ARCHIVED -  Transcript / Transcription - Gatineau, Quebec - 2002-05-06

This page has been archived on the Web

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.

Providing Content in Canada's Official Languages

Please note that the Official Languages Act requires that government publications be available in both official languages.

In order to meet some of the requirements under this Act, the Commission's transcripts will therefore be bilingual as to their covers, the listing of CRTC members and staff attending the hearings, and the table of contents.

However, the aforementioned publication is the recorded verbatim transcript and, as such, is transcribed in either of the official languages, depending on the language spoken by the participant at the hearing.



                       SUBJECT / SUJET:


HELD AT:                               TENUE À:

Conference Centre                      Centre de Conférences
Portage IV                             Portage IV
Outaouais Room                         Salle Outaouais
Gatineau, Quebec                       Gatineau (Québec)

May 6, 2002                            Le 6 mai 2002

                           Volume 1


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

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.


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



Charles Dalfen                     Chairperson / Président
Andrée Wylie                       Commissioner / Conseillère
Cindy Grauer                       Commissioner / Conseillère
Andrew Cardozo                     Commissioner / Conseiller
Stuart Langford                    Commissioner / Conseiller


William Howard                     Legal Counsel /
Leanne Bennett                     Conseillers juridiques
Michael McWhinney                  Hearing Coordinator  /
                                   Coordonnateur de l'audience
Pierre LeBel                       Secretary / Secrétaire

HELD AT:                           TENUE À:

Conference Centre                  Centre de Conférences
Portage IV                         Portage IV
Outaouais Room                     Salle Outaouais
Gatineau, Quebec                   Gatineau (Québec)

May 6, 2002                        Le 6 mai 2002

                           Volume 1


                                                   PAGE / PARA


PRESENTATION BY CHUM LIMITED /                          8 / 40

Application No. / No de demande 2001--1327-5
Application No. / No de demande 2001-1323-3
Application Nos. / Nos de demandes 2001-1326-7, 2001-1388-7
Application No. / No de demande 2001-3121-7
Application No. / No de demande 2001-3125-9
Application No. / No de demande 2001-3124-1
Application No. / No de demande 2001-3122-5


  1                        Gatineau, Quebec / Gatineau (Québec)
  2       --- Upon commencing on Monday, May 6, 2002
  3           at 0930 / L'audience débute le lundi
  4           6 mai 2002 à 0930
  5  1                    THE CHAIRPERSON:  À l'ordre, s'il
  6       vous plaît.  Order, please.
  7  2                    Good morning ladies and gentlemen.
  8       My name is Charles Dalfen and I am the Chairman of the
  9       CRTC.  I will be chairing this hearing.
 10  3                    I will be joined by my colleagues,
 11       Andrée Wylie, to my right, Vice-Chair, Broadcasting;
 12       Cindy Grauer, to my left, Regional Commissioner for
 13       British Columbia and the Yukon; and Commissioners
 14       Andrew Cardozo, to Andrée's right, and Stuart Langford
 15       to Cindy's left.
 16  4                    The public hearing will consider the
 17       applications by CHUM Limited to renew the licences for
 18       seven television stations that it owns in Toronto,
 19       Vancouver, Ottawa and other cities across Ontario.
 20  5                    Following these items, we will review
 21       the licence renewal application for the national
 22       specialty ethnic television service, Telelatino.
 23  6                    Finally, we will hear representatives
 24       of the Cable Public Affairs Channel Inc., or CPAC, on
 25       renewing the licences for its English- and


  1       French-language programming undertakings.
  2  7                    Commission staff assisting us at this
  3       hearing are Michael McWhinney, Hearing Coordinator;
  4       William Howard and Leanne Bennett, Legal Counsel; and
  5       Pierre LeBel, Hearing Secretary.
  6  8                    The CRTC released its most recent
  7       television policy in 1999.  In it, the Commission said
  8       it would renew all conventional television licences
  9       held or controlled by a group at the same time.  This
 10       hearing will give us the opportunity to consider the
 11       renewal of CHUMs conventional television licences in
 12       light of this policy and, of course, under the policy
 13       objectives set out in the Broadcasting Act that outline
 14       the Commission's mandate.
 15  9                    In Notice of Public Hearing CRTC
 16       2002-2, the Commission pointed out that station groups
 17       like CHUM generally offer program schedules that differ
 18       from those of the largest groups.  As set out in the
 19       TV Policy, the Commission encourages these groups to
 20       remain distinctive and to experiment with new genres of
 21       programming.  It also encourages them to find
 22       innovative ways to meet the needs of their audiences.
 23  10                   The policy calls for the Commission
 24       to consider various elements when considering the
 25       renewal of television station licences such as those


  1       operated by CHUM.  For example, we will examine CHUM's
  2       corporate strategy and how it will be implemented at
  3       the individual station level.  We will also examine how
  4       the strategies for the NewNet stations differ from
  5       CHUM's approach for CITY-TV Toronto and CKVU-TV
  6       Vancouver, their larger market stations.
  7  11                   The renewal of CHUM's
  8       non-conventional broadcasting licences will not be
  9       examined at this hearing, nor will we be looking at the
 10       renewal of the new conventional station, CIVI-TV
 11       Victoria, since it has only been on air since
 12       October 4, 2001.
 13  12                   Nevertheless, consistent with the
 14       TV policy, the panel will examine the contributions of
 15       all aspects of CHUM's operations to the broadcasting
 16       system.
 17  13                   Next, we will hear from
 18       representatives of the Telelatino Network on its
 19       application to renew its national ethnic specialty
 20       television service, which provides programming directed
 21       to Italian and Spanish-speaking audiences.
 22  14                   The panel will also examine the
 23       licensee's request to amend two of its conditions of
 24       licence.
 25  15                   Telelatino proposes to reduce the


  1       amount of Italian and Spanish third-language
  2       programming from 85 per cent to 75 per cent.  It also
  3       proposes to increase the maximum level of ethnic
  4       programming in the official languages directed to
  5       Italian and Spanish-speaking audiences from 15 per cent
  6       to 25 per cent.  Telelatino also proposes a minimum
  7       evening Canadian programming level of 15 per cent.
  8  16                   The panel will examine Telelatino's
  9       overall Canadian content level and the level of its
 10       Canadian programming expenditures, as well as
 11       programming concerns which were raised in various
 12       interventions.
 13  17                   Finally, we will hear from
 14       representatives of CPAC regarding its application to
 15       renew the broadcasting licences of its English- and
 16       French-language satellite-to-cable programming
 17       undertakings.
 18  18                   The panel will examine CPAC's request
 19       to broaden its definition of "nature of service", by
 20       adding new programming categories.
 21  19                   The panel will also consider
 22       CPAC's request to charge a graduated wholesale fee of
 23       $0.10 per month for the first two years of the new
 24       licence term, and of $0.11 per month starting in the
 25       third year.


  1  20                   CPAC proposes that $0.03 of these
  2       amounts would be paid by CPAC affiliates, while the
  3       remaining $0.07 and then $0.08 would be paid by
  4       subscribers.
  5  21                   Lastly, the panel will examine CPAC's
  6       proposal that its service be authorized for
  7       distribution on a dual status basis, that is, that it
  8       be carried by cable systems as part of the basic
  9       service, unless it agrees to carriage on a tier.
 10  22                   This hearing will run for
 11       approximately three and a half days.  As soon as this
 12       hearing ends, it will be followed immediately by
 13       another hearing which should last approximately a day
 14       and a half.
 15  23                   During the second hearing, the
 16       Commission will reconsider the application of World
 17       Television Network/Le réseau Télémonde to obtain a
 18       licence to operate two national specialty television
 19       services.
 20  24                   We should inform you that this
 21       proceeding will be heard by Commissioners who did not
 22       participate in the two previous Commission hearings on
 23       the applications presented by World Television
 24       Network/Le réseau Télémonde.
 25  25                   We will begin each day at 9:30 a.m.


  1       and finish at approximately 5:00 p.m.  You will be
  2       advised as soon as possible of any change in the
  3       schedule that may occur as we proceed.
  4  26                   Please turn off cellular phones and
  5       beepers when you are in the hearing room, as they are
  6       an unwelcome distraction for participants and
  7       Commissioners.  We would appreciate your cooperation in
  8       this regard at all times during the hearing.
  9  27                   Now, before we begin, I will turn
 10       things over to our Hearing Secretary, Pierre LeBel, to
 11       explain the process that we will be following.
 12  28                   Mr. LeBel.
 13  29                   MR. LEBEL:  Thank you, Mr. Chairman.
 14  30                   Before we begin, just a few
 15       housekeeping matters.
 16  31                   First, I would like to indicate that
 17       the Commission's examination room is located in the
 18       Papineau Room adjacent to the public hearing room.
 19       Public files of the applications being considered at
 20       this hearing can be examined there.
 21  32                   Second, there is a verbatim
 22       transcript of this hearing being taken by court
 23       reporters at the table to my left at the centre.  If
 24       you have any questions about how to obtain all or part
 25       of this transcript, please approach the court reporter


  1       during a break for information.
  2  33                   Finally, if you want to have messages
  3       taken, we will be happy to post them outside the public
  4       examination room.  The phone number in our examination
  5       room is area code (819) 953-3168.  If you have any
  6       further questions, don't hesitate to contact me or the
  7       examination room officer.  We will be more than pleased
  8       to assist you where we can.
  9  34                   Now, Mr. Chairman, we will proceed
 10       with items 1 through 7 on the Agenda.  These are
 11       renewal applications for seven local television
 12       stations owned by CHUM Limited.
 13  35                   We will proceed as follows:
 14  36                   First, we will hear the applicant in
 15       three different presentations.  Questions from the
 16       Commission will follow each presentation.
 17  37                   In Phase II, the appearing
 18       intervenors listed in the Agenda will be granted
 19       10 minutes to present their intervention and there may
 20       be questions from the Commission following each
 21       presentation.
 22  38                   In the last phase, the applicant will
 23       be provided with an opportunity to respond to the
 24       interventions submitted to its applications.  Ten
 25       minutes will be granted for this reply and, again,


  1       questions may follow.
  2  39                   Now, Mr. Chairman, we will hear the
  3       first presentation by CHUM and I will ask Mr. Switzer
  4       to introduce his colleagues.
  6  40                   MR. SWITZER:  Thank you.
  7  41                   Good morning, Mr. Chair, Madam
  8       Vice-Chair, Members of the Commission.  My name is Jay
  9       Switzer, President of CHUM Television.
 10  42                   Before beginning the formal part of
 11       our presentation, please let me introduce our panel to
 12       you.
 13  43                   Starting with this first row, on your
 14       far left is Sarah Crawford, Vice-President Public
 15       Affairs for CHUM Television.
 16  44                   Next to Sarah is Prem Gill, Manager
 17       of Public Affairs for CKVU Vancouver.
 18  45                   Next, on my right here, is Moses
 19       Znaimer, who has, among other titles, the
 20       responsibility as Vice-President Corporate Development
 21       for CHUM Limited.
 22  46                   Continuing to your right, next to me
 23       is Peter Miller, Vice-President Planning and Regulatory
 24       Affairs for CHUM Television.
 25  47                   On your far right, Diane Boehme,


  1       Director of Independent Production for CHUM Television.
  2  48                   In our second row -- and I know the
  3       map will make it a little easier for you -- starting on
  4       your far left, to your right is David Kirkwood,
  5       Vice-President Sales and Marketing for CHUM Television.
  6  49                   Next is Dan Hamilton, Vice-President
  7       National Sales, Conventional, CHUM Television.
  8  50                   Next is Peter Palframan,
  9       Vice-President Finance and Administration, CHUM
 10       Television.
 11  51                   Next should be and is Rob Waters,
 12       Executive Vice-President, CHUM Limited.
 13  52                   Next to him I sure hope is Fred
 14       Sherratt, Vice-Chairman, CHUM Limited.
 15  53                   On your far right of the second row,
 16       Marcia Martin, Vice-President of Production, Citytv.
 17  54                   At our side table, from your left to
 18       your right, David Caporicci, Director, Sales
 19       Administration for CHUM Television.
 20  55                   Next, Daphne Hubble, Director of
 21       Marketing and Research for CHUM Television.
 22  56                   Next, Paul Gratton, Senior
 23       Programming Executive, CHUM Television.
 24  57                   And, on the right, Brigitte Davlut,
 25       Manager, Regulatory Affairs for CHUM Television.


  1  58                   In the audience, I would also like to
  2       mention joining us is Lenny Lombardi, the President of
  3       CHIN Radio and Television, and a long-time friend and
  4       production partner of CHUM.
  5  59                   To start our presentation, I would
  6       like to invite Fred Sherratt to make a few short
  8  60                   MR. SHERRATT:  Mr. Chairman, Madam
  9       Vice-Chair, Members of the Commission, while I stepped
 10       back from the day to day operations of CHUM last year I
 11       wanted to be at this hearing for three important
 12       reasons.
 13  61                   The first was, to keep my record
 14       intact.  Over the past half century I have appeared
 15       before the chair of every Canadian broadcast regulator.
 16       It started with Davidson Dunton at the CBC Board of
 17       Governors, then Andrew Stewart of the BBG and, since
 18       1968, every chair of the CRTC.
 19  62                   Second, Mr. Chairman, this is CHUMs
 20       first appearance before you since your appointment and
 21       I wanted to be the one, on behalf of CHUM, to welcome
 22       you in your new role and to thank you for making the
 23       commitment to lead the Commission at what is a very
 24       crucial time in Canadian Broadcasting.  While we face a
 25       lot of challenges, we are comforted by your presence.


  1  63                   The third is the fact that this is a
  2       very important hearing for CHUM.  The Canadian
  3       television landscape has undergone a major change in
  4       the last few weeks and we, as a company, are facing a
  5       much more difficult future than when we filed our
  6       renewal applications.
  7  64                   As you know, CHUM Limited is a
  8       publicly traded company with significant family
  9       ownership.  The company had its beginning in 1954 when
 10       Allan Waters purchased a daytime AM station in Toronto,
 11       1050 CHUM.  We have grown considerably in the
 12       intervening 48 years to become a strong mid-sized
 13       broadcaster, but we still remain overwhelming
 14       Canadian-owned.
 15  65                   In the early days, CHUM focused on
 16       radio.  In 1965 we became part of the television scene
 17       when we acquired an interest in CKVR-TV Barrie, at that
 18       time, one of the country's largest privately owned CBC
 19       affiliates.
 20  66                   In 1970 we acquired CJCH-TV Halifax
 21       and became a partner in CTV.  By 1971 we had taken
 22       CJCB-TV Sydney and CKCW-TV Moncton/St. John under our
 23       wing and launched the Atlantic Television System, ATV.
 24       From that base, with the launch of Anik A3 we
 25       established a "World Television First", the Satellite


  1       Network, ASN.
  2  67                   One of our key milestones occurred in
  3       1978 when CHUM acquired a truly original voice in
  4       broadcasting, Citytv Toronto.  Low-powered, low-cost,
  5       locally focused and committed to reflecting cultural
  6       and racial diversity, Citytv broke the mould from the
  7       very beginning.
  8  68                   Now, Ron Waters will start the
  9       process of giving you further insight on how we have
 10       built on those beginnings.
 11  69                   MR. WATERS:  Mr. Chair, Members of
 12       the Commission, we welcome the opportunity to spend
 13       some time today telling you the CHUM Television story,
 14       our successes, our challenges and the exciting
 15       opportunities we see to develop our business and
 16       contribute to the Canadian broadcasting system.
 17  70                   We have grown our business by
 18       building on what we started with:  CKVR, a CBC
 19       affiliate; ATV, a CTV affiliate; and Citytv, an
 20       independent, to now eight local stations in Ontario and
 21       British Columbia, all independent.  We began with a
 22       commitment to local service and we have continued to
 23       invest more in local.
 24  71                   In the last four years CHUM
 25       Television has undergone dramatic changes.  We are no


  1       longer involved in CTV or in Maritime Television.  In
  2       the last few years we have focused on the re-launch of
  3       what were defacto "repeaters" and network affiliates in
  4       Ontario as strong local independent stations and most
  5       recently the launch of the new station in Victoria.
  6  72                   The result is what is known as
  7       "The NewNet", which comprises local stations in
  8       Ottawa/Pembroke, Barrie, London/Wingham/Windsor and,
  9       since last October, CIVI, serving Victoria and the
 10       Island.
 11  73                   Our other focus, more urban and
 12       culturally diverse, grows from Citytv Toronto and now
 13       encompasses Vancouver with the recent acquisition of
 14       CKVU.  Many stations are still very much a "work in
 15       progress", particularly in Ottawa and British Columbia.
 16  74                   We have always invested in local with
 17       a view to the long-term, and our slow but steady
 18       expansion has in large part been due to sound public
 19       policy and regulators committed to growing a strong,
 20       vital, distinct Canadian broadcasting system.
 21  75                   The addition of the two new stations
 22       in Toronto will mean a serious revenue blow to our
 23       southern Ontario stations and, therefore, to our
 24       television group as a whole.
 25  76                   So as we welcome the chance to tell


  1       you the CHUM story, we must point out that today the
  2       way in which we see our story unfolding in the future
  3       looks very different from what we imagined when we
  4       filed our renewal applications some months ago.
  5  77                   Now, to cover the details, I will
  6       turn the panel over to CHUM Television President, Jay
  7       Switzer, who will act as our quarterback today.
  8  78                   MR. SWITZER:  To start, I would like
  9       to give you a road map of our approach here today and
 10       tomorrow.
 11  79                   First, we will spend some time
 12       discussing our corporate approach and philosophy.
 13  80                   We will not now go into great detail
 14       about local programming.  That discussion, we believe,
 15       should most appropriately take place with each of our
 16       local teams where the decisions regarding local
 17       reflection are actually made.
 18  81                   After our discussion with you on
 19       corporate matters, we will introduce the teams from
 20       Citytv Toronto and our newest station, CKVU Vancouver.
 21       These two stations serve the largest English markets in
 22       Canada.  They share similar national programming,
 23       including emphasis on long-form and feature film, and
 24       have the responsibility of reflection of their highly
 25       urban multicultural audience.


  1  82                   After that discussion, we will
  2       introduce the teams from our five stations in Ontario,
  3       and our newest member -- not up for renewal but
  4       obviously a key part of our expanded "NewNet" group of
  5       stations -- the "NewVI" serving Victoria and the
  6       Island.
  7  83                   We developed this approach with the
  8       helpful guidance of your staff, and believe it will
  9       give you the best possible overview of what we do and
 10       the commitment and expertise of our people.
 11  84                   One of the most important roles that
 12       the Canadian broadcasters play, is telling people's
 13       stories, both reality and fiction.  Everyone has a
 14       personal story.  Here is mine.
 15  85                   I was a TV brat.  I joined Citytv in
 16       1983.  My mother, Phyllis, co-founded Citytv with Moses
 17       in 1972.  My father Israel, or Sruki, is an engineer
 18       whose many successes include building major cable
 19       systems around the world.  I grew up talking television
 20       around the dinner table.  My first job in television
 21       was on switchboard.
 22  86                   There are many on our team who, like
 23       me, have been here for 10, 20 or 30 or more years.
 24       Some are much newer.  Each one of our stories involves
 25       making a significant contribution to our broadcasting


  1       system.  Together, these stories comprise the CHUM
  2       Television story.
  3  87                   MR. ZNAIMER:  Though it wasn't always
  4       the case, today the things that we have always
  5       championed, the things that we started decades ago --
  6       localism, cultural diversity, long-form drama -- are
  7       recognized as "important".  Indeed, in many ways public
  8       policy now seeks to impose on other players in the
  9       Canadian broadcasting system the very things we have
 10       always done voluntarily.
 11  88                   We want to continue to improve and
 12       expand our kind of local television, both in the
 13       markets we currently serve and in still other markets
 14       across the country.  So we come before you with these
 15       simple propositions:
 16  89                   If you want us to continue to
 17       emphasize local, please make sure we have the tools,
 18       flexibility and the revenue opportunities to make our
 19       stations profitable and grow;
 20  90                   If you want cultural diversity,
 21       please assure that those who know it and live it
 22       and have done it for literally decades can continue to
 23       do so;
 24  91                   If you want more popular Canadian
 25       movies, we will do that job, through a combination of


  1       in-house and truly "independent" production; and
  2  92                   If you want risk-taking --
  3       particularly if, Mr. Chairman, you want a response to
  4       your "Book Mark" challenge of taking U.S. prime time
  5       head on -- please recognize in us a team who are
  6       itching to put ourselves in a position to take up that
  7       challenge.
  8  93                   When my partners and I launched
  9       Citytv in 1972, we did it with a combination of dreams,
 10       chutzpa and progressive ideas.
 11  94                   Let me read a short paragraph from
 12       the original license application I wrote on my kitchen
 13       table in 1971:
 14                              "...there is a brilliant rainbow
 15                              of religion, race, and ethnicity
 16                              that animates this city and
 17                              [channel] Seventy-nine will
 18                              acknowledge this fact on the
 19                              television air..."
 20  95                   We saw then that the real face of
 21       Toronto, the urban multicultural face, was not
 22       reflected on mainstream television and needed to be.
 23       That became our mission!
 24  96                   Citytv was then, and has remained,
 25       the heart of Toronto:  The Peoples' Station.  An


  1       alternative to the generalist conventional networks,
  2       recognized for our pioneering commitment to intensely
  3       local positive, accessible, culturally and racially
  4       diverse television.  Streetfront.  Storefront.
  5       Engaged.  Open to new talent.  Breaking down barriers.
  6  97                   To sum it up with one of our
  7       oft-used, oft-quoted, slogans:  "Everybody's Welcome.
  8       Everyone Belongs".
  9  98                   These core values and commitments
 10       have endured and have been extended to all our local
 11       CHUM Television stations.
 12  99                   MS GILL:  I first appeared before you
 13       in Vancouver just over two years ago as part of CHUM's
 14       application team for CITT Vancouver.
 15  100                  While that application did not meet
 16       your approval, our application for CIVI Victoria did.
 17  101                  That station launched just last year,
 18       on October 4, 2001.  Less than two weeks later, on
 19       October 15th, you approved CHUM's application for
 20       transfer of ownership of CKVU Vancouver, the station
 21       where I am proud to work, and from which I also assist
 22       at the CHUM Corporate level in serving and reflecting
 23       the needs of multicultural youth.
 24  102                  Almost overnight CHUM has arrived in
 25       B.C. with a bang and, in the process, gone from serving


  1       roughly 40 per cent to over 50 per cent of English
  2       language households across Canada.
  3  103                  We are early days yet at CKVU, but
  4       our style, our approach to local and, most important,
  5       our commitment to cultural diversity, is already being
  6       felt.
  7  104                  While details will not be announced
  8       until June 6th, we will be returning CKVU to its roots
  9       as a distinctive, culturally diverse, local station:
 10       Citytv Vancouver.  In this case, "City" meaning
 11       Vancouver, and joining Citytv Bogota, Citytv Barcelona
 12       and Citytv Toronto as the fourth major market local,
 13       movie-based, culturally diverse "Citytv" in the world.
 14  105                  Together, Vancouver and Victoria, the
 15       Lower Mainland and the Island, are now getting a taste
 16       of CHUM's style of television.  We, and our
 17       communities, could not be happier with the results.
 18  106                  At a time when the British Columbia
 19       economy is not exactly booming, this company has
 20       invested close to $160 million dollars in
 21       infrastructure, 250 television jobs, and 54 hours of
 22       local programming a week.
 23  107                  MR. SWITZER:  Our job today is to
 24       give you a sense of our business and a sense that our
 25       business is and needs to be different if we are to


  1       succeed.
  2  108                  Thankfully, you have created a public
  3       policy framework that encourages difference, a TV
  4       framework that recognizes that what the CBC's and CTV's
  5       and Global's do is, and should be, different from what
  6       we do.
  7  109                  But we hope you also recognize that
  8       our aspirations and our business potential do not exist
  9       in a vacuum.  So as we talk about what we want to do,
 10       we hope you recognize that that discussion will be in
 11       the context of what we can do and what we need from you
 12       in the much changed environment in which we now find
 13       ourselves.
 14  110                  For example, our appetite for local
 15       programming, and our sense of the business opportunity
 16       there, is directly dependent on the market conditions
 17       in which we operate, market conditions that depend in
 18       turn on what the economy is like, what our competitors
 19       do, and what you do.
 20  111                  As Ron said earlier, with the pending
 21       launch of the two new stations in the greater Toronto
 22       area, our southern Ontario stations have been struck a
 23       serious revenue blow.  Therefore, so has our television
 24       group as a whole.  We estimate direct revenue losses of
 25       $12 million annually in the 2003/2004 broadcast year,


  1       not taking into account losses caused by the loss of
  2       popular programming to these new competitors or
  3       increased U.S. programming costs due to the bidding up
  4       of U.S. rights.
  5  112                  As we look at our operations, and
  6       what we will need to do to respond to those revenue
  7       losses, we find we have very little choice but to look
  8       at local programming.
  9  113                  We can't really cut Canadian national
 10       programming, because of our commitments to priority
 11       programming and our need to invest more and more in
 12       that area
 13  114                  We can't cut U.S. programming costs.
 14       In fact, it is already evident that those costs, as
 15       forecast, will rise.  Indeed, in the first 21 days
 16       since the licensing decisions, our U.S. programming
 17       costs for next year already have increased by over
 18       $1.5 million.  That is just on a couple of our acquired
 19       shows at the beginning of the buying process.
 20  115                  So what is left to cut?  What is left
 21       to rationalize?  It is local.
 22  116                  We have to make it more
 23       cost-effective.  We have to make it more efficient.
 24       And, yes, we may have to cut the number of hours.  We
 25       hope you will appreciate that we must have that


  1       flexibility.
  2  117                  We must be in a position to continue
  3       to evaluate our options.  The condition of licence
  4       proposals we have set forth are absolute minimums.  It
  5       is not our intention to arbitrarily cut any local
  6       service.  Local service is what we have built our
  7       stations on.  However, in this vastly changed
  8       environment, we must be in a position to act.  The
  9       ability to do so is in the best interests of the
 10       stations and, thus, in the best interests of the
 11       communities they serve.
 12  118                  That being said, we listened very
 13       hard to our viewers in Wingham and Windsor and came to
 14       a decision.  Rather than completely cutting separate
 15       Windsor and Wingham News, as we had said we would do or
 16       that we would have to do if you licensed what we called
 17       the "worst-case scenario", we will keep commitments for
 18       those communities as filed for a least two years.
 19  119                  As you will discover in your
 20       discussion with the New PL/WI/NX team, these
 21       commitments still give us the ability to effect some
 22       rationalization and make our news operations more
 23       efficient but, most important, they mean viewers of
 24       Wingham and Windsor will not see any real reduction in
 25       local service.


  1  120                  MS CRAWFORD:  You already know of our
  2       30 years of leadership in the area of cultural
  3       diversity.  I would like to touch on a few recent
  4       initiatives.
  5  121                  Two and a half years ago, we marked a
  6       first in Canadian broadcasting by voluntarily putting
  7       our commitment to cultural diversity in writing.  Our
  8       Corporate Statement of Cultural Diversity Best
  9       Practices codifies successful practices and articulates
 10       core values in a set of guidelines that we
 11       systematically extend across all of our television
 12       stations.
 13  122                  In March 2001 we convened, produced
 14       and televised the CHUM Television Colloquium on
 15       Cultural Diversity in the Media.  This five-hour, live,
 16       national dialogue on diversity in the print and
 17       electronic media was webcast on our corporate site,
 18       telecast live on Canadian Living Television and made
 19       available free to other interested broadcasters.
 20       Vision, APTN and CPAC all carried the program that
 21       included phone, fax and e-mail participation from
 22       Canadians coast to coast.
 23  123                  The Colloquium was shaped by a
 24       nine-person, national, community-based steering
 25       committee, and included 27 stakeholder participants.  A


  1       one-hour "highlights" version of the show has been
  2       telecast on all our local stations and is made
  3       available free to educators, complete with Study Guide
  4       for in-class use.
  5  124                  You have all asked all corporate
  6       groups, large and small, at group licence renewal to
  7       provide their plans for cultural diversity.  Since our
  8       plan springs from our living, breathing philosophy and
  9       business practices, rather than filing a document after
 10       the hearing we have already provided you with a draft
 11       of our corporate plan.
 12  125                  The plan includes a commitment to
 13       ensure that on-air and behind the scenes staff are, at
 14       minimum, reflective of the community each station
 15       services.
 16  126                  The plan also outlines objectives,
 17       strategies, tactics and specific goals in areas such as
 18       corporate accountability, community input and feedback,
 19       and on-air reflection.  In doing so, it provides more
 20       formal mechanisms for implementing our Best Practices.
 21  127                  MS BOEHME:  Our commitment to
 22       independent production is strong.  We don't have the
 23       largest budgets, but we move quickly, we move with
 24       respect and what we do is top-notch.
 25  128                  We are proud of our relationships


  1       with independent producers, as epitomized by the many
  2       solid, positive interventions received in this
  3       proceeding, including that of the CFTPA.
  4  129                  Allow me to red from just one such
  5       intervention -- that of Robin Cass of Triptych Media.
  6       I quote:
  7                              "CHUM provides a very important
  8                              means by which many communities
  9                              across the country can access a
 10                              whole range of films by Canadian
 11                              filmmakers.  Often these films
 12                              are not even available in their
 13                              local multi-plex and thus, their
 14                              broadcast services can be seen
 15                              to be contributing to the
 16                              expansion of a national audience
 17                              and an awareness of our domestic
 18                              cinematic storytelling.  Given
 19                              Canada's vast geography there is
 20                              much that broadcasters can do to
 21                              offer audiences opportunities to
 22                              view new and classic Canadian
 23                              films.  CHUM are indeed leading
 24                              players in this arena."
 25  130                  End quote.


  1  131                  Our commitments include specific
  2       script and concept development moneys at the local
  3       level and serious staff liaison, from me, as Director
  4       Independent Production for all of CHUM Television, and
  5       from our development officers located at each station
  6       in the CHUM Television group.
  7  132                  MR. SWITZER:  Despite the fact that
  8       we are not a large multi-station group we have, over
  9       the last two years, voluntarily accepted the eight
 10       hours priority programming threshold on all our
 11       stations, except Citytv.  This is a significant
 12       undertaking on our part because, in effect, it means we
 13       as a group have committed to 16 hours of unduplicated
 14       priority programming on a revenue base that is roughly
 15       one-third that of the larger multi-station groups.
 16  133                  We will continue to increase, on a
 17       case-by-case basis, spending on independent production
 18       in priority programming categories as appropriate and
 19       as we move forward with our priority programming plans.
 20       In particular with Citytv Toronto, we will commit to
 21       growing priority programming from the current level of
 22       approximately five hours to six hours for the first
 23       three years of a new license term and seven hours
 24       thereafter.
 25  134                  In sum, consistent with your TV


  1       policy, our unique place in the broadcasting system,
  2       and the significant changes to the environment in which
  3       we operate, we seek four key measures from you, two of
  4       which we will be discussing in our station
  5       presentations and two of which we have touched on this
  6       morning:
  7  135                  1)   A direction to cable operators
  8       to continue to distribute CKVR-TV, Barrie, on a channel
  9       position no higher than channel 25, as initially
 10       mandated in the Commission's disaffiliation decision
 11       of 1994;
 12  136                  2)   Approval of our "split feed"
 13       application for CHRO Pembroke/Ottawa, in recognition of
 14       the unique history of local service at that station and
 15       in accordance with your policy of requiring local
 16       programming and a local presence in order to access
 17       local advertising;
 18  137                  3)   Approval of our minimum
 19       commitments for local and regional programming on our
 20       Ontario stations; and
 21  138                  4)   Approval of our priority
 22       programming plans, including those of Citytv Toronto,
 23       and flexibility with respect to the mix between
 24       in-house and independent production.
 25  139                  Mr. Chair, Madam Vice-Chair, Members


  1       of the Commission, while the challenges facing us are
  2       big and real, we want to assure you that we want to
  3       continue our leadership role in local programming and
  4       in reflecting cultural diversity.  We want to be
  5       leaders in innovative priority programming, original
  6       and independent production.  These are our core
  7       strengths.
  8  140                  We cite our track record of exceeding
  9       conditions of licence and commitments in the past as
 10       your best assurance that we will, if we can.
 11  141                  We want to do more, but we can only
 12       do more if the business climate, the regulatory
 13       framework and market conditions allow.
 14  142                  Thank you very much.
 15  143                  We look forward to your questions.
 16  144                  THE CHAIRPERSON:  Thank you very
 17       much.
 18  145                  I believe counsel has an item.
 19  146                  MR. HOWARD:  Thank you, Mr. Chairman.
 20  147                  Just a matter to clear up.
 21  148                  On May 3rd you filed some more
 22       documentation with the Commission consisting of revised
 23       financial statements, draft cultural diversity
 24       corporate plan and CKVU-TV update of transfer benefits.
 25       That is correct?


  1  149                  MR. MILLER:  That is correct.
  2  150                  MR. HOWARD:  I think you sought
  3       confidentiality with regard to part of the revised
  4       financial statements, namely the column which was for
  5       the current year.
  6  151                  MR. MILLER:  That is correct.
  7  152                  MR. HOWARD:  The Commission has
  8       granted confidentiality to that, so I believe what you
  9       have now filed as a revised document, which is now
 10       public, which has severed that particular column.  Is
 11       that correct?
 12  153                  MR. MILLER:  Precisely.
 13  154                  MR. HOWARD:  These are available to
 14       intervenors?
 15  155                  MR. MILLER:  Yes.  I have provided
 16       copies to the Secretary.
 17  156                  MR. HOWARD:  Great.
 18  157                  I believe the panel has decided that
 19       intervenors would have 10 days to make comments upon
 20       that, if that is acceptable to yourself.
 21  158                  MR. MILLER:  Certainly.
 22  159                  MR. HOWARD:  And three days to
 23       yourself to make replies to any of those comments
 24       afterwards.
 25  160                  MR. MILLER:  Certainly.


  1  161                  MR. HOWARD:  Within the confidential
  2       documents, at least the ones that the Commission
  3       received, there was a transmission error with regard to
  4       the results for the station in London.  I understand
  5       that now the documents you have filed have corrected
  6       this.  The full page is there for that, on the record,
  7       for intervenors now?
  8  162                  MR. MILLER:  That is correct.
  9  163                  MR. HOWARD:  Great.  Thank you very
 10       much.
 11  164                  THE CHAIRPERSON:  Mr. Switzer, just
 12       before we begin, are the messages in square brackets
 13       meant to be subliminal messages?
 14       --- Laughter / Rires
 15  165                  MR. SWITZER:  We sometimes edit on
 16       the fly, Mr. Chair, for time.
 17  166                  THE CHAIRPERSON:  Thank you.
 18  167                  I am going to try to see if I can
 19       understand the point that you make about market impact
 20       of the new Toronto licences, among other things.
 21  168                  I will use your newly filed financial
 22       statements.  You will forgive me for perhaps not being
 23       as familiar with them as I might be because they were
 24       only recently filed, but you will perhaps help me go
 25       through them.  The point that Mr. Waters raised about


  1       the stations being a serious revenue blow.
  2  169                  I guess what I would like you to help
  3       me with is how you begin to get the base from which you
  4       then gauge the impact.  In other words, do you assume a
  5       size of the Toronto market based on growth
  6       year-over-year of which you have a share and then with
  7       the licensing of new stations that share is then
  8       eroded?
  9  170                  If that is the path you follow, could
 10       you guide me through it step-by-step?
 11  171                  MR. SWITZER:  Yes, Mr. Chair.
 12  172                  This work began as homework for the
 13       previous Hamilton hearing and there was an awful lot of
 14       line-by-line analysis and work done in preparing these
 15       revenue estimates.  In the revised financial tables,
 16       which you have, we have brought everything up to date,
 17       including every bit of information that we know at
 18       present.  Our gang is happy to take you through
 19       top-line information or line-by-line.
 20  173                  It was not simply a case of looking
 21       at market size and market share, but a detailed program
 22       schedule analysis effect of pricing in the market,
 23       effect of supply and demand, and we are happy to take
 24       you through whatever you require.
 25  174                  THE CHAIRPERSON:  Okay.  To look at


  1       your 2002/2003 revenues -- year one I assume is
  2       2002/2003 -- you have revenues of $175 million.
  3  175                  Is that right.
  4  176                  MR. SWITZER:  Yes.
  5  177                  THE CHAIRPERSON:  Right.  What I
  6       would like you to do is to start as to how you grew the
  7       market for 2002/2003, based on what base year, assuming
  8       what percentage of growth, how large a market, what was
  9       CHUM's share, and then what was CHUM's share as a
 10       result of the impact of the new licences.
 11  178                  I appreciate that when you do all
 12       stations -- and I am looking at the "All Stations"
 13       chart here -- so I assume that you are looking at both
 14       Ontario and British Columbia?
 15  179                  MR. SWITZER:  Yes.  I would like to
 16       ask Peter Palframan to assist, as the Vice-President of
 17       Finance.
 18  180                  All of the information that we are
 19       going to talk about has been filed in various
 20       assumption tables in terms of percentage increases.  It
 21       was certainly done station-by-station you will note,
 22       and Peter will talk about baseline revenue assumptions
 23       for stations such as CKVU in Vancouver and the NewRO in
 24       Ottawa are growing in the early years at much higher
 25       numbers than some of the more mature stations.


