ARCHIVED -  Decision CRTC 85-1146

Decision

Ottawa, 14 November 1985

Decision CRTC 85-1146

Transfer of Control of Standard Broadcasting Corporation Limited to Slaight Broadcasting Inc.

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At a Public Hearing in Hull on 17 September 1985, the Commission considered applications for approval to transfer the ownership and effective control of Standard Broadcasting Corporation Limited (Standard), and of its licensed broadcasting subsidiaries in Ontario and Quebec, to Slaight Broadcasting Inc. (Slaight) through Slaight's purchase of 5,039,797 issued common voting shares of Standard (85%) from Hollinger Argus Limited (Hollinger) and other shareholders.

In addition, the Commission considered the related proposals whereby Standard will acquire the assets of CJOH-TV Ottawa, CJOH-TV-6 Deseronto and CJOH-TV-8 Cornwall from Bushnell Communications Limited (Bushnell), its wholly-owned subsidiary; as well as the ownership of the shares held by Bushnell in Telecable Laurentien Inc. of Hull and Buckingham, Quebec and Rockland, Ontario, Skyline Cablevision Limited (Skyline) of Ottawa and CTV Television Network Ltd, (CTV).

By majority decision, the Commission approves all of the applications noted above, in accordance with the provisions set out in this decision.

The Commission will issue a broadcasting licence to Standard to continue the operation of CJOH-TV and its rebroadcasters upon surrender of the current licence issued to Bushnell. The licence will expire 30 September 1987 and will be subject to the conditions specified in the licence to be issued. As noted in Decision CRTC 85-214 renewing the current licence for CJOH-TV to 1987, this term should enable the Commission to consider the further renewal of this licence in the context of the recommendations of the Task Force on Broadcasting Policy.

Background

Standard has had a distinguished history in Canada's broadcasting industry. Its flag-ship station, CFRB Toronto, was established in the mid-1920's. The large listenership enjoyed today by CFRB and by Standard's other stations in Ontario and Quebec reflects its fine record of past quality and service.

Standard, a public company, is deemed to be controlled by Hollinger through its ownership of 49.4% of Standard's issued common shares. Hollinger is in turn controlled by G. Montegu Black III and Conrad M. Black of Toronto through their control of a number of associated companies.

Standard's holdings in licensed broadcasting undertakings include its ownership of 100% of the shares of the following companies: CFRB Limited, licensee of CFRB/CFRX and CKFM-FM Toronto, CKTB and CJQR-FM St. Catharines, and CJSB Ottawa; CJAD Inc., licensee of CJAD and CJFM-FM Montreal; and Bushnell licensee of CJOH-TV Ottawa and its rebroadcasters at Deseronto and Cornwall, Ontario. Through Bushnell, Standard also owns 100% of Telecable Laurentien Inc., licensee of cable television undertakings serving Hull and Buckingham, Quebec and Rockland, Ontario; 25.3% of Skyline of Ottawa and 8.3% of CTV.

In addition to the above-named companies licensed by the Commission, Standard has direct and indirect holdings in several other Canadian enterprises involved in such broadcast-related fields as media sales, production and promotion, and is the owner of Valley Cable, a cable television system in California.

Slaight is a private company owned and effectively controlled (92.5%) by Slaight Communications Inc. (SCI), which company is in turn owned (100%) by Allan Slaight of Toronto. Mr. Slaight, a well-known and experienced broadcaster, has achieved a solid record in Canadian broadcasting which is largely attributable to his entrepreneurial abilities and personal energies which will now be devoted to the management of Standard.

Mr. Slaight began his broadcasting career at CHAB Moose Jaw in 1948, held various positions with radio stations in Edmonton, Toronto and Montreal and, for some time, served as president of a national radio sales representation firm. Mr. Slaight also served as president and chief executive officer of Global Communications Limited in the mid-seventies, a crucial period in Global's history.

Since 1979, Mr. Slaight has been the controlling shareholder of CFGM Richmond Hill and CILQ-FM Toronto. The proceeds from the sale of these two stations to Westcom Radio Group Ltd. (Westcom), approved today in Decision CRTC 8~-1147, will form part of the financing for Slaight's purchase of the Standard shares.

