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TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO-TELEVISION AND
Licence Renewals for Private Conventional
Television Stations /
140 Promenade du Portage
May 1st, 2009
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Canadian Radio-television and
Licence Renewals for Private Conventional
Television Stations /
Konrad von Finckenstein Chairperson
Michel Arpin Commissioner
Len Katz Commissioner
Peter Menzies Commissioner
Rita Cugini Commissioner
Candice Molnar Commissioner
Louise Poirier Commissioner
Lynda Roy Secretary
Stephen Millington Legal Counsel
Nanao Kachi Hearing Manager
140 Promenade du Portage
May 1st, 2009
- iv -
TABLE OF CONTENTS
PAGE / PARA
Rogers Broadcasting Limited (cont.) 196 / 1313
--- Upon resuming in camera on Friday, May 1, 2009 at 1040
1313 THE SECRETARY: Mr. Chairman, I would just like to remind everyone that we will have a fire drill at around 11:30. That may last maybe 5 to 10 minutes. We would ask you to please not leave the room. We will stop for a few minutes but please don't leave the room until we are done the in camera session. Thank you.
1314 THE CHAIRPERSON: Okay, we are now in camera and we can speak about this. I have two questions for you, Mr. Viner.
1315 First of all, you were here yesterday or the day before yesterday -- I'm losing track of time -- when CBC --
1316 MR. TONY VINER: I was at our AGM on Wednesday, but the other time I was here.
1317 THE CHAIRPERSON: Right. I'm sure you were informed. CBC was before us and I thought they made a sort of insightful remark. We were talking about, you know, in effect the way that conventional television is facing a lot of problems and they divided it into three aspects.
1318 They said, first of all, there is local television, which basically, except for exceptional circumstances, doesn't make money and requires a subsidy. It is something that is necessary because of the objectives of the Broadcasting Act and there is a great Canadian demand for it but it can't be met by normal commercial principles.
1319 Secondly, they said there is a question of signal integrity. Canada, like any other nation, when you buy the rights for Canada you don't get them exclusively, you have to compete with the American programming, which is headed by BDUs.
1320 Thirdly, there is the question of the value of the product that the BDUs distribute, which really belongs to the broadcaster but the BDU distributes it and while we have a compensation scheme for specialties we don't have one for conventional.
1321 As an analytical framework it struck us as being relatively a nice clear division of three different problems, et cetera. Do you agree with this analysis or not?
1322 MR. TONY VINER: Well, maybe we should take them one by one.
1323 As you may have been able to tell from my exchange with Commissioner Katz, local television sure does need a subsidy, although it is our position that that subsidy can be provided by a strong U.S. programming schedule, as it has had in the past.
1324 We don't make any money on local programming and we have some material that we would be happy to show you that sort of outlines that, but sure, local television needs a subsidy. We think that subsidy can be provided by U.S. programming.
1325 The distant signal issue for --
1326 THE CHAIRPERSON: I wasn't talking about distant signal.
1327 MR. TONY VINER: Sorry.
1328 THE CHAIRPERSON: I was talking program integrity of the U.S. signal for the same one, for a program of which you have purchased the right but it will still be distributed in Canada on American signal unless it is in simultaneous substitution position.
1329 MR. TONY VINER: Right. You know, perhaps I can let Leslie respond to that.
1330 MR. SOLE: In a general statement, Mr. Chairman, and I don't want to go back, but the first point on local programming and a subsidy, if the Canadian channels weren't allowed to or there wasn't a mechanism for the Canadian channels to monetize the viewing of those U.S. signals coming into the market, all of that opportunity to make money and support Canadian production would be lost.
1331 On the second part, I think the point that is being made, and it has been made by a few broadcasters, is that when you own more than one show on two different networks in one hour, you have to run one of the programs not in simulcast. At that exact time Canadians can watch it on the originating U.S. network and that particular audience can't be sold in Canada. You can take your rights for that program and run it outside of simulcast in a more negative economic environment.
1332 THE CHAIRPERSON: I was asking purely whether as an analytical framework, looking at the issue from these three different perspectives and perhaps coming up with different solutions, if you would find it helpful or not, whether you think that is something that we should adopt or not. That was my question if I wasn't clear.
1333 MR. SOLE: We can see the issue, which is the one that Leslie described, which is that you can buy a program and not have rights for it because it comes in on another channel and certainly that does have an impact.
1335 THE CHAIRPERSON: You are jumping to remedies, I was just still at the -- we are faced with this problem, everybody is throwing it at us and saying, especially the broadcasters, find a solution. Here was one of the public broadcasters saying yes, but that creates three problems and you may require three different approaches. I just wondered whether in general you agree with this proposition or not.
1336 MR. TONY VINER: Local television needs a subsidy, the issue of not owning your own rights in your own country is an issue, and the third was that the BDUs are --
1337 THE CHAIRPERSON: Distributing a product for which they have not paid, in a nutshell.
1338 MR. TONY VINER: We don't think that is a problem. As I said early in the proceeding, we think mandatory carriage, low dial position and simultaneous substitution are extraordinarily valuable to us.
1339 THE CHAIRPERSON: Okay. Second question: We, yesterday, had an in camera session with Canwest -- I'm sorry, I have a mint in my mouth, but I have a sore throat, so I find it hard to speak otherwise.
1340 MR. TONY VINER: No problem.
1341 THE CHAIRPERSON: And they own this ethnic station in Montreal. I can't show you the numbers but they have not been able to make it --
1342 MR. TONY VINER: [REDACTED]
1343 THE CHAIRPERSON: Yes, good. As I was listening to you I was very impressed with what you are doing with OMNI and you are doing -- you actually have created an ethnic network and it looks like you are on the way to success.