  1  181                  Peter, can you add some detail?
  2  182                  MR. PALFRAMAN:  Yes.  Good morning,
  3       Mr. Chair.
  4  183                  I guess the important thing in
  5       looking at the revised financial projections is to take
  6       it back a step to what we filed originally.  Because
  7       what we filed originally obviously took into account
  8       our normal expectations for growth in the market,
  9       inflationary increases, and so on.
 10  184                  So just to establish that as starting
 11       point, what I can reflect is that in our original
 12       filings we showed revenues going from the current of
 13       $170 million to $177 million in the first year of the
 14       projected new license period 2002/2003.
 15  185                  So that showed what we would have
 16       considered normal growth, growth in the market and the
 17       efforts that our sales team put together and all the
 18       work that they did in enabling us to come up with
 19       realistic financial projections.
 20  186                  Four weeks ago, of course, we got
 21       news that that whole market scenario was going to
 22       change and we then revisited our projections.  So what
 23       you have today are the revised financial projections
 24       based on that.
 25  187                  I think it will be a discussion that


  1       we will need to develop with our sales team as to how
  2       they came up with the impact of that and how it gets
  3       reflected in the financial projections.
  4  188                  But on that top page we have actually
  5       done a reconciliation from what we originally filed,
  6       the $176 million in the first year of the new license
  7       period and then showing the revenue losses that we are
  8       projecting.
  9  189                  THE CHAIRPERSON:  Yes, I do have both
 10       sheets before me so I am able to follow along with you.
 11  190                  MR. PALFRAMAN:  Okay.
 12  191                  THE CHAIRPERSON:  I didn't want to
 13       quite get to impact just yet, I wanted to get to total
 14       market size first.
 15  192                  MR. PALFRAMAN:  All right.
 16  193                  THE CHAIRPERSON:  Thank you.
 17  194                  MR. PALFRAMAN:  Okay.  Thank you.
 18  195                  MR. MILLER:  Can I, Mr. Chair, just
 19       add a couple of other dimensions.
 20  196                  First of all, as Mr. Switzer said, we
 21       started this analysis of impact at the Toronto/Hamilton
 22       hearing.  We did it in two ways.  We did a bottom-up
 23       analysis with our sales team, where they went through
 24       the proposed program schedules of the applicant's and
 25       on a case-by-case program-by-program basis estimated


  1       the impact on our stations.
  2  197                  We also did a top-down analysis that
  3       was an outside consultant's report prepared by Hans
  4       Jansen that looked more at the factors that you raised
  5       in your question, the size of the market, the likely
  6       share of competitors.
  7  198                  Each was complimentary, but
  8       differently arrived at so that we could estimate these
  9       initial impact numbers that then we used here.  We will
 10       talk a little later about how we used them here to
 11       develop the impact projections.
 12  199                  In terms of the overall market
 13       again -- and our sales team can obviously speak to
 14       that -- we have projected largely flat, conventional
 15       growth.  Again, there are some differences in early
 16       years than later years.  That is also consistent with
 17       the Jansen report that was filed both in the Hamilton
 18       hearing and in this hearing.
 19  200                  THE CHAIRPERSON:  Right.  So can you
 20       help me build it up then?
 21  201                  MR. PALFRAMAN:  Yes.  In the
 22       assumptions that we originally filed, what it indicated
 23       was, as Peter said, that the Toronto market would be
 24       flat in the first three or four years.  So we have
 25       projected zero growth in the first year for CITY-TV


  1       Toronto, and then that grows to 1 per cent in years
  2       two, three and four, and then 2 per cent through
  3       years five, six and seven.  Then it varies in the
  4       different markets.
  5  202                  So for example Barrie we are
  6       projecting 2 per cent growth throughout the new license
  7       period.
  8  203                  For CHRO in Ottawa, where we have
  9       been growing that market, we are expecting our revenues
 10       to increase at much higher levels in the first three
 11       years:  15.8 per cent in year one, 14 per cent in year
 12       two, 12.8 per cent in year three, and then it starts to
 13       level off and goes to 6 per cent and 4 per cent in
 14       years five, six and seven.
 15  204                  In the CFPL/CHWI/CKNX
 16       London/Windsor/Wingham group, in general we are
 17       expecting market growth in the order of 4 per cent to
 18       3.5 per cent for the first three or four years and then
 19       2 per cent for years five, six and seven.
 20  205                  Victoria and Vancouver we are
 21       obviously expecting higher growth in the first couple
 22       of years as they are new stations or re-launched
 23       stations.
 24  206                  So for Victoria we are projecting
 25       10 per cent for the first year, 9 per cent growth in


  1       the second year, 7 per cent growth in the third year,
  2       and then it levels off to about 3 per cent and 2 per
  3       cent for years five, six and seven.
  4  207                  For Vancouver, 8.5 per cent in the
  5       first year, 7 per cent in the second year, 4 per cent
  6       in the third year and then it levels off also at about
  7       2 per cent.
  8  208                  So as you can see, we have different
  9       scenarios for each market, having looked at them and
 10       recognizing that each market is growing and is
 11       projected to grow at different rates.  And each of our
 12       stations are different and are at different stages in
 13       their growth.
 14  209                  So we have tried to take as precise a
 15       view -- and, as I say, that goes back to our original
 16       filings in November, at which time we were able to do
 17       that analysis.
 18  210                  I'm not sure if that is helpful.
 19  211                  THE CHAIRPERSON:  Well, we are both
 20       trying to kind of grope to get there.
 21  212                  I guess I am trying to understand,
 22       your year one I guess in all of these charts is
 23       2002/2003?
 24  213                  MR. PALFRAMAN:  Right.
 25  214                  THE CHAIRPERSON:  I guess looking at


  1       your six months statements of February 28th I note
  2       that, for the group anyhow -- I guess it isn't broken
  3       out by conventional stations, but there is a healthy
  4       growth of the company's revenues.
  5  215                  I guess also the assumptions that
  6       would have been made back at the time you filed your
  7       intervention would probably have been quite different
  8       about GDP growth in Canada, and in Ontario in
  9       particular, than they are now, let's say, or that they
 10       have been for the last few weeks or month.
 11  216                  I have Conference Board numbers that
 12       show approximately 6 per cent GDP growth rates for
 13       Ontario and British Columbia 2002/2003 and going
 14       forward and I'm just wondering the extent to which
 15       those are factored into these tables.
 16  217                  MR. PALFRAMAN:  Yes, we do look at
 17       all of those statistics and of course we look at all
 18       the TVB data that gives us an even more precise reading
 19       of the advertising market.
 20  218                  Obviously at the time that we did our
 21       original projections as well, we also were in a period
 22       of uncertainty economically for a variety of reasons.
 23       Certainly it has been well publicized that advertising
 24       revenues have been under pressure.  I think we are
 25       emerging from that and, in fact, as Jay indicated, in


  1       filing our revised financial projections we were able
  2       to take some of that apparent turnaround into account.
  3       So some of those revised assessments have been taken
  4       into account now.
  5  219                  But it may be helpful for Dave
  6       Kirkwood just to give you some idea of some of the
  7       additional data that we do take into account in
  8       assessing what the market is like.
  9  220                  MR. KIRKWOOD:  We are dealing with a
 10       market reality that dictates that there is no growth
 11       really in conventional television advertising.  If
 12       there is within that category it is reserved for big
 13       network advertising and it has become fairly common
 14       knowledge that local television advertising is actually
 15       on a decline.  The Toronto market is no different than
 16       any other.  It may be a little bit more in decline.
 17  221                  The TD Newcrest and the
 18       Pricewaterhouse papers both indicate that this is the
 19       case and aren't as optimistic as the Conference Board
 20       is about the future.
 21  222                  Because we represent specialty
 22       television, we are well aware that the growth is there.
 23       I believe within network television the growth is
 24       something -- last year it was 18 per cent in that
 25       category.  But such is not the case for local.  In


  1       fact, last year it returned to, I think, 1996 levels.
  2  223                  You are probably acquainted with the
  3       TVB's time sales report that also indicates that sort
  4       of high is the reality we live with.
  5  224                  MR. WATERS:  Mr. Chair, if I could
  6       just add to Mr. Kirkwood's comments, I think the
  7       important thing in these new numbers you have received
  8       is that the year that we are in currently, these are
  9       the latest and most up-to-date numbers we have compared
 10       to November when we filed.  It was the beginning of the
 11       year, we had had September 11th.
 12  225                  So as you can see from those new
 13       numbers and if you go to individual stations,
 14       particularly Victoria and Vancouver where we just
 15       launched them in October and received the other one in
 16       November, we weren't quite too sure how they were going
 17       to do.  They were brand new stations to us with
 18       different formats.
 19  226                  So these new numbers are much more
 20       accurate for those two stations and even for some of
 21       the ones in Ontario.
 22  227                  I think what the key is, the first
 23       year number that you are talking about in these new
 24       projections, we take into account only one new station
 25       in Toronto and that is the Rogers station.  Then in the


  1       year two we take in two new stations in Toronto, which
  2       includes the Craig station.
  3  228                  So that is why you see those revenue
  4       losses go from $2.3 million in year one to
  5       $11.9 million in year two.
  6  229                  MR. HAMILTON:  If I could just add to
  7       what Ron said, we have the most up-to-date TVB time
  8       sales survey right through September 1st to March 2002.
  9       If you look at television across the country broad
 10       landscape, total TV is down 3.3 per cent, network is
 11       down 2.6 per cent, specialty is up 6.4 per cent and
 12       spot, which is mostly what we trade in in our local
 13       stations across the country, is down 6.1 per cent.
 14  230                  So that gives you some sense of the
 15       current situation relative to advertising spent.
 16  231                  THE CHAIRPERSON:  Right.  It is
 17       difficult, though, to try to assess these without the
 18       detailed assumptions in particular underlying your
 19       figures.
 20  232                  Your first line, Mr. Waters, is of
 21       course confidential so I don't want to go into how
 22       those numbers are derived but, as you said, your
 23       Vancouver station, consistent, I suppose, with
 24       start-up, takeover and the rest, put a downward impact
 25       on the numbers.  That is to some extent counteracted by


  1       Toronto and by growth.
  2  233                  I guess one can't assess it without
  3       perhaps going back -- without trying to belabour it --
  4       and getting total market size for your assumptions in
  5       regard to total market size for year one, and so on,
  6       that is on the public record, and then deriving the
  7       share.  So I am kind of back to my original question.
  8  234                  It may be that you don't have all the
  9       numbers handy and that you may want to file something
 10       as to going through the steps of deriving those numbers
 11       and then factoring in the impact numbers as you like.
 12  235                  But I guess in the face of the GDP
 13       growth, both on the part of the Conference Board, the
 14       Bank of Montreal and others, up towards the 6 per cent
 15       range, I am just wondering whether the extent of any
 16       impact that the licensing of the new stations might
 17       have on you might, to a large degree, be counteracted
 18       by general growth in the economy that arise.
 19  236                  MR. SWITZER:  Let me begin,
 20       Mr. Chair.  This is a obviously a very important matter
 21       and maybe I can try to explain why it has always been
 22       our preference in history to do effectively
 23       line-by-line, city-by-city, client-by-client analysis
 24       as opposed to a larger market share approach, which we
 25       do and have filed some supporting third party work from


  1       some consultants certainly to give the Commission
  2       comfort.
  3  237                  Advertising is bought and sold first
  4       to the larger players, to the big network players, to
  5       the CTVs and Globals.  They earn a disproportionate
  6       share of revenue to their tuning.  So it is very
  7       important that we not be saddled or injured, if you
  8       will, by market average analysis.  The hit shows on the
  9       CTVs and Globals are bought first.
 10  238                  For example -- and this is just a
 11       hypothetical number -- if the CTV or Global share is
 12       perhaps, in any given province, 12 per cent of tuning,
 13       they might enjoy 18 or 20 per cent of advertising,
 14       because they are the ones being bought first.
 15  239                  So a more specific and detailed
 16       station-by-station bottom-up approach in addition to a
 17       top-down temperature check of whether it makes sense
 18       and has comfort has been more useful to us because that
 19       is the way our stations operate.  That is the
 20       environment we work in.
 21  240                  Certainly in markets like Ottawa,
 22       which we are doing very well, and markets like
 23       Vancouver and Victoria which are yet to come, we have
 24       assumed growth rates, as Peter discussed, up to 14 per
 25       cent and 15 per cent per year.  That is set against


  1       what we know as a much, much lower average in markets
  2       where there is going to be tough competition in terms
  3       of the no growth models in some other.
  4  241                  So an industry kind of economic
  5       factor might be good at a macro level, but we are
  6       dealing day-to-day fighting for advertising after the
  7       agencies and advertisers have spent their money
  8       nationally.
  9  242                  THE CHAIRPERSON:  So you are saying
 10       you don't get your revenue share that is correlative to
 11       your tuning share?
 12  243                  MR. SWITZER:  This team will, I'm
 13       sure, add much more professional comments, but no, we
 14       do not.  Others are able to get a larger share of
 15       advertising relative to their share of tuning because
 16       they have top 20 hit programs and we are more
 17       local-driven.
 18  244                  THE CHAIRPERSON:  Gentlemen, you have
 19       sold your management on that.  Congratulations.
 20       --- Laughter / Rires
 21  245                  MR. KIRKWOOD:  Typically the larger
 22       shows, obviously "The West Wings" and such, command
 23       premiums and as such get a larger share of the revenue
 24       than their share of tuning would suggest.  That is just
 25       the way the market has been for some time.


  1  246                  I am just thinking as you speak of
  2       market sizes, we are really dealing with two, the
  3       market size of tuning and the market size of revenue.
  4       The market size of tuning has remained the same
  5       basically, regardless of how many channels have been
  6       introduced to the market.  So we are dealing with an
  7       average, say, of 22 hours a week of tuning.  So
  8       regardless, we have some cost -- we have a loss there
  9       of tuning with the further fragmentation.
 10  247                  The revenue has been such that it has
 11       not increased in any significant way for years.  In
 12       fact, television's share of the overall advertising pie
 13       has actually been in decline.  Even if there were a
 14       6 per cent increase in, say, the local area, and all of
 15       that was applied to the local dollars in Canada, it
 16       would still only return us to 1999 status.
 17  248                  So even with those which we consider
 18       to be ambitious projections we are not exactly moving
 19       forward.
 20  249                  MR. MILLER:  Mr. Chair, maybe I could
 21       just also help and divide these various factors up in a
 22       way that may be helpful.
 23  250                  First of all, just to look at the
 24       impact.  Again, to be clear, the detailed impact that
 25       we filed from our sales team that became the basis for


  1       the impact here, did not depend on the financial
  2       projections of the applicants but our detailed
  3       program-by-program analysis of what those stations do
  4       to us.
  5  251                  I should say that that impact
  6       analysis was unchallenged in the Toronto/Hamilton
  7       hearing.  What we did for the purpose of Friday's
  8       filing and our comments leading up to this hearing is
  9       figure out how the combination of two stations rather
 10       than just one has an additional impact.  We can get
 11       into that later.
 12  252                  That I think is clear.
 13  253                  THE CHAIRPERSON:  We will get into
 14       that later.
 15  254                  MR. MILLER:  In terms of your issue
 16       of the base, first of all let's again remember where we
 17       are coming from.  As we pointed out in our corporate
 18       statement at page 31, CITY-TV, for example, hit its
 19       peak in revenues of $84 million in 1997-1998.  We went
 20       down to the $76-$77 million range and we are just
 21       coming up a little bit.
 22  255                  Why?  Because CITY-TV is a format,
 23       movie-driven, local, that is under tremendous threat.
 24       Superstations such as the Superstation channel 47 are
 25       carrying a lot more movies.  They have a real impact on


  1       CITY.  The National Network has been re-launched as The
  2       National Network and is carrying a lot of "Star Trek"
  3       programming that we carry.
  4  256                  So our stations, when we look at it
  5       and the challenges we face, we have a history of major
  6       challenges and we see that going forward.
  7  257                  Thirdly, the market conditions.  In
  8       addition to the sales analysis in the Jansen report
  9       that we filed, because we realized this was such an
 10       important issue we asked PWC to look at the market
 11       condition, look at where our conventional is going,
 12       look at where our specialty is going.  Again they point
 13       out -- and I could point to their slide page 11 where
 14       they show that the advertising growth of the Toronto
 15       stations has slowed dramatically and our stake, our
 16       part within it is even greater impacted.
 17  258                  So to conclude, while we obviously
 18       accept the overall evidence of the Toronto market and
 19       the profitability of the Toronto broadcasters as a
 20       whole, we regrettably haven't shared in those profits.
 21       In fact, not only has City lost revenue and we are in a
 22       real turnaround situation with City, absent new
 23       licensing, our Ontario NewNet stations, if I remember
 24       correctly, lost something like $46 million since 1997.
 25  259                  So even before the Toronto licensing


  1       decision we were in a turnaround situation with our
  2       stations and trying to grow them.  The Toronto decision
  3       and the two licences that have been granted obviously
  4       create an additional setback that then we have now
  5       reflected in these new financials.
  6  260                  THE CHAIRPERSON:  Thank you.
  7  261                  We will go into the impact analysis
  8       in a moment.  I am interested in how you derived that.
  9  262                  But I guess I am still a little stuck
 10       on this issue of market size and how you established
 11       the size of the market on which to base your own
 12       projections.
 13  263                  I appreciate you do a bottom-up
 14       analysis as well as the top-down, but in your top --
 15       have you done a top-down analysis to back up the
 16       revenue projections?
 17  264                  MR. MILLER:  When we initially
 18       filed, yes.
 19  265                  Go ahead, I'm sorry.
 20  266                  MR. PALFRAMAN:  Yes, Mr. Chair,
 21       perhaps just as a starting point and then Peter can add
 22       to it.
 23  267                  Just in a simplistic way, the way we
 24       have done the projections is based on two things.  It
 25       is based initially on what we really know.  What we


  1       really know is what we did, what our actual was, our
  2       most recently completed actual year, which was August
  3       2001.  That was our starting base for our revenues.
  4  268                  Then we did all the analysis, and the
  5       sales team do all their work in determining what a
  6       reasonable level of growth is, taking all of those
  7       factors into account.
  8  269                  So our starting base point for all
  9       the revenue projections is August 2001.  Then we take
 10       into account those growth factors and from that it is
 11       really just a calculation of moving forward to what we
 12       think will be a realistic projection based on what we
 13       know and based on what can reasonably expect.  The
 14       first year out obviously you can always be more
 15       precise, further out years are a little tougher.
 16  270                  So the 2001/2002 projections that you
 17       have in the first column, those are based on the 2001
 18       actuals and then the growth factors that we have
 19       calculated based on all the information we have.
 20  271                  So we have that on one side and that
 21       is our starting point.
 22  272                  Then we validate that with all of the
 23       detailed calculations that we go through on the
 24       bottom-up basis to make sure that the schedules we have
 25       and what we think we are going to deliver in


  1       advertising supports that project that we have.
  2  273                  So it is not terribly magical.  It is
  3       based on something that is an actual and that we know
  4       we have done and then our best estimate and our
  5       experience of what that might lead to in the very next
  6       year.  So there is nothing terribly magical about it,
  7       except that we do validate it.
  8  274                  I don't want to take away from the
  9       great work that the sales team do, but we do then
 10       validate that based on what we know we will deliver.
 11  275                  THE CHAIRPERSON:  When I look at your
 12       national versus local numbers, it is about a six-to-one
 13       ratio.  Is that about right?  Fifteen to 20 per cent
 14       local to 85 per cent national?
 15  276                  MR. PALFRAMAN:  Yes, it is about
 16       80/20, that's right.
 17  277                  THE CHAIRPERSON:  So that would
 18       suggest to me that Canadian GDP numbers would be
 19       relevant in the sense that national advertising would
 20       account for over 80 per cent of your revenues.
 21  278                  I guess what I'm not hearing is how
 22       those macro statistics get factored into projections
 23       going forward when one has projections from a variety
 24       of institutions that are showing fairly optimistic
 25       growth rates.


  1  279                  I take your point about "The West
  2       Wing" capturing a premium, but I have always been
  3       taught that basically if you can't get your revenue
  4       share to roughly match your tuning share, change your
  5       marketing department.
  6       --- Laughter / Rires
  7  280                  THE CHAIRPERSON:  CITY and your
  8       stations may be a notable exception to that, but
  9       "grosso modo" I would have thought that there were some
 10       correlations in that that would hold.
 11  281                  MR. SWITZER:  Great, lots of people
 12       want to contribute.
 13  282                  MR. HAMILTON:  I want to make a
 14       comment relative to the ratio of local to national.  In
 15       the case of CITY-TV local and national are reported
 16       together, so it understates the total percentage of
 17       local.  In fact, in the case of CITY-TV we are quite
 18       proud that our local represents about 25 per cent of
 19       our overall revenue.
 20  283                  If you adjust our numbers then
 21       accordingly and add those revenues back into the total,
 22       we actually represent about 30 per cent of our sales
 23       would be local.
 24  284                  Three years ago we just made the
 25       decision to bring our CITY-TV retail and national sales


  1       teams together as one unit.  That did not mean we were
  2       abandoning local, it just meant we were taking on a
  3       different sales and marketing strategy.  In fact we
  4       created a new business development team who were doing
  5       both local new business development and national and
  6       giving us more of a broader emphasis on developing new
  7       dollars.
  8  285                  So we didn't abandon local.  Local is
  9       still a big part of what CITY-TV is all about, but we
 10       report the numbers as one number
 11  286                  THE CHAIRPERSON:  Mr. Hamilton, I am
 12       having a hard enough time, don't complicate --
 13       --- Laughter / Rires
 14  287                  THE CHAIRPERSON:  I have to go by
 15       what you have filed, by what you filed here.
 16  288                  MR. HAMILTON:  Yes, I know.  I am
 17       just trying to give you some sense of what those -- at
 18       least in the case of CITY-TV, what those number mean.
 19  289                  We used to really confuse you in
 20       terms of we used to have national, regional and local
 21       dollars.  We had three divisions generating revenue on
 22       behalf of our organization.  We felt it would be better
 23       to streamline it in the case of CITY-TV into one
 24       organization, but we do keep track of our local versus
 25       our national numbers, and local does represent about


  1       25 per cent of CITY-TVs revenues.
  2  290                  MR. SWITZER:  Mr. Chair, specifically
  3       to your question, we have always preferred the
  4       precision of the detail of the specifics.
  5  291                  For example, early on in the buying
  6       process the big Globals and CTVs will be at the major
  7       agencies doing very large national deals, $50 million
  8       deals, $100 million deals.  We are not fortunate enough
  9       to be part of that club as mid-sized players.  We do
 10       not play in that upfront national business.  The team
 11       will use much more carefully crafted words.  That is
 12       their business.
 13  292                  We may have national advertisers, but
 14       they are done on a spot basis.  Those kinds of macro
 15       effects as to whether the General Motors and Labatt's
 16       beer and Tide detergents spend 3 per cent more or 2 per
 17       cent less is a much bigger factor to the national
 18       players than it is to the mid-sized players who are
 19       effectively fighting for what is left over.
 20  293                  THE CHAIRPERSON:  Mr. Switzer, let me
 21       try it another way.
 22  294                  Your revenues of all stations of
 23       $175 million for year one represent what share of what
 24       you believe those total markets are going to be?
 25  295                  MR. MILLER:  We can calculate that


  1       for you, but I guess what we are saying is that is not
  2       the way we have developed these estimates.  We have
  3       developed them based on --
  4  296                  THE CHAIRPERSON:  No, no, I
  5       understand that.
  6  297                  MR. MILLER:  But we could certainly
  7       calculate that for you fairly quickly.
  8  298                  THE CHAIRPERSON:  Right.
  9  299                  MR. MILLER:  But if I can give you a
 10       couple of sanity checks, because maybe that will help
 11       in the --
 12  300                  THE CHAIRPERSON:  Comfort checks.
 13  301                  MR. MILLER:  Yes, comfort checks,
 14       sanity checks, whatever is the right word.
 15       --- Laughter / Rires
 16  302                  MR. MILLER:  In the global and CTV
 17       renewals, they projected fairly flat 2-2.5 per cent
 18       increases.  That was unchallenged.  What we are saying
 19       is, given the nature of our stations --
 20  303                  THE CHAIRPERSON:  New people, new
 21       challenges, Mr. Miller.
 22  304                  MR. MILLER:  I'm sorry?
 23  305                  MR. SWITZER:  New challenges.
 24  306                  THE CHAIRPERSON:  New people, new
 25       challenges.


  1  307                  MR. MILLER:  New challenges, yes.
  2  308                  Given the nature of our stations the
  3       niches that they occupy, given the way we sell
  4       advertising and, again, how the buying process is, and
  5       also given the fact that we don't have the top 20,
  6       top 30 shows which really drive the revenues for the
  7       major players, we are different.
  8  309                  So you can't do the traditional
  9       analysis of saying:  If the pie is going to grow like
 10       this, we are going to get this chunk of it.  It doesn't
 11       work for us.
 12  310                  What we are trying to show to you,
 13       demonstrate to you, is the way we do it, based on our
 14       history, based on our understanding of the market and
 15       based on what the competition will be, is the more
 16       accurate way.
 17  311                  Because what we are going to face now
 18       is two new entrants who are not competing with CTV and
 19       Global for programming, they are not competing with CTV
 20       and Global for advertisers, they are competing with us,
 21       because we have similar programming, similar
 22       advertising sales ability.  So that is why the revenue
 23       will come from us.
 24  312                  Again, what is the right -- it's not
 25       sanity check, what did we --


  1  313                  MR. SWITZER:  Comfort check.
  2  314                  MR. MILLER:  Comfort check.
  3       --- Laughter / Rires
  4  315                  MR. MILLER:  If we had compared the
  5       impacts on us with what the revenue projections of the
  6       others were -- and we did this comparison -- in the
  7       early years roughly 25 per cent -- again, just a
  8       comfort check, we are not talking a direct move, but
  9       basically the impact on us in the early years
 10       represents about 25 per cent of the revenue projected
 11       by the applicants.  In the later years it represents
 12       only about 17 per cent.
 13  316                  So again, as a comfort check we are
 14       not suggesting relative to what those players will do,
 15       we think an overly aggressive impact, it is
 16       unfortunately simply the reality of our business.
 17       While averages are very useful, averages don't tell the
 18       story, I think, for us.
 19  317                  MR. KIRKWOOD:  I have to share
 20       information that you are looking for.  It will also
 21       redeem the sales department.
 22       --- Laughter / Rires
 23  318                  THE CHAIRPERSON:  Boy they act
 24       quickly.
 25       --- Laughter / Rires


  1  319                  MR. KIRKWOOD:  Their jobs are on
  2       the line.
  3       --- Laughter / Rires
  4  320                  MR. KIRKWOOD:  CITY-TV's share -- at
  5       least we can base it on the one station -- in the fall
  6       of 1998 was 6.3 per cent.  Basically that share of
  7       tuning -- that is what that is, 6.3 -- fell 14 per cent
  8       to today.  Our share of revenue, without revealing the
  9       confidential information of this year, year-to-date,
 10       has only dropped 1.9 per cent.
 11  321                  So our return of revenue per share
 12       point has actually increased 14 per cent.
 13  322                  So in the headwind, let's say, of
 14       changing buying paradigms that have favoured specialty
 15       national network television and top 20 programming, we
 16       have still been able to take CITY-TV, which depends
 17       largely on local and national spot local, and mine our
 18       resources to get a stronger revenue return.
 19  323                  THE CHAIRPERSON:  Peter Miller
 20       mentioned historic figures that prove that your share
 21       of revenues don't correlate with your share of
 22       tuning -- am I interpreting you correctly -- on
 23       anywhere near a one-to-one basis?
 24  324                  MR. KIRKWOOD:  We don't have that
 25       particular item here, but we could produce that.


  1  325                  We wouldn't be the only ones.  When
  2       you consider -- in fact, I don't think there is a media
  3       director who would disagree with this because I have
  4       confronted a number of them with it, that their buying
  5       plan now, especially where there are more stations to
  6       buy, and they have fewer people to do it and shrinking
  7       margins themselves, they want to make it as convenient
  8       and easy as possible.
  9  326                  They lay out a huge base of national
 10       network, regional network buys.  That covers off a lot
 11       of smaller markets and selective buys.  Then they go to
 12       specialty more often now than they used to, right
 13       around the time they do the network buys, where they
 14       can buy at a currency that is -- I'm not proud to
 15       say -- about half of what it is buying average
 16       conventional television.  That compensates for the
 17       premium that they have paid on the big guys.
 18  327                  What is left, then, are the people in
 19       between.  As Jay called us, the mid-sized players.
 20  328                  So the efficiencies we come up with
 21       there are very, let's say, competitive.  I think that
 22       any other mid-sized player would find the same thing.
 23  329                  Specialty channels also have smaller
 24       shares.  They don't get the same level of currency, of
 25       return on their share points as a big player.  We can't


  1       all have greater than our share and unfortunately that
  2       privilege belongs to the biggest.
  3  330                  THE CHAIRPERSON:  Have you done any
  4       correlation between GDP and total Toronto market,
  5       national sales?
  6  331                  MR. KIRKWOOD:  No.
  7  332                  THE CHAIRPERSON:  Growth figures
  8       in each?
  9  333                  MR. KIRKWOOD:  No.  You mean
 10       specifically what the GDP has been and --
 11  334                  THE CHAIRPERSON:  GDP might not be a
 12       bad proxy for total national dollars in the Toronto
 13       market year-over-year in any period.
 14  335                  MR. KIRKWOOD:  We don't have that
 15       figure, but that would be an interesting correlation.
 16  336                  THE CHAIRPERSON:  If you want to file
 17       supplementary material, as they say, on --
 18  337                  MR. KIRKWOOD:  We would be delighted.
 19  338                  THE CHAIRPERSON:  Anything that can
 20       enlighten this discussion would be helpful, because I
 21       was struck by that, as I say.
 22  339                  Turning to your revenue changes based
 23       on updated projections, you have numbers in years one
 24       and two of $580 and $1,481.  I guess those represent,
 25       what, half a per cent, .3 per cent and under 1 per


  1       cent, increases year-over-year from your overall
  2       revenues?
  3  340                  MR. SWITZER:  Yes.  Those are in
  4       addition to the base increases that were part of the
  5       base model.  These are the changes compared to the
  6       previous filing.
  7  341                  THE CHAIRPERSON:  Right.  When we
  8       turn to that impact analysis, -- which is I guess what
  9       you filed the 16th of April?
 10  342                  MR. MILLER:  That is correct.
 11  343                  THE CHAIRPERSON:  Right.  I take it
 12       what you did was you took your intervention document
 13       figures from the Toronto/Hamilton hearing, you combined
 14       what you had as impacts of licensing a Craig station,
 15       added to a Rogers station, and you got a total impact
 16       on CHUM of $8.3 million.  Then you added an additional
 17       impact factor of some $23.1 million for your total of
 18       $11.5 million.
 19  344                  I have read your methodology which
 20       you filed with that, but I am not clear about a number
 21       of the points in it.
 22  345                  Seven per cent for daytime I believe
 23       was a number that you used?
 24  346                  I'm looking at the page that doesn't
 25       have a number, but up at the top right is "2002-04-17,


  1       Advertising Sales Impact as per Intervention".
  2  347                  MR. CAPORICCI:  Yes, that was the
  3       original impact analysis that was done at the
  4       intervention stage.
  5  348                  THE CHAIRPERSON:  Right.  I guess
  6       when I look at the footnotes under "CITY":
  7                              "7 per cent impact on daytime,
  8                              6:00 to 7:00 p.m. due to high
  9                              percent of foreign acquired;
 10                              5 per cent impact in prime-time
 11                              due to a high percent of foreign
 12                              acquired; and
 13                              5 per cent impact in late news
 14                              and late-night due to high
 15                              percent of foreign acquired."
 16                              (As read)
 17  349                  I'm not sure I follow that.
 18  350                  First of all, how were those numbers
 19       derived and could you explain how you expect that that
 20       would work?
 21  351                  MR. CAPORICCI:  What we started out
 22       with was, we have a detailed line-by-line, show-by-show
 23       revenue forecast that we do at the beginning of each
 24       season, and then what we did was basically lined up
 25       each -- at the time of the intervention for each


  1       application, so we did it six times.  We lined up their
  2       draft program schedule and looked at what type of
  3       programming they had.
  4  352                  So depending on the applicant, in
  5       some cases if it was mostly Canadian programming or the
  6       type of programming, we estimated what we thought the
  7       rating would be and what effect it would be on us
  8       specifically for each day part.
  9  353                  So when we talk about a 7 per cent
 10       impact, it was based on -- it was all relative.  A
 11       7 per cent impact was higher than most others and that
 12       was when we were assuming a high foreign percent
 13       acquired.
 14  354                  THE CHAIRPERSON:  Seven, five and
 15       five sound kind of precise as numbers.
 16  355                  MR. CAPORICCI:  Yes, they do.  I
 17       think the easiest way to explain it is, we used precise
 18       figures, but really what we are estimating is it is an
 19       estimated impact.  So really it is in a range more
 20       often than not.
 21  356                  I could never state that we are that
 22       precise that it is exactly going to be 7 per cent, but
 23       roughly 7 per cent, yes.
 24  357                  THE CHAIRPERSON:  Right.  Those were
 25       taken on the basis of draft schedules that were put in


  1       the application.
  2  358                  MR. CAPORICCI:  That is correct.
  3  359                  THE CHAIRPERSON:  So I guess
  4       (a) those may not necessarily be the programs in the
  5       schedule; and (b) you have Messrs Znaimer and other
  6       programmers who will presumably counter program to
  7       mitigate the impact of that.
  8  360                  Did you factor any of that into it?
  9  361                  MR. SWITZER:  Yes.  Mr. Chair, these
 10       are both experienced broadcasters and in the case of
 11       one have already begun acquiring programs for their
 12       pending launch.
 13  362                  In one particular case, we have
 14       already lost a very popular significant daily U.S.
 15       syndicated show to one of the competitors.  So not only
 16       do we have  problem of replacing it, they are going to
 17       have known estimates.
 18  363                  The analysis was precise in that and
 19       we used historical day parts presuming that they would
 20       have a mix of good, medium and bad spread across
 21       critical time periods, that they would put their best
 22       programming in the day parts that would generate the
 23       most revenue to them, and line-by-line, case-by-case in
 24       terms of the things that they both said and showed in
 25       their draft schedule and reasonable assumptions as to


  1       the mix of, in the case of Rogers, what they are
  2       already doing, and in the case of Craig to the best of
  3       our ability what they are already doing and what they
  4       said they would do.
  5  364                  So there is no explosion or huge
  6       assumptions, it was, within a category of program,
  7       damage line-by-line.
  8  365                  MR. MILLER:  If I could add,
  9       Mr. Chair, because I remember working -- this is
 10       obviously not my expertise, but I remember working with
 11       the sales team on this and I was stunned at how low the
 12       numbers were.
 13  366                  But what they did is, they took the
 14       schedules -- and some of the members that were on that
 15       panel, remember the schedules didn't have a lot of
 16       detail.  So, first of all, we weren't actually dealing
 17       with very detailed program schedules, it was mostly our
 18       sense of what they would do in the various time periods
 19       given the commitments they made.
 20  367                  Obviously with Rogers we know from
 21       8:00 to 10:00 it is an ethnic block.  With Craig
 22       application we knew they had Toronto One in the
 23       schedule so we could make judgments accordingly.
 24  368                  I keep on coming up with the word
 25       sanity check because I keep on forgetting the other


  1       word.  We also had, of course, the Hans Jansen analysis
  2       which we refiled in this proceeding as part of
  3       January 18th filing.  I don't need to take you to it,
  4       but if I read from it, for example he did the top-down.
  5  369                  So he estimated that Craig would
  6       achieve something like a 3.1 per cent share of tuning,
  7       and then based on that said that the impact should be
  8       in the neighbourhood of the $10 million range.
  9  370                  So again, it was part of our way to
 10       try to come to a figure that made sense in the
 11       broadest context.
 12  371                  THE CHAIRPERSON:  Was that the Bay
 13       Consulting Report?
 14  372                  MR. MILLER:  Precisely, yes.
 15  373                  THE CHAIRPERSON:  I remember looking
 16       at that in another lifetime and not being able to find
 17       underlying reasoning for those figures.  I am going by
 18       memory, but did he provide a rationale for those
 19       numbers?
 20  374                  MR. MILLER:  He had to estimate share
 21       of the tuning of the new applicants.  Again, there is
 22       no science to that.  It is kind of an art based on what
 23       they filed in terms of revenue projections.  But if I
 24       remember correctly, he made sure that his share
 25       estimate was roughly consistent with his -- the revenue


  1       estimates sort of, in a sense the more traditional
  2       analysis that we were talking about earlier today.
  3  375                  THE CHAIRPERSON:  I appreciate what
  4       you have tried to do here on the bottom-up, it is just
  5       strange that you would attach a 5 per cent number due
  6       to a high percentage of foreign acquired for one
  7       category and then 12 per cent for another.  I guess it
  8       is, at the end of the day, touch and feel and a moving
  9       target.  Would that be --
 10  376                  MR. CAPORICCI:  Yes.  Our ratings
 11       in -- on CITY-TV specifically we have, I guess it is a
 12       disproportionate amount of fringe ratings versus
 13       prime-time ratings versus other broadcasters.  Other
 14       broadcasters have a higher percentage in prime of their
 15       ratings and in fringe we have -- and they have a lower
 16       percentage in fringe.
 17  377                  We don't have that gap.  So the
 18       effect on daytime is going to be larger than it would
 19       be in prime-time.  We think we can maintain our ratings
 20       moreso there with the increased competition than in
 21       fringe where we are more susceptible.
 22  378                  MR. MILLER:  If I could translate
 23       that, Mr. Chairman.
 24       --- Laughter / Rires
 25  379                  MR. MILLER:  Here is a perfect


  1       example of the two different stations.  The NewNet is a
  2       more lower rated station with less popular U.S.
  3       programming.  So the impact of a new entity that has
  4       programming more similar to it is going to be higher,
  5       hence 12 per cent.  CITY-TV is a stronger station.  A
  6       new station is unlikely to get as high quality
  7       programming as CITY-TV so the impact is lower.
  8  380                  I guess these gentlemen live and
  9       breathe this and so they could come up with these
 10       numbers.  I couldn't come up with these numbers.  What
 11       I tried to do is make sure when it all came together it
 12       passed all the necessary smell tests, if you will, and
 13       that we were being consistent.
 14  381                  So when we looked at it at every
 15       possible level it all seems to make sense.  Again, from
 16       the expertise of our sales department, it is consistent
 17       with their experience.
 18  382                  THE CHAIRPERSON:  How was the
 19       additional impact gauged?  I think you have 3 per cent
 20       on CITY's existing sales.
 21  383                  MR. CAPORICCI:  It was based
 22       entirely on the supply, the increase in supply.  Our
 23       entire industry is based on supply and demand, so when
 24       we did the original impacts they were based on one
 25       station being licensed.  With the two stations being


  1       licensed, we see it as more of a flood of avails into
  2       the market so it is entirely based on supply.  We
  3       calculated it to be based on draft schedules, again
  4       45 per cent more 30s, 30-second actual units available
  5       in prime-time alone.
  6  384                  So what we are saying as an impact
  7       is, it is not a direct revenue flow to the two new
  8       licences, it is a depressing of the entire market.
  9       Again, we are more susceptible to that than our
 10       competitors because of where we are in the pecking
 11       order in the buying process.
 12  385                  THE CHAIRPERSON:  But I had assumed
 13       that you would do supply with Craig and supply with
 14       Rogers.  Why am I getting the funny feeling that one
 15       plus one equals 2.3?
 16  386                  MR. CAPORICCI:  You are correct.  We
 17       did take into -- at the intervention stage we took into
 18       account supply, we took into account the decrease in
 19       our ratings with more competition.
 20  387                  But again, I can't emphasize enough,
 21       when you have that many more avails coming into a
 22       market in an already really fragmented, cluttered
 23       market, we are basically at the mercy of the market.
 24       So now agencies, our buyers and clients, they are able
 25       to be more in control.  They can now control price


  1       moreso with two stations than if it was just one.  With
  2       one we felt we could have stemmed the tide on the
  3       supply side, but when you have two new stations with
  4       that much more actual 30-second units available in the
  5       market, we lose our ability -- it is a paradigm shift
  6       basically.
  7  388                  Now we are looking at more --
  8       agencies can hold us more at ransom, I guess is the
  9       best way to put it, be it on upfront pricing -- our
 10       initial pricing when we get to year two with two
 11       stations in the market, we are going to have revisit
 12       how we do that and where the market is trading.  We may
 13       be looking at 5 per cent to 10 per cent decrease in
 14       upfront pricing before the market even takes hold and
 15       drives us down further.
 16  389                  THE CHAIRPERSON:  I can understand
 17       where the sudden flood of supply would perhaps have a
 18       temporary effect on the market, but you are not saying
 19       that.  You have already fully accounted for a Craig and
 20       fully accounted for a Rogers and now you are saying the
 21       sudden rush of supply is going to extend for seven
 22       years.  I can't quite figure it out.
 23  390                  MR. MILLER:  Actually, we are not
 24       saying that, Mr. Chair, but we have built that into
 25       second year because, again, we have assumed for the


  1       purpose of these revised financials that only Rogers
  2       launches this September, Craig launches the following
  3       September.  That is where we have that sudden influx
  4       which comes to 11.9, if memory serves.
  5  391                  But then that factor decreases to
  6       zero over the seven years.  So by the time you get out
  7       to the seven year, all we have is the mathematical
  8       addition of the impacts as we project them out in
  9       accordance with the same percentage revenue estimates
 10       of the applicant's revenue projections.
 11  392                  THE CHAIRPERSON:  I see.  I didn't
 12       see how you would get that.  I do see that you are only
 13       factoring in 2.3 for the first year as a revenue loss
 14       and then 11.9.  But I guess the 11.9, does that not
 15       include the additional impact?
 16  393                  MR. MILLER:  The 11.9 in the second
 17       year does.
 18  394                  THE CHAIRPERSON:  Right.
 19  395                  MR. MILLER:  But by the seventh year
 20       that additional impact is no longer there.  So if staff
 21       wanted to verify --
 22  396                  THE CHAIRPERSON:  Oh, I see what you
 23       are saying.
 24  397                  MR. MILLER:  -- the projections that
 25       we filed for the individual new licences in terms of


  1       their revenue and what the percentage impact would be
  2       by the seventh year, we have just done the
  3       mathematical --
  4  398                  THE CHAIRPERSON:  When does it go to
  5       zero?
  6  399                  MR. MILLER:  It goes to zero in the
  7       seventh year.
  8  400                  THE CHAIRPERSON:  That's what I said.
  9  401                  MR. MILLER:  It is a slow decline.
 10  402                  THE CHAIRPERSON:  It is seven years
 11       that additional --
 12  403                  MR. MILLER:  But it declines to zero.
 13       It doesn't go overnight to zero, but basically we are
 14       saying it is going to take that long for the market to
 15       absorb all this additional inventory and for it not to
 16       have that kind of effect.  Because remember --
 17  404                  THE CHAIRPERSON:  Seven year trauma.
 18       You are only going to come out in seven years as a
 19       result of the two versus one licensing scenario.  So
 20       that the $3 million -- I don't have the numbers here
 21       because they are not broken out on what you have
 22       filed -- I don't think they are -- but if you did you
 23       would show $3.1 million declining slowly to zero over
 24       seven years.
 25  405                  What is it in year three for


  1       instance?  Or year four, three or four?
  2  406                  MR. MILLER:  I just think we do a
  3       mathematical decline, so by year four it is something
  4       like $2 million.
  5  407                  I think it is a straight decline.  Am
  6       I correct?
  7  408                  MR. PALFRAMAN:  Yes.
  8  409                  By year seven, as Peter said, it is
  9       just a straight addition of Rogers and Craig.  For
 10       example, if you go to year three, the total revenue
 11       change is $12.6 million.  The straight addition of
 12       Rogers and Craig would be just over $11 million.  So it
 13       $1.6 million at that point.  The additional amount has
 14       gone down by the second year to $1.6 million.
 15  410                  In year four, the straight addition
 16       of Rogers and Craig would be $12.3 million based on
 17       what we filed, the seven year spin-out of what we
 18       filed.  So that would be $12.2 million.  Our actual
 19       revenue losses are $13.3 million.  So you can see it is
 20       coming down slightly.
 21  411                  Then by year seven the addition of
 22       Rogers and Craig, the straight mathematical addition of
 23       those two is $15.2 million and we have $15.6 million.
 24       The $400,000 difference is the NewNet impact that we
 25       have now applied.


