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Decision
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Ottawa, 10 June 1987
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Decision CRTC 87-391
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Newfoundland Capital Corporation Limited
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Dartmouth, Nova Scotia - 863210100 - 863211900
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Following a Public Hearing in Halifax on 9 March 1987, the Commission approves the applications by Newfoundland Capital Corporation Limited (Newfoundland Capital, the purchaser) for authority to acquire the assets and for licences to continue the operation of CFDR and CFRQ-FM Dartmouth upon surrender of the current licences issued to Patterson Broadcasters Limited (Patterson, the vendor).
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The Commission will issue licences for CFDR and CFRQ-FM expiring 30 September 1989 to Newfoundland Capital Corporation Limited, subject to the terms and conditions specified in this decision and in the licences to be issued.
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The Commission notes that CFRQ-FM will be operated in the Group II music format which encompasses its current "Progressive" format.
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Patterson is owned and effectively controlled by Mr. C.A. Patterson of Dartmouth, an experienced broadcaster with a significant record of community involvement. Its AM station, CFDR, has served the Dartmouth/ Halifax region for more than twenty-five years while CFRQ-FM has provided a harder rock sound to the area since November 1983.
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Newfoundland Capital is a diversified, public holding company with interests mainly in transportation and communications. The principal shareholder (43%) is Mr. Harry Steele, a Dartmouth resident and successful businessman. Among the company's holdings are controlling interests in the Great East News Co. Ltd. which publishes "The Daily News" in Halifax and Northumberland Broadcasting Co. Ltd., licensee of CHTN Charlottetown. The Commission notes that Mr. Steele has been actively involved in the general management of CHTN.
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With respect to the current applications, Newfoundland Capital has stated its intention to maintain and improve the service provided by the Dartmouth stations and has offered concrete proposals that "will build upon the stations' high quality programming and ensure that the information and entertainment needs of listeners are as fully satisfied as possible".
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At the hearing, Mr. Patterson indicated that it was time for him to divest himself of his broadcasting enterprises after some 35 years in the business; he stated that he would, however, continue to contribute to the stations as a commentator and adviser. His selection of Newfoundland Capital was based, he said, on the financial strength of the company, its success with other communications properties, the fact that its head office and directorate are situated in Dartmouth, and his personal high regard for Mr. Steele. He added that his operations needed a broader financial base to compete with the larger broadcasters in this market such as CHUM Limited (CHUM) and Maclean-Hunter Limited (Maclean-Hunter). Mr. Patterson also commented favourably on the management style of Newfoundland Capital, which accords its undertakings a significant degree of independence and management autonomy.
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Newfoundland Capital proposes to acquire Patterson's assets for a purchase price of $4.6 million. The acquisition will be a cash transaction, without debt financing, so that no financial burden will be placed on the stations. The Commission has no concerns with regard to the availability and adequacy of the required financing. It is also satisfied that the purchaser has the necessary resources to meet the commitments made in respect of these applications and to withstand unforeseen shortfalls in revenue should any occur.
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As stated in a number of decisions relating to applications for authority to transfer ownership or effective control of licensee companies, and because the Commission does not solicit applications for such transfers, the onus is on the applicant to demonstrate to the Commission that the application filed is the best possible proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
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The Commission reaffirms that the first test any applicant must meet is that the proposed transfers of ownership or control yield significant and unequivocal benefits to the communities served by the broadcasting undertakings and to the Canadian broadcasting system as a whole, and that it is in the public interest.
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In particular, the Commission must be satisfied that the benefits, both those that can be quantified in monetary terms and others which may not easily be measurable in terms of their dollar value, are commensurate with the size of the transaction and that they take into account the responsibilities to be assumed, the characteristics and viability of the broadcasting undertakings in question, and the scale of the programming, management, financial and technical resources available to the purchaser.
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The benefits identified in the applications and addressed at the public hearing are outlined below:
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1. Local Involvement and Corporate Record
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Newfoundland Capital is a locally-based company whose majority owner and directors are residents of the stations' coverage areas.
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As indicated at the hearing, each radio station would have a separate board of directors composed primarily of local residents supplemented by no more than two members from Newfoundland Capital. Further, the Commission notes that in addition to proven financial resources, the purchaser has made clear commitments and, at the hearing, expressed a willingness to provide "whatever it takes" in terms of a capital commitment to make its new operations succeed.
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2. Programming and Technical Improvements
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The purchaser has allocated a budget of $15,000 to carry out a preliminary audience survey. Its aim is "to ensure that the stations are fully serving their audiences' needs" by canvassing both current listeners and a "broad segment of the potential listening public in the service area". The survey would also indicate whether a more in-depth study of listener attitudes and opinions was required.
