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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.
TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO‑TELEVISION AND
TELECOMMUNICATIONS COMMISSION
TRANSCRIPTION DES AUDIENCES DEVANT
LE CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT/SUJET:
VARIOUS BROADCASTING APPLICATIONS /
PLUSIEURS DEMANDES EN RADIODIFFUSION
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
Portage IV Portage IV
140 Promenade du Portage 140, promenade du Portage
Gatineau, Quebec Gatineau (Québec)
April 30, 2007 Le 30 avril 2007
Transcripts
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
Contents.
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Transcription
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès‑verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
Canadian Radio‑television and
Telecommunications Commission
Conseil de la radiodiffusion et des
télécommunications canadiennes
Transcript / Transcription
VARIOUS BROADCASTING APPLICATIONS /
PLUSIEURS DEMANDES EN RADIODIFFUSION
BEFORE / DEVANT:
Konrad W. von Finckenstein Chairperson / Président
Rita Cugini Commissioner / Conseillère
Helen del Val Commissioner / Conseillère
Stuart Langford Commissioner / Conseiller
Elizabeth Duncan Commissioner / Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
Chantal Boulet Secretary / Secrétaire
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
Portage IV Portage IV
140 Promenade du Portage 140, promenade du Portage
Gatineau, Quebec Gatineau (Québec)
April 30, 2007 Le 30 avril 2007
- iv -
TABLE DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
PHASE I
PRESENTATION BY / PRÉSENTATION PAR:
CTVglobemedia Inc. on behalf of CHUM Limited 3 / 24
Gatineau, Quebec / Gatineau (Québec)
‑‑‑ Upon commencing on Monday, April 30, 2007 at 0930 /
L'audience débute le lundi 30 avril 2007 à 0930
LISTNUM 1 \l 11 THE CHAIRPERSON: Good morning, everybody. Bonjour, tout le monde.
LISTNUM 1 \l 12 This is a hearing into CTV's Application.
LISTNUM 1 \l 13 L'ordre sera le suivant : premièrement, CTV; après ça, ceux qui appuient la soumission de CTV; après, ceux qui opposent; et finalement, ceux qui ont des commentaires sur un aspect ou l'autre.
LISTNUM 1 \l 14 We have a full day, so we will now go ahead.
LISTNUM 1 \l 15 Madame Boulet, would you make certain procedural announcements.
LISTNUM 1 \l 16 Thank you.
LISTNUM 1 \l 17 LA SECRÉTAIRE : Merci, Monsieur le Président. Bonjour, tout le monde.
LISTNUM 1 \l 18 Permettez‑moi de porter à votre attention quelques points d'ordre pratique qui contribueront au bon déroulement de cette audience publique.
LISTNUM 1 \l 19 Simultaneous interpretation service is available during the public hearing. Receivers are available at the commissionaire's desk outside the hearing room.
LISTNUM 1 \l 110 The English interpretation is on channel 7 and the French on channel 8.
LISTNUM 1 \l 111 When you are in the hearing room, we would ask you to please turn off your cell phones, beepers and BlackBerrys, as they are an unwelcome distraction and they cause interference on the internal communication system used by our translators.
LISTNUM 1 \l 112 We would appreciate your cooperation throughout the hearing.
LISTNUM 1 \l 113 As you will have noticed there is a camera in front of the room and the purpose is to retransmit the applicant's and the intervenors' presentations for the public in the room.
LISTNUM 1 \l 114 We expect this hearing to take approximately two days. We will begin at 9:00 or 9:30 and finish approximately at 4:30. We'll take about an hour for lunch and a morning break and afternoon break.
LISTNUM 1 \l 115 We will let you know of any schedule changes that may occur.
LISTNUM 1 \l 116 Pendant toute la durée de l'audience, vous pourrez consulter les documents qui font partie du dossier public dans la salle d'examen situé à la Salle numéro V, à l'arrière de la salle Pontiac. Vous y avez accès via le corridor situé à votre droite à la sortie de la salle d'audience.
LISTNUM 1 \l 117 Vous pouvez également communiquer avec la salle d'examen au 819‑994‑7929.
LISTNUM 1 \l 118 Une transcription quotidienne des comparutions sera affichée sur le site web du Conseil peu après la fin de l'audience.
LISTNUM 1 \l 119 If you wish to obtain all or part of the transcript of these proceedings, you may speak to the Court Reporter sitting at the table to my right or communicate with the company Mediacopy directly.
LISTNUM 1 \l 120 And now, Mr. Chairman, we will proceed with the presentation on the application by CTVglobemedia Inc. (CTVgm), formerly Bell Globemedia Inc., on behalf of CHUM Limited, seeking authority for the transfer of effective control of CHUM to CTVgm through its wholly‑owned subsidiary 1714882 Ontario Inc.
LISTNUM 1 \l 121 Appearing for the applicant is Mr. Ivan Fecan, who will introduce his colleagues.
LISTNUM 1 \l 122 Mr. Fecan, you will have 20 minutes to make your presentation thereafter.
LISTNUM 1 \l 123 Please go ahead.
PRESENTATION / PRÉSENTATION
LISTNUM 1 \l 124 MR. FECAN: Good morning, Mr. Chairman, members of the Commission and of course staff.
LISTNUM 1 \l 125 My name is Ivan Fecan, and I am president and CEO of CTVglobemedia. It gives me great pleasure to be here today to present our application to acquire effective control of CHUM.
LISTNUM 1 \l 126 Before beginning our presentation, I would like to introduce our panel for the record.
LISTNUM 1 \l 127 Seated to my right is Kathy Robinson, our regulatory counsel at Goodmans; to my left is Rick Brace, president of CTV; Dawn Fell, group vice‑president of human resources at CTVglobemedia and team leader of our CTV‑CHUM integration project; Brian McClusky, CTV's vice‑president of revenue management; Robin Fillingham, our CFO and chief administrative officer; Allan Mayne, CHUM's CFO and Jay Switzer, the president and CEO of CHUM; and Paul Ski, president of CHUM Radio.
LISTNUM 1 \l 128 In the second row, starting from your left, we have Jim Waters, chairman of CHUM's Board of Directors; Fred Sherratt, a director of CHUM's board; Sarah Crawford, CHUM's vice‑president of public affairs; Paul Sparkes, senior vice‑president corporate and public affairs for CTVgm; Rob Malcolmson of Goodmans; Debra McLaughlin of Strategic Inc.; Steve Armstrong of Armstrong Consulting; David Kirkwood, CHUM Television's executive vice‑president of sales and marketing; Peter Palframan, senior vice‑president of operations at CHUM Television, and Roma Khanna, senior vice‑president of content at CHUM Television.
LISTNUM 1 \l 129 Finally, in the third row, beginning again from your left, is Ryan Voegeli of Merrill Lynch. Beside Ryan is Corrie Coe, CTV's director of program administration and administrator of our BCE‑CTV benefits; Susanne Boyce, president of CTV programming and chair of the Media Group at CTV; and Andre Serero, group vice‑president legal and corporate secretary for CTVgm.
LISTNUM 1 \l 130 I would also like to introduce the independent trustee of the CHUM Services, John D. McKeller, who is seated in the front row of the audience.
LISTNUM 1 \l 131 Before I begin, I would like to take a minute of your time to say how meaningful this particular hearing is to me.
LISTNUM 1 \l 132 I've been before the Commission, if not more than any other broadcaster, certainly as often. But for me this hearing has a special significance because just under 30 years ago, at the ripe old age of 24, I left CBC Radio to begin my television career at Citytv, Toronto.
LISTNUM 1 \l 133 I didn't own a suit or a tie, my hair was long, and brown. I was a green kid, but it was there that I co‑created City Pulse News with a legendary Moses Znaimer from whom I learned much, especially about risk taking.
LISTNUM 1 \l 134 Canadian television at that time was spectacularly non‑ethnic and dry. The vibrancy and reality of the street was not portrayed on the screen.
LISTNUM 1 \l 135 Citytv changed all that and stood conventional television on its head here in Canada and abroad. It was bold and innovative, culturally diverse and intensely local. It hired people and aired shows never before seen on our screens.
LISTNUM 1 \l 136 I was there when CHUM bought Citytv and, in doing so, provided the long‑term stability and financial resources for City to grow, and grow it did.
LISTNUM 1 \l 137 I love the place, but never in my wildest dreams could I have imagined that almost 30 years later, in a suit and tie, with grey hair, I would now be seeking approval for the purchase of CHUM by CTVglobemedia.
LISTNUM 1 \l 138 It is an honour for me to be here, and thank you for indulging me. Now to the matter at hand.
LISTNUM 1 \l 139 This transaction marks the departure of the Waters family from broadcasting after some 53 years. Jim Waters, Allan's oldest son, is Chairman of the Board of CHUM Limited and Fred Sherratt was Allan's partner since the early sixties.
LISTNUM 1 \l 140 Our presentation this morning begins with Jim.
LISTNUM 1 \l 141 MR. WATERS: Mr. Chairman, members of the Commission, immediately following the death of my father and CHUM founder, Allan Waters, in early December 2005 it was not our intention to sell CHUM.
LISTNUM 1 \l 142 In fact, I said so publicly later that month at the CHUM Limited annual meeting of shareholders.
LISTNUM 1 \l 143 However, my brother Ron and I were appointed executors of the Allan Waters' estate.
LISTNUM 1 \l 144 As chairman, vice‑chairman and executors, Ron and I now had to decide not only what was best for CHUM and all its shareholders, but also what was best for the family.
LISTNUM 1 \l 145 On the family side, we knew that it had always been dad's wish that his life's work at CHUM would provide stability for his family well into the future.
LISTNUM 1 \l 146 On the business side, CHUM's radio division was holding its own. But, as was the case with other broadcasters, our conventional television business was suffering.
LISTNUM 1 \l 147 We took on significant debt, including the purchase of Craig Media, to try and improve our television business. But things were simply not getting any better.
LISTNUM 1 \l 148 It was clear that due to fragmentation and new media, the conventional television business was changing dramatically.
LISTNUM 1 \l 149 We came to the realization that there was room for only a limited number of players if it was to survive.
LISTNUM 1 \l 150 After very careful consideration, we concluded that the best decision for CHUM, and all its shareholders, including the Waters family, was to sell the company.
LISTNUM 1 \l 151 We held a limited auction, looking for a company that would be the best buyer and the best custodian of the CHUM assets and our people.
LISTNUM 1 \l 152 Over the years I knew that the late Ken Thompson and my father had spoken a number of times. Mr. Thompson had said if you are going to do something, to call him.
LISTNUM 1 \l 153 Three or four years ago Ron and I met David Thompson, and he expressed the same interest to us. The Thompsons wanted to see their holdings in Canada grow.
LISTNUM 1 \l 154 In addition, Ron and I have known Ivan Fecan since his days with Citytv, and in recent years have admired his leadership of CTV.
LISTNUM 1 \l 155 We are extremely pleased that we were able to complete this transaction with CTVglobemedia.
LISTNUM 1 \l 156 We know that with your approval of this application, CHUM will be falling into good hands, and we strongly believe the strengths CTV brings to the table will ensure the future of CHUM's television stations, and that they will be good custodians of CHUM's other highly successful broadcasting undertakings.
LISTNUM 1 \l 157 MR. FECAN: Thanks Jim.
LISTNUM 1 \l 158 First I'd like to talk about why this proposal is good for Canada and how it actually will expand the diversity of voices.
LISTNUM 1 \l 159 Growth is more than a good thing. It's a necessity for a strong economy here in Canada and around the world.
LISTNUM 1 \l 160 Strong economies are based on strong businesses, with the ability to innovate and adapt.
LISTNUM 1 \l 161 As we all know in today's business world, there's no such thing as a status quo. You either go forward or you are left behind.
LISTNUM 1 \l 162 But, in the media world, the rate of change is explosive. Much of this is driven by the advent of new media which has no borders, recognizes no regulated system and has no particular interest in furthering Canadian culture.
LISTNUM 1 \l 163 It is within this context that we are asking for the right to grow. We believe that in order to compete, and indeed survive, we must achieve more scale.
LISTNUM 1 \l 164 In my view, scale, in and of itself, is neither good nor bad. It's an instrument. And, like any instrument, it depends on what you do with it.
LISTNUM 1 \l 165 To best understand how we wish to utilize this new scale, it's instructive to look at what we have been able to accomplish with the increased size previously granted to us by the Commission.
LISTNUM 1 \l 166 Several years ago our predecessor company, Baton Broadcasting, was awarded the privilege of buying the CTV network, most of its affiliated stations, TSN and Discovery, and launching several new and conventional specialty licenses.
LISTNUM 1 \l 167 From those pieces came the CTV Inc. of today, a broadcasting company that fulfilled the destiny that the founders of CTV in the 1960s only dreamt about.
LISTNUM 1 \l 168 We needed and used that scale to help create the Canadian programs of today are the top‑rated English Canadian programs in virtually every genre.
LISTNUM 1 \l 169 The number one comedy, "Corner Gas"; the number one drama series, "Degrassi: The Next Generation"; the number one Canadian series since the advent of electronic ratings, "Canadian Idol"; the number one award show, the Junos.
LISTNUM 1 \l 170 Scores of many important Canadian movies and mini‑series, many of whom won their time periods while deeply touching Canadians. I'm thinking of the "Terry Fox Story", "The Louise Arbour Story", "Lies of the Saints".
LISTNUM 1 \l 171 In fact, over 24 of our movies have each achieved audiences of over one million viewers in the last eight years. And, by the way, many of these programs are making a huge impact internationally.
LISTNUM 1 \l 172 No other broadcaster, public or private, can lay claim for this list of achievements.
LISTNUM 1 \l 173 Some of these efforts were kick‑started by the BC benefits, but this track record of invasion and audience appreciation continues today without the push of those benefits.
LISTNUM 1 \l 174 These achievements were made possible by the growth, the scale, that you the Commission approved. And this is precisely what we at CTVglobemedia want to do again. We want to make a difference again. This time with CHUM.
LISTNUM 1 \l 175 As you are all aware, our system is under increasing strain, a strain seen most clearly in conventional television where the city stations are teetering at the financial edge.
LISTNUM 1 \l 176 The approval of this application not only ensures the survival of the CHUM services, it will give the people of CHUM the opportunity to once again be risk taking trail blazers.
LISTNUM 1 \l 177 We will provide the resources to let City be City, to enrich the programming of CHUM specialty services, and to provide the backing, financial and otherwise, to further develop CHUM's radio group.
LISTNUM 1 \l 178 We will give CHUM Services the opportunity to no longer be forced to make comprises for the short term, but to make decisions for the long term.
LISTNUM 1 \l 179 In short, we will do for CHUM what CHUM did for City 30 years ago.
LISTNUM 1 \l 180 Our core belief, my core belief, is that homogenization destroys value. The corollary being the value is created through distinctive voices.
LISTNUM 1 \l 181 Our proposal not only preserves diversity, I submit it actually enhances diversity. After all, asking someone to be different, without giving them the economic freedom to do so, is hollow.
LISTNUM 1 \l 182 I know, as with any applications, there are all sorts of issues you need to examine, some more complex than others.
LISTNUM 1 \l 183 Perhaps one of the most difficult issues is the matter of the twin sticks.
LISTNUM 1 \l 184 At the essence, this issue is about diversity of voices.
LISTNUM 1 \l 185 This morning we are making a new commitment to demonstrate our seriousness on this matter. We pledge that there will be zero overlap in programming, that's zero overlap, between any CTV station and any Citytv station, measured not just on a weekly basis, but on an annual basis.
LISTNUM 1 \l 186 This guarantees that both screens will remain measurably and demonstrably different with the one twenty hour per year cultural exemption that we propose.
LISTNUM 1 \l 187 This commitment is more than any other broadcaster has made in asking for exemptions and been granted those exemptions to your two stations in a market rule.
LISTNUM 1 \l 188 When you combine that with our proposed journalistic safeguards, again more than any other broadcasters has put forward, we believe we've set a new benchmark in guaranteeing diversity.
LISTNUM 1 \l 189 Broadly speaking, I think you can divide the twin stick markets into two categories.
LISTNUM 1 \l 190 In the Toronto/Hamilton market and in the Vancouver/Victoria market there is much diversity in media.
LISTNUM 1 \l 191 This application doesn't negatively impact that, as we are essentially stepping into the shoes of a pre‑existing exception.
LISTNUM 1 \l 192 In addition, Rogers, if approved, will prove to be a very strong new entrant in these markets and create additional diversity.
LISTNUM 1 \l 193 This is because in Toronto there currently exists some 33 hours per week of programming overlap between the CHUM station, City and CKVR.
LISTNUM 1 \l 194 And in Vancouver there is some 12 hours per week of programming overlap between CHUM station CKVU and CIVI.
LISTNUM 1 \l 195 Under our proposal that overlap will disappear because the Rogers programming will be new and there will be zero overlap between our two services.
LISTNUM 1 \l 196 Calgary, Edmonton and Winnipeg are different cases. CanWest does have an imperfect second stick in Alberta, which is seen in Calgary and Edmonton on basic cable.
LISTNUM 1 \l 197 And, in a sense, CHUM also currently has an imperfect twin stick in Alberta through the access stations, which are allowed to air certain commercial programming in prime time with simulcast privileges.
LISTNUM 1 \l 198 However, with your approval, access will now be owned by Rogers.
LISTNUM 1 \l 199 We believe our promise of zero programming overlap and journalistic safeguards will ensure the city stations in Edmonton, Calgary and Winnipeg remain distinct.
LISTNUM 1 \l 1100 I would also note that we've received an overwhelming number of positive interventions, and only a handful of negative ones from citizens in those three communities who believe we will be good stewards of their stations.
LISTNUM 1 \l 1101 There are those that may suggest that we should divest these three stations. Here are the three reasons why this is not in the public interest.
LISTNUM 1 \l 1102 One, efficiency. Love it or hate it, the fact is that the economic engine of Canadian conventional television is still American programming.
LISTNUM 1 \l 1103 Canadian private broadcasters, who don't enjoy the guaranteed support of public money, must buy the American to finance the Canadian. Hollywood studios force package. You can't just buy the hits.
LISTNUM 1 \l 1104 CanWest can efficiently buy volume because they have two conventional networks. We have had to match their volume so that we could, too, get the hits.
LISTNUM 1 \l 1105 However, unlike CanWest, we don't have the second network to air those shows. The extra programming we buy goes to waste; thus, it doesn't earn money for us or for the Canadian system.
LISTNUM 1 \l 1106 This is a lost opportunity. Instead, some of this program, that which is appropriate to City's brand, could be used on City to approve its revenues and support its Canadian programming.
LISTNUM 1 \l 1107 In other words, the excess American can be put to work supporting Canadian production.
LISTNUM 1 \l 1108 The second reason is that the loss of City programming in these community takes away a unique voice.
LISTNUM 1 \l 1109 Alberta is Canada's third largest and fastest growing market. Manitoba is our country's heartland. Its citizens deserve the opportunity to continue seeing City's distinctive brand of programming.
LISTNUM 1 \l 1110 If we were to divest these stations, the buyer would almost certainly be someone else seeking scale with their own programming line up. Consequently, City's programming would disappear in these markets.
LISTNUM 1 \l 1111 The third reason is the health of Citytv. A healthy City requires national scale, which is why CHUM expanded City from just Toronto in the first place. You need national scale to afford top quality Canadian programming, to enlist top talent, and to secure national sponsors.
LISTNUM 1 \l 1112 We've all seen what happens to stand‑alone TV stations, even in major markets.
LISTNUM 1 \l 1113 Diversity is not well served by weakening City.
LISTNUM 1 \l 1114 My point is that Citytv is one of the most iconic media brands in Canadian history. It's worth fighting for. It's worth strengthening and reinvigorating.
LISTNUM 1 \l 1115 In summation, we believe that the combination of CTV and CHUM conventional, radio, specialty and new media, along with its most important asset, its talented people, will create a stronger Canadian champion in media.
LISTNUM 1 \l 1116 This will give rise to new opportunities for the production and promotion of Canadian programming and artists.
LISTNUM 1 \l 1117 It will enhance the quality and distinctiveness of programming available to Canadian audiences and will create a solid base to face the challenges of the unregulated universe.
LISTNUM 1 \l 1118 We believe that CTVglobemedia in particular is uniquely positioned to achieve this.
LISTNUM 1 \l 1119 CTV and CHUM have a history. We have a special understanding of who and what CHUM is and what it could be.
LISTNUM 1 \l 1120 We also have a history of successfully managing diverse creative entities and delivering on‑screen results, and we have the reputation and the track record of keeping our promises.
LISTNUM 1 \l 1121 For all these reasons, we respectfully ask you to approve our applications.
LISTNUM 1 \l 1122 We look forward to your questions.
LISTNUM 1 \l 1123 THE CHAIRPERSON: Thank you Mr. Fecan.
LISTNUM 1 \l 1124 Now, this has been divided, sort of, into various subject matters by your application, and we'll do our questioning on that basis.
LISTNUM 1 \l 1125 First of all on the whole issue of media concentration. I have read your submission very carefully and you suggest that, in effect, there's no room for intermediate players and that's part of it.
LISTNUM 1 \l 1126 Can you elaborate on that? I find that sort of difficult to believe ‑‑ not believe, but to accept or understand, because CHUM was not a failing network, and you've referred to CHUM, you've referred to the upcoming purchase of Standard by Astral, both of those intermediate players were not suffering. As far as I understand it was a question of the young generation not taking over, but wanting to sell out.
LISTNUM 1 \l 1127 So what is the basis of your relatively categorical statement that there's no role for intermediate players in the Canadian market?
LISTNUM 1 \l 1128 MR. FECAN: My reason for that statement, and let's parse it in pieces.
LISTNUM 1 \l 1129 CHUM Radio is doing well. When we originally made this deal, was one of the larger groups. Today it's, if you approve the Astral‑Standard merger, it will be the smallest of the four. But it's doing relatively well. It needs support. It needs backing to grow.
LISTNUM 1 \l 1130 CHUM's specialty is doing relatively well as well.
LISTNUM 1 \l 1131 But, as Jim Waters pointed out, and I think as the evidence in our application pointed out, the conventional stations are not doing well. The As are probably not doing well at all, and the Citys are teetering on the financial edge.
LISTNUM 1 \l 1132 There's a huge symbiotic relationship between the Citytv conventional stations and the specialty stations. They exchange staff and programming back and forth. The health of one affects the health of the other.
LISTNUM 1 \l 1133 And so, when you consider the new media, when you consider the unregulated world, when you consider economies of scale, putting more money on the screen, putting more money into programming where it can create differences, I do believe that you either have to have scale to create those efficiencies, or you have to be small to have as much nimble ability as possible, and I think it's very difficult in the middle.
LISTNUM 1 \l 1134 THE CHAIRPERSON: Thank you. And you made a very detailed explanation why this is in the interests of CTV, but I am not quite so sure whether I quite understood why it is in the public interest that this deal be approved.
LISTNUM 1 \l 1135 MR. FECAN: It will be in the public interest because it'll allow CHUM, the people of CHUM, the programs of CHUM, to be the risk taking trail blazers that they were at the beginning, that parts of them still are, but parts of them are no longer able to be because they need to ‑‑ they need to make decisions for a shorter‑term basis rather than the long‑term basis.
LISTNUM 1 \l 1136 We want to let City be City. And City hasn't been able to be City in the last few years because it needed to be the breadwinner for a whole bunch of things.
LISTNUM 1 \l 1137 THE CHAIRPERSON: But you're a public company, too. You have to justify to yourself to shareholders.
LISTNUM 1 \l 1138 How come you can take longer views than City can take right now?
LISTNUM 1 \l 1139 MR. FECAN: Well, we're not a public company. We're a private company.
LISTNUM 1 \l 1140 THE CHAIRPERSON: Sorry, you're absolutely right, but your shareholders will presumably want to see return on their equity.
LISTNUM 1 \l 1141 MR. FECAN: Our shareholders understand that with the economies of scale we can make decisions for a longer term. And it has been ‑‑ and our shareholders, many of them, if not all of them, have been fortunate in giving us the opportunity to think in terms of multiple years, not quarters.
LISTNUM 1 \l 1142 It doesn't mean we don't have to perform on a sound financial basis, but it does mean that we have the ability to look just beyond that horizon.
LISTNUM 1 \l 1143 THE CHAIRPERSON: And this would not have been capable under ‑‑ why is City ‑‑ I'm sorry, I'm trying to grasp the idea of why City's time horizon is so much shorter.
LISTNUM 1 \l 1144 I mean, they're eclectic, they're urban, they're different than everybody else, and they obviously sell. They have been very successful in the past.
LISTNUM 1 \l 1145 So what will they be doing under CTV ownership that they're not doing right now?
LISTNUM 1 \l 1146 MR. FECAN: They haven't been as different, they haven't been as eclectic, and they haven't been as ‑‑ as ‑‑ as invigorated as they want to be, as they have been, and we submit in the interests of the system, they can and ought to be, and that is what we are bringing to them. We are giving them the opportunity to do what it is they did best.
LISTNUM 1 \l 1147 THE CHAIRPERSON: I see. Undoubtedly you have seen the CBC submission, which have a nice little pie chart showing the proportion of advertising revenue for a major player. And if CTV and CHUM are together you basically occupy 50 percent of the pie chart.
LISTNUM 1 \l 1148 And so we going to have one very large player here and the rest of it sort of divided amongst smaller ones.
LISTNUM 1 \l 1149 Why is that healthy for the Canadian system to have such a large disproportionate player?
LISTNUM 1 \l 1150 MR. FECAN: Well, the pie chart I suppose is accurate in a point in time. But in ‑‑ in the broadcasting business, and in television in particular, revenue follows ratings.
LISTNUM 1 \l 1151 People pay a disproportionate amount of revenue to get top 20 shows.
LISTNUM 1 \l 1152 In the last few years we have been very successful, some might say skillful, others might say lucky, probably in truth a combination of the above, in getting a majority of the top 20 shows.
LISTNUM 1 \l 1153 Five or six years ago CanWest had the majority of those shows.
LISTNUM 1 \l 1154 And I think they're coming back now, as they have said to their shareholders, that they intend to ‑‑ they feel they're in a position to challenge us again for the top shows.
LISTNUM 1 \l 1155 When you actually kind of think about it, we were lucky and maybe chose well when we bought "American Idol", but that's two nights a week. So that's two out of 20.
LISTNUM 1 \l 1156 We bought "CSI" and there's three of those as it turns out. We only bought one. But there are now three. And that's five out of 20. So third ‑‑ say we have 15 now, a third of that is two shows.
LISTNUM 1 \l 1157 The flip side of that is four or five years ago we had a show called "Who Wants to be a Millionaire", it was on four days a week, it was a top‑rated show, and then it died and we lost four positions of the top 20.
LISTNUM 1 \l 1158 My point is, it's completely cyclical. It will go up, it will go ‑‑ those revenues will go up and will go down depending on how well we perform.
LISTNUM 1 \l 1159 And so that was a bit of a high water mark.
LISTNUM 1 \l 1160 Our increase this year has not been very much. I noted in the CanWest report to shareholders they're up eight percent. We're not anywhere near up anything like that. You can see it beginning to turn again.
LISTNUM 1 \l 1161 And then of course the other thing the chart doesn't really deal with is all the other forms of advertising in those markets. It doesn't deal with print. It doesn't deal with new media. It doesn't deal with radio.
LISTNUM 1 \l 1162 Advertisers have lots of choices. And, you know, those ‑‑ so that's a very narrow view taken in a point in time, probably a high water mark, and that's why I think you need to look at it within that context.
LISTNUM 1 \l 1163 THE CHAIRPERSON: I have a question for Mr. Waters.
LISTNUM 1 \l 1164 You explained the reasons why you're selling it and it was described as a limited auction. Why was that? Why did you select it ‑‑ only ask two players to bid since you presumably wanted to get the biggest return for your family? Why did you have a limited auction here?
LISTNUM 1 \l 1165 MR. WATERS: Mr. Chairman, we enlisted a private company to help us with evaluation and so on at the beginning, and we actually did look at all of the possibilities that were out there for CHUM to consider.
LISTNUM 1 \l 1166 And no matter how much research and number‑crunching was done, it always came up that really Bell Globemedia was the best choice.
LISTNUM 1 \l 1167 I think that also during that process it was very important to my brother and I that we ‑‑ that the company ‑‑ that CHUM fall into the hands of a company that would take not only good care of our assets, but of our people.
LISTNUM 1 \l 1168 And we felt very strongly that that was the case with Bell Globemedia, and we were very comfortable with our dealings with them and that's really where it ended.
LISTNUM 1 \l 1169 THE CHAIRPERSON: Okay. Thank you.
LISTNUM 1 \l 1170 Mr. Fecan, one problem I have with your submission ‑‑ you're basically positioning yourself as a national champion. Say I need to have the necessary size and I will do what is necessary for Canada.
LISTNUM 1 \l 1171 This idea of a national champion I'm very familiar with from my previous experience as commissioner of competition.
LISTNUM 1 \l 1172 And one of the problems with the national champion is that the idea in theory is wonderful in practice, unfortunately very often it becomes not a national champion but a national predator.
LISTNUM 1 \l 1173 This company becomes very large, very big. It is so controlling that it really doesn't need to use its creative energies in order to be productive, generate new efficiencies in the ‑‑ but rather it becomes relatively laid back and just milks the profits.
LISTNUM 1 \l 1174 What is shown ‑‑ so we have here that should you ‑‑ this be approached, and should you be as successful as you suddenly hope to be, we don't wind up with a laid back CTV that milks profits rather than is innovated, forward looking, and efficient, et cetera.
LISTNUM 1 \l 1175 MR. FECAN: I think companies in general, but maybe media and broadcasting companies in particular, are about the people. So let me kind of address your question in the parts that you pose.
LISTNUM 1 \l 1176 First, I'm not saying we should be the media champion. We're not saying that there shouldn't be others. We think we should be one of the national champions. We have no problem with there being others. We think that's a good thing.
LISTNUM 1 \l 1177 Secondly, we have the track record. We have demonstrated that we have taken that scale, and we have helped with the creation of wonderful programming that has the best ‑‑ the best possible reaction ‑‑ the audience reaction.
LISTNUM 1 \l 1178 I mean we're all here for the audience. And if our programming was just terrific but it didn't connect, it wouldn't be as meaningful. But it's actually connected with the audiences. I think ‑‑ and that's good for us too. But we have this track record.
LISTNUM 1 \l 1179 So we've shown what we've done when you've given us scale before. We've showed what you've done ‑‑ what we've been able to do with that scale. And that's precisely what we want to do again with this other increased scale.
LISTNUM 1 \l 1180 But I think ‑‑ I think the other thing I would really want to point to is our core belief that the value is in diversity. The value is not in homogenization.
LISTNUM 1 \l 1181 If you have ‑‑ if you have all kinds of things that are basically the same voices, the same programs, the same points of view, why do you need all of these different things? Why does anybody need them? The value is in having the differences. And that's where we've put our money and that's where we've put our resources. And that's why I submit we have been successful with the scale we've been given.
LISTNUM 1 \l 1182 In addition, I would just point out to you that we're on a very short leash here. Within a year our licences ‑‑ our conventional licences come up. And as we have proposed in our submissions, we would be delighted should we get approval of this to advance the city licences, so that within a year you can take a quick look and see whether we're behaving as we said we would have.
LISTNUM 1 \l 1183 So, you know, track record, people, core beliefs of our shareholders who also believe that values of diversity ‑‑ homogenization destroys value, and a short leash. Those would be my answers.
LISTNUM 1 \l 1184 THE CHAIRPERSON: Do any of my fellow Commissioners have any questions on concentration, Rita?
LISTNUM 1 \l 1185 COMMISSIONER CUGINI: Thank you. Good morning. I just have a follow‑up question with regards to the conversation you just had with the Chairman, wherein you said that CHUM has not been able to be as innovated or eclectic or as different as it once was. Yet in response to deficiencies on ‑‑ dated January 29, you say that CFTO and City TV in particular, for example, target and appeal to very different demographics.
LISTNUM 1 \l 1186 Is that not an indication of how different and innovative and eclectic it has been able to stay? Because I'm also assuming when you make that statement that you are staying that City TV has been able to target a younger demo than CFTO.
LISTNUM 1 \l 1187 So what compromises has it made in your opinion that have caused it or caused you to say it hasn't been as innovative, eclectic, or different?
LISTNUM 1 \l 1188 MR. FECAN: Thank you for the question. I'm going to going to answer first, but I would also like Jay and Roma to answer because they can provide firsthand testimony. Because they are there.
LISTNUM 1 \l 1189 CTV is a mainstream top 20 broadcaster. We go after everybody. You know it's the town square of Canada when we're doing our job right.
LISTNUM 1 \l 1190 City TV focuses on a much younger audience. But in the last three or four years, maybe five years, they've moved more to the mainstream because they had to pay the rent.
LISTNUM 1 \l 1191 I submit that's not a good thing for the system. I submit that diversity is better served if it can do its job without worrying about supporting the A Channels or being a breadwinner generally.
LISTNUM 1 \l 1192 I'd like to pass it to Jay and to Roma who I think can talk about their firsthand experiences.
LISTNUM 1 \l 1193 MR. SWITZER: Thank you. Commissioner Cugini, you hit on an important point. There is a desire for difference. We're very proud of the creativity and innovation that exists across the CHUM stations, and we're speaking now particularly of City TV.
LISTNUM 1 \l 1194 The challenges that we faced both in the market in terms of competition and terms of technology, there's a long list of reasons why the conventional television space has challenged many of them ‑‑ came up during the recent look at television. Have forced us in the past few years in small ways, decision by decision, to slowly move a little bit towards the middle.
LISTNUM 1 \l 1195 Because at the end of the day it was about survival. These are difficult things to talk about. You're very aware of what our financials are. You're aware that our conventional television business overall is not making money and that things are getting worse.
LISTNUM 1 \l 1196 Several years ago ‑‑ for many years ‑‑ for 20 years, as a point of pride, as a point of difference, for example, we made a programming decision that City TV Toronto was not going to carry any paid infomercials. Late night, 24 hours a day as a unique point of differentiation to support our brand and our unique voice there would be no infomercials on City TV Toronto.
LISTNUM 1 \l 1197 A few years ago we reviewed that decision and said we just can't afford to do that anymore. We have to support the rest of our system. We've had increasing challenges on specialty and City TV Toronto now carries infomercials.
LISTNUM 1 \l 1198 Program by program, City TV today ‑‑ Roma can speak to many of these things ‑‑ carries in prime time an American simulcast show, America's Funniest Home Videos. A very fine show. It makes us lots of money. It pays for other things that we have to do.