  1  412                  MR. SWITZER:  Mr. Chair, we have had
  2       some experience with fundamental changes in market
  3       conditions with the flooding of new channels and I have
  4       had to live and grow through them.
  5  413                  Maybe Mr. Kirkwood can add some
  6       detail.
  7  414                  MR. KIRKWOOD:  Yes.  We have had a
  8       history with this in the area of specialty television.
  9       Actually, I was fortunate to be there at the beginning
 10       of MuchMusic and when there was just MuchMusic and TSN
 11       we enjoyed selling advertising at cost per thousand
 12       currencies that were comparable to broadcast.  When
 13       that specialty group tiered up to 1995 and achieved a
 14       certain critical mass, the cost per thousands actually
 15       started dropping.
 16  415                  I don't think anything affects price
 17       so much in this business as supply.  When there was
 18       that mass to deal with the competition, for some pretty
 19       ambitious budgets, had prices dropping precipitously.
 20       Much to the concern of conventional broadcasters at the
 21       time, we still have not seen those actually come back
 22       up.  In 1997 another tier of specialty channels.
 23  416                  The advertisers have benefitted and
 24       that is part of the reason I think we haven't actually
 25       seen so much growth in advertising, overall television


  1       advertising dollars.
  2  417                  That is by way of explaining the
  3       additional impact, when it reaches that critical mass
  4       it is at a certain tipping point.
  5  418                  THE CHAIRPERSON:  Another question on
  6       share, going back to the Rogers and Craig impacts.  I
  7       gather that you projected that 16 per cent of the full
  8       impact of awarding a licence to Rogers would be
  9       incurred by CHUM and 19 per cent of awarding a new
 10       licence to Craig would be directed towards CHUM
 11       stations in your original analysis.
 12  419                  How did you arrive at these
 13       percentages?
 14  420                  MR. MILLER:  I believe they were what
 15       the result was.  We didn't start with those numbers,
 16       they were what the result was when we did our sales
 17       analysis.
 18  421                  THE CHAIRPERSON:  That kind of
 19       analysis.
 20  422                  MR. CAPORICCI:  Yes.  We didn't even
 21       look at what they had filed as their revenue
 22       projections.  We did it based on the impact it would
 23       have to us.
 24  423                  Again, it is not a direct revenue
 25       flow to those two stations, it is the effect on the


  1       entire market.
  2  424                  If I can just add one other thing in
  3       terms of the specialty experience.  You had asked
  4       earlier about share of tuning versus share of revenues
  5       and specialty is the perfect example to explain that.
  6  425                  Specialty has, let's say it is a
  7       30 per cent to 35 per cent share of tuning.  Because of
  8       the amount of supply with all of those specialty
  9       stations, specialty only garners about 15 per cent,
 10       16 per cent of the total advertising pie.
 11  426                  So that is the best example I think
 12       that puts it back -- that talks specifically to supply.
 13  427                  THE CHAIRPERSON:  You mean adding the
 14       revenues of specialties together with the revenues of
 15       conventional you would find that the shares of tuning
 16       are twice as high for specialties than their percentage
 17       of that total revenue pot?
 18  428                  MR. CAPORICCI:  That is correct.
 19  429                  THE CHAIRPERSON:  And conventional
 20       would be the reverse?
 21  430                  MR. CAPORICCI:  Yes.  Especially when
 22       we are talking about -- that is when we get into the
 23       CHUM --
 24  431                  THE CHAIRPERSON:  All the more reason
 25       for being optimistic about conventional stations.


  1  432                  MR. CAPORICCI:  But that is why it
  2       goes back to the effect that it has on CHUM
  3       specifically back to the advertising buying patterns.
  4       The effect on a mid-sized player -- when we talked
  5       earlier I think David had mentioned the pecking order
  6       of the buying process.  So you start with your big
  7       national networks that have the high profile
  8       programming, then, so slowly but surely, that is
  9       inching up the specialty share of revenue.  Specialty
 10       is moving up the pecking order in terms of when it is
 11       bought.  A mid-sized player like ourselves, with our
 12       type of programming, is falling down further in the
 13       pecking order.
 14  433                  THE CHAIRPERSON:  Thank you.
 15  434                  We will break now for 15 minutes.
 16       Nous reprendrons dans 15 minutes.
 17       --- Upon recessing at 1100 / Suspension à 1100
 18       --- Upon resuming at 1115 / Reprise à 1115
 19  435                  THE CHAIRPERSON:  Order, please.  A
 20       l'ordre, s'il vous plaît.
 21  436                  Moving right along, I am looking
 22       now at your projections at the "Programming Increases"
 23       line, "Impact of the Two New Stations".  I didn't see
 24       an explanation for how those estimates were calculated.
 25       You estimate that they will reach $4,743,000 in


  1       year two.
  2  437                  Could you explain how those were
  3       arrived at?
  4  438                  MR. SWITZER:  Mr. Chair, yes, of
  5       course.
  6  439                  We are basing it on our early
  7       experience, as I said earlier, in our first three or
  8       four weeks of our program renewals.  These renewals are
  9       not for prime-time blocks for the NewNet stations or
 10       for CITY-TV, but simply for what are normal considered
 11       orderly renewals for daytime programs.
 12  440                  We have already lost one significant
 13       program that has been acquired by one of the new
 14       licensees.  We have increases on a daytime program
 15       already, one simple renewal that would normally be
 16       2 per cent or 3 per cent that has come in at 12 per
 17       cent or 14 per cent and is already about a $500,000
 18       increased number.
 19  441                  We have two other renewals that we
 20       are in negotiations on.  The normal asking price is
 21       2 per cent, 3 per cent or 4 per cent.  Because of
 22       pending launch of the two new licensees the initial
 23       asking price by particular studios have come in at
 24       20 per cent.  Basically they have said to us "If you
 25       pay us 20 per cent we won't go to market with these


  1       renewals, otherwise we may go to market".  So of course
  2       we may not end up there.
  3  442                  So to be precise, we have estimated
  4       a programming increase effect of about $2.5 million
  5       next year and with the expected launch in the second
  6       year of the second station about $4.7 million.  That
  7       never goes away and that effectively continues for the
  8       length of this.
  9  443                  THE CHAIRPERSON:  So your answer is
 10       basically market experience and you took --
 11  444                  MR. SWITZER:  Market experience,
 12       specific experience in the first three or four weeks,
 13       and very reasonable expectations.
 14  445                  With my principals  here I wouldn't
 15       suggest that that number could be considerably higher
 16       than that.  That is a very fair and conservative
 17       number.  We are already at, with some specificity,
 18       about $1.5 million.
 19  446                  THE CHAIRPERSON:  So you hit the
 20       $4.7 million and then projected forward on a percentage
 21       basis.  Is that right?
 22  447                  MR. SWITZER:  Correct.  That
 23       raises base prices for some of these programs and it is
 24       very difficult with two new players to ever see those
 25       go backwards.


  1  448                  THE CHAIRPERSON:  They do go down a
  2       bit, I guess, over the period.
  3  449                  MR. SWITZER:  Yes.
  4  450                  THE CHAIRPERSON:  They kind of
  5       flatten, start to decline after year three.
  6  451                  MR. SWITZER:  Yes.
  7  452                  THE CHAIRPERSON:  I'm just wondering
  8       how you derive the shape of that curve.
  9  453                  MR. SWITZER:  We have some comfort
 10       with what we expect over the first three years, the
 11       first year with the launch of one station, the
 12       following year the second, and the third year some
 13       comfort.  As we, of course, get further out in the
 14       model it becomes a little more difficult.  The
 15       important thing is, we believe the order of magnitude
 16       is somewhere between $4.5 million and $5 million.
 17  454                  THE CHAIRPERSON:  So the assumptions
 18       for the derivation of that curve you can't share with
 19       me as to how those precise numbers were derived?
 20  455                  MR. SWITZER:  Yes, I am happy to give
 21       you specifics as to the model in the later years.
 22       Mr. Palframan will add detail.
 23  456                  The most important crucial steps were
 24       how we ramp up the $1.5 million we have experienced to
 25       date in the first few weeks, the expected roughly


  1       $2.5 million in the first year, rising to $4.7 million
  2       in the second, and then small fluctuations beyond that.
  3  457                  Peter, can you add something?
  4  458                  MR. PALFRAMAN:  Yes.  All I would add
  5       is that Jay is exactly right, it is our experience and
  6       our best estimates.  Obviously, as with any
  7       projections, you are using your best estimate of what
  8       you expect might happen.
  9  459                  As general barometer starting out in
 10       looking at programming increases, and based on
 11       discussions with the programming people who do all the
 12       major buying, it was my sense that we could face as
 13       much as a 10 per cent increase.  So my starting point
 14       was a 10 per cent increase in costs on our non-Canadian
 15       applied programming.
 16  460                  So that was the basis assumption I
 17       started out with.  In fact, then we decreased that
 18       based on my discussions with them and our best estimate
 19       of the particular programs that would be most affected.
 20  461                  So it came in generally between
 21       5 per cent and 7 per cent as an increase, which was
 22       consistent with what I thought would be reasonable.
 23       So just to give additional background to those
 24       assumptions.
 25  462                  MR. SWITZER:  Mr. Chair, to give you


  1       extra comfort, and I know it was discussed at a
  2       previous hearing, but although there are available
  3       unsold programs in the market that are not now being
  4       broadcast by Canadian broadcasters, some of the early
  5       activity we have seen from one of the new applicants
  6       has in fact -- unfortunately, as we discussed -- not
  7       gone after some of the unsold stuff but has been
  8       direct-to-tax on existing programs that are already in
  9       the market on existing Canadian broadcasters.  So that
 10       has unfortunately resulted in some early damage.
 11  463                  THE CHAIRPERSON:  That would be
 12       appreciated, if you could file how you derived that.
 13  464                  Your note that one of the synergies
 14       between your conventional and specialty TV business
 15       segments is the expanded ability to amortize the cost
 16       of purchasing programming rights.
 17  465                  In the supplementary brief I think
 18       you raised concerns about your ability, as you said
 19       today, to compete for program rights with the new
 20       Toronto station or stations.
 21  466                  To what extent does the synergy that
 22       you note mitigate this concern?
 23  467                  MR. SWITZER:  There are tremendous
 24       synergies that are already in place, Mr. Chair, and
 25       obviously it is that strength, it is that combination


  1       of deciding more than 15 years ago to invest in
  2       specialty a one of our core business that has allowed
  3       us to get to the point where we are today.  Certainly
  4       the investments in capital and people and some of the
  5       operating losses that these conventional stations have
  6       suffered and are going through has been in part been
  7       possible because of the strength and contribution that
  8       the specialty channels offer us.
  9  468                  There is an existing amount of
 10       program synergy in place.  There has been with every
 11       station.  Those costs and effects are already part of
 12       these models and separately or part of our specialty
 13       channel businesses.  Obviously we can always do more
 14       with new channels.
 15  469                  The importance of this conventional
 16       group is now ways for us to figure out east and west,
 17       how these channels can continue to cooperate, share
 18       programs, expose programs in both directions.  The
 19       specialty synergies are there, they remain, they
 20       continue.  There is no change or factor that is
 21       material here.
 22  470                  THE CHAIRPERSON:  So nothing was
 23       changed from the time you filed your original
 24       projections to the ones the other day in that regard?
 25  471                  MR. MILLER:  No, essentially what the


  1       synergies allow us to do is to mitigate the damage.
  2       For example, what we are essentially assuming is that
  3       we are going to have to pay more for some of this
  4       programming, but overall we will ensure equal program
  5       quality.  Without those synergies we wouldn't be able
  6       to have that assurance that we could at least make sure
  7       we get programming of equal or better quality.
  8  472                  THE CHAIRPERSON:  (Of microphone)
  9       ...try to compare your operating expense levels to
 10       other large TV groups and overall averages for Canadian
 11       conventional TV.
 12  473                  The results we got were that as a
 13       percentage of group revenues the CHUM Group expended
 14       significantly more on programming than the other groups
 15       in the industry.  For example, in 2001, 76 per cent of
 16       your revenues were expended on programming as compared
 17       to an industry norm of 58 per cent, a larger amount
 18       also significantly on news, other information, human
 19       interest, Canadian programs and non-Canadian
 20       programming.
 21  474                  Does this accord with your own
 22       analyses and do you have any comments on that ?
 23  475                  MR. SWITZER:  I would be happy to
 24       begin, Mr. Chair.
 25  476                  Of course we have historical data,


  1       I'm sure as do you, and yes, we have historically spent
  2       more on programming than the industry average.  That
  3       has been precisely part of the difference that we bring
  4       to the table.
  5  477                  Our difference has been primarily
  6       because of our intensely local focus in every station.
  7       In general you will see a higher percentage of
  8       programming costs overall and within that a higher
  9       percentage of in-house programming costs on shows that
 10       we produce ourselves locally in each market to be
 11       relevant and connected to each community.
 12  478                  But on top of that, we have
 13       additional newer stations, stations that have either
 14       re-launched, changed affiliations.  In the case of
 15       Ottawa and Pembroke, completely started up, again and
 16       so you have certain fixed costs.  You decide to launch
 17       a new morning show in London, Wingham and Windsor.
 18       That doesn't result in immediate revenue gains but your
 19       costs certainly go up right away.
 20  479                  Significant costs in Ottawa in the
 21       last few years with an investment in staff and new
 22       programming.  The revenue growths have been slower to
 23       date than the programming costs and so, quite rightly,
 24       those costs as percentage of revenue are in fact higher
 25       than our competitors.


  1  480                  MR. MILLER:  The other large factor
  2       is the acquisition of Canadian and U.S. programming
  3       where we buy national rights, but because we are a
  4       smaller group we can't amortize those costs across as
  5       many stations and the whole country as CTV and Global
  6       do.  Obviously the addition of Victoria and Vancouver
  7       has already improved that situation considerably.
  8  481                  We will lose a lot of those benefits,
  9       unfortunately, through the increased programming
 10       costs of the licensing of the two new stations.  But
 11       generally speaking, as we are able to grow as a
 12       conventional group, those largely fixed national
 13       programming costs can be amortized that much more
 14       effectively.  That will also help bring down our
 15       ratio of operational costs to closer to some of
 16       the larger groups.
 17  482                  MR. SWITZER:  To add another specific
 18       example or two, when we make a commitment to a new
 19       Canadian feature film it is national rights, it might
 20       be a theatrical film or a made-for-television film.
 21       This is Diane's life, it is what she does every day.
 22       If we are out licensing national rights for $200,000 or
 23       $300,000 or even $400,000, we share it amongst our
 24       group and amongst our station.  We make it available to
 25       other broadcasters where we don't operate.  Those


  1       license fees are not generally significant.  We are
  2       left with a much larger piece in each of these
  3       individual stations than would be the case on
  4       percentage terms with a CanWest or a CTV.
  5  483                  We are certainly not complaining
  6       about it, it is part of the cost of being a
  7       mid-sized player and trying to grow and do some
  8       things nationally.
  9  484                  THE CHAIRPERSON:  I guess when we
 10       analyzed your specialty services the numbers came in
 11       the opposite way, that you were below the industry
 12       norms in terms of the programming expenses incurred by
 13       the specialty services, with or without the inclusion
 14       of the video services.  So it appears that of a given
 15       dollar a larger chunk is allocated to conventional and
 16       a much smaller to your specialty than is common in
 17       the industry.
 18  485                  MR. SWITZER:  You use the word
 19       "allocated".  I don't think we operate or set up our
 20       businesses or our channels that way.  We set out to do
 21       a job, to produce a particular range of programs,
 22       whether it be for conventional or specialty.
 23  486                  Obviously we want to have a positive
 24       bottom line.  We don't in a meeting say "Well, to have
 25       a good business thou shalt not spend more than 46.8 per


  1       cent of your revenues on programming".  We go out to
  2       get the job done, knowing that if we build our
  3       viewership and build our ratings in each local
  4       community the revenues will follow.  In some cases it
  5       is many years and we have been fortunate enough to
  6       have that.
  7  487                  THE CHAIRPERSON:  Right.  In arms'
  8       length transactions I understand when you are
  9       amortizing to a third party --
 10  488                  MR. SWITZER:  Yes.
 11  489                  THE CHAIRPERSON:  -- or selling to a
 12       third party, but when you are distributing the costs
 13       within the CHUM Group I would have thought that is a
 14       judgment call as to how much you allocate to CITY-TV,
 15       how much to Bravo! and so on and so forth.  Is that not
 16       correct?
 17  490                  MR. SWITZER:  Two things.  One, there
 18       is a lag in the ratio in the percentages because the
 19       revenues follow the growth in ratings.
 20  491                  In Ottawa, for example, we made a
 21       significant investment.  Those costs of what is a first
 22       class and, frankly, an expensive morning show, are now
 23       paying fruit.  It is a one-year delay between revenue
 24       growth, which we have seen and have filed in our
 25       revisions, but the costs were there last year.


  1  492                  As to matters between stations, it is
  2       always done, of course, on a fair market-value basis
  3       with respect to the value of the programs to each
  4       channel's ratings and each channel's revenues and
  5       sometimes revenue potential is used as a proxy, in
  6       other cases other equivalent pricing.
  7  493                  THE CHAIRPERSON:  Do you have any
  8       measure of percentage of your programs that are
  9       intended to be shown on both your conventional and your
 10       specialty services in terms of what you either produce
 11       or purchase?
 12  494                  What percentage of your programs
 13       would you say are produced or acquired for purposes of
 14       showing on more than one of your stations, including
 15       your specialty stations?
 16  495                  MR. SWITZER:  Well, if we looked at
 17       it from the base of these conventional stations -- and
 18       perhaps I can speak broadly and I'm certain we can work
 19       through whatever you need.
 20  496                  The very local morning shows have
 21       some regional value.  The intensely local newscasts
 22       primarily, with the exception of southwestern Ontario,
 23       do not.  Some of the local community access, perhaps a
 24       local agriculture show or a local charity Bingo show or
 25       a local show with a local hospital or a multi-faith


  1       religious group may not have value.
  2  497                  Some of the magazine shows do travel
  3       and in fact may be shared both within conventional
  4       stations and between conventional and specialty.
  5  498                  It is not as though we would have a
  6       rule and say a third of everything we produce must find
  7       a home.  They will find a natural platform.
  8  499                  Book Television is shared between
  9       CITY-TV and Bravo!.  "The New Music", an important
 10       music magazine show showcasing artists, is shared
 11       between CITY-TV and MuchMusic.  I could go through a
 12       lot of examples.
 13  500                  Where it makes sense, where we
 14       want to primarily -- in the shows we produce,
 15       primarily where they are about the glamorization of
 16       Canadian architecture or photography or movies or
 17       television or music, those we want to showcase on as
 18       many platforms as possible.  It is done in a way that
 19       is natural to the quality of the show, not in any
 20       forced percentage way.
 21  501                  THE CHAIRPERSON:  Right.  What are
 22       the allocation methods you use?  You can pick the show
 23       if you like and give me an example.  You can give me
 24       overall figures.  How do you decide how much is to be
 25       allocated to CITY-TV and how much to Bravo! in that


  1       example?
  2  502                  MR. SWITZER:  Let's take an example
  3       of an acquired high profile movie.  CHUM was -- Diane
  4       actually, was very instrumental in helping develop and
  5       finance the acclaimed Canadian feature film "The Red
  6       Violin".  That was a film that we purchased.  Diane was
  7       able to draw various pools of money together from
  8       various groups of in-house stations.  We were able to
  9       not only help it be financed, but actually acquire the
 10       rights.
 11  503                  We called all the programmers
 12       together and decided that this was a film which should
 13       premier first on Bravo!.  So internally amongst
 14       themselves on what was the responsibility was
 15       fair-market basis.  Bravo! gets the first run, it has
 16       higher marquis value, higher marketing value, higher
 17       advertising value, perhaps CITY-TV has the second run,
 18       it may go to the NewNet stations and then back to
 19       Bravo!.
 20  504                  So those programmers have an
 21       obligation to take that single sum of money and divide
 22       it into percentages, not by formula but by this
 23       particular movie for this particular telecast, the
 24       value of Bravo! first run has a value of $75,000 and
 25       perhaps the CITY-TV second run, perhaps $50,000,


  1       et cetera, et cetera.  Those numbers are hypothetical,
  2       Diane I'm sure could you give more specifics, but it is
  3       not done on a predetermined formula basis.
  4  505                  The important thing is that we can
  5       group a bunch of smaller stations together to be able
  6       to help finance a movie.
  7  506                  MR. MILLER:  If I could just return
  8       to the initial part of your question on this, as to why
  9       the operational expenses on specialty might be lower
 10       considerably than conventional.  There are really two
 11       factors.
 12  507                  One is what Jay has been talking
 13       about in terms of the local programming emphasis of our
 14       local station.  So obviously that creates more in the
 15       way of operational expense.  Our specialties are, with
 16       one very important exception, CP-24, they are national
 17       so they operate very differently.
 18  508                  The other factor is the synergy
 19       working to the benefits of the specialties.  Because
 20       the specialities have been able to be built on the core
 21       infrastructure that we already had, their operational
 22       expenses are much lower than, say, a standalone.  So
 23       while an Alliance Atlantis Group would have higher --
 24       they have had to build these operational expenses from
 25       nothing, we had buildings, we had infrastructure, we


  1       had employees, so that is why our operational expenses
  2       for those two reasons are low.
  3  509                  MR. ZNAIMER:  Mr. Chair, if I could
  4       intrude?
  5  510                  THE CHAIRPERSON:  I beg your pardon?
  6  511                  MR. ZNAIMER:  I just wanted to make a
  7       non-numerate point.
  8  512                  As we chose the specialty channels
  9       that we applied for and eventually launched, we did
 10       they specifically as extensions of programming and
 11       production in which we were already engaged.
 12  513                  THE CHAIRPERSON:  I understand that
 13       point and I take it.
 14  514                  Does it follow from that, though,
 15       that the bulk of any program acquisition costs would be
 16       amortized principally on the CITY-TV?
 17  515                  MR. ZNAIMER:  Well, it began with the
 18       mothership.  These channels at their launch were rather
 19       in their infancy.  As they have grown in their own
 20       strength we get together and we try to reallocate those
 21       costs in a more realistic way.  Generally speaking
 22       there is a lag there.
 23  516                  MR. SWITZER:  I guess to put as much
 24       precision as possible, the amount of shared programming
 25       that these conventional television stations share with


  1       specialty channels, either on an hour count or a dollar
  2       count, would not be large in terms of the value to the
  3       total groups of the stations.  There are lots of
  4       examples, we have listed them in this renewal document.
  5       We are proud of that sharing and it has let us finance
  6       some of these programs.
  7  517                  But, I don't know what word to use,
  8       it would certainly not be material or significant, you
  9       know, well under 20 per cent or 15 per cent in terms of
 10       hours or dollars, to give you some comfort there.
 11  518                  THE CHAIRPERSON:  That is helpful.
 12       Under 15 per cent to 20 per cent.  Well, I guess if it
 13       is under 15 per cent it is under 20 per cent as well.
 14       --- Laughter / Rires
 15  519                  THE CHAIRPERSON:  Okay.  Thank you
 16       for that.
 17  520                  On your international sales, revenues
 18       derived from international sales and sublicensing, are
 19       those deducted from the cost of the program when you
 20       complete the Commission's annual return?
 21  521                  MR. SWITZER:  While Mr. Miller looks
 22       for notes, we deduct the costs of sales to related
 23       parties, and in fact we have, for matters of practice
 24       and mechanics, run some of that Canadian syndication
 25       through what we call our international division.  Those


  1       sales do get deducted.
  2  522                  Sales to third parties of our weekly
  3       magazine shows do not get deducted and we believe that
  4       is in compliance with CRTC policy.
  5  523                  MR. MILLER:  The specific policy
  6       reference there would be 1993-93, page 3.
  7  524                  THE CHAIRPERSON:  You are reading
  8       from the Commission Notice?
  9  525                  MR. MILLER:  Yes, CRTC Public
 10       Notice --
 11  526                  THE CHAIRPERSON:  No.  I was asking
 12       whether you comply with it.
 13  527                  MR. MILLER:  Yes.
 14  528                  THE CHAIRPERSON:  Okay.  Thank you.
 15  529                  MR. MILLER:  Yes.
 16  530                  THE CHAIRPERSON:  I wanted to ask
 17       you -- again back to the financials -- about the
 18       synergies and -- I had it noted here.
 19  531                  Right.  I am quoting here from the
 20       May 3rd letter to the Commission, to Mr. Ketchum, where
 21       you say on page 2 that:
 22                              "In developing our projections
 23                              for revised operating costs we
 24                              have, in essence, reverse
 25                              engineered these estimates by


  1                              focusing on a target we need to
  2                              achieve with respect to cost
  3                              reductions in order to bring our
  4                              stations back to a reasonable
  5                              level of profitability.  As
  6                              such, beyond the specific
  7                              direction of operational savings
  8                              (local programming and the local
  9                              support infrastructure necessary
 10                              to support it) and given the
 11                              limited amount of time that we
 12                              have had in which to evaluate
 13                              the situation, we are presently
 14                              unable to determine precisely
 15                              where savings will be realized."
 16                              (As read)
 17  532                  Then I go to the bottom section of
 18       the document that you filed this weekend, the revised
 19       financial analysis, analysis of savings.
 20  533                  That statement would reflect itself
 21       where in that bottom table?
 22  534                  MR. MILLER:  Mr. Chair, it is not
 23       that we haven't given detail in the financial
 24       statements, it is the fact that beyond the first year
 25       you can't assume that what we have said there is


  1       exactly what will happen.
  2  535                  To step back, in the last couple of
  3       weeks, as we have looked at this and as we got more
  4       market information, the relief -- and I can honestly
  5       say it was relief -- was to realize that in all
  6       likelihood only one of the two stations would launch
  7       this September.  So what that meant is we can focus on
  8       the first year and the finding of savings, which I
  9       think we estimated only about $1.2 million for the next
 10       broadcast year.
 11  536                  Then we know we need to find
 12       additional savings, considerably more savings when the
 13       second station launches.
 14  537                  It is from that point out when we
 15       have made the allocations that we have tried to, within
 16       the short time, be reasonable and we think where we
 17       have made the operational savings are reasonable and we
 18       can speak to exactly how we have done it.  But I think
 19       what we wanted to signal here is that precise thing is
 20       not accurate.
 21  538                  So while there may be a precise
 22       number in the financial statements, if you go to
 23       Category 2A in one of our stations and ask us why has
 24       this gone down from "X" to "Y", there is no particular
 25       reason because we haven't made that precise a level of


  1       determination.
  2  539                  THE CHAIRPERSON:  I see.  So on that,
  3       for example, the reduction in programming commitments
  4       is reflected on that table or not?
  5  540                  MR. MILLER:  The general direction of
  6       the programming commitments is correct.  We can go
  7       through again our logic as to how we did that, but what
  8       we are trying to signal is a specific reduction at a
  9       specific station at a specific point in time may or may
 10       not be exactly where we choose to do it.
 11  541                  It is the reason why we have said
 12       reverse engineered.  What we have recognized as a group
 13       is that we need to realize these savings to turn our
 14       bottom line around.  We are giving ourselves some time
 15       to get there, but we have essentially developed a
 16       target of where we think we need to get to and then how
 17       we would, given the projections that we have.
 18  542                  THE CHAIRPERSON:  I see.  So
 19       essentially by year seven you are saying that you
 20       basically have to find the money that you absorbed in
 21       revenue losses and additional programming costs and
 22       this is a rough guess of how that money is going to be
 23       distributed or be found and at this stage you can't
 24       give us any more detail.  Is that a fair analysis?
 25  543                  MR. SWITZER:  That is absolutely


  1       correct, Mr. Chairman.
  2  544                  THE CHAIRPERSON:  Okay.  Thank you.
  3  545                  I want to turn for a moment to your
  4       six-monthly report for the period ending February 28th
  5       of this year.
  6  546                  I guess it was published after the
  7       licensing decision because you speak in there of the
  8       impact of the new licences.
  9  547                  I also note that you note in there,
 10       or at least your father, Mr. Waters and Taylor Baden
 11       are happy to say that:
 12                              "It is not anticipated that
 13                              there will be any major concerns
 14                              for the licence renewals."
 15                              (As read)
 16  548                  MR. MILLER:  I can tell you,
 17       Mr. Dalfen, I wasn't happy with that choice of wording,
 18       but, there you go.
 19  549                  THE CHAIRPERSON:  I hope he is right.
 20  550                  But the question I wanted to ask is
 21       that you in effect show -- I am looking at the
 22       statements on page 5, you show a healthy growth, both
 23       in revenue and net earnings, as you do when you go
 24       farther on in the document and you break out -- this is
 25       page 9, you break out television from radio and other.


  1  551                  I assume television is both specialty
  2       and conventional here.
  3  552                  I guess that raises another question
  4       in my mind as to why, in light of what Mr. Waters
  5       Senior and Mr. Baden say is a strong revenue growth
  6       that the company continues to have, and particularly in
  7       television, why one shouldn't expect you to hold to the
  8       higher levels of programming consistent with the
  9       overall growth in your company and in particular in the
 10       television sector.
 11  553                  MR. SWITZER:  Perhaps I can begin,
 12       Mr. Chair.
 13  554                  First of all, it is very important
 14       for us to restate that the revenues that we filed on
 15       Friday do include, to the best of our ability, as of
 16       information internally last week, all of the news that
 17       we have that is up to date, including the bad news in
 18       some parts of the country and the good news, including
 19       some ratings gains, revenue gains, particularly in
 20       Toronto and Ottawa.  Those are in those numbers and
 21       absolutely current in terms of our forecast.
 22  555                  We did say in that same document, and
 23       I will just read from it.  Perhaps Ron Waters or Fred
 24       Sherratt may want to add.  I quote from page 3, and it
 25       speaks of "Expectations of Management":


  1                              "Management of the company
  2                              anticipates that the granting of
  3                              these two new licences,
  4                              particularly the
  5                              English-language television
  6                              station licence, will be likely
  7                              to have an adverse impact on the
  8                              revenue and profits for CITY-TV
  9                              and CHUM's other southern
 10                              Ontario stations."  (As read)
 11  556                  Continuing lower down:
 12                              "Management anticipates that the
 13                              impact of the revenues of
 14                              CITY-TV and CHUM's other
 15                              southern Ontario stations will
 16                              be significant".  (As read)
 17  557                  So as a manager, and I'm not
 18       principal here, it is not for me and I won't, but these
 19       are matters of significance.
 20  558                  MR. MILLER:  To your question,
 21       Mr. Sherratt --
 22  559                  THE CHAIRPERSON:  Mr. Waters, did you
 23       want to comment?
 24  560                  MR. WATERS:  I was just going to add
 25       to what Mr. Switzer said, and maybe Mr. Sherratt wants


  1       to add.
  2  561                  I think what we as a company were --
  3       I think what we were looking forward to was the
  4       opportunity to turn our NewNet stations around in
  5       Ontario which, as I think Mr. Miller mentioned, we have
  6       lost $46 million.  But we do see the light at the end
  7       of the tunnel and they are doing a great job here in
  8       Ottawa at the NewRO and we can see those huge revenue
  9       increases coming.  So we hope to break even in the next
 10       few years.
 11  562                  I think that we are so pleased with
 12       our new station in Victoria and the approval of our
 13       acquisition for CKVU, but we just got on the air in
 14       October with Victoria and just got the keys in November
 15       for VU, so we were looking as an opportunity, as we
 16       talked about, to amortize those programming costs
 17       through B.C. as well as Ontario to give us some
 18       savings.
 19  563                  So everything was looking very
 20       positive and unfortunately we have some new stations to
 21       come to Toronto, and that is okay, you know, we will
 22       react and we will do the right things.  You mentioned
 23       that earlier.  We are looking forward to that, but it
 24       will just take us a little longer.  It is not quite
 25       going to turn around as fast as we hope, but we are


  1       looking forward to the challenge.
  2  564                  I think we are here today, as you
  3       know, to look for a little bit of flexibility just so
  4       we can do that.  I think in time we can turn that
  5       bottom line around again and see the increases we would
  6       like to see.
  7  565                  MR. MILLER:  You did ask,
  8       Mr. Chair --
  9  566                  THE CHAIRPERSON:  I will not let the
 10       moment pass without asking Mr. Sherratt if he has any
 11       additional comments.
 12       --- Laughter / Rires
 13  567                  MR. SHERRATT:  Mr. Chairman, I think
 14       Ron's answer did it very well, but we were getting to
 15       that day where the payoff of the last four years, we
 16       were starting to see some light at the end of the
 17       tunnel.
 18  568                  There has been quite a dramatic
 19       change in our television operations in the last four
 20       years, out of CTV, out of the Maritimes and, as you
 21       know, back when we put the Maritimes together in the
 22       good years that we had there, those were very
 23       profitable operations.  The stations in Ontario are at
 24       a low level.  Pembroke was in Pembroke and they were
 25       trying to get into Ottawa, but not very successfully.


  1  569                  So that was a challenge.  We saw it
  2       as an opportunity and the logical progression of the
  3       system.
  4  570                  We didn't like leaving the
  5       Maritimes, but we left the Maritimes after a long
  6       heritage there, really, to get on with the system, and
  7       the system has always been at the forefront in what we
  8       have tried to do.
  9  571                  We were seeing light at the end of
 10       the tunnel and that light is real.  I guess it just
 11       that the trains -- I don't know whether you say the
 12       train is closer or the train is farther away with the
 13       launch of new stations in Toronto, but it will come.
 14       Our business will continue to be successful.
 15  572                  Our margins have historically been
 16       smaller than many of our competitors.  We need to grow
 17       those, that is important for the future, but in the
 18       conventional group it is essential that we get
 19       profitability in those in order that the rest of our
 20       businesses can be strong as well.
 21  573                  MR. MILLER:  Mr. Chair, I have now
 22       interrupted everyone and I apologize for that, but I
 23       did want to get back to your question, which I think
 24       was:  With our increase in revenue should there be a
 25       commensurate increase in our contribution?  The answer


  1       is yes.
  2  574                  Indeed, in what we have put on the
  3       table with the new stations that are primarily
  4       responsible for those increases in revenue are
  5       significant increased contributions.  Even at this
  6       hearing, even with what we are going to suffer in the
  7       Toronto market, we are looking to increase our
  8       contribution in priority programming over the next
  9       license term.
 10  575                  So we certainly acknowledge that
 11       as our revenue grows and as we grow as a station
 12       group, that our contribution must commensurately
 13       increase as well.
 14  576                  THE CHAIRPERSON:  Thank you.
 15  577                  Mr. Langford.
 16  578                  COMMISSIONER LANGFORD:  Thank you.
 17  579                  I am really delighted to have to
 18       follow up after the comments of Mr. Sherratt and
 19       Mr. Waters because, like Mr. Znaimer, I don't revel in
 20       numbers.
 21  580                  I would like to ask you, Mr. Znaimer
 22       a question.
 23  581                  I am thinking back to not very long
 24       ago when we had a kind of similar meeting in Vancouver
 25       and your group came to the CRTC looking for two


  1       conventional licences on the west coast, one in
  2       Victoria and one in Vancouver.  You were successful in
  3       the former and now have made yourself successful in the
  4       latter.  Hats off to you I say, and so say all of us I
  5       assume.
  6  582                  But at that time there were people
  7       with large, large lists of numbers whose basic message
  8       was "Don't do this.  For goodness sake, don't do this."
  9  583                  I think I am going to quote you
 10       pretty correctly here.  You summed up your approach to
 11       market analysis as follows, "I don't really know what
 12       the numbers say, but I have been for a walk and let me
 13       tell you the joint is jumping."
 14  584                  What we are hearing here today is
 15       kind of some pretty dark scenarios from some of your
 16       knowledgeable numbers folks, but what we are hearing
 17       generally from the Conference Board and some other
 18       soothsayers is that the joint is beginning to jump.  I
 19       wonder if perhaps your numbers in that sense, your
 20       projections in that sense, aren't just a little too
 21       dark, using your own formula.
 22  585                  MR. MILLER:  Can I?  Moses will
 23       follow up with his comments, but I think every market
 24       is different, every new entrant is different.
 25  586                  Our entry into the Vancouver market,


  1       whether it had been the two stations that we initially
  2       filed for or the one station that we were granted is
  3       different for two reasons.  The market dynamics are
  4       different there.  There wasn't a station doing what do.
  5       We going into that market does not bid up U.S.
  6       programming costs.
  7  587                  Perhaps the first factor, as between
  8       the two markets, times are hot, times are not so hot,
  9       at the end of the day may be less material, but the
 10       other two factors are very material.
 11  588                  The two licences issued in Toronto
 12       are for stations who will do, at least in one case, a
 13       lot of what we do.  That creates a different dynamic.
 14       Also, that station, because it will be a new purchaser
 15       of U.S. rights, will bid up the costs.
 16  589                  So you have to go beyond the issue of
 17       the market and the health of the market and look at
 18       what the impact will be on incumbents, given the format
 19       of the incumbents and the format of the new stations.
 20  590                  At the end of the day, I can't tell
 21       you that we were surprised that you chose to license in
 22       Toronto.  I can tell you that we were somewhat
 23       surprised with the decisions, but that is the
 24       difference.
 25  591                  MR. ZNAIMER:  Specifically in


  1       response to your question, we have succeeded in getting
  2       into Vancouver not because you issued us a new licence
  3       but because we acquired an existing one.  So from that
  4       point of view, the people who were saying that there
  5       isn't additional, or there wasn't additional room in
  6       the market for a brand new player were perhaps correct.
  7  592                  Given that we are there now and we
  8       are facing the realities of our revenues in that
  9       market, I would have to say that they were correct,
 10       that even with an existing licence we are experiencing
 11       some difficulty today in the Vancouver market.
 12  593                  I know these things go in cycles, so
 13       at the time that we first launched our application
 14       British Columbia was perhaps the most energetic part of
 15       Canada.  By the time we were able to work our way into
 16       the market it is less so.
 17  594                  COMMISSIONER LANGFORD:  Perhaps you
 18       were wrong then and you will be wrong now and
 19       everything will work out just dandy.
 20  595                  Mr. Miller spoke about at least one
 21       of the stations in Toronto -- I think your words were,
 22       I tried to write it down here -- will be doing what we
 23       do.  That brings me to another intangible that
 24       interests me about the group I see before me.
 25  596                  Don't you do what you do best?  Isn't


  1       that at this point in the game almost a given in
  2       Canadian broadcasting, and why should an imitator be
  3       able to eat your lunch?
  4  597                  MR. ZNAIMER:  Nobody is going to eat
  5       our lunch, Commissioner Langford, and we are not here
  6       asking for a wholesale retreat.  All our submissions
  7       involve increases over conditions of license which we
  8       currently live with.
  9  598                  I think that is right, Peter, or
 10       perhaps in some cases we want to stay pat.  But in no
 11       case are we looking for a retreat.
 12  599                  We are simply looking for some
 13       flexibility over the near term especially in order to
 14       be able to absorb this new information, these new
 15       realities.  As Mr. Waters said and Mr. Sherratt said,
 16       we will respond, but we need a little flexibility in
 17       order to craft that response.
 18  600                  COMMISSIONER LANGFORD:  Perhaps later
 19       when we get into local programming I will contest the
 20       comment with you a little bit about what constitutes a
 21       retreat and what constitutes a hold the line.
 22  601                  But let me just ask you on one other
 23       just general subject, the sort of subject that your
 24       group and the Chair have been talking about in terms of
 25       numbers this morning.


