ARCHIVED -  Decision CRTC 94-33

Decision

Ottawa, 9 February 1994

Decision CRTC 94-33

CTV Television Network Ltd.

Across Canada - 930682000

Television Network Licence Renewal

Following a Public Hearing commencing 27 September 1993 in the National Capital Region, the Commission renews the broadcasting licence for the national English-language television network undertaking operated by CTV Television Network Ltd. (CTV), from 1 September 1994 to 31 August 1999, subject to the conditions specified in the appendix to this decision and in the licence to be issued.

This licence term will provide the Commission a timely opportunity to review the licensee's performance in responding to the various concerns, requirements and expectations set out in this decision.

I Background

CTV, Canada's only privately-owned national television network, has been in operation since 1961. Its programming is available, whether through the network's 18 affiliated television undertakings and their associated transmitters, by satellite or by cable, to approximately 93% of the country's population and to virtually all of Canada's English-speaking households.

In its renewal application, CTV takes justifiable pride in noting that it is the "most watched programming service in Canada". The applicant describes its role as serving to link "Canadians together through shared national viewing experiences", thereby contributing to the "development of a national popular culture", and providing a "unifying force in an increasingly fragmented environment".

The importance of the network was also addressed by a number of interveners, including the Directors Guild of Canada, whose spokesperson at the hearing observed that:

 The CTV Network has a unique contribution to make in providing Canadian television programming at the national level and in organizing what would otherwise be disparate unconnected local stations across the country into a national system.

In recent years, the network's abi-lity to make the unique contribution referred to by the Directors Guild of Canada and expected of it by others, including the Commission, had come under increasing threat due to the failure of CTV's shareholders to conclude negotiations on the terms of a new shareholder agreement. Certain of the shareholder arrangements governing such issues as board representation, the company's capital structure and votes on money matters had proven reasonably successful during years of network profitability. These arrangements, however, were revealed as less than satisfactory when payments from the network to its affiliates started to decline in the late 1980s, and became unworkable when the network began to show losses in pre-tax income at the turn of the decade.

In order to allow CTV's shareholders to complete their negotiations on a new agreement, the Commission twice granted the licensee short-term administrative licence renewals, ultimately extending the present term to the end of August 1994 (see Decisions CRTC 92-442 and 93-101 dated 3 July 1992 and 30 March 1993, respectively). In light of the special circumstances surrounding the last two years of the licence term, the Commission has only examined the first five years of the term (1 October 1987 to 31 August 1992) for the purpose of assessing CTV's compliance with its conditions of licence.

On 27 January 1993, seven of CTV's eight equal shareholders entered into an agreement, the purpose of which was to modify the network's structure and cost-sharing arrangements. Later, on 1 September 1993, new long-term affiliation agreements came into force which altered significantly the terms under which CTV provides programming to its affiliates.

The implications of these new agreements were examined closely at the September 1993 hearing. This hearing also marked the Commission's first opportunity in almost seven years to conduct a public discussion of the broader questions surrounding CTV's past, present and future role within the Canadian broadcasting system. These and other matters are discussed below.

II Old and New Shareholder Agreements

Under the old arrangements between CTV shareholders, the network functioned essentially as a co-operative. Eight shareholders, each holding 100 common voting shares (12.5%), had an equal vote and voice in network policy regardless of the size of their respective audiences, the number of undertakings they owned or their contributions to the resources used in the network's operations. In addition, each shareholder held the power to veto the passage of resolutions in all money matters, including those calling for financial contributions from shareholders to cover network losses.

Under the terms of the new shareholder agreement, CTV has shed its former characteristics as a co-operative in favour of a more conventional approach, whereby the composition of the Board of Directors is determined by the holding of common voting shares and the passage of all resolutions is by a majority of all votes cast.

Ownership of shares is not a pre-condition of network affiliation and shares may be sold or assigned. Moreover, each of the seven signatories to the agreement has agreed to recapitalize the company by purchasing a $2 million debenture. Although each debenture is convertible to 2 million common voting shares, such conversion will only take place provided a minimum of four of the seven shareholders who are party to the agreement declare themselves satisfied with the terms of the present CRTC renewal decision.

In general, the Commission considers that the new agreement holds the potential to put an end to the impasse of recent years and enable the network to respond more quickly to a changing environment.

III Old and New Affiliation Agreements

For much of the past licence term, CTV contracted to provide its affiliates with a total of 39.5 hours per week of "network sales time" programming consisting of: Canadian programs either produced by the network or co-produced with its affiliates or their associated production companies; other Canadian product either acquired from or co-produced with independent producers; non-Canadian acquired programs; and international co-ventures. Compensation by the network to its affiliates for use of their airtime consisted of all of the network's profits earned from network sales time programming, divided among affiliates in accordance with a formula. Affiliates also retained the revenues associated with two minutes of advertising inserted by themselves in each hour of this programming. A further 20.5 hours per week of "affiliate sales time" programming was acquired by CTV on behalf of its affiliates, paid for by them, and broadcast outside of network hours. "Special network service" programming, including special coverage of national and international news events, the Olympic Games and other sports programming, was also provided by the network to its affiliates, under terms agreed to by the parties from time to time.

As indicated earlier, these co-operative arrangements proved workable only so long as the network continued to operate at a profit and was able to compensate affiliates for use of their facilities at a level they deemed acceptable. This situation changed in the late 1980s as CTV's profits declined. When the network's operations began to show losses, the affiliate/shareholders found themselves unable to agree on the means to cover those losses.

