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Ottawa, 2 July 1986
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Decision CRTC 86-634
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Western Caissons Limited
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St. John's, Newfoundland; Halifax, Nova Scotia; Saint John, New Brunswick; Pointe-Claire, Quebec; Toronto, London and Ottawa, Ontario; Winnipeg, Manitoba; Regina, Saskatchewan; Calgary and Edmonton, Alberta; Vancouver, British Columbia - 853282200 - 853280600 - 853281400 - 853272300 - 853268100 - 853274900 - 853273100 - 853278000 - 853279800 - 853276400 - 853277200 - 853275600
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Related Documents: Decisions CRTC 76-416 (12 July 1976), 77-387 (5 July 1977), 81-189 (11 March 1981) and 82-189 (18 February 1982); Public Announcement (12 January 1979) and Public Notice CRTC 1985-258 (29 November 1985); and CRTC - Notice of Public Hearing 1986-18 (7 March 1986).
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Following a Public Hearing in Toronto on 6 May 1986, the Commission renews the broadcasting licences of Western Caissons Limited for the one AM and eleven FM radio stations which comprise the CKO national news and information radio service (the CKO News Service), from 1 October 1986 to 31 March 1988, subject to the terms and conditions specified in this decision and in the licences to be issued.
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Background
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The CKO News Service was initially licensed in July of 1976 (Decision CRTC 76-416) to add to the diversity of news services available to radio listeners in the various regions of Canada. Licences were issued for a term of 5 years for the purpose of broadcasting on a twenty-four hour a day basis only spoken word programming, primarily consisting of news and information content, with music used only as a bridging (production) device or as a component of advertisements and station promotions.
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The service was to be fully implemented by the fall of 1979.
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In 1977 when the Commission approved the acquisition of the assets of the AM radio station at Pointe Claire, it emphasized "the importance of reflecting adequately the social and cultural character of Montreal and Quebec City both to its Montreal area listeners and to the rest of Canada" (Decision CRTC 77-387).
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Since that time, the CKO News Service has appeared before the Commission on five occasions: at licence renewal hearings in January and November of 1981 and in May 1986, and at public hearings in November 1978 and September 1985 to address concerns about the frequency of live sports programming on some of its radio stations.
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In the first licence renewal decision (CRTC 81-189 dated 11 March 1981) the Commission reaffirmed its "belief in the value of a national all-news service which would provide an alternative news voice to Canadians and reflect the various regions of Canada". The Commission noted in the decision that the service had not yet been made available to the Atlantic region or to Winnipeg or Regina, but recognized "the magnitude and complexity of the initiative taken by the licensee in attempting to establish the all-news concept on a viable basis across the country".
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The licensee was required to submit specific plans for the implementation of the stations not yet in operation, in line with the original programming concept, and was reminded that its programming "must include coverage of local issues and events for each of the licensed areas".
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In view of serious financial difficulties which had resulted in the curtailment of all regional production between 1978 and 1980, the Commission granted a one-year renewal of the licences and authorized certain changes in the ownership structure of the undertakings in order to give the licensee an opportunity "to crystallize its plans for the implementation of the original all-news concept".
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Subsequently, at the November 1981 renewal hearing, the CKO News Service submitted a revised implementation schedule whereby the five remaining cities would all be served by 1 September 1986. The licensee also presented firm plans to develop a strong national news service based in Toronto, with regular contributions by and exchanges among the various regions of the country. It further committed to implement local programming by April 1982 at all of the stations then in operation, and to commence such programing at each new station from its inception.
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On the basis of these commitments, the Commission renewed the licences for the operation of the CKO News Service from April 1982 to September 1986 (Decision CRTC 82-189). The licensee was required to fulfill the commitments it had made with regard to the implementation and operation of its full service including the local programming commitments contained in each station's Promise of Performance. It was also required to submit yearly progress reports on: (i) the implementation of service in Halifax, Winnipeg, Regina, Saint John and St. John's; (ii) the reopening and/or establishment of local studios at each location and the commencement of local programming at each station; and (iii) the implementation of its programming proposals for the Montreal station, in accordance with its special mandate for that location.
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With respect to play-by-play sports coverage, and in response to the position advanced by the licensee at the November 1981 renewal hearing, the Commission imposed a "game of the week" limit on live actuality broadcast coverage of sporting events and required the licensee to seek prior approval if it wished to increase the frequency of such broadcasts.
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On 31 August 1983, the Commission approved an application by Western Caissons Limited to enter into a limited partnership which would own the assets and provide for the operation and management of the CKO News Service. Approval was conditional upon the nature and composition of the proposed CKO Partnership not being altered without the prior approval of the Commission. The licensee was to submit applications as soon as possible for new licences to continue the operation of the CKO News Service.