  1  602                  You have talked again somewhat
  2       pessimistically about what is happening already in the
  3       market.  They are bidding on American programs that you
  4       are interested in, you have already lost one.  But
  5       isn't there more to this than just numbers, isn't there
  6       instinct and experience and just smarts in this
  7       business and haven't you been at this a long time and
  8       aren't there a lot of programs to bid on and might
  9       you -- okay, you have lost one here, but don't you have
 10       the instincts and the smarts or aren't you confident
 11       enough in your smarts and your instincts to get out
 12       there and find the next winners?
 13  603                  Why should this be -- I get the sense
 14       that you are arguing the kind of stasis, that the
 15       market is now as it is now, that the program numbers
 16       are as they are now, the numbers of programs, and that
 17       the bidding is for a very finite pool of program
 18       resources here.
 19  604                  That certainly isn't the way I
 20       understand the history of your organization, as I read
 21       it in your own applications.  It seems to me that what
 22       I read about is a group that is the sort of group that
 23       Mr. Sherratt described, that comes out of the
 24       Maritimes, that comes into different areas, that is
 25       nimble, it is quick, that has a good instinct for


  1       something new and what might sell, and I wonder whether
  2       you have factored any of that in.
  3  605                  MR. ZNAIMER:  Yes, we have.
  4  606                  We are nimble with the things that we
  5       can control.  We are nimble in the fields where we
  6       operate ourselves.
  7  607                  The discussion about climbing costs
  8       focuses on an area where we have been trying over the
  9       years to communicate to the Commission that as much as
 10       we try to apply rational analysis, it is show business,
 11       it is therefore a hit-driven business and there is a
 12       premium paid for hits and for known commodities.
 13  608                  So if we bemoan the loss of a program
 14       that we had before, it is because the price that was
 15       finally paid, perhaps by a competitor, reflects the
 16       fact that its results are already known.
 17  609                  Our clients don't want to speculate
 18       along with us.  Our clients are looking for sure
 19       things.  As a result, there is a premium paid for hit
 20       programming, both at our level and at the level of our
 21       clients.
 22  610                  COMMISSIONER LANGFORD:  And you have
 23       a competitor that is coming in with, counting Toronto,
 24       42 per cent, say, of the English-speaking market, you
 25       have somewhere very close to 70 per cent, I think it is


  1       around 67 per cent.  Does that worry you?
  2  611                  Are you telling me that you can't
  3       outbid them if it is a show that you really, really
  4       need, or that you don't have the wherewithal to get out
  5       and find the next hit as opposed to their ability to
  6       outbid you in finding the next one?
  7  612                  MR. SWITZER:  Commissioner, actually
  8       because we are talking about the first year, we are
  9       talking about the other player, I think, if -- you are
 10       right, that will be a fact next year.  We are not
 11       suggesting that the player I presume you are referring
 12       to is actively involved yet.  They are not.  I want to
 13       be very clear about that.
 14  613                  COMMISSIONER LANGFORD:  We can give
 15       them names.  It is Craig I am talking about.
 16  614                  MR. SWITZER:  Correct.
 17  615                  COMMISSIONER LANGFORD:  It is not a
 18       secret any more.
 19  616                  MR. SWITZER:  The Rogers Group
 20       certainly has been.
 21  617                  It is, in many ways, because they are
 22       smaller that they must launch with a credible schedule.
 23       It puts additional pressure on them to even go above
 24       and beyond what would be normal margins because they
 25       don't want to wait three or four years and try to find


  1       something that is successful and maybe take a shot and
  2       have a very small business.
  3  618                  They need to be credible, and the
  4       only way to be credible is to take things that are
  5       known commodities, to go for the best.  Even though
  6       they don't play in the prime-time world, in their world
  7       of daytime and what is called access, the hours between
  8       5:00 and 8:00 p.m. and the hours between 10:00 p.m. and
  9       midnight, I would suggest generate 80 per cent or
 10       90 per cent of Rogers revenues for their current
 11       station in Toronto and probably for their second.
 12  619                  There is tremendous pressure that on
 13       June 1st when they go into their advertising agencies
 14       that they have a credible schedule.  That puts pressure
 15       on the market overall.
 16  620                  We are going to get the job done.  We
 17       are going to absolutely.  We have the smartest,
 18       brightest, most nimble team around and of course come
 19       September 1st we are still going to be on the air and
 20       still be in business -- presuming a renewal of course,
 21       but --
 22       --- Laughter / Rires
 23  621                  MR. SWITZER:  But yes, we will of
 24       course work though it, but --
 25  622                  COMMISSIONER LANGFORD:  We have


  1       surprised you before.
  2       --- Laughter / Rires
  3  623                  MR. SWITZER:  But the pressures
  4       are real.
  5  624                  It is not good enough for them to not
  6       go after the best.  It is only their business nature,
  7       their human nature and we must live with that.  The
  8       effects of that are being felt immediately on the
  9       market.
 10  625                  It doesn't take away from all the
 11       other wonderful things we hope we can celebrate with
 12       you today in terms of the things we are doing, we are
 13       touching on the business reality of -- there aren't
 14       20 identical or 30 identical shows, whether you are
 15       talking about daytime or the access period or the
 16       prime-time.  Within each category everybody wants the
 17       best, and we are living with it.
 18  626                  MR. MILLER:  To go to your finite
 19       argument, it is a finite advertising pie in Toronto.
 20       The viewing to conventional TV and to TV overall is
 21       finite.  So all the evidence suggests that when a new
 22       player comes in they take share and advertising -- not
 23       all, but in terms of advertising they take from the
 24       incumbents.
 25  627                  All we are saying -- and we are, in


  1       our view, being very conservative in our projections --
  2       is that we will need to pay more for our programming to
  3       maintain our competitive edge and we will receive less
  4       in advertising because of the new players.  I think
  5       that is uncontested, Commissioner Langford.
  6  628                  COMMISSIONER LANGFORD:  But if the
  7       joint starts jumping, there will be new advertisers,
  8       there will be new industries.  It won't be finite.
  9  629                  MR. MILLER:  The discussion we have
 10       had and the evidence that we have filed suggests that
 11       when it comes to conventional TV that is not what has
 12       happened.  Conventional TV is where the -- where the
 13       joint jumps is in the hits and the battle here will not
 14       be on the hits.  So there is no big pot of money that
 15       is suddenly going to arrive on everybody's doorstep
 16       come this September or next September because new
 17       stations arrive.  That is the reality of the
 18       conventional business.
 19  630                  MR. SHERRATT:  Commissioner Langford,
 20       one of the key things I think is that, yes, the joint
 21       may be jumping, but there are a lot more places to
 22       jump.
 23  631                  COMMISSIONER LANGFORD:  Not necessary
 24       a bad thing.
 25  632                  THE CHAIRPERSON:  Commissioner


  1       Cardozo.
  2  633                  COMMISSIONER CARDOZO:  Thank you,
  3       Mr. Chair.
  4  634                  I just have one question.  It is a
  5       bit of a thought and if you would care to I would like
  6       to hear your response.
  7  635                  As I have gone through the material
  8       and listened to your conversation with the Chair this
  9       morning, it seems to be at odds with your closing
 10       remark in your oral presentation.  I will just read you
 11       this two-line paragraph.
 12                              "We want to do more, but we can
 13                              only do more if the business
 14                              climate, the regulatory
 15                              framework and market conditions
 16                              allow."
 17  636                  So if you take those three factors,
 18       the business climate aren't what the Commission sets,
 19       that is sort of the international and national state of
 20       things.
 21  637                  The market conditions, I suppose you
 22       could say that is what we set in licensing, but that is
 23       done.  That is over.
 24  638                  So what we are talking about today
 25       and tomorrow is the regulatory framework.  What you are


  1       asking is for the flexibility to do less, even though
  2       you say "We want to do more".
  3  639                  So I am left perplexed at the end of
  4       the day what you want out of this is that the viewers
  5       will get less of -- you are asking for the flexibility
  6       to do less in terms of programming expenditures and in
  7       terms of local programming.
  8  640                  So just tell me if I am
  9       misunderstanding your pitch today.
 10  641                  MR. SWITZER:  That is certainly --
 11       that flexibility that we require is absolutely one of
 12       the four points we enunciated as one of the specifics
 13       that we are here to talk about and set as part of this
 14       renewal.
 15  642                  Part of the frustration for us is
 16       that the effect, the problems, the effect on revenues,
 17       the effect on costs are starting to begin right away.
 18       We will live with, we certainly hope, for seven years
 19       the rules, the conditions, the discussion, the
 20       expectations that we will presumably set this week.
 21  643                  We have shown over the last seven
 22       years, in part because of the regulatory framework and
 23       the environment, that we have vastly exceeded, that we
 24       have grown.  We have done it voluntarily, I believe.
 25  644                  Our commitment on CITY-TV in total is


  1       for 13 hours and change.  We have grown up and down
  2       with our news, with our non-news programming, it has
  3       been higher, it has been much higher.  Today it is
  4       north of 40 hours, approximately 45 hours a week.  It
  5       is fundamental to the people who are in this room, to
  6       the people you are going to talk to this week.
  7  645                  That doesn't take away from our
  8       business responsibility, our financial responsibility,
  9       to not declare an emergency, to not panic, but to say
 10       these are important, serious, material matters of
 11       revenues and costs and best we talk to you openly today
 12       and tomorrow about how we have to deal with it, because
 13       we do have a responsibility to come up with flexibility
 14       to deal with these changes.
 15  646                  It is not our intent, and nor have we
 16       in the past seven years on any of these stations,
 17       arbitrarily cut or in any way responded in a knee-jerk
 18       reaction, but this is a serious business situation and
 19       although there will perhaps be some tension between us
 20       on this matter, it is best, we believe, to talk about
 21       fair and reasonable proposals that deal with all the
 22       conflicts that we are facing in all of these factors,
 23       and we are happy to talk to you about any of these
 24       things.
 25  647                  COMMISSIONER CARDOZO:  I appreciate


  1       that.  We will get to the details as we go through more
  2       questions, but I am just struck by the request for less
  3       or flexibility to do less when you say you want to do
  4       more.
  5  648                  MR. MILLER:  Flexibility --
  6  649                  COMMISSIONER CARDOZO:  Maybe I won't
  7       take you there.  I don't mind leaving it at this.  The
  8       answers will pan out as we go through other sections
  9       too.  Thanks.
 10  650                  Thanks, Mr. Chair.
 11  651                  THE CHAIRPERSON:  If you would care
 12       to comment, go ahead.
 13  652                  MR. MILLER:  The point is, we want to
 14       do more.  The flexibility we seek is one of many tools
 15       we will have, regulatory flexibility.
 16  653                  Again, more doesn't always
 17       mean volume.
 18  654                  In terms of your comment about local
 19       service to our viewers, I think that is probably the
 20       most important one.  We want to make sure that our
 21       local viewers get the same sense of local reflection
 22       and commitment that they have always had.  We may do it
 23       a different way, we may do it through a greater
 24       combination of local and regional programming for
 25       example, we may do it not necessarily with separate


  1       newscasts ultimately in areas such as Windsor and
  2       Wingham, it may be a common newscast, but that sense of
  3       local reflection, that commitment to local will be
  4       there.  We want the flexibility to do it in different
  5       ways.
  6  655                  Also, again we are talking about a
  7       certain time period and we are talking about the fact
  8       that we need to seek this flexibility now and over
  9       time, again, things change.
 10  656                  But the point we were trying to make
 11       here is that we want to do more, but we only can if the
 12       conditions allow us to.
 13  657                  THE CHAIRPERSON:  Thank you.
 14  658                  Commissioner Wylie.
 15  659                  COMMISSIONER WYLIE:  Thank you,
 16       Mr. Chairman.
 17  660                  Good afternoon.  I will discuss
 18       with you your programming strategy and plans for the
 19       next license term, particularly in light of the
 20       potential synergies that are available to the CHUM
 21       Television Group.
 22  661                  I will have some specific questions
 23       on priority programming plans, but none on your
 24       specific local programming plans per station or
 25       overall, only in light of the overarching programming


  1       strategy.
  2  662                  Hopefully we can lift this funereal
  3       pall on the hearing to date and find some more positive
  4       happenings in CHUM's life, which were recognized, for
  5       example, by Mr. Waters himself in your annual report
  6       of 2001.
  7  663                  I know that the world hadn't
  8       continued to change, it started a long time ago, as
  9       Commissioner Langford alluded to, and so did
 10       Mr. Sherratt, that there have been many changes, some
 11       positive, some less, in CHUM's life in the broadcasting
 12       system.
 13  664                  But Mr. Waters, if I quote from
 14       page 8 of that annual report, said:
 15                              "First, our stations are
 16                              intensely local and highly
 17                              targeted sought after niche
 18                              markets.
 19                                  Second..."  (As read)
 20  665                  And this is what I want to emphasize
 21       as a positive as opposed to the funereal quality of
 22       your position today:
 23                              "The synergies between our
 24                              various television, radio and
 25                              new media platforms give us


  1                              unmatched opportunities in
  2                              sales, strategic promotions and
  3                              programming cross promotions."
  4                              (As read)
  5  666                  So I think that for your conventional
  6       TV stations, without looking even at the specialty
  7       array of services that you hold license for, you have
  8       now access to the two major markets in the country,
  9       Toronto and Vancouver, you have regional distribution
 10       of CITY in Ontario, and you have dual station ownership
 11       in Vancouver and Toronto.  Those are the probably more
 12       positive or larger components of the synergies.  Then
 13       the NewNet stations probably in some cases are
 14       struggles, some of them are only beginning, you haven't
 15       really yet mined all the potential.
 16  667                  So that is, to me, a more positive
 17       beginning of the reality of CHUM Television as a group
 18       to be perhaps opposed to the concerns you are
 19       expressing about recent licensing decisions in the
 20       system.
 21  668                  In your supplementary brief at
 22       page 28 you have a Part 4 which is entitled "CHUM's
 23       Emergence as a National Player".  You say:
 24                              "With the addition of Victoria
 25                              and Vancouver, CHUM Television


  1                              is poised to become a true
  2                              national alternative station
  3                              group."  (As read)
  4  669                  I am wondering if your new position
  5       in the system, as an emerging national player, will
  6       affect your ability to purchase foreign program rights?
  7       You have alluded to it this morning about the (a) and
  8       the (b).  Is it possible that this will move you, in
  9       fact as your wrote yourself, closer to being an
 10       emerging national player with the consequences in the
 11       purchasing clout you may have?
 12  670                  MR. SWITZER:  Madam Vice-Chair, I
 13       will begin.
 14  671                  The addition of the most recent
 15       conventional stations in Victoria and Vancouver are a
 16       very important new part of our group and they have
 17       helped us quite a bit.  We have already seen that
 18       effect.  Perhaps I can explain to you what life was
 19       like before that.
 20  672                  To remain competitive -- perhaps I
 21       will take half a step back.
 22  673                  We are not in the same traditional
 23       dramatic network series, network sitcom business that
 24       the CTVs and Globals are in, so we have chosen as a
 25       matter of differentiation -- and frankly where our


  1       hearts are and where we think there is a business, to
  2       not enter that fray.  But in the areas that we have
  3       entered, in the areas of action/adventure series and
  4       movies, motion pictures, new Canadian films, some
  5       science fiction, we have grown.
  6  674                  To remain competitive, over the past
  7       five or six years we had to start buying national
  8       rights.  We grew to be a small national rights player
  9       in these alternative programs, again not in the
 10       traditional dramas or sitcoms, in the movie business
 11       and in some of the action/adventure series, and we are
 12       operating with one hand tied behind our back.
 13  675                  Our margins were considerably lower
 14       because we had fewer markets to share those programs
 15       with.  We make most of our programs available to the
 16       Craigs in the prairies and that helps to some extent,
 17       but in B.C. we had very little takers.  We had, except
 18       for an occasional program or an occasional movie, no
 19       interest.  So we had to commit to national rights.  We
 20       were out competitive full network pricing for those
 21       kinds of movies and series and we could not share those
 22       program costs.
 23  676                  Victoria and Vancouver have made a
 24       very big difference and it has reduced the competitive
 25       disadvantage that we live with.  We are still at a


  1       smaller disadvantage, it certainly has made a great
  2       deal of difference.
  3  677                  So what it does is reduce the risk of
  4       losing those specialized programs.  We are large enough
  5       a little bit to control our own destiny.  It doesn't
  6       fundamentally change our ability, nor do we have any
  7       desire to change our ability and change what we are
  8       doing.
  9  678                  I know in other parts of the country,
 10       in Alberta and Manitoba, the Craig's have shifted away
 11       from a movie format to more of the CanWest Global
 12       programming, I'm sure for their own business reasons.
 13       We have chosen to remain primarily movie-driven on CKVU
 14       and CITY-TV and on the NewNet stations, including
 15       Victoria, more action/adventure hours and alternative
 16       kinds of programs.
 17  679                  Our ability to have these stations
 18       now means that we can more fairly share the costs and
 19       it takes pressure off of the group as a whole.
 20  680                  COMMISSIONER WYLIE:  Yes.  You
 21       acknowledge on the next page in your supplementary
 22       brief that:
 23                              "With the Vancouver and Victoria
 24                              station (you) will be able to
 25                              amortize program costs more


  1                              effectively, thereby increasing
  2                              the quality of the programming
  3                              as well as reducing the
  4                              programming costs."  (As read)
  5  681                  My question was more not that it
  6       would drive you necessarily to the CTV/Global capacity,
  7       but whether it would in fact be, as you say here, an
  8       emerging national player and that the quality --
  9       without going perhaps to the "A" level -- the quality
 10       of the "B" level could be improved and make you more
 11       competitive with those very stations that you say will
 12       compete with you at the "B" level.
 13  682                  Surely it is not just "A" and "B",
 14       there is the ability to buy higher or lower quality,
 15       depending on one's ability to amortize the costs, which
 16       is what you are suggesting in the line I was just
 17       reading, that with the additional stations you will be
 18       able to increase the quality of your "B" programming
 19       perhaps by reducing the program costs in the
 20       amortization.
 21  683                  Wouldn't that be something that will
 22       drive you to a level that is not the same as you were
 23       yesterday and, therefore, perhaps overly concerned
 24       about the ability of a new player with less ability to
 25       amortize, to buy exactly the same level of programming?


  1  684                  MR. SWITZER:  You are absolutely
  2       right, it is important.  We do of course always want to
  3       improve the quality of our programs, both the programs
  4       we produce and the programs we purchase.  We don't
  5       believe it will be a big factor in the next seven
  6       years, but we in fact have included some growth, some
  7       small growth in qualify of those acquired programs.
  8  685                  You used the reference "A" and "B",
  9       you are right, it is a palette.  There is a wide
 10       palette of things, and although we do not in any way
 11       want to enter the traditional network business of CTV
 12       and Global, of course we can always improve the quality
 13       of our acquired programs and we have planned to do that
 14       to the best of our ability.
 15  686                  MR. MILLER:  I think what has
 16       changed, Madam Wylie, since we filed this, is that
 17       those savings -- which again, it is not savings to the
 18       cost of programming, it is the fact on a per-station
 19       basis the costs come down because you are now
 20       amortizing over more stations.  Those savings that we
 21       have anticipated have basically been wiped out with the
 22       licensing -- in fact more than wiped out with the
 23       licensing in Ontario.
 24  687                  So we kind of back to where we were
 25       before in terms of the health of the group as a whole.


  1       In fact, we are worse off, I think, as Peter could
  2       point out to you if you wanted to go through that.
  3  688                  COMMISSIONER WYLIE:  A bit of a side
  4       question.
  5  689                  You emphasize in your application the
  6       export opportunities that you have had and the ability
  7       of CHUM to find a presence for itself in Barcelona and
  8       to sell programming outside the country.  Is that going
  9       to be increased with the new CHUM, I would call it?
 10  690                  You can't possible have two stations
 11       in the second largest Anglophone market in Canada and
 12       not call it the new CHUM, as far as television is
 13       concerned.  We will get to the specialties next.
 14  691                  Could this new CHUM have greater
 15       opportunities to export?
 16  692                  MR. SWITZER:  We certainly do intend
 17       to export the best of the shows that we produce across
 18       the country.  And yes, it is our desire that in the
 19       next 18 months both the Victoria station and the
 20       Vancouver station each contribute at least one weekly
 21       half hour that our international team will make
 22       available around the world.  It might be the program
 23       that deals with the environment, it might be the First
 24       Nations program, it might be a larger Pacific Rim half
 25       hour that we are also looking at.


  1  693                  Of course we want to take these to
  2       many countries and we are proud of the distribution and
  3       the number of countries that they are seen in.  It is
  4       not, from a business point of view, if you add up the
  5       number of hundreds of dollars per telecast that some of
  6       the countries pay a material or significant
  7       contribution.  Certainly it is an export we are proud
  8       of and of course we want to grow it.
  9  694                  We also want to, of course, make sure
 10       that these shows are seen across Canada as we talked
 11       about when we appeared before you in Vancouver.
 12  695                  COMMISSIONER WYLIE:  The Chairman
 13       discussed with you briefly how you treat the revenue
 14       and the costs of programming when there are
 15       opportunities.  I believe the discussion was more
 16       domestically how the allocation is made.
 17  696                  What do you do?  How do you treat
 18       financially, in your report to the Commission, revenues
 19       that may flow from programming that has been produced
 20       here and exported?
 21  697                  MR. SWITZER:  I'm sure others may
 22       correct me if I am wrong.  I do not believe that is
 23       reported as regulated revenue in any of our station
 24       returns.
 25  698                  COMMISSIONER WYLIE:  So it has no


  1       effect, then, on the cost side either?  All the costs
  2       of a program that is exported with some return remains
  3       assigned to the television station where it originated?
  4  699                  MR. SWITZER:  The international
  5       division pays any incremental expenses that are
  6       specific to the sale internationally, so additional
  7       clearances or music rights.
  8  700                  COMMISSIONER WYLIE:  That would show
  9       up, then, in your financials --
 10  701                  MR. SWITZER:  That shows up in --
 11  702                  COMMISSIONER WYLIE:  -- as revenue?
 12  703                  MR. SWITZER:  No.  Let me clear, I'm
 13       speaking of the costs now.  You asked on the cost side
 14       what costs are attributed internationally, if I
 15       understand you.
 16  704                  COMMISSIONER WYLIE:  Yes.
 17  705                  MR. SWITZER:  The only cost --
 18  706                  COMMISSIONER WYLIE:  Well, I asked
 19       cost and --
 20  707                  MR. SWITZER:  Of course.
 21  708                  COMMISSIONER WYLIE:  -- revenues.
 22  709                  MR. SWITZER:  Revenues.
 23  710                  COMMISSIONER WYLIE:  How do you
 24       treat it?
 25  711                  MR. SWITZER:  Revenues to related


  1       parties to CHUM television stations domestically are
  2       reduced from or clawed back from an eligible Canadian
  3       program expense.
  4  712                  International revenues are not shown
  5       as part of station revenue totals.  Costs for those
  6       shows remain where those shows are produced, with the
  7       exception of incremental costs that are specifically a
  8       result of sales internationally.  Those are not at the
  9       station level or included in the program production
 10       budget.
 11  713                  COMMISSIONER WYLIE:  So there is no
 12       effect really?
 13  714                  MR. SWITZER:  No.  In a word, no.
 14  715                  COMMISSIONER WYLIE:  So the cost of
 15       producing that program which may get revenues from
 16       export is all on the Canadian station that produced it?
 17  716                  MR. ZNAIMER:  Madam Wylie, that is
 18       the remarkable thing about these shows, is we didn't
 19       make them for export.  We made them for our stations.
 20       We made them well enough --
 21  717                  COMMISSIONER WYLIE:  But they are
 22       exportable.
 23  718                  MR. ZNAIMER:  Yes, but they were made
 24       for the stations that ran them originally and therefore
 25       the costs lie in those stations.


  1  719                  COMMISSIONER WYLIE:  Can you give me
  2       an example of one, let's say in Barcelona, that is
  3       exported?
  4  720                  MR. SWITZER:  Yes.  I believe they
  5       play the as-produced Toronto version of Fashion
  6       Television, and I believe they might play Media
  7       Television as well.
  8  721                  I should add that the Barcelona's,
  9       the Bogota's, many of the things that we have talked
 10       about in terms of the sales, the program sales are
 11       really a very small component of the business we do
 12       with these stations.
 13  722                  These stations have come to us to
 14       partner or create a joint venture to license our
 15       intellectual material, our intellectual property.  They
 16       are buying a format, they are buying a system, they are
 17       buying our assistance, they are buying training,
 18       marketing help, news help, in some cases sales help,
 19       and along with that some programs are included.  But
 20       they are generally working with us to help them create
 21       a strong, local, feisty, independent station in their
 22       particular market.
 23  723                  MR. ZNAIMER:  Over time we encourage
 24       them to actually replace the programs they receive from
 25       us with equivalent programs produced by those stations


  1       themselves.
  2  724                  MR. SWITZER:  So our joint venture in
  3       Finland for example, in Helsinki, began in the first
  4       year carrying Fashion Television.  In the second year
  5       they made half of the episodes themselves.  By the
  6       third year they were producing completely their own
  7       local show, and in fact although their fees to us
  8       continued for our systems and brand and intellectual
  9       copyright, they were in fact not telecasting the
 10       program at all.
 11  725                  COMMISSIONER WYLIE:  So what you are
 12       saying basically is you are selling expertise --
 13  726                  MR. ZNAIMER:  That's right.
 14  727                  COMMISSIONER WYLIE:  -- and that the
 15       programs that are exported as such, and probably
 16       subtitled or dubbed in the language of the --
 17  728                  MR. SWITZER:  As what is appropriate
 18       to the market, yes.
 19  729                  COMMISSIONER WYLIE:  -- are not a
 20       major component of --
 21  730                  MR. SWITZER:  That is correct.
 22  731                  COMMISSIONER WYLIE:  -- of the
 23       revenue that accrues from international expansion?
 24  732                  MR. SWITZER:  Correct.
 25  733                  COMMISSIONER WYLIE:  Now, as you


  1       know, in the TV Policy the Commission said at
  2       paragraph 10 that it:
  3                              "...will take into account, when
  4                              looking at large groups, the
  5                              other holdings of the group such
  6                              as the specialty service,
  7                              although not necessarily
  8                              entertaining the license renewal
  9                              of that service at the same
 10                              time."  (As read)
 11  734                  Now, if I return to the more positive
 12       comments in the annual report, this time at page 18,
 13       Mr. Waters addresses -- that is the 2001 report -- it
 14       may not be Mr. Waters necessarily this time, but the
 15       report says, and I quote:
 16                              "Each of the new digital
 17                              channels is a logical extension
 18                              of programming genres and
 19                              formats already established by
 20                              CHUM in the marketplace.  This
 21                              strategy has resulted in marked
 22                              increases in viewership and
 23                              revenue across CHUM's
 24                              established specialty networks."
 25                              (As read)


  1  735                  I think this morning that one of
  2       you -- I think it may have been Mr. Sherratt --
  3       actually put forward the benefit or the positive that
  4       flows from the fact that your genre of television is,
  5       not only with the specialty but also with the analog
  6       networks, make it possible to have extensive program
  7       synergies between them.
  8  736                  I think you would agree that you do
  9       have a lucrative array of specialty services, analog
 10       and emerging digital services, which provide numerous
 11       rebroadcasting opportunities or repurposing of
 12       programming by cleverly focusing on some genres that
 13       you already have some expertise in.
 14  737                  In your application you, over and
 15       above the speech to the shareholders, the speech to us
 16       in your application as at page 33 is that:
 17                              "The synergies between CHUM's
 18                              conventional and specialty
 19                              services..."  (As read)
 20  738                  I am reading from page 33:
 21                              "...have been essential to the
 22                              success of CHUM Television.
 23                              Specialties provide less than
 24                              one-half of CHUM TV revenues,
 25                              but the vast majority of its


  1                              profits."  (As read)
  2  739                  At page 34 of your application you
  3       talk about it being "very much a two-way street".
  4  740                  So there is no doubt that when we
  5       talk synergies, number one the Commission has said it
  6       would go, in looking at conventional, beyond the
  7       conventional assets and that you see yourself as very
  8       well positioned with specialty services while the world
  9       fragments in the conventional side.
 10  741                  I would like you to elaborate on what
 11       those synergies are and that two-way street is in what
 12       I believe has to be positive if it provides you with
 13       the majority of your profits, although half -- less
 14       than half of your revenues.  The synergies between the
 15       two in a general way, and then I will have more
 16       specifics.
 17  742                  MR. SWITZER:  Thank you,
 18       Vice-Chair Wylie.
 19  743                  Yes, the synergies are important and
 20       we are indeed very fortunate to have built and created
 21       a very innovative and successful group of specialty
 22       channels.  We have spent a lot of time and gone to some
 23       detail to try to summarize what those synergies mean
 24       for us and how it works.
 25  744                  Perhaps Peter Miller can be specific.


  1  745                  MR. MILLER:  In these pages that you
  2       outlined, Madam Vice-Chair, we essentially divided the
  3       synergies into four categories:  the advertising sales,
  4       the program acquisition, schedule and promotion, and
  5       then the back office, admin, and so forth.  So we have
  6       taken full advantage of those synergies.  Indeed, as
  7       Moses said, it was our ability to launch specialty
  8       given our conventional niche presence that got us into
  9       this business in the first place.
 10  746                  To give some specific examples, our
 11       digitals, we were able to launch digital channels with
 12       incremental additions in terms of staff and programming
 13       costs that were far lower than our competitors.  That
 14       was very necessary given that, for example, our digital
 15       Category 2s are not carried at all by one of the DTH
 16       operators.  So were we not able to have those
 17       synergies, we wouldn't have been able to launch so
 18       many digitals.
 19  747                  Another specific example, we have
 20       some of the lowest subscription fees of any specialties
 21       in Canada.  Again, that is because this company
 22       realized very early that specialty could be sold and
 23       therefore has always placed a high emphasis on
 24       advertising.
 25  748                  So I can take you through with our


  1       team how we do it, if that is helpful to you, but we
  2       did, as you have noted, have some description in the
  3       application.
  4  749                  COMMISSIONER WYLIE:  And some
  5       examples of programs.
  6  750                  Did I correctly understand that you
  7       responded to the Chairman this morning that the
  8       programming repurposing exchange or second window or
  9       third or first, whatever, as between your conventional
 10       and specialty services is in the range of 15 per cent
 11       to 20 per cent?
 12  751                  MR. SWITZER:  That was a quick
 13       approximation, 15 per cent to -- I said under 20 per
 14       cent or under 15 per cent, which of course means under
 15       15 per cent --
 16       --- Laughter / Rires
 17  752                  MR. SWITZER:  -- of either the hours
 18       or the dollars involved of the conventionals would also
 19       show up -- be shared or in any other way be connected
 20       to programmatically the specialties.
 21  753                  Of course, the cross promotion is one
 22       of the areas that you touched on and that Peter just
 23       mentioned, and that is an area that we have gone to
 24       great lengths to develop and to build and it is an
 25       important part of being a mid-sized player and to be


  1       able to get, as the marketing team says, more bang for
  2       the buck.
  3  754                  COMMISSIONER WYLIE:  Yes.  And we
  4       have heard a lot about cross promotion of course in the
  5       last few years of attempts at convergence and it is
  6       fairly obvious on our screen right now what cross
  7       promotion between various media can be.
  8  755                  You say it is below 20 per cent and
  9       possibly below 15 per cent.  Would you be in a position
 10       to be able to file with the Commission, let's say of
 11       the last broadcast year, a list of the programs -- the
 12       number and the genre of programs that were actually
 13       seen on both your specialties and conventional stations
 14       to see whether it is below 20 per cent or below
 15       15 per cent.
 16  756                  MR. SWITZER:  Of course we would be
 17       happy to go through a list and we will file --
 18  757                  COMMISSIONER WYLIE:  Yes, and
 19       file it.
 20  758                  MR. SWITZER:  -- from the base of
 21       conventional those that --
 22  759                  COMMISSIONER WYLIE:  The number and
 23       the nature of the programming --
 24  760                  MR. SWITZER:  Yes.
 25  761                  COMMISSIONER WYLIE:  -- that was


  1       repurposed as between any specialty, digital or analog,
  2       compared to conventional.
  3  762                  We are just trying to get -- you had
  4       a discussion this morning with the Chairman as to your
  5       programming costs, et cetera, and of course, not
  6       surprisingly when -- and the possibility that we are
  7       not focusing sufficiently on the potential synergies
  8       and the effect of them, of your new position of CHUM
  9       Television and too much on whether it will be
 10       completely not only wiped out but drag you down because
 11       another decision has been made since that has brought a
 12       change in the broadcasting landscape.
 13  763                  So I think we are not renewing your
 14       specialties, but we are looking at what are your
 15       strengths, not only yesterday but today, with your new
 16       array of services.
 17  764                  MR. SWITZER:  I am going to ask
 18       Marcia to go in a second, but can I just address one
 19       point before we start.
 20  765                  This very issue of conventional
 21       versus specialty is an issue that is very important for
 22       this proceeding and we recognize it.  That is why we
 23       asked PWC to do the report that you have seen that was
 24       filed with our application.  It is important to
 25       recognize in that report that it projects what we are


  1       already seeing, and that is while we have been very
  2       successful with our specialty business, that business
  3       is not going to keep growing the way it has in the
  4       past.
  5  766                  The magnitude, the significance of
  6       the 40-plus new digital licences that were issued in
  7       September cannot be over stated.  That is more
  8       licences -- more stations launched, more specialty
  9       stations launched on a single day than were launched in
 10       the previous 15 years.
 11  767                  So what we are seeing is that that
 12       specialty business and our specialty business will not
 13       have the historically strong profits and, therefore,
 14       while we have absolutely maximized the synergies
 15       between specialty and conventional and will continue to
 16       do so, what we see is declining specialty profits,
 17       which is the reason why we absolutely have to get our
 18       conventional business on a firmer profitable financial
 19       footing, because otherwise we will be in serious
 20       trouble as a company.
 21  768                  But to synergies, I think the thing
 22       that we have forgotten to mention is synergies come to
 23       people, and I would like Marcia to jump in here.
 24  769                  MS MILLER:  Thank you.
 25  770                  I think the real strength, and as we


  1       have already talked about, channels have come out of
  2       the success of TV shows that have started specifically
  3       on CITY-TV.
  4  771                  Movie Television and Fashion
  5       Television are very good examples of the synergies from
  6       a content and people perspective.  When we started
  7       these shows, Movie Television I think in terms of
  8       helping launch Star!, it was 14 years of being in that
  9       community of movies in the Canadian feature film and
 10       stars that started us off without having to network
 11       from the beginning, starting off with already having
 12       our foot in the community and with a huge resource of
 13       footage and archival material that the channels, both
 14       Fashion and Star! were able to tap into.
 15  772                  So you had people already in the
 16       business of those genres for 15 years and 17 years
 17       being able to cross over with new people coming in, but
 18       also utilizing their expertise and content.
 19  773                  COMMISSIONER WYLIE:  I understand the
 20       general principle, what I am trying to get at is:  We
 21       have numbers now, it is less than 20 per cent, less
 22       than 15 per cent, it would be interesting to know just
 23       what is the actual result or the possibility of having
 24       either producing or purchasing programming that is
 25       aired on both conventional and specialty.


  1  774                  You may have some comments as well as
  2       to whether that will be increased as between the analog
  3       and the new specialized digital channels.
  4  775                  You have explained this morning you
  5       have been clever in ensuring that to an extent the
  6       genres and formats are compatible with your style of
  7       television which will, of course, bring some questions
  8       later on as to why you would take the risk of changing
  9       that style.
 10  776                  But, in any event, you have an array
 11       of specialty services which is quite remarkable in that
 12       it hangs together and there are synergies there that
 13       can flow and we would like some more details.
 14  777                  You have discussed with the Chairman
 15       how -- well, first let me say that in your application,
 16       in your financial assumptions you explain how you
 17       allocate costs and revenues, et cetera, with regard to
 18       programming that is shared as between your conventional
 19       television stations.  Do you have anything more to add
 20       about how you do it between specialties and
 21       conventional to what you responded this morning?
 22  778                  MR. WATERS:  Jay, I just want to add
 23       one thing before you go there.
 24  779                  I was just thinking about that 20 per
 25       cent or 15 per cent under.