Considerations

In order to achieve the various objectives of the Broadcasting Act, ownership matters are dealt with by the Commission on a case-by-case basis. Given the extent to which ownership transactions differ in terms of their magnitude and complexity, the Commission examines each case on its individual merits to ensure that the benefits are commensurate with the size and nature of the transaction, and that they reflect the responsibilities to be assumed by the purchaser.

In considering an ownership transaction of this magnitude, the Commission carefully assesses not only those benefits that can be quantified in monetary terms, but also those which are not easily measurable in terms of their dollar value, in order to determine the overall significance of these benefits and to ensure that approval is in the public interest.

In the present case, while the Commission recognizes that the impact of the substantial debt financing involved on the ultimate purchaser, who is an independent entrepreneur, may be greater than on a widely-held public company, the Commission wishes to emphasize that this in no way diminishes Slaight's overall obligations to the Canadian broadcasting system and to the Canadian public served by the broadcasting undertakings involved.

The Commission has examined the substantial amount of debt financing involved in this transaction as well as the terms and conditions of the loan agreement entered into between Slaight and its lender, the Bank of Nova Scotia, and the revenue and expense projections submitted with the applications in order to determine the overall financial viability of the proposal. The Commission has also taken note of Slaight's firm assurance that these bank loan obligations will not in any way be permitted to impair Standard's performance in the implementation of all existing and new commitments, regardless of whether or not the financial projections are realized.

Further, in light of the significance of Standard's broadcast holdings in Ontario and Quebec, the vital role played by these stations in the communities they serve, the broadcasting responsibilities that Slaight will assume through its purchase of a controlling interest in Standard, and the benefits for the Canadian broadcasting system that should accrue from a transaction of this nature and size, the Commission has carefully examined all of the commitments with respect to the operation and programming of the undertakings involved.

The Commission has also considered the commitments made by Slaight with regard to the enhancement of Standard's contributions to the production of new Canadian television programs and the development of Canadian musical talent, and has decided that it is in the public interest to place strong expectations on Slaight which go beyond these commitments, in these important areas.

After carefully examining all of the implications of this important transfer of ownership, the Commission is satisfied that the overall benefits accruing from this transaction to the communities and broadcasting undertakings concerned, and to the Canadian broadcasting system as a whole, are significant and that approval of the transaction is in the public interest.

In its assessment, the Commission has taken into account the fact that, with divestiture by SCI of its existing broadcast holdings, there will be no increase in concentration of ownership resulting from this transaction, and no decrease in the number of broadcast voices available in the Toronto market or elsewhere. The Commission also notes that the transaction does not raise any crossmedia ownership concerns.

As well, the Commission has considered the views of the many individuals, broadcasters and other interested parties who submitted interventions, all expressing firm and unqualified support for these applications.

The Commission has also given considerable weight to the commitment made by Slaight to sell Standard's holdings in Valley Cable. This U.S. cable system has been a financial liability for Standard since 1983, and currently represents a debt of approximately $76 million. In the Commission's view, the proposed transaction would not have been financially viable without Slaight's firm commitment, reiterated at the hearing, to take immediate action to dispose of Valley Cable. The Commission views the sale of Standard's interest in this U.S. cable system as an essential action in order to remove an otherwise serious drain on Standard's financial capacity to contribute effectively to the objectives of the Broadcasting Act.

At the hearing, Slaight emphasized that, if necessary, the debt associated with the share purchase could be reduced through the addition of new equity partners or by the sale of certain assets, particularly non-broadcasting-related assets, owned by Standard. Specifically, Mr. Slaight stated:

We are certainly aware of the various equity routes we can take at any time to reduce the debt load if for any reason we find it uncomfortable.

Accordingly, the Commission expects Slaight to take whatever steps are necessary, including those contemplated above, to ensure, at all times, that the broadcasting licensees now coming under its ownership have access to sufficient financial resources to meet all of their commitments. The Commission will follow Slaight's performance in this regard closely.

