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Decision
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Ottawa, 27 October 1988
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Decision CRTC 88-775
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Chinavision Canada Corporation
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Toronto, Ontario -880335500
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Following a Public Hearing in the National Capital Region commencing 13 June 1988, the Commission renews the licence issued to Chinavision Canada Corporation (Chinavision) to carry on a network for the distribution of a national specialty service consisting of predominantly Chinese-language programming, to be distributed to cable television affiliates on a discretionary user-pay basis. This licence is renewed from 1 April 1989 to 31 August 1993 and will be subject to the conditions of licence specified in the appendix to this decision and in the licence to be issued.
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This term, the end of which conforms with the end of a broadcast year, will enable the Commission to consider the renewal of this licence at the same time as that of other Canadian specialty and pay television licences.
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Chinavision is owned by Frances K.K. Cheung. It was first licensed in 1984 to provide a specialty service on a discretionary basis consisting of predominantly Chinese-language programming (Decision CRTC 88-445). In Decision CRTC 87-74 dated 30 January 1987, Chinavision was permitted to extend its service to British Columbia, which it had originally been excluded from serving in order to minimize any adverse effects on the ethnic regional pay television network licensee, World View Television Limited (now Cathay International Television Inc.).
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According to the licensee, Chinavision's service will continue to be dedicated exclusively to programming which has as its target audience Chinese-speaking communities across Canada. At the hearing, the licensee stated:
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Chinavision will continue to work closely with the community, provide a channel for exchanging news, viewpoints and concerns between the communities, and most important, to provide entertainment and education, so that the older generation will feel more at home living in North America, and the younger generations will learn and retain the Chinese culture and heritage, so that the Chinese community will continue to contribute significantly toward the multicultural mosaic of our society.
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In order to ensure that Chinavision's programming will remain narrowcast in nature and continue to be directed to its target audience, the Commission has imposed as a condition of Chinavision's licence a definition of the licensee's service which is in line with the above description and in accordance with Public Notice CRTC 1985-139 entitled "A Broadcasting Policy Reflecting Canada's Linguistic and Cultural Diversity".
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This condition, which is set out in the appendix to this decision, states that the licensee shall provide a national network service that consists of programming of Types A, C, or D, as defined in Schedule II of the Television Broadcasting Regulations, 1987, and that has as its target audience the Chinese-speaking communities across Canada.
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Chinavision's Performance
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Chinavision currently relies on the "bicycling" of tapes to provide its service to subscribers in Toronto, Calgary, Edmonton and Vancouver. Chinavision stated that, because of an inability to negotiate national rights to certain foreign programming, the network distributes a foreign programming segment in Vancouver that is entirely different from that distributed in the other three cities. It also explained that delays encountered as a result of packaging its Canadian material in its Toronto studio have contributed to making the programming schedule in Vancouver different from the schedule provided elsewhere.
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In its original licensing decision, Chinavision was required, by condition of licence, to devote 10% of its total programming hours and 12% of prime viewing hours (7:30 p.m. to 10:30 p.m.) to the distribution of Canadian programs. These requirements increased to 30% and 40% respectively, commencing 1 January 1987. Chinavision was also required, by condition of licence, to devote a minimum of 37% of its total programming expenditures during each of the first two years of operation and not less than 60%, on average, over the term of licence, to the acquisition of or investment in Canadian programs.
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From July 1985 to December 1987, Chinavision consistently devoted more of its total programming hours to Canadian programs than required by its conditions of licence and, except for one semester, also exceeded its requirements for its prime viewing hours. In this respect, the Commission notes that, from July 1985 to December 1986, Chinavision devoted, on average, 21.6% of its total programming hours and 16.5% of its prime viewing hours to Canadian programs, measured on a semester basis.