1345 MR. TONY VINER: [REDACTED]
1347 We have two new stations which we just launched. We have CFMT or Channel M, which we have just rebranded. [REDACTED]
1350 THE CHAIRPERSON: Okay. Thank you.
1352 COMMISSIONER CUGINI: Thank you, Mr. Chair.
1353 We will be following the same pattern, I will focus on the City financials and then Commissioner Molnar will focus on the OMNI financials.
1354 But before we begin there I would like to start where Vice-Chairman Katz left off and that is the purchasing of U.S. programming.
1355 The first question is: How or has your relationship with the studios changed with the purchase of the City stations? Because with OMNI it was primarily purchasing of syndicated programming with some programming that you could simulcast. Is it true that now you're looking for more programming that you can simulcast on City? So how has that relationship with the studios changed?
1356 MR. SOLE: I wouldn't characterize it as changed at all. The transactions have changed. Our relationship with the five or six big U.S. studios, as Rogers and as OMNI, we have been doing business with them for 23 years.
1357 The material difference is at the OMNI channels we are in the business of syndicated programming, formerly broadcast programming or what everyone would refer to as reruns or strip programming and that is a certain kind of transaction. When you buy those programs you buy them for multiple years and you populate your schedule for multiple years with the same titles because they are repeats.
1358 COMMISSIONER CUGINI: How many plays do you --
1359 MR. SOLE: It can be as many as -- excuse me, I have the same thing the Chairman has. [REDACTED]
1362 COMMISSIONER CUGINI: Okay.
1363 MR. SOLE: More?
COMMISSIONER CUGINI: Yes.
1364 MR. TONY VINER: [REDACTED]
1365 COMMISSIONER CUGINI: How does that happen?
1366 MR. SOLE: We buy under the same rules, we bid under the same conditions, we have to meet all of the same -- so the relationship is who doesn't love another buyer. They like us. They like the fact that we purchase programming. They like the fact that we like certain kinds of programming.
1367 We match up with some studios better than others [REDACTED]
1368 COMMISSIONER CUGINI: Has the cost of U.S. programming gone up since you have entered into this market and competed more -- and competing head-to-head with CTV and Canwest?
1369 MR. SOLE: [REDACTED]
1371 MR. TONY VINER: The only thing I would add -- and Leslie and Malcolm buy the shows, but there are five networks competing for U.S. dollars. You know, the effect -- and those five networks are two from CTV and two from Global and then us. [REDACTED]
1375 COMMISSIONER CUGINI: In terms of the syndicated programming on OMNI, of course, one of the advantages is -- no, don't make assumptions, Rita. Is one of the advantages that you can schedule that programming where you like, when you like and how often you like? In other words, you are not dependent on the U.S. schedule?
1376 MR. SOLE: Overall, yes. [REDACTED]
1378 It is one of the side benefits of an ethnic station focusing on 8 to 10 o'clock at night. [REDACTED]
1380 COMMISSIONER CUGINI: Is there a difference between purchasing syndicated programming for OMNI and City?
1381 MR. SOLE: No.
1382 COMMISSIONER CUGINI: Is at one deal?
1383 MR. SOLE: [REDACTED]
1384 COMMISSIONER CUGINI: Is there a difference in terms of the conditions of your contract when you buy syndicated versus first run?
1385 MR. SOLE: Only inasmuch as that first run is perishable. First run you have to run it within a very tight window or your rights expire. In some cases you can get extensions but first run is not as flexible as syndication but it is far more profitable.
1386 COMMISSIONER CUGINI: Because you can simulcast?
1387 MR. SOLE: Because you can simulcast it, because there is a market demand, because of the cover of "People" magazine, because entertainment magazines on television are talking about it, because of the scandal sheets, all of the things in current pop culture that make American programming noisy and somewhat appealing to a group of people. That is one of the advantages of Canadian broadcasters being day date on time with the U.S. networks.
1388 COMMISSIONER CUGINI: But is there an obligation placed on you by the studios to -- by the studios or the networks in the U.S. to broadcast those shows at the same time that they broadcast them, including repeats?
1389 MR. SOLE: [REDACTED]
1390 COMMISSIONER CUGINI: Yes, but let's talk about a show that is -- that you purchase for Citytv and it's on at the same time. It's on FOX at 8 o'clock -- I'm making this up obviously --
1391 MR. SOLE: Yes.
1392 COMMISSIONER CUGINI: -- and you simulcast that show, you pay them a right --
1393 MR. SOLE: Yes.
1394 COMMISSIONER CUGINI: -- to simulcast that show.
1395 MR. SOLE: We pay them a right to run that show --
1396 COMMISSIONER CUGINI: To run that show. And they decide that next week they are going to repeat an episode.
1397 MR. SOLE: Yes...?
1398 COMMISSIONER CUGINI: Do you also syndicate that repeat episode -- not syndicate, do you simulcast that repeat episode as well?
1399 MR. SOLE: [REDACTED]
1400 COMMISSIONER CUGINI: So even though it runs on the U.S. network and you don't -- you have scheduled something else in that time slot, you still have to pay?
1401 MR. SOLE: That's correct.
1402 COMMISSIONER CUGINI: By what percentage do you anticipate your U.S. programming expenses to increase?
1403 MR. SOLE: We are in camera and I can give you detail, but if I give you an estimate for conversational purposes, we think that CITY-TV, over the next period of time, depending on availability and our ability to get programs, will probably have to increase our spend on U.S. programming between [REDACTED] and [REDACTED] percent.
1404 COMMISSIONER CUGINI: Over and above its current --
1405 MR. SOLE: Over and above, making this a base year.
1406 So it would be anywhere between $[REDACTED] and $[REDACTED].
1407 COMMISSIONER CUGINI: And that is reflected in the projections that you have filed with us?
1408 MR. SOLE: I am sure that it's far more precise than what I said and --
--- Fire drill
1409 COMMISSIONER CUGINI: All right. Now, I see that in your projections for the 2009-2010 broadcast year you are projecting a [REDACTED] of just under $[REDACTED] for all of the CITY stations.
