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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:
CanWest MediaWorks Inc. (CanWest), on behalf of Alliance
Atlantis Communications Inc. (Alliance Atlantis) /
CanWest MediaWorks Inc. (CanWest), au nom
d'Alliance Atlantis
Communications Inc. (Alliance Atlantis)
HELD AT: TENUE À:
Conference Centre Centre de conférences
Outaouais Room Salle Outaouais
140 Promenade du Portage 140, Promenade du Portage
Gatineau, Quebec Gatineau (Québec)
November 20, 2007 Le 20 novembre 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
CanWest MediaWorks Inc. (CanWest), on behalf of Alliance
Atlantis Communications Inc. (Alliance Atlantis) /
CanWest MediaWorks Inc. (CanWest), au nom d'Alliance Atlantis
Communications Inc.
(Alliance Atlantis)
BEFORE / DEVANT:
Konrad von Finckenstein Chairperson / Président
Elizabeth Duncan Commissioner / Conseillère
Len Katz Commissioner
/ Conseiller
Michel Arpin Commissioner
/ Conseiller
ALSO PRESENT / AUSSI PRÉSENTS:
Jade Roy Secretary / Secrétaire
Lyne Renaud Hearing Managers /
Rachel Marleau Gérantes
de l'audience
James Wilson Legal
Counsel /
Neil Campbell Conseillers
juridiques
HELD AT: TENUE
À:
Conference Centre Centre de conférences
Outaouais Room Salle
Outaouais
140 Promenade du Portage 140, Promenade du Portage
Gatineau, Quebec Gatineau (Québec)
November 20, 2007 Le 20 novembre 2007
- iv -
TABLE
DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
INTERVENTION BY / INTERVENTION PAR:
ACTRA National 266 / 1544
Insight Production Company Ltd. 298 / 1723
Tricon Films & Television 305 / 1750
Aboriginal Peoples Television Network 307 / 1763
Innoversity 316 / 1794
Barna-Alper Productions 321 / 1814
Canadian Film and Television Production 336 / 1890
Association
Canadian Association of Film Distributors and 360 / 2015
Exporters
Manitoba Motion Picture Industry Association 364 / 2042
Writers Guild of Canada 380 / 2143
Alberta Motion Picture Industry Association 407 / 2289
REPLY BY / RÉPLIQUE PAR:
CanWest MediaWorks 428 / 2413
Gatineau, Quebec / Gatineau, Québec
‑‑‑ Upon resuming
on Tuesday, November 20, 2007
at 0833 /
L'audience reprend le mardi
20 novembre 2007 à 0833
LISTNUM
1 \l 1 \s 15341534 THE
CHAIRPERSON: Let's proceed.
LISTNUM
1 \l 11535 Madam
Roy.
LISTNUM
1 \l 11536 THE
SECRETARY: Good morning, everyone.
LISTNUM
1 \l 11537 I
would like to remind you that simultaneous interpretation is available. The English interpretation is on channel 7. L'interprétation française se trouve au canal
8.
LISTNUM
1 \l 11538 We
will now hear the presentation of ACTRA National.
LISTNUM
1 \l 11539 Please
introduce yourself and your colleagues.
You will then have 10 minutes for your presentation.
LISTNUM
1 \l 11540 Thank
you.
LISTNUM
1 \l 11541 THE
CHAIRPERSON: Madam Roy, I thought you
had another announcement to make.
LISTNUM
1 \l 11542 THE
SECRETARY: Yes. After all of the intervenors' presentations,
we will ask CanWest to come forward. The
panel will have questions for you, and we will ask for a response after lunch.
LISTNUM
1 \l 11543 Thank
you.
INTERVENTION
LISTNUM
1 \l 11544 MR. HARDACRE: Thank you.
LISTNUM
1 \l 11545 Good
morning, Mr. Chairman and Commissioners.
It's a pleasure to see you again.
And thank you to the Commission Staff for your thorough preparation of
these proceedings.
LISTNUM
1 \l 11546 My
name is Richard Hardacre. I am a
professional Canadian actor and I am the elected President of the Alliance of
Canadian Cinema, Television and Radio Artists.
LISTNUM
1 \l 11547 I
have with me a few colleagues. Kim Hume,
on my far left, is ACTRA's Director of Public Policy and Communications.
LISTNUM
1 \l 11548 Garry
Neil is ACTRA's Policy Advisor.
LISTNUM
1 \l 11549 And
we are joined today by legal counsel, Mr. Robert Buchan and Ms Anne Tardif,
from the law firm of Fasken Martineau DuMoulin, who assisted, also, our
Coalition of Canadian Audio‑Visual Unions to research and prepare its
interventions.
LISTNUM
1 \l 11550 I
am pleased, quite sincerely, to have this chance to bring to this hearing the
concerns of more than 21,000 members of ACTRA, performers who live and work in
every corner of this country.
LISTNUM
1 \l 11551 ACTRA
members are English‑speaking artists whose performances in film,
television, sound recordings, radio, and new media entertain, educate and
inform Canadians and global audiences.
LISTNUM
1 \l 11552 ACTRA
members are proud to count ourselves among the Canadian creative resources that
broadcasters are required by the Broadcasting Act to make maximum use of in
their programming content.
LISTNUM
1 \l 11553 Together
with other Canadian creators, including script writers, directors and
technicians, we created the Coalition of Canadian Audio‑Visual Unions as
a vehicle through which we can pursue our common public policy interests.
LISTNUM
1 \l 11554 That's
who we are.
LISTNUM
1 \l 11555 It
is the shared concerns of Canadian creators that I will first speak about.
LISTNUM
1 \l 11556 As
we stated in our written comments, ACTRA supports the intervention of the CCAU
on the issues of foreign ownership and control in the regulatory process in
this proceeding.
LISTNUM
1 \l 11557 We
also support CCAU's supplementary comments filed on October 10.
LISTNUM
1 \l 11558 Mr. Chairman,
in my recent presentations before this Commission, and in various other public
fora, ACTRA has concentrated its work on seeking to correct the serious
deficiency in the production and availability of high quality Canadian
television dramas. ACTRA believes that
the issue of foreign ownership is inextricably linked to this drama issue.
LISTNUM
1 \l 11559 The
provisions of the Broadcasting Act are quite clear. In Declaration 3(1), Canada's
"Broadcasting system shall be, effectively, owned and controlled by
Canadians."
LISTNUM
1 \l 11560 In
ACTRA's view this is a cornerstone of Canadian broadcasting policy. Ensuring Canadian ownership of cultural
sector firms, including broadcasting, cable and film distribution companies, is
fundamental to ensuring that the Canadian public will have access to Canadian
stories, to music, to dance and to the arts in every cultural industry.
LISTNUM
1 \l 11561 Increased
foreign control of broadcasting would damage our cultural sovereignty, deepen
the crisis in Canadian drama, and potentially jeopardize Canadian content
rules.
LISTNUM
1 \l 11562 ACTRA
and the CCAU are convinced that the present application must be denied.
LISTNUM
1 \l 11563 If
the Commission were to approve it, Goldman Sachs and its affiliates, which are
non‑Canadian, would obtain overwhelming control in fact of both Alliance
Atlantis and the existing television business of CanWest that is to be
contributed to CW Investments Corporation, referred to in the application as
"Joint Co." This would be in
violation of the Act and the Order‑in‑Council direction to the CRTC
on the ineligibility of non‑Canadians.
LISTNUM
1 \l 11564 The
de facto control results primarily from the strategic direction for the
regulated businesses that Goldman Sachs and its affiliates have imposed upon
CanWest under the terms of the agreements filed in this proceeding.
LISTNUM
1 \l 11565 The
de facto control exists notwithstanding the mechanisms used by CanWest and
Goldman Sachs to provide Canadians with legal control of the day‑to‑day
management of Joint Co. and its subsidiaries.
LISTNUM
1 \l 11566 No
amount of tinkering, layering, manoeuvring or, indeed, the smoke and mirrors of
who sits on and what is discussed at a reporting committee will resolve the
fundamental problem of the de facto control held by Goldman Sachs and its
affiliates.
LISTNUM
1 \l 11567 We
have reviewed the August 20th and October 22nd replies to the interventions
filed by CanWest MediaWorks. We do not
agree with most of the arguments made in the replies on the issue of control in
fact, and we believe further that CanWest either misstates or misunderstands
some of the practices of the CRTC and Industry Canada with respect to control
in fact.
LISTNUM
1 \l 11568 We
refer you to the Industry Canada document provided by the Directors Guild of
Canada, which we understand to be a more accurate statement of the approach
taken by that department.
LISTNUM
1 \l 11569 We
also understand this to be the approach taken, as well, by yourselves, the
Commission.
LISTNUM
1 \l 11570 Mr. Chair,
while we believe firmly that the Commission must deny the application, we
realize that this is our only opportunity to comment upon it, and in the few
remaining minutes I would like to deal with the issue of the proposed benefits
package.
LISTNUM
1 \l 11571 Our
written intervention addresses this matter at some length.
LISTNUM
1 \l 11572 ACTRA
acknowledges that in its reply of August 20th, CanWest made several
improvements to its benefits package.
The first of these is to commit that 84 percent of its on‑air
programming benefits will be produced by independent producers.
LISTNUM
1 \l 11573 The
second is to commit that 60 percent of its drama benefit would go to 10 Point
Productions.
LISTNUM
1 \l 11574 And
the third is to commit that all of the pilot projects will be drama.
LISTNUM
1 \l 11575 Indeed,
we welcome these improvements, but we still believe that the benefits package
falls short of what is needed.
LISTNUM
1 \l 11576 We
believe that this continues to be insufficient for an acquisition with the
scope of this one.
LISTNUM
1 \l 11577 In
our written submissions and in our oral comments in recent public hearings, and
again today, we call on the CRTC to establish a new standard for all future
tangible benefits packages that would provide:
(1) that the appropriate percentage of tangible benefits must be
calculated on the full value of the transaction, with no discounting for debt
acquired, assets to be divested, or inherited benefits obligations; and (2)
that a minimum of two‑thirds of total benefits should be allocated to 10
Point Canadian drama programming, produced independently of the broadcaster.
LISTNUM
1 \l 11578 We
will make no comment about how the current application lives up to the first
point, since we note that the CFTPA has put forward a proposition that the
benefits package should be based on a transaction value of $1.446 billion,
which includes the Alliance Atlantis Communications' minority stake in
regulated assets.
LISTNUM
1 \l 11579 With
respect to our second point, ACTRA is proposing that CanWest be required to
reconfigure its benefits package to ensure that of the $136.9 million, at least
$91.3 million should be allocated to 10 Point drama programs and series that
are produced by independent Canadian producers.
This would include projects at the development phase, since CanWest has
now allocated all of it to drama.
LISTNUM
1 \l 11580 I
realize that you have heard our arguments about why this new standard is
essential ‑‑ essential for cultural and economic reasons ‑‑
so I will not repeat those arguments today.
LISTNUM
1 \l 11581 What
I will do, however, is to note that since this application was filed, and revised,
and then revised again, the CRTC has received the study it commissioned from
Messrs. Laurence Dunbar and Christian Leblanc.
Those authors remind us that market forces alone are unlikely to achieve
the policy objectives of the Broadcasting Act, and specifically highlight that
drama is a category of programming that is not adequately supported by the
marketplace. Their words ‑‑
"not adequately supported by the marketplace."
LISTNUM
1 \l 11582 As
an actor, I have to raise my opposition to the figure of $13.5 million that
CanWest is proposing to direct to building what the application refers to as a
star system.
LISTNUM
1 \l 11583 We
desperately need a star system in Canada to help build the profile of our
terrifically talented performers, to help them become the household names that
their work deserves. But let us not kid
ourselves; the profile of Canadian actors is not raised by funding campaigns of
billboards and red carpet launches on which no Canadian actors appear. There simply must be a significant volume of
Canadian production first in order to have stars.
LISTNUM
1 \l 11584 This
benefits money should be redirected to the development and broadcasting of 10
Point, high quality, Canadian drama programming. If you build that, then you can develop the star
system.
LISTNUM
1 \l 11585 Finally,
we join with the chorus of intervenors to urge the Commission to reject the
self‑serving proposal of CanWest to spread the benefits over a period of
10 years. CanWest should be required to
fulfil its obligations over the next 7 years, or sooner, like all others who
provide tangible benefits to the Canadian broadcasting system.
LISTNUM
1 \l 11586 I
will conclude by dealing with the issue of the proposed drama benefit.
LISTNUM
1 \l 11587 ACTRA
reiterates its written submission that CanWest's proposal to allocate $55
million to drama in its overall benefits package is, in fact, modest.
LISTNUM
1 \l 11588 Mr. Chairman,
English‑language, over‑the‑air, private broadcasters spent
only $40 million on Canadian dramas in 2006.
All broadcasters together spent perhaps 12 times this amount on imported
American dramas, programs which they showcase and broadcast at times when the
largest audiences and the largest advertising dollars are available. They marginalize Canadian dramas on their
schedules.
LISTNUM
1 \l 11589 In
the face of this massive and unconscionable deficit, the proposal, as part of
the benefits package, to spend $5.5 million in each of the next 10 years on
drama is insignificant. I think we are
being charitable even to call it modest.
LISTNUM
1 \l 11590 Thank
you, Mr. Chairman and Commissioners.
We look forward to answering your questions.
LISTNUM
1 \l 11591 I
would like to say in closing that I speak here as a Canadian actor, but I also
have 21,000 members who look to our union to do the right thing for Canadian
workers and Canadian culture. Many of
our members are members of the Order of Canada and Officers of the Order of
Canada, people whose names you may know ‑‑ people like Gordon
Pinsent and Fiona Reed, and many, many others.
These performers did not gain their membership in the Order of Canada by
working on productions that were American, and they did not become Canadian
performers to work on productions by companies that were controlled by Wall
Street.
LISTNUM
1 \l 11592 I
thank you for your time. We are fully
prepared to answer your questions. To
assist in that, I will be inviting Mr. Robert Buchan and Ms Anne Tardif to
address matters that you may have dealing with the issues of foreign ownership
and control in the regulatory process.
LISTNUM
1 \l 11593 Thank
you.
LISTNUM
1 \l 11594 THE
CHAIRPERSON: Thank you.
LISTNUM
1 \l 11595 On
the last point you just made, saying that the famous Canadian actors do not
work for companies controlled by Wall Street, is that really the issue?
LISTNUM
1 \l 11596 Is
it not the issue whether somebody produces Canadian drama, employs Canadian
actors, meets the 10 Point requirement?
LISTNUM
1 \l 11597 Whether
the money comes from Wall Street or from Bay Street, does that really make a
difference?
LISTNUM
1 \l 11598 MR. HARDACRE: It would make no difference if the original
producers are interested in doing Canadian stories.
