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Decision
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Ottawa, 14 March 1985
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Decision CRTC 85-141
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APPLICATION FOR A NETWORK LICENCE TO DISTRIBUTE AN ENGLISH-LANGUAGE CANADIAN HEALTH AND LIFESTYLE SPECIALTY PROGRAMMING SERVICE
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The Life Channel Inc
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formerly Michael W. Rinaldo, representing a company to be incorporated) Toronto, Ontario - 84130070
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Table of Contents
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Pages
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Ownership 1
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Service to be provided 2
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Canadian Content 4
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Financial Viability 6
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Distribution Arrangements 8
- Satellite-to-cable 8
- - Distribution, Pricing and 9
- Packaging
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Advisory Board and Voluntary 11
Code of Ethics
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French-language Programming 13
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Interventions 14
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Appendix Conditions of licence
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For related documents: see Public Notice CRTC 1984-81 dated 2 April 1984; Notices of Public Hearing 1984-108 dated 17 December 1984, 1985-1 dated 16 January 1985 and 1985-6 dated 29 January 1985.
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Following a Public Hearing in Hull, Quebec on 5 February 1985, the Commission approves the application by The Life Channel Inc. (TLC) for a licence to carry on a national English-language 24-hour-a-day, seven-day-a-week health and lifestyle specialty programming network 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. This period will enable the Commission to consider the renewal of this licence at the same time as those of other specialty programming networks.
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Ownership
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The major shareholder in TLC is CUC Limited (CUC), which has extensive broadcasting interests in Ontario. CUC holds 49.5% of the common voting shares, while the remaining share-holders, which include a company controlled by Michael G. Rinaldo and his family of Toronto and Dr. John Tyson of Winnipeg will, pursuant to a voting trust agreement, form a controlling block of 50.5% of the voting shares.
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By virtue of the proposed terms of the agreement, CUC will not have voting control of the licensee, even though it is contributing 72% of the equity of the licensee company. The licensee is required to file a copy of the executed agreement with the Commission as soon as possible prior to implementation of service.
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Dr, John Tyson, a former Professor of Obstetrics and Gynaecology, is involved in the development of the new service as President of the company, Dr. Tyson has participated in numerous medical television programs in Canada and the United States and has long-standing experience in the visual presentation of health-oriented advice and information. Mr. Michael G. Rinaldo, a lawyer with considerable experience in program production, will also play an active role in the establishment and operation of the new service as Director and Secretary. Mr. Geoffrey Conway, the President of CUC,is the treasurer of the new company.
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Based on the financial resources at CUC's disposal, the relevant and professional expertise of the directors and their personal commitment to this service, the Commission considers that the applicant should be able to develop a viable Canadian health and lifestyle service which will complement and enhance the diversity of discretionary services currently available to cable subscribers.
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Service to be provided
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The applicant's aim is to provide a service which will give Canadians a greater awareness of personal health care and general well-being. The programming will provide professional information to the public on health and lifestyle, and will be directed at various target audiences, among others: women, parents, senior citizens, health-care professionals, fitness-oriented individuals and medical practitioners. It will deal with a variety of issues and problems concerning the quality of life, health, personal lifestyles, human relations and specialized medical programming. Programs on children's and senior citizens' health and lifestyle concerns, and talk-shows involving the participation of subscribers will be featured on a regular basis. Personal lifestyle programming will have an emphasis on exercise, physical fitness and nutrition. Programs on human relations will encompass such topics as family counselling, pre-natal care and child care.
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The service, which is scheduled to commence operation on 1 September 1985, is "predicated on being packaged and marketed in a tier with other Canadian services or as part of a specialty tier." It will initially be comprised of some 25 hours a week of Canadian-originated programming which will gradually increase, as revenues permit. The balance of the programs will be acquired from foreign sources, largely from the United States. The applicant indicated that, based on current negotiations, it expects that the major component of its programming will be received from the Lifetime Channel, a U.S. specialty service which distributes quality programming on health and better living.
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The applicant advised that the Canadian material will be scheduled in such a way as to, among other things, substitute for any of the U.S.-originated programs for which there are not the required Canadian program distribution rights or that have been determined by the applicant to be inappropriate for canadian viewing.
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On the basis of the programming proposals contained in the Promise of Performance and further elaborated at the hearing, the Commission notes that TLC does not propose to distribute feature films, or other programming which appeals to a mass audience, on its health and lifestyle network. In view of the narrowcast and complementary nature of this service, the Commission will monitor closely the licensee's performance in this regard to ensure that feature films and other general interest types of programming are not distributed on this network.
