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Decision
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Ottawa, 1 May 1987
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Decision CRTC 87-331
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CFPL Broadcasting Limited, London, Ontario - 861547800
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CKNX Broadcasting Limited, Wingham, Ontario - 861548600
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Following a Public Hearing in the National Capital Region, on 1 December 1986, the Commission approves, effective 31 August 1988, the applications by CFPL Broadcasting Limited and by CKNX Broadcasting Limited to amend, respectively, the broadcasting licences for CFPL-TV London and for CKNX-TV Wingham by deleting the conditions of licence which require CFPL-TV and CKNX-TV to operate as affiliates of the English-language television network operated by the Canadian Broadcasting Corporation.
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At the same hearing, the Commission heard applications by the CBC to establish new television stations to rebroadcast the CBC's Englishlanguage television network service originating from CBLT Toronto, Ontario in areas presently served by CFPL-TV and CKNX-TV. These are addressed specifically in Decision CRTC 87-332 of today's date.
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BACKGROUND
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Historically, the CBC's arrangements with its privately-owned affiliates across Canada have played a significant part in ensuring that Canadians in all areas of the country have access to the national television broadcasting service. These arrangements have permitted the Corporation to deliver a significant proportion of its programming to audiences that would otherwise be very costly to reach through additional publiclyfunded CBC owned-and-operated stations. While 99% of Canadians now have direct access to CBC television services, for 21% of the Corporation's English audience and 16% of its French audience the affiliated stations are the only available source of CBC programming. For the affiliates, the arrangements have allowed the CBC's network programming and financial resources to assist in the provision of local program services and to offset the cost of producing or acquiring additional programming.
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In recent years, however, technical advances and refinements in distribution systems have overcome many previously existing limitations on the extension of the Corporation's television signal and, in some cases, have made affiliation agreements less vital in the provision of CBC services to Canadians. At the same time, the success of affiliates in certain markets and the possibility in other markets for the provision of full CBC service as part of a twin-stick operation mean that CBC affiliates may no longer need to rely on the CBC either for its financial resources or as a source of programming. These factors, among others, have led some affiliates to consider disaffiliating from the CBC network.
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There are presently 26 privatelyowned stations, including CFPL-TV London and CKNX-TV Wingham, affiliated with the Corporation's Englishlanguage television network and five privately-owned stations affiliated with the Corporation's French television network. The affiliates receive compensation from the CBC in exchange for carrying a predetermined portion of the network's schedule. The remainder of the affiliates' schedules consist of programs produced or acquired by the affiliates themselves. In some cases, the affiliates carry only 60% to 70% of the CBC's complete network television schedule.
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CFPL-TV has been an affiliate of the CBC English-language television network since the station was first licensed in 1953. CKNX-TV has been an affiliate since 1955.
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Decision CRTC 85-161, dated 11 April 1985, approved an application by CFPL Broadcasting Limited for a broadcasting licence for an English-language television network consisting of CFPL-TV London and CKNX-TV Wingham for the purpose of providing a microwave feed to distribute programs from London to Wingham for broadcast on CKNX-TV. In issuing a network licence expiring 30 September 1989, the Commission noted that there would be no change in the programming available to Wingham viewers, since the sole purpose of the new network was to improve the quality of the service by eliminating the practice of sending programs by videotape.
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CFPL-TV broadcasts on channel 10 in the London market, serving a population of 1.3 million within its grade B contour in southwestern Ontario. CKNX-TV broadcasts on channel 8 in Wingham to a population of 410,000 within its grade B contour in midwestern Ontario. The two licensees intend to operate independent television stations and to maintain their operation as a two-station network with CFPL-TV as the source station. They will each retain the channel currently licensed to them.
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REASONS FOR DISAFFILIATION
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In October 1986 the Commission conducted a hearing to consider the Corporation's application for the renewal of its English- and Frenchlanguage television network licences. The Commission recently renewed these licences in Decision CRTC 87-140. At the October hearing, the CBC outlined its intention to increase the level of Canadian programming to be carried by its owned-and-operated stations and its affiliates, a move which the Commission fully supports. As stated by the licensees at the 1 December hearing, both CFPL-TV and CKNX-TV support the Corporation's plans as well. However, Mr. Robert Elsden, President of CFPL Broadcasting Limited, speaking on behalf of the two television stations, explained:
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We cannot ... be part of (CBC's) plan and continue to discharge our obligations to our viewers, our shareholders or to this Commission. As private broadcasters our financial health is determined by the sale of commercial time. We require competitive programming, flexibility in scheduling and the ability to plan our future.
