ARCHIVED -  Decision CRTC 88-512

Decision

Ottawa, 25 August 1988

Decision CRTC 88-512

Standard Radio Inc., Licensee of CKFM-FM Toronto

Determination on the Matter of the Show Cause Hearing Held in the National Capital Region on 13 July 1988 Concerning the Possible Suspension of the Broadcasting Licence of CKFM-FM Toronto

In CRTC Notice of Public Hearing 1988-34 dated 28 April 1988, the Commission called Standard Radio Inc. (Standard) to a public hearing commencing 26 May 1988 in the National Capital Region, to show cause why the broadcasting licence of CKFM-FM should not be suspended on the grounds that the licensee failed to comply with its conditions of licence during the week of 3 to 9 January 1988. On 20 May 1988, in response to a request from Standard for additional time to prepare its case, the Commission postponed the hearing until 13 July.

In accordance with sections 17 and 24 of the Broadcasting Act, the Executive Committee of the Commission may suspend a broadcasting licence when it is satisfied that a licensee has violated or failed to comply with a condition of licence.

Background

On 8 September 1987, the Manager of CHUM-FM, a competing station in the Toronto market, notified the Commission that CKFM-FM was programming "hit material well in excess of the authorized guideline". In its response to this complaint, dated 10 September 1987, Standard informed the Commission that CKFM-FM would be in compliance within one week, if it was not so already. In its Promise of Performance, CKFM-FM has undertaken to program hit and non-hit musical selections from category 5 music (Music-General) in an approximate ratio of 49:51 during each broadcast week.

The licensee was subsequently asked to provide its own assessment of the programming broadcast for the weeks of 11 to 17 October 1987 and 3 to 9 January 1988. According to CKFM-FM's self-assessment, the station was playing 63.8% hits during the week of 11 to 17 October and 60.2% during the week of 3 to 9 January, with 65.4% hits on 15 October 1987 and 62.1% on 8 January 1988. Commission analyses of CKFM-FM's programming on these two days indicated the station had programmed 68.7% and 66.5% hits respectively.

On 29 March 1988, CKFM-FM was called to a public hearing commencing 12 April 1988 to discuss its apparent failure to meet the obligations set out in its Promise of Performance for both the proportion of hits and Canadian musical selections broadcast by the station (CRTC Notice of Public Hearing 1988-24 dated 29 March 1988).

At that hearing, Standard confirmed that it was not meeting its commitment with respect to hits in either October 1987 or January 1988 and that it was still not in compliance at the time of the 12 April 1988 hearing. It further indicated that, while it had taken some steps to rectify the situation since being made aware of the Commission's concerns, it would not have a system in place to ensure compliance until the end of April 1988. When questioned on this, the licensee stated that it could be in compliance by the next day.

In light of such persistant non-compliance, Standard was called to appear before the Comission to show cause why the broadcasting licence of CKFM-FM should not be suspended for failing to comply with its conditions of licence during the week of 3 to 9 January 1988.

The conditions of CKFM-FM's licence require, among other things:

1. that the licensee make all reasonable efforts to fulfill substantially each section of the Promise of Performance which is a part of its licence;

2. that the licensee obtain the prior approval of the Commission before broadcasting, for a period longer than four weeks, any programming which constitutes a substantial variation from any section of its Promise of Performance; and

3. that the licensee notify the Commission immediately where, during any broadcast week, the programming broadcast by it constitutes a substantial variation from any section of its Promise of Performance.

The 13 July Public Hearing

At the 13 July 1988 public hearing and in its written final argument which was filed with the Commission on 18 July, Standard submitted that it did not breach any conditions of its licence during the week of 3 to 9 January 1988 when it failed to meet its commitment with respect to hits.

The licensee first pointed out that the conditions in question relate to substantial compliance with a section of the Promise of Performance. According to the licensee, the word "section" refers to the seven major sections in the Promise of Performance and not to any component part of these sections or to any single commitment. The licensee noted that the portions of section D "General Policy and Plans -Music" which apply to CKFM-FM set out its commitments with respect to the ratio of hit to non-hit songs as well as five other matters. Specifically, commitments concerning the group in which the station is operated are found in D-1 while commitments with respect to the ratio of vocal-to-instrumental selections, the ratio of language of vocal selections, the number of distinct musical selections, the maximum repeat factor and the hit to non-hit ratio are found in D-2. According to the licensee, the Commission must consider all of these elements in assessing whether there has been non-compliance with the conditions of licence.

