ARCHIVED - Decision CRTC 2000-392

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Decision CRTC 2000-392
Ottawa, 21 September 2000
John P. Wright, on behalf of a company to be incorporated
Kingston, Ontario – 199911368
CHUM Limited
Kingston, Ontario – 199911350
McColman Media Inc., on behalf of a company to be incorporated
Kingston, Ontario – 199902838

9 May 2000 Public Hearing
in Kingston

New rock music FM station to serve Kingston

The Commission approves one of three applications competing for an FM licence to serve Kingston. The two remaining applications are denied. All three applicants had sought use of the frequency 105.7 MHz (the last available FM channel allotment in the Kingston area), and were thus technically mutually exclusive.
The successful applicant is a new entrant to Kingston’s radio market and will increase the diversity of editorial voices available to listeners in that growing community. The station will contribute further to diversity through its proposed rock music format, one not currently provided by any of Kingston’s four existing radio stations. The service will be targeted principally to an audience of those between the ages of 18 and 44.

1.

The Commission approves the application by Mr. John P. Wright, on behalf of a company to be incorporated, for a broadcasting licence to carry on a new English-language FM radio programming undertaking at Kingston. The competing applications by CHUM Limited and by McColman Media Inc., on behalf of a company to be incorporated, are denied.

2.

Subject to the requirements set out in this decision, the Commission will issue a licence expiring 31 August 2006. The licence will be subject to various conditions, including one that establishes a maximum percentage for the amount of hit material aired on the new station, and others that specify minimum levels for local programming, Canadian content and financial support for Canadian talent. These conditions are either presented below or will be specified in the licence to be issued. As noted in Public Notice CRTC 1999-137, standard conditions of licence are now set out only on the licence form and are not repeated in the decision.
Background: the market and the applicants

3.

There are four commercial radio stations (two AM and two FM) now licensed to serve the population of approximately 166,300 residing in the Kingston central market area. Two of these stations are licensed to a numbered company effectively controlled by Corus Entertainment Inc., one of Canada’s largest radio broadcasters. CFFX is an oldies music station whose target audience includes adults in the 25 to 49 age group. CFMK-FM operates in the country format and appeals to a broad audience of those 35 years of age and older.

4.

Corus purchased the two stations in March of this year from Power Broadcasting Inc. Before that transaction, Power had filed an application with the Commission for a new Kingston FM station. The application proposed a station that would have operated in the same format and targeted the same audience as that proposed by Mr. Wright. Corus, however, following its purchase of CFFX and CFMK-FM, withdrew the application on the strength of its conclusion that the market would not support a new entrant. Corus appeared at the Kingston hearing to oppose all three of the competing applications.

5.

One of these competing applications is by CHUM Limited, another of Canada’s largest radio broadcasting groups. CHUM is the licensee of Kingston’s other two radio stations, CKLC and CFLY-FM. These stations operate in adult contemporary (AC) music formats aimed at differing though overlapping age groups (adults of 35 years and older in the case of CKLC, and those between the ages of 25 and 44 in the case of CFLY-FM). CHUM is also the licensee of CHXL-FM, an album oriented classic rock station in Brockville, some 80 kilometres east of Kingston. CHXL-FM's signal is receivable in the Kingston market.

6.

CHUM’s proposed FM station at Kingston would have offered a Soft AC music format targeted principally to women within the 35 to 54 age group. Had its application been approved, CHUM planned to move CKLC from its present AC format to a nostalgia format, and to retarget CFLY-FM on a narrower, younger audience of those 18 to 34 years of age by moving into a hot AC format.

7.

These plans to move CFLY-FM into a hot AC format would have positioned the station in more direct competition with WBDR-FM Watertown. WBDR-FM, promoted under the name The Border, is a contemporary hit radio (CHR) station. It operates a rebroadcasting facility at Cape Vincent, New York, some ten kilometres south of Kingston. WBDR-FM is very popular among young radio listeners in Kingston, and is owned 11% by Mr. Garry P. McColman.

8.

Mr. McColman is the prospective principal shareholder of the company to be incorporated whose application was one of those competing at the Kingston hearing. The McColman proposal was for a new Kingston station that would have operated in a soft AC or easy listening music format aimed at those 40 years of age and older. The Commission notes that this choice of format would have avoided any direct competition for listeners with WBDR-FM.

9.