Based on Slaight's performance as a broadcaster and the substantial resources of the broadcasting undertakings it is acquiring from Standard, the Commission is confident that Slaight will adequately fulfill these expectations, and it will hold the company accountable in this respect.

Slaight's commitments, in addition to those outlined above, and the Commission's expectations with regard to the further benefits which it considers will flow from approval of these applications, are addressed below.

Other Commitments and Benefits

In the Commission's view, a significant benefit arising from its approval of this transaction will be the leadership, initiative and broadcasting expertise which the purchaser will bring to the management and operation of these undertakings, keeping in mind Mr. Slaight's personal commitment to be actively and fully involved in the direction of the licensee companies.

Mr. Slaight indicated that he would rely in large measure on Standard's highly capable and experienced management team, indicating his intention to retain five directors who currently serve on the boards of Standard or its subsidiaries, to ensure continuity and stability of management. These directors include Hollis T. (Mac) McCurdy, whose valuable experience and knowledge of Standard's operations will also be available to Slaight on a consultative basis. Moreover, Standard's board of directors will provide for a new dimension of regional representation, not present within the current board, through the nomination of directors from each of the regions served by Standard's various undertakings.

With respect to appointments to the Boards of Directors of Standard or of the other licensees, the Commission would like to draw attention to the Direction to the CRTC (Eligible Canadian Corporations) Broadcasting Act, Chapter 376 (P,C. 1969-2229).

An essential guarantee given by Slaight to the Commission and the Canadian public is that company's firm undertaking to fulfill all of Standard's existing reponsibilities and new commitments, to maintain the high calibre of performance and the high quality of service provided by the various broadcasting licensees concerned, and "... that nothing will be sacrificed whether or not [my] financial projections are met". Mr. Slaight also noted:

I want to maintain what is excellent and build on the traditions and strengths of a respected company ... I suggest that [Standard's] radio stations have special responsibilities for leadership, innovation, depth in news and public affairs and excellence in programming ... I am aware of the ingredients which have made Standard stand above the rest and I am sensitive to the need to maintain and improve these areas of programming and service.

Among the commitments given by Slaight, over and above those contained in the most recent licence renewal applications of these undertakings, which constitute new benefits resulting directly from the transaction, are enhanced contributions to the production of new Canadian television programs and to the development of Canadian musical talent, and the introduction of new computer communications technology at some of the radio stations which will greatly enhance their news-gathering and dissemination capabilities.

In the Commission's view, a further and significant benefit to the Canadian broadcasting system that will derive from this transaction is to be found in new initiatives that will flow from a related transaction, integrally linked to this one. That is the coincident divestiture by SCI of radio stations CFGM and CILQ-FM, in Richmond Hill and Toronto respectively. This related divestiture of CFGM and CILQ-FM will result in an expansion of the operations in Eastern Canada of Westcom, an experienced and successful broadcaster based primarily in Western Canada. Further details of the benefits which the Commission considers will arise from Westcom's purchase of the assets of SCI's stations are to be found in Decision CRTC 85-1147.

CJOH-TV Ottawa

In addition to the $4,800,000 currently allocated for the production of local programs by CJOH-TV, Slaight committed an additional expenditure of $775,000 for the production of three new local television programs.

They include a new, annual, one-hour prime-time special entitled "Homegrown" which CJOH-TV and CHAN-TV Vancouver will produce in alternate years. This presentation is a television version of the popular "Homegrown" concept developed eight years ago by CILQ-FM Toronto and will essentially feature previously unrecorded bands selected through contests held by radio stations across the country.

The second project is a series tentatively named "Instapoll", which will consist of 13 half-hour episodes, featuring interviews and dialogue on matters of interest to residents of the National Capital Region and which will provide an opportunity for the audience to comment on significant issues of the day.

The third program, entitled "The System", will be a half-hour prime-time comedy and satire series consisting of 13 episodes. This program was described by Slaight as a "fast-paced, hard hitting-spoof on the life, times and social values of the Ottawa civil servant and the surrounding political community".

