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Ottawa, 25 June 1993
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Decision CRTC 93-235
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Shaw Cablesystems Ltd., on behalf of DMX Canada Ltd.
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Edmonton, Alberta - 920394400
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New Pay Audio Programming Undertaking (Select Digital Music)
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Following a Public Hearing in the National Capital Region commencing 21 September 1992, the Commission, by majority decision, approves the application by Shaw Cablesystems Ltd. (Shaw), on behalf of DMX Canada Ltd. (DMX), for a broadcasting licence to carry on a new pay audio programming undertaking. The national digital musical service that will be provided by the undertaking is to be delivered by satellite to cable distribution undertakings across Canada, and will be made available to their subscribers on a discretionary basis.
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The Commission will issue a licence expiring 31 August 1998, subject to the conditions specified in the appendix to this decision and in the licence to be issued. This five-year term will enable the applicant to establish its operations and will allow the Commission, at the time of licence renewal, to assess whether the Canadian content requirements it has imposed on DMX should be maintained or increased, taking into account the financial performance of the service in the Canadian cable market.
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Initially, the music service proposed by DMX will include 33 digital audio channels, most of which will be devoted to a specific musical format or theme. In addition to providing high quality sound, the service will offer uninterrupted music 24 hours a day with no news, commercial messages or spoken word other than occasional interviews with artists.
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DMX proposes, initially, to offer at least three programming channels produced in Canada, and to add one more such channel in each of the first two years of operation. The five proposed channels will be devoted to contemporary, classical and French-language music, a "Relax" channel featuring environmental sound effects, and a "DISCovery" channel reserved for the studio recordings of unknown Canadian artists. The applicant committed to ensure a minimum Canadian content level of 30% on the contemporary music channel, 40% on the Relax channel, and 50%, 60% and 100%, respectively, on the classical music, French-language music and DISCovery channels.
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As stated in Public Notice CRTC 1993-94, which introduces this decision, the Commission has decided to require the licensee to add to its audio programming service an additional two Canadian-produced channels before the end of the fourth year of its licence term, each having a minimum Canadian content level of 30%. The Commission expects the licensee to provide details concerning the music formats or themes it intends to use for the two additional channels herein required, and to confirm in advance the dates on which it intends to introduce them. The Commission notes in this regard the view expressed by DMX that the programming of the Canadian-produced channels will benefit from the experience and resources available both within Shaw's radio division and within DMX. It also assured the Commission that it would be able to achieve the proposed levels of Canadian content without excessive repetition of musical selections. As for the distribution of the Canadian-produced channels, the Commission expects DMX to ensure that they are packaged in a suitable manner, either alongside or within groups of other channels offering similar musical fare.
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As for the concerns raised in several interventions by representatives of the creative segment of the music industry regarding the payment of copyrights, the Commission notes the commitment made by DMX at the hearing to voluntarily set aside a minimum of 2% of its gross annual revenues for this purpose, pending a decision by Copyright Board Canada.
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According to the applicant, the proposed service will "provide a national venue for Canadian musical talent and provide greater exposure to a wider variety of Canadian music". DMX added that: "only by licensing a competitive Canadian service before the U.S. services are established in Canada can we be sure of any degree of digital music exposure for Canadian artists".
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As for its plans to provide direct support to the development and promotion of Canadian talent, DMX pledged to allocate the sum of $816,000 over a seven-year period to the DISCovery Fund. This fund represents the extension of a project first launched by Shaw six years ago as a benefit of its application, approved in Decision CRTC 87-696, for authority to acquire effective control of certain radio stations in Alberta. In the present application, DMX proposes to underwrite the production of compilation discs and to support a variety of other promotional and financial assistance initiatives directed towards encouraging young musical artists to take advantage of the new DISCovery channel.
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Given the Commission's decision to grant a five-year rather than a seven-year licence term, the Commission has decided to require DMX to contribute to the development and support of Canadian talent a minimum annual amount equivalent to $116,571, or 2.86% of its gross annual revenues, whichever amount is the greater. The Commission notes that, based on the applicant's projections, 2.86% of the average gross annual revenues to be earned by the service over a seven-year period would equate to $116,571, or one-seventh of the amount the applicant has committed to contribute to the DISCovery Fund over a seven-year period.