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In the early years, we had in our affiliations with the CBC a carefully balanced sharing of time, programming and revenue. The last eight to ten years has seen this balance change towards more CBC control of time, without recognition by the CBC of the financial consequences to its private affiliates.
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Mr. Elsden went on to stress that the desire for flexibility was an important reason for filing these applications:
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In order to continue our service to our community in today's broadcast environment, we need the flexibility that independence would provide.
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We are confident of our future based on our past experience, our present community status, our future objectives in the provision of a strong local independent schedule.
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The decision to disaffiliate is not, in Mr. Elsden's words, a "short-term fix" but "a long-term decision to really change the modus operandi of our station and of our company ... it is to us a survival strategy to build."
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At the hearing, CFPL Broadcasting Limited explained that, in contemplating disaffiliation, it had taken into consideration the loss of network revenues as well as the loss of network programs, the network news service and news feeds. The cost of replacing these elements was estimated by the licensee at approximately $4.5 million annually.
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1. Replacing Network Revenues
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After disaffiliation, CFPL-TV will no longer receive financial compensation from the CBC for carriage of the Corporation's programming. The licensee projected that its revenue in its first year following disaffiliation would be $16.9 million, of which $2.4 million would be from local sales. These revenue figures are comparable to those CFPL-TV would expect to generate were it to remain a CBC affiliate.
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Based on information provided by CFPL-TV at the hearing, however, the number of 30-second commercial availabilities which the station may sell each year will increase with disaffiliation by approximately 70,000 or 67%. In addition, the number of hours of U.S. programming CFPL-TV expects to simulcast in the evening broadcast period will increase substantially, which could result in larger audiences for its programming and a proportionate increase in advertising revenue.
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The Commission notes that CFPL-TV's projections rest on the London census metropolitan area marketing base. At the hearing, Mr. Eldsen estimated that the London market has a population of some 260,000. However, based on BBM figures for 30 October to 5 November 1986, CFPL-TV's audience reach is 800,000, or 65% of the estimated 1,234,000 population in the combined Kitchener-London extended market. As the Commission recognized in its decision renewing the licence of Global Communications Ltd. (Decision CRTC 86-1086), the southern Ontario television market is one of significant growth. Between 1981 and 1985, total advertising revenues in southern Ontario grew at a rate of 9.6% per year on a compound annual basis. This rate of growth exceeded the national average of 8.6% per year.
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The Commission also notes that CFPL-TV intends to increase the number of its sales and promotion employees from 16 to 28, six of whom would be assigned specifically to generating local advertising revenue.
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Taking into account CFPL-TV's plans to increase its level of local programming, the expanded opportunities for simulcasting, the additional commercial availabilities, the proposed increase in CFPL-TV's sales force and the potential of the London market, the Commission considers CFPL-TV's revenue projections following disaffiliation to be conservative.
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At the hearing, the licensee emphasized the importance of local advertising revenue in its financial plans and requested that a condition be attached to the CBC's new television licences prohibiting the Corporation from soliciting local advertisements. This matter has been addressed in Decision CRTC 87-332 of today's date.
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2. Replacement of Network Programs, Network News Service and News Feeds
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In the first year following disaffiliation, CFPL-TV intends to invest $4.3 million for program replacement in addition to its current annual program expenditures. This additional money will be directed toward new local productions and program acquisitions, expansion of news programs and services, and program development.
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(a) New Local Productions and Program Acquisitions
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With respect to local programming, the applicant made a commitment to spend an additional $344,000 in the first year after disaffiliation on the production of new local programs. Local production will expand from 19.5 hours per week to 30.5 hours, with news and public affairs accounting for 24 hours. The remaining 6.5 hours from various other categories represent an increase of 5 hours over the present level of local non-news related production, and will consist of six new programs: an arts magazine; an arts and entertainment program; a sports call-in program; a religious program; a program highlighting activities at the University of Western Ontario; and a music talent series. There are no new locally-produced drama programs in the proposed schedule.
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At the hearing, CFPL Broadcasting Limited stated that CFPL-TV had broadcast 40 hours of locallyproduced specials between September 1985 and August 1986, of which nine hours were aired in the evening broadcast period, and made a commitment to continue this level through the rest of the licence term. Saturday afternoons will feature university and high school sports produced by CFPL-TV either on its own or in co-operation with CHCH-TV Hamilton. In addition, CFPL-TV is negotiating with the London Symphony Orchestra to broadcast four to six concerts per year to be aired in the evening.
