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ARCHIVED - Decision CRTC 2000-138

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Decision CRTC 2000-138
Ottawa, 4 May 2000
CHUM Limited (MuchMusic)
Across Canada – 199812657
Application processed by
Public Notice CRTC 1999-177
dated 2 November 1999
Summary
The Commission renews the licence of MuchMusic for a full term, but denies the rate increase proposed by the licensee.
The majority of MuchMusic's conditions of licence remain identical to those in effect during the previous licence term. These include conditions related to the exhibition of Canadian programming, minimum levels of programming featuring music videos, the number of hours devoted to certain types of feature films, levels of French-language videos, advertising levels, maximum wholesale rates, and the adherence to industry codes on programming standards.
While many conditions remain unchanged, the Commission is requiring an increase in MuchMusic's minimum yearly allocation to VideoFACT, for the development and production of Canadian music videos.
Introduction

1.

The Commission renews the broadcasting licence for the English-language specialty programming undertaking MuchMusic from 1 June 2000 to 31 August 2006. For administrative reasons only, MuchMusic's current licence was renewed in Decision CRTC 99-129 from 1 September 1999 until 29 February 2000 and subsequently in Decision CRTC 2000-52 from 1 March 2000 until 31 May 2000. The new licence is subject to the conditions specified in the appendix to this decision, and in the licence to be issued.

2.

The Commission is satisfied that MuchMusic has been in compliance with all conditions of its licence throughout the past licence term.
Proposed rate increase

3.

As part of its application, CHUM proposed to increase the maximum wholesale rate for MuchMusic, when distributed as part of the basic service of Class 1 distribution undertakings serving English-language markets. The licensee proposed that the rate be increased from $0.09 to $0.14, in annual $0.01 increments over a five-year period. As an alternative to the incremental increases, CHUM further suggested a one-time $0.05 increase.

4.

CHUM offered two reasons for the proposed increase. First, it noted that MuchMusic is reliant upon advertisers for 75% of its total revenues, and the increase would protect MuchMusic from any sudden reductions in advertising revenue. CHUM further noted that the authorised basic rate for carriage of MuchMusic has not increased since 1992. Secondly, CHUM committed to dedicate at least 75% of any incremental revenue from increased subscriber rates, to the production of Canadian music-based documentaries and feature-length drama. CHUM considers such programming to be "virtually unrepresented". CHUM estimated that the increased rate could result in an additional $4 million to be spent on new Canadian music-related drama. It also noted that an amount of as much as $266,000, representing an additional 5% of all incremental revenue would be committed to VideoFACT.

5.

The Canadian Cable Television Association (CCTA) submitted an intervention in opposition to the rate increase. The CCTA opposed the increase on the basis that MuchMusic is in an extremely strong financial position, has above-average profitability, and has underestimated its advertising and subscriber revenue growth.

6.

In response to the intervention, CHUM noted that with increased viewer choice in an expanding universe of available channels, it does not believe that it will sustain the audience and revenue growth seen in the 1980s and 1990s.

7.

In Decision CRTC 93-581, the Commission granted a rate increase to MusiquePlus, the French-language specialty music service. In that decision, the Commission stated that the level of any rate increase subsequently authorised would be based on the Commission's determination of the financial resources required by a licensee. The Commission's policy in this regard remains unchanged.

8.

The Commission has examined the financial performance of MuchMusic over the five-year period ending August 1999, and has determined that over that period, MuchMusic performed significantly better than had been projected. The Commission further notes that, while MuchMusic has the lowest wholesale fee of all English-language specialty services, it has one of the highest profit before interest and tax (PBIT) margins.

9.

The Commission concludes that MuchMusic is currently in a strong financial position with above-average profitability, and that it would remain so whether or not the Commission approved the rate increase. The Commission notes that MuchMusic has stated that the rate increase has not been made on the basis of economic need. The Commission further notes that any rate increase would be borne by the subscribers, since distributors are permitted to recoup such an increase directly from their customers. For all of these reasons, the Commission denies the proposed rate increase for MuchMusic.
Music videos – minimum Canadian content

10.

MuchMusic is currently subject to a condition of licence requiring it to ensure that at least 30% of all music videos played in each broadcast week are Canadian music videos, based on the current definition set out in Public Notice 1984-94. (As of 1 September 2000, the revised definition set out in PN 2000-42 will apply.)

11.

During this proceeding, the possibility of increasing the current level to 35% was discussed with CHUM. The same suggestion was made in interventions submitted by the Canadian Independent Record Production Association (CIRPA) and the Society of Composers, Authors and Music Publishers of Canada (SOCAN).

12.

SOCAN suggested that CHUM could increase its Canadian video content by 1% per year for five years, and supported its recommendation on the basis that MuchMusic has effectively already met that level, the proposed level would be consistent with the 35% required on radio, and that the 1% increase per year is modest.

13.

In response to the suggestion of increasing the requirement, CHUM responded that a 35% weekly Canadian content requirement would have a negative impact on its schedule, its incentive to meet regulatory objectives, and its competitiveness at home and in export markets. MuchMusic also noted that the supply of qualified Canadian content videos is shrinking and the shelf life of videos is becoming shorter.

