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Ottawa, 29 March 1994
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Public Notice CRTC 1994-37
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Proposed Amendments to the Television Broadcasting Regulations, 1987; Revisions to Restrictions on the Permissible Amount of Advertising Material
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In Public Notice CRTC 1993-137 dated 7 October 1993, the Commission proposed amendments to the Cable Television Regulations, 1986 and to the Television Broadcasting Regulations, 1987 (the regulations).
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In response to its notice, the Commission received 113 submissions from members of the public, from private and public broadcasters and from various broadcasting industry associations. The present public notice, however, examines only those comments addressed to the proposed amendments to section 11 of the television regulations. Comments regarding the proposed amendments to the cable television regulations, and the Commission's disposition with respect thereto, are the subject of a separate notice issued on 3 February 1994 (Public Notice CRTC 1994-7).
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The effect of the proposed amendments to section 11 of the television regulations would be to permit a licensee, pursuant to a condition of licence, to broadcast in excess of 12 minutes of advertising material in each clock hour during the broadcast day.
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The Commission stated in its October 1993 notice that this amendment should provide licensees with an additional measure of flexibility to operate successfully in the evolving communications environment, and would be consistent with the Commission's objectives, outlined in Public Notice CRTC 1993-74, regarding the regulatory framework for the Canadian broadcasting system.
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Public concern varied regarding the proposed amendments to the television regulations. Many individuals stated that there were already too many commercial interruptions in television programs, while others claimed that advertisements are aired at excessive and annoying audio levels. Some members of the public suggested that the Commission should consider adopting a strategy followed in some European countries, where channels dedicated exclusively to advertising messages are not uncommon.
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Representatives of the broadcasting industry submitted comments both for and against the proposed amendments. Most of these comments requested that the Commission maintain the current restriction of 12 minutes of advertising material per hour, since the demand for inventory does not exceed the current supply.
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A majority of the members of the Television Board of the Canadian Association of Broadcasters (CAB) expressed concern that an increase in advertising inventory would result in further downward pressure on advertising rates at a time when the television advertising marketplace is relatively flat.
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The consensus of the CAB's Radio Board was that the current "fragile economic state" of private radio is directly due to the expansion of television inventory in recent years, and that the proposed amendment would only serve to exacerbate this situation.
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Notwithstanding these concerns, there were a number of broadcasters and others associated with the industry who, in their comments, favoured complete deregulation. They argued that, due to cost/return discipline within the industry, advertisers are not always able to pay the high price demanded by television stations for their unsold inventory.
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The Association of Canadian Advertisers (ACA) noted that advertisers have worried for many years about the effects of "clutter" on the effectiveness of their messages. On the other hand, the Canadian Direct Marketing Association (CDMA) suggested that, in the consumer-driven market, viewers will not tolerate additional advertising clutter on television, especially as viewing options increase.
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In considering the views expressed by those within the television industry, it is important to note that, while most recommended that no increase be permitted in the regulated amount of conventional advertising on television, they also recommended that the Commission extend greater flexibility to television broadcasters by allowing them to air non-traditional forms of advertising, in particular "infomercials", during the broadcast day.
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Infomercials are described in the Commission's Circular No. 350 dated 8 August 1988 as follows:
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As commonly understood, an "infomercial" is the combining of entertainment and information together with the selling and promoting of goods or services into a virtually indistinguishable whole. An "infomercial" may also involve the promotion of products mentioned in distinct commercial breaks in programming. An "infomercial" therefore resembles a program but, in reality, constitutes a long commercial message for a given product or service. In some cases, programming is provided to television stations complete with advertising breaks. While "infomercials" may address any topic, the programming noted by the Commission is frequently related to the subjects of real estate, financial advice, travel and health.
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Currently, the Commission's regulation limiting the amount of advertising per hour to 12 minutes during the broadcast day effectively restricts the broadcast of infomercials to the hours of between midnight and 6:00 a.m. on Canadian television stations.
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The industry's request for the flexibility to air infomercials during the broadcast day is based on their concerns regarding the potential revenues associated with this form of advertising that are currently lost to Canadian television stations and are flowing, by default, to U.S. border stations. The CAB's Television Board and the CDMA estimate that Canadian television stations competing with U.S. border stations are losing between $100 and $125 million in infomercial revenue each year. The CAB's Television Board offered the view that this flow of revenue to U.S. border stations represents a loss to the Canadian broadcasting system and the programming it is able to provide.
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The Commission has considered the views of the public and the majority of representations from the broadcasting industry opposing an increase in the permissible amount of advertising material on television. The Commission has also considered the somewhat related issue raised in the other comments supporting the introduction of non-traditional forms of advertising, such as infomercials, during the broadcast day.
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In the Commission's view, the implications of allowing television stations to broadcast infomercials warrant further examination. It is advertising revenue alone that ensures the ability of private broadcasters to meet their obligations with respect to Canadian programming under the Broadcasting Act. The growth of infomercials outside of Canada is reasonable evidence of their ability to capture specific target audiences, generate sales, and even to inform and entertain. Allowing Canadian broadcasters the flexibility to access the revenue potential of infomercials may improve their ability to compete in the rapidly evolving communications environment, and assist them to meet their obligations to provide high-quality Canadian programming.