A budget of approximately $300,000 was allocated to the production of "The System". At the hearing, Slaight agreed that the sum of $300,000 to develop and produce 13 half-hour episodes was a very conservative estimate of the likely final cost:

It is quite possible that "The System", if it is properly developed for network play and for network affiliate use, would expand those numbers pretty dramatically, and it might even be something that we go to Telefilm for some possible assistance on a series basis depending upon whether or not the CTV Network or its affiliates were interested in syndication.

In addition to these three specific projects, Slaight indicated that a number of other new local programs will be initiated.

The Commission encourages the development of programs such as "Homegrown", which will be accessible to the viewers of CJOH-TV Ottawa and CHAN-TV Vancouver. In the Commission's view, the increased exposure across Canada of quality Canadian programs, both radio and television, through co-operative initiatives such as co-productions and program exchanges, is highly desirable. Such enhanced exposure will not only contribute to the flow and exchange of cultural and regional information in the different regions of Canada but will provide an incentive for the production of high quality entertainment programs and, at the same time, offset the financial burden of producing these programs.

In order to ensure that "Homegrown", "The System~ and all of CJOH-TV's local productions are of adequate quality and to maximize their opportunity for exposure on other stations across the country, it is the Commission's strong expectation that Slaight increase the amount of the proposed new funding from $775,000 to $900,000 in the first year, as a minimum, so that at least $5,700,000 is invested in local television production in that year, and that this overall expenditure on local programming be increased in each subsequent year in proportion to the percentage increase in gross revenues achieved by CJOH-TV. The Commission expects to receive detailed plans and projections for the allocation of this increased funding to local program production by CJOH-TV. The adequacy of these plans together with the licensee's performance with regard to the development of local programs will be discussed with the licensee when the Commission considers its application for the licence renewal of CJOH-TV, which expires on 30 September 1987.

As noted in Decision CRTC 85-214, CJOH-TV is also expected to submit a report on its overall Canadian content programming plans and commitments, priorities, scheduling practices, program sources and budgetary allocations, before 30 May 1986.

Standard's Radio Stations and Their Support of Canadian Musical Recording Artists

Slaight undertook to increase the contributions made by Standard's radio stations in Ontario and Quebec for the development of the Canadian recording industry and the promotion of Canadian artists. The annual amounts currently committed by Standard and those now proposed by Slaight are listed below

Ontario Stations/Stations Standard Slaight
de l'Ontario

CFRB Toronto 66,000 85,000
CKFM-FM Toronto 12,000 12,000
CKTB St. Catharines 3,000 3,000
CJQR-FM St. Catharines 3,000 4,500
CJSB Ottawa 1,200 1,200

85,200 105,700

Quebec Stations/Stations Standard Slaight
du Québec

CJAD Montreal 13,500 27,000
CJFM-FM Montreal 30,000 30,000

43,500 57,000

Slaight indicated that half of the $57,000 to be contributed by the Montreal stations would be allocated to MUSICACTION. This recently established organization is the Quebec counterpart to FACTOR/CTL and will fund the production of new recordings and music videos by French and English-language artists in Quebec. It was proposed that the other half of the funding committed by the two Montreal stations, together with the funds committed by Slaight in respect of Standard's radio stations in Ontario, would continue to go to FACTOR/CTL for new recordings by Canadian artists seeking the support of that organization.

The Commission's concern regarding the shortage of new French-language recorded music was addressed in Public Notice CRTC 1985-100 dated 22 May 1985, Task Force on French-language Popular Music.

The formation of MUSICACTION as a vehicle to assist in overcoming this shortage was first proposed by CHUM Limited (CHUM) in its applications to acquire the assets of CKGM and CHOM-FM Montreal (Decision CRTC 85-666 dated 19 August 1985). In that decision, CHUM was expected to allocate a minimum investment of $100,000 in the first year for startup costs, and $50,000 during each of the subsequent years of the licences for CKGM and CHOM-FM to that initiative.

Similarly, the Commission considers that, as major Montreal stations, CJAD and CJFM-FM have a responsibility to contribute to the establishment and ongoing operation of MUSICACTION. Accordingly, it strongly expects Slaight, through its Montreal stations, to invest a minimum of $100,000 as seed money for this new organization in its first year of operation.