  1  780                  One of the things that may be
  2       difficult, and I think I am kind of tagging onto what
  3       Marcia said, the team here knows I always use this one
  4       as an example, but CITY-TV and CP-24, which I would say
  5       there are more synergies with CITY and CP-24 than there
  6       is with any one of our specialty channels.  To quantify
  7       that in programs -- looking over at Mr. Hurlbut over
  8       there -- would be very difficult to do.
  9  781                  COMMISSIONER WYLIE:  I didn't raise
 10       that one.
 11  782                  MR. WATERS:  It is just it is a
 12       specialty channel.
 13  783                  COMMISSIONER WYLIE:  Yes, I realize,
 14       but I meant other than CP-24.
 15  784                  MR. WATERS:  Okay.
 16  785                  COMMISSIONER WYLIE:  The genres and
 17       formats and so on, because the news --
 18  786                  MR. SHERRATT:  If I could just hop
 19       in, Madam Vice-Chair --
 20  787                  COMMISSIONER WYLIE:  I don't think it
 21       is a big moneymaker yet, is it?
 22  788                  MR. WATERS:  No, we wish it was, but
 23       it is a long way away from that.
 24       --- Laughter / Rires
 25  789                  COMMISSIONER WYLIE:  We are only


  1       looking at where you are successful right now.  The
  2       funeral is over.
  3       --- Laughter / Rires
  4  790                  MR. SHERRATT:  Madam Vice-Chair, if I
  5       might just hitchhike on what Marcia and Ron have said.
  6  791                  It wasn't that many years ago when we
  7       described the difference between radio and television
  8       as radio being one big program and television being an
  9       exhibitor of programs.  That is blurring now.  These
 10       specialty channels that Marcia is talking about, the
 11       channel is a program.  It is one program 24-hours
 12       a day.
 13  792                  So the input and the synergy and the
 14       value of the people who made the program that was
 15       30-minutes a week into what is now a seven-day a week,
 16       24-hour a day program, those synergies, you can't
 17       quantify them because it is the expertise and the feel
 18       for it.
 19  793                  But that is kind of the analogy that
 20       I see, that these specialty channels, as they become
 21       more and more focused, become more and more like radio,
 22       one single 24-hour a day program.
 23  794                  COMMISSIONER WYLIE:  I am sure that a
 24       group of people who can give us the details of how a
 25       licensing decision will affect you for seven years can


  1       tell us the advantages in, let's say the year ending
  2       2001 or 2002, whichever you want, more details about
  3       why it is that you have, in your own words, an
  4       unmatched opportunity to gain synergies as between
  5       the two.
  6  795                  So we simply want a better fix on the
  7       number and the genre of programs and what is the extent
  8       of the -- then we can add, Mr. Sherratt, on top of
  9       that, the advantages you have just spoken to which have
 10       a value, which is you are not doing sports or something
 11       different from what you do normally so it is much more
 12       easy.  Of course, it was very clever to actually keep
 13       in the genres and formats, but it is an advantage that
 14       we would like plumb the realities of a little more.
 15  796                  So perhaps by reply time you will
 16       have some more details.
 17  797                  MR. MILLER:  Maybe I can just add two
 18       observations.
 19  798                  First of all, I think the single
 20       biggest synergy, as Jay alluded to, is cross promotion.
 21       We don't own newspapers, as our larger competitors to,
 22       but the ability to cross promote is a huge synergy and
 23       that is probably the largest on.
 24  799                  In terms of programming synergies,
 25       let's separate program purchasing power from multiple


  1       windows.
  2  800                  Again, the programming purchasing
  3       power is important.  The fact that we can buy a movie
  4       package and then run the movies on conventional and
  5       specialty and split them up is a tremendous synergy,
  6       but that doesn't mean the same movie is running over
  7       and over again on every single channel.
  8  801                  Finally, in terms of the actual
  9       overlap of programming, and what we will do is we will
 10       go through our conventional stations and we will
 11       estimate based on a program schedule basis and a
 12       program cost basis how much of that is also going to
 13       specialty.
 14  802                  I would submit that over time the
 15       programming overlap will diminish.  It will diminish
 16       for two reasons.
 17  803                  One, as we on the conventional group
 18       become more national people have more opportunities to
 19       see our programming on conventional.  So the extra
 20       window, if it were, on specialty, doesn't necessarily
 21       add much in the way of audience.
 22  804                  We have learned that what is very
 23       interesting about using programming on different
 24       channels is that each channel has its own audience
 25       which may be attracted to the same program in an


  1       entirely different context.  So one program may reach
  2       an entirely different audience when it is shown on a
  3       different channel.  That will continue to some point,
  4       but over time, as we become more national in the
  5       conventional group, the repeat factor, if you will, on
  6       specialty will go down.
  7  805                  Secondly, technology will drive us
  8       there.  We are spending a lot of time on what has
  9       happened in the last few months, but over our next
 10       seven year license there will be huge technological
 11       changes.  Seven years ago no one knew of the Internet.
 12       So think of what can happen over the next seven years.
 13       I would submit that one of the big changes will be
 14       PVRs, TiVo replay in the U.S., personal video
 15       recorders, which will allow consumers to get the
 16       programs they want.  So repeating programs as a
 17       strategy maybe ultimately will be less valuable.
 18  806                  So all of those things together
 19       probably suggest that in some way we have reached our
 20       peak in programming synergies, but the cross promotion
 21       synergies, they will become and remain very strong.
 22  807                  COMMISSIONER WYLIE:  Well, at least
 23       2001 or 2002 you can show us what is actually happening
 24       with more detail, numbers and so on.
 25  808                  You may want to be more specific as


  1       well, either orally or on paper, as to then what
  2       happens with the financial where the costs and revenues
  3       from those programming as between specialty and
  4       conventional are treated.  You are quite clear in
  5       pages 9 and 10 of your financial assumptions in your
  6       application as to how you do it as between conventional
  7       stations, but not the other way.
  8  809                  All this in the context of the
  9       Commission's desire and your own comments about the
 10       synergies of your television assets as between
 11       conventional and specialty.
 12  810                  Mr. Chairman, that seems to be both a
 13       call from the stomach and a good time for a break.
 14  811                  Thank you.
 15  812                  THE CHAIRPERSON:  Permission granted.
 16  813                  We will resume at 2:15.
 17       --- Upon recessing at 1245 / Suspension à 1245
 18       --- Upon resuming at 1418 / Reprise à 1418
 19  814                  THE CHAIRPERSON:  A l'ordre, s'il
 20       vous plaît.  Order, please.
 21  815                  Madam Wylie.
 22  816                  COMMISSIONER WYLIE:  Thank you,
 23       Mr. Chairman.
 24  817                  Welcome back.  I would like to talk
 25       to you now about your programming strategy for the


  1       coming term in light of some of the concerns you have
  2       about your ability to continue exactly what you were
  3       doing and requiring more flexibility and what the
  4       effect may be on that programming strategy.
  5  818                  So the way I understand it now, if I
  6       look at pages 19 and 20 of your application, under
  7       4.11, which is "Programming Strategies and Policies", I
  8       think it would be fair to say you describe your
  9       programming strategy for the NewNet stations as
 10       generalist with emphasis on science fiction, fantasy
 11       genre and largely series based, whereas CKVU and CITY
 12       would be largely movie-based with original magazine
 13       style shows.
 14  819                  Is the ownership, for example of
 15       Space, Star!, Bravo!, an incentive for CHUM Television
 16       to maintain and even intensify its current programming
 17       strategy for its conventional stations?
 18  820                  By that I mean, we spoke this morning
 19       about what you describe as the advantages that flow
 20       from the clever connection between your specialty
 21       services and your conventional services.  That has been
 22       continued, to a large extent, with your digital
 23       channel.
 24  821                  Conversely, will that be an incentive
 25       as you proceed in your new term to maintain the


  1       strategy I just described for your two groups of
  2       conventional stations so that the synergies continue?
  3  822                  MR. SWITZER:  Madam Vice-Chair,
  4       perhaps I can begin.
  5  823                  Yes, we have every plan to continue
  6       along the same strategy that we have outlined.  We
  7       think it takes advantage of synergies.  We think it
  8       provides programming in the markets in a way that is
  9       not now being served.
 10  824                  This is, of course, in the context of
 11       each of these groups of stations being intensely local
 12       and connected to their community in a truly local way.
 13       So the elements of differentiation that we are talking
 14       about have to do with some of the acquired programming.
 15  825                  We believe that the format for
 16       CITY-TV and CKVU to remain movie-based is sound and
 17       remains as valid as ever, in the same way that the
 18       NewNet stations, along with the NewVI in Victoria, to
 19       concentrate on more action/adventure programming, some
 20       science fiction programming and to deal with their
 21       generally smaller markets in a way that is appropriate
 22       to those markets.  The synergies that you mention
 23       continue.
 24  826                  What we have to deal with is that set
 25       against these decisions on format and specialization


  1       and differentiation are the new revenue implications
  2       and the new cost implications.  But those pressures do
  3       not suggest to us that we should change course from the
  4       path that we have set these stations upon.
  5  827                  COMMISSIONER WYLIE:  Of course if we
  6       go to the TV Policy we can find a paragraph, which you
  7       can find as quickly as I can, where the Commission
  8       indeed -- I think it was paragraph 15 -- encouraged
  9       that type of distinctiveness especially among the
 10       stations that were not in the largest multi-group.
 11  828                  So the distinguishing factors is, as
 12       I described, it is also -- if we go back to those
 13       pages 19 and 20 -- news and local programming.
 14  829                  Of course, there is no need to go
 15       through all the places in your group supplementary
 16       brief where the words "local", "intensely local
 17       orientation", et cetera, is raised -- and "local
 18       reflection" and "fiercely local" and "commitment to
 19       local reflection" and that is what makes you different
 20       as well.
 21  830                  So then what would make you different
 22       would be the strategies I just described for NewNet,
 23       CKVU, CITY and this "intensely local".
 24  831                  But at page 28 this morning, of your
 25       special brief, I pointed out that you had that section


  1       called "CHUM's Emergence as a National Player".
  2  832                  With some of the proposals you are
  3       making about reducing as a strategic measure, and the
  4       only one you see to react to the new realities in
  5       Toronto, I heard you say this morning, a reduction in
  6       local, do you not risk becoming a national player like
  7       the others with less clout to compete?
  8  833                  What are you going to put in those
  9       hours if you were to reduce them to the level that you
 10       have suggested you may need as flexibility?
 11  834                  How will you retain your
 12       distinctiveness, since it is based on local reflection
 13       and those two strategies?
 14  835                  MR. SWITZER:  Vice-Chair Wylie, you
 15       hit on the point exactly.  Our differentiation is our
 16       distinctiveness.  Our localness is what makes us
 17       special.
 18  836                  What we are talking about is a review
 19       of all the factors in front of us.  It has to do with
 20       not only hours of production but the types of programs
 21       we may choose to produce, whether, as Peter touched on
 22       this morning, some of them may involve regional
 23       productions, matters of how many episodes, how we do
 24       them, how we crew them, how we staff them, budget
 25       levels.  It is a complicated mix.  We have many factors


  1       in front of us.
  2  837                  Yes, hours are important, but it is
  3       certainly -- to be here today and talk about the
  4       flexibility that we require in a very open and complete
  5       discussion doesn't mean that it is our intent certainly
  6       to do that in any quick knee-jerk reaction.
  7  838                  We are talking about flexibility to
  8       run our businesses so that these stations can continue
  9       to do the wonderful things they are doing and this is
 10       very important.
 11  839                  COMMISSIONER WYLIE:  But if you were
 12       the regulator -- you don't look very interested --
 13       --- Laughter / Rires
 14  840                  COMMISSIONER WYLIE:  -- of
 15       conventional television stations, wouldn't "hours" ring
 16       a bell and say:  They now say this is their strategy or
 17       what it is they provide in the broadcasting system and
 18       it is intensely local and this is how many hours we do.
 19  841                  In some cases, from what I gather,
 20       you are way above the commitment and now you are
 21       committing to do half or even less -- Commissioner
 22       Langford will go into that in more detail later.
 23  842                  Then you ask yourselves:  Well, what
 24       is going to be the strategy and what does this
 25       medium-sized group of conventional stations look like


  1       once half of this programming disappears?  Is it still
  2       going to be what you like to call yourselves,
  3       alternative TV based on fiercely local anchoring?
  4  843                  MR. SWITZER:  This is at the heart of
  5       the matter, Vice-Chair Wylie.
  6  844                  COMMISSIONER WYLIE:  It is.
  7  845                  Applicants for renewal or new
  8       licences can tell us "This is what I am prepared to
  9       promise you, but I will do way more."
 10  846                  For a seven year licence it is not
 11       easy for us to really assess what it is we have before
 12       us and what your new role will be if it comes to pass
 13       that it is lowered to the level that you are prepared
 14       to commit to as opposed to what you hope you will
 15       continue to --
 16  847                  MR. SWITZER:  We understand.  We are
 17       here to make commitments and to be very specific.
 18  848                  Let's take an example of the
 19       performance, the commitments and the results, at
 20       CITY-TV to cite one example over the past seven years.
 21  849                  Our commitments in total are at a
 22       little over 13 hours, 13 and change per week.  Our
 23       production has flexed over the past seven years, both
 24       in news and in non-news programming.  The news has
 25       grown, has shrunk, continues to grow, as has the


  1       non-news programming.
  2  850                  Today, not because we have to but
  3       because we have chosen to, we have grown the local
  4       production slate at CITY-TV to approximately 45 hours
  5       per week.
  6  851                  The commitments that we are making as
  7       part of our need for flexibility in fact are at a
  8       35 per cent level higher than the 13 hours and change
  9       that we currently live with.
 10  852                  We are not suggesting we are going to
 11       produce at that level immediately, but in the same way
 12       our production has flexed, with our ability, with our
 13       competition, with the business climate, we believe that
 14       a 35 per cent increase in the case of CITY-TV versus
 15       our current conditions is an acceptable and fair level
 16       to discuss with you today, alongside the matter of
 17       priority programming.
 18  853                  We have been torn.  We are competing
 19       with priorities set in policy where both priority
 20       programming is recognized as something important that
 21       we should grow and want to grow and are growing, set
 22       against the specific acknowledgement that mid-station
 23       groups are expected or have the ability to do
 24       distinctive and innovative local programming, which
 25       is sometimes at some tension with the priority of


  1       priority programming.
  2  854                  We have come to this table with
  3       specific priority programming commitments on CITY-TV
  4       where we now have none, and as a medium-sized player
  5       under current policy would have no obligation to do so.
  6  855                  We are torn between finding the right
  7       balance of reflecting our community, continuing to do
  8       this wonderful innovative programming -- which we hope
  9       we will get to and be able to talk about with some of
 10       those producers -- against the business reality we are
 11       facing in a way that is not negative, but in a way that
 12       addresses the reality that we are facing in a way that
 13       we think is fair and balanced in our solution.
 14  856                  COMMISSIONER WYLIE:  We will get into
 15       the details of priority programming somewhat later.
 16  857                  What I am looking at now is what is
 17       it you are telling us?  You may actually have a very
 18       different programming strategy because of the realities
 19       of the new licence in Toronto.
 20  858                  I am looking at a letter as recent as
 21       January 18, 2002, a deficiency letter.  At page 3 I
 22       quote you where you say:
 23                              "With no reasonable prospects
 24                              for turnaround, CHUM would be
 25                              forced to radically revisit


  1                              NewNet's structure and approach
  2                              and in particular its local
  3                              programming strategy."
  4                              (As read)
  5  859                  At page 5 of the same letter, under
  6       the response No. 2, the third paragraph on that page,
  7       you add:
  8                              "Moreover, the very real
  9                              potential exists that should
 10                              more than one station be
 11                              licensed in the GTA significant
 12                              commitments in areas other than
 13                              local programming may also have
 14                              to be revisited.  These could
 15                              include, but are not limited to,
 16                              for example, descriptive video
 17                              and/or script and concept
 18                              development."  (As read)
 19  860                  Again put yourselves in the shoes of
 20       the regulator and you read this and you say "What is
 21       the message here?  With a new station in Toronto we are
 22       reducing our local programming.  We may actually
 23       restructure our whole NewNet stations and, in fact, we
 24       may make other changes that we don't know quite what
 25       they are or we are not about to tell you and we may


  1       look very different shortly."  Mr. Craig probably feels
  2       quite powerful by now.
  3  861                  If we risk having something that is
  4       going to be entirely different -- what do we have to
  5       test what is the number of hours of local, number of
  6       hours of priority programming?  We can't tell you you
  7       are going to remain science fiction.  We have some
  8       tests to know what it is we are dealing with and
  9       whether it makes sense in the circumstances.
 10  862                  So in terms of programming strategy
 11       overall, how much can you cut back on local, for
 12       example, and still be alternative and distinct?
 13  863                  MR. SWITZER:  Mr. Miller wants to
 14       touch on some of our history I know, but let me restate
 15       and absolutely clarify for the record some of the
 16       things you touched upon.
 17  864                  In this renewal document we have not
 18       in any way altered many of the things that you
 19       suggested.  Our commitments to descriptive video, to
 20       closed captioning, to script and concept development,
 21       to various transfer benefits that are in place, to
 22       specific promises that were made as part of the
 23       application in Victoria, the promises that were made as
 24       part of a transfer of CKVU, those all remain absolutely
 25       intact and are committed as minimums.


  1  865                  The area we do seek flexibility is
  2       one of the few areas that we do have to work with, and
  3       that is with our approach to local which has flexed
  4       over time.
  5  866                  Peter, can you continue?
  6  867                  MR. MILLER:  Thank you.
  7  868                  I want to address this in three
  8       parts.  I want to talk about the last seven-year
  9       license term and give you some examples of what has
 10       happened there.
 11  869                  I want to talk about the
 12       circumstances in which we filed the January letter.
 13  870                  I want to talk about what we did over
 14       the last four weeks to look long and hard as to what we
 15       needed to come to you today with, taking into account
 16       all of the factors, Madam Vice-Chair, that you have
 17       raised.
 18  871                  First of all, a bit of history.
 19       I hope we get into this with each of our stations
 20       later on.
 21  872                  Jay's point on CITY-TV, our
 22       commitment to local news in this last license term for
 23       CITY-TV was 13 hours and 36 minutes.  The first year of
 24       this license term, 1995-1996, we did 14 hours and
 25       30 minutes, okay, just slightly above the commitment.


  1       We were able to grow that to the point that in
  2       1998-1999 we were doing 23 hours, 45 minutes.  In the
  3       last two years that came down by an hour.
  4  873                  In other words, you gave us the
  5       flexibility to grow.  We are saying you have to give
  6       the flexibility to cut back.
  7  874                  CITY-TV was no less a local station
  8       in 1995-1996 with 14 hours and 30 minutes of local news
  9       as it is today with 22 hours and 43 minutes.  We would
 10       submit that if we went to 18 hours, as we proposed, it
 11       would still be no less a local station.
 12  875                  COMMISSIONER WYLIE:  Yes, but that is
 13       a long time ago.  There are a lot of things that have
 14       happened since.  I was talking more about the NewNet
 15       stations.
 16  876                  MR. MILLER:  Well, if you would allow
 17       me to finish, Madam Vice-Chair.
 18  877                  The reason I think the history is
 19       relevant is because we are coming before you today
 20       again to ask for a seven-year license.  What we are
 21       proposing for, say, CITY-TV, is that we are going to
 22       raise our commitment from 13 hours and 36 minutes to
 23       18 hours of local programming a week.  That is two and
 24       a half hours more than CTV, two and a half hours more
 25       than Global, three and a half more hours than Toronto


  1       One.  We are committing to that for the next seven
  2       years.  That, in our view, is a substantial commitment.
  3  878                  But to why we did this, both in terms
  4       of CITY and NewNet, why we came to these numbers, I can
  5       tell you that when I and our team wrote that
  6       January 18th letter, we told you about what we thought
  7       was the worst-case scenario.  We never thought we would
  8       be facing it.
  9  879                  But we think we did our homework then
 10       and we have done our homework since, but we also, as
 11       Jay will say, looked again to make the final decisions
 12       as to where we were going to seek flexibility and we
 13       felt, given your priorities as a Commission, we
 14       couldn't, for example, come to you and say "We are
 15       going to change our priority programming plans.  We are
 16       not going to do descriptive video."  So we came to the
 17       conclusion that the only thing that we could look at
 18       is local.
 19  880                  Now let me get to the business
 20       aspect.
 21  881                  When it comes down to it, we could
 22       cut an hour here and there and that might save a little
 23       bit of money, but the reason we have asked for these
 24       levels is at the end of the day if we had to
 25       rationalize to the extent of significant savings we


  1       might have to cut crews.
  2  882                  All of our stations are fully
  3       staffed.  We have at least two crews doing both morning
  4       and afternoon/evening.  It may be that over some period
  5       of time, if worst came to worst, we would have to cut
  6       crews.  That is what all those commitments relate to.
  7       As we get into them at the station level, that is why
  8       we have asked for those numbers.
  9  883                  How can we remain local while cutting
 10       crews?  Well, the answer will be regional, just as the
 11       PL London, WI Windsor, NX Wingham trio of stations take
 12       advantages of some common regional programming,
 13       ultimately we might have to do more of that with
 14       NewNet.
 15  884                  So we looked at the numbers in terms
 16       of how we would have to get there if we had to get
 17       there.  We looked at them from a business point of
 18       view, we looked at them from the perspective what our
 19       competitors do, and we said "Okay, over the next seven
 20       years what is the worst-case scenario?"
 21  885                  That is what we had to give you, the
 22       absolute worst-case because, as you pointed out Madam
 23       Vice-Chair, that is our minimum commitment.
 24  886                  But what we have also shown to you
 25       over the last license term is where we can we have


  1       exceeded those minimum commitments and we will do it
  2       again over the next license term if we can.
  3  887                  COMMISSIONER WYLIE:  I said this
  4       morning -- and other panel members will go into it in
  5       more details about local.  I am trying to just look at
  6       the overall strategy.
  7  888                  If I look at page 6 of your
  8       supplementary brief, you are talking here about CFPL,
  9       CKNX and CHWI in the middle of the page, but I suspect
 10       that is true for all the NewNet stations, where you
 11       say, for example:
 12                              "Similar to the NewRO this
 13                              station carries certain programs
 14                              common to the NewVR, yet hold a
 15                              strong local identity.  Each
 16                              maintains a separate character
 17                              through their own news
 18                              information programming and
 19                              station branding."  (As read)
 20  889                  In your application at page 32 you
 21       specify that:
 22                              "Each station operates
 23                              autonomously with separate
 24                              management."  (As read)
 25  890                  I am wondering if this approach would


  1       be maintained or would still be necessary in your
  2       worst-case scenario.
  3  891                  You are talking about cutting crews.
  4       Would we have now a group of NewNet stations where
  5       there would not be autonomous separate management and
  6       the stations would not have a local identity or a
  7       separate character because of the extremely lowered
  8       level of -- I retract "extremely" -- a lower level of
  9       local programming which allows you to make these
 10       statements that despite the fact that they share
 11       programming they are separate and distinct.
 12  892                  How much is needed for them to remain
 13       that way and not be all blended?
 14  893                  MR. SWITZER:  Madam Vice-Chair, I
 15       cannot conceive of a situation where we would not
 16       maintain independent managements.  It is what these
 17       stations -- we have invested 10s of millions of
 18       dollars.
 19  894                  While some of our competitors have,
 20       frankly, gotten rid of general managers, gotten rid of
 21       local program managers and centralized everything, we
 22       have hired dozens and dozens of people across southwest
 23       Ontario, in Ottawa, in Victoria, we are in the process
 24       in Vancouver.  Our whole raison d'être is to have those
 25       local teams activity reflect the communities at a time,


  1       frankly, when our competitors are pulling back locally
  2       and doing things more centralized.
  3  895                  I believe that will be an advantage
  4       for us for a long time to come.  It does not change the
  5       plan to create a series of strong, local, independent
  6       stations with independent management that are, of
  7       course, connected with some acquired programming, with
  8       some sales and marketing leverage, with some back
  9       office savings functions.
 10  896                  Certainly we can always do a better
 11       job and, yes, we are looking at back office shared
 12       matters of human resources and finance and so on, but
 13       they must remain separate and independent and you will
 14       see that when you speak to each of these teams later
 15       today and tomorrow.
 16  897                  COMMISSIONER WYLIE:  And if you were
 17       the regulator again, Mr. Switzer, what would you use as
 18       mechanism or a measure of some sort to ensure that it
 19       will remain as you describe, autonomous, separate,
 20       local?
 21  898                  What is possible for us as a
 22       mechanism to ensure that that is what is going to occur
 23       and you will remain an alternative station?  What is
 24       the mechanism, other than hours of local programming --
 25  899                  MR. SWITZER:  I would certainly --


  1  900                  COMMISSIONER WYLIE:  -- a minimum
  2       number of hours of local programming?
  3  901                  Is there any other mechanism other
  4       than what you are telling us today.  Suppose you want
  5       something to measure it three years down the line:  Are
  6       they what they said they would be?  What is another
  7       measurement, or is that the only one?
  8  902                  MR. SWITZER:  I can understand that
  9       those kinds of tests are some of the tools you have to
 10       work with to give you comfort.  I would certainly do my
 11       best to argue that in this case it is not required and
 12       not appropriate in at least one situation in Canada.
 13  903                  We live with -- I'm not sure if it is
 14       a commitment or an expectation or a condition, but we
 15       certainly treat it as a condition of license, and that
 16       has to do with separate management, program management
 17       and separate news management in our Vancouver and
 18       Victoria stations.  That is part of the license, that
 19       is frankly --
 20  904                  COMMISSIONER WYLIE:  It is not a very
 21       high price to pay to have two stations in the same
 22       market, is it?
 23  905                  MR. SWITZER:  No.  We are fortunate
 24       to have the privilege of operating two stations in that
 25       market.


  1  906                  I am trying to point to an example
  2       where in the past the Commission has come up with some
  3       language that was perfectly acceptable and appropriate
  4       for that situation.
  5  907                  COMMISSIONER WYLIE:  Are you
  6       suggesting that that would be a good idea as between
  7       your stations?
  8  908                  MR. MILLER:  No, Madam Vice-Chair,
  9       and for a very simple reason.  We think track record is
 10       important.  We think actually it is probably more
 11       important than conditions of license.
 12  909                  We pride ourselves in exceeding our
 13       conditions of license.  I'm not saying we make don't
 14       make mistakes, we occasionally do, but we think track
 15       record is important.
 16  910                  COMMISSIONER WYLIE:  Yes, and that is
 17       why Mr. Miller's backtrack is a problem for us as
 18       regulators in the sense that if you said you would do
 19       "X" hours and you are now saying I want the flexibility
 20       to do half as much -- or whatever Commissioner Langford
 21       will discuss with you -- also creates a concern.
 22  911                  MR. MILLER:  But that is not what we
 23       are saying.
 24  912                  COMMISSIONER WYLIE:  Because normally
 25       you do what you said you will.


  1  913                  MR. MILLER:  Normally we exceed what
  2       we say we would do.
  3  914                  Again, we are not saying we are going
  4       backwards in commitments of CITY-TV, we are saying we
  5       need the flexibility, particularly on the NewNet
  6       stations, consistent with your policy, consistent with
  7       what you have given our competitors.
  8  915                  You put me in an interesting position
  9       when you asked me what we would have done if we were
 10       the regulators.  I guess we wouldn't have put ourselves
 11       in this situation if we were the regulators, is the
 12       honest answer.  But we are in this position now and we
 13       are trying to deal with it as responsibly as we can.
 14       If you have better ideas for us we are certainly open.
 15  916                  But we have read your policy many,
 16       many, many times, we have a track record of exceeding
 17       our commitments to our local communities.  What we are
 18       saying is, the way we do that in the future will need
 19       to be different.
 20  917                  As you get into the specific
 21       discussions with our GMs you will see how we can do
 22       that very creatively, how we can still serve our local
 23       communities with less "hours", by your definition, but
 24       as much local commitment as we continue to provide
 25       today.  That will be an important discussion.


  1  918                  I guess in my view the best example
  2       of that is our new PL/WI/NX, three stations who really
  3       do a fabulous job serving that locality, both on a
  4       strictly local and a regional basis.  Again, perhaps in
  5       the future that will be more of a model for the entire
  6       NewNet across Ontario.  But that combination of serving
  7       local and regional to make ourselves distinct.
  8  919                  Also it is our other programming that
  9       makes us distinct as well.  We will remain distinct.
 10  920                  COMMISSIONER WYLIE:  Yes.  So what I
 11       gather, then, is your strategy for the NewNet and for
 12       CKVU/CITY will remain the same including the intensely
 13       local approach?
 14  921                  MR. SWITZER:  Absolutely, of course.
 15  922                  COMMISSIONER WYLIE:  I am intrigued
 16       by a comment you made at page 34 of your supplementary
 17       brief where you say that, quote:
 18                              "It is critical that a stable
 19                              regulatory environment exists in
 20                              order for CHUM to continue to
 21                              maintain its unique position in
 22                              the system."  (As read)
 23  923                  What is intended by that?  Because a
 24       stable regulatory environment wouldn't see you coming
 25       back here with, I don't know how many more specialty


  1       services and two more stations in the second largest
  2       market.  That is not very stable, but it seems to have
  3       worked well.
  4  924                  MR. MILLER:  I think in particular
  5       that was meant to refer to your TV Policy implemented
  6       in 1999.  We think it is a good policy, we think you
  7       should stick to that policy and we have tried to make
  8       sure that we have stuck to that policy in what we filed
  9       with you.
 10  925                  COMMISSIONER WYLIE:  But you are
 11       prepared, I heard you say, to revisit how you do things
 12       without being outside of your broadcasting mission,
 13       even if there are changes.  Some of them are to your
 14       advantage, some of them are not.
 15  926                  MR. MILLER:  As we, I think,
 16       indicated in our opening statement, that are various
 17       parameters in our world, the market reality, the
 18       economic reality and the regulatory climate, which is
 19       an important but not the only important factor in our
 20       lives.
 21  927                  So what we are simply signalling is
 22       within the regulatory framework, yes, we want that
 23       flexibility.
 24  928                  COMMISSIONER WYLIE:  Some of the
 25       broadcasters, including CHUM Television, would not be


  1       where they are if the TV Policy had been followed
  2       verbatim.  You would have only one station in
  3       Vancouver.  That would be stability, but it would not
  4       be so positive for CHUM, would it?
  5  929                  MR. MILLER:  Again, sometimes there
  6       are exceptions and if those exceptions are consistently
  7       applied then they become a defacto new policy.
  8  930                  So you are right, Madam Vice-Chair,
  9       we are not suggesting that everything is stagnant.  Our
 10       business evolves, and your policies evolve and we
 11       totally respect that.
 12  931                  COMMISSIONER WYLIE:  So with regard,
 13       then, to local programming you will have more
 14       discussion with Commissioner Langford when each station
 15       is looked at.
 16  932                  One more thing I want to discuss with
 17       you.  As far as I understand it we discussed to date
 18       the advantages that may flow to you from international
 19       activities.  I think I understood you to say you were
 20       selling mostly your expertise not your programming so
 21       it doesn't really come into the picture very much.
 22  933                  We discussed how you allocate costs
 23       and revenues related to programming as between your
 24       conventional stations and that is in your financial
 25       assumptions.


  1  934                  The Chairman also discussed with you
  2       how you allocate as between -- how you handle as
  3       between specialties and conventional, related ones, and
  4       you cited back the 1993 PN to me.
  5  935                  Why has this situation with
  6       sublicensing, when you sublicense programs, how do you
  7       handle that in your financial projections?
  8  936                  For example, the right to "Lexx".  Do
  9       you buy programming domestic and foreign that you can
 10       then sublicense?
 11  937                  What is the state of your
 12       relationship with Craig which you alluded to with
 13       regard to sublicensing?
 14  938                  So two questions:  What is it,
 15       especially with Craig?
 16  939                  How is it handled or reflected
 17       financially, the money you get back from sublicensing?
 18  940                  MR. SWITZER:  Madam Vice-Chair, I
 19       will take you through it to the best of my ability.
 20       Let's take it category-by-category.
 21  941                  For non-Canadian programs that
 22       are sublicensed, essentially or effectively we have
 23       two sublicense ongoing clients in Canada, the Craigs at
 24       the moment and our friends at CTV in the Maritimes.
 25       They pay license fees and those license fees are


  1       deducted from the total price of the acquisition and
  2       the remainder is shared between the CHUM stations
  3       that use it.
  4  942                  As to Canadian-produced programs that
  5       we produce ourselves, as I said earlier, sublicensing
  6       to third parties does not come out of the cost of those
  7       programs.  Sublicensing or sharing inside the CHUM
  8       family does come out, and we believe that is in
  9       compliance with 1993-93.
 10  943                  As to acquired Canadian programs
 11       such as "Lexx" that we do not produce but that we
 12       commission, again we treat it as if it were a
 13       non-Canadian program in that the full license fees
 14       that we receive from the Craigs, or from others, come
 15       off our national license fee and we are left with
 16       expensing the balance between the CHUM stations that
 17       are left with it.
 18  944                  You asked about our relationship with
 19       the Craigs.  Despite some small tensions in Ontario
 20       certainly the relationship in Alberta and Manitoba is
 21       constructive and ongoing and we see no reason for a
 22       change in that relationship in the next year or two,
 23       certainly in Alberta and Manitoba.
 24  945                  COMMISSIONER WYLIE:  I was trying to
 25       figure out the meaning of the footnote at page 29 of


  1       your supplementary brief.
  2  946                  MR. MILLER:  The reference there,
  3       Madam Vice-Chair, if I recall correctly, simply was to
  4       the point that some of the shows that we make available
  5       in Alberta are not currently being exhibited.  I think
  6       we address that, if I recall correctly, in our response
  7       back to you on our reply to interventions where we gave
  8       some examples of shows, Canadian shows that we have
  9       made available to Craig Broadcasting in Alberta and
 10       they are not carried and it is understandable now that
 11       the Craigs are getting programming also from CanWest
 12       from CHEK stream.  Obviously they don't have as much
 13       time available so they are taking fewer of our shows.
 14  947                  COMMISSIONER WYLIE:  Less.  Fewer.
 15       But you still have a relationship with them --
 16  948                  MR. SWITZER:  Absolutely.
 17  949                  COMMISSIONER WYLIE:  -- a
 18       sublicensing relationship?
 19  950                  MR. SWITZER:  Absolutely.
 20  951                  COMMISSIONER WYLIE:  How do you
 21       expect that to be affected by the recent decision that
 22       is the cause of your angst?
 23  952                  MR. SWITZER:  Small amounts of
 24       tension.
 25  953                  We must plan for an eventual end to


  1       that relationship in Alberta and Manitoba, not
  2       necessarily at our doing, but we would expect and have
  3       reason to believe that once Craig gets up and running
  4       and does his own larger national buying there will just
  5       be less interests and less shelf space and less demand.
  6  954                  Because the more -- perhaps I'm
  7       speculating here, but one might suggest or an industry
  8       analyst might suggest that the more Craig takes from
  9       CanWest and from CHUM in Alberta, the less shelf space
 10       and buying power there is to support presumably their
 11       important Toronto station.
 12  955                  It is not for me certainly to be
 13       specific.  I don't know what is in their mind, but we
 14       must plan for one more year of traditional syndication
 15       and sublicensing to them.
 16  956                  We will continue to make programs
 17       available to them.  We are getting signals that they
 18       will have interest in those programs for next year and
 19       probably not for the year after.  We are making our
 20       plans accordingly.
 21  957                  COMMISSIONER WYLIE:  It is not clear
 22       to me whether that loss, so to speak, has been
 23       expressly factored into your projections when you were
 24       discussing with the Chairman the effect of the
 25       licensing of Toronto One.


  1  958                  MR. SWITZER:  It mirrors the
  2       assumptions we have made.
  3  959                  COMMISSIONER WYLIE:  Now, priority
  4       programming, in CIVI, in the licensing of CIVI you have
  5       accepted as a condition of license eight hours of
  6       priority programming.  In the transfer of CKVU you also
  7       will carry eight hours of priority programming.
  8  960                  Are you accepting this as a condition
  9       of license?
 10  961                  MR. MILLER:  Yes.
 11  962                  COMMISSIONER WYLIE:  My understanding
 12       as well is that they will be eight different hours?
 13  963                  MR. MILLER:  That was the safeguard
 14       we committed to for CKVU and CIVI.
 15  964                  COMMISSIONER WYLIE:  That is also
 16       acceptable to you as a condition of license going
 17       forward?
 18  965                  MR. MILLER:  Yes.
 19  966                  COMMISSIONER WYLIE:  Because at
 20       transfer, as you know, we weren't in a position to do
 21       other than to tell you we would review this at renewal.
 22  967                  Then when CIVI was licensed you also
 23       committed to eight hours of priority programming on
 24       NewNet, on the NewNet stations.
 25  968                  MR. MILLER:  Yes.


  1  969                  COMMISSIONER WYLIE:  You actually
  2       applied and that was done through Decision 2001-519.
  3  970                  Now, will that programming on the
  4       NewNet stations be exactly the same as CIVI, consistent
  5       with the NewNet programming strategy?
  6  971                  MR. SWITZER:  It is expected that it
  7       will be, but it may not be.  In general there are great
  8       similarities, both on the Canadian acquired and some of
  9       the foreign acquired.  We have not drilled down to that
 10       level of specificity in terms of exactly a perfect
 11       match on that priority programming.
 12  972                  COMMISSIONER WYLIE:  But would you be
 13       prepared to commit that it won't be the same as on CITY
 14       for the NewNet stations?
 15  973                  MR. SWITZER:  Based on our filings
 16       for CITY-TV in this renewal document, yes, we would.
 17  974                  COMMISSIONER WYLIE:  Would you accept
 18       that as a condition of license?
 19  975                  MR. SWITZER:  Yes, we would.
 20  976                  COMMISSIONER WYLIE:  That the NewNet
 21       stations not have the same priority programming as
 22       CITY?
 23  977                  MR. MILLER:  With the same language
 24       as you had in the safeguards for CIVI and CKVU.
 25  978                  COMMISSIONER WYLIE:  What is your


  1       view of CHUM station potential reach in the manner in
  2       which the Commission calculates that for the purpose of
  3       the TV Policy?
  4  979                  At page 9 of your presentation you
  5       say that you serve roughly 40 per cent to over 50 per
  6       cent of English-language households.
  7  980                  At page 16 you certainly emphasize
  8       that you are not a large multi-station group.
  9  981                  But what is the level below 70 per
 10       cent that you consider your are at in that regard?
 11  982                  MR. MILLER:  We actually spent a
 12       little time on this late last week and it wasn't
 13       something that we had looked at before because I think
 14       where we and the staff analysis is in agreement is that
 15       we are not at the 70 per cent threshold.
 16  983                  But while I understand the staff
 17       analysis puts us at 67 per cent reach of English
 18       households, our analysis puts us at 51.2 per cent
 19       reach.
 20  984                  I think we have done it the same way.
 21       I was hoping perhaps at some stage the staff and we can
 22       have some discussion to figure out if we have just been
 23       looking at it differently and try to reconcile it.
 24  985                  But certainly our numbers -- and I
 25       can break that down for you.  In Ontario we find


  1       ourselves with 81 per cent reach, in B.C. we find
  2       ourselves with just shy of 70 per cent reach.  When we
  3       bring that together we find ourselves overall in Canada
  4       with 51.2 per cent reach.
  5  986                  So we are lower than the staff
  6       numbers and we haven't had the chance to figure our
  7       exactly what the reason for that discrepancy is.
  8  987                  COMMISSIONER WYLIE:  I perhaps can
  9       read to you what I am told is the way it is calculated"
 10                              "Potential reach is based on the
 11                              assumption that if one survey
 12                              respondent in a cell -- that is
 13                              the smallest geographically
 14                              defined are in a BBM audience
 15                              survey -- reports tuning to a
 16                              particular station then the
 17                              entire population of that cell
 18                              is counted as potential
 19                              audience."  (As read)
 20  988                  So that is how we do it.  But I would
 21       certainly be foolish to start arguing with you about
 22       how that is done, but I can tell you that our numbers
 23       or our assumptions are 67 per cent.
 24  989                  MR. MILLER:  Daphne might want to
 25       add, but I am aware of that assumption and we tried to


  1       do it the same way, but we still came up with very
  2       different numbers and it is something that obviously we
  3       should try to resolve because I think we are dealing
  4       with the same BBM numbers, if I recall correctly.
  5  990                  Daphne.
  6  991                  MS HUBBLE:  Yes.  In fact, that
  7       methodology is, just to be exact, based on a 1 per cent
  8       share I believe.  So in any county where CITY-TV would
  9       have 1 per cent or more share of viewing, that county
 10       would be included.
 11  992                  We have done that analysis as well
 12       and come to a total share of 60 per cent across the
 13       country.
 14  993                  I think where we may differ is in
 15       counties outside of Ontario, for example, for CITY-TV.
 16       So this is something that we do have to reconcile.
 17  994                  COMMISSIONER WYLIE:  But what I was
 18       telling you was that the assumption was if one survey
 19       respondent in a cell -- I heard you say 1 per cent,
 20       which --
 21  995                  MS HUBBLE:  That could be the
 22       difference.
 23  996                  COMMISSIONER WYLIE:  -- is entirely
 24       different, is it not?
 25  997                  MS HUBBLE:  Yes.  That could be the


  1       difference.
  2  998                  COMMISSIONER WYLIE:  But anyway,
  3       those are our numbers.
  4  999                  Which leads me to ask whether you
  5       have further plans for expansion.
  6  1000                 THE CHAIRPERSON:  You might have to
  7       get up to 120 per cent by our reckoning.
  8       --- Laughter / Rires
  9  1001                 MR. SWITZER:  Madam Vice-Chair, we
 10       are here today to --
 11  1002                 COMMISSIONER WYLIE:  We are talking
 12       about priority programming and of course the
 13       requirement for a multi-station group and how that is
 14       calculated and the emphasis that you are being very
 15       generous in doing what you don't have to do, but we
 16       think you are only 3 per cent from having to do it.
 17       --- Laughter / Rires
 18  1003                 MR. MILLER:  It is an important 3 per
 19       cent, if indeed it is 3 per cent.
 20  1004                 MR. SHERRATT:  We will be back for a
 21       reduction in power.
 22       --- Laughter / Rires
 23  1005                 COMMISSIONER WYLIE:  Reduce the
 24       antenna height or perhaps bite the bullet and expand
 25       beyond 70 per cent.


  1  1006                 MS HUBBLE:  Could I just add a
  2       comment on the methodology being used, whether it is a
  3       1 per cent share or one respondent in a county.  That
  4       methodology is something that we have felt
  5       overestimates what our coverage is.
  6  1007                 Let me give you an example.  There
  7       are certain areas, for example Kingston, where we do
  8       get some viewership, however you take the entire county
  9       of Kingston, not everybody can get CITY-TV via cable
 10       there.  So my understanding is that we are on a fairly
 11       high channel position there and that we do not have
 12       cable coverage throughout the county.  So to count
 13       everybody within that county as being part of our
 14       coverage area would be an overestimation.
 15  1008                 In fact, we have tried a second
 16       methodology using Media Stats data where we get an
 17       actual count of subscribers in Ontario and an actual
 18       count of subscribers to direct-to-home, again from
 19       Media Stats.  There we have to make some estimates
 20       because we can only get eastern Canada and western
 21       Canada.  But we use BBM data in terms of being able to
 22       estimate how many households there are in Ontario with
 23       direct-to-home.
 24  1009                 So we feel very confident we have
 25       some good numbers on exactly how many homes can receive


  1       CITY-TV via cable or via a DTH.
  2  1010                 Then probably the more difficult part
  3       is the off-air.  Again we have come up with a
  4       methodology to get a little bit better estimate of how
  5       many people are reaching us off-air.  So again, we are
  6       coming out with a lower number using that methodology
  7       and we are confident that those numbers probably better
  8       reflect our true coverage.
  9  1011                 COMMISSIONER WYLIE:  Of course we
 10       will never get very far unless we agree as to what the
 11       assumptions are for coming to the calculation of 70 per
 12       cent.  But of course, if you had come in with eight
 13       hours of priority programming on CITY we wouldn't have
 14       had to have this difficult conversation about how you
 15       calculate it, which leads me to ask you:  Why not?
 16  1012                 First let me ask you:  You have in
 17       your 2001 schedules, if we look at the programming that
 18       is priority, we calculate seven hours on CITY.  That is
 19       in 2001.  CKVU 9.5 hours and NewNet stations eight to
 20       nine hours.
 21  1013                 What is the situation in 2002?
 22  1014                 MR. MILLER:  Those counts are from
 23       our program schedules are they, Madam Vice-Chair?
 24  1015                 COMMISSIONER WYLIE:  The current
 25       program schedule.