1410 MR. TONY VINER: That's what we projected three months ago, yes.
1411 COMMISSIONER CUGINI: And do these financial projections include any savings from the approval of your requested COLs -- changes to your COLs?
1412 MR. SOLE: They do.
1413 Are you referring to relief from priority programming?
1414 COMMISSIONER CUGINI: I am referring to priority programming --
1415 MR. SOLE: Yes, they do.
1416 COMMISSIONER CUGINI: -- and independent programming, everything we talked about earlier.
1417 MR. SOLE: They make the assumption that this proceeding is favourable to our requests.
1418 COMMISSIONER CUGINI: Other than the $[REDACTED] that we talked about earlier, are there any other savings attributable to priority programming that have been included in these projections?
1419 MR. SOLE: Alain...?
1420 MR. STRATI: Commissioner Cugini, nothing in the projections themselves. The priority programming budget is the $[REDACTED].
1421 We also have -- depending on which year we are talking about, there are some benefits, as well, for both Craig and CITY, for a number of years, for about three years, and then solely CITY for a number of years after that.
1422 So some priority will come from that, or has come from that, and will continue.
1423 We have also, with OLN, and other specialties as well, but more specifically with OLN -- there are a few shows which we have aired on CITY over the course of the last 12 to 18 months.
1424 But for specific budgets for priority, those are the budgets.
1425 COMMISSIONER CUGINI: And if we were to deny all of the requests to the changes in your Conditions of Licence, what would this projection look like?
1426 MR. TONY VINER: [REDACTED]
1427 Financially, you know, it's hard to say. We won't be able to achieve our brand objectives. We won't be able to have better local programming. We won't have better local news.
1428 I think those are the impacts.
1429 MR. STRATI: It would slow down our western objectives.
1430 COMMISSIONER CUGINI: But my question is, if you have taken into account in these projections our approving all of the changes to the Conditions of Licence that you have asked for, what would happen if we didn't approve?
1431 I know all of the qualitative things that would happen if we didn't approve, but from a financial point of view, what would this look like?
1432 MR. TONY VINER: In our projections, we have said that the $[REDACTED] we will spend, but, really, our commitment is to hours, as opposed to spending.
1433 It is going to look worse no matter what. Will it look a lot worse? It's really hard to judge.
1434 We would be happy to review with you the financial impact of having priority programming, and the margin loss that we have incurred.
1435 MR. SOLE: I guess, if you are looking for a difference between two different decisions, I would just say this out in the open. The numbers that you have in front of you -- it's already way worse than that. There is no indication that it is going to get anything more than even worse than that worse than that.
1436 So when we try to put things in and out of the next year, they aren't material.
1437 MR. TONY VINER: Commissioner Cugini, I would be happy to hand this material around, but Crusoe and Murdoch Mysteries are two examples of priority programming that we have done. For the Murdoch Mysteries, which I think many have seen, our licence fee is just a bit over $[REDACTED], and our revenue is about $[REDACTED].
1438 We have played that 26 times now. That is 13 --
1439 MR. STRATI: Multiple occasions of that show. It's played twice a week.
1440 MR. TONY VINER: Right, but there are only 13 different episodes.
1441 So we [REDACTED] on that.
1442 I would assume that if you decided that we would keep priority programming, we would continue to lose in the order of magnitude of that amount for each series that we licensed.
1443 COMMISSIONER CUGINI: Are any of the Canadian shows on CITY-TV breaking even?
1444 MR. TONY VINER: [REDACTED]
1445 We have a sheet, and I don't know whether it would be useful for us to hand it out, but what it breaks down is the revenue and cost by type of programming, based on January through December. We have a slightly different fiscal year.
1446 I don't know if it would be helpful to hand that out.
1447 COMMISSIONER CUGINI: Sure.
1448 MR. TONY VINER: Could I ask you to do that, Navaid?
1452 Perhaps I will wait for you to get it, and then I can respond to your questions.
1453 You can see that we [REDACTED] on news. [REDACTED]
1454 We have, at the bottom of the page, given you a couple of examples of priority programming.
1455 I don't know if that will answer some of your questions.
1456 COMMISSIONER CUGINI: This is very helpful, and some of my colleagues may come back to it.
1457 MR. TONY VINER: Certainly.
1458 COMMISSIONER CUGINI: Thank you very much.
1459 I'm sorry, my page numbers have changed recently, so just bear with me.
1460 COMMISSIONER CUGINI: When I look at what CITY-TV has spent historically on Canadian -- and, of course, we understand that it was under different ownership at the time, but it has been declining year over year. It went from [REDACTED] percent in 2001-2002 to [REDACTED] percent in 2007-2008.
1461 And, as we know, the number of hours has not changed.
1462 What are CITY-TV's plans for the next couple of years, in terms of spending on Canadian as a percentage?
1463 MR. SOLE: I will hand this over to Navaid, but I would like to make a comment on the past. If it's not helpful, then let me know.
1464 CHUM kept track of Canadian content differently than we do, and that is not a comment positive or negative. When you have a stable of specialty channels as extensive as they had, and when you have an over-the-air group that was as turbulent as the one they had --
1467 When we have talked to our managers, and we have talked to each other about building a fiscal foundation for the CITY channels, we have found -- and we are not suggesting that you need find it this way -- that the older numbers are not helpful. They are very complicated.
1468 So, in this second fiscal, about a year ago, we tried to build a new baseline, and Navaid can give you, from that new baseline of a Rogers ownership of five OTA channels, with no MuchMusic, no Bravo, no Space -- we have tried to give this thing a new base.
