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Decision
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Ottawa, 28 September 1989
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Decision CRTC 89-772
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Moffat Communications Limited, representing a company to be incorporated
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Edmonton, Alberta - 890260300 - 890261100
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Following a Public Hearing in Winnipeg on 16 May 1989, the Commission approves the applications by Moffat Communications Limited, representing a company to be incorporated (MCL) for authority to acquire the assets of CHED and CKNG-FM Edmonton from Moffat Communications Limited (Moffat) and CFCN Communications Limited (CFCN) respectively, and for broadcasting licences to continue the operation of these undertakings.
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The Commission will issue licences to MCL upon surrender of the current licences. The licences will expire 31 August 1992, and will be subject to the conditions specified in this decision and in the licences to be issued. This term will enable the Commission to consider the renewal of these licences in the context of its FM Policy Review announced in Public Notice CRTC 1989-30 dated 14 April 1989.
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This authority will only be effective and the licences will only be issued at such time as the Commission receives documentation establishing that the company has been incorporated in accordance with the applications in all material respects.
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Moffat, which is controlled indirectly by Randall L. Moffat, is the licensee of CHED, as well as of joint AM and FM undertakings in Winnipeg, Vancouver and Calgary, CHAB Moose Jaw, Saskatchewan, CHFM-FM-1 Banff, Alberta and CHAM Hamilton, Ontario. It is also the licensee of CKY-TV Winnipeg and five other television broadcasting undertakings operating in the province of Manitoba. Moffat is also the licensee of CKYB-TV Brandon, CKYD-TV Dauphin and CKYB-TV-1 McCreary, Manitoba and holds 74.46% of the shares of Winnipeg Videon Incorporated which is the licensee of cable television undertakings serving part of Winnipeg and Pinawa, Manitoba.
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CFCN is ultimately controlled by Maclean Hunter Limited which, through various subsidiaries, holds effective control of radio stations in Alberta, Ontario and the Maritimes as well as cable television undertakings serving 18 Ontario locations. In addition to being the current licensee of CKNG-FM Edmonton, CFCN is the licensee of CFCN-TV Calgary and its twelve rebroadcasting undertakings operating in Alberta and British Columbia and CFCN-TV-5 Lethbridge, Alberta, a partial rebroadcaster. It is also the licensee of CFCN and CJAY-FM Calgary, CJAY-FM-1 Banff, Alberta and CJAY-FM-3 Invermere, British Columbia.
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Under the proposed shareholders' agreement, Moffat would hold 725 common voting shares of MCL (72.5%) with CFCN holding the remaining 275 common voting shares (27.5%). At the hearing, MCL stated: The shareholders' agreement provides for CFCN's share of the new company to be increased to 35% during the first three years of its operation, at the option of either CFCN or Moffat and that both CKNG-FM and CHED would be managed on a day-to-day basis by Moffat, with overall direction provided by a Board of Directors comprised of representatives of each of Moffat and CFCN.
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At the hearing there was considerable discussion concerning the value of the assets of CKNG-FM which is, effectively, the only station which would undergo a change of control as a result of these transactions. At the Commission's request, subsequent to the hearing MCL submitted documents setting the estimated value of CKNG-FM's assets at $3.5 million.
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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 such applications and because there is, thus, only one proposal presented to the Commission, 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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The applicant has attached a cash value of $985,000 to its commitments for the provision of benefits over five years, of which $375,000 would be direct cash expenditures. In Public Notice CRTC 1989-109 of today's date, the Commission has issued a policy statement which summarizes the types of benefits that, for one reason or another, it has been unable to accept in considering applications for the transfer of control of broadcasting undertakings, as distinct from those it is generally prepared to accept as "significant and unequivocal" in nature.
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The Commission, in this instance and in accordance with its policy statement, has accepted in its entirety, the tangible benefits package totalling $375,000 in direct expenditures although there are some obligations which MCL will be required to address, as discussed later in this decision.