LISTNUM 1 \l 1199 It's is probably as far off brand ‑‑ and with respect to the producer of that show ‑‑ not particularly innovated or created, but as the breadwinner inside is CHUM television family, City TV has had to make decision by decision. In their hearts there is a desire and passion to continue to do the risk taking and innovating things, not only at City TV, but in specialty that we dream of doing.
LISTNUM 1 \l 1200 But without the stability, the financial comfort, the ability to look long term, the removal of the reliance to continue to be a breadwinner for group, it has been an increasing challenge.
LISTNUM 1 \l 1201 And if it's appropriate, I'd like our Head of Contend, Roma Khanna, to just expand a little bit.
LISTNUM 1 \l 1202 MS KHANNA: Thank you, Jay. As Mr. Switzer and Mr. Fecan said all of that is exactly right. But from the actually programmers and content people's perspective I can tell you that the core has to do with this difference between short term versus long term as stability.
LISTNUM 1 \l 1203 The heart and soul of the City TV brand is about re‑invention in any given moment of time, risk taking, innovation, and doing something differently. And what that means to us today is looking at alternative business models, alternative revenue streams, alternative programming, and things that are different than every ‑‑ what everybody else on the street might be doing.
LISTNUM 1 \l 1204 A very specific recent example of something that we are very excited and proud about was a late night block of programming called "Play to Win", which was essentially an interactive program controlled entirely by the audience via SMS, where they would play along with word games and such things while they were watching TV.
LISTNUM 1 \l 1205 And the idea was you didn't need as many people watching, as long as the people watching were fully engaged and participating. It was about stickiness as opposed to ratings and revenue.
LISTNUM 1 \l 1206 It made us money. It made a decent amount of money. We believed very strongly that over time it would make even more money for us. The problem was that in the moment ‑‑ in the short term it wasn't make enough money to make up for the fact that it was eroding general audience numbers at the time, and therefore bringing down our traditional business model of the audience numbers across the board.
LISTNUM 1 \l 1207 So we made the decision to take that off of the air because we couldn't wait the six to eight months that I believe it would take for those numbers to get to the level where they were supporting themselves in the traditional business models as opposed to the new ones.
LISTNUM 1 \l 1208 So just one example. And things like that happened every day where we made choices that were less innovative than we wanted them to be based on the financial realities.
LISTNUM 1 \l 1209 COMMISSIONER CUGINI: And what effect has this shift in your programming had on your demographics, both in terms of size and core demo for this ‑‑ let's use the City TV station as an example.
LISTNUM 1 \l 1210 MS KHANNA: Well, my colleague Mr. Kirkwood, might be able to speak to specifics in terms of the demographic and how that might have changed in the last little while.
LISTNUM 1 \l 1211 MR. KIRKWOOD: The overview, Commissioner Cugini, would be our demographics remain younger, and we're very proud that we're effectively the youngest ‑‑ askew youngest average age both in terms of our news and our overall turning to conventional television versus the others in the Toronto market.
LISTNUM 1 \l 1212 But audiences for conventional television overall as a sector continue to decline. You're very well aware that what used to be a 70 or 80 percent total share of tuning is now under 50. And unfortunately the audiences for our City TV Toronto station have been decreasing at a rate faster than the industry decline in total tuning.
LISTNUM 1 \l 1213 COMMISSIONER CUGINI: Thank you very much, Mr. Chairman. Thank you.
LISTNUM 1 \l 1214 COMMISSIONER LANGFORD: I'm having trouble with this line of defence or whatever it is that you're putting up here. Because I see in it an inherent contradiction that I can't seem to get around ‑‑ I need some help with.
LISTNUM 1 \l 1215 You're saying, if I get Mr. Switzer correctly, "It's about survival." He said:
"We had to move to the middle. It's about survival."
LISTNUM 1 \l 1216 And you Mr. Fecan are saying, "We've got the deep pockets. We'll move it back to the edge." Which edge I'm not sure, but an edge.
LISTNUM 1 \l 1217 So don't you want it to survive? I mean if that wasn't selling for Mr. Switzer, how's it going to sell for you? Because there's nothing in your application or any of your file materials that tells me what edge he is. I keep hearing it's going back to its original roots, and it's going to be "edgy".
LISTNUM 1 \l 1218 But Mr. Switzer said that didn't work. And it was survival. He had to change. So it seems to me you've got either a secret formula that I'm dying to be let in on here.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1219 Maybe we're going back to baby blue movies, I don't know.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1220 Or you're telling us you've got deep pockets and you're just going to subsidize this second ‑‑ this second service forever.
LISTNUM 1 \l 1221 MR. FECAN: Well, what we're going to do is invest. And investment takes patience. And I don't think that city TV has been in a position to invest for the long term. I assure you we're not trying to bring disco back.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1222 We are looking at reinventing in a way appropriate for today what that risk taking brand stood for 30 years ago. It's not going to be the same thing.
LISTNUM 1 \l 1223 That's going to be the job of the programming people at City and CHUM and the independent producers they work for. But they will have in their heads a very clear sense of the brand with a backing to invest in that brand for the longer term.
LISTNUM 1 \l 1224 And our gamble, our assertion is that that will pay dividends for both the system and ourselves, but it might take a bit of patience. And that's what we offer. We offer the longer term opportunity.
LISTNUM 1 \l 1225 COMMISSIONER LANGFORD: Well, that may not be good enough for me right now. And I'll tell you why it may not be good enough. Because you've come here, in everything you've written to us, and this morning you put particular emphasis on it, I'm sure I can pick it out of what you said, but you know it's there as well as I do.
LISTNUM 1 \l 1226 And you're not only going to maintain diversity, you're going to enhance it, I think, is the mantra here this morning, and that's fine. That's music to our ears. That's what the Broadcasting Act tells us to listen for. And we've been listening for it, we've heard it.
LISTNUM 1 \l 1227 The trouble is we haven't heard how you're going to do it. And then you said, well you'll get another shot at us in a year. Well, by then it will be too late. By then this thing ‑‑ city TV, whatever it is, CHUM, whatever it was, will be chopped up, some of it will be divested, some of it will be rolled into something we won't be able to do anything about if we don't like the look of it.
LISTNUM 1 \l 1228 You know, it's not going to be ‑‑ this is our chance today to deal with CHUM. Not in a year. There will be no CHUM in a year. There will be pieces of CHUM in different places, doing different things.
LISTNUM 1 \l 1229 You have someone here, Ms Fell, who is the team leader for the CTV CHUM Integration Project. So by very definition this thing is going to change, and it's going to be integrated, and it's going to become a big different organization. So it's today we've got to know.
LISTNUM 1 \l 1230 So I'm hearing some contradictory things. I'm hearing you want to be edgy. I'm hearing you've got plans, but I'm not hearing what the plans are. At the same time I heard you say again this morning, we've got all this extra program we're buying, and we're going to put some of it ‑‑ as appropriate, was your term ‑‑ into City TV.
LISTNUM 1 \l 1231 I don't want to be unfair about this. I heard the conditional. So here's what I'm hearing ‑‑ and I'm sorry to go on so long. But I think we're really at the threshold of something ‑‑ I am in my mind.
LISTNUM 1 \l 1232 I'm hearing from you that we're going to make this diverse. I'm hearing from Mr. Switzer that in order to be the breadwinner, we couldn't go down that road. I'm hearing from you we're going to put some programming, which you call in your reply, "less attractive programming", but as appropriate, that we can't use right now in City. And I'm hearing from you be patient. But I'm not hearing a plan.
LISTNUM 1 \l 1233 I have no idea having read every bit of this record and listen to what I've heard this morning in the last 45 minutes ‑‑ I have no idea what edgy means and what City TV is going to look like. And that scares the pa‑Jesus out of me.
LISTNUM 1 \l 1234 MR. FECAN: Well, the creative process is a scary process, Commissioner. And I think it's unfair for you to consider that suits in a room should be designing programs. Program makers do that, programmers do that. And what they need is the support and backing to do it. And that's what we're offering.
LISTNUM 1 \l 1235 It would be foolish of us ‑‑ of me to tell them in isolation what these programs ought to be. That's for them to do. And that's ‑‑ and it is trial and error.
LISTNUM 1 \l 1236 If programming could be designed by a box, GE would have all the programming in the world. They don't. It's a creative process. It's trial and error. It's depends on people who have ideas that they've have been carrying around for years who just are looking for the right opportunity. It's a messy process. But in order to play that process well for the long term you need the support and the backing and the safety to do it in. And that's what we're offering these people.
LISTNUM 1 \l 1237 COMMISSIONER LANGFORD: But I don't know what that means. I mean ‑‑ I'm sorry. In terms of making a decision for Canadians to guarantee them the diversity of voices that they have gotten used to, in terms of saying, look Canada, everybody out there in vacuum land, when you're out there looking at your television, this is the sort thing you can expect.
LISTNUM 1 \l 1238 I mean maybe you can give me at least an example of what's an edgy program right now. If you had ‑‑ if you and your suit, though you're not a programmer ‑‑ or somebody here had to do some programming for City ‑‑ the new City, the City you envisage, the City that's moving out of the bread basket, out of the breadwinner role, out of the middle, no longer concerned about survival, give me some idea of what we're ‑‑ what we're being asked to accept here in the sense of diversity of voices?
LISTNUM 1 \l 1239 MR. FECAN: You're being asked ‑‑ well, first of all the differences in the screen that we're talking about ‑‑ there's diversity in differences. The differences are measurable, and I think we've addressed that with a zero overlap what these new programs might be.
LISTNUM 1 \l 1240 All I can say is look at what we've been able to create by ‑‑ through the creative method, through the development of programs look at our track record at doing that.
LISTNUM 1 \l 1241 And, you know, I don't really want anybody on this panel to make up ideas on the stand that then, you know, somebody has to attribute to. The ideas have to come from the creative people. And we have to believe in that creative process, and that creative process has delivered programs that have hit total targets with our audiences in Canada. We've done it.
LISTNUM 1 \l 1242 COMMISSIONER LANGFORD: When you use the word "edgy" you must have had something in mind. I mean there must have been some show that was top of mind. Can you not give me the title of one existing show that you would categorize as edgy?
LISTNUM 1 \l 1243 MR. FECAN: I'm not going to play that game, Commissioner.
LISTNUM 1 \l 1244 COMMISSIONER LANGFORD: It's not a game. It's a question. It's a question that arises from a concern that we want to ensure that when you tell us you're not ‑‑ not only going to maintain but enhance a diversity of voices, we want some idea of that that's going to work.
LISTNUM 1 \l 1245 MR. FECAN: And for that you have to rely on the creative people, both in the independent production sector, and at CHUM, and a development process, and the funding to carry out that development process and to take risks on the air. And through that process you will have hits and misses. It's the only ‑‑ it's the only truth I know in this area.
LISTNUM 1 \l 1246 COMMISSIONER LANGFORD: If I could switch to another subject. I have your answer. Level playing fields, which I think is part of this general area. Would you agree, Mr. Chairman? We're still in this general area? I don't want to overlap?
LISTNUM 1 \l 1247 THE CHAIRPERSON: Yeah. As you know we're going to move on to two stick policies in a second.
LISTNUM 1 \l 1248 COMMISSIONER LANGFORD: Yes, maybe that's a good idea. We'll hold off on level playing fields and see what else we've got.
LISTNUM 1 \l 1249 My only other question and, Mr. Chairman, maybe you can guide me on this, too, would be with the notion of news voices, distinctive news voices. I don't know whether that comes into this category or whether we can filter that down. Pardon me?
LISTNUM 1 \l 1250 THE CHAIRPERSON: I think that's all the next part.
LISTNUM 1 \l 1251 COMMISSIONER LANGFORD: We'll hold off then. Maybe before Phase IV you could come up with an edgy program.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1252 THE CHAIRPERSON: Any other questions from the other commissioners?
LISTNUM 1 \l 1253 Mr. Fecan, my colleague brought out I think one thing that leaves me a bit troubled, too, is the contradiction between you're one thing saying acquiring TV, bigger clout, bigger heft, you have to buy packages from Hollywood and you put the big hits on CTV, and you can have the secondary program on CHUM and off‑load and it doesn't get to waste, which somehow is a little bit in contradictions, as at City will be this urban, edgy station, et cetera.
LISTNUM 1 \l 1254 So how do you reconcile on the one hand using it as a place to air the secondary program on, on the other hand it's supposed to be the new leader in edginess?
LISTNUM 1 \l 1255 MR. FECAN: Only the ones that are appropriate. And that ‑‑ so that the entire distinction there is in the program selection and choosing the ones that we may have access to through our volume buying that are appropriate to City, that make sense for City and it's demographics.
LISTNUM 1 \l 1256 COMMISSIONER LANGFORD: Just one further, if I may. Why wouldn't you keep the other ones, then?
LISTNUM 1 \l 1257 If you've got all this programming, and you don't know what to do with it, and you can't monotize it, and you've now come to the realization that zero overlap will make us a lot happier than ten percent on a weekly basis. Somebody had a brainstorm over the weekend and that's a good thing.
LISTNUM 1 \l 1258 Why wouldn't you ‑‑ I mean, you can run this stuff on weekly and probably people wouldn't ‑‑ I mean, why wouldn't you keep some of the other ones?
LISTNUM 1 \l 1259 What are you going to do with all this program that's not appropriate? You've got no room for it on CTV, and it seems to me you're putting yourself in a bad situation.
LISTNUM 1 \l 1260 What are you going to do with this programming?
LISTNUM 1 \l 1261 MR. FECAN: I'm sorry, Commissioner, I'm not sure which programming you're ‑‑
LISTNUM 1 \l 1262 COMMISSIONER LANGFORD: You have told us ‑‑
LISTNUM 1 \l 1263 THE CHAIRPERSON: The secondary, none of ‑‑
LISTNUM 1 \l 1264 COMMISSIONER LANGFORD: The less attractive programming.
LISTNUM 1 \l 1265 MR. FECAN: It gets wasted. It goes to waste is what we do with it.
LISTNUM 1 \l 1266 COMMISIONER LANGFORD: That's what you do with it now.
LISTNUM 1 \l 1267 MR. FECAN: Yes, that's right.
LISTNUM 1 \l 1268 COMMISSIONER LANGFORD: The hope certainly was ‑‑
LISTNUM 1 \l 1269 MR. FECAN: We don't intend to force inappropriate programming to City's brand on City's brand.
LISTNUM 1 \l 1270 COMMISSIONER LANGFORD: Whatever that means.
LISTNUM 1 \l 1271 MR. FECAN: It's called breakage.
LISTNUM 1 \l 1272 COMMISSIONER LANGFORD: Yes, okay. The edgy brand. Okay.
LISTNUM 1 \l 1273 THE CHAIRPERSON: Let's then go to the second area, which I think is very difficult for us to follow you, which is a two stick policy.
LISTNUM 1 \l 1274 Your submission, in effect, asks us to disregard that policy. You're asking for exemptions in five markets. There's never been an exemption application of that nature.
LISTNUM 1 \l 1275 We've made exemptions in the past. All of them have been based essentially on a station in a secondary market not doing well, allowing them to extend their reach into the major neighbouring centre, and therefore improve their revenue and continue as a local station and provide the local programming.
LISTNUM 1 \l 1276 What you're now proposing is quite different. You set out ‑‑ you say you're stepping in the shoes of CHUM in Vancouver, Victoria and in Hamilton, Ontario, Toronto, but you're making a completely separate case for Alberta, and I haven't heard any justification at all for Winnipeg.
LISTNUM 1 \l 1277 So maybe you can explain to me why you feel this should be approved and why, in effect, we should be canning our two stick policy as far as CTV is concerned. Because that's how it appears at first blush. I mean, we totally could be wrong and stand to be corrected.
LISTNUM 1 \l 1278 MR. FECAN: Well, a bit of perspective, please.
LISTNUM 1 \l 1279 First, there are three station groups currently in English conventional television. Two of them have the exemptions to the policy.
LISTNUM 1 \l 1280 So ‑‑ so we're the only ones that don't have an exemption to the policy. From a distance, I think that's worth noting.
LISTNUM 1 \l 1281 Secondly, in the case of CanWest and WIC, Hamilton was in Toronto and Victoria was in Vancouver. Yes, they were failing stations. Yes, these are failing stations. But, as a matter of fact, both the stations were already in ‑‑ in ‑‑ in that market.
LISTNUM 1 \l 1282 THE CHAIRPERSON: I'm sorry, these are failing stations?
LISTNUM 1 \l 1283 MR. FECAN: City is.
LISTNUM 1 \l 1284 THE CHAIRPERSON: I thought the Channel A could be characterized as such. I thought the City actually were not failing.
LISTNUM 1 \l 1285 MR. FECAN: A station that on the EBITDA line barely makes money and under the PBIT line loses money is not a healthy financial station. It's one that needs help.
LISTNUM 1 \l 1286 THE CHAIRPERSON: So you consider the City station failing stations?
LISTNUM 1 \l 1287 MR. FECAN: I think it's teetering on the edge, yes. I think the As are in worse shape, and I'm delighted that the Rogers company will add its scale in all its various dimensions to revitalizing those stations.
LISTNUM 1 \l 1288 So, in the Toronto/Vancouver market, that's why my remarks this morning, I put them in two different categories.
LISTNUM 1 \l 1289 I recognize that in Edmonton, Calgary and Winnipeg it's a different case. It's not the same case as Toronto, Hamilton, Vancouver, Victoria.
LISTNUM 1 \l 1290 And for those cases I thought ‑‑ I tried to make my points about why I think it's still in the public interest.
LISTNUM 1 \l 1291 First point being the ‑‑ the idea of efficiency. Second point being it's not in public interest to take those programs off the air that are there now, because they are not going to be seen most likely with whoever acquires those stations, should you ask us to divest those stations.
LISTNUM 1 \l 1292 They will be looking for scale as well. They will be looking to expand their scale. Whether it's Rogers or Videotron or whoever, chances are it's going to be somebody who doesn't have stations there, who will want stations to expand their scale.
LISTNUM 1 \l 1293 Why do they want the scale? To pay for the foreign programming, to pay for the Canadian programming, to get the national sponsors. For all the reasons that City wanted to expand the scale in the first place.
LISTNUM 1 \l 1294 And so the third reason is the health of City.
LISTNUM 1 \l 1295 THE CHAIRPERSON: Excuse me if I interrupt you on that point, but just the logic here somehow I can't follow it.
LISTNUM 1 \l 1296 You say because you have the heft, you can take a long‑term view. You are convinced that edginess will sell in the long run. It needs to be invested in, you have to grow the audience, you have to grow the appetite, and that's what you intend to do with City.
LISTNUM 1 \l 1297 Fine. Why couldn't, for argument's sake, if Rogers bought City rather than you, Rogers has the heft, et cetera, why could they not take the same long‑term view and say everybody is offering the same brand. City has a unique brand. It hasn't been properly marketed, it hasn't had the necessary money. I'll pump the money in there and I will reap the rich rewards because it's something different that urban youths want to watch, et cetera.
LISTNUM 1 \l 1298 Why are you unique and be able to do this?
LISTNUM 1 \l 1299 MR. FECAN: We think we have a history with City, we think we have a joint appreciation of how to develop Canadian programming, and so we think we are uniquely positioned.
LISTNUM 1 \l 1300 I can't speak for what would or could happen in some other hypothetical situation. But clearly we ‑‑ we believe we're the best possible steward of these assets.
LISTNUM 1 \l 1301 THE CHAIRPERSON: So then Vancouver and Toronto basically you're saying continue in existing exceptions. You just switch stations.
LISTNUM 1 \l 1302 MR. FECAN: And create more diversity through ‑‑ because the overlap that exists in those markets between the two City stations and the A Channel, so to speak in those markets, there's a lot of overlap now, 33 hours in Toronto, 12 hours in Vancouver. That disappears because we have zero overlap.
LISTNUM 1 \l 1303 And Rogers, as the new purchaser of the A stations, will have their own program line up. So there's actually more diversity in those two markets.
LISTNUM 1 \l 1304 THE CHAIRPERSON: And you ‑‑ in terms of Calgary and Edmonton, again you make the same argument in terms of keeping the City format alive and available, which under other ownership might not.
LISTNUM 1 \l 1305 You also talk about competitive equality with Global, something that I just don't understand. Number one, I don't know why I should be concerned with competitive equality. I don't think there's anything in the Broadcasting Act that speaks of it.
LISTNUM 1 \l 1306 Secondly, I find it difficult to understand the competitive equality given the difference in size between you and Global.
LISTNUM 1 \l 1307 Is this really a valid point? I appreciate what you said about off‑loading secondary programming on a different chain, but you are vastly bigger than Global right now. So even if you want to go down this road, I will have thought you are more than capable of fending for yourself.
LISTNUM 1 \l 1308 MR. FECAN: The difference in scale has to do with ratings, which drives revenues.
LISTNUM 1 \l 1309 THE CHAIRPERSON: Yes.
LISTNUM 1 \l 1310 MR. FECAN: And that's incredibly cyclical. If you had looked at it five or seven years ago, it would be the opposite to what it is today.
LISTNUM 1 \l 1311 And so I think people come and go, they get hot and cold. I do think as a business person I need to look at structural fairness and some sort of equity.
LISTNUM 1 \l 1312 If they have the opportunity to more efficiently buy volume, and monotize that volume for their own benefit, and for the benefit of the system, I'd like to have the same opportunity. Because right now in order to compete, we need to match their volume, and the matching goes to waste.
LISTNUM 1 \l 1313 So we don't think that ‑‑ I don't see how that benefits the system to have this go to waste, because we ‑‑ because in order to compete we do need to match volume.
LISTNUM 1 \l 1314 And there's no benefit to us doing that, except, you know, we do well, but we could do better for ourselves and the system, because the American does support the Canadian.
LISTNUM 1 \l 1315 THE CHAIRPERSON: Now, any ‑‑ how does Winnipeg fit into the mix? I mean, even ‑‑ and I heard you ‑‑ will accept as the rational explanation for Vancouver, Toronto. I see one for Alberta.
LISTNUM 1 \l 1316 I am not aware yet about Winnipeg, why we should make an exception for Winnipeg.
LISTNUM 1 \l 1317 MR. FECAN: It is probably the thinnest of cases of the ones we've put forward, but I still don't see that there's an advantage of taking programs that people are used to and like in Winnipeg and ripping it off the screen.
LISTNUM 1 \l 1318 You would substitute presumably somebody else's programs for ours. It is the weakest of the cases, I concede.
LISTNUM 1 \l 1319 THE CHAIRPERSON: Okay. The other thing is you decided to divest the A Channel and keep Citytv.
LISTNUM 1 \l 1320 Just as a matter of interest, why wouldn't you have done that the other way around? I mean, in terms of our policy, failing station, et cetera, by your own admission Channel A is on the brink, and would have been a slam dunk in terms of exceptions, while this is a very difficult one. So ‑‑ and you still would have given, you know, the secondary network to dump the packaging that you have to buy from Hollywood also, which you have no room for.
LISTNUM 1 \l 1321 So explain to me why you chose to do ‑‑ if one of your competitor ‑‑ if competitive equality is one of your concerns, why you chose the harder route in terms of regulatory approval rather than the obvious one.
LISTNUM 1 \l 1322 MR. FECAN: Because I think it's the right thing for the system. And let me explain.
LISTNUM 1 \l 1323 From an economic point of view, purely from the competitive equality point of view in particular, it would be easier and possibly better for us to hold on to the As and to divest the City's.
LISTNUM 1 \l 1324 However, we believe we can make a difference at City. We believe we've got a special connection with City. We believe it's worth fighting for. And so that's why we chose to go down that road.
LISTNUM 1 \l 1325 The other thing that is very clear is we actually kind of think of City as almost as a specialty channel. When it's doing its job right, it's very focused.
LISTNUM 1 \l 1326 And, yes, it's the youngest of the conventionals now, but it needs to be younger than what it is and it was in its heyday.
LISTNUM 1 \l 1327 Whereas the A channels effectively become CTV, too. It's just ‑‑ it's a second network for CTV. It's not necessarily a new diverse re‑invigorated outlet. The demographics are almost precisely what CTV's demographics are.
LISTNUM 1 \l 1328 So because we believe the values and diversity, because we think we can do better by not so much changing CTV, because that's ‑‑ I think it's doing a pretty good job of where it needs to be, but helping position City as more distinctive.
LISTNUM 1 \l 1329 We think that's a benefit to the system that we can provide. Whereas, if we owned the A channels, it would be much too close for my liking to what CTV already is. It's in my interest to make them different.
LISTNUM 1 \l 1330 And ‑‑ and those stations, with their particular audience blend, are almost duplicative to CTV's. And that's why, even though the short‑term answer might have been, and the easier answer, might have been keep the As, I think the better long‑term answer, we think for us, and we submit for the system, is the combination we've proposed.
LISTNUM 1 \l 1331 THE CHAIRPERSON: You make twice in your submission a distinction between markets and City's, and saying that the CRTC policy is one station per market per language, not per City. And, in effect ‑‑ but you don't elaborate on that.
LISTNUM 1 \l 1332 If I understand what you're driving at City ‑‑ if successful City serves a different market than CTV, and therefore they're not in the same market because one is sort of a hip urban generation and one is the general public or what ‑‑ what did you mean by drawing out this distinction?
LISTNUM 1 \l 1333 MR. FECAN: Well, I think I was trying to refer to what the policy actually said was three stations in a market, and Toronto, Hamilton is a market. Vancouver, Victoria is a market. And so that's what I was keying to.
LISTNUM 1 \l 1334 My point with the difference in City's audience is it's not just necessarily defined by demographics, although that's an easy way. It's almost more probably appropriately defined by psychographics. Attitudinally young.
LISTNUM 1 \l 1335 THE CHAIRPERSON: Yes.
LISTNUM 1 \l 1336 MR. FECAN: Attitudinally young. So you can be whatever age, but be attitudinally young.
LISTNUM 1 \l 1337 It's an energy, it's a way of looking at things, it's perhaps some cynicism, perhaps an alternative view. It's a whole bunch of things.
LISTNUM 1 \l 1338 When I ‑‑ when you drive from Toronto and Hamilton, with the exception of a park here and there, it's urban sprawl. It's ‑‑ it's the same market.
LISTNUM 1 \l 1339 THE CHAIRPERSON: And coming back to your earlier comment that, you know, there's essentially no room for intermediate players, and yet at the same time in your submission you're saying by selling the A Channel to Rogers we are sewing the seeds for third national network, et cetera.
LISTNUM 1 \l 1340 How do you reconcile those statements?
LISTNUM 1 \l 1341 MR. FECAN: Well, Rogers is way bigger than us ‑‑
LISTNUM 1 \l 1342 THE CHAIRPERSON: Yes.
LISTNUM 1 \l 1343 MR. FECAN: ‑‑ so we don't think of them as an intermediate player.
LISTNUM 1 \l 1344 Clearly the Rogers organization, and Ted Rogers personally, has made a decision that he would like to build this group of stations, and it's part of his vision for what he wants to do with his broadcasting group. Which, when it's appropriate, and if you approve this deal, he would be sitting here and explaining. I think he has to speak for himself.
LISTNUM 1 \l 1345 But, you know, when you consider their size, not just in broadcasting, but on the BDU, on the wireless and telephony, all these different forms of communication, many of which are ‑‑ are causing difficulty to conventional television.
LISTNUM 1 \l 1346 I think he has all the pieces to potentially make a difference to those stations, and I was delighted that he stepped forward to offer to do so.
LISTNUM 1 \l 1347 But I don't think he's a medium player.
LISTNUM 1 \l 1348 THE CHAIRPERSON: Medium really in terms of financial resources to not only in terms of the presence in the broadcasting. Okay.
LISTNUM 1 \l 1349 Now, before I pass you on to my colleagues, I just want to say that we have a policy that says one station per market per language except for exceptional circumstances.
LISTNUM 1 \l 1350 We've always ‑‑ when we allowed an exception it was because it was a failing station.
LISTNUM 1 \l 1351 Here, let's be honest, they're not failing stations. They may not be doing as well as the others, but failing is ‑‑ you think we should invoke the exception nonetheless because it will create diversity of great deficiencies. And if you go market by market you're saying essentially Vancouver, Hamilton and Toronto ‑‑ Toronto, Hamilton, Victoria and Vancouver, you're just substituting the stations. You're contending one is an exception, therefore they're all exceptions.
LISTNUM 1 \l 1352 Edmonton and Calgary you suggest they are appropriate because it will allow City to continue and provide that programming there and it will put you on a ‑‑ in a ‑‑ it will not deprive those cities of the diversity that City and its former brings, while City on the other hand will undoubtedly go back into the mainstream.
LISTNUM 1 \l 1353 For Winnipeg you essentially admit it's a very weak case along the same line.
LISTNUM 1 \l 1354 Thank you.
LISTNUM 1 \l 1355 I'll pass on to my colleagues. Helen?
LISTNUM 1 \l 1356 COMMISSIONER DEL VAL: Thank you, Mr. Chair.
LISTNUM 1 \l 1357 On this ‑‑ on the one station per market policy, you know, and there's going to be a hearing on diversity of voices, and that policy itself will be considered. But say just today, and let's assume for now that we do grant yet another exception in the CTV situation, where do you see that one station per market rule applying?
LISTNUM 1 \l 1358 Is there any scenario that you see that it would still apply?
LISTNUM 1 \l 1359 MR. FECAN: I have to confess, Commissioner, I haven't really considered that question.
LISTNUM 1 \l 1360 I think your policy states that you consider this on a case‑by‑case basis. That it's not ‑‑ not the case that made the argument work before necessarily should be the case that makes it work today. I mean, they're judged on its individual merits, and I think ‑‑ I think that's the right way to do it.
LISTNUM 1 \l 1361 COMMISSIONER DEL VAL: Okay. And I don't know whether you're aware, you know, Australia just did a media and policy review, and they decided to retain the ‑‑ the one station per market. What they call their reach rule. I believe that the States also has one. It's got some qualifications, but two stations.
LISTNUM 1 \l 1362 And one of the main reasons I think for such a rule, I think the key benefit is to have an objective quantitative rule for diversity of voices, pluralicy of ownership.
LISTNUM 1 \l 1363 I'm wondering whether you're aware of the situation and whether you have any comments on those.
LISTNUM 1 \l 1364 MR. FECAN: Well, I think every conventional broadcaster in Canada would love to have the geographical separation Australia has from America over the air signals. And that ‑‑ and that, you know, I'd happily trade one for the other, thank you very much, but that's not the situation we have.
LISTNUM 1 \l 1365 In the U.S., I could be mistaken, but I thought in some situations there are two stations in the market by common owners. But I'm not ‑‑ I might ‑‑ I don't know, Kathy, you can ‑‑ let me get back to you on that one.
LISTNUM 1 \l 1366 But I like the Australian situation a lot if it was possible.
LISTNUM 1 \l 1367 COMMISSIONER DEL VAL: Okay. Then, a follow‑up question from your discussion with Mr. Chair here.
LISTNUM 1 \l 1368 And you were saying, you know, the Rogers is buying the ‑‑ the A Channels and you felt that you were the best candidate to ‑‑ for the ‑‑ for the Citytv. But why do you think you are the best? As you said, say Rogers is in your own ranking of revenues for media operations is number one.
LISTNUM 1 \l 1369 In that situation it would be a continued grandfathering of what is already a grandfathered situation, and in terms of ‑‑ of strengths, why do you think that you are the best?
LISTNUM 1 \l 1370 MR. FECAN: We think we're best ‑‑ well, and I want to preface this. I think the Rogers organization is a wonderful organization, and this is ‑‑ this is not about them. It's about why we think we're the best.
LISTNUM 1 \l 1371 And we think we've got a great cultural fit. We have a demonstrated track record of dealing with diverse, independent media entities, different brands, and letting ‑‑ letting and supporting those brands flourish. This is something that we think we know how to do particularly well.
LISTNUM 1 \l 1372 And of course there's also, for better for worse, my own personal connection with Citytv, and understanding the brand at its formation and what it stood for in the context of that time, and what it might stand for in the context of this time.
LISTNUM 1 \l 1373 COMMISSIONER DEL VAL: Thank you. Then just on the ‑‑ the chart that you have provided in your January 29th reply to deficiencies. I'm looking at page 35 and figure 9 where you've ranked the media operations before and after acquisition.
LISTNUM 1 \l 1374 MR. FECAN: Let me just have someone find if for me.
LISTNUM 1 \l 1375 COMMISSIONER DEL VAL: It's page ‑‑ yes, it's page 35 of ‑‑ yes, it's the 77‑page document.
LISTNUM 1 \l 1376 MR. FECAN: Thank you. Yes, I have it in front of me.
LISTNUM 1 \l 1377 COMMISSIONER DEL VAL: Okay. Good. Now, I just wanted to ‑‑ to clarify some numbers. One theory you have two separate lines ‑‑
LISTNUM 1 \l 1378 MR. FECAN: Yes.
LISTNUM 1 \l 1379 COMMISSIONER DEL VAL: Are you ready?
LISTNUM 1 \l 1380 MR. FECAN: Yes, I am now. Thank you.
LISTNUM 1 \l 1381 COMMISSIONER DEL VAL: You have two separate lines for CanWest, one for total, I take that's worldwide operations, and one for just Canada. And I see that the others, obviously some of them also have worldwide operations.
LISTNUM 1 \l 1382 I just want to make sure I'm comparing apples and apples.
LISTNUM 1 \l 1383 Is ‑‑ for the others that you have ranked, do they reflect their worldwide income of revenues? Or ‑‑
LISTNUM 1 \l 1384 MR. FECAN: Before I ask Steve to ‑‑ Steve Armstrong, who prepared the chart ‑‑
LISTNUM 1 \l 1385 COMMISSIONER DEL VAL: Yes.
LISTNUM 1 \l 1386 MR. FECAN: ‑‑ to answer the question, I just kind of want to make the point that, you know, capital is fairly portable.
LISTNUM 1 \l 1387 COMMISSIONER DEL VAL: Pardon me?
LISTNUM 1 \l 1388 MR. FECAN: Capital is portable.
LISTNUM 1 \l 1389 COMMISSIONER DEL VAL: Sorry, yes.
LISTNUM 1 \l 1390 MR. FECAN: And as a company we've decided to invest all of our capital in Canada. I'm not saying it's better or worse.
LISTNUM 1 \l 1391 Some companies have chosen to, you know, get into print in a much bigger way than we have, or broadcasting in other countries. And there's no ‑‑ there's no attempt to be pejorative about this one way or the other, it's just who we are.
LISTNUM 1 \l 1392 COMMISSIONER DEL VAL: No, Mr. Fecan, I didn't take it that way. I just wanted to make sure that I was ‑‑ I had the correct information and was interpreting it correctly.
LISTNUM 1 \l 1393 MR. FECAN: Steve Armstrong.
LISTNUM 1 \l 1394 MR. ARMSTRONG: Yes, Commissioner, the revenues there for all of the companies are as reported in their 2005 annual reports.