Under the terms of the new affiliation agreements, network sales time totals 40 hours per week, including 12 hours between 7:00 p.m. and 11:00 p.m., but affiliate sales time has been reduced to 2.5 hours per week. Provisions for special network service continue to exist much as before. The reduction in the amount of affiliate sales time reflects a preference among affiliates, either as individual stations or as part of larger ownership groups, for acquiring their own programming to fill the hours surrounding the network schedule, rather than have the network acquire it on their behalf.

The most significant difference between the old and new agreements is that, instead of receiving compensation based on a sharing of all network profits, affiliates are now guaranteed fixed annual cash payments from the network in return for the airtime used by CTV for the broadcast of its network service, regardless of the actual revenues earned by CTV. The total amount of these annual payments is scheduled to increase from $14.8 million in 1994-95 to $21.8 million in 1998-99. The payments to affiliates are scheduled to rise further to $25.2 million by the end of seven years. CTV's President and Chief Executive Officer, Mr. J. M. Cassaday, noted at the hearing that this amount would represent a return of approximately 14% on CTV's projected net revenue which, he stated,"... is approximately the level of payment that, coincidentally, the affiliates had been accustomed to historically".

CTV Television Network Ltd.

Across Canada - 930682000

Affiliates will also continue to earn revenues from their insertion of two minutes of advertising in each hour of network sales time programming. On the basis of there being 12 minutes of commercial time per hour, these revenues would represent close to 20% of those earned by CTV during the same one-hour period for programming, the expenses of which are all accounted for within the network's operation.

The Commission considers that CTV's compensation to its affiliates for use of their airtime is, at the very least, generous. Because the compensation is fixed in each year, and is thus independent of the network's profitability, these arrangements could affect CTV's ability to meet its responsibilities should revenues fall short of projections in any given year. Although the Commission, elsewhere in this decision, discounts the likelihood of such a revenue shortfall during the new licence term, it would expect the licensee's shareholders and affiliates to act responsibly should such an event occur, and ensure that the network has adequate resources to fulfil its obligations.

IV CTV's Past Performance

The Commission has reviewed CTV's record, as measured against the various licence conditions and expectations contained in Decision CRTC 87-200. In that decision, the Commission placed a strong emphasis on the role it expected CTV to play in providing its audiences with distinctive Canadian programming, particularly drama. The Commission also stated that such drama programming should be scheduled when the largest audiences are available.

It therefore imposed a condition of licence requiring CTV to broadcast regularly-scheduled Canadian drama programming increasing from an average of 2 hours 30 minutes per week in 1987-88 to an average of 3 hours in each of 1988-89 and 1989-90, 4 hours in 1990-91, and an average of 4 hours 30 minutes per week in 1991-92. The Commission stated further that, in each year, no more than one hour per week of the regularly-scheduled drama was to be broadcast before 8:00 p.m. The amounts of programming required by the Commission in this category exceeded the commitments made by the licensee in its 1986 renewal application by 1 hour per week in 1990-91 and by 1 hour 30 minutes in 1991-92.

In addition to these hours of regularly-scheduled drama, the Commission imposed a condition of licence requiring CTV to broadcast each year, during network sales time, at least 24 hours of Canadian dramatic features, mini-series and limited series.

Decision CRTC 87-200 also required CTV to make minimum annual expenditures on Canadian programming broadcast during network sales time, rising from $68.4 million in 1987-88 to $93.3 million in 1991-92. These minimum expenditures stipulated by the Commission were based on CTV's projections, as filed with its 1986 renewal application, and thus did not include the costs associated with the additional drama requirements imposed by the Commission. Accordingly, the Commission required CTV, by condition of licence, to surpass the Canadian program expenditure levels specified for each of 1990-91 and 1991-92 by the amount associated with the costs of the additional drama programming required by the Commission in those years. The Commission considers that CTV met its condition of licence requirements with respect to minimum expenditures on Canadian programming.

The Commission also notes that CTV encountered no apparent difficulty in meeting and exceeding the requirements contained in the condition of licence specifying that it broadcast at least 24 hours each year of Canadian dramatic features, mini-series or limited series. At the hearing, CTV brought attention to the success it has enjoyed with long-form drama as part of its strategy to position the network as the source of "Big Event" programming for Canadian viewers.

The Commission considers that the critical acclaim earned by CTV and other Canadian broadcasters for their long-form drama productions, and the growing popularity of this programming among Canadian viewers, has raised the level of importance of this type of programming as a vehicle for cultural expression. In recognition of this fact, and as a means to ensure the continued availability of long-form Canadian drama, the Commission has again included a condition of licence specifying minimum requirements for programming in this category.

In assessing CTV's performance with regard to the condition requiring the broadcast of minimum amounts of regularly-scheduled Canadian drama programming, the Commission has taken into account the impact of pre-emptions on the amount of such programming actually broadcast by the licensee. CTV stressed that Canadian and non-Canadian programming is equally apt to be affected by pre-emptions, and assured the Commission that it takes steps to avoid pre-empting Canadian programming unnecessarily:

 We know that the Big Event programming, which is so important to us, tends to be broadcast more frequently on Sunday, Monday and Tuesdayevenings. We therefore try to avoid scheduling any Canadian programming on those  nights.... So you will find ENG on Thursday, which is not normally a pre-emption night; you find Counterstrike, Matrix, Katz and Dog, on Saturday night.