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Based on the experience of audio programming undertakings in the United States and on its own research, DMX forecasts that its service will achieve a market penetration of approximately 2% of cable subscribers in the first year, rising to 4.2% in the seventh year. These forecasts assume a monthly fee of approximately $10 and a competitive environment involving at least one other national pay audio programming undertaking licensed to operate in Canada. The material supplied by the applicant indicates that, under these conditions, the audience migration from conventional radio to its service would be in the order of 2% to 3% after seven years. The Commission notes the commitment given by DMX that the terms of its agreement with International Cablecasting Industries Inc., the U.S. company that will program and supply the non-Canadian channels of the proposed service, will not preclude other licensed pay audio undertakings from obtaining fair and equitable access to cable undertakings, including those affiliated with DMX.
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The Commission notes the interventions filed in support of this application by a large number of individual cable licensees and their industry association, the Canadian Cable Television Association. Opposing interventions were received from Telesat Canada and from the conventional broadcasting sector and the creative segment of the music industry, including the Canadian Association of Broadcasters, the Society of Composers, Authors and Music Publishers of Canada (SOCAN), the Canadian Recording Industry Association (CRIA), the Canadian Independent Record Production Industry (CIRPA), The Canadian Music Publishers Association (CMPA), la Société professionelle des auteurs et des compositeurs du Québec (SPACQ), l'Union des Artistes (UdA), l'Association québécoise de l'industrie du disque, du spectacle et de la vidéo (l'ADISQ) and la Guilde des musiciens du Québec. The concerns of these groups related principally to the policy and regulatory issues raised in Public Notice CRTC 1993-94 of today's date which has been published as an introduction to this decision.
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In Public Notice CRTC 1992-59 dated 1 September 1992 and entitled "Implementation of an Employment Equity Policy", the Commission announced that the employment equity practices of broadcasters would be subject to examination by the Commission. It encourages the applicant to develop and implement an effective plan of action to ensure that adequate employment equity practices are followed by the newly licensed undertaking.
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Allan J. Darling
Secretary General
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APPENDIX/APPENDIX
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DMX Canada Ltd.
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Conditions of licence
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1. The licensee shall retain at all times ultimate control over and responsibility for the programming content it broadcasts.
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2. The licensee shall not broadcast commercial messages or spoken word, with the exeption of artist interviews.
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3. The service of the licensee's pay audio programming undertaking shall include a minimum of 3 Canadian-produced programming channels upon commencing operations, increasing by one such channel by the end of each of the first two years of its licence term, and increasing again to a minimum total of 7 such channels by the end of the fourth year and for the remainder of the licence term.
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4. The licensee shall ensure that all affiliation agreements reached between itself and the licensees of cable distribution undertakings contain the stipulation that the latter shall distribute all available Canadian-produced channels, first and foremost, before any non-Canadian channels are distributed.
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5. The seven programming channels produced in Canada shall contain at least 30% Canadian musical selections, and Canadian musical selections on four of those seven channels shall consist of a minimum of 40%, 50%, 60% and 100%, respectively, of their total musical content.
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6. The licensee shall spend each year an amount equal to at least 2.86% of its gross annual revenues for the development of Canadian talent, with a minimum annual contribution of $116,571.
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7. The licensee shall adhere to the provisions contained in sections 3 and 11 as well as subsections 8.(1), (5) and (6) of the Radio Regulations, 1986, as amended from time to time by the Commission.
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8. The licensee shall adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' (CAB) Sex-Role Portrayal Code for Television and Radio Programming, as amended from time to time and approved by the Commission.
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9. This undertaking shall be in operation within twelve months of the date of this decision or, where the licensee applies to the Commission within this period and satisfies the Commission that it cannot complete implementation before the expiry of this period and that an extension is in the public interest, within such further period of time as is approved in writing by the Commission.
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10. The definitions of "Canadian", "commercial message" and "spoken word" set out in section 2 of the Radio Regulations, 1986, as amended, and the definition of "Canadian musical selection" set out in subsection 2.2(2) of the said Regulations, as amended, shall apply to these conditions and the licensee, with the necessary changes.
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