ARCHIVED -  Decision CRTC 88-437

Decision

Ottawa, 28 June 1988

Decision CRTC 88-437

Télévision Saint-Maurice Inc. Trois-Rivières, Quebec -871085700

Télévision Saint-François Inc. Sherbrooke, Quebec -871086500

Following public hearings in Quebec City on 30 November 1987 and 7 March 1988, the Commission approves the applications by the above-named licensees to amend the licences of CFKM-TV Trois-Rivières and CFKS-TV Sherbrooke respectively by authorizing each of the licensees to broadcast local programs and by relieving each of them of its respective commitment, in order to permit them to broadcast local advertising at such time as each station commences broadcasting local programming.

The Commission authorized the operation of CFKM-TV and CFKS-TV on 4 March 1986 (Decisions CRTC 86-165 and 86-166) as full rebroadcasters of CFJP-TV Montreal, which is the mother station of the Réseau de télévision Quatre-Saisons. These decisions were made subsequent to Decision CRTC 85-733, dated 6 September 1985, which authorized the operation of a new French-language television station in Montreal, CFJP-TV. In that decision the Commission, having considered the potential impact of the introduction of this new television service in secondary markets within the province of Quebec, had invited interested parties to submit applications to extend this new service by means of retransmitters to be operated by existing stations in these markets. In this regard, the Commission notes that the above-named licensees are also authorized to operate CKTM-TV Trois-Rivières and CKSH-TV Sherbrooke which are affiliated with the CBC's French-language television network.

Both Trois-Rivières and Sherbrooke are each served by four local French-language television stations. For Trois-Rivières they are: CHEM-TV which is affiliated with the Pathonic and TVA networks; CKTM-TV, a CBC French-language affiliate; CIVC-TV, the Radio-Québec station; and CFKM-TV, a total rebroadcaster of CFJP-TV Montreal, with no local programming or advertising; and for Sherbrooke, CHLT-TV which is affiliated with the Pathonic and TVA networks; CKSH-TV, a CBC French-language affiliate; CIVS-TV, the Radio-Québec station; and CFKS-TV, a total rebroadcaster of CFJP-TV Montreal, with no local programming or advertising.

Commission policy stipulates that a broadcaster that wishes to benefit from the financial support of a community must be prepared to offer certain services in return, including programs that are locally produced and locally oriented. This policy was reiterated recently in Public Notice CRTC 1988-59, dated 13 April 1988. The Commission assesses this type of application primarily on the basis of two fundamental criteria: the capacity of the market to support an additional drain on local advertising revenues without creating undue hardship for existing broadcast undertakings, and the relevance of the proposed local programming in relation to the revenues forecast and the range of services available in the particular market.

Market Capacity

a) The Applicants' Arguments

At the 7 March 1988 hearing, the applicants emphasized that recent changes in the sources of television advertising revenue have had a significantly adverse effect on the revenues of CFKM-TV and CFKS-TV in comparison with the projections set out in the original applications of October 1985. They indicated in fact that the sources of advertising revenue had undergone a major transformation. Whereas the ratio between national and local advertising has traditionally been about 70:30, the current ratio is about 55:45 and the trend is towards proportions that are virtually equal.

According to the information submitted at the March 1988 hearing, national and network advertising revenues at CFKM-TV and CFKS-TV in 1986/87 were below the levels originally forecast by 39% and 46%, respectively. For 1987/88, the applicants again anticipate shortfalls, in relation to their original projections, of 57% and 72% respectively. They pointed out that, even with the addition of the local advertising revenue projected in these applications, neither station would attain the level of income projected in 1985. They added [TRANSLATION]: "These results and the earlier presentation demonstrate that, without local advertising, the profitability of the undertaking is insufficient to guarantee its local involvement and its development as a regional station." The applicants also noted that their respective CBC affiliated stations, CKTM-TV and CKSH-TV, are at a strong economic disadvantage in comparison with the competing Pathonic stations affiliated with the TVA network, CHEM-TV and CHLT-TV, as the amount of broadcast time available for commercial sales is considerably less than that of the Pathonic stations and, further, that they are unable to sell advertising within those CBC programs that attract the largest audiences.

The applicants also stated that their access to the local markets of Trois-Rivières and Sherbrooke [TRANSLATION] "would not have a significant effect on the broadcasters in the area". On the strength of an analysis of the advertising markets based on the retail sales in these communities, the applicants stated that according to their projections they would be drawing only a tiny fraction, varying between .7% and 1.2% of the total available advertising base for each of the next five years. They added [TRANSLATION]: "This percentage is not likely to jeopardize the stability of any of the existing media in the Sherbrooke and Trois-Rivières markets." They also emphasized that their applications come at a time when the economies of both areas are growing, a fact which should lead to an increase in advertising expenditures, to the benefit of all media.

