ARCHIVED -  Decision CRTC 92-571

Decision

Ottawa, 17 August 1992

Decision CRTC 92-571

YTV Canada, Inc.

Across Canada - 912827300

Following a public hearing in Toronto beginning on 10 March 1992, the Commission renews, from 1 September 1992 to 31 August 1999, the licence issued to YTV Canada, Inc. (YTV) for the national English-language children, youth and family-oriented speciality programming undertaking. The licence will be subject to the terms and conditions specified in the appendix to this decision and in the licence to be issued.

The Commission first licensed YTV in 1987 (Decision CRTC 87-903), concurrent with its decisions approving applications proposing a number of other new specialty programming and pay television services. In accordance with subsection 10(2) of the Cable Television Regulations, 1986, this service is delivered via satellite to cable, on an optional basis, for distribution by cable television affiliates serving Anglophone markets as part of the basic service. In Francophone markets, the service may be distributed as part of a discretionary tier, with the licensee's consent. More than 6 million households across Canada currently subscribe to this service, including approximately 1.25 million in Quebec.

The March 1992 hearing was the Commission's first opportunity to publicly review YTV's performance. The Commission is satisfied that YTV has met the various expectations and has complied with each of the conditions attached to the current licence. In some areas, YTV has exceeded the Commission's requirements. Accordingly, the Commission considers that a full-term licence renewal, as requested by YTV, is justified.

Provisions for Cable Carriage

As noted in the introduction, in the Anglophone market YTV is currently provided on an optional basis to cable affiliates, but if carried, must then be distributed to all subscribers as part of the basic service. Some interveners, including the Canadian Cable Television Association (CCTA), suggested that cable operators should be given the flexibility to distribute YTV and other Canadian specialty services as part of an extended basic tier. YTV agreed with the CCTA, but noted that its application was predicated upon its continued carriage on the basic service.

The Commission considers that questions concerning provisions for the cable carriage of YTV and other specialty services are matters more appropriately addressed in the context of the public hearing regarding the structure of the broadcasting industry tentatively scheduled for the spring of 1993. The Commission notes the licensee's statement that, notwithstanding any regulatory changes that may flow from that proceeding, its preference was for a full-term licence. YTV added, however, that it would seek any amendments to its conditions of licence that it considers necessary as a result of any such regulatory changes.

As part of its renewal application, YTV requested amendments to several of its conditions of licence relating to, among other things, wholesale rates, programming and advertising. YTV's proposals, and the Commission's determination with respect to these and other matters, are discussed below.

Wholesale Rates

YTV requested amendments to the condition of its licence governing the wholesale rates it is authorized to charge cable television affiliates. Specifically, YTV proposed that the monthly subscriber rate in Anglophone markets be increased from the present level of $0.32, to $0.33 effective 1 January 1993, with further increases of $0.01 to be implemented on 1 January of each subsequent year of its licence term. It also proposed a one-time increase in the monthly subscriber rate charged in Francophone markets from $0.08 to $0.09, effective 1 January 1994. According to YTV, the revenues generated by the proposed wholesale rate increases will enable it to enhance the value of the service to subscribers by increasing the proportion of gross revenues devoted to Canadian programming to 35%, up from the level of 30% currently required by condition of licence.

In Public Notice CRTC 1991-23, the Commission stated that it planned to examine carefully the wholesale fees of specialty programming undertakings as part of the licence renewal process to ensure that the fees in effect remain appropriate, taking into account the contributions of such services to the Canadian broadcasting system and the Commission's concerns regarding the affordability of basic cable service.

As a general approach to the rate regulation of undertakings such as YTV, the Commission has decided not to allow annual increases based upon inflationary costs. While such increases may be justifiable in the case of specialty services that do not distribute advertising, and whose income from subscribers is thus their only source of revenues, services such as YTV have the ability to compensate for inflation, or otherwise to increase their revenues, by maximizing their advertising income. The Commission notes that licensees of such services also have the ability to improve their operating margins by increasing the overall efficiency of their undertakings. Consistent with the general approach described above, and based upon its analysis of the licensee's various initiatives and the justifiability of their related costs, the Commission has decided to grant YTV, by condition of licence, a one-time increase in the wholesale rates it may charge cable television affiliates, effective 1 January 1993, of $0.03 in Anglophone markets and $0.01 in Francophone markets, representing new maximum rates of $0.35 and $0.09, respectively. In setting these wholesale rates, the Commission has taken into account the impact of inflation. The subsequent annual increases sought by the licensee in respect of the wholesale rate for Anglophone markets are denied.