LISTNUM 1 \l 1395 CanWest is the only company where I chose just for interest to look at its Canadian‑only operations.
LISTNUM 1 \l 1396 COMMISSIONER DEL VAL: So is it possible to ‑‑ so that I can have the picture, the same type of picture for the Canadian media environment, is it possible for you to produce another table ranking these media operations just according to their Canadian revenues, please?
LISTNUM 1 \l 1397 MR. ARMSTRONG: I will certainly try to do that.
LISTNUM 1 \l 1398 COMMISSIONER DEL VAL: Thank you.
LISTNUM 1 \l 1399 MR. ARMSTRONG: I'll be limited by what's ‑‑
LISTNUM 1 \l 1400 COMMISSIONER DEL VAL: Sure.
LISTNUM 1 \l 1401 MR. ARMSTRONG: ‑‑ what's in their annual reports.
LISTNUM 1 \l 1402 COMMISSIONER DEL VAL: Yes, I understand. And also, I'm looking at your footnotes on the previous page where you've broken it down to broadcasting services, broadcasting distribution services.
LISTNUM 1 \l 1403 MR. ARMSTRONG: Yes.
LISTNUM 1 \l 1404 COMMISSIONER DEL VAL: Is it possible to get a breakdown according to those categories to the best that you can?
LISTNUM 1 \l 1405 MR. ARMSTRONG: Absolutely, to the extent it's set out in the annual report.
LISTNUM 1 \l 1406 COMMISSIONER DEL VAL: Okay. So while we're on ‑‑ just can I ‑‑ while we're on the same reply, can you go to page 19, please? That's figure number 1 where this chart is supposed to tell me the diversity of ownership among traditional media post transaction.
LISTNUM 1 \l 1407 Now, I see you list, say, for each sector a number of distinct owners. Now, if the ‑‑ for example, if the number of seven distinct owners is the same as the seven distinct owners in newspaper, this will be quite a different picture than if those ‑‑ those owners were ‑‑ were distinct between the two groups.
LISTNUM 1 \l 1408 So is it possible for you to please file with me the names of the outlets and the owners that's backing up this table?
LISTNUM 1 \l 1409 MR. FECAN: We'll be happy to do so. Debra McLaughlin prepared that.
LISTNUM 1 \l 1410 COMMISSIONER DEL VAL: Thank you. Great. Great. Sorry?
LISTNUM 1 \l 1411 MS McLAUGHLIN: I can file it.
LISTNUM 1 \l 1412 COMMISSIONER DEL VAL: Is it also possible to just make some footnote or distinction to ‑‑ to indicate what's changed pre and post merger?
LISTNUM 1 \l 1413 MS McLAUGHLIN: Yes, absolutely.
LISTNUM 1 \l 1414 COMMISSIONER DEL VAL: Thank you very much.
LISTNUM 1 \l 1415 Those are all my questions. Thank you, Mr. Chair.
LISTNUM 1 \l 1416 THE CHAIRPERSON: Thank you. Any other questions?
LISTNUM 1 \l 1417 Stewart?
LISTNUM 1 \l 1418 COMMISSIONER LANGFORD: Thank you, Mr. Chairman.
LISTNUM 1 \l 1419 I'm trying to figure out a way to give you what you want ‑‑
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1420 ‑‑ in the smithee of your soul, as Joyce might have said.
LISTNUM 1 \l 1421 And what you want is an opportunity to recreate, I suppose, the City energy, edginess, and tell me if I've got this wrong, but I think that's one half of it. The other half seems to be to be on a level playing field with CanWest Global in the sort of twin stick rule.
LISTNUM 1 \l 1422 Is that generally pretty accurate?
LISTNUM 1 \l 1423 MR. FECAN: Yes, Commissioner Langford.
LISTNUM 1 \l 1424 I would just suggest that what we're looking to do is to re‑invigorate the City brand.
LISTNUM 1 \l 1425 I know we can't go back to the context of the time and make it the same. It needs to be authentic, but it needs to be in the moment.
LISTNUM 1 \l 1426 COMMISSIONER LANGFORD: Okay. What station is City on in Toronto?
LISTNUM 1 \l 1427 MR. FECAN: It's on cable 7.
LISTNUM 1 \l 1428 COMMISSIONER LANGFORD: Cable 7.
LISTNUM 1 \l 1429 MR. FECAN: Channel 57.
LISTNUM 1 \l 1430 COMMISSIONER LANGFORD: Channel 7.
LISTNUM 1 \l 1431 MR. FECAN: 57.
LISTNUM 1 \l 1432 COMMISSIONER LANGFORD: What would happen if it had to move ‑‑ the channel became impaired and it had to move to 10 or something, let's just pick a number.
LISTNUM 1 \l 1433 Does it in your view have devoted enough followers that they'd find 10 and settle in and get used to it?
LISTNUM 1 \l 1434 MR. FECAN: I can't imagine why anybody would want to put snow ‑‑ or distort a picture and then ask Canadians to watch that.
LISTNUM 1 \l 1435 COMMISSIONER LANGFORD: No, no, that's not what I'm suggesting, sir.
LISTNUM 1 \l 1436 Let's assume that that channel became impaired for some reason, we don't know why, some, you know, thermal ducting over Lake Ontario, who knows, and suddenly it just wasn't usable any more, so Rogers had to move it just for your benefit, for the benefit of City they just had to move it. So they moved it to some other channel, pick a channel, 10, it doesn't matter.
LISTNUM 1 \l 1437 Would their fans do you think at this point, though it's been breadwinnered a bit, be loyal enough that they'd go seek it and find it?
LISTNUM 1 \l 1438 MR. FECAN: I would hope that with the right amount of promotion ‑‑
LISTNUM 1 \l 1439 COMMISSIONER LANGFORD: M'hmm.
LISTNUM 1 \l 1440 MR. FECAN: ‑‑ and marketing to let people know.
LISTNUM 1 \l 1441 I mean, as you know, when cable companies move channels there is ‑‑ there is for a period of time a loss of audience because people ‑‑
LISTNUM 1 \l 1442 COMMISSIONER LANGFORD: M'hmm.
LISTNUM 1 \l 1443 MR. FECAN: ‑‑ no matter how well you tell people where it's gone, I mean they just may not know. But ultimately, with the right marketing promotion, I would hope so, yes.
LISTNUM 1 \l 1444 COMMISSIONER LANGFORD: Okay. So if we're trying to re‑invigorate, to borrow your word, City, and we're also going for a level playing field, why couldn't you have constructed something along these lines, and you don't necessarily have to approve of my future for you, but you could sort of speak to the underlying themes that I'm getting at.
LISTNUM 1 \l 1445 Why couldn't you have said to Rogers or some buyer, we're keeping quite a few of the A Channels, certainly the one in Victoria, because that would make us perfectly equal, perfectly level playing field with CanWest Global, and we'll just deal with Victoria and Toronto to make it simpler, and we're going to keep Barrie, because Barrie would be perfectly synonymous with Hamilton. And we'd have all the same local programming handicaps, soliciting ad handicaps. It would be a perfectly level playing field.
LISTNUM 1 \l 1446 And then said, we're selling off the Vancouver station rather than Victoria, and we're selling off what's now the City station, the Queen Street property, but we're keeping the City brand.
LISTNUM 1 \l 1447 So you'd have your edginess, you'd have no problem with the twin stick, or a lot less problem, because you wouldn't be asking for an advantage, you'd be asking for what you ‑‑ you say you're asking for, a perfectly level playing field.
LISTNUM 1 \l 1448 Why couldn't you have gotten more creative in that way and made the exceptions less monumental?
LISTNUM 1 \l 1449 Isn't there room here for more creativity in that way?
LISTNUM 1 \l 1450 MR. FECAN: I think it wouldn't be authentic.
LISTNUM 1 \l 1451 COMMISSIONER LANGFORD: Oh, for ‑‑
LISTNUM 1 \l 1452 MR. FECAN: The City brand stands for a cyclographic, it stands for an urban‑minded focus, and I think ‑‑ I think it needs to be exactly where it is. And I don't think it would be authentic, and I think ‑‑ I think when you push something inauthentic at people, they'll push back.
LISTNUM 1 \l 1453 COMMISSIONER LANGFORD: Well, at least they play it in Ottawa.
LISTNUM 1 \l 1454 MR. FECAN: It's not Citytv in the market it's ‑‑
LISTNUM 1 \l 1455 COMMISSIONER LANGFORD: No, they do have a rebroad for City in Ottawa. It's quite popular.
LISTNUM 1 \l 1456 MR. FECAN: Yes, they've got a rebroad, but it's the rebroad of the authentic Toronto experience, the downtown Toronto experience.
LISTNUM 1 \l 1457 COMMISSIONER LANGFORD: So it's got to be on Queen Street, it's got to have the little booth where the people can stick their tongue out at the camera ‑‑
LISTNUM 1 \l 1458 MR. FECAN: May not have to be on Queen Street, but it has to be authentic. It could be at the distillery district in Toronto, it could be in harbour front, it could be in any number of places, but it can't be in Barrie.
LISTNUM 1 \l 1459 COMMISSIONER LANGFORD: Can it be out at, where are you, McGowan Road and 401?
LISTNUM 1 \l 1460 MR. FECAN: Yes, we're in Scarborough.
LISTNUM 1 \l 1461 COMMISSIONER LANGFORD: So you can move City out there for synergistic reasons and it would still be authentic?
LISTNUM 1 \l 1462 MR. FECAN: I don't think it would be. How would you walk by and ‑‑ and go to the video booth on the McGowan for one?
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1463 It needs to be authentic, Commissioner, that's ‑‑ that's kind of the issue here.
LISTNUM 1 \l 1464 You choreographed it ‑‑ I mean, we thought about, you know, should we keep Vancouver, should we keep Victoria and not Vancouver. But really, I mean, how do you have a City brand that's not in Vancouver?
LISTNUM 1 \l 1465 So if you're going to do this, you've got to do it right.
LISTNUM 1 \l 1466 COMMISSIONER LANGFORD: Well, we may give you the opportunity to try to figure that out, but anyway, I've heard your answer.
LISTNUM 1 \l 1467 Thank you very much. That's my question on that one, Mr. Chair.
LISTNUM 1 \l 1468 COMMISSIONER DUNCAN: Mr. Fecan, I have a question also to do with the statistics in the 77‑page letter, response, and that's at page 31. And a similar question at page 33.
LISTNUM 1 \l 1469 And you'll see on ‑‑ I'll wait 'til you get there.
LISTNUM 1 \l 1470 In the paragraph where you're talking about national conventional television shares, and partway through that paragraph you say that you will be left with ‑‑ sorry, that other conventional stations will hold 63 percent of the television shares after this acquisition.
LISTNUM 1 \l 1471 But I'm just wondering when I look at the table, it looks to me that the other conventional television owners would own 80 percent and not 63.
LISTNUM 1 \l 1472 MR. FECAN: Can I pass that to Debra who prepared the chart?
LISTNUM 1 \l 1473 COMMISSIONER DUNCAN: Sure.
LISTNUM 1 \l 1474 MS McLAUGHLIN: I'm sorry, can I just understand the question? If you're adding up these?
LISTNUM 1 \l 1475 COMMISSIONER DUNCAN: I'm just looking at the paragraph the national conventional television shares, and in the table it shows that post acquisition CHUM would have 20 percent of the share, right?
LISTNUM 1 \l 1476 MS McLAUGHLIN: Yes.
LISTNUM 1 \l 1477 COMMISSIONER DUNCAN: So doesn't that mean the others would have 80?
LISTNUM 1 \l 1478 MS McLAUGHLIN: Well, yes, but the base that is used in that table is for conventional and specialty.
LISTNUM 1 \l 1479 COMMISSIONER DUNCAN: Oh. Because the paragraph, then, above is talking about national conventional and it has 63.
LISTNUM 1 \l 1480 So you don't mean it just in relation then?
LISTNUM 1 \l 1481 MS McLAUGHLIN: That's right.
LISTNUM 1 \l 1482 COMMISSIONER DUNCAN: Okay. Thank you. And that's undoubtedly the same explanation, then, on page 33?
LISTNUM 1 \l 1483 MS McLAUGHLIN: Yes, that's correct.
LISTNUM 1 \l 1484 COMMISSIONER DUNCAN: Okay. Thank you. Thanks.
LISTNUM 1 \l 1485 That's it, Mr. Chairman.
LISTNUM 1 \l 1486 THE CHAIRPERSON: Mr. Fecan, I have one more question for you.
LISTNUM 1 \l 1487 Put yourself in my shoes for a second. We are the regulator, we are governed by the Broadcasting Act, we are supposed to do things that are in the best interests of Canada as defined under the Broadcasting Act. We establish rules.
LISTNUM 1 \l 1488 One of the rules ‑‑ one of our purposes is obviously diversity of voices and variety of programming so Canadians see themselves.
LISTNUM 1 \l 1489 Our tool ‑‑ our principal tool is for programming for over the air station gets carried by broadcasters and satellites.
LISTNUM 1 \l 1490 We have this rule of one station per market per language. The rule has been honoured somewhat in its breach in the past, we both know that, but it's mostly because the exceptions each time was driven by economics, by local stations that would go out of business otherwise if we didn't make the exception by doing it, we allowed local programming to continue and along come you with this transaction.
LISTNUM 1 \l 1491 It has absolutely nothing to do with that. You want us to do an exception, and you've made a very good case in terms of efficiency, in terms of keeping the variety and edginess of City alive. You're asking us to make an exception for five cities.
LISTNUM 1 \l 1492 Assume I agree with you, assume I think, yes, you're right, City is unique, let's make sure it keeps on.
LISTNUM 1 \l 1493 How do I justify that in light of my policy, which by approving your deal I sort of way, you know, that policy is very fine. We have established exceptions, they no longer apply. But here is this whole new exception that I honour basically on the basis of efficiency and variety of programming.
LISTNUM 1 \l 1494 Doesn't that ‑‑ I mean, how can I explain that? How can I justify it and still retain any credibility as a regulator who does things in a consistent way on the basis of well thought out policies?
LISTNUM 1 \l 1495 MR. FECAN: Well ‑‑
LISTNUM 1 \l 1496 THE CHAIRPERSON: I know I'm stating it on purpose, but I just wanted you to see how the dilemma looks from the other side.
LISTNUM 1 \l 1497 MR. FECAN: Well, hopefully you would, in this case, since your policy suggests you consider this on a case‑by‑case basis, in this case I would hope that the benefits to the system are such that it is worth making an exception to the policy.
LISTNUM 1 \l 1498 I would also suggest that happily you have a whole new proceeding in the fall to ‑‑ to consider the question you just posed in the larger context.
LISTNUM 1 \l 1499 And I think the other thing that I would suggest that might be worthy of factoring in is the pressure ‑‑ the overall pressure conventional television is under.
LISTNUM 1 \l 1500 It's a different time today than even a few years ago. And I don't think it's going to get a whole lot better.
LISTNUM 1 \l 1501 THE CHAIRPERSON: Well, maybe you can elaborate because I did not hear you mention that at all in your submission. I know it's in your written submission. But in our overall today that part of the pressure of over the air from other media ‑‑ from new media presumably, et cetera ‑‑ can you give me a little bit more background on how you see that from somebody has to live it daily?
LISTNUM 1 \l 1502 MR. FECAN: Well, it's was just this morning in the Globe and Mail in the report on business, page three. The Internet Advertising Association pointed out that the spend is now a billion dollars in Canada on Internet advertising.
LISTNUM 1 \l 1503 We see direct evidence now that by virtue of geo‑gating, because these companies can isolate the Canadian market, they can sell directly to Canadian advertisers.
LISTNUM 1 \l 1504 In fact, the Citytv Conventional lost a deal recently to ‑‑ I'm not sure if it was Google or Facebook or whoever. But somebody who was geo‑gating Canada took money out of the conventional marketplace and moved it on to a geo‑gated Canadian targeted Internet platform.
LISTNUM 1 \l 1505 We don't believe for a second that the clock is going to turn back on this kind of change. It's going to keep increasing. And if you like I can actually ‑‑ you know, I don't know whether you want it or not, but Jay can provide direct testimony to that one thing. But let's take it for granted, unless you'd like to hear it, of course, that this is happening.
LISTNUM 1 \l 1506 The city stations just, you know ‑‑ you know, I think our public filing shows, Vancouver, Calgary, Edmonton, and Winnipeg are losing money. Toronto is making some money. Just to be clear on that.
LISTNUM 1 \l 1507 So the entire sector is under a lot of pressure. Viewing is down this year. It's down not just in Canada, the conventional; it's down in the US, the conventional.
LISTNUM 1 \l 1508 I don't think anybody with accurately say it's because of this or that or the other thing. It's time shifting, it's DVRs, it's this, it's that, it's Internet. At the end of the day I'm not really sure it matters where it's going. I know it's going down for conventional. So that's also part of the context that I think you need to consider at this point in time.
LISTNUM 1 \l 1509 THE CHAIRPERSON: We've been at this an hour and a half. Why don't we take a 15 minute break, and that will give you a chance to consult with your colleagues, and we can come back to this question after the break. Thank you.
‑‑‑ Upon recessing at 1103 / Suspension à 1103
‑‑‑ Upon resuming at 1122 / Reprise à 1122
LISTNUM 1 \l 1510 THE CHAIRPERSON: Mr. Fecan, I said I would come back to my last question and give you a chance to elaborate on your answer after ‑‑ with the benefit of coffee. So it's over to you.
LISTNUM 1 \l 1511 MR. FECAN: Thank you, Mr. Chairman. There is a worldwide competition for youth viewers that has no boarders. This competition, I think, is felt first maybe as the canary in the mine, maybe not with other kinds of consequences, but it is felt first and foremost right now in conventional.
LISTNUM 1 \l 1512 When we look at the conventional English language trend, the decrease in audiences on a year‑to‑year basis, '07 versus '06, well it's down five percent and two plus. Everybody. If you look at the youth demos, it's ten percent in 18 to 34.
LISTNUM 1 \l 1513 THE CHAIRPERSON: I'm sorry, are you looking at some particular statistics?
LISTNUM 1 \l 1514 MR. FECAN: Yes.
LISTNUM 1 \l 1515 THE CHAIRPERSON: In your submission?
LISTNUM 1 \l 1516 MR. FECAN: I'm not sure ‑‑ these are fresh.
LISTNUM 1 \l 1517 THE CHAIRPERSON: Okay, fine. Go ahead.
LISTNUM 1 \l 1518 MR. FECAN: And we'll happily file them.
LISTNUM 1 \l 1519 THE CHAIRPERSON: We'd appreciate that. Go ahead.
LISTNUM 1 \l 1520 MR. FECAN: I'd like to turn it over ‑‑ I'd like to kind of go deeper into some statistical analysis of what's going on to conventional. We're kind of going to try and answer your question in three parts.
LISTNUM 1 \l 1521 We're going to answer some of the statistical with Deborah. I'd like Fred Sherratt to talk about why it hasn't worked for CHUM. I mean what ‑‑ they've expanded, and what was the problem. And I'd like to also then turn to Roma ‑‑ Roma Khanna who perhaps can help Commissioner Langford and others with the definition of edgy.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1522 But you'll have to wait for that.
LISTNUM 1 \l 1523 COMMISSIONER LANGFORD: I didn't think it was ever going to come. So I'm willing to wait.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1524 MS McLAUGHLIN: All right, I'd just like to review some of the stats. If we just look at two plus from 2002/'03 year to 2006, the pro capita tuning overall is down from 28.6 to 27.9. Now that's just over the full week and that's all measurable audiences.
LISTNUM 1 \l 1525 When you start to go through the demographics the most striking of these is 18 to 34. And it moves from a per capita tuning in the week of 24.6 to 22.4. Those are broad national stats.
LISTNUM 1 \l 1526 If we look at market like Calgary where arguably it's the youngest market in the country, in prime time the decline is 22 percent in the 18 to 24 demo. So the youth demographic is turning away from television. They are the future of television. You've heard us argue this when it comes to radio. Well, it's same in this medium.
LISTNUM 1 \l 1527 In direct contrast they're increased in terms of the time they spend with Internet ‑‑ has been increasing exponentially. Those numbers are a little harder to provide because unlike television it's not as succinctly measured or as consistently measured. But we can provide to you by rely some of those really impressive growth numbers in terms of both access and use.
LISTNUM 1 \l 1528 MR. FECAN: So faced with ‑‑ sorry.
LISTNUM 1 \l 1529 THE CHAIRPERSON: I said thank you. That's all.
LISTNUM 1 \l 1530 MR. FECAN: So faced with that, and it was coming and it was evident years ago ‑‑ Fred Sherratt who was Alan Waters partner from the '60s, who's been on the board of CHUM for a very long time, and who has been there with Jay, wanted to offer some perspective on what they try to do and why it didn't quite work.
LISTNUM 1 \l 1531 MR. SHERRATT: Well, Mr. Chairman, it's been clearly demonstrated that we're going through a systemic change in television. And the audience erosion and those things that they've talked about, it's up 25 percent in a very short period of time.
LISTNUM 1 \l 1532 We attempted to ‑‑ when City really was structured 30 odd years ago it was built on movies, news, music. Movies started to not work because there were so many sources of movies. And the movies that were getting reasonable ratings in prime time, and generating the revenue that was going into the shows that we've been talking just wasn't coming in. The movies weren't working.
LISTNUM 1 \l 1533 What we were going to? We had to get programming that would drive revenue. To do at that we felt you had to have a national platform. So we attempted to expand over a number of years. We tried it by trying to get new licences. We didn't get very far with that. We tried in Ottawa. We tried in the prairies. We eventually got into Vancouver and had Victoria, then we bought the Craigs.
LISTNUM 1 \l 1534 By the time we did that it was too late. We couldn't get the revenue generation to buy the programming that was going to allow us to continue with the City brand.
LISTNUM 1 \l 1535 That's why ‑‑ it's not a matter of bad management. You can say it's bad management if you didn't expand fast enough. But we just couldn't. It wasn't there to be done.
LISTNUM 1 \l 1536 So on that basis City needed a buyer ‑‑ or CHUM needed a buyer that would bring the kind of strength to the cities that would allow them to have the programming to drive revenue. And that's why Jim in his opening remarks said we looked at all the potential buyers in Canada.
LISTNUM 1 \l 1537 And we clearly ‑‑ it was clear to us that the most logical place for these stations was with CTV because they could bring that programming that we'd not been able to build the strength to acquire. And with that programming you could then finance the shows that are already there, many of them. There's edgy programming there. They just need to be invigorated. They need more investment. And you can only do that by generating more revenue.
LISTNUM 1 \l 1538 That's why we were ‑‑ Jim said we were very pleased that CTV emerged as the winning bidder. Because we believe they can make it work.
LISTNUM 1 \l 1539 MR. FECAN: So when we compete with Google and You Tube and AOL and Face Book and Microsoft what kind of programming do we think will compete well against it, will make a difference for the City brand. And for that I turn to Roma.
LISTNUM 1 \l 1540 THE CHAIRPERSON: Really what you're telling me ‑‑ I don't want to put more words in your mouth, but I read that as saying that the one station, one market, one language policy is from a different era. It's doesn't make sense in today's era where over‑the‑air television is under attack.
LISTNUM 1 \l 1541 And, you know, you cannot look at diversity only in terms of that policy. You have to look at it in terms of the market reality that you and your colleagues just described. Do I understand you correctly? Is that what you're saying?
LISTNUM 1 \l 1542 MR. FECAN: I ‑‑
LISTNUM 1 \l 1543 THE CHAIRPERSON: By you, I mean CTV.
LISTNUM 1 \l 1544 MR. FECAN: I wouldn't presume to tell you how to look at it, but that is our case.
LISTNUM 1 \l 1545 THE CHAIRPERSON: My question started off saying put yourself in my shoes. So that's basically the approach you advocate we should be taking?
LISTNUM 1 \l 1546 MR. FECAN: Yes. But I think you should hear what kinds of programs this creates.
LISTNUM 1 \l 1547 THE CHAIRPERSON: Yeah. I totally want to hear that.
LISTNUM 1 \l 1548 MR. FECAN: Okay.
LISTNUM 1 \l 1549 MS KHANNA: Thank you. You know, when we talk about edgy, it's sometimes hard to put the right words around it because it's one of those things where it's hard to define but I know it when I see it.
LISTNUM 1 \l 1550 But the hundreds of creative staff at City TV who think about this every day, who are the creative soul of our company, would tell that when they think about edgy they think about risk taking, trendsetting, being innovative, trying new things that no one's tried before that are unproven ideas.
LISTNUM 1 \l 1551 They would think about access and granting access to our audience in to our processes and what we're doing, and they would talk about being proactive in creating connections on any platform in any manner that our audience wants to connect with us. This is something that they are held accountable to every single day as they work coming with creative ideas. And the ratings come in overnight and tell them whether or not the Canadian people think they've been successful in that.
LISTNUM 1 \l 1552 There is a long history of shows that I can give you names of that we've created over time. Everything from Speakers Corner to the MMVAs, the Much Music Video Awards. The only award show of that I know that takes place in a parking lot that literally opens its doors ‑‑ or lack of doors to the public to come down and be a part of it.
"Much on Demand", which is a daily show Monday to Friday that does the same thing. The Schmooze party promoting Canadian feature film talent across the country. I mentioned before, "Play to Win", a fully SMS driven program. The first of its kind in North America; not just in Canada. "The Spacies", "Happy Tree Friends", an animated show with little killer bunnies. All great examples of what we believe to be innovated programming.
LISTNUM 1 \l 1553 Coming up we have a dramatic slate of well over seven shows that are ready to go into production. From a financing perspective we'll be lucky to put one, maybe two of these shows into production. That's so disappointing to us.
LISTNUM 1 \l 1554 The things we did in the past are now things that are called today user generated content. And You Tube, the number one entertainment site in Canada, does this already. So we need to now find the next version of that.
LISTNUM 1 \l 1555 Dramas like "Blood Ties", a sexy vampire detective series that is just finishing production of its first season playing on Life Time in the States. And we're looking forward to considering it for second season if we can afford it.
LISTNUM 1 \l 1556 With respect ‑‑ I think we've got the creative talent, and we always have, to create the edgy programming that this brand needs. What we don't have are the resources to actually do even a fraction of what we come up with and what we think about.
LISTNUM 1 \l 1557 And that's where we get excited about the future and the ability to say, you know, out of seven dramas instead of just picking one drama that no other conventional broadcaster in this country would play, maybe we can pick two, three, four and actually give those creative people a chance to get that out to the Canadian audiences.
LISTNUM 1 \l 1558 THE CHAIRPERSON: Thank you. Stewart, you had another follow‑up question?
LISTNUM 1 \l 1559 COMMISSIONER LANGFORD: Yeah. I just want to make sure I've got it right. I think we're about ready to move off the edge.
LISTNUM 1 \l 1560 I think what I've heard since the break is that Mr. Sherratt and his team, just for no fault of anybody, lack of timing, lack of available options got caught. And that by the time they found some area to move in it was too late. I think I understand that.
LISTNUM 1 \l 1561 Second I think what I've heard ‑‑ I may not have this in the right order ‑‑ but I think what we've heard from Deborah McLaughlin was that the real problem demographic right now may spread, may get worse, but it's the young demographic.
LISTNUM 1 \l 1562 And finally I heard about edgy, which is good. Because I have been wondering what it was. I lead a very un‑edgy life I realize.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1563 I mean, killer bunnies, who knew, right? But this ‑‑ I still have a problem with it. I just wonder whether you're not letting nostalgia get a grip on you here. I don't mean that in a demeaning way. It can happen. I actually own a 1959 MGA. Now how dumb is that as a consumer decision, right? It only runs about 300 miles a year and eats money like a killer bunny.
LISTNUM 1 \l 1564 So I know about nostalgia, and I understand it as a concept. I understand that all purchases are not uniformly made on the most rational basis. But this one seems difficult for me still. And I think ‑‑ I'm sorry to drag it out, but I want to be clear on my difficulty.
LISTNUM 1 \l 1565 By keeping City you've built the biggest regulatory hurdle you can possibly have between you and acceptance. We've got to really climb over that policy and just stomp it into the ground. I mean it won't exist after if this goes through. Because this is wholesale. This is a tsunami of case by cases. This isn't just one case by case. So that's tough.
LISTNUM 1 \l 1566 Two, you've chosen by your own definition, by what Ms McLaughlin said, the toughest demographic on god's Earth. So you've chosen the toughest regulatory route. The toughest demographic to win back from YouTube and Facebook and whatever. And three you're going to have to pour money into a whole new type of programming that only exist in kind of concept, and maybe a few developmental forms at this point.
LISTNUM 1 \l 1567 Whereas if you went for the other string, the age handle, and I'm not trying to push you in any direction. I'm trying to understand the thinking. You'd be appealing to an older demographic, a safer demographic. You wouldn't have the regulatory hurdle to get over, and not certainly nowhere near as high. And three, you can offload a lot of that programming you already own and can't broadcast anywhere. So why isn't that a better idea?
LISTNUM 1 \l 1568 MR. FECAN: Commissioner Langford, we did not choose the easiest road for us.
LISTNUM 1 \l 1569 COMMISSIONER LANGFORD: No duh, as my kids would say.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1570 MR. FECAN: Or for you. We think, however, we chose the right road for us and the system because of what we think rightly or wrongly we can bring to this collection of stations and networks and channels.
LISTNUM 1 \l 1571 If an opportunity is obvious to everybody then, you know, maybe it wouldn't be the same opportunity. I guess we're looking at this as, yes there is some difficulty here. I don't disagree with the case as you laid it out. It's not an obvious opportunity, but we think it will be a good one. And we believe rightly or wrongly that we're going to help make a difference. I could be wrong. You could be sitting in my spot here saying, you know, we like the A Channels in the future.
LISTNUM 1 \l 1572 You know, business and show business because you need both ‑‑ you need both. We think sometimes the less easy, the less obvious opportunities, will be the longer lasting one and the more meaningful ones.
LISTNUM 1 \l 1573 And I think it's really important for us to connect with these audiences. To not lose the connection between the system, the broadcast system, and these audiences. I think it's a worthwhile objective for us. So if we think we can make a difference ‑‑ and yes it's hard, and yes, you know, there's a lot stacked against us.
LISTNUM 1 \l 1574 We've got great talent in this country, and I think we certainly have the will among the CHUM group in terms of developers and the creative people. Why not give them a chance and back them. And why not let us back them.
LISTNUM 1 \l 1575 COMMISSSIONER LANGFORD: Well, then I have a little more homework for you if you don't mind ‑‑ at least to consider. I'm the kind of free thinking professor type, so if you don't do the homework, you don't do it. But it might be helpful for me if you did do it.
LISTNUM 1 \l 1576 You came today with a concrete way that we could at least attempt to guarantee better diversity of voices, you're Zero Overlap Proposal. And that's good. Because we're sort of concrete folks. We think in terms of conditions of licence and regulatory rules. Boring bunch, aren't we? You talk about men in suits ‑‑ or women and men in suits.
LISTNUM 1 \l 1577 So I guess what I need from you now that you have gone to the edge and had edginess described and talked about your plans, I think I need you to propose some sort of concrete COLs or at least some ‑‑ some kind of language that can give us as much comfort in some of these areas, for example, that you're going to stay with the City demographic, and that you're going to somehow not come to us in two years and say, oh my goodness we're going down. You've got to help us. You've got to lift the problem. Let us out of this. We wish we've never gotten into it.
LISTNUM 1 \l 1578 We need to hear from you ‑‑ at least I do. I shouldn't speak for my colleagues. They've probably got it clear as a bell. But I need to hear from you some suggestions on how we can hem this in if we go along with it.
LISTNUM 1 \l 1579 Not in the sense we're trying to constrain you. But we're trying to come away from a process where everybody knows because it is part of the written record what it is you're going to be doing; not over the next year, even though you'll be back in a year, but over the next seven years, say, in that kind of sense.
LISTNUM 1 \l 1580 And that's what I don't have now. I have a better understanding of edgy. I have a certain respect for your commitment, even though it may or may not be suicidal. But I don't have a sense of how we can look you in the eye in three years and say, "But folks, this is what you agreed to. Here it is." 'Cause these transcripts have a way of fading away, you know, and a new record is developed in three years.
LISTNUM 1 \l 1581 So that's something you might want to think about for a later phase, coming up to us with some sort of language, some sort of constraints you could put on it.
LISTNUM 1 \l 1582 MR. FECAN: I would certainly think about it, but I do want to make a comment. And that is that you can measure differences. It's ‑‑ you know, one program is different from the other. And that's why we went to the zero percent, because I know that if I were in your shoes, I would want to be able to concretely somehow measure it.
LISTNUM 1 \l 1583 It's ‑‑ it's ‑‑ you know, it's very difficult to measure in advance whether a program will achieve one kind of audience or another.
LISTNUM 1 \l 1584 It's in our economic interest to make these services as different as possible. When you have, you know, a station ‑‑ a radio station owner that has four stations in a market, I think the example we use, it's pretty darn unlikely that all four of them would be country and western stations. They're going to make them as different as they can.
LISTNUM 1 \l 1585 It is in our economic interest ‑‑ in fact, the only way we make this work is if we break through on the Canadian programming ‑‑ on the City type of Canadian programming and make it as different as possible. That's how we break through. That's how we earn back the investment.
LISTNUM 1 \l 1586 We don't earn it back by doing what the As would do for us, which would duplicate largely our audience and not increase diversity.
LISTNUM 1 \l 1587 So ‑‑ but ‑‑ but in order to ‑‑ but you can't ham in a program maker. I can't say to Roma, you know what, this program you developed is great, but there's too many old people, so we're going to cancel it. We don't know.
LISTNUM 1 \l 1588 We know what we're aiming for, and hopefully that will work. But how would I ham her in that way?
LISTNUM 1 \l 1589 COMMISSIONER LANGFORD: Well, maybe you don't ham her in. Maybe what you do is you commit to some sort of demographic focus, I can't do this job for you ‑‑
LISTNUM 1 \l 1590 MR. FECAN: Yes.
LISTNUM 1 \l 1591 COMMISSIONER LANGFORD: I mean, I'm not going to write the application and judge it as well, I think that's ‑‑ that's asking too much from me, and you've got more people than we do, so ‑‑
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1592 ‑‑ remember some of the other things you're ‑‑
LISTNUM 1 \l 1593 MR. FECAN: ‑‑ maybe young, but, you know, they're not that young demographically.
LISTNUM 1 \l 1594 COMMISSIONER LANGFORD: Well, then, think of a way to ‑‑ to sort of expand on edgy.
LISTNUM 1 \l 1595 But, you know, one of the other things that you're asking, and I think it's important that we keep this in mind, you're asking for a level playing field with CanWest Global, but in fact you're getting one that's going to ‑‑ if you get what you want, it will be tilted in your favour. There's just no doubt about that, it will be. Maybe it's not huge, but it is in the terms of the local programming and your ability to sell ads and ad packages and whatnot in the market.
