ARCHIVED -  Decision CRTC 89-490

Decision

Ottawa, 19 July 1989

Decision CRTC 89-490

NewCap Broadcasting Limited

Gander, Grand Bank, Grand Falls, Harbour Grace, Musgravetown and St. John's, Newfoundland - 880952700 - 880951900 - 880950100 - 880953500 - 880949300 - 880934500 - 880948500

Following a Public Hearing in Moncton on 10 April 1989, the Commission approves the applications submitted by NewCap Broadcasting Limited (NewCap) for authority to acquire the assets of CFYQ Gander, CKYQ Grand Bank, CIYQ Grand Falls, CFIQ Harbour Grace, CHYQ Musgravetown, CKIX-FM and CJYQ St. John's from CHUM Limited, and for broadcasting licences to continue the operation of these undertakings, under the same terms and conditions as the current licences.

The Commission will issue licences to NewCap upon surrender of the current licences. The licences will expire 31 August 1993.

NewCap is the licensee of CFDR and CFRQ-FM Dartmouth, Nova Scotia. It owns 100% of each of Leader Broadcasting Corporation Limited, licensee of CJLB Thunder Bay and CJLB-FM-1 Nipigon/Red Rock, Ontario and Northumberland Broadcasting Company Limited, licensee of CHTN Charlottetown, Prince Edward Island. Pursuant to Decision CRTC 89-372 dated 23 June 1989, NewCap also acquired 100% ownership of CFCW Ltd., licensee of CKRA-FM Edmonton and CFCW Camrose, Alberta and CHRK-FM Kamloops, British Columbia. For its part, NewCap is 100% owned and controlled by Newfoundland Capital Corporation Limited (NCC) whose President and principal shareholder is Mr. Harry Steele, who has extensive business interests in the province of Newfoundland.

Other than the undertakings which are the subject of this decision, CHUM Limited owns or controls a total of 18 radio broadcasting operations, 8 television stations and their rebroadcasting undertakings and MuchMusic, an English-language specialty programming service. It also owns 50% of MusiquePlus, a French-language specialty programming service. The President and principal shareholder of CHUM Limited is Mr. Allan Waters of Toronto.

At the hearing, CHUM Limited explained that during the five years that it has owned these Newfoundland-based radio undertakings, it has invested over $7,600,000 in the stations. CHUM Limited stated that while the programming and audience ratings of the stations have improved under its ownership, the stations have continued to experience financial losses. Mr. Waters stated:

 CHUM is not a seller of broadcast stations. We are long-term operators and this is the first time in my 35 years of broadcast ownership that we have ever sold a station.

He explained that when Mr. Steele approached him to purchase the stations three years ago, the company undertook a detailed assessment of the stations and concluded:

 that the direct involvement of a highly-motivated Newfoundlander would be in the best interests of the Q system. Mr. Steele has demonstrated his personal commitment to the development of these stations and this, coupled with the resources of Newfoundland Capital Corporation and his commitment to the province of Newfoundland, we believe, makes him the ideal owner of these properties.

In this respect, NewCap stated that it has firm plans to "rebuild the Q system to a place of prominence in Newfoundland broadcasting".

The Commission notes that NewCap intends to fund the $1.2 million purchase price by way of $200,000 in equity supplied by NCC and a $1,000,000 promissory note to CHUM Limited to be paid in six annual principal payments commencing in 1991. Given NCC's substantial corporate strength and the documents filed with the applications, the Commission has no concerns with respect to the availability or adequacy of the required financing.

Further, NewCap made a commitment that it would meet all cash requirements even if they are higher than projected. In this regard, Mr. Steele stated:  ... I think it is fair to say we generally tend to be optimistic, and if it [a financial turnaround] is not achieved in five years, if it takes seven, we will do whatever it takes to do it ... [however] we feel very confident that we can put a team together, get the people in place and do whatever it takes to make the Q radio system very successful.

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.