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As an independent station, CFPL-TV will continue to produce its original half-hour children's program, Friends, as well as the high school quiz show, Reach for the Top.
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In total, CFPL-TV will expend $5.5 million on local program production in its first year following disaffiliation.
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In addition to its commitments with respect to local Canadian production, CFPL-TV has also made a commitment to spend $1.275 million on 44 hours per week of Canadian-acquired programming in its first year as an independent station.
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CFPL-TV and CKNX-TV have concluded a program acquisition agreement with CHCH-TV Hamilton that will come into force with the Commission's approval of this application. While this program acquisition co-operative was established primarily to procure popular U.S. programming, it will make efforts to acquire top Canadian-produced programs as well.
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(b) Expansion of News Programs and Services
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The expansion of CFPL-TV's news programs and services will account for 10% of the station's $4.3 million first year program replacement budget. News programming will expand from 17 hours to 22 hours per week with the extension of the weekday morning news program, and the addition of one half-hour per night to the current week-night program. Following disaffiliation, CFPL-TV's current production levels in terms of its noon, early evening and weekend news will be maintained.
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CFPL-TV will also double the amount of its public affairs programming with the introduction of two new half-hour weekend programs, tentatively entitled Parliament in Review and Behind the News.
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In addition, CFPL Broadcasting Limited made the following commitment with respect to news specials:
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... we plan as we did in the past two years to do at least four to six news specials in addition to regular news programming. These, of course, evolve as a consequence of events in our market.
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These news specials will range in length from 30 to 90 minutes "depending on the topic and how big it is."
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Two years ago, in anticipation of its application for disaffiliation, CFPLTV joined the Independent Satellite News Network (ISN) in order to secure a national news feed to replace the CBC's feed. In addition, the station has added an "enhancement budget to allow us to send our crews from London out on specific stories each month where they may occur in Canada and relate them perhaps more directly back to our own market." As well, CFPL-TV will establish a Queen's Park News Bureau. For international news, the licensee stated that it has already talked to VIZ News and NBC as possible news feeds.
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The Commission notes that, as part of a building enlargement plan undertaken since CFPL-TV's last licence renewal, the station has added a new 6,000 square foot computerized newsroom, and acknowledges this station's performance in the field of local news and public affairs.
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(c) Program Development
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With respect to program development, CFPL-TV stated that approximately $430,000 has been budgeted over five years for use "as a pool resource for specials, for independent production with producers, for script development and for co-station production and equity."
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In terms of co-production, CFPL-TV stated:
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We have had discussions ... with other stations and while we have nothing specific at this stage we have agreed in principle to station co-production. I have had conversations with both the western stations and the stations in the East, on the Atlantic coast and as we approach in an optimistic way our independent mode, we now want to become bigger players and we are excited about it in the co-production field, both with independents and co-stations.
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CFPL-TV noted that the $430,000 may also be used as leverage toward projects funded by Telefilm Canada.
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With respect to the development of dramatic productions, CFPL-TV's intention is to align itself with the London Grand Theatre in a local playwright contest and to produce the winning scripts for television. As of the hearing, the station was "just beginning discussions" on this project.
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REPLACING THE CBC SERVICE WITH AN INDEPENDENT SERVICE: CKNX-TV
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According to CKNX Broadcasting Limited, the elimination of CBC revenue and the replacement of network programming and news services will cost CKNX-TV almost $1 million per year.
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As noted earlier, CFPL-TV and CKNX-TV began operating under a network licence in 1985. According to the stations' network arrangements, upon disaffiliation, 95 hours of CKNX-TV's programming, constituting 75% of its weekly schedule, will be broadcast simultaneously with that of CFPL-TV. These hours will include all of CFPL-TV's non-Canadian programming, all programming between 1:30 p.m. and 6:00 p.m. Monday to Sunday, and all programming between 7:00 p.m. and 11:00 p.m. Monday to Sunday with the exception of one half-hour program.
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At present, CKNX-TV produces 12 hours of local news programming and one half-hour of Reach For the Top each week. As well, CKNX-TV provides one additional half-hour per week of local programming through the co-production with CFPL-TV of the program Inquiry.