LISTNUM 1 \l 1596 So, you know, you're asking us to go not only to level, but to skew it a little bit in your favour. So you're asking for a lot.
LISTNUM 1 \l 1597 And other than the zero overlap, which is concrete and something measurable, you're not giving future panels a lot on which to judge whether or not you've fulfilled your side of the bargain.
LISTNUM 1 \l 1598 And whether there's anything we can say to you about wait a minute, this is what you promised us and we don't have it.
LISTNUM 1 \l 1599 So I don't expect you, Mr. Fecan, to whip this one off the top of your head, but I hope you can understand that I, at least, am having trouble bringing the same sort of concreteness, if I can call it, to the rest of your proposal as you have brought to the zero overlap this morning.
LISTNUM 1 \l 1600 MR. FECAN: Well, zero overlap is no small thing compared to the other exceptions that you've approved, and I know you recognize it, but I think I would just like to point out that it's no small thing compared to what you have approved as a Commission.
LISTNUM 1 \l 1601 I would ‑‑ in terms of the competitive balance, this is really driven by ratings performance. Structurally in Vancouver, Victoria, Toronto, Hamilton, it would be the same.
LISTNUM 1 \l 1602 In Alberta it's within your power to make it the same because you have an application in front of you from CanWest to get local programs, local station status for their Red Deer station, and we haven't opposed that.
LISTNUM 1 \l 1603 In Winnipeg it's different.
LISTNUM 1 \l 1604 COMMISSIONER LANGFORD: But even on Alberta, if you've read that application closely, they'll be hamstrung with regard to selling ads and with regard to covering local ‑‑ local programming. They will have to be identified if they're successful still as a Red Deer station, and that's a handicap.
LISTNUM 1 \l 1605 I mean, you don't want to be identified as Barrie for a city, and I'm sure they'd rather not, in the sense of just ease of selling themselves in the big city, be identified as Red Deer.
LISTNUM 1 \l 1606 So there are ‑‑ there are puts and calls on this sort of thing on all sides.
LISTNUM 1 \l 1607 Anyway, look, you didn't think you could name an edgy program only an hour ago, and you've come up with four or five of them, so I have faith in you.
LISTNUM 1 \l 1608 MR. FECAN: But let the record show this suit didn't. The programmer did.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1609 COMMISSIONER LANGFORD: Well, delegation is a big part of being a suit.
LISTNUM 1 \l 1610 THE CHAIRPERSON: I think we've beaten this issue to death. One last ‑‑ I think we've beaten this issue to death. One last question from Elizabeth.
LISTNUM 1 \l 1611 COMMISSIONER DUNCAN: Mr. Fecan, I do have a question and it is with respect to your change today in regards to the zero overlap. Because when I was reading your reply, I was struck with what does it mean, you know, on a weekly basis, it won't be identical. So this seems to me to be a huge thing.
LISTNUM 1 \l 1612 MR. FECAN: Yes. Thank you.
LISTNUM 1 \l 1613 COMMISSIONER DUNCAN: So I'm just wondering if terms of cost, or percent of increase in cost to what you had originally anticipated or projected. What type of an increase would that represent would you say?
LISTNUM 1 \l 1614 MR. FECAN: Honestly, Commissioner Duncan, I think we always intended to have a fairly ‑‑ a completely different program services there.
LISTNUM 1 \l 1615 Perhaps out of ‑‑ out of too much caution we ‑‑ we gave ourselves a little bit of elbow room there, and that attracted a great deal of attention from some of the intervenors. And as we read the interventions ‑‑ honestly they're right.
LISTNUM 1 \l 1616 I mean, if what we say is they're going to be completely different, they should be completely different, and we shouldn't have any wiggle room on that, and so that's why we came forward with this this morning.
LISTNUM 1 \l 1617 It was always our intention to make it completely different, but sometimes out of abundance of caution you give yourself a bit of room.
LISTNUM 1 \l 1618 So this is ‑‑ it's the right thing. We have proposed a very small 20 hour a year exemption, and I thank you for pointing out the difference between weekly, which is what you have approved on the ten percent, and annually. This is ‑‑
LISTNUM 1 \l 1619 So there's two things there that ‑‑ and the annually, of course, is more onerous than the weekly, but I don't consider it onerous because that's what we would do anyway.
LISTNUM 1 \l 1620 And the 20 hour exception, of course, is so that we could ‑‑ you know, if the MVAs are great and we want to repeat that somewhere, we can, or if we want to repeat the Junos or the Geminis, very limited, very focused. Not at the expense of existing priority, in place of American for this 20 hour per year exemption.
LISTNUM 1 \l 1621 So we just felt that it was the right thing to do, and we just felt that maybe the abundance of caution was getting in the way of actually achieving the objective.
LISTNUM 1 \l 1622 COMMISSIONER DUNCAN: So then I take it you wouldn't accept ‑‑ you wouldn't object to having that as a COL then?
LISTNUM 1 \l 1623 MR. FECAN: I would not. I would prefer it as an expectation because the other ‑‑ the other exceptions you've granted I believe are expectations. I stand to be corrected if I'm wrong on that, but we're serious about this and we intend to live up to it.
LISTNUM 1 \l 1624 COMMISSIONER DUNCAN: Okay. That's fine. Thank you very much.
LISTNUM 1 \l 1625 THE CHAIRPERSON: Just because we have ‑‑ we focused on the two sticks policy didn't mean to suggest we didn't realize the major issue that you put on the table by suggesting zero overlap. We appreciate it.
LISTNUM 1 \l 1626 So we go now into the next area of specialty TV, and Commissioner Del Val will lead the question.
LISTNUM 1 \l 1627 COMMISSIONER DEL VAL: Thank you, Mr. Chairman.
LISTNUM 1 \l 1628 I'll just get some of the housekeeping items out of the way first.
LISTNUM 1 \l 1629 Firstly, I found it ‑‑ I couldn't isolate from the ‑‑ from the data that you provided ‑‑ some of them is for consolidated. I could not isolate the audience share and also the revenues attributable only to ‑‑ to specialties.
LISTNUM 1 \l 1630 And so I just want to turn to page 33 of your January 29th answer, the same chart that Commissioner Duncan had referred to earlier.
LISTNUM 1 \l 1631 I see at the bottom of that chart you said it's based on total Canadian English tuning, conventional and specialty, but the chart is for pre and post transaction specialty audience shares.
LISTNUM 1 \l 1632 So is that ‑‑ when you show that it's ‑‑ for example the post figure for CTV, 16.7, is that share of conventional and specialty?
LISTNUM 1 \l 1633 MR. FECAN: Debra McLaughlin, please.
LISTNUM 1 \l 1634 MS McLAUGHLIN: What it essentially is is the share of total English ‑‑ tuning to all Canadian English services in Canada, both conventional and specialty.
LISTNUM 1 \l 1635 And what it allows you to do, further to the discussion we had earlier, is take that 16.7 and add it to the 20.4 on the prior page to get a total overview of the new merged entity in terms of their share of tuning.
LISTNUM 1 \l 1636 COMMISSIONER DEL VAL: Yes, but then what I would be getting is a percentage of viewing to specialties as ‑‑ a percentage of that ‑‑ of the total conventional and specialties, isn't it?
LISTNUM 1 \l 1637 MS McLAUGHLIN: That's correct.
LISTNUM 1 \l 1638 COMMISSIONER DEL VAL: Okay. Can I please ‑‑ could you file the ‑‑ the ‑‑ the audience share figures for only specialties?
LISTNUM 1 \l 1639 MS McLAUGHLIN: So the share of these new specialties ‑‑ new group as a percent of the total tuning to specialties?
LISTNUM 1 \l 1640 COMMISSIONER DEL VAL: Yes, only to specialties.
LISTNUM 1 \l 1641 MS McLAUGHLIN: Yes, I can do that.
LISTNUM 1 \l 1642 COMMISSIONER DEL VAL: And could you then in that breakdown provide ‑‑ further break it down into English, French for each of the following categories: Analog, Cat‑1, Cat‑2 and then pay per view? Thank you.
LISTNUM 1 \l 1643 MS McLAUGHLIN: Yes.
LISTNUM 1 \l 1644 COMMISSIONER DEL VAL: And you would have the pre and post for that?
LISTNUM 1 \l 1645 MS McLAUGHLIN: Yes.
LISTNUM 1 \l 1646 COMMISSIONER DEL VAL: Thank you.
LISTNUM 1 \l 1647 Now, so even based on your chart here that you've provided, the post transaction you will still be significantly bigger than the number 2, which is Chorus, and number 3 should CanWest and Atlantis Alliance merge.
LISTNUM 1 \l 1648 So in terms of your audience share in specialties, you will be significantly larger than the number 2 and number 3.
LISTNUM 1 \l 1649 MS McLAUGHLIN: As a total, yes.
LISTNUM 1 \l 1650 COMMISSIONER DEL VAL: Okay.
LISTNUM 1 \l 1651 MS McLAUGHLIN: But individually, of course, they all represent separate genres.
LISTNUM 1 \l 1652 COMMISSIONER DEL VAL: Yes.
LISTNUM 1 \l 1653 MS McLAUGHLIN: So it's a bit of an apples and oranges comparison.
LISTNUM 1 \l 1654 COMMISSIONER DEL VAL: Yes, I agree it's as a total.
LISTNUM 1 \l 1655 Now, CanWest ‑‑ CanWest Intervention, page 15, they have a table "L".
LISTNUM 1 \l 1656 UNIDENTIFIED SPEAKER: What page are you on?
LISTNUM 1 \l 1657 COMMISSIONER DEL VAL: I don't ‑‑ CanWest ‑‑ page 15 of CanWest Interventions. Table "L".
LISTNUM 1 \l 1658 I don't ‑‑ I'm just asking for whether you agree with the number. You'll get a chance to comment on the interpretation later, but just in terms of the number.
LISTNUM 1 \l 1659 Do you agree with the numbers provided by CanWest in their table "L"?
LISTNUM 1 \l 1660 MS McLAUGHLIN: It's difficult for me to comment because, as you can see, their definition of the time period is fall '06.
LISTNUM 1 \l 1661 Now, fall '06 in a ‑‑ I'm assuming ‑‑ it says BBM/NMR meter data, and then it has a time frame one typically associates with a BBM diver measurement. So I'm not sure how they're defining it.
LISTNUM 1 \l 1662 COMMISSIONER DEL VAL: Okay.
LISTNUM 1 \l 1663 MS McLAUGHLIN: So I would reserve comment on ‑‑
LISTNUM 1 \l 1664 COMMISSIONER DEL VAL: Okay.
LISTNUM 1 \l 1665 MS McLAUGHLIN: ‑‑ whether I could agree or not.
LISTNUM 1 \l 1666 COMMISSIONER DEL VAL: Okay. Perhaps after you've also done your own analysis of ‑‑ perhaps then you could also file within your comment on whether table "L" is correct, because I don't think you've addressed it in your reply. And I didn't want to assume from the silence that you agree with the numbers.
LISTNUM 1 \l 1667 MS McLAUGHLIN: That would be a safe assumption.
LISTNUM 1 \l 1668 COMMISSIONER DEL VAL: Thank you. Okay.
LISTNUM 1 \l 1669 On the issue of just the numbers of specialties our own Commission count of, say, analog specialties is between 28 and 30 right now. So post ‑‑ post merger, this merger, I believe you will be up to 12 English analog, which means it's about 40 percent, 40 to 43 percent of all English analog specialties.
LISTNUM 1 \l 1670 And so ‑‑ and that is ‑‑ the next largest owner of analog English specialties would be CanWest Alliance, if they merge, with 23 percent, and if they don't, then Alliance Atlantis currently have 20 percent.
LISTNUM 1 \l 1671 And I'm focusing on English analog, because I think that accounts for about 90 percent of the revenues from ‑‑ from specialties.
LISTNUM 1 \l 1672 Now, do you agree with those numbers, or would you like to file your own ‑‑ your own account of your calculation of how many specialties there are in terms of just numbers and provide us with your calculation?
LISTNUM 1 \l 1673 MS McLAUGHLIN: Yes, we would like to file.
LISTNUM 1 \l 1674 COMMISSIONER DEL VAL: Okay. Good. Then could you please do the same, number of specialties broken down into English, French, again for analog, cap 1, cap 2, pay per view?
LISTNUM 1 \l 1675 MS McLAUGHLIN: Yes.
LISTNUM 1 \l 1676 COMMISSIONER DEL VAL: Now, for revenues for specialties again. And if you could file the comparison of revenues for only specialties pre and post transaction, again broken down into English, French and the analog, cap 1, cap 2, pay per view.
LISTNUM 1 \l 1677 MR. FECAN: Yes, we could file that.
LISTNUM 1 \l 1678 COMMISSIONER DEL VAL: Okay. How long do you think you'll need to file all of those things?
LISTNUM 1 \l 1679 MS McLAUGHLIN: If we could get back to you on that, because there seems to be a lot to be filed here, so we're going to have to determine what overlaps and how we could ‑‑
LISTNUM 1 \l 1680 COMMISSIONER DEL VAL: If it helps, I think ‑‑ I don't want to presume how readily available that information is. It's information that's broken down, say, in our 2006 monitoring report, except our data is only up to 2005.
LISTNUM 1 \l 1681 So it's quite similar information that I would have assumed you would track anyway.
LISTNUM 1 \l 1682 MS McLAUGHLIN: Well, we have everything you've asked for in various forms ‑‑
LISTNUM 1 \l 1683 COMMISSIONER DEL VAL: Yes.
LISTNUM 1 \l 1684 MS McLAUGHLIN: ‑‑ it's merely just reassembling it.
LISTNUM 1 \l 1685 COMMISSIONER DEL VAL: Yes. Thank you.
LISTNUM 1 \l 1686 So again, you don't need to turn to it yet, because I suspect I know your answer, for CanWest Intervention and Cogeco Interventions, they both have given a ‑‑ their own view of ‑‑ of the 2005 revenue comparison for pre and post arising out of the specialties.
LISTNUM 1 \l 1687 So I should not assume that they ‑‑ you don't ‑‑ I'm sorry, I should not assume that you agree with those, even though you are silent on your reply. Is that correct?
LISTNUM 1 \l 1688 MR. FECAN: That is correct.
LISTNUM 1 \l 1689 COMMISSIONER DEL VAL: Okay. Then could you please, then, take a look at ‑‑ this again is for filing, CanWest Intervention, it would be their table "J" and their table "K". And for Cojco Intervention it would be appendix 2 and appendix 3. And could you file your comment/response on whether you agree with those numbers?
LISTNUM 1 \l 1690 Now, still ‑‑ on the number of specialties, I think you are hovering about ‑‑ for English analog, I think you're hovering around 40 percent. I don't think that that ‑‑ I hope you don't need me to go through how I calculated 40 percent. We can accept that, okay?
LISTNUM 1 \l 1691 Then in terms of the ‑‑ the revenues from English analog. Based on our own numbers from the monitoring report, you would be around 36 percent of revenues from English analog.
LISTNUM 1 \l 1692 From CanWest Intervention they estimate about 41 percent. So we're looking at high 30s say.
LISTNUM 1 \l 1693 Audience share for ‑‑ for analog English you're probably going to about 37 percent.
LISTNUM 1 \l 1694 So, now, I think what ‑‑ and also based on the ‑‑ the ‑‑ if you look back on the monitoring report of 2006, I think it's safe to say that the real growth area is specialties.
LISTNUM 1 \l 1695 In fact, in 2005 ‑‑ in fact, in 2005 growth of Canadian English language specialty service ‑‑ services increased, while viewership of Canadian conventional, non‑Canadian conventional and non‑Canadian specialties all declined. That is the fact.
LISTNUM 1 \l 1696 Do you agree with that?
LISTNUM 1 \l 1697 MS McLAUGHLIN: Yes, we do.
LISTNUM 1 \l 1698 COMMISSIONER DEL VAL: Okay. So ‑‑ I mean, I think Mr. Fecan was saying that, you know, for a number of reasons conventionals are decreasing.
LISTNUM 1 \l 1699 But isn't it also true that specialties is also drawing away some of those audience who would back in the old days watch conventional. Do you agree with that?
LISTNUM 1 \l 1700 MR. FECAN: Yes, I would. But I don't know at what point in the cycle we are at right now.
LISTNUM 1 \l 1701 COMMISSIONER DEL VAL: Yes. Okay.
LISTNUM 1 \l 1702 MR. FECAN: I don't think specialty would be immuned from the forces that are affecting conventional at some point in the cycle. But certainly we're seeing it more in conventional now.
LISTNUM 1 \l 1703 COMMISSIONER DEL VAL: Okay. So nonetheless, with this same transaction, you are going to have a ‑‑ there certainly would be predominance in the specialty field, going to 40 percent in specialty in English analog, which is the area of specialty, which is attracting 90 percent of the revenues.
LISTNUM 1 \l 1704 Now, if we were to ‑‑ and your ‑‑ your plea, I guess, is for us to correct the imbalance in conventional. I mean, if I ‑‑ if I were to do that ‑‑ if I were to be concerned with the imbalance in conventional, should I not be equally concerned with the imbalance that this is going to create in specialty, where specialty is actually a growing area?
LISTNUM 1 \l 1705 MR. FECAN: We all made our choices about where to invest our capital.
LISTNUM 1 \l 1706 We chose in the late nineties to invest our capital in specialty. CanWest chose to invest it in print, and outside of the country I think before that.
LISTNUM 1 \l 1707 We're all adults, we made our choices, and now I guess through the AA transaction that will eventually be in front of you, they are looking to get back into specialty.
LISTNUM 1 \l 1708 So ‑‑ so I would start by ‑‑ by ‑‑ by going to that big picture.
LISTNUM 1 \l 1709 I would point out to you that the specialties are in different genres, will not be immuned, our specialties. There's not much overlap. It's not going to be immune to the forces of new media either at some point.
LISTNUM 1 \l 1710 That your priority programming regime and conventional television has not really allowed us to utilize much of our specialty content ‑ our strongest is TSN and RDS ‑ on the conventional sticks. So there hasn't ‑‑ there isn't much overlap on the program market.
LISTNUM 1 \l 1711 And I think it's important to have strong companies in specialty as well, because I believe as we move to digital migration, and I know there will be a separate proceeding on that, that I can foresee a day when must offer/must carry may not be there.
LISTNUM 1 \l 1712 And so in order to prepare for what most likely will be there, whether it's in three years or five years or seven years, I think it's important to have strong companies in the specialty area as well.
LISTNUM 1 \l 1713 COMMISSIONER DEL VAL: Yes, I see. You see, my difficulty is that one very strong proposition that you make in your ‑‑ in your submission is that we correct the ‑‑ the structural imbalance between you and CanWest, your major competitor.
LISTNUM 1 \l 1714 But then ‑‑ and, yes, and I agree with what you've said, I look at the whole picture, but you're focusing ‑‑ when you're telling me to ‑‑ to correct the imbalance with a strong competitor, you're focusing on the conventional side where ‑‑ on the conventional side.
LISTNUM 1 \l 1715 But if I look at the whole picture, as you ask me to, then I am to look at specialties, too.
LISTNUM 1 \l 1716 Now, where do ‑‑ where do I know as a regulator when to stop about correcting imbalances?
LISTNUM 1 \l 1717 If I correct this imbalance in conventional, am I creating another imbalance in specialty?
LISTNUM 1 \l 1718 If I correct your competitive imbalance versus CanWest, am I creating artificially an imbalance between then you two and all of the other players in the market? Where do ‑‑ where do I stop?
LISTNUM 1 \l 1719 If you're asking me to look at ‑‑ correct imbalance, should I not be looking at the entire picture?
LISTNUM 1 \l 1720 MR. FECAN: Well, let me try and distinguish the cases.
LISTNUM 1 \l 1721 The conventional ‑‑ we're asking you to look at the imbalance within the conventional marketplace.
LISTNUM 1 \l 1722 And CanWest went out and applied for relief on the second station in the market rule, and you gave it to them for ‑‑ for I'm sure good reason at the time. And that imbalance is there.
LISTNUM 1 \l 1723 Nothing stops them from going out and buying more specialty, which they have done and presumably nothing continues to stop them from going out and correcting that themselves, or they could launch more Cat‑2s, or, I mean, this is a business matter that they've chosen to use their capital outside of the regulated system and bought, you know, the majority of daily newspapers in the country.
LISTNUM 1 \l 1724 COMMISSIONER DEL VAL: Sorry. Sorry, no, go ahead.
LISTNUM 1 \l 1725 MR. FECAN: I ‑‑
LISTNUM 1 \l 1726 COMMISSIONER DEL VAL: No, sorry, go ahead.
LISTNUM 1 \l 1727 MR. FECAN: So within ‑‑ within the specialty sector this is something that they can correct.
LISTNUM 1 \l 1728 From ‑‑ if I were sitting in your shoes, and I'm not, I would have to look at it on a case‑by‑case basis to see whether any kind of business acquisition poses public policy issues, and whether it's ‑‑ whether it's good for the system or not. But I think you need to look at it on a case‑by‑case basis.
LISTNUM 1 \l 1729 COMMISSIONER DEL VAL: And you're ‑‑ sorry.
LISTNUM 1 \l 1730 THE CHAIRPERSON: Can I just interject because I'm somewhat lost here what you're talking about, competitive imbalance. It's not ‑‑ if that is an objective of broadcasting. It's something that surely this is just a means to deal with the underlying issues of assuring the purposes of the act, be it diversity, be it access, whatever it is.
LISTNUM 1 \l 1731 So if you answer the Commissioner there was not talking about comparative imbalances, but in terms of assuring and making sure that the objectives of the Broadcasting Act are obtained, how would you phrase your answer?
LISTNUM 1 \l 1732 MR. FECAN: Well, I would hope that our application puts forward the reasons why it is in the public interest to approve what we're asking for.
LISTNUM 1 \l 1733 And I think you would recognize that in my oral this morning I framed it as an efficiency argument, not an imbalance argument, and talked about how this is a benefit to providing more funds to create more Canadian programs.
LISTNUM 1 \l 1734 THE CHAIRPERSON: Yes, I understood that on conventional, but now she's asking you about specialties. So essentially the same argument applies to specialty?
LISTNUM 1 \l 1735 MR. FECAN: We haven't raised an imbalance argument in specialty.
LISTNUM 1 \l 1736 THE CHAIRPERSON: I'll get back to you.
LISTNUM 1 \l 1737 COMMISSIONER DEL VAL: I wouldn't raise the imbalance argument if I were in your shoes either.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1738 So now you're right, in specialties there is no common ownership policy as we do and maybe did in conventional. So if I ‑‑ and you said, yes, CanWest is free to go out and buy more, more specialties and so are you.
LISTNUM 1 \l 1739 So wouldn't the ‑‑ all these imbalances that you're talking about, wouldn't it correct itself?
LISTNUM 1 \l 1740 MR. FECAN: Well, I was talking again, I'm sorry, I may be a bit dense about this, about a specific imbalance in a specific sector.
LISTNUM 1 \l 1741 You know, I have no objection to them buying out ‑‑ to going and buying out all the newspapers in the country, which they've done.
LISTNUM 1 \l 1742 You know, you choose to deploy your assets in different ways. And they ‑‑ it appears to me they're certainly taking steps to ‑‑ to correct an imbalance, perceived or otherwise, on the specialty side.
LISTNUM 1 \l 1743 COMMISSIONER DEL VAL: Okay. So I'll move on to another topic on the ‑‑ one of the ‑‑ the key ‑‑ one of the few key concerns that the intervenors raised is basically the loss of number of buyers to whom they can sell their wears. I'm sorry, it's the intervenors who are the producers. Loss of outlets for independent production.
LISTNUM 1 \l 1744 And do you ‑‑ you know, in the past we have had conditions of license sort of limiting the ‑‑ limiting the amount of expenditure on related ‑‑ on productions by related companies. That was in Canal Histoire and Radio mutuel.
LISTNUM 1 \l 1745 And now do you have any ‑‑ any ‑‑ any suggestions to make in order to allay those concerns for independent producers?
LISTNUM 1 \l 1746 MR. FECAN: Well, certainly. I think the record will show, and certainly you'll ‑‑ you'll potentially hear it firsthand tomorrow, that I think the producers are by and large in favour of ‑‑ of ‑‑ of this transaction, but ‑‑ but you will hear for yourself.
LISTNUM 1 \l 1747 Part of why I think they're in favour of it is they understand our track record and development. They understand that we will have separate buyers for different brands. And that the vast majority, virtually all, but not all, of the production is with independent production.
LISTNUM 1 \l 1748 COMMISSIONER DEL VAL: Okay. So then I was just looking to see if you could give me some guiding principles or commitments to use independent production here.
LISTNUM 1 \l 1749 I know you've got volumes and volumes of supporting producers, but, for example, you just mentioned separate buyers. Like, is that a ‑‑ is that a commitment you're willing to make?
LISTNUM 1 \l 1750 MR. FECAN: It would be an expectation we'd be willing to make, and I don't see another way of doing it frankly.
LISTNUM 1 \l 1751 The ‑‑ the people who buy programs for CTV are going to have a different sensibility than the people that buy programs for Citytv.
LISTNUM 1 \l 1752 COMMISSIONER DEL VAL: Okay.
LISTNUM 1 \l 1753 MR. FECAN: There may be some commonalities, but out of necessity they're going to look at it through their brand perspective ‑‑ sorry, through their brand perspective and look for different kinds of things.
LISTNUM 1 \l 1754 COMMISSIONER DEL VAL: Okay.
LISTNUM 1 \l 1755 MR. FECAN: And so, yes, I mean that's something that I think we've put in our application and I would restate.
LISTNUM 1 \l 1756 COMMISSIONER DEL VAL: Okay. And you just ‑‑ you also mentioned a majority.
LISTNUM 1 \l 1757 So are you willing to commit to a specified amount of ‑‑ of programming that you would buy from independent producers?
LISTNUM 1 \l 1758 MR. FECAN: I think there is ‑‑ well, let me get back to you on a number, but just to be clear, virtually all of the priority programming is from independents. I think it all is right now.
LISTNUM 1 \l 1759 There are a number of programs that CHUM has produced over the years that they've got an in‑house group in, that, you know, they do their own thing and have for years.
LISTNUM 1 \l 1760 So ‑‑ but let us get back to you on ‑‑ on a more precise commitment.
LISTNUM 1 \l 1761 COMMISSIONER DEL VAL: Thank you. I think you might have started to ‑‑ to address this already.
LISTNUM 1 \l 1762 Some of the intervenors like CFTPA, Manitoba Motion Picture Industry, they suggested that you have separate programming departments more ‑‑ such as what you have suggested for news departments, but that they believe that such separation should apply for all programming.
LISTNUM 1 \l 1763 Could you comment on that, please?
LISTNUM 1 \l 1764 MR. FECAN: I think it's important to have separate buyers, but I also think it's important to have a degree of coordination as well. I think it's a little different than the news issue.
LISTNUM 1 \l 1765 The news issue is one of absolute certainty where ‑‑ where you have to have editorial independence completely guaranteed.
LISTNUM 1 \l 1766 There are sometimes economies of scale when you're buying program, particularly American programming, as we've discussed earlier today.
LISTNUM 1 \l 1767 So what we would agree to, and what we have proposed, is separate buyers within CTV and the CHUM Television Group.
LISTNUM 1 \l 1768 COMMISSIONER DEL VAL: Okay. And can I assume that that is the level of separation of programming that you would be willing to commit to, just separate buyers?
LISTNUM 1 \l 1769 MR. FECAN: Separate buyers.
LISTNUM 1 \l 1770 COMMISSIONER DEL VAL: Okay. But not as they have suggested, which is the decision makers ‑‑ I'm sorry, I forgot the words that they use with respect to programming, editors be separate.
LISTNUM 1 \l 1771 MR. FECAN: Well, that's how I see ‑‑ buyers would be by colloquial way of describing people who develop and commission and ‑‑ and make choices. But within CHUM this is how they've done this, and at CTV this is how we do this. I don't see how, you know, you could have the same person doing both.
LISTNUM 1 \l 1772 COMMISSIONER DEL VAL: What about ‑‑ what about CFTPA's suggestion that it be a condition of license that a terms of trade between you and them be entered into?
LISTNUM 1 \l 1773 MR. FECAN: Well, we've been, you know ‑‑ as you may know it's an expectation on our existing conventional license, and we've been working diligently with them and making a lot of progress.
LISTNUM 1 \l 1774 We have stated, and let me just restate it now, that whatever the terms of trade end up being with CTV, Citytv, the CHUM Television organization would work under the precise same terms of trade.
LISTNUM 1 \l 1775 However, there is a fair bargaining process going on right now between two willing parties. There's progress being made.
LISTNUM 1 \l 1776 And I think it would tilt the balance of the fair bargaining process should ‑‑ should this be a matter for this proceeding.
LISTNUM 1 \l 1777 COMMISSIONER DEL VAL: Thank you. I just want to learn a bit more about your ‑‑ you were talking about excess U.S. programming.
LISTNUM 1 \l 1778 Could you use some of that for your specialty services?
LISTNUM 1 \l 1779 MR. FECAN: Well, you know, typically the rights don't transfer.
LISTNUM 1 \l 1780 Typically when you ‑‑ when we go to Hollywood, and maybe others do it different ways, but in our situation in most cases you're buying conventional rights. And if you need specialty rights, then you need to buy that separately. There's ‑‑ the license fee is split out.
LISTNUM 1 \l 1781 In our situation, and, you know, over all the years that I've been part of it, 99.9 percent of what you're buying is conventional rights. Occasionally you might be able to get something else, but usually you pay a little extra for it.
LISTNUM 1 \l 1782 COMMISSIONER DEL VAL: Okay. Do you think having increased ‑‑ being bigger now after this transaction, do you think that that would work in your favour in terms of buying the ‑‑ bargaining that the excess programming could be used for specialties or that's just ‑‑
LISTNUM 1 \l 1783 MR. FECAN: No, I think they're different situations.
LISTNUM 1 \l 1784 I think ‑‑ what my hope is, is, if you think of it this way, right now, CanWest buys for two networks, CHUM has been buying for two networks, and we've been buying in order to match CanWest principally for two networks.
LISTNUM 1 \l 1785 Hopefully at the end of this CanWest will continue buying for two, we'll continue buying for two, and Rogers will buy for one.
LISTNUM 1 \l 1786 COMMISSIONER DEL VAL: Thank you. I want to move on to the distribution regulation, the Section 18(14) the five to one rule right now, and then I'll come back and last thing we'll touch on is genre concentration.
LISTNUM 1 \l 1787 So on the five to one rule. I just want to set the background so we know what numbers we're talking about.
LISTNUM 1 \l 1788 I understand that Bell Expressvu currently carries 35 unrelated and 7 related cap 2 services. Is that correct?
LISTNUM 1 \l 1789 MR. FECAN: Let me ask Mr. Brace too.
LISTNUM 1 \l 1790 MR. BRACE: Yes, that's correct. We have to modify that a little bit. In fact they were confused a little bit. We did this research before we came to the thing, and there may be some modest discrepancy there, but yes.
LISTNUM 1 \l 1791 COMMISSIONER DEL VAL: Okay. Okay. And then now we're going to add four more related. Is that correct?
LISTNUM 1 \l 1792 MR. BRACE: That's correct.
LISTNUM 1 \l 1793 COMMISSIONER DEL VAL: Okay. And I've also ‑‑ we made some progress on this, because you ‑‑ in your reply you've agreed with the suggestion by ACTRA that the ‑‑ for a five to seven ‑‑ what I call exception period. Is that correct?
LISTNUM 1 \l 1794 MR. BRACE: That's correct, yes.
LISTNUM 1 \l 1795 COMMISSIONER DEL VAL: So I'll just call that ‑‑
LISTNUM 1 \l 1796 MR. BRACE: ACTRA has proposed that we have a five to seven year transitional period as we migrate down the road and others come onboard, and who knows what's going to happen corporately.
LISTNUM 1 \l 1797 MR. FECAN: For as long as Expressvu is a related party.
LISTNUM 1 \l 1798 MR. BRACE: As long as Expressvu is a related party, that's right.
LISTNUM 1 \l 1799 COMMISSIONER DEL VAL: Yes.
LISTNUM 1 \l 1800 MR. BRACE: So yes.
LISTNUM 1 \l 1801 COMMISSIONER DEL VAL: Of course. So I just want to clarify how the exception is going to ‑‑ to apply.
LISTNUM 1 \l 1802 So you are carrying four related services too many. So it sounds like you want four to be grandfathered. So I just want to ‑‑
LISTNUM 1 \l 1803 Here is how I'm thinking on how the calculation would work. So are the four grandfathered to be removed completely from the five to one calculation, so that during the exception period Expressvu can always carry four more unrelated. That's scenario one.
LISTNUM 1 \l 1804 Or, scenario two, is that the four grandfather services are deemed unrelated for the purposes of calculating the five to one rule.
LISTNUM 1 \l 1805 And in this second scenario right now, post merger, Expressvu will be deemed to be carrying 39 unrelated and 7 related.
LISTNUM 1 \l 1806 Therefore, you can actually add one more unrelated and still ‑‑ you can add one more unrelated to stay on side ‑‑ and add one more related I mean.
LISTNUM 1 \l 1807 MR. BRACE: Our proposal, to be perfectly clear, is to identify the ones that are now out of, what you would call ‑‑ out of compliance, I guess, in terms of the regulations. And say those are the ones that we would like to, you know, remain through the transitional period after which ‑‑ so it's not like we're going to drop that one and replace it with another one. It's only like four exceptions.
LISTNUM 1 \l 1808 COMMISSIONER DEL VAL: So you will specify ‑‑ do you know which four?
LISTNUM 1 \l 1809 MR. BRACE: Yes. And actually there's a debate whether it's three or four, but we need to get back to you with that ‑‑
LISTNUM 1 \l 1810 COMMISSIONER DEL VAL: Okay.
LISTNUM 1 \l 1811 MR. BRACE: ‑‑ and we can identify those. Absolutely.
LISTNUM 1 \l 1812 COMMISSIONER DEL VAL: Okay. And you will be able to do that when do you think?
LISTNUM 1 \l 1813 MR. BRACE: By the end of the hearing certainly.
LISTNUM 1 \l 1814 COMMISSIONER DEL VAL: Thank you. What about ‑‑ what about freezing ‑‑ freezing during the exception period? Sort of ‑‑ that you cannot add any more unrelated until you come on side?
LISTNUM 1 \l 1815 MR. BRACE: So you're talking, Commissioner, between now and the time you make a decision on this transaction ‑‑
LISTNUM 1 \l 1816 COMMISSIONER DEL VAL: No, I'm sorry. I'm talking about the exception period. Say right now if we say five to seven is the exception period, and during these five to seven years you can't ‑‑
LISTNUM 1 \l 1817 MR. BRACE: I understand. We'd be prepared to accept that as well. So what it means in effect is we stick with the four. We don't add any more down the road that will be ‑‑
LISTNUM 1 \l 1818 COMMISSIONER DEL VAL: Yes.
