|
|
|
Ottawa, 23 December 1992
|
|
Decision CRTC 92-828
|
|
CFCF Inc.
|
|
Montréal, Quebec - 912834900
|
|
Following a Public Hearing commencing 21 September 1992 in the National Capital Region, the Commission denies the application by CFCF Inc. (CFCF) to amend its broadcasting licence for CFCF-TV Montréal, by changing the condition of licence regarding expenditures on Canadian programming so as to reduce the amount required to be expended in the year ending 31 August 1991 from $18,445,554 to $17,880,000 and for the year ending 31 August 1992 from $17,914,332* to $14,067,000.
|
CFCF had asked that the amount of $14,067,000 be accepted by the Commission as a revised "base figure" from which annual expenditure requirements in the two remaining years of the current licence term would be determined in accordance with the formula originally outlined in CFCF-TV's latest renewal decision (Decision CRTC 89-143 dated 6 April 1989). Subsequently, CFCF applied to amend its application to include retroactive flexibility for an overexpenditure of $141,000 in broadcast year 1989/90, which would have reduced the licensee's underexpenditure of $329,000 in the following year to an amount representing less than 5% of the expenditures otherwise required for the 1990/91 broadcast year.
|
* The Commission notes that the amount that CFCF was required to spend on Canadian programming expenditures in the broadcast year ended 31 August 1992 was $17,914,332, not $17,997,037 as indicated in Public Notice CRTC 1992-48 dated 21 July 1992. In Public Notice CRTC 1989-27 dated 6 April 1989, the Commission stated that the level of spending on Canadian programming is a vital element in ensuring the quality of Canadian programming and announced the establishment of a formula linking programming expenditures to advertising revenues. The Commission stated that licensees of private, English-language television stations whose annual total advertising revenues exceeded $10 million would be required by condition of licence to meet or exceed levels of Canadian programming expenditures established by the formula. Adherence to the formula was made an expectation for licensees with annual advertising revenues of less than $10 million.
|
|
At the hearing, CFCF stated that it was seeking relief from the requirements of its current condition of licence, not because the formula is "too onerous", but because of an unexpected decline in advertising revenues of approximately 11% in the 1990/1991 broadcast year. CFCF also noted that its first year commitment to Canadian programming expenditures was the fourth highest of all CTV affiliates in terms of percentage of revenues, and the highest in terms of absolute dollars. In addition, CFCF indicated that, while it had undertaken major decreases in its Canadian programming expenses, primarily through staff lay-offs in 1991, these personnel reductions did not affect the quality or quantity of its local programming.
|
|
The Commission does not consider that the projections for Canadian programming expenditures in CFCF's 1988 renewal application were inordinately high. In this regard, the Commission notes that CFCF met its projected base figure for the first year of its licence term. Nor does the Commission consider that the costs associated with the payment of staff primarily hired to do external productions not directly related to the licensee's own local programs serve the purpose of the condition of licence.
|
|
The Commission notes that the formula was designed to minimize any year-to-year fluctuation in Canadian program expenditures resulting from a sharp increase or decrease in advertising revenues by averaging the growth rate of the licensee's revenues over three years. While it does not agree that CFCF should be allowed to reprofile its Canadian programming expenditures in the manner requested, the Commission recognizes the financial difficulties facing the licensee which led to its failure to achieve the required levels of Canadian programming expenditures in both 1991 and 1992. In particular, the Commission acknowledges the sudden and precipitous drop of advertising revenues of more than 10% experienced by the licensee in 1991. The Commission also recognizes the difficulties and the financial pressures that CFCF would experience in having to make up the full amount of the shortfall that occurred in the 1991/1992 broadcast year, while having to meet, at the same time, its ongoing Canadian programming expenditure requirements under the condition of licence.
|
|
Accordingly, the Commission is prepared to offer CFCF the choice, either to operate in accordance with the proposed condition of licence set out in the appendix to this decision, or to continue to operate in accordance with the current condition of licence concerning Canadian programming expenditures. As discussed at the hearing, the proposed condition of licence would replace the averaging mechanism of the Canadian programming expenditure formula with the requirement that the licensee meet its annual requirements for Canadian programming expenditures on the basis of year-to-year changes in advertising revenues.