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With respect to the intangible benefits identified by the applicant, several of these fall outside of what is generally acceptable to the Commission. As stated on numerous occasions, commitments with respect to maintenance of staff levels, increased employment security and enhanced career opportunities are considered to be of benefit only to MCL and its employees.
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Further, since both parties will continue to have an interest in the ownership of MCL, the Commission does not consider that as a result of this transaction there will be any perceptible change in terms of experience that the parties will contribute to the market or to the Canadian broadcasting system.
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At the hearing, the applicant referred to a number of intangible benefits that would result from the combined operation of these stations. The Commission considers these to be potential effects of a business decision taken by the parties involved and not direct benefits to the stations' audiences. MCL also stated that two employees of the AM station would be re-assigned to the FM station to write enrichment material for CKNG-FM. While the Commission acknowledges that this may assist in the preparation of spoken word programming, it notes that with or without this transaction, it is incumbent upon the licensee to meet its obligation to provide the 18% foreground programming and 50% combined foreground and mosaic programming approved in Decision CRTC 87-336 dated 7 May 1987, by which the licence of CKNG-FM was last renewed.
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With respect to the tangible benefits proposed by the applicant, the Commission notes that they relate entirely to the promotion and development of Canadian talent. When combined with the existing Canadian talent development budgets of CHED ($50,000 per year) and of CKNG-FM ($100,000 per year), MCL will spend a total of $1,125,000 over five years for this purpose.
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In this regard, MCL stated at the hearing that it planned to replace the existing CKNG-FM initiatives "KING Concerts", "King Search for the Stars" and "Road Show" with initiatives developed as a result of its association with The Alberta Talent Festival, organized by the Alberta Recording Industry Association. CKNG-FM's monetary commitment to this new initiative is $91,000. MCL indicated at the hearing that this is to be a one-time commitment in 1989/90 since it considers that if the festival is a success, it should be "self-generating" in future years.
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Given that CKNG-FM's existing annual commitment to Canadian talent development is $100,000 and that the station has earmarked $91,000 for the festival, the Commission requires MCL to explain the $9,000 discrepancy in the current-year expenditure allocations. It also notes that approximately 95% of the budget for the new "One Night Stand" concert series is to be devoted to talent and studio costs. Further, the Commission expects that the new "Basement Tapes Program" will be broadcast during hours convenient for the largest number of listeners.
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With respect to CHED, the Commission notes that MCL will retain Moffat's annual monetary commitment to FACTOR, Musicfest Canada and the Edmonton Symphony Orchestra and that MCL has recently made a commitment to continue to support the "Teen Festival" by providing $5,000 in recording time as a Grand Prize for the winner of the "Boom'N'Blast" competition. MCL will also continue CHED's "Catch a Rising Star" contest.
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The Commission has also taken note of MCL's statement made at the hearing:
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We give you our commitment that this money [$225,000 per year total] will be spent. If one project stalls, the money will be transferred to a different project, if necessary; not banked, not saved. We will put it forward each year for [Canadian talent] development.
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MCL is required to submit to the Commission, a yearly report specifying its direct and indirect expenditures related to the Canadian talent development initiatives to be undertaken by CKNG-FM and CHED. The Commission notes that the applicant has committed a minimum of $225,000 per year in direct expenditures for the two stations.
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The Commission also considers important MCL's undertaking to maintain the present formats and styles of CHED and CKNG-FM so as to maintain the diversity of radio service in the Edmonton market. It expects MCL to honour this commitment.
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The Commission is satisfied that the proposed benefits are commensurate with the size of the transaction and take into account the responsibilities to be assumed by MCL, the characteristics and viability of the broadcasting undertakings concerned, and the scale of the programming, management, financial and technical resources available to CFCN and Moffat.
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The Commission acknowledges the seven interventions received with respect to these applications, all of which advocated approval of the transaction.
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It is a condition of each licence that the licensee 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.
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It is also a condition of each licence that the licensee 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.
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Fernand Bélisle
Secretary General
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