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Decision
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Ottawa, 1 December 1987
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Decision CRTC 87-898
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Le Réseau des sports (RDS) -871184800
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The Commission approves the application by Le Réseau des sports (RDS) for a network licence to provide a French-language sports specialty service. This satellite-to-cable service will be available to cable television affiliates situated in regions served by a satellite beam covering eastern Canada, on an optional basis for distribution on the basic service, in accordance with the provisions set out in the Public Notices accompanying this decision (Public Notices CRTC 1987-260 and CRTC 1987-261). The licence, which will be issued and be effective on 1 September 1988, will expire 31 August 1993 and will be subject to the conditions specified in the appendix to this decision and in the licence to be issued.
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The applicant proposed to provide a 24-hour-a-day sports service organized and marketed as a completely distinct service from its English-language equivalent, TSN. RDS is designed or French-speaking Canadians, particularly those residing in Quebec. The programming is to be complementary and highly diversified, and will cover most types of sports activities in Quebec, North America and Europe. In accordance with the applicant's proposal, as stated in the appendix, it is a condition of licence that the service offered by the applicant be devoted exclusively to all aspects of sports, including coverage of professional and amateur sports events, sportscasts, magazine shows, interviews, commentaries, documentaries, audience participation programming, instruction and training programs, and others designed to promote physical fitness.
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At the 20 July 1987 public hearing, the Commission also examined an application submitted by Mr. Jean-Paul Champagne on behalf of a company to be incorporated (La Télévision des Sports (TVS-25) Limitée) for a network licence to operate a 24-hour-a-day French-language sports and leisure specialty service to be distributed in the province of Quebec. In view of this decision to approve RDS, and for the reasons set out in Decision CRTC 87-906, the application by Mr. Jean-Paul Champagne has been denied.
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Ownership
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The applicant, RDS, is an equal partnership of The Sports Network (TSN) and Télémédia Communications Inc. (Télémédia). TSN, for its part, is an equal partnership of the Labatt Brewing Company Limited and Ault Foods Limited, both of which are subsidiaries of John Labatt Limited. John Labatt Limited is a diversified Canadian company involved, through its subsidiaries, in brewing, dairy products and the packaging and distribution of foods and wine. TSN is currently licensed to operate the national English-language sports specialty network.
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Télémédia is a wholly-owned subsidiary of Télémédia Inc., which is controlled indirectly by Mr. Philippe de Gaspé Beaubien. Télémédia is one of the largest broadcast undertakings in Quebec and Ontario, where it operates AM and FM radio stations and French-and English-language broadcasting networks. Télémédia also has an interest in a number of French-and English-language Canadian publications, particularly on such subjects as television, nutrition and personal finances.
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In support of its RDS proposal, the applicant pointed to the unique experience that TSN had acquired in successfully establishing and marketing a Canada-wide sports specialty network. It also emphasized that TSN's staff is among Canada's most experienced and competent in terms of the production of high-quality sports programming. It further explained that the RDS organization will be designed so as to profit from TSN's experience and its resources in order to offer a service equal in quality to that provided by TSN.
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In addition, the applicant pointed out that Télémédia's sports organization, with more than thirty sports journalists, is one of the largest of all of the private electronic media in Quebec. It operates French- and English-language radio sports networks that broadcast games of Canadian professional baseball and hockey teams. The applicant also mentioned that Télémédia has been operating successfully in the major Quebec markets for more than fifteen years, and therefore brings to the new undertaking a thorough knowledge of these markets.
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Demand
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At the hearing, the applicant presented the results of market studies and audience surveys that it had commissioned which indicate that there is an unfulfilled demand for quality French-language sports programming and a certain elasticity of demand in the price francophone viewers are willing to pay for better services or a greater choice of French-language programs. A study by Sorécom Inc. indicated that 43% of francophone cable households in the province of Quebec expressed interest in subscribing to a French-language sports specialty service. The applicant added that an analysis of BBM data on television viewing in recent years supports its argument. While overall francophone viewing to English-language stations has declined substantially--by about 17%--between 1984 and 1986, an opposite trend has been observed with respect to he viewing of sports programs, in that francophone audiences of English-language sports programs increased y 180% in this same two-year period. It added that according to the BBM date, there is good reason to believe that a portion of the time devoted to viewing the RDS service would be new viewing rather than hours taken from, in particular, French-language conventional television stations.