14.

The Commission has decided not to impose a requirement for a higher level of Canadian music videos on MuchMusic. In reaching this determination, the Commission has considered that the volume of Canadian videos is lower than that of Canadian musical selections. It is common that, while an artist might produce a CD with 12 songs, only one video might be made to promote the same CD. In addition, the Commission notes that MuchMusic contributes to the Canadian music industry in other ways, including the broadcast of artist profiles and interviews. The Commission also notes that maintaining the current level of 30% Canadian videos will result in continued scheduling flexibility for MuchMusic.

15.

A condition of licence requiring that 30% of all music videos during each broadcast week be Canadian is set out in the appendix to this decision, and the Commission encourages the licensee to exceed that level.
Contributions to independent production

16.

The licence for MuchMusic is currently subject to a condition of licence, which specifies that MuchMusic allocate not less than 5% of the previous year's gross revenues to VideoFACT, for the development and production of Canadian music videos.

17.

The Canadian Film and Television Production Association (CFTPA) submitted an intervention in which it suggested that MuchMusic's proposed increase in production should not be tied to its request for a rate increase. The CFTPA argued that MuchMusic could play a bigger role in the provision of Canadian contemporary music-based documentaries and feature-length drama, and could increase its contribution to Canadian production even without a rate increase. The CFTPA argued this on the basis that MuchMusic's 5% contribution was low in comparison to the industry average.

18.

In response to the intervention, CHUM stated that much of the production supported by MuchMusic is done by producers who are too small for CFTPA membership, leading to the assumption that less money is spent than is actually the case. CHUM also noted that MuchMusic makes payments to composers, publishers, copyright holders and producers and to the Canadian Audio-Visual Licensing Agency Inc. It added that, while other production funds focus on long-form, non-musical programming, MuchMusic dedicates its funding entirely to music.

19.

The Commission has determined that, while the requirement for the broadcast of Canadian music videos remains appropriate, a modest increase in funding for the production of Canadian music videos is equally appropriate. In reaching this conclusion, the Commission has taken into account MuchMusic's strong financial position, and above-average profitability. A condition of licence requiring that the licensee allocate a minimum of 7% of the previous year's gross revenues to the production of Canadian music videos is set out in the appendix to this decision.
Relationships with independent producers

20.

In its intervention, the CFTPA also raised the issue of the CHUM group's recent investment in a production company. The intervention expressed the concern that vertical integration in this industry could lead to unfair practices in acquiring programming.

21.

The Commission acknowledges the concerns expressed by the CFTPA in this regard, and will monitor the situation, consistent with its approach in other cases of producer-affiliated broadcasters.
Other matters
Cultural diversity

22.

In Public Notice CRTC 1999-97 Building on success - A policy framework for Canadian television, the Commission expressed its confidence that the Canadian broadcasting system could "better reflect the presence of minority groups in Canadian society, and…portray them accurately and fairly." The Commission commends MuchMusic for its efforts to reflect and portray fairly the rich ethnic diversity of Canadians through the selection of music, music genres, on-air hosts, special guests and sponsorship of special events, and expects the licensee to continue its activities in this respect.
Industry codes

23.

Conditions of licence requiring that MuchMusic adhere to the Canadian Association of Broadcasters' (CAB) codes relating to gender portrayal, advertising to children and violence in television programming are set out in the appendix to this decision.
Employment equity

24.

The Commission notes that this licensee is subject to the Employment Equity Act that came into effect on 24 October 1996, and therefore files reports concerning employment equity with Human Resources Development Canada.
Closed captioning

25.

The Commission notes the licensee's statements that it has closed captioned all VideoFACT funded music videos since July 1994, and that it has captioned key live interviews during VideoFlow, as well as signature programming such as FAX, The NewMusic, TooMuch4Much, Intimate&Interactive, and some special programming such as The MuchMusic Video Awards.

26.

For the new licence term, MuchMusic has committed to spend a minimum of $100,000 annually to caption its most relevant programming, including music videos, specials, and documentaries. The Commission expects MuchMusic to meet this commitment, and encourages it to exceed the levels of captioning achieved over the past licence term. In addition, the Commission encourages MuchMusic to caption 90% of all non-music programming during the broadcast day, including presentations by program hosts, by the end of the licence term.
Interventions

27.