The Commission notes that the one-time increases herein approved are less than the cumulative total sought by the licensee over seven years, and will generate total revenues over the licence term that are lower than those projected. Nevertheless, the Commission is satisfied that the new wholesale rates are reasonable and sufficient to enable the licensee to increase the proportion of its expenditures on Canadian programming to 35% of its gross revenues, as proposed, and to continue to provide a viable and attractive service to subscribers over the licence term.

Canadian Programming Expenditures

As noted above, YTV is currently called upon, by condition of licence, to devote not less than 30% of its gross revenues in each year to expenditures on Canadian programming. The present licence condition specifies that, of this amount, one-third be allocated "to investment in the development and production of first-run Canadian programs", and two-thirds be directed to "the licensing of Canadian programs". In its renewal application, YTV proposed that the existing condition of licence be replaced by the following:

 In each broadcast year, the licensee shall expend not less than 35% of the annual gross revenues derived from the operation of this service in the preceding year to acquiring and investing in Canadian programs. Of this amount, no less than one-third must be allocated to the development, production and licensing of original, first-run Canadian programs.

According to the licensee, the distinction that the existing condition draws between "investment" in Canadian programs and the "licensing" of Canadian programs has caused difficulties because independent producers prefer programming services to acquire the rights to broadcast their productions through licence fees, and are reluctant to accept investment from YTV in the form of equity. This preference was confirmed at the hearing by both the Canadian Film and Television Production Association (CFTPA) and Atlantis Films Limited. YTV claimed that the proposed condition would alleviate the problem by including licence fees within the definition of investment in original, first-run Canadian programs.

At the hearing, YTV indicated that the commitment to increase its annual expenditures on Canadian programming from the present level of 30% to a minimum of 35% of its gross revenues was predicated on approval in full of its proposed increases in wholesale rates.

As stated in the previous section, however, the Commission is satisfied that the rate increases approved herein are sufficient to enable YTV to meet this commitment, regardless of the fact that the revenues flowing from such increases may fall somewhat short of the licensee's projections. Accordingly, the Commission requires YTV, by condition of licence, to expend on Canadian programming in each year an amount representing no less than 35% of its gross revenues earned in the previous year. In light of the concerns expressed by YTV and representatives of the independent production sector, the Commission has included licence fees as an acceptable form of investment in original, first-run Canadian programs.

YTV's Programming Orientation and the Protagonist Rule

One of YTV's current conditions of licence specifies that it must ensure that all drama programs distributed during the evening broadcast period are programs whose major protagonist is a child, a youth under the age of 18 years, a puppet, animated character or creature of the animal kingdom. YTV asked that this condition be amended by adding to the list of acceptable protagonists the categories "folk, comic book, and/or super heroes", and by raising the upper age limit for youth who are major protagonists from under the age of 18 to under the age of 21 years.

According to the licensee, the proposed changes "would help YTV to better serve its young audience" by allowing its viewers access to "many children's classic folk tales". YTV also argued that children and youth identify with young people three or four years older than themselves.

The Canadian Association of Broadcasters (CAB), and WIC Western International Communications Ltd. (WIC), owner of seven television stations in western Canada, opposed the proposed change to the definition of protagonist on the grounds that approval would result in an inappropriate expansion of YTV's mandate to encompass programming of a type more appropriately distributed as part of a general interest service. On the other hand, the CCTA, Concerned Children's Advertisers, CINAR Films Inc., Nelvana Limited, Visual Productions Ltd., Alliance Communications and others supported the proposed amendment, claiming that it would provide increased opportunities for Canadian producers without unduly affecting YTV's programming orientation.

At the hearing, the panel discussed with YTV the Commission's concern that the addition of the categories "super heroes and comic book characters" might lead to the introduction of drama programming with an objectionable level of violence. While noting that it is difficult to define, YTV assured the Commission that it would not exhibit violent programming. Specifically, YTV stated:

 ... one certainly has to ensure that we are not going to carry violent or racist programming. It has never been in our repertoire of programming to date and it certainly never will.