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On this basis, the applicant maintained that RDS will not only fill a demand but will also complement existing services. It will do so by creating a new outlet during popular viewing hours for those sports programs which, to date, have been ignored by conventional television broadcasters. It explained that while conventional broadcasters usually concentrate on major sports events, a specialty service like RDS could, on a regular basis, schedule both regular-season games and provide increased exposure for less ell-known or lower-profile sports that are not presently carried by conventional television stations for lack of broadcast time. It added that the complementary character of the RDS service also stems from the fact that it will serve a new group of viewers composed of sports devotees who feel that they are currently poorly served in terms of the content of the programs offered in prime time.
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Programming
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This 24-hour-a-day service is primarily programmed on an 8-hour cycle, portions of which may be repeated within a 24-hour period. Its weekly program schedule will be divided into four components. The first will consist of eighteen hours or original programs originating in the province of Quebec, including in particular a daily sportscast, a phone-in show and magazine-style programs featuring, among other things, amateur sports in Quebec and sporting activities from Europe and around the world. With regard to the programs that will be produced in Quebec, the Commission notes the applicant's intention to give particular exposure to sports activities in regions outside the Montreal area during its initial years of operation and to consult the Fédération du sport amateur du Québec to determine which amateur sports events it will cover on a province-wide basis.
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The second component of its programming will consist of fourteen hours of original Canadian programs, specifically ones that have never before been broadcast by any other Canadian broadcasting service and which will be broadcast for the first time by this licensee. These programs will include coverage of high-profile sports events such as professional hockey, footballs and major league baseball. While these programs will be co-produced with the TSN network, the applicant emphasized that coverage of each of these sports events will be provided by an on-site RDS production team and French-speaking commentators.
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The other two elements of its programming will be non-Canadian material. The applicant proposed to broadcast two hours a week of French-language programming from Europe, primarily from France, Belgium and Switzerland, as well as 23 hours of programming originally produced in English and consisting of coverage of such sporting events as U.S. college football and basketball, professional boxing, and Wimbledon tennis tournaments, with French-language commentary to be provided from the RDS studios in Montreal.
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The applicant made a commitment to devote at least 60% of the broadcast year and at least 50% of the evening broadcast period to Canadian programs. It also undertook to devote at least 25% of the broadcast year to the distribution of programs produced by RDS in Quebec or acquired from producers carrying on business in Quebec. The applicant will be requires, by conditions of licence, to abide by these commitments and also to devote at least 19% of the hours during which non-Canadian programming is distributed to programs from non-North American sources.
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As indicated in the appendix, by condition of licence, the applicant will be required to invest $10.8, $11.5, $12.2 $12.9 and $13.6 million respectively during its first five years of operation in the production and acquisition of Canadian programming.
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Viability
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RDS will derive its revenue from two main sources--subscriber fees and advertising--which will represent 87% and 13% respectively of its total revenue. With respect to subscriber fees, the applicant proposed a wholesale rate to cable operators subscribing to the RDS service of $1.00 per subscriber per month for the first year, increasing to $1.05, $1.10, $1.15 and $1.21 in the next four years. These rats are hereby authorized as a condition of licence. With regard to advertising, the applicant proposed to distribute 8 minutes an hour of national and regional advertising. However, by condition of licence, the Commission authorizes no more than 8 minutes per hour of national advertising on this service. In light of this, the licensee shall not distribute advertising which specifically includes the names, addresses, or telephone numbers of regional businesses.