When questioned as to why CTV scheduled so much of its Canadian drama programming on Saturday evening, the licensee replied that its decision to do so was affected by various factors, including its limited access to affiliates' schedules, the practice of U.S. networks generally to schedule movies on Sunday, Monday and Tuesday evenings, and its desire to provide counter-programming to the hockey games broadcast on Saturday evenings by the CBC. CTV also claimed that its decision was justified by the relatively large audiences attracted to its Saturday evening drama programs.

The Commission considers that CTV has acted in a fair and responsible manner in its pre-emptions of Canadian program material, and that the licensee generally attempts to avoid such pre-emptions when possible. The Commission is also satisfied that the number of pre-emptions affecting CTV's network programming in past years has been at a normal and reasonable level in the circumstances, particularly given the limited number of hours of network sales time available to the licensee.

On this basis, the Commission has determined CTV to have met the condition of licence requirements for regularly-scheduled Canadian drama in each of the first four years of its licence term. In the fifth year, however, the amount of drama regularly-scheduled for broadcast during network sales time, and after 8:00 p.m., fell 30 minutes per week short of the requirement for a weekly average of 3 hours 30 minutes.

At the hearing, CTV stated that the weekly half-hour shortfall was due to its "confusion" regarding the application of the Commission'spolicy granting television licensees a time credit of 150% in respect of certain qualifying Canadian drama productions. This time credit was established by the Commission in 1984 to encourage the broadcast of qualifying Canadian drama programs during peak viewing hours, by allowing licensees to claim an additional 50% of the actual duration of such programs for the purpose of meeting the requirements for Canadian content set out in the relevant regulations.

CTV's apparent misunderstanding was that this time credit for Canadian drama programs could also be applied towards meeting its condition of licence requirements for a specified number of clock hours of regularly-scheduled Canadian drama. The licensee claimed that its misunderstanding in this regard was clarified as the result of discussions with Commission staff in late 1991, but stated that this occurred well after the network's schedule had been established, and too late for it to acquire the additional half hour of Canadian drama for the 1991-92 broadcast year.

The Commission has considered, but does not accept, the licensee's explanation of the half-hour shortfall, and therefore finds CTV to have been out of compliance with its condition of licence specifying that there be an average of no less than 3 hours 30 minutes per week of regularly-scheduled drama in 1991-92, during network sales time and after 8:00 p.m. In reaching its determination on this matter, the Commission has noted that CTV met its condition of licence requirements in the years prior to 1991-92 without claiming the 150% time credit for Canadian drama programs. To grant the 150% time credit for 1991-92 would be tantamount to contradicting the clear intention of the Commission, expressed in Decision CRTC 87-200, that an additional half hour of Canadian drama be broadcast in that year. In fact, application of the 150% credit could have resulted in a decrease of Canadian drama being broadcast in 1991-92. The Commission further considers that, rather than acting on its assumptions, CTV should have consulted the Commission for a ruling on theapplicability of the 150% time credit well before establishing its 1991-92 network schedule. The Commission's concern regarding CTV's non-compliance is reflected in the licence term herein accorded the applicant. The importance the Commission continues to place on the presence of regularly-scheduled drama programming in CTV's network schedule is indicated by its inclusion, later in this decision, of a condition of licence specifying minimum weekly levels for such programming that, as in Decision CRTC 87-200, exceed the licensee's commitments in this area.

V CTV's Programming Plans and Future Direction; the Commission's Requirements and Expectations

The Commission has reviewed CTV's financial projections in order to determine their reasonableness and assess the network's financial capability. Taking into account its conclusions in this regard, and in light of CTV's role and responsibilities as a principal participant in the Canadian broadcasting system, the Commission has examined closely the applicant's programming commitments for the new licence term, and has measured these against certain minimum levels of achievement it considers CTV should be capable of meeting or exceeding in various programming and other areas. As in the case of regularly-scheduled Canadian drama programming, where CTV's commitments fall short of these minimum levels, the Commission has set out expectations and conditions of licence requiring adherence to these standards, as a minimum.

a) CTV's financial capability

There was considerable discussion at the hearing regarding the reasonableness of the financial projections developed by CTV. Over a seven-year projection period, the licensee forecasts a return to profitability ($5.2 million per year, on average, in pre-tax profits after payments to affiliates), but projects average operating margins and profits (before interest and taxes) that are significantly lower thanthe averages achieved by the Canadian television industry in 1992. CTV also projects a growth in advertising revenues of 3% (only 0.5% after inflation), and foresees no significant change in net advertising revenues between those earned in 1992-93 and those projected for 1994-95. While net advertising revenues in 1993-94 are expected to be considerably greater than those forecast for the two adjacent years, this reflects CTV's estimate of earnings associated with its television coverage of the Winter Olympic Games in 1994.

At the hearing, the licensee stated that its projected real revenue growth rate of a modest 0.5% is based on assumptions regarding the impact of budget cuts by major national advertisers, and increased audience and revenue fragmentation brought about by the introduction of new specialty and other services in the near future.