The successful application by Mr. Wright, on behalf of a company to be incorporated, is for an FM station that will feature rock music. Mr. Wright, an experienced broadcaster familiar with the Kingston radio market, will control the new company through his ownership of 60% of its voting shares. Other shareholders include Rogers Broadcasting Limited (25%), a major radio broadcasting group, and Mr. Douglas Kirk (15%). Mr. Kirk is also involved in the ownership of radio stations at Ajax, Chatham, and Hamilton/Burlington, Ontario.
Evaluating the applications

10.

In recent decisions involving competing radio applications, the Commission has noted four main factors that it generally finds to be relevant to its evaluation of such applications. While their relative importance can vary according to the specific circumstances of the market, the factors identified by the Commission include: the impact of a new entrant on the market; the competitive state of the market; the quality of the applications; and their implications with respect to the diversity of editorial voices in the market.

11.

The Commission discussed these factors with the applicants at the hearing. Its observations concerning the three applications in relation to these factors are set out below.

Impact of a new entrant on the Kingston market

12.

The Kingston radio market is characterized by a high level of tuning to out-of-market stations (about 52% of all tuning by people 12 years of age and older). Of this 52%, some 18% is to CBC Radio One, a non-commercial service. A further 16%, however, is captured by WBDR-FM Watertown. Some 5% is accounted for by CHUM’s Brockville station CHXL-FM.

13.

This amount of "spill" into Kingston by out-of-market radio signals has likely had a negative impact on the revenue-generating potential of Kingston’s four stations. In 1999, the aggregate profit before interest and taxes of the four stations was –9.4%. In the Commission’s view, however, this figure may have been skewed by the inclusion of significant one-time expenses incurred in that year by one of the four stations.

14.

The Commission also considers that the high percentage of out-of-market listening can be taken as evidence of an opportunity to introduce a new station to the Kingston market, particularly one that would operate in a distinctive, unduplicated format. This would avoid erosion of the audiences or revenues of existing stations to the degree that might otherwise occur.

15.

The Commission notes in this regard that, of the formats proposed in the three competing proposals, it is the one described in the Wright application that would be most clearly distinguishable from those currently offered by Kingston’s existing radio stations. Moreover, it is the format that will compete most directly for listeners with WBDR-FM.

16.

At the same time, the Commission notes the projections contained in the Wright application. These suggest that the proposed station would not divert any advertising revenue from local market radio stations. The Commission considers that this could underestimate the impact of the proposed station on Kingston’s incumbent radio broadcasters. Nevertheless, given the size, national presence and considerable resources of the two incumbent broadcasters concerned, and notwithstanding the arguments presented by Corus in its opposing intervention, the Commission is satisfied that the proposed station will pose no undue threat to the continued operations of Kingston’s existing stations.

Competitive state of the Kingston market

17.

In the Commission’s view, approval of the CHUM application would serve to reduce, rather than increase, the level of competition in the market. Approval would bring to four the number of CHUM-owned radio stations with signals available throughout all or most of the Kingston market. This would clearly give CHUM a significant competitive advantage in that market.

18.

By comparison, approval of either the Wright or the McColman proposals would increase the level of competition in the market. Either would introduce a new FM station to vie with the local AM/FM combos owned by CHUM and Corus. The Commission notes that the rock music format described in the Wright application will complement the musical programming of the four existing Kingston stations. This would not be the case for the AC format proposed by Mr. McColman. Moreover, as noted above, the format proposed by Wright will compete squarely against WBDR-FM for young listeners, and thus has the greater potential to repatriate Kingston area listeners and advertising revenues. As well, of these two applications, the Commission considers that the Wright proposal will provide the more truly independent, and hence more competitive, new voice in the market.
Quality of the applications

19.

In assessing the quality of a new radio application, the Commission considers four main elements. These are: the applicant’s Canadian content commitments; local programming proposals and plans for providing reflection of the local community; its business plan; and commitments to support the development of Canadian talent.

20.

In the case of the competing Kingston FM proposals, the Commission notes that all three offered acceptable Canadian content commitments. The three also provided adequate plans for local programming and local reflection in their applications. Although the proposals by the McColman group in this area were more expansive than those of the other two applicants, the business plan it presented did not rate as highly in the Commission’s view as the business plans filed by CHUM and Mr. Wright.

21.