  1  1016                 MR. MILLER:  No, I was asking you
  2       where your counts were from.
  3  1017                 COMMISSIONER WYLIE:  I believe it is
  4       from the schedules that were 2001 and filed with the
  5       application.
  6  1018                 MR. SWITZER:  Let's perhaps start
  7       with CITY-TV and look at the current -- or I should say
  8       the 2001-2002 schedule.
  9  1019                 The current priority programming in
 10       that schedule is approximately five hours and it is
 11       made up of two one-hour Canadian dramas.  In the fall
 12       schedule they are the Canadian drama "Relic Hunter" and
 13       the Canadian drama "Lexx", as well as at least one
 14       Canadian movie in prime per week.  That is four hours.
 15  1020                 There are bonuses some weeks and
 16       there are bonuses in some cases, depending on the age
 17       of the movie and the age of the shows.  In addition,
 18       the only other priority program that we believe is
 19       priority according to current regs is the Star! TV
 20       program which is a special program, magazine
 21       exclusively supporting and glamorizing Canadian stars,
 22       Canadian television and Canadian film.
 23  1021                 Our other very innovative and very
 24       distinctive local magazine programs -- and this is
 25       really the crux of this question -- do not qualify we


  1       believe, and we believe that is unfortunate -- do not
  2       qualify under your current definitions of priority
  3       programming, even though we believe these programs are
  4       making a huge contribution in the case of Movie
  5       Television or Media Television in terms of advancing
  6       media literacy and all of the good things that these
  7       shows are -- they do not qualify.
  8  1022                 So our base number before bonuses in
  9       a typical week on CITY-TV this year is 4.5 hours.  With
 10       various bonuses it averages our to a total of five
 11       hours.  The promises we have put on the table are six
 12       and then, beginning three years later, seven.
 13  1023                 COMMISSIONER WYLIE:  They do not
 14       qualify because they are not -- they are magazine-style
 15       but they don't fall within the definition of what is a
 16       priority program in that category?
 17  1024                 MR. SWITZER:  It is a very hot topic
 18       around our shop and we would like to talk to you about
 19       that for hours, but we are living with the regulations
 20       and policy without in any way stretching, and according
 21       to our read of those rules, even though these shows
 22       provide community access and discuss in great depth and
 23       detail important matters of Canadian culture, Canadian
 24       music, Canadian art, Canadian architecture, Canadian
 25       films, Canadian television, they do not qualify under


  1       priority programming.  That is the fundamental reason
  2       for the gap between six hours and eight hours, it is
  3       these many hours of magazine programs which for us
  4       contribute to the contribution of the CITY-TV station.
  5  1025                 COMMISSIONER WYLIE:  And don't fall
  6       within the definition --
  7  1026                 MR. SWITZER:  Correct.
  8  1027                 COMMISSIONER WYLIE:  -- in the
  9       definition of the categories as Canadian
 10       entertainment magazine programs as defined with the
 11       percentages and whatever the definition is, and can't
 12       be tweaked to fit?
 13  1028                 MR. SWITZER:  Well, that is an
 14       interesting question.
 15  1029                 MR. MILLER:  That is an interesting
 16       question.
 17  1030                 COMMISSIONER WYLIE:  What are the
 18       hours on CKVU currently of priority?  I have a sneaking
 19       suspicion that --
 20  1031                 MR. MILLER:  We are up to eight hours
 21       now.  We can add up how we get there, but we are at the
 22       eight hours on CKVU right now.
 23  1032                 COMMISSIONER WYLIE:  The calculation
 24       that was made for seven hours included these
 25       non-qualifying programs.


  1  1033                 MR. SWITZER:  I will just --
  2  1034                 COMMISSIONER WYLIE:  So we obviously
  3       have our own question marks.
  4  1035                 MR. MILLER:  Maybe they qualify and
  5       we have been too conservative all along.
  6  1036                 MR. SWITZER:  The Canadian hours that
  7       would qualify -- and I apologize that the CKVU team
  8       will be much better briefed on the detail than I am,
  9       but the hours in the current 2001-2002 schedule include
 10       "Beastmaster" -- we are speaking of CKVU now -- "Relic
 11       Hunter", "Earth:  Final Conflict", a show shot in
 12       Vancouver called "The Crow", at least one Canadian
 13       movie, and a show called "Highlander:  The Raven".
 14  1037                 Some of those are eligible for
 15       bonuses, some are not.  In total, in addition, they
 16       would add up to at least eight hours, and of course the
 17       Star! TV half hour, which is eligible and does qualify
 18       because it is predominantly about the Canadian
 19       entertainment business.
 20  1038                 So it varies depending on the
 21       bonuses.  We are clearly making the eight hours and in
 22       some weeks it is nine and ten hours.
 23  1039                 COMMISSIONER WYLIE:  On the NewNet
 24       stations?
 25       --- Pause


  1  1040                 MR. SWITZER:  I will take you through
  2       a sample schedule.
  3  1041                 Again, the NewNet programmers and
  4       general managers will be better briefed, but I will do
  5       my best.
  6  1042                 There is at least one Canadian movie
  7       per week which would count for two hours.  In addition,
  8       the "Beastmaster" show, the "Tracker" program", "Earth:
  9       Final Conflict", "First Wave", a drama shot in
 10       Vancouver, "The Immortal", a drama shot in Vancouver,
 11       and bonuses on top of that in addition to Sir Arthur
 12       Conan Doyle's "The Lost World" as an hour.  Those are
 13       all one-hour programs, some eligible for bonuses, some
 14       not.  Again, we are in excess of the required eight
 15       hours.
 16  1043                 That program schedule, with some
 17       variations, would be similar across the Ontario NewNet
 18       stations.
 19  1044                 COMMISSIONER WYLIE:  So on CITY,
 20       then, the ones that you think are close to
 21       magazine-type programmings that could fit as
 22       entertainment would be Media TV and Movie TV?
 23  1045                 MR. SWITZER:  There are many programs
 24       we produce, Movie Television that could be -- certainly
 25       "The New Music", Movie Television, Movie Media, "The


  1       New Music".
  2  1046                 Of course of "Speaker's Corner"
  3       program which we haven't talked about which in some
  4       markets is as much variety and performance as it is
  5       politics and democracy might qualify.  It is to suggest
  6       that at the local level we are doing lots and lots of
  7       magazine programs that unfortunately don't qualify,
  8       although they are absolutely acknowledged as industry
  9       leaders and making a contribution.
 10  1047                 MR. MILLER:  We have been very
 11       conservative, Madam Wylie, in our interpretation.  It
 12       could well be that some of these shows would qualify as
 13       long-form documentaries because they are over half an
 14       hour, half an hour or more.
 15  1048                 The other interesting thing
 16       obviously, if some of them were produced elsewhere, for
 17       example if they were produced in Ottawa or Victoria,
 18       then they clearly would be priority programs because
 19       they would fall under the regional priority programming
 20       definition.
 21  1049                 So it is somewhat ironic that if we
 22       tweaked them, as you say, they would qualify, but at
 23       the moment being conservative we have assumed they
 24       haven't, but we believe, as Mr. Switzer has pointed
 25       out, that they are a key part of our contribution.


  1  1050                 They are very strong shows, both
  2       domestically -- they export Canadian culture and
  3       Canadian values abroad.  They don't make us a lot of
  4       money abroad, but we think it is a wonderful thing that
  5       they are abroad and we think it would be a shame if
  6       inadvertently we were forced to cancel these shows
  7       through a premature application of the higher priority
  8       programming obligations on CITY-TV.
  9  1051                 COMMISSIONER WYLIE:  You could have a
 10       documentary on a CRTC hearing.
 11       --- Laughter / Rires
 12  1052                 COMMISSIONER WYLIE:  You could call
 13       it "This Minute Has 22 Hours".
 14       --- Laughter / Rires
 15  1053                 MR. SWITZER:  A 22-part mini-series
 16       event, that's right.
 17  1054                 COMMISSIONER WYLIE:  I think I will
 18       charge you for that idea.
 19       --- Laughter / Rires
 20  1055                 COMMISSIONER WYLIE:  So is this your
 21       rationale for the peculiar distribution of priority
 22       programming where CIVI and CKVU would have different
 23       eight hours of priority programming, your NewNet
 24       stations would have eight hours as well, and then CITY
 25       would have less?  Is it because of these programs?


  1  1056                 You gave another reason this morning,
  2       you talked about flexibility, et cetera, but is it
  3       because of this particular style of programming that
  4       you want to be able to have in peak time, or what is
  5       the rationale for this asymmetry?
  6  1057                 MR. SWITZER:  Obviously -- I
  7       shouldn't say "obviously".
  8  1058                 The number one reason is, of course,
  9       revenue pressures, but you have hit it in that we are
 10       disadvantaged in that we have been so conservative in
 11       our treating of these programs not as priority.  These
 12       magazine shows are the fundamental reason for the
 13       difference, yes.
 14  1059                 COMMISSIONER WYLIE:  And they are
 15       always aired in peak time, between 7:00 and 11:00?
 16  1060                 MR. SWITZER:  They are first
 17       telecast -- for the most part, yes, I can't think of
 18       one that isn't.  In many cases they will repeat,
 19       perhaps the following week, later in the evening or in
 20       the afternoon, but they each have at least one
 21       prime-time exposure as a first play, yes.
 22  1061                 COMMISSIONER WYLIE:  What would it do
 23       to your overall programming strategy if the Commission
 24       decided that indeed in the circumstances you should do
 25       eight hours of priority programming on CITY?


  1  1062                 MR. SWITZER:  We would have to -- I
  2       will be discreet -- tweak perhaps.  We would have to
  3       reassess the shows we make or where we make them.  We
  4       may have to cancel -- frankly, cancel some local
  5       programs that we want to do but that don't qualify and
  6       perhaps don't contribute as much revenue or margin and
  7       therefore is we were to both do extra priority and some
  8       of these extra shows it would be perhaps not the best
  9       use of some of the prime-time, and yet if we move them
 10       out of prime-time they are worthy of prime time.
 11  1063                 It is not something that is easy to
 12       talk about and it is part of why I say we are facing
 13       the conflicting pressures of recognizing the importance
 14       of priority programming and still wanting to ensure
 15       that all of these magazine shows can continue to be
 16       vibrant.
 17  1064                 MR. MILLER:  And also the --
 18  1065                 MR. ZNAIMER:  But, Madam Wylie, that
 19       is precisely the tough logic that leads us to look at
 20       the thing that you think is the least likely thing that
 21       we should be looking at, which is local programming.
 22  1066                 MR. MILLER:  If I could be clear, it
 23       would mean, for example, that we would have to lower
 24       our local commitments.  We have been prepared to make
 25       an 18-hour a week local commitment on CITY, recognizing


  1       in part -- recognizing in part the fact that we are not
  2       prepared at this time to make the eight hour priority
  3       programming commitment.
  4  1067                 If we had to make the eight hour
  5       programming commitment on CITY, in light of what Jay
  6       has said about cutting shows, we would probably have to
  7       cut that 18 hour commitment to a level more consistent
  8       with our competitors.
  9  1068                 COMMISSIONER WYLIE:  These shows come
 10       right now within your definition of local.
 11  1069                 MR. SWITZER:  Yes, of course.  They
 12       count as local original productions.  They do not
 13       qualify as priority.
 14  1070                 This goes back to Chairman Dalfen's
 15       opening comments this morning which made us smile when
 16       he reminded us of perhaps our role as mid-sized players
 17       to come up with distinctive, unique, innovative
 18       programming to serve our local markets in ways that may
 19       be different than the larger players.  You have seen
 20       this natural expression through these magazine shows.
 21       We are doing a very good job.  We want, of course, to
 22       continue along the path we are.
 23  1071                 COMMISSIONER WYLIE:  If they were
 24       produced in your new facility in Ottawa they would be
 25       priority programs, wouldn't they?


  1  1072                 MR. SWITZER:  Yes, they would.
  2  1073                 COMMISSIONER WYLIE:  That is another
  3       great idea that I have.
  4       --- Laughter / Rires
  5  1074                 COMMISSIONER WYLIE:  It would be fair
  6       to say, would it, that the type of priority programming
  7       you do in drama is more the six-to-nine points type of
  8       programming?
  9  1075                 MR. SWITZER:  Our main thrust remains
 10       movies, long-form programming, made-for-television
 11       movies and theatrical films.  I would like Diane Boehme
 12       to speak briefly to that, because in that area, which
 13       remains our first most important priority, we have
 14       talked about action/adventure and some science fiction,
 15       six-to-nine point Canadian dramas, and yes they are
 16       important and yes they are in our schedule, but where
 17       we make a difference, where we can contribute where
 18       others either do not or have chosen not to, is in the
 19       intensely Canadian feature films and
 20       made-for-television movies.
 21  1076                 Sometimes we don't take enough time
 22       to brag about that, frankly.  Since we are sometimes
 23       known as braggers, I would like Diane to just spend a
 24       few seconds on why this important area is an area where
 25       we have filled in where others have chosen not to.


  1  1077                 MS BOEHME:  Thanks, Jay.
  2  1078                 Actually, most of the Canadian
  3       long-form fiction that we do, whether it is a
  4       made-for-television movie or whether it is a theatrical
  5       feature film is either a nine out of ten or a ten out
  6       of ten.
  7  1079                 There is occasionally, as more and
  8       more Canadian independent producers are trying to raise
  9       their budgets and draw more audiences to the cinemas,
 10       and ultimately to our screens as well, in order to
 11       raise the budget they have tried to go to international
 12       co-productions which changes and skews things a little
 13       bit.  So in those cases where there is international
 14       co-productions and there is either actors or directors
 15       or screenwriters that are representative of the treaty
 16       co-production partner, we don't necessarily come in at
 17       nine or ten points.  But most of the time our material
 18       that we develop and that we prelicense is all nine out
 19       of ten on the long-form side.
 20  1080                 COMMISSIONER WYLIE:  Can you give us
 21       some type of ratio as between the 10 point drama and
 22       the six-to-nine point drama?
 23  1081                 MS BOEHME:  On long-form fiction
 24       or on --
 25  1082                 MR. SWITZER:  In the movie area.


  1  1083                 MS BOEHME:  In the movie area?
  2  1084                 COMMISSIONER WYLIE:  On all drama.
  3  1085                 MS BOEHME:  On all drama.
  4  1086                 In the movie area, the nine or tens
  5       would be, I would think, 80 per cent of our activity.
  6       On the television drama series side it is certainly
  7       less than that because of the nature of what we are
  8       trying to do.
  9  1087                 We have recently been trying to go
 10       through the more typical Canadian funding system where
 11       we would have 10 out of 10 projects.  Unfortunately we
 12       have not been successful in this recent round.  We did
 13       not, for reasons that still remain mysterious, receive
 14       the support from the funding agencies for those 10 out
 15       of 10 drama series that we chose to initiate this year.
 16  1088                 But on the television drama series,
 17       they are more typically six or seven out of ten
 18       probably 75 per cent of the time.
 19  1089                 MR. SWITZER:  Vice-Chair Wylie, Diane
 20       hits on the point of the disadvantage that medium-size
 21       players are facing at the funding agencies.  This year
 22       with the growth of our western stations we were able to
 23       come to the table to Telefilm and to the CTF with full
 24       national network trigger prices on -- I will give you
 25       one example.


  1  1090                 A completely conceived, written,
  2       produced, set in Vancouver brand new, fully expensive,
  3       regular $1.5 million an episode new Canadian drama.
  4       That project set in Vancouver did not pass the test of
  5       CTF and Telefilm, in part we believe because we don't
  6       provide national coverage.  We were disadvantaged to
  7       the CTVs and Globals, even though we were offering the
  8       same license fee, $232,500 per episode, which for a
  9       medium-size player like us is a monstrous number, that
 10       project was not successful and we were penalized
 11       because of our limited coverage and because we could
 12       not guarantee to them that as many Canadians would see
 13       it as if it played on the CTV.
 14  1091                 So we have put most of our resources
 15       in the area -- and there is a long list in our filing
 16       of extraordinary Canadian films from coast-to-coast
 17       where we have been able to effect some change, we have
 18       been able to help producers get money.  It is not a
 19       case of one is right and one is wrong, we have chosen
 20       to put our budgets and our hearts into the movies
 21       because we are at a funding disadvantage with the
 22       agencies at series.
 23  1092                 COMMISSIONER WYLIE:  This inability
 24       to get funds, would that be from the CTF?
 25  1093                 MS BOEHME:  Yes, it is.


  1  1094                 COMMISSIONER WYLIE:  And not because
  2       something was judged to be better, simply you didn't
  3       make the threshold requirements?
  4  1095                 MS BOEHME:  On the LFP side that is a
  5       complicated question.
  6  1096                 It is very simple just to cite an
  7       example.  Last week I had a conference call with
  8       Telefilm when the EIP Decisions came out, because the
  9       EIP is where the majority of the support does end up
 10       coming from.  At that point in time we had, out of
 11       eight projects, there was only one small digital movie
 12       out of Victoria that has received support.
 13  1097                 I asked them to review very briefly
 14       if there was a problem with our ranking and it was very
 15       clear and we all agreed that there is a systemic bias
 16       against non-national players.
 17  1098                 One portion, especially in an
 18       oversubscribed year like this one, one portion of the a
 19       analysis that the Telefilm people apply to the
 20       decisions that they make for projects to support, is
 21       very much geared towards the maximum number of eyeballs
 22       that those programs will receive.  They admitted and
 23       agreed that there is a systemic bias against people who
 24       are not national players and we do not score points in
 25       that area that is equivalent to our competitors in the


  1       market.
  2  1099                 COMMISSIONER WYLIE:  Is there an
  3       avenue, formal or informal right now, to enter into any
  4       type of discourse with the funding agencies about these
  5       problems?
  6  1100                 MS BOEHME:  That was the sum of the
  7       call actually, is that they admit and recognize that
  8       there is a problem.  We have to have a dialogue to
  9       rewrite the rules in order to address this.
 10  1101                 COMMISSIONER WYLIE:  But you don't
 11       have representation on the board or any --
 12  1102                 MS BOEHME:  No.
 13  1103                 COMMISSIONER WYLIE:  -- avenue to
 14       engage with them?
 15  1104                 MR. SWITZER:  Not right now.  We are
 16       trying to take a more active role as a medium-sized
 17       player and, frankly, effect some change to reduce this
 18       bias.  We are hopeful, but it has been a struggle and
 19       it has to do with competing pressures from
 20       semi-independent producers.  It is a mess, frankly, and
 21       we are not happy and we must solve that problem.
 22  1105                 It complicates things when we are
 23       trying to talk about financing new series.  Paul
 24       Gratton has been very involved.
 25  1106                 Diane, if I can ask Paul to join


  1       our --
  2  1107                 MR. GRATTON:  Yes.  I was going to
  3       say, I have sat on the CTF Board in prior years.  I sit
  4       on the Independent Production Fund, which is the old
  5       McLean Hunter fund.  I also sit on the Feature Film
  6       Advisory Committee to Telefilm.
  7  1108                 This year there was a major crisis.
  8       I mean, demand far exceeded available funds.
  9  1109                 It is explicit in the Telefilm
 10       evaluation grid that priority, all other things being
 11       equal, will be given to those shows that can be exposed
 12       to the highest number of eyeballs.  So I think what we
 13       found this year was almost all the second tier players
 14       had their proposals rejected.
 15  1110                 Of course, with so many more licensed
 16       people all with conditions of licence, the number of
 17       proposals that came forward this year was almost double
 18       last year.  Last year there were enough funds for most
 19       of the drama requests.  This year a huge number of
 20       drama series were turned down.
 21  1111                 I think it is fair to say that the
 22       last thing Telefilm really wants to see from the CHUM
 23       Group is us coming forth with 10 point drama series
 24       such as they see from the CTVs and the CBCs of this
 25       world.  I think they prefer us to exercise our support


  1       for high content, Canadian content in the area of
  2       feature films where other broadcasters are far less
  3       involved.
  4  1112                 There is just enough money to
  5       continue to support 10 out of 10 point Canadian dramas.
  6       This is consistent on all the funds that I am exposed
  7       to.  They are simply tapped out in terms of the
  8       requests and the available dollars.
  9  1113                 COMMISSIONER WYLIE:  With regard to
 10       scheduling you have heard us, I'm sure, discuss with
 11       CTV, Global and Craig at their renewals, the focus on
 12       scheduling.
 13  1114                 I think "grosso modo" if we look at
 14       your block schedules right now there seems to be a
 15       spread.  In your view, is that important that it be
 16       maintained, that the scheduling of the priority
 17       programming not be only in peak hours but be spread
 18       throughout the week?
 19  1115                 MR. SWITZER:  We obviously
 20       acknowledge the importance of priority programming
 21       and treat it and promote it in prime-time in a very
 22       serious way.
 23  1116                 To continue to be totally candid with
 24       you, we don't think of it in terms of day of the week.
 25       We are fortunate in that it is spread because to meet


  1       the needs of our views in each community it has made
  2       sense, both in the distribution of Canadian movies,
  3       which is effectively across every night of the week,
  4       and the various Canadian dramatic series.
  5  1117                 On all of our stations there is a
  6       very even distribution across the week and ironically
  7       the traditional lowest tuning night, Saturday night,
  8       generally, I think on all of our stations, represents
  9       the smallest amount of Canadian priority programming in
 10       any of our schedules and it has been that way certainly
 11       through the year or two years where we have had stepped
 12       up commitments.
 13  1118                 So we don't program it that way, we
 14       don't think of it that way, it is not one of the
 15       mechanisms that each of the programmers is trying to
 16       balance, but because they are each doing a good job in
 17       their community and we don't have the CTV/Global
 18       problem of first setting our schedule with American
 19       simulcasts, our station grids are not driven by
 20       American simulcasts so the programmers have the
 21       flexibility to better put shows where they think it
 22       will make the most good and that has resulted in an
 23       even distribution.
 24  1119                 COMMISSIONER WYLIE:  But do you see
 25       an overall virtue in even distribution?


  1  1120                 MR. SWITZER:  Yes, we do.  Obviously
  2       there is a virtue in shows being made available across
  3       the week.  I am trying to add a layer that suggests it
  4       has not -- our success in this area was not driven by a
  5       particular mandate.
  6  1121                 MR. MILLER:  I think, Madam
  7       Vice-Chair, just to add a couple of observations.  The
  8       fact that the Friends of Canadian Broadcasting are not
  9       here before you with their chart of the reds and the
 10       blues is at least some indication that at least they
 11       don't see us as a problem in that regard.
 12  1122                 Secondly --
 13  1123                 COMMISSIONER WYLIE:  Maybe
 14       Mr. Morrison is on holidays.
 15       --- Laughter / Rires
 16  1124                 MR. MILLER:  That is the other
 17       possibility, yes.
 18  1125                 But the other thing that we were
 19       looking a little bit at our success in attracting
 20       audiences to Canadian programming and just I will give
 21       you a couple of numbers.
 22  1126                 Looking at CITY-TV for example, we
 23       estimate our prime-time viewing to our Canadian
 24       schedule results in roughly an 18 per cent viewing to
 25       Canadian in prime-time on CITY, it is about 15 per cent


  1       on VR.  That compares to 7 per cent on CFTO, the CTV
  2       affiliate, and 4.7 per cent on Global.
  3  1127                 So by that measure on average I think
  4       we are doing a relatively good job in attracting
  5       Canadians to Canadian programming in prime-time.
  6  1128                 COMMISSIONER WYLIE:  In the case of
  7       CITY let me go back.  When you say that you should be
  8       allowed to do six hours as of September 2002 for the
  9       first three years and then seven hours, you would
 10       accept that as a condition of license?
 11  1129                 MR. MILLER:  Yes.
 12  1130                 COMMISSIONER WYLIE:  If in our
 13       judgment it should be eight, that would be a condition
 14       of license as well.
 15  1131                 MR. MILLER:  We can't accept eight.
 16  1132                 COMMISSIONER WYLIE:  For the reasons
 17       you have given.
 18  1133                 MR. MILLER:  Yes.
 19  1134                 COMMISSIONER WYLIE:  Last question
 20       on -- no, second last question on priority programming.
 21  1135                 Are you in a position to be able to
 22       tell us what is the ratio of original to repeat
 23       programming in the various categories for CKVU, the
 24       NewNet stations and CITY?
 25  1136                 MR. SWITZER:  We would of course be


  1       happy to provide you with whatever specific information
  2       you need.  Perhaps I can --
  3  1137                 COMMISSIONER WYLIE:  You may want to
  4       wait until later on, the reply stage.
  5  1138                 We would be interested in knowing
  6       what is original material as opposed to repeats and
  7       what is programming that has already been broadcast by
  8       other services in the three situations and by genre of
  9       programming?
 10  1139                 Is that possible to produce?
 11  1140                 MR. SWITZER:  We will do our best.
 12  1141                 COMMISSIONER WYLIE:  Using, I
 13       suppose, the current block schedule --
 14  1142                 MR. SWITZER:  Yes.
 15  1143                 COMMISSIONER WYLIE:  -- or what you
 16       expect will be on the air in your first year.
 17  1144                 The credit for drama, as you know --
 18       I don't have to go through the mechanics -- it is
 19       different if you are a multi-station group and if you
 20       are not, but in the case of the NewNet station in
 21       Decision 2001-519 the credit system applicable to
 22       multi-station group was what was going to be applied.
 23       I assume that you would accept that as to be the case
 24       for CKVU?
 25  1145                 MR. MILLER:  Yes.


  1  1146                 COMMISSIONER WYLIE:  What about
  2       for CITY?
  3  1147                 MR. MILLER:  The same.
  4  1148                 COMMISSIONER WYLIE:  The same.
  5  1149                 MR. MILLER:  Yes.
  6  1150                 COMMISSIONER WYLIE:  The same credit
  7       system would apply and it would not go to reducing the
  8       Canadian content in the evening period only in that
  9       priority programming time?
 10  1151                 MR. MILLER:  Precisely.
 11  1152                 COMMISSIONER WYLIE:  I only have one
 12       or two questions remaining about children's
 13       programming.
 14  1153                 I don't think I found any mention of
 15       children's programming in the application.  CKVU of
 16       course did a fair amount of children's programming.
 17       What is your intention in that regard in any station
 18       including CKVU?
 19  1154                 MR. MILLER:  I believe this issue
 20       comes up with respect to CKVU, CKVR and CHRO, and in
 21       each case in section 6 of those applications we have
 22       indicated our desire to be relieved of any expectations
 23       with regards to children's programming.  It is not a
 24       genre that we specialize in and consistent with your
 25       TV Policy we feel there are enough other choices for


  1       children's programming in the broadcasting system that
  2       it is not necessary any more for us to do that.
  3  1155                 COMMISSIONER WYLIE:  Yes, I
  4       apologize.  In those separate applications it was
  5       addressed, but it wasn't addressed as part of your
  6       overall programming strategy.
  7  1156                 MR. MILLER:  No, you are right.  We
  8       didn't mention it in the overall document, we referred
  9       to the specific stations.
 10  1157                 COMMISSIONER WYLIE:  You referred to
 11       the TV Policy, which discusses of course the fact that
 12       there is a lot of children's programming available now
 13       on specialty services and some programming could, of
 14       course, be priority programming.
 15  1158                 Do you see -- you don't see any need
 16       to have any at all on any of your stations?
 17  1159                 MR. MILLER:  I am a parent and I can
 18       tell you my kids watch a lot of children's programming
 19       and I can tell you that there is a lot of great
 20       children's programming out there and I personally don't
 21       see a need, and I don't think any of the parents that I
 22       meet today, see a need for CITY or other stations to
 23       carry children's programming.  That is not what we are
 24       known for.  In fact, quite frankly I think it would be
 25       inappropriate because that is not the demographic we


  1       appeal to.
  2  1160                 We have in some stations had a mixed
  3       children/youth expectation, that is the case in the
  4       NewRO and we certainly believe we meet that because so
  5       much of our programming is youth-oriented, but again in
  6       terms of specific requirements for children's
  7       programming we just simply don't think that is
  8       appropriate or necessary given the choices available in
  9       the system.
 10  1161                 COMMISSIONER WYLIE:  When you speak
 11       of youth-directed programming, which is an aspect of
 12       your stations, what age are you talking about?
 13  1162                 MR. MILLER:  I think for simplicity
 14       we tend to use the definition of children as under 12
 15       and youth between 12 and 18.  Certainly, as is
 16       evidenced from the type of programming we do and our
 17       interest in our programming, we tend to attract youth
 18       audiences.  But we don't see any need for any specific
 19       conditions of license or requirements there.
 20  1163                 COMMISSIONER WYLIE:  By the time your
 21       children reach that age you will find that you may be
 22       actually programming to children, if the threshold is
 23       12, because it seems to me that children are getting to
 24       be youth younger and younger, so you may actually be
 25       doing children's programming by your seventh year.


  1  1164                 MR. MILLER:  There you go.
  2  1165                 COMMISSIONER WYLIE:  Thank you very
  3       much for your cooperation.  Those are my questions.
  4  1166                 Thank you, Mr. Chairman.
  5  1167                 THE CHAIRPERSON:  Thank you.
  6  1168                 Commissioner Langford.
  7       --- Pause
  8  1169                 COMMISSIONER LANGFORD:  Thank you.  I
  9       am just wondering what the schedule was and looked
 10       ahead.
 11  1170                 Commissioner Wylie touched on a good
 12       many of the points that I was interested in and had
 13       been assigned in the way we break up our work a little
 14       bit, about the way you break up yours, and then we step
 15       on each other's toes.  It makes for some interesting
 16       dancing and some good things come out of it.  But I'm
 17       sure there are some other rocks out there that we can
 18       turn over and look under to try to figure out exactly
 19       what beast lurks there.
 20  1171                 I think what I would like to do is to
 21       start with a little statement about local programming
 22       which will either demonstrate my wisdom or my complete
 23       lack of understanding, but I am willing to risk it.  We
 24       have counsel here, Mr. Howard, who will bring me up
 25       very shortly if I am wrong.


  1  1172                 But as I understand the law and the
  2       policy, the proposals you have made with regard to
  3       local programming are probably fine in the sense of
  4       black letter law and black letter policy.  There might
  5       be some question as to what exactly regional reflection
  6       means, and that sort of thing, and we can talk about
  7       that and we will.
  8  1173                 So I think we can put behind us,
  9       unless Mr. Howard leaps up and disagrees with me, the
 10       whole question of whether what you are suggesting is in
 11       some way improper, illegal, out of keeping with policy.
 12       I don't think it is.  I think it is fine.
 13  1174                 On the other hand, it is somewhat
 14       perplexing, if I can put it this way.  I don't say that
 15       to try to draw some kind of cute line, it actually is
 16       to me a little bit perplexing, and probably that is
 17       because it is so different, by your own admission in a
 18       way, or by your own characterization perhaps would be
 19       better, than what you are so well known for.  If people
 20       had to pick one work to describe CHUM and "outrageous"
 21       was not the word that was allowed, probably "local"
 22       would be the one people would think of.
 23  1175                 So herein lies my kind of sense of
 24       mystery.  You have a commitment to local going back to
 25       sometime just after the flood.  You do it well, so you


  1       tell us and I am prepared to believe that.  You do it
  2       beyond any expectation of law or policy, in the sense
  3       of hours and variation and depth across the board of
  4       your NewNet stations and your other stations.
  5  1176                 And I understand that you have been
  6       dealt the thunderbolt from hell in the sense of a
  7       recent decision, but I would like to put that behind us
  8       now if we could, we have all heard you on that and I
  9       think it is time to look forward a little bit.
 10  1177                 So understanding that there are ups
 11       in life when one visits Vancouver, and downs in life
 12       when one makes one's points in Toronto.  You have come
 13       out pretty even I would say, some would argue slightly
 14       ahead, but anyway, you have told us that about the only
 15       place left for you, the only place where you can kind
 16       of make inroads and try to get your financial house in
 17       better order is in the local area, the very area where
 18       you are known and respected for your historic
 19       programming.
 20  1178                 Why would you not look elsewhere?  I
 21       know that there are few places in a sense, you have
 22       told us how you are trapped, but why would you look for
 23       local in the sense that -- too local in the sense that,
 24       as I understand it, there really isn't a lot of money
 25       there anyway?


  1  1179                 Can we start there?
  2  1180                 MR. SWITZER:  Let me start,
  3       Commissioner and Moses can add.
  4  1181                 It is our desire to look forward and
  5       to be very positive and to be thankful for our
  6       privileges.  That is set against what we know is
  7       happening this month, next month, next year.  I will
  8       keep this as constructive as possible.
  9  1182                 It is a real shudder to our system
 10       that we must effect.  We can review many areas of our
 11       business, technologies, sales and marketing, back
 12       office, administration expenses, foreign acquired,
 13       Canadian priority, Canadian news, in-house, other.
 14       When we go through that list, many of us in the
 15       meetings that we have held in the past four weeks, your
 16       words have been echoed around out tables as we also
 17       deal with this problem.  I know Moses will get to that.
 18  1183                 At the very end of the day, when we
 19       go through -- in fact on some of our sheets we have
 20       shown some savings to the best of our ability in
 21       administration and in technology and in other areas,
 22       and in fact even small amounts in Canada acquired, some
 23       of it that might be Canadian priority.  The two largest
 24       areas are foreign acquired and local in-house staff.
 25  1184                 Unlike some of our other competitors,


  1       we have chosen a path voluntarily that has added
  2       tremendous staff.  Literally hundreds of people across
  3       our system were not -- we have done this voluntarily.
  4       We have grown.  Your regulations allow it.  It
  5       encourages us.  These are decisions we have made.
  6  1185                 We are now suggesting that that
  7       flexes in both directions.  It is important enough for
  8       us to talk about because what we talk about today will
  9       be the rules that we live with for the next seven
 10       years.
 11  1186                 COMMISSIONER LANGFORD:  So is it
 12       staff cuts where the money is?
 13  1187                 MR. SWITZER:  No.  It comes down to
 14       something that was touched on earlier, and that has to
 15       do with the way television plants work.  It has to do
 16       with not exclusively but to some great extent when push
 17       comes to shove perhaps -- and we hope it doesn't
 18       happen -- years down the line, crews, operation crews.
 19  1188                 Most of our television stations work
 20       today with two crews, in many cases dozens of people.
 21       Once you invest in a crew and infrastructure and camera
 22       people and lighting people and audio people and all the
 23       support that goes along with that, you wish to add
 24       hours of production to take advantage of those fixed
 25       costs that you have invested in.


  1  1189                 We have two crews in most of our
  2       stations I think, in fact all of our stations.  So yes,
  3       we could flex a little bit of money or a half an hour,
  4       but the big -- I won't say fixed costs, but the big
  5       chunks that are not linear, they don't move in a kind
  6       of organic way, you can just go up or down by 10 per
  7       cent, are these crews and the production associated
  8       with that.
  9  1190                 So it may come to pass that we will
 10       have to look at, in some situations and some stations,
 11       one crew rather than two.  That may involve
 12       reorganizing our shows, the time periods that we
 13       produce.  Right now, to be clear, we have in most
 14       stations a morning crew that deals with morning shows,
 15       daytime shows, perhaps noon newscasts, and an
 16       afternoon/evening crew that deals with dinnertime
 17       newscasts, late newscasts and other kinds of things as
 18       well as other magazine shows.
 19  1191                 COMMISSIONER LANGFORD:  You are
 20       talking studio crews rather than field crews that are
 21       out chasing ambulances?
 22  1192                 MR. SWITZER:  Correct.  Correct.
 23  1193                 COMMISSIONER LANGFORD:  Thank you.
 24       I'm sorry to interrupt, but I wanted to be sure.
 25  1194                 MR. SWITZER:  We don't have


  1       traditional studios, but yes, in that vernacular, yes.
  2  1195                 So part of it isn't just hours that
  3       are up or down but these large thresholds, steps that
  4       you must take in either direction to effect any real
  5       change.
  6  1196                 So we have shown that we are looking
  7       at improved technologies, admin and other
  8       non-programming areas, but the single biggest area for
  9       us to flex in, given that we cannot flex in U.S.
 10       acquired because of pressures there, is local.
 11  1197                 We have an obligation to bring these
 12       stations to some kind of bottom line.  It may not be a
 13       30 per cent or 40 per cent bottom line -- Mr. Sherratt
 14       is probably smiling -- that some of our competitors
 15       have enjoyed, but certainly these stations cannot
 16       continue to lose money.
 17  1198                 COMMISSIONER LANGFORD:  I can
 18       absolutely assure you that nobody at your table is
 19       smiling.
 20       --- Laughter / Rires
 21  1199                 COMMISSIONER LANGFORD:  This is like
 22       the last scene from "On The Beach" or something what is
 23       going on here.
 24  1200                 MR. SWITZER:  Occasionally when I
 25       mention potential margins of 30 per cent or 40 per cent


  1       Mr. Sherratt will smile a little bit.
  2  1201                 COMMISSIONER LANGFORD:  He hasn't
  3       smiled yet.
  4  1202                 MR. SWITZER:  So this is the problem
  5       we are in and we share the perplexity of this
  6       situation.
  7  1203                 COMMISSIONER LANGFORD:  Oh, I'm glad.
  8  1204                 I saw that Mr. Znaimer was nodding
  9       yes while you were saying no and he is now keen to get
 10       at the microphone, so let's hear why.
 11  1205                 MR. ZNAIMER:  I am in the process of
 12       echoing some of what Jay said and wanting to express
 13       some appreciation for your recognition of our
 14       discomfort in the circumstance.  You are quite right,
 15       there is a kind of logical inconsistency of it, but you
 16       have just witnesses the discussion with Madam Wylie.
 17       She asked:  Six hours of priority programming, seven
 18       hours of priority programming, will you accept eight?
 19       Mr. Miller at some point said no, we can't go any
 20       further.
 21  1206                 So what I wanted to add to the
 22       discussion was that we had some disagreement internally
 23       in preparing for this hearing and I was the voice of
 24       dissent saying:  Let's cut back on priority Canadian at
 25       CITY -- at CITY.