LISTNUM 1 \l 1819 MR. BRACE: Until such time as ‑‑
LISTNUM 1 \l 1820 COMMISSIONER LANGFORD: Until its compliance ‑‑
LISTNUM 1 \l 1821 COMMISSIONER DEL VAL: Until you're on ‑‑
LISTNUM 1 \l 1822 MR. BRACE: Yep. Exactly.
LISTNUM 1 \l 1823 COMMISSIONER DEL VAL: Whichever will be earlier. The end of the exception period or until you're on side?
LISTNUM 1 \l 1824 MR. BRACE: Exactly.
LISTNUM 1 \l 1825 COMMISSIONER DEL VAL: Okay. Now, can you comment on ‑‑ what about ‑‑ what about the CAT two versions ‑‑ I'm sorry. The HD versions of the CAT two services, should they be included or excluded in your situation when you've got the five to one rule ‑‑ while you're outside the five to one rule?
LISTNUM 1 \l 1826 MR. BRACE: They would have to be included.
LISTNUM 1 \l 1827 COMMISSIONER DEL VAL: Thank you. Can I also ‑‑ since Express View, is asking for this exception, because of capacity you're not asking this exception to be extended to, say, Bell DSL or Bell/Aliant?
LISTNUM 1 \l 1828 MR. BRACE: That's correct.
LISTNUM 1 \l 1829 COMMISSIONER DEL VAL: Okay. So it's only for the DTH?
LISTNUM 1 \l 1830 MR. BRACE: That's correct.
LISTNUM 1 \l 1831 COMMISSIONER DEL VAL: As you know, we can't decide on the exception because you will ‑‑ I expect that Bell ExpressVu will be applying for an amendment to their COL?
LISTNUM 1 \l 1832 MR. BRACE: That's our understanding.
LISTNUM 1 \l 1833 COMMISSIONER DEL VAL: Okay. Great. What are you going to do during the five to seven years, the exception period, to bring yourself on side?
LISTNUM 1 \l 1834 MR. BRACE: I think that's more of a function of what Bell ExpressVu will be doing by adding more services. We've talked, for example, of Can West making a big entry in to the specialty market if their proposal for Alliance Atlantis is approved.
LISTNUM 1 \l 1835 We would assume ‑‑ I don't want to assume, but we could suggest that possibly they and others ‑‑ there are lots of applications for services out there. So it is our belief that Bell ExpressVu will choose to launch some of those services at least. And then the ratio becomes more in compliance.
LISTNUM 1 \l 1836 COMMISSIONER DEL VAL: Okay. Why do you need five to seven years?
LISTNUM 1 \l 1837 MR. BRACE: I think that, you know, what we're seeing is the growth and the number of US eligibility services coming across the board. We're seeing a number of Canadian services being added. It's just enough of a time, I suppose, to do two things.
LISTNUM 1 \l 1838 I mean I believe that what we don't want to do is kind of develop these category two services or these services that are just really fledgling ‑‑ they still are fledgling. They're still finding their way, only to then take them away from, first of all the consumers who are starting to enjoy them, and secondly from the Canadian system. So I think it's counterproductive.
LISTNUM 1 \l 1839 We believe that five years, certainly at the minimum, would give us enough comfort to be able to do that. I mean it really is to a certain extent an estimate ‑‑ to a great extent an estimate. But we feel it can work.
LISTNUM 1 \l 1840 COMMISSIONER DEL VAL: There are tons of CAT2 services which have been licenced and launched. You know, if you just want to come on side, is it not feasible to take a few of those on, say, within a two to three year time frame rather than five to seven years?
LISTNUM 1 \l 1841 MR. BRACE: But that's a decision for Bell ExpressVu. That's not our decision. So we really have to rely on them and their business plan and their strategy in order to make this work. It wouldn't be our unilateral decision.
LISTNUM 1 \l 1842 COMMISSIONER DEL VAL: Okay. So you're telling me that this is ‑‑ this is a question for Bell ExpressVu when they come to apply for the amendment to the COL?
LISTNUM 1 \l 1843 MR. BRACE: Yes.
LISTNUM 1 \l 1844 COMMISSIONER DEL VAL: Thank you. On genre concentration it seems that as result a of the specialties ‑‑ after the transaction you will have three new specialty services being CTV News Net, then the Business News ‑‑ CTV News Net being national, and then you've got Business News and then Pulse 24, which is a Regional News Service.
LISTNUM 1 \l 1845 A number of the interveners have raised concerns about diversity of news voices, editorial independence and all. And I also know that on page 21 of your reply, and then several times later, you've talked about keeping four separate groups of ‑‑ for news purposes ‑‑ keeping them independent.
LISTNUM 1 \l 1846 And two of those groups included ‑‑ the first group is Citytv stations, Pulse 24, and CHUM radio as one news group. And then another group with CTV stations, CTV News Net, and ROB TV, which is the Business News. So on ‑‑ let's just talk about the one group first.
LISTNUM 1 \l 1847 You're proposing that the statement of principles that you currently have in place remain in place after the transactions; is that correct?
LISTNUM 1 \l 1848 MR. FECAN: Remain in place and are expanded to deal with ‑‑ with ‑‑
LISTNUM 1 \l 1849 COMMISSIONER DEL VAL: Yes.
LISTNUM 1 \l 1850 MR. FECAN: ‑‑ this situation.
LISTNUM 1 \l 1851 COMMISSIONER DEL VAL: Yes. The same safeguards?
LISTNUM 1 \l 1852 MR. FECAN: Yes.
LISTNUM 1 \l 1853 COMMISSIONER DEL VAL: Yes. And then you've answered my second question. Extended to cover cable Pulse 24.
LISTNUM 1 \l 1854 MR. FECAN: Just if you allow me just a little bit of background. News Net is a creature of the CTV News service. It operates off its infrastructure. It's doesn't ‑‑ you can't separate it. It's the same thing. CP 24 in the same way operates off the infrastructure of City News. So they are joined at the hip as well.
LISTNUM 1 \l 1855 COMMISSIONER DEL VAL: Okay. And you're not going to propose any additional safeguards due to the increased concentration of ownership in the news services?
LISTNUM 1 \l 1856 MR. FECAN: Well, the safeguard is the separate editorial functions. There will be a ‑‑ there isn't now, but there will be, should you approve this, a head of news at City Television?
LISTNUM 1 \l 1857 COMMISSIONER DEL VAL: Okay.
LISTNUM 1 \l 1858 MR. FECAN: That hires and fires their own journalist, chooses what stories to cover or not to cover, how it gets covered. So the management and presentation function will be completely separate.
LISTNUM 1 \l 1859 Should viewers or other ‑‑ or even internal parties feel that that's not the case, the ‑‑ they would be invited to apply to the CBSC. We want to be very transparent on this because the credibility of these services depends on the factual independence and the perception of independence.
LISTNUM 1 \l 1860 COMMISSIONER DEL VAL: So just to ‑‑ just to make sure I understand. Whatever ‑‑ whatever you have in place right now to keep editorial independence for CTV station, CTV News Net, and ROB TV you will extend that same regime to Pulse 24?
LISTNUM 1 \l 1861 MR. FECAN: Pulse 24 and Citytv. I mean ‑‑ Citytv and Pulse 24 are one group.
LISTNUM 1 \l 1862 COMMISSIONER DEL VAL: Yes.
LISTNUM 1 \l 1863 MR. FECAN: Yes. Plus the radio. Plus the radio.
LISTNUM 1 \l 1864 COMMISSIONER DEL VAL: Yep. I'm just singularly focused on specialties because that's what's been assigned to me. Okay. Then ‑‑ can you describe the synergies or the shared resources you will now have among CTV News Net, ROB TV, and cable Pulse 24?
LISTNUM 1 \l 1865 MR. BRACE: I don't expect there to be any.
LISTNUM 1 \l 1866 COMMISSIONER DEL VAL: Okay. Thank you. Those are my questions. Thank you, Mr. Chair, those are my questions.
LISTNUM 1 \l 1867 THE CHAIRPERSON: Can I just ask for clarification. When you were talking with Commissioner Del Val, about separate purchases; you were talking about expectations, she was talking about commitments. In my mind those are separate things. What is it going to be? Are we talking about ‑‑ are you going to commit to this by way of conditional licence or just expressing it as an expectation, i.e. a fond hope which hopefully will materialize?
LISTNUM 1 \l 1868 MR. FECAN: Well, out of my desire for symmetry, CanWest, I believe, when you approve their Twin Stick situations promise separate program buyers. And I believe, I could be wrong, that it's an expectation.
LISTNUM 1 \l 1869 THE CHAIRPERSON: Whatever happens to Can West ‑‑ what's going to happen with TV? I'm asking you what you're offering?
LISTNUM 1 \l 1870 MR. FECAN: I'm offering expectation.
LISTNUM 1 \l 1871 THE CHAIRPERSON: Okay. Thank you. Any other questions for my friend, Commissioner? I think then we should break for lunch. This morning when I talked to a few of you about the Twin Sticks, one issue that we didn't go into, which Commission Langford tried to earlier and I cut him off, which was editorial independence that we just touched on now. Let's leave it at that for after that lunch. So we'll break now. And we'll resume at 2 o'clock. Thank you.
‑‑‑ Upon recessing at 1231 / Suspension à 1231
‑‑‑ Upon resuming at 1359 / Reprise à 1359
LISTNUM 1 \l 1872 THE CHAIRPERSON: Madame Boulet, you have some announcements to make?
LISTNUM 1 \l 1873 THE SECRETARY: Yes, thank you, Mr. Chairman.
LISTNUM 1 \l 1874 I would like to indicate for everyone's information that we will complete today's session with the questioning of the applicant. We will continue tomorrow with the intervenor's presentation at 9:00 a.m.
LISTNUM 1 \l 1875 I understand the applicant has a few remarks to make before we continue with the questioning.
LISTNUM 1 \l 1876 Thank you.
LISTNUM 1 \l 1877 MR. FECAN: Mr. Chairman, earlier this morning you made a statement that I think you invited us to confirm or challenge. The statement roughly quoted was let's be honest, these can't be failing. I think you were referring to the Citytv stations.
LISTNUM 1 \l 1878 This afternoon we would like to first orally and then in writing file some evidence to suggest that they are likely to fail and the trend line and the actual numbers support that.
LISTNUM 1 \l 1879 There are a few other points I would like to make, but for the evidence on this I would like to go to Allan Mayne, CMUM's CFO.
LISTNUM 1 \l 1880 THE CHAIRPERSON: Sure, go ahead.
LISTNUM 1 \l 1881 MR. MAYNE: Thank you, Ron.
LISTNUM 1 \l 1882 Mr. Chairman, in the January 29th response to the second of deficiencies, CTV noted that:
"In its TV policy review submission CHUM noted that over the last decade its conventional television stations had recorded pre‑tax losses..." (As read)
LISTNUM 1 \l 1883 THE CHAIRPERSON: What page are you reading from?
LISTNUM 1 \l 1884 MR. MAYNE: Page 4 of 34, January 29th response to the second set of deficiencies.
LISTNUM 1 \l 1885 THE CHAIRPERSON: I have it. Mine goes only until page 77.
LISTNUM 1 \l 1886 MR. MAYNE: There was two filed on that day.
LISTNUM 1 \l 1887 THE CHAIRPERSON: Okay.
LISTNUM 1 \l 1888 MR. MAYNE: I am at the bottom paragraph. I will just summarize that.
"...its conventional CHUM stations had recorded pre‑tax losses of some $68 and even its flagship station, Citytv Toronto had averaged only single digit profitability over the last three years." (As read)
LISTNUM 1 \l 1889 I would like to update you with some information that you don't have, that being the financial results for the Citytv group of stations for the first seven months of this fiscal year.
LISTNUM 1 \l 1890 During that period of time, the Citytv group of stations have actually recorded a drop in revenue of 4 per cent, and most notably the drop in profit before tax is in excess of 90 per cent. Now, for the first time, the flagship Citytv Toronto station is actually incurring an operating loss.
LISTNUM 1 \l 1891 This is a continuation of the trend that started with the fiscal yearend 2002 for CHUM.
LISTNUM 1 \l 1892 MR. FECAN: Thank you, Allan.
LISTNUM 1 \l 1893 I also think that perhaps I neglected to really talk for a few seconds about the symbiotic relationship between the Citytv station in Toronto and the specialty channels.
LISTNUM 1 \l 1894 If I wasn't clear before, let me be clear now. They trade people, resources, programs back and forth. The health of one really does have an impact on the health of the other. Originally City was a mothership and, if you will, the specialties were the children. The children have grown up and they trade back and forth now, but it is a complete symbiotic relationship. I think it is important, as you make your consideration, to understand to creative dynamic in that building between all of those specialties and that particular Citytv in Toronto, where the other specialties are located.
LISTNUM 1 \l 1895 One of the questions that was asked earlier today was why are we the best buyer? During the break Jay Switzer, the CEO of CHUM, suggested to me that he really wants to give his perspective on that because it is material and important to distinguishing this opportunity for the system versus the others that may or may not be in the wings.
LISTNUM 1 \l 1896 THE CHAIRPERSON: Mr. Switzer.
LISTNUM 1 \l 1897 MR. SWITZER: Yes, thank you, Mr. Chairman.
LISTNUM 1 \l 1898 We certainly think on behalf of the CHUM employees here to let you know what we believe and some thoughts to answer questions raised this morning. Certainly on the surface, we are anxious and pleased that the new ownership group, if approved, certainly respects and has a commitment to helping us build our distinctive style and to help us build and protect the unique voice and independence that we are so proud of.
LISTNUM 1 \l 1899 I also want to add, perhaps more importantly, the notion that we have for many years, and I have said on the public record at many speaking engagements in the past five years, the professional respect and, dare I say, envy, at the magnitude of what they have been able to accomplish.
LISTNUM 1 \l 1900 Although we are complimentary in our nature to what they have done, I think for full discussion and clarification, the list of programs that Yvon referred to earlier, the successes they have aren't just programs on air and numbers, in a challenged space, the ability to generate audiences of a million viewers or more is such a significant accomplishment, it has so challenged our group over the past years to say, look at their commitment to results, look at their commitment to audiences, look at their success. We have been envious of their financial ability.
LISTNUM 1 \l 1901 I say all of this, Mr. Chairman, to add some understanding from CHUM's side. You heard from our Chairman this morning, the former controlling shareholder. From CHUM's management point of view, we have had professional respect and envy over their commitment to results. What is a big driving part of this is that they respect the creative process. For a hundreds, the thousands of people that work in CHUM Television, to be joining a group that has a culture in history of respect for the creative process and that is led by someone who shows leadership in this area is an unbelievable ‑‑ there is legitimate excitement as to what is possible with this group, and I think that helps answer your question as to why we believe this group is uniquely qualified to help us do what we want to do.
LISTNUM 1 \l 1902 MR. FECAN: We were also struggling a lit, all of us this morning, in terms of trying to nail down the differences between the audiences. I would like to just pass out some charts, and we will file them on the public record as well, because it visually represents ‑‑ it may help you visualize. Sometimes they say a picture is worth a thousand words. Certainly in my case that seems to be true.
LISTNUM 1 \l 1903 It may help you understand how we see the differences between the audiences. In the vernacular of the business they are known as bubble charts.
LISTNUM 1 \l 1904 What they represent, the first page, what they represent on the left is a gender access, male/female, female at the top, younger female at the top, younger male at the bottom, the axis along the bottom is average age.
LISTNUM 1 \l 1905 The first chart you see, this is based on Toronto because we wanted to compare apples to apples.
LISTNUM 1 \l 1906 The average age of CTV in Toronto is 51. If you just look at the massing of bubbles, it doesn't quite look like that 51 is dead centre, and that is because the evening news and the national news run seven days a week. So, it disproportionately shifts that axis over.
LISTNUM 1 \l 1907 For your own amusement later, you could look at which show falls where in the axis. This is based on season to date.
LISTNUM 1 \l 1908 The next page is City Television, Toronto. Its average age is 41.
LISTNUM 1 \l 1909 CTV and City represent the two extremes, the oldest and the youngest in terms of average age. Again, you can see the programs and so forth.
LISTNUM 1 \l 1910 If you flip the next page over, you see the A Channel. The average age is 47. Considerably older than CTV. They have less impact with their news, so probably it is actually closer to CTV than just the ages suggest because the news, the seven‑day‑a‑week thing tilts the axis a bit.
LISTNUM 1 \l 1911 Sorry, considerably younger than CTV.
LISTNUM 1 \l 1912 The last two charts are what happens when you superimpose them.
LISTNUM 1 \l 1913 The average age at the bottom is not of those two superimpositions, but it's the average age of the top six home stations. So it just gives you a consistent frame.
LISTNUM 1 \l 1914 You can see on this one City is notionally to the left younger than CTV. The object of our exercise is to push it even further younger. When you look at the A Channel superimposed on CTV, you can see clearly they are pretty well, with a little more male focus perhaps on the A Channel, but they are pretty well going after the same demographic, the same audience.
LISTNUM 1 \l 1915 This is just an effort to try and make it as clear as possible.
LISTNUM 1 \l 1916 Ten years between 51 and 41 doesn't sound like a lot perhaps to some, but in television it is a huge spread, and the youngest and the oldest is what they represent.
LISTNUM 1 \l 1917 This is why in pure demographic terms, City is a way more complimentary mix for us than the A Channels, which I fear would not add as much to diversity if we were to keep those.
LISTNUM 1 \l 1918 THE CHAIRPERSON: I don't quite understand the chart.
LISTNUM 1 \l 1919 How come on the last two practically all the bubbles are above the 50 per cent line, while on previous ones, when you started out on the first page, et cetera, the programs seem ‑‑
LISTNUM 1 \l 1920 MR. FECAN: The 50 per cent is male/female.
LISTNUM 1 \l 1921 THE CHAIRPERSON: Yes, I understand. But for instance, the Citytv on page 50 there, you seem to have quite a bit of programs which also appeal to male, and the same as the next one. Now at the end they seem to be predominantly appealing to females. Am I reading these charts wrong?
LISTNUM 1 \l 1922 MR. FECAN: I think when you superimpose it, you have to shift the axis in your mind a bit.
LISTNUM 1 \l 1923 If you take a look at ‑‑ let me just find one here ‑‑ SexTV on the City chart, it is in the bottom right quadrant, to locate that on the CTV/Citytv superimposition, it is now because the scale has changed. Now we are on 48 as an average scale for all six home stations. You can see that it is the bottom left quadrant toward the centre.
LISTNUM 1 \l 1924 COMMISSIONER LANGFORD: That one bubble that is down there is Sex TV?
LISTNUM 1 \l 1925 MR. FECAN: Yes.
LISTNUM 1 \l 1926 COMMISSIONER LANGFORD: What about Celebrity Poker Showdown?
LISTNUM 1 \l 1927 MR. FECAN: The next one down would be World Poker Tour, then Celebrity Showdown, which would be the outlier at the very bottom there.
LISTNUM 1 \l 1928 COMMISSIONER LANGFORD: Thanks.
LISTNUM 1 \l 1929 THE CHAIRPERSON: I see Sex TV on page 50. You say it is now on page 63.
LISTNUM 1 \l 1930 MR. FECAN: Mr. Chairman, those are ages, not page numbers.
LISTNUM 1 \l 1931 THE CHAIRPERSON: Okay, sorry. On the second slide I see Sex TV. On the second last slide, you are telling me that single bubble there beneath the line?
LISTNUM 1 \l 1932 MR. FECAN: It's this one right here.
LISTNUM 1 \l 1933 THE CHAIRPERSON: No, it is CTV. Isn't it news?
LISTNUM 1 \l 1934 MR. FECAN: No, red is City on that one.
LISTNUM 1 \l 1935 THE CHAIRPERSON: You changed colours?
LISTNUM 1 \l 1936 MR. FECAN: Yes, sorry. We thought of everything.
LISTNUM 1 \l 1937 COMMISSIONER LANGFORD: You guys are professional communicators, right? I just wanted to clear that point up.
‑‑‑ Laughter
LISTNUM 1 \l 1938 THE CHAIRPERSON: And Ed's Night Party.
LISTNUM 1 \l 1939 MR. FECAN: Ed's Night Party.
LISTNUM 1 \l 1940 MR. FECAN: That is the one at the very bottom there. It is a little more male and a little younger. If you would see the show, I think you would understand.
LISTNUM 1 \l 1941 THE CHAIRPERSON: I understand now how the chart works. Thank you.
LISTNUM 1 \l 1942 If you remember before we broke for lunch, I mentioned that Commissioner Langford wanted to ask some questions on news gathering and diversity of opinions.
LISTNUM 1 \l 1943 Stuart.
LISTNUM 1 \l 1944 COMMISSIONER LANGFORD: Thank you, Mr. Chair.
LISTNUM 1 \l 1945 As we get farther into this, sometimes the segues to the questions aren't quite as smooth, but there are areas we want to raise.
LISTNUM 1 \l 1946 It kind of comes up in two ways, a little bit about the discussion on the specialty news you were having with Commissioner Del Val and then earlier your discussion about distinct voices. As I looked at your plans for news, there was a phrase that kept coming up. I don't actually think these are trick questions. I think ‑‑ I hope ‑‑ I will advertise them as just straight information questions.
LISTNUM 1 \l 1947 I didn't understand the phrase about separate presentation. I got the idea about having separate news management. That seems fairly clear, I think. But what does "separate presentation" actually mean?
LISTNUM 1 \l 1948 MR. FECAN: Part of the medium is the message. Part of the style, the set, the look, the graphics, the approach, all of the style editorial elements that go into a newscast, we think these various news entities have to have separate news management and separate presentation.
LISTNUM 1 \l 1949 COMMISSIONER LANGFORD: Does that filter down to the actual stories, or does is that basically what it seems to sound like, presentation of the studio, the look, maybe the music, the logos, whatever?
LISTNUM 1 \l 1950 MR. FECAN: These are entirely separate journalistic organizations. They would separately determine how they are going to cover a story, if they are going to cover the story, how much time they give it, and which way they might cover it.
LISTNUM 1 \l 1951 They have got to make these decisions on their own and they have to have the tools to do that.
LISTNUM 1 \l 1952 COMMISSIONER LANGFORD: Let's look at Toronto, just to make sure I am clear on this.
LISTNUM 1 \l 1953 You have CTV Television in Toronto, and then assuming this goes through, you will have Citytv. Then you have an AM and an FM radio. Then I guess you have the Toronto Star, sort of a relationship with the Toronto Star; you have a relationship with the Globe and Mail; you have Cable Pulse 24 in there; and you've got Newsnet. I don't think I have missed any.
LISTNUM 1 \l 1954 These folks are all doing separate news, every last one of them?
LISTNUM 1 \l 1955 MR. FECAN: No, I hope we very clearly on the record pointed out that CP24 is a creature of the City Television newsroom, and Newsnet is a creature of the CTV newsroom.
LISTNUM 1 \l 1956 COMMISSIONER LANGFORD: You did point that out.
LISTNUM 1 \l 1957 MR. FECAN: I have to correct the record. The Toronto Star, we have no influence. They are a shareholder. Torstar, the corporation, is a shareholder of ours. There is no relationship between those news organizations whatsoever. However, in our Statement of Principles, we went the extra step to say there will never be one, as well.
LISTNUM 1 \l 1958 COMMISSIONER LANGFORD: So let's take out the Toronto Star, and let's take out Newsnet and Cable Pulse.
LISTNUM 1 \l 1959 Just to repeat, Citytv, CTV TV, CHUM Radio AM, CHUM Radio FM and the Globe and Mail, they would all be subject to this separation of management and presentation?
LISTNUM 1 \l 1960 MR. FECAN: Yes. But I think to be fair to accurately reflect what is going on, CHUM Radio and the CHUM television services might work together from time to time. What we are propose something to not change anything that is currently there.
LISTNUM 1 \l 1961 COMMISSIONER LANGFORD: Let's take a story. There is a major news story, it doesn't matter what it is, but certainly anybody who is covering news in the City of Toronto would be there. It might be national, it night be Mr. Harper announcing something big in Toronto, who knows?
LISTNUM 1 \l 1962 So, how many crews go out, how many reporters? Let's just do it that way, if you don't mind.
LISTNUM 1 \l 1963 MR. FECAN: As many as the individual heads of news feel is necessary.
LISTNUM 1 \l 1964 COMMISSIONER LANGFORD: Would you send a camera crew from both Citytv and CTV or would you just pool your shots?
LISTNUM 1 \l 1965 MR. FECAN: That would be up to the independent news directors. If they wanted to do some commerce and if they felt, let's say, for instance, this is a handout kind of press conference, where they are cutting a ribbon or something ‑‑
LISTNUM 1 \l 1966 COMMISSIONER LANGFORD: No, no, this is a major story. I want to do a major story.
LISTNUM 1 \l 1967 MR. FECAN: If you are going to do a major story, then they will make their own decisions about who they send out and how many people they send out.
LISTNUM 1 \l 1968 COMMISSIONER LANGFORD: But they could get on the blower as the story reduces in importance and say, why don't we just share shots?
LISTNUM 1 \l 1969 MR. FECAN: They could if they felt like it, but it would be their decision.
LISTNUM 1 \l 1970 COMMISSIONER LANGFORD: I am not quite sure what independent news means. Does that just mean literally that if you are the news manager, news director of CTV and I am the news director of city, all on our own we have the power to share shots, share reporters, share stories, or we have no power like that at all?
LISTNUM 1 \l 1971 MR. FECAN: The choices of what to cover and how it is covered has to be theirs. As you probably know from your former life ‑‑
LISTNUM 1 \l 1972 COMMISSIONER LANGFORD: That was a long time ago though.
LISTNUM 1 \l 1973 MR. FECAN: ‑‑ journalists talk to each other all the time.
LISTNUM 1 \l 1974 COMMISSIONER LANGFORD: We had real Indians on Pontiacs when I was a journalist. We are going back a long time here.
LISTNUM 1 \l 1975 MR. FECAN: I don't know that a whole bunch has changed. I mean, journalists talk all the time.
LISTNUM 1 \l 1976 COMMISSIONER LANGFORD: Right.
LISTNUM 1 \l 1977 MR. FECAN: For me, the important principle is that each organization determines stories they cover and how they want to cover it.
LISTNUM 1 \l 1978 If one has a helicopter shot and the other doesn't have it, if it is in their interest to cooperate, they might, but we would not make them do that. I would want them to make those choices themselves.
LISTNUM 1 \l 1979 COMMISSIONER LANGFORD: Is that what independence means? I am not trying to be cute here. It means that nobody above the level of news manager or news director forces them to do anything?
LISTNUM 1 \l 1980 MR. FECAN: That's correct.
LISTNUM 1 \l 1981 COMMISSIONER LANGFORD: So you don't send down a thing saying, hey, our budgets are out of control, start sharing reporters, start sharing cameras?
LISTNUM 1 \l 1982 MR. FECAN: No.
LISTNUM 1 \l 1983 COMMISSIONER LANGFORD: That is what it means?
LISTNUM 1 \l 1984 MR. FECAN: That is what it means. We don't tell the Globe and Mail what to cover either, as I am sure you know.
LISTNUM 1 \l 1985 COMMISSIONER LANGFORD: There's a nice story you've got in the Toronto Star. It's hard to believe nobody whispered in anybody's ear, but, anyway, I will take your word for it.
LISTNUM 1 \l 1986 MR. FECAN: I don't know if Mr. Vissey is in the room and wants to testify to that.
LISTNUM 1 \l 1987 COMMISSIONER LANGFORD: Let's go to a foreign story, then.
LISTNUM 1 \l 1988 Do you have at CTV some sort of formal or informal relationship with, say, a big American news organization, NBC, CBS, ABC?
LISTNUM 1 \l 1989 MR. FECAN: I think we do, yes.
LISTNUM 1 \l 1990 COMMISSIONER LANGFORD: Would City have one as well? Does anybody know?
LISTNUM 1 \l 1991 MR. FECAN: I am presuming they would.
LISTNUM 1 \l 1992 COMMISSIONER LANGFORD: Do you happen to know who you have it with?
LISTNUM 1 \l 1993 MR. FECAN: Our primary relationship is with CNN. I think we have ABC, we have CNN. CNN is a multi‑lateral. I think it is available to pretty anybody that wants to work with it for a fee.
LISTNUM 1 \l 1994 COMMISSIONER LANGFORD: Who makes that decision after this deal goes through? Would the independent be with CNN or would you ‑‑
LISTNUM 1 \l 1995 MR. FECAN: No. The independent news managers have to make that decision. They have to.
LISTNUM 1 \l 1996 COMMISSIONER LANGFORD: The independent news managers have to make that decision.
LISTNUM 1 \l 1997 So, we could see very different footage, very different shots, very different perspective right down to the cutaways on each different news voice, if I can put it that way?
LISTNUM 1 \l 1998 MR. FECAN: I would hope you would. We took the exercise of looking at the CTV news locally in Toronto at 6:00 o'clock and the Citytv news local in Toronto over the last three days of last week. In some cases the stories were similar; in some cases they were wildly different.
LISTNUM 1 \l 1999 City on Friday night spent ten minutes at the Environmental Expo Exhibition in downtown Toronto. CTV led with hard news. CTV is more of a ‑‑
LISTNUM 1 \l 11000 COMMISSIONER LANGFORD: Some thing the environment is hard news.
LISTNUM 1 \l 11001 MR. FECAN: CTV is more news cast of record. That is what they try and be.
LISTNUM 1 \l 11002 City has a street journalism mandate. It is a different kind of mandate.
LISTNUM 1 \l 11003 But they do need to make those decisions separately. I don't think it works any other way. Just as I don't want to ever be in a position of telling a journalist what to do, I don't want to ever be in a position of telling him what not to do. They have to have that freedom.
LISTNUM 1 \l 11004 THE CHAIRPERSON: Isn't it a bit Pollyannish? The fact is everybody has a budget, everybody has to produce it. To the extent that you can send one news crew and then send it to about four different channels, et cetera, it reduces your costs. The pressure will be on not to have separate news gathering, but to have uniform news gathering and then split it up and sell it in six different ways.
LISTNUM 1 \l 11005 MR. FECAN: If we believe what we say we believe, and we do believe it, that the value is in the diversity, you leave that judgment to those individual news managers because it could well be that one reporter will ask a different question than the other. He or she may get a different take from the back of the room. He may get a different source. He may have a different angle.
LISTNUM 1 \l 11006 From an efficiency point of view I can see where some would see that this is not creating value, but we believe that the value is in the differences. So, therefore, if that is what they want to do, that is what they are going to do.
LISTNUM 1 \l 11007 THE CHAIRPERSON: So, you are aware that in some other transaction we insisted on separate news gathering? That is something that you are holding out here?
LISTNUM 1 \l 11008 MR. FECAN: I think that was true in the Quebec market, and I think in general it probably will be true here. But I am very nervous about telling a journalist not to talk to somebody, not to trade opportunistically a source or a shot.
LISTNUM 1 \l 11009 Once you put a rule like that in there, I worry that just from a place of principle that if you tell somebody to do something, it is bad, but if you tell them not to do it, it is an equally bad thing. I worry that when it is a rule, it is not in the public interest.
LISTNUM 1 \l 11010 THE CHAIRPERSON: I understand that, but you appreciate our worry, that the economic forces force, in effect, uniform gathering and then multiple presentations.
LISTNUM 1 \l 11011 MR. FECAN: I think it is the opposite. I think for this to work they have to be different. If they are the same, what is the point of having both of them?
LISTNUM 1 \l 11012 The economic bet we are making is exactly the opposite that the differences will create the value.
LISTNUM 1 \l 11013 THE CHAIRPERSON: Are you at all worried about self‑censorship by the journalists in news gathering, working for your company, knowing where you and your company stands, let's say wherever the position is on environment, you are a very poor environmentalist, therefore, knowing that, they will be restrained in reporting something that goes contrary to your health, firmly held beliefs?
LISTNUM 1 \l 11014 MR. FECAN: Currently our journalists are famously independent.
LISTNUM 1 \l 11015 THE CHAIRPERSON: They also like job security?
LISTNUM 1 \l 11016 MR. FECAN: No, they are famously independent. We are very clear, we want the facts there, but they are free to say what they like within the context of the journalistic policy of each organization. Each organization, the Globe has a policy, CTV has a policy, not an editorial policy, a journalistic policy. CTV has the beginnings of one, and under our stewardship, if we are approved, it would also have a policy.
LISTNUM 1 \l 11017 THE CHAIRPERSON: Sorry, Stuart, I didn't mean to take over from you.
LISTNUM 1 \l 11018 COMMISSIONER LANGFORD: No problem, I must be asking the right questions because you asked my next one on my list. So, I don't mind being a straight man. It will be a nice change for me.
LISTNUM 1 \l 11019 I was going to ask about this sort of tension, but I think it is covered now, between distinctiveness of voices and synergies.
LISTNUM 1 \l 11020 Tell me, then, I know you balk at the notion of COLs ‑‑ and you may want some time on this ‑‑ you said at the beginning the tradeoff here is make some exceptions for us here, and we will guarantee you distinctiveness of voices, and we will in fact make it grow as a concept.
LISTNUM 1 \l 11021 So, what do we need to do to capture what you have said? Is a COL that simply says something like, use you are your catch phrase, separate management and separate presentation, is that enough? Does that capture content? Does that capture journalistic sharing to the point where we don't get homogenized, everybody with the same shot, or do we need more?
LISTNUM 1 \l 11022 You can have time to think about that, if you want. How do you want to do it? Do you want to think about it?
LISTNUM 1 \l 11023 MR. FECAN: I will think about it, of course, but I have spent a few minutes in journalism myself and I have this really strong aversion to the state or anybody telling a journalist who not to talk to.
LISTNUM 1 \l 11024 COMMISSIONER LANGFORD: So you think that would be enough is probably your short answer, repeating what you have, trying to capture that would do it, and keeping in mind, though, these relationships which you have clearly set out here on the record between, for example, Newsnet and CTV and whatnot?
LISTNUM 1 \l 11025 MR. FECAN: And there is a complaints procedure, a transparent complaints procedure should anybody inside the organization or outside the organization feel that we have not been living up to that, which goes to the CBSC.
