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Decision
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Ottawa, 23 June 1989
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Decision CRTC 89-372
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CFCW Ltd.
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Edmonton and Camrose, Alberta and Kamloops, British Columbia- 882174600 - 882172000 - 882173800
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Following a Public Hearing in Saskatoon on 20 February 1989, the Commission approves the applications for authority to transfer effective control of CFCW Ltd., licensee of CKRA-FM Edmonton, CFCW Camrose and CHRK-FM Kamloops, through the transfer of 17,999 (90%) Class "A" common voting shares held by CFCW Radio Ltd., which in turn is controlled by Harold J. Yerxa of Camrose, and 2,001 (10%) Class "A" common voting shares held by Warren H. Holte to Newcap Broadcasting Limited (NewCap).
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NewCap is the licensee of CFDR and CFRQ-FM Dartmouth, Nova Scotia; CJLB Thunder Bay, Ontario through Leader Broadcasting Corporation; and CHTN Charlottetown, Prince Edward Island through Northumberland Broadcasting Company Limited. NewCap is, in turn, 100% owned and controlled by Newfoundland Capital Corporation Limited (NCC) whose President and principal shareholder (43%) is Mr. Harry Steele, a Dartmouth resident and businessman. At the hearing Mr. Yerxa, who founded CFCW Radio Ltd. nearly 35 years ago, explained that he has been seeking a purchaser for the stations "for a couple of years". He stated that although other parties had expressed interest, he considered that NewCap would ensure that "the quality and level of local service enjoyed by our local listeners will be maintained and enhanced in the years ahead". Mr. Yerxa indicated that he placed great emphasis on the continuity of the broadcast service currently provided to "our many listeners in Alberta and British Columbia" and on protecting the livelihood of CFCW Ltd.'s employees, all of whom will continue to be employed by NewCap. In this regard, the Commission notes that Mr. Warren Holte, who is currently Vice-President and General Manager of CFCW Ltd., will assume the role of President under a five-year management contract and that Mr. Yerxa will become Chairman of the Board of Directors, which will be "western based" and include representation from Edmonton, Camrose and Kamloops.
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The Commission notes that the proposed purchase price is $18.5 million. NCC has guaranteed that it will fully fund the cost of this transaction either by liquidating marketable securities or taking on bank debt. Given NCC's substantial corporate financial strength and the related documents filed by NewCap, the Commission has no concerns with respect to the availability or adequacy of the required financing. It also notes NewCap's commitment made at the hearing that
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the cash flow generated by CFCW Ltd. will first go to fund any capital expenditure requirements of the radio stations within the CFCW group....
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NCC stated that any cash surpluses would be used to offset operating cash losses of other NewCap and NCC stations and only then would accrue to NCC "for purposes of funding or servicing the debt".
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As stated in a number of decisions relating to applications for authority to transfer the ownership or effective control of broadcasting undertakings, 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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In its consideration of these applications, the Commission has given significant weight to the continued involvement of Messrs. Yerxa and Holte and to the fact that NCC and NewCap have a history of providing a significant element of local autonomy to their broadcasting undertakings. The stations which are the subject of this decision are well established in their respective communities, have a notable record of community involvement and are enjoying financial success. The Commission therefore considers that such factors as the continuation of existing management, local autonomy and the western-based Board of Directors will benefit the communities served by CKRA-FM, CFCW and CHRK-FM. The Commission also notes NewCap's proposal to establish an external advisory committee.
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NewCap identified numerous benefits which it considered could be quantified in monetary terms. The Commission has accepted the majority of these, specifically those benefits relating to programming improvements and the promotion and development of Canadian talent. As discussed later in this decision, however, consistent with past decisions, the Commission has disallowed those proposals which it considers to be associated with the normal cost of doing business. These include staff incentives, on-air promotion of the stations' specific endeavours and on-going audience research studies aimed at providing management with empirical data on which to base programming decisions. The tangible benefits which have been accepted by the Commission total $1,212,500 over five years.
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CFCW Ltd. currently has in place commitments in respect of Canadian talent development which represent annual expenditures of $154,000. NewCap intends to maintain and build upon the existing commitments and to introduce important new initiatives in this area which, it states, will require the creation of a full-time position, that of Canadian talent co-ordinator, at a cost of $30,000 per year.