b) The Interveners' Position

At the November 1987 and March 1988 hearings, Réseau Pathonic Inc. (Pathonic) intervened in opposition to these applications. It stated that approval of these applications could jeopardize the survival of [TRANSLATION] "regional television production, which the Pathonic network considers important and which characterizes its operation", through an excessive centralization of production in Montreal by the major networks, leaving only a minimal amount of production in the region, consisting mainly of news and information programming. In terms of the Trois-Rivières and Sherbrooke markets in particular, Pathonic claimed that approval of these applications would create unfair competition for its stations CHEM-TV and CHLT-TV since [TRANSLATION]: "the addition ... of a little more than an hour in each of the Trois-Rivières and Sherbrooke markets, as set out in the applicants' Promises of Performance, wouldn't offer anything new or essential to viewers in these markets; on the contrary, the insidious result would be to reduce Pathonic's capacity to maintain the highly demanding pace of its local production". The intervener also stated that its national and network advertising revenues had decreased significantly since the commencement of the Quatre Saisons network but that this decrease was offset by an increase in its local advertising revenues in Trois-Rivières and Sherbrooke.

Moreover, in written interventions opposing these applications, the National Association of Broadcast Employees and Technicians (NABET) also expressed its concern with regard to the impact on the equilibrium of the market and with regard to the amount of available advertising revenue. Two licensees, Communications Radiomutuel Inc., which operates AM and FM stations in Trois-Rivières and Sherbrooke, and the Compagnie de radiodiffusion Shawinigan Falls Limitée, which operates radio station CKSM Shawinigan, also expressed concern about the potential impact of these stations on their revenues and on radio advertising rates.

c) The Applicants' Response

In response to these interventions, the applicants pointed out that the information submitted by Pathonic at the November 1987 hearing actually supports the argument that the Trois-Rivières and Sherbrooke markets are growing, and that the amount of local advertising revenues they had forecast [TRANSLATION] "wouldn't have a significant effect on Pathonic's operations, whether in Sherbrooke or Trois-Rivières". Thus, the applicants noted that, according to Pathonic itself, its local advertising revenues had increased between 1986 and 1987 by 48% in Sherbrooke and 44% in Trois-Rivières, while its national selective sales during the same period had risen by 16% in Sherbrooke and by 5% in Trois-Rivières. The applicants also reiterated that they would be tapping barely 1% of the total available advertising revenue in each market, as noted earlier.

With regard to the concerns expressed by Communications Radiomutuel Inc. and by the Compagnie de radiodiffusion Shawinigan Falls Limitée, the applicants pointed out that the present applications would have only minimal impact on radio revenues and that the growing economies of Trois-Rivières and Sherbrooke would provide sufficient revenue for all media. As for advertising rates, the applicants noted that there would continue to be a distinction between radio and television since the rates for local sales proposed for CFKM-TV and CFKS-TV will be on average about three times higher than current radio rates, based on gross rating points.

Programming

a) The Applicants' Proposals

The applicants initially proposed levels of 1 hour 8 minutes and 1 hour 5 minutes respectively of locally-produced news a week for CFKM-TV and CFKS-TV, with no subsequent increase proposed in the hours of local broadcasting. However, in their presentations at the March 1988 hearing, they improved upon their proposals, with each offering to commence broadcasting 1 hour 25 minutes a week of local programming within 30 days of the Commission's decision, increasing that amount to 3 hours 10 minutes with the start of the fall 1988 schedule, and subsequently to 3 hours 40 minutes per week and to 4 hours 55 minutes per week as of 1 September 1989 and 1 September 1990 respectively.

In accordance with the applicants' new commitments, the local productions to be broadcast from the outset by CFKM-TV and CFKS-TV will consist of a 15-minute late-evening weekday newscast and four news bulletins of 2 minutes 30 seconds each, to be broadcast on weekends, specifically two on Saturday evening and two on Sunday evening. Starting in September 1988, a weekly 30-minute program will be added consisting of a news reporting competition between students from the CEGEP and the university. Also as of September 1988, a 15-minute magazine program on sociocultural matters will be broadcast from Monday to Friday, to be extended to 30 minutes a day in September 1990. In addition, a weekly 30-minute Saturday morning news program, reviewing the major news items of the week, will be added in September 1989.

b) The interveners' Position

Pathonic estimated that the applicants' programming proposals would not bring anything new or essential to the Trois-Rivières or Sherbrooke markets, while NABET sought assurance that the proposed programs would be complementary and of a comparable quality to those presently available in these markets. The unions representing the employees of CHEM Télé-8, Trois-Rivières and the producers at Télé-7 Sherbrooke, et al, while not objecting to the establishment of new television stations in the area, expressed concern in their interventions about the absence of proof of complementarity in the proposed programming, notably in the newscasts, and stressed the importance of assessing the relevance of the proposed programming to the particular needs and interests of each region.