LISTNUM
1 \l 11599 I
had the benefit of living in New York City myself and working there. I have an American mother. I lived there for four years, in Los Angeles
for four years. I never found any
producer interested in doing a Canadian story in all that time I was there.
LISTNUM
1 \l 11600 I
don't mean to be cute about that but I would expect that controlling interests
are interested in seeing stories that would maximize or production that would
maximize advertising revenue and perhaps that is all.
LISTNUM
1 \l 11601 THE
CHAIRPERSON: Okay.
LISTNUM
1 \l 11602 MR. NEIL: Mr. Chairman, just on this point I
acknowledge that there are no statistics from the film and television
production industry but if you look at the book publishing industry and if you
look at the sound recording industry in Canada, you have overwhelming evidence
that the Canadian companies are the ones which produce the Canadian authors,
the Canadian writers and the Canadian musicians and singers.
LISTNUM
1 \l 11603 In
the book publishing industry, for example, and I am just going off the top of
my head, about 80 percent of the Canadian author titles are produced by the
Canadian industry, which only controls about a third to 40 percent of the
marketplace. So there is strong evidence
from other cultural industries that Canadian owners are the ones who are far
more likely to produce the Canadian content.
LISTNUM
1 \l 11604 THE
CHAIRPERSON: Yes, but let's stick to
this industry. Book publishing is a much
smaller industry.
LISTNUM
1 \l 11605 You
want capital to invest in Canada, play by Canadian rules, produce Canadian
content. Obviously, that is also the aim
of this Commission.
LISTNUM
1 \l 11606 I
just wondered whether it really makes a difference to you what the origin of
the money is. You assume because it is
foreign it will reluctantly play by Canadian rules and, as you suggested, will
really have audiences in mind, Canadian audiences, and that is where sort of
the rubber hits the road, if I understand you correctly.
LISTNUM
1 \l 11607 MR. HARDACRE: Yes.
LISTNUM
1 \l 11608 THE
CHAIRPERSON: Okay.
LISTNUM
1 \l 11609 Now,
coming back to your opening statement, it is the same thing I heard from the
Directors Guild. You make this
categorical statement that:
"Legal control of day‑to‑day
management of Joint Co. subsidiaries rests with Goldman Sachs. No amount of tinkering, layering or
manoeuvring will resolve the fundamental problem of de facto control held by
Goldman Sachs and its affiliates." (As read)
LISTNUM
1 \l 11610 Spell
this out to me. Yesterday I didn't probe
on it but now you made a second statement a second time of saying what is
really ‑‑ what is the root the all this? Is it the equity? Is it the 35 versus 65 percent that is really
the key to all of this in your mind?
LISTNUM
1 \l 11611 MR. HARDACRE: Please, Robert.
LISTNUM
1 \l 11612 MR. BUCHAN: Yes.
Mr. Chairman, it is the same point that we tried to make yesterday,
that it isn't what some people refer to as de jure control and that is why the
reference to tinkering or layering and this is all of those questions, the
indicia of operational control and how far the minority shareholder protections
can extend and everything.
LISTNUM
1 \l 11613 In
the Coalition's intervention we did not rely on or as I said yesterday, I
think, we didn't think there was a gotcha provision in there or some bright
line that we could find. We don't take a
position with regard to those measures and you are reviewing some of them with
the applicant and ask him to look at the role of the review committee and to
try to get a definition of material and whatever.
LISTNUM
1 \l 11614 The
fact that it was 65 percent is the second aspect of it. It comes from ownership rather than from the
control and it is the focus on ownership and the fact that 65 percent of the
equity of the company will be owned by Goldman Sachs.
LISTNUM
1 \l 11615 When
there is 65 percent ownership it has been found by others in the past that a degree
of control comes with the ownership.
That is why I think yesterday we made reference to the decision in the
Canadian Airlines case, a reference where increases above 25 percent of such
shareholdings become of increased importance in determining where control in
fact lies.
LISTNUM
1 \l 11616 My
understanding of this Commission's past practice is that there was always
concern expressed when shareholdings got above 40 percent in the hands of one
foreign shareholder, whether control could be exercised indirectly through the
ownership block when there was one dominant shareholder and dominance started
to be sensed at the 40 percent level.
LISTNUM
1 \l 11617 Here
we have 65 percent. I know there is an
exception on the record, the Persona case.
Until all of the publicity surrounding this transaction became public,
very, very few people had ever heard of the Persona case or knew what it was
about.
LISTNUM
1 \l 11618 Really,
what it was about, as you know, was cable systems in small communities in
dispersed areas in Canada that were failing and about to go under and they had
an American strategic investor that was available and came in and filled the
gap. There wasn't a public hearing. There was very little attention given to it.
LISTNUM
1 \l 11619 Persona
is now back in the hands of Canadians but that, I think, was looked upon by
people in the industry as an anomalous situation where failing small cable
companies in dispersed communities were saved in the short term.
LISTNUM
1 \l 11620 But
this is Canada's second largest private broadcasting undertaking betting the
farm with 65 percent non‑Canadian ownership in the hands of one company.
LISTNUM
1 \l 11621 THE
CHAIRPERSON: Let me put the question the
other way around. What would it take to
save this transaction, in your view, to make it acceptable?
LISTNUM
1 \l 11622 MR. BUCHAN: I think I should ‑‑ we have
been asked to advise the Coalition. To
explain our position, I am not going to totally equivocate because I will come
to ‑‑ but we advised that it is difficult to get into
tinkering or doctoring the proposal of someone else, particularly as complex a
commercial arrangement as this is, and that it ought to go back to the parties
to bring forward an application that satisfies the Commission and what we
believe to be the direction to the Commission with regard to foreign ownership.
LISTNUM
1 \l 11623 So
not to get into suggesting specific measures and certainly not in the day‑to‑day
level but there are members of the Coalition, and I know you will hear from
one ‑‑ I won't speak for ACTRA but I know there is another one
that would be prepared to say it has to be below 50 percent.
LISTNUM
1 \l 11624 Now,
they are working on ‑‑
LISTNUM
1 \l 11625 THE
CHAIRPERSON: I thought you were here in
support of ACTRA. So is that ACTRA's position?
LISTNUM
1 \l 11626 MR. BUCHAN: No, I am not speaking for ACTRA, I am
speaking for the Coalition. Because
ACTRA is a member of the Coalition, the Coalition filed the brief with regard
to foreign ownership issues.
LISTNUM
1 \l 11627 THE
CHAIRPERSON: Mm‑hmm. So are you getting two kicks at the can?
‑‑‑ Laughter /
Rires
LISTNUM
1 \l 11628 MR. BUCHAN: No.
You may see me later in the day but ‑‑
‑‑‑ Laughter /
Rires
LISTNUM
1 \l 11629 MR. NEIL: He will change his tie.
LISTNUM
1 \l 11630 MR. BUCHAN: I just want to be clear that we are not
prescribing the fix. We are not saying
that it can't be fixed but there are members of the Coalition who believe that
if it were below 50 percent, closer to the 46 and two‑third percent level
that is often quoted as being the allowable level of equity, but bearing in
mind that this is all held by one company, I am not on record as making that
recommendation.
LISTNUM
1 \l 11631 THE
CHAIRPERSON: What does ACTRA have to say
on this?
LISTNUM
1 \l 11632 MR. HARDACRE: Yes.
Thank you for the opportunity.
LISTNUM
1 \l 11633 I
would like to just ‑‑ because we have the ability to have our
opinion quite clear. We are very
satisfied with the current level allowed for foreign ownership, the current
practice, which is in the 46 percent, 46.something percent level.
LISTNUM
1 \l 11634 I
would like to elaborate further.
Mr. Chair, you did ask a question about our quite dramatic
statement and about our alarm at the overwhelming control.
LISTNUM
1 \l 11635 I
refer you to the July 31st media release from CanWest Global
Communications. We read it quite
carefully. On page ‑‑ I
believe it is the fourth page of the release.
Now, this is acknowledging that we knew nothing about the confidential
matters of the deal until this release came out and gave us a few more bits of
information.
LISTNUM
1 \l 11636 So
on the fourth page of the release, just before the area that is in italics,
there is a clause starting "The shareholders' agreement" and it says:
"The shareholders' agreement
will also contain typical minority shareholder protections for the benefit of
Goldman Sachs, including restrictions on the incurrence of additional debt by
CW Investments and its subsidiaries and other transactions outside the ordinary
course of business, in each case without the unanimous approval of the Board of
Directors of CW Investments. CanWest
will agree to similar restrictions in respect of the operations of its Canadian
television business." (As read)
LISTNUM
1 \l 11637 It
goes on. But that phrase "CanWest
will agree to similar restrictions in respect of the operations of its Canadian
television business," this tells us that control does not necessarily rest
in CanWest, it rests in a tower in Manhattan.
It is their statement, sir.
LISTNUM
1 \l 11638 So
I would like to just answer your question more with that. Thank you.
LISTNUM
1 \l 11639 THE
CHAIRPERSON: Okay. We have heard a lot about the fact, you know,
we all share the same objectives. We
want to see the Broadcasting Act put into practice. We want to see the Canadian broadcasting
system reflect Canada. We want to see a
lot of Canadian production, a lot of Canadian drama. That was all said.
LISTNUM
1 \l 11640 A
lot of people appearing before us say you need players of size in order to do
that in this modern world. If you want
to compete, especially thanks to our neighbours to the south, we need healthy,
large companies.
LISTNUM
1 \l 11641 I
gather you feel the company that is about to be created here, for which they
are seeking approval, would not fit that bill, that it just would be too tied
up, too leveraged to its American majority equity partner/minority voting
control partner so as to make a contribution; is that the bottom line?
LISTNUM
1 \l 11642 MR. HARDACRE: Yes.
LISTNUM
1 \l 11643 THE
CHAIRPERSON: Okay. Thank you.
LISTNUM
1 \l 11644 Commissioner
Duncan, you have some questions?
LISTNUM
1 \l 11645 COMMISSIONER
DUNCAN: Actually, Mr. Chairman, I
read very carefully the submission of ACTRA and I read the responses from
CanWest and I think they did respond, as you indicate in your comments today,
to a lot of your concerns.
LISTNUM
1 \l 11646 And
I have no further questions. I think it
all revolves around this control, in fact.
LISTNUM
1 \l 11647 Thank
you.
LISTNUM
1 \l 11648 THE
CHAIRPERSON: Vice‑Chairman Arpin.
LISTNUM
1 \l 11649 COMMISSIONER
ARPIN: Well, I will have a question on
benefits. The usual policy for benefit
packages is that the benefits shall apply to the bought organization.
LISTNUM
1 \l 11650 Now,
in the package that Global presented to us yesterday ‑‑ and
when I'm hearing your earlier presentation today, you don't seem to make that
differentiation that ‑‑ particularly when you're dealing with
10‑point drama, are you dealing with 10‑point drama on Showcase or
are you dealing on 10‑point drama all over the property of CanWest?
‑‑‑ Pause
LISTNUM
1 \l 11651 MR. HARDACRE: Sorry, we will respond. I would actually like to ask Mr. Neil to
give you that response.
LISTNUM
1 \l 11652 Thank
you.
LISTNUM
1 \l 11653 MR. NEIL: We have ‑‑ we are pretty
aggressive in saying that two‑thirds of the complete benefits package
ought to go to Canadian television drama, 10‑point television drama. We understand, and we fully support, that
normally in transactions the benefits relate to the purchased assets rather
than to the purchaser's assets.
LISTNUM
1 \l 11654 And
of course we want to see as much drama as possible on Showcase and History
television and so on, and some of the properties clearly will be directed
there. But we also understand that the
bigger issue, the bigger problem is over‑the‑air television, and so
if some of those properties also show up on CanWest Global we would be happy.
LISTNUM
1 \l 11655 COMMISSIONER
ARPIN: Thank you.
LISTNUM
1 \l 11656 That
was my question, Mr. Chairman.
LISTNUM
1 \l 11657 THE
CHAIRPERSON: Vice‑Chairman Katz.
LISTNUM
1 \l 11658 COMMISSIONER
KATZ: Thank you, Mr. Chairman.
LISTNUM
1 \l 11659 I
want to follow up on one question that the Chairman asked and then ask one of
my own as well.
LISTNUM
1 \l 11660 It
appears to many people that CanWest is bidding the farm on this
transaction. What makes you think you
are in a better position to dictate the way the transaction will flow or to
deny this transaction when Mr. Asper and CanWest is literally putting up
his entire corporation for this transaction?
LISTNUM
1 \l 11661 MR. HARDACRE: Can you just give me a second, please?
‑‑‑ Pause
LISTNUM
1 \l 11662 MR. HARDACRE: Just I wanted to make sure my conscience was
speaking the right way to me.
LISTNUM
1 \l 11663 We
are interested in seeing Canadian companies be successful and we don't wish to
see Mr. Asper or the company fail.
It's not ‑‑ it's not a question of us attacking a
philosophy that's there. What we do not
want to see is a major interest that is non‑Canadian controlling a
company that is one of our great and largest private broadcasters, and we would
like to see the deal structured in such a way that that does not happen.
LISTNUM
1 \l 11664 COMMISSIONER
KATZ: Having the deal structured in such
a way that does not happen is what everybody would like to see. I think what I heard ACTRA say is you want
this deal to be scuttled and another one to be created at some point. What is the difference?
LISTNUM
1 \l 11665 The
question first that the Chairman asked is how do we make this deal work; what
would it take?
LISTNUM
1 \l 11666 MR. HARDACRE: M'hm.
LISTNUM
1 \l 11667 COMMISSIONER
KATZ: And what I think I heard you and
some of the other folks say is this deal will not work, deny this deal.
LISTNUM
1 \l 11668 MR. HARDACRE: Yes.
LISTNUM
1 \l 11669 Go
ahead, please.
LISTNUM
1 \l 11670 THE
CHAIRPERSON: Just the point of deny this
deal because ‑‑ that was my last question to you ‑‑
you feel it's solely because he cannot live up to the object of the
Broadcasting Act. And I mean I go from
the assumption he is a business man. He
wants to succeed and he knows what his obligations are and he will try ‑‑
he will fulfill them. I mean, he walks
into this with his eyes wide open so that's why Vice‑Chairman Katz'
question.
LISTNUM
1 \l 11671 You
know, why do you feel this doesn't make ‑‑ he is making an
obviously grievous error if the assessment is correct.
LISTNUM
1 \l 11672 MR. HARDACRE: Please, Bob.
LISTNUM
1 \l 11673 MR. BUCHAN: I would just like to say, Mr. Chairman
and Mr. Katz, that when we undertook this mandate on behalf of the
coalition one of the things we asked at the outset was: Do the coalition members have a preference
for one potential buyer of Alliance Atlantis broadcasting assets over
another? Is it the intention of the
coalition members to block the sale to CanWest?
