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Ottawa, 3 December 1986
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Decision CRTC 86-1173
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CKCW Broadcasting (1980) Limited
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CFQM-FM Broadcasting LimitedCJCW Broadcasting LimitedCFAN Broadcasting Company LimitedRestigouche Broadcasting Company LimitedCFCY Broadcasting LimitedCHLQ-FM Broadcasting LimitedMoncton, Sussex, Newcastle and Campbellton, New Brunswick; and Charlottetown, Prince Edward Island - 861486900 - 861487700 - 861485100 - 861484400 - 861483600 - 861489300 - 861488500
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Following a Public Hearing in Saint John on 9 September 1986, the Commission approves the applications for authority to transfer effective control of Eastern Broadcasting Co. Ltd. (Eastern) through the transfer of 90% of its issued voting shares from Mr. Jack Schoone (40%) and Mr. Irving Zucker (50%) to Maritime Broadcasting Company Limited (Maritime Broadcasting, the purchaser). The effect of this transaction will be to transfer to Maritime Broadcasting the controlling interest that Eastern holds in each of the above-named licensee companies which operate CKCW and CFQM-FM Moncton, CJCW Sussex, CFAN Newcastle, CKNB Campbellton, CFCY and CHLQ-FM Charlottetown.
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Background
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Maritime Broadcasting, a wholly-owned subsidiary of Maclean-Hunter Limited (MHL), is the licensee of CHNS and CHFX-FM Halifax. Although these stations are the only broadcasting undertakings in the Atlantic region controlled by MHL, its broadcast holdings elsewhere in Canada are extensive and diverse. In Ontario MHL, operating under the name of Maclean-Hunter Cable TV, owns 16 cable television undertakings serving approximately 7% of all cable subscribers in the country. MHL also owns 100% of Key Radio Limited, the licensee of six Ontario radio stations serving audiences in Toronto, Ottawa, Kitchener and Chatham. Further, MHL owns 100% of CFCN Communications Limited, which is the licensee of radio stations in Calgary and Edmonton, as well as of the CTV affiliated television stations serving Calgary and eleven other communities elsewhere in Alberta and British Columbia.
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The vendor, Eastern, is currently owned and controlled equally by Messrs. Zucker (50%) and Schoone (50%). Their involvement in radio broadcasting in the Maritimes began twenty years ago with their purchase of CKNB Campbellton. Today, with the exception of CJCW Sussex, all of the stations controlled by Eastern rank either first or second, in terms of audience share, in the markets they serve. Together, these stations account for approximately 20% of all hours tuned in the Maritimes. Combined with CHNS and CHFX-FM Halifax, they would represent approximately 27% of the total listening hours in the Maritimes which is more than that attained by the radio stations owned by any other privately-owned broadcasting group in the region.
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Over the years the Commission has developed general policy guidelines for dealing with applications involving transfers of the ownership or effective control of broadcasting undertakings. Under these guidelines, the first test an applicant must meet is to demonstrate that the proposed transaction will yield significant and unequivocal benefits to the communities served by the broadcasting undertakings in question and to the Canadian broadcasting system as a whole, and that approval is in the public interest.
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In the case of applications which raise the issue of concentration of ownership, such as those for the transfer of Eastern's radio interests to MHL, the Commission must also be satisfied that the advantages of increased concentration of ownership, such as enhanced economies of scale, greater financial stability, and the resulting greater contribution to the Canadian broadcasting system, clearly outweigh the potential disadvantages.
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In the applications, MHL outlined a number of proposals and commitments to demonstrate that significant and unequivocal benefits will flow from approval of the proposed transaction, including various means to safeguard against any potential concerns related to concentration of ownership. These benefits are outlined below.
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Benefits
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a) Commitments in support of Canadian musical talent.
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The Commission notes that current commitments in support of Canadian talent by stations within the Eastern group represent expenditures totalling approximately $69,000 per year.
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In addition to assuming ongoing responsibility for meeting these commitments, the applicant undertook to implement the following new initiatives.
