ARCHIVED - Broadcasting Public Notice CRTC 2002-17

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Broadcasting Public Notice CRTC 2002-17

Ottawa, 8 April 2002

Introductory statement to decisions approving two new television stations to serve Toronto/Hamilton

InNew television station for Toronto/Hamilton and New multilingual ethnic television station to serve Toronto, Broadcasting Decisions CRTC 2002-81 and 2002-82 (Decisions 2002-81 and 2002-82), also published today, the Commission awarded licences for two new television stations to serve the Toronto/Hamilton market. In this notice, the Commission introduces those decisions by reviewing the market and the economic issues considered as part of the hearing process.



In response to applications submitted by TDNG Inc. for broadcasting licences to carry on television programming undertakings to serve Toronto, Hamilton and Kitchener, Ontario, the Commission issued Call for applications for a broadcasting licence to carry on a television programming undertaking to serve all or any one of Toronto, Hamilton and Kitchener, Ontario, Public Notice CRTC 2001-51, 10 May 2001 (Public Notice 2001-51). In response to the call, five additional proposals for new television stations were submitted. An application by CTV Television Inc. (CTV Television) was withdrawn before the hearing, and the remaining proposals were considered at a public hearing held in Hamilton, Ontario, commencing on 3 December 2001.


Pursuant to this proceeding, the Commission has approved in part the application by Rogers Broadcasting Limited (Rogers), and a majority of the Commission has approved the application by Craig Broadcast Systems Inc. (OBCI) (Craig). The other competing applications considered at the public hearing are denied. Those applications were submitted by Global Communications Limited (Global), TDNG Inc. (TDNG), and Alliance Atlantis Broadcasting Inc. (Alliance Atlantis).


In Public Notice 2001-51, the Commission identified a number of factors that each application should address. Without restricting the scope of the issues to be considered, those factors were:

· The contribution that the proposed service will make to achieving the objectives established in the Broadcasting Act and, in particular, to the production of local and regional programming.
· The expected audience of the proposed service.
· The proposed expenditures and the means by which the applicant will promote the development of Canadian talent, including local and regional talent.
· An analysis of the markets involved and potential advertising revenues, taking into account the results of any survey undertaken supporting the estimates.

· An indication of possible shared investment or co-operative program buying arrangements with Canadian or foreign broadcasters.

· Evidence as to the availability of financial resources consistent with the requirements established in the financial projections of the applicant's business plan.


After taking into account all of these factors for each application, as well as the Commission's general policies, the Commission then assessed the individual proposals presented, and the potential impact of each on the existing broadcasters in the market. The Commission's concern in such circumstances is to ensure that no undue negative impact should result. An undue negative impact would be considered as one that would restrict an existing licensee's ability to fulfil its own regulatory obligations.

Characteristics of the Toronto/Hamilton television market


The Toronto Extended Market (EM), which includes Hamilton, is the largest television market in Canada, by population. According to the Bureau of Broadcast Measurement, the total number of persons over the age of 2 in the Toronto EM was 6,243,350 in 2001. According to the 1996 Statistics Canada Census, the total combined population of all ages in the Hamilton and Toronto Central Metropolitan Areas (CMA) was 4,850,720. In the same Census, for the same two combined areas, the total visible minority population was 1,387,005, and the total population of aboriginal origin was 21,555. Also in the 1996 Census, approximately 3 million persons, representing two-thirds (66.5%) of the population of the Greater Toronto Area (GTA), identified their ethnic origin, in whole or in part, as other than British, French or Aboriginal. Further, the Commission notes that at subsequent public hearings and consultations, various parties asserted that the size of aboriginal, ethnic and visible minority communities in Canada are increasing exponentially.

The existing local stations


The owners of all but one of the existing privately owned local stations in the Toronto-Hamilton television market are among the largest broadcasting groups in Canada, each controlling multiple broadcast outlets. The licensees of these stations are Global (CIII-TV and CHCH-TV), CTV Inc. (CFTO-TV), Rogers (CFMT-TV) and CHUM Limited (CITY-TV). One other privately owned station, the independent CITS-TV, which is operated by Crossroads Television System, is a not-for-profit religious programming service. The Toronto/Hamilton market is also served by CBLT (CBC) and CBLFT (SRC).


Global operates a total of 18 conventional television stations across Canada. Global's television stations have the potential to reach over 97 per cent of English-speaking viewers in Canada. Global also controls the specialty service PrimeTV. In addition, Global Television Network Inc. (Global Television), Global's parent company, controls four Category 2 specialty service licensees and is a partner in two Category 1 specialty services. CanWest Media Inc. (CanWest), parent company of Global Television, is an international, diversified media company. CanWest also owns 14 major metropolitan newspapers, 126 community newspapers and The National Post, among other interests.