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Canadian Content
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In response to questioning at the hearing, the applicant made the following firm commitments with respect to Canadian content:
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The Life Channel is prepared, on a weekly basis, but at the end of our first year of operations, to commit to 10% Canadian content for our service. This figure would rise to 15%, again on a weekly basis, at the end of our second year of operations. And finally, at the end of our fifth year of operations, we commit, again on a weekly basis, to 30% canadian content. This is premised and predicated on an 18-hour day, 06:00 a.m. to midnight, eastern standard time, and inclusive of repeats.
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The applicant emphasized, however, that while its Canadian content approach was a cautious one, it was firmly committed to increase the amount of quality Canadian programming as revenues permit. TLC specifically stated:
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we will be striving to substitute a higher proportion of programming, not only over the course of the licence, but even by the end of the first year.
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... In terms of dollars we certainly are looking to spend more than half the programming dollars on Canadian content and our projections show an objective of getting to over 70% ... The Life channel is prepared to commit that 70% of our total expenditures for programming shall be devoted to the acquisition of, or investment in, Canadian programs in the fifth year of operations ... I do not think we would have a difficulty of making the same sort of commitment in terms of percentage of Canadian programming -- of expenditure for Canadian programming budget in any year of the application quite frankly.
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The Commission has considered the commitments made by the applicant during the hearing with respect to Canadian content and, in particular, the emphasis that TLC has stated it will put on the gradual development of attractive Canadian programs of competitive high quality.
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The Commission has imposed conditions of licence with respect to Canadian programming exhibition time and expenditures, which are set out in the appendix to this decision. The Commission emphasizes, however, that these conditions are minimum requirements which the applicant is expected to exceed as revenues permit.
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As discussed during the hearing, the Commission intends to examine TLC's progress in developing this specialty service after two years of operation. Within the context of such a review, the Commission will discuss with the applicant at a public hearing the feasibility of maintaining or exceeding the minimum Canadian content levels set out for years 3 and 4 of its licence term, in the light of TLC's experience during its initial period of operation.
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Financial Viability
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In Notice of Public Hearing 1984-108 issued 17 December 1984, the Commission reiterated its concern with the start-up financial capability of applicants and the continued viability of the proposed services, and stated that it was "therefore essential that all applicants provide firm evidence of continued financial commitment. They must also demonstrate that there is a clear demand and market for their proposed services."
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As evidence of the demand and market for a Canadian health and lifestyle programming service, the applicant submitted to the Commission a copy of a report dated 30 January 1985 of the major findings from an Ontario-wide survey carried out by Decima Research Limited. The report stated "sixty-seven percent (67%) of cable subscribers would like to see either "a lot more" (19%), or "a little more" (48%) health programming on television." In addition to the applicant's survey, the Government of Ontario stated in its intervention to this application, that its 1983 Gallup Omnibus survey indicated that 6.4% of Ontario cable subscribers would be interested in subscribing to a health and fitness channel for an additional fee of up to $1.00 per month. The Commission notes that, in the United States, the Lifetime service has attracted some 22 million subscribers and strong sponsor/advertiser support.
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Furthermore, in addition to the above-noted surveys, the Commission also took into consideration the evidence on file indicating that Health and Welfare Canada and other related government organizations support the application and intend to use The Life Channel to conduct some of their Canadian health and lifestyle promotional activities. The Commission is also encouraged by the success of The Sports Network and the MuchMusic network, the first two Canadian specialty services, which have already attracted approximately 500,000 subscribers and substantial advertising revenues.
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The Commission concluded, on the basis of evidence submitted, that CUC Limited, as the major shareholder in the licensee company, has the financial capacity to make its initial investment of $725,000 and its commitment to an additional contribution of $247,500. Moreover, the applicant has confirmed that a contingency capital financing fund of $1,000,000 is available from the bank, if required.
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With respect to advertising, in view of the very special nature of the programming proposed, the applicant indicated that it would sell advertising on a sponsorship basis, rather than the conventional type of advertising, and would generally charge advertisers a flat rate of $100,000 for the sponsorship of Canadian programs. Such advertising or sponsorship will be inserted in that portion of the programming schedule which originates in Canada. In addition, the applicant expects to attract financial contributions from federal and provincial government health and welfare agencies and organizations.