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Toronto Public Hearing
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In light of all of the above, the licensee was advised prior to the May 1986 hearing, that it would be required to address a number of matters relating to the operation of the CKO News Service, including its financial and corporate structure, the apparent delegation to CKO Incorporated regarding the operation and management of the undertakings and the licensee's failure to apply for new licences to regularize its ownership structure; programming matters including news, play-by-play sports coverage, open-line and local programming; and the non-implementation to date of its licensed authority for the operation of radio stations in the cities of Regina, Winnipeg, Saint John and St. John's.
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Corporate Structure
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During the 6 May Public Hearing, Mr. Stan Stewart, President of the CKO News Service, confirmed that the corporate structure of the CKO News Service was "the same as that advised to you in our letter of July 26th, 1983, for which approval was received August 31, 1983". He submitted that the licensee had intended neither to form a new corporation nor to transfer the CKO News Service licences into the limited partnership "unless and until the operation became profitable".
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In response to Commission concern that the entity which holds the licences should be the same as that which owns the broadcasting assets of the CKO News Service, Mr. Stewart stated that the partners had agreed to file the requisite application and had so advised the Commission by telex on 25 April.
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The Commission also expressed concern about the apparent delegation of the operation and management of the CKO News Service to CKO Incorporated. In response, Mr. Torchinsky, the president and principal shareholder of Western Caissons Limited, explained that CKO Incorporated "is the nominee of [and is] wholly owned by Western Caissons, to act as the operating manager of the CKO partnership".
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The Commission notes that, in response to the commitment made at the hearing in this regard, applications have just been filed and will be given early consideration.
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Programming Matters
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i) News Programming
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In his presentation to the Commission, Mr. Stewart explained that the CKO News Service does not propose to reduce its news content:
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The figure of 38.5 hours [per week] provided in our current applications represents a minimum of news programming, whereas our 1981 figure [53 hours 29 minutes per week] represented a typical level.
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In fact, our present and planned news content in a typical week is in excess of our 1981 commitment.
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The applicant also confirmed that open-line programming, sports actuality and sportscasts had not been included in calculating the 38 hours and 30 minutes per week of news programming.
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Consistent with the licensee's firm commitment that no station of the CKO News Service would have less than 38.5 hours of news content per week, the Commission requires y condition of licence that each such station broadcast a minimum of 38.5 hours of news each week.
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ii) Play-by-Play Sports
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With respect to play-by-play sports coverage, the Commission notes the clarifications provided by Western Caissons Limited at the Toronto hearing.
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The licensee stated that play-by-play sports coverage would not be scheduled during "principal information periods" (as noted in the program description of each station's application) nor before 11 a.m. on Saturdays and Sundays; that such broadcasts would contain regular news updates; and that they would be subject to pre-emption in order to cover major news developments should circumstances warrant. The Commission expects the licensee to abide by these commitments.
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In accordance with the stated intention of the FM policy that licensees be given considerable flexibility in the planning and scheduling of their programming, the Commission will not restrict the way in which the CKO News Service schedules such games beyond the parameters mentioned above. Accordingly, it will not reimpose the condition of licence restricting the CKO News Service to a "game of the week". The Commission requires, however, as a condition of licence, that the licensee adhere to its commitment to restrict sports coverage on each station to a maximum of six games per week, and will expect it not to exceed a maximum annual average on each station of ten and a half hours per week of play-by-play sports.
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In a letter dated 4 April 1986, the Commission approved a request by the CKO News Service for live baseball coverage on its London, Halifax, Edmonton, Vancouver and Calgary stations, subject to certain provisions set out in the letter, until the end of June 1986. In light of the discussion at the hearing, the licensee is hereby authorized to broadcast the proposed remaining games of the Toronto Blue Jays and Calgary Cannons, subject to the provisions set out in this decision regarding play-by-play sports.
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The Commission is satisfied that live sports broadcasts will help the licensee to attract listeners and give it greater flexibility to generate advertising revenue.
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iii) Open-line programming
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The Commission notes the licensee's proposal to broadcast a talk-show on weekday mornings from 9 a.m. to 11 a.m. Eastern time on its Halifax, Montreal, Ottawa, Toronto and London stations and a weekday Vancouver-produced open-line program commencing at 8 p.m. Pacific time, which is to be broadcast on all stations of the CKO News Service.
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The Commission reiterates its intention to allow licensees considerable latitude to effect programming changes, and will, therefore, permit the CKO News Service added flexibility in the scheduling of its talk shows, provided the licensee abides by its undertaking to broadcast an eight-minute national news report each hour during each open-line show and provided it does not schedule open-line programming during "principal information periods".
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iv) Local Programming
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As noted above, commitments were made at the November 1981 renewal hearing to implement local programming at each station by April 1982. However, at the May 1986 hearing, the licensee confirmed that the Edmonton station had commenced local production only on 26 April 1986. In discussing its local production, the licensee acknowledged that local weekday morning news programs are currently produced only at Calgary, Vancouver and Toronto.