The licensee also pointed out that the first condition it must meet does not actually require that section D be fulfilled substantially; rather, it simply requires the licensee to make all reasonable efforts to fulfill the section substantially. Accordingly, the licensee submitted that the Commission should not count as hits any musical selections that CKFM-FM could not establish as such using "reasonable efforts" or that CKFM-FM had categorized as non-hit selections, on what the station considered was a reasonable ground.

The licensee proposed that the CRTC make certain adjustments in calculating the number of hit selections broadcast during the week of 3 to 9 January 1988. The first adjustment related to 19 new age and jazz recordings which the Commission had not classified as category 5 (Music-General) musical selections. The second adjustment related to 41 titles that appeared on charts that the licensee argued were not readily available to it, or only at extraordinary expense. It also referred to non-Canadian songs that became hits only in Canada and to songs that became hits only on country music charts.

The licensee also submitted that at least 16 of the hit selections included in a four-hour special event program "should not have been given the same weight because of the need for flexibility" to allow special event programming of this kind. Finally, the licensee contended that it had played live or accoustic recordings of six musical selections which it considered should not have been included in the hit calculation as they achieved hit status in a different version. Applying these adjustments, CKFM-FM calculated that the hit to non-hit ratio during the week of 3 to 9 January 1988 would be 61.2:38.8.

As for the other elements included in section D, the licensee submitted that it had met all of its commitments other than the number of distinct musical selections. It asserted that it had even exceeded its commitments in several cases.

In its discussion of whether this performance amounted to a substantial fulfillment of section D of its Promise of Performance, the licensee maintained that the Commission had never indicated in a policy statement what constituted substantial fulfillment of section D of the Promise of Performance or what level of variance in the hit commitment would be viewed by the Commission as substantial. According to the licensee, the only directions from the Commission on this issue relate to a substantial variation in respect of other single commitments, for instance the vocal-to-instrumental ratio or maximum repeat factor, or to consideration of substantial compliance with another section of the Promise of Performance, specifically that entitled "Duration of Programming in Each Content Category".

The licensee relied on these directions to argue that a station is in substantial compliance with section D of its Promise of Performance so long as it does not vary with respect to the six commitments set out in this section by more than 20% on average. CKFM-FM then provided two assessments of its own performance, based firstly on the assumption that these commitments should be weighted equally in calculating the average variation, and secondly, on the assumption that certain of the commitments in section D should be weighted more heavily. On the basis of these calculations, CKFM-FM concluded that it was not in breach of its conditions of licence, even if the Commission were not to make any of the adjustments requested or to give CKFM-FM credit for overcompensation in respect of certain of the commitments in section D of the Promise of Performance and were to give greater weight to CKFM-FM's commitments with respect to the group in which the station was operating, the ratio of hits to non-hits, the maximum repeat factor, and the number of distinct musical selections.

The licensee further submitted that even if the Commission were to determine that CKFM-FM had breached conditions of its licence, it should exercise its discretion in favour of the licensee in deciding whether a suspension of licence is warranted. In this respect, Standard argued that the station had already sustained some $350,000 in lost advertising revenue that, in its view, could be attributed directly to the 28 April announcement calling CKFM-FM to a show cause hearing. It also contended that the impact of a suspension of the station's licence for a few days would be much greater than a simple calculation based on CKFM-FM's average daily revenue from radio sales. Specifically, a period of dead air would lead to a loss of audience, with the potential for a "profound" impact on the station's ratings and consequent decline in revenue; even an anticipated decline in ratings would cause many advertisers to defer spending on CKFM-FM. The licensee asserted that in its view, "a suspension of licence is a much more severe penalty than a short-term renewal".

The licensee spoke of other extenuating circumstances that should be considered by the Commission in making its determination. While admitting that the station had not been in strict compliance with its hit to non-hit commitment, Standard submitted that its misapprehension of the importance of this matter did not constitute deliberate defiance. Further, "once the lesson was clearly and unequivocally brought home to CKFM", it had taken immediate measures to redesign the station's playlist controls so as to ensure strict adherence. The licensee pointed out that since 1 May 1988 it has submitted weekly reports attesting to its compliance in respect of the level of hits and Canadian musical selections broadcast.