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From January to December 1987, Chinavision devoted, on average, 33.6% of its total programming hours to Canadian programs measured on a semester basis, which exceeded its increased requirement. In the January to June 1987 semester, the licensee devoted, on average, 40.2% of its prime viewing hours to Canadian programs. From July to December 1987, however, the licensee fell short of its increased requirement in this respect, averaging only 28.9% Canadian content in its prime viewing hours. The licensee offered no explanation for this shortfall.
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In terms of its Canadian program expenditures, Chinavision complied with its condition of licence for its first two years of operation. As of 31 August 1987, Chinavision had expended over $2 million on Canadian programming. The Commission notes, however, that when projections for 1988 are included, this figure represents less than the 60% of Chinavision's total programming expenditures required to be expended on Canadian programs over the licence term.
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Chinavision has met its original commitment to produce a balanced schedule of Canadian and Asian programs. The licensee's own productions have consisted mainly of news, public affairs and educational shows, including a daily news magazine, language-training programs and a program entitled "National Community News" which "informs the audience on community events in various cities across Canada".
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As noted in the Public Notice of today's date introducing this and other specialty network licence renewal decisions, Chinavision has experienced difficulty in gaining access to certain cable systems since it was first licensed. This has had an impact on its ability to meet its original financial and subscriber projections. According to its application, Chinavision had approximately 13,000 subscribers as of April 1988.
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In its original application in 1984, Chinavision had undertaken to limit its advertising material to three minutes per hour of national commercial messages only.
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At the hearing, Chinavision explained that its inability to provide a consistent network programming schedule across the country and its access problems have restricted its ability to secure major national advertising accounts. Chinavision stated that "in order to survive, it therefore began to tap the large local advertising market". The licensee submitted that, in doing so, its actions were consistent with the Commission's general policy of permitting a broadcaster to carry local advertising only if it offers a local programming service "because [Chinavision] has had local input in all the cities that it is serving".
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Financial Projections for the New Licence Term
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In its renewal application, Chinavision projected that the number of its subscribers would increase over a five-year licence term from 14,315 by the end of year one (31 August 1989) to 19,462 by the end of year five (31 August 1993). These figures represent annual growth rates of 10% up to August of 1991 and 6% thereafter. The licensee stated that these projections, which are based on the assumption that the service will continue to be distributed using a tape-bicycling approach, take into account "the uncertain nature of carriage by cable operators, the problem of program supply, the national growth of the Chinese population, and the increase in penetration over the years". Chinavision also indicated in its application that it plans to expand into five more major cities over the next three years.
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Chinavision stated that satellite distribution of its service will be unlikely for at least "the next few years", based on the present supply and marketing situation, and depending on Telesat Canada's tariff structure at the time.
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As part of its application, Chinavision requested that it be permitted to increase its amount of advertising from three minutes per hour to a maximum of eight minutes of commercial messages per hour. It also requested that it be permitted to sell local advertising.
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Chinavision explained that it made these requests not only so it could acquire added advertising income to supplement its subscriber revenues, but also to respond to "a wide interest among the local Chinese merchants and Canadian businesses to advertise on Chinavision, many of whom have not advertised on ethnic television before". The licensee stated that its viewership levels and advertising rates would not pose a threat to other ethnic broadcasters, particularly CFMT-TV in Toronto.
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Chinavision projected that advertising revenues under its proposal would rise from $550,000 in year one of its new licence term to $1.46 million in year five. It projected further that subscriber revenues over this period would increase from $2.4 million in year one to $3.7 million in year five.
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Chinavision has yet to show a profit and its cumulative deficit as of 31 August 1987 was approximately $4 million. According to its financial projections, Chinavision's cumulative deficit will not be fully recovered during the licence term granted in this decision.
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The Commission acknowledges the difficulties which Chinavision has experienced in attempting to sell national advertising on a service which has been available in only four cities. It also recognizes that if Chinavision is to be expected to develop and maintain diverse and high quality programming, the licensee will require additional revenues.
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Accordingly, the Commission will permit Chinavision to distribute a maximum of eight minutes of commercial messages during each clock hour. Moreover, based on its unique ability to address the local Chinese community wherever it is distributed and because the small size of its market should limit any impact on other broadcasters, Chinavision will also be permitted to include in the eight minutes per hour a maximum of four minutes of local and regional advertisements.