CTV Television, which controls CFTO-TV Toronto, is a national broadcast communications company with conventional television operations across Canada and has a strong position in the specialty television sector. CTV Television's conventional television signals have the potential to reach 99 per cent of English-speaking viewers in Canada. CTV Television is wholly owned by CTV Inc., which in turn is a wholly owned subsidiary of Bell Globemedia Inc. (Bell Globemedia), a multi-media company, which also operates The Globe and Mail, Globe Interactive and Sympatico-Lycos. Bell Globemedia is controlled by BCE Inc. (70.1%).


CHUM Limited (CHUM), licensee of CITY-TV, operates 28 radio stations across Canada, 8 conventional television stations in Ontario and British Columbia and many specialty services. CHUM's local television stations include CKVR-TV Barrie, available on cable throughout much of the Toronto-Hamilton market. CHUM's conventional television signals have the potential to reach 67 per cent of English-speaking Canadians.


Rogers, licensee of CFMT-TV, is controlled by Rogers Communications Inc. (RCI). Rogers controls 35 radio stations across Canada and has significant holdings in specialty television services. RCI is a national communications company. In addition to radio and television, RCI is involved in cable television, cellular, digital personal communications services (PCS), paging, data communications, high-speed Internet access, video retailing, tele-shopping, publishing and new media businesses.

Size of the Toronto/Hamilton conventional television market


Various estimates of the size of this conventional television market, including local, national and network advertising revenues, were provided in connection with this proceeding. The estimates varied, depending upon the assumptions made in developing them. In an intervention to this proceeding, Global estimated the size of the Toronto/Hamilton conventional television market at about $533 million in 2001, based upon data from the Television Bureau's Time Sales Survey. Alliance Atlantis provided an estimate of $528 million for 2001, and TDNG provided a study commissioned from Harrison, Young, Pesonen and Newell, which estimated a market revenue base in the Toronto-Hamilton television market of $477.9 million in 2002.


In 2001, the television stations serving the Toronto/Hamilton market reported combined total revenue of $620 million, including revenues drawn from other markets.

Regional coverage


The existing Toronto/Hamilton local stations draw a significant portion of their viewing audiences from outside the Toronto-Hamilton market. As a group, the regional coverage of these stations means that over 30% of their viewing takes place outside of the Toronto-Hamilton market. This is called spill-out tuning.



The level of profitability of existing privately owned stations in the Toronto-Hamilton market consistently exceeds the average for the industry. In terms of profit before interest and taxes, the average margin for privately owned Toronto-Hamilton stations was 21.7% in 2001. This level of profitability is significantly higher than the industry average, despite lower than average performances by CITY-TV and CHCH-TV in 2001.

Economic outlook for the Toronto/Hamilton market


The Conference Board of Canada predicts that the rate of growth of the real gross domestic product (GDP) for the Toronto CMA will increase from 1.2% in 2002 to 4.3% in 2003. The economic "bounce" predicted by The Conference Board would occur in time for the expected Spring 2003 launch date of the new TV stations licensed pursuant to Decisions 2002-81 and 2002-82. The real GDP growth rate is predicted by the Conference Board to average 3.5% from 2003 to 2006.


Other economic indicators for the Toronto-Hamilton market also favour the licensing of new television stations in the Toronto-Hamilton market. Recent population growth rates in the area have been among the highest in Canada. Personal income per capita for the Toronto CMA is about 16% higher than the Canadian average. Furthermore, retail sales in the Toronto CMA are projected by the Conference Board to grow at an average annual rate of over 4.5% until 2006.

Sources of advertising revenue


Some of the advertising revenue generated by the new television stations is expected to be new conventional television advertising revenue, either from increased budgets of existing advertisers or from advertisers new to conventional television. On average, the applicants estimated that about 47% of the Year Two advertising revenue generated by their proposed Toronto/Hamilton stations would be garnered from existing Canadian conventional stations.

Advertiser demand for a new station


At the hearing, the Commission heard evidence that the trend in Ontario towards regional coverage among conventional television stations has made it more difficult for advertisers to focus an advertising message on Toronto, Hamilton, or Kitchener, without paying for the wider geographic coverage of the incumbent stations.


Craig stated that "the Toronto EM is no longer accessible to advertisers as a stand-alone market because clients are also forced to buy other Ontario markets." Alliance Atlantis expressed the view that "there is abundant opportunity in the Toronto television market to bring local advertisers back to conventional television, a medium that today is either unaffordable or unavailable to many advertisers." As part of its application, TDNG Inc. submitted a study, which also concluded that "The medium therefore became expensive for some retailers that were confined to these markets."


The Association of Canadian Advertisers noted that local markets like Toronto and Hamilton have become less accessible to advertisers as standalone markets, likely driving some television advertising revenue to Buffalo and some advertisers out of the medium. It further noted that new television availabilities would allow local retailers and other potential advertisers to return to the television medium.

