ARCHIVED - Decision CRTC 84-339

Decision

Ottawa, 2 April 1984

Decision CRTC 84-339

Action Canada Sports Network - 832428700

The Commission approves the application by Action Canada Sports Network (ACSN) for a licence to carry on a national, 24-hour-a-day, specialty sports programming service to be distributed via satellite to cable television affiliates, on a discretionary, user-pay basis. The licence will expire 31 March 1989 and will be subject to the conditions specified in this decision and in the licence to be issued.

ACSN is a partnership of Labatt Brewing Company Limited and Ault Foods Limited which are both wholly-controlled subsidiaries of John Labatt Limited. John Labatt Limited is a diversified Canadian company and is active, through its subsidiaries, in the brewing and dairy production industries, and in the packaging and distribution of grocery food products and wines. John Labatt Limited also holds a 45% interest in the Toronto Blue Jays Baseball Club.

In describing its corporate organization, the applicant emphasized that:

 ACSN will be operated independently of any of the other companies in the John Labatt family. We would construct an annual business plan and be expected to table that business plan with the management committee and, once accepted, be expected to ... make that business plan happen. There would be monthly progress reports related to variations, if any, from that business plan, but we would be operating at an arm's length basis, as an independent venture within the family of companies.

The applicant indicated that while it would utilize the marketing and merchandising expertise of the Labatt organization, "they would not be involved directly in implementing any marketing strategies." In response to questioning, it further stated, "we certainly will not have a corporate logo or a name that has Labatt or a Labatt identification in it."

Based on the substantial financial commitment to this sports service, the significant corporate resources and expertise of the Labatt group, their experience in sports programming and the demonstrated professional abilities of ACSN's proposed management team, the Commission is satisfied that the applicant has the capacity to develop and maintain a viable, high-quality, discretionary specialty programming service. The Commission notes that Mr. Gordon Craig, the president and general manager of ACSN, has had extensive experience in broadcasting, particularly in the planning and production of sports programming; Ms. Liane Langevin, the vice-president, brings to this service a varied background in corporate management and in the franchising and marketing of cable television services in Canada and the United States.

In describing the service, the applicant indicated it will offer Canadian sports fans a diverse mix of Canadian and international sports and will provide exposure for Canadian collegiate and amateur sports. The applicant stressed that the service is designed to supplement, rather than compete with, the Canadian sports programming currently available on conventional television and on pay television. In reply to questioning at the hearing, the applicant reiterated the commitment made in its application that it would not siphon, or compete for the rights to, the major sporting events covered by conventional television licensees or by pay television licensees:

 We will not take anything that they currently have on the air ... the financial reality of a service like ours being able to afford and attract those properties is not feasible. We see this service ... as being complementary and supplementary rather than being the leader in the first exposure of major sports.

The applicant indicated that the sports service could be operational by 1 September 1984, and will draw upon four basic categories of events. The coverage of major events of wide audience appeal, such as professional hockey, football and major league baseball will provide the foundation for the service. The second major element will consist of sports of narrower appeal broadcast only occasionally on conventional television., such as soccer, basketball, boxing and Canadian college sports. The third category of sports will include the coverage of early tournament play and preliminary rounds of various sporting events, such as golf, soccer, tennis and curling. A fourth block on its schedule will include seldom-broadcast sports, such as rugby, rodeo, karate, gymnastics and others aimed at more narrowcast audiences.

The applicant undertook to allocate a budget of $26 million during the five year licence term to cover expenditures related to marketing and promotion, and will expend an estimated $65 million, which represents approximately 70% of its total programming budget, on the acquisition and production of Canadian programming. As noted in the appendix to this decision, the Commission requires, as a condition of licence which will remain in effect during the term of the licence, that not less than 70% of its total expenditures be devoted to Canadian programs.

Emphasizing the low repeat factor inherent in an all-sports specialty service, ACSN stated that, initially, Canadian programming would comprise 18% of its overall programming, including a minimum of 34% Canadian content levels in the evening viewing hours between 6:00 p.m. and midnight, and 47% between 7:30 p.m. and 10:30 p.m. While the Commission finds these commitments regarding Canadian content exhibition on a sports service to be realistic for the first two years of operation, during which period the market for discretionary, specialty services will have to be intensively developed, it emphasizes that they are minimum commitments which the applicant will be expected to exceed, as revenues permit.

Accordingly, a condition of licence pertaining to the exhibition of Canadian sports programming, requiring the licensee to maintain these levels of Canadian content as a minimum, will remain in effect for the first two years of operation. From the beginning of the third year and for the remainder of the licence term, the Canadian content exhibition requirements of the licensee will be increased to comprise not less than 35% of total hours, and 50% during both the 6:00 p.m. to midnight and the 7:30 p.m. to 10:30 p.m. periods. Such increases would, in the Commission's view, bring the licensee's Canadian programming obligations more in line with pay television services, and would further appear to be reasonable, taking into account the licensee's anticipated penetration and financial projections.

As discussed with the licensee, the Commission intends to conduct a general review of specialty services after the initial two years of operation. Within the context of such review, the Commission will discuss with the applicant the feasibility of reaching the minimum Canadian content levels set out for years 3, 4 and 5, in the light of its experience during the first two years of operation.

