Broadcasting Commission Letter addressed to Oliver Jaakkola (Sirius XM Canada Inc.)


Ottawa, 26 April 2019

Mr. Oliver Jaakkola
Senior Vice-President and General Counsel
Sirius XM Canada Inc.
590 King Street West, Suite 300
Toronto, Ontario  M5V 1M3
oliver.jaakkola@siriusxm.ca

Subject:  Audit of Sirius XM Canada Inc.’s (Sirius XM) 2014-2015 Canadian content development contributions

Dear Mr. Jaakkola:

As part of its annual audit of Sirius XM’s Canadian content development (CCD) contributions, the Commission recently reviewed the licensee’s contributions for the 2014-2015 broadcast year.  During that audit, Commission staff identified instances of apparent non-compliance with regard to Sirius XM’s CCD contributions.  You were notified of this apparent non-compliance by Commission staff letters dated 11 August 2017, 9 November 2017 and 31 January 2018 and responded by letters dated 8 September 2017, 29 November 2017 and 9 February 2018.

This letter is to inform you that the Commission finds Sirius XM in non-compliance with condition of license 13.(a) as stated in the Appendix to Broadcasting Decision CRTC 2012-629 in regards to Sirius XM’s CCD contributions for broadcast year 2014-2015:

13.(a) During each broadcast year, the licensee shall contribute a minimum of 4% of gross revenues from its satellite subscription radio undertakings reported in its annual returns for the previous broadcast year to eligible initiatives for the development of Canadian content development (CCD).

The Commission has provided clear guidance on the purpose of CCD and how CCD funds should be spent. The Commission’s examination of the direct benefits received by licensees as a result of CCD expenditures assists in determining whether an initiative is self-serving in nature and does not introduce any new concept that is inconsistent with Commission policy. Evaluating whether an initiative is self-serving has always been a part of evaluating compliance with the CCD policy.

Further information on CCD contributions and eligible initiatives can be found on the CRTC Website: http://www.crtc.gc.ca/ENG/GENERAL/ccdparties.htm

Below is a breakdown of the individual expenditures deemed non-compliant:

Recipient, Invoice # and Issues Amount($)
1. NHL Enterprises Canada - 2-13100
Contribution not deemed well above and beyond promotional activities. While Canadian artists benefitted to some degree from the songs played during the videos, Sirius XM derived a significant promotional benefit in the form of promotion of Sirius XM, which was self-serving. Therefore, 50% of the total cost of the initiative is deemed ineligible.
253,320
2. Festival Juste Pour Rire - Montréal - FC01917
Contribution not deemed well above and beyond organization's normal programming costs. Sirius XM received 33 professionally recorded and edited spoken word segments and aired this content on the Sirius Canada Laughs channel for a total of 382 hours from 1 January 2015 to 31 December 2016. Moreover, the CCD funds were directed to a comedy event that in return provided many hours of programming that was used towards meeting condition of licence 1 of Appendix to Broadcasting Decision CRTC 2012-629.
180,000
3. Republic Live Inc. - 511 and 524
Contribution resulting in self-serving benefit to licensee. The receipt of tickets and passes results in a self-serving benefit since these items allow Sirius XM to leverage its services or other parts of its business, for example offering these items as perks to customers or incentives to sign-up new customers, through the use of CCD funds. Therefore, the market value of these tickets and passes are not zero for Sirius XM and it is reasonable to find the retail face value of these items ineligible.
28,371
4. Pemberton Music Festival - 0006 & 0007
Contribution resulting in self-serving benefit to licensee. The receipt of tickets and passes results in a self-serving benefit since these items allow Sirius XM to leverage its services or other parts of its business, for example offering these items as perks to customers or incentives to sign up new customers, through the use of CCD funds. Therefore, the market value of these tickets and passes are not zero for Sirius XM and it is reasonable to find the retail face value of these items ineligible.
37,206
5. Nat Corbeil - 0186
Contribution not deemed well above and beyond promotional activities. The press release was issued by Sirius XM and focuses on Sirius XM and its sponsorship of the initiative rather than promoting any artists. Therefore, this expenditure is deemed self-serving and ineligible.
1,500
6. Taxi Canada - 79886, 79594, 78969, 79452, 78906 and 79440
Contribution not deemed well above and beyond promotional activities and lacked transparency. Of the three ads for the Juno Awards, one of the ads makes no mention of any artist or the Juno Awards and instead focuses on Sirius XM. The licensee also did not provide one of the three ads, which makes it impossible for the Commission to determine eligibility. Lastly, the invoices did not provide costs breakdowns for the costs per ad and therefore, the Commission cannot determine the appropriate cost for each of the creative materials. Given the above, it is appropriate to find two-thirds of the cost for the development of these creative materials ineligible.
In addition, for the video entitled “CCD program awareness video”, although video of Canadian artists is played, the focus of the video is on describing the impact Sirius XM has made on Canadian artists and promoting Sirius XM. Thus, due to the self-serving nature of the expenditure related to this video, the entire cost is deemed ineligible.
52,564
7. Headspace Marketing - 1457,1463,1464,1537,1549 and 1562
Contribution not deemed well above and beyond promotional activities.  While the presence of the company’s logo on the marketing materials at an event is generally acceptable, these ads do not mention any specific Canadian artist. Instead, the materials focus on the partnership between Sirius XM and the festival. Given the focus of these ads on Sirius XM’s services and its brand, this expenditure is deemed self-serving and therefore ineligible.
14,660
Total 567,621

