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Decision
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Ottawa, 8 March 1990
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Decision CRTC 90-223
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CHAY Limited
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Barrie, Ontario - 890849300
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Following a Public Hearing commencing 21 November 1989 in the National Capital Region, a majority of the Commission approves the application for authority to transfer effective control of CHAY Limited, licensee of CHAY-FM Barrie, through the transfer of all common and related preferred shares (100%) from Vincent, Elizabeth and Donald Dittmer, and Susan Cotton to Shaw Cablesystems Ltd. (Shaw).
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The licensee has been managed by Vincent Dittmer since its inception in 1977, and has been controlled by Mr. Dittmer and members of his family since 1985. At the hearing, Mr. Dittmer expressed the view that the station has progressed as far as it can under its present ownership. He submitted that, although the station requires extensive capital improvements, these could only be carried out "by adding more debt than is prudent for someone in his sixties."
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Shaw is a public company controlled by members of the Shaw family of Edmonton, Alberta and Woodridge, Ontario who, collectively, own 59.5% of the total issued voting shares. Shaw, through a number of wholly-owned subsidiaries in Western Canada, Ontario and the Atlantic Region, is the country's fourth-largest cable operator by revenues.
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Through two other subsidiaries, it also owns radio stations in Edmonton, Red Deer, Lethbridge and Taber, Alberta. The purchaser noted that this application represents its first attempt to enter the Ontario radio market.
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Because the Commission does not solicit applications for authority to transfer ownership or effective control of broadcasting undertakings, and because there is thus only one proposal presented to the Commission, the onus is on the applicant in such cases to demonstrate to the Commission that the application filed is the best possible under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
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According to the purchaser, the transaction will yield several important, though intangible, benefits. Shaw noted, for example, that it would represent a new voice among Ontario radio stations and will bring with it "... the energy, ideas and programming initiatives that have proven successful in the Alberta market." It emphasized its record as a radio broadcaster and cable operator, noting:
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We have tended to overachieve on the commitments that we have made to the Commission... The same trend will prevail in this case. Shaw added that it possesses the financial capacity and is fully prepared to implement the various capital improvements at CHAY-FM that Mr. Dittmer identified as being necessary.
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According to Shaw, the tangible benefits associated with this transaction represent direct cash expenditures by the licensee amounting to $1,755,000 over five years. The Commission has assessed the various projects and initiatives described by Shaw as the tangible benefits of the transaction. While the Commission welcomes Shaw's commitments to make the financial expenditures necessary to implement them all, it notes that certain of the tangible benefits claimed are in respect of capital or operating expenditures that, in the Commission's view, are more appropriately considered as being part of the normal cost of doing business. Moreover, the Commission considers that these expenditures are within the financial capacity of the licensee and its present owners to carry out, notwithstanding their expressed unwillingness to do so. They thus fall into the category of expenditure that the Commission generally rejects as benefits, in accordance with its longstanding policy in considering transactions of this nature, as summarized in Public Notice CRTC 1989-109 dated 28 September 1989.
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Although the Commission, in its consideration of this application, has disqualified certain of the benefits claimed, it is generally satisfied that those remaining are significant and unequivocal, and commensurate with the size and nature of the transaction. Moreover, taking into account the financial resources that the new owner will bring to the Barrie station, and Shaw's past performance as a radio broadcaster, the Commission is satisfied that approval of this application is in the public interest.
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The Commission expects Shaw, in keeping with its commitments, to ensure that all of the proposed expenditures of $1,755,000 are made over the course of the next five years in accordance with the schedule outlined in the application.
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Among the proposed initiatives is one entitled "Project Easy", which is designed both to assist Canadian talent and to help reduce the current shortage in this country's production of easy listening recordings. Under this proposal, the licensee will fund the production of a minimum of 150 recordings over five years, "... in Canadian studios... utilizing only Canadian musicians, producers and, where possible, Canadian compositions." Shaw added that the recordings will be offered to other easy listening stations across Canada, "... in the hope that (they) will add their support to the project and make it grow." The Commission will follow with interest the licensee's progress towards implementation of this and its other proposed initiatives.