LISTNUM
1 \l 11674 And
the answer was "No, that wasn't the objective." The answer was, "We want to intervene on
the issue of benefits, of course, but we also are very concerned about ‑‑
on the foreign ownership and control aspect" and that's the only part we
were asked to advise them.
LISTNUM
1 \l 11675 But
all the members said the same thing; the objective is not to block the sale to
CanWest. It's to make sure that the
Canadian ownership and control provisions of the Broadcasting Act under the
direction of the Commission are adhered to.
LISTNUM
1 \l 11676 So
it isn't a question of wanting ‑‑ on the part of the coalition
on the ownership and control aspect of the application to block the sale to
CanWest.
LISTNUM
1 \l 11677 COMMISSIONER
KATZ: As a follow up, Mr. Buchan, I
think you mentioned the Persona situation as well and I believe your final
words were, "Persona is back in the hands of Canadian industry".
LISTNUM
1 \l 11678 Isn't
that what CanWest is doing here as well?
What they are trying to do is work out a deal within the confines of the
Broadcasting Act that ultimately they can buy back themselves and have it
totally Canadian in four years or six years?
LISTNUM
1 \l 11679 MR. BUCHAN: Yes, Mr. Katz, certainly it is. But there is quite a distinction I think in
the case of Persona, as I read the record.
LISTNUM
1 \l 11680 And
I think that in the reply of CanWest that Commissioner Duncan just referred to
it ‑‑ it's a very thorough reply and attached to it there is a
little postscript as to why the Persona situation isn't a good precedent. But there is a fairly accurate, I believe,
description of the Persona case and as of July 31st, whatever that year was a
couple of years ago, because they were outside of their debt covenants and were
going under, the company was going to go into receivership and into
bankruptcy. And the Hicks Muse people
came along and they were able ‑‑ they had a deal. They had a proposed deal that was negotiated
basically with the Commission. It wasn't
in a public hearing and a decision was rendered.
LISTNUM
1 \l 11681 But
Alliance Atlantis isn't facing bankruptcy.
Alliance Atlantis isn't about to go dark and Alliance Atlantis is a
programming undertaking.
LISTNUM
1 \l 11682 Now,
I know there is no distinction in the law between a broadcasting distribution
undertaking and a programming undertaking, but in terms of magnitude and role
and function it's not a very apposite precedent, and I think the applicants
even agree with that and attach a special attachment to their reply to say so.
LISTNUM
1 \l 11683 THE
CHAIRPERSON: But the logical abstract
from what you just said is you want to see it.
You seem to have different rules for broadcasting and programming
operations and distribution operations.
LISTNUM
1 \l 11684 MR. BUCHAN: No, it doesn't necessarily ‑‑
I know that's been suggested to you.
That's not part of our position.
I am saying the law says that they are both broadcasting undertakings
whether a programming undertaking or a distribution undertaking. But it may have been a factor that influenced
the Commission to take what some people consider to be an anomalous situation
with regard to the Persona decision in allowing 65 percent of equity in the
hands of a non‑Canadian to be approved, because of the nature of the
undertakings at the time and the fact that it was going into receivership.
LISTNUM
1 \l 11685 All
I'm saying is that in this case Alliance Atlantis certainly is not facing
receivership.
LISTNUM
1 \l 11686 THE
CHAIRPERSON: Okay.
LISTNUM
1 \l 11687 Commissioner
Duncan.
LISTNUM
1 \l 11688 COMMISSIONER
DUNCAN: I just want to just focus in
just on that one line, and that is probably a little repetitive of everything
that you have already heard, but no amount of tinkering, layering or
manoeuvring will resolve the fundamental problem.
LISTNUM
1 \l 11689 As
a lawyer are you suggesting that the Commission is not going to be able to
address this then, that we are not going to be able to come up with a solution
that we can be satisfied with?
LISTNUM
1 \l 11690 MR. BUCHAN: Well, I think the intent of that line was to
suggest that within the ‑‑ call the de jure control element on
the question of how many members on the board of directors, the role of the
programming committee, all of those various ‑‑ we think ‑‑
personally, I will say we have respect for friends on the other side who have
done this job and it's been well lawyered in that respect.
LISTNUM
1 \l 11691 We
think that the issue is the foreign ownership and the direction. And it's the ownership side of it and not the
control side. So we don't think that
just by fixing up the programming committee or fixing up a definition or
creating a definition for what constitutes material ‑‑ that's
the reference of the tinkering. It goes
back to the issue of ownership.
LISTNUM
1 \l 11692 COMMISSIONER
DUNCAN: So in your view then, if I
understood what you said, ownership around 46 percent would be satisfactory to
you?
LISTNUM
1 \l 11693 MR. BUCHAN: That's the position. Well, I think each of the members of the
coalition may feel a little differently on that but ‑‑
LISTNUM
1 \l 11694 MR. HARDACRE: For us the answer is "yes".
LISTNUM
1 \l 11695 THE
CHAIRPERSON: But that's ‑‑
isn't that a somewhat dangerous path to go.
That means you are really saying control and everything depends on
equity ownership. What about if there is
a huge debt and you need the equity and there is a large debt, does it fit?
LISTNUM
1 \l 11696 I
mean, isn't the whole idea of looking ‑‑ what is the totality
of the interests held by non‑Canadians and to what extent does that
interest allow them to influence the operation, the strategy and the management
of the corporation?
LISTNUM
1 \l 11697 MR. BUCHAN: Of course, it does. And that ‑‑ and one of the
reasons, and I guess this provides me with a bit of an opportunity to refer to
this document that we attached to the intervention which is the document of
Industry Canada that was reissued in August of this year, the CPC‑2‑0‑15. It was reissued in August and some of us in
the industry wondered why was it reissued at the time that it came out?
LISTNUM
1 \l 11698 I
don't know whether government cooperates or talks or whatever, but I think
Industry Canada reissued this document because a former official of Industry
Canada was giving an interpretation that was put on the record of these
proceedings as to how Industry Canada deals with equity and debt.
LISTNUM
1 \l 11699 And
I can only ‑‑ I will go right to the heart of it, which is at
page four where Industry Canada says what Industry Canada looks at when it is
trying to determine Canadian ownership and control. And the first thing, the first bullet at the
top of page four says:
"The percentage of share
holdings by Canadians and non‑Canadians."
LISTNUM
1 \l 11700 It
doesn't refer ‑‑ there is no distinction made between voting
and non‑voting shares in that bullet.
There is no ‑‑ going down the bullets to the end it's a
source of debt and equity financing.
LISTNUM
1 \l 11701 So,
the source. Now, of course they have to
look at the debt because the debt may have covenants attached to it. They look at a lot of other things, a lot of
other agreements, like, whether something could be buried in the trade mark
agreement or in another related agreement sometimes these control provisions
are shuffled off into, as you know.
LISTNUM
1 \l 11702 I
mean, the Commission has looked at all these agreements on transactions of this
kind. It's to determine overall the
control.
LISTNUM
1 \l 11703 And
in the direction to the Commission it's whether ‑‑ the
operative words are:
"...whether on the basis of
personal, financial, contractual or business relations or other considerations
relevant to determining control other than beneficial ownership and control of
voting shares." (As read)
LISTNUM
1 \l 11704 MR. BUCHAN: Because they've dealt with the beneficial
ownership of voting shares above in the strictly control provisions.
LISTNUM
1 \l 11705 So,
we think that at the level of 65 per cent...
LISTNUM
1 \l 11706 Someone
asked me yesterday after we had intervened:
"Well, what's the difference between ownership and
control?" And I tried to explain it
again to this person and the same ‑‑ and I won't repeat
myself ‑‑ and he said:
"Well, didn't they say that 65 per cent of this is going to be
owned by Goldman Sachs, by one shareholder?" I said:
"Yes, that's true." And
he said. "Well then, don't they own
the company?" And I said: "Well, that's what we think, they own
the company."
LISTNUM
1 \l 11707 THE
CHAIRPERSON: Okay. Thank you very much for your intervention.
LISTNUM
1 \l 11708 COMMISSIONER
DUNCAN: Mr. Chairman, can I just
ask another question?
LISTNUM
1 \l 11709 THE
CHAIRPERSON: Sorry, yes.
LISTNUM
1 \l 11710 COMMISSIONER
DUNCAN: Can you just explain to me, if
they have 65 per cent of the shares but they don't have 65 per cent of the vote
and it comes to a vote, how can they control the vote, assuming the debt covenants
don't play into it?
LISTNUM
1 \l 11711 I
just don't understand how that works.
LISTNUM
1 \l 11712 MR. BUCHAN: Well, Commissioner Duncan, what our position
is, is that on a day‑to‑day operations of the company CanWest, the
Canadians, will control the day‑to‑day operations.
LISTNUM
1 \l 11713 But
the arrangements, these complex arrangements have been put in place and they're
not complex just for the sake of being complex, they're complex because you're
dealing with the most successful, sophisticated investment bank in the world,
you know, 20,000 employees, they know what they're doing and they're assured
that in 2011 they're going to get their guaranteed rate of return.
LISTNUM
1 \l 11714 They've
put arrangements in place that are quite complex, and we feel it's a bit like
Gulliver in the Land of the Lilliputians, that CanWest is tied down and they
can maybe blink their eyes and move around if that's operational control in the
short term, but to get to where they want to be in 2011, to get themselves back
to 50 per cent or more of the issued equity of the company, they've got very
little room for manoeuvre.
LISTNUM
1 \l 11715 COMMISSIONER
DUNCAN: Thank you, Mr. Buchan.
LISTNUM
1 \l 11716 Mr. Chair.
LISTNUM
1 \l 11717 THE
CHAIRPERSON: Thank you for your
presentation. We will go to the next
intervener, Madam Roy.
LISTNUM
1 \l 11718 Thank
you very much.
LISTNUM
1 \l 11719 THE
SECRETARY: I will now call Insight
Production Company Ltd., Tricon Films & Television, Aboriginal Peoples
Television Network, Innoversity and Barna‑Alper Productions to appear as
a panel.
‑‑‑ Pause
LISTNUM
1 \l 11720 THE
CHAIRPERSON: Okay, Madam Roy.
LISTNUM
1 \l 11721 THE
SECRETARY: We will start with Insight
Production Company Ltd. Please introduce
yourself and you will then have 10 minutes for your presentation.
LISTNUM
1 \l 11722 Thank
you.
INTERVENTION
LISTNUM
1 \l 11723 MR. BRUNTON: Well, thank you very much. Thank you, Mr. Chair and
Commissioner. I would like to thank you
for the opportunity to speak today.
LISTNUM
1 \l 11724 I
would like to speak in support of Global's acquisition of Alliance Atlantis
from my perspective as a television producer in Canada.
LISTNUM
1 \l 11725 Insight
and Global have a long history, probably going back some 20 years. I would say that more than any other company
Global has helped put my company, Insight, on the drama map, not just here in
Canada but around the world, from co‑ventures in the very beginning with
Home Box Office to dramas like Ready Or Not that have been seen in over 40, 50
countries around the world.
LISTNUM
1 \l 11726 This
relationship goes back many, many years and the dramas that we've produced by
large for Global have been 10 out of 10 dramas.
Most recently we produced a TV series called Falcon Beach, it's now seen
in about 100 territories around the world, it's just launched in the BBC in the
U.K.
LISTNUM
1 \l 11727 And
certainly one of the things that I wanted to speak about today is that if, in
fact, this acquisition of Alliance Atlantis had occurred a couple of years ago
it's quite possible that my TV series, my drama, Falcon Beach, might still be
on the air.
LISTNUM
1 \l 11728 And
part of that relates to the notion of how shows in the future, if this deal
went through, could potentially migrate from one channel to another.
LISTNUM
1 \l 11729 And
one of the difficulties that we had with our show, Falcon Beach, was competing
against the very, very stiff competition from the United States, television
shows like the OC, were put up against our program, and having the opportunity
for a potential second window for the sponsors involved and everyone involved
on channels like Showcase for example, in my opinion, could have possibly been
the hail Mary that that show needed to continue to keep going in Canada.
LISTNUM
1 \l 11730 And
so, you know, I really think that in this day and age when we Canadian
producers are fighting this avalanche, this tidal wave of publicity and
promotion that comes across the border, that to have big, strong Canadian media
companies with a lot of platforms that can fight back and use those platforms
for advertising and promotion of the television shows that we produce would
have a huge positive impact on my business.
LISTNUM
1 \l 11731 In
the past year our company has produced a show called Deal Or No Deal Canada for
Global, I think one of the highest rated Canadian television shows of the year.
LISTNUM
1 \l 11732 We
just are in the midst of completing and delivering a show called Are You
Smarter Than A Canadian Fifth Grader, which is presently on the air at Global.
LISTNUM
1 \l 11733 And
we presently have a TV series on air on Slice at Alliance Atlantis and it is
called Project Runway Canada.
LISTNUM
1 \l 11734 In
the cases of both Are You Smarter Than A
Canadian Fifth Grader and Project Runway Canada, both those shows right now
would enormously benefit by this potential acquisition.
LISTNUM
1 \l 11735 Project
Runway Canada I think is a terrifically produced show, I'm extremely proud of
it. Could that show take advantage of
the multiple platforms that this deal would produce? Would I love to have a second window
broadcast on E! or Global?
LISTNUM
1 \l 11736 Would
I love my promos to run for my show across the presently owned Global platforms
including Global itself which has access to huge audiences to potentially drive
those viewers back to Slice?
LISTNUM
1 \l 11737 Would
the on‑air promos that exist that are supported by L'Oreal who are one of
our advertisers seen across multiple platforms benefit L'Oreal who are helping
to pay for the program in a huge way?
LISTNUM
1 \l 11738 So,
certainly one of the things that I feel is that, you know, this potential deal
has got huge synergies for a producer like myself and there are many, many ways
that I could see very selfishly how Insight Productions could take advantage of
the opportunity of having these various platforms and the opportunity for my
shows to migrate around the circle of assets that Global would control.
LISTNUM
1 \l 11739 You
know, the world is changing so quickly.
You know, I see my kids watching television in a way that I could never
have imagined. You know, they have their
iPod in one ear and they've got their lap top on their laps and they may
be ‑‑ instead of watching traditional television, they may
have a DVD of their favourite TV show that they bought at Rogers that they used
to watch on CTV or Global or the CBC.
LISTNUM
1 \l 11740 And,
you know, the access of the Hollywood content through the Internet and through
the video stores and all of these things are a concern to those of us who
produce Canadian content and it's a real worry.
LISTNUM
1 \l 11741 And,
so, certainly this notion that big, strong Canadian companies that can compete
from an advertising and promotions perspective that could compete in the new
media world, that can compete against what is an increasingly difficult thing
to regulate, which is the wave of American content, you know, crashing across
our borders.