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When questioned during the hearing about the projected revenues and anticipated market penetration of RDS, the applicant expressed confidence in its ability to ensure the viability of this service, given the enthusiasm that televised sports events have always generated, especially in Quebec, and TSN's commitment at the hearing to withdraw from the French-language market in Quebec if this application were to be approved. The applicant also cited as favourable factors the additional value RDS will bring to the basic cable service and the fact that it could thus contribute to an increase in the penetration rate of cable television, particularly in the province of Quebec. The applicant also pointed out that, compared with the current subscription rate of approximately $7 or $8 a month for the TSN service when purchased alone on a discretionary basis, there will be a substantial decrease in the substantial decrease in the subscription cost for RDS which will likely be an additional incentive for sports fans.
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The applicant also maintained that overall, according to its findings, RDs will have no negative impact on conventional television broadcasters. In support of this contention, it pointed out that more than 85% of its revenues will consist of Canadian programs to which the rights have already been acquired by TSN on behalf of RDS, that it will be broadcasting a number of original programs that it has produced itself, and that it intends to broadcast sports programs from Europe as well as amateur sports events in which conventional television broadcasters have seldom, if ever, shown any interest.
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Other Matters
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In presenting its distribution plan, the applicant indicated that the RDS broadcast origination centre and studios will be established in Montreal, and that its service will be retransmitted by satellite by means of the satellite beam serving eastern Canada, and will thus be available to cable operators in the four Altantic provinces, Quebec, Ontario and the most heavily populated part of Manitoba, thereby reaching the vast majority of francophone Canadians.
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With respect to issues of public concern and as set out in the appendix, the Commission requires by condition of licence that RDS adhere to the CAB's guidelines on sex-role stereotyping and to the CAB's Broadcast Code for Advertising to Children, as agreed to by the applicant at the hearing.
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The Commission also expects RDS to ensure that its Canadian programming realistically reflects the participation of multicultural minorities in Canadian society.
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The Commission further encourages the applicant to close caption its programs for the hearing impaired as its financial situation permits.
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Conclusion
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The Commission is satisfied that this new French-language sports specialty service will make a positive contribution to achieving the goal of diversifying the programming services available to Canadians, particularly to francophone audiences. It considers that the applicant's proposal will provide Francophones with access to a great variety of different sports programs that will be complementary in terms of scheduling, thereby satisfying the French-speaking audience's keen interest in sports and contributing to the enrichment of the French-language component of the Canadian broadcasting system.
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The Commission is also of the opinion that the benefits to be derived from this application outweigh any possible concerns with respect to increased concentration of ownership of broadcasting undertakings.
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In approving this application, the Commission is satisfied that the proposed service has fulfilled the Commission's basic criteria relating to demand, viability and appeal. The Commission has, in addition, taken into account a number of other favourable factors, notably the solid and realistic programming proposal RDS has submitted which is based on the expertise and experience of the two partners, in particular, TSN's experience in operating the English-language sports service; the solid financial backing that the two companies bring to this application; and the positive contribution that their mutual association in the applicant company will provide.
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As for the impact that the licensing of this service would have on existing broadcasters in terms of audience fragmentation and erosion of advertising revenues, the Commission has examined the evidence and information presented by the applicant, as well as the comments and studies available in the context of this hearing.
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In particular, the Commission notes that the projected advertising revenues will increase from $2 million in the first year to $3.5 million by the fifth year of operation, as well as the applicant's commitment given at the hearing [TRANSLATION]:
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RDS undertakes not to compete with conventional networks for the rights to the important sports events that are broadcast by existing stations.
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Having assessed all of the information available to it, the Commission has concluded that even if this service could attract as much as 2.6% of the audience of conventional broadcasters, the overall impact on existing broadcasters will be minimal.
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The Commission further notes that the RDS service would not have an undue negative impact on the number of subscribers to other licensed specialty services since it will not be competing directly with them.
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Interventions
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In approving this application, the Commission has taken into account the concerns raised by the interveners, particularly the Association des câblodistributeurs du Québec Inc., as well as some twenty-six cable licensees with respect, among other matters, to an excessively high subscriber fee, the request for mandatory distribution, the risk that there may be overbidding on broadcast rights and the revenues of television broadcasters. The Commission notes that these concerns have been addressed in this decision or in the introductory statement to the decisions released today.
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The Commission has also taken note of the comments of other interveners, including the Quebec Department of Communications.
