous deal with Conrad Black for most of Canada's biggest daily papers, they thought they were getting a bunch of near-monopolies - but they weren't alone in misjudging how quickly printed media would lose its protective moat.

It also wasn't Leonard Asper's fault that his father bequeathed him a company with a crummy balance sheet: The Black deal was Izzy's deal. But then, CanWest wasn't alone on that score, either. After a two-year merger horror show in 1999-2000 - AOL and Time Warner, BCE and CTV, Quebecor and Vidéotron - plenty of media and communications companies staggered under the burden of acquisitions their shareholders wished they hadn't done.

The difference was in the response. AOL and Time Warner went for a divorce; BCE tossed aside its Yellow Pages and most of its stake in what's now CTVglobemedia (which owns the Globe and Mail); Quebecor fixed Vidéotron and began to knock down debt.

Meanwhile, CanWest tinkered, obsessed with financial engineering and badly served by selfish investment bankers all too eager to lead Mr. Asper to the next fee-rich deal. An asset sale here, a purchase there, spin out an income trust - no, wait, let's buy it back - shuffle, restructure, and shuffle again.

Ask yourself: Through all of this, what was the business strategy? To put it another way: What did the Aspers want CanWest to be? A media company with dominant TV stations and newspapers in major Canadian cities? An international broadcasting giant? An owner of niche specialty-cable channels? A leading-edge producer of online media content?

And who was the audience - high-brow, low-brow, the great middle class?

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It seemed that Leonard Asper could never decide, so CanWest tried to be all of them, and that was the root cause of the company's inability to do anything about its debt. After paying a fat price for Alliance Atlantis, CanWest could have taken a big bite out of its nearly $4-billion in debt by selling its Australian TV network or its Canadian newspapers. The company did what companies do when they lack a clear direction. It stayed paralyzed until it was too late.

Change is a constant in any business, and few industries have been as thoroughly tortured by change in the past five years as old-line media. Not many media companies can thrive in this environment without having some focus. While the revolution was taking place, CanWest decided a few years ago to invest in radio in Turkey - a medium in which it had never made any money, in a market it knew nothing about.

Though the deal was financially insignificant, there is no more perfect illustration of the company's drift: Leonard Asper was buying Turkish radio stations when he should have been selling soap.

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