1469 We can help you from that point of view.
1470 COMMISSIONER CUGINI: Sure.
1471 MR. TONY VINER: The only thing I would like to point out, though, is that the figures we have show that spending on total Canadian prior to our ownership was $[REDACTED], and in the first year ours was $[REDACTED]
1472 In 2010 we are projecting -- it sort of goes up a little bit, or stabilizes, and there is no Canadian priority.
1473 MR. SOLE: That is our base.
1474 MR. TONY VINER: That's our base.
1475 I just thought that it was important that the numbers I have don't say it's declining.
1476 COMMISSIONER CUGINI: As a percentage of your programming expenses, that's what I was referring to.
1477 The dollar figures haven't declined, but as a percentage of spending...
1478 MR. SOLE: It's the same reason. When CITY-TV bought a motion picture -- you said overall program spending -- they were able to take the value -- let's make it $100,000 -- take the $100,000, put $70,000 to CITY-TV, $10,000 to Space, $10,000 to Bravo, and the overall percentage of U.S. versus Canadian on CITY would appear to be better than what we are doing.
1479 COMMISSIONER CUGINI: I understand.
1480 MR. SOLE: We cannot do that.
1481 MR. TONY VINER: We had the discussion with Commissioner Katz, Commissioner Cugini -- we need to spend more on American. We are losing --
1484 So we can't afford to spend any more. We think we have done exceptionally well. We haven't threatened to close any stations. We haven't begged for fee-for-carriage. But we are faced with an economic reality.
1485 We bought these stations. We came to you and asked for your approval to give them to us. We are darn happy that we've got them, but it's a tough go. We cannot lose $[REDACTED] for any extended period of time.
1486 So part of it is economics. Part of it is the situation in which we find ourselves.
1487 CHUM was able to leverage a lot of their program acquisition with their specialties. That's why you saw a lot of horror and a lot of Space on the schedule. They bought it through their CPE and ran it on their Canadian schedule.
1488 And how they did their allocations, I don't know. And we are not finding fault with it, it's just different.
1489 What we would like you to think is that there is a certain level of spending that we have to do in order to put on quality Canadian programming. We are not going to make money at it, but it's going to be quality Canadian programming. We want to make that the best programming that we can, so we are spending roughly the same amount each year.
1490 Look, the truth is, you buy your U.S. programming over a number of years. You buy your Canadian priority over a number of years, or Canadian-produced programming over a number of years. When you hit a recession, the only thing that you can move on is your local programming, and we don't want to do that. But that's what has led to this issue.
1491 I hope I have made my point.
1492 COMMISSIONER CUGINI: After that, I am almost embarrassed to ask this one last question.
1493 MR. TONY VINER: Go ahead.
1494 COMMISSIONER CUGINI: In Winnipeg specifically, I notice that the cost of production [REDACTED], in order to accommodate your 2010 formula for local programming. How much of that increase is the LPIF?
1495 MR. TONY VINER: I don't know.
1496 MR. SOLE: I think these numbers predate the LPIF.
1497 MR. TONY VINER: No, I don't think so.
1498 MR. SOLE: I just revised --
1499 Navaid, could you help me here?
1500 Do these assume any income from a production fund?
1501 MR. MANSURI: Yes, in the projections that we filed for 2009, we had estimated about $600,000 --
1502 MR. TONY VINER: From LPIF?
1503 MR. MANSURI: Yes.
1504 MR. SOLE: Sorry.
1505 COMMISSIONER CUGINI: So even if there wasn't an LPIF, you would still increase the number of local hours in Winnipeg at the level that you had.
1506 MR. SOLE: I would reserve the right to contemplate that.
1507 You certainly caught my enthusiasm, and that's why Navaid is there.
1508 MR. SOLE: I think it would be something less than that.
1509 COMMISSIONER CUGINI: In terms of expenditure.
1510 MR. SOLE: In terms of expenditure.
1511 But on the 2010, the hourly obligation is in front of you.
1512 COMMISSIONER CUGINI: Thank you, those are my questions.
1513 THE CHAIRPERSON: Before I pass you on to my colleagues; you started, Mr. Sole, [REDACTED] and in previous discussions with you, you highlighted the need to compete for U.S. programming, but yet it is really self-destructive for the Canadian system as a whole, and part of the solution, we thought, would be the 1:1 ratio.
1514 Now, we heard yesterday in camera from your colleagues that, first, that is the only element of the system that makes money. Secondly, because of the strange contracting that the U.S. studios impose on you, basically when you buy a new show -- let's say House, that was the example we used -- whenever NBC shows it, whether the original or a rerun, you have to pay, even though you may not show it yourself.
1515 However, very often the U.S. networks change their schedules. Therefore, if you had a hole on Wednesday night, you would buy this program so that you could get the simulcast advantage, but if they changed their schedule, then suddenly you would lose it because it is being shown in the hour in which you have another simulcast, or something like that.
1516 Therefore, imposing a 1:1 ratio would really create a tremendous risk, which they weren't willing to take.
1517 Secondly, there are other outlets, and the studios would probably take a very negative reaction and try to sell their programming to VoD or to pay-per-view, or put more of it on the internet, et cetera.
1518 In effect, if we were to impose a 1:1 ratio, most likely it would backfire, it would have the exact opposite effect of what we would want.
1519 Your comments; your reaction?
1520 MR. SOLE: I think I would start by saying that all of those things are accurate, and that they make up only part of the challenge.
1523 I believed that correlation or a ratio, as complicated as it is, was worthy of investigation.
1524 I am not very good at explaining this, but...
1525 The fact is, the Top 20 shows are always going to be expensive. They are the best things you can run on television. The market will decide what they are. They are what governs the success of over-the-air television.
1526 The problem that we have as an industry -- those things are symptoms -- [REDACTED]
1532 And to Tony's point, it is, hypothetically, a five-network country, when ten years ago it was a three-network country.