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Programming Plans
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In evaluating Chinavision's proposals and commitments for the new licence term, the Commission has taken into account the licensee's financial situation as outlined by Chinavision in its application and discussed at the hearing. In particular, the Commission acknowledges that the licensee has had difficulty in gaining access to certain cable systems serving large numbers of its target audience and this has had an impact on its subscriber revenues. The Commission also notes that Chinavision has, for various reasons, only been able to attract limited national advertising revenues. Although Chinavision has at times exceeded its programming commitments despite these problems, the Commission recognizes that the licensee may be unable to continue to contribute in a meaningful way to the production and exhibition of Canadian programs unless its financial situation improves.
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(i) Exhibition of Canadian Programs
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The licensee's programming proposals for the new licence term are based on a weekly 60-hour national programming service in both the Cantonese and Mandarin dialects, consisting of 12.5 hours of Canadian programs produced by Chinavision, and 47.5 hours of feature films, drama serials and some variety programming purchased from Hong Kong, Taiwan and the People's Republic of China. Chinavision intends to provide its service from 4:30 p.m. to 12:30 a.m. weekdays and from 2:30 p.m. to 12:30 a.m. on weekends.
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With respect to its Canadian programming, Chinavision stated that it will continue to produce such educational programs as "Let's Talk English" and "Learn Mandarin" and plans to produce six to eight specials per year consisting generally of "taped live functions, usually involving international and Canadian performers, jointly organized by Chinavision and community organizations for charity fund-raising purposes". It indicated further that it hopes to increase its production of informational programs, including news and community messages and entertainment, academic and educational programs.
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In its application, Chinavision requested that its Canadian content requirement be lowered to 20% overall and to 30% during its prime viewing hours, which it proposed be redefined as the hours between 7:00 p.m. and 10:00 p.m. At the hearing, the licensee stated that due to the problems it has experienced in gaining access to cable systems and difficulties it has encountered in its efforts to attract national advertising dollars, it can no longer continue producing a sufficient amount of high quality programs to comply with its original commitments and existing conditions of licence. It described its request as being a temporary measure necessary to achieve long-term financial viability:
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Referring to Chinavision's over-performances in the past, the Commission can rest assured that, when given the proper conditions, Chinavision will produce more Canadian programs than it is required to do. In fact, it is Chinavision's belief that it must eventually commit to more Canadian productions in order to reduce its dependence on foreign suppliers for programming. We consider this reduction of Canadian content as a temporary measure required for the survival of the operation.
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Chinavision stated that it was requesting to change its prime viewing hours from 7:30 p.m. to 10:30 p.m. to 7:00 p.m. to 10:00 p.m. in order to accomodate the viewing habits of its audience. According to the licensee, Chinavision "has more viewers during the time slot we are proposing than the hours presently established".
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In light of the impact that the licensee's financial difficulties will have on its ability to produce programs for distribution on its undertaking, the Commission has determined that Chinavision's reduced commitment whereby it will devote a minimum of 20% of its total programming to Canadian programs is justified. For the same reason, the Commission considers that the licensee's commitment to devote at least 30% of its prime viewing hours to the distribution of Canadian programs is also justified. Further, it is the Commission's view that maximum exposure of Canadian programs can be assured during the time period from 7:00 p.m. to 10:00 p.m., which the licensee requested be considered as its prime viewing hours. As set out in the appendix to this decision, Chinavision will be required to adhere to its commitments made with respect to the exhibition of Canadian programs over the course of the new licence term.
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The Commission notes the licensee's commitment to exceed these minimum levels for Canadian programs once its financial status has improved and, accordingly, views these reductions as interim in nature. The Commission intends to review these requirements at Chinavision's next licence renewal at which time it will expect the licensee to offer increased Canadian programming commitments.
