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ARCHIVED - Broadcasting Decision CRTC 2009-203

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  Route reference:
Broadcasting Public Notice 2008-71
  Ottawa, 21 April 2009
  TELETOON Canada Inc.
Across Canada
  Application 2008-0749-8, received 30 May 2008
 

Teletoon/Télétoon – Licence amendment

  The Commission, by majority decision, approves an application by TELETOON Canada Inc. to amend the broadcasting licence for the national specialty programming undertaking known as Teletoon/Télétoon, in order to modify its condition of licence relating to the method of reporting of Canadian programming expenditures. The Commission denies the licensee's request for this amendment to be retroactive to 1 September 2007. This amendment will take effect 1 September 2008, for the 2008-2009 broadcast year.

A dissenting opinion by Vice-Chairman of Broadcasting Michel Arpin is attached.

 

Introduction

1.

The Commission received an application by TELETOON Canada Inc. (TCI) to amend the broadcasting licence for the national English- and French-language specialty programming undertaking known as Teletoon/Télétoon. Specifically, the licensee proposed modifying subsection (b) of condition of licence number 3 relating to the method of reporting of Canadian programming expenditures (CPE), which reads as follows:

3(b) In the broadcast year beginning 1 September 2004 and in each subsequent broadcast year of the licence term, the licensee shall expend on the acquisition of and/or investment in Canadian programs a minimum of 47% of the gross revenues derived from the operation of this service during the previous broadcast year.

so that it read as follows (change in bold):

3(b) In the broadcast year beginning 1 September 2004 and in each subsequent broadcast year of the licence term, the licensee shall expend on the acquisition of and/or investment in Canadian programs, on a cash basis, a minimum of 47% of the gross revenues derived from the operation of this service during the previous broadcast year.

2.

The licensee also requested that the Commission's approval of the above-noted amendment be made retroactive to 1 September 2007.

3.

In support of its application, TCI submitted that the proposed licence amendment would allow it to adjust to the payment terms now in place in animation production. The licensee also stated that the proposed amendment is consistent with the accounting methodology used by its shareholder, Corus Entertainment Inc. (Corus), for its other specialty services (YTV and W Network), as well as by Corus and Astral Media Inc. (Astral)1 for their pay services.2 TCI further argued that an outlay on a cash basis, as compared to amortization, would be more reflective of its true commitment to Canadian programming, and that the proposed licence amendment would not result in a reduction in its expenditures on Canadian programming. Finally, the licensee stated that its operations would continue to be governed by all of the Commission's policies, and, in particular, those set out in its condition of licence relating to CPE.3

4.

The Commission received an intervention in opposition to this application from the Directors Guild of Canada (DGC), as well as an intervention offering general comments from the Canadian Film and Television Production Association (CFTPA). The interventions and the licensee's replies to the interventions can be found on the Commission's website at www.crtc.gc.ca under "Public Proceedings."
 

Commission's analysis and determinations

5.

After examining the application, the interventions and the licensee's reply to the interventions, the Commission considers that the issues to be determined relate to the impact of the proposed licence amendment on the licensee's required Canadian programming expenditures, and the licensee's request that the proposed amendment be retroactive to 1 September 2007.

6.

In their interventions, both the DGC and the CFTPA expressed a concern relating to the Commission's flexibility rule for CPE, set out in Public Notice 1992-28. In that public notice, the Commission stated that it would permit a licensee to underspend with respect to Canadian programming, in each year of the licence term other than the final year, by an amount representing no more than 5% of the minimum amount otherwise established for that year by condition of licence. Further, if a licensee utilizes this flexibility to underspend in a given year, the amount by which the licensee has underspent must be added to the amount required to be spent, by condition of licence, for the following year.

7.