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With disaffiliation, CKNX-TV will expand its local production to 20 hours per week. Five of these additional hours will result from the expansion of two weekday news programs by one half-hour each day. The station will also introduce a half-hour weekly series dealing with farm issues in the Wingham area. The remaining additional local programming will consist of co-productions with CFPL-TV of the children's program, Friends, and This Business of Farming. With respect to other ventures with CFPL-TV, CKNX-TV indicated that co-production credits would be claimed on an ad hoc basis depending on its actual participation:
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We have worked out a formula at this point in time of approximately 10% of London's cost of producing a designated series. There is also the opportunity, hopefully, to open our facilities in Wingham to production of some of these particular series.
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The station also hopes to provide budgetary assistance for CFPL-TV's new music talent program, although it does not expect such involvement to take place within the first year following disaffiliation.
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CKNX-TV has budgeted $747,520 for local productions in the first year following disaffiliation, $12,480 for joint productions and $165,000 for acquisitions from Canadian independent sources.
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THE COMMISSION'S FINDINGS
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As a result of the Commission's approval of these applications and of its decision with respect to the related CBC applications, viewers in the London and Wingham markets will now receive both full CBC service and the added program diversity which the new independent services will provide. In this respect, the Commission notes the statement made at the hearing by Mr. Elsden:
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We see this solution to the problem ... as being a win-win situation for the viewers, for the Commission, I think for our company. It is going to provide the service that is not there right now, which is good, because it provides a diversity of service and it is Canadian. It is going to provide us with further opportunity to serve our communities of London and Wingham and that is good, because that is needed.
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With this decision, London and Wingham area viewers will have access to quality Canadian programs on the CBC's full service which were not previously available to them and, at the same time, will receive increased local news coverage and new locally-oriented programming from the newly independent stations. In this regard, the Commission acknowledges the interventions received from Mrs. Betty J. Waite and 3 signatories, Ms Joyce Fraser, Mr. Brian Colgate and Mr. Philip Elliott.
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The Commission has taken into consideration the fact that CFPL-TV has embarked on a 5-year capital expenditure plan totalling $7 million. In preparation for its disaffiliation, the station last year spent $3.5 million in capital expenditures and has planned to spend $1.3 million this year, $690,000 in 1987/88, and $2.145 million in 1988/89. The station anticipates hiring 26 new full-time staff and 5 "talent" as a result of disaffiliation.
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The Commission has also taken note of the commitments by both licensees to adhere to the Broadcast Code of Advertising to Children and the CAB Voluntary Industry Code on Sex-Role Stereotyping, and to be sensitive to scheduling, community standards and subject matter concerning violence.
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The Commission is not, however, satisfied with the licensees' proposed level of Canadian programming, especially drama, in peak viewing periods. Although the proposed schedules of both CFPL-TV and CKNX-TV meet the regulatory requirement of 50% Canadian content between 6 p.m. and midnight, the Commission notes that only 3.5 hours (or 16.7%) of programming in the available 21 hours per week between 8:00 p.m. and 11:00 p.m. would be Canadian, representing the lowest Canadian content performance during the popular mid-evening period of any English-language independent licensee.
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As noted in the Global renewal decision (Decision CRTC 86-1086), the Commission expects broadcasting licensees to make a concerted effort to improve significantly the level and quality of their Canadian programming. A significant investment in, and proper scheduling of, new Canadian programs represent the most important and appropriate areas in which television licensees can contribute to the fulfilment of the goals of the Broadcasting Act.
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Accordingly, the Commission expects CFPL-TV and CKNX-TV, upon disaffiliation, to devote at least one hour per week in the 8 p.m. to 11 p.m. time period to Canadian dramatic programming, either station-produced or co-produced.
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In presenting its application at the same public hearing, the CBC stated that it expected to begin operating its new transmitters within 14 months of the Commission's decision. Accordingly, the approved amendments to the licences of CFPL-TV and CKNX-TV will become effective 31 August 1988.
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The network licence for CFPL-TV and CKNX-TV expires 30 September 1989 as do those of the individual stations. In their applications for licence renewal, CFPL Broadcasting Limited and CKNX Broadcasting Limited will be expected to describe their plans to increase the amount of high-quality Canadian programming, particularly drama, throughout their schedules for each year of their upcoming licence terms.
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At the time of licence renewal, the Commission may impose conditions of licence on these licensees in this regard or with respect to other matters. It therefore reminds the licensees that it expects commitments to Canadian programming to be commensurate with the gross revenues achieved by the stations.
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Fernand Bélisle
Secretary General
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