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Eastern's FM stations in Moncton and Charlottetown and the Halifax FM station owned by Maritime Broadcasting operate in the Country music format, as do other FM stations within the MHL group in Kitchener and Ottawa. The applicant proposes to form a "country music alliance" among these stations for the purpose of achieving "high levels of program production quality and to co-ordinate station group promotions and general support activities for the country music industy." Under this proposal, each station in the country music alliance will produce a weekly hourlong foreground format program for use by the other stations in the group, resulting in enhanced program quality and diversity.
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Further support for the country music industry in Canada will be provided by the applicant through implementation of a "country-wide talent search including co-ordination of live performances, on-air promotion, demo tape recording sessions and finally, the co-ordination and production of a professional album for the successful competitor." In the applications, the purchaser made a commitment to provide the equivalent of $50,000 in commercial air-time to promote the talent search on an annual basis, and to provide the sum of $25,000 per year to meet expenses associated with the talent search. It also stated that it would contribute $25,000 per year to FACTOR.
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MHL also proposed to lend additional support to Maritimes-based performers by having each of its stations in the region provide free on-air advertising to announce appearances by performers at local entertainment centres. The applicant estimated that this initiative in support of local artists would have a value in excess of $45,000 per year. Similarly, commercial advertising time with an estimated value of more than $25,000 annually will be allocated to promote the sale of recordings by performers from the Atlantic region.
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In these applications it was initially proposed that, upon approval, the sum of $100,000 would be contributed by MHL for the creation of an "Atlantic Performing Arts Fund" which would finance the career development of musical performers from the region. The applicant made a commitment to contribute an additional $25,000 annually to replenish the fund in subsequent years.
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At the hearing the applicant was questioned regarding whether such a fund might not duplicate the efforts of FACTOR in some respects. The applicant responded that its primary concern was to ensure that money in the fund was allocated to performers from Atlantic Canada:
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If FACTOR could in a sense assure us that these funds would be allocated to the development of Atlantic talent ... I think we would gladly provide it as a FACTOR contribution if the Commission felt that it was a better vehicle for us to participate.
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MHL's willingness to redirect these monies from the Atlantic Performing Arts Fund to FACTOR was confirmed and elaborated upon in a letter dated 11 September 1986 which was submitted and accepted by the Commission at the conclusion of the Saint John hearing. In the letter, MHL stated that FACTOR had confirmed that it would guarantee the distribution of the money to Atlantic Canadian artists, including a portion "earmarked for the support of country recording artists."
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MHL also stated that, should the Commission consider that such FACTOR contributions would be a more productive overall method of supporting Atlantic regional talent, it would make the following contributions:
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1. Immediately following approval of the transaction, a lump sum of $100,000 will be contributed to the FACTOR project.
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2. At the end of Year 2, a contribution comprised of $25,000, earmarked for the recording of country music artists, and an additional $25,000, equivalent to the presently proposed Atlantic Performing Arts Fund Year 2 contribution, would be forwarded to FACTOR.
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3. At the end of Years 3, 4 and 5, a similar contribution equal to Year 2 will be paid to FACTOR with the same conditions.
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4. Assuming five year licence renewals, contributions to FACTOR will be reviewed in conjunction with licence renewals, but with a long-term objective to continue our support in a similar fashion.
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MHL also confirmed that:
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This newly structured FACTOR package would replace our previous Atlantic Performing Arts Fund, our $25,000 FACTOR contribution, and the proposed annual $25,000 contribution earmarked to replenish the Atlantic Performing Arts Fund. All other proposed benefits included in our application would remain unchanged.
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b) Commitment to develop French-language radio service in northeastern New Brunswick.
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The Commission notes with particular interest the purchaser's commitment to make a concerted effort to improve French-language radio services in northeastern New Brunswick by co-ordinating meetings with existing broadcasters and by extending organizational, technical, management and other forms of assistance to any local applicant who might come forward with proposals for a new service.