The Commission notes that, while the expansion in the number of Canadian specialty services in the late 1980s did have an impact on CTV's advertising revenues, the licensee was clearly able to respond to that challenge in that, by 1992, it had regained the same share of available advertising revenues it enjoyed in 1987. Moreover, historical data reveals a very strong correlation between variations in the licensee's net advertising revenues and those experienced by the private television industry as a whole (excluding CTV). A similar positive relationship exists historically between changes in CTV's advertising revenues and changes in general economic conditions as represented by the national gross domestic product (GDP). The Commission notes in this regard that a study prepared on behalf of the Canadian Association of Broadcasters (CAB) and the Television Bureau of Canada predicts that Canadian television advertising revenues will grow by an average of 5% in each of the first three years of CTV's new licence term, compared to the 3% forecast by the licensee. Moreover, the Conference Board of Canada estimates that the nominal growth rate in the GDP will be 4.7% in 1994, rising to 5.1% in each of the following two years.

CTV Television Network Ltd.

Across Canada - 930682000

On the evidence, even allowing for a measure of optimism on the part of the two industry associations and of the Conference Board, the Commission has concluded that CTV's own projections are pessimistic.

b) The Commission's requirements for expenditures on Canadian programming

During the past licence term, CTV's expenditures on Canadian programming were tied by condition of licence to the projections for such expenditures contained in its 1986 renewal application for the broadcast years up to and including 1991-92. The Commission notes that the licensee's actual expenditures in 1992-93 declined significantly from the level set the previous year; they are also projected by the licensee to remain well below that level in the current broadcast year and throughout the new licence term. Of particular concern to the Commission is the real and projected drop in spending on Canadian entertainment programming.

CTV explained at the hearing that the drop in its overall Canadian programming expenditures was largely accounted for by its loss of the broadcast rights to Toronto Blue Jays baseball and CFL football games. The licensee added that, although its Big Event strategy would undoubtedly have it pursuing its share of sports programming in the future, its projected sports expenditures only take into account such properties as the 1994 Winter Olympic Games and others for which it already holds the rights. CTV also noted that its primary commitment has always been to a quality news service, for which a high level of programming expenditure is virtually assured. For these reasons, the licensee submitted that a condition of licence requiring a minimum annual level of Canadian programming expenditures is inappropriate, arguing that it is clearly in its own interest to air the best quality programming possible in order to attract audiences and revenues.

The Commission agrees with CTV that the lion's share of its spending and a significant portion of its advertising revenues in past years have been associated with its news and sports programming. The consistent quality of CTV's newscasts and public affairs programming, and the diversity and attractiveness of its sports coverage, are among the network's major strengths. The Commission is satisfied that CTV will be motivated to maintain its performance in these areas, thus obviating the need for a condition of licence governing expenditures on programming in these categories.

The Commission's concern, however, is that the removal of all spending requirements for Canadian programming would lead to a reduction in the quality of entertainment programming aired by the licensee, particularly drama programming. The Commission considers that this concern is amply justified by CTV's actual and projected decrease in expenditures on entertainment programming. At the hearing, CTV acknowledged that its largest losses on Canadian programming are related to its costly regularly-scheduled drama. In the Commission's view, it is in this area that CTV would be most tempted to reduce spending in order to maximize profits. Accordingly, the Commission has taken a more focused approach in setting requirements for expenditures by the licensee on Canadian programming in the new licence term, an approach that addresses only CTV's spending on Canadian entertainment programming (categories 7, 8 and 9). CTV's combined expenditures on programming in those categories are projected to amount to approximately $15.2 million in 1994-95. While this reflects a drop of 5% relative to the projected level in the current year, it represents a much greater decrease of 27% from the actual expenditure level attained in 1991-92.

CTV attributed the recent reduction in its expenditures on entertainment programming to a variety of factors, including the lower licence fees it has been able to negotiate with independent producers, its decision to no longer make equity investments in programs, and reduced inventory levels. Although the Commission considers that such factors may account for a portion of the overall decrease, it is concerned that, unless the trend is reversed, the licensee's ability to maintain the current quality of its drama and other entertainment programming will unavoidably suffer.

Accordingly, the Commission requires CTV, by condition of licence, to expend on Canadian entertainment programming (categories 7, 8 and 9), at a minimum,

 i) in the year ending 31 August 1995, the amount of $18,000,000; and

 ii) in each subsequent year of the licence term, an amount calculated in accordance with the following formula: the amount of the previous year's minimum required expenditures increased (or decreased) by the year-over-year percentage changes in the total of the network's time sales revenues, as reported in the relevant Annual Return for the years ending 31 August, averaged over the four previous years.

By a further condition of licence set out in the appendix to this decision, and consistent with the flexibility extended to other television licensees, the Commissionwill permit CTV, in any year of the licence term except the last, to expend on Canadian programming up to 5% less than the amount otherwise required in that year, provided that the full amount of the underexpenditure is made up in the following year. As also set out in the appendix, the Commission will permit CTV, by condition of licence, and in respect of an expenditure on Canadian programming in any year that exceeds the minimum required amount for that year, to deduct an amount or amounts totalling not more than that overexpenditure from the minimum required expenditure in the following year or years.