  1  1207                 I was persuaded that no, in the
  2       hierarchy of values as expressed by this Commission
  3       priority of Canadian programming in general and
  4       specifically in the case of CITY-TV took precedence
  5       over local programming.
  6  1208                 I said, half in jest:  Well, since we
  7       can see that CTV has generally withdrawn or in the
  8       process of withdrawing from the arena, CBC is obviously
  9       in the process of withdrawing from the arena, Mr. Craig
 10       apparently in his renewal said also that he was looking
 11       for flexibility in local, I said half in jest:  The
 12       Commission will wake up one morning and decide that
 13       local programming is a priority and then we will be at
 14       one with these regulations.
 15  1209                 But in the meantime, if the cost of
 16       our import programming that pays so much of the freight
 17       is going up, and if you have decided, as between local
 18       and Canadian priority, Canadian priority has priority,
 19       we have nowhere left to go.  So we find ourselves here
 20       with a hangdog expression because it is logically
 21       inconsistent.
 22  1210                 At the same time, I am partially
 23       bemused because we are not talking about necessary
 24       reality here, we are talking about theoretical
 25       minimums.  What we are trying to establish here is what


  1       is the theoretical minimum to which we could go if all
  2       hell broke loose.
  3  1211                 So we talk about our current
  4       undertaking of 13.5 hours and as compared to that our
  5       willingness to undertake 18 hours of COL does appear to
  6       be an increase rather than a decrease.  It is a rather
  7       subtle discussion and it leaves us apparently on the
  8       defensive and nothing could be less true.
  9  1212                 We wanted to come here to tell you
 10       all the great things we have done, but we didn't want
 11       to find ourselves in a position, which sometimes the
 12       regulatory process leaves you in, of being punished for
 13       your over fulfilments by being frozen into them.
 14       Because we have flexed up, we didn't want then for you
 15       to say "Well, that's swell.  That is where you have to
 16       be forever", knowing that we have a business that is
 17       also a master, we have many masters to serve here, and
 18       while all of this has been going on various analysts
 19       have knocked about $100 million off the market cap of
 20       this company because of recent events.
 21  1213                 So in trying to balance all these
 22       masters we have come to what is an uncomfortable but
 23       seems to be an unavoidable conclusion.
 24  1214                 COMMISSIONER LANGFORD:  I know the
 25       Chair wants to call a break and I'm sure that everybody


  1       will be more than happy to get that news.
  2  1215                 When we come back I would like to
  3       focus hard, kindly, in a gentle blue-skying way, but
  4       well-focused on the worst-case scenario, what would
  5       be on the box on your stations, what you would replace
  6       it with, what those costs would be, that sort of thing,
  7       so we can get an idea of -- I mean, you like to talk
  8       about worst-case scenarios and best-case scenarios and
  9       so do we.
 10  1216                 THE CHAIRPERSON:  Thank you.
 11  1217                 We will resume in 15 minutes at 4:05.
 12       --- Upon recessing at 1530 / Suspension à 1530
 13       --- Upon resuming at 1605 / Reprise à 1605
 14  1218                 THE CHAIRPERSON:  Order, please.  A
 15       l'ordre, s'il vous plaît.
 16  1219                 Just to assist everyone in their
 17       planning, we will go today until 5:30, which means that
 18       we will not be hearing from any intervenors today.  We
 19       will break at that point no matter where we are in the
 20       schedule.
 21  1220                 But our intention would be to finish
 22       intervenors and the CHUM reply tomorrow, so that may
 23       mean that we would be sitting a little later tomorrow,
 24       depending on the requirements.
 25  1221                 I would now turn the microphone back


  1       to Commissioner Langford.
  2  1222                 COMMISSIONER LANGFORD:  Thank you,
  3       Mr. Chair.
  4  1223                 Having given you advance notice
  5       perhaps we can just move sort of in an orderly way
  6       through some of your thinking.
  7  1224                 So the worst-case scenario from, I
  8       would assume, both of our positions regarding local
  9       programming is that you have to cut back or fall back
 10       to the minimum numbers you have provided us with.
 11  1225                 So then what happens?
 12  1226                 MR. ZNAIMER:  There are a number of
 13       ways forward.
 14  1227                 In the most extreme -- I will start
 15       with that because I think that is what you are most
 16       interested in.
 17  1228                 COMMISSIONER LANGFORD:  Not really,
 18       but I am interested in knowing really the full gamut.
 19  1229                 MR. ZNAIMER:  Yes.
 20  1230                 COMMISSIONER LANGFORD:  So we can
 21       really comprehend what we are dealing with here.
 22  1231                 MR. ZNAIMER:  Right.  At its most
 23       extreme we would have to cut crew, and with crew goes
 24       programming.
 25  1232                 If you were to examine the output of


  1       CITY-TV just before our last license renewal you would
  2       see that we had crystallized the identity of CITY-TV.
  3       It was known for its local programming, for its up
  4       tempo, for its youthful vitality, for its interest in
  5       cultural diversity, even before we doubled the number
  6       of hours that we actually produced.  The increase is
  7       heavily featured in the morning hours all through to
  8       about noon hour.
  9  1233                 So in the extreme, whether it is
 10       CITY-TV or any of the other NewNet stations, that is
 11       how that would tumble.
 12  1234                 In the alternative, that is the
 13       last thing that any of us want to do and all of us
 14       have said so.
 15  1235                 In my particular case, Madam Wylie,
 16       again it may not be a form of regulatory assurance but
 17       I think it is a potent form of assurance, I have spent
 18       my entire career here building up these programs and it
 19       would break my heart to cut them down.
 20  1236                 In fact, I was trying to think over
 21       the break over my entire career at CITY-TV how many
 22       shows we have actually cancelled.  Fewer than the
 23       fingers on one hand.  We are not cavalier about
 24       launching programming, but when we do we mean those
 25       programs to stick.


  1  1237                 So other avenues of retreat available
  2       to us would be to increase the number of repeats, to
  3       take in programming from other stations and run them in
  4       different stations in our group.  You know, it is not
  5       only a matter of hours, it is a matter of quality.
  6  1238                 In the break one of our people from
  7       RO reminded us that before CHUM bought and improved
  8       that station, repositioned that station, they were
  9       doing their news with six people.  Today we are doing
 10       the same news, but we are doing it with 60 people.  So
 11       the difference is quality.  It is that quality that we
 12       would be desperately trying to sustain.
 13  1239                 But at the end of the day there is
 14       that one fatal line in the financial projections which
 15       demonstrates the money gap that we have to make up, one
 16       way or another we have to make up.
 17  1240                 What we have been trying to tell you
 18       and perhaps it has compounded the sense of uncertainty,
 19       is that we don't have at this point a precise blueprint
 20       of how to get there.  That wouldn't be reasonable.  We
 21       have only just absorbed the news.  But if we had to get
 22       there, these are some of the steps that we would be
 23       taking.
 24  1241                 COMMISSIONER LANGFORD:  Would it be
 25       news that would go first or would it be non-news


  1       programming?  Because I noticed that in some of your
  2       projected cuts it appears as though non-news
  3       programming is not guaranteed in any way, whereas there
  4       is always some level of news that is guaranteed.  So I
  5       assume it is non-news programming that would go first.
  6       Am I reading -- I am only assumed that.
  7  1242                 MR. SWITZER:  In our financial tables
  8       I think we used the phrase "local programming" and that
  9       is to assume both news and non-news.
 10  1243                 COMMISSIONER LANGFORD:  But, as I
 11       say, when I look at your minimums, some actually
 12       include no non-news.  So am I to assume that in some
 13       way non-news is a slightly lower priority than news?
 14  1244                 MR. MILLER:  Commissioner --
 15  1245                 COMMISSIONER LANGFORD:  This is the
 16       sort of thing I -- I'm sorry to interrupt, but --
 17  1246                 MR. SWITZER:  No, no, it is very
 18       important.
 19  1247                 COMMISSIONER LANGFORD:  This is what
 20       leads to my state of perplexity, I just don't quite
 21       know how to read the signals that seem to underlie the
 22       kind of position you have put to us here.
 23  1248                 MR. SWITZER:  I would like to begin
 24       just very briefly and Peter can fill in.
 25  1249                 Part of our request for flexibility


  1       on some of these stations and in some of these
  2       categories is a move away from the historic news and
  3       non-news count towards total local programming counts.
  4       That gives us, in addition to the question of hours,
  5       flexibility to change over time that ratio without
  6       having to deal with micro-counts of some shows that may
  7       be one, may be the other, may have elements of both.
  8  1250                 In general the promises in these
  9       renewals deal with total commitments to local original
 10       programming without specificity as to news or non-news.
 11  1251                 MR. MILLER:  Commissioner Langford, I
 12       remember at the Hamilton/Toronto hearing you made a
 13       comment to one of the applicants, I think it was the
 14       Alliance applicant, when we were talking about the
 15       905 belt and you said "Surely news is where news
 16       happens".  We think you are right.  And local is where
 17       local happens as well.  Certainly news is the most
 18       highly local of our local programming.
 19  1252                 So both the fact that a suppertime
 20       and an evening newscast are almost assured to always
 21       remain in the schedule because they are something that
 22       viewers want and they are something that for the most
 23       part we can recoup our costs on, then that would be
 24       there whereas the local -- and they share a crew,
 25       because it is one crew to do the suppertime and the


  1       late evening.
  2  1253                 The local non-news, you are right to
  3       some extent.  To some extent it is the most vulnerable,
  4       but it is also the one that can lend itself most to
  5       regionalization.  Again, for example, you recognized
  6       that with CFPL, CHWI and CKNX, where earlier, in the
  7       previous license term we had specific commitments to
  8       news, but that the three stations could share the same
  9       non-news.
 10  1254                 So if we go to our breakfast show
 11       scenario, right now we have a separate breakfast show
 12       at CITY-TV, separate breakfast show in the NewRO,
 13       separate breakfast show that serves with different
 14       inserts CFPL, CHWI and CKNX.  Again, perhaps one
 15       scenario, not that we have planned for it, not that we
 16       have thought about it, but this flexibility would allow
 17       us to do, would be to have some kind of a regional
 18       Ontario show.  Maybe that would work with some
 19       combination of common regional programming and separate
 20       news inserts.
 21  1255                 These are all the variations, but
 22       your comment about news versus non-news is something I
 23       think the Commission has recognized in this policy,
 24       news, a certain level of news is certainly going to be
 25       there than non-news, but we do say that with one


  1       important caveat, and that is the caveat that Moses has
  2       made, is that the non-news shows that are central to
  3       our CITY-TV schedule, we would be loathe to drop.  One
  4       of the reasons we have asked for the flexibility on
  5       priority programming is to make sure that we could keep
  6       those shows in our schedule.
  7  1256                 COMMISSIONER LANGFORD:  So if I may
  8       borrow a little from CTV, instead of having three
  9       separate morning shows, you would have an "Ontario AM"
 10       and then pop into that some very locally responsive
 11       news, perhaps even a rerun of some of the items from
 12       the late news the night before if they still held up,
 13       that kind of thing I suppose.  Because you don't have
 14       your crew in the morning so I guess you could work it
 15       that way.  You would have some sort of update from the
 16       night before and run that down the wire from wherever
 17       you are.
 18  1257                 Okay.  Now, we then move to what you
 19       have just touched upon and that is this notion of local
 20       and/or regional.  You use the word "regional", but you
 21       don't define it.  You use the word "local" and you
 22       don't define it either, and I don't blame you.  I don't
 23       think we quite define it all that well ourselves so we
 24       can hardly ask you to.
 25  1258                 Although there is an interesting kind


  1       of definition of local, or you might call it that in
  2       one of your supplementaries.  The supplementary brief
  3       to CFPL-TV and the others, Windsor and Wingham, and I
  4       think, if I can remember -- yes, on page 3 of that, at
  5       the top, you say:
  6                              "Today, despite such
  7                              setbacks..."
  8  1259                 And we know what they are:
  9                              "...and the continued
 10                              difficulties facing conventional
 11                              broadcasters, CFPL-TV, CHWI-TV
 12                              and CKNX-TV have returned to
 13                              their roots and provide their
 14                              local communities with distinct
 15                              and reflective programming."
 16                              (As read)
 17  1260                 To my mind, though I can't force this
 18       down your throat in a proceeding like this, that is not
 19       a bad definition of local.  It is certainly something
 20       you could almost put in the window, it is short enough,
 21       but is it a definition of "regional" or, to put it
 22       another way, if that is local does the notion you are
 23       giving us of regional, which you don't describe, or at
 24       least I didn't see it, does that really substitute for
 25       local?


  1  1261                 MR. MILLER:  I think we have to
  2       separate a regulatory definition from a working
  3       definition.  Maybe I will use CKVR as a good example.
  4  1262                 By your definition, any show produced
  5       at CKVR is a local show.  So we could run a news
  6       operation out of CKVR entirely covering the Toronto
  7       news market and it would still be a local show.  That
  8       would accord with your definition of local, but it
  9       wouldn't be what we think is the right local for that
 10       market.
 11  1263                 COMMISSIONER LANGFORD:  And it
 12       wouldn't accord with your definition that I have just
 13       read here --
 14  1264                 MR. MILLER:  Exactly.
 15  1265                 COMMISSIONER LANGFORD:  -- if you
 16       accept it as a definition.
 17  1266                 MR. MILLER:  Exactly.  So from an
 18       operational and a philosophical point of view we
 19       believe in this -- and when you hear from our CKVR team
 20       they will tell you how they make sure that their local
 21       news is for Barrie and central Ontario.  It is not for
 22       Toronto.  Maybe some people commuting up to cottage
 23       country like checking in on it, but it is not for
 24       Toronto audiences.  That is an important distinction.
 25  1267                 But if we are coming to regulatory


  1       instruments and tools, which at the end of the day we
  2       have to, we think the only reasonable definitions are
  3       for local it is what is produced in that locality by
  4       the station and for regional, just to finish, for the
  5       purposes of what we have talked about in terms of
  6       replacing some of our local Ontario programming with
  7       regional programming, we would use "regional" meaning
  8       Ontario.  So any program produced in Ontario would
  9       qualify under that regional flexibility we have sought.
 10  1268                 MR. SHERRATT:  Mr. Langford,
 11       sometimes to know where you are going it pays to look
 12       at the past a little bit.  At the risk of getting a
 13       little historical, I think a pretty good example of
 14       what we are talking about happened in the Maritimes in
 15       the 1970s.
 16  1269                 When we acquired those three
 17       television stations in Nova Scotia, Prince Edward
 18       Island and New Brunswick, they were each running local
 19       television newscasts that were just dreadful in the
 20       ratings.  Everybody in the Maritimes watched the CBC.
 21       The quality wasn't there, the input wasn't there, they
 22       weren't working.
 23  1270                 We evolved into one single newscast
 24       that to this day still serves the three Maritime
 25       provinces with bureaus and crews and people all over


  1       the region feeding back into a central place.  And yes,
  2       the newscast is assembled in Halifax, but it is the
  3       local newscast for the people of the Maritime
  4       provinces.
  5  1271                 Within a year it was the number one
  6       rated newscast in the Maritimes and it and BCTV were
  7       the two strongest local news programs in the country,
  8       and I think probably continue to be that to this day in
  9       terms of representative share of the size of the
 10       audience, because they did it much the same way in
 11       British Columbia.
 12  1272                 But we did three provinces with it,
 13       but to those people that is their local newscast.  It
 14       is because of the content, it is they are being
 15       reflected in it, they are there when it is important
 16       news.  So it is their newscast in Sydney as much as it
 17       is the people in Moncton.
 18  1273                 COMMISSIONER LANGFORD:  But it
 19       certainly isn't -- and I don't say this in a critical
 20       way.  I am looking for information here and information
 21       only.  I want to repeat that my understanding of what
 22       you have proposed is that it comes within the policy.
 23       My understanding of "local" as defined is precisely
 24       what Mr. Miller has given us, but then there is CHUM's
 25       preferred "local".


  1  1274                 I am trying to get a sense for your
  2       strategy, assuming that for all of Mr. Znaimer's career
  3       distinct and reflective programming has been something
  4       of a mantra.  We are now moving to, I would say,
  5       something somewhat different from that if you look at a
  6       strict CRTC definition:  Produce locally, good enough
  7       for me.
  8  1275                 So how far are you prepared to move,
  9       or how far have you considered moving from the Znaimer
 10       definition, the historic CHUM position, to the black
 11       letter law of CRTC policy?
 12  1276                 MR. SWITZER:  Perhaps I can begin.
 13       You are asking about difficult worst-case scenarios.
 14       Certainly there will be some flex with budgets
 15       before -- we talked about the NewRO.  I think the total
 16       news budget for the same traditional prime-time evening
 17       news hours was in the range of $400,000 or $500,000 a
 18       year.  Today it is in the many millions, perhaps
 19       $4 million or $5 million a year and is now generating
 20       growing ratings and is the number two newscast in
 21       Ottawa and, finally, the number one newscast in the
 22       Valley.  Those millions of dollars made a difference.
 23  1277                 They were still doing effectively the
 24       same news hours on one-tenth the budget.  That is not
 25       where we want to go.


  1  1278                 One, there is some flex with budgets.
  2  1279                 Two, there is some possibility of
  3       some regional reorganization.  It is not part of a
  4       larger solution.
  5  1280                 But, frankly, in a worst-case
  6       scenario, candidly would be to drop those hours, to not
  7       do that day shift, to not do that morning shift, and
  8       that is of course the last thing on our mind and
  9       something that we would obviously consider last.
 10  1281                 MR. MILLER:  Mr. Langford, if I can
 11       add a three and a four to what Jay just said, I would
 12       say number three, you see that operational savings are
 13       not something we are asking for right away.  We are
 14       giving ourselves some time.  We have deliberately
 15       ramped them up to give ourselves the time to do the
 16       right thing and to perhaps become more efficient.
 17  1282                 Number four, we are always learning.
 18       We are not static.  I hope we have a chance to tell you
 19       about our new Victoria breakfast show where with
 20       essentially one person and one camera person and a lot
 21       of other support, we run this vibrant, energetic,
 22       fabulous show out of our bureau in Nanaimo.
 23  1283                 So we are learning how we can do more
 24       with less and we are going to bring some of that skill
 25       to how we meet this challenge.


  1  1284                 COMMISSIONER LANGFORD:  I hope we
  2       have time for that as well, but if you will permit I
  3       will just stay on track here with where I am going and
  4       kind of the education of Commissioner Langford here.
  5  1285                 I am looking at your
  6       London/Wingham/Wheatley/Windsor/Hereford/Hartford and
  7       Hampshire, hurricanes hardly ever happen.
  8       --- Laughter / Rires
  9  1286                 COMMISSIONER LANGFORD:  You have
 10       today commitments to 17 hours of local news and eight
 11       hours of local non-news and 5.4 hours a week of
 12       separate local news originating in Wingham and 10 hours
 13       per week of local Windsor news, which is quite a pile.
 14       It is somewhere just over 40 hours, if I can still add.
 15       I may have got it wrong, but it is still quite a pile
 16       of hours.
 17  1287                 You are proposing, again quite within
 18       the parameters of the Television Policy, 15.5 hours a
 19       week of local programming overall, and then there was
 20       some call to arms from Windsor, but that is perhaps
 21       going to up that time for a couple of years or so, as I
 22       understand it.
 23  1288                 But let's just for the sake of
 24       argument say that you conceivably in a worst-case
 25       scenario here could find yourself more than cut in half


  1       on local programming news and non-news and other places
  2       like Wingham and -- well, let's leave that for a
  3       moment.  Overall more than cut in half.
  4  1289                 What do you fill that with and how is
  5       that a cost saving?
  6  1290                 MR. MILLER:  Again, I will start.
  7  1291                 First of all, it does get confusing
  8       because some of the definitions change in a sense as to
  9       how we look at it and how the Commission now looks at
 10       it.  That local non-news commitment ended up being
 11       served by what we consider to be a local common
 12       program, now our breakfast show, that is seen across
 13       all three of those stations.  The separate local news
 14       was the signal that it actually to be separate.
 15  1292                 When you have a chance to talk to the
 16       team from the NewPL, they will tell you how, first of
 17       all, we are going to effect the changes we have
 18       proposed for Windsor and Wingham.
 19  1293                 In terms of for CFPL, what would
 20       ultimately happen, for example, is the news in the
 21       evening, both the suppertime and the late night would
 22       remain the same.  In the morning, instead of having
 23       perhaps a London breakfast show it might be, as you
 24       have suggested, a regional Ontario breakfast show,
 25       perhaps with inserts, perhaps with not from news.  That


  1       is the kind of thing that would change.
  2  1294                 In other words, the programming would
  3       come most likely -- and this again is just an initial
  4       estimate, a crack at it -- from taking some of the
  5       shows that have been strictly local and make them more
  6       regional across Ontario.  That is certainly one option
  7       that we would look at.
  8  1295                 COMMISSIONER LANGFORD:  So basically
  9       you are not in the market for any new shows under this
 10       scenario.  What you are doing is culling the inventory
 11       you have and choosing one out of three, shall we say
 12       for sake of argument, and running that across the
 13       Ontario network.  Is that one of the solutions you have
 14       looked at?
 15  1296                 I just want to make sure I understood
 16       what you have said.
 17  1297                 MR. MILLER:  What I have said is,
 18       again we are talking still about the worst-case
 19       scenario, should we have to go to what we filed as the
 20       minimum commitment, certainly one of the options is to
 21       do what you have said.
 22  1298                 But beyond thinking about it in
 23       theory and beyond, again, understanding and making sure
 24       that we could achieve the operational savings through,
 25       for example, changing the number of crews and making


  1       sure we could still meet the minimum commitments of
  2       hours in so doing, we haven't spent a lot of time sort
  3       of figuring out exactly how we would balance it.
  4  1299                 Again, as you will hear from our
  5       people, we can be very creative and still be very
  6       local, but in accordance with your "local" definition
  7       have a lot fewer hours.  So for example, that 1.5 hours
  8       on Wingham, it is the same people, still four people in
  9       Wingham, the smallest market in Canada with a
 10       television station, it is 3,000 people at Wingham, we
 11       still have those same four people there, but instead of
 12       having to produce the same amount of hours, they are
 13       producing more targeted hours.
 14  1300                 So from that local community's
 15       perspective, they will see as much local reflection as
 16       they ever had, but we will be able to produce it more
 17       efficiently.
 18  1301                 COMMISSIONER LANGFORD:  So it won't
 19       be 1.5 hours of Wingham, it will be 1.5 hours of
 20       Wingham wrapped into some other regional perhaps
 21       morning show?
 22  1302                 MR. MILLER:  Precisely.
 23  1303                 COMMISSIONER LANGFORD:  So I want to
 24       be sure I'm clear on this now.
 25  1304                 It is not a matter, then, of having


  1       to refill or differently -- how do I put this?  Let me
  2       back up.
  3  1305                 You have to do 60 per cent during the
  4       day Canadian.  There is certainly nothing clearer than
  5       that.  So it is not a matter of dropping, for example,
  6       the news at noon in Ottawa/Pembroke and filling it with
  7       a fishing show, it is just a matter perhaps of dropping
  8       the news at noon as it comes out of Ottawa/Pembroke,
  9       filling it with one news at noon that would go across
 10       all three, and then having inserts from different
 11       communities to give people watching it a sense that,
 12       yes, we are somewhere on the board in this -- we are
 13       somewhere on the assignment board in this show.
 14  1306                 Is that a fair characterization?
 15  1307                 MR. SWITZER:  It is certainly
 16       possible, but that is not the specific plan to deal
 17       with worst-case scenarios.  There are probably
 18       20 plans.
 19  1308                 There are lots of other programs we
 20       are producing in these stations.  We may end up
 21       producing a daily show in Victoria of one kind or
 22       another that we think has value and merit and if
 23       economics prevail and there are pressures and an
 24       excellent show is being produced in one area, it may
 25       knock out other local production that doesn't


  1       contribute in Ontario or in either direction.
  2  1309                 So we don't have the specific plan.
  3       We can talk about what we must do in a worst-case
  4       scenario and we know that it will involve crews and it
  5       will involve large blocks of programming and that there
  6       will have to be a way to change the way we share,
  7       repurpose and reuse other programs to fill those
  8       day parts.
  9  1310                 We are not trying to in any way be
 10       evasive, but to suggest we have a year and our
 11       financial suggests we have a year to deal with planning
 12       for what we hope won't be a worst-case scenario.  That
 13       gives us time to look at all of our options.
 14  1311                 COMMISSIONER LANGFORD:  You have
 15       spoken persuasively and at times eloquently today about
 16       how you are different from the big guys, the guys who
 17       can outbid you, and one of the big differences of
 18       course has been this kind of local, perhaps now it
 19       will be regional sort of connectedness, if I can put it
 20       that way.
 21  1312                 Is there a chance under any of the
 22       scenarios that you will look more like the big guys?
 23       You still won't have as deep pockets, but in fact
 24       things like local news at noon, perhaps your morning
 25       show, whatever regional shows, anything from Bingo


  1       to -- I don't have the -- but anyway you have named
  2       some of them today, some of your local shows,
  3       "Speaker's Corner" for example, that some of these will
  4       just simply give way to, shall we call it, Canadian
  5       acquired for lack of a better term?
  6  1313                 MR. ZNAIMER:  The answer is no.
  7  1314                 COMMISSIONER LANGFORD:  Why is that?
  8  1315                 MR. ZNAIMER:  There is no way that
  9       whatever adjustments we have to make will strike at the
 10       heart of the stations.
 11  1316                 We have various mechanics available
 12       to us to recapture a difficult financial position, but
 13       these stations are made up of more than just this
 14       program or that program.  The identity of a CITY-TV is
 15       derived from a multiplicity of components.  You have
 16       mentioned "Speaker's Corner".  It could be our voice,
 17       you know, it could be the visual style.  Many people
 18       identify the components that pleases them the most.
 19  1317                 The sum total is a station that is
 20       crisp, clear, easily identified, it existed before we
 21       ramped up to 45 hours, it will exist after we take
 22       those numbers of hours down, if we must.
 23  1318                 If I may add a small coda, when we
 24       speak of flexibility, if we have a tough moment to deal
 25       with and we must contract, there is nothing to prevent


  1       us from bouncing back when that difficult period has
  2       passed.
  3  1319                 COMMISSIONER LANGFORD:  Well, that is
  4       heartening.  I don't mean that facetiously, it is
  5       heartening, but it may not have the legs to survive
  6       this day.
  7  1320                 I am not asking you to make policy on
  8       the fly here, but your documents, your application
  9       documents clearly have minimum numbers which have been
 10       proposed to us in writing and today as absolutely
 11       floors, worst-case scenarios.  You have minimum numbers
 12       now from licenses you have purchased or had renewed
 13       under your own stewardship and you have exceeded them,
 14       regular as clockwork.  Hats off to you.
 15  1321                 Why wouldn't you come in with a less
 16       depressing proposal to us, knowing full well that you
 17       can come to us at any time if you are in an urgent
 18       situation and say to us,  "Look, we told you the worst
 19       thing in the world had happened in Toronto.  We warned
 20       you in Hamilton not to do it.  You did it.  We have
 21       told you what has happened.  We have reiterated what
 22       has happened.  We have made our best efforts.  We can't
 23       do it any longer and we propose the following
 24       solution."
 25  1322                 Why would you give us the worst news


  1       today when, first of all, you are a year away from one
  2       of the stations launching.  You have no real hard
  3       empirical evidence yet that the economy won't recover
  4       and that everybody will be happy as heathens along the
  5       way economically.  Why would you ask us to take this
  6       step and to put it in some kind of regulatory concrete
  7       when there really isn't any need to do it now?
  8  1323                 MR. SWITZER:  Let me begin and I know
  9       Peter wants to join in.
 10  1324                 We certainly have -- and I will chose
 11       my words carefully -- an urgent situation particularly
 12       with the NewNet stations.  We have reviewed with you
 13       that since 1997 their cumulative losses approximate
 14       $46 million.
 15  1325                 Two, we have evidence in the first
 16       four weeks that the pressures on program prices are
 17       real and significant and if the early news is bad we
 18       know it will get worse.
 19  1326                 Number three, we have real evidence
 20       from informal discussions with advertising agencies
 21       that there is pricing pressure in the market.  In
 22       Toronto unit prices cost per thousand, cost per points,
 23       are going down, even for this year, because Rogers is a
 24       very smart and successful broadcaster, very
 25       experienced, it is putting pressure on all of us


  1       immediately for fall.
  2  1327                 So these are not hypotheticals.  The
  3       first taste of what we are facing is real and we have
  4       made it as specific as possible in the documents filed
  5       last week.
  6  1328                 As to the problem of our desire to
  7       not come before you and declare some kind of emergency
  8       in the weeks ahead, I would like Peter to add to that.
  9  1329                 MR. MILLER:  We said in our opening
 10       statement we needed a stable regulatory climate and
 11       that stability has two aspects.
 12  1330                 One, consistency with the policy
 13       that you have set.  As you have said, Commissioner
 14       Langford, what we have requested is entirely consistent
 15       with that policy.
 16  1331                 The other is the certainty to know
 17       that we can do what we need to do over the next seven
 18       year period, just as our competitors have that
 19       certainty.  We absolutely must know that whatever
 20       happens we can deal with it.
 21  1332                 We have spent a lot of time, too much
 22       time talking about the Toronto licensing decisions,
 23       because there are many other challenges, the ongoing
 24       threats to conventional from specialty, the problems
 25       with DTH.  It is having a major impact on all our


  1       stations in terms of advertising, and that is only
  2       going to increase as DTH in Canada goes from about
  3       $2.2 million to over $3 million, perhaps $4 million.
  4  1333                 Issues of interactivity.  I said
  5       earlier that last license renewal no one had heard of
  6       the Internet, now we are dealing with all of those
  7       challenges, we are dealing with issues of PVRs, we are
  8       dealing with huge changes to the viewing patterns of
  9       our audiences.
 10  1334                 And, finally, we are talking about
 11       all these new digitals, huge threats to our traditional
 12       movie audiences, huge threats to our niches in music
 13       and other categories.  We absolutely must have the
 14       certainty from you that says we can deal with it and we
 15       can deal with it like that.
 16  1335                 In terms of over performance,
 17       Mr. Langford, we have over performed.  If we were a
 18       different company we would have come today and
 19       announced the cuts, but we are not prepared to do that
 20       because we built these stations.  We built them, we
 21       invested in them, we want to continue to do so and we
 22       are going to give ourselves the time to rationally and
 23       carefully look at how to recoup the losses that we are
 24       going to suffer.  It is not theoretical, it is very,
 25       very clear.


  1  1336                 That is why we need seven year
  2       licenses and that is why we need the flexibility that
  3       we have asked for and we think, quite frankly, in the
  4       context, we think we are being very, very reasonable.
  5  1337                 COMMISSIONER LANGFORD:  I don't want
  6       to argue the toss with you because no one would argue
  7       against regulatory certainty, certainly not after some
  8       of the public pronouncements we have heard lately.
  9  1338                 But your own plans are not completely
 10       certain.  In some ways you have created your own world
 11       of uncertainty, if I may say so.  You talk about moving
 12       from local and having the flexibility to be regional,
 13       but that is not very clear.  We have put some meat on
 14       the bones today, but the application itself is not a
 15       study in clarity in that sense.
 16  1339                 You have talked in the
 17       Windsor/Wingham area, Windsor particularly, of dropping
 18       the whole local commitment entirely, then I would only
 19       assume, I don't know, I don't sit in your boardrooms in
 20       response to the Mayor of Windsor, rethought that and
 21       came back with another approach that you would keep it
 22       alive but for two years, minimum two years and you
 23       would revisit it at that time.
 24  1340                 So you are not adverse, I would
 25       suggest, to a little uncertainty in your own life.


  1  1341                 I guess turned on its head, I think I
  2       could make a fairly cogent argument that what we --
  3       what I am suggesting, I shouldn't say "we", my
  4       colleagues may not be on board with this at all -- but
  5       what I am suggesting at this point in fact is a far
  6       more certain approach, because you are sticking with
  7       the tried and true CHUM model that Mr. Znaimer has
  8       built his life on, and others around him.  One has only
  9       to listen to your opening statement today to hear the
 10       words "commitment to local".  That message is there
 11       repeatedly.
 12  1342                 So what could be more certain that
 13       you folks coming in here and saying, "There are
 14       problems, but we have invested a huge amount of money
 15       in the NewRO and in different facilities here and there
 16       and the other thing.  We are going to try to stick with
 17       this model.  It is a certain model.  It is a winner.
 18       It is improving.  Revenues are going up.  We see a
 19       brighter future.  We have some big capital investments
 20       to pay off, but we can do it.  We are putting you on
 21       notice now that we may come back if there is a problem,
 22       if we have misjudged, but right now it is full steam
 23       ahead.  We are staying with the local model that we
 24       have stuck with all these years and we are going to do
 25       it better than anyone else."


  1  1343                 Wouldn't that be a far more certain
  2       atmosphere to create here in this room than the one you
  3       have created with best-case scenarios, worst-case
  4       scenarios, changed scenarios, "Maybe we will have to do
  5       this, we hope we won't have to do it.  We may go down
  6       to one crew, we might not go down to one crew.  We have
  7       an exciting thing going on in Victoria which is
  8       different than our exciting thing going on in Ottawa."
  9  1344                 To me that may be life, and it may be
 10       messy like life, but it is not particularly the type of
 11       message that I would bring -- I am speaking very
 12       subjectively now -- to a regulatory proceeding if I
 13       were trying for certainty.
 14  1345                 MR. MILLER:  I hope others might join
 15       in.  I guess we have a very different perspective.
 16  1346                 I think again -- and I don't know how
 17       many more times we can repeat it -- we looked at the
 18       situation we face, we looked at the possible things we
 19       might have to do in light of that situation.  It is not
 20       theory, it is real.  We know the numbers, we know
 21       pretty accurately what is going to happen next year.
 22       We know pretty accurately what is going to happen the
 23       year later.  We made it clear going into this renewal,
 24       even absent those decisions, that we needed to get our
 25       conventional group on a firmer financial footing.  We


  1       had no choice.
  2  1347                 That imperative is still there so we
  3       have to move in that direction.  And we don't operate
  4       in a vacuum any more than you do.  We operate in an
  5       environment where we face very strong competition from
  6       larger players, from specialty services and now in the
  7       heart of the revenue base of this company, and the
  8       heart of the GTA, two new stations.  So we have to
  9       respond to that.
 10  1348                 We have come with commitments that
 11       are entirely reasonable in light of that, and all we
 12       ask -- all we ask is for the same certainty that you
 13       have given our competitors.  You have just licensed a
 14       player in Toronto that is going to do less local
 15       programming than we are currently committing to as an
 16       absolute bare minimum on CITY-TV.  We are doing more
 17       ethnic programming as a percentage of acquired
 18       programming than that applicant promised.  So by any
 19       and every measure what we proposed is entirely
 20       reasonable.
 21  1349                 Looking at our bottom line as it
 22       existed before the decision that came out four weeks
 23       ago we had to make changes, now that imperative is even
 24       stronger and we are simply saying:  Give us the tools
 25       to do what we need to do so that we don't face the


  1       uncertainty of having to come back and having to face
  2       the possible no.
  3  1350                 MR. WATERS:  Maybe I could just add
  4       to what Mr. Miller has said.
  5  1351                 We came to the hearing you were at in
  6       Toronto and Hamilton with those numbers on the revenue
  7       impact of each station.  We were serious there.  We
  8       knew what the impact was.
  9  1352                 You licensed two.  In your decision
 10       you read back what that impact would be on us with both
 11       Craig and Rogers, and I recall it was $9.7 million when
 12       you added them up.  Well, that $9.7 million was our
 13       profit on our conventional stations in our first year
 14       of this renewal.
 15  1353                 When our sales team did their numbers
 16       and came back with the supply and demand, that it was
 17       going to go from $9.7 million to $11.5 million, or
 18       $12 million by year two in this scenario here, that is
 19       a serious impact on our business.  I think if we came
 20       here today and said to you "Oh, we are okay.  We will
 21       be just fine.  We will find the $12 million programming
 22       increase and whatever it is", I don't think you would
 23       take us very serious in the future.
 24  1354                 We are serious about that.  We were
 25       serious about it in Hamilton, we are serious about it


  1       today.  It is a big impact on our bottom line and we
  2       need that flexibility.  We wouldn't be here asking for
  3       it and we don't want to go there, but if we have to go
  4       there, we will have to go.
  5  1355                 COMMISSIONER LANGFORD:  It wasn't
  6       your seriousness I was questioning, it was your
  7       certainty.  I think I have heard now, particularly in
  8       Mr. Miller's last comment, that this is far more
  9       certain than perhaps a reading of your application
 10       would have led one to believe.  It looked to me like
 11       something that might happen, didn't want it to happen,
 12       possibly might happen, worst-case scenarios were kind
 13       of words bantered around even today.  But from what
 14       Mr. Miller has said, that puts a different complexion
 15       on things.
 16  1356                 I will have some more local -- I am
 17       trying to split it.  It is a little difficult to know,
 18       but I will have some more questions on local, of
 19       course, when we see some of your actual representatives
 20       of the local stations a little later in the process.
 21       But those are all my questions for now.
 22  1357                 Thank you, Mr. Chair.
 23  1358                 THE CHAIRPERSON:  Thank you.
 24  1359                 Commissioner Grauer.
 25  1360                 COMMISSIONER GRAUER:  Thank you.


  1  1361                 Well, I must say I will hand it to
  2       you gentlemen for staying on message.
  3  1362                 I have a couple of questions about
  4       your corporate opening statement and then I have
  5       questions on regional and independent production.
  6  1363                 On page 10 of your opening statement
  7       you talk about that you have:
  8                              "...invested close to
  9                              $160 million dollars in
 10                              infrastructure ... jobs, and ...
 11                              programming...."
 12  1364                 I just wondered if you could
 13       elaborate for me what that $160 million is?
 14  1365                 MR. SWITZER:  I would like Prem Gill
 15       to perhaps address that.  We are having a bit of
 16       discussion here in terms of in that she had said it.  I
 17       can certainly give you top line, Commissioner.
 18  1366                 COMMISSIONER GRAUER:  That is all I
 19       am interested in.
 20  1367                 MR. SWITZER:  Oh, then no problem.  I
 21       thought you had wanted some specifics and detail.
 22  1368                 That is the summation of the
 23       investment in capital and infrastructure in Victoria
 24       for the build and the acquisition price of CKVU,
 25       together with the 104 full-time staff, local staff that


  1       we employ in Victoria, as well as the approximately
  2       145 full-time people we inherit at CKVU and of course
  3       we are growing that.
  4  1369                 COMMISSIONER GRAUER:  So the
  5       acquisition cost of CKVU, though, would be money going
  6       to CanWest Global, not to British Columbia.  Correct?
  7  1370                 MR. SWITZER:  Of course.  The point
  8       in the mention this morning was the seriousness of our
  9       investment in the market.
 10  1371                 COMMISSIONER GRAUER:  But
 11       $160 million, if it is the acquisition cost, is not
 12       money in the market.  I do understand you have two
 13       stations.
 14  1372                 MR. MILLER:  It is money going to
 15       infrastructure in the market.  Where the money goes
 16       after that is not in out control, but it did go to that
 17       infrastructure in that market.
 18  1373                 COMMISSIONER GRAUER:  Thank you.
 19       --- Pause
 20  1374                 COMMISSIONER GRAUER:  I think I will
 21       leave the others until tomorrow.
 22  1375                 What I would like to do is talk about
 23       regional production sort of conceptually, both with
 24       respect to independent production and station produced
 25       production.