Communications Radiomutuel Inc. stated that it was not opposed to the production of local programs by the applicants, while the Compagnie de radiodiffusion Shawinigan Falls Limitée expressed its concern about the complementarity of the news programs proposed at Trois-Rivières. The Mauricie regional chapter of the Association féminine d'education et d'action sociales (AFEAS) voiced its concerns about sex-role stereotyping and violence on television.

c) The Applicants' Response

In response to these interventions, the applicants stated that they were certain that their proposals would benefit local production in Trois-Rivières and Sherbrooke. In support of their argument, they pointed to the new competitive spirit and the tangible improvement in the quality of programming among Montreal television broadcasters that occured following the announcement of the start-up of the Quatre Saisons service.

They also made known their conviction that the main purpose of a local station is to inform the public of local events of immediate concern to them and that they intend to orient their programming primarily toward local news. They stated that they intend to produce newscasts that would be distinctive in both form and content by pooling the news reporting facilities at the existing stations and by hiring three additional journalists at CFKM-TV and CFKS-TV, including one full-time staffer beginning in the first year, and a full-time sports reporter at CKFS-TV during the second year. Finally, while pointing out that they have no control over the programming they receive from the network, they expressed their full support for the industry guidelines on sex-role stereotyping and their concern about violence on television.

The applicants concluded by stating that their programming proposals would result in the investment of over $3 million over five years and the hiring of six additional people at Trois-Rivières and seven at Sherbrooke, and that they were convinced that their applications contained significant benefits for their audiences, for local talent and for the broadcasting system, and would not have any serious negative impact on broadcasters in these areas.

Conclusion

In assessing these applications, the Commission's primary concern has been to examine the development of the television advertising market since 1985 and to attempt to discern the trends. During the fall of 1987, the Commission discussed this issue with a number of licensees in Canada's anglophone markets. Despite the fact that a significant number of new private television stations have been grated licences in recent years, the licensees of these stations stated unanimously that there was a very substantial increase in both local and national advertising revenues during the fall of 1987. In the province of Quebec, despite the arrival of Quatre Saisons, overall local and national advertising revenues among all private television stations increased by 8% during the year ending 31 August 1987, while the advertising revenues of the CBC also increased substantially over the same period.

In terms of the two Pathonic stations that serve these markets, specifically CHLT-TV Sherbrooke and CHEM-TV Trois-Rivières, both are strong financially and enjoying increased local revenues. CHLT-TV's local sales have risen continuously since 1979, with the exception of a slight decline in 1984, and there was an increase of 27% between 1986 and 1987. Despite a drop in network sales in 1987, CHLT-TV's total revenue for the same year rose by 22%, while CHEM-TV reported a 16% growth. According to the statements made by Pathonic at the hearing concerning the first quarter of 1987/88, this stability in the local market seems to be continuing.

The positive competitive position in terms of local advertising of the Pathonic stations appears to be borne out by the ratings which, according to its own statement, increased by 131% in Sherbrooke and by 71% in Trois-Rivières between 1984 and 1987. In 1987, CHLT-TV and CHEM-TV both dominated their markets by wide margins, with audience shares of 35.2% and 34.4% respectively, in spite of the entry in their respective markets of CFKS-TV and CFKM-TV.

In light of all of the foregoing, the Commission considers that the applicants' projected local revenues will not have a significant impact on the Pathonic stations CHLT-TV Sherbrooke and CHEM-TV Trois-Rivières, given the strong financial position of these two undertakings and, in particular, the steady growth of their local revenues. It further notes Pathonic's statement that there are other factors that could explain the decline in its national selective advertising revenue in recent years and that it had taken concrete measures to counter this trend, particularly by opening its own national advertising sales office in Toronto.

In view of all of the economic indicators that have been described in this decision on the one hand and, on the other, the quantity and nature of the proposed local programming, which represents a significant improvement over what was initially proposed, the Commission has decided to approve the applications to amend the licences for CFKM-TV and CFKS-TV by authorizing them to broadcast local productions in Trois-Rivières and Sherbrooke.

The Commission considers that this approval is in the public interest and will enable the applicants' stations to consolidate their positions in these markets, given the competitive disadvantage of their CBC affiliated stations, CKTM-TV Trois-Rivières and CKSH-TV Sherbrooke, as a result of the limited availability of commercial revenues that is inherent in their affiliation structure and the stations' poor financial performance.

However, each of these licensees' existing commitment not to broadcast local advertising on CFKM-TV and CFKS-TV respectively is to remain in effect until such time as each of the stations commences broadcasting the 1 hour 25 minutes per week of locally-originated production to which each is committed.

The Commission considers, moreover, that the addition of these new programming services at Trois-Rivières and Sherbrooke will significantly increase the availability of programs that are truly of local interest, resulting in a diversity that is of benefit to the public. The Commission intends to review the licensees' efforts in this regard when it considers the renewal of the licences of CFKM-TV and CFKS-TV which expire 31 March 1990, and it expects that by then the licensees will be a position to propose further increases in their local programming. The Commission notes that the licences for the Pathonic stations CHEM-TV Trois-Rivières and CHLT-TV Sherbrooke expire 30 September 1990, which will permit the Commission to assess the situation in all of these markets at the same time.

Fernand Bélisle
Secretary General