LISTNUM 1 \l 11026 COMMISSIONER LANGFORD: The problem, as I said earlier ‑‑ and I am a big fan of the complaints system, so that the fine, I don't want to denigrate that at all ‑‑ is if you let this stuff go too long, there is nothing much left to complain about. Then a whole new news organization has to be built, whereas right now you've got it; you've got the stations, you've got the organizations, you've got the employees. Some of them are going to go, and we can talk about those synergies later on, I am sure, but I always like to try and nail this stuff a little in advance so that you've got the organization now, and I would like to see put in place some sort of commitment from you, whether we fight over whether we are going to call it an expectation or COL is another thing, but I would certainly like to see something which captures what you are saying so that if you go off to become a English car restoration expert in your next career, then your predecessor will understand in writing what is there.
LISTNUM 1 \l 11027 Those are my questions in that area. Thank you, Mr. Chair.
LISTNUM 1 \l 11028 THE CHAIRPERSON: Let me just echo what was said. For me we are coming here to one of the key issues.
LISTNUM 1 \l 11029 You made a very eloquent case that you need strength, that you need service in order to afford the diversity, et cetera. But we don't want to do it at the expense of diversity. Having one owner, by definition, you don't have the same dynamics, the same diversity that if you have several owners.
LISTNUM 1 \l 11030 So, you are trying to say we have internal rules which will ensure internal competition and, by the way, it is in our own interest too, because that way we appeal to a larger audience. At this point in time we have heard from you that you believe in undertaking it in your presentation. How can one contractually nail that down no make it enforceable in terms of condition of licence? I think that is an issue in which we would like to have some more specificity.
LISTNUM 1 \l 11031 MR. FECAN: Okay.
LISTNUM 1 \l 11032 THE CHAIRPERSON: Let's go on to the next issue, which is radio, and Commissioner Langford will lead off the questioning.
LISTNUM 1 \l 11033 COMMISSIONER LANGFORD: Thank you.
LISTNUM 1 \l 11034 Radio. This I hope you will allow me to direct my questions to Mr. Ski and perhaps to one of your legal counsel, my initial questions, but of course it is up to you who answers.
LISTNUM 1 \l 11035 What I want to deal with here is this strange little transitional period we are in with the new radio policy. There is some new kind of notions in the idea of an emerging artist and this kind of thing. There is some notions in the sense of CTD becoming CCD, Canadian Talent Development becoming Canadian Content Development or whatever.
LISTNUM 1 \l 11036 There were some statements in that policy which I am sure the radio people of CHUM and probably your legal counsel are familiar with that we will be looking for input from people as they come before us. So I don't think it is a question here of saying please agree to the following ten things, but there is some notion that this is an opportunity as set out under the new radio policy to get some input so we can start to build some new direction.
LISTNUM 1 \l 11037 It does sound a little airy fairy off the top, and I apologize for that, but we are all getting our feet wet, we are all getting used to this motion.
LISTNUM 1 \l 11038 I want to give you a little introduction to this, if I can, that I wrote out on the weekend. The 2006 revised commercial radio policy refocused and rebranded Canadian Talent Development contributions based on market size to Canadian Content Development based on annual gross revenues.
LISTNUM 1 \l 11039 Have I said anything that surprises anybody so far? We are on that, are we?
LISTNUM 1 \l 11040 As we are in transition from the old to the new regime, the CTD contributions made, as we wait for the new regulations, can be deducted from the contributions under the new scheme.
LISTNUM 1 \l 11041 Are you familiar with that piece of ruling? Mr. Ski, can I take that nod as a yes?
LISTNUM 1 \l 11042 MR. SKI: Yes.
LISTNUM 1 \l 11043 COMMISSIONER LANGFORD: Great. I just have a few questions with that in mind.
LISTNUM 1 \l 11044 First of all, have I said anything in this little introduction that surprises you? Are you aware of these changes and are you prepared to discuss them and to comply with them when and if they ever become set in stone?
LISTNUM 1 \l 11045 MR. SKI: Yes, we are.
LISTNUM 1 \l 11046 COMMISSIONER LANGFORD: Do you currently operate any spoken word formats at CHUM Radio?
LISTNUM 1 \l 11047 MR. SKI: Yes, we do.
LISTNUM 1 \l 11048 COMMISSIONER LANGFORD: And if yes, and it is yes, are you aware that you can still allocate 60 per cent of your CCD to factor or music action, or you can apply for a COL allowing you to support other initiatives. Do you know about that new part of the radio policy?
LISTNUM 1 \l 11049 MR. SKI: Yes.
LISTNUM 1 \l 11050 COMMISSIONER LANGFORD: Thank you. Sorry, this stuff is a little tedious, but we just have to get through it.
LISTNUM 1 \l 11051 Specific extra CTD or CCD payments. As you know that there are new annual amounts and allotments based on your gross revenues, but three of your stations, one of them which isn't quite a station yet, also have some special outstanding payments from the old CCD days, and that is CFJR FM Brockville, which is to be paying an extra $2,500 for the years 2007, 2008, 2009 and 2010. Those are above and beyond any annual contributions that will be levied based on revenues.
LISTNUM 1 \l 11052 CHBN FM Edmonton, which has agreed to pay $571,492 ‑‑ boy, Brockville sold out too cheap, didn't they ‑‑ per year for the years 2007 to 2012, and that again is above and beyond.
LISTNUM 1 \l 11053 Then your new FM in Calgary, which I am afraid I don't know the call letters for, if it has call letters, it must be very close, which has agreed to pay $640,000 per year for the first seven consecutive years of its licence, plus $645,000 per year to AVR for those seven consecutive years as well, again above and beyond the annuals.
LISTNUM 1 \l 11054 Have I said anything here that you disagree with?
LISTNUM 1 \l 11055 MR. SKI: No.
LISTNUM 1 \l 11056 COMMISSIONER LANGFORD: And you understand that you are bound by these payments as I have described them?
LISTNUM 1 \l 11057 MR. SKI: Yes.
LISTNUM 1 \l 11058 COMMISSIONER LANGFORD: Thank you very much.
LISTNUM 1 \l 11059 Now, we get to emerging artists and I have a few questions about that because this is a kind of new area as well for radio.
LISTNUM 1 \l 11060 In paragraph 102 of your reply, you indicated that you had reconsidered your earlier definition of emerging artists, which you had supplied in your January 29th, 2007 letter. I guess really what I wanted to know is is that your position at this point, your final position on emerging artists or have you amended that definition again?
LISTNUM 1 \l 11061 MR. SKI: Before Paul completes the answer, I just want to say that I think CHUM's record in supporting emerging artists is terrific. We understand there is an issue. We saw the news releases last week in terms of the CD sales falling in Canada. We want to be part of the solution.
LISTNUM 1 \l 11062 Paul and some of his management and myself and some of our people have already met with CRIA several times to try and see how we can move this forward. As I understand it from a position of being the new person in radio, it is tough because if you can't measure it, you can't manage it. There is a lot of different definitions about what is the right standard of measurement here.
LISTNUM 1 \l 11063 I know we are trying to come to terms with that and to get to a common definition because I think that is when you can really measure it and manage it.
LISTNUM 1 \l 11064 Paul.
LISTNUM 1 \l 11065 MR. FECAN: Before Mr. Ski gets involved and educates all of us, I will say that we have a lot of sympathy for what you are going through. It is exactly the process we are going through.
LISTNUM 1 \l 11066 We have noticed that you have mixed sort of air play and sales measures definition, and I assume that you know as well that may not be the final definition we come up with. But basically we are fact finding here and we are looking for input from people with the kind of depth of experience that the CHUM people have and that eventually you will have.
LISTNUM 1 \l 11067 Mr. Ski, sorry.
LISTNUM 1 \l 11068 MR. SKI: Thank you. Commissioner Langford, if I could, it is a very complex issue, as you have mentioned, but we want to be part of the solution, I think.
LISTNUM 1 \l 11069 You may know that CHUM has been a leader in developing and supporting Canadian talent. We were certainly Canada's first contemporary radio station back in the fifties, playing new Canadian music. We were a founding member of Factor and Starmaker. Recently we launched our emerging Indie artist initiative, which is the first national program coast to coast.
LISTNUM 1 \l 11070 If I could, I would like to try to answer this maybe in three parts. I may answer some further questions, but if you will allow me ‑‑
LISTNUM 1 \l 11071 COMMISSIONER LANGFORD: Take all the time you want. You are one of the first people that we have had up in front of us working on this. It is sort of unplowed ground and we are happy to have your input.
LISTNUM 1 \l 11072 MR. SKI: Thank you. First, I would like to just talk about what CHUM is current doing to support Canada's emerging artists because I think it might be instructive and how we might be able to do that better.
LISTNUM 1 \l 11073 Secondly, what are the current issues and challenges.
LISTNUM 1 \l 11074 Third, what are we going to do about it? What is the plan or what plan have we, at least, come up with at this point because it hasn't been long since the radio policy in December.
LISTNUM 1 \l 11075 What is CHUM currently doing? As I said, we are pretty proud of our record. Sam Feldman in the intervention said CHUM has made the promotion of Canadian artists a primary objective of its radio platform. The emerging indie artist initiative is our coast‑to‑coast program where programmers vote, our programmers vote across the country from submitted CDs and MP3s from various artists. An artist is chosen and then gets significant air play over a month long time period, and that artist will reach, on all the radio stations that are part of this, over two million listeners, consumers over that time period.
LISTNUM 1 \l 11076 That is being supplemented by an additional ad promotional campaign worth in the rounded off numbers of about half a million dollars.
LISTNUM 1 \l 11077 The artists also get website access, because, as you may know, emerging artists and young people kind of go hand in hand. Younger people tend to have more of an interest in emerging artists than those who are a little bit older. So, website access, internet access is very important for them.
LISTNUM 1 \l 11078 Dean Cameron, the President of EMI Music, said the emerging indie artist initiative reflects CHUM's efforts to increase exposure for Canadian artists. Suzy McNeil is our very first artist in this particular initiative.
LISTNUM 1 \l 11079 CHUM FM, Canada's most listened to FM radio station, regularly features these artists not only with air play, but on our morning show, which is heard by more people than any other radio station in Canada, not only in interviews, but also playing acoustic sets. So it gives the listeners a chance to really get to know that particular artist as opposed to just playing a song in conjunction with other songs being played.
LISTNUM 1 \l 11080 CHBN Edmonton, our Bounce Showdown winner, KreeSha Turner got a Virgin worldwide record contract based on the Bound Showdown and the fact that our manager actually lobbied the various record companies to try to get that contract for her.
LISTNUM 1 \l 11081 C100 Halifax recently received an award at Canadian Music Week for Canadian radio station that best supports new talent.
LISTNUM 1 \l 11082 So that is just a sampling of some of the things that we have been doing, because we believe that the emerging artist approach should be multifaceted, not just airplay, but promotion and other types of things that we are doing now.
LISTNUM 1 \l 11083 So what are the current issues and challenges that we face? First of all, it is the definition. There isn't currently agreement from sectors of the industry on how to we best define emerging artist. As you will recall from the radio review, I think there were nine different definitions at that particular time, so it is not an easy thing to define.
LISTNUM 1 \l 11084 There is also currently no national database to measure current levels of play or to establish effective levels. BDS and MediaBase are the two companies that measure airplay at the present time and they don't have the database to determine what might be considered an emerging artist. So without a common definition it is difficult to establish any kind of consensus.
LISTNUM 1 \l 11085 In the analysis that CRIA did and CHUM also did an analysis, these are probably the largest types of analysis that have been done in this area since the policy review and that is only a three‑month time period, which isn't nearly long enough to see what is happening. And, by the way, because there is no database this all has to be done manually.
LISTNUM 1 \l 11086 So manually, we are going through three months of data to try to determine which artists are emerging using what we believe might be, in the end, the appropriate definition. But we are still, quite frankly, unsure of that as are members in the industry. So it is difficult to set goals without consensus.
LISTNUM 1 \l 11087 The second problem is formats. I think the Commission recognized this and has in various policy findings in 1998 and 2006 that all formats can't play emerging artists. And if they do play emerging artists, what is an emerging artist to a listener, to a CHR or a Hot AC, Hot adult contemporary station, is not the same as an emerging artist to a Soft AC or gold‑base station.
LISTNUM 1 \l 11088 They, first of all, wouldn't play as many and an emerging artist on a contemporary hit radio station might be an emerging artist a year later on a Soft AC, soft adult contemporary or gold‑base station. So the varying proportions of gold to current music make it somewhat difficult formatically.
LISTNUM 1 \l 11089 So what are we going to do about it and what is the plan? Well, we plan to continue the dialogue that Mr. Fecan mentioned with regards to the folks from CRIA and CIRPA and, quite frankly, other industry stakeholders too, because there are many.
LISTNUM 1 \l 11090 We agree with the notion that there should be established an industry working group so that all stakeholders can be involved and we have had preliminary discussions, as had been mentioned, with CRIA and CIRPA, in that regard. And what we hope to come out of that are a couple of things. One, we hope to actually establish what an emerging artist is so that everybody can agree up on that. Secondly, what are the realistic commitments realizing different formats and musical eras in terms of radio stations? And thirdly, what types of effective promotion or ancillary benefits can come out of this in addition to airplay in order to help the emerging artists?
LISTNUM 1 \l 11091 So we are prepared at CHUM to take a leadership role in establishing that working group and base that on the CRTC's consensus building approach which was, we believe, set out in PM‑2000‑65 and invite the CRTC to be involved if it so wishes. We want it to be a collaborative effort, obviously, just because there isn't a consensus at the present time.
LISTNUM 1 \l 11092 The goal of this is to hopefully have a set of guidelines that reflect stakeholders' positions and file that with the Commission. We hope that will form the basis of support for emerging artists on an ongoing basis.
LISTNUM 1 \l 11093 I guess at the end of the day, it is not just about the airplay, it is actually about building careers and that is what we hope this whole process might accomplish.
LISTNUM 1 \l 11094 COMMISSIONER LANGFORD: Okay. That has been very very helpful and more than I had hoped for, so I am pleased. And I want to give you a little homework, if you will, and this is not an undertaking in the sense that actually has to do with this particular application.
LISTNUM 1 \l 11095 THE CHAIRPERSON: Let us stay to transaction.
LISTNUM 1 \l 11096 COMMISSIONER LANGFORD: Well ‑‑
LISTNUM 1 \l 11097 THE CHAIRPERSON: We have gone way beyond the scope, but it was useful. But, for now, let us ‑‑ if we ask for specific information with regard to this transaction.
LISTNUM 1 \l 11098 COMMISSIONER LANGFORD: Right. Well, as you know, the radio policy asks when there is a transfer like this and certain things are going on we request some information, because we are trying to build this library of information.
LISTNUM 1 \l 11099 So anyway, what I would like is say in the next two weeks if you could, a list of all your stations ‑‑ and this goes to the second point that you made, Mr. Ski, and the different formats ‑‑ Callsign, location, so we can just identify them and format, which is very important to this. And then with your views on a an appropriate commitment of airtime for emerging artists on each station. And if you can't nail it right down to the last minute or percentage or whatever, that is fine, but give us the best information you can and I think that will carry us forward on the spirit of the new policy and its demands.
LISTNUM 1 \l 11100 I would like to ask for something similar on local programming. And I sense the Chairman wants to move us along a little here, but at the same time I feel under the new policy I have no choice but to ask for this. We have rephrased kind of our sense of the importance of local programming in the new radio policy and speak, for example, of requiring more detail, you know, direct relevance to the communities served, promotion of local events, that sort of thing. It seems to dig more deeply than the old policy, which just spoke to local and sometimes to regional.
LISTNUM 1 \l 11101 I am going to ask you to flesh out a little bit your notion about how you might meet that new challenge. But I would also, when you are making that list for the emerging artists, could you provide as well for each of those stations the sort of formal levels that you might propose to capture this sort of new emphasis in the revised radio policy, the kind of levels of local programming you think would be appropriate to each one of those stations considering its format, considering its location, considering its size.
LISTNUM 1 \l 11102 Is that a fair assignment?
LISTNUM 1 \l 11103 MR. SKI: Yes.
LISTNUM 1 \l 11104 COMMISSIONER LANGFORD: Then could you speak to us reasonably briefly just about what kind of thought you have given to the radio policy and its new emphasis on local programming?
LISTNUM 1 \l 11105 MR. SKI: Certainly, and I will try to be brief.
LISTNUM 1 \l 11106 COMMISSIONER LANGFORD: Well, I just have a sense that I am dragging this out a little and I apologize for that. But it is new territory for me as well and I find it a little more difficult to phrase the questions.
LISTNUM 1 \l 11107 MR. SKI: Certainly. The reason that our radio stations have been successful is because they are local. Each one of our radio stations is built one local listener at a time. We do separate research for everyone of our radio stations. We don't provide anything corporately for those stations and I am involved in some of those processes in each individual market. We research the markets and we try to make sure that we are serving our listeners with local programming.
LISTNUM 1 \l 11108 And I think we do quite a good job of being part of the community, I think our record shows that and I would be more than happy to provide additional information in that regard.
LISTNUM 1 \l 11109 I think where we have to be flexible and we understand the Commission's one‑third local policy as it relates to FM and the case by case AM policy. And I think AM, in particular, requires as much flexibility as possible. We have challenges with our AM and we have tried, as you know, at CHUM to do a lot of different things, some of them have been successful, others maybe not so much. But at least we are trying to reinvigorate the AM side of our station base.
LISTNUM 1 \l 11110 I will just give you one example of the reason for even flexibility on the AM side and that is I know that when we decided after finding out that one of our AM stations in Vancouver, CFUN, could no longer compete from a music standpoint unless it was ‑‑ there are only two formats you can compete with in AM radio in music and they were already taken. So we decided that talk might be the best way to go.
LISTNUM 1 \l 11111 Talk takes a lot of time to establish. Any kind of news talk or talk formats take a long time to establish and a lot of resources to be able to establish them. So we started out that radio stations, which was losing money at the time, with a number of syndicated programs, non‑local programs. We had a local morning show, we thought that was important and I think one other local afternoon drive show that was local. After that, the rest was syndicated.
LISTNUM 1 \l 11112 Today, after being on the air with this format for about five or six years, most of the programming is now local, because we gained success with that particular format. So it is much better now than it used to be, it has gained some traction obviously and this year, for the first time, it actually may be somewhat profitable. So we do need some of that flexibility on the AM side at that is the only other comment I would make on that.
LISTNUM 1 \l 11113 COMMISSIONER LANGFORD: Well, I think if you can provide us with some more of that in a report to us. And I am not looking or a 40‑page report, but anything that can guide us is obviously going to be beneficial to all sides.
LISTNUM 1 \l 11114 I just want to indulge in just another now more general line of questioning. We have heard from your radio pros, the people who have been running this and running it successfully, it is my understanding, for many years. And I have read in paragraph 97 of CTV's official reply, I don't know who penned it, but basically that radio has not been a preoccupation of yours, it just hasn't, you haven't been able to turn your mind to it yet, but it is an important piece of this puzzle.
LISTNUM 1 \l 11115 So I guess really we need to now know some basic thoughts from you if you have them, if you have had time to turn your mind to them as to sort of what use you are going to make of this brand new part of the sort of CTV's empire if I can call it that, CTV structure? Are you going to leave it the way it is, have you got plans for it, do you want to work on synergies and cutback on costs? Give me some idea, if you can, what you are going to do with the radio assets you have.
LISTNUM 1 \l 11116 MR. SKI: In the most direct way, if it is not broken, don't fix it. This is a remarkable radio company with great roots, terrific management and we are there to support them and give them financial and other kinds of resources as they need to grow. But, you know, we are biased, we think it is probably the best radio group in they country. We just want to help them, we don't want to get in their way.
LISTNUM 1 \l 11117 THE CHAIRPERSON: Do you see it as providing any synergies for the rest of your network?
LISTNUM 1 \l 11118 MR. FECAN: Not really, Mr. Chairman, you know I can see a little bit of cross‑promotion, that kind of thing. Not material in terms of whether this is the reason you do such a transaction or not. But they are a great group. We, as a company, were last in radio in the early 1970s, some of the stations we sold we ended up seeing to CHUM which, if you approve this, come back home so to speak. But this is a new line of business for us in the Canadian media space and I just really see this as an opportunity to grow in another way.
LISTNUM 1 \l 11119 MR. LANGFORD: Speaking of synergies, you are taking on an enormous debt load. I mean, no matter how you have gotten the money together to buy this, it is still an enormous debt load. I mean, do you see yourself just forced by, you know, the realities of life, of your financial situation, just having to find economies in some of these operations whether or not that would be your ideal way to go? And, if so, where do you find them, in your ads, in your marketing, in your ad sales or where are the economies to be found in bringing this whole brand new operation together?
LISTNUM 1 \l 11120 MR. FECAN: Well, I think our plan has pointed out where we see the economies, but they are not to do with the programs themselves. We are very fortunate to have shareholders that are there for the long‑term and look towards this as a long‑term business. And the faith that they have put in us is that they believe that we are right, that there is value to be created through distinctiveness and through the differences.
LISTNUM 1 \l 11121 And so how we borrowed the money is indicative, the shareholders wrote the cheque themselves, that is how much they believe.
LISTNUM 1 \l 11122 COMMISSIONER LANGFORD: I would have done that. That is how I would have done it.
‑‑‑ LAUGHTER / RIRES
LISTNUM 1 \l 11123 One last question. Subscription radio. CHUM picked up a license in the satellite subscription radio proceedings a couple years now. We are coming up to that kind of theoretical drop dead date on revocation or do something. What are your plans? Can you share that with us?
LISTNUM 1 \l 11124 MR. SKI: Commissioner Langford, I think you may know we recently applied for an extension for that particular license. We haven't had the opportunity to discuss that with CTV for obvious reasons. We hope to enter into a pilot project in the very near future, which I think we have outlined. And we have always believed from the time to the hearing to the license that we were trying to find a made‑in‑Canada solution to subscription radio.
LISTNUM 1 \l 11125 We think that, you know, the CRTC amended its transitional radio policy, there are now new rules there, DAB is a little different now than it was previously. There is a lot of changes, so ‑‑
LISTNUM 1 \l 11126 THE CHAIRPERSON: Mr. Ski, please, in the interest of time, just answer the question and we can move on.
LISTNUM 1 \l 11127 MR. SKI: Certainly, sir. And so I guess what I am saying is we have applied for the extension and we hope to in the very near future have some answers.
LISTNUM 1 \l 11128 COMMISSIONER LANGFORD: Those are my questions. Thank you very much, Mr. Chairman.
LISTNUM 1 \l 11129 THE CHAIRPERSON: Thank you.
LISTNUM 1 \l 11130 Commissioner Duncan, do you have a question?
LISTNUM 1 \l 11131 COMMISSIONER DUNCAN: I have a quick question. On the CRIA submission, and this is in reference to what you are offering in the emerging artist initiative, and you intend to play the emerging artists, add them to the playlist 15 times per week for four weeks. And in their comments they make the comment that not all airplay is equal and that the airplay should be in peak audience times and should avoid burnout and should be coupled with other promotional measures, which I think you have addressed the promotional measures.
LISTNUM 1 \l 11132 They asked us to ask you to make a commitment to play the tracks by these new and emerging artists in prime time. And I apologize if it is addressed here. I didn't see it and I was wondering what you were planning to do.
LISTNUM 1 \l 11133 MR. FECAN: I think Paul needs to answer that. But just as a matter of background, I think the things have advanced since we have filed our reply and that we have had meetings with these organizations and the file is evolving, if you will. Paul.
LISTNUM 1 \l 11134 MR. SKI: Certainly. We have had dialogue with them and I think one person's prime time is not another's. So I think that is going to be part of the dialogue that I had discussed earlier.
LISTNUM 1 \l 11135 COMMISSIONER DUNCAN: Okay, thank you.
LISTNUM 1 \l 11136 THE CHAIRPERSON: Okay then, let us move over to the next area of questioning that has to do with evaluation and Commissioner Duncan will lead off a little bit.
LISTNUM 1 \l 11137 COMMISSIONER DUNCAN: And I am moving very quickly but, you know, when you are dealing with numbers you have to have a clean desk, so it will be one second.
LISTNUM 1 \l 11138 I wanted to start out by asking questions about the long‑term debt and operating leases and other commitments and about adding those to the value of the transaction.
LISTNUM 1 \l 11139 And as you I am sure know, the Commission considers the value of the transaction for the purpose of determining benefits, when it does it normally includes long‑term debt and equivalence. And you have indicated that the debt attributable to CHUM's purchase of CKVU and the Craig assets should be excluded because the benefits were already paid on it and it would amount to double dipping to include it.
LISTNUM 1 \l 11140 And you have also indicated that the value of operating leases and other commitments should be excluded. We have had a number of interveners who have indicated that they feel the long‑term debt should be taken into consideration. And I just wonder if you would care for an opportunity to elaborate further on your position as to why it should be excluded?
LISTNUM 1 \l 11141 MR. FECAN: I would like to pass this over to Robin Fillingham, our CFO.
LISTNUM 1 \l 11142 COMMISSIONER DUNCAN: Okay, thanks.
LISTNUM 1 \l 11143 MR. FILLINGHAM: Thank you, Commissioner.
LISTNUM 1 \l 11144 Fair value in this transaction is best measured by purchase price. In this transaction the purchase price is represented by the equity value of the corporation, the $1.365 (billion) cash consideration that was paid. Agreed, that there was in existence long‑term debt, net debt if you like, of $270 million, which got you to the enterprise value for the corporation of $1.635 (billion).
LISTNUM 1 \l 11145 The purchase price, in actual fact the cash consideration represents the value monetization and monetized by the previous custodians of the licenses being transferred and reflects, as yet, the only the unrealized value to the acquirer. We agree that debt must be looked at to ensure it does not represent an arbitrary reduction, if you like, of the purchase price, but it is not the case in this application.
LISTNUM 1 \l 11146 The debt primarily relates to past acquisitions. In actual fact, almost $350 million of acquisitions, that still have $20 million of benefits still outstanding and being assumed by CTV, as you say. That almost represents a $200 million value. And when you look at the valuation of the stations as they are, I think the high‑end range on the valuation prepared by Merrill, because these are the same stations with the City station being added, at a high end value of about $150 million.
LISTNUM 1 \l 11147 So, we believe that Commission policy provides for this to ensure fairness by reviewing the value of a transaction on a case by case basis.
LISTNUM 1 \l 11148 And I'd like to pass to Mr. Malcomson of Goodman's, to provide some policy considerations here.
LISTNUM 1 \l 11149 MR. MALCOMSON: Thank you, Robin.
LISTNUM 1 \l 11150 There's really 3 parts to my answer: there's the actual wording of your policy, Commissioner Duncan; there's the unique nature of the debt which Robin has alluded to; and then there are the overall policy considerations as you apply the policy.
LISTNUM 1 \l 11151 So just beginning with the policy as articulated in the TV policy, it speaks to the value of the transaction as accepted by the Commission.
LISTNUM 1 \l 11152 Two quick points there. The definition in your policy does not state it to be enterprise money, i.e. equity plus the debt. And it, again it speaks to as accepted by the Commission.
LISTNUM 1 \l 11153 And in fact, as the policy has been applied to various transactions over the years, debt has not always been included in all cases. We acknowledge, certainly that in recent cases, the Commission has made a point of saying in it's decisions that debt is something that should be looked at to be included.
LISTNUM 1 \l 11154 But in this particular case ‑‑
LISTNUM 1 \l 11155 THE CHAIRPERSON: Excuse me if I interrupt you, but as a newcomer to this field maybe you can explain to me when is a situation when you would not include the debt? And it just seems to me a sort of a concept that flies in the face of normal accounting principles. So what were the exceptions when the debt was not considered part?
LISTNUM 1 \l 11156 MR. MALCOMSON: Well, I can refer to the precedents and maybe Mr. Fillingham will elaborate on the ‑‑
LISTNUM 1 \l 11157 THE CHAIRPERSON: Oh, what's the underlying rationale for not doing this? Does anyone know?
LISTNUM 1 \l 11158 MR. FILLINGHAM: Again, it's saying that the value for purposes of ‑‑ right back to the history of the policy which was really designed to the fact that there was any auction taking place for purposes of transfers of licenses so that there should be some benefit to the broadcast system.
LISTNUM 1 \l 11159 We're basically saying that in a sense, the cash consideration, the purchase price really and truly represents the monetization of the previous custodians to the acquiring company. In a sense all it's recognizing is potential value.
LISTNUM 1 \l 11160 We haven't realized the potential value of these assets because we've assumed the debt and so it's really strictly the net position that was monetized back to the previous custodians that should, in our opinion, be assessed for value.
LISTNUM 1 \l 11161 And then there have been precedent transactions where the debt was not included in the assessment of benefits.
LISTNUM 1 \l 11162 THE CHAIRPERSON: On the basis of the rationale you just advanced?
LISTNUM 1 \l 11163 MR. FILLINGHAM: The rationale would have been maybe on a different case. But Rob may be able to decipher ‑‑
LISTNUM 1 \l 11164 THE CHAIRPERSON: Okay.
LISTNUM 1 \l 11165 MR. FILLINGHAM: ‑‑ each of the policy decisions.
LISTNUM 1 \l 11166 THE CHAIRPERSON: Thank you. Sorry. You can go back to ‑‑
LISTNUM 1 \l 11167 MR. MALCOMSON: It's difficult on the face of the decisions to ascertain why debt was included and why debt was excluded in any particular case.
LISTNUM 1 \l 11168 The one transaction I would point you to, since you've articulated the television policy where debt was excluded for the purposes of calculating benefits is of course the BCE‑CTV transaction when BCE acquired CTV for $2.3 billion. The value of the benefits package was equal to 10 percent of the purchase price. So there was a benefits package of $230 and the long‑term debt of CTV at that point in time was not included for the purpose of the benefits calculation.
LISTNUM 1 \l 11169 So, I point to that as an example. And it's interesting that the Director's Guild, who in this particular case are asking for the debt to be included in that particular case intervened in favour of and in support of the transaction and had no problems with the benefits package.
LISTNUM 1 \l 11170 All of that to say, it's simply representative of the fact that this is clearly a case by case analysis. In our view the nature of the debt in this particular instance would allow you if you saw fit to exclude it. Why? Because it's acquisition debt that was used to finance purchases of regulated undertakings for which benefits were paid and continue to be paid.
LISTNUM 1 \l 11171 It's not a case, as some interveners have pointed out, where a company has re‑jigged its capital structure just before it comes to the steps of the hearing seeking to reduce the purchase price or the value of the transaction in order to avoid benefits. And we think that's an important consideration for you to take into account.
LISTNUM 1 \l 11172 And the final point that I would point out is the Broadcasting Act at Section III requires each element of the system to contribute in an appropriate manner to the creation and presentation of Canadian programming. The benefits policy is one of the regulatory tools that you use to accomplish that statutory objective.
LISTNUM 1 \l 11173 So, the test is, what's an appropriate contribution given the nature of the transaction? And again, in this particular case it's our view that $103 million benefits package, taking into account the challenges facing conventional television, taking into account the financial state of the City TV stations and taking into account the parallel unregulated universe that conventional television broadcasters must and do compete against, that this is an appropriate contribution to the system at this particular juncture.
LISTNUM 1 \l 11174 So, at the end of the day it's case by case. And we think it's fair and reasonable in these particular circumstances.
LISTNUM 1 \l 11175 COMMISSIONER DUNCAN: Thank you, Mr. Malcomson.
LISTNUM 1 \l 11176 I'm just ‑‑ my understanding and it might be useful if you could give us a list of the precedents that you're referring to. It's my understanding that the Commission has generally taken the value of the transaction to be the enterprise value and that the enterprise value would include the assumed debt and the commitments.
LISTNUM 1 \l 11177 So, just proceeding along, at any rate, just so we can ‑‑ we'll have all of this discussion on the record for further consideration. But are you suggesting then, if there was no debt remaining then there'd be no adjustment, correct?
LISTNUM 1 \l 11178 MR. FECAN: That's correct because the equity value would be represented but is now by the enterprise, so...
LISTNUM 1 \l 11179 COMMISSIONER DUNCAN: And so, do you think that it's reasonable or fair that different financing structures for previous acquisitions should influence the benefits paid on a current transaction?
LISTNUM 1 \l 11180 MR. FILLINGHAM: Essentially and I believe this is why it has to be examined on a case by case basis, because it's not necessarily the function of, as I say, a function of the financing structures because those decisions have to be made independently in terms of how a company will structure its capital on the most efficient basis.
LISTNUM 1 \l 11181 This particular case and while we feel that there should be some justification as well, again, as I mentioned, it's ‑‑ we've got debt outstanding of $270 million that is representative from acquisitions over the, at most, 4 years ago, that were done for $350 million. And there's still $20 million of benefits still outstanding on those.
LISTNUM 1 \l 11182 As I say, the erosion of value over the period, when you do look at the value for these conventional stations, that it certainly in this case would seem to warrant a special consideration as well.
LISTNUM 1 \l 11183 MR. FECAN: Let me just add ‑‑
LISTNUM 1 \l 11184 COMMISSIONER DUNCAN: Sure.
LISTNUM 1 \l 11185 MR. FECAN: ‑‑ from my perspective, I'm not an accountant either but out of good faith as Mr. Sherratt and Mr. Switzer said earlier today, they went out and bought stations to get scale. They borrowed money to do it.
LISTNUM 1 \l 11186 Today the stations are worth 20 percent what they paid for them a few years ago. I'm not sure what the number is, it's 3 or 4 years or ‑‑ but fairly recently. So it's worth 20 percent. There's $20 million in benefits outstanding which is about what the stations are worth on our valuation.
LISTNUM 1 \l 11187 From my perspective as a business person, I look at that and I say, you know, that sort of ‑‑ that's why we come to the conclusion that maybe debt isn't part of the benefits transaction on this play, in this particular instance.
LISTNUM 1 \l 11188 COMMISSIONER DUNCAN: I appreciate that. We can take that into consideration.
LISTNUM 1 \l 11189 I guess I didn't realize the ‑‑ you're sort of enlightening me here, I didn't realize that these decisions were made on a case by case basis. I thought that they were ‑‑ followed a clearer policy than that. But at any rate we can take that into consideration.
LISTNUM 1 \l 11190 Just following along with it then, to calculate the amount of the long term debt you deducted the cash on the balance sheet, on CHUM's balance sheet at August 31st, 2006.
LISTNUM 1 \l 11191 MR. FILLINGHAM: Yes, we did. We took the net debt position.
LISTNUM 1 \l 11192 COMMISSIONER DUNCAN: Yes. And I'm just wondering, I understand that if the cash is in excess, then it's reasonable to deduct it? And I'm just wondering your thoughts on whether that cash is needed for operations or whether in fact it would be considered to be in excess.
LISTNUM 1 \l 11193 MR. FILLINGHAM: Usually on a balance sheet date the excess cash is shown net of the long term debt because you're basically structuring with term and revolving or term and what they call operating.
LISTNUM 1 \l 11194 And essentially what you try and do to manage your cash is to structure your financing so that any excess is applied against an operating loan. And then you're drawing on an operating loan when you need the cash because you minimize your interest expense at that time.