The Commission is satisfied that the $18 million in expenditures it has required of CTV in the first year of the new licence term, amounting to approximately $3 million more than those expenditures projected by the licensee for entertainment programming in 1994-95, will reverse the downward trend in spending in this important programming area, and will fall well within the licensee's financial capacity to achieve. The Commission also considers that the four-year averaging mechanism, which will establish the required level of expenditures in subsequent years, coupled with the flexibility mechanisms provided for within these conditions of licence, offers an equitable method of dispersing the impact of those anomalous years in which CTV would expect to encounter higher-than-average levels of revenues associated with, for example, Olympic Games coverage.

c) Other requirements and expectations regarding programming in under-represented categories

 i) Drama

Because of the costs involved, few of CTV's affiliates provide any regularly-scheduled drama programming during peak viewing hours. They, and the Commission, must accordingly rely upon the network to fill the void in this essential programming area during those evening hours when the largest numbers of viewers are available. At the hearing, CTV stated that it would prefer peak viewing hours, or prime time, to be defined as the period between 7:00 p.m. and 11:00 p.m. CTV indicated that, if peak viewing hours were deemed to commence at 7:00 p.m., rather than at 8:00 p.m. (as specified in its existing conditions of licence), it would be able to schedule a family drama series in the 7 o'clock time period on Sunday evenings. The Commission believes that it would be reasonable for CTV to schedule such a series at 7:00 p.m. on Sundays, or possibly on Saturdays, but considers that the bulk of its drama should continue to be scheduled after 8:00 p.m. and before 11:00 p.m. on all other evenings, when the largest audiences are available.

CTV's commitments for the new licence term include a minimum of 3 hours per week of regularly scheduled drama programming, and a minimum of 30 hours per year of long-form drama programming, during peak viewing hours. This would represent a total weekly average of 3 hours 35 minutes of drama in all categories.

This contrasts with CTV's condition of licence requirements in 1991-92 which were for 3 hours 30 minutes per week of regularly-scheduled drama and 24 hours per year of long-form drama, representing an average of 3 hours 55 minutes per week of programming in all drama categories during peak viewing hours. CTV's commitments for all drama in peak viewing hours during the new licence term thus fall short of the amount required of it in 1991-92 by 20 minutes per week, or a full 18 hours per year.

While mindful of the constraints imposed by CTV's agreements with its affiliates, the Directors Guild of Canada and the Canadian Film and Television Production Association (CFTPA) expressed concern regarding the adequacy of the licensee's hourly commitments to drama during peak viewing hours. The CFTPA suggested that CTV and its affiliates should be broadcasting a minimum of 5 hoursof Canadian drama per week during peak viewing hours. The National Association of Canadian Film and Video Distributors commented on the licensee's increasing presentation of long-form Canadian drama, but emphasized that its support for CTV's licence renewal was conditional upon there being a commitment by CTV to broadcast a greater number of Canadian content feature films than it has in the past.

For its part, the Commission does not consider that, in the important area of Canadian drama programming, CTV should be permitted to do less during peak viewing hours than the minimum that was required of it in 1991-92. In fact, the Commission believes that the licensee, over time, will prove itself financially capable of doing, and should therefore be called upon to do, more than those minimum hours.

Accordingly, it is a condition of licence that CTV broadcast in network sales time between 8:00 p.m. and 11:00 p.m. Monday through Friday, and between 7:00 p.m. and 11:00 p.m. Saturday and Sunday, the following average number of hours per week of regularly-scheduled Canadian drama programming in each year of the licence term: 3 hours per week in each of the first three years, and 3 hours 30 minutes per week in each of the last two years.

The Commission expects the licensee to ensure that, in each year, the proportion of original first-run hours of its regularly-scheduled Canadian drama, as opposed to repeats of such programming, remains above 70%.

Further, the Commission expects the licensee to adhere to its commitment to ensure that pre-emptions of its regularly-scheduled Canadian programs are maintained at a normal level.

It is also a condition of licence that CTV broadcast in network sales time between 8:00 p.m. and 11:00 p.m. Monday through Friday, and between 7:00 p.m. and 11:00 p.m. Saturday and Sunday, a minimum of 48 hours per year of Canadian dramatic features, mini-series and limited series, to be averaged over the licence term.

  ii) Children's programming

CTV's role in providing programming directed to children and youth was examined in Decision CRTC 87-200 and came under discussion again at the September 1993 hearing. In Decision CRTC 87-200, the Commission expressed the expectation that the licensee adhere to its Promise of Performance commitments to broadcast a minimum of 4 hours 30 minutes per week of programming in this category, supplemented by 11 new children's specials over the course of the licence term and aired in the evening hours.

Although CTV met and exceeded these expectations over the five years ending 31 August 1992, the amount of regularly-scheduled children's programming has decreased markedly during the last two years. CTV noted that the cancellation of one such program, namely the half-hour weekday morning program Romper Room, was related to the removal from affiliation agreements of any provision for affiliate sales time, apart from the 30 minutes allocated to individual stations each weekday within the Canada A.M. program.

The licensee stated that a further hour of children's programming on Saturday mornings was replaced in order to accommodate a new program, Canada A.M. Weekend. CTV explained that its decision to include this program in its schedule was in order to provide some programming directed to adults during a time segment when very little else is made available to that audience by other television networks or stations.

The Commission acknowledges the popularity achieved by CTV's Canada A.M. Weekend among adult audiences, and the applicant's argument regarding the availability of children's television fare from other sources. It notes in this latter regard the important role to be played by CTV affiliates in providing such programming during appropriate time periods. At the same time, the Commission is somewhat concerned by the fact that the quantitative efforts by certain of these affiliates fall conspicuously short of those put forward by others in serving the needs of younger audiences. It therefore intends to review this matter with individual CTV affiliates in the near future, when considering their applications for licence renewal.

With regard to CTV, the licensee's commitments for the new licence term are to provide a minimum of 1 hour per week of regularly-scheduled Canadian children's programming during network sales time on Saturday mornings, and a minimum of 6 new children's or family specials in each year. CTV stated that its commitment to regularly-scheduled programming would likely be met through drama programming for at least the first year of the licence term, but requested that the Commission allow a measure of flexibility by not identifying a requirement in any specific program category, and "...simply leave it to our good judgement to continue to provide an hour of children's programming on Saturday morning, hopefully superior to that which we are doing now.... Our hope is that we could do something better".