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The Commission also considers that the introduction of infomercials during the broadcast day need not prompt concerns regarding the effect of advertising clutter, provided infomercials are clearly identified as such, and scheduled so as not to interrupt the continuity of conventional programming to any greater extent than the interruptions created by the one-fifth of each clock hour that the regulations now permit to be devoted to commercial
messages.
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Accordingly, under the proposed guidelines set out below, a licensee would be permitted to broadcast infomercials during the broadcast day, and not have them counted as advertising material, provided they are broadcast outside the body of any program. However, whenever such an infomercial shares the same clock hour with programming other than infomercials, the amount of commercial messages permitted within the body of the other programming would be restricted to no more than one-fifth of the number of minutes of the clock hour occupied by the other programming. For example, in the case of a 30 minute infomercial and non-informercial programming of the same duration broadcast during the same clock hour, the amount of commercial messages permitted within the non-informercial programming would be restricted to no more than six minutes.
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Infomercials that are inserted into a program would be considered as constituting advertising material for the purpose of assessing adherence to the regulations.
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Among other things, however, the Commission would wish to be assured that the addition of infomercials during the broadcast day not result in any reduction in the amount of, or expenditures on, Canadian programs developed or broadcast by that licensee. It would also wish to be assured that any additional advertising revenues associated with infomercials results in a corresponding increase in contributions to the financing of Canadian programs.
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A licensee would therefore not be permitted to apply the production costs of infomercials against the requirements contained in any condition of licence or expectation respecting its expenditures on Canadian programming or on script and concept development.
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Infomercials would also be logged as having no program nationality. Accordingly, a licensee choosing to broadcast infomercials may be obliged to remove an equivalent amount of non-Canadian programming from its schedule in order to adhere to its regulatory requirements for Canadian programming. Moreover, revenues earned from the broadcast of infomercials would be included as part of a licensee's revenues for the purpose of any Canadian programming expenditure that may apply.
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The issues surrounding the inclusion of non-traditional forms of advertising during the broadcast day was not raised in Public Notice CRTC 1993-137. Accordingly, and in view of the potential benefits and concerns associated with this matter, the Commission has decided to invite public comment on the matters discussed herein, including the following proposed guidelines, which might be used to govern the broadcast of infomercials:
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1. An infomercial broadcast outside the body of a program would be logged as having no program nationality, and would not be counted as part of the 12 minutes per clock hour of advertising material currently permitted under section 11 of the regulations.
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2. Notwithstanding subsection 4 (3) and section 11 of the regulations, whenever an infomercial is broadcast outside the body of a program, but shares the same clock hour with programming other than infomercials, the amount of commercial messages permitted within the body of the other programming in that clock hour would be restricted to no more than one-fifth of the number of minutes of the clock hour occupied by the other programming.
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3. An infomercial that is inserted into a program during the broadcast day would be considered as advertising material by the Commission and counted as such for the purpose of assessing adherence to the regulatory maximum of 12 minutes per hour.
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4. Revenues derived from the broadcast of infomercials would be included in a licensee's annual revenue total for the purpose of any Canadian programming expenditure formula that may apply.
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5. A licensee would not be permitted to apply the production costs of infomercials against any condition of licence or expectation respecting its expenditures on Canadian programming or on script and concept development.
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6. An infomercial would be defined using the description outlined in Circular No. 350 dated 8 August 1988.
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7. In order to avoid any confusion on the part of the viewer, a licensee would be expected to clearly identify infomercials. The Commission is prepared to consider proposals as to how this might be accomplished. For example, some who offered comment on this matter suggested that infomercials need only be identified as such at the beginning, end and within the body of the infomercial, while others proposed the inclusion of a message in the form of a continuous on-screen crawl identifying the programming as being a commercial message.
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In addition to comments on these proposed guidelines, the Commission requests the views of interested parties as to whether the additional flexibility contemplated under this approach should be extended to licensees of specialty programming undertakings, the licensees of all television programming undertakings (including the CBC and educational broadcasters), or private television licensees only, or whether the matter should be assessed on a case-by-case basis.
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In the case of an infomercial that is aired outside of a program, the Commission also requests comments as to whether any advertising material that is unrelated to the product or service promoted by the infomercial, but that is inserted within it or immediately following its broadcast, should be counted as part of the 12 minutes per hour of advertising material permitted by the regulations. The Commission notes that, under the current definition of an infomercial and of a program, such additional advertising material would be treated as forming part of the infomercial itself, and would not be counted as part of the 12 minutes under the proposed guidelines.
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The Commission expects that any authority that might be granted to air such infomercials during the broadcast day would be by condition of licence, and notes that such a process would require amendment to the regulations in the manner proposed in Public Notice CRTC 1993-137.
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The Commission further notes that broadcasters would have to apply for such a condition of licence, thus allowing for a public process where additional comments on the merits of individual applications might be made.
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Parties wishing to comment on the matters raised in this notice must send their submissions to the Secretary General, CRTC Ottawa, Ontario, K1A 0N2 by 13 May 1994. While receipt of submissions will not be acknowledged, they will be considered by the Commission and will form part of the public record of the proceeding.
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Allan J. Darling
Secretary General
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