LISTNUM 1 \l 11195 So, I think in fairness and I think the structure at CHUM was such that that really, and rightfully, was the proper way to disclose, which it was.
LISTNUM 1 \l 11196 MR. MAYNE: If I could add one thing, the reason we had excess cash at that point in time is we finance through a vehicle known as banker's acceptances which have fixed maturity dates typically ranging from 30 to 90 days. And so those maturity dates don't always coincide when we have cash. And there's a penalty if we pre‑pay those banker's acceptances.
LISTNUM 1 \l 11197 So, as the CFO of the company my objective is to minimize the cash position of the company and hence minimize the net debt position of the company.
LISTNUM 1 \l 11198 COMMISSIONER DUNCAN: Just following up then on Mr. Fillingham's point, on the balance sheet though for CHUM, it does show the cash separate not netted out against the debt.
LISTNUM 1 \l 11199 MR. MAYNE: Yes, it does because that's a fairer accounting presentation.
LISTNUM 1 \l 11200 COMMISSIONER DUNCAN: So, if I understood Mr. Fillingham you were saying that if it was excess it would be offset against ‑‑ shown offset?
LISTNUM 1 \l 11201 MR. FILLINGHAM: Pardon me?
LISTNUM 1 \l 11202 COMMISSIONER DUNCAN: Did I understand you to say that if it was excess cash it would be shown on the balance sheet as offset against the ‑‑
LISTNUM 1 \l 11203 MR. FILLINGHAM: No, I think as Mr. Mayne explained, I mean to the extent that that's the proper accounting disclosure, but in a sense it's not a long term restriction when Mr. Mayne is talking about financing with banker's acceptance, that's really just over probably a balance sheet date, like a month end date there.
LISTNUM 1 \l 11204 COMMISSIONER DUNCAN: All right. I was just trying to make sure I understood your earlier remark.
LISTNUM 1 \l 11205 I'm just ‑‑ when I look at the balance sheet I notice that CHUM also has other long term liabilities. And they include program rights and future income taxes ‑‑ actually they are long term rights and future ‑‑ program rights, I mean and future income taxes. And if it is, then, as I understand it, the Commission's policy to include assumed debt, then would there be a reason for not including those in the calculation?
LISTNUM 1 \l 11206 MR. FILLINGHAM: Yes, those are just the normal the operating in terms of splitting a program contract over whether ‑‑ but that's a normal operating expense. The ‑‑ you've got a long term nature if your contract is going for 18 months then you split because you're just strictly dealing with a current liability and a long term nature. But that would not be considered in normal circumstances to be a long term debt.
LISTNUM 1 \l 11207 MR. MAYNE: If I could add to that, those are liabilities that arise out of the ordinary course operation of the business. We don't borrow from anyone in particular to incur those liabilities. They arise as part of the ongoing working capital of the company.
LISTNUM 1 \l 11208 So they are liabilities but they would not be considered from an accounting principles perspective, to be in the same vein as bank debt or bonds or something of a similar nature.
LISTNUM 1 \l 11209 COMMISSIONER DUNCAN: Your revolving credit line, it's ‑‑ it would be in operation, I would assume and it's ‑‑ am I correct, it's what's included in your long term debt, your revolving credit line?
LISTNUM 1 \l 11210 MR. MAYNE: Yes we have a revolving credit line where we do actually ‑‑ we do actually borrow. But as has been mentioned here the amount outstanding as at August 31st, 2006 principally relates to the 2 large acquisitions that the company made from CKVU for approximately $130 million in 2001 and then Craig Media for a net cash outflow of about $231 million as at December 31st ‑‑ or December 1st, 2004.
LISTNUM 1 \l 11211 COMMISSIONER DUNCAN: One of the interveners went through at great lengths to prove or to attempt to prove at any rate that there's no way that we could be certain that the debt outstanding related to those purchases and that on an ongoing basis how reasonable would it be to expect that the Commission could do such a thing. Would you care to comment on that? I mean...
LISTNUM 1 \l 11212 MR. MAYNE: This is certainly ‑‑ I can't speak for how capable the Commission is in doing so. I believe that they would be capable of doing so.
LISTNUM 1 \l 11213 But however, you're referring to the Director's Guild intervention, I believe.
LISTNUM 1 \l 11214 COMMISSIONER DUNCAN: Yes.
LISTNUM 1 \l 11215 MR. MAYNE: I'd like to point out a few things with respect to that intervention. The Director's Guild did spend the time in analyzing certain CHUM annual reports. I think in one of their points, I think it's D‑58, they mention that out of the starting point of $83 million of debt, apparently none of that was due to acquisitions.
LISTNUM 1 \l 11216 I would just like to say that that's not in fact the case. In that number there is $33 million worth of debt that was related to acquisitions that the company had made outside of CKVU and outside of Craig Media.
LISTNUM 1 \l 11217 But looking at the supposition they made which I think is in section D‑59, they go on to make a supposition. And that's their words as to how the cash could have been applied. And I think what I would say is that if they had looked at the actual annual reports of the company from 2002 to 2004, the facts don't support that supposition.
LISTNUM 1 \l 11218 As a matter of fact, over that 2 year period the company did actually pay down over $45 million of non‑acquisition debt. The supposition that the Director's Guild made I think is convenient to their position that says, let's suppose the cash flow was applied to this debt. But the facts over those 2 years don't support that supposition.
LISTNUM 1 \l 11219 And what I would want to say is if you look at how the cash was applied over those 2 years and you roll that analysis forward to the end of 2006, you would find that about 88 percent of the debt or about $238 million would be principally related to those 2 acquisitions.
LISTNUM 1 \l 11220 COMMISSIONER DUNCAN: Do you think that we'd be, if we were to accept this and make this sort of a precedent, at least it would be a precedent case if we were to accept it, that we'd be taking on quite a challenge in the future if the acquiring company had numerous earlier acquisitions trying to follow through the debt outstanding from those earlier acquisitions.
LISTNUM 1 \l 11221 I mean it seems to me like it might be quite a nightmare. Just reading the Guild's follow through with it, okay, you know it's involved and I just don't know how realistic it is to accept that approach.
LISTNUM 1 \l 11222 MR. FILLINGHAM: I agree it could get to be very difficult for very large companies in terms of analyzing some of those cash flows. But I guess what I would add as well though is the fact that, I mean I think it gets back to some of the rationale for perhaps not including debt and not paying on enterprise value, if you like. Because it's easy enough to know if there's been debt incurred for purposes other than normal acquisitions or normal operating expenditures in terms of financing perhaps operating losses.
LISTNUM 1 \l 11223 But perhaps then at the policy hearings in the future, to kind of get a clarification, because as I say a lot of it has and seems to have been done on a case by case basis in the past.
LISTNUM 1 \l 11224 COMMISSIONER DUNCAN: The other thing that occurred to me when I looked at the statements and looked at your supplementary brief because of course in the supplementary brief and as you've mentioned here today, there is $19.7 million outstanding in outstanding benefits which is also a debt that you've taken on. And if the policy is interpreted as I understand it is, why would that be excluded?
LISTNUM 1 \l 11225 MR. MAYNE: And I hate to take you down a road or treatise on generally accepted accounting principles but as at the date of our year end audited financial statements, the amount of benefits that we have committed to as a corporation and I stress the word "committed" are not liabilities as at the date of our audited financial statement.
LISTNUM 1 \l 11226 COMMISSIONER DUNCAN: I understand. It's not an accounting exercise because the commitment note that's in the statements is being added to the value or that's what we're proposing at any rate to add.
LISTNUM 1 \l 11227 But over and above that there are other commitments and that's these tangible benefits that for some reason aren't described in the note. And I know that the note for the operating commitments is not entered in the statement. It is just that, a note to the statements.
LISTNUM 1 \l 11228 But I'm just wondering why this $19.7 would be any different commitment than the commitments outlined in that note. If you like I can tell you the note number.
LISTNUM 1 \l 11229 MR. FILLINGHAM: In actual fact though, Commissioner, I will say as well that the ‑‑ because the accounting treatment as well have been different because CTV in actual fact does recognize the out ‑‑ the commitment, the full amounts of the benefits payable at the time of the decision and the approval. And we recognize it as a liability.
LISTNUM 1 \l 11230 But I think in a way if you, I mean if you keep adding that it kind of ‑‑ I mean I don't find the rationale to keep accumulating that as a value of the transaction somehow, that's all.
LISTNUM 1 \l 11231 MR. MAYNE: And if I could add, Madam Commissioner, if one was to look at how a Merrill Lynch or any other capital market practitioner would calculate enterprise value, they wouldn't add back operating liabilities because if when you value a company based on the cash flow as Merill Lynch has in this case, the networking capital position which would capture our accounts payable and our program rights payable would be captured in the working capital investment that's required to generate the revenue and the cash flow.
LISTNUM 1 \l 11232 So it wouldn't be considered by investors or lenders as liabilities that would be typically be added into the calculation of enterprise value.
LISTNUM 1 \l 11233 COMMISSIONER DUNCAN: We are not proposing to add in the operating liabilities. We're just talking about these longer term commitments. And as I understand it these are decisions that are made when a company decides whether it's going to purchase or lease an asset and how they decide to finance it whether they're buying it outright or leasing it. And so that's the reason, as I understand it, that it's taken into consideration.
LISTNUM 1 \l 11234 In any event, we'll ‑‑ as I say, we'll have this all on the record. And we appreciate your comments. And I know there's been a lot of communication with the Commission on these points. So we're just trying to make sure we have a full record.
LISTNUM 1 \l 11235 If the Commission were to decide to increase the amount of the enterprise value for the purpose of calculating the tangible benefits how do you think that we should allocate the benefits for the purpose of this transaction; that is, allocated each group of assets; television, radio?
LISTNUM 1 \l 11236 MR. FECAN: I think the way we would look at is if you don't buy our argument we will buy yours.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11237 MR. FECAN: And that therefore it gets ‑‑ the first thing you have to do is figure out what the actual debt is without the unregulated assets. And then I would ‑‑ because we kind of didn't back out unregulated assets ‑‑ and then we would propose to apply it on the same proportion that we put forward between radio and TV, 10 percent and 6 percent.
LISTNUM 1 \l 11238 COMMISSIONER DUNCAN: Mr. Fecan, did I read somewhere the reason that you didn't include the assets to be divested was because they more or less offset the non‑operating assets, the terrestrial subscription radio and the Calgary FM; there was no value in there for them?
LISTNUM 1 \l 11239 MR. FECAN: We did in one model and did in the other and Robin can explain that difference for you.
LISTNUM 1 \l 11240 MR. FILLINGAM: And in fact, in the professional evaluation that was performed in terms of ‑‑ by Merrill Lynch ‑‑ the DCF analysis portion, because of course they used as well as ‑‑ in addition to the precedent transaction procedure they did a DCF and of course the Calgary projections were included in their DCF.
LISTNUM 1 \l 11241 So for purposes of getting back to how we would split the purchase price for purposes of benefits, the Merrill model in actual fact does take into account the new Calgary licence on a go‑forward basis through the DCF model.
LISTNUM 1 \l 11242 So in the high‑end ranges, which you see in their model, the Calgary licence is taken care of. The decision on the satellite of course was still not made and is still not made so that that was not applicable.
LISTNUM 1 \l 11243 COMMISSIONER DUNCAN: I just want to move now to the benefits that will be due as a result of the assets that are being divested. And in the event there was a shortfall, in your supplementary brief you indicate that it's not clear to you that the benefits would be payable on MusiquePlus and the MusiMax.
LISTNUM 1 \l 11244 We just wanted to confirm that because we believe they are payable, we just want to confirm that you are prepared to pay benefits on any short fall that may arise from that transaction?
LISTNUM 1 \l 11245 MR. FECAN: We are but I think the news is actually pretty good. I think the value of the Rogers transaction and, if approved, and the MusiquePlus plus the benefits that Astral, I understand, is putting forward and what I might expect Rogers to put forward would be in excess by about around $20 million ‑‑
LISTNUM 1 \l 11246 MR. FILLINGAM: Yes, that's right and ‑‑
LISTNUM 1 \l 11247 MR. FECAN: ‑‑ than what we guaranteed.
LISTNUM 1 \l 11248 MR. FILLINGAM: Yes.
LISTNUM 1 \l 11249 COMMISSIONER DUNCAN: And I understand that. I think I am only asking in case the deal doesn't happen or if something falls apart.
LISTNUM 1 \l 11250 So in that case, and just following along on that question, should the Commission then look to settle the shortfall or the benefits ‑‑ if there were a shortfall as things didn't turn out the way it appears they are going to, if there were a shortfall should the Commission determine the shortfall at each transaction or wait to the end of the both of them? I don't know what timing you are looking at getting these both finished.
LISTNUM 1 \l 11251 MR. FILLINGAM: These, they are on the dispositions.
LISTNUM 1 \l 11252 COMMISSIONER DUNCAN: Yes.
LISTNUM 1 \l 11253 MR. FILLINGAM: And the shortfall?
LISTNUM 1 \l 11254 COMMISSIONER DUNCAN: Yes.
LISTNUM 1 \l 11255 MR. FILLINGAM: I think it should be at the end and then we will know in total because they shouldn't ‑‑ I wouldn't want to deal with it on a transaction‑by‑transaction.
LISTNUM 1 \l 11256 COMMISSIONER DUNCAN: No, and so what type of window do you think we are looking at? Are they both filed at this point? One is.
LISTNUM 1 \l 11257 MR. FECAN: I believe the Astral one is and I am not sure when the Rogers one will be but I think they were trying to do it relatively quickly.
LISTNUM 1 \l 11258 COMMISSIONER DUNCAN: Okay, thank you.
LISTNUM 1 \l 11259 Now, I would like to look at the Merrill Lynch report. I have a couple of questions on there. And if you turn to page 11 of that report, and this is with respect to conventional television?
‑‑‑ Pause
LISTNUM 1 \l 11260 COMMISSIONER DUNCAN: Okay. So Merrill Lynch in their calculations determines an adjusted mean and an adjusted median of 2.3 and 2.6 times respectively, and I am just wondering because I notice on the subsequent tables for mature speciality, digital speciality and radio that the adjusted means and medians that they calculated were very close compared to this one at least, to what they used to carry forward in their calculations. So I am just wondering why that would be, because it calculated a 2.3 to 2.6, as I say, and they selected a range of 0.75 and 1.00 times.
LISTNUM 1 \l 11261 MR. FECAN: Yes, and I will ask Mr. Voegeli of Merrill Lynch to respond to those.
LISTNUM 1 \l 11262 COMMISSIONER DUNCAN: Thank you.
LISTNUM 1 \l 11263 MR. VOEGELI: Thank you.
LISTNUM 1 \l 11264 I mean, the adjusted means and medians in these tables were included as reference or starting points for our valuation. We looked at each of the individual CHUM assets and looked at them compared to kind of the assets that were the targets in those transactions.
LISTNUM 1 \l 11265 And I think, you know, the point has been made earlier today. In particular, when you look at the conventional television business and CHUM's conventional television business, given its relatively very modest profitability, when we looked at it compared to the previous precedent transactions, we felt it deserved a significant discount to where those transactions were done.
LISTNUM 1 \l 11266 COMMISSIONER DUNCAN: So it's basically you are reflecting the current stage, is what you are saying?
LISTNUM 1 \l 11267 MR. VOEGELI: Correct, yes. I mean, it's based on our professional judgment of looking at what are CHUM's assets, what would they be worth in the market today and our value is they would not ‑‑ our valuation was that they would not get a 2.3 to 2.6 times multiple, that the .75 to 1.00 times revenue multiple is appropriate.
LISTNUM 1 \l 11268 COMMISSIONER DUNCAN: I notice as well in that calculation that you eliminated the two transactions, and there were two transactions that were higher multiples because you didn't think that they were representative transactions. And so I am wondering then why you left in the three low end ones. You know, usually I think when you do outliers you eliminate the high end and the low end. And I understand that two of those low end ones where, let me get this right now, did not involve a change in control and that the other transaction involved a mandated sale by the Commission that had to be done within a specified period of time.
LISTNUM 1 \l 11269 So I wondered how realistic it was to leave those in there.
LISTNUM 1 \l 11270 MR. VOEGELI: I mean, again, I would just reiterate the precedent transactions we have included in this list were used as a guide only. So the fact that there was a ‑‑ that our ultimate valuation, the multiples that we applied; for example, to specialty TV or radio, were close to the multiples that are suggested by these adjusted means and medians is not ‑‑ I mean, it wasn't ‑‑ we didn't use those means and medians in these transactions to calculate our valuation.
LISTNUM 1 \l 11271 The transactions that we have excluded here ‑‑ the two transactions we excluded on a conventional TV basis were excluded because we didn't think they were representative for a whole host of reasons and the ones that were lower multiple transactions we thought were representative transactions and therefore should be included.
LISTNUM 1 \l 11272 COMMISSIONER DUNCAN: Even though we were different circumstances.
LISTNUM 1 \l 11273 MR. VOEGELI: Correct.
LISTNUM 1 \l 11274 COMMISSIONER DUNCAN: And not prepared ‑‑
LISTNUM 1 \l 11275 MR. VOEGELI: I mean every one of these transactions has different circumstances. We looked at each of them in turn and made our own professional judgment of which one should be included and which one should not be included.
LISTNUM 1 \l 11276 COMMISSIONER DUNCAN: You see, when I follow it through to page 17 of your report, "The Precedent Transaction Analysis", well, the range that you have taken becomes very relevant because the 1.00 times range for revenue for conventional television is the high end of the precedent transaction and so then that is the number that is taken forward to page 23 when you come to your valuation conclusions.
LISTNUM 1 \l 11277 So I am just ‑‑ it must have had some bearing on the allocation of the values between TV and radio.
MR. VOEGELI: Sorry, I am not sure I follow.
LISTNUM 1 \l 11278 COMMISSIONER DUNCAN: Okay. So if you ‑‑
LISTNUM 1 \l 11279 MR. VOEGELI: Yes, I am looking at page 17.
LISTNUM 1 \l 11280 COMMISSIONER DUNCAN: Yes, okay. So you see where the range is there at the top? The top is 0.75 to 1.00 times?
LISTNUM 1 \l 11281 MR. VOEGELI: Correct, yes.
LISTNUM 1 \l 11282 COMMISSIONER DUNCAN: And the 1.00 times is the high end. It gives you the number there in the column on the right for the high end?
LISTNUM 1 \l 11283 MR. VOEGELI: Yes.
LISTNUM 1 \l 11284 COMMISSIONER DUNCAN: And then if you follow that through to your valuation conclusion on page 23 that's the number, it seems to me, because you took the highest and the lowest from the discounted cash flow ‑‑
LISTNUM 1 \l 11285 MR. VOEGELI: Correct.
LISTNUM 1 \l 11286 COMMISSIONER DUNCAN: ‑‑ and the precedent value transaction calculations. So that number made it forward to your conclusion. And if it had been 2.00 times, because even 2.00 would have been less than the range you calculated, 2.3 and 2.6, if it had been 2.00 times it would have been double the amount.
LISTNUM 1 \l 11287 MR. VOEGELI: Yes, I think that's a fair comment. What I would say to that, though, is that's why we look at it on two valuation methodologies. So we look at it on a discounted cash flow basis and on a precedented transaction multiple basis; the discounted cash flow basis in this particular circumstance when looking at a conventional TV basis, the high end of the range was actually lower than the 1.49 that we show and, therefore, that was not the highest of the high, if you will.
LISTNUM 1 \l 11288 But I think that just speaks to the fact that a 2.00 times revenue multiple for CHUM's conventional television business isn't appropriate because it would be so far out of whack to what the DCF or discounted cash flows analysis suggests.
LISTNUM 1 \l 11289 COMMISSIONER DUNCAN: When you came to the bottom of that, the equity value, there is quite a range there and you came in between that range. These are pink sheets for me so I don't know if I can use the dollar amounts or not.
LISTNUM 1 \l 11290 But at any rate, you picked a number in between the range, closer to the low end than to the high end which was the $1.365 billion for the valuation?
LISTNUM 1 \l 11291 MR. VOEGELI: Well, we didn't pick a specific number.
LISTNUM 1 \l 11292 COMMISSIONER DUNCAN: So you are just trying to justify or explain?
LISTNUM 1 \l 11293 MR. VOEGELI: No. I mean, we valued each of these assets on a standalone basis. The fact that the $1.365 (billion) that CTV actually paid for CHUM falls in the middle of that valuation, you know, again that we didn't ‑‑
LISTNUM 1 \l 11294 COMMISSIONER DUNCAN: But weren't these numbers used then to allocate the $1.365 billion to the different ‑‑ to the different categories for the purpose of calculating the benefits?
LISTNUM 1 \l 11295 MR. VOEGELI: That's correct. CTV used these numbers to allocate the benefits.
LISTNUM 1 \l 11296 COMMISSIONER DUNCAN: Okay, thank you.
LISTNUM 1 \l 11297 Just a couple more questions.
LISTNUM 1 \l 11298 THE CHAIRPERSON: Elizabeth, How much longer do you have? Because I think some people are in dire need of a health break.
LISTNUM 1 \l 11299 COMMISSIONER DUNCAN: Oh, are they?
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11300 COMMISSIONER DUNCAN: We could have the break first if you like.
LISTNUM 1 \l 11301 THE CHAIRPERSON: Okay, let's take a 10‑minute break.
LISTNUM 1 \l 11302 Thank you.
‑‑‑ Upon recessing at 1532 / Suspension à 1532
‑‑‑ Upon resuming at 1544 / Reprise à 1544
LISTNUM 1 \l 11303 THE CHAIRPERSON: Okay. It's our hope, our fervent hope we can finish with CTF submissions today so let's go on. Let's finish up this, Elizabeth, please.
LISTNUM 1 \l 11304 MS DUNCAN: Okay. We just want to clarify for the record that we don't accept your explanation for the enterprise value and we will be continuing with the one that we have.
LISTNUM 1 \l 11305 Just a couple of questions just to clarify your response of April 26th, and that's to question 3(a) that:
"Financial projections for 2008 and subsequent years do not include the additional savings to be realized from the new structuring program." (As read)
LISTNUM 1 \l 11306 And I realize this is the way the question was asked, but is it correct as well that it should be eliminated from the 2007 projections?
LISTNUM 1 \l 11307 MR. FILLINGAM: No, this is the cost from the restructuring, correct ‑‑
LISTNUM 1 \l 11308 MS DUNCAN: Yes.
LISTNUM 1 \l 11309 MR. FILLINGAM: ‑‑ that was announced by CHUM?
LISTNUM 1 \l 11310 No, and these were the projections used preparing for the Merrill valuation, and I think it is totally correct to use them for the '07 in the sense that those savings were in fact implemented as part of the CHUM restructuring. I think the other savings were really related to structural changes that were taking place between the CHUM stations but when the transaction was taking place and certain assets were being divested, i.e. some of the mass or control synergies back and forth between an A‑channel and a City channel, they in our opinion should not be included because everything is kind of on hold on a lot of those cases.
LISTNUM 1 \l 11311 MS DUNCAN: Okay.
LISTNUM 1 \l 11312 Again, in your April 26 response you show synergies ‑‑ this is in your Appendix C to that response ‑‑ you show synergies in advertising revenue and synergies in operating expenses, but you show them for Citytv as a total.
LISTNUM 1 \l 11313 Can you allocate those for us between the specialty stations or attribute some of that to the specialty stations as well, specialty services?
LISTNUM 1 \l 11314 MR. FILLINGAM: We did apply all of the specific synergies, I think, to the city, to the conventional stations.
LISTNUM 1 \l 11315 MS DUNCAN: Yes.
LISTNUM 1 \l 11316 MR. FILLINGAM: And essentially, we did that on the basis that that is where most of the synergies really are going to come from. These are the ‑‑ in effect, synergies I think in terms of the corporate expenses which I think amounted to about 13 and sale synergies which amounted to about 3.
LISTNUM 1 \l 11317 MS DUNCAN: Yes, they did.
LISTNUM 1 \l 11318 MR. FILLINGAM: Most of the sale synergies are going to come from conventional. That's the biggest structure we have. That's the biggest structure that ‑‑ and again, because the city television structure kind of services all of the others that's where the two biggest structures are. So we felt that that was the best place to allocate to ‑‑
LISTNUM 1 \l 11319 MS DUNCAN: Okay, I understand that.
LISTNUM 1 \l 11320 So it's actually 16 and 3, but that doesn't change your answer?
‑‑‑ Pause
LISTNUM 1 \l 11321 MS DUNCAN: 3 on the ‑‑
LISTNUM 1 \l 11322 MR. FILLINGAM: Oh, sorry, because 3 was on the revenue side.
LISTNUM 1 \l 11323 MS DUNCAN: Yes, it was.
LISTNUM 1 \l 11324 MR. FILLINGAM: Yes, sorry, on the uptick and that definitely was a conventional uptick.
LISTNUM 1 \l 11325 MS DUNCAN: Okay. And the only other thing I wanted to pickup on was this morning when you were talking about investing money in the programming for CHUM. How is that reflected or what kind of an increase would you expect to see in programming expenses, perhaps, on the CHUM side as a result of this investment?
LISTNUM 1 \l 11326 So this would be, assuming that the transaction is approved, how much will the expenses ‑‑ what will the programming investment be?
LISTNUM 1 \l 11327 MR. FILLINGAM: Right. I think the projections that we filed with the application really only went out to two years. So in a sense I think the two particular years were '08 and '09. '08 really is just the first year of saying the station is getting together. So I think that in truth the plans haven't been totally finalized because of the uncertainties.
LISTNUM 1 \l 11328 MS DUNCAN: And I noticed that in one spot in your assumptions there is mentioned a number of increased expenditure for non‑Canadian programming but I didn't see ‑‑ I don't know if I can find that quickly to draw it to your attention.
LISTNUM 1 \l 11329 I didn't see ‑‑ oh, here it is here. It's in your Revised February 27th Response and it shows non‑Canadian purchase programming expenses for conventional increase and it gives the amount. So I am just wondering if there is a similar amount that we should see for Canadian programming expenses because all I can see from looking at the projections is ‑‑
LISTNUM 1 \l 11330 MR. FILLINGAM: Well, no ‑‑ well, I think on the assumptions that just went out to the '09 year that those growth rates would have been approximately the same.
LISTNUM 1 \l 11331 MS DUNCAN: Two percent?
LISTNUM 1 \l 11332 MR. FILLINGAM: Yes.
LISTNUM 1 \l 11333 MS DUNCAN: It actually ‑‑ it looks like it's going out maybe further; is it, to 2012, 2011? In the information that was just filed on the 26th it goes out further?
LISTNUM 1 \l 11334 MR. FILLINGAM: Okay. You are ‑‑ okay. I am sorry. Those are the valuations that were ‑‑ the valuation ‑‑ the projections that were filed on the DCFs?
LISTNUM 1 \l 11335 MS DUNCAN: No. This is what was filed on the 26th and it looks to me to be projections going out to ‑‑ I don't think it is related to the discounted cash flow.
LISTNUM 1 \l 11336 Oh, yes, okay. Yes, it is. I understand, okay.
LISTNUM 1 \l 11337 Well, then, answer the question this way if you would. What kind of an expense increase would we expect to see as the result of this additional investment that you mentioned this morning you were going to put in CHUM's programming?
LISTNUM 1 \l 11338 MR. FILLINGAM: Well, at this point, I mean, what we would be doing is ‑‑ and I think the synergy shows up on the CTV side that was filed where I think we put in the $25 million savings that we anticipate from efficiencies and the efficient use of programming. On the city side that is not reflected as a reduction of their expenses. They are still going to be able and still will be driving an increase in programming costs because that is just going to continue.
LISTNUM 1 \l 11339 In terms of any particular plans for increased spending on Canadian programming on an ongoing basis weren't in those projections. They were just provided, I think, for the five years on the same kind of a growth rate.
LISTNUM 1 \l 11340 MS DUNCAN: Two percent, I see here it looks like.
LISTNUM 1 \l 11341 MR. FILLINGAM: Correct.
LISTNUM 1 \l 11342 MS DUNCAN: So you don't have a number in mind then, referring to your comment this morning about ‑‑
LISTNUM 1 \l 11343 MR. FECAN: We put ‑‑ '08 would be the September that broadcast year ‑‑ our notion ‑‑ so we filed two years of projections. Our notion is that we need to improve city's revenue line and from that will flow program spending improvements on the conventional Canadian side. We are a conservative bunch in terms of projections.
LISTNUM 1 \l 11344 MS DUNCAN: Okay, thank you.
LISTNUM 1 \l 11345 That's the end of my questions, Mr. Chairman.
LISTNUM 1 \l 11346 THE CHAIRPERSON: Thank you. Then we will move to the last area which is benefits and Commissioner Cugini will lead the questioning.
LISTNUM 1 \l 11347 COMMISSIONER CUGINI: Thank you, Mr. Chairman.
LISTNUM 1 \l 11348 Throughout your application both in terms of the application itself, the deficiency questions and lastly your reply, you present your argument as to why the majority of the tangible benefits should be self‑administered. You refer to the unmitigated success of the BCE‑CTV benefits model. You maintain that that model fosters creative excellence and that any third party funding model has never enjoyed the level of success of the BCE‑CTV model, and you do know that the benefits policy does state that the Commission assesses each application on its own merits.
LISTNUM 1 \l 11349 The BCE‑CTV decision does state that the approval of self‑administered funds was indeed a departure from past practice. So without retelling us the history of the success of the BCE‑CTV model as you have characterized it, comment please on why you think once again for this transaction the Commission should depart from its past practice as opposed to directing you to spend the tangible benefits on either an endowment fund or a third party fund.
LISTNUM 1 \l 11350 MR. FECAN: And I will try not to be lengthy.
LISTNUM 1 \l 11351 Basically, I think we should build on success. We have something that works. It's done extraordinarily well. It's something to be proud of from both the point of view of CTV and the producers involved and the Commission. We went down that road together and it worked.
LISTNUM 1 \l 11352 I believe ‑‑ I could be wrong, but I believe there have been other decisions for self‑directed funds since the BCE one. I think there is two or three others, so that's not the only one. I think building on success is an important thing.
LISTNUM 1 \l 11353 The programming created is incremental to priority programming. So it takes the place of American. It doesn't utilize the CTF which we all know has got capacity issues and other kinds of issues. So it doesn't utilize that.
LISTNUM 1 \l 11354 The producers seem to like it.
LISTNUM 1 \l 11355 And, you know, more to the point, mostly in 1965 Robert Fowler had his famous quote about the only thing in broadcasting that matters is programming, the rest is housekeeping. The basic thesis of the BCE benefits program was that we wanted to put as much money as directly as possible into the creative people because we felt that that would derive the best results, and it has.
LISTNUM 1 \l 11356 So that is why we feel that, you know, you build on the success.
LISTNUM 1 \l 11357 COMMISSIONER CUGINI: A number of intervenors have suggested that 10 percent, while in keeping with the benefits policy, is quite simply not enough. And somebody even suggested that it should have been as high as 15 percent, especially because you are asking for an exception to the twin stick policy. They have cited examples of other transfer of ownership applications that postdate the 1999 policy where intangible benefits were committed at above the 10 percent threshold.
LISTNUM 1 \l 11358 Why in your opinion is 10 percent commensurate with the size and nature of this transaction?
LISTNUM 1 \l 11359 MR. FECAN: I think the ‑‑ and I would thank the Directors Guild for this. They correctly pointed out that where more than the 10 percent was paid it was on conventional‑only transaction having to do with twin sticks. It was not specialty or anything else. If the Commission felt that that was the right way to go then I think you have to value it on the basis of the conventional twin sticks being acquired.
LISTNUM 1 \l 11360 COMMISSIONER CUGINI: So let's just spend a couple of minutes on that.
LISTNUM 1 \l 11361 THE CHAIRPERSON: Can you explain that?
LISTNUM 1 \l 11362 MR. FECAN: The precedent used was the WIC precedent, the CanWest precedent where WIC was being acquired by CanWest and the only assets in WIC were conventional. So the entire value of the transaction was attributed to the conventional stations and they offered more than 10 percent as part of an inducement to the exception rule.
LISTNUM 1 \l 11363 THE CHAIRPERSON: And translated to this transaction?
LISTNUM 1 \l 11364 MR. FECAN: $150 million is the value and the high end of the conventional. So if you were going to say that it should be more than 10, some people said 12, some people said 15, I think the WIC one was 12. I could be wrong ‑‑ 11.8, I am corrected. It would be based on the 150 as the foundation.
LISTNUM 1 \l 11365 COMMISSIONER CUGINI: Okay. Thank you.
LISTNUM 1 \l 11366 We know that there will be more applications before us in the very near future that will talk about tangible benefits. What in your opinion is going to be the net effect on independent production in terms of variety of formats, regional representation and reflection and the true independence of producers if we accept that going forward self‑administered funds is indeed the best model?
LISTNUM 1 \l 11367 MR. FECAN: I think you should ‑‑ you should, again, and this is a bit of an echo, but look at everything on a case‑by‑case basis. I think the producers seem ‑‑ the producers, the creators, the writers seem to like the self‑directed because it gets them their money in one shot largely and it gets them in front of the cameras and there is a minimum of people giving well‑meaning notes to creative people and they get to their audiences as quickly as possible. That's what makes it work.
LISTNUM 1 \l 11368 So I think you have to look at each group and each proposal and see if it makes sense. But I do really want to say that the producers seems to like this and the creative people seem to like this.
LISTNUM 1 \l 11369 COMMISSIONER CUGINI: And we will be hearing from them tomorrow and we will ask them as well. Thank you.
LISTNUM 1 \l 11370 I want to move to just a couple of details of your benefits proposal. In the letter dated February 21 following the filing of your annual reporting of the BCE‑CTV benefits you explain that you allocated four percent of the benefits monies from that transaction to incremental administrative expenses related to the incremental programming strands.
LISTNUM 1 \l 11371 Do you have plans to apply a similar administrative fee to the benefits that we are talking about today?
LISTNUM 1 \l 11372 MR. FECAN: Robin?
LISTNUM 1 \l 11373 MR. FILLINGAM: Yes, I think, and they are strictly tentative at this point, but the figure we have talked about is about $2 million over the seven years is the max, essentially because a lot of the structure already exists. So the incremental increase isn't really going to amount to anything. In fact, we should be able to do it for a lot less.
LISTNUM 1 \l 11374 COMMISSIONER CUGINI: Because the infrastructure has been established with the BCE‑CTV benefits plan?
LISTNUM 1 \l 11375 MR. FILLINGAM: That's correct, yes.
LISTNUM 1 \l 11376 MR. FECAN: And as I understand it, it's considerably lower than the administrative costs of the CTF of telefilm and certain third party funds by as much as half.