In the circumstances, the Commission is satisfied that CTV's quantitative commitments are reasonable. Given the age of certain of the children's drama productions still being aired by the network, the Commission also welcomes CTV's suggestion that it meet its weekly commitment through other types of regularly-scheduled children's programming, provided these productions are of high quality and include a reasonable level of original programs.

Accordingly, it is a condition of licence that, in each year of the licence term, CTV broadcast in network sales time a minimum of 1 hour per week of regularly-scheduled Canadian programming directed to children. The Commission expects the licensee, in adhering to this condition, to give strong emphasis to the presentation of new, original programs of the highest possible quality.

CTV Television Network Ltd.

Across Canada - 930682000

The Commission also expects CTV to adhere to its commitment to broadcast a minimum of 6 new children's or family specials in each year of the new licence term.

Further, it is a condition of licence that the licensee adhere to the CAB's "Broadcast Code for Advertising to Children", as amended from time and approved by the Commission.

iii) Programming in other under-represented categories

The licensee's commitments for Canadian programming in other under-represented categories total 22 hours per year, with 18 of these hours to be broadcast during peak viewing hours. Included in this figure are music and variety specials and a new commitment by CTV to broadcast as many as four documentary programs each year.

The Commission expects the licensee to adhere to its commitment to the inclusion of documentary specials in peak viewing hours of its network schedule.

CTV has enjoyed considerable success with its family, animated and music specials. Music and variety specials have also formed a significant part of CTV's efforts to provide exposure for Canadian talent in past years, and the network has attracted large audiences for such programs as the Canadian Country Music Awards and specials featuring Canadian artists such as Céline Dion and Rita MacNeil. The Commission takes note of CTV's statements at the hearing regarding the difficulties in producing successful music and variety programs:

 We have increasingly found that in order to achieve audiences for music and variety shows -- but particularly for music shows -- we really need that strength of performer who can gather a crowd.

The Commission considers that there is a continuing need for good quality programming in these under-represented areas. It is also satisfied that the licensee will have sufficient resources, and should thus be required, to expand upon its commitments in this area over the new licence term.

Accordingly, it is a condition of licence that CTV broadcast in network sales time a minimum of 18 hours per year of Canadian specials, including music, variety, documentary and children's or family specials in each of the first three years of its licence term, and 26 hours per year of such programming in each of the last two years of its licence term.

The annual amounts of programming specified in this condition of licence would include the children's or family specials referred to in the expectation set out at page 21 of this decision.

The Commission expects CTV to ensure that all of its entertainment programming is scheduled at times when the maximum numbers of viewers are available.

d) Additional programming matters

 i) News, information and sports programming

As indicated earlier, the Commission is satisfied with the licensee's past performance in news, information and sports, and considers that CTV's program plans for the new licence term in these categories are reasonable.

CTV proposes to broadcast 2 hours per week of regularly-scheduled sports coverage, complemented by numerous sports specials throughout the year. CTV's block program schedule also makes provision for a total of 18 hours 30 minutes per week of regularly-scheduled news and information programming, including 1 hour 30 minutes per week of public affairs programming.

The Commission expects CTV to continue to broadcast a high quality public affairs program during peak viewing hours throughout the licence term.

The Commission also expects CTV to maintain and, if possible, to expand its existing news bureaus.

 ii) Program development

Since 1972, CTV has made annual contributions to its Canadian Program Development Fund. It was CTV's commitment in its previous renewal application to allocate $500,000 per year to program development and, in Decision CRTC 87-200, the Commission expected the licensee to adhere to that level of expenditure.

CTV has renewed its undertaking to make annual contributions of $500,000 for program development during the new licence term. The Commission considers that this level of annual expenditure continues to represent a reasonable contribution to program development, and therefore expects the licensee to adhere to its commitment in this regard. Under the Commission's definition, acceptable program development expenditures are limited to those investments in the script and concept development phases of Canadian entertainment and documentary projects; emphasis should be placed upon providing seed money to less experienced writers, directors and producers. In the past, the Commission has refused requests by CTV for a broadening of this definition to include such expenditures as those on market research and program sales development. Moreover, although the Commission accepted most of the licensee's expenditures on program development during the past licence term as legitimate, it rejected certain of them since they pertained to news and sports programs, or otherwise fell outside of the Commission's definition.

The Commission, however, did allow the licensee a measure of flexibility in meeting the expectation set out in Decision CRTC 87-200, by permitting CTV to average its program development expenditures over the licence term. At the time of the September 1993 hearing, CTV's actual expenditures fell approximately $161,000 short of the total amount expected of it over the licence term. The Commission notes in this regard CTV's commitment at the hearing to make up this shortfall by the 31 August 1994 expiry date of its current licence. The Commission further notes the licensee's statement at the hearing that it is prepared to abide by the Commission's definition of program development.

 iii) Support for independent producers

More than 25 independent producers and related industry associations submitted interventions to CTV's renewal application, and three of these appeared at the hearing to present their views. Virtually all interveners expressed support for CTV's application and had praise for the consideration and fairness exhibited by the licensee in its business dealings with them over the course of the current licence term. In its application, CTV noted that all of its prime time regularly-scheduled Canadian drama and Canadian long-form programming during the licence term has been acquired from independent producers. The applicant added that, in keeping with the preference of most independent producers, its investment in their productions is limited to licence fees and no longer includes equity participation. Although CTV acknowledged that it has sought effectively in recent years to negotiate lower licence fees, it stated that it is "comfortable" with the present levels, and is satisfied that they are "competitive within the industry".