LISTNUM
1 \l 11742 And,
so, I really, really strongly support the notion that we should be building
really strong Canadian media companies.
And I've proposed this idea not just here for the first time and I'd
like to see all of our companies as big and strong and robust as they can be,
you know.
LISTNUM
1 \l 11743 And
to this notion of living in isolation, almost every one of the shows that we
produce that are dramas have foreign investment that's necessary. So, I think that that's an important thing to
consider as well, that Falcon Beach with all of the support from all of the
arenas in Canada still couldn't have gotten finance without a big strong
international distributor that was involved.
It was impossible to finance it here in Canada.
LISTNUM
1 \l 11744 So,
I just would like to say that I think that the foundation of the future of this
country has to do with having strong, powerful media companies that have a lot
of platforms to repurpose our Canadian content in a bunch of different
ways. I think that the notion of content
migrating from cable, when they are ready, to conventional and from
conventional and second windows on cable and all these things give us a chance
to get our shows to more eyeballs in Canada, and that is why I really think a
deal like this makes sense, very selfishly for a producer like myself.
LISTNUM
1 \l 11745 The
one other comment that I wanted to make, because I have been hearing a little
bit about this with the ACTRA presentation, this notion of ten out of ten
drama, the Canadian dollar is soaring right now. Runaway productions from the United States is
shrinking and it will shrink dramatically.
I think that all of the organizations should rethink the notion of six
out of ten drama. Every one of the U.S.
networks are considering it as an option right now. The whole idea of a Canadian program being
simulcast on a Friday or Saturday night on a U.S. network I think is an option
that we should all be considering and looking at. It is a little bit off topic, but I just
wanted to put that on the table as it relates to the benefits package.
LISTNUM
1 \l 11746 Thank
you very much for the opportunity to speak today.
LISTNUM
1 \l 11747 THE
CHAIRPERSON: Thank you very much.
LISTNUM
1 \l 11748 THE
SECRETARY: Thank you.
LISTNUM
1 \l 11749 Now
we will hear Tricon Films & Television.
Please introduce yourself and you have ten minutes.
INTERVENTION
LISTNUM
1 \l 11750 MS
GORFOLOVA: Thank you.
LISTNUM
1 \l 11751 Honourable
Commissioners, honourable Chair, thank you for letting me speak here. It is strange because we are the first people
to actually speak in support of this deal here.
LISTNUM
1 \l 11752 I
have founded the Tricon Films and Television in 2000. It was actually based on a commission from
Alliance Atlantis, who has been my longest client. Tricon Films and Television produces what we
call lifestyle reality television, which I know not many people are not all
that in favour of. But over the seven
years, we started with a commission of 13 episodes for life network at that
time, and three years later it went to 169 episodes and sold in the majority of
countries around the world.
LISTNUM
1 \l 11753 Seven
years later we have grown from a small production company to a production
company that produces hundreds of hours of television a year. We produce for almost every broadcaster in
Canada. We produce for U.S. broadcasters
as well.
LISTNUM
1 \l 11754 But
90 per cent of our programming does sell internationally. The majority of our programming has also sold
to the United States. So, I am not here
to brag about what we do, but it is just to show that lifestyle television,
reality programming is watched and we should be proud of it in many ways.
LISTNUM
1 \l 11755 When
we got our first commission from Alliance Atlantis, it was kind of the
beginning of the lifestyle reality television's run, and all the specialty
channels have been in support of this type of programming. They have pretty much built their specialty
channels on this kind of programming.
They have come a long way.
LISTNUM
1 \l 11756 In
the beginning there was very little support even from Alliance Atlantis to
these specialty channels, and we have seen a significant difference over the
seven years. The first year we were
deregistering our RRSPs to pay our people because we couldn't get paid for six
months, and it just doesn't happen these days because there has been more
resources put behind these channels, but there are still limits, and that is
what brings me more into discussing of why we are in support of this deal.
LISTNUM
1 \l 11757 As
John said, and we are probably going to be speaking of exactly the same thing,
CanWest brings a terrestrial channel and it brings terrestrial viewers, which
brings vertical integration. It does
bring larger commissions to programming that we do. It gives us bigger opportunities to produce
better programming.
LISTNUM
1 \l 11758 Over
the last few years, the majority of shows that I have got a commission in
Canada for, especially for smaller specialty channels, I had to find a gap
financing either from a foreign broadcaster or private funding or whatever
there is, to be able to produce these shows.
All these shows do very well on the Canadian network later and, as I
said, sell internationally. So there is
a risk diversification.
LISTNUM
1 \l 11759 But
it would be great for us to be able to produce bigger shows. It would be great to see them on several
channels in Canada. It would be great to
see advertising for your show on different networks. I think that is the bottom line of why I am
in support of this.
LISTNUM
1 \l 11760 Thank
you.
LISTNUM
1 \l 11761 THE
SECRETARY: Now we will hear Aboriginal
Peoples Television Network. Please
introduce yourself and you have ten minutes.
LISTNUM
1 \l 11762 Thank
you.
INTERVENTION
LISTNUM
1 \l 11763 MR. LaROSE: Merci.
LISTNUM
1 \l 11764 Mr. Chair,
Mr. Vice‑Chair, Commissioners and staff, my name is Jean
LaRose. I am the chief executive officer
of Aboriginal People's Television Network, and I am an Abenaki citizen of the
Odanak First Nation.
LISTNUM
1 \l 11765 I
am appearing before you today to express APTN's support for the application by
CanWest to acquire the broadcasting companies of Alliance Atlantis
Communications Incorporated. Over the
past decade CanWest has made significant contributions to APTN, in particular,
and to the aboriginal community.
LISTNUM
1 \l 11766 CanWest
has consistently demonstrated its commitment to enhancing the role of
aboriginal peoples in the Canadian broadcasting system. CanWest supported APTN's original licence
application more than eight years ago, the only broadcaster that did so, I
might add.
LISTNUM
1 \l 11767 Together,
we established a CanWest APTN production fund from the benefits package arising
from the WIC acquisition in 2000. Most
recently, we have worked together in an alliance to broadcast the National
Aboriginal Achievement Awards.
LISTNUM
1 \l 11768 CanWest
is building on that long history of support with the proposed benefits package
that is part of this application. Approval
of this application will ensure that programming will continue to be produced
that will appeal to viewers of both APTN and CanWest television and specialty
networks.
LISTNUM
1 \l 11769 We
are particularly pleased that CanWest has once again committed to devote
considerable funds to the production of aboriginal drama programs. As the Commission is well aware, drama is one
of the most popular forms of television programming and it plays a critical
role in ensuring that the stories of aboriginal peoples are effectively told
from their own perspective and in their own words.
LISTNUM
1 \l 11770 It
is an unfortunate reality of life that high quality drama programming is
extremely expensive and the expense is often prohibitive, particularly for
aboriginal producers. That is why the
APTN aboriginal drama project proposed by CanWest is so important. The $2 million that CanWest has set aside for
drama productions that will be aired on APTN in the first broadcast window and
hopefully on CanWest for the second window or shared window reflects the
company's ongoing commitment to develop programming that is attractive to both
of our audiences.
LISTNUM
1 \l 11771 The
fund will be used for productions that will be of interest for both
broadcasters and our audiences. This
programming will contribute to reducing stereotypes and will help build bridges
between aboriginal communities and the rest of Canada.
LISTNUM
1 \l 11772 The
Canadian broadcasting system has produced only a small amount of high quality
programs featuring aboriginal talent, both on screen and behind the
scenes. In our view, the limited
knowledge that the general population in Canada has regarding aboriginal
peoples can in part be traced back to the fact that Canadians have had very
little exposure to First Nations, Inuit and Métis characters through the
programming they watch on their television sets, and the exposure they do have
is more often than not through the lens of a news camera. The whole picture is not seen.
LISTNUM
1 \l 11773 This
is starting to change with the broad reach of services like APTN and the
contribution that a number of broadcasters like CanWest are making to the
production of drama programming by aboriginal producers.
LISTNUM
1 \l 11774 CanWest's
proposal to contribute this funding to independent aboriginal producers is also
important because it will foster the development of aboriginal talent within
the broadcasting industry in Canada. The
aboriginal producers that will receive this funding will use aboriginal
writers, directors, actors and other key personnel to work on these
productions. This funding will create
new opportunities for aboriginal individuals that would probably not otherwise
be available.
LISTNUM
1 \l 11775 APTN
is also very pleased that CanWest continues to see its relationship with APTN
as a partnership that can benefit broadcasters.
By granting APTN the first window broadcast rights to this drama
programming, CanWest recognizes that APTN is playing a leading role in
presenting images of aboriginal peoples in television and in ensuring that
First Nations, Inuit and Métis peoples are able to tell their stories to their
own communities and to mainstream Canadians.
LISTNUM
1 \l 11776 The
fact that CanWest has indicated that its service will receive the second
broadcast window will further ensure that programming created by aboriginal
producers will reach a wider Canadian audience.
In this respect, we would note that there are natural affinities between
some of the Alliance Atlantis specialty services that CanWest is seeking to
acquire and APTN that will allow us to develop vibrant and interesting Canadian
dramas that will be attractive to Canadians from all walks of life.
LISTNUM
1 \l 11777 In
addition to the APTN aboriginal drama project, CanWest is also committed to
contribute funds to several other initiatives that will provide much needed
support and assistance for aboriginal individuals who are interested in working
in the broadcasting industry.
LISTNUM
1 \l 11778 For
instance, CanWest has committed to contribute $190,000 over seven years to the
Canadian council for aboriginal business, which is the country's leading non‑profit
organization dedicated to promoting the full participation of aboriginal
peoples in the Canadian economy. CanWest
is proposing to develop, in partnership with CCAB, a much needed scholarship
program for aboriginal film and television students enrolled in the post‑secondary
institution.
LISTNUM
1 \l 11779 CanWest
is also proposing to contribute $500,000 to the National Aboriginal Achievement
Foundation in support for the foundation's industry in the classroom series
called Taking Pulse. We believe this
initiative, which will consist of developing a high school curriculum and video
that will target aboriginal youth, will play an important role in the development
of the next generation of aboriginal producers and broadcasters.
LISTNUM
1 \l 11780 APTN
is considering airing these productions once the series is completed both as an
educational tool, but most importantly, as a vehicle to reach out to our youth
and present them with career opportunities they may not have considered.
LISTNUM
1 \l 11781 Another
benefit directed towards the aboriginal community is the proposal to contribute
money to the Imaginative Film and Media Arts Festival. This is an international festival that
celebrates the latest work by aboriginal peoples in film, video, radio and new
media. Financial contributions to the
festival will help ensure that the talents of Canada's aboriginal peoples are
showcased and recognized.
LISTNUM
1 \l 11782 I
would also point out that CanWest has proposed a number of other benefits that,
while not directly going to APTN or an aboriginal organization, are designed to
promote and encourage diversity in the Canadian broadcasting system. That initiative will certainly be of
assistance to aboriginal peoples. We
fully support CanWest's efforts to provide funding to support under‑represented
groups in Canadian society.
LISTNUM
1 \l 11783 These
initiatives reinforce and clearly give life to the spirit and intent of the Broadcasting
Act and the CRTC's vision for diversity in the system.
LISTNUM
1 \l 11784 In
our view, the financial contributions that CanWest has proposed as part of
these benefits should be recognized by the Commission in the broadcasting
industry as one of the key positive outcomes associated with ownership
transactions like these. These
transactions allow broadcasters like CanWest to grow and consolidate their
media holdings, which then gives them the resources that others like APTN can
leverage.
LISTNUM
1 \l 11785 APTN
has, on several occasions in the past, acknowledged that larger broadcasting
entities are necessary in Canada to meet the challenges of new technologies and
audience fragmentation. We recognize
that it is important for Canada to have large robust media companies. It is equally important, however, for the
Commission to ensure that smaller independent broadcasters, particularly those
that are operated by or for under‑represented groups, continue to be able
to make significant contributions to fulfilling the objectives of the
Broadcasting Act.
LISTNUM
1 \l 11786 One
key way to do this is to make sure that the smaller broadcasters like APTN have
the resources in terms of finances and talent necessary to continue to provide
audiences with vibrant and compelling programming.
LISTNUM
1 \l 11787 As
I stated in past appearances before you, I believe that the Commission must
allow the development of a strong industry to face the challenges of global
competition, while using its regulatory and policy powers judiciously to ensure
that the Canadian content element in the industry is never lost.
LISTNUM
1 \l 11788 Over
the years, CanWest has demonstrated that it is committed to working with APTN
and with independent aboriginal producers to support the production of
programming that meets the needs of the aboriginal community in Canada and also
speaks to the wider Canadian audience.
LISTNUM
1 \l 11789 The
support that CanWest has provided to APTN and aboriginal peoples in
broadcasting through its contribution to the CanWest APTN production fund, its
broadcast of the National Aboriginal Achievement Awards and our collaboration
on the dramatic series RenegadePress.com is evidence of the strong commitment.
LISTNUM
1 \l 11790 APTN
supports CanWest's application to acquire Alliance Atlantis and the tangible
benefits package proposed in that application.
We believe that the financial commitments and initiatives outlined by
CanWest will provide significant support to APTN and aboriginal peoples
involved in broadcasting.
LISTNUM
1 \l 11791 I
thank the Commission for this opportunity to appear at this hearing in support
of CanWest, and I will be pleased to answer any questions you may have
regarding your intervention.
LISTNUM
1 \l 11792 THE
SECRETARY: We will now hear the
presentation from Innoversity. Please
introduce yourself and you have ten minutes.
LISTNUM
1 \l 11793 Thank
you.
INTERVENTION
LISTNUM
1 \l 11794 MS
REYES: Thank you.
LISTNUM
1 \l 11795 Good
morning, Commissioners. My name is
Cynthia Reyes. I am Chair of
Innoversity.
LISTNUM
1 \l 11796 Innoversity
was founded in winter of 2000 by two veteran media professionals ‑‑
I am one of them ‑‑ in response to what we saw as a great lack
of cultural diversity of people with disabilities and other people from
minority groups, both in the workplaces and in the content of Canadian
broadcasting, and particularly in mainstream broadcasting at the time.
LISTNUM
1 \l 11797 Today
we support organizations such as APTN, the proposed Canada 1 TV, and we support
major broadcasters who are making very serious efforts to increase the cultural
diversity and the participation of under‑represented groups in their
workplaces and in their content.
LISTNUM
1 \l 11798 I
am here today to speak in support of the application.
LISTNUM
1 \l 11799 Innoversity
holds an annual summit. Last year we had
over 1,000 people attending the summit.