Further, Standard argued that its "overall good character" as a licensee should be taken into consideration. In this respect, the licensee filed five letters of appreciation from charitable organizations in the Toronto area that have benefitted from the station's community service activities over the years. The endorsements were from the Hospital for Sick Children Foundation, Big Brothers, The Cystic Fibrosis Radiothon, Easter Seals Canada and the Toronto Symphony. Standard claimed that further evidence of its sense of responsibility and commitment to good broadcasting is to be found in CKFM-FM's leadership role in support of developing Canadian music talent. In this regard it noted sixteen letters of support from Canadian musical groups and record labels and the comments of three independent witnesses at the 13 July hearing, David Farrell of The Record, Walt Grealis of RPM Weekly, and Earl Rosen from Marquis Records, who spoke of the long history of support for Canadian artists that Standard, the Slaight family and the current management of CKFM-FM have demonstrated. These three witnesses also elaborated upon the factors that determine ranking on hit charts and the impact of the hit guidelines on the promotion of Canadian talent.

Conclusion

The Commission, having carefully reviewed the entire record of this proceeding, is satisfied that CKFM-FM failed to comply with its conditions of licence during the week of 3 to 9 January 1988. In reaching this conclusion, the Commission has first considered the licensee's proposed adjustments to the calculation of the number of hit selections broadcast during the week of 3 to 9 January 1988.

The Commission has rejected Standard's argument as to the 19 new age and jazz selections. It notes that the licensee agreed that, in the past, it has considered such music as category 6 selections in calculating whether it has met its requirements in this respect and had itself not included the 19 selections from the playlist submitted with its self-assessment of the programming broadcast during the week of 3 to 9 January 1988.

With respect to the 41 selections that, according to the licensee, were not on readily available charts, the Commission has clearly stated in recent renewal decisions for CKQM-FM Peterborough, Ontario (Decision CRTC 85-921) and for CHUM-FM Toronto (Decision CRTC 87-593), both licensed to CHUM Limited, that a licensee must obtain whatever information is necessary to ensure that its level of hits remains consistently below 50% of all musical selections, in accordance with its Promise of Performance and the Commission's FM policy.

With respect to Standard's assertion that there is a need for flexibility for special event programming, the Commission points out that each licensee is responsible for its own programming. Further, it maintains that licensees have sufficient flexibility to broadcast more hit selections within occasional special event programs since the hit commitment is measured on a weekly basis.

As for the final adjustment requested, the Commission has stated that "selections on the music list that match a selection in the Commission's [computer] file both by title and by artist are counted as a hit" (Public Notice CRTC 1986-248). The single selection that the Commission agrees to classify as a non-hit is the live version of a song which was recorded primarily for broadcast use and was not available for sale to the public.

Accordingly, based on an analysis of the logger tapes and playlists submitted by the licensee, the Commission has concluded that during the week of 3 to 9 January 1988, 66.2% of the category 5 music broadcast by CKFM-FM was composed of hits. Further, the Commission has calculated that CKFM-FM broadcast 922 distinct musical selections rather than the approximately 1,100 to which it was committed. The Commission assumes that CKFM-FM was in compliance with its other programming commitments during the period of 3 to 9 January 1988.

In deciding whether the broadcasting of 66.2% hits constitutes substantial fulfillment of CKFM-FM's Promise of Performance commitments, the Commission has carefully reviewed its own pronouncements with respect to the circumstances in which it would be satisfied that there was a breach of condition of licence. The Commission considers that it has given licensees considerable guidance with respect to this issue and that the appropriate pronouncements have been brought to the attention of its licensees on the covering page of the Promise of Performance.

When it first elaborated its FM policy in 1975, the Commission stated that it would:

expect a licensee to fulfil substantially the programming objectives set forth, taking the schedule as a whole. Each section of the Promise of Performance will similarly be read as a whole in interpreting the requirement for substantial compliance. Thus some variation in programming schedules and formats will be permitted without requiring notification to the Commision for prior consent.

