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Decision
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Ottawa, 28 September 1989
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Decision CRTC 89-768
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Niagara Television Limited
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Hamilton, Ontario - 890219900
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Following a Public Hearing commencing 29 May 1989 in the National Capital Region, the Commission denies the application for authority to transfer effective control of Niagara Television Limited, licensee of CHCH-TV Hamilton, from MH Acquisition Inc. (MHA) to CFPL Broadcasting Limited (CFPL).
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The transfer of control was to have been effected through the transfer to CFPL of 100% of the common voting shares of NEWCO Niagara Television, a company to be incorporated. NEWCO Niagara Television becomes the parent of the licensee company as a consequence of Decision CRTC 89-766 of today's date, which approves applications for authority to transfer effective control and for the reorganization of the various Selkirk broadcasting undertakings under the indirect ownership of MHA.
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In addition to CFPL-TV London, the prospective purchaser is the licensee of radio stations CFPL and CFPL-FM London. The company is owned by Blackburn Group Inc., which also owns CKNX Broadcasting Limited, the licensee of CKNX, CKNX-FM and CKNX-TV Wingham. The London and Wingham television stations have been operated as independent stations since 4 September 1988. Prior to that date, and for a period of well over 30 years, CFPL-TV and CKNX-TV were operated as affiliates of the CBC television network.
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For its part, CHCH-TV disaffiliated from the CBC in 1961, becoming Canada's first independent television station. As an independent station operating in the country's largest market, CHCH-TV's potential to attract audiences and revenues is exceeded by few other stations. In the Commission's view, this potential gives CHCH-TV the opportunity, and hence the responsibility, to play an important and strategic role in the production and acquisition of Canadian programming.
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Of concern to the Commission is the failure of CHCH-TV to realize its full potential under the ownership and direction of Selkirk. Compared to the financial performance of the television industry as a whole, CHCH-TV's recent record has been weak, and the projections of both Selkirk and CFPL do not indicate any significant improvement in the next five years.
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Based on the application before it, the Commission is also concerned by the absence of any definite plans by CFPL as to the future orientation of the Hamilton television station. For example, many of the program proposals appeared to be little more than plans to expand upon programs currently being produced in London. Moreover, CFPL failed to convince the Commission that the efficiencies associated with a larger economic entity would, as claimed by the applicant, result in "enhanced service to viewers throughout the area and, indeed, across the country".
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The Commission's concern with regard to CHCH-TV's performance under Selkirk's ownership related principally to the high ratio of expenditures for the acquisition of non-Canadian programs. This concern was a central factor in the Commission's recent decision to renew the licence for CHCH-TV for a period of three years only, to 31 August 1992 (Decision CRTC 89-92 dated 6 April 1989).
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According to the financial projections for the Hamilton station, as revised in May 1989, direct expenditures on Canadian programming under Selkirk's ownership were to amount to less than 33.4% of CHCH-TV's total program expenditures over five years. The Commission noted in its renewal decision that most other Canadian independent stations would spend more than 50% of their total programming budgets on Canadian programs.
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At the 29 May 1989 hearing, the Commission questioned CFPL as to how it proposed to respond to the Commission's concern about CHCH-TV's disproportionately high expenditure on non-Canadian programming and, specifically, what strategy it proposed to follow once CHCH-TV's contract with Entertainment Programming Services for the provision of non-Canadian programming expires. Mr. Bob Elsden, CFPL's President, replied as follows:
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That is an interesting question and one I really cannot answer. The reason for that is that we have yet to develop a strategy.
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According to the financial projections for CHCH-TV submitted by CFPL, 34.5% of the station's total programming expenditures over five years would be for Canadian programming. In the Commission's view, this represents a negible improvement in the ratio of Canadian to non-Canadian program expenditures when measured against the financial plans of the previous owner. Specifically, the applicant failed to convince the Commission that it has developed dynamic strategies and an effective business plan that will be necessary if CHCH-TV's financial performance in its market is to improve, and the station is to reduce its foreign programming costs to an acceptable portion of its total program expenditures. For these reasons, the Commission is unable to conclude that CFPL's application to acquire control of CHCH-TV is the best possible under the circumstances and, accordingly, has denied the application.
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As a consequence of this denial, effective control of the licensee will remain with MHA. Accordingly, the Commission directs MHA, within six months of the date of this decision, either to submit to the Commission for prior approval its own proposals for a benefits package and a business plan for CHCH-TV or, consistent with its firm commitment given at the hearing, to return to the Commission with a new application for the transfer of control of Niagara Television Limited to a third party. In either event, MHA undertook to ensure that the level of the benefits proposed at that time would be at least equal to that proposed by CFPL in the current application. The Commission notes in this regard that, among the benefits proposed by CFPL, were acceptable quantifiable benefits having a value of $5,438,000 over five years. This excludes the sum of $2,750,000 which CFPL proposed to spend for the construction of a microwave system and new rebroadcasters at Chatham and Sarnia. As discussed with CFPL at the hearing, and consistent with the Commission's policies reiterated in Public Notice CRTC 1989-109 of today's date, the amount of $2,750,000 cannot be accepted as a significant and unequivocal benefit of this transaction because these expenditures would be contingent upon Commission approval of future applications.
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The Commission wishes to emphasize that its denial of the current application is for reasons unrelated to any findings with respect to the adequacy of the dollar value attached to the benefits proposed by CFPL. The Commission, however, reminds MHA that the benefits package it is required to bring forward within the next six months, either on its own behalf or on behalf of a third party seeking to acquire control of CHCH-TV Hamilton, will be assessed on its own merits by the Commission, taking into account the concerns addressed in this decision, as well as the responsibilities to be assumed and the scale of the programming, management, financial and technical resources available to the applicant.
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Fernand Bélisle
Secretary General
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