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In the Public Notice introducing this and other specialty network renewal decisions, the Commission addresses the issue of cable access for Chinavision in Montreal. The Commission recognizes that the shared channel arrangement for Chinavision in Montreal described in the Public Notice could restrict the licensee's ability to distribute its complete schedule of Canadian and foreign programs, particularly during the licensee's prime viewing hours in the evening period. With this in mind, the Commission has determined that the requirement relating to the level of Canadian programming to be exhibited during the period 7:00 p.m. to 10:00 p.m. will not apply in those markets where Chinavision's programming is not distributed during any part of this time period.
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The requirement that Chinavision devote 20% of its total hours to the exhibition of Canadian programming, will, however, apply in all markets where the specialty service is provided.
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In the interest of diversity, it is the Commission's view that Chinavision should expand the types of programs it offers its subscribers over the course of its licence term. The Commission notes that, in its application, Chinavision indicated it would offer an increasingly diversified schedule of Canadian programming during the new licence term. Accordingly, in line with this commitment, the Commission expects the licensee to provide in its schedule, as a minimum, Canadian programs in each of the categories of news/public affairs, education, sports and variety, and to add Canadian musical programming in 1990/91 and Canadian drama in 1991/92.
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(ii) Expenditures on Canadian Programming
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In its application, Chinavision proposed to devote 45% of its total programming expenditures to Canadian productions. It based this proposal on its commitment to devote 20% of its total programming hours to the distribution of Canadian programs.
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Given the licensee's current financial status as well as its future projections, the Commission considers that this 45% commitment is realistic. In this respect, the Commission notes that, between 1985 and 1987, Chinavision devoted approximately 43% of its total programming expenditures to Canadian programming. According to Chinavision's projections, applying a 45% level in each year of the new licence term will result in over $380,000 being expended on Canadian programming from 1 April to 31 August 1988, representing year one of the licence term, rising to $1.03 million by year five, for a total expenditure on Canadian programming over the licence term of approximately $4.2 million.
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Other Matters
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Closed Captioning
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In its intervention, Ontario Closed Caption Consumers stated that viewers with hearing problems, as well as others in the broader audience, would benefit if Chinavision were to obtain some captioned programming on a regular basis.
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In its application, however, Chinavision stated that its limited market size effectively prevented it from providing closed captioning. Nevertheless, the Commission notes the licensee's indication that some of its programs are subtitled.
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The Commission considers that, given the licensee's market size and the fact that current closed captioning technology is not designed for use with Chinese characters, it would be unreasonable to expect Chinavision to provide closed captioning at this time. However, the Commission expects Chinavision to provide this important service at such time as it has the financial and technical resources to do so.
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Sex-Role Stereotyping and Violence
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Chinavision adheres on a voluntary basis to the Canadian Association of Broadcasters (CAB) guidelines on sex-role stereotyping. The Commission notes that, at the hearing, the licensee reiterated its commitment to ensure that women are portrayed in a positive manner in both its purchased programming and in its in-house productions, and committed to continue to adhere to the CAB's guidelines on sex-role stereotyping, as amended from time to time and approved by the Commission, with respect to programming it produces. Chinavision also committed to continue to monitor its programming carefully to ensure that it does not broadcast programs containing scenes of gratuitous violence.
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The Commission expects Chinavision to abide by these commitments during the course of its new licence term.
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Regulatory Provisions
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The Commission intends early next year to issue for public comment proposed regulations dealing specifically with specialty undertakings. Included in these regulations will be provisions of the Television Broadcasting Regulations, 1987 that were incorporated by reference into the licences of the specialty networks licensed by the Commission on 30 November 1987. In the interim, however, as discussed with the licensee, the Commission expects Chinavision to adhere to sections 5, 6, 7, 8, 12, 13 and 14 and subsections 10(1), 10(3) and 10(6) of the television regulations, with the necessary changes.