LISTNUM 1 \l 11377 THE CHAIRPERSON: Let's not digress into CTF here. Another day.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11378 COMMISSIONER CUGINI: The Writer Only Drama Development fund for $3.5 million you say that:
"Projects would be considered for the CHUM platforms first and should it not be suitable for a CTV platform next and that CTV would then pay for the development costs." (As read)
LISTNUM 1 \l 11379 So I just want to elaborate ‑‑ I would like you to elaborate a little bit on how that would work. Would the CHUM benefits pay a tranche of those development costs and if not deemed suitable CTV would then pay for the rest of those development costs?
LISTNUM 1 \l 11380 MR. FECAN: Well, let's take a project, say Brent Butt has got a new idea for Show and he feels it fits the Citytv format and so he pitches it to them and they use some development money to do this and then it works out that, no, it doesn't fit their needs for whatever reason. What I would like to have happen is that he gets an opportunity to take that to CTV and if that doesn't work he can take it anywhere else.
LISTNUM 1 \l 11381 Should it go into production somewhere outside of City, the Citytv development has to be paid back. So I goes back into the fund. If you just do it on each development tranche, it puts a burden, if you will, on the project, but if somebody else takes it, maybe CanWest takes it or the CBC takes it, or whoever, the money has to be paid back into the Citytv writer's only benefits and reutilized.
LISTNUM 1 \l 11382 COMMISSIONER CUGINI: If CTV takes it, CTV will pay back.
LISTNUM 1 \l 11383 MR. FECAN: Absolutely. These benefits are for the City and CHUM television assets, they are not for the CTV stations.
LISTNUM 1 \l 11384 COMMISSIONER CUGINI: In the end, ultimately, who would own the rights to the development project, the producer or City or CTV?
LISTNUM 1 \l 11385 MR. FECAN: Let me ask Corrie Coe, who has administered all of BCE benefits, but I'm presuming that the writer does if there is no producer involved. Ultimately, then, the writer, in these particular cases ‑‑ the whole point of this writer's development process is to give them the power to develop their passion ideas and then choose the producer that can incubate it and take it to production.
LISTNUM 1 \l 11386 Corrie...?
LISTNUM 1 \l 11387 MS COE: Ivan is right, if a project started in writer‑only with City and then at some point City decided it just wasn't working for them and it didn't work for CTV either, the writer would then have the project to take off to another broadcaster, et cetera.
LISTNUM 1 \l 11388 If, however, the project continued on at City, and City liked it, generally, as it worked under the BCE benefits, when it was around a first draft stage, or little bit thereafter, a producer got involved and with the writer we all talked closely about who might be the best match.
LISTNUM 1 \l 11389 The writer and the producer will then take the project away and the producer will have the rights and jointly the writer and the producer will continue to develop and CTV, or someone, would continue to help finance the development, but no longer out of the Writer Only Fund, just out of our normal development monies.
LISTNUM 1 \l 11390 COMMISSIONER CUGINI: Do you have any idea how many projects you intend to develop with this $3.5 million fund?
LISTNUM 1 \l 11391 MR. FECAN: Past this prologue maybe Corrie can hazard a guess.
LISTNUM 1 \l 11392 MS COE: It's hard to say because it really varies by project and what the need is. Of course, Writers' Guild set scale for writers, fees, et cetera.
LISTNUM 1 \l 11393 Generally, I think a rough approximation to get it through to first draft with some story editing assistance, and perhaps some research, some travel, et cetera, is somewhere between $50,000 to $65,000 of a commitment, and that moves on from there, for a drama. It is less of course in other genres.
LISTNUM 1 \l 11394 COMMISSIONER CUGINI: I'm sorry, I didn't hear the last part of your answer.
LISTNUM 1 \l 11395 MS COE: That's for a drama. I'm just clarifying.
LISTNUM 1 \l 11396 COMMISSIONER CUGINI: Thank you.
LISTNUM 1 \l 11397 Trendsetters and risk takers for $30.75 million.
LISTNUM 1 \l 11398 I did read your response provided in your January 29 letter wherein the staff asked specifically how much will be allocated to series extension versus new drama.
LISTNUM 1 \l 11399 But given the fact that this one initiative makes that more than 47 percent of the total, I'm wondering if you had some time to think about it and give us some more specifics.
LISTNUM 1 \l 11400 MR. FECAN: I would like to go to Corrie and Roma.
LISTNUM 1 \l 11401 COMMISSIONER CUGINA: All right.
LISTNUM 1 \l 11402 MS COE: At the risk of sounding like I'm just throwing this, I really think it does depend on what projects are pitched to Roma and her team and what they feel most passionate about and what they want to get involved with and whether what they are looking at and most excited about creatively is a brand new series or whether it is extending something that they have already been doing but long to have more episodes of.
LISTNUM 1 \l 11403 So it is really hard to estimate how many of one type or the other might actually evolve over the next few years.
LISTNUM 1 \l 11404 So at the risk of sounding like I'm passing the buck, I'm going to throw to Roma.
LISTNUM 1 \l 11405 MS KHANNA: Thanks, Corrie.
LISTNUM 1 \l 11406 Commissioner, as Corrie said, it is very difficult to quantify at this point because the creative development is such an imprecise process but, as I said earlier today, what Citytv needs at the end of the day is twofold and it would fall into both of those categories.
LISTNUM 1 \l 11407 One is more original Canadian programming than what we are able to do financially today and we are excited about doing more.
LISTNUM 1 \l 11408 But the second, and absolutely true, is being able to invest more into those projects.
LISTNUM 1 \l 11409 If I could use an example of a show that we have recently picked up, a half an hour comedy called "Less Than Kind" that will be based out of the prairies from a production perspective, we were only financially able to pick up eight episodes. That is unfortunate for us, that is unfortunate for the producer, but most importantly it is unfortunate for the audience who doesn't get at least 13 episodes of a series to determine whether or not they can connect with this new series.
LISTNUM 1 \l 11410 So that would be an example of something where I would happily be able to turn to these funds and say "Well, if we like it enough to make eight, maybe we like it enough to make 13" and be able to supplement that with a series extension".
LISTNUM 1 \l 11411 On the flip side, if we look at a series like "Blood Ties", the vampire series I mentioned earlier where we picked up a number of episodes, we didn't make a full commitment in terms of our licence fee was a full $315,000 an hour, but we weren't able to allocate enough CTF money to maximize what we would normally be able to do. That would be an example, if it were a new series we were picking up, of being able to put more money into one series, not necessarily more episodes, to create higher quality drama and to save the producers from having to, in this case, have found a U.S. partner before we could green‑light the show.
LISTNUM 1 \l 11412 So I think both of those speak directly to Citytv's desire to create on‑brand original programming that wouldn't be seen on any other broadcaster and that would be different than what we are able to do today.
LISTNUM 1 \l 11413 MR. FECAN: If I may just finish that, we really, as a company, believe in quality, so to the degree that, you know, Roma has a hit, she may want a few extra episodes, to the degree that she is still looking for a hit in the context of Citytv, she might spread the money differently.
LISTNUM 1 \l 11414 But I think quality is important because we always have to bring this back, I believe, to the audience, the Canadian audience. So it is whatever tool ‑‑ it is giving her the toolbox so that she can do what she possibly can with the ideas that are coming in that she has been able to develop with her team.
LISTNUM 1 \l 11415 THE CHAIRPERSON: How do you know what is the trendsetter? Surely you only know that after you finance something and it's out whether it's setting a trend or not.
LISTNUM 1 \l 11416 Just tell me, in your mind, how do you determine this is the trendsetter? You wait until a couple of episodes have been aired and you see it is taking off or how do you do this?
LISTNUM 1 \l 11417 MR. FECAN: I'm going to let Roma answer that, but I would tell you that artists have an uncanny ability to see over the horizon sometimes. In my own experience in developing things, I remember when "Codco" the Newfoundland satirical troupe was talking in their sketches about priests in St. John's and nobody would believe that this comedy was appropriate because, I mean, who could believe that. Then it turns out that they were right, they saw a little into the future, and then we did "The Boys of St. Vincent".
LISTNUM 1 \l 11418 Artists have an ability to see over the horizon and so I just think it is one of those wonderful intangibles about the show business thing.
LISTNUM 1 \l 11419 Roma...?
LISTNUM 1 \l 11420 MS KHANNA: At the risk of sounding repetitive is when we were talking about edgy earlier, it is hard to define but we know it when we see it and there is a large team of people at CHUM and at Citytv who have made their living of thinking about nothing but that question over the last number of years.
LISTNUM 1 \l 11421 As we look at projects we often look to say, you know, "From a trendsetter/risk‑taking perspective, is this something that could also live on another conventional network?" If the answer is yes it doesn't feel exactly like it should be on Citytv. So we have to take some risks and try to find these trendsetting shows.
LISTNUM 1 \l 11422 But you are absolutely right, like any artistic development you are going to invest in things that just don't work and we were just wrong about, but the beauty about being able to do more is that within a portfolio of projects the goal is to find those things that actually become trendsetters or where the risks take off.
LISTNUM 1 \l 11423 We remind ourselves all of the time that we are fully accountable for our decisions and our ability to actually have that portfolio pay off in the end because we get our ratings from the Canadian audiences overnight and then over a 13‑week period and if it is just not working, then we are just not good at our jobs and we have to reevaluate the approach we are taking.
LISTNUM 1 \l 11424 COMMISSIONER CUGINI: At the risk of trying to ask you to be a little bit less subjective, what will be the criteria for eligibility to these funds from a trendsetter or risk‑taker point of view?
LISTNUM 1 \l 11425 For example, are we looking at 10 point drama only, are we looking at regional projects?
LISTNUM 1 \l 11426 If you can, can you try to put some parameters around this for us so we know what it is that you will be looking for when deciding which projects to fund?
LISTNUM 1 \l 11427 MR. FECAN: Before Roma answers, the whole question, it would be for whatever the best idea is. When we set out to get behind "Corner Gas", it wasn't because we needed to do something from the prairies that was a half‑hour sitcom, it is because Brent Butt walked in with an amazing idea and we believed that he could deliver. So you have to work with what the artists bring you.
LISTNUM 1 \l 11428 I would be disappointed if we did industrials. I don't think that is the intention here. The industrials are the shows that might be Canadian by the category, but not set here, not really about us. They are an industrial project, so to speak. I don't think we are thinking about that at all.
LISTNUM 1 \l 11429 Roma...?
LISTNUM 1 \l 11430 MS KHANNA: Absolutely. In terms of the quality, the creative qualities of the product, again it would go back to being specifically on brand Citytv and the related services that the show would need to play on.
LISTNUM 1 \l 11431 In terms of the technical qualifications of what we would be looking for, we are looking at drama, 10 out of 10, sometimes that includes co‑productions if it qualifies as a Canadian drama, but in terms of whether or not a 6 out of 10 Canadian drama would qualify, perhaps Corrie can go through the technical aspects of that.
LISTNUM 1 \l 11432 MS COE: Thank you, Roma.
LISTNUM 1 \l 11433 Under the BCE benefits what we found was really effective was flexibility. Our sort of grounding there was, as Ivan has already noted, looking first at the story and going after the very, very best creative. We weren't rigid about whether it had 10 points or 8 points. Many of them ended up being 10, because I was just right creative grouping, but we had some where the director was from the U.K. or there was a star from the U.S., or something along those lines, and the reason we did that was because it was going to make the show better and that was what was really important.
LISTNUM 1 \l 11434 So we didn't have those kind of normal restrictions, so long as it fell within Canadian content obviously but, more importantly, was just really great.
LISTNUM 1 \l 11435 COMMISSIONER CUGINI: Are you including the entire Category 7 drama in this definition, that is MOW, series, comedy?
LISTNUM 1 \l 11436 Yes. Okay.
LISTNUM 1 \l 11437 MS COE: Yes.
LISTNUM 1 \l 11438 THE CHAIRPERSON: Let me just understand that. I'm really have trouble like my colleague here getting my head around this.
LISTNUM 1 \l 11439 You are setting up $30.75 million for this trend and to determine trendsetter it has to be Canadian clearly and the rest is basically your golden gut determining this is going to be a trendsetter, risky are not.
LISTNUM 1 \l 11440 You haven't give me one objective criteria that I can lay my hands on. I don't doubt that you have that golden gut, your success speaks for itself, but there must be some sort of internal guidelines or approaches that you have now to determine: Yes, this qualifies or no, this doesn't qualify.
LISTNUM 1 \l 11441 MR. FECAN: It's fundamentally an artistic process. I don't have a golden gut, but we have a group of people that are completely passionate about this and the only way you can measure whether it works or not is to look at track record, their track record compared to other people's track record.
LISTNUM 1 \l 11442 Again, it is the artists that come in with the ideas. That is a really important point of principle in how you must develop.
LISTNUM 1 \l 11443 You know, it has worked awfully well. It's hard to argue with results, I would suggest.
LISTNUM 1 \l 11444 THE CHAIRPERSON: I'm not questioning the results, I'm just trying to understand the process.
LISTNUM 1 \l 11445 Go ahead.
LISTNUM 1 \l 11446 COMMISSIONER CUGINI: Now, in the BCE‑CTV decision it did say that all of the production that was attributable to the tangible benefits represented 175 hours of original programming, all of which was incremental.
LISTNUM 1 \l 11447 Now, I can appreciate that you are asking for flexibility, it is a popular word whenever we talk about conventional television, but you are allocating $65 million of your benefits money to priority programming.
LISTNUM 1 \l 11448 Can you give us a general idea of how many hours of original programming you hope to generate with this amount of money?
LISTNUM 1 \l 11449 MR. FECAN: We will come back to you with that, please.
LISTNUM 1 \l 11450 COMMISSIONER CUGINI: All right. Fair enough.
LISTNUM 1 \l 11451 We will move to the area of social benefits for 11.5.
LISTNUM 1 \l 11452 You have divided these benefits into six distinct categories. I can appreciate that you received a number of proposals, but as of January 29th you could not provide us with any further details.
LISTNUM 1 \l 11453 Do you have an update for us at this stage as to the organizations and/or institutions in each of the six categories that would be the beneficiaries of these benefits monies?
LISTNUM 1 \l 11454 Because I can see this becoming a full‑time job for somebody, receiving these proposals and assessing whether or not they fit within your criteria.
LISTNUM 1 \l 11455 MR. FECAN: I am about to introduce you to ‑‑
LISTNUM 1 \l 11456 COMMISSIONER CUGINI: Paul Sparkes?
LISTNUM 1 \l 11457 MR. FECAN: ‑‑ to a couple of people who are going to be spending an awful lot of time on this. I'm going to introduce you to Paul Sparkes and Sarah Crawford.
LISTNUM 1 \l 11458 I would say that CHUM has been a leader in this kind of social field and it is something that we do well at CTV as ,well but we are really looking to take Sarah's guidance as much as possible.
LISTNUM 1 \l 11459 So let me turn it over to Paul and Sarah to tell you a bit about the process and how we got to where we are and how we are looking at it.
LISTNUM 1 \l 11460 MR. SPARKES: Thank you very much, Madam Commissioner.
LISTNUM 1 \l 11461 Yes, we are very popular. We have received to date over $200 million worth of requests for benefits, so we are massively oversubscribed. So we decided to create these funding envelopes that address the categories of the need that people had and also that were aligned with the areas of social investment of which CHUM is known.
LISTNUM 1 \l 11462 The approach we took in terms of creating envelopes is a different approach from previous transactions, but we feel that this allows for greater transparency, that the public can see the funding categories that have been identified, can tweak them if they feel that their original proposal didn't originally fit that envelope, and it also allows for new applicants to apply.
LISTNUM 1 \l 11463 If I may just turn it over to Sarah who, as you know, is an expert in this field and is very well‑known in this country for diversity and social issues and maybe Sarah could continue.
LISTNUM 1 \l 11464 MS CRAWFORD: Sure, I would be happy to provide some more detail.
LISTNUM 1 \l 11465 CTV was very inclusive with a number of CHUM people in developing this approach and, as Paul mentioned, it was specifically designed to provide greater transparency than the usual approach.
LISTNUM 1 \l 11466 By creating the six funding envelopes, it allows potential recipient organizations to be aware of the kind of funding that we do have available. We received a tremendous amount of inquiries about funds available in each of those envelopes.
LISTNUM 1 \l 11467 We specifically determined not to make a determination behind closed doors in advance of submitting an application because, frankly, we wanted to provide the transparency and through this process I think give people an opportunity to still come forward with some asks.
LISTNUM 1 \l 11468 It was a very rigorous and time‑consuming process that we undertook. As I mentioned, a group of people were involved right from the most senior levels of CTV. I was included as well from CHUM, as were other colleagues, but Ivan Fecan was involved, Paul Sparkes, Susanne Boyce was involved, in discussing the overall approach.
LISTNUM 1 \l 11469 Again, I think it is an approach that is designed to fill the needs of the asks that we have received. The bucket, the funding envelopes, are aligned with the areas that CHUM has been known for in terms of its social investment. Around that table in the committee we had great resources in terms of experience with those who had experience in both the BCE benefits and also we have had quite a bit of experience in not only benefits allocations with CHUM, but also through our areas of social investment.
LISTNUM 1 \l 11470 COMMISSIONER CUGINI: You may call it transparency, we may call it a departure from past practice, because usually people come to us with very distinct proposals and ask for our approval.
LISTNUM 1 \l 11471 So if we permit this flexibility that you are asking for here today, how will you be accountable to the Commission and to the public as to the allocations, the organizations you choose to fund, and how will you report this to the Commission and in what timeframe? Will this be done every six months, every year?
LISTNUM 1 \l 11472 MS CRAWFORD: We propose to meet with each of the potential recipient organizations to discuss in more detail with them what the intention of the proposed investment would be, so to get more detail to ensure that it not only meets the Commission criteria, but to ensure that it is really going where the money is needed and can make the most difference to ultimately enhance what is on our screens. So we propose those meetings would take place.
LISTNUM 1 \l 11473 First of all, we propose to keep the benefits open. Potential new recipients could come forward within 30 days following a time, should the Commission decided to approve this application.
LISTNUM 1 \l 11474 We would hold the meetings in a 30‑day period following that and then we propose to file with the Commission a list of the initiatives and organizations that we would propose to support, with each of the funding envelopes, to give you an idea in much more detail about what exactly these kinds of investments could accomplish, and, of course, that would be for your approval.
LISTNUM 1 \l 11475 Furthermore, we, of course, would propose to file annually a report to detail exactly what has happened in terms of the investments that we proposed to ensure that we are making good on our commitments and that the money is doing exactly what we said that it would.
LISTNUM 1 \l 11476 COMMISSIONER CUGINI: Thank you.
LISTNUM 1 \l 11477 We will move to the radio benefits for a total of $4.6.
LISTNUM 1 \l 11478 The Canadian Academy of Recording Arts and Sciences for $1 million. What will be the eligibility criteria and who will establish that criteria for both the Fred Sherratt Award and the Allan Waters Humanitarian Award?
LISTNUM 1 \l 11479 MR. SKI: That will be established by CARAS.
LISTNUM 1 \l 11480 COMMISSIONER CUGINI: And what will be the ‑‑ the eligibility criteria as well?
LISTNUM 1 \l 11481 MR. SKI: Yes.
LISTNUM 1 \l 11482 COMMISSIONER CUGINI: Okay.
LISTNUM 1 \l 11483 Mr. Sherratt, Mr. Waters, you guys are okay with that?
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11484 MR. WATERS: Quite.
LISTNUM 1 \l 11485 COMMISSIONER CUGINI: CHUM Musicfest at Canadian Music Week for $2.6 million. This event is without doubt the premier music event, we all know that. It is well attended, well sponsored, well promoted and it is probably the premier event for showcasing new and emerging artists.
LISTNUM 1 \l 11486 Of course, always more can be done but why did you choose this particular initiative as the one to which you allocate more than 56 percent of your radio benefits?
LISTNUM 1 \l 11487 MR. SKI: Well I think this falls in line with our earlier discussion about emerging artists. I mean it is the premier event, as you said, for, I guess, booking agents, talent scouts, et cetera, managers of various artists and it is the event in Canada in terms of Canadian artists and in terms of emerging artists. So we just thought it was money put in the right area at this particular point in time.
LISTNUM 1 \l 11488 COMMISSIONER CUGINI: So it can do more of what it is already doing well?
LISTNUM 1 \l 11489 MR. SKI: That is correct.
LISTNUM 1 \l 11490 COMMISSIONER CUGINI: You say that Canadian Music Week will be able to hold a large venue event that will showcase Canadian emerging artists as well as featuring a headline star to draw fans.
LISTNUM 1 \l 11491 Will the headline star be a Canadian artist?
LISTNUM 1 \l 11492 MR. SKI: That is correct.
LISTNUM 1 \l 11493 COMMISSIONER CUGINI: Okay, because I don't think the Canadian Music Week people said that specifically in their letter.
LISTNUM 1 \l 11494 Would you be able to have them refile a letter attesting to that fact?
LISTNUM 1 \l 11495 MR. SKI: Yes, we will. That is our understanding and their understanding.
LISTNUM 1 \l 11496 COMMISSIONER CUGINI: Okay, thank you.
LISTNUM 1 \l 11497 My final line of questioning has to do with measurement and reporting of incrementality.
LISTNUM 1 \l 11498 I have read your response to deficiency questions as well as your reply to intervenors but in terms of priority programming, how do you propose we establish the baseline for spending on priority programming made by the Citytv stations?
LISTNUM 1 \l 11499 Should it be based on the previous year's spending? Should it be an average of the last three years, for example, as some intervenors have suggested? How should we establish that baseline?
LISTNUM 1 \l 11500 MR. FILLINGHAM: I think what we are proposing is that the baseline could probably go back to that original baseline at $4.094, which is how that original split was between the City and the A channels, as I understand it. I think in a sense that figure actually exceeds the expenditures last year on the City channels.
LISTNUM 1 \l 11501 COMMISSIONER CUGINI: And so, of course, anything over and above that would be attributable directly to the benefits money?
LISTNUM 1 \l 11502 MR. FILLINGHAM: That is correct for the Craig ‑‑ for the outstanding Craig benefits, yes, and then our benefits will be over and above those benefits.
LISTNUM 1 \l 11503 COMMISSIONER CUGINI: Okay.
LISTNUM 1 \l 11504 Now in terms of the specialty services you say that incrementality would be determined by using the services' existing CPE as a baseline.
LISTNUM 1 \l 11505 We know that the CPE percentage doesn't change, the dollar amount does in fact, though, fluctuate from year to year since it is a percentage based on gross revenues.
LISTNUM 1 \l 11506 So how exactly would this work in terms of establishing a baseline?
LISTNUM 1 \l 11507 MR. FILLINGHAM: I think any of the costs incurred for any of the benefit programming could not be included in any count towards any CPE of an existing specialty channel.
LISTNUM 1 \l 11508 So in other words, specifically, I guess, the Bravo! initiatives per se that are being proposed, none of the costs associated with producing those programs could be included towards any of the CPE of Bravo!
LISTNUM 1 \l 11509 COMMISSIONER CUGINI: Okay. So give me ‑‑ I apologize, I don't know what the Bravo! CPE is.
LISTNUM 1 \l 11510 MR. FILLINGHAM: Yes, including Bravo!FACT it is 38 percent.
LISTNUM 1 \l 11511 COMMISSIONER CUGINI: Thirty‑eight percent, okay. So take me through how exactly this would work, that Bravo!'s CPE is 38 percent, it spends X million dollars in 2007 on Canadian programming, how do I see what it spent of the benefits money in 2008?
LISTNUM 1 \l 11512 MR. FILLINGHAM: Well I think what we could ‑‑ we could certainly incorporate because otherwise you would have to deal with all of that detail. I mean I think a lot of it starts with having the ‑‑ and committing to the auditor report each year because that can be a specific requirement that the auditors report on to ensure that none of the costs of these programs were being used to count towards any of the CPEs.
LISTNUM 1 \l 11513 COMMISSIONER CUGINI: You therefore agree to file a detailed audited annual report of the initiatives undertaken in fulfillment of the benefits as approved by the Commission?
LISTNUM 1 \l 11514 MR. FILLINGHAM: Yes.
LISTNUM 1 \l 11515 COMMISSIONER CUGINI: Thank you.
LISTNUM 1 \l 11516 Thank you, Mr. Chairman, those are my questions.
LISTNUM 1 \l 11517 THE CHAIRPERSON: Any other questions? Mr. Stewart?
LISTNUM 1 \l 11518 COMMISSIONER LANGFORD: Yes. I am taken by the word "incremental" as well and I just have a couple of questions on it.
LISTNUM 1 \l 11519 I am looking at the line ‑‑ and you don't have to go to it, I don't think ‑‑ page 34 of your supplementary brief, under the conventional television specialty, total tangible benefits 76.5, and then in paragraph 2, you say:
"The benefits include a total of $65 million or 85 percent of the total for new incremental priority programming initiatives." (As read)
LISTNUM 1 \l 11520 What does incremental mean there, just specifically what do you mean by that word in that sentence?
LISTNUM 1 \l 11521 MR. FECAN: Well I ‑‑ Robin, you might want to take a shot at it but it is exactly the definition for conventional and for specialty that Robin just testified to in answer to Commissioner Cugini's question.
LISTNUM 1 \l 11522 COMMISSIONER LANGFORD: It is above this baseline then?
LISTNUM 1 \l 11523 MR. FILLINGHAM: Yes.
LISTNUM 1 \l 11524 COMMISSIONER LANGFORD: So give me a number of the baseline again for conventional. You gave it to Commissioner Cugini but I forget it, I am sorry. What is the baseline number?
LISTNUM 1 \l 11525 MR. FILLINGHAM: The baseline number for the City television stations is $4.094 million.
LISTNUM 1 \l 11526 COMMISSIONER LANGFORD: Okay, $4.094 million. So let's just call it $4 million to make it easy.
LISTNUM 1 \l 11527 So if we split the $65 million up evenly, does that mean you are doing ‑‑ over seven years, is that sort of close to $10 million a year? Am I doing my math right here?
LISTNUM 1 \l 11528 MR. FILLINGHAM: Yes.
LISTNUM 1 \l 11529 COMMISSIONER LANGFORD: So you are spending 4 now and you are going to increase that by more than 200 percent? You are going to go from 4 to somewhere around $13‑14 million; is that right?
LISTNUM 1 \l 11530 MR. FILLINGHAM: That is the benefit policy, that is the benefit spending.
LISTNUM 1 \l 11531 COMMISSIONER LANGFORD: Right.
LISTNUM 1 \l 11532 Now it seems to me that if you are going to put that kind of money on the table and you are looking for a way to impress us with how much more you are doing in the public interest if you are given these twin sticks and these new programs and you are asking us to literally ride roughshod over the policy because in this case the public benefits will be so worthwhile and the public interest will be served, why wouldn't you as well as spending more on priority programming do more priority programming?
LISTNUM 1 \l 11533 MR. FECAN: We may well. If it works out with City as we want, we may well.
LISTNUM 1 \l 11534 COMMISSIONER LANGFORD: But you are spending over three times as much ‑‑ yes, you are spending over three times as much as you have spent for at least seven years, every year for seven years, why wouldn't you crank it up to ‑‑ I mean when you think about it, instead of doing 8 hours of priority programming, you could be doing 24.
LISTNUM 1 \l 11535 Now that may hurt your business case, I realize that, but why wouldn't you crank it up to at least another half‑hour a week, another hour a week, find a way to do that? I mean that would be impressive, wouldn't it?
LISTNUM 1 \l 11536 I mean we are talking about another way of looking at the word "incremental." Have you ever considered it?
LISTNUM 1 \l 11537 MR. FECAN: It is likely to fail Citytv.
LISTNUM 1 \l 11538 COMMISSIONER LANGFORD: Okay. Explain why.
LISTNUM 1 \l 11539 MR. FECAN: Why? I think Mr. Mayne explained to you that it is not making money. The trendline plus the actuals plus the evidence we put on the record after the lunch break will, I think, demonstrate clearly that these stations are on the verge.
LISTNUM 1 \l 11540 COMMISSIONER LANGFORD: Right.
LISTNUM 1 \l 11541 MR. FECAN: So I think they have obligations which we will live up to.
LISTNUM 1 \l 11542 COMMISSIONER LANGFORD: Right.
LISTNUM 1 \l 11543 MR. FECAN: We hope that through some of the programming heft we can bring to it in terms of the foreign programming that their revenues will revive. We hope that that will allow us to spend more on Canadian and meanwhile, the benefits, the clear benefits policy will put a whole bunch more incremental programming on, and much like what happened with the BC‑CTV benefits when "Corner Gas" exceeded its envelope on the benefits, CTV picked up the tab, 100 percent of it.
LISTNUM 1 \l 11544 COMMISSIONER LANGFORD: But you are tripling your money, you are more than tripling your money, and are you essentially saying that doing more priority programming, even way more high quality because you are going to put a lot more money into it, would be a death sentence?
LISTNUM 1 \l 11545 MR. FECAN: No. I am saying we would like to, we would like to be able to and our track record has demonstrated that we do when we can. And there is no difference here but, you know, rules live forever.
LISTNUM 1 \l 11546 COMMISSIONER LANGFORD: Which rules are we referring to?
LISTNUM 1 \l 11547 MR. FECAN: Any rule that gets written into this licence.
LISTNUM 1 \l 11548 COMMISSIONER LANGFORD: But would it be completely untoward ‑‑ I mean you are talking about failure here. Are you saying that if we were to say to you, we want to push the notion of incrementality and we want you to do at least, for seven years, eight and a half hours of priority programming in primetime, are you telling me that that would be akin to a death sentence?
LISTNUM 1 \l 11549 MR. FECAN: You know, at the end of the day it has to be an economically viable enterprise and I think you can ask us to do anything you like but at the end of the day it is in your interest and our interest for this to be a success.
LISTNUM 1 \l 11550 COMMISSIONER LANGFORD: That is right.
LISTNUM 1 \l 11551 MR. FECAN: So as prospective stewards of this asset we will try and grow it as much as we can.
LISTNUM 1 \l 11552 COMMISSIONER LANGFORD: Well I am a steward of regulation and ‑‑
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11553 COMMISSIONER LANGFORD: ‑‑ I have to say to you that I would like you to consider that overnight if you would because it seems to me that I keep coming back to the same problem, that a lot of what you are saying is trust us and we will do it and I am looking for some concrete steps. You gave us one in the opening this morning but precious little since then.
LISTNUM 1 \l 11554 So anyway it is just a further thing for you to consider. You may in one of the later phases have something more concrete but it seems to me with that kind of money on the table there is scope here for looking at the word "incremental" in different ways.
LISTNUM 1 \l 11555 MR. FECAN: Well I think you should also recognize that a lot of that money is going into specialty, the incremental money. Not all of it is going to conventional. So let's just start there.
LISTNUM 1 \l 11556 I think you should also recognize that these stations are going to be sold. That is not in doubt. The only thing that is in doubt is to whom.
LISTNUM 1 \l 11557 So I think you should also consider whether we are the best possible buyer for those stations and we have tried to put forward arguments about why we are the best possible buyer and we have the most passion for this and I think you have heard from the City people that they are excited about that.
LISTNUM 1 \l 11558 I think you heard from the former owners that their life's work, 50 odd years life's work, they needed to entrust somewhere that they not just got the most money for it but also believe would actually do right by their people and the things they built and they have testified to that.
LISTNUM 1 \l 11559 So I think you need to look at all of these things and I think also we really need to have successful businesses.
LISTNUM 1 \l 11560 COMMISSIONER LANGFORD: I agree with all of that and I will look at that overnight on your instructions but I would remind you that when I asked you to name an edgy program you didn't want to play but when you thought about it for a while, you did play.
LISTNUM 1 \l 11561 So now I am asking you to look at incremental. You seem reluctant to play that game but I would like you to play or think about playing and we will talk again tomorrow.
LISTNUM 1 \l 11562 That is my question, Mr. Chairman.
LISTNUM 1 \l 11563 THE CHAIRPERSON: Okay.
LISTNUM 1 \l 11564 Elizabeth has a question?
LISTNUM 1 \l 11565 COMMISSIONER CUGINI: My apologies. I did have one other question for you and it is a terrific segue to the discussion you just had with Commissioner Langford because yes, your benefits money is going to priority programming, some of it is going to specialty and none of it is going to local programming, and it is what will distinguish you in the market.
LISTNUM 1 \l 11566 So if you could please explain to us why you have decided to not allocate any of the benefits money to local programming. I know you have made the commitment that you will maintain the levels of local as they apply to each of the Citytv stations but why did you not find it advantageous to perhaps enhance those hours of local programming?
LISTNUM 1 \l 11567 MR. FECAN: It is something in concert with the previous question we would like to think about overnight.
LISTNUM 1 \l 11568 COMMISSIONER CUGINI: Thank you.
LISTNUM 1 \l 11569 THE CHAIRPERSON: Did you want to make a closing statement or did you want to wait till we have heard the intervenors and do it as part of your rebuttal?
LISTNUM 1 \l 11570 MR. FECAN: Well I guess I will do it at the very end but I do want to thank you for the opportunity to appear in front of you. We have heard ‑‑
LISTNUM 1 \l 11571 THE CHAIRPERSON: Before you do that, let me just add my two cents.
LISTNUM 1 \l 11572 I think we had a long day. You opened quite dramatically with your undertaking of no overlap and this large benefits package that we have just discussed but there are some major hurdles with two‑stick policies.
LISTNUM 1 \l 11573 Obviously, one of them, you are asking us for a seven‑year phase‑in on your specialty TV. However, on the valuation you are not prepared to recognize that which seems to me to fly against basic accounting principles.
LISTNUM 1 \l 11574 And then when we talked about benefits, when we poked, you basically said trust us, our record speaks for itself, this is an artistic enterprise, you can't bind it into rules, and any push for commitments either by Commissioner Stewart or Cugini you sort of reserved on.
LISTNUM 1 \l 11575 I am just saying that is sort of how it looks for us now at this point in time. So when you make your final rebuttal you might think of that, you know, whether all of these you are not asking a bit too much and whether there is some give on any one of them.
LISTNUM 1 \l 11576 Thank you.
LISTNUM 1 \l 11577 MR. FECAN: Thank you. We heard you and we have a lot to think about.
LISTNUM 1 \l 11578 THE CHAIRPERSON: Okay, thank you.
LISTNUM 1 \l 11579 We stand adjourned then. Thank you.
LISTNUM 1 \l 11580 We will start at 9:00 a.m. tomorrow morning.
‑‑‑ Whereupon the hearing adjourned at 1637, to
resume on Tuesday, May 1st, 2007 at 0900 /
L'audience est ajournée à 1637, pour reprendre
le mardi 1er mai 2007 à 0900
REPORTERS
____________________ _____________________
Kristin Johansson Monique Mahoney
____________________ _____________________
Jean Desaulniers Jennifer Cheslock
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