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The Commission has long been concerned with the task of developing French-language services in northeastern New Brunswick. As stated in Decision CRTC 86-665, although it remains convinced of the demand for a French-language station that would serve the Acadian community of the area, "it will wish to examine the impact of the introduction of any new service on the capacity of existing licensees to provide the service for which they have been licensed. The Commission encourages interested parties to continue to consult and reminds those concerned that any proposals derived from this rationalization process should be viable and relevant to the people of northeastern New Brunswick."
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c) Local ownership, continuity of direction and decentralized management
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According to Eastern, a major factor behind its success has been the policy of its owners to encourage local management autonomy; this has been achieved in part by involving local managers and company executives in the ownership of the various licensee companies. Eastern noted that, under this policy, local managers are rewarded for the success they help to create, thus ensuring that each station remains responsive and responsible to the community it serves.
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MHL made a commitment to continue with this policy by maintaining "local management ownership structures, strong local programming, top quality facilities, and an active involvement in each of the communities served." In line with this commitment, MHL confirmed that virtually all of the current station managers and corporate executives will be retained and, together, will continue to own between 4.5% and 9.5% of the voting shares of the individual licensee companies.
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With respect to other employees of the various Eastern stations, MHL indicated that projected reductions in operating costs will be achieved without any decrease in staff numbers. MHL stated:
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Perhaps one of the most significant obligations within the Eastern stations is the obligation Mr. Schoone has and will continue to have to the employees of these companies. We share his commitment, and we believe that through a new association with Maritime Broadcasting, even more opportunity for training and advancement will become available to the employees of Eastern.
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It was confirmed at the hearing that Mr. Schoone will retain a 10% ownership position in Eastern and will continue as its Chief Executive Officer. Mr. Schoone stated that he will also become President of Maritime Broadcasting and, in this capacity, will assume "an expanded role within the Maritimes and possibly, to a smaller extent, the other stations of Maclean Hunter."
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The purchaser submitted that the continued active participation of Mr. Schoone, and of other existing station managers and company executives, will ensure continuity of management and direction which, in turn, will benefit the audiences served by the individual stations and. by the broadcasting system as a whole
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MHL emphasized that local management autonomy has long been a cornerstone of its corporate philosophy. In support of this claim, it noted that the Halifax stations owned by Maritime Broadcasting "are presently autonomously run by a management team that reports maybe twice a year or three times a year ... to a Board [on] which Maclean Hunter has ... two representatives ... so, we are in a minority on that Board."
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Maritime Broadcasting stated that a majority of its Board of Directors would continue to be independent of MHL's operations, and will include new members from each of New Brunswick and Prince Edward Island who will ensure better representation of regional interests on the Board.
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MHL submitted that any concerns which might exist regarding concentration of ownership were effectively outweighed by these measures to ensure local management autonomy. According to MHL:
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We are trying to create something here which is, if you like, even more independent and more autonomous from us than it has been in the past ... We are not one big business ... There is a segregation as between the management of the individual operations and the management of Maclean Hunter ... We insist that all of our operations have appropriate controls in place to ensure that there is no polluting of the editorial waters with business concerns.
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d) Access by Eastern to the financial stability and programming resources of the Maclean Hunter organization
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The applicant submitted that a major benefit flowing from the proposed transaction will be the access that smaller stations in the Eastern group will have to the financial resources of MHL. According to the applicant, such access will ensure that each station is able to maintain high standards in the quality of its local programming despite unforeseen fluctuations in the local economy.
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The applicant stressed that listeners will benefit further by the proposal to link Eastern's stations to MHL's "Newsradio" service. This will provide listeners of each station with more newscasts than are currently broadcast, particularly during non-prime time hours. In addition, the local stations will become contributors to the Newsradio service. Regional news coverage will be improved through implementation of the applicant's commitment to establish a news bureau in Fredericton which will provide coverage of the New Brunswick provincial legislature to each of the licensee's stations in Atlantic Canada. The applicant noted that the addition of the Fredericton news bureau will also contribute greatly to the national newsgathering capabilities of Newsradio.