The Commission notes the support CTV has provided to the Canadian independent production sector. It encourages the licensee to maintain this support in the new licence term and to ensure that the licence fees it pays to independent producers are set at reasonable levels.

 iv) Regional reflection

As noted at the outset of this decision, CTV provides the most watched programming service in Canada. In almost all English-language markets, the local audiences attracted to CTV's national evening news exceed those attracted to any other news program. CTV's responsibility to ensure that all regions of this country remain visible to Canadians has thus never been clearer, not only in the area of news and information, but in all categories of its Canadian programming.

In the mid-1980s, when CTV was still functioning essentially as a co-operative enterprise, the general expectation was that much of the regional reflection provided within CTV's network programming would result from initiatives by its affiliated stations. Over the course of the licence term, however, CTV's use of regional productions by its affiliates decreased. While regional affiliates still participate in the production of a substantial amount of CTV's sports programming and regularly contribute news stories, the network has turned increasingly to independent producers across Canada for its other programming, particularly drama. The licensee emphasized at the hearing that this would likely remain the pattern, given the new business-oriented approach dictated by the terms of the new shareholder agreement.

At the hearing, however, CTV acknowledged its responsibility "to reflect the diversity of this country", and assured the Commission that it will maintain its ties with independent producers outside of the main production areas with a view to purchasing "the best shows we can, regardless of where they are produced". CTV also confirmed that it retains the ability to collect material from affiliates across Canada for its daily network news program. As for programming in other categories, CTV stated: "The receptivity that we have, and will have in the future, towards outstanding programming developed by our affiliates will remain very, very high".

The Commission notes the commitment made by CTV to ensure that its door remains open to input from all regions of the country in its news and entertainment programming, and encourages the network to consider programming produced by its affiliates and regional independent producers for inclusion in the network schedule.

CTV Television Network Ltd.

Across Canada - 930682000

e) Societal concern

 i) Portrayal of violence

At the time of the hearing, CTV indicated that it expected to have completed a review of its internal policy dealing with the on-air depiction of violence by early this year. As general policy principles, CTV has committed to "not broadcast programming which contains scenes of gratuitous violence", to schedule programs with "questionable problem content" only after 9:00 p.m., and to "use program advisories where we think they are essential". The Commission notes the licensee's commitment to adhere to these practices, and requests the licensee to file a copy of the revised policy upon its completion.

The Commission also commends CTV on its active participation with the CAB in preparing a new industry code on violence which was completed in October 1993. In keeping with CTV's commitment, it is a condition of licence that the licensee adhere to the CAB's "Voluntary Code Regarding Violence in Television Programming", as amended from time to time and approved by the Commission.

 ii) Sex-role portrayal

In its intervention to CTV's renewal application, Mediawatch noted that there is an under-representation of women by CTV in some programming areas such as sports and in areas where professionals are represented or depicted.

CTV, in its current "Style and Journalistic Policy" document, acknowledges the network's shortcomings in this area, and advised the Commission at the hearing that it has taken steps to improve its performance. It confirmed that it is a principle of the network's corporate philosophy that "CTV programming and its work environment should represent Canadian men and women, in an equitable, non-discriminatory and non-exploitive manner".

The Commission encourages CTV to continue its efforts to ensure that all of its programming properly reflects the role of women in Canadian society. It is a condition of licence that the licensee adhere to the guidelines on gender portrayal set out in the CAB's "Sex-role
Portrayal Code for Television and Radio Programming", as amended fromtime to time and approved by the Commission.

 iii) Portrayal of ethnic minorities

At the hearing, CTV spoke of its responsibility to educate "...our producers and the independent producers that we work with on the importance of reflecting Canada's mosaic effectively". It noted that all of the network's dramatic programming is scrutinized for the manner in which ethno-cultural groups are portrayed, and that minority groups are routinely represented within its network programming. CTV indicated that it has also sensitized its reporters and producers to the need to ensure that the appearance of visible minorities in news and information programming represents fairly their numbers and status in the community.

The Commission expects CTV to continue its efforts to ensure that all of its programming properly reflects the role of ethnic minorities in Canadian society.

 iv) Employment equity

In general, CTV's record has been less than satisfactory over the course of the present licence term in the hiring and promotion of those within the four designated groups (women, aboriginals, disabled persons and persons belonging to visible minorities). At the hearing, CTV acknowledged its lack of progress, but noted that the network had experienced two major rounds of personnel reductions in the course of its corporate reorganization which have rendered any quantifiable progress with regard to employment equity difficult to achieve. Mr. Cassaday added that CTV has worked internally to identify any other barriers that may have contributed to its lack of progress to date, and has taken steps to ensure improvement:

 In conclusion, the mechanics are in place for significant change, and we can now fulfil our commitment to employment equity and, in the process,become a broadcast leader in this area as well. Notwithstanding CTV's past performance, the Commission is satisfied that the network has made serious and acceptable commitments to move towards achievement of employment equity in the new licence term. It expects CTV to adhere to its commitments to improve its performance with regard to the employment of women, aboriginals, disabled persons and persons belonging to visible minorities.

 v) Service to the Deaf and Hard of Hearing

CTV's responsiveness to the needs and concerns of the deaf and hard of hearing has been exemplary. The licensee's efforts to provide closed captions for its programming were acknowledged in interventions supporting its renewal application by two closed captioning organizations.