The purpose of the summit is primarily to bring together people from
under‑represented groups with broadcasters. A lot of education happens. Executive training is held for broadcast
managers, and career training; training in how to pitch projects for air and
for film are held at the summit each year.
LISTNUM
1 \l 11800 A
lot of good has come out of it. A number
of people have gotten jobs, internships and other opportunities or have
developed their program ideas that were pitched at the summit.
LISTNUM
1 \l 11801 Last
year we also launched the media access and participation project which is
called MAPP for short, which is dedicated to helping people with disabilities
to find their place in the media sun. I
suppose you all know that people with disabilities are having a very hard
time. Many of them live below the
poverty line and even if they get the training, their unemployment rates are
extremely high in this country, so much so that a friend of mine who is an
advocate for people with disabilities in the media is threatening to apply for
refugee status in Britain, where apparently people with disabilities who have
media experience have a much easier time both as citizens and as professionals.
LISTNUM
1 \l 11802 MAPP
has been working with broadcasters such as CanWest and Alliance Atlantis and
others to help educate media managers and to help to educate people with
disabilities about career opportunities.
LISTNUM
1 \l 11803 We
also co‑produce a program called Through Our Eyes arts initiative, which
helps grades 7 and 8 students, particularly students from under‑represented
groups, blacks, Vietnamese, Asian people of various kinds, aboriginal people,
all kinds of people, and primarily living in disadvantaged communities, for
these children to learn about television and film. We trained them in production skills. They produced a total of seven short films,
and they have been chosen for many film festivals around the world in the last
year.
LISTNUM
1 \l 11804 It
has been a delight for us to see these children. There are 25 of them taking part in the
program, and we asked them before this program did you ever consider a career
in the media. All but one said no. Today, the majority of them are considering
it and our challenge will be how to encourage others like them and encourage
them as they move forward through high school and college to continue in this
path.
LISTNUM
1 \l 11805 We
support CanWest's application because for several years both CanWest and
Alliance have played strong roles as partners and sponsors of the Innoversity
creative summit. Alliance Atlantis has
been one of the sponsors of our pitch competition, the lifestyle category,
training and offering development contracts to people with good ideas for any
one of the Alliance Atlantis channels.
LISTNUM
1 \l 11806 CanWest
Global has helped Innoversity to develop the first national annual media career
fair in the country. In fact, largely
with the help of CanWest last year the career fair was a huge success.
LISTNUM
1 \l 11807 We
hope that becoming a larger organization means that CanWest will bring greater
strength and breadth and heft to Innoversity and help us to realize our mutual
goals. In fact, we strongly expect this,
and I have served notice on my colleagues at CanWest that we hope that this is
an opportunity for them to expand their involvement with Innoversity.
LISTNUM
1 \l 11808 Today,
as we look around the media industry, we see that strides have been made in
reflecting a greater diversity of the population of our country on the front
lines of broadcasting, but certainly not even in the middle levels of
management. People of colour, aboriginal
people, people with disabilities, internationally trained professionals,
immigrants, are left out of those ranks.
We all know they are left out of the ranks of the ownership by and
large, but we would like to see them far better represented through the ranks
of the mainstream media. The time has
come, and quite frankly, in my opinion, passed, and I think we have to learn
from the lessons of integrating women which were primarily white women, white,
able‑bodied women in the media industry, we have to apply that now to
other under‑represented groups of today.
LISTNUM
1 \l 11809 This
is why I think it is so important that CanWest continues as a partner to us in
the annual media career fair, to help to introduce these under‑represented
groups to different opportunities in the media.
If you are not from a media family or you don't have a neighbour or a
friend or someone that you know well who is from the media, chances are you
will not consider it at all as a future career.
As we have learned and relearning from Through Our Eyes program, that
kids start to think about careers in grades 7, 8 and 9 and, as I mentioned
earlier, only one of 25 students in the Through Our Eyes program had even
remotely considered media as a career, and then had no idea what it involved
and how they could get there.
LISTNUM
1 \l 11810 So,
we are looking forward to working in partnership with the expanded CanWest, and
to achieve our mutual goals.
LISTNUM
1 \l 11811 Thank
you.
LISTNUM
1 \l 11812 THE
SECRETARY: Thank you.
LISTNUM
1 \l 11813 Now
we will hear Barna‑Alper Productions.
You have ten minutes. Please
introduce yourself.
INTERVENTION
LISTNUM
1 \l 11814 MR. BARNA: I am Laslo Barna. I am delighted to be here. Thank you very much for the opportunity.
LISTNUM
1 \l 11815 First
and foremost, I would like to congratulate you on your new logo. I hope it is a new logo, and I am not out of
line. Let me tell you why I like
it. Because my father had a furniture
store on St. Laurent in Montreal and his motto was "All roads lead to
Barna and Barna." If I interpret
the arrows properly, all roads lead to the CRTC.
LISTNUM
1 \l 11816 THE
CHAIRPERSON: The logo is not new. We are just displaying it more prominently.
LISTNUM
1 \l 11817 MR. BARNA: All right.
Certainly my road has led over and over to the CRTC, which is actually
quite wonderful. Years back ‑‑
I know I am taking away from time ‑‑ I erroneously enrolled at
Simon Fraser in the communications program thinking that it was a film making
program. They lectured us to death about
the CRTC, and I thought what on earth do I have to do with the CRTC. So it was not a wasted education.
LISTNUM
1 \l 11818 Our
company has been around for 30 years, and for 30 years I have been intertwined
with the CRTC, and I have made many appearances here. By and large, I have had a really good
experience, as I watched the broadcast spectrum expand and grow and
change. I am not a person who is afraid
of change.
LISTNUM
1 \l 11819 Because
I am one of the older guys now in the room, I would like to remind the
Commission how it used to be in the old days, like in the early eighties, you
had two phone calls to make. You could
call the CBC and you could call the National Film Board, and if they weren't
hiring, you could go back to bed for a year.
Things have gotten better.
LISTNUM
1 \l 11820 I
came here in support of the original licences for the Alliance family initially
for Discovery Channel. As a result of
the growth in the broadcast spectrum, we were able to build an interesting,
viable, healthy company. We ended up
making hundreds of hours of programming in history, in science, in drama
series, in movies. We did over 90
episodes of Da Vinci's Inquest and Da Vinci's City Hall. We did 54 hours for Global Television, a show
called Blue Murder, a mystery series. I
have done movies on Milgard, on Sue Rodriques, on Shaina Twain. We are about to release a film on Céline
Dion.
LISTNUM
1 \l 11821 Some
of the programming I am most proud of is programming that we did for the
History Channel. A series called Turning
Points of History, which enabled us to do an anthology series that enabled us
to do great Canadian historical events by some of the best film makers in this
country.
LISTNUM
1 \l 11822 so,
what do I think about this transaction?
First, I have to tell you that I am filled with a little bit of
regret. I am filled with regret because
the Alliance Atlantis folk did a hell of a good job with the networks. They fostered creativity, innovation. They supported us with dollars. There were no hassles. They made the right choices.
LISTNUM
1 \l 11823 There
was a tremendous pressure, for instance, to make the History Channel a war
channel, and they resisted that. They
always put more than was merited in terms of what they were getting back, and I
know there was internal bookkeeping to make things same, but they did a good
job. Of course now they hand over a
legacy that I would like to see protected.
LISTNUM
1 \l 11824 We
do many history programs. We just won
the Donald Brittain Gemini for a show called Fatherland. We did a feature documentary, which was a
precursor to our feature film Shake Hands With The Devil called The Last Just
Man for the History Channel.
LISTNUM
1 \l 11825 Unusually
the History Channel people said, you know what, one hour is not enough time to
give to Romeo Dallaire; the General deserves more time. It's unprecedented when a network not only
asks you to expand a program, but they put the money behind it, and they did.
LISTNUM
1 \l 11826 But
change happens. You know, I had a
tremendous allegiance to the original Discovery family led by Trina
McQueen. When it went to CTV, my heart
was in my throat. It was going into a
much larger corporation. Since then, we
have gone on to do hundreds of hours for the Discovery programs.
LISTNUM
1 \l 11827 So,
in the end, I have to conclude that change is challenging, it is inevitable,
and positive.
LISTNUM
1 \l 11828 Let
me talk a little bit about CanWest. They
are no strangers to me. Probably over a
decade ago ‑‑ well, I don't know if I should mention
this ‑‑ the first person I met that was related to CanWest was
David Asper because he happened to be the lawyer for David Milgard. So I had this inadvertent entry into the
Asper domain, which I enjoyed very much.
LISTNUM
1 \l 11829 But
then we developed a series, a mystery series which was immensely successful,
the Blue Murder series, and like John said, we sold into 52 different
countries.
LISTNUM
1 \l 11830 I
know there were some tough times, and I know that some people were unhappy that
there wasn't enough Canadian programming, but in the past couple of years at
CanWest, all that has changed. They are
a major source of documentary film making.
They support Canadian programs.
Falcon Beach was one of them.
LISTNUM
1 \l 11831 I
want to take a minute and talk about a program that completely took me by
surprise. They ordered a show from us
called Da Kink in my Hair. It is a show
that was adopted from a stage play, a fringe festival play. It is about a black hairdressing salon. They came to me to produce this show. I want to point out to the Commissioners,
this was done on real money. CanWest at
this point is disadvantaged in terms of the CTF envelopes, and they reached
into their pockets to make the show happen, because they believed in it.
LISTNUM
1 \l 11832 Let
me just say, in the course of doing this show, in the course of trying to put
shows on diversity that involved diversity together, and I have been doing this
for very many years, this is the first broadcaster that has stepped up to the
plate on principle, with money, with patience, with support, with advertising,
to make it a success.
LISTNUM
1 \l 11833 Indeed,
it has been very, very successful. The
measure of their support for this show can be seen in the Eaton's Centre, where
there's a full electronic billboard singing its praises.
LISTNUM
1 \l 11834 There
is another little ‑‑ and I will try to hurry up ‑‑
advantage to CanWest Global/Alliance Atlantis.
Mergers are really, really tough.
You bring together two different cultures. Barbara Williams, Christine Shipton have a
wealth of understanding and experience of the Alliance Atlantis Broadcast
Group. I have known both of them for
over a decade. I know the extent to
which they are committed to making things happen. I know that their track record, their
understanding puts them in a great position to do something that is
complimentary rather than detracting.
LISTNUM
1 \l 11835 I
have had many conversations with them. I
expect that the CanWest team will not be minimizing, will not be taking away
from, but will be adding to the immense success that Showcase, that Splice,
that History, that Food have become.
LISTNUM
1 \l 11836 I
just have two other observations. I want
to talk a little bit about the benefits package. I think it is great
LISTNUM
1 \l 11837 THE
REGISTRAR: I am sorry, but you have
about 30 seconds left.
LISTNUM
1 \l 11838 MR. BARNA: I just want to point out, I am 59 years old,
so this ten‑year business is way too long. It should be really five years actually, but
if you let them get away with seven, that would be good.
LISTNUM
1 \l 11839 What
else do I say in 30 seconds? I want to
say I want to take a chance with them.
All companies are under tremendous pressure from their shareholders, and
CanWest is no different, but I think the company has the integrity, they have
the vision, and that is why I am standing in support of their application.
LISTNUM
1 \l 11840 Thank
you.
LISTNUM
1 \l 11841 THE
CHAIRPERSON: Thank you very much for
your interventions.
LISTNUM
1 \l 11842 I
just have one question, Mr. Brunton.
You spoke about the soaring loonie.
I do not quite understand what is the implication there?
LISTNUM
1 \l 11843 MR. BRUNTON: The only point I was making is that in regard
to runaway production, that fuels a huge sector of the production community in
Ontario and certainly in B.C., and to some extent also in Halifax and Montreal,
that the advantage of producing runaway shows in Canada is diminishing quickly
and, at the same time, the appetite for co‑ventures with American
broadcasters is increasing.
LISTNUM
1 \l 11844 So,
I am just saying that the opportunity to make some compromises from our ten out
of ten position to some six out of ten productions I think is good timing
because part of what we need to do is support our production community from
coast to coast, and a lot of those people are going to be out of work pretty
soon with the dollar, if it remains at this level.
LISTNUM
1 \l 11845 THE
CHAIRPERSON: Thank you.
LISTNUM
1 \l 11846 Commissioner
Katz, you had a question.
LISTNUM
1 \l 11847 COMMISSIONER
KATZ: Thank you, Mr. Chairman.
LISTNUM
1 \l 11848 I
have a question for all of you actually.
LISTNUM
1 \l 11849 We
have heard a lot about the nature and the source of the financing of this
transaction. I guess I want to ask each
one of you whether you believe the nature and the source of financing for this
transaction will have any influence or impact on the production of Canadian
programming in Canada?
LISTNUM
1 \l 11850 MR. BARNA: Whenever you go borrow money from anybody,
there is tremendous impact. Whether, as
the Chairman pointed out, it is the Royal Bank or whether it is Goldman Sachs,
there is certainly cause to worry.
LISTNUM
1 \l 11851 I
would say that all of our colleagues share the concern that there is a pressure
on all of the companies, CTV included, to make the bottom line. If you were to ask me am I worried that
Goldman Sachs, in particular, is going to be in charge of the programming? No.
But if you were to ask me is there a tremendous pressure to pay off the
debt? Yes.
LISTNUM
1 \l 11852 But
I want to point out that we support this transaction. We are just independents. We are not powerful on one‑on‑one
negotiations. We are going to have to
rely on the CRTC to put those safeguards in that we have become accustomed
to. We are not able to make those
decisions in terms of how money is moved around in corporations.
LISTNUM
1 \l 11853 So,
am I particularly concerned? I am
concerned in the same manner that any large corporation ‑‑
they are large. Astral is large, Corus
is large, CTV Globemedia, they are huge.
They are in debt, some of them.
Even if they are not, they have to meet their bottom line, and it tends to
impact on the programming.
LISTNUM
1 \l 11854 MR. BRUNTON: As Barna said, we have been accustomed for
many years and certainly the timing of my career matching up with Telefilm, and
we were in a period in our early careers where there were two phone calls to
make.
LISTNUM
1 \l 11855 I
guess we have become accustomed to, in many ways, the CRTC protecting us by the
rules and regulations that they have put in place as it relates to quotas about
Canadian content and all of those things.
So, regardless of where the debt exists, there is still a sense on my
part, that whether it is Goldman Sachs or the Royal Bank, they are still going
to have to rise up to the rules and regulations that you set forth for the
Broadcast Act and so on and so forth.
LISTNUM
1 \l 11856 So,
when you are in the tight squeeze and ad revenue starts to shrink and all those
things, there is all sorts of mechanisms that people have to take into
consideration when they run their business, and I don't know how dramatically
that changes when there is very, very clear rules and regulations that are laid
out as to what the responsibilities of Canadian broadcasters are as it relates
to Canadian content and other aspects of our world.