Based on the resources of the individual radio stations and the expanded role and responsibilities to be assumed by Slaight within the Canadian broadcasting system, it is also the Commission's strong expectation that the annual amounts of $27,000 and $30,000 proposed by Slaight for the development of the Canadian recording industry and the promotion of Canadian artists through CJAD and CJFM-FM, be doubled in the second year to $54,000 and $60,000, respectively, and that they be increased in each subsequent year in proportion to the percentage increase in gross revenues earned by each station.

Moreover, the Commission strongly expects Slaight, in the first year, to double its proposed contributions to FACTOR/CTL for each of Standard's Ontario radio stations so that the total for those stations will be increased from $105,700 to $211,400, and to further increase these contributions in each subsequent year in proportion to the percentage increase in gross revenues earned by each station.

The Commission is satisfied that, given the nature and size of the transaction, these expectations are both appropriate and reasonable, and that they are generally consistent with the broadcasters' responsibilities to contribute to the production of Canadian musical recordings in order to fulfill the fundamental objectives of the Broadcasting Act for the development of a distinctive and strong Canadian broadcasting system.

CFRB and CKFM-FM Toronto

Slaight emphasized the heavy involvement by CFRB and by the other AM radio stations owned by Standard in the provision of high quality news and other spoken word programming. In order to improve CFRB's performance in this area, Slaight made a commitment to the expenditure of approximately $150,000 to computerize the news facilities of the station. The new equipment which will allow for easy storage and speedy retrieval and editing of news stories, will also be available to the news staff of CKFM-FM.

The news-gathering facilities of CFRB and other Standard stations will be further enhanced through their participation in Electronic News (EN), a proposed new Canadian satellite distribution system to improve the dissemination of news and other services across the country.

With respect to CKFM-FM, Slaight has promised to allocate annually an additional sum of $15,000 to sponsor a group of Canadian musicians which will be given exposure on the station, and will be placed at the disposal of local organizations to entertain at fund-raising events and charity functions.

CKTB and CJQR-FM St. Catharines

Slaight made a commitment to computerize the music programming of CKTB and CJQR-FM. Slaight stated that the improvements will provide for quick access to music selections by programmers and allow batter overall control of the stations' music programming. CKTB will also participate in the proposed new EN service.

CJSB Ottawa

Slaight made a commitment to accelerate the involvement by CJSB in training programs for aspiring student broadcasters. The station's news programming will also be improved through access to the EN service. Slaight promised further that CJSB would increase its charity involvement by sponsoring the Community Club Awards which, it expects, should raise a minimum of $15,000 each year for local service clubs and groups.

CJAD and CJFM-FM Montreal

As with the Toronto stations, Slaight gave an undertaking to computerize the newsrooms of CJAD and CJFM-FM, and committed the sum of $100,000 to accelerate completion of this project. Both stations will participate in EN.

Slaight also made a commitment to the expenditure of $40,000 to install a new and modernized master control room at CJFM-FM to improve working conditions and on-air audio quality.

Slaight will also establish a new CJFM-FM scholarship fund which will disburse $5,000 annually to aid the education of outstanding Montreal CEGEP students and encourage their pursuit of careers in the field of broadcast journalism. The Commission encourages Slaight to review its commitment in this regard, with a view to increasing the size of its contribution to this valuable initiative.

Telecable Laurentien Inc.

At the hearing, Slaight confirmed that Telecable Laurentien Inc. would honour each of the commitments given previously to the Commission. These were addressed by the Commission in July of this year, in Decision CRTC 85-541, which renewed the licence of this cable system to 30 September 1990. One of the commitments was that the licensee improve the balance between English and French-language FM services distributed on the undertaking. In keeping with the spirit of this commitment, Slaight gave an undertaking to add the carriage of the new French-language third television service which was recently licensed by the Commission to serve Montreal and is expected to become operational in the fall of 1986.