Where licensees are unclear as to what kinds of programming changes are substantial enough to require either notification or prior approval of the Commission, they may obtain rulings from the Commission. In making such rulings, the Commission will have in mind its desire to encourage experimentation and variety on FM. On the other hand, where the licensee intends to broadcast programming which consitutes a substantial variation from any section of the Promise of Performance over an extended period of time, the Commission will require that its approval be first obtained. In such cases, the licensee will be required to submit a revised Promise of Performance setting out the proposed new commitments, and the Commission will treat it as it would an application for amendment of a licence.

Following implementation of the policy, guidance was sought from the Commission as to its likely rulings on this issue. These were provided in the Public Announcement dated 20 April 1979 entitled "Implementation of the FM Policy". On page 7 of that announcement, the Commission stated:

In the course of Phase I, the Commission developed a set of guidelines to determine whether any change in programming (effected or proposed) constitutes a "substantial" change from the programming commitments set out in the licensee's Promise of Performance.

In response to requests for clarification from the Canadian Association of Broadcasters and others, the Commission advises that it will consider as "substantial" any fluctuation in programming resulting in:

-a change in the station's format ...,

-a decrease of 20% or more in Spoken Word content ...,

-a decrease of 20% or more in the News content ...,

-an increase of 20% or more in the number of times that any one musical selection may be repeated ..., or

-an increase or decrease of the vocal-to-instrumental ratio across the 50% mark ....

While the 1979 announcement did not address the question of what would be an acceptable variation in the number of hits, the Commission did provide some guidance several years later. In Public Notice CRTC 1984-249 dated 10 October 1984 entitled "Amendments to the Radio (F.M.) Broadcasting Regulations and the Radio (A.M.) Broadcasting Regulations -FM Renewal Applications", the Commission stated the following at page 4 under the heading "Substantial Change to Promise of Performance":

In examining applications for the renewal of FM licences, the Commission will generally consider as major amendments to a Promise of Performance, and gazette for public comment, proposals that result in:

-an increase or decrease of the vocal-to-instrumental ratio across the 50% mark ...;

-a decrease in the amount of Category -News greater than 20%;

-a decrease in the total amount of Spoken Word programming greater than 20%;

-a decrease in the amount of Category 6 -Music -Traditional and Special Interest;

-the elimination of any condition of licence;

-any proposal which is contrary to policy;

-a change in station group or format.

While the issue of hits is not addressed directly in the enumeration, the Commission does indicate that any proposal which is contrary to policy would be considered a major amendment to a Promise of Performance. The Commission's policy with respect to hits has been clearly articulated in a number of documents including the Policy Statement on the Review of Radio (Public Notice CRTC 1983-43 dated 3 March 1983) and in Public Notice CRTC 1986-248 entitled "Regulations Respecting Radio Broadcasting". In both of these documents which were issued following thorough public consultation, the Commission states that FM stations will be required to maintain a level of hits below 50%. This policy has also been clearly articulated in many of the Commission's licensing decisions.

Accordingly, the Commission has concluded that CKFM-FM failed to comply with its conditions of licence during the week of 3 to 9 January 1988 by broadcasting 66.2% hits. The Commission wishes to emphasize that inasmuch as the licensee in its Promise of Performance had established a commitment in respect of hits at the limit stipulated in Commission policy statements (less than 50% of the popular music selections broadcast each week) the licensee had thereby availed itself of whatever flexibility was possible in this regard. The Commission is of the view that exceeding the maximum permissible level of hits by 35.1% is clearly unacceptable.

The Commission has concluded that CKFM-FM was in breach of its conditions of licence even if the station was in compliance with four of the six commitments in respect of the musical indicators set out in section D of its Promise of Performance. Specifically, based on the evidence before it, the Commission has determined that the licensee has not made all reasonable efforts to fulfill substantially each section of the Promise of Performance which is a part of its licence and that the licensee failed to notify the Commission that during the week of 3 to 9 January 1988 the programming broadcast by CKFM-FM constituted a substantial variation from section D of its Promise of Performance.

If the Commission were to interpret the words "substantial fulfillment" as the licensee proposed at the hearing by balancing "a better performance on one commitment against a less good performance on another commitment", the undertakings given by the licensee in its Promise of Performance would be rendered meaningless, uncontrollable and unmonitorable. Accordingly, the Commission wishes to make it clear that an FM licensee may be in breach of its conditions of licence when its performance in respect of a single commitment in a section of its Promise of Performance varies by more than that contemplated in the April 1979 Announcement or Public Notice CRTC 1984-249, referred to above, or is contrary to Commission policy, unless otherwise authorized by the Commission.