1533 THE CHAIRPERSON: But this is all an analysis of the problem, what is the solution?
1534 MR. SOLE: The recession will go a long way to solving the problem.
1535 THE CHAIRPERSON: I know, but every single Canadian artistic group that comes before us points to the numbers and says, "Look at how U.S. spending has gone up, and Canadian -- "
1536 And, of course, the spending on U.S. programming leaves less dollars for us.
1537 MR. SOLE: [REDACTED]
1541 THE CHAIRPERSON: And the 1:1 ratio, on a group level, or whatever ratio --
1542 MR. SOLE: A luxury tax or --
1543 THE CHAIRPERSON: Yes, a luxury tax. It's all the same thing. It's basically imposing some sort of cap on the system.
1544 MR. SOLE: But they are asking you to solve their enthusiasm, and I don't --
1545 THE CHAIRPERSON: Do "they" include you?
1546 MR. SOLE: Sure, but --
1547 MR. TONY VINER: We have never asked for fee-for-carriage, but you are right, and we have asked for flexibility.
1550 If there were three networks instead of five, that would probably go a long way toward it, but I don't know how you effect that, I truly don't.
1551 THE CHAIRPERSON: I am trying to get a clear answer out of you. Are you saying that the 1:1 ratio won't work?
1552 MR. TONY VINER: It won't work.
1553 MR. SOLE: [REDACTED]
1554 One of the things that we don't talk about in these hearings, and that we don't talk about in the business, is, this is all about attracting people to your channel. It is really about bringing together enough audience to pay the rights fees.
1555 And when you have programs and audiences being burnt, or not being exploited, you not only lose the money that night, you have to run that program at another time.
1556 I think that Tony is right, three networks, or a less commercial CBC. Again, these aren't even recommendations.
1558 THE CHAIRPERSON: You confirmed the selling techniques of the U.S. studios for prime time shows. What is it when you buy for OMNI, which, as I understand it, is basically reruns, primarily. Is it the same system, do you have to pay when the U.S. network plays the reruns, or do you just pay per episode or per rerun, or whatever?
1559 MR. SOLE: It is set. I will give you an example. There are 100 episodes of a show. We will buy all 100 of those episodes, get to play them ten times over ten years, completely within our control.
1560 MR. TONY VINER: [REDACTED]
1561 THE CHAIRPERSON: I am sure they do that.
1562 MR. TONY VINER: Absolutely.
1563 THE CHAIRPERSON: I was so surprised -- all of us were surprised yesterday, hearing that, in effect, you pay when the U.S. networks play. But that doesn't apply to reruns, I gather.
1564 MR. SOLE: No, it doesn't.
1565 THE CHAIRPERSON: Thank you.
1566 Candice, over to you.
1567 COMMISSIONER MOLNAR: Thank you.
1568 I just want to continue on with what the Chair has been asking, and that is related to foreign programming on OMNI. It doesn't have the same pressures as first-run, I understand.
1569 When I look at your programming expenditures between Canadian and non-Canadian, Canadian programming is running at [REDACTED]
1572 MR. SOLE: I think you identified one of the elements, which is that specialty channels have profit margins in things that are healthier now, so that they can afford to bid against us on that.
1573 But there are also other broadcasters that bid for syndicated programming against us.
1574 U.S. or foreign programming rarely goes down, unless there is a market correction, like the one we are going through right now.
1577 COMMISSIONER MOLNAR: What do you anticipate, as we look forward, would be the outcome of this?
1579 MR. SOLE: I think it's an indicative ratio.
1582 The one thing that you are witnessing is us going from two to five stations, and guessing at what things are going to cost in the future in Alberta and B.C.
1583 I don't have the -- I don't have the piece of paper in front of me.
1584 MR. TONY VINER: [REDACTED]
1585 You know, we have managed over the last 20 years to sort of manage our programming costs, foreign costs prudently. Their pressures are the ones that Mr. Sole identified. [REDACTED]
1587 COMMISSIONER MOLNAR: Okay.
1588 MR. MANSURI: Just in terms of your question on the -- in the projections that we filed the ratio stays relatively consistent over the next few years. We don't see a disproportionate increase in Canadian versus U.S.
1589 COMMISSIONER MOLNAR: Thank you. That actually was going to be my next question, so thank you for that.
1590 So if we do look at the projections you filed, a similar question to what Commissioner Cugini asked: Do these projections incorporate the changes that you propose to your licence over the six-year term?
1591 MR. MANSURI: Yes, they do.
1592 COMMISSIONER MOLNAR: And do you have some quantum as to what value -- what is the impact of the regulatory projections that has been incorporated into these financials?
1593 MR. MANSURI: As Tony referred to earlier, a lot of the changes are to harmonize and streamline the conditions across the five stations. There is not a material impact from a financial point of view. The OMNI stations in Alberta and --
--- Fire drill
1594 THE CHAIRPERSON: There is apparently some Quebec law that requires you to do weekly fire tests.
1595 MR. MANSURI: In the projections that we filed we projected that the newly launched stations in Alberta and the station in Vancouver which we acquired last year [REDACTED]
1596 So it's not a material financial impact. As Tony referred to earlier from the changes, it is more about the simplicity and the consistency across the five stations.
1597 COMMISSIONER MOLNAR: Thank you. I'm going to move back to the issue of Edmonton in a minute just to understand that better.
1598 Before I do that, I see in your projections, the six-year projections, that you would project the total group of stations to become [REDACTED] Is that based -- what would be the primary -- is that right?
1599 MR. MANSURI: I just want to -- do you mean he OMNI stations?
1600 COMMISSIONER MOLNAR: The OMNI, yes. I'm sorry.
1601 MR. MANSURI: Yes, okay.
1602 COMMISSIONER MOLNAR: I'm looking at OMNI.
1603 MR. MANSURI: [REDACTED]
1604 COMMISSIONER MOLNAR: No, I'm sorry. I'm looking at OMNI, at the schedule of projected revenues over the six-year proposed licence term and it projects profitability of the full station group in year three.