The Commission is of the view that the non-compliance stems from a variety of factors, including excessive promotional activities, contributions resulting in self-serving benefit to the licensee, and specific ineligible expenditures within eligible initiatives.

Based on the above, the Commission directs Sirius XM to pay the total shortfall amount of $567,621 by 27 May 2019 as follows:

Proof of payment for the total CCD shortfall ($567,621) must be filed by 25 June 2019.

The Commission notes that the determinations set out in this letter address only the 2014-2015 broadcast year and do not relate to any subsequent broadcast years.  This determination of non-compliance for the 2014-2015 broadcast year will be taken into account as part of the on-going licence renewal process. Footnote1

In the above-noted initiatives, Sirius XM received significant direct benefit as a result of its CCD obligation in the form of tickets to an event, substantial promotion of Sirius XM itself, and professionally edited Canadian comedy content that was used by Sirius XM towards meetings its Canadian programming requirements. In the Commission’s view, receipt of such benefits is self-serving because it allows Sirius XM to promote its services or leverage other parts of its business using CCD funds. The Commission further notes that failure to supply sufficient documentation to support the eligibility of Sirius XM’s contributions for future broadcast years may result in the Commission finding those contribution(s) ineligible and may affect the service’s compliance with its regulatory obligations.

The Commission reminds Sirius XM of the importance of supporting emerging Canadian artists with CCD funding. The Commission further reminds Sirius XM that the receipt of significant non-monetary benefits by a licensee from a CCD-funded initiative could lead to the entire initiative being found ineligible. The generally acceptable level of benefit that can be received by the licensee is an acknowledgement of the CCD sponsorship by the receiving group.

The Commission also reminds Sirius XM of the importance of providing accurate information at all times.  In particular, with respect to item 1 in the table above, the provision of inaccurate information by Sirius XM, in both its annual returns and its response dated 8 September 2017, increased the challenges faced by the Commission in determining the eligibility of the initiative.

Lastly, how Sirius XM generally uses and might benefit from the large amounts it spends on discretionary CCD initiatives is beyond the scope of this audit; however, this issue will be examined during the ongoing licence renewal. For example, as part of the ongoing licence renewal process, the Commission intends to fully examine Sirius XM’s practice of sponsoring events without providing the funds directly to the initiative.

Yours sincerely,

Claude Doucet
Secretary General

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