ARCHIVED -  Decision CRTC 99-425

Decision

Ottawa, 31 August 1999

Decision CRTC 99-425

CHUM Limited

London, Wingham and Wheatley, Ontario - 199901450 - 199901476 - 199901468

Applications processed by
Public Notice CRTC 1999-91
dated 21 May 1999

Partial approval for reduction in spending on Canadian programming

1.  The Commission approves in part applications by CHUM Limited (CHUM) to amend the condition of licence which specifies the amounts the licensee must expend on Canadian programming, on a combined basis, for CFPL-TV London, CKNX-TV Wingham and CHWI-TV Wheatley for the years ending 31 August 1998 and 31 August 1999.

2.  Under the requirements of the condition of licence, the combined amount to be expended on Canadian programming is based in the first year of the licence term on a specific, fixed dollar expenditure referred to as the "base amount". To calculate subsequent years' required expenditures, this base amount is then increased or decreased, on a rolling forward basis, in accordance with a formula that takes into account year-by-year fluctuations in the stations' combined advertising revenues.

3.  In support of its applications to decrease the amount required to be spent in the two broadcast years ending 1998 and 1999, CHUM cited the "vast difference that has occurred between the historical base amount of revenues upon which the Canadian programming expenditures calculation was made for CFPL/CHWI/CKNX, compared with the actual revenues for the stations, since CHUM acquired ownership". In particular, total revenues for the three stations during the 1997-1998 broadcast year were approximately 45% lower than for the previous (1996-1997) broadcast year. This decline has resulted in required expenditures representing much higher percentages of advertising revenues than originally projected.

4.  According to the material filed in its applications, CHUM's existing condition requires that it spend on Canadian programming approximately $8 million for the year ending 31 August 1998 and approximately $8.1 million for the year ending 31 August 1999. By comparison, the requested amendment proposed expeditures totalling $5.092 million in 1998, and $6.112 million in 1999. With $6.112 million as the new base amount, CHUM proposed to continue thereafter with the percentage of revenue formula as contained in its current condition of licence for the remainder of the licence term.

5.  An intervention in opposition to the request was submitted by Friends of Canadian Broadcasting (Friends). Friends argued that when CHUM purchased the three stations in 1997 (approved in Decision CRTC 97-527), it did so with full knowledge of the existing conditions of licence. Friends asserted that the existing spending requirements should remain in effect for the full term of licence.

6.  In response to the intervention, CHUM argued that in London, Wingham and Wheatley it faces exceptional financial circumstances, and such situations should be dealt with on a case-by-case basis.

7.  Based on the evidence filed with the application, the Commission notes that the actual decline in the licensee's combined revenues for the 1998 broadcast year is greater than the decline CHUM had projected at the time it took control of the three stations. Moreover, the Commission is satisfied that the projected actual decline in revenues for the 1999 broadcast year will also be significantly higher than what CHUM had projected. For these reasons, the Commission is satisfied that the existing requirements for Canadian programming expenditures for these three stations would require levels of expenditures significantly in excess of the industry average.

8.  For the reasons set out above, the Commission approves, by majority vote, the licensee's request to amend the expenditure condition for the year ending 31 August 1999. The new base amount required to be expended by the licensee for all three stations for Canadian programming in the broadcast year ending 31 August 1999 is accordingly set at $6,112,000. This amount will increase or decrease in subsequent years in accordance with the formula set out in the amended condition of licence set out in the Appendix to this decision.

9.  The Commission is not, however, satisfied that the reduction for the 1998 broadcast year is justified. The Commission notes that it has already addressed the issue of CHUM's spending for the year ending 31 August 1998 in Decision CRTC 97-527, and it noted that the licensee had sufficient flexibility under its current condition of licence to react to changes in advertising revenue. When CHUM purchased these three stations, it did so with full knowledge of its conditions of licence. Moreover, the Commission is concerned that approval of the applications in their entirety would result in Canadian programming expenditures, over the term of the licence, that are less than would otherwise be reasonable for stations of this size.

10.  For this reason, the Commission denies CHUM's request to amend its condition of licence, in order to reduce the amount of the expenditure requirement for the year ending 31 August 1998. Accordingly, in the attached Appendix, the Commission has deleted the existing condition of licence set out in Decision CRTC 97-527 for these stations, and replaced it with a condition of licence that reproduces the existing condition of licence for the 1998 broadcast year, adds a paragraph setting out the new base amount for the 1999 broadcast year, and reproduces in substance the balance of the existing condition of licence. As contemplated in this condition of licence, the Commission requires the licensee to ensure that any expenditure short-fall that may have been incurred for the 1998 broadcast year is expended over the remaining years of the licence term.

This decision is to be appended to each licence. It is available in alternative format upon request, and may also be viewed at the following Internet site:
http://www.crtc.gc.ca

Secretary General

Appendix to decision CRTC 99-425 / Annexe à la décision CRTC 99-425

Condition of licence 1 for CFPL-TV London, CKNX-TV Wingham and CHWI-TV Wheatley is hereby deleted, and the following substituted therefor:

The licensee shall, for CFPL-TV, CKNX-TV and CHWI-TV combined, expend on Canadian programming, at a minimum,

(i)  In the year ending 31 August 1998, the minimum required level of expenditures in the year ending 31 August 1997 (before consideration of any overexpenditures or underexpenditures from prior years), increased (or decreased) by the year-over-year percentage change in the total of the station's annual advertising revenues and network payments, as reported in the relevant Annual Return for the years ending 31 August, averaged over the three previous years;

(i.1)  In the year ending 31 August 1999, $6,112,000;

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 expenditures (before consideration of any overexpenditures or underexpenditures from prior years) increased (or decreased) by the year-over-year percentage change in the total of the stations' annual advertising revenues and network payments, as reported in the relevant Annual Returns for the years ending 31 August, averaged over the three previous years;

iii)  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 paragraphs (i), (i.1) and/or (ii) above; 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;

iv)  In any year of the licence term, excluding the final year, where the licensee expends an amount on Canadian programming that is greater than the minimum required expenditure for that year as set out or calculated in accordance with paragraphs (i), (i.1) and/or (ii) above, the licensee may deduct:

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

b)  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 a) above;

v)  Notwithstanding paragraphs (iii) and (iv) 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 paragraphs (i), (i.1) and/or (ii) above.

For the purpose of the above condition, "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.

For the purpose of the above condition, the licensee is not permitted to credit any overexpenditure made in the previous licence term towards Canadian programming expenditures in any year or years of this licence term.