1605 MR. MANSURI: That's correct.
1606 COMMISSIONER MOLNAR: Is there some particular drivers that change? In current year, for example, it is [REDACTED]
1607 MR. MANSURI: As you will note in our projections, if we start at PBIT, [REDACTED]
1609 COMMISSIONER MOLNAR: Okay, thank you. That helps me understand that better. Thank you.
1610 Are there any other -- you mentioned it is assuming [REDACTED] Are there any other significant risks one way or the other as it regards these financial projections, upside risks or downside risks?
1611 MR. MANSURI: In this environment, it's hard to identify any upside risks. I would say three months ago when we did these projections, even since then our outlook for the current year and at least for the next couple of years has deteriorated significantly. So I think the biggest risk is downside risk on the revenues, which would make the projections a lot worse than what you currently have.
1612 MR. TONY VINER: Commissioner, the only thing I would add. You know, our history is it took sometime for these stations to become an important established part of the community, an important and established part of the advertising alternatives that are available.
1613 There is a significant risk if DTH doesn't carry us. DTH doesn't carry either Calgary or Edmonton. So, you know, we have challenges there. The risks are mostly downside, I think. Because of the type of programming, both local and acquired, we can pretty accurately predict what the revenue is likely to be.
1614 COMMISSIONER MOLNAR: Can I just pick up so I understand the issue with DTH. Is it that there are two stations within the same province?
1615 MR. TONY VINER: Well, the ownership group, I think the letter of the law is that they can choose one city and not choose anything else. I think the number is -- and, Malcolm, you can confirm this -- something like, in the Province of Alberta, 30 percent. What is the --
1616 MR. DUNLOP: I believe it is 27 percent on satellite.
1617 MR. TONY VINER: Twenty-seven percent of the tuning is done through DTH and DTH won't be carrying -- may not be carrying Calgary and Edmonton. They can pick up City Calgary and their obligation to us has been fulfilled.
1618 UNIDENTIFIED SPEAKER: Do they now?
1619 MR. TONY VINER: No, they don't know. They don't carry us now.
1620 MR. SOLE: If you are a multicultural television viewer in Calgary and Edmonton and you don't have cable or over the air, you don't get an OMNI channel.
1621 In the most recent undertaking and your publication there was the notion that on the linkage with DTH that you would take one from each corporate group and it was our feeling that the DTH companies would see that as a choice between City and OMNI because they were both owned by RBL. In that case we made the assumption that they would choose City because of the U.S. programming.
1622 MR. TONY VINER: They may not but we don't know.
1623 COMMISSIONER MOLNAR: Thank you for that. So right now neither are carried on DTH?
1624 MR. TONY VINER: That is correct.
1625 COMMISSIONER MOLNAR: And these financials would reflect that continuing position?
1626 MR. TONY VINER: Yes.
1627 COMMISSIONER MOLNAR: So, when we look, for example, at the financial projections of Edmonton and [REDACTED]? I assume that when you launched these stations did you understand that you would or would not be carried?
1628 MR. TONY VINER: Sure. These are sort of regional licences, so dividing it up between Calgary and Edmonton is, you know, not something -- when we applied for it, we were fully aware that these two -- this was looked --
--- Fire drill
1629 MR. TONY VINER: Commissioner Molnar, I will ask Alain Strati to provide you with a little more detail.
1630 COMMISSIONER ARPIN: (Off microphone / Sans microphone) next week.
1631 MR. STRATI: We will be here.
1632 Actually, as part of our application for OMNI Alberta it is certainly something we considered. It is one of the reasons why we had an approach that had sort of a regional schedule, so if you will, one schedule that is common for both Calgary and Edmonton, different local elements, of course, but the schedule itself so you get the programming.
1633 Because we were aware at the time -- although OMNI was carried by both ExpressVu and Star Choice, we knew that Channel M in Vancouver was having DTH carriage issues, was not carried by Star Choice and still not carried by Star Choice and was on "the bad bird" with ExpressVu which had lower distribution.
1634 So we tried to make it as easy as possible so that there wouldn't be a two-station issue. At least we could try and work with one and get one issue carried in Alberta. We haven't succeeded yet but that was certainly one of the things we kept in mind as part of the application process.
1635 COMMISSIONER MOLNAR: Thank you for that.
1636 MR. STRATI: I would just like to clarify Edmonton.
1637 Edmonton appears to be -- we would like you to think of OMNI in Alberta provincially because Edmonton does have the most employees, it does have the majority of the production centre compared to Calgary. So when you do projections over a period of years allocations are not as fair to Edmonton as they are to Calgary. So Edmonton will constantly appear to have more expense pressure on it because it is our central production centre.
1638 COMMISSIONER MOLNAR: Yes, thank you. Actually, while the fire alarm was going off I did add the two together, so I see. I see that when you put the two together [REDACTED]. So thanks for that.
1639 Just one more question. I am interested in the DTH carriage issue and I know that you have committed to go over the air in all of the markets and I'm talking now still just OMNI.
1640 Do you have a sense as to what your viewership is that relies on over the air in markets, for example -- you know, as you go into these markets?
1641 MR. STRATI: I don't think we have a sense that it's different than what you hear, that is, 9 to 11 percent depending on the particular market that it's in. We can provide you with all kinds of anecdotal and theoretical information but I don't think we have any hard facts that say OMNI is different.
1642 MR. SOLE: Ten percent is material to us. To Vice-Chair Arpin's comment, it is not just the number of people, it is the density of hours that people that only have four channels spend with their four channels.
1643 COMMISSIONER MOLNAR: Okay, thank you. Those are my questions.
1644 THE CHAIRPERSON: Michel...?
1645 COMMISSIONER ARPIN: Thank you.
1646 Mr. Mansuri, in responding to Mrs. Cugini's question regarding Winnipeg you said that you have taken into account a $600,000 contribution from the LPIF.