  1  1376                 I don't know if any of you were here
  2       last year when we did the CTV and Global renewals, and
  3       of course pursuant to both the Broadcasting Act and the
  4       Television Policy we take the view that it is important
  5       that television, and particularly conventional
  6       television, reflect the country in terms of a cultural
  7       perspective in terms of programming, but also an
  8       industrial perspective in terms of where the
  9       investments are being made.
 10  1377                 So I wonder if you could perhaps
 11       elaborate for me somewhat your plans for the new
 12       license term with respect to that kind of regional
 13       reflection?  Both, I think British Columbia and
 14       Ontario, anything you might be doing from other parts
 15       of the country and any specifics you might have on the
 16       Ontario issues, for instance Ottawa, London, whatever,
 17       with respect to Toronto and the west?
 18  1378                 MR. SWITZER:  Commissioner Grauer, I
 19       will begin and, with your blessing and permission, will
 20       leave some of the in-house local station production
 21       reflection across the country to those program creators
 22       and programmers at the local market, which will be
 23       later.
 24  1379                 I would like to pass to Diane Boehme
 25       to talk about some of the acquired Canadian programming


  1       which is done across the country and uses funds and
  2       resources from various parts of Canada, including
  3       specific promises or commitments made in the west.
  4  1380                 Diane.
  5  1381                 MS BOEHME:  Thank you, Jay.
  6  1382                 I think just as a point of reference,
  7       as far as our breakdown of support for independent
  8       production companies across the country, I did sort of
  9       a little tally about who we have supported and how many
 10       projects we have done in the license term which we are
 11       currently in.
 12  1383                 We have supported 137 separate
 13       independent production companies over the course of the
 14       current term.  Ninety-four point eight per cent of
 15       those happens to be activity with small to medium-size
 16       enterprises, but out of that 137, 70 are based in
 17       Toronto, 41 are based in Vancouver and the rest are
 18       scattered around the country, everywhere from Halifax
 19       and St. John's through to Victoria, Regina, Saskatoon,
 20       one in Petrolia which we have supported, and this is
 21       all feature film activity that we have done.
 22  1384                 So we are, in those cases, supporting
 23       people who are telling stories from wherever they
 24       happen to be from and giving them a platform that
 25       reflects wherever they might appear in the rest of the


  1       CHUM system.
  2  1385                 MR. SWITZER:  And we make a conscious
  3       effort to make sure that those films are broadcast
  4       across the country in various windows in various orders
  5       as is appropriate so that they can be exposed to all
  6       parts of our system.
  7  1386                 COMMISSIONER GRAUER:  So then are we
  8       talking about feature films in what you have talked
  9       about here?
 10  1387                 MS BOEHME:  Yes.
 11  1388                 COMMISSIONER GRAUER:  Okay.
 12  1389                 MS BOEHME:  There is a little bit in
 13       there too.  I mean, in many cases these are the
 14       production entities that we have worked with.  In some
 15       cases that entity might -- we have done more than one
 16       project with.  In one case it might be a documentary
 17       series as well as a feature film.
 18  1390                 COMMISSIONER GRAUER:  In looking in
 19       your block schedules, and as we have talked a bit this
 20       morning, you are doing both the drama series --
 21  1391                 MS BOEHME:  Yes.
 22  1392                 COMMISSIONER GRAUER:  -- as well as
 23       the feature films, so --
 24  1393                 MS BOEHME:  Just to be specific, out
 25       of that 137, 130 of those projects were with small to


  1       medium-sized enterprises.  The seven, there were seven
  2       productions that were with larger vertically integrated
  3       or publicly traded independent production entities and
  4       those are primarily the people that we have this drama
  5       series activity with.
  6  1394                 MR. SWITZER:  And of course it is
  7       these feature films, as we discussed earlier today,
  8       that are mostly the full 10 point projects that in many
  9       ways we are most proud of.
 10  1395                 COMMISSIONER GRAUER:  One of the
 11       things that is, of course, of great interest to me, and
 12       I think to all of us at the Commission, is the extent
 13       to which these acquired independent productions, the
 14       extent to which they make use of Canadian creative
 15       talent.  I wonder if you could tell me to what extent
 16       do you look at that criteria when you are licensing,
 17       prelicensing, script and concept and to what extent is
 18       that important as you move forward in your --
 19  1396                 MS BOEHME:  Yes.  It is absolutely
 20       fundamental to our development process.  In fact, I
 21       think in the eight years that I have been doing this
 22       job I can think of only two projects where there was
 23       not the entire team were Canadian.  In one case there
 24       was an American writer, and in the second case there
 25       was an American writer.  But they were Canadian


  1       producers, Canadian directors.  As far as Canadian
  2       on-screen talent goes, as I said a little bit earlier,
  3       in the majority of the cases that also holds true.
  4  1397                 MR. SWITZER:  Our particular strength
  5       is with new and emerging directors, first-time
  6       directors and in stories that others may not finance.
  7       We would rather make a difference with a smaller
  8       independent project than to join on a much larger
  9       project with American stars that may be Canadian that
 10       may get made with or without our support.  Almost
 11       exclusively our support has been on these smaller, more
 12       intense personal projects where our funds and our
 13       development and our support makes a difference.
 14  1398                 MS BOEHME:  In the development
 15       commitments that we make with the producers,
 16       contractually they have to agree that the participants
 17       are Canadian creatively above the line.
 18  1399                 COMMISSIONER GRAUER:  That is in your
 19       feature film and long-form.
 20  1400                 MS BOEHME:  Yes.
 21  1401                 COMMISSIONER GRAUER:  What about the
 22       drama series?
 23  1402                 MS BOEHME:  In the drama series it is
 24       different.  As I think I alluded to this morning, we
 25       are not necessarily the initiating partner.  In the


  1       cases where we are the initiating partner, that is
  2       different, but where we have co-production entities
  3       where we have to respect that there are Treaty
  4       participants that are directors or producers from those
  5       countries, that certainly we have a more reduced
  6       participation there.
  7  1403                 But "Lexx" for instance, two of the
  8       three principal characters were Canadian.  One was a
  9       representative of the international co-production
 10       company.  All of the writing was Canadian.  I think
 11       85 per cent of the directing talent was with Canadians
 12       and the others were the treaty co-production partners.
 13  1404                 MR. SWITZER:  It is getting to be a
 14       little more difficult in the series area to make a
 15       difference given the impediments that we discussed
 16       earlier today in terms of financing at CTF and
 17       Telefilm.  We are trying to grow in the series area.
 18       It will not overcome or take over from the priority of
 19       these Canadian films.  They remain our most important
 20       priority.  There are hundreds of them and it is the one
 21       thing that is in common.  It is where we believe we can
 22       make the most difference.
 23  1405                 But in that we are growing in series
 24       and other areas, our next problem to solve will be to
 25       get past this funding crisis where, because of coverage


  1       differences, our national network license fees are not
  2       able to trigger financing to the same level as the
  3       larger players.
  4  1406                 MS BOEHME:  And there is momentum
  5       there.  I think you will also know that there has been
  6       some fairly common and public discussion with some of
  7       the independent production community on the feature
  8       film side about allowing third party or American cast
  9       as well in order to increase box office and get budgets
 10       up in order for them to be able to finance their films.
 11  1407                 We have been included in the process
 12       of that discussion and in any given year out of the 15
 13       to 20 features that I might precommit to, I would
 14       think -- I mean last year, for instance, I precommitted
 15       to 17 films, nine of which were with first-time
 16       filmmakers.  Every one of those first-time filmmakers
 17       were, top to bottom, all Canadian.
 18  1408                 In the others, there were only two
 19       that were larger multi-million dollar productions, they
 20       were International Co-Productions or there was an
 21       American cast brought in, and one single American cast.
 22  1409                 COMMISSIONER GRAUER:  I am just
 23       trying, for helping myself because I want to do
 24       independent production generally as well as this
 25       regional production and maybe the way to handle this,


  1       as I say, we can talk about your station-produced when
  2       your stations come in.
  3  1410                 But you are new to British Columbia
  4       and aside and apart from any of the public benefits
  5       expenditures, do you have a -- I think you said this
  6       morning, Mr. Switzer, that you were here to be specific
  7       and make commitments, and going forward do you have any
  8       internal mechanisms in place to ensure that there is a
  9       balance of your, let's say the feature film productions
 10       originating from British Columbia or other parts of the
 11       country?
 12  1411                 MS BOEHME:  Well, I think certainly
 13       in connection with the NewVI which is out of Victoria,
 14       we have that commitment there that is $12 million that
 15       we will spend with independent producers over the
 16       license term.  A minimum of 50 per cent will be spent
 17       with Island-based producers and we have already
 18       announced initiatives to try to raise the level of
 19       production there.  The others we have committed to
 20       spend with British Columbia-based producers and that is
 21       over and above our commitment with CKVU.
 22  1412                 COMMISSIONER GRAUER:  Okay.  Because
 23       of the licensing commitments with CIVI.  Maybe if we
 24       talk about CKVU then, apart from --
 25  1413                 MR. SWITZER:  Commissioner Grauer, to


  1       your question, we have not had to formalize it in the
  2       past.  If you were to take a snapshot the month before
  3       we were fortunate enough on either of these B.C.-based
  4       stations and were to look at the past five years or six
  5       years or seven years, through the natural course of the
  6       quality and the material that was coming through
  7       Diane's office, sometimes to the detriment of Toronto
  8       producers -- not to the detriment, but as a result of
  9       the supply that came in the door, some years it was
 10       very Halifax heavy, in some years Calgary heavy, in
 11       many years Vancouver heavy.  It hasn't been enveloped
 12       in any way and it has been a reflection of the quality
 13       that has come through the door.
 14  1414                 The diversity is terrific, the
 15       exposure on many of our stations in terrific and
 16       genuinely the stations are better off because of
 17       everything going east to west and west to east.
 18  1415                 COMMISSIONER GRAUER:  As you probably
 19       know, we agreed with CTV and Global that we would set
 20       up a reporting mechanism where they would report
 21       annually on a variety of aspects of their independent
 22       production, including where it originates, and I wonder
 23       if you could give me your comments on the possibility
 24       of you doing a similar reporting?
 25  1416                 MR. MILLER:  Perhaps I can get back


  1       to you on the specifics of that in reply.  We will have
  2       an annual reporting mechanism on the benefits for CKVU,
  3       which is the formal part of our contribution to the
  4       independent production sector there.  So that is a
  5       given.
  6  1417                 Let me look at what else we might do
  7       for you there.
  8  1418                 COMMISSIONER GRAUER:  I really do
  9       want to keep the benefits separate because I want to
 10       talk to you about the benefits separately because I
 11       think the public benefits are one aspect, but ongoing
 12       regular activity is also important.
 13  1419                 MR. MILLER:  Maybe I can actually
 14       speak to that ongoing regular activity.
 15  1420                 I think, as Jay is signalling, in the
 16       normal course we produce where we can get the best
 17       product.  We, by the way, have not demanded the $2,000
 18       cup of coffee.  Diane spends more time on the road than
 19       anybody I know and she is meeting with independent
 20       producers across the country on a regular basis.
 21       Now with our local development officers, our
 22       independent producers have the choice of going to Diane
 23       or going to our local person.  So we have that
 24       infrastructure set up.
 25  1421                 We also have script and concept


  1       development at all our stations, some of it within the
  2       benefits for example at VU, and with the benefits that
  3       are ending on RO and PL, but then even when those
  4       benefits have ended for RO and PL we are continuing
  5       with script and concept development as we have and will
  6       continue at CITY.  So that is the other triggering
  7       mechanism to develop talent.
  8  1422                 So it is that twin approach of making
  9       sure that we can sort of have some development funds
 10       there to trigger emerging talent and then, if you will,
 11       throw the weight of CHUM Television behind any projects
 12       that we want so that we can take it across our
 13       appropriate stations across the country.
 14  1423                 COMMISSIONER GRAUER:  As you know,
 15       this really came about because there were a number of
 16       organizations in western Canada, in particular B.C.
 17       Film, AMPIA from Alberta, SaskFilm and Manitoba Film &
 18       Sound who have had grievances for many years about
 19       having not reaped the benefits of the Canadian
 20       broadcasting system.
 21  1424                 Really what this is designed to do
 22       is, the more light that we can shine on the licensing
 23       and funding activities of all of the private
 24       broadcasters, and the better understanding all of us
 25       can get as to exactly what is transpiring, hopefully we


  1       can reduce those grievances and have people feel a
  2       sense of inclusion in terms of enjoying the benefits.
  3  1425                 I am not meaning by any stretch of
  4       the imagination to suggest that CHUM has not been
  5       pulling its weight, but I think it is really important
  6       for all of us that the more we see, the more we
  7       understanding, the clearer it is, then the less
  8       aggravation we encounter.
  9  1426                 MS BOEHME:  I certainly have to
 10       agree.  We have been very involved with all of the
 11       organizations that you have cited, routinely in touch
 12       with them about what our needs are and what their needs
 13       are and how we can cooperate by helping each other.
 14  1427                 I think the other thing that we are
 15       really active working with is the CFTPA in defining
 16       terms of trade which I think is going to help all of us
 17       to know exactly who is doing what and why we are doing
 18       things and that everything is transparent.  They have
 19       been very good about it and it is one of those things
 20       that is high on my list of priorities of things to do.
 21  1428                 But we have been active in British
 22       Columbia.  If you want to look at "Last Wedding" as an
 23       example, it was four years in the making, long before
 24       CKVU or CIVI was on our horizon here.
 25  1429                 It just happened to be a great


  1       talented team of people and a terrific property that,
  2       if you want to use an old-fashioned term of
  3       psychographically, demographically it is the kind of
  4       film that we were looking for and it comes out of a
  5       really vibrant, vital independent community.  That
  6       community is not going anywhere.  As long as those good
  7       ideas are there, there is no shortage of that, we will
  8       certainly be there front and centre.
  9  1430                 COMMISSIONER GRAUER:  I wonder if you
 10       can help me.  As you know, one of the great
 11       frustrations in British Columbia has been the inability
 12       to develop a strong indigenous production industry.  I
 13       think it is a frustration that is deeply held there.
 14       There are of course the talented people.  We don't have
 15       the strong indigenous production companies as exist
 16       even, frankly, Alberta is a bit stronger than British
 17       Columbia has been.  Certainly in the feature film area,
 18       as you point out, there are some real success stories
 19       out there.
 20  1431                 I would be curious to know what kind
 21       of license fees generally?  I know you talked about
 22       "The Red Violin" and it was quite a significant license
 23       fee that you paid and that was across all, both Bravo!,
 24       CITY and some others.  But what in general are the
 25       kinds of license fees that you would be paying for a


  1       two-hour feature on CITY and, let's say, CKVU and your
  2       ability to -- what I am really trying to do is get a
  3       fix on the 10 out of 10 per hour license fee that a
  4       producer might receive.
  5  1432                 MS BOEHME:  Sure.  Just by
  6       coincidence and maybe to put it in context, as a matter
  7       of fact during the lunch break I have been doing some
  8       negotiating on a B.C.-based film which I think is maybe
  9       the next "The Red Violin" or even bigger in the market.
 10       It has been something that we have in development for
 11       the last 14 to 18 months.
 12  1433                 It was one of those things that we
 13       were negotiating, as was CBC for the same rights.  In
 14       fact CBC was dismayed at the fact that we came to the
 15       table with a significant enough license fee as we did
 16       and they basically backed away because they couldn't
 17       afford to compete at that level.
 18  1434                 It is a $10 million picture.  It is
 19       the kind of thing that deserves serious six figure
 20       license fee on a post-pay basis and we were more than
 21       happy and fortunate enough to be able to come to the
 22       table in that way where we can turn heads where we
 23       need to.
 24  1435                 We have been functioning very well
 25       with the distribution community at the same time


  1       because this is also a very complex question, as I am
  2       sure I don't need to remind you, when it starts to talk
  3       about the new state of Telefilm and the size of market
  4       guarantees and how that is changing with the actual
  5       distribution.
  6  1436                 So it depends on the rights that we
  7       acquire and the size and scope of the film.  A film
  8       like that I am obviously paying a more sizeable license
  9       fee than a small digital first-time feature that has a
 10       total budget of $300,000, which is less than the entire
 11       license fee of a larger picture.
 12  1437                 So it is very much on a case-by-case
 13       basis depending on the project.
 14  1438                 COMMISSIONER GRAUER:  Would this film
 15       for instance, the license fees be part of your benefits
 16       money?  Would that be the funds that you are using?
 17       Because I am really trying to not go there but get a
 18       sense, not just this one, but what is an average
 19       license fee that you would be paying?  How does it work
 20       out on an average?
 21  1439                 If we look at what are the license
 22       fees that conventional broadcasters are paying for
 23       10 out of 10, we are looking at anywhere between, what,
 24       $150,000 and $200,000 an hour.  So I'm just trying to
 25       equate it.


  1  1440                 MR. SWITZER:  There are theatrical
  2       films, there are made-for-television movies.  There are
  3       many categories which Diane has touched upon and she
  4       can't -- there may be a small, little personal
  5       "Au Tour" digital video project where $50,000 makes her
  6       day and let's the film get off and running and that is
  7       fair value for the quality of the film, the attention
  8       we are going to get, the ratings we are going to get.
  9  1441                 At the other end, we have licenses of
 10       $300,000, $400,000 and even more, and it -- in other
 11       words, averages are deceiving.  I could probably
 12       suggest that there are more than a dozen pictures, a
 13       dozen movies in the past two years where our license
 14       fee has been in excess of $300,000 or $350,000, but
 15       there are many where it is $150,000 and some perhaps
 16       much less.
 17  1442                 MS BOEHME:  In those cases, for
 18       instance, of made-for-television movies which are
 19       putting through the funding system of the CTF, we are
 20       paying identical license fees to CTV or Global or CBC
 21       in that case.  "Stork Derby" which we aired in January
 22       was a perfect example of something that went through
 23       that funding system on a per-hour basis, we are paying
 24       identical license fees.
 25  1443                 COMMISSIONER GRAUER:  Yes.  That is


  1       the discipline of going through CTF is that your
  2       license fee is an important element of whether they
  3       match the funds.
  4  1444                 MR. SWITZER:  Commissioner Grauer, I
  5       know you are aware of this, but just to be very clear,
  6       part of the frustration in planning business and doing
  7       this wonderful storytelling is that many of these films
  8       take three and four years from development to financing
  9       to execution until they are finally made.  So the
 10       projects that we are working on now may not make it to
 11       air for three years.
 12  1445                 MS BOEHME:  And "Stork Derby" for
 13       instance, we supported that film for six or seven
 14       years.
 15  1446                 MR. SWITZER:  Four ways of
 16       development, six years of preparation and financing,
 17       and it is a full 10 point Canadian terrific true story
 18       set in Toronto.  From her first meeting until the day
 19       Ellen Baine, the Director of Programming, telecast it,
 20       was seven years.
 21  1447                 MS BOEHME:  Six and a half years.
 22  1448                 COMMISSIONER GRAUER:  Okay.  This is
 23       a good time for my next question.  Before I didn't know
 24       if it was going to be next, but it is a perfect segue.
 25  1449                 That is the whole area of script and


  1       concept development has been characterized as the R&D
  2       of television, that it is a really important element
  3       and it is part of, again, the return to the Canadian
  4       people from the broadcasters for the privilege of
  5       holding a license.  It is part of that investing in the
  6       development of the creative and intellectual resources
  7       of our people, our country.
  8  1450                 So I think it is wonderful that you
  9       work that long, but maybe you could tell me, for
 10       instance, you would do script and concept development
 11       money and then your prelicensing.  Maybe you could just
 12       take me through what kinds of percentage of investment
 13       in the final budget you would do.
 14  1451                 Do you see that as something
 15       that necessarily is going to bring you a return, or is
 16       it something that you do to hopefully develop a
 17       project, but --
 18  1452                 MR. SWITZER:  I will let Diane go
 19       through the details, because this is her life every day
 20       and if you go into her office you will see hundreds of
 21       scripts piled up around her you kind of have to fight
 22       your way through.
 23  1453                 Of course we want to see return and
 24       we want to help develop and work with producers and
 25       directors and writers that will generate stories that


  1       our viewers will want to see.  Our track record is
  2       improving.  In fact, our Canadian films, both
  3       made-for-television and theatrical are better than they
  4       have ever been.  The average tuning and average
  5       audiences are getting much better.
  6  1454                 If we were to do an analysis, I'm
  7       sure I would find they do not contribute and in fact we
  8       are spending more than we are receiving in advertising.
  9       We are here going forward, we are here growing, we
 10       believe in the future there will be a payback as it
 11       gets better.
 12  1455                 I'm sure you recognize from our
 13       schedules and our promotions and the way we deal with
 14       Canadian movies we do not "ghettoize" them.  We don't
 15       put them into corners, put titles on them and run them
 16       on Saturday night.  They are dealt with in a very
 17       serious way.
 18  1456                 As to the waves of development, how
 19       it might work, we have two pools to work with, one
 20       traditional script and concept development and the
 21       rules on the kinds of costs that qualify for that in
 22       terms of our own rules are very specific and very clear
 23       and some of those will lead to a situation where then
 24       Diane or the local development officers can commit
 25       prelicensing monies to the actual production.


  1  1457                 MS BOEHME:  If think I have to
  2       totally agree with you that it is a vital component and
  3       it has certainly been one of those things that we have
  4       been really, proud of over the years.
  5  1458                 A producer can come to us at any
  6       point in time in that process.  They can have, in some
  7       cases, a novel that they have optioned that they want
  8       to see whether or not we want to proceed into
  9       development with them and we think there is something
 10       in there.  They can come to us with a treatment, they
 11       can come to us with a final draft script where they
 12       maybe need a story editor to help them.
 13  1459                 Our budget and our involvement and
 14       our level of involvement financially depends on where
 15       they are in that mix.  If they come to us with a script
 16       that is in a fairly good shape but they need to hire a
 17       story editor to do a polish, then we don't necessarily
 18       stay as involved financially as we might for somebody
 19       who has acquired the rights to a stage play or a very
 20       preliminary synopsis or outline of an idea that we like
 21       that can sometimes take years and 10s of thousands of
 22       dollars over the course of those years to be able to
 23       support them through that.
 24  1460                 Because it is an intangible.  When
 25       you are working with creative people it takes as long


  1       as it takes and it is going to get where it is going to
  2       get.  Through no fault of their own sometimes, the
  3       rights lapse, they have a falling out with whatever
  4       production team.  I mean, there are as many reasons as
  5       you can possibly imagine.
  6  1461                 Our ratio used to be about one in ten
  7       of projects that we had supported with development at
  8       one phase or another that actually proceeded to
  9       prelicensing.  That is enormously high risk money, but
 10       when I look at it it is a high risk on a per-project
 11       basis, it is not high risk when it comes to the talent
 12       that is behind it.
 13  1462                 Because there has been a number of
 14       instances where we have had people who we have
 15       supported, the project for one reason or another didn't
 16       go ahead, but we have established a wonderful working
 17       relationship and they learned something and we learned
 18       something and it was the next one or the next one that
 19       we supported them on that actually became -- you know,
 20       we see it on our screens.
 21  1463                 So that is the investment, it is
 22       really long term.  You are right, it is filled with
 23       intangibles and if we don't put something back to the
 24       creative community we don't have anything, and if we
 25       don't put something to keep them here the seduction of


  1       going south or elsewhere is enormous.
  2  1464                 On the local level I think I want
  3       Prem to talk a little bit about what we are doing there
  4       especially with Vancouver's other stories which we are
  5       really excited about which we think is really
  6       fundamental to who we are in the future and where we
  7       are going.
  8  1465                 COMMISSIONER GRAUER:  You know what,
  9       I would love to talk about Vancouver's other stories,
 10       but what I want to do is that is part of the benefits
 11       for CKVU and I want to leave that all to end of day
 12       tomorrow, if we could.
 13  1466                 So I really want to focus on your
 14       approach going forward with all of this, being in two
 15       provinces and the kind of specific commitments you are
 16       prepared to make and how you see it both with the
 17       feature film and again with the other.
 18  1467                 MR. SWITZER:  I can start with the
 19       promises made in here and there are script and concept
 20       development funds at each of our stations.  Those are
 21       primarily executed by the local development officers,
 22       sometimes in consultation with Diane.  Those are
 23       promises that we made in this application and it is, as
 24       you say, fundamental to growing our feature film and
 25       made-for-television pool.


  1  1468                 COMMISSIONER GRAUER:  Then your
  2       100 hours of movies, long-form features, and those are
  3       for CKVU and CITY, and then there is the rest of your
  4       independent production acquired, if I can put it that
  5       way, and the extent to which you use small,
  6       medium-sized enterprises and small local producers.
  7  1469                 In that area, which is really the
  8       bulk of your activity, do you expend any script and
  9       concept development or prelicensing funds in those what
 10       are what, lower Canadian content programs.
 11  1470                 MS BOEHME:  When you say "lower
 12       Canadian content" you mean six out of 10?
 13  1471                 I can only think out of 137 companies
 14       we have dealt with that -- there are more projects than
 15       that, those are just the companies that we have dealt
 16       with -- it would probably be only one, maybe two.
 17       There are nine out of tens and out contract indicates
 18       that the writer, producer and director must all be
 19       Canadian in order for them to receive development
 20       support from us.
 21  1472                 So it is --
 22  1473                 COMMISSIONER GRAUER:  (Off
 23       microphone).
 24  1474                 MS BOEHME:  Yes.  That is correct.
 25  1475                 COMMISSIONER GRAUER:  (Off


  1       microphone).
  2  1476                 MS BOEHME:  Yes, it is.
  3  1477                 MR. SWITZER:  Generally, to be very
  4       specific and clear on some of the lower six point out
  5       of ten or seven point out of 10 dramatic series, we are
  6       not involved creatively at their conception and they
  7       are acquired for much smaller license fees.
  8       --- Pause
  9  1478                 COMMISSIONER GRAUER:  I wonder if I
 10       can -- you talked briefly about a Terms of Trade
 11       Agreement with the CFTPA and I wonder if you could tell
 12       me if you have been working with them and, if so, what
 13       is the status of that?
 14  1479                 MS BOEHME:  We have initiated
 15       conversations with them.  We have opened a dialogue.
 16       We know we want to do it, they are not quite ready to
 17       have us yet and they have said "Absolutely, we haven't
 18       heard any problems or complaints about you guys, we
 19       don't anticipate a problem."
 20  1480                 It is one of those things that is on
 21       both of our horizons, but there is no sense of urgency
 22       on either side to put one together but we have opened
 23       up a dialogue and are prepared to talk whenever they
 24       are ready.
 25  1481                 COMMISSIONER GRAUER:  I wonder if you


  1       could just -- you explained earlier how you actually
  2       had an application into the CTF and to Telefilm to do a
  3       10 out of 10 series and it wasn't accepted for funding.
  4       Your understanding is that is largely because you are
  5       not a national group and couldn't give national
  6       distribution.  Do you know that or have you had an
  7       explanation?
  8  1482                 MR. SWITZER:  No.  For the record, we
  9       do not know that.  We believe that.  We know it is a
 10       factor.  It has been discussed.
 11  1483                 MS BOEHME:  It was told to me as the
 12       reason for some lack of support on the
 13       made-for-television movie side.
 14  1484                 On the case of that particular drama
 15       series in Vancouver, it was a little more complicated
 16       than that.  It is a very long story and I think
 17       ultimately at the end of the day the producer at this
 18       point in time is feeling quite ill-done by and
 19       ill-treated by the CTF on the LFP side, which initiated
 20       a sort of ripple effect.  Because he feels that they
 21       didn't appropriately evaluate his application on the
 22       LFP side, he was then given seven days to replace, I
 23       think, $300,000 per episode in order to remain in the
 24       queue for the EIP, and despite the fact that we all
 25       love the creative and our support was there, it became


  1       problematic.
  2  1485                 But I think the producer is in a
  3       position where he is taking that up on a separate issue
  4       with the LFP and I wouldn't feel it appropriate to
  5       bring that up here.
  6  1486                 COMMISSIONER GRAUER:  Because if we
  7       look at your NewNet stations, I mean some people
  8       suggested that the location at which the production
  9       originates can be a proxy for regional reflection,
 10       which might be a bit of a challenge with the drama
 11       series that appear on the NewNet stations given their
 12       genre, science fiction and fantasy, and whatnot.
 13  1487                 I just wonder if you have given some
 14       thought to how you might -- or have you thought about
 15       doing more reflective drama, more indigenous drama,
 16       utilizing more Canadian creative talent with the drama
 17       that is on the NewNet stations.  Do you have an
 18       approach in that respect?
 19  1488                 MR. SWITZER:  Yes, we do and we would
 20       absolutely agree with you in that we would not
 21       categorize a Canadian treaty co-production shot in
 22       Australia as any kind of a refection.
 23  1489                 I guess my answer would be two-part.
 24  1490                 One, we are trying now that we have
 25       more stations together and have stepped up to the table


  1       with these very significant license fees and must get
  2       past this financing hurdle where, as again we have just
  3       discussed, we have had a 10 point conceived, written
  4       and dreamed about set in Vancouver series turned down,
  5       in part because -- at least in part because of our
  6       national coverage.
  7  1491                 So there is a genuine desire to do
  8       more and we have already stepped up to that table.
  9  1492                 We still believe, secondly, that the
 10       film component, the independent film component,
 11       although it may not make up as many hours, certainly
 12       makes up a significant amount of dollars and we have
 13       gone to great lengths in the past three years to take
 14       advantage of completely local productions.  I know the
 15       teams tomorrow will want to talk to you about that,
 16       including films such as "Juiced" shot here in Ottawa,
 17       conceived, cast, written, directed, a terrific small
 18       film that was seen across our station group.
 19  1493                 Similarly, films in the NewNet area,
 20       including a film called "Shadow Lake" set in VR-land,
 21       conceived, written, shot in the area.  There are plans
 22       for similar local films to be conceived -- or we will
 23       develop them and expect that they will completely be
 24       reflective of those communities and will be seen across
 25       the system, not as one-time only events, but as the


  1       start of an ongoing process to increase the frequency
  2       of these so that we can do a better job.
  3  1494                 Diane, do you want to add to that?
  4  1495                 MS BOEHME:  I just wanted to say we
  5       have looked at that proactively down the road and in
  6       the event that that is a way that we wanted to go we
  7       are developing a couple of things that fit exactly that
  8       mould, particularly they are coming through the Island,
  9       they are Island-based stories, they are set
 10       identifiably on the Island, and it is one of those
 11       things that it is going to -- again, it takes as long
 12       as it takes.
 13  1496                 They are at a very early script
 14       stage.  We had hoped they were going to be ready to go
 15       through in this funding round, but creatively it just
 16       wasn't there yet.  But it is one of those things that
 17       we are trying to address long-term.
 18  1497                 MR. SWITZER:  And if we can get to
 19       the point where each of the NewNet stations can
 20       contribute one feature film per year to the system that
 21       is seen elsewhere, that would be a wonderful success,
 22       certainly a good start.
 23  1498                 COMMISSIONER GRAUER:  The other area
 24       perhaps you could give me some help with is the whole
 25       area of rights ownership and the extent to which rights


  1       ownership factors in when you are program planning.
  2       Again, I am really thinking here of acquired
  3       programming, owning Canadian rights, U.S. rights,
  4       international rights.
  5  1499                 Do you consider rights ownership at
  6       all, especially with the independent producer?
  7  1500                 MR. SWITZER:  Yes.  I want Diane to
  8       answer that, but other broadcasters deal in different
  9       ways and they make their own choices for their own
 10       reasons.
 11  1501                 We have chosen to deal specifically
 12       with license fees where we are strictly a short-term
 13       licensee, ownership completely remains in the hands of
 14       the independent producer, and for probably 99 per cent
 15       of the productions we have been involved with to date
 16       Canadian rights.
 17  1502                 We have had other opportunities to
 18       complicate that or step that up or perhaps become more
 19       aggressive and we are avoiding the potential for abuse.
 20       Our license fees are done in a very transparent way.
 21       If we then choose to bring to that producer an
 22       opportunity for exhibition elsewhere in the world, we
 23       will, after the fact in a very transparent way, come
 24       back and say "We may have a station in Territory A, B
 25       or C and they are prepared to license this, would you


  1       like to sell it to them".
  2  1503                 Diane, can you add anything?
  3  1504                 MS BOEHME:  No, that is perfect, Jay.
  4  1505                 We only take Canadian rights, we only
  5       take English Canadian rights by and large, and the only
  6       thing we do when I have producers -- and very often
  7       they are the small emerging producers who don't have a
  8       lot of experience and they ask me about things like
  9       that, then one of the intangible things we do is we
 10       broker relationships with people who we know in the
 11       business who are looking for that kind of product, but
 12       we don't take them ourselves.
 13  1506                 COMMISSIONER GRAUER:  My question
 14       wasn't whether you took rights, but again I think one
 15       of the really critical aspects of growing an indigenous
 16       industry here and really developing our own talent is
 17       retaining the ownership of rights.  My concern is with
 18       a lot of these industrial programs, with a lot of
 19       these -- they may be Canadian producers, but I don't
 20       know how many of the rights remain here.
 21  1507                 I think that these are really good
 22       opportunities, we don't have them that often, to really
 23       talk with the industry, because broadcast licenses are
 24       critical to the development of these, as you know, and
 25       the broadcasters play an essential role in the


  1       development of these small, medium-sized and peripheral
  2       industries, if I can say, with respect to our talent in
  3       this country.
  4  1508                 So to take this opportunity to really
  5       push and get a better understanding of where the rights
  6       ownership lie and the funding issues and pushing you a
  7       little bit because I appreciate you may have
  8       shareholder issues and I guess we are here for our
  9       shareholder, being the Canadian public.
 10  1509                 MR. SWITZER:  We fundamentally
 11       agree with you and with these concerns and particularly
 12       in the area of feature films with small producers and
 13       the emerging small Canadian distribution companies.
 14       We have been their best friends in that we provide
 15       license fees that, as you suggest, are critical and
 16       all we ask for are limited Canadian English-language
 17       television rights.
 18  1510                 COMMISSIONER GRAUER:  I think we will
 19       leave it there and I will finish up tomorrow morning.
 20       I don't have too much.
 21       --- Pause
 22  1511                 THE CHAIRPERSON:  Thank you.
 23  1512                 Commissioner Cardozo.
 24  1513                 COMMISSIONER CARDOZO:  Thank you,
 25       Mr. Chair.


  1  1514                 I will just start on a couple of
  2       areas that I am going to be questioning and I will tell
  3       you about the areas they belong to as well, which you
  4       have probably figured out.
  5  1515                 What I am going to be covering is
  6       described video, closed captioning, ethnic programming
  7       and reflection of cultural diversity.  Maybe I will
  8       leave that last one until tomorrow, partly because of
  9       course I only got your input a few hours ago so it will
 10       give me what, another 10 hours to read it overnight and
 11       have some good questions for you tomorrow.
 12  1516                 At any rate, let me start with
 13       described video.
 14  1517                 I note your clarification I think,
 15       Mr. Switzer, earlier today that your commitments on
 16       described video and closed captioning are firm and
 17       not up for reduction through any scenarios we have
 18       talked about.
 19  1518                 MR. SWITZER:  Correct
 20  1519                 COMMISSIONER CARDOZO:  Okay.
 21  1520                 The commitments that you have made
 22       for a certain number of hours per station taking in at
 23       different times depending on the size of the station,
 24       and so forth, those are original hours, are they?  They
 25       are not repeat hours?


  1  1521                 MR. MILLER:  We have followed the
  2       precedent set with CTV and Global which, if memory
  3       serves, was half original, half -- it was 50/50.  One
  4       repeat was allowed.
  5  1522                 COMMISSIONER CARDOZO:  We can clarify
  6       that, that might have been for the first couple of
  7       years there was a repeat, if I'm not mistaken.
  8  1523                 MR. MILLER:  I thought it was
  9       throughout the term, but I can check that for reply.
 10  1524                 COMMISSIONER CARDOZO:  Okay, could
 11       you?  Yes, please do.
 12  1525                 What you are willing to do is the
 13       same commitments as CTV and Global?
 14  1526                 MR. MILLER:  Again, we have modelled
 15       our commitments on CTV so, as you have alluded to, the
 16       description commitments kick in immediately for CITY-TV
 17       and CKVU, but for the NewNet stations they don't kick
 18       in for three years and that is parallel to what you did
 19       with the major market CTV stations --
 20  1527                 COMMISSIONER CARDOZO:  For the small
 21       stations.
 22  1528                 MR. MILLER:  -- versus their smaller
 23       market stations.  So we took our lead from what you
 24       did there.
 25  1529                 COMMISSIONER CARDOZO:  Okay.  The one


  1       part, then, I just want to clarify with you in terms of
  2       their model, with regards to Wingham and Wheatley, you
  3       haven't agreed to those as conditions of license and I
  4       understand that Wingham and Wheatley have common
  5       programming with London, largely are rebroads, so would
  6       you be amenable to the Wingham and Wheatley conditions
  7       of licensing mirroring those of London?
  8  1530                 MR. MILLER:  Perhaps I can come back
  9       in reply on that?
 10  1531                 COMMISSIONER CARDOZO:  Okay.  Sure.
 11  1532                 And in terms of described video for
 12       American programming, what is your experience or what
 13       is your projection with regards to acquired U.S.
 14       programming with described video?  Is it your sense
 15       that it is increasingly available in American
 16       programming and that you will be able to carry that?
 17  1533                 MR. MILLER:  It is staring and Sarah
 18       might want to speak, but I do know of one example that
 19       Ellen Baine can allude to where we got a program from
 20       the U.S. that was described but then it wasn't
 21       captioned.  So there are always difficulties, but --
 22  1534                 MR. SWITZER:  Which, for the record,
 23       we live captioned for its first telecast so that it was
 24       indeed both described and captioned when it went to
 25       air.  But it speaks to the difficulties that we are


  1       seeing in terms of reliability from some of the
  2       non-Canadian material.  It is certainly getting better.
  3  1535                 MS CRAWFORD:  But we also did have
  4       one case of a U.S. supplier that did not want to pass
  5       along the described video rights to the film in
  6       question.  Again, perhaps Ellen Baine tomorrow at the
  7       CITY-TV panel can more fully talk about that.
  8  1536                 COMMISSIONER CARDOZO:  Okay.  Are you
  9       finding that, as Commission Grauer was talking about,
 10       these are interesting opportunities to talk to the
 11       industry about how these issues are developing, but
 12       apart from just what we are dealing with in terms of
 13       the license, but is it your sense that there is more
 14       American programming that has described video and is
 15       the rights issue a common -- do you think it is going
 16       to be a common problem?
 17  1537                 MR. MILLER:  I think the trouble is
 18       that when one buys a program there are all kinds of
 19       ancillary things that you want that are often there but
 20       they don't necessarily want to give to you.  So, for
 21       example, we don't necessarily get it closed captioned,
 22       even though we know it is captioned.  That is a
 23       problem.  We don't necessarily get it described, even
 24       though it may be described.  We don't necessarily get
 25       an HD version, even though we know there is an HD


  1       version.
  2  1538                 It has been a problem, it always is a
  3       problem.  We try to deal with it through our conditions
  4       of contract, but very often, despite all best efforts,
  5       while we know it is out there we don't get it.
  6  1539                 In terms of the supply of foreign
  7       described programming, it is just starting, obviously
  8       in response to the new requirements on U.S.
  9       broadcasters.  I think it will clearly get better
 10       over time, but we are not expecting a sudden influx
 11       of described U.S. programming for example in the
 12       next year.
 13  1540                 COMMISSIONER CARDOZO:  I have heard
 14       examples of these different streams being so basic as
 15       being on different diskettes and people just literally
 16       lose diskettes after they run a show with described
 17       video.  Have you come across that kind of stuff, or
 18       just don't want to give it to you I guess is what?
 19  1541                 MR. MILLER:  It is as simple as
 20       that, yes.
 21  1542                 MR. SWITZER:  That we have come
 22       across, yes.
 23  1543                 Not particular stories of loss
 24       of data, but it is a negotiation point of contract
 25       and license.


  1  1544                 COMMISSIONER CARDOZO:  Okay.  So for
  2       your contracts that you are signing with American
  3       acquired programming you are increasingly asking for
  4       the described video and the closed captioning.  Is that
  5       an automatic thing?
  6  1545                 MR. MILLER:  We are starting to it
  7       for the next -- for the next broadcast season.
  8  1546                 Again, we are not seeing a huge
  9       amount of product out there, but just as we did it with
 10       captioned we are doing it with described video.  But
 11       what we find is they won't accept an absolute
 12       requirement, we have to make it a sort of on a
 13       best-efforts basis, which is why even today we
 14       sometimes find a product that we should get captioned
 15       doesn't, unfortunately, arrive captioned.
 16  1547                 COMMISSIONER CARDOZO:  On audio
 17       description, which is the description of alphanumeric
 18       stuff usually on the screen, like telephone numbers and
 19       stuff, what is your approach to that?
 20  1548                 MR. MILLER:  That is a very important
 21       question actually, because as some Commission staff are
 22       aware we actually received a complaint via the Human
 23       Rights Commission on some of our shows in terms of that
 24       kind of description.
 25  1549                 I guess what we are looking for going


  1       forward is the ability to ensure first of all that any
  2       visuals in our news programming are also orally
  3       described.  In some of our magazine shows it is more of
  4       a creative thing that we have to deal with on a
  5       case-by-case basis.
  6  1550                 But I think the point that has become
  7       evident to us is that while we understand your focus on
  8       drama, we also see the importance of description on for
  9       example our magazine shows so to fulfil some of our
 10       requirements we would be looking for a mix of both
 11       drama and other prime-time programming such as our
 12       magazine show.
 13  1551                 COMMISSIONER CARDOZO:  But on news I
 14       don't see that you are necessarily doing it and it is
 15       also quite difficult to do where you have -- in your
 16       weather reports you have this incredible graphic that
 17       pops up with little sort of pickets popping up with all
 18       the temperatures and I have to tell you they are very
 19       easily to follow and watch, but for somebody who
 20       doesn't see them they are --
 21  1552                 MS CRAWFORD:  It is definitely
 22       something that we endeavour to do whenever there is the
 23       opportunity for on-screen text to be augmented with an
 24       oral description of it.
 25  1553                 Again, our News Vice-President who is


  1       going to be on the CITY-TV panel tomorrow can speak to
  2       the specificities of doing that and the challenges on
  3       news and speaking of CHUM corporately when we get into
  4       multi-screen news formats it is an additional challenge
  5       as well.  But we certainly do endeavour to do it
  6       throughout, particularly when we are presenting
  7       information of import to the community.
  8  1554                 COMMISSIONER CARDOZO:  Okay.  Well,
  9       thanks very much.  I think we will stop there.  We will
 10       start tomorrow with closed captioning.
 11  1555                 Thank you for what you have shared
 12       so far.
 13  1556                 Thank you, Mr. Chair.
 14  1557                 THE CHAIRPERSON:  Thank you.
 15  1558                 We will adjourn now and resume at
 16       9:30 tomorrow morning.
 17       --- Whereupon the hearing adjourned at 1739, to resume
 18           on Tuesday, May 7, 2002 at 0900 / L'audience
 19           est ajournée à 1739, pour reprendre le mardi
 20           7 mai 2002 à 0900

Date modified: