|
TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TELECOMMUNICATIONS COMMISSION
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
BROADCASTING APPLICATIONS AND LICENCES/
DEMANDES ET LICENCES EN RADIODIFFUSION
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
Hull, Quebec Hull (Québec)
December 7, 1999 Le 7 décembre 1999
Volume 2
Transcripts
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
Contents.
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Transcription :
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès-verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
Canadian Radio-television and
Telecommunications Commission
Conseil de la radiodiffusion et des
télécommunications canadiennes
Transcript / Transcription
Public Hearing / Audience publique
Broadcasting Applications and Licences/
Demandes et licences en radiodiffusion
BEFORE / DEVANT:
A. Wylie Présidente/Chairperson
D. McKendry Commissioner/Conseiller
A. Noël Commissioner/Conseillère
B. Cram Commissioner/Conseillère
J.-M. Demers Commissioner/Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
P. Cussons Hearing Manager /
Gérant de l'audience
G. Batstone Legal Counsel /
Conseiller juridique
D. Santerre Secretary / Secrétaire
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
Hull, Quebec Hull (Québec)
December 7, 1999 Le 7 décembre 1999
Volume 2
TABLE OF CONTENTS / TABLE DES MATIÈRES
PAGE
INTERVENTIONS
Ottawa Senators Hockey Club / 345
Club de Hockey des Sénateurs d'Ottawa
Questions by the Commission 353
Canadian Cable Systems Alliance 373
Questions by the Commission 379
Toronto Blue Jays 388
Questions by the Commission 397
Canadian Independent Sports Producers Association 409
Questions by the Commission 419
Questions by Commission counsel 427
Directors Guild of Canada / 430
La Guilde canadienne des réalisateurs
Questions by the Commission 436
Questions by Commission counsel 454
CBC, Canadian Broadcasting Corporation / 459
SRC, Société-Radio Canada
Questions by the Commission 468
Canada Games Council / 495
Conseil des jeux du Canada
Questions by the Commission 503
Office of Commissioner of Baseball 512
Questions by the Commission 519
Question by Commission counsel 525
Canadian Football League 528
Questions by the Commission 540
Forefront Entertainment Group 551
Questions by the Commission 556
Association canadienne de patinage de vitesse 561
Questions de la Commission 571
Productions Charade Inc. 577
Questions de la Commission 580
Sports-Québec 583
Questions de la Commission 589
TABLE OF CONTENTS / TABLE DES MATIÈRES
PAGE
INTERVENTIONS
Bell ExpressVu 604
Questions by the Commission 615
Friends of Canadian Broadcasting 623
Questions by the Commission 634
Global Television Network Inc. 652
Questions by the Commission 657
CTV/NetStar
Reply 674
Hull, Quebec / Hull (Québec)
--- Upon resuming on Tuesday, December 7, 1999 at
0831 / L'audience reprend le mardi 7 décembre 1999
à 0831
1888 THE CHAIRPERSON: Good morning and welcome, ladies and gentlemen.
1889 Madam Secretary.
1890 MS SANTERRE: Thank you, Madam Chair.
1891 This morning we will start with the interventions concerning CTV/NetStar. I would like to remind each intervenor that they have 10 minutes to present their interventions.
1892 We will start with the Ottawa Senators Hockey Club/le Club de Hockey des Sénateurs d'Ottawa with Mr. Bryden.
1893 THE CHAIRPERSON: Good morning, Mr. Bryden.
1894 MR. BRYDEN: Good morning.
1895 THE CHAIRPERSON: Proceed when you are ready.
INTERVENTION / INTERVENTION
1896 MR. BRYDEN: Good morning and thank you for hearing me.
1897 I'm here to intervene in support of CTV's acquisition of NetStar, and also, should that be approved, to encourage the ability of the CTV Sportsnet and, in our case, that portion of NetStar which is RDS and TSN to remain together.
1898 The reason for our intervention is what I perceive to be the best interest of our hockey club.
1899 We have been working very hard to build a franchise here since 1990. In fact, it was nine years ago Monday that the franchise was awarded to Ottawa.
1900 We did have the pleasure of having the second worst ever team in the National Hockey League for one year, Washington having managed to be worse by one game when they came into the league, and it was a struggle to develop a fan following, either on television or in the seats. Of course, if there is not a high level of fan interest and viewership, the value of our promotional relationships with corporations that have become the mainstay of our revenue stream, that relationship is worth very little if the fans are not attached to the team.
1901 The value of our advertising revenues were minimal and our attendance was relatively low because we had a small building.
1902 So we have had to build the basis for a viable hockey club and we benefitted from the fact that it is an extraordinarily dynamic market. The Ottawa market itself is, in my view, the best urban economy in this country based on a very stable government and an absolutely booming technology industry. We are very confident that over the next 10 years we will have a very, very strong economic base from which to deliver hockey into our community and across Canada.
1903 We have also worked to control our costs and deliver quality entertainment at either the lowest or second lowest cost in the National Hockey League year after year.
1904 One of the things that we must do is, we have to develop ways in which to support the revenue base of our team without putting it on the back of the individual ticket holder who goes to buy their ticket at our ticket office.
1905 We suffer from the fact that our expenses, 80 per cent are the payment for players. We pay those in Canadian dollars, but we pay a number of Canadian dollars to allow that to be competitive with the U.S. dollar income that those players could earn if they played for a U.S.-based team, and 70 per cent of all the teams in the league and all the players in the league are playing for U.S. teams and, as with any other market, if a huge majority of the market is in one currency, that is the currency of the market. It's not a matter of choice.
1906 The result of that is that if we were to pass on to our fans the increase in ticket price to reflect the fact that what we collect is a Canadian dollar and therefore we need 50 per cent more of them to pay an American dollar bill to our players, we would price the tickets out of their reach. They would be inappropriately priced competing with other entertainment and other necessities in our market.
1907 What we need to do is build revenues that are not ticket revenues in order to offset the fact that we cannot have the ticket revenue base in American dollars that our U.S. competitors have.
1908 We have more people coming, we had the seventh highest attendance in the National Hockey League last year, only 41 tickets a game less than the New York Rangers, a wonderful market, but we get Canadian dollars.
1909 We do also benefit, however, from the fact that we are -- outside a very few large markets, New York, Chicago, Boston in particular, Philadelphia to some degree -- outside those markets ratings for television programming, while the National Hockey League is often in the two-three range where we are in the -- Hockey Night in Canada I think is still running in the 12 to 14 range on a regular night and our CTV Sportsnet numbers are moving up towards that target, which we believe we will achieve.
1910 It does mean that even though we have slightly fewer people in our total regional network now, including the Atlantic and the English-speaking part of Quebec, and with RDS on a significant number of games, francophone broadcasts, French broadcasts in Quebec. So we have a significant market.
1911 But the a big advantage for us over our American competitors is the ratings are much higher than the Florida Panthers would get when they broadcast their games or the San Jose Sharks when they broadcast theirs. Our ratings are much higher.
1912 My interest is in building the viewership and building the ratings and having a strong broadcaster that can do that. It is a very significant part of what will be the base of the Ottawa Senators, and I believe also the Calgary Flames and the Edmonton Oilers and the Vancouver Canucks being strong in this country for a long time.
1913 I recognize that that is not necessarily the same for Major League Baseball or for basketball. In Canada we benefit from the fact that the fan support for the National Hockey League is several percentage points higher than the fan support for the National Football League is in the United States. We are a more dominant sports property in Canada than the NFL is dominant in sports in the United States. We don't have 350 million people, but we have 30 million people who absolutely love hockey and it is great programming.
1914 So what our interest is to have a strong broadcaster that has an interest in building the franchise value of our franchise across the region.
1915 We have an excellent partnership with the Toronto Maple Leafs and the Montreal Canadiens. They are very co-operative in many ways in our league, and the fact that they were here for 90 years before we came -- well, before we came back anyway -- and built the national franchise is a fact of which they should be proud and we don't resent in any way. Nonetheless, it is a fact that we have to build a national following for the Ottawa Senators Hockey Club.
1916 We have to build a regional following, and if we did not have a network whose interest was to build that, and whose own financial self-interest was to build that.
1917 The simple answer for any carrier would be to broadcast the Leafs and the Canadians every night. They play just as many games as we do, there would be few nights they couldn't get the Leafs or the Canadians.
1918 But on any given day -- this has been looked at three years ago or four years ago, before our team became one of the better teams in the league -- the self-evident answer for any broadcaster to maximize revenue in any given day would be to put the Leafs or the Canadians on as often as you can.
1919 That is changing on Hockey Night in Canada. Our games are on more frequently. The fact that we are in CTV Sportsnet across our region is a big part of building our franchise value. We can deliver the product, but we have to get in front of people.
1920 To have the same network with the opportunity to build value at the regional level and then benefit from the fact that that value can be moved nationally in an organization which has the same financial interest is a very substantial reason why their self-interest is the same as our self-interest.
1921 I am not in the slightest concerned about getting our share. We are not children. We are not weak. We know that if we have a specialty sports channel the best thing they can possibly have on that channel is National Hockey League hockey. If they can prove otherwise, good on them, let them go try. The National Hockey League is a marvellous item to broadcast on a specialty sports channel in this country.
1922 We also have the information from the National Hockey League -- with many, many years of experience in dealing with broadcast -- the share of a dollar of advertising revenue that is appropriate to go to the broadcaster for us to be getting our share.
1923 We are very happy to look after ourselves. What we really need is to increase the size of the pie.
1924 I am not at all concerned about dealing with CTV and dealing fairly. We have dealt with them for some years. Last year in particular, with the expansion of our carriage into the Atlantic, we found that CTV has the right balance, for us at least, between the desire to have a reasonable return, that is a reasonable financial result I suspect, no net return, in the current year and the need to invest in building the value of our franchise, and we had to come to common judgments to say how much are we prepared to say we need to invest as well in building that value.
1925 So our interest is in building the maximum amount of the pie and we will look after ourselves in getting our fair share.
1926 In the event that we should find that for some reason we are being dealt with unfairly by CTV, they are not the only broadcaster in Canada. I know that you have before you an application which has also intervened in favour for Headline Sports to make them a more general carrier of sports.
1927 This is a very dynamic industry. If there is unreasonable profit being earned by someone there will certainly be others there competing to get it quite quickly, and we also have the ability to participate in that as well.
1928 So I have an unreserved interest and support for their request, and I hope that the Commission will allow this to be as strong as possible a sports broadcaster so that we can maximize the value of that Canadian signal and maximize the number of Canadian teams that could remain here.
1929 THE CHAIRPERSON: Thank you, Mr. Bryden.
1930 Commissioner McKendry.
1931 COMMISSIONER McKENDRY: Thank you, Madam Chair.
1932 Good morning, Mr. Bryden.
1933 You said -- I think I took this down correctly -- that you need to build revenues that are not ticket revenues. You describe some of the initiatives that you and your club are taking to do that and there seemed to be some positive developments in terms of your relationship with CTV and TSN and Sportsnet.
1934 If we approved the application that is in front of us, what would be different from your perspective? Why would it be better than the successes and headway you are making under the current situation?
1935 MR. BRYDEN: TSN has never been a bidder for our rights and we would -- we believe that we will demonstrate over the course of this year and next with Sportsnet that the Ottawa Senators are a national franchise, certainly an eastern Canada franchise at the very least and I hope more than that.
1936 I believe that the ability of TSN to move that increasingly national will be something significantly to our advantage.
1937 It not only becomes an advantage of the direct dollars that are paid for the broadcast. The value of our rink boards has just about doubled in the last three years. The reason the value has doubled, for one reason, is there are more people sitting in the seats looking at them.
1938 But that is not the primary reason why the rink boards were valuable. If that were the reason, the signs up facing the fans exactly at eye level would be even more valuable, but they are not. The reason the rink boards are valuable is they are on television. Our signal is on television a lot more with a lot more people watching it so the value of our rink boards is doubled.
1939 That doesn't come from the broadcaster, it comes from the companies who want to have their signal in front of us. If I can have that broadcast nationally it will further increase the value of our rink boards. It won't get them to where Toronto is, which is on national television more frequently, and its regional market is still larger than ours even with the Atlantic and part of Quebec, but it will get them significantly higher than they are today.
1940 So I believe that with the ability to invest at the regional level and benefit from moving that signal nationally, there is a self-interest on the part of those two to achieve that.
1941 If the national carrier is not associated with the regional development, their logical target would be to get as many Leafs games and as many Canadians games as possible and only carry the Senators to the extent that the league put the arm on them to give it a little bit of equity.
1942 COMMISSIONER McKENDRY: So just to make sure that I understand, the opportunity from your perspective -- or the primary opportunity is to move into a national audience for the Ottawa Senators given that TSN and NetStar would be part of the same organization?
1943 MR. BRYDEN: Well, there are two parts. Building our regional audience is significant and that is only beginning.
1944 It was not long ago that our signal was carried on CHRO under is prior arrangements with a very limited footprint, so that we were on the station with the weakest ratings in our region and had the narrowest coverage in the region and that is where our signal was shown. It was very rare that it was in the Atlantic, only if it was part of Hockey Night in Canada or the mid-week game.
1945 So the Sportsnet move has already had a significant effect on broadening our appeal across the Atlantic, but I am anxious to see us -- and I believe the entire revenue base in the league will expand by giving Canadians a wider range of choice.
1946 It is a fact that the Leafs will continue to be a strong national franchise and the Canadians are and will continue to be a strong national franchise, but there are significant viewers who will not be viewers of the -- will not be committed fans to the Leafs and the Canadians. Some of those will like the Oilers and some will like the Senators, but they have to have access to them. I believe that combination will be one of the ways to do that. By no means the only one, but certainly one of them.
1947 COMMISSIONER McKENDRY: With respect to Sportsnet, I take it that you are on their regional feed for eastern Canada?
1948 MR. BRYDEN: That's right.
1949 COMMISSIONER McKENDRY: Is that the situation?
1950 If Sportsnet provided all of its regional feeds to one subscriber, would that achieve the same result?
1951 MR. BRYDEN: I'm sorry, I don't understand the question.
1952 COMMISSIONER McKENDRY: Well, if Sportsnet could make available the four regional feeds -- I think it is four regional feeds -- that it has up there to all subscribers as opposed to just one regional feed to a subscriber in a particular region, would that give you the kind of national coverage that you would be looking for?
1953 So if the regional Atlantic signal was available to everybody in Canada, would that solve your problem?
1954 MR. BRYDEN: Certainly, if we were the only one that that was applied to, but of course it wouldn't be. If what we were to do was to eliminate the existence of a true regional network and make it national as well, that would be the worst possible world because the Leafs would be on every night.
1955 The only logical answer for an owner of a network that has a national feed today is to put the team on that has the best national draw today. That would be the Canadians or the Leafs. It wouldn't be us, it wouldn't be the Oilers, it wouldn't be the Canucks, it wouldn't be the Flames. It would be the Leafs or the Canadians.
1956 That's not because they are conspiring. It's because they have been Canada's hockey teams for nearly a hundred years. If we don't preserve the strength of the regional network, we will never build the value of the teams that are not in Canada's media centres.
1957 On the other hand, if we isolate them into two separate ownership groups, we will never get those teams beyond the region. If the answer to that is well, let's make the regional network a national network, then we are right back to having two ways in which the Leafs can compete for more money because you will have two people fighting for their signal. Nobody's fighting for mine.
1958 The Toronto Sportsnet -- I mean TSN didn't bid on my signal. They only bid on the Toronto signal.
1959 COMMISSIONER McKENDRY: In terms of the enhanced value, you make reference in your written submission to the enhanced value of the broadcast and the sharing of that value between the team and the broadcaster. Could you just elaborate a little bit on what you mean between the sharing of the value between the team and the broadcaster?
1960 MR. BRYDEN: Well, as in any business, at any point in time there may be reasons for investment where the actual amount that should be paid is not the same as the net revenue minus cost. There could be the market building initiatives and the like, but take those out, which we wouldn't take out -- we recognize those as well -- what we need to look at is how many dollars of advertising revenue will be generated by the broadcast.
1961 In many cases, in particular with CTV Sportsnet, we work cooperatively in selling those advertising slots. Many of the same companies that are team sponsors, Bell Canada or Molson, General Motors, a large number of corporate sponsors who also buy rink boards, who also buy signs in the building, also are the logical candidates to buy television ads. They often would like to have some participation by a player. Working together, we can get better value than working separately.
1962 It would only be lack of interest on our part that would fail to have us know pretty much exactly what a minute of advertising is worth and who is buying it and what they are getting. Then the question is what's a fair amount for the broadcaster to get for producing the game, what's a fair amount for them to get for their investment in the network and what's a fair amount for us to get for having delivered the product.
1963 In assessing that, we are by no means alone. The National Hockey League, as other major sports franchisers in the United States, is focused heavily on broadcast. They spend a huge amount of time on broadcast, much more, say than -- they don't come to explain to me how to sell tickets, but they do come help me understand how to do broadcast.
1964 They have provided us with the norms across the United States and their experience in other regions in Canada, their experience with CBC as to what share of total advertising generated by that broadcast is appropriate for us to expect to get and still have the strong broadcaster with an interest in carrying our games and with competition to get that.
1965 It's also something worth remembering that the reason why we had such a significant increase last year or the year before -- last year -- in our television revenues was from two reasons. One is the development of regional programming with CTV Sportsnet which had a very significant change in our revenue base because it opened the Atlantic region. The second was competition for sponsorship. It wasn't competition between CBC and CTV and Global. It was competition between Molson and Labatt's for being the sponsor.
1966 It is common, at least in the National Hockey League, for the team or the league to go and seek the sponsors and work cooperatively with or on some occasions present to the broadcaster "Here's a sponsorship deal. Which broadcaster is going to compete to deliver this product for this price from that sponsor at the lowest service charge for delivering it?"
1967 This isn't a mom and pop industry. We do not need to be protected from ourselves. What we need is to maximize the gross and we will look after our share.
1968 COMMISSIONER McKENDRY: I realize you are here representing the Ottawa Senators this morning. Would it be your view that the other Canadian teams you have referred to, the Canadians and the Leafs, but the other teams that market similar to Ottawa, would they be facing the same kind of situation that you are facing and looking for the same kinds of opportunities in your view?
1969 MR. BRYDEN: Exactly as that question is phrased, yes. I am not authorized to speak on behalf of anyone other than myself. I didn't seek it. I had lots of issues to seek cooperation on. I did not seek their authority to speak for anyone other than myself.
1970 I am absolutely certain that you would find the Flames and the Oilers and the Canucks as an individual team telling you that their interest is to build the value of their television revenues in that it is the principal single way in which they can maintain a competitive position in their club and not burden their fans with a price that they can't pay at the ticket office.
1971 Whether they would have exactly the same view of the mechanics of that as I, I don't know, but I do not believe that they would be primarily concerned with negotiating as between broadcasters to ensure they get a fair cut of the total. The real issue is what is the mechanics by which we make the total the highest.
1972 COMMISSIONER McKENDRY: Thank you very much, Mr. Bryden.
1973 Those are my questions, Madam Chair.
1974 THE CHAIRPERSON: Mr. Bryden, you seem convinced that the only way that this can be accomplished is by having common ownership of the sports services, that that will improve your ability to reach what is your goal as owner of the Senators. You obviously know that we have a concern, the intervenors have expressed concern, about the concentration in one type of very specific programming that would result if we were to approve this.
1975 If you give any significance to that concern, then we have to look at what else is there in the balance that would be improved by approving this and try to find out with our public interest hat on whether that's good or not for the broadcasting industry as a whole.
1976 Your interest then on this side of the balance is to say this is the best way I can achieve or maximize my presence on the air. It will be better, as Commissioner McKendry asked you, if they are all owned by the same party than if they are not, or at least the number of what we have been referring to as the CTV/NetStar group, which would include a national network with a large number of local television stations under its ownership, reaching 99 per cent of the population, TSN, RDS, Sportsnet, Outdoor, which you know has a substantive amount, part of a pay service which has substantive revenues from a few, but nevertheless important sports events.
1977 This is our dilemma. What are the positives, what are the negatives. You are saying for you it's going to greatly improve your ability to reach your goals.
1978 MR. BRYDEN: Yes. The last part of your statement especially is absolutely right. For the combined organization to be allowed to function and build a substantial position is very much in the interest of the Ottawa Senators Hockey Club. I personally believe, although I am not authorized to speak for them, that exactly the same facts apply to the Calgary Flames and the Edmonton Oilers. I would be surprised if it didn't apply to the Canucks.
1979 What I think we need to recognize is that if the Senators already had as big a share of the Canadian fan following as we were going to get, if we were already at a maximum, our sole question would be "How many different bidders could we get to buy a share of the property which is already at its maximum value?"
1980 In that context, there's a good argument to say more bidders is better, you tend to get a higher price from somebody. If they pay too much, when they finally get tired, probably somebody else will be prepared to pay too much again.
1981 I can understand that if we already had as high a representation as we were going to get, then our issue would be how do we get more bidders? If there were no Ottawa Senators and there were no Calgary Flames and there were no Edmonton Oilers and there were no Vancouver Canucks, every "Hockey Night in Canada" would either be Montreal or Toronto. It would probably be both, depending whether you were east or west. They would have the market.
1982 THE CHAIRPERSON: Maybe our population would grow. You would have a bigger audience.
1983 MR. BRYDEN: Well, the evidence is not in that the ratings for "Hockey Night in Canada" in total have grown because there are, believe it or not, some people in Canada west of the Ottawa River who are not Toronto Maple Leafs fans. There are. I know you find it hard to believe with such a wonderful city, and people love it, nonetheless there are some who aren't.
1984 COMMISSIONER McKENDRY: This is music to Commissioner Cram's ears who is from Saskatchewan.
1985 MR. BRYDEN: What I'm saying is then it's hard to say that without sounding like I'm shooting at Toronto, and I am let's face it, nonetheless I'm not blaming the Toronto Maple Leafs because they did a wonderful job of building a national franchise. That's exactly what they should do.
1986 The fact that the Leafs are doing so well again is undoubtedly increasing the ratings of "Hockey Night in Canada" and increasing our value. It's very much in everyone's interest. That goes into a pot that is shared by all teams, including our American partners. It doesn't just get shared between Montreal and Toronto if we weren't here. It would still be shared by the same number of teams. They just send the money to Houston or Dallas or wherever the team went.
1987 What I'm saying is in the case of the Ottawa Senators Hockey Club, and I believe also in the case of the Edmonton Oilers, the Vancouver Canucks, the Calgary Flames, we are not yet at the point where as many Canadians who would become fans of ours have done because we haven't been in front of them much. To be able to be in front of them more will build our value.
1988 The only two reasons why a broadcaster would do that is either if they are pressured by the National Hockey League to put some share of those teams on television, which they are, or if they have their own financial self-interest that by building a greater following, that if you have 40 per cent of total hockey fans who are neither Leafs' nor Canadiens' fans, maybe they will also watch if they can watch the team that they would become supporters of.
1989 You can build the aggregate size and they will do that so long as they end up with some of that value. I don't believe that the best way to build value is to force people to do things by regulation, whether it's the CRTC's regulation or the National Hockey League's regulation, that you must do things contrary to your own self-interest because it's good for us.
1990 The best way is to structure the business so that by each party acting in their own self-interest as aggressively and enthusiastically and effectively as they can, they build each other's value. I'm not suggesting that there shouldn't be other strong organizations with the same integrated interest between a true regional network and national sports programming.
1991 What I am saying is we need one and we don't have one and this would be a great one. We already have it. Why break it up.
1992 THE CHAIRPERSON: You may not want to answer this, but you have experience obviously in the sports field. I know you are speaking for your team and possibly for others in a similar situation, but what is your answer to those who have concerns about the concentration in sports programming that would result from this?
1993 MR. BRYDEN: My answer to that would be that if this were on the main networks that could be a real problem because the value of the sport programming is not its gross value. It's that value minus whatever it had to push off at that time that might be very valuable as well getting a low-cost feed from an American program that has a good rating might be a lower-cost alternative to fill CTV or Global or CBC than buying quality programming from the National Hockey League.
1994 But in a sports channel in this country there isn't anything they can buy that is as good a piece of programming as the National Hockey League. We are perfectly happy with that position.
1995 That may not be true for basketball. Maybe in basketball if they are buying time to get their sport exposed, maybe they would rather have others who had to fill their programming so they could compete for how cheaply you carry it. I can understand that as well.
1996 That is not the problem with the Ottawa Senators. It's not the problem with the Calgary Flames. It's not the problem with the Edmonton Oilers. What we are trying to do is put quality programming in front of the carrier and through them in front of the viewer.
1997 So, I believe that the best interest of our fans and of our hockey club and of other hockey clubs in the country would be served by what you have in front of you if it is allowed to become a very strong and viable organization.
1998 THE CHAIRPERSON: It would make it easier to achieve your goal of getting more coverage.
1999 MR. BRYDEN: Yes, it would
2000 THE CHAIRPERSON: As I said earlier, when you weigh the concerns and the balance against the positives we can put that down as a positive, but you have no further comments about how you respond to answer correctly meet the other side of the scale.
2001 MR. BRYDEN: The other side being ...?
2002 THE CHAIRPERSON: That in some areas there is a lot more to sports programming, although it is hard for you to believe, than hockey, obviously, for us to consider. There are a lot of other sports. There is amateur sports. There is a variety of issues that we have to face.
2003 There is also the fact that we would have a major network owning the specialty sports services which may serve your purposes, but may have some negatives on the other side, but that's not your responsibility.
2004 MR. BRYDEN: I would like to add one comment on that though because my interest in seeing the strength available to us causes me to be interested in how that can be done consistently with the interests of others. The need to fill the time on sports programming in Canada certainly causes sports that historically in Canada would never have been seen to be regularly viewed on Canadian television. Most of those are probably being carried at a net loss in order to have a network which is able to operate to carry those programs which it can carry at a net profit.
2005 In some ways I could argue that what that really means is that the value of a National Hockey League game has to some degree to be absorbed into the costs in order to have a vehicle to carry it, of being able to carry amateur sport, other activities. The money has got to come from somewhere. Where it is really coming from is those programs which are profitable.
2006 I don't object to that at all. The fact is to have a vehicle to generate that commercial value it needs to be a vehicle that meets the national interest, which includes carrying lots of stuff that is not ours and a significant share of the value that we create, as you know there is a tax on our cable programming to support Canadian films.
2007 Personally, I believe that there should be a 5 per cent tax on every other industry. If they are going to tax my industry to support Canadian television production, they should tax the oil industry to support Canadian television productions and, nonetheless, there is a tax on our cable programming which goes into a fund that we can't participate in, unless, of course, I were to produce a TV series pretending to play hockey games and then I would qualify, but real hockey games don't quality.
2008 I recognize that a part of the revenues generated by the national Hockey League will go to support amateur sport programming on CTV or other channels that we need to have as viable channels within the public interest in order to be able to carry us and I don't in any way resent that, but I do think that we should be careful not to erode the value that is paying those costs by ensuring that there is a maximum share of the time available to those which are not profitable programming and unlikely to be for some considerable period.
2009 THE CHAIRPERSON: Thank you, Mr. Bryden.
2010 I am sure despite the early morning we have not been any more difficult with you than some of the people you have had to meet in the last month or two.
2011 MR. BRYDEN: You are right about that.
2012 THE CHAIRPERSON: Thank you.
2013 MR. BRYDEN: Thank you
2014 THE CHAIRPERSON: Madam Secretary.
2015 MS SANTERRE: Thank you, Madam Chair.
2016 The next intervention will be by the Canadian Cable Systems Alliance with Alyson Townsend.
INTERVENTION / INTERVENTION
2017 THE CHAIRPERSON: Good morning.
2018 MS TOWNSEND: Good morning, Madam Chair and Commissioners.
2019 My name is Alyson Townsend and I am here today on behalf of the Canadian Cable Systems Alliance and its 87 shareholder companies. Collectively, our companies serve approximately 450,000 customers across Canada and, when considered a virtual MSO, is equivalent to the fifth largest cable company in Canada. A list of the shareholder companies is attached to my remarks, marked Schedule A.
2020 CCSA represents small and medium-sized BDUs in the negotiation of commercial arrangements with suppliers, including suppliers of signals. Over the past six years, CCSA has successfully concluded over 50 master agreements for the benefit of its shareholders.
2021 We are pleased that most Canadian and all American programmers have accepted CCSA as the commercial representative of these smaller BDUs. TSN is a notable exception: They have steadfastly refused to recognize the collective aims of CCSA's companies.
2022 Why are these companies here today?
2023 CCSA companies are the prime targets for competition from satellite and other distributors. these small, independent operators are committed in their desire to compete for the benefit of their customers, exactly as the Commission had planned. However, another part of the equation for their survival, and the survival of competition in remote areas of the country, is the reduction of operating costs.
2024 As you know, fees for programming now represent the largest expense category for these companies. Bringing economies of scale and size to these smaller companies was the reason for the creation of CCSA.
2025 Unfortunately, in spite of the efforts of the Commission, competition has not yet reached the next level of the chain of supply. The Commission consciously created a competitive market for sports programming when it approved the creation of CTV Sportsnet and the market worked as it intended: There was a choice for the customer and distributor in the critical category of sports programming.
2026 Innovation and creativity in programming and price pressure began to work positively to affect the consumer and the distributor. The acquisition of NetStar by CTV will eliminate this emerging competitive market and negate the benefits for which the Commission was aiming.
2027 While the economics of globalization are currently driving the merger of competitors, the impact of such large commercial deals on smaller Canadian businesses and on Canadian consumers is often poorly understood in the process. Mergers are not by definition the antithesis of competition, but in the small Canadian market it concentrates power and control of products in the hands of very few players.
2028 This, in turn, limits innovation, reduces incentive and, worse, creates the ability to dictate price and terms in the home market, especially to smaller customers. This affects the distributor and the consumer, both in terms of price and the ability to provide new products and services. This was not the intent when you introduced competition into broadcasting.
2029 In short, CCSA cannot support this acquisition because it creates roadblocks to effective competition.
2030 What does CCSA want from the Commission?
2031 Denial of this application.
2032 However, CCSA also recognizes that this merger has likely progressed beyond the point where it would be undone. CCSA also recognizes that an intervention by a coalition of small BDUs will not likely hold up this multi-million dollar sale. We must be practical and we must account for the needs and expectations of all parties.
2033 So to the practical solution.
2034 The Commission is aware that CCSA companies did not freely negotiate and enter into binding and enforceable affiliation agreements with TSN, as CTV claims in its response to our intervention.
2035 These agreements were achieved under the threat of, or actual loss of, the service when no alternate sports programming service was available.
2036 Please refer to correspondence from CCSA to NetStar, dated April 8, 1998, as Schedule B to these remarks, to illustrate this point.
2037 Should this application be approved, CTV will inherit these contracts. If the contracts are not voided, they will continue for four more years.
2038 Also contrary to CTV's response to CCSA's intervention, GSN did not always deal with BDUs equitably, regardless of size.
2039 Please refer to Schedule C of these remarks to review TSN's rate card, which very clearly states that systems over 1 million or over 500,000 subscribers pay less for the service than small systems.
2040 The delivery costs are the same. This is not equitable, especially in view of the fact that TSN would not recognize CCSA as a collective entity, in spite of CCSA's offer to provide the administrative benefits of a Virtual MSO.
2041 Does CCSA request the CRTC to declare the contracts null and void? This is a possible solution. However, the new environment will be similar to the environment in which the contract was executed; that there is no alternate supplier of the product. Therefore, renegotiation is unlikely to yield a different result.
2042 CCSA sees a more simple solution, both for its companies and for CTV; that is, that the contracts signed in 1998 by CCSA's then largest company, formerly Fundy Communications, form the template for a master agreement between CCSA and CTV for the provision of a TSN service. This was actually intended by Fundy when it signed the agreement.
2043 Going forward, CCSA would be treated as a single entity for the purposes of calculating volume. CTV would then have enforceable agreements not entered into under duress, and CCSA companies would at least have the industry standard affiliation agreement that TSN claims.
2044 There would be no lengthy negotiation, simply an equitable conclusion to an inequitable situation that has lasted for over five years.
2045 It is recognized by CCSA that this is only a band-aid approach to the larger problem of the lack of a competitive market for signal supply. That is why CCSA actively supports the licensing of a new competitive sports service, as well as the application by Headline Sports to offer an enhanced service.
2046 Thank you for your time and for your consideration.
2047 THE CHAIRPERSON: Thank you, Ms Townsend.
2048 Commissioner McKendry?
2049 COMMISSIONER McKENDRY: Thank you, Madam Chair.
2050 I want to make sure that I understand what your position is here with respect to the application that is in front of us. You say that this merger, and I am quoting:
"...has likely progressed beyond the point where it can be undone."
2051 What do you mean by that? We haven't approved the application.
2052 MS TOWNSEND: I understand that, Mr. Commissioner. I think what we mean by that is that we do not believe that your decision will rest on the position that the Canadian Cable Systems Alliance sees small BDUs. I believe that you have much more paramount concerns in this application and that our intervention is not likely going to be a definitive intervention.
2053 That is all that was meant by that.
2054 COMMISSIONER McKENDRY: When you say that we have more paramount concerns, what did you have in mind there?
2055 MS TOWNSEND: I noticed in CTV's papers that they had at the back of the room that they didn't even mention that the Canadian Cable Systems Alliance had intervened.
2056 I think that probably your issues with sports programming and the purchase of sports programming are going to be paramount to your decision. However, we are the other side of the equation; that is, the price paid by BDUs for sports programming.
2057 We are in a somewhat similar position to CTV, in that they stated that they were buying from a sole source and in fact so are we.
2058 So we are the other side of the equation from the purchase of the programming.
2059 COMMISSIONER McKENDRY: Do I take it that you would support the application if we did what you are seeking here, which I take to be requiring the Fundy contract to be put in place in lieu of the other contracts that exist?
2060 MS TOWNSEND: We believe that there should be a competitive market; that we probably would not have a deal with CTV for the other services if there had not been a competitive market at the time.
2061 However, we would be prepared to support this particular merger because we believe that Headline Sports will come out with a potentially competitive service. There will be new applicants.
2062 The industry is dynamic. This situation probably will not last forever.
2063 COMMISSIONER McKENDRY: Help me to understand your position. In order to do what you what, I take it we would have to require that the contracts that exist be voided, or that CTV or NetStar would somehow have to agree with you to do that, and that the Fundy contract would form the basis of a going forward relationship between CTV, NetStar and yourselves.
2064 Is that what you are seeking?
2065 MS TOWNSEND: In a fashion. The contracts which were entered into under duress are already voidable if the member companies wish to say that they take the position that they are voidable.
2066 However, that is a very dangerous position for them to take because they will be out of contract with TSN, which is a "must have" service. If they took that position, they could potentially lose the service, which in fact has happened in the past.
2067 No company is prepared to take that position.
2068 We are hoping that CTV can rectify the position of having potentially voidable contracts by simply adopting the Fundy contract, allowing CCSA member companies to enter into that contract, and therefore they would have valid and enforceable agreements.
2069 COMMISSIONER McKENDRY: In paragraph 13 this is what you say, and I quote:
"This is why CCSA actively supports the licensing of a new competitive sports service..."
2070 What did you have in mind there when you say "new competitive sports service"?
2071 MS TOWNSEND: I would imagine that there will be applications for new sports services in the not too distant future. That is where CCSA will come forth and actively support those applications.
2072 We believe that any introduction into the area of competition and signal supply will benefit the smaller BDUs and ultimately the customers that they serve in the more remote regions of Canada.
2073 COMMISSIONER McKENDRY: I have a couple of questions about your written intervention that was submitted earlier.
2074 In that written intervention you make the statement, and I quote:
"Effective competition is yet to be introduced at the level of program supply." (As read)
2075 Is that because at the level of the smaller systems that you represent Sportsnet is not available or you don't believe that there is effective competition between Sportsnet and TSN?
2076 MS TOWNSEND: TSN is currently the "must have" service. CTV Sportsnet did provide an alternative, not necessarily a competitor, because they were offering different things.
2077 There was the attempt by the Commission at the introduction of competition, albeit not directly competitive services; one was regional and one was national.
2078 TSN remained the service that cable companies had to carry in order to remain viable.
2079 COMMISSIONER McKENDRY: Do most of your members carry Sportsnet and TSN?
2080 MS TOWNSEND: Yes.
2081 COMMISSIONER McKENDRY: Would they carry Headline Sports as well?
2082 MS TOWNSEND: Some do. That would not have the same type of carriage as TSN, for sure. And CTV would probably have more than Headline Sports.
2083 COMMISSIONER McKENDRY: In your written intervention you said that you opposed the application as it restricts choices for distributors and their customers.
2084 Could you elaborate on that a little more. You made reference to that this morning.
2085 In terms of restricting the choice for distributors and customers, we heard yesterday from CTV and Sportsnet that in fact there would be more choice for customers; for example, Sportsnet and TSN would not program against each other. The example that was used was they would not program Sports News at the same time as they do now.
2086 There were other examples: more baseball games being available.
2087 Do you have any comment on that?
2088 MS TOWNSEND: I did find that a little bit difficult to understand how that was going to increase choice. You know, currently there are two suppliers and those two suppliers intend to become one supplier. It does seem difficult to see how that will increase choice. I think that there will be further applications before you in the not-to-distant future that will increase choices, but two services becoming one service, although they may offer enhanced packages, is still one sole-source supplier.
2089 COMMISSIONER McKENDRY: You discussed with us this morning your view that TSN consistently refuses to treat your member companies collectively to allow them to operate, to use your expression, as a virtual MSO and to get the economies of scale that are available to the larger operators. Could you just tell us a little bit more about the circumstances surrounding that issue.
2090 MS TOWNSEND: That's actually a very long tale, but in the result there were four years of attempted negotiations. In the end result, CCSA member companies were advised by us to sign the agreement unnegotiated so that they would not lose the TSN service.
2091 There was an attempt at mediation and it was during that process that one CCSA company lost the TSN service completely for three weeks. It was determined at that time that no member company could ever put themselves in that situation again. It was an economic hardship that was impossible to recover from, so in the end the agreements were signed unnegotiated and forwarded to TSN.
2092 COMMISSIONER McKENDRY: Thank you.
2093 Again, I just want to make sure that I understand properly what your view is of the application.
2094 You are supporting it, I take it, conditionally, the condition being that the contract that you set out in your comments this morning is put in place, the contract that was represented by Fundy. In a nutshell, do I have your position?
2095 MS TOWNSEND: That in a nutshell is our position. We are loath to see competition be lessened in the area of program supply.
2096 However, I think that circumstances will be such that other competitors will emerge. So in this particular case, yes, you are correct. That's our position.
2097 COMMISSIONER McKENDRY: Thank you very much.
2098 Those are my questions, Madam Chair.
2099 THE CHAIRPERSON: Thank you.
2100 Commissioner Cram.
2101 COMMISSIONER CRAM: Do I hear you that in an ideal world what we should do is licence another national sports specialty, let's call it CSN, so that we would have this kind of competition so you would have the choice? Is that what we are going at? Is that where you are really headed?
2102 MS TOWNSEND: I think in the competitive environment it is going to be all comers and those who have the programming, those who have the audience appeal will be the survivors. Yes, I think that probably that is where we are headed, that those who have a plan and what looks like a reasonable plan should be licensed and be allowed to compete. Yes.
2103 COMMISSIONER CRAM: So we break sort of the regulatory deal of some of the conditions that we require for a broadcasting system in exchange for, if you want, a single genre and we say fight it out. Would that solve the issue of leveraging that we were talking about yesterday in terms of the leveraging issue also, do you think, amongst sports rights programming rights?
2104 MS TOWNSEND: I'm not sure that I understand your question.
2105 COMMISSIONER CRAM: The concern that we had yesterday -- not necessarily just yesterday -- was the issue of somebody owning a whole panoply of platforms in the sports genre and being able to leverage that in terms of the rightsholders.
2106 MS TOWNSEND: Yes.
2107 COMMISSIONER CRAM: So the alternative, then, would be to create more national sports specialties.
2108 MS TOWNSEND: Yes. I think so. I think so.
2109 And it will work on both sides. It will ensure that there are fair prices to the BDU and to the consumer and it will ensure that there are fair prices to the sports pro.
2110 COMMISSIONER CRAM: Thank you.
2111 THE CHAIRPERSON: Thank you, Ms Townsend.
2112 MS TOWNSEND: Thank you.
2113 THE CHAIRPERSON: Madam Secretary.
2114 MS SANTERRE: Thank you, Madam Chair.
2115 We would like now to invite the Toronto Blue Jays with Mr. Pollock.
INTERVENTION / INTERVENTION
2116 THE CHAIRPERSON: Good morning, Mr. Pollock.
2117 MR. POLLOCK: Good morning.
2118 Madam Chairman and Members of the Commission. Thank you very much for this opportunity to intervene this morning.
2119 My name is Sam Pollock. I'm Senior Chairman of the Toronto Blue Jays Baseball Club.
2120 I would like to just say at the outset that, for maybe some of you who don't know, I was for 33 years with the Montreal Canadians in the National Hockey League, including the last 14 as Vice-President and General Manager.
2121 I have also been a Director. I was a Director at John Labatt from 1981 and I saw the creation of TSN and was the Chairman of Labatt in 1995 when TSN was acquired by investors including senior management. So I have a very strong love and admiration for both of these organizations.
2122 THE CHAIRPERSON: But not from Mr. Bryden's position.
2123 MR. POLLOCK: No. I think we are definitely opposed -- well, opposed to Mr. Bryden's position, although he did say some interesting things which I think support what I am going to say, and maybe I will be saying things to support what he had to say.
2124 I think there is a situation to be looked at here. Your body made an informed decision a few years ago to create Sportsnet and they came into existence I believe in September of last year, was the date, and they might make quite a name for themselves on the sports scene.
2125 What we are really opposed to is a monopolistic situation where one organization controls both sports specialty channels. We don't think that is in the best interests of the Canadian viewing public.
2126 I want to deliver here a clear message about the implications on the Blue Jays of reducing competition amongst Canadian sports broadcasters, to provide the Committee with a better understanding of the history of the Toronto Blue Jays television broadcast partners, to demonstrate how broadcasting competition has increased choice for baseball fans in Canada, to communicate the Blue Jays' opposition to the creation of a monopolistic environment for sports specialty channels in Canada, and to clearly define the role that broadcasting plays in the overall financial structure of our organization.
2127 Broadcasting rights fees comprises 25 per cent of the Blue Jays' revenue base. Television revenues assist in keeping baseball tickets at moderate levels for sports fans as compared to other major sports in Canada.
2128 Also, the CBC's new public mandate is to focus less on professional sports, which may lead to less selection and viewing opportunities for baseball fans.
2129 Sports fans agree the competition Sportsnet has brought to the market has increased the quantity and quality of sports broadcasts in Canada.
2130 If CTV is permitted to acquire NetStar, there will be a substantial lessening of competition in the marketplace for Blue Jays' television broadcasting rights. A broadcasting monopoly will not be in the best interests of both the Blue Jays and baseball fans in Canada.
2131 Now, I certainly here can speak from experience because I negotiated the contract with Sportsnet just in January of this year. I also negotiated the new agreement that we have with the CBC. Our agreement with TSN/NetStar had three years to run at that time and has two more years to run.
2132 I can tell you honestly that it was only through NetStar that we were able to now telecast all of our games on television, which we believe gave an opportunity to seniors and others to view afternoon games and also shift workers to view late-night games which they previously weren't able to.
2133 So we think this created a great opportunity for fans to see all of our games.
2134 The introduction of Sportsnet as a separate, and I quote:
"...not complementary as CTV describes the new relationship between TSN and Sportsnet..."
and competitive sports broadcaster, increased the number of Blue Jay games televised by 33 per cent for the 1999 season over 1998.
2135 I want to make some quotes here that were mentioned in the CTV rebuttal.
2136 First of all, if you exclude the "SkyDome factor" that was a new facility from 1989 to 1994 and included two World Series wins in 1992, that we draw more sports fans to our games than the Leafs and the Toronto Raptors basketball team combined. This is in response to what CTV says in their rebuttal about declining attendances.
2137 I would also like to point out that the New York Yankees -- probably the greatest team in the history of baseball, and still are -- have only drawn 2.5 million -- over 2.5 million fans in five years out of the 75 years they have been in existence. So when you are talking about Blue Jays drawing from 2 to 2.5 million, that is pretty good attendance. That is certainly in the middle of the league or better.
2138 Another thing that happened in Toronto, of course, was the introduction of the Toronto Raptors, a third major professional franchise into the market in 1996. So this had the effect of taking sponsors and some fans and it will take time once again for everybody to rebuild.
2139 Of course, I think everybody in the sports world will recognize that the Toronto Maple Leafs are a unique entity in the sports world and in the City of Toronto.
2140 Television exposure, through increasing fan awareness, helps to drive the live gate at Blue Jays games.
2141 Certainly operating a professional franchise in Canada is challenging. I think we have heard quite a bit of that about the National Hockey League and let me tell you that in baseball and basketball it is even much tougher.
2142 A strong revenue base supports a healthy professional sports industry so fans can share local and not foreign-based teams.
2143 The next slide, as you see, shows you the number of Blue Jays games telecast since 1995. You will see how it increased in 1999 up to 160 games and will remain that way at least for the next two years.
2144 I would like to point out also, in paragraph 13 of the CTV rebuttal they happen to refer to the Blue Jays and the Canucks and the Grizzlies as foreign-owned sports entities. Well, I remember when TSN was acquired by new investors that ESPN had quite a substantial investment in that organization, and also Fox, I understand, has an investment in CTV Sportsnet. So I'm wondering what the rationale for this is.
2145 I would like to point out that the owners of the Toronto Blue Jays have absorbed $100 million of losses in the last three years and I am reasonably sure that the same thing applies to Mr. McCaw with the Vancouver Canucks.
2146 Paragraph 42 is, in our opinion, totally incorrect. CBC rights fees increased dramatically in 1999 because of Sportsnet. In addition, Sportsnet bought all unsold inventory of the Blue Jays which could never previously sell. They were paying more for prime time games than TSN is currently paying in their contract.
2147 In paragraph 59 the Blue Jays agree that under the current structure we are not disadvantaged in terms of games sold for local broadcast. This is because Sportsnet has created competition. When there was less competition in 1996 and 1997, our Blue Jay rights on TSN decreased by 20 per cent.
2148 In paragraph 89 the CTV asserts that conventional broadcasters have always owned rights to the highest profile major league sporting events. This statement I think conveniently overlooks that in 1999 TSN had exclusive coverage of Major League Baseball playoffs and the World Series.
2149 We are quite concerned about what will happen if there is no competition in these specialty sports channels.
2150 We believe, as I said before, that what you created before works for the benefit of sports teams and rightsholders and it works for the Canadian television public.
2151 Major sports leagues, for example, in order to protect competition do not permit any one entity to own stock or to own or control two teams in the same sport. I'm wondering if this rationale doesn't somewhere fit when we are talking about sports specialty channels. That is done for obvious reasons, to preserve competition and not have one organization short of act as a farm club or a secondary organization of the other.
2152 According to CTV, if the market for sports properties is not going to worsen, I wonder if they are prepared to guarantee the current broadcasting environment.
2153 I think the CRTC should consider national and regional competition for sports properties and that the system currently in place is fair.
2154 I don't believe we are going to replace television exposure for baseball fans and team revenue after these contracts expire if there is no competition in the marketplace, and I suggest that certainly guarantees be put into any ruling that you might make in regard to this acquisition.
2155 I wouldn't want to see our fans being able to watch fewer games on television in the future if, for example, this application is approved.
2156 We have heard -- and I am very aware and will be here tomorrow -- that Headline Sports is making an application to the CRTC, but I would suggest it would take some considerable time -- as much as I am in favour of this application, it will take some considerable time for Headline Sports to accomplish what Sportsnet has in the past year. That is simply because Sportsnet went out to really be a strong competitor of CTV and they have done a great job. That is why we feel there shouldn't be a monopolistic situation.
2157 I want to talk about fair market value. I think it is very correct to say that if there is a monopoly fair market value will simply be the price that the buyers set.
2158 That concludes my presentation here this morning and I would be quite happy to respond to any questions that the Commission may have.
2159 THE CHAIRPERSON: Thank you, Mr. Pollock.
2160 Commissioner Cram.
2161 COMMISSIONER CRAM: Thank you, Mr. Pollock, and welcome.
2162 I wanted to ask, in this application today, what then is your solution, that we would totally deny the application?
2163 MR. POLLOCK: I'm not going to say that, but divestiture of one or the other. I mean, you know, CTV wants to have TSN as their prime property then maybe somebody else should be the owner of Sportsnet.
2164 But it's not my job, I don't think, to dictate businesses practices or whatever.
2165 What we want certainly is a competitive situation and we feel what you created two years ago created that -- provided that for fans.
2166 COMMISSIONER CRAM: How do you reconcile your position with that of, say, Mr. Bryden or some of the other sports organizations?
2167 MR. POLLOCK: Well, let's deal with Mr. Bryden first.
2168 I think that he correctly said that hockey was a unique situation in Canada. As I said, through my past experience with the Montreal Canadians and negotiating TV contracts on their behalf, for years, as you know, the Montreal Canadians and the Toronto Maple Leafs carved up Canada.
2169 In 1970, when the Vancouver Canucks came in, they joined into the national televised system, but not really to a great degree because their games had to start at 5:00 at night to get an 8:00 p.m. start in Eastern time. It was only when Edmonton and Calgary came into the league -- Edmonton in 1979, Calgary was transferred from Atlanta in 1981, and then of course the Senators came along.
2170 Of course, the Senators have, I believe, a strong relationship with Sportsnet and I respect what their opinion is.
2171 But I think we are talking about apples and oranges here and I think there is a big difference between different situations in Canada. I think the National Hockey League is one particular situation.
2172 I wouldn't agree that competition isn't better for them too. I mean, they may feel their product is so strong that -- you know, it's the case of how high is the moon, but I think competition will benefit them too.
2173 COMMISSIONER CRAM: I find that when you say when Sportsnet came in that there was more competition, but if these two associations are together, they will still have the time that they have to fill, wouldn't they? That won't change.
2174 MR. POLLOCK: Yes, but that comes back to my statement about in major sports about somebody owning two teams. They could very easily make the decisions that "Well, TSN is going to cover baseball, Sportsnet is going to do something else".
2175 I don't think we have to be rocket scientists to believe that they are going to bid each other to acquire rights. That's why we have a healthy situation today.
2176 COMMISSIONER CRAM: So they would essentially be -- it's the leveraging argument that they would say "We will take all of your games, but will pay you two cents a game". Is that the point?
2177 MR. POLLOCK: I don't know what they would say because until Sportsnet came on the scene, TSN wouldn't take any more than 80 games. I don't know what would happen, whether we would go back to the 1998, 1997 situation.
2178 I can't predict that. I think I have been in the sports world long enough to know that we wouldn't have competitive bidding if somebody owned both of these specialty channels.
2179 COMMISSIONER CRAM: We heard yesterday about what was called by CTV or Netstar the suppressing of games because of the competitive nature. They in fact I believe gave an example of your team, and that last year or this year TSN declined to bid for certain games that were in a two week period full well knowing that Sportsnet couldn't broadcast those games or would have to come in late on the games. As a result, their position was that two games were lost to the Canadian public and others were delayed or heard less than a full game.
2180 Their point is that they could reconcile broadcasting all of these, the whole set, in a more rational manner.
2181 MR. POLLOCK: Well, you know, I'm glad you gave the opportunity to respond to that.
2182 COMMISSIONER CRAM: That's why I said that.
2183 MR. POLLOCK: First of all, I will take you right through how the contracts exist. The conventional broadcaster has the right, for some years has had the right, and in the TSN contract to select the first 60 games in the contract. Now, the conventional broadcaster won't buy 60 games. He buys 40. In fact, I got him up from 35 to 40.
2184 He has the right to select the first 40 games. Then TSN's contract, which has been in force for some time, they have the right to select the next 80 games. They are obviously going to select the games that benefit them the most. How? Because they have been in the past working with CBC, so they will go into a city. TSN might take Friday and Sunday and the CBC Saturday night. So it makes a saving of expenses.
2185 Now, when you look at last year, you want to go back to last year's schedule, you can obviously see -- it's the old saying, I guess, they took the sirloin and they left the rump, which I guess is what I would do too.
2186 When it came along to the Sportsnet contract, we recognized that. We wanted to be fair to Sportsnet, so we had to do something we didn't quite want to do but we did it because we thought it was fair.
2187 We gave Sportsnet the right to sell off those games or give off those games to conventional TV. That was their decision if they wanted to do it. I don't think they were able to do it because it was too late in the game for that.
2188 It was a business decision on the part of TSN who was well aware that Sportsnet had this National Hockey League commitment. As I said, this was just jockeying between the two of them, you know, one making it a little tougher for the other.
2189 They would have us believe now that everything would be wine and roses, you know, if there's no competition.
2190 COMMISSIONER CRAM: That's right, that there would be no more, as you call it, jockeying.
2191 MR. POLLOCK: Yes.
2192 COMMISSIONER CRAM: That's not credible to you, is that your point?
2193 MR. POLLOCK: I don't think it's credible. It would be credible in the next two years because we have contacts.
2194 COMMISSIONER CRAM: Yes.
2195 MR. POLLOCK: So they are not going to throw games away.
2196 COMMISSIONER CRAM: When you talk about a loss of bargaining power, is there some way you could put a monetary value on that or a percentage of income or something?
2197 MR. POLLOCK: Yes, about $7 million a year.
2198 COMMISSIONER CRAM: And that's what you believe this will cost the --
2199 MR. POLLOCK: Well, that's what we talking about in the current environment. That's what happened this year. Our revenue increased by $7 million by having a competitive network.
2200 COMMISSIONER CRAM: As a result of Sportsnet.
2201 MR. POLLOCK: Yes. Between the money we got from Sportsnet and the increased money from CBC.
2202 COMMISSIONER CRAM: What do you say to CTV, and I believe what they said is that -- yesterday they said that there are ebbs and flows in sports, that some are popular today and not popular tomorrow and that the costs should vary with the ebb and flow of public opinion. I know they're fickle, public opinion, but that's their point.
2203 MR. POLLOCK: I think that's an incorrect statement, quite frankly. That's my opinion. I think that you have major league baseball, major league hockey, major league basketball. I think that these sports have grown in popularity each year.
2204 Teams naturally will change standings in different years. In the past two years we have been very, very competitive. We were very close to making the playoffs. Unfortunately, we missed in both seasons by a very small margin. I don't think that the popularity of teams ebbs and flows.
2205 COMMISSIONER CRAM: Or particular sports.
2206 MR. POLLOCK: Especially particular sports, not the major sports that we are referring to.
2207 COMMISSIONER CRAM: Forgive me, I come from Regina and the Rough Riders. There's some issue as to their popularity.
2208 MR. POLLOCK: Well, we had a farm team, Regina Pats, for a number of years, so I am very familiar and it's a pleasure to be there.
2209 COMMISSIONER CRAM: Do you think that part of the issue right now is the Toronto market itself and the Raptors and certainly created by that, does that add to your concerns? Is that an additional concern to this particular issue?
2210 MR. POLLOCK: No. I mean I think with all due respect that the Blue Jays are basically Canada's national team, other than in Quebec. We are certainly concerned with our situation as it would be nationally as well as locally. There are more Canadian baseball players coming and playing baseball today and coming into major league baseball. We would not want to see any lessening of interest on television.
2211 COMMISSIONER CRAM: Tell me, you were talking about the conventional networks and in the written presentation there was reference to only CBC being still marginally involved and a reference to the fact that CBC is proposing to reduce their professional sports by 20 per cent over seven years. How is that going to impact on you?
2212 MR. POLLOCK: Well, I mean, first of all I wouldn't want to say CBC is marginally involved. I mean 40 games is, you know, quite a bit more than marginal.
2213 COMMISSIONER CRAM: More than marginal.
2214 MR. POLLOCK: I could only take from what I have read in the newspapers that CBC is under pressure to reduce their sports content. I don't know. I'm sure that CBC Sports would prefer not to walk down that road. I can't be 100 per cent sure they are going to walk down that road as far as Blue Jays baseball is concerned.
2215 Even a cutback of five games would be quite substantial to us. I believe they are talking cutbacks in the neighbourhood of 15 to 20 per cent. We will work hard, of course, to convince them to maintain what they now have. I don't think there's any hope that they would increase.
2216 COMMISSIONER CRAM: Thank you very much for coming here. Thank you for your input and your thoughtful answers.
2217 MR. POLLOCK: Thank you.
2218 THE CHAIRPERSON: Mr. Pollock, I know you look as young as Mr. Bryden, but you have obviously had more years in hockey than he has had. Do you have any fatherly advice as to how he could reach his goals without approval of this application?
2219 MR. POLLOCK: Well, before you added those last few words, I was going to say I'm cheering for him in everything he does because we have all of the same problems in spades with taxes and everything of that nature.
2220 THE CHAIRPERSON: I meant his goals with regard to this particular application in broadcast exposure. You were here, you heard him this morning.
2221 MR. POLLOCK: Yes, I heard him. I heard most of his --
2222 THE CHAIRPERSON: Can those goals be achieved without this concentration? I was talking earlier of balancing the pros and the cons. You are obviously on this side.
2223 MR. POLLOCK: Yes.
2224 THE CHAIRPERSON: Is there any way of dragging him over there?
2225 MR. POLLOCK: Well, I think what Rod was saying was that hockey was a unique sport in Canada. Of course, it would be difficult for me to argue against that position.
2226 So I think the point that he was trying to make is that because it is unique that it's something that these networks simply have to have and right now, of course, what you have is the CBC has Hockey Night in Canada, which is a national program, and then you have all these teams with their various regional rights.
2227 Of course, Mr. Bryden, I believe -- I can't talk for him, but I believe he is selling them to Sportsnet. The Maple Leafs I believe are with TSN, the Canadians probably with RDS, but I am not sure about these things, and so I think there is a different situation.
2228 I think things affect different organizations, but I am very interested, of course, that both the Vancouver franchises also oppose the concentration and creation of a monopoly. Does that answer your question?
2229 THE CHAIRPERSON: I am sure you don't have to answer for Mr. Bryden. My question was, obviously, his goal is to get exposure on TSN, to get greater exposure on as many platforms as possible and his belief is that if they are all owned by the same party this is more likely to occur.
2230 MR. POLLOCK: Well, of course, we don't agree with that because we have the experience. That didn't happen until Sportsnet was created.
2231 THE CHAIRPERSON: But he is saying that it is different in hockey and that would help greater exposure.
2232 MR. POLLOCK: I don't know that hockey can get much more exposure than they are getting now. I think you would really have to stretch your imagination to think that there could be more exposure.
2233 THE CHAIRPERSON: Well, more exposure for his team.
2234 MR. POLLOCK: You know, they have a national contract and each team has their own local rights. I can't see how they can telecast more games or very many more games than they are telecasting now.
2235 THE CHAIRPERSON: Or to a greater audience I guess.
2236 MR. POLLOCK: Yes.
2237 THE CHAIRPERSON: His exposure in the national sense I suppose.
2238 Thank you very much, Mr. Pollock, for joining us this morning.
2239 MR. POLLOCK: Thank you for the opportunity.
2240 THE CHAIRPERSON: We will take a 10-minute break, so we will be back between 1005 and 1010.
--- Recess at 0955 / Suspension à 0955
--- Upon resuming at 1015 / Reprise à 1015
2241 THE CHAIRPERSON: Madam Secretary.
2242 MS SANTERRE: Thank you, Madam Chair.
2243 I would like now to invite the Canadian Independent Sports Producers Association with Mr. Partington.
INTERVENTION / INTERVENTION
2244 THE CHAIRPERSON: Good morning, Mr. Partington.
2245 MR. PARTINGTON: I am Lawrence Partington, the President of the Canadian Independent Sports Producers Association. I am here to intervene in support of CTV's application.
2246 The Canadian Independent Sports Producers Association represents production companies primarily involved in producing sports programming for conventional and cable broadcasters. Our members annually produce over 300 hours of original programming for TSN and CTV Sportsnet.
2247 Our organization was formed over the summer in anticipation of these hearings because we did not feel that our niche of the Canadian broadcasting industry was being properly represented. Individually our member companies "live or die" based on their relationships with TSN, RDS and CTV Sportsnet.
2248 CRTC hearings are one of the few opportunities we have to address and influence industry-wide concerns. At your hearing three years ago when both TSN and CTV were applying for regional sports licences, too many of us sat on the fence for fear of "backing the wrong horse" and, as a result, our concerns were not raised to the Commission. As a group we will not make that mistake again.
2249 As a 20-year sports veteran myself, I am typical of our membership when I say that I've chosen the sports genre because I sincerely believe that it's important. We see TV sports as television at its best, delivering shared experience to a national community live in real time. Live coverage of major sports events is uniquely possible on television. Radio, print and the Internet cannot compete.
2250 TV sports is also broadcasting at the absolute technical cutting edge. Innovations that eventually transform the look of all broadcasting usually have their start in sports programming. Whether we're discussing miniature cameras on race cars or hockey nets, digital satellite transmission, interactive web support or high definition TV, these exciting innovations are all propelled by sports production. We're proud to be independent sports producers.
2251 That there are approximately 35 Canadian production companies working in the field is largely thanks to TSN and RDS. Since 1984 they nurtured the freelance talent and technical infrastructure which stood ready to support CTV when it launched Sportsnet last year. TSN was founded by and has always been run by executives who shared our enthusiasm for sports as TV at its best.
2252 Top executives have paid their dues as producers and directors in the trucks on the front lines of live TV production. They have our great professional respect. A number of talented TSN alumnae are now instilling the same sense of mission to CTV Sportsnet. I am pleased to note that CTV has had the good sense to tap its very strong sports division when it comes to a major live broadcast like its upcoming Millennium Special.
2253 Based on our faith in the management of both groups and the programming benefits package being offered by CTV, our group strongly endorses the proposed takeover of NetStar by CTV. We want this deal to be approved. From our point of view, working with competing or even rival sports specialty channels has been a failure.
2254 Although I would be willing to offer my opinion on any aspect of the application, I will limit my remarks here to the production benefits package relating to the sports services, as this is the area which directly concerns our members.
2255 In the amateur sport production pool, CTV proposes that TSN and RDS will provide funding for the production of amateur sports events that would otherwise receive no national television exposure in Canada. If CTV's application is approved, they will allocate $500,000 per year to produce coverage of amateur events.
2256 We respectfully suggest to the Commission that the applicant be allowed to meet this benefit commitment by Canadianizing live coverage of amateur sports events already televised by a foreign broadcaster. Canadian cable rights to world class amateur competitions will cost a fraction of mounting a host broadcast here at home. By stretching the $500,000 annual investment over many more events, a greater number of sports federations will be able to benefit.
2257 Putting a Canadian focus on a foreign event means more than adding a voice-over in Montreal or Toronto. We'd expect to see features, interviews and bonus content produced on-site included in the Canadian broadcast.
2258 We would appreciate clarification from CTV that this money will go toward coverage of new sports, not just new events. Otherwise a new made-for-TV curling bonspiel or figure skating event would qualify which we are sure is not CTV's intention.
2259 Once a sport has been identified, we suggest to CTV that at least one independent production company be invited to tender a production bid. While the broadcaster may elect to produce in-house, the independent bid should be the amount that the broadcaster can count toward its amateur sport production benefit commitment. This procedure will solve the complicated question of assigning fair market valuations for in-house services.
2260 The Canada Games, Canada Cup of Women's Hockey, Canadian Sports Minutes, these are wonderful ideas that we support without reservation. The women's hockey property could quickly develop into a highly profitable, high-profile event. It's overdue and good luck to the broadcaster that creates it.
2261 Canadian sports documentaries. TSN and RDS propose to dedicate $4.5 million over five years to the production of half-hour sports documentaries. Fifty-two will be broadcast in total. All will be licensed from independent producers and all will be broadcast in prime time.
2262 This proposal is wonderful news for our membership. TSN and Sportsnet currently have no CRTC required financial obligation to support independent production, although TSN must air 250 hours per year. But the paranoid in me would like one small reassurance spoken into the record by CTV before we can endorse the plan. That is, staff or contracted employees of CTV/NetStar as of the date of these hearings, today, will be ineligible for production contracts included in this documentary licence program.
2263 Documentary contracts must not be used in lieu of severance packages to redundant employees after the NetStar/CTV specialty operations are merged. "You're not fired; you're an independent producer" would not be in keeping with the spirit of this proposed benefit.
2264 In private conversation at these hearings I have been assured that that absolutely is not CTV's intention, but we would like it on the record.
2265 Now, here's the big one for our members and that's a formal definition. "Independent sports producers" is an oft-times misinterpreted term.
2266 I do not agree with Mr. Fillingham's dismissal of CFTPA and our request for a definition as "something better dealt with outside these hearings". It is only at moments like these that the parties are motivated to commence negotiations.
2267 We would encourage the Commission to adopt the following wording:
"A sports program qualifies as a Canadian independent production if it is created and the copyright owned by a production company which:
- is owned and controlled by Canadians
- has no ownership or management links with a licensed broadcaster
- has no ownership or management links with a professional sports franchise relating to the project under review, and
- is not compelled to use facilities or technical personnel controlled by the broadcaster."
2268 If the independent producer freely chooses to hire facilities from the broadcaster, the broadcaster should get full credit for its licence fee, but not if a broadcaster's facilities are included as a barter element in a production contract.
2269 With this proposed definition, we are specifically trying to stop staff members or resident freelancers of a broadcaster from producing and selling "independent programs" to that broadcaster. If they are drawing a salary, have an office, and a telephone extension, they are not independent.
2270 We are trying to disqualify a freelance producer from working on a show with network personnel and facilities and thereby qualifying the entire internal expense as a credit toward independent production commitments.
2271 In our written intervention we proposed an end to the barter programming which accounts for the vast majority of independently produced sports hours on air. We now withdraw that proposal because we acknowledge that barter programming is here to stay in sports. Independent sports producers face the same situation worldwide, not just here in Canada. It breeds overt commercialism and programming mediocrity. But barter programming is a reality.
2272 A typical barter deal gives the producer 50 per cent of the commercial inventory in that show in lieu of a licence fee. Raising sufficient advertising support to profitably finance the entire production has been becoming increasingly difficult due to audience fragmentation.
2273 For this reason, our organization would have no objection to NetStar repeating our programs on Sportsnet or Outdoor Life. During these hearings I have heard the Commission's concerns regarding repeats, but please realize that for us repeat broadcasts of our programs to a variety of audiences is a very good thing.
2274 We hope the Commission will leave open the door for CTV to judiciously schedule repeats as it may be in the best interests of Canadian producers.
2275 The only permanent remedy we see to the escalating commercialism in independent sports production is to change eligibility requirements for Téléfilm's funding programs to include sports programming and/or to recognize commercial barter as a licence fee.
2276 There was some discussion yesterday about whether or not the programming initiatives proposed in the CTV benefits package should be counted as "incremental". Yes, absolutely they are incremental. Any licence fees being proposed for independent sports producers are largely unprecedented and are therefore, by definition, incremental.
2277 In conclusion, our association solidly supports this application. We find the production benefits package very imaginative and exciting. Our objections are not really objections at all, rather requests for minor but important-to-us clarification.
2278 We urge the Commission to approve the application, and I invite any questions.
2279 THE CHAIRPERSON: Thank you, Mr. Partington.
2280 Commissioner Noël?
2281 COMMISSIONER NOËL: Good morning, Mr. Partington.
2282 In the section on amateur sports production pool, you made reference to the fact that broadcasters should tender production contracts to arm's length production companies.
2283 Could you illustrate how there would be an alternative in favour of amateur sports programming?
2284 MR. PARTINGTON: I see it as getting the best price for the money. I am not suggesting that a condition of licence should be that independent producers have to do these shows. There may be occasions when the broadcaster can do a better deal for the sports federation by producing in-house.
2285 I would like to think we can provide a financially more attractive alternative. But by asking the independent producer to put in a competitive bid, we are guaranteeing that the Federation sees that their money is being well spent and also policing, I suppose, that the broadcaster is not over charging even on the benefits package.
2286 It is a way of getting a second quote.
2287 COMMISSIONER NOËL: In your presentation as well as in your written intervention, you talk about Canadianizing --
2288 MR. PARTINGTON: It's a new verb.
2289 COMMISSIONER NOËL: It is hard in French, so it is even worse in English.
2290 MR. PARTINGTON: I know what you mean.
2291 COMMISSIONER NOËL: You talk about Canadianizing live coverage of amateur sports events already televised by foreign broadcasters.
2292 Could you elaborate a bit on that, please.
2293 MR. PARTINGTON: Take World Cup ski racing, as an example. CBC just last weekend did a wonderful host broadcaster job of the World Cup at Lake Louise. I am not privy to their budgets, but I would guess they probably dropped $150,000 to $200,000 on production costs. Very expensive. They did an excellent job.
2294 As an alternative, Sportsnet or TSN could get an equally wonderful production, featuring the same Canadian athletes racing in Switzerland, Austria or France, for a small fraction of that.
2295 I think it does the Canadian Sports Federation and the Canadian athletes just as much good to be seen racing and winning, or doing well, in another country as it does in Canada. Sometimes as Canadians I think we actually attach more credit if you win a competition abroad than in your own country.
2296 But the cost to the broadcaster is far, far less to import that signal than to produce it at home. It is a factor of probably one-twentieth of the cost.
2297 That is not to say we accept imported coverage in lieu of Canadian content. But the broadcaster can make efforts, inexpensively, to have cameras at the foreign events to focus on the Canadian athletes, to follow the team around, to do value-added on that host broadcast feed that they have purchased and make a better show.
2298 It can be done timely, it can be done live, or at least same day. That's it. More events for the money for the sports federations. I think sports would be the beneficiary.
2299 COMMISSIONER NOËL: Which would leave more money for independent producers.
2300 MR. PARTINGTON: Naturally. I think independent producers who do all of this stuff.
2301 But the direct result would be more events, more sports covered without spending more money.
2302 COMMISSIONER NOËL: You indicated in your written argument that you would like to see fair negotiations of licence fees with independent producers.
2303 How would you qualify a fair process?
2304 MR. PARTINGTON: In ongoing research we have heated discussions with our members. We have really had to walk away from that. It is not going to happen.
2305 COMMISSIONER NOËL: That is what you mentioned in your oral presentation.
2306 MR. PARTINGTON: I'm afraid it is. TV sports is this weird area -- but it is like this all over the world -- where the producer has to do a world-class program but is expected to do it for no money. But that is the way it is.
2307 We are expected to raise our own financing through commercial sponsors.
2308 We have dropped that. It would be nice, but it is a dream.
2309 COMMISSIONER NOËL: Thank you very much. I don't have any further questions.
2310 THE CHAIRPERSON: Mr. Partington, you raise the incrementality of the benefits as an issue that was raised yesterday. Another issue that was raised was self-serving possibility of the benefits and whether or not the actual increment in benefit had to be netted from what could be a return to the service.
2311 MR. PARTINGTON: Yes.
2312 THE CHAIRPERSON: Do you have any comments on that, with regard to the money that would flow out for the production of sports-related programming?
2313 You know what the issue is, which is different from incrementality. I see you emphatically say that it is incremental.
2314 MR. PARTINGTON: For sure.
2315 THE CHAIRPERSON: Another issue was raised, which is that of whether the very finely calculated amount of money, to which the 10 per cent should be discounted, should be discounted by any value that the giver of the benefit could get from it.
2316 MR. PARTINGTON: These 10 per cent benefit packages that are required by the CRTC, I don't think your intention is to punish a successful broadcaster. This is not a penalty that is being given to them, but rather it is supposed to be a catalyst for brilliant programming.
2317 Now, it never occurred to these people to create the Canada's Cup of Women's Hockey, but, trying to think how can we do 10 per cent benefits, let's do the Canada's Cup of Women's Hockey. Maybe it will make and be a huge success. If that is true it will go on forever, long beyond this licence. But congratulations to the CRTC for stimulating that and making it happen.
2318 I think you are trying to create better programming, and I am very impressed quite honestly by CTV's application. I think they have taken the spirit or the benefits package to heart.
2319 So some of these programs, like the documentaries -- quite frankly, I have been trying to sell documentaries for years and been told documentaries won't draw flies on a sports network -- there is an opportunity cost there. They are going to have to not broadcast WWF one night and air a documentary. The documentary won't pull like WWF. The advertising revenue won't be there. So even if commercials are sold in the documentary, and even though the independent producers will be delighted -- I mean, it's great, we love to do sports documentaries -- the network isn't coming up financial better.
2320 THE CHAIRPERSON: Your argument would almost be we should increase the benefits because there may be a cost when they air the programming.
2321 MR. PARTINGTON: You can argue it. Sure.
2322 THE CHAIRPERSON: I would take the other side of pushing this argument.
2323 Your definition, which you say is the big one for you, includes that you not be compelled to use facilities or technical personnel controlled by the broadcaster.
2324 Is there any relationship between that and the production-related facilities company, if I understand well, that comes with this purchase of NetStar?
2325 MR. PARTINGTON: Well, yes, there could be.
2326 THE CHAIRPERSON: Would that be a problem? There may not be any relation, but I think --
2327 MR. PARTINGTON: No. There is a definite relation.
2328 THE CHAIRPERSON: Because we heard them at length say that the facilities that they own would be used in part for adding programs.
2329 MR. PARTINGTON: We are talking about Dome Productions. It is probably -- well, it is definitely Canada's foremost mobile facility vendor.
2330 Now, pertaining to this specific -- this application and the benefits package, there is really no connection, because in documentary production, which is the benefit that is on the table for independent producers, you don't need a truck, you don't need a mobile for it, so it is not really an issue.
2331 Editing facilities, I own editing facilities. All of my fellow members and competitors own editing facilities. We don't need any help, thank you.
2332 In the event of an independent producer outside of this benefits package wanting to do a live event, which we do, we televise boxing and motor racing and different live events occasionally, I would object to being compelled to use their truck. However, if I have a licence fee or a budget under my control, I may very well elect to use their truck because Dome has very good trucks.
2333 THE CHAIRPERSON: As long as you are not compelled.
2334 MR. PARTINGTON: That's it.
2335 THE CHAIRPERSON: So that is the operative word.
2336 MR. PARTINGTON: They shouldn't be --
2337 THE CHAIRPERSON: That it can be your choice depending on --
2338 MR. PARTINGTON: That's it.
2339 THE CHAIRPERSON: -- what is most effective for you.
2340 MR. PARTINGTON: That's all.
2341 THE CHAIRPERSON: Thank you very much.
2342 Oh, sorry. Counsel.
2343 MR. BATSTONE: I just have one quick question.
2344 You mentioned in your presentation that:
"From our point of view, working with competing or rival sports specialty channels has been a failure." (As read)
2345 I just wonder if you could elaborate a bit on that, why in fact that is the case?
2346 MR. PARTINGTON: If you accept that the vast majority of independent production is done on a barter basis, all right, we produce half hour programs which ideally we would be on a conventional broadcaster but realistically we aim to be on TSN because they deliver the biggest audience.
2347 To go on Sportsnet, that would be a -- which delivers a smaller audience, so that means we get less income for the audience that is being exposed to our sponsors. Audience fragmentation has been a big problem. A show that might pull 150,000 viewers on TSN, if it only gets 75,000 on Sportsnet, I can't finance it. It has to be on the national service. That's why this --
2348 You know, audience fragmentation isn't going to be solved by this deal. Audience fragmentation exists with Speedvision and the Golf Channel and other specialty channels that will continue to come into Canada.
2349 This brings me to that question or this point about repeats. There is the potential for a CTV/NetStar to negotiate with an independent producer to deliver an audience, like an audience number.
2350 If my sponsors say, "To make this deal, to justify the money we are giving you, Lawrence, to produce this show, you have to get 200,000 viewers for us in aggregate", it may be a certain demographic, if I can't get that I'm not going to get the money. I have a very -- if I could propose to CTV/NetStar, "Here is the show. Run it as often as you can until your ratings say I have 200,000", my client would be happy. Even if it runs at three o'clock in the morning in the west coast region on Sportsnet and it is getting prisoners and shut-ins, you know, they are still warm bodies and I still get to, you know, put a mark on the board.
2351 MR. BATSTONE: But is that something that is -- I mean, conceivably that could still happen with a merged undertaking. You could still end up on the one that has the lower ratings and you could also, I presume, have a similar problem with repeats, I guess.
2352 MR. PARTINGTON: Well, I guess that is in the CRTC's hands.
2353 MR. BATSTONE: Would the deal help us --
2354 MR. PARTINGTON: If they are not allowed to do repeats, yes, I will have to insist that the show is on TSN, and if it is not on that national service, I probably can't make the deal go or I would have to negotiate with TSN to allow -- I mean, we do a lot of motor racing in my company. Currently, because of Speedvision being imported to Canada, I have to choose. Am I going to sell to Speedvision or barter to TSN? I can't do both because I'm selling Canadian rights and Speedvision comes here. They are not going to blackout my show.
2355 The point was I would have to negotiate with TSN to either give me second, third airings on Sportsnet or some affiliated sister service or let me sell Canadian rights on a delay to Speedvision.
2356 MR. BATSTONE: Thank you.
2357 THE CHAIRPERSON: Thank you, Mr. Partington.
2358 Madam Secretary.
2359 MS SANTERRE: Thank you, Madam Chair.
2360 The next intervention will be by the Directors Guild of Canada/La Guilde canadienne des réalisateurs.
INTERVENTION / INTERVENTION
2361 THE CHAIRPERSON: Good morning, Mr. King, Mr. Grant. Proceed when you are ready.
2362 MR. KING: Madam Chairman and Members of the Commission, I am Allan King, the President of the Directors Guild of Canada. With me today is Peter Grant our regulatory counsel on this matter. Pamela Brand, our National Executive Director was unable to join us today.
2363 The Directors Guild of Canada represents key creative and logistical personnel in the film and television industries with seven district councils representing over 2,700 members.
2364 While the Guild and its members are not directly concerned with sports programming or sports rights as such, they are vitally concerned with ensuring that the principles of section 3 of the Broadcasting Act be followed, and that Canadian broadcast licensees be owned and controlled by Canadians, and that appropriate benefits in terms of quality Canadian programming accompany any applications for changes of control.
2365 That is the purpose of our intervention today.
2366 I want to start, however, by emphasizing that the Guild does not oppose the concept of having CTV control TSN, RDS and Discovery Canada. CTV has a distinguished record in providing quality Canadian programming, and the fit of CTV's broadcast assets with the NetStar services makes strategic sense.
2367 Our concern is limited to two matters.
2368 First, the amount of the benefits package being put forward by CTV given the size of the transaction.
2369 And, second, our concern with the proposal that TSN change its name to ESPN Canada.
2370 In our written intervention, we raised a third issue, namely the excessive degree of control that could be exercised by ESPN under the shareholders agreement. However, the amendments to that agreement that were filed yesterday by CTV address our concerns in that regard. Accordingly, provided that the shareholders agreement is amended as proposed, we no longer object to it.
2371 Now let me turn to our two remaining concerns. The first relates to the amount of the benefits being proposed. The Commission itself has expressed concern with this matter in its Notice of Public Hearing. The Commission's new benefits policy, issued on June 11, 1999, stated that the appropriate benefits would be 10 per cent of the value of the transaction.
2372 In our view, the value of the transaction in this case can be described very simply as CTV's percentage ownership of the enterprise value of NetStar, less its share of the value of the unregulated assets included in the transaction.
2373 The enterprise value of NetStar is by common agreement $908 million Canadian. CTV has purchased 68.4 per cent interest in NetStar. KPMG has estimated that the broadcast assets of NetStar represent about 80 per cent of the NetStar value.
2374 Accordingly, the guild considers that the value of the transaction in this case is $534.6 million and at 10 per cent, CTV should be providing benefits of about $53.3 million.
2375 CTV argues that the existing $320 million of debt of NetStar should not be included as part of the value of the transaction. By subtracting this out, CTV argues that the value of the transaction is only $352 million for which it has offered $35.2 million in benefits.
2376 We do not believe the Commission should accept this approach. The transaction here is not just the purchase of certain shares by CTV. Rather, it is the acquisition of effective control of the NetStar business enterprise.
2377 If the CRTC were to exclude debt from the calculation of the value of the transaction for the purposes of the benefits policy, this would not only result in lesser benefits being payable, but would create incentives to restructure broadcast assets prior to their sale to minimize the application of the benefits policy. We have given examples of this in our written intervention.
2378 We believe that this is the time for the CRTC to clarify to prospective purchasers in the television field that debt is irrelevant in assessing the size of a transaction for the purposes of the benefits policy. Any other approach would, in our view, give rise to accounting distortions which would not be in the public interest.
2379 Our second concern relates to the name of the service. In its application, CTV has indicated that it intends to change the name of TSN to ESPN Canada. This is undoubtedly in the interest of ESPN in terms of promoting its brand name around the world, but it is not in the long term interest of the Canadian broadcasting system to have a vital and viable Canadian specialty service abandoned for essentially no consideration what is one of the strongest brand names in Canadian broadcasting.
2380 NetStar has spent years and millions of dollars in promoting its brand name, TSN. TSN is now an extremely strong name with universal recognition across Canada. It is a tribute to its previous owners and to our broadcasting system that TSN is seen as one of the components of the system that is truly distinct and unique and not just a platform for U.S. programming.
2381 Under these circumstances, the guild sees no conceivable public interest in dropping one of the strongest names in Canadian broadcasting in favour of a name like ESPN Canada.
2382 ESPN supplies less than 15 per cent of the programming on TSN. By continuing with the TSN name, Canada's DTH suppliers can distinguish themselves with popular and uniquely Canadian services that no grey market DTH supplier can provide.
2383 If, on the other hand, the TSN name were switched to ESPN Canada, the message would be conveyed that there is really very little real difference between the U.S. and Canadian offerings.
2384 We are aware that in normal circumstances the CRTC does not become involved in the name of its licensees or the names of their services. This case is the rare exception. In this case the message that would be sent with the change of name is that TSN is a service that is just another part of the world-wide ESPN family. In the case of TSN, nothing could be further from the truth. It belittles the history of TSN and NetStar to allow such a name change to happen.
2385 That outlines our concerns, Madam Chair. We want to conclude by re-emphasizing that we have no problem with the notion of CTV owning and controlling the NetStar properties. The guild has a high regard for CTV and its management and for its innovative and positive approach to Canadian programming.
2386 Thank you, Madam Chair. We look forward to any questions you may have.
2387 THE CHAIRPERSON: Thank you, Mr. King.
2388 Commissioner Noël.
2389 COMMISSIONER NOËL: Mr. King, my questions will bear mostly on the value of the transaction or how you determine what the value of the transaction is.
2390 Could you explain why we should adopt your methodology rather than the methodology proposed by CTV? Could you emphasize on that?
2391 MR. KING: My understanding is that if debt can be subtracted from the value, then it invites restructuring of the balance sheet to increase the debt to diminish the benefits. It seems to us that this is not in the interests of the broadcasting system.
2392 COMMISSION NOËL: But, you know, restructuring the balance sheet is a costly operation too. Do you think that it would really foster reorganization of the balance sheet and creation of debt just to avoid the 10 per cent benefit package?
2393 MR. KING: I think --
2394 COMMISSIONER NOËL: For instance, there are commissions to be paid to bankers and the like and they are not cheap.
2395 MR. KING: Peter, can you speak to that?
2396 MR. GRANT: Well, I think it goes to the heart of the question which is what is the proper interpretation of the term "value of the transaction", Commissioner.
2397 There are a number of decisions which have equated the value of the transaction, in the guild's view, properly as the enterprise value which in the analogy presented in the guild's intervention is like establishing the price of a house on the market. It is an independent price.
2398 The house, when you purchase it, may be acquired all in cash if its free from debt. You may assume a mortgage. The mortgage may not require a personal guarantee. It may be simply on the assets. But that doesn't change in any way the enterprise value that the market assesses to the asset.
2399 TSN is probably a good example. A few years back when TSN was restructured, there were $43 million in benefits paid. That was based on the purchase price, but the purchase price did not include any debt because it was debt free. It was in fact equivalent to the enterprise value of NetStar then.
2400 Now, as we come forward a few years later, you are having CTV acquire effective control of 68 per cent of this same company which is valued now in the market far in excess of what it was three years ago. It's now $908 million. You would reduce that by the unregulated assets.
2401 To now suggest that the benefits have somehow dropped because there was some debt put I think doesn't make sense. The value of the enterprise which CTV is acquiring control of has in fact gone up in the last few years, not down.
2402 The question as to what debt is on the assets from time to time could reflect a whole variety of factors and is not controlled by the Commission. You don't set a required debt equity ratio. People can refinance for all kinds of reasons. They can do it for tax reasons and others.
2403 To have the benefits policy tied then to what in effect is an arbitrary ratio when really the central question is "What is the value of the broadcast station or enterprise that is being acquired", that is the central question before you in applying the benefits policy. I think that's the case for putting this on a straightforward basis, that you simply look at the enterprise value, the proportion being acquired, net of course of the unregulated aspects of the enterprise.
2404 COMMISSIONER NOËL: Would you make a distinction between an asset acquisition and a share purchase?
2405 MR. GRANT: No. I think in an accounting sense once the asset is acquired, both the debt that may be attached to it and the equity are then consolidated up into the books of the parent and they both are seen there as being essentially part of the structure and ownership and assets owned by the parent.
2406 Now, you know, from the perspective of lawyers, there are many good reasons why they may want to structure a relationship as an asset deal as opposed to a share deal. You have to ask the question "Why should that matter in terms of how you value it? You should be looking a the value of the station." In other words, the enterprise value.
2407 If the pre-existing shareholders happen to have encumbered it with debt and taken that money out of it, the person who is acquiring the asset is still acquiring an enterprise that is spinning off revenue at a certain level. It's worth something in the market and that worth should be reflected, it seems to the guild, in the benefits policy.
2408 COMMISSIONER NOËL: One of the arguments that was made by CTV yesterday was that the NetStar was still assuming its debt, therefore it should be subtracted from the purchase price. Do you have any comments on that?
2409 MR. GRANT: Well, again that is simply an issue as to whether the revenue stream of the acquired asset is capable of supporting debt without having to go for an upstream guarantee.
2410 So, in a sense, it's an invitation that if it is a profitable enterprise and you don't have to guarantee the debt, then somehow it becomes extracted. But if it is an unprofitable, or you have to negotiate with a guarantee from the acquiring shareholder, then suddenly it does come into play.
2411 Recall that the accounting principles for consolidation are very clear. Whether or not the parent has guaranteed the debt, both the debt and the equity are consolidated upwards and appear then on the balance sheet of the acquiring company, if it is a subsidiary, which it would be in this case.
2412 That proves my point that from an accounting perspective the enterprise value is the total of the debt plus the equity.
2413 COMMISSIONER NOËL: That doesn't apply for income tax returns, consolidation?
2414 MR. GRANT: No. That's correct.
2415 COMMISSIONER NOËL: Now, you mention in your arguments that it would be an incentive -- and I'm coming back to that -- incentive for reorganization of debt.
2416 Could you talk to me a little bit more about that? I'm not convinced that this would be an incentive because, you know, the pros and cons are not that --
2417 MR. GRANT: I don't think the case is made solely on that ground, Commissioner, because people will be presented in assets in their current form and some will historically have more debt and others less for other reasons that are extrinsic to the value of the enterprise.
2418 I think the key issue, though, is to have a clear rule that applies across the board and is not subject to these sort of anomalies of what happens to have been in the balance sheet structure at the time.
2419 You have now a series of decisions, some of which do refer to purchase price, some of which when you examine them and look at them more closely the benefits were paid on the enterprise value. There is a conflict here. I think the key issue is to resolve it by clarifying what is the denominator. What is the -- how do you define that.
2420 Now, it was really never much of an issue a few years ago because the numerator was never specified. The Commission had never put a precise number like 10 per cent on the table, and so it was loosely interpreted.
2421 If you go back over the last many years, there will have been some major transactions in which the numerator may have been 5 per cent, it might have been 15, 10 was often in there. So as you soon as you do put 10 in you owe it to the industry to define precisely what the 10 is of, and it seems to us that the only fair way that puts everybody on the same level is to identify that with enterprise value, which is in fact how it has been applied in a number of major cases in the past.
2422 MR. KING: Could I add to that, Peter?
2423 It seems to me also that that is a clearer way of dealing with the issue than dealing with the amount of debt, which doesn't necessarily affect the value of the enterprise, it is simply what is the history of the enterprise before the time of the sale.
2424 Therefore, you would have a very fluctuating number with which to measure benefits which would be, it seems to me, therefore, possibly unfair from one party to another.
2425 For example, Alliance Atlantis paid a benefit of the value of the enterprise. In this situation one is taking account of the debt, in another it might be another thing, so that it seems to us that it's a muddy place and it would be beneficial to have clarity and that the value of the enterprise is the clearest way of doing it.
2426 COMMISSIONER NOËL: Now let's go to the change of name or proposed change of name.
2427 Your position is quite different from your predecessors at this Tribunal. Why do you think we should get into that operation of change of name and move from our regular position, which is not to intervene?
2428 MR. KING: I guess in a sense speaking personally, and assuming I speak also on behalf of my membership, as a country of enterprises we have a tendency to move toward a world in which by enterprise we are Corporation X (Canada), Corporation Y (Canada), Corporation Z (Canada).
2429 I have four children. My youngest is 12. He is at a point where he is very keen about his Canadianness, about being a Canadian. He is deeply distressed watching the migration of hockey clubs to the south. It's muddy for him what is it.
2430 I think I can remember as a child to discover that Kellogg's was an American company not a Canadian company was disturbing.
2431 What I'm saying really, in a long, rambling, personal way, is that we have a very successful enterprise built up here called TSN with a name that everybody in Canada knows. To change it to ESPN (Canada) for no particularly good reason when ESPN is only 15 per cent of the broadcast, is giving away a part of our identity, a part of our tradition, and doesn't seem to make sense. It is part of a pattern which I think is unfortunate.
2432 COMMISSIONER NOËL: Thank you.
2433 THE CHAIRPERSON: Commissioner McKendry.
2434 COMMISSIONER McKENDRY: I just wanted to follow up on something Mr. Grant said with respect to the value of the transaction.
2435 I think you said we should have a clear rule with respect to the value of the transaction.
2436 I discussed this yesterday at some length with the CTV panel and I think the position that they put forward is that we do have a clear rule and the clear rule is that we don't look to the value of the transaction, we look to the purchase price.
2437 To support that view the panel indicated they have reviewed many, many transactions, since I think 1984, and we had consistently applied the view that it was the purchase price, not the value of the transaction. I think the panel went so far as to say that it would be unfair and inappropriate for us to now change.
2438 So I wonder if you could comment on the view that it would be unfair and inappropriate and, I suppose, if in fact it is a change?
2439 MR. GRANT: Well, Commissioner McKendry, it is true that some past decisions have referred to purchase price, but some other past decisions have focused on the value of the enterprise as being the appropriate words. The words in the policy are the value of the transaction, they are not the purchase price.
2440 If you look at the Alliance Atlantis merger, the Fundy case, and actually the old NetStar deal, when you examine it, they were based on the value of the enterprise, whatever else you want to say about it.
2441 So I think to say that the decisions are clear is quite wrong. They are equivocal at best.
2442 It is also fair to say that even in those cases where the words "purchase price" were used I don't see any showing that the debt issue was really raised by anyone. You know, it was certainly in those cases not raised by the Commission and not by any intervenors.
2443 So I can't see you reading those decisions as indicating that the Commission has actually addressed its minds to the particular issue we are now focused on because suddenly people I think have realized: Wait a second. How can the benefits here be so much lower than they were just a few years ago for an enterprise that has gone up in value? I mean, anybody on the street would realize there is something out of sync here.
2444 The Commission raised it in its deficiency letters. Now, if there had been a clear policy and the Commission had said it was purchase price, that never would have happened, and the Commission had identified it in the public notice.
2445 So I think you now have it raised in a way that should be resolved. It has been raised quite properly, and I think it is the first time other than the Fundy case where it has been raised quite specifically in a context where it should be addressed in a public hearing.
2446 You have, of course, had interventions on both sides so you will have an adequate public record to deal with the matter.
2447 It is an accounting matter. I mean, it's not often that accounting matters get raised at this level, but it is an important one because it will set the terms for a lot of subsequent applications that are down the road.
2448 The position of the Guild is that it is time now to clear the air and hopefully set the ground rules that it is in fact the transaction value that should be the test, has been the test in a number of cases and is now clarified to be the test.
2449 COMMISSIONER McKENDRY: Thank you very much.
2450 THE CHAIRPERSON: Commissioner Cram.
2451 COMMISSIONER CRAM: Thank you.
2452 The name change is what interests me. We heard yesterday that CTV would only proceed with the name change if they perceived it to be to their commercial advantage.
2453 Do you have any comment on that, Mr. King?
2454 MR. KING: Well, I would hope the commercial advantage is to retain the name and to retain the tradition. I think it's a valuable name and should stay there.
2455 It may be that there are commercial reasons to change. It doesn't seem to be the case. Certainly the people I talk to are very eager to watch TSN, much less interested in ESPN -- or rather less interested.
2456 The regard for TSN is very, very high with its viewership and to change the brand name on such a successful venture would seem commercially curious.
2457 COMMISSIONER CRAM: Secondly, and perhaps, Mr. Grant, you can answer this, if we agreed with you how do we stop it? It's a contractual obligation.
2458 MR. GRANT: I would have thought that it's not a matter where the Commission would need to weigh in with any kind of condition. It would simply be a statement in your decision on this that the Commission is concerned that not an adequate support has been given for the plans to change the name and that from the Commission's perspective, absent any other showing, it does not seem to it appropriate for a name change of this kind to occur and literally leave it at that.
2459 Now, in fairness to CTV they have not contractually committed themselves to changing the name. They do have an exit strategy and I think -- I mean, there is a strong commercial reason for them to change the name and that's the fact that they are faced with this problem, that if they don't change the name and ESPN does not waive its contractual requirement, then as I understand the arrangement ESPN does have the right to put its interest to CTV and be taken out.
2460 But it seems to me if the Commission gives a signal to CTV that they too are disturbed about this aspect of it that what's driving this change has nothing to do with the public interest, but simply an interest by the minority foreign owner at the time when they had an opportunity to play one potential applicant against the other. That should have no place in terms of your deliberations.
2461 And having just made that statement in the decision I would leave it at that.
2462 COMMISSIONER CRAM: Thank you.
2463 THE CHAIRPERSON: Mr. Grant, I gather that you agree with CTV or the applicant's panel that the rule with regard to the value of a transaction is not clear. They have reviewed many decision, many of which have nothing to do with debt, so you can't use them to decide whether it was the value of the transaction or of the enterprise.
2464 Some of which, however, I think you would have to agree are less clear as to the message given.
2465 Having said that, what would you propose we do right now? If we agree that it is not clear and it has to be clarified, you say you are not against this transaction. Are you supporting it with the amount of money proposed and, if not, what are we to do about this?
2466 MR. GRANT: Well, I think to complete the record, if you are disposed to agree with the guild's decision or the general thought that it should be the value of the enterprise --
2467 THE CHAIRPERSON: Well then it should be clarified was more my question.
2468 MR. GRANT: Yes. That's right.
2469 THE CHAIRPERSON: When and to whom?
2470 MR. GRANT: But I think that a specific question should be made to CTV during the reply phase if we, the Commission, make the determination that the value of the transaction is, in our view in this case, not what the purchase price is that you have suggested, but is rather your net interest in the enterprise value on the regulated side. And if we make that determination are you prepared to put additional benefits on the table of the same kind that you have addressed? They have not been pressed to take a position, but I think you owe it to the record to ask that question and reply.
2471 Then it is up to you really in the end to decide, which you are free to do, that it will be a condition of your approval that a supplementary benefits package be put forward. This is wholly within your control to deal with this transaction any way you see fit. This is a very important case for setting the direction for consolidations that will occur in the next few years.
2472 So to just sort of say, well, we have been unclear in the past. I mean, I agree with the CTV panel, some of the decision are equivocal and can be read either way. So it is important to be clear on this matter, but that's about all I can offer.
2473 THE CHAIRPERSON: Mr. Grant, of course, you may not want to answer this question, but you go to a very general section of the Act, section 3, to support your arguments and your position on the importance of the rebranding. Is the concentration ownership also a very broad concept, so that legitimizes my question. Of course, you are still free not to answer it.
2474 First, you say that the members of the guild, or of your client, are not directly concerned with sports programming or sports rights, and then that you don't oppose the concept of having CTV control TSN, RSD and Discovery and you re-emphasize that at the end you have no problem with this notion. Is it because your members are not directly concerned with sports programming or sports rights, or is it because you actually have no problem with concentration? In other words, is it because your members have no interest in this, so you are not going to take a position on it because it is also a very broad issue, as broad, and even less broad perhaps than the ESPN, the rebranding matter.
2475 MR. KING: As members and as the Directors Guild, no, we don't have an interest in that. As citizens we may, but I am not empowered to speak on behalf of my membership in their notions of citizenship or economics or those things in this issue because it wouldn't affect things that directly bear on the welfare of our membership.
2476 On the other hand, it is the case that that which will make Canadian broadcasters economically strong and viable is in our interests because it means that they are better able to engage in the kind of programming that we think is important and that speaks again there for our interest in the benefits package.
2477 THE CHAIRPERSON: And also to the concentration issue. To you it's balanced positively by the strengthening of a network that has some impact on your members?
2478 MR. KING: Yes.
2479 THE CHAIRPERSON: Thank you.
2480 Counsel.
2481 MR. BATSTONE: I just have one question and I expect that Mr. Grant may wish to answer this, but you mentioned in your presentation this morning that with the amendments that CTV filed you are now satisfied on the issue of control. I wanted to explore or perhaps get your opinion of the term "material change". Would you see it in the same light that CTV put it forward, that is a very fundamental change to the nature of the business of the overall enterprise, or how would you see that term defined?
2482 MR. GRANT: I agree with CTV's view on that.
2483 MR. BATSTONE: So that by saying a material change to a material part of its existing business, you see that that would have to be a very high level change?
2484 MR. GRANT: Like all lawyers, you have to point out that it depends on the facts and the circumstances, but I don't disagree with CTV's counsel on that question.
2485 MR. BATSTONE: Thank you.
2486 THE CHAIRPERSON: I have a further question. I know you pointed out this morning that if we don't clarify right now what the value of the transaction means in the sense that you would want it clarified or in the direction you would want it clarified that it would create incentives to restructure in order to avoid the 10 per cent.
2487 I know you pointed out it wasn't your major argument, but what is your comment on I think Mr. Fillingham's response to that, that the Commission would be empowered to look at that issue and see whether the restructuring was done to reach this objective, rather than for other reasons?
2488 MR. KING: It would seem to me that going down that road leads into a morass, that you might then find yourselves involved in micromanaging balance sheets. Our suggestion around this is simply that the debt and debt level can be a very confusing and that has a consideration with respect to benefits. That has a consideration as a way of looking at the value of the enterprise is a complicated and muddy one and may well lead you into micromanaging in the industry.
2489 MR. GRANT: I think it would be very difficult after the fact to assess what the real purpose of a restructuring was. There will be many purposes.
2490 You know, it is all fair to say, oh well, as long as the level of debt reflects a bona fide liability -- I am taking this from the SPTV intervention -- on the balance sheet and has not been manipulated in any way in order to lower the benefits payable. It sounds attractive, but the problem is in applying it in practice the debt will be a bona fide liability. There is no big issue about that. It is just a matter of putting it on and it's a charge on the assets and whether or not it was put for a particular purpose it will be bona fide, I mean that's not an issue.
2491 As to whether it was done in a manipulative way, there is a myriad of reasons to restructure that have a surface validity to them and there may be multiple reasons. For the Commission then to enter into that exercise and say, well, we are going to look at motivation, would be really a very difficult exercise for you.
2492 I don't know, frankly, how you would be able to assess the real motivation of a lot of these arrangements. It is so much simpler to simply take the general accountant's view, which is to add the equity and the debts together to get the value of the enterprise, and you are done.
2493 THE CHAIRPERSON: Mr. Grant, you know that in the past the Commission has adjourned a transaction, although the circumstances were not the same, until benefits were brought forward, in the Skyline case.
2494 Is that what you are suggesting here? Or are you just suggesting that we say to the applicant we are only going to approve this if you give benefits on the larger amount and get a commitment from them at the reply stage?
2495 What are you suggesting as a regulatory mechanism to achieve your goal?
2496 MR. GRANT: I would start with that, just address the issue at the reply stage. Then whether or not CTV makes that commitment, it is within your right to simply say in a decision that it is a conditional approval.
2497 THE CHAIRPERSON: And have them brought back with more benefits so that you can assess whether they are proper.
2498 MR. GRANT: Yes. There are precedents for that, apart from Skyline where the Commission has done that. I don't see any problem with that approach.
2499 What that then does is it sends a clear signal for everybody: These are the ground rules. This is now what the meaning of the words "the value of the transaction" is in the television field -- we will limit to this -- and then on we go.
2500 THE CHAIRPERSON: I gather from some of your comments that some of the underlying reasons for this, other than regularizing what you say is unclear and what the CTV panel admits is unclear -- but you have a different view as to which direction it should be clarified.
2501 One of the underlying reasons, by going back to the benefits that were paid before, is that this is not a package of benefits that is concomitant with the value of what is being purchased. That would be also an underlying philosophical reason besides the accounting argument.
2502 MR. GRANT: Yes. That goes really to the heart of the reason why you would set the 10 per cent policy in the first place.
2503 THE CHAIRPERSON: That is what we were to read from your comment about the level of benefits that were paid before, the level that is paid now if you go to the question of whether it is a package of benefits that makes sense in the circumstances.
2504 MR. GRANT: Yes.
2505 THE CHAIRPERSON: Thank you very much, gentlemen.
2506 MR. KING: Thank you very much. It was a pleasure.
2507 THE CHAIRPERSON: Madam Secretary.
2508 Mme SANTERRE: Merci, Madame la Présidente. Alors j'inviterais maintenant la Société-Radio Canada, the Canadian Broadcasting Corporation, à présenter leur intervention.
2509 THE CHAIRPERSON: Good morning, Madam and gentlemen. Proceed when you are ready.
--- Pause / Pause
INTERVENTION / INTERVENTION
2510 MR. McCOUBREY: Madam Chair, Members of the Commission, we are pleased to be here today to express our strong concerns about CTV's proposed acquisition of control of NetStar.
2511 My name is Jim McCoubrey, Executive Vice-President of the CBC. With me today are, to my right, Nancy Lee, Deputy Head of Sports, English Television; to my left, Michel Tremblay, Chief Planning Officer of the Corporation; and behind me, Daniel Henry, Senior Legal Counsel; and Michael Harris, Executive Director, Regulatory Policy, English Television.
2512 The CBC is by far the largest broadcaster of sports programming over the air on free television in Canada today. We believe that the acquisition of NetStar by CTV will result in a monopoly over sports programming in the Canadian marketplace. The new entity would control 95 per cent of the air time for English language Canadian sports programming.
2513 The merger should only be allowed to proceed if CTV is required to divest itself of one of its two major sports properties, TSN or Sportsnet.
2514 Further, we believe that to allow beneficial partnerships to continue between broadcasters and sports specialty channels, the divestiture should not be to an over-the-air broadcaster.
2515 We have three areas of concern in the proposed merger.
2516 First, it would give CTV undue market power and the general advantages of a competitive marketplace will be lost.
2517 Second, the merger will see more sporting events siphoned from free television to discretionary and pay-per-view services.
2518 Third, we are concerned about the extraordinary control that the minority shareholder ESPN may exert over the operations of the merged entity, coupled with the presence of Fox in a significant ownership position. We are concerned about Canadian control and we are concerned that the merger will encourage the development of a North American sports rights marketplace.
2519 CBC has always been Canada's leader in sports coverage. Our sports department has created Hockey Night in Canada, la Soirée du Hockey, and racked up impressive accomplishments as host broadcaster at domestic and international competitions, including the Olympics.
2520 We have broad exposure that has helped Canadian amateur and professional sports organizations survive and prosper. Canadians depend on CBC's sports coverage.
2521 As you heard at our renewal, our professional sports programming brings large audiences to CBC. It essentially pays for itself and allows us to mount amateur sports coverage and permits us to channel our full parliamentary appropriation to drama, children's programming performance, and news and current affairs.
2522 This proposed merger jeopardizes our future in sports and all the benefits that flow to Canadian audiences from it.
2523 Nancy.
2524 MS LEE: CTV says that CBC will continue to bid aggressively for sports properties after the takeover is approved, and that is true. We will bid aggressively, but all too often unsuccessfully.
2525 CTV says a specialty service cannot compete against a broadcaster for rights. That is not true. CTV says that a competitive environment will continue after the creation of its monopoly. It is hard to accept their analysis in the face of the facts.
2526 Recent history provides clear evidence of the weakness of CTV's argument. Last year CBC was outbid by TSN for the CFL and for Formula One Car Racing, and by Sportsnet for International Snowboarding.
2527 CBC was able to stay in CFL coverage only through a subsequent deal with a still independent TSN.
2528 Since Sportsnet came into the picture as part of CTV two years ago, CBC has only been able to restore balance in the sports marketplace by working together with TSN to obtain and exploit sports rights. It was CBC's co-operative arrangement with TSN that permitted CBC to match the combined CTV Sportsnet/Outdoor Life Olympic bid.
2529 CTV has repeatedly said that the rights-holders have all the power. But that is not true.
2530 In hockey, for example, CTV NetStar can offer to take all the content the league can provide for a single overall price, whether it puts all the playoffs on conventional television or not. CBC can only take a fraction of the NHL schedule.
2531 CBC's bid to the NHL might be three times higher per game because of the higher value of conventional over-the-air coverage, but CBC could still lose the NHL rights. CTV could offer to carry hundreds more games and arrange its network specialty and local station schedules to maximize its value for all the games combined.
2532 Because the specialty channel piece of the puzzle is so massive, the NHL would have no other recourse but to sell the rights to the CTV NetStar monopoly even if CTV was only prepared to show the Stanley Cup semi finals and finals on free television and relegate the rest of the playoffs to its specialty channels.
2533 Realistically, CBC or other over-the-air broadcasters cannot bid against that conglomerate, particularly with no specialty partner. If the CTV NetStar monopoly wants hockey, it will get it -- or football, or baseball, or the Olympics.
2534 The broadcaster who can bring 95 per cent of the available scheduled time to the table will have an unbeatable advantage in competition for rights. In the future, if the merger is allowed to proceed, we will have a partner only when CTV allows it.
2535 MR. McCOUBREY: CBC is now a prime source of high profile and high quality amateur sports coverage on free television.
2536 If CBC is only permitted to pick up events that the CTV/NetStar sports monopoly doesn't want, CBC may well lose its ability to deliver this coverage.
2537 As the Commission knows, CBC sports management and production infrastructure is subsidized by our professional sports coverage. It is that infrastructure that allows us to excel in coverage of amateur sports such as track and field, swimming, diving and canoeing. Without that infrastructure our amateur sports coverage is jeopardized.
2538 We are concerned about the sports communities and we are particularly concerned about sports viewers. A significant portion of Canadian audiences will either be deprived of or forced to pay for programming they now enjoy on free television.
2539 CTV has made it clear that it plans to reduce its sports programming on its over-the-air television service. That means that when CBC can no longer acquire the rights to a sports property it may well end up on one of CTV's sports specialty services, resulting in a net loss of sports coverage for the over-the-air television viewers.
2540 Seven and a half million Canadians, 23 per cent of the population, do not have cable or satellite services. Those Canadians will simply be deprived of popular sports programming now available on free television because a monopoly controls the pipeline and is syphoning the properties to pay tiers.
2541 Syphoning is no longer speculation. It is already a reality. Recently, TSN outbid CBC for the rights to the Canada games. CBC then offered to co-operate with TSN in the coverage and to sell it jointly so that the revenue would be fairly shared. TSN refused. The result, TSN's audience averaged only 49,000 viewers for events which drew for CBC in previous years over 300,000 viewers.
2542 A second recent example is coverage of Canada's premier thoroughbred and harness racing events. CTV and Sportsnet acquired rights to four key races, all of which used to be on the CBC. Now three of the four are only available on a specialty service and reach smaller audiences. The difference is significant. The average audience of these events on CBC was 400,000. On Sportsnet this past year it was 20,000.
2543 Nevertheless, in today's competitive environment, CBC can co-operate with TSN and avoid syphoning. This summer we mounted joint coverage of the Pan-Am games. CBC averaged over 600,000 viewers and TSN averaged 166,000. Importantly, a full 46 per cent of CBC's audience, almost half, came from viewers without cable. This large additional audience would have seen little or nothing of the Pan-American games if the coverage had been completely syphoned to a specialty channel.
2544 We share the concern of Global, Major League Baseball and other intervenors about the unusual degree of control exercised by ESPN as a minority shareholder. We are also concerned that through allowing one Canadian monopoly to house both ESPN and Fox in significant ownership positions the Canadian sports rights market would be undermined. Increasingly, Canadian rights would be packaged on a North American basis through and for the American mega corporations.
2545 Should the Commission decide to approve this transaction, it should direct CTV to divest itself of either TSN or Sportsnet. In our view, to maintain balance in the system and to permit other partnerships, the divested property should not go to a conventional broadcaster. It will be important for the specialty service to be independently viable, with the ability and resources to compete effectively in the national sports rights arena.
2546 The CRTC acted wisely when it decided to grant CTV a sports specialty licence. We are reminded of what CTV said at the time in support of its application for a competitive service. Its proposal, CTV said, would:
"...ensure a second, strong, diversified, nationally and internationally competitive sports programming entity to provide Canadians with a choice of high quality Canadian sports programming." (As read)
2547 To allow CTV now to own both TSN and Sportsnet would be to undo many of the positive benefits that have accrued since the competitive Sportsnet licence was granted.
2548 In a transfer application, the onus is on the applicants to demonstrate that approval will be in the interest of the public, the communities served by the licences, including listeners, viewers and cable television subscribers and the Canadian television system. In this case, the negative structural impact on the system as a whole, on sports communities and on Canadian viewers in general far outweigh any conceivable benefits package.
2549 Thank you.
2550 THE CHAIRPERSON: Thank you, Mr. McCoubrey.
2551 I'm not sure I quite understand your position with regard to the problems that would flow to CBC in particular from an approval and the remedy that you are offering, so I would like you to explain this to me better.
2552 If I understand from your comments and also from what has been the material filed before us, you have had -- the sports rights are sold usually in a fashion that includes an over-the-air broadcaster and a national reach specialty service, which in this case is TSN. That is the optimal package.
2553 MR. McCOUBREY: Well, I think, Madam Chair, the point they were trying to make is that the CBC cannot air all the product that is available and in the past and successfully we have enjoyed a partnership with TSN to make that possible. Now that that partner is being acquired by our competitor and that competitor has in no way had discussions with us to indicate that the partnership we have enjoyed with TSN could continue, we presume that it won't. Therefore, frankly, we won't be able, because we have no shelf space for it, to air sports properties because we will be bidding for those sports properties in competition with someone who has and who will win.
2554 Essentially, it means that, as we have tried to indicate, the reason why we are in opposition is that it would clearly end our ability to be a sports broadcaster. That is why we have recommended that, if this transaction goes forward, one of the two sports networks be divested and that it not be sold to an over-the-air broadcaster so that we might enjoy a continuing partnership with that sports broadcaster.
2555 THE CHAIRPERSON: When you speak of an over-the-air broadcaster, I assume you mean one with coverage that goes beyond an independent market.
2556 MR. McCOUBREY: Frankly, the request that it not be sold to an over-the-air broadcaster in a way could be determined to be a selfish request on our part. We would like to do business with a sports specialty broadcaster. We are presuming that if it was owned by someone who competes in the marketplace for a share of audience and advertising with us that they would not permit that to happen.
2557 Therefore, we think that all over-the-air broadcasters should be able to benefit from whichever service CTV is forced to divest being available to them not just to us but to the other over-the-air broadcasters also.
2558 THE CHAIRPERSON: Then your position is that a CTV/TSN connection, ownership connection, is detrimental to your interests?
2559 MR. McCOUBREY: Our position is that CTV, through ownership of both sports specialty networks, would be in a monopoly position and, yes, that would be detrimental to our interests.
2560 In a perfect world, we would prefer that TSN be the one that they were forced to sell and continue its relationship with us and with other people. But I don't think that NetStar was purchased so that they would then have to sell TSN, so I'm --
2561 THE CHAIRPERSON: That is the reason for my puzzlement is the remedy that you propose could end up with CTV and TSN being commonly owned. I'm wondering to what extent that mechanism, considering the position of 60 per cent in Sportsnet, et cetera -- I know that you wouldn't want it sold to an over-the-air broadcaster but you would still end up with this mechanism of the Commission choosing which -- you know, of answering your concerns by requiring the divesture of Sportsnet would still leave you with a combination CTV/TSN, and I'm wondering, considering, I repeat, the material that has been filed before us, the manner in which rights are sold, whether I'm wrong in coming to the conclusion that this choice may or may not resolve the problem that you posit.
2562 MR. McCOUBREY: Well, there is no perfect solution to the problem that we face, Madam Chair, but I think what we are looking for is an opportunity to use our creativity and ingenuity to find a way to continue in the sports business.
2563 At the moment, under the existing licensed applicants -- or existing licences in Canada, if this transaction is approved and both TSN and Sportsnet become the property of CTV we don't see how that would be possible.
2564 THE CHAIRPERSON: On the other hand, I can conclude even though it would not be a perfect solution that if CTV owns TSN but not Sportsnet you would still be able to deal with TSN in the manner you have dealt with them in the past?
2565 MR. McCOUBREY: If I understood your question correctly, if CTV owned TSN but not Sportsnet would our relationship with TSN be permitted to continue as it has the past. I doubt that that is how CTV would handle it, but --
2566 THE CHAIRPERSON: The reason I am asking is because you say: We have no problem with you approving this if you require the divestiture of one or the other.
2567 So let's say we require the divestiture of Sportsnet, we end up with a CTV/TSN connection. If they stay with their mandate there is more limited possibility for Sportsnet to reach a national audience, and you say: Well, their 60 per cent shouldn't be sold to an over-the-air broadcaster but we don't really know who -- you don't know who it would be sold to or approved, so in the end you would be left the next Monday morning with CTV/TSN as a competitor.
2568 I'm asking you whether that -- you know, how partial a solution is that to your problem?
2569 MR. McCOUBREY: Well, that would be a partial solution to our problem. I think that we would certainly prefer there be a national sports specialty service with whom we could work.
2570 I would like to turn this -- because you are asking a question that I have obviously not answered satisfactorily, I would like to ask Michel to assist me.
2571 MR. TREMBLAY: Well, obviously the --
2572 THE CHAIRPERSON: I don't want to press you unduly. You are just before us suggesting solutions to a problem that you perceive and you are the best party to explain to us how you deal with sports rights at the moment and to what extent as a broadcaster you will be harmed by an approval.
2573 I'm asking you how helped will you be by one of the correctives that you propose to us.
2574 MR. McCOUBREY: Well, in a perfect world, were TSN forced to be back in independent hands, that would suit us very well.
2575 In an imperfect world, but nevertheless a --
2576 THE CHAIRPERSON: At the moment.
2577 MR. McCOUBREY: -- a better world --
2578 THE CHAIRPERSON: It's in the trustees hands.
2579 MR. McCOUBREY: -- a better world than what is contemplated in the transaction, if Sportsnet were available to us as a potential partner on things, that wouldn't make our lives easier but we might live with that.
2580 I think you are hearing shortly, as well, an application by Headline Sports and were their application received favourable that would suit us well also.
2581 THE CHAIRPERSON: In your written submission or intervention at paragraph 22 you talk about the control of NetStar. I assume here you are talking about if the whole proposal as it is framed was approved by us, that CTV would control -- it would mean an effective end to any competition at all, because one player would have -- I'm looking at paragraph 22 -- "disproportionate market power" and other broadcasters could get rights only to those properties CTV didn't want.
2582 MR. McCOUBREY: Well, I think in that paragraph, Madam, what we are saying is that in the business interests of CTV they could acquire, through the combination of the two sports networks that they would then own and their over-the-air network, they could combine an attractive package, both to themselves and to any sports rightsholder, that would make anyone who was obliged to go simply with their over-the-air licence unattractive to that sports rights holder and, therefore, any property that CTV wanted it would get and that ourselves, as a for instance, would be left with only those properties that CTV chose not to air.
2583 THE CHAIRPERSON: Someone from CBC I think has been here throughout so you have heard the panel, the CTV panel suggest that they would decrease the amount of sports programming on the network itself. They talked about a gradual decrease. There were no specific commitments made that I recall.
2584 But would that not be helpful or place you in a better position?
2585 MR. McCOUBREY: Well, I think if that were a condition of licence that they were not permitted to air any sports events at all on CTV, yes, that would help us.
2586 THE CHAIRPERSON: "Any" is a lot.
2587 MR. McCOUBREY: Well, it's -- I think in that --
2588 THE CHAIRPERSON: But I think the spirit of your answer is yes, to the extent --
2589 MR. McCOUBREY: An absolute is easier to decide on than something which can be twisted, turned and eventually end up back before the Commission for a ruling.
2590 THE CHAIRPERSON: Yes. In case I was confusing you with my questions before, now that I am looking at this paragraph 22, I see in paragraph 20 a sentence that brought me to ask the questions about whether the divestiture of Sportsnet would solve your problem.
2591 In the middle of paragraph 20 there is a sentence that says:
"Without the ability to bring a specialty channel partner a network..." (As read)
I assume an over-the-air network:
"... will almost surely be shut out of major rights acquisition in the future." (As read)
2592 I took that to mean that it is the national coverage partner that is crucial.
2593 Mr. Harris is shaking his head.
2594 MR. McCOUBREY: I would like to ask Nancy Lee to start the answer. If Mr. Harris wants to jump in --
2595 THE CHAIRPERSON: I don't want to revisit completely, I'm just trying to explain what my question was, that the corrective is either one or the other, but the crucial one appears to be the national specialty service, that it be some -- that it not be connected to a network.
2596 MS LEE: On CBC we only air event programming nationally on the network. We don't pick up local hockey rights on the CBC stations across the country.
2597 So yes, in fact what you are saying is our interest is in a cable partner who has national rights to that particular sport.
2598 MR. HARRIS: My addition was going to be that we believe that there is enough flexibility in the Sportsnet licence to allow us to at least be at the table.
2599 Although it would be more difficult than it would be with TSN, we think that the Sportsnet licence is flexible enough to allow us to --
2600 THE CHAIRPERSON: That's helpful. So by "flexibility" you mean their ability to have programming to a certain percentage present on all four feeds without -- and that would be within definition of licence.
2601 So that's helpful. Thank you.
2602 You are the Michael we were teasing so much before. I'm glad you are here, Michael.
2603 MR. HARRIS: I hope you are not starting again.
--- Laughter / Rires
2604 THE CHAIRPERSON: Something familiar to help us through this.
2605 In your intervention you talk about the pressure of competition between all players that has been brought by a new specialty sports service has had upward pressure on the cost.
2606 Is it your belief that these costs would be affected if this proposal were approved, that there would be a comparable downward pressure on costs of sports programming?
2607 MS LEE: I would just phrase it back in terms of what we have seen over the last two years. There is no question in the major sports properties, as well as the amateur properties, is that there is more money on the table.
2608 CFL is a very good example in terms of we certainly paid more, and you would have to ask the others their thoughts, but I know the CFL is coming up afterwards. And the timing for the renegotiation for both the cable rights and the over-the-air for the CFL, I would suggest it was very good timing for the league.
2609 So I would say that competition increase certainly offered in some cases to amateur sports some money on the table, certainly exposure for the amateur sports, and I would think it is our point that the costs could come down.
2610 I think there are other issues involved in it in terms of exposure is a huge issue, volume of hours and essentially where we sit as well in terms of our hearing in June and the results of that.
2611 MR. McCOUBREY: If I might add to what Nancy Lee has said.
2612 Clearly if we are doing fewer professional sports we will then not have the infrastructure to do amateur sports, therefore we will no longer be bidding on those amateur sports. Therefore, I am presuming with us not in that equation any further, I would imagine it would be insane of the sole bidder to bid the price up.
2613 THE CHAIRPERSON: Would I read your view as saying that the cost of being up or down is only one aspect of the public interest here, that an increase in the cost need not necessarily have a bearing, negative or positive, on the public interest as much as the ability to compete, to lead to diversity and more imagination in the way that sports programming is put forward in the broadcasting system?
2614 MR. McCOUBREY: Well, if I understood your question correctly, you are directionally correct, but I think the point that we would like to make is if those amateur events were no longer on over the air television, that means that their audiences would be insignificant compared to what they were. I think all Canadians would lose something and certainly amateur athletes would lose a lot.
2615 THE CHAIRPERSON: In your written intervention you address I gather the argument of CTV that if we approve this proposal, one of the intangible benefits will be that they will exploit their licences as complementary services exactly in the manner that was intended with great vigour and no desire to go outside of what their service is supposed to be.
2616 You state in that paragraph that the logic ensuring separate ownership is the best way to achieve this goal. Could you elaborate on why the complementarity can't also or just as well be achieved by having two properties that are supposed to be complementary under the same ownership?
2617 MR. McCOUBREY: If I may ask for your assistance here, I'm not certain that I understand what part of our intervention you are referring to.
2618 THE CHAIRPERSON: I was looking at paragraph 24. CTV makes the point that the complementarity between TSN and Sportsnet, which has led to some discussion before, will be best assured by having them under common ownership.
2619 In paragraph 24 you say that the best logic to apply to that is to have separate ownership. Why is the logic that if it's under common ownership it will be in the financial interest of the owner to have complementary services to reach the most audience possible?
2620 MS LEE: I am going to try and answer that question.
2621 THE CHAIRPERSON: Well, let me try to simplify. CTV says:
"One of the advantages of approving this proposal is that we will keep Sportsnet and TSN truly complementary. We will be less likely to diverge from the nature of these services as complementary -- " (As read)
The way it appears to have happened in some instances when they were owned by two different parties.
2622 You appear to say in 24 that that logic is faulty, that the best logic is to keep them under separate ownership, that that way they will remain complementary. I am asking you to expand on what's wrong with their logic.
2623 MR. McCOUBREY: I don't think that per se there is anything wrong with their logic. Rather, we were trying to make the point that their news service and our news service are complementary because we both do things that we believe we do better and that are intended to serve the audiences better.
2624 If we owned both or they owned both, I guess you would see a great deal of one network on the other one and ultimately over time the objective would be to reduce the cost, reduce the coverage. We think that by perpetuating the existing structure, you will arrive at a better complementary sports system than by permitting the two of them to be melded under one ownership searching for maximum profits. I guess that's the point.
2625 THE CHAIRPERSON: Thanks. Again, in paragraph 32, again in your intervention, you refer to the fact that Sportsnet has Fox programming and ESPN has -- NetStar has a supply of programming from ESPN. It has been mentioned many times without anybody disagreeing with this that it's about 15 per cent of the programming.
2626 You seem to find it worrisome that the ownership interest would lock up Canada for these two major players. Is that necessarily a problem?
2627 MR. McCOUBREY: I know you want to hear from our Michael, so we will ask him to answer that.
2628 MR. HARRIS: There's nothing really concrete we can say here. What we can say is that ESPN has paid $500 million for NHL rights for five years. We fear that in the future ESPN may pay $600 million for North American rights for the NHL and that their position in the CTV conglomerate makes that -- facilitates that process.
2629 We haven't seen a great market in North American rights so far, but we see this merger as facilitating it and not really protecting Canadians from it.
2630 MR. HENRY: If I could just add to that. I think that the CTV position is a bit contradictory in this respect. A number of times in their supplementary brief they make the point that North American rights are a big problem. As a result, they need to consolidate so they can stand up to that threat.
2631 At the same time we at CBC are supposed to face the combined might, if I may, Disney, ABC, ESPN, Fox, CTV/NetStar. It would be very simple for that combination to acquire North American rights.
2632 There is, if I may, another inherent contradiction which feeds this in terms of ESPN control. I note that in the legal materials that have been filed with the oral presentation they have amended their shareholder agreement so that ESPN would not influence indirectly or directly any programming decisions, but at the same time if you read their supplementary brief, they trumpet the fact that ESPN has 20 international networks, they serve 180 countries. It's wonderful to have a great partnership. We want to build the specialty portfolio together. They are going to be sitting at the same table together in the board of directors and we are expected to believe that they are not going to talk to each other about their common business.
2633 Those two thoughts don't, if I can use the word, merge. There is good reason to be concerned about the impact that that group can bring to the acquisition of Canadian sports rights.
2634 THE CHAIRPERSON: You were here this morning. You heard Mr. Bryden. I look at again your written intervention in the executive summary, page (i), second last paragraph from the bottom. You say that:
"With many Canadian franchises struggling for survival, their recent increased ability to attract fair market value for their television product has injected new life into Canadian hockey, baseball and football teams." (As read)
2635 How do you understand Mr. Bryden's position or reconcile it with this view? I take it you are against this proposal as framed and he was very much for. Perhaps we can put him under the rubric of a Canadian franchise struggling for survival. How do you reconcile those two?
2636 MS LEE: I will begin the response. I think it was confusing to us just in terms of what Mr. Bryden was saying. I'm not too sure if it was the same for you folks, but in the NHL rights are sold at two different levels. They are sold at a national level and a local level.
2637 The league sells national over the air, which we have a national cable which Sportsnet currently has. Then it's up to the local teams to sell the same over the air local and cable local.
2638 Mr. Bryden's request for greater exposure nationally is gained in two ways. They are on "Hockey Night in Canada" on Saturday nights and they are on the Sportsnet national package during the week.
2639 That's the only way that he can get national exposure. I was thinking that he was hoping to take his local package nationally. He doesn't have the right to do that through the league.
2640 From our perspective, the league, and he made some points about the league and sort of forcing how the teams get on the air. The league is very, very good to us because we want Canadian teams on the air. The league would like us to have more American. We say we don't want the American, we want the Canadian teams.
2641 In fact, the last two years the league has gone out of their way to give us more Ottawa games. This year we are putting on a dozen. Last year we had seven. So, we recognize the talents and where his team is at. We are giving it greater exposure.
2642 I think his point is in terms of the competition that he had or did not have when local rights -- he was selling his local rights. I am just not familiar enough with that situation, but he was pointing to Toronto in terms of like it or not, Toronto is a very valuable hockey rights to have, both on the national front and also locally, so there can be more competition over the teams that would attract a larger audience base depending on where they are at and where the audience is coming into the picture. Michael.
2643 MR. HARRIS: I think Nancy has answered well. The only thing I would like to add is that CBC has gone to enormous lengths in the past years to increase its exposure of Canadian franchises, first by adding the second game on Saturday night, allowing teams in the west to play games at eight o'clock and giving exposure at midnight here in eastern Canada or 10:30 or 11:00, but prime time exposure in the west.
2644 Plus, we mount frequently parallel coverage of Montreal games, Toronto games and Ottawa games that are different ones than shown nationally and in southern Ontario. So at CBC we have tried hard not to be Toronto/B.C. and we think that Ottawa has benefited from that and, in fact, the franchise, as he was saying, is a franchise that is teetering for a bunch of reasons, but not because it hasn't been supported on television.
2645 THE CHAIRPERSON: So the bottom line is you had difficulty understanding as well how approval of this total proposal would further his desire for greater exposure.
2646 MS LEE: It's simplistic on my part, but if he has got competition of two different television networks or stations that want his rights, the price is going to go up. If he only had one, the television broadcaster can name the price and off they go.
2647 THE CHAIRPERSON: Yes, except that I think we have discussed with a number of parties, rightly or wrongly, the fact that cost is one thing, exposure is another. They are not discrete, but one can be sometimes more valuable than the other -- in other words, greater exposure in the end may be of greater value.
2648 At paragraph 34 of your written brief you address a different problem, which is distribution and the ability to lever one's power through multiple ownership for distribution. You talk about having greater carriage clout and packaging power. Could you expand or give an example of -- expand on how this would be achieved if this proposal were approved as put forward?
2649 MR. HARRIS: I think the CCSA made the point earlier today that -- it's on, I am just speaking softly.
2650 THE CHAIRPERSON: Mr. Henry's is on as well.
2651 MR. HARRIS: That cable companies have to have a sports specialty channel. Currently, they pretty much have to have TSN.
2652 If in negotiations with TSN they have no right in the negotiations to say there is another sports specialty channel that we can take instead of you, that that puts very much power in the hands of the CTV group.
2653 Now, I am not concerned about -- who cares what I am concerned about?
2654 THE CHAIRPERSON: We do.
2655 MR. HARRIS: Rogers and Shaw are certainly big enough to take care of themselves, but the belief is that the power of this entity will put other broadcasters and other specialty services at a disadvantage in terms of placement packaging pricing and issues like that.
2656 THE CHAIRPERSON: I am going to show you how much we care about what you say by asking you, and you may not be too pleased with that, by asking you to expand at paragraph 50 you say that divestiture, we have been through that divestiture of one or the other services is a condition for -- you are against this proposal, but if there were divestiture it would be less worrisome for you, but you say at paragraph 50 that:
"...forcing divestiture of one of the sports specialty channels is a typical first step, but more must be done. At the end of the day, assuming that CTV divests itself of Sportsnet, the smaller and less profitable, additional measures will still be required to rebalance the system." (As read)
2657 So we would like to hear your suggestion on what these additional measures could be and that would be the second step to making this proposal acceptable.
2658 MR. TREMBLAY: In our view the divestiture of Sportsnet is a critical first step, but it will not serve in itself a purpose of rebalancing the sports rights' market in Canada. We believe that in due course the Commission should envisage a broadening of the operating parameters of Sportsnet so that it can really become a true, national competitor to TSN.
2659 As Jim has pointed out before, we would also view favourably a sort of loosening of the condition that applies to Headline Sports as well to really attempt to recreate a balance. This will not be happening overnight, but this is what we mean, it's a first step. Then we have to allow these players to grow into players who have the resources or equipped with the necessary licence to be competitive.
2660 THE CHAIRPERSON: So I gather then we discussed earlier complementarity that a solution would be to make them competitive, but under different ownership rather than complementary and attempting to keep them complementary.
2661 MR. TREMBLAY: And our view of that is they will compete on a range of fronts for professional sports, for amateur sport as well and they will compete across the spectrum of sports programming.
2662 THE CHAIRPERSON: Of course, these would be steps that would follow any decision on this because we don't have -- we wouldn't know who the new owner is or what his proposal or his desire would be, but that would be to you an end regime that would make sense by restoring the balance through separate ownership and equal ability to broadcast in the same manner?
2663 MR. TREMBLAY: That is correct.
2664 THE CHAIRPERSON: Thank you very much for participating.
2665 MR. BATSTONE: Sorry, Madame Wylie.
2666 THE CHAIRPERSON: Pardon, counsel.
2667 MR. BATSTONE: I apologize for that.
2668 THE CHAIRPERSON: I have to be careful.
2669 MR. BATSTONE: I wanted to ask you to clarify one thing that you mentioned in your presentation. You talked about the Canada Games and, specifically, I think you mentioned, and please correct me if I am wrong, that you were outbid for the rights by TSN. Is that right? So could you just explain that process to me? Was there an active bidding process for the rights to the Canada Games?
2670 MS LEE: It was prior to my time, but my understanding of sort of the history of it is that the Canada Games had been on the CBC for some time and at the particular year we were in discussion with Canada Games, saying here's the situation that we are at. We cannot offer you a bid on more than one games at a time, not a multi-game offer. This is the "x" amount of time that we have on the schedule. We do an hour in prime time on the schedule with added programming on the weekends and the third was a money issue.
2671 My understanding is that at the same time, at that period of time there was the change in ownership. Management of TSN was taken over and I believe it was put forward as a public benefit, that they would air the three upcoming games, which progressed, I am not exactly sure of the time line along that.
2672 Once the Games were awarded to TSN by the Canada Games Society, we wrote to TSN suggesting that we do the opening and closing ceremonies, as well as a weekend review program that would go on the two different weekends on either side and they didn't accept that offer. Does that sort of --
2673 MR. BATSTONE: That's sort of what I was getting at, so this would have been a negotiation that took place a few years ago, I take it?
2674 MS LEE: Yes.
2675 MR. BATSTONE: Just generally on that subject then, obviously, what you are saying this morning is that CBC had some desire to broadcast that programming.
2676 MS LEE: Yes.
2677 MR. BATSTONE: That's somewhat contrary to what CTV was saying yesterday. They were suggesting that there would be very little interest in broadcasting les Jeux de Québec and the Canada Games because of the amateur nature of it, the cost involved. Could you comment on that?
2678 MS LEE: We look at things a bit differently and we have different goals and different mandates. I think the estimation is correct in the sense of the viewership is not terrific. Therefore, there are not a lot of advertising dollars involved in it, but as the public broadcaster we believe that we should have it on the air. We just weren't able to offer the Games Society the volume of hours that TSN was able to offer and money probably as well. I am just not sure of the specifics on that.
2679 MR. BATSTONE: Thanks.
2680 THE CHAIRPERSON: Thank you again for your participation.
2681 We will hear one more intervenor and then we will adjourn for lunch and then resume with the Office of the Commissioner of Baseball and then continue with the agenda as published.
2682 Madam Secretary.
2683 Mme SANTERRE: Merci, Madame la Présidente.
2684 I would like now to invite the Canada Games Council/Conseil des jeux du Canada.
2685 THE CHAIRPERSON: Mr. Trask, good afternoon.
2686 Proceed when you are ready, Mr. MacAdam.
INTERVENTION / INTERVENTION
2687 MR. MacADAM: Merci, Madame la Présidente, Commissioners. My name is Lane MacAdam. I am the President and CEO of the Canada Games Council.
2688 Merci pour cette occasion pour vous adresser la parole quant aux propositions reliées aux programme des Jeux du Canada.
2689 I hope also to clarify certain issues that were just raised as a result of that last question.
2690 While the Commission has identified several issues in connection with this application, I will focus my remarks on those aspects related to the delivery of unequivocal tangible benefits and in particular those related to extension of coverage for the Canada Games.
2691 I hope to convince you, following these brief remarks, that when CRTC policy-makers invented the notion of unequivocal tangible benefits, they had programs like the Canada Games in mind.
2692 My proposition to you today is simple; that the TSN and RDS and connected Sportsnet relationship proposal to extend coverage of the 2003, 2005 and 2007 Canada Games is indeed in the public interest.
2693 The Canada Games celebrate youth and sport. They are the highest profile national multi sport competition for Canadian youth from every province and territory. The Canada Games strengthen sport development in Canada. They promote the benefits of sport, build partnerships, provide the opportunity for Canadians to learn more about themselves, each other and about Canadian culture and values.
2694 For prospective high performance athletes, the Games provide an opportunity to pursue excellence in sport while meeting Canadians from different regions and cultures.
2695 For sport, the Games offer an instrument for sport development and for building stronger links between national, provincial, territorial and community sport organizations and agencies.
2696 For communities that host the Canada Games, the Games provide a vehicle for community development, confidence and civic pride. Development of volunteers and facilities ensures a legacy of resources which will enhance the host community long after the closing ceremonies.
2697 The Canada Games are a source of pride for all Canadians. This partnership between communities, governments, national organizations and the corporate sector successfully advances public policy and societal expectations of Canadians while promoting Canadian unity and cultural understanding.
2698 The Canada Games Council, as the governing body, was incorporated as a non-profit organization in 1991. The Council is a partnership with federal, provincial and territorial governments, sports organizations and the corporate sector.
2699 As such, the Canada Games must ensure that its policies and procedures, and ultimately the delivery of the event itself, are in the public interest.
2700 The proposal by CTV and NetStar to continue its commitment to Canada's largest ongoing amateur sport event is also in the public interest. This convergence of the public interest, in our opinion, provides unequivocal tangible benefits as defined by the Commission.
2701 The Canada Games began as a Centennial project in 1967 à la ville de Québec. Since then, this event for Canada's up and coming athletes has been held every two years, alternating between winter and summer games.
2702 Every province has now hosted the games at least once. By 2009 every province will have hosted twice.
2703 Since the first games in 1967 there have been over 45,000 direct competitors in the games, with over 85,000 volunteers. Over $230 million has been invested in capital facilities and operating costs.
2704 The upcoming 2001 Canada Summer Games will see action in 16 sports, involving 4,200 athletes, coaches and managers; while the 3003 Canada Winter Games in Bathurst-Campbellton, New Brunswick, will include 21 sports and 3,300 athletes, coaches and managers.
2705 The Canada Games alumni include hundreds of Olympians and notable athletes, such as Gaétan Boucher, Greg Joy, Bob Gainey, Paul Criea(ph), Diane Jones Konahosky(ph), Marian Limport(ph), Lennox Lourd(ph), and fully one-third of Canada's National Olympic Team in Nagano, Japan.
2706 For others the Canada Games is their Olympics.
2707 The recent 1999 Canada Winter Games in Corner Brook, Newfoundland, was the smallest market ever to stage the games. With a total budget of $38 million, $27 million for new or upgraded facilities, the legacy of the games and the national exposure for western Newfoundland on TSN and RDS was immeasurable.
2708 In contrast, London, Ontario will be the largest market to host the Canada Games in the summer of 2001. With a total budget of $27 million, 100 employees, 7,000 volunteers, and an estimated economic impact of $42 million, the Canada Games is essentially a medium size Canadian business.
2709 Despite the success of the games, they will never become a profitable television property, given the age group of the athletes, the complexity and cost of broadcasting, essentially 16 to 21 national championships in one spot over a two-week period.
2710 Up until 1995 the Canada Games were provided between 16 and 18 hours of coverage over a two-week period on a national public broadcaster, less on the French service. Coverage included ceremonies and daily highlights, with no live events.
2711 After the 1995 Games, the Canada Games Council determined that it needed to focus on the future and secure increased TV coverage, secure a long-term broadcast commitment and integrate television into its sponsorship strategy.
2712 I note with interest the vocabulary used by both CTV and CBC may have been somewhat overstated. On the one hand, yesterday CTV indicated that the CBC abandoned the Canada Games. Moments ago there was a reference to the fact that TSN outbid CBC.
2713 I can assure you that there was no bidding involved. I wish it was that simple. There was no exchange of rights and fees for the coverage of the Canada Games.
2714 Ultimately, for the Canada Games, about the same time, 1995, NetStar was seeking Commission approval for ownership transfer from Labatts. As part of the public benefit NetStar was prepared to (1) cover the next three Canada Games and (2) provide a minimum of 84 hours on TSN and RDS, including live events coverage, features and highlights.
2715 Finally, at the end of the day it was our decision.
2716 After two games under our belts, how are we doing? The 1997 and 1999 Canada Games on TSN and RDS were provided 53 and 54 hours of coverage, respectively, on French and English. This tripled the traditional English volume of coverage and it was six times more than the traditional French package.
2717 There was significant pre-promotion of those two events, integrated sponsorship sales, and planning is currently in progress for the 2001 games in London as we speak.
2718 Other benefits, over and above the public benefit, have included athlete training videos in French and English, one-year countdown special features, production of promotional videos, production of PSAs and athlete profiles.
2719 TSN and RDS have in effect become important partners in the planning and execution of the Canada Games.
2720 What has the impact been after two games? There are several: greater overall awareness of the games; a stable TV platform; enhanced sponsorship potential; live sports coverage; and equitable French and English coverage.
2721 The new CTV NetStar proposal offers continuity in broadcast coverage of the Canada Games; expanded coverage to amount to 125 hours; the opportunity for regional penetration on Sportsnet, to the tune of 20 to 30 hours; and continued collaboration on sponsorship sales.
2722 The new CTV NetStar proposal offers the Canada Games therefore the opportunity to promote amateur sport and healthy lifestyles, the opportunity to promote diversity of Canada, the opportunity to promote smaller regions of Canada, and the opportunity to motivate athletes to achieve excellence.
2723 On a broader scale, the new CTV NetStar proposal offers greater coverage of amateur sports events, increased documentaries and promotional vignettes, coverage of les Jeux du Québec, financial support for facilities upgrades in small communities.
2724 These proposals would not otherwise be available to promote amateur sport.
2725 In closing, you may ask why this is important.
2726 The Canada Games has significant national public interest, as evidenced by the letters of support from coast to coast to coast.
2727 Secondly, television provides a power promotional vehicle to promote sport development.
2728 In conclusion, TSN and RDS' proposal to extend coverage of the 2003, 2005 and 2007 Canada Games is indeed in the public interest, as is TSN and RDS SportsNet's proposal to invest in Canadian amateur sport.
2729 For these reasons, we support this application. Merci pour votre attention.
2730 I would be happy to take your questions.
2731 THE CHAIRPERSON: Thank you, Mr. MacAdam.
2732 Commissioner McKendry.
2733 COMMISSIONER McKENDRY: Thank you, Madam Chair.
2734 Could you elaborate for me what you see happening as a result of the application that is not happening now.
2735 You, I think, captured quite well for us the success you are experiencing and the positive aspects of the carriage that you experienced over recent times. It sounds like a very positive experience from your point of view.
2736 What is it that is wrong with the situation that causes you to believe that the application that is in front of us, if it was approved, would enhance what is happening today, from your perspective?
2737 MR. MacADAM: Well, I guess it is not a question of what is wrong; it is a question of what opportunities are there to grow that experience.
2738 Certainly the proposal envisages an increase in the coverage to 125 hours, which would be a 25 per cent increase in the coverage. Certainly we have enough events to provide the programming. That is never the question. We have 12 days of competition running 10 to 12 hours a day. So it is not a lack of programming.
2739 Certainly the long-term commitment is important to us, to the extent that that first public benefit is coming to its end after the 2001 Canada Summer Games in London. To the extent that there would be a commitment to provide a broadcast platform for the next three games is very important for us.
2740 Certainly to the extent that Sportsnet would provide the opportunity for a regional appeal is quite significant.
2741 You may have a situation where TSN would cover the finals in a given sport on a Friday night at the games and a semi-final game happening an hour prior may be picked up between two Maritime provinces, for instance.
2742 So that opportunity for that regional appeal is significant.
2743 I think the other aspect that is not necessarily listed in the public benefit, that we see as a potential opportunity, are the lead-up activities that lead to the actual Canada Games finals in the regions of the country. We see some potential, perhaps, to have Sportsnet extend a leverage there in association with the games finals themselves in some of the lead-up activities in the various regions of the country.
2744 COMMISSIONER McKENDRY: And you are convinced that these things wouldn't happen if the application wasn't approved. It would be your view that the things you have described to us aren't within the mandate of Sportsnet or TSN to do in any event.
2745 MR. MacADAM: On their own?
2746 COMMISSIONER McKENDRY: Yes.
2747 MR. MacADAM: I mean, at this juncture, I think it is safe to say that it is not as if there are all kinds of competition to secure the right to broadcast the Canada games. It is not profitable programming.
2748 It is a large, complex broadcast to cover given the number of events in sports and given the nature of the product. It is not as if there is a great advertising potential there. Obviously, we are trying to close that gap, but certainly I think CBC and TSN will tell you that it is not profitable programming for them.
2749 COMMISSIONER McKENDRY: Just on this point about the profitability of the games, you alluded to the awarding of the rights for the Canada games and some statements by CTV and some statements by CTV in your oral comments. Can you just go back to that for a moment and explain the situation for us and clarify that for us.
2750 MR. MacADAM: Following the games in 1995, we felt that it was important for us to stabilize our broadcast platform to the extent that we could grow the Canada Games to the extent that public resources for the operating and capital support of the games were, you know, levelling off or declining and we needed to be more aggressive in how we were able to sell the games.
2751 One of the important aspects of that was to ensure that we had a broadcast platform built in early enough to cover a long enough commitment. So at that time we went to the CBC and described, I guess, our vision of how we might continue the relationship. At that same time, CBC, I believe, was going through its mandate review and I guess decisions were difficult to the extent that they could make commitments beyond that.
2752 Fortunately for us, the Commission was also hearing applications for the transfer. At that point there was interest expressed by TSN to look at taking the Canada Games under its wing, looking at a long-term commitment, looking at significantly increased hours of coverage. So we were faced with a situation where there was no bidding war -- I mean, I wish that were the case. The fact is I think the description of "abandonment" and "outbidding" are probably a bit overstated.
2753 But, ultimately, we made the decision -- faced with a traditional package of highlights, an hour a day, versus a commitment that a cable package would look at a longer term commitment, significantly increased hours, we decided that that would be in our longer term best interests, and that ultimately is the decision that we made.
2754 COMMISSIONER McKENDRY: You say there was no bidding war, but there was two offers presumably.
2755 MR. MacADAM: Yes. That would be correct. I mean, there was no dollars exchanged, there are no rates fees associated with either of the networks' coverage of the Canada Games in the past and not likely to ever be in the future.
2756 COMMISSIONER McKENDRY: If I recall the CBC's presentation correctly, I think a point they made was that they were in a position to offer a much wider audience in terms of number of viewers than you would obtain on cable. To what extent is that a factor from your point of view?
2757 Presumably you are trying to promote amateur sport. How do you trade off a number of viewers against cash-in-hand, so to speak?
2758 MR. MacADAM: Sure.
2759 I guess certainly it is a factor. It is not the sole factor in determining the decision that we made.
2760 Ultimately, we looked at the penetration of cable in households, we looked at the potential reach, we looked at the potential to prepromote the games, we looked at the potential to add other feature programming around the games and leverage the property, and we came to a conclusion that, all things being equal, it wasn't simply a matter of eyeballs. It had other features in it. Plus, more importantly, the long-term commitment that TSN was prepared to make over a three-game cycle in addition to the equivalent French language coverage which we have never had, that parity in terms of Canada Games coverage in the past.
2761 COMMISSIONER McKENDRY: Do you sense or do you do any research to assess whether or not interest from a viewer perspective in amateur sport is growing in Canada?
2762 MR. MacADAM: We do some research. We do some omnibus tracking of the game's awareness. We do some research during the game's event itself in terms of issues like ticket pricing, these kinds of things.
2763 My sense is, you know, stepping back from the Canada Games program itself, that there is a strong appetite for supporting amateur sport in this country. I think, notwithstanding the media focus on the Parliamentary hearings on the Mills Committee, I think if you read carefully the report you will recognize that the lion's share of the recommendations in the report deal with the amateur side of the equation. Obviously, professional sport is an important component of that, but there is no question that supporting and reinvesting in amateur sport is a significant public policy benefit.
2764 I think the Mills Report, for the first time, also looked at the amateur sport side of the equation from a different perspective, and that is the economic impact perspective. We have always talked about the health and the unity and the promotion of Canadian values, but never before has there been an exhaustive look at the economic impact of amateur sport, and the Mills Committee was able to do that.
2765 So I would say I would hope that, after several years of downsizing from public support for amateur sport, we have seen the end of that. There has been, I think, a renewed appetite to support amateur sport, both from a public investment as well as a private sponsorship standpoint, and certainly the broadcasters, as evidenced in the discussion here, have indicated an appetite and Canadians want to see and hear and touch and feel amateur sport.
2766 COMMISSIONER McKENDRY: If we don't approve CTV's application, is it your view that your coverage is at risk or is it the extent and nature of the coverage that is at risk?
2767 MR. MacADAM: I guess, you know, not being as familiar with the conditions of licence and so on, my understanding is that the public benefits related to the TSN licence perhaps would remain.
2768 From that standpoint, I suppose we can't lose, but what we would lose obviously is the opportunity to extend the regional appeal of the games, either during the games themselves or in a lot of the lead-up activity that happens around selecting teams and running selection events for Canada Games.
2769 A Canada Games athlete will go through probably a two-year period before they actually step on the field at the competition themselves. So there is a significant amount of activity that goes around identifying, selecting, coaching, training athletes before they get to the Canada Games. We think there are some great stories there and those are great stories to be told on a regional basis as well as on a national basis.
2770 COMMISSIONER McKENDRY: Thanks very much.
2771 Those are my questions, Madam Chair.
2772 THE CHAIRPERSON: Thank you very much, Mr. MacAdam.
2773 We will now adjourn until 2:00. Nous reprendrons à 2 heures.
--- Recess at 1236 / Suspension à 1236
--- Upon resuming at 1403 / Reprise à 1403
2774 THE CHAIRPERSON: Madam Secretary.
2775 MS SANTERRE: Thank you, Madam Chair.
2776 Now we would like to introduce Mr. Beeston from the Office of Commissioner of Baseball who will be making his presentation. Thank you.
2777 Mr. Beeston.
INTERVENTION / INTERVENTION
2778 MR. BEESTON: Madam Chairman, Members of the Commission, I do trust that you can hear me.
2779 THE CHAIRPERSON: Yes we can, Mr. Beeston. Good afternoon.
2780 MR. BEESTON: Good afternoon.
2781 I appreciate that you have given me this opportunity and I apologize for not being there today. I appreciate that you made these special accommodations particularly because this is very important to me as I represent Major League Baseball, the 30 constituent clubs, including the two Canadian clubs, as a Canadian and as someone who has been in sports for a number of years.
2782 When I first heard about the decision of CTV to purchase NetStar, I must say that at that time I became quite concerned about this acquisition as the effect it would have not only on Major League Baseball but perhaps to all of sports in Canada in general.
2783 I have thought about the good and I have thought about the bad. I have thought of what I could do to advocate it and what may be wrong. Perhaps at the very end of the conclusion of it I came to the conclusion that it was very difficult for me to see where this would be good for sports.
2784 You have had an opportunity, I believe, to review our brief which we submitted to you, but I did think I might take the opportunity to elaborate on a couple of issue.
2785 First of all, in the last little while I have been involved, I guess for maybe five straight days up until yesterday, with a couple of hours sleep each night, in kind of a negotiation, one might say, with ESPN, a name that I'm sure we will be referring to today.
2786 But in that one of the things we were talking about, of course, was competition, and one of the things we all approved and liked was that competition was a good thing.
2787 What I look at when I see this, I see somewhat of a monopoly that will be created, a monopoly that I can't think is good for anybody in sports at the present time in Canada, and for a number of reasons.
2788 When I look at the monopoly and what it would do to the marketplace, I do see that there is going to be a restriction in that marketplace. I have been there, I have seen it, I have negotiated in what amounted to be a monopoly.
2789 More importantly, as we go forward into sports in Canada, and as someone who still lives in Canada on the weekends and considers myself a Canadian citizen, I do believe that when we look at what is going to happen we are going to find ourselves in a position where as CBC and CTV and the over-the-air networks get out of broadcasting of sports we get to the specialty channels.
2790 If it is brought to the conclusion that there is just one specialty channel that is controlled -- or two specialty channels that are controlled by one entity, I do believe that you are going to see a number of effects and dramatic effects. I think you will see a dramatic effect on rights fees, I think you would see a dramatic on what games may be on, I think you will see a dramatic effect on prices of tickets, I think you will see a dramatic effect on production, I think you will see a dramatic effect on the way that sports in general is going to be broadcast in Canada.
2791 Let me elaborate a little bit about that.
2792 We first negotiated a way back in 1996, at a time when Sportsnet was not available and we were dealing with TSN and TSN only. CTV, in their judgment, determined to get out of sports. At that point in time we were putting 140 games on television. Those 140 games were as a result of a decision made by CTV not to get into it, and I don't regret or dispute their right to do that because clearly it was -- they were making a programming decision there.
2793 The result was less games on television. We ended up with 110 games on television.
2794 We went back to TSN at that point and tried to work with them, tried to add some additional games, wanted to get the 140 games that we had had on really from 1991 right through until 1995. It was impossible. They didn't want to negotiate. They couldn't put the games on.
2795 I might add, at that time the rights fees came down too. The rights fees came down from $150,000 a game to $120,000 a game.
2796 We have a choice. It became a concern. We have a choice in what we were doing because we only one person that we could deal with, and that's fair. But at the very end of the day it would have been nice if NetStar had been there and they would have been able -- or NetStar, rather CTV had been there and we would be able to negotiate with them too.
2797 I think Sam Pollack testified earlier today, and I don't know what he said, but I do know that when I left the Blue Jays, and I was with them for 22 years, that CTV at that point did get Sportsnet up. CTV went to the Blue Jays. There were more games on television. The rights fees went back up. It was competition.
2798 Competition is good. Maybe it's because I am in sports that I like competition. I'm not afraid of it.
2799 What I think should happen is, to make sure that the Canadian teams are on an even playing field with the rest of the teams they are competing against they have to have a way of being able to compete for the dollars.
2800 If in fact you don't get it from a media point of view there is only one other way that you are going to get it, and that is ticket prices. If we get it from ticket prices it is inevitable those ticket prices are going to increase. Because really the two sources of income that you have are media, which is huge, and from tickets, which I will say is bigger but depending on the city, depending on the deal, the percentage can be very, very close.
2801 What I would suggest or what I would hope is that we would consider an opportunity where we could let these two entities still compete. I fully believe that the competition has resulted in good for the viewer -- good for the viewer on a couple of points. Good for the viewer of the number of games, but also, more importantly, on how production is handled.
2802 You see, down here -- I have had the good fortune of working in the United States for the last little while and I have seen what Fox has done, I have seen what ESPN has done, I have seen what CBS has done and NBC, and the production for the fan gets better and better all the time.
2803 I don't think if you had that competition you would see that production. I don't think it could be lost on it because ultimately what you are trying to do is provide entertainment the fan and, more importantly, to the viewer.
2804 My biggest concern -- I will conclude with this -- is that if it gets down to a point where the dollars are so low it may not be beneficial for the teams to put the games on television. If they don't put them on television everyone loses. It could be the old CFL syndrome where you blacked out.
2805 I prefer it to go the way and learn from watching from the Conn Smythe way, the best way of marketing a product is to have it on television. But if it gets down where the price is so low we may not put ourselves in a position where teams can put their product on television. I think that would be a concern.
2806 That really concludes my remarks. The brief is there.
2807 I again apologize for not being available today in Ottawa but do appreciate the opportunity you have given me and the accommodations you have made, Madam Chairman.
2808 Thank you.
2809 THE CHAIRPERSON: Thank you, Mr. Beeston.
2810 Can you hear us?
2811 MR. BEESTON: Yes, very well. Thank you very much.
2812 THE CHAIRPERSON: Have you had the opportunity to be kept abreast of what is going on since yesterday morning? I just want to --
2813 MR. BEESTON: Not really. I read the --
2814 THE CHAIRPERSON: Go ahead.
2815 MR. BEESTON: I'm sorry.
2816 I did read The Globe and Mail this morning and I was advised of kind of what happened on a general basis. To say that I know it in detail I think would be stretching it.
2817 THE CHAIRPERSON: The reason for asking is exactly that, that there has been some discussion and some amendment or proposed amendment by the Applicant on issues that you have raised. So I won't raise those with you if you haven't been kept abreast of the details because those were not in The Globe and Mail that I know of.
2818 I will have a few general questions.
2819 We do have your brief, which is substantial, and a number of the issues that you have raised have already been discussed.
2820 I can tell you Mr. Pollock was here this morning and he didn't change his view of this matter.
2821 Mr. Bryden was here as well earlier this morning, and I wonder if you have any comment about the difference between your sport and Mr. Bryden and the way it is treated on the broadcast properties we now have that would lead them to have such a different view -- Mr. Pollock and you on one side and Mr. Bryden on the other -- as to the appropriateness of the proposal?
2822 MR. BEESTON: Well, I can't presuppose or think what Mr. Bryden says. He is a very intelligent man who believes in the Ottawa Senators and obviously wants to keep them there notwithstanding all their problems. I don't understand the position that he is taking.
2823 I can only tell you from my experience that if you exclude competition from -- what's the word I'm looking for -- bidding on the rights, if you like, Madam Chairman -- if you exclude that it is never the rights -- the right value will go down.
2824 If I can bore you for a minute with what has happened in the last five days, we were able to conclude a significant rights fee with ESPN. We did that because there was competition in the marketplace. There was Fox, there was Turner, there was a suggestion that there was going to be a submission from CBS.
2825 What happened was, it kept everybody honest and it drove up the price to what we think was market value. At the very end of the day if you don't have that you have something that is artificially set that you may have to accept.
2826 I know Mr. Bryden's position. I don't understand it and I have not talked to him about it so I couldn't really -- I couldn't really dispute it, other than to say that is not, to me, the way that I would think you could maximize your dollars.
2827 THE CHAIRPERSON: Your first proposition is that we should deny this application and the alternative would be that we require that TSN be a divestiture. Correct?
2828 MR. BEESTON: Yes.
2829 THE CHAIRPERSON: We had a discussion with the CBC this morning whose position is either TSN or Sportsnet -- but their caveat was that TSN not be sold to an over the air broadcaster. Do you have any comment on that?
2830 MR. BEESTON: Yes, I do. I think that the best is to deny the application in its entirety, but if there is going to be divestiture, I think that if you could divest and put it with TSN, I think you are better off. TSN can stand on its own. It is more affordable. It has a better reputation from the point of the view of the years. I'm not sure it's a better reputation from a programming point of view, but they have been around longer. They would have a much better chance of sustaining themselves.
2831 You don't really know whether or not it should be an over the air entity or not. I mean in some places it works, in some places it doesn't work. Quite clearly, ESPN stand autonomously in some respects down here from ABC. Fox Sportsnet in some respects is autonomous from Fox.
2832 Notwithstanding that fact, ESPN has a much better chance of -- or TSN has a much better chance of making a go of it I think on its own if you were to divest one as opposed to the other, Madam Chairman.
2833 THE CHAIRPERSON: One of the areas of concern in your written intervention is with the trade mark licensing agreement. With only the Globe and Mail to help you, you may not find it easy to answer this question, but I suspect you had some experience in licensing. This is one area that appears to be not anywhere near a final negotiation between the parties.
2834 Do you have any advice for us or for the applicant as to what would be required to correct the problems you see in a trade mark licensing agreement?
2835 MR. BEESTON: Well, I'm not certain that I understand specifically what we are referring to, but if it is the licensing of programming that would be going on an international basis, that is one area that they will generate revenue from.
2836 We can talk about what they are going to do to do certain things, but if it is going to be a form of distribution of product from the perspective of that, that's all part of the station or the network itself.
2837 THE CHAIRPERSON: My question is probably unfair in light of the circumstances. Was criticism in your written brief about the power or problem that you see in the extent of the power that is given to ESPN under the agreement, but in light of --
2838 MR. BEESTON: I'm sorry.
2839 THE CHAIRPERSON: That's why I was --
2840 MR. BEESTON: Thank you, Madam Chairman. ESPN is a very formidable and an outstanding organization. As I say, we have just done a five year extension with them. I find it very odd and somewhat uncomfortable, nevertheless I think I must say it. You know, they are a partner of major league baseball's that we just concluded a multimillion dollar deal with.
2841 ESPN is very strong. ESPN has tremendous programming. ESPN has tremendous people. ESPN likes to be heard. We will have something to say as to what and how that network is going to be run. It does not matter to me that they own 30 per cent or 33 per cent or vote 10 per cent or vote 15 per cent, ESPN and what they will be able to do is going to be very, very powerful.
2842 Forget the changing of the name from TSN to ESPN. The result of the people that work for ESPN and their quality and the programming they have, if they don't have control, they will have de facto control just by the sheer size, and you can't deny that.
2843 More importantly, there's nothing to apologize for. They are a world-wide power. The programming they have and the way that they will operate from a production point of view and being able to provide things to this network I think will just continue the way it has the last few years.
2844 THE CHAIRPERSON: And that would be regardless of who that Canadian partner is.
2845 MR. BEESTON: I believe that ESPN is that way, yes.
2846 THE CHAIRPERSON: If my colleagues have no questions, I don't have any others. We appreciate your brief and the efforts you have made to speak to us this afternoon.
2847 MR. BEESTON: I appreciate very much the opportunity. Thank you very much and good luck.
2848 THE CHAIRPERSON: Don't go yet, Mr. Beeston. Our legal counsel has a question.
2849 MR. BATSTONE: Mr. Beeston, I had two questions actually. One issue that has been discussed both yesterday and a bit today is the issue of North American rights. I thought that as a licensor of rights you would be in a very good position to tell us what you think of this issue.
2850 Do you anticipate a move towards licensing of sports properties on a North American basis?
2851 MR. BEESTON: I think it varies probably from league to league. I can talk from a baseball point of view. We license our property from a United States point of view and from an international point of view, so Canada is separate and Mexico is separate. They are not part of any North American licensing program, if you like.
2852 I can't tell you about what the NFL, NBA, NHL, soccer, the Olympics or anyone like that is doing, but inevitably the world is getting smaller. It is getting to be a global community. You know, you could see that at some point in time, I suppose, but we have no intention of doing that for the foreseeable future. I can only speak for baseball.
2853 MR. BATSTONE: Why is it that -- is there a reason why you don't foresee doing that in the near future for baseball? Is there a particular reason?
2854 MR. BEESTON: Well, there is no particular reason other than to say the following. We have two different entities in major league baseball. We have what we call our domestic rights and we have an international department. That international department licenses rights in Japan. They license rights in Canada. They do it in Latin America and they do it in Europe.
2855 For whatever reason, we determined to do it that way and the domestic United States is where the rights are licensed for baseball purposes.
2856 MR. BATSTONE: But if it became economically attractive to do it on a North American basis, I assume that's probably the way you would want to go.
2857 MR. BEESTON: You can be sure we would change our minds.
2858 MR. BATSTONE: Right. I said I had two questions. It turns out I had more. My last question, and I am asking this on behalf of a Commissioner who shall remain nameless, is why won't you let Pete Rose into the Hall of Fame? You don't have to answer.
2859 MR. BEESTON: We hit a fair on that one.
2860 MR. BATSTONE: That's outside our jurisdiction.
2861 Thanks very much.
2862 MR. BEESTON: Thank you.
2863 THE CHAIRPERSON: I won't admit, Mr. Beeston, that I asked "and who's Pete Rose?".
2864 Thank you very much.
2865 MR. BEESTON: Thank you very much.
2866 THE CHAIRPERSON: Madam Secretary.
2867 Mme SANTERRE: Merci, Madame la Présidente.
2868 I will now invite the Canadian Football League to present their intervention.
INTERVENTION / INTERVENTION
2869 THE CHAIRPERSON: Good afternoon, Mr. Giles.
2870 MR. GILES: Good afternoon. Thank you very much for having me here today. My name is Jeff Giles. I am the President of the Canadian Football League. I am here representing our eight Canadian teams and our Board of Governors who run the Canadian Football League.
2871 It is my pleasure to be here to support the CTV/NetStar ownership transfer application on behalf of the Canadian Football League.
2872 The CFL is a very unique sports enterprise, and the word "unique" has been thrown around here quite a bit today, so if it is possible to be more unique, we are. We are at a very critical stage in what we hope will be a made in Canada turnaround story. We believe that this transfer is critical to that story having a successful conclusion.
2873 We are unique because for many of our sports fans, we are more than a sport. We have been played in this country for over 138 years, football as we know it, and we have become a tradition. We have become part of this Canadian culture.
2874 For the past 87 years the Grey Cup game, our championship match, has brought together more Canadians at any one point in time during the year than any other event that this country has. Last Sunday in Vancouver we had a Grey Cup game and we drew a reach of almost eight million Canadians who at one point watched that game. That means that one in three Canadians were drawn to that game for whatever reason.
2875 Why do we believe so many people are still watching the Grey Cup game in the Canadian Football League? Because it's a very important part of being Canadian. It's one of the last great cultural events that this country still has and provides us with one of the few remaining opportunities to really feel Canadian.
2876 All of us who are associated with the Canadian Football League are conscious of this added responsibility that this tradition and this cultural heritage brings with it. We often find ourselves in an unusual position of trying to balance the demands of the business against the need to maintain a tradition and the cultural tradition.
2877 The truth is that many of our owners in this league are in it more out of pride of their country than for any other reason. But the bottom line is if we want this tradition to continue, we have to try and make the business work.
2878 Our goal is to build on our new found stability that I am going to talk about and to build a successful, vibrant, financially viable league that all Canadians can be proud of, and the key to achieving this status is to continue with the promotion and the marketing of our fan development initiatives that we have continued for the past two years.
2879 Once we continue and once we achieve this status everything else will fall into place. To illustrate what I mean, and I am going to expand on this a little bit later, but for the last two years we have been very fortunate and in large part due to the efforts of NetStar, that we have seen huge increases in our television ratings on TSN. Our television ratings have been up over 50 per cent, and as a direct result of that because there are more people watching, there were more people watching. There were more people in the stadiums watching because of the promotions, we were able to increase our corporate sponsorship by over 400 per cent.
2880 Mr. Bryden spoke a little bit about the value of his rink boards this morning and how that goes up with promotion and eyeballs and that is very much what has happened to us in the last two years. It is important to us that we continue that trend because in actual fact we believe that we can double our corporate sponsorship revenue again over the next three years if we continue with these fan development initiatives.
2881 If we can double our corporate support alone, without worrying about rights fees, without worrying about anything else, we will become successful and financially viable.
2882 The support of the CTV/NetStar ownership transfer -- we support it because we are confident that the new entity will continue to support and promote the CFL as NetStar has for the past 12 years and will, in fact, be a much stronger broadcast partner for the CFL, better able to help us promote, market, expose our game, which for reasons previously mentioned are our top priority.
2883 The CFL has been aired on TSN since 1987. Our relationship has grown from this point in time to right now where it is focused on mutual benefits, mutual goals. With the signing of our new five-year deal two years ago, it got us back on our feet financially, got us back on our feet from a promotional point of view. It helped launch the rebirth of the Canadian Football League.
2884 And as a direct result of the promotion and the advertising and the exposure of our game, as I have said, we have enjoyed dramatic increases in tenants and various other avenues of revenue. But in order for us to reach our goal and be a successfully viable league in this country, we have to continue that exponential growth. We can't be satisfied with that 50 per cent increase.
2885 We have to continue to grow, and the new entity, we believe, will provide the flexibility to promote the league on a national and regional basis across all networks, which will greatly expand the reach, the frequency and efficiency of these promotions and these marketing efforts. This will be a major benefit to our league and to our fan development initiatives.
2886 In addition to expanding and enhancing our promotional efforts, it is also important to our league's future that more of our games are broadcast. In 1999, 41 of our 72 regular season games were carried and televised.
2887 In large part, this reduced -- this lower number was a direct result of conflicts that the national broadcaster, primarily TSN, had with other properties. It is our position that the greatest marketing vehicle we have is our three-hour games. When these games are not available for broadcast, especially back to the visiting team's home market, we have in effect lost the most important marketing vehicle that we will ever have to sell tickets and generate new fans.
2888 The CTV/NetStar ownership transfer will provide our broadcast partner with more flexibility to air our games, both regionally and nationally, which will result in more televised games and more exposure for our product which we believe is critical.
2889 The CFL is also unique because we are the only professional league which plays exclusively in this country. There have been many other leagues and many other teams who have been here today, but nobody else can make the statement that they play exclusively in this country. This means that we have to market and promote our game across this entire country and at the same time take into account all the regional disparities, including language, that makes this country so unique.
2890 To do this effectively in a country this large, on a budget as small as ours, we rely very heavily on the co-operation and willingness of our broadcast partners to work closely with our teams.
2891 NetStar/TSN has done its best on a local basis to help out, but they have been restricted by their national mandate. The one exception, of course, is Quebec where RDS has in effect adopted the Montreal team and helped propel that team to heights that were thought unattainable a few years ago.
2892 In 1999, RDS ratings increased by over 80 per cent, while the club itself enjoyed consistent sellouts. Not surprisingly, going back to my theme originally, the Montreal club had the highest level of corporate support in our entire league. We believe that this type of regional relationship between the broadcaster and the clubs is critical to our success. The potential for similar relationships on other parts of the country with similar results will be greatly enhanced as a direct result of this ownership transfer.
2893 One of the unique challenges we have at being exclusively a Canadian professional sport is overcoming what I call the apathy that most Canadians feel towards anything that is uniquely ours. We have a tendency in this country to assume that any Canadian product or any Canadian service is second rate until the U.S. has given it its stamp of approval, and up until a couple of years ago that perception was often reinforced when people watched CFL broadcasts on television and compared them to NFL broadcasts and looked at the broadcast discrepancy and the production quality discrepancy.
2894 But thanks to the efforts of NetStar over the past two years this gap has been significantly narrowed, and this has served to improve our overall image and help us reposition our sport, and it has gone a long way to help us in our fan development initiatives.
2895 It is critical to our future that Canadian broadcasters remain competitive with their U.S. counterparts. We believe that the approval of this application will increase the stability of the broadcasters involved, which will in the long term allow them to invest in and maintain consistent, high-quality productions, which is again critical to the Canadian Football League.
2896 As many of you probably know, in addition to being exclusively played in Canada, we are one of the only leagues that insists that half of its players have to come from Canada. This is unique in the world of professional sport and one of the traits that makes us radically Canadian.
2897 We believe it is our responsibility to ensure that there will always be a place for Canadian kids to play professional football in this country, and to this end we rely very heavily on the CIAU to develop players who can play at the level required and it is in our best interests that the CIAU is a healthy and strong and prosperous organization.
2898 Both the CIAU and the CFL have been fortunate in that NetStar has been a loyal partner to the CIAU and their many sports for years. Their support of the football program and their broadcasts during the regular season, playoff and the Vanier Cup game, has served to elevate the game's profile, has helped us to build up new fans at the college level, has attracted more players at the game and provided the much needed financial support that the CIAU has required.
2899 We are convinced that the new entity's commitment to amateur sport in general, and the CIAU football program in particular will not only continue, but in fact expand with the ability to air regional coverage. This is great for amateur sport. It's great for the CIAU and it's great for the Canadian Football League.
2900 As I indicated in my written submission, the effect, if any, that this transaction will have on long term property rights' fees will be more than offset by the benefits. I started off by stating that our needs were unique because our situation is unique. Our challenge is a uniquely Canadian business to make ourselves relevant to more Canadians, to capture their imagination and to create something that all Canadians can be proud of. I said that once we have achieved this status we will be in control of our own future.
2901 Perhaps we are a little old fashioned, the Canadian Football League, but we believe that our revenue stream should be based on true value. When I say that I talk about the price of tickets. In the Canadian Football League our tickets are very affordable compared to any other professional sport in this country. No other sports where you can take a family of four to a game, enjoy a Coke and park for less than $100. We believe it is our mandate to ensure that we continue to do that for the Canadian public. We believe it's the best kept secret and we have to continue to tell people about how great and affordable and the great value we provide to our customers.
2902 When we sell sponsorships we want to develop long-term relationships. We want to sell true value, that's cost effective sponsorships. We believe it is our job when we deal with our corporate partners to have them sell beer, to help them sell doughnuts, to help them sell cars, it is their job to help us sell football, but it is our job to help them sell what they sell and that's delivering true value.
2903 When it comes to our broadcast partner we believe the same thing. We believe in true value. We believe in "win-win". Two years ago when we sat down and we renegotiated our new conventional telecast deal, we were fortunate in that we had four bids, four offers, and it would naive of me to say that perhaps because of the four offers, for the first time perhaps in 10 years we actually had more than one offer, that we did benefit slightly financially, but more importantly, when I was the one who was negotiating these deals, what was most important to us was the promotional element of our new contract, and every one of the four deals that we talked of, except for one, had a significant promotion element to it.
2904 Mr. Bryden spoke this morning of grossing a pie. He talked about creating a bigger pie for people to share, not worrying about how the mechanism is going to divide up that pie, but how we are going to build the pie.
2905 We believe it is our responsibility to work with our partners to build that pie, to get more viewers, to get more corporate sponsors, to get more people in the parks, so that it's a win-win so all of our partners are doing better.
2906 At the end of the day, if we are building that pie through promotions, it is a win-win situation, and the mechanics of how we divide it up, which comes back to rights fees and negotiations, will look after themselves.
2907 We believe that this ownership transfer between CTV and TSN is what the Canadian Football League needs to get it to where it needs to be, which is a financially viable business that will continue the tradition of Canadian football in this country. We believe that this is best for the Canadian Football League.
2908 I welcome your questions.
2909 THE CHAIRPERSON: Thank you, Mr. Giles.
2910 Commissioner McKendry.
2911 COMMISSIONER McKENDRY: Thank you, Madam Chair.
2912 Perhaps because you touched on them near the end of your presentation, we could talk about the property rights issue for a moment.
2913 In your written submission you said, and I quote:
"Any effect, if any, that this transaction will have on long term property rights fees is more than offset by the benefits, as far as the CFL is concerned." (As read)
2914 And you discussed that in your oral comments as well.
2915 What do you see as the negative impact on long-term property rights if we approve this application?
2916 MR. GILES: Before I answer that, let me expand a bit on what the benefits are. I will be straightforward and honest about the discussions that we had two years ago. As a result of that competition that was there two years ago, we increased our rights fees in television by $3 million a year.
2917 But more importantly, we increased our promotional element of those deals as well.
2918 As a result of that, as I talked about increasing attendance, which has been 15 per cent over two years and the increasing corporate support, in total the other benefits as a direct result of that have totalled over $10 million in two years.
2919 So because of the added promotion, because of the added marketing, because of the added exposure that we have received, we have had financial benefits to this league in the last two years of over $10 million, as compared to an incremental rights fee of $3 million.
2920 In the long term, do I believe that our rights fees will be affected by this? It is hard to say. But as I say, I believe we are in control of our own future.
2921 Two years ago when we negotiated this deal our ratings were 50 per cent lower than they are today. I believe that we are in control of our own future, and in three years time when our television rights come up I believe we will be as competitive as it was two years ago because of the fact that we are a unique Canadian organization; we provide great product; and we are looking for a win-win relationship.
2922 So the answer is: If there is any effect, I believe it will be insignificant.
2923 COMMISSIONER McKENDRY: Help me a bit in understanding what you mean by the promotional element.
2924 Is that a monetary benefit? What is a promotional element?
2925 MR. GILES: A promotional element is everything from throughout the week promoting when the games are on, to throughout the week on TSN or RDS promoting the fact that there is a game in Vancouver next Saturday at 5 o'clock and buy your tickets.
2926 It is a matter of covering -- we have a grassroots program called Flag Football Canada that is in about 400 to 500 schools across this country. TSN and RDS have attended those schools and have covered those flag football games for us and promoted that the CFL is involved with this.
2927 It is those types of promotions that I am referring to. It is keeping us in the public's eye. And the fact that they promote promotions is also elevating the profile of our players: to show Canadians just how great these players are, what they do in their communities.
2928 There have been lots of those examples as well. That is promotion.
2929 COMMISSIONER McKENDRY: I think you said that you had four bids and three of them included promotional elements in their bid.
2930 Did I get that correct?
2931 MR. GILES: That's right.
2932 COMMISSIONER McKENDRY: So when people compete to get your product, they are competing on the level of the property rights fee and they are competing on the basis of a promotional package.
2933 If there is consolidation, if we approve this application, where would be the incentive to compete on the promotional package?
2934 I think you are agreeing with others that the incentive to compete on rights will possibly lower the rights fees. Why is there any more incentive to compete in a monopoly environment for promotional rights?
2935 MR. GILES: I don't believe that with this transfer our ability to negotiate and our ability to leverage will disappear.
2936 Going back two years ago, as I said, we had four solid offers. This transfer would only eliminate basically one of those offers, and we would still be sitting with three.
2937 I still believe that three is a good number to create a competitive atmosphere.
2938 COMMISSIONER McKENDRY: You are not concerned, like property rights, that promotional package offers will be impacted as well in a less competitive environment.
2939 MR. GILES: I believe it is in everybody's best interest to -- in actual fact, if push came to shove, I think some networks would rather be more heavily weighted towards promotion than they would dollars because it helps builds their ratings as well.
2940 So I think there is an incentive actually to be more heavily weighted towards promotion than there is dollars. And it is our job to negotiate the best balance between those two.
2941 COMMISSIONER McKENDRY: I assume you heard Mr. Beeston's comments, and I don't know whether or not you had an opportunity to hear Mr. Pollock's comments this morning.
2942 MR. GILES: I did.
2943 COMMISSIONER McKENDRY: It seems that baseball is different than football, or at least CFL football. Why is it different?
2944 What is different about your sport in terms of television coverage and so on and the bidding of rights than baseball?
2945 MR. GILES: There are a couple of things.
2946 First, our rights fees compared to what they get are insignificant. I guess everything is relative in life, and our rights fees relative to theirs are insignificant.
2947 Second, they look at this -- to be honest with you in North America right now, they talk about if the competition is there it will be borne on the back of the consumers who have to go and pay for the tickets.
2948 I take exception to that, because as a league that is trying so hard to control its costs in keeping players' salaries under control, I don't believe that that is the biggest issue. I think the biggest issue is escalating player costs, and the public is being asked to bear those costs.
2949 We are a unique business enterprise that competes in this country alone. We don't have that image. We don't have that exposure that U.S. television that Canadians are exposed to that legitimizes sport. We have to legitimize this sport on our own in Canada.
2950 As I said to you before, it is pretty difficult sometimes because Canadians assume that if it is just Canadian, there has to be something wrong with it.
2951 We are working really hard to prove to Canadians that there is nothing wrong with it. That is why we are different than major league basement and that is why we are different than some other major sports in this country, who are just teams of a North American league.
2952 We are a league and teams exclusively in this country, so we have different needs.
2953 COMMISSIONER McKENDRY: I want to understand more specifically what will be different from your perspective, from the perspective of the CFL, if we approve this application.
2954 You gave us a very good description of the success that the CFL has experienced in recent years and the increasing fan sport and increasing viewership, and so on. In fact, I think you mentioned that RDS has adopted the Alouettes as their team, at least with respect to football.
2955 You painted a picture, a very successful picture, under the existing system.
2956 What is it specifically, if we approve this application -- what benefit will accrue? Is it more games on television? Is that what you are seeing or what you would like to see?
2957 MR. GILES: That would be the primary benefit. I painted a successful picture, but I don't want to leave the impression that the Canadian Football League is out of the woods. We are still not out of the woods. We are still struggling to survive.
2958 I painted a picture of incremental success, but I wanted to make it clear that we have a long way to go yet. And that as it exists today, we could continue as it exists today but we need to be exposed more than we are.
2959 A good example is out west where we often have games right now between Saskatchewan and Winnipeg or between those teams that never get covered. They never get carried. The people in Regina or the people in Winnipeg are saying to us: How come?
2960 And it is because quite often it is the time changes; it is the fact that they want to play on a certain date and it conflicts with other national sports, like baseball or something else.
2961 It is important to the Saskatchewan Rough Rider fans that they get to see their club as much as the Toronto Argonaut fans get to see their club. We try our darndest to schedule that and work with our partners, but we believe that the ability to schedule both nationally and regionally will enhance our ability and be able to expose more than the 41 games that got exposed last year.
2962 COMMISSIONER McKENDRY: How many games are in your regular season?
2963 MR. GILES: Seventy-two.
2964 COMMISSIONER McKENDRY: So 41 were televised of the 72. What do you expect that to rise to if we approve this application?
2965 MR. GILES: That is hard. We have not had any concrete discussions about that. I would hope that over the next two to three years at some point we could see close to 65 or 70 games, and I would hope at some point that we could see all of our games on television.
2966 COMMISSIONER McKENDRY: If it went from 41 to 65, presumably the games would displace the programming that is there now. If the networks would have to find space in their schedule to put that in, what would go?
2967 MR. GILES: When you say that, we are a pretty flexible league, and when one of our teams finds out that their game is going to be televised or Saskatchewan is in Winnipeg and they say, "We have to move it a few hours" or "We have to move it because we want to get televised and get exposed", we will do that.
2968 We don't have the infrastructure that other large leagues have and so we are pretty creative, we are pretty flexible and I think that if -- our ratings and the numbers that we draw are pretty attractive to advertisers, so if we can't dispose of something or move something around, then we are pretty flexible to get our game exposed so that, as I say, it is the greatest marketing vehicle we have.
2969 COMMISSIONER McKENDRY: What commitment have you got from CTV, then, to increase the number of games from 41 to your hope -- have they committed to 65? Has there been any commitment at all?
2970 MR. GILES: There has been no commitment at all, other than verbal discussions that the games would increase, the number of games would increase.
2971 COMMISSIONER McKENDRY: Is 41 games as many games as has ever been televised in the CFL's history or is this 41 less than, just looking back over the history of the CFL?
2972 MR. GILES: No. Over the history of the CFL, one of the significant changes that occurred two or three years ago was CBC's decision to only broadcast games on Labour Day forward. You used to have CBC games in July and August. I forget which contract it was, I think it was two contracts ago, that that decision was made to start after Labour Day for two reasons: number one, it was going to conflict with the summer olympics that were occurring that year; and, number two was, I think, they weren't happy with their ratings in the summer and therefore they moved it to the latter part of the season. That dropped our games significantly and so we have been trying to recover from that in the last couple of years.
2973 COMMISSIONER McKENDRY: But would 41 be as many games as has ever been shown?
2974 MR. GILES: No. I would believe at one point -- now it's hard -- going back, we had 13 teams when we were in the United States, when we had -- you know, we had far more games and we would have far more on. But if I compare a team league to a -- on a comparable basis I would say we would peak probably at 55 games at one point in time.
2975 COMMISSIONER McKENDRY: Thanks very much. Those are my questions.
2976 THE CHAIRPERSON: Thank you very much, Mr. Giles for your participation.
2977 MR. GILES: Thank you.
2978 THE CHAIRPERSON: Madam Secretary.
2979 MS SANTERRE: The next intervention will be by Forefront Entertainment Group.
2980 THE CHAIRPERSON: Good afternoon. It is Ms Cynamon? I didn't for one minute think it would be so easy so I made it harder.
--- Off microphone / Sans microphone
2981 THE CHAIRPERSON: Good afternoon. Go ahead when you are ready.
INTERVENTION / INTERVENTION
2982 MS CYNAMON: Good afternoon, Madam Chair, Commissioners, ladies and gentlemen. My name is Helena Cynamon and I'm from Forefront Entertainment Group in Vancouver.
2983 I would like to begin by expressing my thanks to the CRTC for allowing me this opportunity to talk to you today.
2984 I'm here for two important reasons. I'm here because, as an independent producer, I felt the need to come forth with firsthand accounts that will attest to CTV's track record of honouring their commitments to independent producers, particularly those in a region.
2985 I'm also here, like some others, to applaud and congratulate CTV on their encore performance. They continue to understand and take head on the challenges facing Canadian programming by being a driving force behind unique, creative initiatives and benefits.
2986 I'm a founding partner of Forefront Entertainment Group, a B.C.-based production and distribution company that is a leading supplier and deliverer of quality Canadian family programming to broadcasters in over 100 countries. In my capacity as the company's Co-Head of Development and Production, I have been a co-executive producer both on the Canadian award-winning seasons of the youth series Madison and on the detective series The Adventures of Shirley Holmes.
2987 I, however, would like to talk about my most recent experience as the Canadian Executive Producer on our company's Canadian-U.K. co-production series The Magician's House. The Magician's House is a fantasy series, much like the Harry Potters books and Magician's House is the family programming that the program decision-makers of CTV committed to. They walk their talk.
2988 From the very beginning, CTV stepped up to the plate and committed essential dollars in order to regionally develop Magician's House, alongside the BBC, the broadcaster on the U.K. side of the equation. In fact, for the past three years, while the project was in development mode, the western regional office of CTV worked hand in hand with the national office to ensure that when this series was creatively and financially ready to go that regional broadcast licence fees were made available.
2989 However, last February it looked like a regional licence fee was not going to trigger enough points to compete for the licence fee fund money of the CTF. It was at this point that Louise Clark, the Head of CTV's western independent production office, working together with Bill Mustoss(ph), VP of Dramatic Programming, recognized the financial needs of this project and pushed for the show to go over to a national network window. This became a huge financial benefit to the program.
2990 In fact, today is the day that we deliver the series to CTV for their holiday line-up and we are hoping it will be half the runaway hit it is in Britain right now.
2991 The Magician's House has pulled in over 6 million British viewers to each episode and has captured its time slot with a 27 per cent share of the viewers. Any benefits that Forefront or any other Canadian producers will reap by the success in Britain of this Canadian U.K. production can be traced in part back to the champion efforts of many individuals at CTV.
2992 Further evidence of CTV's generous and continued support, not only to regional producers but to regional stories, is evident in their active search for scripts like the Sheldon Kennedy story, the David Milgaard story and, in Forefront's case, CTV has given strong development assistance to the film project Florence. This is a tragic true story of a young Italian immigrant woman living in Alberta during the oppressive thirties.
2993 In addition, the Canadian Literature Initiative spawned Forefront's development of the ambitious film project The Concubine's Children. Based on the Canadian novel by Denise Chong, CTV has given this powerful B.C. story about three generations of a Chinese-Canadian family an important commitment of broadcast licensing dollars that breathes substantial life into the overall financing of this project.
2994 CTV is continuing its commitment to Canadian stories with the Great Canadian Book project proposal, a natural companion to the above-mentioned CTV's Canadian Literature Initiative.
2995 In a past life, I was a documentary producer. I can recognize this book project as a welcome and tremendous boost for independent documentary filmmakers. This initiative will continue to support our wealth of Canadian talent in the documentary field.
2996 There are other goodies in the benefit package that further offer independent producers strategic production support. Some highlights for the independent production sector are: the support for budding talent through grants to the CFC, the penning of ideas with the Ryerson Media Writing Workshop, a study of our star system, new science programming for children, and new distribution opportunities through support of showcases at the Banff Television Festival. These original proposals will definitely make a producer's job that much easier and will create lasting benefits for years.
2997 A further added value to independent productions is, if the CTV/NetStar transfer of ownership transaction occurs, there will be multiple window opportunities. Producers will be able to negotiate even higher licence fees and independent producers will also be able to cross-promote our programming on CTV and NetStar, hence, a valuable marketing strategy mutually beneficial to broadcasters and producers alike. It will present increased viewership and hopefully more demand for original programming.
2998 I would like to wrap up by giving the final say to Stephen Tyler, the time-travelling star of the Magician's House series. His words sum up what I hope is the outcome of this hearing: All things are possible if you allow them to happen.
2999 Thank you for your time.
3000 THE CHAIRPERSON: Thank you, Ms Cynamon.
3001 Commissioner Cram, please.
3002 COMMISSIONER CRAM: Thank you. Did you come from Vancouver to here just for this?
3003 MS CYNAMON: Oh, yes, and jet lag with it.
3004 COMMISSIONER CRAM: Jet lag city.
3005 In the long run, and I mean after all the money has been used up, provided we approve this, how do you see the effects of the benefits? Like after the money is gone, are there going to be long-term benefits?
3006 MS CYNAMON: I think there is long-term shelf-life with products that are produced by these initiatives, and I think, just for example, the STAR system that will continue to create our products to be marketable in the international marketplace. I think the grasps that are given to budding talent will be there forever. We have seen that, you know, in major filmmakers throughout the years that have been given chances at the CFC and, as I just mentioned, I think distributors well, you know, they will be able to sell the products continuously.
3007 COMMISSIONER CRAM: You talked about the opportunity for multiple windows and cross-promotion. What about a small independent producer negotiating with this what has been called a monopoly or the CTV, TSN, RDS, how do you think you could negotiate with them and end up with anything that would be at all fair for you?
3008 MS CYNAMON: Well, in my experience when I have negotiated with broadcasters and they do have chances to place it in second windows or third windows it has always resulted in higher licence fees.
3009 COMMISSIONER CRAM: So you don't think that little old you would have any problems dealing with a larger organization such as CTV/NetStar would be if we approved this?
3010 MS CYNAMON: I think it is in their best interest and my best interest just to keep delivering quality programming to them and if I can't make it financially viable they won't get the product either. So we have to work together to make sure that our licence fees can support the project.
3011 COMMISSIONER CRAM: When you are talking about multiple windows, from your perspective and your history and your experience, were you really talking CTV, Discovery and OLN or where you including the TSN, Sportsnet, RDS group of windows, if I can call it that?
3012 MS CYNAMON: To be honest, I think I was just looking at it as the different platforms that there is some cross-pollinating that can happen between sports programs and programs on Discovery like a natural would be sports programs for kids. You know, there could be those natural alliances of the type of program that could be on NetStar could immediately be on Discovery and vice-versa, you know a nice complement.
3013 COMMISSIONER CRAM: We had somebody here this morning who was with the sports producers and he was talking about, particularly in the sports programming, that there is a tendency by the broadcaster who want to use barter in the sense of producers as part of what will be payable using their production facilities. Is that your experience at all on the other side, on the non-sports side with CTV?
3014 MS CYNAMON: No, I have never had that experience with any broadcaster that part of their production facilities was part of the deal.
3015 COMMISSIONER CRAM: You then talked in your letter about this giving you greater programming diversity and now you are talking about different windows. How does this provide for greater programming diversity?
3016 MS CYNAMON: You are referring to Point 4. I think there is a lot of room for different types of programming. We experienced that at the marketplace and for experimenting in different types of programming. So it interests me that there is going to be these science programs dedicated to kids or some research on kids' programmings because that is the field that I come from.
3017 So I think we think of our genre as a certain genre as coming from the dramatic side, so just to be creative and to stretch and to think of different ways to entertain and inform is exciting, I think, and a challenge for these broadcasters.
3018 COMMISSIONER CRAM: Excuse me, but I see a contradiction. You talk about greater diversity, but then you also talk about running the same programming through various windows and to me that means exactly the opposite. The transaction is going to create more windows, I understand that, but then you are talking about running the same programming through the same windows so I don't see how that creates diversity.
3019 MS CYNAMON: Well, I think more exposure to -- the more windows create the more exposure and so if Canadians are exposed to quality Canadian programming, hopefully that will translate into more demand for Canadian programming and so that the broadcaster will take more risks in the type of programming that are being offered to broadcasters.
3020 COMMISSIONER CRAM: Thank you. Those are my questions. Thank you for coming all the way.
3021 MS CYNAMON: Okay.
3022 THE CHAIRPERSON: Thank you, Ms Cynamon.
3023 Madam Secretary.
3024 Mme SANTERRE: Merci, Madame la Présidente.
3025 L'intervention suivante sera présentée par Nathalie Lambert.
3026 LA PRÉSIDENTE: Bonjour Madame Lambert.
INTERVENTION / INTERVENTION
3027 Mme LAMBERT: Bonjour. Si vous voulez bien je vais parler en français alors s'il y en a qui ont besoin de mettre les écouteurs.
3028 D'abord, Madame la Présidente, merci pour l'opportunité de pouvoir venir vous adresser ces quelques mots en tant qu'ancienne athlète en sport amateur, en sport très amateur. On n'a rien à voir avec un petit peu tout ce qui a été dit précédemment. On parle de choses beaucoup plus grosses que beaucoup d'athlètes qui sont dans les sports comme le mien et je n'ai pas la prétention de vous dire que je représente tous les athlètes de sport amateur.
3029 Par contre avec mon passé d'athlète, avec aussi celui de vice-présidente au marketing et relations publiques pour l'Association canadienne de patinage de vitesse et aussi mon implication en tant que "board member" avec l'Association olympique canadienne, "Coaching Association" et aussi le Club de la médaille d'or.
3030 Le fait que j'ai participé à cinq Jeux olympiques soit en tant qu'athlète, soit en tant que bénévole ou en tant que journaliste. Même chose avec deux jeux pan-américains, je pense que même si je ne représente pas tous les athlètes je peux vous donner un bon tableau de la situation en sport amateur, pas juste en patinage de vitesse mais aussi de par le fait que je connais à peu près tous les athlètes de haut niveau au Canada, plus particulièrement au Québec, un bon tableau de ce qu'ils vivent au quotidien et de ce que les fédérations sportives vivent elles aussi.
3031 Mme SANTERRE: Madame Lambert, est-ce que je peux vous demander de ralentir un peu? C'est difficile un peu pour les interprètes de vous suivre.
3032 Mme LAMBERT: Ah oui? Je vais ralentir.
3033 LA PRÉSIDENTE: Vous pouvez patiner à vitesse, mais pas parler à vitesse.
--- Rires / Laughter
3034 Mme LAMBERT: Je peux le faire en anglais si c'est plus facile pour tout le monde.
3035 LA PRÉSIDENTE: Oh, non, non. Les anglophones n'ont pas le droit de parler vite non plus.
--- Rires / Laughter
3036 Mme LAMBERT: Donc j'ai été très longtemps athlète dans un sport qui pour le Canada a rapporté plusieurs médailles au pays tout au cours de son existence, par exemple, dans les championnats du monde, et plus récemment dans les années 90 les médailles aux Jeux olympiques.
3037 On sait que le patinage de vitesse courte piste a fait son entrée officielle aux Jeux en 1992 et en trois Jeux olympiques c'est une discipline qui a remporté dix médailles pour le pays, dont un tiers des médailles d'or. Donc c'est quand même une discipline qui a bien fait. La seule autre qui se compare c'est dans les Jeux d'été et c'est l'aviron, si on parle des années 90.
3038 Pourtant, malheureusement, comme pour la plupart des sports amateurs, pour les fédération, pour la Fédération de patinage de vitesse courte piste autant que pour les athlètes, il n'y a pas beaucoup de reconnaissance si on déborde des deux semaines des Jeux olympiques.
3039 Il y a très peu de commanditaires intéressés contrairement à ce que parfois les gens que tout le monde vient frapper à nos portes, nous les athlètes, ou aux portes des fédérations. Ce n'est pas le cas. C'est loin d'être le cas. Même avec des agents et de très bons agents c'est tout le temps difficile d'aller chercher un petit peu de financement pour pouvoir survivre et participer à des compétitions.
3040 Et, évidemment, on sait que de développer un athlète de haut niveau c'est un travail de longue haleine. On ne fait pas ça en 3, 4, 5 ans. C'est plus du 10, 15 et même parfois 20 ans, et à la fin on n'est plus très jeunes, on n'habite souvent plus chez nos parents donc c'est un peu difficile de leur demander de défrayer tous les coûts de ce que ça prend pour former un athlète.
3041 Et parallèlement à ça, le sport devient de plus en plus coûteux, coûteux de voyager, coûteux l'équipement qui est de plus en plus sophistiqué ce qui fait qu'en bout de ligne les athlètes se ramassent souvent avec des factures assez élevées.
3042 En tant qu'athlète, moi, j'ai frappé à plusieurs portes. En tant que V-P. Marketing, j'ai frappé aussi à plusieurs portes et ce qu'on se fait dire tout le temps c'est que notre sport n'est pas assez souvent à la télévision. Entre les Jeux olympiques on va être à la télévision vraiment pas souvent. On est chanceux quand on l'est une fois ou deux par année et ça ce n'est pas assez pour créer un engouement.
3043 Notre Fédération internationale a mis sur pied un programme qui permet aux athlètes d'avoir sur leurs "suits" les logos de compagnies pour nous faciliter la tâche. Ça va bien quand on va frapper à une porte et qu'on dit, "Bien, tu peux mettre ton nom de compagnie, par exemple, Kellogg's...", bon c'est une compagnie américaine, alors ce n'est pas un bon exemple, mais "n'importe quel nom de compagnie sur notre costume". Par contre quand ils nous demandent combien il y a de spectateurs dans les gradins ou combien de fois on est allés à la télévision et que notre réponse c'est que les parents sont dans les gradins, donc 400 ou 500 personnes et à la télévision une fois dans l'année si on est chanceux, bien la porte se referme assez rapidement.
3044 Et quand on connaît les coupures gouvernementales -- vous êtes au courant autant que moi, dans le système sportif il y a présentement 38 sports qui sont encore subventionnés et la tendance est, bon à moins que M. Coderre fasse des miracles, la tendance c'est qu'il y en aura d'autres qui ne seront plus du tout subventionnés et chez les fédérations sportives qui le sont encore, il y a de sérieuses coupures et donc le financement maintenant -- et on comprend ces coupures-là. On ne se plaint pas parce que -- je veux dire on se plaint mais on comprend que quand il n'y a pas assez de sous pour aider dans le système de la santé ou dans l'emploi, on comprend que le sport ce n'est peut-être pas la priorité numéro un.
3045 Par contre on réalise que la seule façon pour les fédérations sportives et les athlètes de survivre, bien c'est de se retourner vers le privé et le privé bien ça passe par être diffusés un peu plus souvent.
3046 On a entre les mains un système sportif qui selon moi est en difficulté. Certains athlètes, comme je le disais tantôt, doivent payer pour aller en compétition, pour participer à des coupes du monde ou même à des championnats du monde et ça se fait dans plusieurs sports, notamment en escrime, en canot et kayak même en natation, ils doivent payer pour participer dans des compétitions. La natation c'est quand même un gros sport là, est aussi les autres pays eux continuent d'investir des sous et nous le système gouvernemental va donner des subventions on fonction des résultats, pas seulement les résultats, mais en grande partie en fonction des résultats des athlètes canadiens pour qui c'est de plus en plus difficile d'avoir des standard sur la scène internationale.
3047 La survie du sport amateur donc, selon moi, passe par le privé et l'appui du privé bien ça passe par une couverture télé. Évidemment en tant que vice-présidente aussi j'ai eu la chance de découvrir combien ça coûte mettre en ondes une émission parce qu'on s'est fait dire que oui, dans les différentes stations de télévision on allait les mettre en ondes mais il fallait que nous on absorbe les coûts de production.
3048 Quand on connaît les coûts de tournage pour une journée de compétition, bien vous comprendrez que les fédérations sportives souvent c'est soit ça ou un voyage pour les athlètes donc on ne le fait pas, on ne les met pas en ondes les compétitions à la télévision et c'est un cercle vicieux qui fait que les réseaux de télé n'ont pas non plus les budgets pour payer pour des compétitions qui ne vont pas nécessairement aller chercher des cotes d'écoute comme le football, comme le base-ball, comme le hockey et donc ils ne sont pas prêts à payer pour le faire souvent et pas de cote d'écoute on n'est pas en ondes, et si on n'est pas en ondes au n'aura jamais de cotes d'écoute. Donc c'est un cercle vicieux pour les athlètes et les fédérations sportives et on ne s'en sort pas et on croit -- moi je pense en tout cas fermement que la fusion entre les réseaux ça va permettre d'accroître le pouvoir d'achat, entre autres, CTV, Sportsnet, TSN et du côté francophone RDS et de diffuser plus d'événements et ce qui est bien important aussi d'acheter des événements qui se font outremer. Il y a quelqu'un d'autre qui en a parlé précédemment aujourd'hui.
3049 Les athlètes de haut niveau font des coupes du monde, des championnats du monde dans d'autres pays et c'est très rarement diffusé, ici au Canada, sauf dans les sports qui attirent beaucoup comme le ski alpin ou le patinage artistique. Si on pouvait avoir ça dans les autres sports, si on pouvait juste en avoir un petit peu plus, ça serait déjà un bon pas pour nous, pour nous aider à se financer.
3050 Et c'est encore plus vrai, je pense, si on va du côté de RDS et des athlètes québécois parce que c'est encore un plus petit marché et les athlètes québécois sont moins connus dans le reste du Canada. L'inverse est aussi vrai sauf que c'est moins conséquent pour les athlètes de l'Ontario ou du reste du pays d'être moins connus peut-être au Québec.
3051 Avec une couverture des Jeux du Québec, le développement à la base c'est certain va être mieux appuyé et c'est le système sportif au complet qui va en bénéficier. Même chose pour la diffusion des Jeux du Canada et du Défi sportif. Moi je sais bien que je suis passée par ce système-là, les Jeux du Québec d'abord en 77 -- ça fait longtemps -- les Jeux du Canada ensuite et ça a été un élément déclanchant dans ma décision de vouloir faire une carrière sportive parce qu'en tant qu'athlète c'est la première fois qu'on a un contact direct avec des jeux multi-sports, qu'on peut voir c'est quoi un petit peu les Jeux olympiques en plus petit et qu'on a le goût de les vivre au moins une fois.
3052 Et je vous parle aussi du Défi sportif parce que j'ai eu la chance de le couvrir en tant que journaliste et c'est un événement qui a été mis sur pied, qui est parti de rien et qui est devenu un gros événement au Québec parce que la télévision RDS, notamment, s'est embarquée là-dedans et c'est un événement multidisciplinaires pour les athlètes handicapés avec toutes formes d'handicaps possibles et maintenant on parle de 4 000 athlètes provenant de 11 pays et je ne pense pas que le défis sportif aurait réussi à grandir autant, aussi rapidement et à permettre à plein de petits jeunes dans plusieurs sports différents de pouvoir accès à au moins une compétition sportive et se valoriser par le fait qu'ils sont à la télévision si ça n'avait pas été justement que RDS a décidé d'embarquer parce que c'est évident que ce n'était pas pour les cotes d'écoute dans le cas du défi sportif.
3053 Mais l'investissement a été payant pour le défi sportif et aussi pour RDS je pense parce que maintenant les gens le connaissent cet événement-là et on l'a mis sur pied au Québec et c'est devenu quelque chose qui a fait beaucoup, beaucoup de chemin.
3054 Bref, en terminant, je vous dis moi je vois ça d'un très bon oeil parce que, bon, c'est sûr qu'on va encore miser sur des grosses propriétés mais on pense que par la bande on va pouvoir être plus souvent en ondes, ne serait-ce que si par exemple entre Sportsnet et TSN et ne veut pas se couper l'herbe sous le pied, peut-être qu'à un des deux postes on la mettra la "game" de football et peut-être qu'à l'autre poste on aura au moins la chance d'avoir une compétition, un championnat du monde ou une coupe du monde de sports amateurs et du côté francophone bien RDS aura le meilleur des deux mondes puisqu'ils pourront ramasser les deux émissions.
3055 Merci.
3056 LA PRÉSIDENTE: Nous vous remercions, Madame Lambert.
3057 Madame Noël.
3058 CONSEILLÈRE NOËL: Merci, Madame Lambert. Vous avez oublié de nous dire que vous aviez été la femme athlète de l'année du Y il y a un an ou deux, je pense. Si je me rappelle bien.
3059 Je pense que vous avez couvert le champs pas mal. Je voulais vous demander pourquoi l'approbation de la demande aiderait les jeunes athlètes et de quelle façon? Peut-être vous pouvez juste élaborer un petit peu là-dessus, s'il vous plaît?
3060 Mme LAMBERT: Absolument. Je pense que quand on est un -- ça va à deux niveaux. Ça va pour les jeunes qui commencent dans le sport. Le fait de voir plus souvent des gens dans d'autres sports que juste du hockey, du base-ball et du football ça peut aussi inciter les jeunes à vouloir faire quelque chose en parallèle. On sait aussi qu'on a énormément de problèmes -- peut-être que Jean-Guy Ouellette va en parler un petit peu plus tard -- mais énormément de problèmes au niveau de la santé, la tendance à faire de moins en moins de sports. Je pense qu'on a un rôle à jouer aussi à ce niveau-là. Je n'en ai pas parlé mais ce n'est pas juste important pour les athlètes qui sont dans le sport amateur. C'est important aussi pour les petits jeunes qui grandissent, qu'ils voient des modèles dans autre chose que juste les sports professionnels, et qu'ils aient le goût aussi de faire du sport.
3061 Et au niveau du développement, plus de commandites par plus d'événements à la télévision. Les Jeux du Québec on sait que ça ne rapportera jamais des sous pour un réseau diffuseur mais si, par exemple, les Jeux du Québec sont capables de s'autofinancer et de permettre à plus de jeunes et la même chose dans les autres provinces parce qu'il y a aussi des jeux en Colombie-Britannique et il y en, si je ne me trompe pas en Ontario et en Alberta. S'il y a plus de jeunes qui peuvent participer à ces jeux-là parce que ça grandit cet événement-là du fait que c'est à la télévision, en bout de ligne je pense que c'est la population, la société qui va être gagnante.
3062 Est-ce que ça répond à votre question?
3063 CONSEILLÈRE NOËL: Oui. Dans votre mémoire écrit vous faites référence au fait que du côté francophone le fait d'obtenir les propriétés de TSN et de Sportsnet signifie une programmation beaucoup plus diversifiée. Pouvez-vous élaborer un petit peu là-dessus?
3064 Mme LAMBERT: Absolument. On ne se le cache pas. Je pense que dans les réseaux, les cotes d'écoute au Québec sont plus petites. C'est un plus petit réseau RDS. Le fait d'avoir le pouvoir d'achat et de Sportsnet et de TSN, on peut traduire, ça ça coûte moins cher donc on peut avoir les deux propriétés du côté de RDS. Ça signifie moins de reprises et plus d'émissions en ondes avec le même pouvoir d'achat.
3065 Ce ne sont pas des budgets accrus alors je pense que pour RDS c'est vraiment -- la fusion c'est quelque chose de très positif.
3066 CONSEILLÈRE NOËL: C'est une aubaine.
3067 Mme LAMBERT: C'est une aubaine, c'est ça.
3068 CONSEILLÈRE NOËL: Etes-vous confiante que la consolidation de TSN, RDS, Sportsnet va être bénéfique à long terme pour le sport amateur au Canada, une fois que les bénéfices dont on a parlés ont été dépassés?
3069 Mme LAMBERT: Bien je crois que oui. J'ai l'impression que le sport amateur a besoin à un moment donné que quelqu'un y donne sa place quelque part, ce qui n'est pas nécessairement le cas présentement parce que justement quand je disais qu'il n'y a pas nécessairement les cotes d'écoute, ça c'est à bâtir.
3070 En Europe le sport amateur a de grosses cotes d'écoute. Je ne vois pas pourquoi ici au Canada ça ne pourrait pas être pareil. J'ai l'impression qu'on a juste besoin d'entrer, d'avoir une chance, d'avoir de "l'exposure" et ensuite il va y en avoir une demande pour ça. Les gens ne peuvent pas demander à écouter un sport qu'ils ne connaissent pas du tout. Si on les informe un peu plus et on en met un petit plus souvent en ondes, à court terme ou à moyen terme grâce aux bénéfices, entre autres, qui vont être réinvestis, je pense que ça va entr'ouvrir la porte et le fait que je vois ça d'un oeil très positif moi le fait que CBC, Radio-Canada, TSN et RDS pour les 10 prochaines années vont avoir les Jeux olympiques. Je pense que tous les réseaux vont vouloir mettre un petit peu de sous aussi pour le sport amateur.
3071 Donc au moins pour les 10 prochaines années, j'ai l'impression que le "timing" est bon pour lancer un petit peu la programmation en sport amateur.
3072 CONSEILLÈRE NOËL: Maintenant, vous indiquez toujours dans votre intervention écrite que la transaction permettrait de mettre en ondes plus d'événements sportifs et augmenterait la connaissance du public à autre chose que le hockey et le base-ball. Je pense que vous y avez fait référence dans votre présentation orale aussi.
3073 Alors pouvez-vous nous indiquer, d'après vous, dans les engagements qui ont été pris par la requérante quels sont les éléments qui permettraient justement de donner une "exposure" à d'autres sports que le hockey, le base-ball et le football?
3074 Mme LAMBERT: Bien le fait que d'avance il y a quand même une vocation pour ces réseaux-là d'assumer un minimum de production en terme de sport amateur, le fait qu'il va y avoir un budget -- dans le cas de RDS je crois que c'est 2,5 millions à investir dans la production et dans la diffusion d'événements de sport amateur. Ils vont comme être obligés de le mettre là. J'ose croire que ça va quand même permettre d'amener des produits en ondes qu'on n'a pas nécessairement.
3075 Mais je pense que vous, vous avez en tant -- le CRTC a peut-être un rôle à jouer là-dessus dans le sens que vous allez remettre des consignes aussi. Si la vente a lieu vous pouvez, par exemple, dire que, je ne sais pas moi, le groupe réseau, appelez-le comme vous voulez, aura des engagements minimum encore plus hauts à faire respecter en terme de, par exemple, qu'on soit peut-être obligés de couvrir les compétitions internationales qui se passent dans le Canada, à tout le moins, les compétitions comme des championnats du monde ou des coupes du monde. Il n'y en a pas tant que ça qui sont faites au Canada présentement. Elles ne sont pas toutes couvertes dans les différentes disciplines. Je pense que ça, ça pourrait donner un bon coup de main et aussi dans la couverture des jeux, comme les Jeux du Canada, de mettre peut-être un petit plus -- pas tout le temps, par exemple, dans les Jeux d'hiver, pas mettre autant de temps à un sport comme le hockey et à en mettre un petit plus à d'autres sports.
3076 Il y a moyen que vous fassiez des recommandations qui peuvent encore accentuer ça, mais juste le fait d'avoir un 2,5 -- et je pense que du côté anglais je ne sais pas les chiffres mais c'est au moins l'équivalent, sinon plus. Bien ça va ouvrir la porte à un nouveau sport qu'on ne voit jamais en ondes.
3077 CONSEILLÈRE NOËL: Je n'ai pas d'autres questions. Je vous remercie beaucoup.
3078 LA PRÉSIDENTE: Nous vous remercions, Madame Lambert. Vous avez bien patiné, même sans vos patins.
3079 Mme LAMBERT: Merci.
3080 LA PRÉSIDENTE: Merci.
3081 Madam Secretary.
3082 Mme SANTERRE: J'inviterais maintenant les productions Charade Inc., Monsieur Pierre Charade à présenter son intervention.
INTERVENTION / INTERVENTION
3083 LA PRÉSIDENTE: Bonjour.
3084 M. CHARADE: Bonjour.
3085 Moi je suis ici, je suis un petit, petit producteur et j'écoutais Nathalie qui disait tout à l'heure qu'on a besoin "d'exposure" pour les athlètes et ainsi de suite.
3086 Alors moi j'ai débuté voilà 20 ans, il y une compagnie qui est venu me voir, la compagnie Sealtest qui investissait beaucoup dans le ski, dans le développement du ski au Québec, et ils me disent, "Pierre, toi t'es un vendeur et nous on vend de la crème glacée mais on investit beaucoup dans le ski, 300 000 et on n'a pas `d'exposure' du tout". Il y a 20 ans il n'y avait pas grand-chose.
3087 Alors j'ai dit, "Je vais faire des émissions de télé". Ils m'ont dit, "Tu vas mettre ça où?". Il y avait Radio-Canada, il y avait Télémétropole. Bon. Je suis allé voir, ils ont dit, "Non, on est pas intéressés à ça". Bon, il y avait TVSQ qui existait. Alors je suis allé voir TVSQ et j'ai dit, "Si je vous produit des émissions sur le ski acrobatique, sur le ski de fond et ainsi de suite, est-ce que vous allez mettre ça en ondes?". Ils ont dit, "Oui, pas de problème, dix fois dans la semaine même". Parfait. Alors j'ai produit ça, j'ai trouvé des commanditaires qui étaient les normaux aux compétitions et puis on a mis ça en ondes et tout le monde était content.
3088 Alors ça m'a donné une idée de créer un magazine sur le ski pour faire découvrir les pentes de ski au Québec et ainsi de suite. Et j'ai parti le Magazine du ski. Je suis allé voir Quatre-Saisons par le département des ventes, parce que la programmation a dit, "On n'est pas intéressés". Alors les ventes ont dit, "Oui, parce que j'ai les clients pour ça. Ils vont acheter chez vous si tu mets un show de même en ondes". "Ah, bien, c'est une bonne idée". Alors je l'ai produit. Mais ils me donnaient 4 heures de l'après-midi comme diffusion. On sait qu'à 4 heures de l'après-midi les skieurs sont sur les pentes de ski, ça fait que personne ne regardait, je ne pouvais pas vendre.
3089 Alors ça a duré deux ans, trois ans puis on l'a toffé et là RDS s'en venait. Alors j'ai été voir RDS et j'ai dit, "Je vais vous faire un magazine de ski". Ils ont dit, "Oui, c'est une bonne idée, on va mettre ça en ondes". Mais eux autres ils me passaient l'avantage pour aller voir mes annonceurs, c'est qu'ils m'en passaient cinq puis six fois dans la semaine. Bien l'annonceur il disait, "C'est quoi ça RDS?". Bien je dis, "Bien TVSQ, tu te rappelles, le 25?". Alors il dit, "Ah, c'est le câble". Voilà 10 ans le câble ça n'existait pas beaucoup. Bon j'ai dit, "Il passe 5 fois dans la semaine. Il passe le soir, il passe l'après-midi. Il y a des chances que les clients le regarde". Ils ont dit, "Ah bien, c'est une idée".
3090 Alors c'est comme ça que ça a commencé et puis éventuellement j'ai fait Golf Mag sur le même concept que le ski et le monde l'utilise plus que l'exercice et ainsi de suite. Comme je vous dis, moi je suis un petit producteur. Je produis 4 séries de télévision et les résultats ont été très, très bien. En dix ans, je me débrouille assez bien et il faut prendre de l'expansion alors moi en français le marché est petit, la commandite c'est petit aussi alors j'ai décidé de le faire en anglais parce qu'il y a beaucoup d'intérêt. Exemple, les terrains de golf au Québec. Il y a beaucoup d'Ontariens qui viennent jouer à Tremblant, au Mont-Ste-Anne et ainsi de suite.
3091 Alors je suis allé voir Sportsnet quand ils sont venus au monde et j' ai dit, "J'aurais une série que je pourrais vous produire d'aérobie et non pas pour le golf", parce qu'ils en ont beaucoup et le ski il y en avait une déjà à TSN, alors l'aérobie. Ils ont dit, "Oui, c'est intéressant, un produit canadien, on le prend". Alors ils l'ont pris et on est rendus là à ce point-ci.
3092 Alors c'est pour ça que si ça se produit entre RDS, TSN et Sportsnet, pour moi c'est un plus. C'est comme je vous disais dans le brief que je vous ai envoyé, j'ai commencé avec trois employés, deux là-dessus ce sont mes filles et on est rendu à 30 maintenant pour certaines productions. Et puis c'est tout en "barter" en passant, parce que le "barter" on ne l'a pas inventé, mais disons qu'on connaissait un peu mais il y a RDS qui nous aide beaucoup. Même moi dans mon cas à moi je ne suis tout indépendant, l'équipement à l'occasion, les cassettes, le montage et puis l'argent et ainsi de suite.
3093 Alors ça a été très bien pour moi. J'en suis rendu là.
3094 LA PRÉSIDENTE: Nous vous remercions, Monsieur Charade.
3095 Monsieur Demers.
3096 CONSEILLER DEMERS: Quelques questions, Monsieur Charade.
3097 Alors c'est intéressant ce que vous nous racontez. Pourriez-vous mettre ça en perspective, je ne dirais pas négative. Mais qu'est-ce qui arriverait si on n'approuvait pas cette transaction qui est devant nous -- dans votre perspective à vous?
3098 M. CHARADE: Bien disons moi étant déjà diffusé à Sportsnet, pourquoi j'ai choisi sportsnet aussi parce que TSN avait déjà une émission d'aérobie qui s'appelle Reebok Television Workout. Alors à Sportsnet c'est régional. Mais Sportsnet me dit, "On va mettre ton aérobie locale partout au Canada mais à midi", ce qui était excellent pour moi, mais pour le golf et le ski c'est régional et les gens qui veulent -- et comme je vous dis, ce sont les gens d'Ontario qui viennent skier à Tremblant et ainsi de suite et pour le golf qui viennent jouer à Tremblant et à Saint-Anne, alors moi ce dont j'ai vraiment besoin c'est régional.
3099 Mais si Sportsnet ne le prend pas, bien là je pourrais avoir aussi un "pushing" à partir de RDS pour aller sur TSN. Ça fait que ça ne sera pas dramatique si ça n'est pas accepté, mais j'aimerais autant juste négocier à partir de RDS, "Je suis déjà là depuis dix ans avez vous, bien placez moi à une autre place en anglais". Je vais bénéficier de leur "pushing".
3100 CONSEILLER DEMERS: C'est là les activités que vous faites en sports. Vous n'êtes pas à Radio-Canada.
3101 M. CHARADE: Non, non, j'ai quatre séries. Encore là Radio-Canada j'aurais pu y aller mais c'est l'heure de diffusion qui nous donne. Il n'y a pas un client -- parce que c'est autofinancé -- il n'y a pas un client qui va dire, "Pierre, ils vont de passer à 4 heures de l'après-midi. Oublies ça là". Moi j'ai besoin de samedi à midi, des heures comme ça. Ça je me débrouille bien avec ça.
3102 Si on regarde les commanditaires qui sont avec moi, c'est BMW du Canada depuis dix ans et eux autres ils ne viendraient pas là si j'étais -- bien, à TQS ils ne seraient pas venus, mais à RDS ils sont venus.
3103 CONSEILLER DEMERS: Je n'ai pas d'autres questions, Monsieur Charade.
3104 Merci, Madame la Présidente.
3105 LA PRÉSIDENTE: Nous vous remercions, Monsieur Charade, de votre présentation.
3106 M. CHARADE: Merci.
3107 LA PRÉSIDENTE: Madame la Secrétaire.
3108 Mme SANTERRE: Nous entendrons maintenant l'intervention de Sports-Québec avec M. Jean-Guy Ouellette.
INTERVENTION / INTERVENTION
3109 LA PRÉSIDENTE: Bonjour, Monsieur Ouellette.
3110 Je pense que nous vous avons vu dernièrement au renouvellement de Radio-Canada, je crois.
3111 M. OUELLETTE: C'est ça.
3112 LA PRÉSIDENTE: Allez-y.
3113 M. OUELLETTE: Madame la Présidente et les membres de la Commission.
3114 Mon nom est Jean-Guy Ouellette et dans ma vie professionnelle je suis professeur à l'université. Je suis ici à titre de bénévole. Comme le sport amateur fonctionne principalement autour de bénévolat, comme président de Sports-Québec.
3115 Donc Sports-Québec est une corporation privée qui regroupe 67 fédérations sportives au Québec et cette corporation appuie la demande de transfert de propriété de NetStar à CTV. Notre corporation assume, notamment, la gestion du programme des Jeux du Québec. C'est une programme de coordination sportive et la coordination du Gala Sports-Québec qui est une tribune de reconnaissance de l'excellence des meilleurs athlètes et artisans du sport.
3116 Quant à nos fédérations membres, elles participent annuellement à la réalisation d'événements majeurs en sport, que ce soit du niveau local au niveau international. Est-ce que ça va là dans le débit pour la traduction?
3117 Sports-Québec représente plus de 800 000 personnes, athlètes, officiels, entraîneurs, bénévoles qui sont directement associés à l'ensemble de ces événements. Pour tous ces intervenants, la présente demande de transfert constitue un atout majeur. Dans un contexte où les besoins de promotion du sport amateur sont criants, l'intervention des médias en cette matière est fondamentale et je pense que Mme Lambert tout à l'heure en a fait état, si vous voulez, avec brio.
3118 Or force nous est de constater que les réseaux conventionnels ont effectué, au cours des dernières années, des fonctions importantes dans leur couverture du sport amateur. J'étais devant cette même Commission, Madame la Présidente, il y a à peine six mois pour dénoncer l'absence du sport amateur à la Société Radio-Canada et des effets néfastes d'une telle situation.
3119 Le sport amateur a besoin de cette nouvelle vitrine qui permettra non seulement une plus grande visibilité aux athlètes de très haut niveau mais également à ceux et celles qui sont sur le point de le devenir.
3120 Prenons l'exemple des Jeux du Québec. Chaque finale provinciale était traditionnellement retransmise par la Société Radio-Canada. Depuis 1997, elle s'est retirée de la télédiffusion et nous avons dû avoir recours à la télévision privée pour obtenir une télédiffusion des finales de 97 et de 99. Lors des dernières finales provinciales hiver -- parce qu'il y a les Jeux d'été et les Jeux d'hiver -- à Trois-Rivières, il nous a été impossible de trouver les fonds nécessaires pour assurer la production.
3121 A Alma, aux Jeux d'été qui ont eu lieu au mois d'août, les coûts de production n'ont pas été couverts entièrement par les commanditaires, même si nous avions le temps d'antenne fourni gratuitement par le groupe TVA et ce pour une couverture de quatre heures en différé.
3122 La demande de transfert de propriété vient non seulement palier à ce genre de situations, mais plus encore elle ouvre de nouveaux horizons au sport amateur, autant aux athlètes qu'aux milliers d'intervenants en sport.
3123 L'engagement annoncé par RDS, notamment en ce qui concerne la télédiffusion des Jeux du Québec, aurait des retombées favorables et se traduirait par des bénéfices tangibles. La portée et le niveau de couverture qui est prévu -- et l'on parle de 15 à 20 heures sur les jeux au lieu de quatre, dont les cérémonies d'ouverture et de clôture en direct, et ce en plus des promotions pré et post-jeux -- fourniraient à ce programme un coup de barre important dans le repositionnement des Jeux du Québec à l'aube de ce nouveau millénaire.
3124 Nous sommes conscients que le niveau de couverture proposé exigera un niveau de ressources accrues et ne pourra se rentabiliser selon la preuve conventionnelle d'une stricte rentabilité financière.
3125 En conséquence, d'autres critères auront à être considérés dans un projet d'entente et nous nous réjouissons déjà des retombées qui en découleraient s'il recevait votre aval.
3126 Pour nous plusieurs éléments militent en faveur de ce projet, notamment un accès amélioré à un réseau conventionnel, une diffusion nationale élargie. Je ferai peut-être une petite parenthèse ici pour faire la nuance entre la télédiffusion que nous avons sur les réseaux anglais et sur le réseau français. J'écoutais ce matin un représentant de CBC et lorsqu'on était venus témoigner ici, je pense qu'il y a des différences fondamentales. Le réseau Radio-Canada actuellement n'a aucune couverture du sport amateur au-delà des nouvelles sportives.
3127 Donc pour nous lorsqu'on parle d'une diffusion nationale élargie ça tient compte du fait qu'actuellement il n'y a à peu près rien sur le sport amateur au réseau Radio-Canada. Le réseau TVA qui est maintenant national n'a à peu pas de programmation sportive, et TQS est une télévision qui est régionale.
3128 Donc aussi dans les éléments qui militent en faveur on parle d'un accroissement du nombre d'événements couverts, un temps d'antenne accru permettant la diffusion de différentes facettes du sport amateur. Actuellement nous avons déjà des ententes avec RDS pour la télédiffusion annuelle de notre Gala Sports-Québec et ça se fait -- nous en sommes à la 27e édition -- ça se fait en direct, de même que plusieurs compétitions du sport amateur où selon les termes du présent projet les événements actuellement couverts bénéficieraient d'une plus grande diffusion et de nouveaux sujets qui pourraient être abordés.
3129 Ces nouvelles vitrines supporteraient plus efficacement le système sportif québécois et canadien en créant une plus grande stabilité -- et je fais l'emphase sur stabilité parce que pour nous c'est très important. Les organismes qui doivent autofinancer et les activités et la télédiffusion, la stabilité qu'on n'ait pas à recommencer toujours à chaque année lors de négociations serait, disons, grandement bienvenue et ce de la base jusqu'à l'excellence.
3130 Dans le présent projet, les Jeux du Québec ne seraient pas uniquement couverts pour 2001, mais bien en 2003 et en 2005. Ceci nous permettrait aussi d'avoir une ouverture potentielle à CTV, au réseau anglais pour l'est du Canada, chose que nous n'avons jamais réussi à obtenir dans le passé.
3131 Donc bref, pour l'athlète en développement autant ses parents et amis, il s'agirait d'une source de stimulation inestimable.
3132 Finalement, dans une dynamique où les différentes organisations sportives amateurs sont responsables de leur financement, et ce dans un contexte de vive concurrence, toute amélioration de la visibilité assurée aux événements et accomplissements sportifs sera indéniablement porteuse de retombées auprès des entreprises privées sollicitées comme commanditaires.
3133 C'est principalement pour toutes ces raisons que Sports-Québec souscrit à la création d'un nouveau groupe de télédiffuseurs orienté vers une meilleure livraison du sport amateur.
3134 Il me fera plaisir de répondre à vos questions.
3135 Merci.
3136 LA PRÉSIDENTE: Nous vous remercions, Monsieur Ouellette.
3137 Madame Noël.
3138 CONSEILLÈRE NOËL: Merci, Monsieur Ouellette.
3139 Dans votre intervention vous nous avez dit que la demande constitue un atout majeur spécialement dans un contexte où les besoins de promotion du sport amateur sont criants.
3140 Avez-vous des exemples à nous donner?
3141 M. OUELLETTE: Des exemples, je regarde la télévision -- si on fait l'exception de RDS actuellement -- francophone, on n'a uniquement du sport professionnel. Si on regarde les nouvelles du sport, on a 30 minutes, exemple dans la plupart des réseaux il y a 28 minutes de sport professionnel. Donc le sport amateur a besoin, je pense de vitrines, pour permettre à ce que ceux qui ont des aspirations dans certains sports à devenir des professionnels mais je pense qu'il y a d'autres types de pratiques qui méritent, si vous voulez, qu'on présente leurs exploits à travers le petit écran et ça je pense -- on a les Jeux du Québec, ce n'est pas de l'excellence, ce sont des athlètes de relève, ce sont des jeunes entre 12 et 15 ans, c'est un élément de motivation.
3142 Beaucoup de gens, comme Mme Lambert l'a mentionné tout à l'heure, après ça ont d'autres motivations. Ce sont les Jeux du Canada, après ce sont les équipes nationales. Donc je pense qu'il faut offrir à nos jeunes de demain des modèles, si vous voulez, qu'ils se reconnaissent aussi à travers ces modèles et qu'ils puissent réaliser leurs rêves. Certains ça se termine aux Jeux du Québec, d'autres aux Jeux du Canada, d'autres peuvent accéder, à cause de leurs aptitudes et de leur attitude bien souvent, à d'autres niveaux de réalisation.
3143 CONSEILLÈRE NOËL: Maintenant, vous avez mentionné que la transaction proposée contribuerait à un accès amélioré à un réseau conventionnel. Je suppose que vous parlez du réseau de CTV.
3144 M. OUELLETTE: Bien les réseaux conventionnels pour nous c'est les grands réseaux qui ne sont pas sur le câble. On pense à Radio-Canada, on pense à CTV, on pense à TVA. Ce sont les réseaux conventionnels qui du côté francophone actuellement il n'y a pas de présence, si vous voulez, actuellement par aucun de ces réseaux-là dans le sport amateur.
3145 Donc ça nous permettrait aussi d'avoir accès à travers CTV à un réseau conventionnel et non pas juste câblé.
3146 CONSEILLÈRE NOËL: C'est ça. C'est à travers CTV que vous auriez accès à un réseau conventionnel si la transaction est approuvée, mais est-ce que vous pensez qu'éventuellement ça vous donnerait accès à d'autres réseaux conventionnels?
3147 M. OUELLETTE: Non, mais déjà au Québec qui est une réalité disons peut-être différente à bien des points de vue sur le plan de la langue, ça donnerait accès à un réseau conventionnel de langue anglaise potentiel qui nous permettrait, je dirais, de mieux communiquer avec les anglophones à travers le sports à travers le Québec, parce qu'actuellement je pense qu'il y a des lacunes importantes de ce côté-là.
3148 CONSEILLÈRE NOËL: Je vous remercie.
3149 Ensuite vous parlez de production diversifiée sur le sport amateur. Pouvez-vous me donner des exemples de ça?
3150 M. OUELLETTE: Prenons juste les Jeux du Québec. Actuellement ce qu'on a eu historiquement c'est quatre heures, que ce soit avec la Société Radio-Canada ou avec TVA où en est en différé et là on a, si vous voulez, comprimé à l'intérieur de quatre heures, mettons avec les Jeux d'hiver 14 disciplines qui s'échelonnent sur toute une semaine de compétition.
3151 Donc ça si on a une couverture plus étendue et qu'on est à 15-20 heures ça va nous permettre de voir d'autres facettes, d'aller probablement regarder des délégations régionales, d'aller regarder un petit peu le vécu de certains athlètes, comment ils sont arrivés là dans leur milieux. Donc ça nous amènerait une diversification du produit plutôt que d'arriver comprimés dans une heure où on nous montre une petite conséquence, où on nous montre deux délégations qui rentrent plutôt que les 18 qui sont présentes et que les parents appellent et, "Oh, on n'a pas vu notre délégation, qu'est-ce qui se passe?".
3152 Donc je pense que ça permettrait de couvrir beaucoup plus de dimensions qui sont liées à la pratique sportive et d'en faire aussi un élément dans le cas des Jeux du Québec qui est un élément culturel important. Parce que ça c'est multi-sports, ça permet aux gens d'avoir un sentiment d'appartenance à une région, de côtoyer d'autres jeunes dans d'autres disciplines parce qu'ils sont là sur place et ils peuvent aller encourager le petit bonhomme qui joue au base-ball et aller voir ceux qui sont au tennis, ceux qui sont en athlétisme, et donc ça ça leur ouvre aussi d'autres fenêtres.
3153 Donc dans ce sens-là une télévision qui nous offrirait une plage horaire plus importante, et aussi ce n'est pas uniquement l'ampleur de la plage, mais aussi le moment dans la journée où ça se situe. Nous à TVA on était dans le milieu de l'après-midi le samedi et le dimanche. Lorsqu'on regarde ça serait des émissions qui pourraient avoir lieu d'une demi-heure mettons en "prime time" à 6 heures, 7 heures où là il y a clientèle, si vous voulez, qui est plus importante qui peut regarder, si vous voulez, nos jeunes et leurs prouesses.
3154 CONSEILLÈRE NOËL: Une meilleure couverture.
3155 M. OUELLETTE: Oui.
3156 CONSEILLÈRE NOËL: Vous avez parlé en terminant votre présentation de la stabilité et puis vous avez mentionné qu'un des éléments de stabilité c'est que vous n'auriez pas à renégocier des contrats à tous les ans.
3157 Est-ce qu'il y a d'autres facettes que vous voyez à cette plus grande stabilité si la transaction était approuvée?
3158 M. OUELLETTE: Mais la stabilité c'est que si on pouvait arriver à avoir des plages horaires à l'intérieur de la programmation qui nous permettent de rendre accessible le produit du sport amateur à la population en général, à tout le moins la population qui est intéressée à regarder ces choses-là, moi je pense que ça serait très important pour nous.
3159 Mais c'est sûr qu'à un moment donné quand on regarde toute la question de l'accessibilité de la télévision, on a eu beaucoup de difficulté nous à négocier des ententes avec les réseaux pour les Jeux d'été et d'hiver. Oui, on a passé à travers TQS qui les a faits en 97 et on est revenus les voir et ils ont dit, "Non, on n'est pas intéressés". Là on est allés voir Radio-Canada, ils ont dit, "Ça ne rentre pas dans notre programmation". Bon, et cetera, et cetera. Donc finalement -- et là si on nous dit oui, c'est pour les Jeux 2001, ça fait notre affaire, on regarde les cotes d'écoute, ça ne fonctionne pas, on dit, "Bien, on recommence". On recommence continuellement.
3160 Donc quand on veut nous -- on parlait des commanditaires tout à l'heure et on parlait aussi des candidatures des villes, l'intérêt dit, "Bon, vous n'avez pas de télévision, il n'y a pas de visibilité". Le commanditaire, "Bon, vous n'avez pas d'entente avec un réseau, on ne sait pas ce qui va arriver. On vient vous vendre notre produit mais on ne sait pas l'impact médiatique qu'on va pouvoir vous offrir.
3161 Donc la stabilité dans ce sens-là, si on peut avoir deux ou trois jeux, si on est quatre, cinq ans en avant, bien là ça nous permet de concentrer nos efforts ailleurs plutôt que de recommencer continuellement. On n'a pas fini l'événement qu'on est déjà à renégocier pour l'événement suivant. Pendant qu'on fait ça, on ne s'occupe pas de l'organisation sportive, on ne s'occupe pas des autres facettes et comme je vous le dis on est dans un monde de bénévoles. N'oubliez pas ça non plus. On a un peu de permanence qui nous supporte, mais on est principalement des bénévoles qui travaillent à essayer d'encadrer nos jeunes le mieux possible.
3162 CONSEILLÈRE NOËL: Je connais ça, j'en ai fait un peu dans ma vie.
3163 Vous avez parlé de critères, d'autres critères dans une entente qui serait à négocier avec RDS. Est-ce que vous pouvez élaborer là-dessus?
3164 M. OUELLETTE: Bien, je pense bien que quand on regarde l'expérience récente de vendre à des commanditaires du temps d'antenne pour les Jeux du Québec, on s'aperçoit assez rapidement que les compagnies de plus en plus ont une approche, si vous voulez, très mercantile. C'est quoi les retombées et les cotes d'écoute, et cetera.
3165 Donc dans ce sens-là je ne crois pas que le produit du sport amateur, à quelques exceptions près dans certains sports, qu'on puisse en arriver à cet équilibre-là. Donc il faut qu'il y ait une complicité entre un réseau ou un télédiffuseur qui lui accepte de dire, "Oui, moi je vais faire ma part, si vous voulez, face à cette problématique-là, et je ne m'attends pas...". Il y a un investissement, je pense du réseau, qui dit, "Moi je suis prêt à absorber, si vous voulez, un peu du déficit de ces événements-là parce que ça fait partie d'une contribution plus large" et aussi qu'il y a un lien avec d'autres activités qui sont plus rentables que ce soit le sport professionnel ou des événements médiatisés ou plus facilement, disons, vendables sur le plan du marché.
3166 Je pense à des choses comme le patinage artistique et la gymnastique. Il y a un certain nombre de discipline qui sont connues qui pour elles s'est plus facile un autofinancement. On pense à quatre, cinq au Canada. Les autres, elles, sont en perte de vitesse depuis dix ans au niveau de leur commandite.
3167 Donc cet équilibre-là nous qu'on recherche sur le plan sportif d'offrir à ceux qui n'ont peut-être pas un produit aussi intéressant pour le commanditaire une vitrine quand même pour la population.
3168 CONSEILLÈRE NOËL: Une dernière question, Monsieur Ouellette.
3169 Au-delà de la période initiale d'engagement de RDS pour la couverture des Jeux du Québec, pensez-vous qu'il sera créé un momentum pour faciliter vos négociations au-delà de 2005 par exemple?
3170 M. OUELLETTE: Je pense qu'on est un peu dans un cercle vicieux. Nous ce qu'on demande c'est l'opportunité d'être présents sur une base un peu plus permanente et là je pense qu'on pourra démontrer à ce moment-là l'importance relative de ces événements-là du sport amateur et qu'il aura sa place. On n'aura pas à la négocier. Je pense qu'on va le démontrer.
3171 Mais ce qu'on veut c'est d'obtenir, si vous voulez, qu'on nous ouvre la porte, qu'on nous permettre d'entrer et on la fera notre place. Et là-dessus moi je suis très confiant et bien souvent dans les mondes médiatiques ce qu'on voit -- si vous regardez le journal, vous regardez la télévision, je l'ai dit tout à l'heure, 99 pour cent ont dit que ça n'est rien que ça qui intéresse la population, mais comment voulez-vous qu'on intéresse la population si on ne nous présente pas un autre produit.
3172 Et c'est un peu ça. On est dans cette dynamique-là actuellement. Moi je veux bien qu'il n'y ait rien qu'une sorte de savon, mais s'il y en a d'autres et qu'on ne donne l'opportunité de le connaître bien là peut-être qu'on aura des résultats différents au niveaux des fameuses cotes d'écoute.
3173 Mais nous on n'est pas dans, je dirais, les affaires des cotes d'écoute. Nous on est là pour s'assurer qu'il y a une vitrine de nos jeunes sur la télévision et je pense que l'opportunité qui se présente actuellement en est une qui est excellente, et qui est remplie d'espoir pour nous.
3174 CONSEILLÈRE NOËL: Je vous remercie.
3175 LA PRÉSIDENTE: Merci, Monsieur Ouellette.
3176 M. OUELLETTE: Merci.
3177 LA PRÉSIDENTE: Oh, pardon, ne partez pas. M. Demers à une question. Je regrette, Monsieur Demers.
3178 CONSEILLER DEMERS: Excusez, Monsieur Ouellette de vous garder encore.
3179 J'ai été impressionné par le chiffre de 800 000 personnes. Je pense que pour RDS ça devrait être un chiffre qui les impressionne. On a plutôt parlé -- je ne sais pas si vous étiez ici dans les deux derniers jours?
3180 M. OUELLETTE: Comme bénévole, je ne peux pas être partout.
3181 CONSEILLER DEMERS: C'est correct. Alors dans ce métier-ci, nous autres on n'est pas bénévoles, dans d'autre chose peut-être, mais on ne nous a pas parlé de chiffres aussi élevés quant à une cote d'écoute pour le type de...
3182 M. OUELLETTE: Moi ce n'est pas une cote d'écoute.
3183 CONSEILLER DEMERS: Non, non. Je comprends bien. Mais on nous a parlé que le style de vos jeux, prenons cet exemple-là, n'était pas quelque chose qui attirait beaucoup la clientèle de la télévision. Mettons que j'ai déduit ça moi des réponses à certaines questions.
3184 Mais ce que vous, vous envisagez dans la transaction qui est présentée devant nous ici, si je comprends bien, c'est que vous seriez en direct sur RDS. Est-ce que c'est une des parties de la demande qui est devant nous qui vous intéresse le plus?
3185 M. OUELLETTE: Deux choses. Le 800 000 dont je vous parle c'est notre "membership". Ce ne sont pas les gens qui regarde la télévision dans des événements.
3186 CONSEILLER DEMERS: Mais peut-être des gens très intéressés à ce que vous devez faire.
3187 M. OUELLETTE: Potentiellement. Ça ce sont des gens qui ont leur carte, qui sont inscrits comme athlètes, comme entraîneurs, comme administrateurs dans un organisme que ce soit le football, le hockey ou autre chose.
3188 Dans le projet qui est présenté ici en terme de ré-investissement ou de retombées, si vous voulez, du projet qui est présenté c'est qu'on parle d'investir tout près de deux millions sur la base des six prochains Jeux du Québec donc ce qui veut dire à peu près 400 000 $ par jeux, ce qui amènerait, si vous voulez, un niveau de couverture qui est beaucoup plus important. Qu'on pense à des cérémonies d'ouverture qui durent deux heures et de clôture, ça fait quatre heures. Il reste encore une dizaine d'heures où on va présenter des facettes liées à la performance ou à la vie des athlètes qui participent ou des entraîneurs ou des officiels.
3189 Donc ce qu'on regarde ici c'est pas seulement un nombre d'heures accrues, mais c'est la nature des émissions et, si vous voulez, le niveau qui va être couvert lors de ces jeux-là. On n'aura pas juste, si vous voulez, cinq minutes d'un match de basket-ball ou de volley-ball ou des résultats. On va aller au-delà, si vous voulez, de la performance sportive pour regarder l'être humain qui est en arrière de cette performance-là, qui est en développement et qui provient d'un peu partout et de toutes les classes socio-économiques et de toutes les régions géographiques de la province.
3190 Donc c'est dans ce sens-là que pour nous le niveau et la portée ou l'ampleur de la couverture qui est proposée va permettre, si vous voulez, de projeter une image beaucoup plus complète et beaucoup plus diversifiée des Jeux du Québec.
3191 CONSEILLER DEMERS: Et actuellement ce n'est pas quelque chose qui est sur le réseau RDS par un type d'exemple?
3192 M. OUELLETTE: Non. Ça ne l'est pas aucunement. RDS, au-delà, de la nouvelle ne couvre pas les Jeux du Québec actuellement.
3193 CONSEILLER DEMERS: J'ai cru vous entendre dire qu'il n'y avait pas beaucoup à RDS de sport amateur. Est-ce que c'est...
3194 M. OUELLETTE: J'ai dit à l'exception de RDS.
3195 CONSEILLER DEMERS: Ah, bon.
3196 M. OUELLETTE: J'ai mentionné Radio-Canada, j'ai mentionné TVA, j'ai mentionné TQS. C'est la réalité probablement différente de CBC anglais et de Radio-Canada français où à CBC en anglais on a beaucoup plus de couverture du sport amateur que Radio-Canada français où il n'y en a pas actuellement.
3197 CONSEILLER DEMERS: A RDS votre option quasiment d'un expert en sport amateur, c'est qu'il en existe actuellement.
3198 M. OUELLETTE: Oh, il y en a beaucoup. Qu'on regarde des choses comme récemment vous avez la Ligue de hockey junior du Québec, ce n'est pas une ligue professionnelle ça. Bon, les matches sont retransmis. Il y a des événements soit qui viennent de TSN ou qui sont spécifiquement avec RDS les Championnats canadiens universitaires, il y a beaucoup de compétitions amateur qui sont présentées actuellement au niveau RDS.
3199 CONSEILLER DEMERS: Et si j'ai bien compris jusqu'ici RDS n'a pas retransmis vos jeux en direct ou en différé?
3200 M. OUELLETTE: Disons que ça c'est un nouveau projet.
3201 CONSEILLER DEMERS: Jusqu'ici là?
3202 M. OUELLETTE: Jusqu'ici ils ne le faisaient pas et là ce qu'ils ont sur la table dans le projet ici qui vous est présenté c'est un engagement à le faire pour les trois prochaines éditions des Jeux ou les six prochaines finales et il y a un ordre de grandeur aussi financier qui serait quatre fois la couverture qu'on a actuellement, juste en termes financiers.
3203 CONSEILLER DEMERS: Merci, Monsieur Ouellette.
3204 LA PRÉSIDENTE: Merci, Monsieur Ouellette.
3205 Nous allons maintenant prendre une pause de dix minutes après quoi nous entendrons les trois derniers intervenants et après quoi nous prendrons une pause de 15 minutes avant d'entendre la requérante en réplique.
3206 So we will take a 10-minute break now. We will then hear the last three intervenors after which we will take another break of 15 minutes before we hear the applicant in reply.
--- Recess at 1552 / Suspension à 1552
--- Upon resuming at 1612 / Reprise à 1612
3207 THE CHAIRPERSON: Madam Secretary.
3208 Mme SANTERRE: Merci, Madame la Présidente.
3209 Maintenant nous entendrons l'intervention par Bell ExpressVu. Merci.
3210 LA PRÉSIDENTE: Bonjour, Messieurs Gourd, Frank, Elder.
3211 Go ahead when you are ready.
INTERVENTION / INTERVENTION
3212 M. GOURD: Madame la Présidente et membres du Conseil, bonjour.
3213 Mon nom est Alain Gourd, président du conseil et chef de la direction de Bell ExpressVu. A ma droite immédiate, Monsieur Chris Frank, premier vice-président, relations gouvernementales et développement de l'entreprise, et à sa droite, David Elder, conseiller juridique, réglementation.
3214 Madame la Présidente, membres du Conseil, nous vous remercions de nous donner la possibilité de nous présenter devant vous aujourd'hui.
3215 Bell ExpressVu est le plus important concurrent des câblodistributeurs et celui qui connaît la croissance la plus rapide. Avec plus de 390 000 abonnés, Bell ExpressVu est la cinquième entreprise de distribution de radiodiffusion au Canada et nos services sont entièrement numériques et, en fait, nous sommes le plus important distributeur de services numériques au Canada.
3216 Ces chiffres peuvent paraître impressionnants, mais je dois dire que, collectivement, les nouveaux venus comptent encore pour moins de 8 pour cent du marché et que la plupart de leurs clients n'ont jamais été abonnés aux services d'un distributeur de radiodiffusion canadien. Les défis qu'auront à relever les nouveaux venus demeurent importants, car il existe encore de gros obstacles à leur expansion, particulièrement dans les marchés urbains, qui sont essentiels à notre viabilité à long terme. Les deux prochaines années seront déterminantes pour Bell ExpressVu car l'avènement du câble numérique érode rapidement notre avantage technologique. Nous devrons plus que doubler le nombre de nos clients au cours des deux prochaines années pour devenir un concurrent viable des câblodistributeurs à long terme.
3217 Les émissions sportives sont un élément clé de la programmation d'une entreprise de distribution de radiodiffusion. La présentation d'un plus grand nombre d'émissions sportives de qualité favorisera l'installation de récepteurs numériques dans un plus grand nombre de foyers canadiens, que ce soit par les distributeurs SRD, par câble ou SDM. L'installation de récepteurs numériques permettra, à son tour, la distribution d'un plus grand nombre d'émissions canadiennes comme les actuels services spécialisés et à la carte et les services qui pourront être autorisés dans le cadre du nouveau régime d'octroi de licences qui sera annoncé sous peu.
3218 Lorsque les services SRD canadiens ont été lancés en 1997, on estimait à environ 700 000 le nombre de foyers canadiens utilisant des antennes satellite de type bande C ou DBS pour recevoir des services non autorisés diffusés par des distributeurs américains. Bien que l'absence de services canadiens équivalents était un facteur important, la disponibilité d'une grande variété d'émissions sportives par les diffuseurs américains est une importante raison pour laquelle les Canadiens s'abonnent à ces services en si grand nombre.
3219 Bell ExpressVu et Star Choice have made significant strides in repatriating many of these customers to the Canadian broadcasting system. And, I might say, in doing so are already generating well over $100 million a year in new revenues for Canadian programmers. Nevertheless, the allure of the grey market remains, particularly for premium customers who spend large amounts on programming services.
3220 For Canadian broadcast distributors to be competitive with U.S. DTH suppliers, and to continue their vital role in distributing Canadian programming services to Canadians in all parts of the country, we need to be able to offer consumers extensive coverage of all the major sports as well as a wide range of other sporting events.
3221 Bell ExpressVu supports CTV's application because we believe it is important to have a diversified and financially strong broadcaster committed to assembling the best in sports programming that will appeal to Canadian viewers.
3222 As has been widely reported in the press, the cost of acquiring sports programming has been escalating dramatically, and every indication suggests a continuation of this trend. Allowing CTV to combine its conventional broadcasting network and Sportsnet with NetStar's, TSN and RDS programming services would create a financially strong Canadian broadcaster better able to bid for the broadcasting rights to the relatively limited supply of premier sporting events and to ensure a wide variety of sports events.
3223 The Canadian broadcasting industry continues to evolve rapidly in response to changing consumer tastes and preferences and in light of the broad industry trends in the production and distribution of programming.
3224 As the Canadian Association of Broadcasters noted in its recently released "FuturePlan" document, and I quote:
"Historically, Canadian programmers operated in a protected market. However, that market now is evolving to one that is much more open and much more fragmented."
End of quote.
3225 Looked at in this light, the reasons why approving CTV's application makes sense from a public policy perspective becomes apparent. In response to a fragmenting market, CTV needs to expand horizontally in order to spread the high fixed costs of operating a major broadcast programming undertaking across as many revenue-generating programming outlets as possible.
3226 As we noted in our written intervention, the trend in the broadcasting industry in North America is very much towards larger and more diversified broadcasting groups. The most recent of these is the merger of Viacom, parent of prominent U.S. specialty programming services such as MTV and Nickelodeon, with CBS. The application by CTV, if approved, will allow it to achieve similar synergies as its U.S. counterparts and improve its competitiveness in an increasingly fragmented broadcasting market.
3227 Moreover, as the programming market evolves to one that is more open to new services, both domestic and foreign, CTV needs to become larger with greater financial resources in order to be able to compete more effectively with any sports programming services that find their way into the Canadian market.
3228 Chris.
3229 MR. FRANK: Thank you. Alain.
3230 I would like to elaborate briefly on Alain's point with respect to the importance of sports programming to broadcasting distributors.
3231 The quality and diversity of sports programming that they offer is one of the main reasons why U.S. DTH providers continue to be an important and robust competitor in the Canadian marketplace, particularly for Bell ExpressVu.
3232 By way of illustration I would like to provide you with a short overview of the sports programming offered by U.S. DTH companies.
3233 Let's look at DirectTV, the largest U.S. distributor.
3234 It offers over 30 different sports programming services, it has numerous full time sports channels, including ESPN, ESPN 2, ESPN Classic Sports, the Golf Channel, Fox Sports World and 20 regional sports networks. It also has pay per view packages of all the premier sports, professional football, baseball, basketball -- both men's and women's -- and hockey, as well as U.S. college football and basketball and multiple channels of horse racing. A few of these offerings are available for distribution in Canada. Many are not.
3235 It is also important to realize that the U.S. DTH providers are continuing to expand their channel capacity, which will allow them to offer more programming services, including more sports programming.
3236 Canadian broadcast distributors need more programming, especially sports programming, to stay competitive with the grey market suppliers. To reach a sustainable level of subscribers and thus become an effective competitor to the cable companies, Bell ExpressVu needs more and better sports programming.
3237 More programming services are also the key to increasing the digital penetration rates in Canada which are critical to the launch of new Canadian programming services.
3238 At this stage you might be thinking: How is this relevant to CTV's application? We think it is very relevant.
3239 As the CAB has recognized, the broadcasting market is evolving to one that is more open to new programming services. Overall we believe that this will be a positive trend for all sectors of the Canadian broadcasting system. Approving CTV's application will help ensure a strong Canadian presence -- a strong Canadian sporting presence in this new environment.
3240 Turning now to the comments of other intervenors, we would like first to address one of the more significant points raised, negative intervention of the Commissioner of the Major League Baseball.
3241 Baseball suggests that if CTV's application were approved the balance of power in the negotiations for programming rights would shift unfairly to CTV to the detriment of Major League Baseball.
3242 Major League Baseball is one of North American's premier sporting franchises. It has widespread consumer interest and, along with the CFL, is virtually the only major sports programming available in Canada in the summer, and this is unlikely to change.
3243 From personal experience I can attest to the fact that when you are working on a proposed contract with a major league sports league for distribution rights you face very tough and confident negotiators on the other side of the table who know full well the value of the property they own.
3244 Furthermore, one only has to refer to the submissions of FNS, the copyright collector representing major league sports at last year's Copyright Board retransmission hearing to know and understand that this statement is true.
3245 In addition, it is revealing to note that it is only major league baseball among the premier sports leagues that express this view. The NHL, which is the most important sports league to Canadian broadcasters, has not identified this as a concern. Indeed, the Chairman of the Ottawa Senators has written in support of this application. As well, the head of the Canadian Football League fully supports this transaction.
3246 As a final comment on the other intervenors' comments, we found that support for CTV's application among amateur athletic associations and among prominent professional sports personalities such as Wayne Gretzky, Canada's male athlete of the century, Russ Jackson, Canadian CFL player of the century, and the legendary Jean Beliveau was especially noteworthy.
3247 One also to be impressed with the list of medal winning Olympians who have supported this application, including double gold winners Myriam Bédard and Gaétan Boucher as well as Jean-Luc Brassard, Sylvie Fréchette and, of course, Nathalie Lambert.
3248 It should be noted parenthetically that these athletes represent sports that have full Olympic accreditation yet are under-represented on Canadian TV screens. Therefore, we share their views that CTV's commitment to expanded coverage of Canadian amateur sports is an important benefit.
3249 As a broadcast distributor that operates in all parts of the country, we know that Canadians want to see their fellow Canadians participating in as wide a range of sporting events as possible.
3250 Other important benefits we see in the CTV application include its commitment to strengthen the programming of RDS which will in turn help us sell our French language packages all across the country and its promise of significant initiatives to further enhance the programming of the Discovery channel, which is an excellent educational resource for Canadians of all ages.
3251 M. GOURD: En résumé, Madame la Présidente, membres du Conseil, Bell ExpressVu soutient la requête de CTV car elle renforce tant le secteur de la programmation que celui de la distribution. Nous avons développé des relations importantes avec le groupe d'entreprises de programme de NetStar, comme avec le groupe CTV.
3252 Nous avons, par exemple, été la première entreprise de distribution de radiodiffusion à diffuser les émissions des quatre stations régionales Sportsnet, assurant ainsi une plus large distribution des événements sportifs régionaux. Nous comptons poursuivre cette précieuse collaboration qui consolidera et enrichira l'industrie canadienne de la radiodiffusion.
3253 Voilà qui conclut nos commentaires, Madame la Présidente. Nous serons heureux de répondre aux questions du Conseil.
3254 THE CHAIRPERSON: Thank you. Merci. It's nice to see you on the other side of the room, Mr. Elder. The bad news is Mr. Batstone has very many questions for you.
--- Laughter / Rires
3255 THE CHAIRPERSON: Commissioner Cram, please.
3256 COMMISSIONER CRAM: Hello. First I wanted to talk about -- in your speech at pages 8 and 9, you talk about distributors needing more programming, especially sports programming, to stay competitive with "le marché gris".
3257 How will this transaction achieve more programming, especially sports programming?
3258 MR. ELDER: If I may give the general approach and then turn to Chris. What we need in terms of the digital broadcast distributor which is a new entrant is more programming services, both Canadian and foreign, to be able to benefit from our current technological characteristic and also to be able to use our unused capacity.
3259 By having a stronger Canadian services and a stronger sports programming service in particular, we have a Canadian service which, first, can counter programming and diversify the offering which will have the size to acquire premium rights and, on the other hand, we will have a stronger Canadian programming undertaking which would be able to sustain the arrival of new foreign services when the Commission decides it is timely to do so.
3260 Chris.
3261 MR. FRANK: There's a continuum here really. At one end there's the need to have a strong financially consolidated sporting service, sports service, to maintain the kinds of services we have now in the face of escalating programming costs and escalating rights costs.
3262 We read every day about increasing ticket prices and increasing salaries. Somebody has to pay for that. My suspicion is it will probably be advertisers and the people that acquire the rights and will eventually distribute the sporting programs to consumers.
3263 At the other end, perhaps the more optimistic end, we need a strong consolidated sports programming service to acquire new services, new sporting events as they come along.
3264 We don't know at this point what they may be, but the essence of the response is to maintain what we have got so that we are competitive as costs increase and to acquire new services, new sporting events as they become available, both in Canada and from around the world, because at the end of the day, Canadians want to see everything that's available.
3265 COMMISSIONER CRAM: I guess my question then comes down to where TSN is right now. How much stronger can it be? It's the strongest specialty I believe in Canada. Is it even feasible or possible? When you are talking about the Canadian market, can TSN be any stronger?
3266 MR. FRANK: It can maintain its number one position in the Canadian marketplace and that's exactly what we think this application will allow it to do.
3267 COMMISSIONER CRAM: And do you think without this application it could not do that?
3268 MR. FRANK: That's a very good question. There are no facts in the future. As we said, we see the cost of rights escalating. We see costs increasing. It stands to reason that a financially sound consolidated sports group will be able to keep step with the market.
3269 COMMISSIONER CRAM: You have talked about the 700,000 grey market subscribers. How do you think this transaction would reduce that problem? Is it again the strength issue?
3270 MR. FRANK: Precisely. The two main drivers of our service are sports and movies, movies and sports. We need to have as complete a menu of sporting service as we can within the context of Canadian public policy and regulation.
3271 Frankly, we see this new merged entity as being able to keep pace with the marketplace and be able to sustain the sporting services in Canada and also go out on the world marketplace and acquire events such as the World Cup of Rugby, major soccer properties, major international events.
3272 COMMISSIONER CRAM: Is this in some way, your reasons for supporting this, in some way anticipatory that we will in the digital world consider licensing American sports properties, American sports networks?
3273 MR. GOURD: If I may, I don't think we should -- we are not focusing when we are talking about foreign services, only about more U.S. foreign services. We believe that there is a diversity of services and sport activities that are very well suited for direct to home which can go at the niche market. Let me take cricket, for example, or soccer, whatever.
3274 Therefore, we are in a bit of a dilemma because on the one hand we do need to have as many sporting events as possible from abroad and from Canada. We have indicated in our presentation there are still a lot of events that are not distributed by Canadian BDUs but are distributed in Canada by the grey market.
3275 Therefore, by having a very strong Canadian entity, we have an entity which is able to compete abroad for rights to be distributed for sporting events to be distributed in the Canadian market. At the same time that entity is better positioned to sustain the arrival of new foreign services, partly in niche sporting events.
3276 COMMISSIONER CRAM: Back to the grey market issue and possibly, well, powerfully involved. I want to read to you what Mr. King from the Directors Guild said this morning, or part of it. I'm not going to read the whole speech. He says:
"By continuing with the TSN name, Canada's DTH suppliers can distinguish themselves with popular and uniquely Canadian services that no grey market DTH service supplier can provide. If on the other hand the TSN name were switched to ESPN Canada, the message would be conveyed that there is very little real difference between the U.S. and Canadian offerings."
3277 Do you agree or not?
3278 MR. FRANK: Well, that's one perspective. The other perspective is that people buy programming, not necessarily the brand name. I think that the Canadian consumer is savvy enough to differentiate between TSN whether it's called ESPN or whatever. I think it's really the programming mix.
3279 I think that this particular sports programming service will continue to be seen as Canadian. I don't really see that as a major difficulty.
3280 COMMISSIONER CRAM: You talked about this merger creating a financially strong Canadian broadcaster. When we look at it, we look at the control of a conventional broadcasting network, two Canadian sport specialties and two premier Canadian sport specialties and then Sportsnet. Would you also call that a monopoly or a dominant player?
3281 MR. FRANK: It is certainly a well consolidated company with multiple windows for exhibition. There are competitors in the marketplace. We note, for instance, that you will be hearing an application tomorrow for a modest increase in live sports programming on "Headline Sports", an application which, by the way, we support.
3282 There is lots of competition in the marketplace. It comes through licensed undertakings and from unlicensed undertakings. I think what you have here is an opportunity to create a really sound financial -- financially sound, excuse me, Canadian company which will benefit Canadian sports and benefit Canadian broadcasting.
3283 MR. GOURD: If I may?
3284 We have said a bit earlier that because of globalization, which is unfolding, strong Canadian entities are important to be able to compete for rights and to be able to sustain the arrival of new services from abroad. Then we ask ourselves: What kind of strong Canadian entities? There we have a few models.
3285 One is to have dominant BDUs moving vertically through vertical integration into programming services. We have filed documentation and we have indicated quite a number of times that we did not really believe that that should be the model. We feel that with this proposal we have a stronger entity specializing in programming services without vertical integration, with dominant BDUs, and it is one of the values we see in the transaction.
3286 COMMISSIONER CRAM: I take it, then, from your answers that you don't see this as a monopoly or a dominant player?
3287 MR. FRANK: We see it as a significant player.
3288 COMMISSIONER CRAM: When you talk about sports programming being important to the DTH business, do you think the business in Canada and your business could sustain another competitor in terms of, say, another TSN? Is that the answer to providing diversity and more sports programming, as you say is a concern?
3289 MR. GOURD: It could be a valid answer after due process, certainly.
3290 COMMISSIONER CRAM: Thank you. Those are all my questions.
3291 THE CHAIRPERSON: I think we have intimidated Mr. Batstone.
--- Laughter / Rires
3292 THE CHAIRPERSON: Thank you very much. Merci.
3293 Madam Secretary.
3294 MS SANTERRE: We will now hear the intervention by Friends of Canadian Broadcasting.
3295 THE CHAIRPERSON: Good afternoon. Proceed when you are ready.
INTERVENTION / INTERVENTION
3296 MR. MORRISON: Madam Chair, we are as ready as we will ever be.
3297 I would like to introduce a Friends volunteer, Melanie Stethem, a University of Ottawa communications student who has been and is and will be helping me on this dossier and several others.
3298 THE CHAIRPERSON: Good afternoon.
3299 MR. MORRISON: I would like to thank you for letting us appear.
3300 Madame la Présidente, membres de la Commission, nous vous remercions d'avoir invité les amis de la radiodiffusion canadienne à comparaître. Au Canada le sport amateur et le sport professionnel font partie intégrale de la culture.
3301 Lorsqu'un grand nombre de Canadiens et de Canadiennes dans les diverses régions du pays partagent ensemble l'expérience de regarder en direct les événements sportifs canadiens, cette expérience collective contribue à créer chez nous une identité commune, un sentiment d'appartenance et une sensibilité collective.
3302 Sports programming is also a gold mine. Viewers want to see more and more sports programming. Sports is an advertiser's dream. Nothing has the ability to reach audiences, especially male audiences, quite like broadcast sports. Despite overall cuts in advertising budgets in recent years, sports advertising has remained solid, and even increased.
3303 And television is the foundation of sports team marketing. Television exposure is an essential component of the financial resources which sustain both professional and amateur sports.
3304 Friends wants a broadcasting system which allows the maximum share of the viewer's money -- whether that is expressed in advertising's share of product costs, cable fees or taxes -- to pass through the broadcasters' hands and reach the people who create sports programming.
3305 It is competition among broadcasters that makes this happen.
3306 As you know, despite being licensed as complementary services, TSN and Sportsnet have actively competed for program rights and audience share since Sportsnet's launch last year in September. Your Commission has encouraged this competition on several recent occasions.
3307 This competition between TSN and Sportsnet has been good for Canadian professional sports teams. More events have been covered, more rights have been sold -- for more money.
3308 However, if you were to approve this application, almost 80 per cent of Canadian English-language sports programming would fall under the control of one broadcaster -- CTV.
3309 While Friends has received no indication of intimidation of rightsholders by this applicant, we note that your approval of this application as proposed would confer on the applicant dominant, approach monopoly power -- that is, Commissioner Cram, more than significant power -- in the English-language sports market, certainly of specialty channel sports, in both languages.
3310 Particularly in smaller sports markets, Friends believes this prospect might reasonably intimidate some rightsholders, causing them, as a prudent business move, to withhold criticism of the proposed acquisition, or even to express support.
3311 Our review of interventions and letters of support for CTV's application leads us to two conclusions: many of them are effectively an endorsement of Sportsnet's conditions of licence -- regardless of who might control or manage that licence; and, secondly, supportive comments reflect a remarkable confluence of opinion -- even syntax. For example, 160 of the supportive interventions contain variations on the following words:
"the creation of a stronger broadcasting group that has the resources and platforms to meet the challenges of increasing competition."
3312 If the question before you is whether it would be a good idea to create a stronger broadcasting group, you could not find a better candidate than CTV, which has led its competitors in spending, in reflecting Canadian content, and in keeping promises that it makes to this Commission. And letting CTV control and manage both TSN and Sportsnet would certainly strengthen CTV.
3313 But that is not the question before you. Rather, you have to consider whether approval of this application would strengthen choice, quality and variety in English-language Canadian professional and amateur sports television offerings. As the Commission has previously stated:
"The first test any applicant must meet is that the proposed transfer of ownership or control yield significant and unequivocal benefits to the communities served by the broadcasting undertakings, to the Canadian broadcasting system as a whole, and that it is in the public interest."
3314 In other words, your policy is to put the viewer's interest first.
3315 CTV's application promises a complementary relationship between TSN and Sportsnet. We note, however, that the Commission chose in 1996 not to approve TSN's own application to provide a complementary service. For the same reasons, Friends believes that the Commission should not now permit TSN and Sportsnet to operate under common management and control.
3316 In response to concerns expressed by the Commission during its recent licence renewal hearing, the CBC English Television network has offered to reduce its carriage of professional Canadian sports by 20 per cent by the end of its forthcoming licence period. I don't know what the percentage is, but Ivan Fecan seemed to imply a similar reduction that CTV was planning in the coming years yesterday, sitting at this table. Canwest Global and Ontv are basically not in the sports business because of their simultaneous substitution-driven prime time schedules.
3317 And even if Sportscope were to succeed in persuading the Commission to radically amend its original licence, an application which we are opposing -- Mr. Frank said it was a modest increase, but my math from zero to 15 per cent is an infinite increase -- Sportscope would have the right to purchase live events for only 15 per cent of its scheduled broadcast hours, and would probably lack the resources from its modest financial base to offer substantial rights payments.
3318 The new competitive environment in English-language specialty sports has worked for sports teams and for viewers. It results in: better markets for advertisers, more sports programming rights sold, more sporting events seen by viewers, and higher revenues for Canadian teams.
3319 Our conclusion is that permitting TSN and Sportsnet to operate under one roof would turn back the clock to the benefit of CTV shareholders at the expense of viewers, rightsholders and other broadcasters.
3320 For example, allowing TSN and Sportsnet to operate under common management and control will undermine CBC's revenue base. Permitting CTV a monopoly on specialty channel sports will work to CBC's disadvantage. No Canadian broadcaster other than CTV would have access to network, local, specialty and pay-per-view outlets.
3321 We share the CBC's belief that one eventual result would be much less sports available on "free" -- i.e. conventional -- television. The siphoning of more and more sports from "free" television will likely result because of the dominant broadcaster's wish to attract subscriber revenues.
3322 As the Commission knows, 25 per cent, approximately, of English speaking Canadians, more on the French speaking side -- and these people are concentrated among those with lower average incomes and in rural locations -- receive their TV signals over the air. So approving this application, in our judgment, will eventually cut off millions of Canadians from coast to coast with their contact with a lot of Canadian sports.
3323 ESPN and Fox, the United States' two largest sports broadcasting organizations, are minority owners of TSN and Sportsnet, and we fear a colonization of Canadian sports broadcasting, an area where Canadian sovereignty has hitherto prevailed.
3324 Certainly, it would be more difficult for completely Canadian broadcasters, private or public, to compete for sports rights against a multinational monopoly.
3325 What would stop ESPN, for example, from purchasing North American rights to say the National Hockey League and offloading those rights to CTV, TSN, RDS and Sportsnet? To Friends, it appears that ESPN might have an incentive to do something like that.
3326 Under a specialty monopoly, Friends also foresees a rapid end to the recent upsurge in exposure to less popular amateur sports.
3327 Cable subscribers pay at least $1.07 monthly for TSN and 78 cents for Sportsnet.
3328 I remember, Madam Chair, you once said 76 cents and someone in the audience said 78, and you said you just wanted to get your two cents' worth, I recall, in the licensing of the Aboriginal Peoples Television Network.
3329 Some of these rates are even higher when those services are positioned on discretionary tiers. Together, those fees amount to something in the order of $160 million annually, which is a subscriber subsidy which your Commission mandates and which is on a scale which is equivalent, roughly, to CBC Television's share of CBC's parliamentary allocation.
3330 Both sports specialties drive penetration of their respective tiers. Between subscriber fees and ad revenues, TSN and Sportsnet combined are far larger than any other grouping of Canadian specialty channels. Even separately, they have much more bargaining power with cable for carriage, positioning, tiering and marketing. As a specialty sports monopoly, TSN/Sportsnet can be expected to dominate in negotiations with BDUs -- to the detriment of all other specialty channels.
3331 Therefore, the Commission should not permit CTV to simultaneously manage and control both TSN and Sportsnet because of the following likely deleterious consequences to the Canadian broadcasting system:
3332 One, reduced competition, which deprives viewers of the quality production values resulting from a strong competitive environment in sports programming.
3333 Two, giving one broadcaster a substantial advantage over all others works against the Commission's historic role of balancing interests in the audio-visual system in the public interest.
3334 Three, reducing the bargaining power of Canadian professional sports rights holders can only reduce the quality of Canadian professional sports, ultimately to the fan's disadvantage.
3335 Four, reducing the system's capacity to illuminate amateur sports works against the goals of the Broadcasting Act.
3336 Five, and most important, hastening the migration of Canadian sports programming from free to pay television works against the interest of all viewers, particularly the 25 per cent of English-speaking Canadians who get their TV over the air.
3337 If, despite these arguments and others you have heard, the Commission were to countenance CTV's application, Friends recommends, at a minimum, the following conditions.
3338 And I think having listened very carefully to what you have heard over the last couple of days you might, with your own imagination, consider other conditions that could be added.
3339 But just as a suggestion:
3340 One, banning CTV's use of sports material acquired through its American partners for which they have purchased North American rights;
3341 Two, requiring CTV to reduce either its TSN or its Sportsnet interest to below 30 per cent, and to end its management role in that specialty service in order to ensure arm's length decision-making between the two services;
3342 Three, requiring TSN today to make explicit its intentions regarding future collaboration with CBC Television and making the fulfilment of those intentions an integral condition of your decision for the balance of the licence period.
3343 Nous vous remercions de nous avoir fourni cette occasion de présenter nos opinions et conseils.
3344 Merci, Madame la Présidente.
3345 LA PRÉSIDENTE: Merci, monsieur Morrison.
3346 Monsieur McKendry.
3347 COMMISSIONER McKENDRY: Thank you, Madam Chair.
3348 Just to go to the end of your comments, the potential condition that you set out requiring CTV to reduce either its TSN or Sportsnet interest to below 30 per cent, what is the significance of 30 per cent and why are you comforted with a 25 per cent?
3349 MR. MORRISON: I think the magic figure in the broadcasting business, Commissioner McKendry, is 29.9, is it not? It is the figure at which your Commission requires a review when an investment gets into a position of the kind of influence that might suggest in some circumstances control over that broadcaster. So we pick that figure.
3350 But I would also defer to your wisdom. It is the concept, I think, rather than the statistic that we wanted to put before you.
3351 The idea is that we are recommending that, at a minimum, if you do not require divestiture, you might consider forcing the applicant to reduce its influence over one of the services.
3352 I would like to stress the verb "manage". We think it is quite important that the decision-making between those two services be at arm's length from each other. So some other player would have to come along who would have a larger investment and who would take over the day-to-day operation of that service. In the real world, presumably that would be, we realize, Sportsnet.
3353 COMMISSIONER McKENDRY: Correct me if I am wrong, but I think CTV's interest in Sportsnet is 40 per cent.
3354 MR. MORRISON: Yes. They have 40; Rogers has 20; Molson has 20; and Fox subsidiary has 20, if I am not mistaken -- although there was an effort to change that not too long ago.
3355 COMMISSIONER McKENDRY: You would be comfortable with a situation where we approved the application to acquire TSS and CTV's interest in Sportsnet declined from 40 per cent to 30 per cent.
3356 MR. MORRISON: Provided another entity at arm's length from the CTV group had the management function. That would be an entity, obviously, that would have to be satisfactory to the Commission.
3357 And I would also stress that I think in context it is obvious, Commissioner, that that is a fallback position. Our recommendation is that the two organizations not be allowed to come under one roof.
3358 COMMISSIONER McKENDRY: Earlier in your comments you said that our policy is to put the viewer's interest first, and I just wanted to discuss that with you for a moment from the perspective of what a viewer would see on his or her television screen.
3359 I discussed this briefly yesterday with the CTV panel, and the response of the panel was that in fact if we approved the application this would be good from the viewer's point of view in terms of what the viewer will see on his or her screen.
3360 The two facets of that seemed to be that TSN and Sportsnet would not program the same thing at the same time. They would program it in a complementary way, so as to provide more choice at the same time for a viewer.
3361 The other example that was put forward -- and I think it was put forward as an example, not as the only thing that would happen -- is that there would be more baseball games available.
3362 Do you have any comment on that in terms of what the viewer would actually see on his or her screen if we allowed this?
3363 MR. MORRISON: Ultimately, I suppose if they controlled all programming available in Canada, we would have infinite variety. There is a certain logic.
3364 I would not dispute for a moment that they put their best case forward and that they did it very effectively.
3365 We trust the competitive marketplace to provide that kind of variety more than we trust the goodwill of any specific broadcaster acting in its own interest to do so. That has no reflection whatsoever on the current management of CTV.
3366 I would just like to tell you that I was once dealing with a federal Cabinet minister who told me that I had his personal assurance that something would happen, and then Mr. Trudeau shuffled his Cabinet a couple of months later and I realized how good the personal assurance is.
3367 It is really a question of what it will be like in three, five, seven years, and I cannot see their version of events under this complementary programming, on balance, being anything as good as having real competition out there, remembering that it is the interests of the people who create the sports programming and the interests of the viewers that we want to bring together.
3368 COMMISSIONER McKENDRY: You talk about siphoning in your written submission, and you talked about it today, and you said -- and I will quote:
"The siphoning of more and more sports from "free" television will likely result because of the dominant broadcaster's wish to attract subscriber revenues."
3369 And then you go on to say -- and again I quote:
"So approving this application...will eventually cut off millions of Canadians from...their contact with a lot of Canadian sports."
3370 And these are the Canadians that don't have cable television that you were referring to.
3371 Can you elaborate on that for us. What leads you to that quite stark conclusion that these millions of Canadians will be cut off from most Canadian sports?
3372 MR. MORRISON: I will just touch on a few bullets of this argument, because that could be a long one and I know that you want to move on.
3373 Your Commission gave me the impression of wanting to encourage -- and I will hear whether this is true, I am sure, with everyone else on the 17th of December -- CBC television to reduce its broadcasting of professional sports in the next licence period. And in fact they offered to do so.
3374 So take some period in the middle of the next decade, with 20 per cent less professional sports available over free television, the CBC. Put a number on Mr. Fecan's statement about this CTV conventional group putting out less professional sports.
3375 Looking at the game plan of Global and other major players, we don't see a huge rise in sports activity in their game plan. We might be wrong.
3376 So there right away you are getting less sports available. You are getting a migration up to specialty channels. Give one significant player like CTV access to something in the range of $2.00 per subscriber per month of that type of revenue, they have a real incentive to put more properties onto specialty channels.
3377 Take the case -- I think it was otherwise put before you in the last two days -- of what happened to the American and National League Championship Series and the World Series last year in the Canadian broadcasting system. There are a number of trends that are moving in that direction.
3378 We, and I believe the Commission, feel a special responsibility for those Canadians who, for economic or geographic reasons, are not part of the cable or satellite or MDS delivery system and who otherwise depend on conventional television. Those people we see being disenfranchised in this process: slowly, gradually, but surely.
3379 COMMISSIONER McKENDRY: I take it that it is your view that if we approve this application -- or if we deny the application we will see more sports on conventional television than we will otherwise?
3380 MR. MORRISON: I would take your question as a comment and say: Good point.
3381 I mean, some of these trends are continuing. We see the approval in full of this application as something that will accelerate that trend.
3382 I would point out, though, that I think you have the capacity to extract -- the Applicant is at its most vulnerable this afternoon. You have a lot of influence that you wouldn't have on Thursday morning. They are about to come up and sit at this table and if you really care about certain things you can get them on the record and you can move them from the intentions of one management team to something that is built into an application.
3383 So I would encourage you to exercise fully the influence that you and your colleagues have over this Applicant.
3384 COMMISSIONER McKENDRY: We appreciate your advice.
3385 The purpose of my questioning really was to understand what led you to the conclusion that if we approve the application that millions of Canadians are going to be cut off from most Canadian sports, which is a fairly dramatic position to take.
3386 MR. MORRISON: Well, if you would like me to try again --
3387 COMMISSIONER McKENDRY: No, I don't.
3388 MR. MORRISON: Okay.
3389 COMMISSIONER McKENDRY: Unless there is anything you want to add. Please feel free to add to what you have already said, but if you are going to repeat what you have already said it's not necessary.
3390 Looking at the North American rights issue which you discussed with us in your oral comments, one of the things you say is that ESPN would have an incentive to purchase North American rights to the NHL.
3391 Could you just elaborate on that view and explain for us why you think that is a possibility?
3392 MR. MORRISON: It's an illustration of a concern which, if you look at the issue of sports rights in this application you can see it coming up from a number of points of view that do not appear to have been completely co-ordinated in the Applicant's mind.
3393 But, as you know, North American rights is a major issue in the broadcasting industry generally, leaving out sports. It has not, up until now, appeared to be a major factor.
3394 Friends of Canadian Broadcasting believes that there should be, as much as possible, a level playing field for Canadian licensees in dealing with sports rights. Therefore, we fear an environment where a large American player has a financial incentive to negotiate a mega deal with any North American sports organization which would not be available -- which would have the effect of not making that sports programming available to other Canadian broadcasters.
3395 That's the point that we are trying to put forward. We are trying to cause you to share a concern about something that might happen in the near future.
3396 In fact, one of the suggestions -- just a suggestion -- is that you might enter into some type of dialogue with the Applicant around that issue to box in their flexibility to benefit exclusively from that turn of events should it arise.
3397 I think you had a bit of a conversation, if I'm not mistaken -- it was between you and Mr. Beeston on that subject. It has come up on a number of occasions in the course of these proceedings.
3398 We think it is real. We think it is a threat. And those very intelligent -- Mr. Beeston referred to the ESPN people as a very well-managed company. If it's a good idea they will think of it. They might even follow the proceedings of this Commission, for all I know.
3399 COMMISSIONER McKENDRY: I would just like you to clarify something for me that was in your written comments on page 8. I will just read the two or three sentences. I quote:
"CTV says that TSN and Sportsnet will send Canadian programming to Fox and ESPN. Why has this not occurred to date, given the existing agreements? When Sportsnet ran all ESPN and ABC coverage of the recent Women's World Cup of soccer. There was no Canadian content except for framing comments out of Agincourt." (As read)
Unquote.
3400 I wonder if you could just explain for me what you mean with respect to the fact that there was no Canadian content. What Canadian content would you have expected?
3401 MR. MORRISON: When sports programming -- I'm trying to pull this back, Commissioner, excuse me. We obviously did not consider this to be worth including in any 10-minute presentation.
3402 There would be the potential -- a Canadian programmer of that type of event could bring in -- in some cases it could be sports coverage, in some cases it could be the audio component, and during certain parts of the coverage could introduce certain Canadian perspectives on the event.
3403 There would be a variety of things from direct coverage to audio and video components of something like that that could have introduced a Canadian element, a Canadian dimension, even a Canadian commentary on the event. There was none. It was just a direct feed, wrapped somewhat the way the same company wraps programs with advertising which are Canadian content.
3404 So it was an illustration that until now our observation and that of others we trust is that there has not been a maximum effort to maximize the Canadianness of some of those international events that are coming in through the special arrangement between the two parties, the minority shareholder, the American, and the majority.
3405 COMMISSIONER McKENDRY: So you would have liked to have seen Canadian on-air commentators?
3406 MR. MORRISON: Yes.
3407 COMMISSIONER McKENDRY: Is that the kind of thing you are talking about?
3408 MR. MORRISON: Yes. Canadian value added into an event that had -- take it more as a general comment than a specific anecdote. It is something that we have not witnessed and we would like to see more of.
3409 COMMISSIONER McKENDRY: Just let me end up with asking about your comment on amateur sports.
3410 You told us earlier today that -- again I will quote:
"Under a specialty monopoly, Friends also foresees a rapid end to the recent upsurge in exposure to less popular amateur sports."
Unquote.
3411 Some of the comments we have had, and I don't know whether you have been here to hear them, but certainly some of the interventions during the course of the hearing have been from amateur athletes or people representing amateur athletes and speaking positively about the application and encouraging us to improve it because they saw it as a benefit for amateur sports.
3412 Have you had a --
3413 MR. MORRISON: Just as a --
3414 COMMISSIONER McKENDRY: Well, I will just finish my question.
3415 MR. MORRISON: Yes.
3416 COMMISSIONER McKENDRY: Have you had a chance to take into account any of those comments and do you have any comment in response?
3417 MR. MORRISON: First I want you know that although my body was not in this room my ear was at all times. Sometimes your proceedings are covered on television when the cable industry has an interest in them. This is not one of those occasions and so I had to pay the Government of Canada for access to the audio while doing other things, but I did hear those comments and we have reviewed interventions.
3418 My second comment is that I don't wish to suggest that we doubt the sincerity in any of those people.
3419 We do think they are putting a lot of faith in this Applicant. Maybe they should, but we don't see where their coverage is going to be stronger over a long haul than through two competing specialty sports services.
3420 Obviously there is a monopoly on the francophone side. But on the English-speaking side there is, we feel, a stronger opportunity for the expression of diverse amateur sporting things when not everything is under one body's control.
3421 Now, this Applicant -- and I want to stress not implying any bad will on the part of the Applicant, but the Applicant wants very badly to get all the support it can. God knows, if we had wanted to we might have been able to get 200 letters to come into you on a subject like this. We chose not to do so.
3422 These people believe that a strong CTV will be better for them in amateur sports. They are certainly putting all their eggs in one basket.
3423 A reduction of the CBC's capacity to do this is also a concern to us.
3424 On many occasions when I heard the comments I thought that those people were focusing excessively on the number of hours they were getting on the air rather than the audience that would be developed for those hours. That concerned me. But no doubt those comments were all made with goodwill and with good intent and I guess you have to evaluate them on that basis.
3425 COMMISSIONER McKENDRY: Thank you very much.
3426 Those are my questions.
3427 THE CHAIRPERSON: Now I feel compelled to put my two cents worth in.
3428 In fairness, when you mentioned, in conjunction with your concerns, that sports programming will be removed from the over-the-air broadcaster, in this case CTV, or reduced because of the incentive of getting cable subscription you mentioned almost $2.00. In fairness, Sportsnet is owned only 40 per cent by the Applicant.
3429 MR. MORRISON: That's true.
3430 THE CHAIRPERSON: So that would have to be a tempered comment.
3431 Now, one of the concerns that has been expressed by some and discussed by us is the multiplicity of platforms that the CTV/NetStar group would have, but you seemed to eliminate CTV in that.
3432 So you seemed to eliminate one platform that would be under its dominance by saying that they would have an incentive to remove programming from over-the-air, which is considering the reach or the cover -- or the number of Canadian homes that are reached overall over-the-air and on cable as well, because those that don't watch CTV over-the-air can watch in on cable.
3433 MR. MORRISON: Three-quarters of it.
3434 THE CHAIRPERSON: I don't understand. Perhaps Mr. McKendry had the same confusion.
3435 Your view would be that we shouldn't worry about that platform because in the scheme of things it won't be used. So your concerns would not be as great as those who are against this proposal, in part because of the added platform that the over-the-air network would provide?
3436 MR. MORRISON: Well, the over-the-air network is always available for events that the management in its judgment thinks have very wide appeal.
3437 Your new television policy, the policy that will go into effect September 1st of next year, gives them no particular incentives to put sports programming on in hours of peak viewing because sports programming is not priority Canadian programming.
3438 I think the Applicant, if I heard them properly, correctly told you that they were moving in the direction of your priorities and therefore away from putting sports programming on the air.
3439 The combination of that, and the move to reduce the CBC's airing of sports programming, we see as pretty significant and a threat to the availability of sports programming to that quarter of English-speaking Canadians who have no cable.
3440 THE CHAIRPERSON: You seem to have a lot more faith than some parties and some commentators about what the eight-hour a week requirement will achieve. You seem to --
3441 MR. MORRISON: But I don't --
3442 THE CHAIRPERSON: -- be of the view that there won't be any window left for appealing and major sports events.
3443 MR. MORRISON: I would encourage you to take that up in some detail with the applicant. That would be an interesting subject to get into if there is time.
3444 But it seems to me that you have structured something in a way -- you have sent a message to the television industry in this country that sports programming is not priority programming on conventional Canadian television. That is one of the results of your television policy and I don't wish to argue that at the moment. I'm just saying, therefore, conventional television is a less important platform and specialty is becoming more important.
3445 And then, if you look at the availability, Madam Chair, I cannot verify the CBC's figure, this 95 per cent. I don't know how they got it, but the figure we have got is about 80 per cent. We took the Vancouver market for the data that Nielsen has for the year ended August of '97 and we found by inferring figures to Sportsnet and Outdoor Life that were derived from our knowledge of their services, that something like 80 per cent of all of the Canadian sports programming available in the Vancouver market at the present time is probably controlled by the bundle of services that the applicant wants to bring together. It is quite a lot.
3446 THE CHAIRPERSON: Thank you very much. Thank you, Mr. Morrison. Thank you.
3447 MS STETHEM: Thank you.
3448 THE CHAIRPERSON: Madam Secretary.
3449 MS SANTERRE: Yes, Madame la Présidente.
3450 The next intervention will be Global Television Network Inc.
3451 THE CHAIRPERSON: Good afternoon, Mr. Sward and Mr. O'Farrell. Proceed when you are ready.
INTERVENTION / INTERVENTION
3452 MR. SWARD: Good afternoon.
3453 Madam Chair, Members of the Commission, my name is Jim Sward. I'm Chief Executive Officer of Global Television Network. With me is Glenn O'Farrell, Vice-President of Legal and Regulatory for the Global Television Network.
3454 Madam Chair, Members of the Commission, our issue is largely legal in nature and it speaks to the issue of effective control. I will ask Glenn to briefly give you the essence of our position and then look forward to your questions.
3455 THE CHAIRPERSON: Mr. O'Farrell.
3456 MR. O'FARRELL: Madam Chairman, Commissioners, we are here at the Commission's request and are pleased to assist you in any way we can in your consideration of this important application.
3457 As we indicated in our written intervention, Global neither supports nor opposes the application on its merits. The issue we felt it important to comment on, however, was whether the Commission is in a position to grant its approval to the application in light of the terms of the Cabinet direction to the CRTC relating to the ineligibility of non-Canadians to hold broadcasting licenses.
3458 In particular, in our written brief, we drew your attention to the fundamental question of whether or not you could, in conscience, find that NetStar Communications Inc., the parent company of the licensees on whose behalf the application is filed, would be effectively controlled by Canadians. In our view, the necessary shareholder agreement filed with the application may present contrary evidence in at least three respects.
3459 First, under section 5.3.1, the non-Canadian shareholder, and that shareholder alone, has the power to suspend a bona fide offer from a Canadian or Canadians to Canadian shareholders for three months and to find a party or parties more to its liking. This gives the foreign shareholder substantial power in determining who the majority shareholder will be and, hence, how the majority of the board of directors may be composed, and in influencing both the timing and the substance of corporate decisions through the exercise of that power.
3460 Secondly, the non-Canadian shareholder has the power under the NetStar shareholder agreement to cause the company to undertake certain courses of action, not the least of which is to "collaborate in prosecuting vigorously and diligently" at its own expense an application to the CRTC that arises from the exercise by the non-Canadian shareholder of its power under section 5.3.1, no matter what NetStar or its Board might think of the merits or consequences of such an application.
3461 The third power of the non-Canadian shareholder, to which we drew your attention, was its ability to prevent NetStar from taking certain courses of action, for example, when NetStar would otherwise wish to:
"...enter into, materially amend or terminate any material contract in the ordinary course of business." (As read)
3462 This clearly gave the non-Canadian shareholder a veto power over every important contractual commitment that NetStar considers it necessary to make or to undo in carrying on its business.
3463 While the applicants did not appear to be concerned with this problem in their written reply to interventions filed last week, by yesterday their concern had apparently mounted and they have now decided to propose an amendment to that NetStar shareholder agreement provision that would delete the offending clause.
3464 They would, however, replace it by giving the non-Canadian shareholder the power to veto any effort by NetStar to make any material change in or terminate or suspend any material part of its existing business. Again, the term "material" remains undefined, clearly leaving open the possibility that the kind of change or orientation that might be expected of a sports specialty service operating in the course of its fast-moving and changing business could be thwarted.
3465 In Global's view, these powers, in the hands of the non-Canadian shareholder, both individually and their combined effect, still raise serious questions about whether the licensees in this proceeding would be, at all times, effectively controlled by Canadians if the Commission granted the application as filed.
3466 We are of course aware that the Commission has approved the necessary shareholder agreement on previous occasions and that the powers enjoyed by the non-Canadian shareholder in the current version have not substantially changed. What has changed, however, is that we have all now had the experience of the exercise by the non-Canadian shareholder of its powers under section 5.3.1 of the agreement.
3467 One of the things that experience has taught us is that what might have appeared to be a reasonable minority shareholder protection in theory has proven in practice to raise serious problems of effective control of a licensed Canadian broadcasting undertaking.
3468 To characterize this fundamental business as its most symbolic, whereas previously your approvals were sought on the basis of a NetStar shareholder agreement to operate a sports specialty service called TSN, your approval is now being sought for one that may very well end up being called ESPN Canada.
3469 We would be pleased to answer any questions you may have. Thank you.
3470 THE CHAIRPERSON: Thank you, Mr. O'Farrell, Mr. Sward. And we thank you for responding to our invitation.
3471 We will try to keep our discussion to the matters you have brought forward except for a few questions that I would like to ask you in your capacity as an over-the-air broadcaster and participant in the market as to what effect you can see on your own participation in the broadcasting market.
3472 Of course you are free to answer as little or as much as you wish. That is always the case of course for all parties before us. I just want to put you at ease that we are not planning to ask you questions that would be difficult for you to answer with regard to your own commercial and financial affairs.
3473 My first question is related to this concern about the ability of the Commission, knowing what it now knows is I think your view, to approve this in light of the direction on ineligibility.
3474 You raise section 2.1.10 of the proposed shareholder agreement, one clause of which has been amended, and we can -- or a suggested amendment has been put forward which we can discuss after. But is your concern about all or more of 2.1.10 than .4 for which an amendment has been put forward? Are there other sections -- subsections, rather, of 2.1.10 that raise particular concerns or was this just an example or the section that causes you concern?
3475 MR. O'FARRELL: It really is the section.
3476 THE CHAIRPERSON: That is the only one. The other ones you feel would be acceptable if 2.1.10.4 were amended to your satisfaction?
3477 MR. O'FARRELL: Madam Chair, we are not here today to offer you any formal legal opinions. We felt that it was useful for us to raise some questions and the question we have is with regard to .4.
3478 THE CHAIRPERSON: .4.
3479 MR. O'FARRELL: That does not mean that you may not have or others may not have valid questions that relate to other parts of that provision, but as far as we are concerned, the question we raise is with regard to .4 in the absence of a definition of what "material" is.
3480 THE CHAIRPERSON: If we were to improve on the amendment by having a proposed amendment to the proposed amendment to the proposed shareholders' agreement, how would you define "material" so that we would remove all concern about .4?
3481 MR. O'FARRELL: I think it would be for the Commission to find the wording that would establish the clear parameters in which section 10(3)(b) of the Specialty Service Regulations would be -- you would find compliance with section 10(3)(b) of the Specialty Service Regulations which lay out those issues as to when control may or may not be in the hands of a Canadian shareholder. But we don't have any specific wording for you at this moment.
3482 THE CHAIRPERSON: Except that you know it is not satisfactory. Because it is quite serious to say that under the regulations as framed this prevents us -- I think you said -- I forget what your word was but it was quite serious -- "in conscience", I think you said -- in conscience that we shouldn't be able to --
3483 MR. O'FARRELL: You have to satisfy yourself.
3484 THE CHAIRPERSON: Yes.
3485 MR. O'FARRELL: That's what we are suggesting. We are not trying to dramatize this.
3486 THE CHAIRPERSON: No, no, except that you may not know exactly what it is that the wording should be, but you appear to know what is unsatisfactory to the point of not being approvable by us and 2.1.10.4 as it was drafted was in that category. I understand that even with the amendment, it remains in that category.
3487 You don't want to tell me how to define material, what should it not cover.
3488 MR. O'FARRELL: Well, perhaps my suggestion would be to take the reverse wording of 10.3.B. 10.3.B reads:
"A person has the ability to cause the licensee or its board of directors to undertake a course of action." (As read)
3489 Perhaps wording in the negative would create the kind of box around the activity that would ensure that the person would not have that ability to cause the licensee or its board of directors to undertake a course of action.
3490 THE CHAIRPERSON: No course of action, including who the auditors are.
3491 MR. O'FARRELL: I'm reading from 10.3.B itself. It's not my words.
3492 THE CHAIRPERSON: No, no, but you would have to interpret 10.3.B I suspect so that a course of action isn't as broad and all covering.
3493 MR. O'FARRELL: Absolutely.
3494 THE CHAIRPERSON: It's the opposite of material. It's a difficulty as well. If you don't want to expand on that, that's fine. They are both very broad concepts that when one is either arguing that it's satisfactory and another party is on record as saying that it's not, I think it's legitimate to wonder where is the balance as to what these things should not mean in one case and in the other case what it does mean.
3495 MR. O'FARRELL: Granted.
3496 THE CHAIRPERSON: You don't have any other comment about that.
3497 MR. O'FARRELL: Not as it relates to section 4 of 2.1.
3498 THE CHAIRPERSON: Type of action to be covered. One type of action that you feel should not be possible is what you perceive as -- I'm looking at your written intervention here, the last paragraph, where you say that -- I guess that's a reference to 5.3, I think, which you say gives the minority shareholder tremendous power in determining who the majority shareholders and NetStar and hence the majority of the board of directors will be in negotiating favourable rights, et cetera.
3499 Would it not be fairer in light of the document to substitute "might be"?
3500 MR. O'FARRELL: Correct. Agreed. "Might be" is the possibility.
3501 THE CHAIRPERSON: It would be fairer because it has to be approved by the Commission and my understanding is then the next step, of course, is if the shareholder concerned is prepared to buy out the minority shareholder.
3502 MR. O'FARRELL: "Might" would be a preferable word.
3503 THE CHAIRPERSON: Otherwise you are into a rolling activity possibly where somebody is brought before us and then there's another. There is an out in that. You have heard, of course, the shareholders state that they would be prepared if that were required to actually buy them out.
3504 With regard to this particular proposal, what effect it may have on you as a broadcaster, do you have any comment, for example, about the ability of Global to become a major competitor or a major bidder of sports to provide what is perceived by many as the necessary competitive environment?
3505 You have followed, I gather, the proceeding.
3506 MR. O'FARRELL: Yes.
3507 THE CHAIRPERSON: And you are aware, although I did see you chatting back there --
3508 MR. O'FARRELL: I was actually saying nice things about you.
3509 THE CHAIRPERSON: I hope that doesn't get in the newspaper.
3510 You know that in attempting to argue that this proposal would not create a dominant position or a monopoly position in the CTV/NetStar group was advanced various groups of competitive bidders that would keep the competitive balance and obviously you fit within the first class which were over the air broadcaster.
3511 Do you have any comments as to the validity of that proposition as a counter point to the worry about dominance or monopoly?
3512 MR. SWORD: Madam Chair, may I just reflect back a bit on the shareholders agreement just for a moment --
3513 THE CHAIRPERSON: Absolutely.
3514 MR. SWORD: -- and make a comment about that.
3515 THE CHAIRPERSON: You are going to be more forthcoming than your lawyer friend.
3516 MR. SWORD: No, I'm not. No.
3517 THE CHAIRPERSON: We will be saying nice things about you.
3518 MR. SWORD: I would just like to express a fundamental concern in my own language. My sense is a lot of the concerns we had with the article that allowed for the minority shareholder to veto contracts and ongoing business was largely addressed in the amendment.
3519 The issue is really with 5.3.1. The fundamental issue is at a moment in time, at a period in time both past and in the future life of this enterprise, as long as 5.3.1 sits there, there is a period of time where the fundamental destiny of the enterprise shifts from the hands of the Canadian shareholder to the American shareholder.
3520 Whether it's for three months or four months, and I understand it is now three months -- is it four months now? It's now four months -- that it's not the Canadian shareholders that have the last word on who gets to carry this service forward. It's the American shareholder that has the last word on who gets to carry it forward. The Canadian shareholder is obliged to pursue that vigorously and at their own expense, et cetera, et cetera.
3521 What we are saying is that it's our observation that during that period of time the enterprise is not effectively controlled by Canadians. It's our suggestion, and we certainly can see how that kind of a minority protection may have been appropriate in an environment where the minority shareholder was actually the one that had the largest chunk of shares. There was a bunch of other smaller shareholders and that might be appropriate protection for what I will call a large minority shareholder.
3522 Now we have the presence of a strong single Canadian entity proposing to own this. Perhaps this is the time to correct that amendment so that on a going forward basis the enterprise is at all times clearly controlled by Canadians and most particularly during that very important time when who gets to carry it into the next phase is chosen and that choice is made by Canadians and not by foreign enterprises with their particular agendas dominating.
3523 As to the issue of conventional, Madam Chair, the deal that was talked about yesterday is the one we lost. We lost it on Bay Street and we lost it fair and square and we are on to other things.
3524 All of us, our company, the CTV group, all of us are trying to find our way in a new environment. I think that if we would have had the good fortune to bring the application before you, we probably would be looking forward to a future of being able to dominate a niche, the niche of sports.
3525 It wasn't our day so we aren't forward doing that. Others are. I can understand the business reasons for them doing it. I think that from our point of view that if we stake our future ability on the fact that we are always going to be able to, with just Global Television Network, hold on to the Super Bowl or compete effectively for the Grey Cup or the Stanley Cup or Saturday Night Hockey, then we really are not being realistic.
3526 I don't think that's what the future holds for us. We have to find our niche. We have to find a way to be significant and important players in that niche and carve out our piece of this complicated new environment that we are in.
3527 In a bidding war that went way out of our range we lost our Toronto Maple Leaf franchise that we had for about 14 years on Global Ontario, but that's okay. You know, that's part of what life is like in the world of today. We lost them to TSN and we have gone on and we have found other things to do. We have got a good replacement strategy for it.
3528 Yes, but I think in large measure it's just the world unfolding as it is at this time.
3529 THE CHAIRPERSON: So, Mr. Sward, if I had as much power as Mr. Morrison suggests and we could say "poof" and section 5.3 is gone, you have no problem with this deal?
3530 MR. SWARD: 5.3.1?
3531 THE CHAIRPERSON: Yes.
3532 MR. SWARD: Absolutely.
3533 THE CHAIRPERSON: You don't have a problem as a broadcaster yourself as to what effect this may have on your ability to operate?
3534 MR. SWARD: No. We are not here advocating that you deny this and we are not here advocating in any way that you deny it or that you --
3535 THE CHAIRPERSON: Well, that wasn't the purpose of my question. It was to try to make sure I understand that you as a broadcaster don't have a problem with the look of the world if this were approved, other than the particular manner in which it is put forward.
3536 MR. SWARD: That's correct.
3537 THE CHAIRPERSON: Which are two different questions in my view. One is you have a problem with that. The other is what effect will it have on you as an important broadcaster.
3538 What do you see happening in the near to medium term when you say the world is unfolding as it must I guess with regard to sports rights? Do you see anything in particular that makes you -- I understand you to say we are going to proceed, the world is going to unfold in any event and this won't make any difference to us as broadcasters for a variety of reasons.
3539 Do you see anything happening in the actual sports programming market or sale or a move or a trend towards North American rights, which is something that has been put forward both negatively and positively?
3540 MR. SWARD: Madam Chair, the whole sports rights issue unfolds incrementally in little bits and bites and you turn around and they are sometimes surprised how much change has happened.
3541 But as competition increases and as we offer more and more services and the Internet, as you have probably heard is now livestreaming a few of us, there are even more platforms out there, fundamentally, and sports is a valuable franchise and a wonderful one on television and always will be.
3542 The big shows that they talk about, that everybody talks about, the Stanley Cup and the Grey Cup and the final playoffs in the NHL and the World Series and the Super Bowl, the only way you get at those and the applicant is absolutely right, the sports people are looking for two things. They are looking for who will pay me the most and, as importantly, where can I get the most exposure for my sport?
3543 Usually the run-up to all of these sports is quite a significant number of games of some sort. So they really want to do business with people who can give their sport the most exposure. So it's the multiplatform broadcasters that really have the room to be able to give that kind of exposure, who are ultimately going to end up with these premier events at one point or another.
3544 And if you haven't managed to build those kind of platforms, well, you have to find another place, another place to work.
3545 So, I think that it certainly was our plan that if we were successful that we would look forward to a future of those kind of high-profile events, but there is nothing that's -- in recent times the sports rights have always been interested in those two aspects and that is who will pay me the most and who will give me the most exposure.
3546 The broadcasting group that can respond to that most effectively is the one that at the end of the day is going to walk away with the prize of the rights.
3547 THE CHAIRPERSON: My last question to you, Mr. O'Farrell, much has been made about the fact that these sections, both of the sections that concerned you, one no longer does, but some parties were still concerned -- well, I guess one which still concerns you, so your concerns remain, were found satisfactory before and the question this raises what significance should be given to that.
3548 Do I understand your comment to be we have now seen in the flesh, so to speak, the effect of 5.3 and, therefore, it's no longer -- it's not open to anyone to say, well, you have approved it before, it's fine.
3549 One reason would be because we have seen the effect of it. The other would be that the number of shareholders is smaller. Is that your position?
3550 MR. O'FARRELL: Effectively, yes, and if I may add we think that you have before you now the evidence of that experience of which we spoke of in our oral presentation. And not considering that experience, as you make your determinations on this application and on the proposed shareholder agreement we think would be inappropriate because it's there for you to factor in, and you may come to the conclusion inescapably that for a moment in time, as Jim was saying, that provision does create a situation that does not comply with 10(3)(b).
3551 If you don't address that in this context with a favourable finding or an unfavourable finding on this whole thesis, it may be regretful in terms of sanctioning a provision or an instrument that others may determine is appropriate for other shareholder agreements and such might lead to a practice.
3552 THE CHAIRPERSON: It is interesting that I didn't see you chatting when we were talking about how to calculate the value of the transaction for the benefits.
3553 MR. O'FARRELL: We have no problem with that.
3554 THE CHAIRPERSON: But may I ask you whether you feel that --
3555 MR. SWARD: We totally support the way CTV are suggesting that they calculate benefits.
3556 THE CHAIRPERSON: I will ask your lawyer now, Mr. Sward, whether he also agrees that the Commission has the discretion to change its mind in that area too?
3557 MR. O'FARRELL: Certainly, but with caution because there are issues that I believe the marketplace at large is entitled to have forewarning of and notice, therefore, is important and the manner in which the CAB I think crafted the intervention on point speaks to that notionally, and we support that intervention as filed on the record of this hearing.
3558 THE CHAIRPERSON: But not, Mr. Morrison, you will suggest that forewarning can be 15 minutes?
3559 MR. O'FARRELL: Well, not in I think the regulatory world that you live in. There is such a thing as due process and due process has certain obligations tied to it that come in the form of appropriate timing for notice purposes.
3560 THE CHAIRPERSON: I apologize, Mr. Morrison. I believe it was Mr. Grant who made that suggestion, although you did say we could extract or wield our influence at reply stage with his 15 minutes. Am I being unfair?
3561 MR. MORRISON: Mr. Grant is agreeing.
3562 THE CHAIRPERSON: These are my questions.
3563 We are grateful that you did respond to the invitation to come forward. I know, Mr. O'Farrell, you have many other things to do, but that you were here and seeing that you said nice things about me I forgive you for chatting.
3564 THE CHAIRPERSON: Forgiveness taken. Thank you.
3565 THE CHAIRPERSON: Thank you, gentlemen.
3566 That completes the interventions. We will take a 15-minute break and come back with the reply at approximately a few minutes after 6:00
--- Recess at 1745 / Suspension à 1745
--- Upon resuming at 1810 / Reprise à 1810
3567 THE CHAIRPERSON: Welcome back.
3568 We will proceed with the last phase of this process.
REPLY / REPLIQUE
3569 MR. FECAN: Madam Chair, Members of the Commission, the dream of a strong, uniquely Canadian, and truly national broadcaster -- un grand rêve canadien -- is not just my dream. It's not just the dream of my colleagues on this panel. It's a dream that is shared by Canadians across all kinds of sectors and geographic regions.
3570 The CTV team has laid the foundation over the last few years for the development and growth of a body of excellent Canadian programming with true resonance for audiences in this country. Now we can say on a regular basis that telling Canadian stories is bringing people to our electronic hearth.
3571 This is the dream that we are seeking to sustain and grow with this transaction. We are thrilled that for the first time we are able to include French speaking Canada in our company and in our dream.
3572 We received the support of close to 200 positive interventions from the broadcasting, professional and amateur sports communities; we were supported by scientists, independent producers, advertisers and concerned citizens. All of them we believe will benefit from the approval of our application.
3573 We are honoured by their trust and we will endeavour to keep on earning it.
3574 Nous remercions ces intervenants de tout coeur.
3575 Madam Chair, Members of the Commission, you told us yesterday that you would primarily address the concerns about this proposed transaction, and this is what you did -- very thoroughly.
3576 But we feel strongly about taking this one last opportunity to remind you of the benefits of the transaction. We feel these benefits are outstanding and that they definitely outweigh any concerns.
3577 We have listened carefully to the intervenors today, and we have a few specific comments.
3578 As Rob Bryden said so eloquently, it all comes back to viewers. He also made a point that we agree is fundamental: this discussion is about the mechanics of how we make the pie bigger.
3579 He told you, with confidence, that this transaction is good for smaller market teams, because it allows them to benefit from the synergies created by both national and regional exposure. We can provide this with the complementary mandates of TSN and Sportsnet.
3580 About the CCSA: We are definitely sensitive to the difficulties of facing a sole source supplier with must-have product. That said, we at CTV have had a positive relationship with the CCSA, and we have recognized it as an agent for its members for the purpose of negotiating affiliation agreements, and, if this application is approved, TSN will do the same.
3581 Prior to the expiry of current agreements, we will be happy to open a dialogue with them to attempt to resolve any outstanding problems.
3582 On Sam Pollock's intervention: Sportsnet has never bid against TSN for the Blue Jay rights. The expanded number of games sold last year is a matter of increased shelf space provided by the start-up of Sportsnet.
3583 This will not change with this application. However, when Sportsnet needed Blue Jays baseball because it is a must-have product to build our summer schedule, we were forced to buy 40 games instead of the 30 we wanted. This was regardless of the fact that there was no other bidder.
3584 Mr. Pollock is an excellent negotiator, and we needed the product.
3585 It just illustrates the countervailing power of the rightsholders. And we note that the Blue Jays have sold local broadcast rights for all 162 of their games.
3586 Approval of this application will not change the fact that both TSN and Sportsnet need baseball. Without it, a sports specialty service simply cannot fill its summer schedule.
3587 On the independent sports producers, we at CTV currently use the Téléfilm and Cable Fund definitions and guidelines. We find them adequate and we undertake to extend those to the members of Mr. Partington's association.
3588 On the issue of benefits, if there is confusion about the policy, we believe that a public process is the appropriate place for resolving that, rather than in the context of a particular application. This is only fair.
3589 With regard to the CBC, we are stating for the third time on the record in this hearing that we intend to honour TSN's partnership agreements with the CBC, and that we would actively seek to partner with the CBC and other broadcasters. We have full confidence in the CBC's ability to continue securing the premium sports rights for which they wish to compete. And we have looked forward to partnering with them to our mutual benefit.
3590 To clarify the Canada Games: TSN's existing agreement is to broadcast the Games until 2001. Without approval of this transaction, there is no commitment beyond that date.
3591 On the issue of Canadian control of NetStar, we understand the importance of the Cabinet Direction, and we will respect it on an ongoing basis.
3592 In fact, the agreements which are before you contain guarantees which go well beyond the requirements of the Direction, and we note that ESPN has given up rights which it now has. We are filing with you today the signed shareholders' agreement, as amended.
3593 We affirm that Netstar will be firmly under CTV's control. We will be managing partner, with full responsibility for day-to-day management and operational control of the licensees. Furthermore, we will have complete decision-making power for all programming.
3594 We do expect that the relationship will open new avenues for exports of Canadian programming and Canadian talent, something we think benefits the Canadian broadcasting system.
3595 Of the 18 professional Canadian teams and leagues which sell broadcast rights, three intervened positively -- all Canadian owned -- and 12 have chosen not to raise any concerns with you.
3596 It is novel to hear about the benefits of competition from Major League Baseball, the mother of all sports monopolies. I say that because let's remember that it has relied since 1922 on an exemption to the Sherman Anti-Trust Act granted to it by Justice Oliver Wendell Holmes just so it could carry on business.
3597 Here is an American organization governing Canadian baseball 100 per cent, complaining about ESPN holding 32 per cent of NetStar's equity and 20 per cent of the voting rights.
3598 There are a few things I need to correct in MLB's presentation.
3599 Mr. Beeston talked about his unhappiness about the drop in rights fees for the Jays in 1996. He forgot to mention four things: baseball's disastrous strike, followed by a horrible season for the Jays, followed by fan erosion. They signed the richest pitcher in baseball, and then expected TV to pay for it.
3600 His fearmongering on ticket prices is regrettable. This morning we all heard Mr. Pollock talk about being in a long-term deal for his Blue Jay rights. Last Friday, the National Post covered the announcement of the Jays' raising ticket prices 5 per cent. The same article goes on to point out that the Toronto Maple Leafs, who benefit from the TSN/Sportsnet launch, have the highest ticket prices in the NHL.
3601 Their sister organization, the Raptors, has the third-highest average ticket price in the NBA. Not bad for a relatively new team.
3602 My point is that local supply and demand conditions govern ticket prices. And if it is in a team's interest to raise prices, they do so regardless of the TV revenues. And they don't lower them when their TV revenues go up.
3603 Mr. Beeston forgot one other thing. His intervention was written under some bizarre circumstances. The four-day negotiation he refers to is in fact the culmination of a major lawsuit Major League Baseball launched against ESPN over the fact that ESPN had pre-empted three MLB games out of 81.
3604 Interesting that he considers a major lawsuit just another rights fee negotiation.
3605 MS McQUEEN: The Commission, and other intervenors, have expressed concern that this transaction would turn CTV/NetStar into a dominant player whose various services and windows would give it the power and the leverage to control the price of sporting rights, and to dictate what viewers see on television.
3606 This is an understandable concern, but the reality is that within each of those windows there will continue to be powerful competitive and disciplining forces that would prevent such a scenario. The world has changed a great deal and continues to change.
3607 The post-transaction CTV/NetStar, if approved, would still absolutely need rights to the major professional sports leagues which provide its bread and butter. We still will have to pay market value in order to get those rights. The leagues are sole-source suppliers of the must-have products for us, and they can package that product in many different combinations.
3608 But the relationship is mutually beneficial: we have a major stake in their survival and prosperity, as they do in ours. And this transaction won't change that.
3609 Perhaps it would help to look at some of these windows individually.
3610 CTV's conventional stations will not increase their carriage of sports. Our Canadian programming strategy is a very real, very deep commitment, which requires significant resources. CTV is a brand with strong resonance and currency among viewers. We will not be bumping the CTV National News for hockey, night after night. We will not be transferring resources from Canadian priority programming, especially drama, to sports.
3611 We simply can't afford to be the kind of behemoth that has been evoked by the negative intervenors unless we abandon our Canadian programming strategy and dream -- and we are not prepared to do that.
3612 In fact, what we are trying to do is to use the resources generated by this application to strengthen our dream.
3613 We will be in the market for sports rights. With two services, complementary mandates and plenty of shelf space for large amounts of significant sports product, we have no choice but to pay fair market value for those rights. But our focus is on competing for viewers.
3614 For rightsholders what counts is the proper exposure for their products and maximizing revenue streams, whether that is through broadcast windows, ticket sales or ancillary products.
3615 The Friends of Canadian Broadcasting expressed concern about the number of hours of sports programming that we would provide once this transaction is approved. As we have said, we believe that measuring the number of hours in a given market is not appropriate.
3616 With two 24-hour a day sports specialty services we would obviously be providing the bulk of the hours of Canadian sports available in a market like Calgary or Vancouver. But even if we provided all of it, and even if you ranked billiards and darts right up there with the Stanley Cup -- and remember, we are not going to be in the market for events like the Stanley Cup -- even if you did all that, Canadian sports are only half the hours of sports programming available in those two markets. Just a shade more than half of all sports programming comes from American sources.
3617 We do not operate in a vacuum. Last year in the southern Ontario market alone viewers could see 375 Major League Baseball games on American services. Every broadcast group in Canada is seeking more specialty licences and U.S. services will continue to seek status on the eligible satellite list.
3618 MR. FECAN: Diverse high quality programming is essential to our business interest. The rivalry between TSN and Sportsnet can work against the interests of our viewers.
3619 We are concentrating on the viewer when we are watching our backs or jockeying for elbow room. With TSN concentrating on national programs and Sportsnet on the regions, this transaction proposes an ownership and management model that is so much more constructive for the Canadian system and for viewer choice and diversity. Our competition will be everyone else on the dial. It is for viewers and advertisers and it is for survival in the coming environment.
3620 What we will have with the approval of this application is the opportunity to grow the overall pie, not squeeze others into lowering costs. This transaction will build a strong and great Canadian company able to fulfil the promise of the Canadian broadcasting system, able to offer Canadian viewers the kind of choice and diversity they demand and deserve, able to shoulder significant responsibilities and offer magnificent opportunities.
3621 We view this application not as being all about sports, but rather as the intelligent way to build a sturdy foundation for our dream.
3622 There is one area in which the CTV/NetStar -- the new CTV/NetStar will be a powerhouse, the development of Canadian talent, putting it on-the-air and on the map in drama, entertainment and news on the CTV conventional service and comedy on the Comedy Network and news on Newsnet and in sports on TSN and Sportsnet.
3623 The skills we build in sports will add to our capabilities in all genre. The revenue streams we will build through rapidly growing specialty subscription and air time will stabilize the eroding conventional base that supports so much of our important Canadian programming, and that includes amateur sports.
3624 Our track record on both services is excellent. This transaction ensures continuing excellence. The $35 million in tangible benefits will provide Canadian talent, Canadian athletes and Canadian viewers with opportunities that would never occur without this transaction.
3625 Aussi, arriver dans la marché francophone est une étape très importante pour nous. Nous voulons donner, et nous voulons apprendre. RDS y gagnera, et le public francophone aussi, avec une télévision plus diversifiée.
3626 In our hearts and minds we are confident that all these benefits do overwhelmingly outweigh any concerns.
3627 Merci, and we await your questions.
3628 THE CHAIRPERSON: Thank you, Mr. Fecan.
3629 We have no further questions at this stage, so we thank you for your reply.
3630 We also thank you and your team for your co-operation in these last two days, and we thank all the intervenors whose participation along with the Applicant's has helped us to understand better all aspects of your proposal.
3631 We worked hard, we shared some smiles, and now my colleagues and I must do some more work before rendering a decision.
3632 Nous remercions la requérante pour sa coopération et tous les intervenants pour leur participation.
3633 That will end the day and we will begin at 8:30 tomorrow morning with the Sportscope application.
3634 Again, thank you very much to your team.
--- Whereupon the hearing adjourned at 1826, to resume
on Wednesday, December 8, 1999 at 0830 / L'audience
est ajournée à 1826 pour reprendre le mercredi
8 décembre 1999 à 0830
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