In determining an appropriate penalty for this breach of the conditions of CKFM-FM's licence, the Commission has taken a number of factors into account. First, the Commission continues to consider that the limitation on the level of hits that may be broadcast by FM stations is important in ensuring the "varied and comprehensive" broadcasting system called for in the Broadcasting Act.

A key objective of the Commission's FM policy is to ensure that FM radio is distinct from AM and that each FM station is distinct from others within the same market. This policy has been developed through an extensive public process including a series of hearings and discussions with broadcasters and representatives of the Canadian artistic community. Since music-oriented AM stations often concentrate on playing the most popular hits with great frequency, the Commission has consistently required stations holding an FM licence to limit their use of hit material to less than 50% of the popular music selections broadcast each week. This policy also ensures that new untried music is played and that a wider variety of older music is broadcast. Other musical indicators that determine diversity are the musical format in which it broadcasts, the size of the record library used by a licensee, and the number of times any particular selection may be repeated (the current limit is 18).

The Commission has repeatedly emphasized that Canadian artists are to be given access to and exposure on Canadian airwaves. Public Notice CRTC 1988-71 reiterated that the limitation on hits and the minimum requirement for Canadian musical selections are fundamental to the fostering of artistic diversity and the development of new musical talent.

The Commission has also considered Standard's argument that it has "already been severely penalized, not only in terms of its image and reputation, but also in terms of substantial losses in advertising revenue caused by the threat of licence suspension". It does not share the licensee's view that the $350,000 financial loss it claims to have already sustained is entirely attributable to the call to a show cause hearing. In the Commission's opinion, the decline in CKFM-FM's advertising revenue correlates with its ratings which have decreased steadily since the spring of 1986 and could be accounted for on this basis.

Further, the Commission reiterates that following a lengthy process of public consultation, the CRTC in 1986 revised and simplified its radio regulations and some of the guidelines under which FM stations are required to operate. Having determined that the rules that remain are the fundamental elements by which it can ensure a dynamic and distinctive Canadian broadcasting system, the Commission expects its licensees to adhere strictly to them. In the process of reviewing the regulatory burden on its radio licensees, the Commission had stressed that broadcasters have a responsibility to ensure compliance.

To ensure fairness to other licensees, the Commission cannot condone the willful disregard of certain requirements on the part of one FM station or pardon the systematic failure to meet commitments made in the Promise of Performance.

Public Notice CRTC 1988-71 concluded with the following statement:

... the Commission views with considerable concern any actions by individual broadcasters that undermine the essential components of the [radio broadcasting] system. Should a licensee consider that it is unable to live up to its commitments, it should apply to modify its Promise of Performance.

The Commission considers that the rules it has developed should apply equally to all FM licensees and that allowing some to disregard these rules would undermine the objectives of the FM Policy and place other broadcasters in an unfair and unequitable competitive situation which ultimately is contrary to the public interest.

At the same time, particularly in light of the submissions at the public hearing, the Commission is mindful of the interest of members of the public in continuing to be exposed to the Canadian talent that receives airing on CKFM-FM and does not wish them to be deprived completely of this outlet for Canadian musical expression or of its activities in support of charitable organizations in its coverage area.

Accordingly, pursuant to paragraphs 17(1)(d) and 24(1)(b) of the Broadcasting Act, the Commission suspends the licence of CKFM-FM for a period of three consecutive weekdays, excluding Saturday and Sunday, during the month of September 1988, with respect to the station's authorization to broadcast commercial announcements, promotional contests and sponsorship mentions (programming subcategories 82, 83, 84, 85 as defined in the regulations respecting FM radio).

During the three days, the Commission encourages the licensee to broadcast public service announcements, announcements on behalf of charitable organizations and promotional messages in support of Canadian musical and artistic talent in place of commercial announcements, promotional contests and sponsorship mention. Based on the licensee's presentation at the 13 July public hearing, the Commission also encourages Standard to take this opportunity to demonstrate its leadership and commitment with respect to the development of new Canadian musical talent by undertaking special programming initiatives. The Commission wishes to be advised in advance as to which three days CKFM-FM will suspend the broadcasting of commercial announcements, promotional contests and sponsorship mention.

Fernand Bélisle
Secretary General