Conclusion

On the basis of the financial projections contained in the applications, and Slaight's undertaking to ensure the early disposal of Standard's holdings in Valley Cable, the Commission is satisfied that the proposed transaction is financially viable. Furthermore, for all the reasons outlined in this decision, the Commission is satisfied that approval of this transaction is in the public interest. In addition, given the Commission's confidence that Slaight will fulfill all of the commitments and expectations, including those with regard to the additional contributions to the production of new Canadian television programs and to the support of Canadian musical talent, the Commission is satisfied that significant benefits will accrue to the broadcasting undertakings and communities involved, and to the Canadian broadcasting system.

The Commission expects to receive reports from each of the licensees concerned during each of the next two years with respect to the fulfillment of the commitments and expectations outlined in this decision.

The licensees are also reminded that they are subject to the Revised Conditions of Licence Related to Transfer of Ownership (Public Announcement dated 7 January 1980). Therefore, any material change in the ownership or effective control of the licensees is subject to prior Commission approval.

At the hearing, the Commission discussed with Slaight the possibility of its purchase of additional shares in Standard, and of a subsequent amalgamation of Slaight with Standard, CFRB Limited and CJAD Inc. The Commission expects to be informed of any future developments in this regard.

Fernand Bélisle
Secretary General

Minority Opinions

Commissioners Jean-Pierre Mongeau and Monique Coupal dissented from the majority decision. Their minority opinions are set out below:

Jean-Pierre Mongeau

Commission practice provides for varying levels through which dissenting opinions may be expressed. In most cases, Members holding a minority opinion defer to the decision of the majority or ask that their dissents be recorded in the official minutes of the proceedings. In other cases, on certain matters of principle or major policy issues, Members holding a minority opinion may request that a decision state that it was not taken unanimously or ask that their dissent be recorded in the decision with their names. In rare circumstances, Members may decide that a written dissent is essential in order to explain their reasoning. I support without reservation the Commission's practice in this regard.

The collegiality of the Commission's work and of its decision-making procedures is a fundamental and positive element which allows Commissioners from different regions of the country and with varying backgrounds and areas of expertise to differ amongst themselves with respect to the merits of particular applications while continuing to maintain their common goal of meeting the objectives of the Broadcasting Act. This is the first time that I have felt it essential to express my dissent in writing.

In the present case, we all agree that the transfer between two private parties of broadcasting undertakings holding licences which are in the public domain, is acceptable wherever the public interest is served. Such a transfer must demonstrate substantial and unequivocal advantages, financial or otherwise, for the broadcasting undertakings themselves as well as for the entire Canadian broadcasting system. Without this, such a transfer would constitute a trafficking in licences, contrary to the approach contemplated by the legal framework under which the decision mast be made.

The majority of my colleagues consider that the applicant has proven that there are significant and unequivocal benefits to be realized from this transfer. While I respect their opinion, I beg to differ. In my view, not only has the applicant failed to provide such evidence, but I consider that the applications are seriously deficient in this regard. My written dissent is, I feel, justified by my characterization of the submitted transaction as a trafficking in licences.

The applications also appear to ma to be seriously deficient with respect to the resources available to maintain and, more importantly, to improve upon the quality of the undertakings being transferred. In my view, prior to approving the applications, the Commission should have required increased capitalization and/or a reduction of the debt/equity ratio, and/or a divestiture of certain holdings, and/or any other method of ensuring that the applicant would have a sufficient operating margin and financial resources.

Mr. Allan Slaight will realize substantial personal benefits through this transaction. He must now prove that the majority decision is right by demonstrating that the transaction will result in significant and unequivocal benefits, not only for each of the acquired undertakings but for the Canadian broadcasting system as a whole. I hope that he does.

Monique Coupal

In my opinion the applications should not have been approved because the applicant has not provided evidence that the public interest will be served, nor that there is any important benefit which will accrue to the Canadian broadcasting system. The financing proposed is so closely budgeted that it will be almost impossible for the applicant to maintain the present level of service; it is even less likely that improvements will be instituted. Nevertheless, I recognize that the applicant, being an independent entrepreneur, will contribute to ensuring a greater diversity in the ownership of Canadian broadcasting undertakings.