LISTNUM
1 \l 11857 So,
that is certainly something that I have considered. It is a big world now. It is a very competitive world. As these companies get bigger and bigger and
bigger, where are the sources of potential investment? So, you know, in many ways we have put our
businesses in your hands to protect us from these things, and you have very
effectively over the course of my career, which spans almost 30 years.
LISTNUM
1 \l 11858 THE
CHAIRPERSON: Any other comments? Mr. LaRose.
LISTNUM
1 \l 11859 MR. LaROSE: Not more, except to say that most First
Nations peoples probably would be in the position to say we are not familiar
with borrowing because that is not something that was very open to us until
recently. But certainly as I mentioned
earlier, and as my predecessors here have said, the scope of how business is
being run now has changed tremendously.
A lot of our corporate sector is getting incredible investment from
outside this country to generate their growth, generate their expansions.
LISTNUM
1 \l 11860 So,
I think what we are seeing in the broadcast sector is no different than what we
are seeing in the mineral sector, what we are seeing in the resources
sector. The role, then, comes back to
you, the regulators to ensure that there is a balance between what the
expectation of Goldman Sachs may be down the road, as well as what your role as
regulators to ensure that the industry can do.
It will boil down to the policies and procedures that you all impose on
this deal.
LISTNUM
1 \l 11861 THE
CHAIRPERSON: Thank you.
LISTNUM
1 \l 11862 Commissioner
Arpin, did you have a question?
LISTNUM
1 \l 11863 COMMISSIONER
ARPIN: My question is directed to the
three producers that we have here at the table.
LISTNUM
1 \l 11864 The
current policy for benefits didn't always state that the money, the onscreen
money has to go towards the acquired organization. The way I am hearing your support
intervention, it seems to me that you don't mind if it goes to Global rather
than to the former Alliance Atlantis services.
Am I correct?
LISTNUM
1 \l 11865 MR. BRUNTON: I certainly don't. I really do think that in the development of
a program, quite often a program can start on cable and get its sea legs and
get its act together, get its writing team operating, get its cast operating
properly. Sometimes that takes a little
bit of time.
LISTNUM
1 \l 11866 Then
there is a point where something could break out and it can break out from
cable and really become a successful conventional.
LISTNUM
1 \l 11867 I
think the reverse can be the case as well.
I cited Falcon Beach, a drama series that we produced, and we really
benefitted by having a second window.
LISTNUM
1 \l 11868 So,
I think that there is a real possibility in this world, and we want and need as
many platforms as possible, including broadband and including digital and all
of these kinds of things. So, the more
platforms we can get for our content, the better. I think that it is kind of gray, and from my
perspective as a producer, I wouldn't necessarily take a prejudice over Global
versus Alliance Atlantis. There are
advantages for shows to be launched on both channels, personally.
LISTNUM
1 \l 11869 MR. BARNA: Some time ago I had an idea. Of course, unless we get a reality show going
called Trading Places, and you guys become independent producers, and we become
commissioners ‑‑ not a bad idea! Just six months. Would that make Parliament to sign up? Anyway...
LISTNUM
1 \l 11870 I
thought all these benefits packages ‑‑
LISTNUM
1 \l 11871 COMMISSIONER
ARPIN: It will not be able to work for
the following five years.
‑‑‑ Laughter /
Rires
LISTNUM
1 \l 11872 MR. BARNA: I gave thought to the notion that the
benefits packages in general, not this benefit package, ought to go to the
third party organization generally pooled under Telefilm or under the Canadian
Television Fund. By the way, to
CanWest's credit they established a fund, I forget which transaction, it was
out west, it was a $35 million promotion fund that was open to all
broadcasters, and then CTV came in and CTV sort of nationalized their money and
they used it internally.
LISTNUM
1 \l 11873 I
think that opportunity has been lost. If
at some point in some future transaction we were to consider these moneys going
to some third party administration to bolster the entire broadcasting system,
that would be attractive. Obviously it
is not on the table here.
LISTNUM
1 \l 11874 I
can't imagine a situation like ‑‑ I mean, what are we talking
about, going to Alliance versus to CanWest.
I think it is going to be an integrated operation. It just doesn't make any sense to me how it
is, like, you know, it will sit on one side and it will be firewall
protected. It just will call for abuse
of that fund. So, I am quite happy with
the way that the package, in that regard, has been put together.
LISTNUM
1 \l 11875 I
just want to say, I know it is not part of the question, I am not crazy about
the Canada focus ‑‑
LISTNUM
1 \l 11876 THE
CHAIRPERSON: Your time is up. You can't slide one in the back door.
LISTNUM
1 \l 11877 COMMISSIONER
ARPIN: Mr. LaRose, out of the
$136.9 million, they will allocate $2 million for aboriginal drama. Over a seven‑year period, that is an
average of plus or minus $300,000. Is
that sufficient to sustain aboriginal drama?
LISTNUM
1 \l 11878 MR. LaROSE: The thrust behind it, when I raised it with
CanWest, was that we would use that, and we are expecting them to also put
something, to develop a drama series and then trigger both of our envelopes,
either the aboriginal language envelope for us, or the CTF envelope for them.
LISTNUM
1 \l 11879 If
we were to partner in that fashion, I believe that we can generate a drama
series.
LISTNUM
1 \l 11880 COMMISSIONER
ARPIN: That $300,000 is incremental to
your broadcast performance involved, both organizations?
LISTNUM
1 \l 11881 MR. LaROSE: That is what I am hoping how it will work,
yes.
LISTNUM
1 \l 11882 THE
CHAIRPERSON: Thank you very much for
your presentation.
LISTNUM
1 \l 11883 I
think we will take a ten‑minute break, Madam Roy.
LISTNUM
1 \l 11884 THE
SECRETARY: Thank you.
LISTNUM
1 \l 11885 We
will be back at 10:20.
‑‑‑ Recessed at
1009 / Suspension à 1009
‑‑‑ Resumed at
1020 / Reprise à 1020
LISTNUM
1 \l 11886 THE
CHAIRPERSON: Madam Roy.
LISTNUM
1 \l 11887 THE
SECRETARY: We will now hear the
presentation from the Canadian Film and Television Production Association.
LISTNUM
1 \l 11888 Please
introduce yourself and your colleagues and you will then have ten minutes to
make your presentation.
LISTNUM
1 \l 11889 Thank
you.
INTERVENTION
LISTNUM
1 \l 11890 MR. MAYSON: Thank you.
LISTNUM
1 \l 11891 Mr. Chair
and members of the Commission, my name is Guy Mayson, and I am president and
CEO of the Canadian Film and Television Production Association.
LISTNUM
1 \l 11892 With
me today are four prominent Canadian producers and distinguished staff member.
LISTNUM
1 \l 11893 Sandra
Cunningham to my immediate right, president of Strata Films in Toronto, is
Chair of the CFTPA board. She is a co‑producer
of such Canadian features as The Statement, Being Julia, Where The Truth Lies,
and, most recently, Fugitive Pieces, and the theatrical feature length
documentary "27".
LISTNUM
1 \l 11894 Ira
Levy, of Breakthrough Films & Television of Toronto is a past Chair of the
CFTPA and co‑chair of our Broadcast Relations Committee. Among the programs he has executive produced
are Atomic Betty, The Adventures of Dudley The Dragon, Kenny Versus Spenny, and
the documentary series Little Miracles and King and Country.
LISTNUM
1 \l 11895 Julia
Keatley, president of Keatley Entertainment of Vancouver, is the co‑creator
and executive producer of the drama series Cold Squad and Godivas. Julia co‑chairs our Broadcast Relations
Committee and is another past Chair of the association.
LISTNUM
1 \l 11896 Last
but not least, Kevin Tierney, president of Park Ex Pictures in Montreal who is
co‑chair of the CFTPA's Feature Film Committee. Kevin produced and co‑wrote Canada's most
successful Bon Cop Bad Cop. His
television productions have been nominated for 11 Emmies and 23 Geminis.
LISTNUM
1 \l 11897 Also
with us today is Mr. John Barrack, the CFTPA's national executive vice‑president
and counsel.
LISTNUM
1 \l 11898 The
CFTPA represents almost 400 companies that create, finance, produce, distribute
and market feature films, television programs and interactive content for new
digital platforms.
LISTNUM
1 \l 11899 The
producers on our panel is here to share with your their experiences in creating
quality original Canadian television programs and films and to discuss the
impact that approval of this transaction could have in how they and their
colleagues do business.
LISTNUM
1 \l 11900 Sandra.
LISTNUM
1 \l 11901 MS
CUNNINGHAM: Thank you, Guy.
LISTNUM
1 \l 11902 Mr. Chair,
Commissioners, the CFTPA's support of this application is conditional.
LISTNUM
1 \l 11903 First,
the CRTC must be fully satisfied that effective ownership and control of the
undertakings being acquired is, and will continue to be, in Canadian
hands. This is the first principle of
Canada's broadcasting policy set out in the Act and is fundamental to ensuring
Canadian broadcasting remains Canadian. Without
such assurance, you cannot approve this transaction.
LISTNUM
1 \l 11904 There
was much debate surrounding this issue yesterday, and some further discussion
today. The Commission has been very
vigilant in identifying the risks associated with the control provisions
imposed on CanWest by Goldman Sachs, specifically limitations on increasing the
debt, the requirement to maintain a high EBITDA, and ensuring that a minimum
rate of return is achieved.
LISTNUM
1 \l 11905 Our
remaining concerns are:
LISTNUM
1 \l 11906 That
CanWest establish a Terms of Trade Agreement with the CFTPA on behalf of
independent production companies;
LISTNUM
1 \l 11907 That
CanWest maintain distinct programming executives and strategies for the AAC
specialty services;
LISTNUM
1 \l 11908 And
that it file a revised benefits package acceptable to the Commission.
LISTNUM
1 \l 11909 CanWest
has provided virtually no information about its future plans for the Alliance
Atlantis specialty services. These
include the Canadian success stories Showcase, History Television, the
Independent Film Channel, Slice, HGTV and a host of other specialty services.
LISTNUM
1 \l 11910 The
privilege of holding multiple licences for television services constitutes an
enormous public trust. Relative to its
peers, CanWest's record of funding and presenting Canadian priority programming
is woeful. An analysis of Global's
report to the CRTC detailing its independent production activities over the
past five years indicates that its average licence fees constituted a meagre 9
percent of the total production budgets for independently produced priority
programming.
LISTNUM
1 \l 11911 CanWest
must contribute much more to the development, creation, scheduling and
promotion of original Canadian programming in the genres of drama, documentary
and feature film, the very kinds of programming that the Alliance Atlantis
channels have championed since their inception.
LISTNUM
1 \l 11912 While
the goal of trying to build Canadian hits is laudable, the synergies suggested
by CanWest yesterday have the potential to turn the benefits for the specialty
services effectively into a pilot program for CanWest conventional television
networks. At the same time, this raises
the spectre of a reduction in shelf space for original Canadian programming on
the conventional networks.
LISTNUM
1 \l 11913 Kevin.
LISTNUM
1 \l 11914 MR. TIERNEY: Thank you.
LISTNUM
1 \l 11915 Theatrical
feature films have long been recognized as being a powerful force in
society. They make important
contributions to the cultural lives of Canadians.
LISTNUM
1 \l 11916 Last
year the government, in response to the report of the Standing Committee on
Canadian Heritage concerning a new feature film policy for the 21st Century,
stated:
"Film is one of the most
effective forms of cultural expression, and Canadians believe that it is
important that Canadian films be available in movie theatres and on television
in Canada."
LISTNUM
1 \l 11917 The
English‑Canadian film industry faces huge challenges. Our biggest challenge is securing financing
to develop, produce and promote quality Canadian feature films. Around the world, television broadcasters
like the BBC and Channel 4 in the U.K., and Canal Plus in France, play a
critical role in the financing, distribution and broadcasting of domestic
theatrical films, but this is not the case in Canada.
LISTNUM
1 \l 11918 The
lack of creative and financial cooperation between the theatrical and broadcast
markets makes Canada a rather sad anomaly in the world, and represents a
serious barrier to success for Canadian movies.
LISTNUM
1 \l 11919 You
need only look at the tremendous box office success of a movie like
"Trailer Park Boys", which first saw life as an original Showcase
production, to understand the potential that flows when producers, distributors
and broadcasters work collaboratively.
LISTNUM
1 \l 11920 In
Quebec there is clear evidence that audience success increases exponentially
when the various segments of the industry work together. This is an important element not only for
great box office success, but TV ratings as well.
LISTNUM
1 \l 11921 Without
specific commitments by Canadian television broadcasters to provide support for
this sector, we are deeply concerned that what is already a paltry contribution
to Canadian theatrical features will continue to dwindle away until it is
virtually non‑existent. We implore
you to take a more active role to address this.
LISTNUM
1 \l 11922 The
CRTC granted Showcase and Independent Film Channel licences for very specific
reasons that must not be forgotten.
LISTNUM
1 \l 11923 Thank
you.
LISTNUM
1 \l 11924 Ira.
LISTNUM
1 \l 11925 MR. LEVY: Thank you, Kevin.
LISTNUM
1 \l 11926 Our
written intervention was quite clear on the CFTPA's views concerning the
valuation of the transaction, and the amount of benefits that should be
payable. We stated that CanWest should
offer a tangible benefits package valued at no less than $142.2 million, as
opposed to the $136.9 million that was proposed.
LISTNUM
1 \l 11927 We
were also blunt about our concerns with some of the benefit initiatives that
were being proposed.
LISTNUM
1 \l 11928 We
recommend that 28 percent of the benefits should be deemed inadmissible, as
they are directed to supplementing in‑house programming initiatives
pertaining to the Global Television stations.
LISTNUM
1 \l 11929 The
news and public affairs and the star system initiatives proposed by CanWest are
directed to its own conventional television assets rather than the AAC channels
it is proposing to acquire.
LISTNUM
1 \l 11930 We
recommend that you require CanWest to file a revised benefits package that
redirects $34 million in expenditures to scripted drama and other priority
programming, including theatrical feature films and documentaries, as well as
new media content.
LISTNUM
1 \l 11931 Should
you determine that the value of the regulated assets is worth more than the
amount that CanWest has put forward, we ask that all additional benefits be
allocated to these purposes.
LISTNUM
1 \l 11932 And
we firmly believe that when benefits are self‑administered, the easiest
way to ensure incrementality and transparency is to require that all of the
programming benefits are allocated to unaffiliated, independently produced
programming.
LISTNUM
1 \l 11933 We
also recommended that the benefits be payable over no more than five
years. Our reason for this is that the
business arrangement underlying this transaction culminates in 2011 or 2013.