The CHUM intervention


CHUM's intervention, submitted in opposition to the granting of a licence for any new Toronto TV station, maintained that licensing any new service would exacerbate conditions in an already competitive market and force CHUM to rethink its commitments to local programming on its Ontario NewNet stations. CHUM's Ontario NewNet stations are CKVR-TV Barrie, CFPL-TV London, CHWI-TV Wheatley (Windsor), CKNX-TV Wingham and CHRO-TV Ottawa/Pembroke. CHUM's intervention explains that its NewNet group was formed less than five years ago, when CHUM acquired CHRO-TV, CFPL-TV, CKNX-TV and CHWI-TV. CHUM stated that its plans for the group included the sharing of programming with CHUM's existing Barrie station, CKVR-TV, to develop a strong, locally based Ontario regional network.


CHUM expressed the view that the licensing of any new television station would result in revenue losses to CHUM's stations of up to $6.5 million per year by the second year of operation. In the case of the Rogers application, CHUM estimated that CHUM stations would incur losses of $2.9 million per year by the second year of operation.


As stated in its intervention, CHUM's position is that the applicants have significantly overestimated market growth, and ignored signs of downturn that have been evident since 2000. According to CHUM, the rate of growth of television advertising revenue in Ontario will be negative for the next two years.


CHUM's view is that an ill-advised licensing decision in Toronto/Hamilton would affect the entire Canadian English-language television industry. This impact could include the introduction of new competitors for U.S. programming rights, which would increase the amount of money being paid to the rights holders of U.S. programming.


In reply, Craig characterized this concern as a non-issue, maintaining that there would be an adequate supply of foreign programming available to allow new entrants to the Toronto-Hamilton market without causing harm to the incumbents. A similar view was expressed by The Canadian Motion Picture Distributors Association (CMPDA) in its intervention. The CMPDA stated that, based upon the amount of non-Canadian programming available, the licensing of additional television stations in Toronto, Hamilton and Kitchener would be unlikely to create market forces that would result in an increase to the cost of non-Canadian program rights.

The CTV Television intervention


CTV Television's intervention, also in opposition to any new Toronto television station, included a letter dated 14 November 2001 in which CTV Television withdrew its competing applications. The letter stated two major reasons for the withdrawal. First, based on the dramatically changing economic environment, CTV Television did not believe that the Toronto and Kitchener markets could sustain any new conventional television service. Second, CTV Television maintained that, if licensed in the current economic environment, it would have been forced to redirect additional revenues to its new station to address lower than projected revenues, at the expense of existing local services and priority programming commitments.

The Global intervention


Global's intervention, in opposition to all other applications, emphasized that, in considering any application for a new conventional television station in Toronto, the changing economic climate must be taken into account. Global stated that "prior to September, it was widely believed that an economic slowdown was likely, although there were differing opinions on the length and severity of that slowdown. As a result of recent events, it now appears that the economic slowdown could be longer and more severe than it otherwise might have been."

Impact of two new stations


The Commission finds that a number of factors mitigate any concern regarding the impact on existing local broadcasters from the licensing of both a new general interest television station as well as a new ethnic service. To begin with, the size of a major market such as Toronto/Hamilton makes it easier for new entrants to be absorbed, and the fact that the existing licensees are major broadcasters makes them well positioned to compete.


Based upon available economic forecasts, the growth of television advertising revenues is expected to further contribute to the capacity of the market to absorb the entry of two new stations in the Toronto area. Furthermore, the existing aggregate profitability of the Toronto/Hamilton conventional television market should enable it to absorb the impact of new entry without causing undue financial harm to existing stations.


Also, as previously discussed, the regional coverage and concomitant revenue enjoyed by the majority of the incumbent stations will aid those licensees in absorbing the impact of new local television services.


Having decided to license two new television stations, the Commission then took into consideration which combination of stations would at the same time, best reflect and have the least impact on the market. A majority of the Commission found that the combination of Craig and Rogers would be best for the market. The Commission took into account that the Rogers proposal would provide increased access to third-language programming in the most diverse market in the country.


In granting a licence for an ethnic television service to Rogers, the Commission is confident that, since the new ethnic station will devote 70% of its program schedule to serving 22 ethnic groups, it will have a lesser impact upon the market than would a second English-language conventional station.


It also noted that the plans for the Craig station would bring to mainstream television audiences a number of elements not currently available in the market, including English-language ethnic cross-cultural programming, regularly-scheduled Aboriginal programming, non-news local programming, news magazine programs during non-traditional news time periods, and the lowest projected revenues of all applicants.


Having taken all of these factors into account, a majority of the Commission finds that the Toronto/Hamilton television market will be capable of sustaining the entry of the Craig general interest television station and the new ethnic television station licensed to Rogers, without unduly impairing the ability of the existing stations in the market to meet their programming obligations.

Secretary General
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Date Modified: 2002-04-08

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