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Use of the satellite facilities currently employed by Newsradio will be expanded to deliver to the various stations a variety of new, high quality spoken word features produced by participating stations or by other non-competing stations elsewhere in the country. These features will be delivered to the stations, either live or for tape-delay broadcast, via a new co-operative network (CONET). The applicant noted that these exchange programs and syndicated features will expose listeners in the Maritimes, and potentially across the country, to a greater number of onair performers than they would otherwise hear on their local stations:
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New voices will be heard providing expanded news coverage, high quality spoken word mosaic features, and foreground format programming, and this will add a great deal of diversity and increased entertainment value to the sound of the stations.
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Conclusion
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The Commission considers that the proposed transaction will produce significant and unequivocal benefits for the various Maritime communities served by the stations in question and for the Canadian broadcasting system as a whole, and it is satisfied that approval of the transaction is in the public interest.
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The Commission is equally convinced that these benefits, together with the safeguards that MHL will put in place to ensure continuity of direction and to preserve a high degree of local management autonomy in the operation of the various radio stations, clearly outweigh any potential disadvantages resulting from the concentration of ownership of broadcasting undertakings in the Maritimes.
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With respect to MHL's original proposal to establish an Atlantic Performing Arts Fund, notwithstanding the merits of such a fund, the Commission considers that, overall, the FACTOR organization represents a more effective vehicle for supporting regional talent in Atlantic Canada, particularly given FACTOR's firm guarantee to ensure that these funds are distributed to Atlantic Canadian artists. The Commission also notes FACTOR's experience and performance in discovering, recording and promoting Canadian artists on a national basis, and the strong association this organization has developed with the Canadian recording industry.
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The Commission therefore accepts MHL's commitment to redirect to FACTOR all funding initially earmarked for the Atlantic Performing Arts Fund. It notes, however, that the proposal outlined in the 11 September 1986 letter from MHL appears to remove from the list of benefits originally outlined in the application, a first year contribution of $25,000 to FACTOR. Accordingly, the Commission expects MHL's first year FACTOR contribution to be $125,000, consisting of the $25,000 originally committed to FACTOR and $100,000 originally committed to the Atlantic Performing Arts Fund.
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Moreover, the Commission notes that the broadcasting licences issued in respect of the various radio stations listed in the front of this decision, all expire 30 September 1987.
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Accordingly, the purchaser is put on notice that, at the time of licence renewal, the Commission may decide to require adherence to some or all of the commitments described in this decision, by condition of licence. In the meantime, the Commission strongly expects the purchaser to adhere fully to these important commitments.
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The Commission notes that the direct costs associated with implementation of the applicant's new commitments in support of Canadian talent, including a first year contribution of $125,000 to FACTOR, amount to $150,000 in the first year, and $75,000 in each subsequent year, for a total over five years of $450,000. The applicant's indirect costs, such as those related to the provision of on-air commercial time to promote regional performers and their recordings, will amount to approximately $120,000 per year, or an additional $600,000 over five years. The total direct and indirect costs of these new initiatives over five years will thus be in the range of $1,050,000.
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The Commission places great importance on the efforts of all broadcasting licensees to provide support for new Canadian talent, whether through contributions to organizations such as FACTOR, through on-air exposure or by other mechanisms. In this context, the Commission notes that in Decision CRTC 86-1174 issued today, it has approved an application by Mervyn Russell, on behalf of a company to be incorporated, for a licence for a new English-language FM radio station to serve Saint John. The company to be incorporated will be owned 70% by Eastern and, as a result of this decision approving the transfer of control of Eastern, will be ultimately controlled by MHL. In Decision CRTC 86-1174, by condition of licence, the Commission has required the company to be incorporated to make direct expenditures amounting to $30,000 per year in support of new Canadian talent. This will increase the contributions by MHL to new Canadian talent, through its radio stations in the Atlantic region, potentially to as much as $1,200,000 over five years. The Commission will monitor the performance of the individual stations in providing this support.
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The Commission wishes to acknowledge the more than 100 letters submitted in support of these applications for the transfer of effective control of Eastern's radio interests to MHL. It also notes that no opposing interventions were received.
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Fernand Bélisle
Secretary General
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