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Financial Reporting
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In its evaluation of this renewal application, the Commission notes that Chinavision does not prepare audited financial statements. Although Chinavision's method of financial reporting may meet the licensee's internal requirements, the Commission found that the financial statements provided made it difficult for the Commission to reconcile the figures submitted in the licensee's annual returns with the calculation contained in its renewal application of the amount it had expended on Canadian programs.
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Accordingly, the Commission will issue a revised version of the annual return to be filed by Chinavision. The licensee will be required to file, as part of its annual return, annual audited financial statements for each twelve-month period ending 31 August during the term of this licence.
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Interventions
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More than 120 interventions were filed in respect of Chinavision's renewal application. While some of these interveners filed comments specifically in respect of Chinavision's access problems, the overwhelming majority wrote to offer their unconditional support for the renewal of Chinavision's licence. These latter interventions were filed by individuals and numerous different groups from within the Chinese-Canadian community, including business and community associations, cultural and educational societies, sports organizations and groups representing seniors. Three of these interveners, the Chinese Community Center of Ontario Incorp., the Woo Hai Association, and the Confederation of Metropolitan Chinese Canadian Organizations were represented at the hearing. Mr. Thomas Lo also appeared at the hearing to speak to the issue of access for Chinavision in Montreal.
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Chinavision also received support from the Government of Ontario, the Canadian Cable Television Association, the Ontario Cable Television Association and some of Canada's largest cable operators.
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No interventions were filed which opposed Chinavision's renewal application. The Commission acknowledges, however, the intervention by the Chinese-Canada Association calling for a short-term renewal of Chinavision's licence and requesting that conditions of licence be imposed requiring the licensee to improve its local programming and provide free access time to the public in exchange for being permitted to receive revenue from advertising.
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Fernand Bélisle
Secretary General
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CHINAVISION CANADA CORPORATION
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Conditions of Licence
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Nature of the Service
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1. The licensee shall provide a national network service that consists of programming of Types A, C, or D, as defined in Schedule II to the Television Broadcasting Regulations, 1987, and that has as its target audience the Chinese-speaking communities across Canada.
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Exhibition of Canadian Programs
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2. (a) Subject to paragraph (b), during each semester of its licence term, the licensee shall devote to the distribution of Canadian programs not less than
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(i) 20% of the time from 7:00 p.m. to 10:00 p.m. and
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(ii) 30% of the total hours devoted to all programming.
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(b) Subparagraph (a) (i) shall not apply with respect to the licensee's distribution of its programming service on a cable undertaking that does not provide access from 7:00 p.m. to 10:00 p.m.
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Expenditures on Canadian Programs
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3. The licensee shall expend not less than 45% of its total programming budget in each broadcast year on the acquisition of or investment in Canadian programs.
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Advertising
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4. During each clock hour, the licensee shall distribute not more than 8 minutes of commercial messages of which no more than 4 minutes shall be local commercial messages.
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Definitions
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5. In these conditions:
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"broadcast year" means the period from 1 April 1989 to 31 August 1989 and each 12-month period thereafter beginning in September.
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"expend on acquisition" means
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(a) expend to acquire exhibition rights for the licensed territory, excluding overhead costs;
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(b) expend on the following items associated with the production of a program:
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* talent fees (on air and other)
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* directly attributable salaries and benefits
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* film and tape
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* studio sets, props and other production materials
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* use of remote and other production facilities
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* delivery of remote programs to the satellite uplink or main studio and
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* any other matter directly related to the production of a program; or
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(c) expend on the production of filler programming, as defined in section 2 of the Pay Television Regulations, SOR/84-797 including direct overhead costs.
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"expend on investment" means expend for the purposes of an equity investment or an advance on account of an equity investment but not overhead costs or interim financing by way of loan.
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"semester" means the five-month period from 1 April 1989 to 31 August 1989 and each six-month period thereafter beginning in March and September.
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"Canadian program", "clock hour" and "commercial message" have the meanings set out in section 2 of the Television Broadcasting Regulations, 1987, SOR/87-49, as amended.
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