LISTNUM
1 \l 11934 If
CanWest is prepared to enter into a $1.4 billion transaction as a means of
growing its business, it should be prepared to commit to greater expenditures
to support the development, licensing and promotion of original Canadian
programming.
LISTNUM
1 \l 11935 Julia.
LISTNUM
1 \l 11936 MS
KEATLEY: Thank you, Ira.
LISTNUM
1 \l 11937 We
consider that the performance‑driven model of the CanWest‑Goldman
Sachs arrangement will be a major factor in CanWest's programming strategy and
spending over the next four years. This
is why we have asked you to pay careful attention to CanWest's Canadian and
foreign programming expenditure ratios.
You must ensure that the proposed business arrangement does not provide
an incentive to CanWest to decrease its Canadian programming expenditures. You can do so by imposing expenditure
requirements as Conditions of Licence at licence renewal.
LISTNUM
1 \l 11938 CanWest's
reply to our intervention addressed a couple of specific concerns that we raised
in our intervention. CanWest claimed not
to understand why it should be required to maintain separate programming
executives with decision‑making power at the AAC specialty services,
saying that:
"A decentralization of
programming strategies would effectively obviate the possibility of a cohesive
strategic direction."
LISTNUM
1 \l 11939 While
at first blush this might sound attractive, it has the potential to become our
worst nightmare. Without separate
programming management there will be fewer opportunities for independent
producers, decision‑making power will become overly concentrated, and
there will be a propensity to license fewer Canadian programs with the cost
amortized over more broadcast outlets.
LISTNUM
1 \l 11940 Differentiated
programming, separate decision‑making and program budgets are a means of
ensuring program diversity and channel distinction. This is why we keep emphasizing the
importance of the creation of original Canadian programming. It is also why we recommend that the
Commission investigate the terms of any program supply agreements between
CanWest and Goldman Sachs, which proposes to purchase AAC's catalogue of
Canadian programming.
LISTNUM
1 \l 11941 CanWest
has said that a greater scale would give them greater program buying power. This greater buying power must be devoted to
original Canadian production. We want
assurance that a steady supply of Canadian catalogue content will not divert
funds from the creation of original Canadian programming.
LISTNUM
1 \l 11942 John.
LISTNUM
1 \l 11943 MR. BARRACK: Thank you, Julia.
LISTNUM
1 \l 11944 Mr. Chairman
and Members of the Panel, a transaction such as this gives rise to greater
business and economic pressure to maximize return on investment. This has consequences for the independent production
sector in such areas as buying practices and the acquisition of program rights.
LISTNUM
1 \l 11945 Faced
with the reality that both CanWest and Alliance Atlantis, independent of one
another, have some of the most aggressive rights acquisition practices in our
sector, safeguards and, specifically, terms of trade are vital to rebalancing
the producer‑broadcaster relationship.
LISTNUM
1 \l 11946 CanWest's
application talks specifically about improved promotional and viewing
opportunities and an integrated approach to new and traditional media. It talks about the development, exhibition
and promotion of Canadian content across multiple genres, and an improved
ability to access audiences on multiple regulated and unregulated viewing
platforms.
LISTNUM
1 \l 11947 When
coupled with CanWest's emphasis on achieving synergies as between its own and
the AAC assets, the situation goes from bad to worse.
LISTNUM
1 \l 11948 Accordingly,
we are asking you to impose the negotiation of substantive terms of trade
between CanWest and the CFTPA as a condition of approval of this transaction.
LISTNUM
1 \l 11949 MR. MAYSON: We ask the Commission to send a clear message
to CanWest about the obligations it will be expected to fulfil in return for
the privilege of being granted ownership of additional specialty television
services.
LISTNUM
1 \l 11950 We
want to see evidence that this particular broadcaster makes original Canadian
programming its number one priority.
LISTNUM
1 \l 11951 To
this end, we want to see appropriate incremental benefits dedicated to a
distinct programming strategy for the Alliance Atlantis specialty channels in
drama, feature film and documentary programming underpinned by terms of trade.
LISTNUM
1 \l 11952 Thank
you for your attention today. We would be pleased to answer any questions.
LISTNUM
1 \l 11953 THE
CHAIRPERSON: Thank you for your
presentation.
LISTNUM
1 \l 11954 First
of all, about the terms of trade, as you know, the Commission has several times
expressed its support for such an idea and has urged the industry to negotiate,
and specifically put an expectation in the Rogers' approval that such a thing
should be negotiated.
LISTNUM
1 \l 11955 So
when I read here you saying, "We are asking you to impose the negotiation
of substantive terms of trade between CanWest and CFTPA as a condition of
approval of this transaction," what do you have in mind?
LISTNUM
1 \l 11956 Is
what we did in Rogers good enough, or do you expect more, and, if so, what?
LISTNUM
1 \l 11957 MR. MAYSON: I appreciate the comment,
Mr. Chair. I think what we are
looking for here is a signal, because we are dealing with a group of very
important specialty channels, that that would be included in the terms of trade
discussions.
LISTNUM
1 \l 11958 I
think we are looking for a signal that CanWest thinks that's a good idea.
LISTNUM
1 \l 11959 THE
CHAIRPERSON: I understand your emphasis
on original Canadian production, and I understand your thinking that a simple
way of ensuring incrementality is to suggest that everything has to be
negotiated with independent producers on the benefits, but I am somewhat perplexed by the idea of
having separate programming for the specialty channels and the network.
LISTNUM
1 \l 11960 Presumably,
some of the reasons for any merger are synergies and cost savings. Another one, of course, is the cost benefit
of ideas, of talent, et cetera.
LISTNUM
1 \l 11961 Just
before you came up, Mr. Barna said:
If you tried to artificially separate them, it won't work. They are going to use their creativity to
spend the money where they want to.
LISTNUM
1 \l 11962 Words
to that effect. That's not exactly what
he said.
LISTNUM
1 \l 11963 How
do you see us imposing that, and why do you feel that would be effective?
LISTNUM
1 \l 11964 Because
surely, in one corporation that is exactly what is going to happen, you will
want to spend the money where you think it best and it will be spent in the
CanWest empire, no question about it, because they have to spend the
benefits. But whether it is spent here
or there, why do you feel that makes such a great difference?
LISTNUM
1 \l 11965 MR. MAYSON: I think our big concern in all of this, in
the whole consolidation world that we are living in, and we have always been
very careful in terms of couching our comments on consolidation that we don't want
to see a diminishment of opportunities.
LISTNUM
1 \l 11966 I
think there is always a danger in a transaction such as this for ‑‑
while we understand the synergy arguments and we understand that there are
efficiencies to be had, there is a huge concern in the production sector that
that suddenly means fewer opportunities and that is our fundamental worry.
LISTNUM
1 \l 11967 That
is why we think if you have a distinct programming strategy for a number of
different specialty channels with distinct mandates you can address that directly.
LISTNUM
1 \l 11968 THE
CHAIRPERSON: Isn't that somewhat
synthetic? I mean do you really think
that if we impose that and they do it you will have truly substantively
different considerations being made by two programming committees within the
same company?
LISTNUM
1 \l 11969 MR. MAYSON: I would only say that I think you can
guarantee that by ensuring that there is a distinct programming strategy with
distinct budgets and decision‑making.
LISTNUM
1 \l 11970 Do
you want to jump in on that?
LISTNUM
1 \l 11971 MS
CUNNINGHAM: Yes, just one point from the
feature film world.
LISTNUM
1 \l 11972 CanWest
Global does not have a history of purchasing or pre‑buying feature films
at all and yet both Showcase and the Independent Film Channel have had strong
reputations of programming and that has something to do with why they existed
but also with who was doing the programming and it is the knowledge of the
people.
LISTNUM
1 \l 11973 I
think CanWest ‑‑ I know it was pointed out on the previous
panel by producers that Barb Williams and Christine Shipton have a knowledge of
the world ‑‑ they are two people. They don't necessarily control their
budgets. In our experience, more people
with distinct tastes allows for more diverse voices to be heard.
LISTNUM
1 \l 11974 This
came up at a previous hearing with the CTV hearings that we were at, and in
fact in meetings that we had with them, they acknowledged when they were
considering how they would approach the branding of the CHUM specialty channels
that there was a need to have distinct programming voices.
LISTNUM
1 \l 11975 THE
CHAIRPERSON: That last point, that is
exactly what ‑‑ if they think that is the way to grow their
business, to have distinct programming for different channels, they will do it
because it makes good sense. But us
imposing it, that was exactly the point I was hooking into.
LISTNUM
1 \l 11976 CTV
testified, yes, they would do it and they justified it because they thought
they thereby could broaden their reach.
I would hope CanWest does the same but my question was really ‑‑
I can understand what you want. I just
wonder whether it is going to be really workable and will have the desired
result that you want, in effect, more doors to knock on.
LISTNUM
1 \l 11977 MR. TIERNEY: I just think it would be a shame to see
Showcase be turned into a farm team for Global.
I mean that is essentially what I gather from the application, is that
this supposed synergy is really creating a triple A team, to use a baseball
metaphor, and I don't think that that is necessarily a route that we would want
to see it go.
LISTNUM
1 \l 11978 THE
CHAIRPERSON: Yes, I concur,
obviously. It would be a shame. I also wonder whether it would be good
business to do that. I think it would
surely lead to an audience loss.
LISTNUM
1 \l 11979 MR. TIERNEY: I disagree.
I mean I think ‑‑ what is good business? Good business is providing Canadian audiences
with a diversity of programming and not homogenizing the whole system.
LISTNUM
1 \l 11980 So
in this asset acquisition, I think it is important that they be reminded that
the traditions, that the original licences granted to the Independent Film
Channel, to Showcase, that there was thought and time and a certain kind of
sensibility that was imposed on those licences and I don't think that they can
just be simply eradicated in a transfer of assets.
LISTNUM
1 \l 11981 THE
CHAIRPERSON: Okay.
LISTNUM
1 \l 11982 MS
KEATLEY: Just to add to that.
LISTNUM
1 \l 11983 We
do think that within a large broadcast universe there is an overall synergy and
certainly the team that is in place with Barb and Christine is a great team and
there will be an overall vision that will flow from that but the individual
teams that run the channels ‑‑ and in fact both Barb and
Christine came from the Alliance Atlantis world originally and know that
extraordinarily well.
LISTNUM
1 \l 11984 So
it is really looking at ‑‑ I think from our perspective in
representing the whole independent production community, we don't want Showcase
to suddenly become Global II. I think it
is really that kind of a rebroadcast network or something like that and it is
not to our colleagues Mr. Barna and Mr. Brunton ‑‑
LISTNUM
1 \l 11985 We
all want our shows to be seen on more or less, you know, by more Canadians, in
more avenues, in different platforms. I
don't think anyone is ever talking about that.
LISTNUM
1 \l 11986 What
we have always talked about is that we should also be paid for it. It shouldn't always become part of this
greater group, which is essentially, to a certain degree, where we have had
fears where this has been going and it has been happening with other
amalgamations of broadcast groups.
LISTNUM
1 \l 11987 So
it is great to talk about your show airing on another channel but are you
actually going to be compensated for that or is that just a lost opportunity?
LISTNUM
1 \l 11988 THE
CHAIRPERSON: Does it take a different
talent or a different person to do the programming for a specialty channel than
for a general over‑the‑air broadcaster or is this ‑‑
I mean in terms of the way you look at things, are these people interchangeable
or are these really in effect a separate genre of talent that you are looking
for?
LISTNUM
1 \l 11989 MR. LEVY: I think good programmers know how to program
for both specialty and for conventional channels.
LISTNUM
1 \l 11990 The
challenge though, I think, is that the brands that Alliance Atlantis channels
have built up because they have had actually specific programmers working on
each one of the channels has actually created what in fact is a very valuable
asset, which of course is why CanWest Global wants to buy it.
LISTNUM
1 \l 11991 So
you don't want to throw the baby out with the bath water, I think, is really
the point.
LISTNUM
1 \l 11992 THE
CHAIRPERSON: Okay, thank you very much.
LISTNUM
1 \l 11993 Do
any of my colleagues have any questions?
LISTNUM
1 \l 11994 COMMISSIONER
KATZ: I have one question.
LISTNUM
1 \l 11995 On
page 10 you indicate ‑‑ and I guess, John ‑‑
that CanWest and Alliance have some of the most aggressive rights acquisition
practices in our sector. Can you elaborate
on that and how does that compare to CTV or Corus or anybody else as well?
LISTNUM
1 \l 11996 MR. MAYSON: I am going to ask Mr. Barrack to address
that. He is actively involved in our
rights negotiation process.
LISTNUM
1 \l 11997 MR. BARRACK: One of the great joys of my job is I get
approached by our members in terms of some of their business practices in terms
of dealing with various broadcasters and certainly what we have seen occur
across the board in the last five years is a real change in the type of
licences, in the structure of licences.
LISTNUM
1 \l 11998 You
have gone from a situation ‑‑ and I am giving you some
context. You have gone from a situation
where there was an acquisition of a program for a single platform for either a
limited number of plays or a short time to where that has accelerated now up to
seven, as many as 12 years across all platforms.
LISTNUM
1 \l 11999 To
put it in specific context, CanWest and AAC in particular have sort of led the
way in terms of what we call corporate acquisition, so instead of acquiring the
specific rights for the specific channel, acquiring those rights for all
channels but for no more money.
LISTNUM
1 \l 12000 That
is obviously what has underpinned our real need for terms of trade and when you
talk about larger companies being stronger and the Chair talks about larger
companies being stronger in the current environment, that may well be the case
in general but that really is what underpins the very need for terms of trade,
and vis‑à‑vis other broadcast entities these are some of the most
aggressive rights grabs, again, for no more compensation and if you now bring
these entities together, that is only going to exacerbate that situation.
LISTNUM
1 \l 12001 I
think Mr. Levy might be able to give you some more specific examples from
a producer perspective.
LISTNUM
1 \l 12002 MR. LEVY: Well, again, I think John has really hit upon
it. It is not just a situation with
CanWest Global or Alliance Atlantis. I think
it is happening across the board with all broadcast groups, especially with
consolidation.
LISTNUM
1 \l 12003 I
think John really hit the point. The way
to address it is to ‑‑ the way to have a rebalance of it is
with terms of trade because that can actually stop the erosion of rights that
an independent producer has in terms of their own programs.
LISTNUM
1 \l 12004 MR. BARRACK: The effective difficulty is that if this
continues in this particular fashion, it is not going to be possible for
independent producers to continue to put the financing together which is
necessary to create these productions.
It is just not.
LISTNUM
1 \l 12005 So
effectively, you will be reducing independent producers to service producers
and if the goal of the Broadcast Act is to have those independent voices, that
need to see those voices maintained is all the more necessary in the face of
these larger corporations, if I might, and certainly that is really why we are
asking you for the terms of trade and particularly vis‑à‑vis these
two groups.