The proposed programming schedule submitted in ACSN's application allocates some 9.5 hours a week for the coverage of Canadian amateur sports events. At the hearing, ACSN further indicated that, if licensed, it would make the following additional commitment to Canadian amateur sport:

 ... in year one, a two-hour program period each week scheduled in prime time, the material to be produced, and supplied by, Sports Canada from the sources identified in the Shaw application, providing it was Canadian content ... All advertising revenue generated in that two-hour prime time Sports Canada magazine would be retained by Sports Canada to support the production costs and the program acquisitions. In year two, if year one was a success, we would be prepared to increase that program segment to three hours per week. Then, if year two is a success, we would be prepared to sit down with Sports Canada and their people to develop a long and lasting, and hopefully, a fruitful relationship.

The Commission encourages ACSN to work closely with amateur sports organizations in Canada to ensure the realization and success of this worthwhile endeavour and expects that amateur sports coverage in Canada will increase significantly as the service develops.

With respect to the promotion of Canadian amateur sport, ACSN undertook to make available, free of charge, up to six minutes per day of commercial air-time to amateur sports groups in Canada to broadcast their messages.

Further, the Commission acknowledges the applicant's commitment to rely totally on independent producers and directors for all of the network's event coverage, except for the news segments which will be produced in-house. It also notes ACSN's intention "to bring a major injection of incremental funding to support that production commitment" and to recruit and provide "the opportunity for the training of new personnel throughout the production industry."

ACSN's news service will include "half-hour sports news programs every night (which) will have a heavy element of Canadian amateur results and profile programming attached to them." These newscasts will be distributed twice daily, Monday through Friday, three times on Saturday and twice again on Sunday, and will be supplemented by an hour-long weekly news magazine on Sundays which will highlight the major sports events of the previous week. In addition, male and female sports personalities will provide Canadian continuity to the programs. These on camera hosts will introduce and link events, and provide background analyses and sport headlines weekday evenings between 7:00 p.m. and 1:00 a.m., and on Saturdays and Sundays, between noon and 1:00 a.m.

With respect to advertising, the Commission notes that the applicant will not distribute any local advertising on the network, and that it will not carry more than eight minutes of advertising material per hour, on average. The applicant is expected to adhere to these commitments.

The Commission also notes the applicant's assurances that fair and equitable advertising policies and practices will be maintained, and its commitment to ensure that no preferential treatment will be given to Labatt products. The applicant further stated, "normal television and advertising practices that are employed by any other network in the country will be the same sort of guidelines that we will have to use."

The Commission also expects the licensee to take the necessary steps to ensure that beer advertising does not occupy an undue proportion of available advertising spots.

Further, as noted in Public Notice CRTC 1984-81, the Commission encourages the applicant to consult with the cable television licensees serving predominantly Francophone communities, to arrive at some reasonable arrangement for the provision of French-language programming in their markets.

The Commission will follow with interest the applicant's progress in developing this sports service and will review its performance in the context of the public hearing to be held after two years on the development of discretionary specialty programming services in Canada.

J.G. Patenaude Secretary General

APPENDIX

Conditions of Licence

Action Canada Sports Network

Canadian Sports Specialty Programming service

1. From the date of commencement of service until 31 December 1984, and in each semester thereafter until 31 December 1986, the distribution of Canadian programs shall comprise not less than

 a) 18% of the total hours devoted to all programming, and

 b) 34% of the hours between 18:00 and midnight, and

 c) 47% of the hours between 19:30 and 22:30

2. In each semester commencing 1 January 1987, the distribution of Canadian programs shall comprise not less than

 a) 35% of the total hours devoted to all programming, and

 b) 50% of the hours between 18:00 and midnight, and

 c) 50% of the hours between 19:30 and 22:30

3. Not less than 70% of the licensee's total expenditures for programming in each year shall be devoted to the acquisition of, or investment in, Canadian programs.

4. The licensee shall maintain and enter in a program log, on a daily basis, the title and a brief description of each program distributed, the time at which each such program began and ended, together with an indication of whether each such program is a Canadian program, as set out in these conditions.

5. The licensee shall present to the Commission, within seven days after the end of each month, its program log for that month carrying an attestation by or on behalf of the licensee certifying the accuracy of its content.

6. The licensee shall keep separate accounts which set out for each financial year ended 31 August

 a) the amounts expended by it on the production of, or for the rights to exhibit, Canadian programs intended for distribution on its undertaking;

 b) the amount expended by it for the distribution of non-Canadian programs on its undertaking; and

 c) the gross revenues in respect of its operations under its licence.

7. The licensee shall file a statement of the accounts referred to in section 6 with the Commission on or before 30 November in each year.

8. For purposes of these conditions,

 a) a program is a Canadian program to the extent that it is so recognized by the Commission in the notice published by the Commission entitled "Recognition for Canadian programs - 15 April 1984";

 b) "semester" means a period of six consecutive months ending on the last day of June and December in each year;

 c) all time periods shall be reckoned according to the Eastern time zone.

9. Sections 14, 15, 18 and 19 of the Television Broadcasting Regulations, c.381 Consolidated Regulations of Canada, 1978, shall apply to the licensee mutatis mutandis.