|
|
The Commission requires CFCF to advise the Commission, in writing, within sixty days of the date of this decision, as to its choice in this regard. The Commission advises CFCF that, should it elect to operate in accordance with the proposed condition of licence, the expenditure requirements for Canadian programming for the entire licence term will be calculated on the basis prescribed therein.
|
|
Whether or not CFCF elects to reprofile its Canadian programming expenditures in the manner proposed by the Commission, the Commission recognizes that the applicant submitted its request in a timely manner that should have enabled it to effect the required expenditures in the broadcast year concerned. The Commission also notes that CFCF-TV's licence expires in less than two years. The Commission has therefore determined that it would be equitable to require the licensee to spend, over the remainder of the current licence term, only 50% of the shortfall that occurred in 1992. The Commission expects CFCF to direct the monies representing 50% of the 1992 shortfall to appropriate Canadian programming expenditures.
|
The Commission recently announced a number of revisions to the formula in Public Notice CRTC 1992-28 dated 8 April 1992. While still requiring licensees to spend over the licence term the full amount required by the condition of licence, licensees were permitted to underspend by up to 5% in the 1991/92 broadcast year and in any subsequent year of their licence terms, provided that they add the amount underspent to the required spending in the following year. As of 1991/92, licensees were also permitted to credit overexpenditures against required expenditures in future years. In Public Notice CRTC 1992-89 of today's date, the Commission has announced that broadcasters may now apply both of these flexibility provisions with full retroactivity to the beginning of their licence terms. Accordingly, regardless of whether or not CFCF chooses to reprofile its Canadian programming expenditures in the manner proposed, the Commission will extend to the licensee full retroactivity over the entire licence term of the flexibility provisions pertaining to overexpenditure and underexpenditure announced in Public Notice CRTC 1992-28.
|
|
The Commission notes that CFCF met, and even exceeded, its expenditure requirements for Canadian programming in 1990. Furthermore, with the 5% retroactive flexibility now available to the licensee, it will have satisfied the requirements of its condition of licence for 1991.
|
As announced in Public Notice CRTC 1992-89, the option of calculating the annual required level of Canadian programming expenditures on the basis of the year-to-year change in advertising revenues may, upon application prior to the expiry of the current licence term, be extended to other licensees in similar circumstances (specifically, those licensees experiencing a 10% or greater drop in advertising revenues in a single broadcast year). Alternatively, such licensees may apply to calculate their Canadian programming expenditures on the basis of a two-year average change in advertising revenues. The Commission emphasizes, however, that whichever calculation method is approved, it must be applied throughout the entire licence term.
|
The Commission notes CFCF's confirmation at the hearing of its commitment to spend $1,161,000 on program development over the current licence term. As discussed at the hearing, the Commission reminds the licensee that its practice of counting as expenditures on program development the funds used to obtain international distribution of its production "Travel Travel" does not meet either the Commission's or the licensee's own guidelines for Canadian program development expenditures. As stated in Decision CRTC 89-143, the Commission expects CFCF
|
|
to continue to provide yearly reports detailing its program development expenditures.
|
|
Allan J. Darling
Secretary General
|
|
Appendix
|
|
Proposed Amendment to Section 2 of the Conditions of Licence for CFCF-TV Montréal
|
|
2. The licensee shall expend on Canadian programming, at a minimum:
|
|
(a) for the year ending 31 August 1990, the amount of $17,474,000;
|
|
(b) for the year ending 31 August 1991, the amount set out in paragraph (a) above, increased (or decreased) by the year-over-year percentage change for the year ending 31 August 1990, in the total of the station's revenues from local time sales, national time sales and payments (if any) received from networks, as reported in the relevant Annual Returns;
|
|
(c) in each subsequent year, an amount calculated in accordance with the following formula: the amount of the previous year's minimum required expenditure, increased (or decreased) by the year-over-year percentage change for the year ending on 31 August, in the total of the station's revenues from local time sales, national time sales and payments (if any) received from networks, as reported in the relevant Annual Returns;
|
with all terms and calculations found in paragraphs (b) and (c) set out above to be interpreted or made in accordance with the explanations set out in the following Public Notices: CRTC 1989-27 dated 6 April 1989; CRTC 1992-28 dated 8 April 1992; and CRTC 1992-89 dated 23 December 1992.
|
|
|
|