In assessing the benefits of this transaction, the Commission has considered important the statements of the vendor and purchaser with respect to the potential positive impact of local ownership and the perceived desireability of introducing a strong Newfoundland presence to the stations. The Commission has also considered important the strong financial position of NewCap and its commitment to ensure that the required financial resources will be available to provide for the continuity of the stations. It notes, in this regard, that NewCap's own projections forecast that the stations will continue to incur substantial losses over the first five years of ownership by NewCap. With respect to those benefits which can be quantified in monetary terms, the purchaser has allocated direct expenditures of $25,000 per year for a minimum of five years for Canadian talent development. Specifically, NewCap will introduce a major talent search project consisting of competitions to be held in Gander, Grand Bank/Marystown, Harbour Grace/ Carbonear, Grand Falls and St. John's, at a cost of $15,000 per year. Local winners will advance to finals at St. John's and the overall winner will be awarded a recording session at a professional facility, for which NewCap has allocated $10,000 per year. It also committed to provide airplay of the winner's song on Newfoundland stations. Further, NewCap stated at the hearing that the winner's music would also be broadcast on other NewCap radio stations if the recording is "appropriate for the format". Further, it plans to provide significant air time to promote other local and regional artists. NewCap also undertook to maintain the $5,000 annual contribution currently made by CHUM Limited to FACTOR, through the current licence term and to contribute an additional $5,000 each year for the next five years, a benefit which is valued at $25,000.

Further, although they cannot be considered to be benefits accruing from this transaction, the Commission has taken note of NewCap's undertaking to continue the Canadian talent promotion and development initiatives put in place by CHUM Limited. These include support for the numerous folk festivals held throughout the province, the recording and broadcast of performers appearing at the annual Newfoundland and Labrador Folk Arts Festival and continuation of the use of free air-time to promote the recordings of Canadian artists.

The Commission did not accept as benefits any of the initiatives originally introduced by NewCap at the 12 April public hearing or proposed in a subsequent letter to the Commission dated 19 April 1989. NewCap had proposed expenditures of $30,000 for a computerized traffic and billing system, $21,000 for the purchase of a compact disc library and $8,000 for the purchase of a computerized music control system, each of which the Commission would have, in any event, discounted as being expenditures associated with the normal cost of doing business.

Nor does the Commission consider the other expenditures detailed at the hearing or referenced in the April letter related to technical improvements which will require, or result from, future applications to the Commission and the Department of Communications to be benefits accruing from the transaction. For example, NewCap explained that CJYQ suffers from what it considers to be a major technical deficiency in its night-time coverage of Mount Pearl and that it intends, therefore, to apply for authority to increase the transmitter power and to erect a third tower. At the same time it intends to convert CJYQ to stereo sound, necessitating major revisions to the studio and control room. According to NewCap, if these applications are approved, approximately $900,000 will be spent to implement these capital improvements. Moreover, at the hearing, NewCap indicated that technical improvements will be required at CFIQ Harbour Grace and CFYQ Gander. In its letter dated 19 April 1989, NewCap estimated that CFIQ's technical changes alone would cost approximately $300,000.

NewCap also stated that part of its business plan would be to examine the programming of the stations serving communities outside St. John's to determine if what is presently offered is appropriate to each of the markets. NewCap noted in this regard that there would not be "wholesale changes" but rather an effort to "fine-tune the programming, to create a niche for the stations" and decide "whether they are country stations or gold stations".

The applicant also indicated that it would examine the levels of local programming broadcast on each of the smaller-market stations. In response to Commission questioning, NewCap indicated that it is unlikely that this examination would result in any reductions and stated:

 It is not our intention, as we look at these, to be anything but builders. That is the attitude we approach these with, that we are going to build and provide service, not take service away. In this respect, it indicated that it anticipates that it will increase local programming at CIYQ Grand Falls from 12 hours to 18 hours per day which would increase operating costs by approximately $60,000 a year. In its letter dated 19 April 1989, NewCap also indicated that renovations will be required at Grand Falls which it estimates, will require expenditures of about $350,000.

With regard to the stations serving St. John's, NewCap advised the Commission that it has undertaken market studies and has determined that "there will be no change" to the country music format of CKIX-FM. It also stated that the gold-based format of CJYQ "appears to be the right format for the market" and indicated that a second round of research would be undertaken only to:

 try to focus the music and ensure that the music that is played within that format is right for the market.

