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Broadcasting Decision CRTC 2017-358

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Reference: 2017-223

Ottawa, 11 October 2017

Avenue Radio Ltd.
Kelowna, British Columbia

Application 2017-0142-5
Public hearing in the National Capital Region
7 September 2017

CJUI-FM Kelowna – Acquisition of assets

The Commission approves the application by Avenue Radio Ltd. for authority to acquire the assets of the English-language commercial radio station CJUI-FM Kelowna from Vista Radio Ltd. and for a broadcasting licence expiring 31 August 2024 to continue the operation of the station.

The Commission denies the applicant’s request for an exception to the requirement to pay tangible benefits. As a result of the tangible benefits stemming from this transaction, $77,788 over the next seven years will flow to various initiatives that support the production and promotion of Canadian music and increase the diversity of radio programming available to listeners.

Application

  1. Avenue Radio Ltd. (Avenue Radio) filed an application for authority to acquire the assets of the English-language commercial radio station CJUI-FM Kelowna from Vista Radio Ltd. The applicant also requested a new broadcasting licence to continue the operation of the undertaking under the same terms and conditions as those in effect under the current licence.
  2. Avenue Radio is wholly owned by Early Frost Investments Ltd., which is in turn wholly owned by J. Nicholas Frost, a Canadian within the meaning of the Direction to the CRTC (Ineligibility of Non-Canadians). Mr. Frost is the sole director and chief executive officer of both corporations, which are incorporated in British Columbia.
  3. Pursuant to the purchase and sale agreement, Avenue Radio would purchase the assets of the undertaking for $650,000. Avenue Radio requested an exception to the requirement to pay tangible benefits.
  4. Following the closing of the transaction, Avenue Radio would become the licensee of CJUI-FM.
  5. Avenue Radio stated that it intended to continue serving CJUI-FM’s target audience of adults over the age of 45 in the short term, while conducting studies to identify the least served market segment in Kelowna and if necessary adjusting the station’s music format. The applicant added that it would incorporate and expand the type of local programming currently provided by its online service Castanet.net in Kelowna in order to significantly increase the amount of news and spoken word programming offered on CJUI-FM and cover the entire Okanagan Valley. Specifically, the station would air at least 112 news broadcasts each week covering a range of topics of local interest, such as sports, weather, traffic and local affairs. To this end, Avenue Radio would hire two new full-time employees.
  6. The Commission received interventions supporting this application, as well as a comment relating to the request for an exception to the tangible benefits policy. The public record for this application can be found on the Commission’s website at www.crtc.gc.ca or by using the application number provided above.

Regulatory framework

  1. The review of ownership transactions is an essential element of the Commission’s regulatory and supervisory mandate under the Broadcasting Act (the Act). Since the Commission does not solicit competitive applications for changes in effective control of broadcasting undertakings, the onus is on the applicant to demonstrate that approval is in the public interest, that the benefits of the transaction are commensurate with the size and nature of the transaction and that the application represents the best possible proposal under the circumstances.
  2. The Commission must consider each application on its merits, based on the circumstances specific to the application. In addition, the Commission must be assured that approval of a proposed ownership transaction furthers the public interest as expressed in the objectives set out in section 3(1) of the Act.

Commission’s analysis and decisions

  1. After examining the public record for this application in light of applicable regulations and policies, the Commission considers that the issues it must address are the following:
    • the impact on the broadcasting system;
    • the request for an exception to the requirement to pay tangible benefits; and
    • the value of the transaction and tangible benefits.

Impact on the broadcasting system

  1. The transaction would maintain the operation of a local station in the Kelowna market. It would also strengthen the diversity of voices by adding local content, particularly local news.
  2. The Commission therefore considers that the transaction would benefit the broadcasting system and the population of Kelowna.