In considering the licensee's proposal, the Commission has taken into account the fact that, during the current licence term, YTV has acted fully in accordance with its mandate by targeting its programming consistently to children, youth and their families. The Commission also notes YTV's assurances at the hearing that it will continue to ensure that its programming remains focused exclusively on its defined audience, and will continue to provide its young audiences with programming that is primarily Canadian in content and non-violent in nature. YTV also stated that it has no intention of altering or redirecting its programming orientation towards that of a general interest service.

Accordingly, the Commission has decided to add the categories "comic book character" and "folk and/or super hero" to the definition of protagonist in the licence condition concerned, as requested by thelicensee. Consistent with the intent and purpose of this particular amendment, the Commission has also added the categories "classical or historical hero" to the list of acceptable protagonists.

The Commission, however, remains concerned that approval of the licensee's request that the upper age limit for youth protagonists be raised to youth under the age of 21 would reduce the clear distinction that currently exists between the nature of the service provided by YTV and that of a general interest service. Accordingly, and consistent with the licensee's undertaking to continue to provide programming that focuses on children, youth and their families, the Commission has decided to maintain the upper age limit for youth protagonists to include only those under 18 years.

Exhibition of Drama Programs of U.S. Origin

YTV is currently required, by condition of licence, to distribute during the evening broadcast period no more than one hour (non-cumulative) of drama programming produced in the United States. This restriction does not apply to feature films. YTV requested that this condition be amended so as to authorize it to distribute seven hours of U.S. drama per week during the evening broadcast period, with a maximum of two hours of this programming to be distributed in any single evening. In addition to feature films, YTV asked the Commission to exclude from the calculation of U.S. drama all animated television programs produced in the United States.

In support of its request, the licensee argued that the proposed amendments would not expand the amount of U.S. drama broadcast on YTV, but would allow YTV more flexibility in scheduling, particularly during such holiday periods as Christmas, Easter and Thanksgiving.

The CAB and WIC opposed this proposed amendment, whereas CINAR Films Ltd., the CCTA, Visual Productions Ltd., l'Association des Câblodistributeurs du Québec and Atlantis Films Limited supported the changes.

In the Commission's view, approval of the licensee's proposal could result in the over-concentration of U.S. drama programming within popular weekend viewing periods, and might relegate Canadian drama to less favourable periods in the schedule. Accordingly, the Commission has decided to retain the existing requirement that YTV broadcast no more than one hour of U.S. drama during the evening broadcast period.

The Commission notes, however, that the licensee's request is based essentially on its desire for greater scheduling flexibility during family holiday periods. In addition to the existing exclusion of feature films, the Commission has therefore decided to exclude from the calculation of U.S. drama all non-regularly-scheduled "specials". The Commission is satisfied that this amendment will provide YTV with a sufficient degree of flexibility in scheduling of U.S. drama during special holiday periods.

Hours of Original, First-run Canadian Programs

YTV's current licence conditions require it to distribute annually a minimum of 55 hours of original, first-run Canadian programs. In its renewal application, the licensee has committed to increase the amount of original, first-run Canadian programs to 60 hours in the first year of the new licence term, rising by five additional hours each year to a level of 90 hours in the seventh year.

At the hearing, YTV made the further commitment that these amounts of original, first-run Canadian programming would be obtained entirely from the independent production sector, either through co-productions or through licensing arrangements. The Commission, by condition of licence, requires YTV to adhere to these commitments. The Commission defines an original, first-run program as one that will be distributed for the first time by a licensee and has never before been distributed by the licensee of any other broadcasting undertaking. In its renewal application, YTV asked the Commission to revise the definition of an original, first-run program to mean a program that has never before been distributed on a national basis by any licensee of a television programming undertaking and which will be distributed for the first time by the licensee. YTV argued that, in the case of programs it co-produces or otherwise funds through licensing agreements, and where its financial participation is key to the realization of the project, YTV should gain first-run credit for the program regardless of what rights to earlier windows may be held by other parties, provided that these earlier windows are not national in scope.

The Commission has considered the licensee's request, and notes the general support for this proposal among independent producers. Nevertheless, the Commission has determined that the definition of an original, first-run program attached to YTV's licence should remain consistent with that applied in the case of other licensees.

Accordingly, the Commission has decided to retain the existing definition of an original, first-run program, as modified to include the requirement that such programming be acquired entirely from the independent production sector.

Advertising Material

YTV is currently required, by condition of licence, to limit the amount of advertising material it distributes to no more than 8 minutes of national advertising per clock hour. No commercial messages are permitted in the context of programs whose target audience is under the age of five years. YTV requested that the condition of licence pertaining to advertising be amended to allow the licensee to distribute up to four minutes of unpaid public service announcements (PSAs) per hour, in addition to its currently-authorized eight minutes per hour of advertising material.

