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Ottawa, 25 June 1993
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Decision CRTC 93-236
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Cogeco Radio-Télévision Inc.
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Montréal, Quebec - 920985900
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New Pay Audio Programming Undertaking (Canadian Digital Radio)
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Following a Public Hearing in Moncton beginning on 17 February 1993, the Commission, by majority decision, approves the application by Cogeco Radio-Télévision Inc. (Cogeco) for a broadcasting licence to carry on a new pay audio programming undertaking. The undertaking will offer a national digital music service delivered via satellite to Canadian cable undertakings and distributed to subscribers as a discretionary service.
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The Commission will issue a licence expiring 31 August 1998, subject to the conditions of licence 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 Cogeco should be maintained or increased, taking into account the financial performance of the service in the Canadian cable market.
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The music service proposed by Cogeco will include 38 digital audio channels, each 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 and, on the children's channel, spoken word content that is not a commercial message. The Commission also notes that the applicant plans to offer up to four additional channels to simulcast the audio portion of Canadian pay television and specialty services to provide digital sound quality.
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Cogeco proposes, initially, to offer at least six programming channels produced in Canada, and to add a seventh channel in the second year of operation. The seven channels proposed will include three English-language channels, one each for rock, country, and new acoustic music; two French-language channels, one for music from the 50s to the present and the other for rock music; one classical music channel; and one bilingual channel exclusively for young Canadian artists. The applicant also committed to maintain a minimum of 50% Canadian content in the seven channels produced in Canada, with two channels broadcasting 100% Canadian content, including the young artists' channel. Cogeco stated that the programming of these seven channels will be assembled by Canadian broadcasters or other groups closely associated with the Canadian music industry, and gave its assurance to the Commission that it could 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 Cogeco 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 Cogeco at the hearing to voluntarily set aside a minimum portion of its gross annual revenue pending a decision by Copyright Board Canada. The applicant proposed to fix its contribution based on a sliding scale, with a minimum contribution of 2% of its gross annual revenue. Cogeco estimates that, under this system, over $2 million will be paid to copyright holders and assignees over a seven- year period.
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Cogeco also stated that the new digital radio service will contribute in several ways to the promotion and development of Canadian talent. It pledged to contribute an amount equal to at least 4.5% of its gross annual revenue, with the minimum and maximum annual amounts varying between $50,000 and $200,000. The applicant proposed to remit 40% of these contributions to MUSICACTION and 60% to FACTOR. Cogeco expects its total contribution to the development of Canadian musical talent to exceed $1 million over seven years.
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In addition to making direct monetary contributions, the applicant proposed to use the young artists channel, "Talent Canada", as an exclusive showcase for new music and for Canadian artists promoted by MUSICACTION and FACTOR, and to assemble programming for the channel in collaboration with these two organizations. It added that its project will open new avenues for developing Canadian talent on the national and international scene. The applicant noted that its proposal to distribute a package of Canadian-produced programming channels on its new audio programming service will expand the audience and enhance the appeal of English-language and French-language songwriters and performers across Canada. It added that, through continental satellite coverage, its service would promote Canadian music and artists across North America and eventually overseas.
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Based on the experience of audio programming undertakings in the United States and on its own research, Cogeco forecasts that its service will achieve a market penetration of approximately 2% of cable subscribers in the first year, rising to 5% or 6% in the seventh year. These forecasts assume a monthly fee of $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, audience migration from conventional radio to its service would be in the order of 1% after seven years. The Commission notes the commitment made by Cogeco at the hearing that the terms of its agreement with Digital Cable Radio, the U.S. company that will program and supply the non-Canadian channels of the proposed service, will not preclude other licensed pay audio programming undertakings from obtaining fair and equitable access to cable undertakings, including those affiliated with Cogeco.
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The Commission notes the interventions filed in support of this application by a large number of 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 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 Association (CIRPA), and the Association québécoise de l'industrie du disque, du spectacle et de la vidéo (ADISQ). The concerns of these groups related principally to the policy and regulatory issues addressed in Public Notice CRTC 1993-94 of today's date which has been issued 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/ANNEXE
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Cogeco Radio-Télévision Inc.
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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 exception of artist interviews and, on the children's channel, spoken word content that is not a commercial message.
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3. The service of the licensee's pay audio programming undertaking shall include a minimum of six Canadian-produced programming channels upon commencing operations, and a minimum of seven 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 broadcast at least 50% Canadian musical selections and two of those seven channels shall contain 100% Canadian musical selections.
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6. The licensee shall spend each year an amount equal to at least 4.5% of its gross annual revenue for the development of Canadian talent, with a minimum annual contribution of $50,000.
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7. The licensee shall adhere to the provisions of 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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