Request for an exception to the requirement to pay tangible benefits

  1. The Commission’s tangible benefits policy is set out in Simplified approach to tangible benefits and determining the value of the transaction, Broadcasting Regulatory Policy CRTC 2014-459, 5 September 2014 (the Policy). In general, the Commission requires the payment of tangible benefits when there is a change to the effective control of a radio programming service. However, in the Policy, the Commission stated that there may be cases where the public interest could be fully met without tangible benefits if the following criteria are met:
    • the undertaking to be acquired is not in its first licence term;
    • the undertaking has suffered significant financial losses over an extended period of time (at least five consecutive years following the first licence term); and
    • the purchaser demonstrates that there is a public interest either for the broadcasting system as a whole or the community served in maintaining the failing undertaking.
  2. In this case, CJUI-FM was launched in September 2008 and is in its second licence term. However, in spite of successive losses, the station does not meet the second criteria as the transaction would occur during the third year of its second licence term beginning 1 September 2014, and as such the station has not posted five consecutive years of losses following its first licence term.
  3. Further, while it is in the public interest to maintain the operation of a local station such as CJUI-FM, there are currently six other local commercial stations in the Kelowna market. In the Commission’s view, the applicant has not demonstrated how the benefits to the public interest associated with maintaining the station’s operation are sufficient to offset the requirement to pay tangible benefits.
  4. In light of the above, the Commission finds that it would not be appropriate to grant Avenue Radio the requested exception. Consequently, Avenue Radio will be required to pay tangible benefits as a result of the present transaction.

Value of the transaction and tangible benefits

  1. The value of the transaction is used to calculate tangible benefits. The applicant performed this calculation according to the Policy. This included, in addition to the purchase price, the working capital that was not considered in the selling price, as well as the value of the assumed leases for premises and transmission equipment for a five-year period. As shown below, the value of the transaction amounts to $1,296,460.

    Value of the transaction

    Purchase price $650,000
    Working capital          $8,000
    Adjusted purchase price $658,000
    Additions:  
        Assumed leases $638,460
    Value of the transaction $1,296,460
  2. Consistent with the Policy, the Commission directs Avenue Radioto pay tangible benefits amounting to $77,788 (6% of $1,296,460), to be allocated as follows in equal annual payments over seven consecutive broadcast years:
    • 3% ($38,894) to Radio Starmaker Fund or Fonds Radiostar;
    • 1.5% ($19,447) to FACTOR or MUSICACTION;
    • 1% ($12,965) to any eligible Canadian content development initiative at the discretion of the purchaser; and
    • 0.5% ($6,482) to the Community Radio Fund of Canada.

Conclusion

  1. In light of all of the above, the Commission approves the application by Avenue Radio Ltd. for authority to acquire the assets of the English-language commercial radio programming undertaking CJUI-FM Kelowna from Vista Radio Ltd.
  2. Upon surrender of the current licence issued to Vista Radio Ltd., the Commission will issue a new broadcasting licence to Avenue Radio Ltd. expiring 31 August 2024. The terms and conditions of licence are set out in the appendix to this decision.

Secretary General

This decision is to be appended to the licence.

Appendix to Broadcasting Decision CRTC 2017-358

Terms, conditions of licence, expectation and encouragement for the English-language commercial radio programming undertaking CJUI-FM Kelowna, British Columbia

Terms

The licence will expire 31 August 2024.

Conditions of licence

  1. The licensee shall adhere to the conditions set out in Conditions of licence for commercial AM and FM radio stations, Broadcasting Regulatory Policy CRTC 2009-62, 11 February 2009, as well as to the conditions set out in the broadcasting licence for the undertaking.
  2. As an exception to the percentage of Canadian musical selections set out in sections 2.2(8) and 2.2(9) of the Radio Regulations, 1986 (the Regulations), the licensee shall devote at least 40% of its musical selections from content category 2 (Popular Music) in each broadcast week and between 6 a.m. and 6 p.m. from Monday to Friday to Canadian selections broadcast in their entirety.


    For the purposes of this condition, the terms “broadcast week,” “Canadian selection,” “content category” and “musical selection” shall have the meanings set out in the Regulations.

Expectation

The Commission expects the licensee to reflect the cultural diversity of Canada in its programming and employment practices.

Encouragement

In accordance with Implementation of an employment equity policy, Public Notice CRTC 1992-59, 1 September 1992, the Commission encourages the licensee to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.

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