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NewCap has committed to maintain CKRA-FM's existing "Take One" weekly talent series and to broadcast this program on CFRQ-FM Dartmouth, thus widening exposure for Edmonton area performers. An annual "K-Lite Discovery Series" ("Star Trax") will be created which will solicit entries from new light rock and pop artists. The winner will receive a professionally recorded digital master and be assured of national distribution on compact disc. Direct costs associated with this initiative amount to $41,000 per year.
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CFCW's country star search competition will also be maintained and the station will become involved in the existing $37 million Edmonton Northland Coliseum's "Youth Talent Quest". NewCap will contribute $35,000 each year to conduct "live elimination competitions" in various north-central Alberta communities. The winner of the contest, which is open to performers between the ages of 13 and 21, will compete in the international finals in Memphis, Tennessee.
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With respect to CHRK-FM Kamloops, NewCap will increase by $6,000 the existing $4,000 annual direct expenditures on behalf of the "Battle of the Bands", the winner of which is awarded a cash prize and recorded in a professional sound studio.
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Newcap intends to introduce several new initiatives on behalf of CFCW Ltd., including a series of seminars entitled "Images and Issues", excerpts of which will be broadcast on all three stations. NewCap explained that it will spend approximately $50,000 each year to collect data and conduct other research in the area, to expand awareness of issues such as sex-role stereotyping, and the problems of visible minorities and aboriginals. A local sociologist will identify the topics to be covered and the research activities will culminate in an annual series of six seminars with public participation. NewCap estimates that the annual direct costs relating to the seminars will total approximately $17,500.
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NewCap's objectives for this initiative, as stated at the hearing, are to encourage participation in community groups, contribute knowledge to these groups and the communities at large, sensitize the staff of the stations to these issues, develop written material for use by other broadcasters and disseminate relevant material through the broadcasting of excerpts of the seminars.
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CFCW Ltd. will also provide $15,000 per year in cash support for Edmonton's three summer festivals and create a program whereby $20,000 will be spent each year to "provide meaningful support" to local theatre, dance and musical organizations in Edmonton, Camrose and Kamloops. Further, $28,000 per year will be spent for bursaries and scholarship support for broadcast and music students attending Edmonton's Grant MacEwan Community College and the Northern Alberta Institute of Technology, ($10,000 each) and Camrose Lutheran College and Kamloop's Cariboo College ($4,000 each).
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The Commission notes that most of these initiatives will receive extensive promotion on the stations and that the Images and Issues seminars will also be promoted in local newspapers. While the Commission recognizes such on-air promotion to be an intangible benefit of this transaction, it has not taken into account the dollar values NewCap has associated with these efforts as they do not represent a direct cost to the company. Nor has the Commission accepted the financial commitments which NewCap proposes for surveys to determine audience preferences since it has not been convinced by the applicant's arguments that such surveys would benefit either the stations' audiences or the broadcasting industry. In this regard, the Commission notes that these stations have been operating in formats which have achieved significant audience acceptance in their markets. Further, unlike stations acquired by NCC and NewCap in previous transactions, NewCap indicated at the hearing that it does not contemplate making format or major programming changes to improve the financial situations of CKRA-FM, CFCW or CHRK-FM.
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The Commission also recognizes that the staff of CFCW Ltd. will benefit from greater job opportunities within a larger organization, from the prospect of a profit-sharing plan and from an annual pension plan to be introduced at the stations. In line with Commission policy, however, it considers that these benefits accrue more to the licensee and its staff than to the public, the communities served or the Canadian broadcasting system. Accordingly, the Commission has not recognized these personnel-related initiatives as benefits of this transaction.
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The Commission intends to review, on a yearly basis, that the commitments noted herein have been implemented and expects that if any of the specific commitments cannot be undertaken, similar initiatives will be implemented. In this regard it notes Mr. Steele's statement: ... As the President of Newfoundland Capital, I stand firmly behind the commitments contained in this application and can assure the Commission that they will be met to the letter in every respect.
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The Commission will also follow with interest the proposed program exchange between CKRA-FM and CFRQ-FM and will view favourably any expansion of this initiative. The Commission also notes NewCap's undertaking to retain agricultural features and reports on CFCW, a commitment made at the hearing in response to an intervention by the Regional Co-ordinator of the National Farmers Union.
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In light of all of the foregoing, the Commission is satisfied that the purchaser has proposed benefits that are commensurate with the size and nature of this transaction and, accordingly, the Commission has concluded that approval of the applications is in the public interest.
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The Commission acknowledges the other 61 interventions received in support of these applications and notes that most of these interventions were from groups and associations in each of the communities served by these radio stations.
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Fernand Bélisle
Secretary General
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