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The Commission views with concern the licensee's failure to adhere to its commitments for local production which were made in 1976 and reiterated at the November 1981 hearing. Furthermore, at the November 1981 renewal hearing, the licensee had promised to upgrade its Montreal coverage early in 1982 and to hire "an adequate number of well-trained staff to reflect accurately and consistently the needs of the Montreal community". These improvements still have not been implemented.
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At the May 1986 hearing commitments were made to the effect that there would be "a local presence" in Montreal as of 1 July and that some network programming would originate from CKO Montreal as of 1 September 1986. The Commission also considers both the licensees's past performance in Montreal and the commitments contained in the current application to be inadequate in light of the licensee's special responsibilities in this market.
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At the hearing, Mr. Stewart suggested that:
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Local programming ... must be seen as subordinate to our primary national mandate, and contingent upon our success in this endeavour.
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CKO is a national news alternative and programming costs are between two and three times higher...than they are for traditional broadcasters.
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In order to amortize that cost over a reasonable base of revenue opportunity, we provide what we think is appropriate programming in a variety of ways.
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While recognizing that the primary function of the CKO News Service is to provide a quality national news service, the Commission considers local programming to be an essential element of this service, as originally licensed. Accordingly, the licensee is expected to take immediate measures to provide a local presence and more local programming in the regular schedule of each station. The Commission will wish to review the licensee's performance in this regard at its next licence renewal.
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Furthermore, during the term of this licence, the programming broadcast on each of these stations must, as a condition of licence, continue to be comprised only of spoken word programming, consisting primarily of news and information, including the coverage of local issues and events for each of the licensed areas.
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Financial Projections and Implementation of Service
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While the CKO News Service has never shown a profit, financial projections submitted by the licensee at the hearing for the current and future fiscal years indicate a significant departure from past results -- for example, for the year ending 31 August 1986, the licensee projects an increase in revenue of 42% over 1985, to $5.3 million.
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Mr. Stewart explained this dramatic change at the hearing:
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the gain in revenue is the product of three things: the increase in rate card, which will account for probably between 16 and 18% of the revenue gain, the improving ability of the sales force which will sell more inventory ... and finally, the growing acceptance of CKO...
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In the past, the licensee has pointed to its financial losses in explaining why it had not implemented service in all communities according to schedule. The Commission notes that the Halifax station became operational on 1 January 1986. At the hearing, the licensee indicated that it would "build Winnipeg in 1988, Regina in 1989, Saint John and St. John's in 1991".
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In light of the difficulties this licensee has experienced in implementing the promised service to a number of communities, the Chairman of the panel at the public hearing questioned Mr. Torchinsky as to whether these new commitments would be met if the projected financial results were not achieved. In response, Mr. Torchinsky stated:
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if within the next year ... there is not a marked improvement, Agra [Agra Industries Limited] will not continue to support CKO ... But for the next year I do guarantee that we will support this company.
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He added:
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If CKO meets its budget next year we will be happy to accelerate the program of build... We have the funds to put in...
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The Chairman drew attention to the fact that while Mr. Torchinsky's assurances were for only one year, Western Caissons Limited was, nevertheless, seeking a five-year renewal.
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Conclusion
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At the hearing, Mr. Stewart emphasized that during its ten years of existence, the CKO New Service has sustained substantial financial losses and reaffirmed its commitment to the all-news concept:
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we do not seek to alter our format, to reduce our foreground programming...or Canadian content...We are firmly committed to being a world-class news and information network.
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The Commission recognizes this initiative which has been difficult and costly to develop, and acknowledges the unique character of the service.
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However, in light of the non-implementation to date of service to St. John's, Saint John, Winnipeg and Regina and the repeated failure to meet firm commitments the licensee has made to the Commission in the past, and in view of the serious concerns expressed in this decision with respect to various aspects of the service, as well as the fact that the major shareholder has stated its intention to reassess plans for the CKO News Service based on the financial results for the period ending 31 August 1987, the Commission considers that a renewal period beyond eighteen months is not warranted at this time.
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During this licence term, the Commission expects that the licensing and ownership matters referred to above will be settled, that a clear picture of the licensee's financial situation will emerge and that the licensee will have taken effective steps to increase its local presence and programming at each station, taking into account the CKO News Service's mandate to reflect the various regions, including the social and cultural character of Montreal. The licensee will also be required to submit a timetable and detailed plans for the early implementation of service in the remaining communities of Saint John, St. John's, Winnipeg and Regina.
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In considering whether a further renewal of the licences is warranted and, if so, under what conditions, the Commission will assess carefully the manner and extent to which the licensee has fulfilled all of the above-noted requirements, given the programming and service commitments clearly made by the CKO News Service at the various public hearings of the Commission referred to earlier in this decision.
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Furthermore, as noted in earlier decisions, the Commission reiterates that should the concept of this national radio news service result in insufficient revenues to maintain the financial health of the operation, it expects the licensee to surrender the licences rather than change the programming in order to generate more revenue.
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Fernand Bélisle
Secretary General
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