At the hearing, YTV stated that it only carries PSAs during the January to September period when its advertising inventory is not completely sold. It added that the proposed change would not enhance its ability to sell advertising, and would thus have no incremental impact on conventional broadcasters.

Having considered the licensee's arguments, as well as the numerous interventions submitted in support of this request by charitable and public service organizations, the Commission is prepared to grant YTV the same flexibility that it extends to licensees of television programming undertakings. Accordingly, the Commission will permit YTV, by condition of licence, in addition to the eight minutes per hour of advertising material currently authorized, to distribute in each clock hour a maximum of 30 seconds of unpaid PSAs.

In addition, consistent with the further flexibility accorded conventional television licensees, the Commission will not count as advertising material any messages promoting Canadian programs to be aired on YTV. The Commission intends to amend the Specialty Services Regulations, 1990 to make available to other licensees the same measure of flexibility herein accorded to YTV with regard to PSAs and promotional messages.

Other Matters

Ontario Film Review Board Certification

YTV is currently required, by condition of licence, to obtain from the Ontario Film Review Board (OFRB) a classification of "Family" or "Parental Guidance" or the equivalent for all feature films prior to their distribution on the service. YTV advised the Commission that it has difficulty in obtaining timely classifications from the OFRB for feature films produced outside Canada or the United States. Accordingly, YTV asked the Commission to add to the present condition the words "when available".

Having reviewed this matter, the Commission has decided to delete from YTV's conditions of licence all former requirements regarding OFRB classifications. In place of these requirements, however, the Commission encourages YTV to include, in the material it submits for publication in weekly newspapers and other television listings, either the OFRB or the licensee's own classification for each feature film scheduled for distribution on the service.

Also absent from the conditions of licence set out in the appendix to this decision are certain requirements that were attached to YTV's current licence pertaining to matters since attended to by the licensee or which, in the Commission's view, are of no continuing relevance. These include, among other things, former reporting requirements in areas now covered by the Specialty Services Regulations, 1990 or concerning such matters as the composition of the licensee's Board of Directors.

Service to the Deaf and Hearing Impaired

In its original licence application, YTV made a commitment that all in-house programming would be closed captioned. According to the information contained in YTV's renewal application, this commitment has and will continue to be met. The licensee advised that all co-productions are also closed captioned. For the new licence term, YTV undertook to expend on closed captioning a minimum of $150,000 in each of years 1 to 5, and at least $350,000 in each of years 6 and 7 of the new licence term. The Commission notes the concerns expressed in an intervention submitted by the Ontario Closed Captioned Consumers (OCCC) regarding the quality of the closed captioning accompanying the programs distributed by YTV. Specifically, OCCC complained that the speed with which the captions appear on the screen often makes it impossible to read the text. The OCCC stressed the importance of the quality of the captions rather than their quantity within a program, and advocated the use of on-line captioning, which would permit captions to be edited prior to a program's distribution.

In light of the concerns expressed by OCCC, the Commission encourages the licensee to consult regularly and actively with representatives of the deaf and hearing-impaired community, with a view to providing captioning of a type and, more particularly, of a quality that will respond to the needs of the audience for which the captioned programming is intended. The Commission also expects YTV, as a minimum, to meet its commitments for the annual expenditures on closed captioning noted above.

At the hearing, the Commission discussed with the licensee its plans to install a telephone device for the deaf (TDD) to facilitate communications with the deaf and hearing-impaired community. The Commission notes the letter subsequently received from YTV confirming that such a system has now been put in place.

The Commission wishes to thank each of the more than 450 interested parties who submitted interventions, the vast majority of which were in support of YTV's application for licence renewal.

Allan J. Darling
Secretary General

U+>Appendix to Decision CRTC 92-571

Conditions of licence

YTV Canada, Inc.

1. In each broadcast year, a minimum of 30% of the programming distributed on YTV shall have as its target audience children up to 5 years of age, a minimum of 48% shall have as its target audience children and youth 6 to 17 years of age, and a maximum of 22% shall have as its target audience families.

2. The licensee shall devote 100% of the programs in the drama category distributed in the evening broadcast period to programs with a major protagonist who is a child, youth under the age of 18 years, puppet, animated character, creature of the animal kingdom, comic book character, folk and/or super hero or classical or historical hero.