In addition to the interventions discussed earlier, the Commission also acknowledges and has considered the numerous interventions submitted in support of this renewal application.
Related CRTC documents
• Decision 2000-52 – Administrative renewal
• Decision 99-129 – Administrative renewal
• Decision 97-76 – Licence amendment
• Decision 94-439 – Last licence renewal
• Decision 93-581 – MusiquePlus - Authority to increase the wholesale rate
• Public Notice 2000-42 – Certification for Canadian programs - A revised approach
• Public Notice 1999-97 – Building on success - A policy framework for Canadian television
• Public Notice 1984-94 – Recognition for Canadian programs
Secretary General
This decision is to be appended to the licence.  It is available in alternative format upon request, and may also be viewed at the following Internet site: www.crtc.gc.ca

 

Appendix to Decision CRTC 2000-138

Conditions of licence for MuchMusic
Nature of the service
1.     The licensee shall provide a national English-language specialty television service consisting only of music or music-related programming, except as provided by condition of licence No. 5.
2.     A minimum of 65% of MuchMusic's broadcast week shall be devoted to the exhibition of programming featuring music videos - Category 8 (b).
3.     The licensee shall devote not more than 15% of the broadcast week to music-related programming from Categories 7(a) - Dramatic Series and 7(e) - Animated Programming combined.
4.     The licensee shall not distribute more than six hours of music-related feature films - Category 7(d) in each broadcast week. Each feature film shall be from one of the following categories:
a)     concert films and documentaries;

b)     music artists' biographies

c)     pop/rock operas and plays; or

d)     feature films that have a minimum music:spoken word ratio of 60:40, in accordance with the following:

i)     where synchronized spoken word occurs within a film, the duration of such dialogue will be counted as spoken word for the purposes of the 60:40 music to spoken word test;
ii)     where synchronized spoken word occurs within a film, accompanied or enhanced by background music, the duration of such dialogue will be counted as spoken word for purposes of the 60:40 test;
iii)     where music occurs in a film, and is not used as background music for synchronized spoken word, the duration of such music will be counted as music for purposes of the 60:40 test;
iv)     where music occurs within a film and small amounts of non-synchronized dialogue are present within such music, the duration of such music will be counted as music for purposes of the 60:40 test.
5.     Nothwithstanding condition No. 1, the licensee shall devote no more than 5% of the broadcast week to programming from Category 2-Analysis and Interpretation, except as individually authorized in advance, in writing by the Commission for extended coverage of special events.
Exhibition of Canadian programming
6.     The licensee shall devote to the distribution of Canadian programs not less than
a)     60% of the broadcast week and

b)     50% of the time from 6:00 p.m. to midnight (Eastern time) during each broadcast week.
7.     Not less than 30% of the total number of music videos distributed by the licensee during each broadcast week shall be Canadian music videos.
8.     The licensee shall schedule its Canadian music videos evenly throughout each broadcast week and in a reasonable manner throughout each broadcast day.
French-language music videos
9.     In each broadcast week,
a)     not less than 5% of the total number of music videos distributed by the licensee shall be French-language music videos, or

b)     the licensee shall broadcast each weekday, a minimum of one half-hour video-oriented program, which will feature between three and five French-language music videos or performances per program.
Expenditures on Canadian music videos
10.     The licensee shall, in each year of the licence term, allocate to VideoFACT for the development and production of Canadian music videos not less than 7% of the previous year's gross revenues.
Advertising
11.     a)     Subject to subsection b), the licensee shall not distribute more than 12 minutes of advertising material per clock hour.
b)     In addition to the 12  minutes of advertising material referred to in subsection a), the licensee may distribute, during each clock hour, a maximum of 30 seconds of additional advertising material that consists of unpaid public service announcements.
c)     The licensee shall not distribute any paid advertising material other than paid national advertising.
d)     Where a program occupies time in two or more consecutive clock hours, the licensee may exceed the maximum number of minutes of advertising material allowed in those clock hours if the average number of minutes of advertising material in the clock hours occupied by the program does not exceed the maximum number of minutes that would otherwise be allowed per clock hour.
Wholesale rates
12.     The licensee shall charge each exhibitor of this service a maximum wholesale rate of $0.09 per subscriber per month where the service is distributed as part of the basic service.
Violence in programming
13.     The licensee shall adhere to the guidelines on the depiction of violence in television programming set out in the Canadian Association of Broadcasters' (CAB) Voluntary Code Regarding Violence in Television Programming, as amended from time to time and approved by the Commission.
Gender portrayal
14.     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.
Advertising to children
15.     The licensee shall adhere to the provisions of the CAB's Broadcast Code for Advertising to Children, as amended from time to time and approved by the Commission.
Definitions
"broadcast day" means the 24-hour period beginning each day at 12:00 noon.
"broadcast week" means seven consecutive days beginning on Friday.
"broadcast month", "broadcast year" and "clock hour" shall have the same meanings as those set out in the Television Broadcasting Regulations, 1987, except that "broadcast month" and "broadcast year" shall be calculated based on the definition of "broadcast day" provided above.
"paid national advertising" means advertising that is purchased at a national rate and receives national distribution on the service.
Until 31 August 2000, "Canadian music video" shall have the same meaning set out in Section VIII of the Appendix to Public Notice CRTC 1984-94, entitled Recognition for Canadian Programs. As of 1 September 2000, "music videos" will be known as "music video clips" and "Canadian music video clip" shall have the same meaning set out in section V of Appendix I of Public Notice CRTC 2000-42, entitled Certification for Canadian programs - A revised approach, as amended from time to time.
"music-related" shall be defined as about the music or recording industries, or about musical artists, concerts and musical performances, compositions or events.

 

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