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In the application, Shaw indicated that, in addition to the direct funding that the licensee would contribute to Project Easy for the production of new Canadian recordings, a further sum of $25,000 over five years, would be contributed by Kalamusic, a U.S. based syndicator of easy listening music, to help provide exposure for the recordings. At the hearing, however, the applicant acknowledged that there was no written agreement pertaining to any such contribution by Kalamusic. In view of the above, and given the applicant's inability to guarantee that the exposure for Canadian artists to result from any such arrangement with Kalamusic would be meaningful or effective, the Commission has disqualified the $25,000 as a significant and unequivocal benefit of the transaction.
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Similarly, the Commission advises that in its assessment of the transaction, it has disqualified as a benefit the sum of $600,000 which the applicant claimed could be raised over five years by community groups and charities from admission charges to the licensee's "Big Band Saturday Night Roadshow", a program to be broadcast live from different venues in CHAY-FM's listening area. In the Commission's view, the amount of $600,000 that the applicant suggests could be raised by this activity over five years is speculative.
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At the time of its last licence renewal in 1985, the licensee made a commitment to provide support for the development of Canadian talent through contributions totalling $12,000 per year to FACTOR/CTL and an organization called the International Beautiful Music Association. In view of the fact that the International Beautiful Music Association ceased operation in 1985, the Commission asked the licensee at the hearing where it has re-directed its financial contributions. The licensee replied that the monies have been re-allocated "... primarily to journalistic expression... (to) stringers, feature performers for the spoken word programming."
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In the Commission's view, such payments to stringers and feature performers fall clearly into the category of normal business expenses and cannot be considered as meaningful contributions to Canadian talent. Accordingly, the Commission expects the licensee to submit a report, within three months of the date of this decision, as to how and where it proposes to allocate this annual sum of $12,000 for the support of Canadian talent, in accordance with the existing commitment of the licensee.
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The Commission, recognizing that the station's contours encompass portions of Metropolitan Toronto, asked Shaw at the hearing to define what it perceives as being CHAY-FM's market. Although Shaw observed that Toronto residents form part of the station's total audience, it made the following comment:
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Essentially the programming is not aimed at Toronto; it is aimed at the general regional audience. We have no intention of changing that particular direction of the station, or any other direction of the station, for that matter... It is a general regional station.
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The Commission notes Shaw's statement, and expects it to ensure that CHAY-FM continues to operate within that regional mandate, centred in Barrie.
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With respect to foreground programming, it is an important part of CHAY-FM's mandate, and the responsibility of every music-based FM station, to provide high quality musical foreground programming. Moreover, foreground programs should not be relegated to early morning or late evening hours, but should be scheduled at times when they can be expected to reach a large audience. Concerns regarding the performance of CHAY-FM in these areas, under its present ownership, were discussed at the hearing.
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The Commission expects the licensee, under its new ownership, to take immediate steps to develop a better mix of spoken word and musical elements in CHAY-FM's foreground programming in order to expand the diversity of service provided to its audience. It also expects the licensee to ensure a more reasonable balance in the scheduling of foreground programs on CHAY-FM.
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The Commission acknowledges the intervention submitted by the Vespia Township Council in support of the current application.
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It has also taken note of the technical matters raised in the joint intervention presented at the hearing by Twigg Communications Limited and five other parties, whose applications for a new FM station to serve Toronto are scheduled for consideration at a Toronto Public Hearing commencing 3 April 1990.
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Fernand Bélisle
Secretary General
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Dissenting Opinion of Commissioner Edward A. Ross
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Considering the Commission's position on benefits as outlined in Public Notice CRTC 1989-109 dated 28 September 1989, and the size of this transaction, I am not convinced that the allowed benefits are significant enough to allow for approval of this transaction.
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If Shaw felt that it had the financial strength to pay such a high purchase price, in my opinion it should have been able to provide a stronger acceptable benefits package.
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Dissenting Opinion of Vice-Chairperson Monique Coupal
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While there appears to be $2,380,000 in proposed benefits, I would not qualify more than $535,000 as being acceptable benefits: the proposed expenditure for technician's equipment is not any more acceptable than those proposed for upgrading production facilities, main control room improvements, a new transmitter and a new building. All those benefits are normal costs of doing business. Moreover, I question the value of the benefits to be derived from "Project Easy".
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I would deny the application since I consider the benefit package inadequate. If Shaw Cablesystems Limited is interested in acquiring CHAY-FM, the benefits package should be adequate, particularly considering the price it is prepared to pay for the Barrie radio station. In my opinion, the advantages should not be only for the private parties to an agreement. The public interest should also benefit.
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