1647 Now, when I'm looking at the financials that you have submitted I don't see where you could have recorded it, because under revenues you have a $[REDACTED] revenue, "other revenue," and under "other adjustments" you have an expense of $[REDACTED]. So where did you account for the $600,000?
1648 MR. MANSURI: From a point of view of accounting for it as cash coming in, we showed it as a reduction in expense as opposed to (inaudible) as revenue.
1649 COMMISSIONER ARPIN: That is what I thought, but for the record I think it's good to have it.
1650 My second question goes back to the discussion we had with the relationship with the studios. I was asking myself, to your knowledge, do you know how the studios are behaving with broadcasters from other continents? Are they behaving -- obviously there is no program substitution but do they have the same type of sales tradition?
1651 MR. SOLE: [REDACTED]
1654 So I think all of those commercial transactional similarities, but I don't think the uniqueness of having our population right along that border where signals come and go over the air just exists anywhere else.
1655 COMMISSIONER ARPIN: In Mexico on the networks you have English programming with subtitles in Spanish. So are they hurrying up to get the programming as fast as you are trying to do?
1656 MR. SOLE: The United States -- I will use GE -- I will use NBC Universal, which is GE -- made the conscious decision to do master issues of U.S. programming with Spanish subtitles almost as course of business. It is used in secondary audio program -- sorry, it is used in open captioning. On SAP you can go and I'm going to say watch a baseball game in Spanish because of simultaneous translation. NBC owns Telemundo.
1657 So there are a lot of business reasons and just the sheer numbers of Spanish-speaking Americans, it is a good commercial idea.
1658 COMMISSIONER ARPIN: Except, the way the studios behave with the Mexicans, is it in a very similar manner that they behave with the Canadian broadcasters?
1659 MR. SOLE: I don't know the answer to that because I don't know that the cable penetration in places like Tijuana would have that material issue of simultaneous substitution.
1660 COMMISSIONER ARPIN: Now, my last question to you is: If the E! Channel and the A Channel were to go dark, what would be the impact on -- where would the revenues go that they are currently making in terms of -- will they remain in over-the-air television or will they be spread around or will they go to the profit line of the advertisers?
1661 MR. SOLE: [REDACTED]
1663 COMMISSIONER ARPIN: However, I'm thinking that at the end of the day, as Mr. Viner was saying in his reply to Commissioner Cugini, that the current stress in the economy may force these two broadcasters to close down these stations as they have indicated and there is nobody to take them up. What will happen with the revenues that they are currently --
1664 MR. TONY VINER: Well, if that were to happen -- and I have to offer my personal opinion that that is not something --
1665 COMMISSIONER ARPIN: Obviously, we will only know after.
1666 MR. TONY VINER: [REDACTED]
1667 COMMISSIONER ARPIN: Thank you. Those were my questions, Mr. Chairman.
1668 THE CHAIRPERSON: Len...?
1669 COMMISSIONER KATZ: Thank you, Mr. Chairman. I only have two questions.
1670 When I look at your 2008 actuals for the (inaudible) stations I notice that your non-Canadian expenditures were $[REDACTED]. When I look at your forecast for City for 2008-2009, the non-Canadian programming is $[REDACTED], based on what I have here, and that's [REDACTED].
1671 But I thought I heard you say, Mr. Viner, that your U.S. purchasing [REDACTED]. Has there been a shift in the numbers?
1672 MR. TONY VINER: No. I am just trying to explain. In 2007 we didn't own the stations, but CTV did.
1673 COMMISSIONER KATZ: In 2008 you did own the stations?
1674 MR. TONY VINER: Yes, for two months in 2007. So the plans were set, other people bought sort of the programming for 2008. We were on the hook for it, so we paid for it. [REDACTED]
1675 So 2008 was really a carryover. It's, you know, their purchase from September of 2007 through August 31, 2008. So we didn't have a lot of control over that.
1677 But as we say, as we go forward, we are going to have to spend more heavily and those projections, I think, reflect the fact that we are going to have to spend more heavily. [REDACTED]
1678 COMMISSIONER KATZ: I'm just trying to find out where I find the number. [REDACTED]
1679 MR. TONY VINER: I think it is one year out from there.
1680 COMMISSIONER KATZ: We are talking about 2011 now?
1681 MR. MANSURI: There is a timing issue in terms of existing deals, and Leslie and Malcolm can elaborate on that. [REDACTED]
1682 MR. TONY VINER: [REDACTED], I think, Commissioner Katz.
1683 COMMISSIONER KATZ: Okay. So it is not 2009, it's 2010?
1684 MR. TONY VINER: Yes. It is just a function of the deals that are in place and when they are over and when you can do new ones.
1685 COMMISSIONER KATZ: Okay.
1686 MR. SOLE: [REDACTED] It could take two years, it could take -- [REDACTED], but because of the way the transactions happen you can't force them, the opportunities have to be there.
1687 COMMISSIONER KATZ: But technically if you went down to California this month, I guess, in May --
1688 MR. SOLE: Yes...?
1689 COMMISIONER KATZ: -- and there was some really hot show that has come available, you would bid on it, obviously.
1690 MR. SOLE: [REDACTED]
1691 COMMISSIONER KATZ: Okay. This page here that you circulated a few minutes ago, I just want to understand it. The City license fee on here for "Caruso" and "Murdoch Mysteries," where would I see that in the production costs up above?
1692 MR. TONY VINER: Alain?
1693 MR. STRATI: It's actually not included.
1694 MR. TONY VINER: Or maybe Navaid can tell you where it's found.
1695 MR. STRATI: Yes. It's actually not in the production costs and the reason being the elements above were mostly in-house productions. So if you look at "Caruso" or "Murdoch Mysteries" you're talking about an acquired program.