In the past, the Commission has expressed concern about significant programming changes being initiated by this licensee following its acquisition of AM and FM radio broadcasting undertakings. However, in light of NewCap's undertaking at the hearing that it intends to retain the existing formats of each of these stations, the Commission is satisfied that the listeners to these stations will not be subject to unforeseen disruptions in the programming they presently receive. Further, with respect to CFYQ, CKYQ, CIYQ, CFIQ and CHYQ, it is a condition of each licence that, at a minimum, the current hours of locally-originated programming be maintained throughout the licence term.

At the hearing, the Commission discussed with CHUM Limited CKIX-FM's failure to comply with the Commission's requirements with respect to the retention of clear and intelligible logger tapes and adherence to the relevant amount of foreground programming set out in the Radio Regulations, 1986 (the regulations). According to a Commission analysis of the programming broadcast during the week of 22 to 28 May 1988, CKIX-FM was also found to be broadcasting 56.3% hits, although Commission policy requires that FM stations broadcast a hit level of less than 50%. The station was also found to be broadcasting less than the full 3 hours 30 minutes per week of Category 6 (Traditional and Special Interest) music to which the licensee was committed in its Promise of Performance.

CHUM Limited stated to the Commission that it had reviewed these problems and instituted a number of procedures to ensure that they do not recur. Specifically, extensive back-up logger tape equipment and a $200,000 back-up generator system for both its studio and transmitter have been installed, and staff have been instructed to check the machines on a regular basis every day. Programs have been revised to ensure adequate levels of foreground programming and the station has since acquired for its library a number of music charts for the purpose of identifying hits. At the hearing, CHUM Limited assured the Commission that the station was being operated in compliance with CRTC policies and regulations and indicated that it will continue its discussions with the Commission regarding Category 6 music.

The Commission reiterates the importance of ensuring that appropriate measures are taken in order that Commission policies and regulations are adhered to at all times, and notes NewCap's plans to establish a committee to deal with sex-role stereotyping issues.

In considering these applications, the Commission has taken into consideration, as outlined above, the information filed with the applications and the statetements made by CHUM Limited and NewCap. Given the difficult financial situation of the stations, the fact that financially sound, local ownership will ensure the continuation of these services, and the undertakings of the purchaser to enhance the local programming and technical capacities of the stations, and given the commitments of the purchaser with respect to Canadian talent initiatives, the Commission is of the opinion that approval of this transaction is in the public interest. It also considers that the benefits are commensurate with the size of the transaction and the resources available to the purchaser.

NewCap is required to submit, within one year of the date of this decision, a detailed report outlining its progress in implementing all of the commitments and initiatives addressed at the hearing. In considering these applications, the Commission has also taken into account the matter of cross-media ownership. In this respect, it notes that NCC holds ultimate control, through Robinson Blackmore Printing & Publishing Ltd., of 12 weekly newspapers in Newfoundland, 2 in Labrador and a Sunday paper in St. John's. The Commission notes, however, that each of the communities served by these stations and these weekly publications has at least one other radio station originating local programming and that CBC radio service is available as well as television services. The Commission, therefore, considers that there will not be a reduction in the number of news voices and has taken note of NewCap's statement:

 Quite simply, the type of news that we would report in most of our community newspapers is quite different than what you would expect to see on your television or hear on your radio.

Accordingly, the Commission considers that cross-media ownership is not an issue of concern in respect of these applications.

It is a condition of each licence that NewCap adhere to the Canadian Association of Broadcasters' (CAB) self-regulatory guidelines on sex-role stereotyping, as amended from time to time and approved by the Commission.

It is also a condition of each licence that NewCap adhere to the provisions of the CAB's Broadcast Code for Advertising to Children, as amended from time to time and approved by the Commission.

The Commission acknowledges the two interventions received in support of these applications and, with respect to the intervention by Mr. Augustus Barron, notes NewCap's statement made at the hearing that Mr. Barron "... is welcome to use the facilities on the same basis as any other advertiser...".

Fernand Bélisle
Secretary General