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Distribution Arrangements
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- Satellite-to-cable
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As noted below, the applicant described its satellite distribution approach as the most cost-efficient method of providing a quality service to Canadians:
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The Life Channel application keeps costs to an absolute minimum by only providing for the part-time usage of Canadian satellite transmission. We propose to obtain a substantial proportion of our programming from U.S. specialty services directly transmitted from their satellites to cable company head ends.
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At the same time, the applicant indicated that the necessary technical arrangements will be in place to ensure that it can maintain control at all times of the programming received. The applicant specifically noted that:
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The equipment will respond totally to command signals from our control centre. These signals, carried by the canadian satellite, will direct the equipment in the cable companies' head-ends as to which satellite feed should be accepted. We are therefore in control at all times of the programming received by our cable affiliates in Canada.
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- Distribution, Pricing and Packaging
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The applicant referred to the most recent data showing the rising penetration of discretionary services and noted that the packaging of pay television with specialty services has increased the penetration of pay television and provided the new specialty networks with subscribers beyond their own initial projections. The applicant argued that its projected 10% national subscriber penetration during the first year was predicated on its service being suitably packaged with Canadian pay television, or as part of a specialty tier. On this basis, it estimates that its service will be made available to cable operators at a rate of approximately $0.55 per subscriber (if packaged with pay) or $0,65 (as part of a specialty tier). As with other licensed discretionary services, the Commission will not regulate the wholesale rate or the retail rate charged to subscribers at this time.
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As noted in Public Notice CRTC 1984-81, the Commission recognizes the important role of cable in the marketing of discretionary services with respect to pricing, packaging and marketing practices, and expects cable television licensees to take all necessary measures to ensure that all Canadian discretionary services, particularly the general interest pay television network services, are marketed vigorously and effectively and are given the maximum opportunity to succeed. The Commission acknowledges the applicant's statement that it has already discussed the carriage of its service with two of the largest cable operators in Canada, and that "they expressed a keen interest in having yet another service available to them in September, which they would want to package with other services."
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In this regard, the Commission notes that, in some cases, the present arrangements between the discretionary network licensees and their cable television affiliates expire this fall and that negotiations are under way with respect to the packaging, pricing and marketing of all discretionary services. The Commission expects to be informed of developments in this regard and will wish to be satisfied that pay television services are given the maximum opportunity to succeed and that the development of all Canadian discretionary services not be hindered by unrealistic or discriminatory retail rate structures.
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In Public Notice CRTC 1984-81, the Commission established a regulatory framework for the introduction of specialty services and announced linkage requirements whereby authorized non-Canadian specialty services could be packaged, on a non-discriminatory basis, with Canadian pay television and/or with Canadian specialty services.
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The Commission reminds those cable television licensees who propose to package this new Canadian service as part of a specialty and/or premium pay combined tier together with two Canadian specialty services, that only up to five channels of authorized non-Canadian services may be packaged on a discretionary tiered basis.
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Advisory Board and Voluntary Code of Ethics
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In view of the nature of much of the programming to be offered, TLC will establish an advisory board to assist in the development of general programming policies and standards. The Board will also assist in assessing the suitability of programming directed at the professional medical practitioner and at the general public in order to develop a consistent and uniform approach to the provision of information on health care and other related issues. It will be composed of representatives from various levels of government, consumers, the production industry, the medical profession and other associated organizations and individuals who will bring to the board a depth of professional expertise and sensitivity in the treatment of issues.
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The applicant has filed, as part of its application, a general statement outlining a Voluntary Code of Ethics which will establish programming standard levels consistent with those followed by the Canadian Association of Broadcasters and the Advertising Standards Council.
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TLC undertook to maintain a strict arm's length relationship with all advertisers and sponsors, including the pharmaceutical industry, and emphasized that it would retain full control for all programming shown on the network. The applicant assured the Commission that:
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If we were granted a licence, any programs that might be put forward by any advertiser would be ultimately subject to our complete discretion as to whether or not to put that program on.
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In line with the applicant's commitment pharmaceutical and other health-product-related companies will not be permitted to hold debt or equity securities in TLC, by condition of licence.
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The Commission gives great weight to the above-noted commitments and TLC's general statement of programming policy objectives. Consistent with such objectives, TLC is expected to submit to the Commission, prior to its commencement of operations, a Code of Ethics which should set out clear guidelines for the following areas:
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a) Adherence to high standard programming policies and practices consistent with Canadian Association of Broadcasters' standards;
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b) adherence to fair and equitable advertising policies and practices of high standards consistent with those of the Advertising Standards Council;
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c) maintenance of an arm's length relationship with all advertisers and sponsors to avoid any perceived conflict of interest;
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d) provision of a reasonable balanced opportunity for the expression of differing views on matters of public concern;
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e) establishment of control mechanisms to ensure the appropriateness of all programming from Canadian and non-Canadian sources, taking into account Canada's distinctive approach to the delivery of health care services.