According to the licensee, 70% of all network programming is currently captioned; CTV projected that this figure will rise to 95% by the end of 1994, and that it should be very close to 100% by the end of the licence term. When questioned regarding the quality of its captioning, and on its efforts to establish standards in this area through consultation with the communities affected, CTV advised that it had met for this purpose with the Canadian Association of the Deaf in 1993, and that it works with Canada Caption Inc. to obtain sponsorship for captions in its Olympic Games programming and in other major event coverage.

The Commission commends CTV on its industry leadership in providing closed captions, and encourages the licensee to pursue its objective of having all network programming captioned by the end of the new licence term.

The Commission also requests that CTV continue its consultations with the deaf and hard of hearing communities with a view to ensuring that the captioning it provides is ofacceptable quality. The Commission notes in this regard that consumers of closed captioning have expressed a strong desire to see captions introduced for unscripted comments made on the air during newscasts and other live broadcasts. Accordingly, the Commission encourages the licensee to concentrate on strengthening its capability to provide this service.

VI Conclusion

As indicated above, the Commission is satisfied with most aspects of the licensee's past performance, and has encouraged CTV to pursue its course in these areas. In others, the Commission has concluded that the network not only bears a responsibility, but should also have the necessary financial and other resources, to perform to higher standards than either those achieved in recent years or those proposed in the renewal application.

In establishing these minimum requirements, the Commission is satisfied that they are achievable, notwithstanding the apparent constraints on the flexibility available to CTV under the terms of its new agreements with affiliates and, more particularly, notwithstanding the licensee's revenue projections, which the Commission has concluded are more conservative than warranted in the circumstances.

The Commission acknowledges the views expressed in the interventions submitted to this application by various independent producers and special interest groups, individuals and other interested parties.

Allan J. Darling
Secretary General

CTV Television Network Ltd.

Across Canada - 930682000

APPENDIX/ANNEXE

The broadcasting licence issued to CTV Television Network Limited for the licence term 1 September 1994 to 31 August 1999 will be subject to the following conditions of licence and to others stipulated in the licence to be issued.

1. The licensee shall expend on Canadian entertainment programming (Categories 7, 8 and 9), at a minimum,

 i) in the year ending 31 August 1995, the amount of $18,000,000; and

 ii) in each subsequent year of the licence term, an amount calculated in accordance with the following formula: the amount of the previous year's minimum required expenditures increased (or decreased) by the year-over-year percentage changes in the total of the network's time sales revenues, as reported in the relevant Annual Return for the years ending 31 August, averaged over the four previous years.

2. In any year of the licence term, excluding the final year, the licensee may expend an amount on Canadian programming that is up to five percent (5%) less than the minimum required expenditure for that year as set out or calculated in accordance with condition 1; in such case, the licensee shall expend in the next year of the licence term, in addition to the minimum required expenditure for that year, the full amount of the previous year's underexpenditure.

3. In any year of the licence term, including the final year, the licensee may expend an amount on Canadian programming that is greater than the minimum required expenditure for that year as set out or calculated in accordance with condition 1; in such case, the licensee may deduct

  i) from the minimum required expenditure for the next year of the licence term an amount not exceeding the amount of the previous year's overexpenditure; and

 ii) from the minimum required expenditure for any subsequent year of the licence term, an amount not exceeding the difference between the overexpenditure and any amount deducted under paragraph i) above.

4. Notwithstanding conditions 2 and 3 above, during the licence term, the licensee shall expend on Canadian programming at a minimum, the total of the minimum required expenditures as set out in or calculated in accordance with condition 1.

(For the purposes of the above conditions, "expend on Canadian programming" shall have the same meaning as that set out in Public Notices CRTC 1993-93 and 1993-174 dated 22 June and 10 December 1993, respectively)

5. The licensee shall broadcast in network sales time between 8:00 p.m. and 11:00 p.m. Monday through Friday, and between 7:00 p.m. and 11:00 p.m. Saturday and Sunday, the following average number of hours per week of regularly-scheduled Canadian drama programming in each year of the licence term: 3 hours per week in each of the first three years, and 3 hours 30 minutes per week in each of the last two years.

6. The licensee shall broadcast in network sales time between 8:00 p.m. and 11:00 p.m. Monday through Friday, and between 7:00 p.m. and 11:00 p.m. Saturday and Sunday, a minimum of 48 hours per year of Canadian dramatic features, mini-series and limited series, to be averaged over the licence term.

7. The licensee shall broadcast in network sales time, in each year of the licence term, a minimum of 1 hour per week of regularly-scheduled programming directed to children.

8. The licensee shall broadcast in network sales time a minimum of 18 hours per year of Canadian specials, including music, variety, documentary and children's or family specials in each of the first three years of its licence term, and 26 hours per year of such programming in each of the last two years of its licence term.

9. The licensee shall adhere to the guidelines on gender portrayal set out in the CAB's "Sex-Role Portrayal Code for Television and Radio Programming", as amended from time to time and approved by the Commission.

10. The licensee shall adhere to the CAB's "Broadcast Code for Advertising to Children", as amended from time to time and approved by the Commission.

11. The licensee shall adhere to the CAB's "Voluntary Code Regarding Violence in Television Programming", as amended from time to time and approved by the Commission.