3. Programming distributed by the licensee with families as the target audience shall not include programs from the following categories as set out in item 6 of Schedule I of the Speciality Service Regulations, 1990: news (category 1), analysis and interpretation (public affairs) (category 2), sports (category 6); or music videos.

4. The licensee shall devote not more than 5% of the broadcast year to music videos.

5. In any evening broadcast period, the licensee shall distribute no more than one hour (non-cumulative) of drama programs produced in the United States, excluding feature films and specials.

6. (1) The licensee shall devote no more than 10% of the broadcast year to feature films.

 (2) In any seven-day period of Sunday to Saturday, in the evening broadcast period, the licensee shall distribute no more than two feature films.

7. The licensee shall devote not less than 60% of the broadcast year and 60% of the evening broadcast period to the distribution of Canadian programs.

8. In the first year of the new licence term, the programming distributed by the licensee shall include a minimum of 60 hours of original, first-run Canadian programs that have been acquired from the independent production sector by YTV, either through co-production or licensing arrangements. This amount shall increase by five hours each year to a minimum of 90 hours of original, first-run Canadian programs during 1998/99.

 For the purpose of this condition, an original, first-run program means a program that will be distributed for the first time by the licensee and has never before been distributed by the licensee of any other broadcasting undertaking.

9. In each broadcast year, the licensee shall devote a minimum of 35% of its non-Canadian programming to programs from non-North American sources.

10. (1) The licensee shall charge exhibitors of this service a maximum monthly wholesale rate per subscriber as set out below:

 From 1 September to 31 December 1992: $0.32

 From 1 January 1993 and for the remainder of the licence term: $0.35.

 (2) Notwithstanding subsection (1), the licensee shall charge exhibitors of this service in Francophone markets a maximum monthly wholesale rate per subscriber as set out below:

 From 1 September to 31 December 1992: $0.08 From 1 January 1993 and for the remainder of the licence term: $0.09.

 (3) For the purpose of this condition, an exhibitor will be considered to be operating in a Francophone market where the population claiming the French language as its first language represents more than fifty percent of the total population of all cities, towns and municipalities encompassed in whole or in part by the licensed area of the exhibitor, according to the most recent population figures published by Statistics Canada.

11. (1) Subject to subsections (3) and (4), the licensee shall not distribute more than 8 minutes of advertising material during each clock hour.

  (2) For the purpose of this condition, advertising material does not include a promotion for a Canadian program to be broadcast by the licensee notwithstanding that a sponsor is identified in the title of the program or is identified as a sponsor of that program, where the identification is limited to the name of the sponsor only and does not include a description or representation of the products or services or any attributes of the sponsor's products or services.

  (3) In addition to the maximum of 8 minutes of advertising material referred to in subsection (1), the licensee may distribute, during each clock hour, a maximum of 30 seconds of additional advertising material that consists of unpaid public service announcements.

  (4) The licensee shall not distribute commercial messages during any program that has as its target audience children up to 5 years of age.

  (5) The licensee shall not distribute any advertising material other than national advertising.

12. In each broadcast year, the licensee shall incur expenses of not less than 35% of the annual gross revenues derived from the operation of this service in the preceding year for acquiring and investing in Canadian programming. Of this amount, not less than one-third must be allocated to the development, production and licensing of original, first-run Canadian programs as defined in condition of licence number 8.

13. Any increase in the overall percentage of shares of YTV held by Rogers Programming Services Inc., CUC Broadcasting Ltd., Cablecasting Limited or any individual or company affiliated with a cable licensee beyond 56.13% requires prior Commission approval.

For the purposes of these conditions:

 all time periods shall be reckoned according to the eastern time zone.

 "broadcast day" means the period of up to 18 consecutive hours, beginning each day not earlier than six o'clock in the morning and ending not later than one o'clock in the morning of the following day, as selected by the licensee.

 "broadcast month" means the total number of hours devoted by the licensee to broadcasting during the aggregate of the broadcast days in a month.

 "broadcast year" means the total number of hours devoted by the licensee to broadcasting during the aggregate of the broadcast months in a 12 month period, beginning on 1 September in any year.

 "clock hour" means a period of 60 minutes beginning on each hour and ending immediately prior to the next hour "evening broadcast period" means the total time devoted to the broadcast of programs between six o'clock in the afternoon and midnight during each broadcast day.