1696 So the Citytv licence fee is the most -- is the easiest one to use because when you talk independent producer they have their production costs across the board. So you, on a budgetary basis, when you pay the licence fee you essentially cover those costs.
1697 COMMISSIONER KATZ: Okay. So when you --
1698 MR. STRATI: It's in the Canadian priority.
1699 COMMISSIONER KATZ: When you license this, has it already been done and you licensed it after the fact or you actually license it and then they produce it?
1700 MR. STRATI: We license it and they produce it.
1701 COMMISSIONER KATZ: And they produce it. So who was the intelligent person who --
1702 MR. SOLE: In those two cases.
1703 COMMISSIONER KATZ: Okay. So who was the intelligent person who committed the $[REDACTED] and the $[REDACTED] when the revenues only came in at $[REDACTED]?
1704 MR. SOLE: Malcolm.
1705 MR. DUNLOP: The $[REDACTED] is our part of it.
1706 COMMISSIONER KATZ: Yes.
1707 MR. STRATI: And let me get you through a little bit, Commissioner Katz, because it is a reality.
1709 So when we show you these revenues in licence fees, we are not showing you, you know, a nonperforming show. [REDACTED]
1710 COMMISSIONER KATZ: But do you not have any choice in the fact that you had to spend money on priority programming? So this was there, so in order to meet the licence obligations of the CRTC you went and bought it and paid the $[REDACTED] and then whatever revenues you got is basically gravy, so to speak? I hate to call it that, but is that the way you look at these things?
1711 MR. STRATI: We don't look at it in terms of gravy. I mean it is an opportunity for us to -- we want to monetize that as much as we can. We understand that it is well understood that Canadian drama is very expensive to produce and this kind of comparison to say the revenue will cover it is not really part of the issue.
1712 COMMISSIONER KATZ: But if you went back to the independent producer and said I will pay you $2.5 million for this, would they just say no, we can't produce it for that price?
1713 MR. STRATI: You know, there's complications. One of them is to access -- you know, what is not here is the funding from the Canadian Television Fund and to access the Fund there are minimum licence fees. So if you look at the [REDACTED] it is $[REDACTED] an hour, which is the minimum for CTF funding which then we could have used to -- and which we then used to access the Citytv envelope for it.
1714 You know, part of it is really the expenditure. We have talked a lot today about it is really the ability to reallocate that expenditure towards original programming on each of our stations that has a consistent, daily, weekly, interaction with our stations. That is really what we're talking about. It's not to say that there is no merit or there is something wrong in the production of a show of this kind, it's just for us, we would prefer the former than the latter.
1715 MR. TONY VINER: But as Mr. Fecan had said to you, Commissioner Katz, nothing happens until we license it. So it all unfolds. As Alain has said, "Murdoch" did reasonably well in terms of the audience. These are the kind of economics, though, that we have to face.
1716 COMMISSIONER KATZ: Thank you.
1717 THE CHAIRPERSON: I think you sparked a follow-up by Michel here.
1718 COMMISSIONER ARPIN: My question has to do with the CTF. In asking us to withdraw you from the obligation of having priority programming, are you at the same time saying that for the future you will not make use of CTF funding, because last year -- for this current year you had a $5.6-million envelope and you are letting it go?
1719 MR. TONY VINER: Alain...?
1720 MR. STRATI: That number went down significantly. For this year it's down to just under $[REDACTED].
1722 COMMISSIONER ARPIN: Okay, thank you.
1723 MR. TONY VINER: [REDACTED]
1724 THE CHAIRPERSON: Okay, I think those are our questions. Before I leave you, let me leave you with a thought. I am now talking to you, I am not talking to your colleague in the last row, I am talking to you as a broadcaster, not as a BDU.
1725 These whole hearings have been really done against the backdrop of the fee for carriage and that is clearly something which we will have to address when we look at the whole structural mess that the over-the-air broadcasters find themselves in.
1726 I am not so sure any one of us has a clear solution, et cetera, but I mentioned at the outset the analytical framework that CBC is using and I must say it has some appeal to me because I think there are three quite different elements which may require a different solution.
1727 But what really perturbs me about all of this is that the over-the-air broadcasters have asked us to (a) give a fee for carriage and (b) set the rate, and saying, you know, we need it.
1728 I think there is some value or there is some merit in their point that if they produce a product that you distribute, for which, in their view, they don't get fully compensated, how does one do that and what (inaudible) but I really don't know why we as a regulator should get involved in there and I'm sort of wondering whether one couldn't approach this from another angle, saying basically this is really a negotiation between broadcasters and BDUs.
1729 There must be some value in over-the-air programming, otherwise broadcasters wouldn't distribute it. On the other hand, you know, what is the value, et cetera. You and the industry are probably better equipped to assess than us.
1730 Isn't this part really -- and requires a negotiation similar to what we have basically authorized under the distant signal and could one approach it from that process and, in effect, have the parties agree on it. If they can't, send it to us for arbitration and sort of on something kind of like baseball, we will pick one of two numbers.
1731 I don't expect you to answer it, I just would like to leave it to you. I made the same suggestion to CTV and Global and I would like you to sort of think about it rather than breaking out of the stalemate or the stale debate we have had now twice, fee for carriage, yes or no, and what is the amount.
1732 Could one sort of segment it into three aspects and then on this aspect look to some sort of negotiated solution?
1733 MR. TONY VINER: You said you didn't expect me to answer, so I won't, if that's your preference.
1734 THE CHAIRPERSON: Okay. As I say, I wanted to treat you fairly. Thank you for coming to us. I think these in camera sessions are very useful, I think. It allows us a frank exchange so that we can put ourselves in your shoes and see how you look at it and vice versa.
--- Upon recessing at 1205, to resume in public immediately
Johanne Morin Sue Villeneuve
Jean Desaulniers Fiona Potvin
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