For one thing, the projected programming expenses contained in the McColman application appear to be low in relation to industry norms. Mr. McColman projected programming expenses in the fifth year of operations to be $105,000. The average annual programming expenses for Canadian English-language FM stations in 1999 were $679,000. While this figure includes the programming expenses of stations in larger markets and is therefore relatively high, the Commission notes that Mr. Wright and CHUM projected year 5 programming expenses of $572,000 and $374,000 respectively. The proposed programming expenses in the McColman application are also significantly lower than those of the existing Kingston stations. The comparatively low level of programming expenses projected by Mr. McColman raises some doubt as to the applicant’s ability to fully and successfully implement his plans for local programming and local reflection.

22.

Each of the applicants agreed to participate in the Canadian talent development plan formulated by the Canadian Association of Broadcasters, and to exceed the financial contributions specified under this plan. The plan calls for minimum contributions of $3,000 per year by stations serving markets the size of Kingston. The contributions must be made to eligible third parties, such as FACTOR, for the development of Canadian musical and other artistic talent.

23.

While each of the applicants proposed further initiatives, the total amount earmarked in the Wright application for the support of Canadian talent far exceeds the financial contributions proposed by either of the other two. Specifically, in addition to an annual contribution of $3,000 to FACTOR, Mr. Wright committed to devote $25,000 in each of the first five years of operation, and $27,500 in each of the sixth and seventh years, to assist in the development of an annual Kingston rock music festival by funding the festival appearances of Canadian rock musicians. A condition of licence requiring adherence to these commitments is set out below.

Diversity of editorial voices

24.

The Commission notes that approval of CHUM’s application for a third Kingston station would not have increased the number or diversity of editorial voices in the Kingston market. Such diversity, however, would clearly be increased through the licensing of the FM station proposed by Mr. Wright. The Commission acknowledges that approval of the McColman application would also have added a new voice to the Kingston market. Nevertheless, based on its consideration of all aspects of the FM radio proposals before it, the Commission has decided to approve the application by Mr. Wright, on behalf of a company to be incorporated.
Other matters

25.

Consistent with the licensee’s commitments, it is a condition of licence that it contribute a minimum of $3,000 each year to FACTOR. It shall also allocate an additional amount of $25,000 in each of the first five years of operation, and $27,500 in each of the following two years, to support live performances in Kingston by Canadian artists. Further, should the amount expended in any year in supporting these live performances fall short of the amount earmarked for that purpose and noted above, the shortfall shall be contributed to FACTOR.

26.

The Commission notes the licensee’s assurances that all expenses associated with its support of live performances by Canadian artists will qualify as direct contributions to Canadian talent development, as specified in Appendix 1 of Public Notice CRTC 1990-111 entitled An FM policy for the nineties.

27.

In Public Notice CRTC 1992-59 dated 1 September 1992 and entitled Implementation of an employment equity policy, the Commission announced that the employment equity practices of broadcasters would be subject to examination by the Commission. In this regard, the Commission encourages the licensee to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.

28.

As proposed by the licensee, the new station will operate on frequency 105.7 MHz (channel 289B) with an effective radiated power of 24,000 watts.

29.

The licence will only be issued and effective when the new station is ready to begin operation. When the licensee has completed construction and is prepared to commence operation, it must advise the Commission in writing. If the station is not constructed and ready to operate within 12 months of today’s date, extensions to this time frame may be granted provided that the licensee applies in writing to the Commission before the 12-month period or any extension of that period expires.

30.

The Department of Industry has advised the Commission that this application is conditionally technically acceptable. The Department will only issue a broadcasting certificate once it has determined that the proposed technical parameters will not create any unacceptable interference with aeronautical NAV/COM services.

31.

In accordance with section 22(1) of the Broadcasting Act, the Commission will only issue the licence and grant the authority to operate when it receives notification from the Department of Industry that its technical requirements have been met, and that a broadcasting certificate will be issued.

32.

This authority will only be effective and the Commission will only issue the licence at such time as it receives documentation establishing that an eligible Canadian corporation has been incorporated in accordance with the application in all material respects and that this corporation may be issued a licence.

33.

The Commission acknowledges the views expressed in the interventions filed with respect to the applications considered at the Kingston public hearing.

Related CRTC document
  • Public Notice 1999-137 – New licence form for commercial radio stations

Secretary General


This decision is to be appended to the licence. This decision is in alternative format upon request, and may also be examined at the following Internet site: www.crtc.gc.ca
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