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The Commission expects that this Code of Ethics will be developed in cooperation with the Policy Advisory Board, which will be responsible for monitoring its application.
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Furthermore, as provided by condition of licence in the appendix to this decision, all Canadian advertising on TLC will be required to comply with the requirements set out in the television broadcasting regulations respecting health, medical, food and drug, and pharmaceutical messages.
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French-language Programming
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During the hearing, the Commission questioned the applicant on its plans for the development of French-language programming to be distributed to cable television licensees in predominantly Francophone communities. The applicant said that some discussions had taken place with a major cable company in Quebec, and with representatives of the National Film Board and Health and Welfare Canada who expressed interest in the matter.
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The Commission has noted the applicant's willingness to cooperate with the above-noted parties and others to assist in the development of French-language programs. The Commission reiterates its concern, expressed in Public Notice CRTC 1984-81, on the need to develop an appropriate package of French-language discretionary services to be made available to cable subscribers in predominantly Francophone communities and encourages all parties concerned to arrive at some reasonable arrangement for the provision of French-language programs in such markets. The Commission will follow developments closely.
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Interventions
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The Commission acknowledges the written interventions submitted by The Royal College of Physicians and Surgeons of Canada, Bristol-Myers Pharmceutical Group, The Canadian Association of Broadcasters, General Foods lnc,, Mr. Howard S. Glossop, Mr. Sheldon M. Bowles, the Honourable Jake Epp, minister of National Health and Welfare, and the Government of Ontario.
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The only appearing intervention was from Dr. D.R. Campbell, President of the Canadian Health Network Ltd., an applicant for a network licence for a health specialty service whose application was withdrawn from the agenda of this hearing because it was not complete. The intervener requested that the Commission delay its decision on TLC's application until his company was in a position to file a proposal with the appropriate funding. The Commission has considered the intervener's request and has determined that it is in the public interest not to delay its decision on this matter.
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Commissioner Monique Coupal dissented from this decision.
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Fernand Bélisle Secretary General
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APPENDIX
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Conditions of Licence
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The Life Channel Inc. Canadian Health and Lifestyle Specialty Programming Network
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1. From the date of commencement of service, and in each semester thereafter until the completion of the first year of operations, the distribution of Canadian programming on this service shall comprise not less than 10% of the hours between 06:00 A.M. and midnight.
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2. From the date of commencement of the second year of service, and in each semester thereafter until the completion of the second year of operations, the distribution of Canadian programming on this service shall comprise not less than 15% of the hours between 06:00 A.M. and midnight.
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3. From the date of the commencement of the third year of service, and in each semester thereafter until the completion of the term of licence, the distribution of Canadian programming on this service shall comprise not less than 20% of the hours between 06:00 A.M. and midnight.
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4. In every week, there shall be a minimum of 6.5 hours of original (first-run), Canadian programming in year one, increasing to a minimum of 10 hours of original Canadian programming by the start of the third year of operations.
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5. 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.
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6. From the beginning of the fourth year of service until the completion of the term of licence, Canadian program expenditures shall be no less than 20% of the gross revenues for this service.
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7. No pharmaceutical or other health-product-related company may hold any debt or equity securities in the licensee company.
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8. 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.
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9. 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.
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10. The licensee shall keep separate accounts which set out for each financial year ended 31 August
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a) the amounts expended by it on the production of, or for the rights to exhibit, Canadian programs intended for distribution on its undertaking;
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b) the amount expended by it for the distribution of non-Canadian programs on its undertaking; and
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c) the gross revenues in respect of its operations under its licence.
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11. The licensee shall file a statement of the accounts referred to in section 10 with the Commission on or before 30 November in each year.
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12. For purposes of these conditions,
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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";
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b)"semester" means a period of six consecutive months ending on the last day of June and December in each year.
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c) all time periods shall be reckoned according to the Eastern time zone.
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13. Sections 14, 15, 18 and 19 ofthe Television Broadcasting Regulations, c.381 Consolidated Regulations of Canada, 1978, shall apply to all of the Canadian-originated advertising on this network, mutatis mutandis.
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