The DGC and the CFTPA noted that there would be a shortfall, based on TCI's projections, in the transition year (i.e., the year in which the licensee proposed to implement the cash-based method). The interveners argued that the change in method would result in a decrease in the amount of the shortfall that would have to be made up by the licensee, thereby resulting in a one-time reduction in the licensee's required expenditures on Canadian programming.

8.

After reviewing the licensee's projections, the Commission considers that the interveners' calculations are based on an incorrect interpretation of those projections, since they viewed the reduction in CPE as a one-time reduction. Instead, the Commission considers that a reduction in the amount of the shortfall would indicate that the licensee has in fact spent more on Canadian programming.

9.

The difference between the amortization and the cash-based methods resides uniquely in the timing for recording CPE. Under the cash-based method, 100% of the expense is recorded when the payment is made. Under the accrual method, which uses amortization, a portion of the full amount paid is recorded as CPE in the first year and the remaining portion is recorded in subsequent years. However, under both methods, the total CPE amount is identical since it is based in both cases on the preceding year's revenues.4

10.

The Commission notes that licensees are bound by all Commission policies relating to CPE, whether they are using the cash-based method or the amortization method. The accounting elements that are used to calculate the amounts under each method are the same; the only difference is that the reporting of the amounts is done over different time frames.

11.

In regard to the licensee's request that the proposed amendment be approved retroactively to 1 September 2007, the Commission notes that the accounting for the financial period covering the 2007-2008 broadcast year has been closed for some time and that an annual report for that year was filed by 30 November 2008. Under these circumstances, the Commission considers it appropriate to approve the accounting method requested by the licensee as of the current financial year, which commenced 1 September 2008.
 

Conclusion

12.

In light of all of the above, the Commission, by majority decision, approves the application by TELETOON Canada Inc. to amend the broadcasting licence for the national specialty programming undertaking known as Teletoon/Télétoon, in order to modify subsection (b) of condition of licence number 3 relating to the method of reporting of Canadian programming expenditures. The Commission denies the licensee's request for this amendment to be retroactive to 1 September 2007. Accordingly, this amendment will take effect 1 September 2008, for the 2008-2009 broadcast year.
  Secretary General
 

Related documents

 
  • W Network – Licence amendment, Broadcasting Decision CRTC 2004-541, 6 December 2004
 
  • Teletoon/Télétoon – Licence renewal, Broadcasting Decision CRTC 2004-12, 21 January 2004
 
  • New Flexibility With Regard to Canadian Program Expenditures by Canadian Television Stations, Public Notice CRTC 1992-28, 8 April 1992
  This decision is to be appended to the licence. It is available in alternative format upon request, and may also be examined in PDF format or in HTML at the following Internet site: http://www.crtc.gc.ca.
 

Dissenting opinion of Vice-Chairman of Broadcasting Michel Arpin

  I would have approved the application by TELETOON Canada Inc. (TELETOON) as submitted, that is, approved the amendment to condition of licence number 3 retroactive to 1 September 2007.
  The application submitted by TELETOON was complete within the 2007-2008 fiscal year. The delays created by the examination of the application resulted in this approval only being published today.
  Given that the application by TELETOON required an amendment to its conditions of licence, I would have left it to TELETOON to inform us of its choice of fiscal year for which the new measure would have started. In my opinion, this choice stems from a business decision, which must be taken by business people and not by a regulatory body, as is the case in the present decision.

Footnotes:

1 Corus and Astral each control 50% of Teletoon/Télétoon.

2 Corus's pay services are Movie Central, Encore Avenue and Max Trax (pay audio). Astral's pay services are Viewer's Choice Canada Inc. (50.1% ownership), The Movie Network, Super Écran and CINÉPOP.

3 This condition of licence is set out in Broadcasting Decision 2004-12.

4 The Commission notes that it approved a similar request by W Network Inc. in Broadcasting Decision 2004-541. In that decision, the Commission noted that the proposed change related to accounting methodology and would not affect W Network Inc.'s total expenditures on Canadian programming over the licence term.

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