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Fernand Bélisle
Secretary General
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APPENDIX
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Conditions of Licence
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Le Réseau des sports (RDS)
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1. The programming provided by the licensee shall be dedicated exclusively to all aspects of sports, including coverage of professional and amateur sports events, sportscasts, magazine shows, interviews, commentaries, documentaries, audience participation programming, instruction and training programs, and other programs that promote physical fitness.
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2. The licensee shall devote not less than 60% of the broadcast year and not less than 50% of the evening broadcast period to the distribution of Canadian programs.
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3. The licensee shall devote not less than 25% of the broadcast year to the distribution of programs produced by the licensee in Quebec or acquired from producers carrying on business in Quebec.
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4. a) From 1 September 1988 until 31 August 1989, the licensee shall expend on the acquisition of and/or investment in Canadian programs not less than $10.8 million.
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b) From 1 September 1989 until 31 August 1990, the licensee shall expend on the acquisition of and/or investment in Canadian programs not less than $11.5 million.
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c) From 1 September 1990 until 31 August 1992, the licensee shall expend on the acquisition of and/or investment in Canadian programs not less than $12.2 million.
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d) From 1 September 1990 until 31 August 1992, the licensee shall expend on the acquisition of and/or investment in Canadian programs not less than $12.9 million.
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e) From 1 September 1992 until 31 august 1993, the licensee shall expend on the acquisition of and/or investment in Canadian programs not less than $13.6 million.
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5. a) The licensee shall distribute no more than 8 minutes of advertising material during each clock hour.
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b) The licensee shall not distribute any advertising material other than national advertising.
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6. a) From the date of commencement of service until 31 August 1989, the licensee shall charge each exhibitor of this service the wholesale rate of $1.00 per subscriber per month.
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b) From 1 September 1989 to 31 August 1990, the licensee shall charge each exhibitor of this service the wholesale rate of $1.05 per subscriber per month.
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c) From 1 September 1990 to 31 August 1991, the licensee shall charge each exhibitor of this service the wholesale rate of $1.10 per subscriber per month.
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d) From 1 September 1991 to 31 August 1992, the licensee shall charge each exhibitor of this service a wholesale rate of $1.15 per subscriber per month.
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e) From 1 September 1992 to 31 August 1993, the licensee shall charge each exhibitor of this service a wholesale rate of $1.21 per subscriber per month.
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7. The licensee shall keep separate accounts which set out for each financial year ending 31 August
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a) the gross revenues in respect of its operations under its licence;
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b) the amounts expended by it on the acquisition of and/or investment in Canadian programs intended for distribution on its undertaking; and
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c) the amount expended by it for the acquisition of non-Canadian programs for distribution on its undertaking.
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8. The licensee shall file a statement of the accounts referred to in section 7 with the Commission on or before 30 November of each year.
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9. The licensee shall adhere to the CAB's self-regulatory guidelines on sex-role stereotyping, as amended from time to time and accepted by the Commission.
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10. The licensee shall adhere to the provisions of the Broadcast Code for Advertising to Children published by the CAB, as amended from time to time and accepted by the Commission.
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11. For purposes of these conditions, all time periods shall e reckoned according to the eastern time zone.
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12. The definitions of advertising material, broadcast day, broadcast month, broadcast year, Canadian program, clock hour and commercial message set out in Section 2 of the Television Broadcasting Regulations, 1987 (SOR/87-49), as amended by SOR/87-425, the definition of evening broadcast period set out in section 4 and the provisions of section 5, 6, 7, 8, 10(1) and (3) to (6), 12, 13, and 14 of the said Regulations shall apply to these conditions and to the licensee with the necessary changes.
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13. Together with the record required to be filed with the Commission pursuant to subsection 10(3) of the Television Broadcasting Regulations, 1987, the licensee is requires to provide in its program log or machine readable record the following information: for each Canadian program, an indication as to whether it was produced by the licensee in Quebec or acquired from a producer carrying on business in Quebec.
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14. The licensee shall devote a minimum of 19% of the hours in which non-Canadian programming is distributed to programs from non-North American sources.
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