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Newfoundland Capital has already identified news programming as an area for improvement and has allocated $25,000 per year, or $125,000 over five years, to this end. The money will be spent on improving the quality of the stations' news services through better feature reporting and documentaries, and the increased use of freelance writers and reporters.
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On the technical side, both Mr. Patterson and Newfoundland Capital referred to a need to strengthen certain aspects of CFDR's technical operation, particularly with respect to its night-time coverage in the neighbouring communities of Sackville and Waverley. Newfoundland Capital proposes, at a cost of $75,000, to conduct engineering studies and upgrade the CFDR signal to eliminate the "nulls" caused by the present directional coverage pattern.
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3. Canadian talent support and contribution to FACTOR/CTL
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The Commission has taken note of the impressive record of CFRQ-FM in the promotion and development of Canadian talent, particularly with respect to local and regional artists. At the hearing, Newfoundland Capital cited Patterson's active role in the promotion of Canadian talent, promising to continue this tradition. The applicant made a commitment to expend $30,000 per year ($150,000 over five years) for the annual production of at least one album featuring local talent. This financial commitment represents a doubling of the commitment originally outlined in the applications and does not include indirect costs such as on-air promotion.
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In this regard, the Commission notes the statement made at the hearing by a Newfoundland Capital representative to the effect that "the lion's share of the dollar should be spent locally because ... [the] return in terms of local talent development and new Canadian music is going to be better, from that form of investment".
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Newfoundland Capital will also make a direct contribution of $5,000 per station per year or $50,000 over five years to FACTOR/CTL.
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The Commission has carefully considered the proposed benefits. With respect to those benefits which are not easily measurable in terms of their dollar value, the Commission is of the opinion that the continuation of local ownership and management and Newfoundland Capital's plan to have strong, local representation on the stations' Boards of Directors, will benefit the communities served by CFDR and CFRQ-FM. The Commission considers that Newfoundland Capital's strong financial position and its expressed commitment to provide the necessary human and financial resources to ensure the success of the stations are important elements in considering these applications and, in this regard, views favourably the purchaser's intentions to assess the needs of the stations' audiences and to effect improvements, most particularly in the area of news programming.
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As regards the benefits which can be quantified in monetary terms, they total $415,000 over five years and are aimed at technical improvements for CFDR, programming improvements at both stations, particularly in news, and the promotion of Canadian talent, with emphasis on local talent promotion.
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The Commission notes that there is a discrepancy in the monetary value of the quantifiable benefits, in that the Commission has identified a benefit package totalling $415,000 while the applicant indicated at the hearing that these commitments amount to $450,000 over a five-year term. Accordingly, the Commission expects Newfoundland Capital to file a report within 30 days of the date of this decision explaining how it intends to allocate the difference of $35,000.
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Having carefully examined the applications as submitted and the statements made at the public hearing, the Commission has concluded that Newfoundland Capital has adequately demonstrated that the proposed transfer of ownership will yield clear and unequivocal, quantifiable and non-quantifiable, benefits to the communities served and to the Canadian broadcasting system as a whole and that it is in the public interest.
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The Commission also approves the proposal to reduce CFRQ-FM's weekly commitment to news programming from 7 hours 12 minutes to 4 hours per week, noting that this decrease will be offset somewhat by an increase in enrichment material. In this regard, the Commission reminds Newfoundland Capital that it has an ongoing responsibility to provide its audiences with a complete and satisfactory news and information service by ensuring the provision, wherever possible, of complementary human interest and background information. It will follow Newfoundland Capital's efforts in this area with interest.
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The Commission also approves a reduction in the Canadian content level for category 5 selections broadcast by CFRQ-FM from 30% to 25% and notes that this commitment exceeds the Commission's minimum Canadian content guideline of 20% for Group II stations.
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It is a condition of licence that the applicant adhere to the CAB selfregulatory guidelines on sex-role stereotyping, as amended from time to time and accepted by the Commission.
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In light of Newfoundland Capital's controlling interest in the Great East News Co. Ltd. of Halifax, it was necessary for the Commission to consider the issue of cross-media ownership at the hearing and in its subsequent deliberations.
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In this regard, it has noted that the Dartmouth/Halifax area is well-served by some 32 separate broadcasting and print media. It has also taken into account Newfoundland Capital's commitment to maintain completely separate editorial policies and judgements for CFDR and CFRQ-FM.
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Under these circumstances, the Commission has concluded that these transactions will not decrease the diversity of voices in the Dartmouth area. It is also of the view that the licensee has adequate safeguards in place to satisfy the Commission's concern about any risks that may exist with respect to the issue of cross-media ownership.
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Fernand Bélisle
Secretary General
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