LISTNUM
1 \l 12006 THE
CHAIRPERSON: On the benefits ‑‑
one more question ‑‑ you are suggesting that the package
should be hiked from $136 million to $142 million. I gather that you arrive there by taking into
account the minority interests and regulated industries that we don't count
because we don't have to approve the transfer.
LISTNUM
1 \l 12007 Are
you aware of any precedent where this has been done, where we calculated the
benefit on regulated industries where the proportion is below the threshold so
that they do not have to come to us for licence transfer approval?
LISTNUM
1 \l 12008 MR. MAYSON: We provided that valuation based on Ernst
& Young's evaluation that it was basically an asset and essentially has
value. We understand the counter
argument but we will certainly look into the whole precedent argument. We felt it was simply logical that these are
assets, they have value in the marketplace, so they should be part of the
transaction.
LISTNUM
1 \l 12009 THE
CHAIRPERSON: Yes, I understand the
logic. I just wondered whether we had
ever done it before or not. You don't
know.
LISTNUM
1 \l 12010 Okay,
thank you very much for your presentation.
LISTNUM
1 \l 12011 MR. MAYSON: Thank you.
LISTNUM
1 \l 12012 THE
SECRETARY: I would now call the Canadian
Association of Film Distributors and Exporters and the Manitoba Motion Picture
Industry Association to appear as a panel and present their intervention.
‑‑‑ Pause
LISTNUM
1 \l 12013 THE
SECRETARY: We will start with the
Canadian Association of Film Distributors and Exporters. Please introduce yourself and you will then
have 10 minutes for your presentation.
LISTNUM
1 \l 12014 Thank
you.
INTERVENTION
LISTNUM
1 \l 12015 MR. EAST: Thank you.
LISTNUM
1 \l 12016 Mr. Chairman
and Members of the Commission, thank you for the opportunity to appear before
you today.
LISTNUM
1 \l 12017 My
name is Ted East and I am President of the Canadian Association of Film
Distributors and Exporters, or CAFDE.
LISTNUM
1 \l 12018 CAFDE
is a non‑profit trade association that represents the interests of
Canadian owned and controlled feature film distributors and exporters. Our members include Alliance Films, Castell
Films, Equinox Films, Maple Pictures, Maximum Films, Mongrel Media, Seville
Pictures, and TVA Films.
LISTNUM
1 \l 12019 CAFDE
members distribute films in Canada from all over the world and in the widest
range of genres and budgets.
LISTNUM
1 \l 12020 I'd
like to speak to you today about a couple of issues that are of concern to us
in this proposed transaction.
LISTNUM
1 \l 12021 The
first issue is related to foreign ownership.
The CRTC does not have jurisdiction over film distribution, however,
there are similar foreign ownership guidelines that are part of a 20‑year
old feature film distribution policy.
This policy has been instrumental in building a Canadian distribution
sector from a handful of boutique companies to a group of strong companies with
real market clout. It has also created a
landscape that encourages new competition.
LISTNUM
1 \l 12022 Mongrel
Media's success and growth over the past five years is testament to this, as is
the recently announced Maximum Films, a new company owned by Alliance founder
Robert Lantos.
LISTNUM
1 \l 12023 In
the past year there have been a number of transactions that have challenged the
ownership guidelines in the distribution policy and CAFDE members were very
concerned that it would not be upheld, so we were very relieved when the
Minister of Canadian Heritage made statements to the industry and the public
that it would be.
LISTNUM
1 \l 12024 Had
it not been, the years ahead would certainly have seen a significant erosion of
the Canadian distribution sector which would have certainly led to a weakened
feature film sector overall.
LISTNUM
1 \l 12025 So,
we look at this transaction and we are concerned. We are certain that a loosening of the
ownership rules will set a precedent that could lead to the shift of Canadian
broadcasting sector from Canadian hands into foreign control. This could only have a negative impact on the
television production sector and, therefore, the Canadian feature film production
sector and the support of Canadian content on the airwaves.
LISTNUM
1 \l 12026 I'm
not going to pretend here to be an expert in the details of this transaction
but, like many others who have appeared before you, I am concerned that the
majority of cash in this transaction is coming from foreign sources.
LISTNUM
1 \l 12027 So,
we are urging the Commission to ensure that the current ownership guidelines
are strictly enforced; that means Canadian ownership and control, control in
reality, control in fact, control in every circumstance regardless of the
revenue or profit targets that are met or not met.
LISTNUM
1 \l 12028 The
other issue I would like to discuss is our concern about the possible
continuing erosion of feature film programming on the Alliance Atlantis
channels under the new ownership, particularly Showcase and History.
LISTNUM
1 \l 12029 I
say continuing because there has been erosion over the past several years. In preparing for these hearings I spoke to
one of the original applicants of Showcase who told me that one of the
cornerstones of Showcase philosophy and application was that it would be a home
for Canadian films, for international films and for independent American films;
in other words, the perfect fit for the films that Canadian distributors have
to offer.
LISTNUM
1 \l 12030 He
also said that the original intention of the early channels of Alliance and
Atlantis was to give producers direct access to the consumer without the need
to go through traditional broadcasters.
Remember that back in 1994 Alliance and Atlantis were producers and not
broadcasters.
LISTNUM
1 \l 12031 In
the years since both Showcase and History have lost their way with respect to
feature films. In looking at a 15‑day
schedule November on Showcase I could only find two films programmed. In 2003 that number was 22.
LISTNUM
1 \l 12032 On
History in the same period there were about a dozen, but none of them were
Canadian, most of them were American studio films, action spy films that really
had nothing to do with historical content at all.
LISTNUM
1 \l 12033 And,
so, it seems now that there is no room for important Canadian films with
historical content like Black Robe, The Grey Fox, Nouvelle‑France.
LISTNUM
1 \l 12034 So,
under the new ownership we are concerned that this will continue and even get
worse.
LISTNUM
1 \l 12035 Historically
CanWest has not participated in feature films.
Since 2004 I could only find two films made for TVs that they had
programmed.
LISTNUM
1 \l 12036 I
have appeared before you twice recently in the context of the sale of the
Citytv stations from CHUM to CTV and then from CTV to Rogers. In those interventions I had pointed out the
importance of broadcast support in the feature film world.
LISTNUM
1 \l 12037 Since
City was one of the few broadcasters that actively and continuously supported
feature films, the uncertainty of City's ongoing commitment to film is
affecting what films distributors are committing to. Equally they are concerned about this
transaction.
LISTNUM
1 \l 12038 So,
we are urging the Commission to ensure that CanWest be required to go back to
the original mandate of these channels and live up to the commitment to
Canadian film.
LISTNUM
1 \l 12039 Thank
you.
LISTNUM
1 \l 12040 THE
SECRETARY: We will now hear from the
Manitoba Motion Picture Industry Association.
LISTNUM
1 \l 12041 Please
introduce yourself and you have 10 minutes.
INTERVENTION
LISTNUM
1 \l 12042 MS
WALKER: I'm Tara Walker, the Executive
Director of the Manitoba Motion Picture Industry Association.
LISTNUM
1 \l 12043 MMPIA
is an innovative membership‑driven association that leads, builds and
represents the motion pictures industry in Manitoba. This year we celebrated our 20th anniversary.
LISTNUM
1 \l 12044 Before
we begin our presentation I wanted to introduce Vonnie Von Helmolt, our Policy
Co‑Chair and an Emmy award‑winning independent producer with over
20 years of experience in film and television.
LISTNUM
1 \l 12045 Recently
Vonnie produced the Gemini winner, Tales of the Magic Flute for the CBC and the
Gemini nominee Ballet Girls for Bravo.
LISTNUM
1 \l 12046 When
we appeared before this Commission during the Rogers hearings in August we told
you about the size and scope of the production industry in Manitoba. Since then our community has entered our
busiest period of production this year and currently there are television
productions for the CBC, the Comedy Network, CTV, Citytv, Slice, and Bravo, all
preparing to shoot or already shooting.
LISTNUM
1 \l 12047 Canadian
broadcasters are truly integral to the health of the Manitoba production community.
LISTNUM
1 \l 12048 You
will note that there is nothing in production currently from CanWest in
Manitoba; that is, independent production.
LISTNUM
1 \l 12049 It's
important to us that we build upon the relationship between CanWest and
Manitoba's producers and creators to the same level we enjoy with other
national broadcasters.
LISTNUM
1 \l 12050 MMPIA's
written submissions stated our support with conditions for the application from
CanWest to buy the Alliance Atlantis broadcast assets.
LISTNUM
1 \l 12051 We
fully support CanWest's strategy to enhance its existing television business
and we would like to believe the commitment it has made to produce even better
Canadian content, promote it more effectively and provide greater access to
more viewers across more platforms.
LISTNUM
1 \l 12052 MS
VON HELMOLT: And coming as we do from
CanWest's home town and early beginnings CKND, we would like to point out that
the founder, Israel Asper, was an early investor in independent film and
television production in Manitoba.
LISTNUM
1 \l 12053 In
the 80s I worked on the fledgling channel's drama project with Stan Thomas, a
collaboration with the National Film Board in Winnipeg which produced three
half hours, one hour and one feature for television over a two or three‑year
period. They were all based on Manitoba
stories, written, directed and shot completely in Manitoba. They went on to win Geminis, among other
awards, and were seen around the world.
LISTNUM
1 \l 12054 Unfortunately,
it's been mostly all downhill from there for producers out of Manitoba.
LISTNUM
1 \l 12055 Regionally
the shift from locally‑owned to consolidated Toronto‑based mega
corporations has wiped out regionally headquartered broadcasters in
Manitoba: The Craigs, A‑Channel;
the Moffats, CKY and WTN; and now the Aspers and CanWest resulting in a real
disconnect between the regional production communities and the broadcast
decision‑makers.
LISTNUM
1 \l 12056 This
shift could reduce the diversity of programming available to Canadians and
weaken the broadcasting and production sectors outside of Toronto.
LISTNUM
1 \l 12057 The
consolidation of CanWest with Alliance Atlantis' broadcasting assets could
potentially be devastating to our local industry. If CanWest continues to centralize in
Toronto, should safeguards not be put in place and enforced?
LISTNUM
1 \l 12058 Unique
Canadian drama, documentaries, arts and lifestyle shows should distinguish
CanWest's main network and the Alliance Atlantis channels from each other and
from other broadcasters.
LISTNUM
1 \l 12059 Cross‑channel
programming, which CanWest has said it plans to do, can't create or continue
that diversity of programming which now differentiates the Alliance Atlantis
brands from CanWest.
LISTNUM
1 \l 12060 MS
WALKER: So, we feel strongly that real
regional involvement by broadcasters is key to the health of the Canadian
broadcast system.
LISTNUM
1 \l 12061 Because
CanWest though, a Winnipeg company, has focused most of the proposed benefits
in this package on central Canada, and Toronto specifically, we recommended in
our intervention that the Commission require CanWest to affirm its commitment
to diversity and to facilitate production throughout Canada.
LISTNUM
1 \l 12062 Our
members are concerned that the benefits dollars could be concentrated with
fewer producers in central Canada, bypassing the regional producers that we
represent.
LISTNUM
1 \l 12063 This
fear is far from unfounded given that this Winnipeg‑based broadcaster's
programming consists largely of Toronto and American productions.
LISTNUM
1 \l 12064 We
asked specifically that CanWest make a commitment to a Winnipeg‑based
programming office empowered with budgets and access to programming schedules
that can represent local producers to all of CanWest's media assets. City ‑‑ sorry, CTV has had
great success with their Winnipeg‑based development office and Allarco
has just established their Super channel programming office in Winnipeg.
LISTNUM
1 \l 12065 So,
we're not asking for anything that is outside of the realm of the possible.
LISTNUM
1 \l 12066 It
should be stated that MMPIA is not recommending a guaranteed regional spend, we
are requesting that the Commission require CanWest to demonstrate how regions
will be well represented in the priority programming on CanWest and Alliance
Atlantis channels.
LISTNUM
1 \l 12067 MS
VON HELMOLT: And like most of the other
interveners you heard from, MMPIA does not support the proposed 10‑year
term of the benefit plan for all the reasons that you've already heard put
forward by CanWest.
LISTNUM
1 \l 12068 MMPIA
encourages the Commission to put in place requirements to spread the benefits
equitably across what we are considering a seven‑year period. I like Laslo's point; a five‑year
period would be even better.
LISTNUM
1 \l 12069 MMPIA
requests guaranteed minimum expenditures each year with significant spending in
the early years.
LISTNUM
1 \l 12070 MMPIA's
members agree that support for dramatic series, films and documentaries, is the
top priority for this and other benefits packages. We suggested in our submission that CanWest be
asked to submit a revised benefits plan that would replace spending on news and
public affairs, which they are going to do anyway, with greater allocations to
the creation and promotion of independent third‑party priority
programming.
LISTNUM
1 \l 12071 And
as we have said before, and as Laslo mentioned, MMPIA would like to suggest a
fund along the model of the successful CanWest Western Independent Producers
Fund, CWIP, which was a huge bonus for the West and which over the five‑year
life of the fund supported over 335 projects across the West with $23.9 million
in contributions. These productions were
destined for many different Canadian broadcasters and benefited both Western
producers and the Canadian broadcasting system as a whole.
LISTNUM
1 \l 12072 MMPIA
applauds the support for APTN's aboriginal drama project, but $2 million over
10 years is really basically just a token.
Our membership includes a number of active aboriginal producers and we
understand from them that it is very difficult to secure development and
production funds for high end dramatic productions that speak from an
aboriginal perspective. Given this
shortage of sources, the $2 million spread over 10 years really is just a token
gesture.
LISTNUM
1 \l 12073 Many
of the social benefits included in this package are focused on Toronto‑based
organizations, CSC, CWC, WIFT, In Adversity, CCAB, NAAF and York University
among them. MMPIA suggests that CanWest
might consider spreading their social benefits beyond central Canada where the
donor base is already strong.
LISTNUM
1 \l 12074 For
example, it would make sense for CanWest to commit substantial funding to
MMPIA's Blizzard Awards that support and celebrate our local industry.
LISTNUM
1 \l 12075 We
also recommend that CanWest could assist with funding film training, Manitoba's
pilot project with Red River College for school‑to‑work training
for technicians and craftspeople to help Manitoba address our film industry
labour shortages.
LISTNUM
1 \l 12076 MS
WALKER: MMPIA too is concerned about the
possibility of CanWest and Alliance Atlantis ending up in American hands, but
intervenors with far more expertise have already addressed this concern.
LISTNUM
1 \l 12077 Most
importantly, we support the Commission's efforts to carefully analyze this deal
to ensure Canadian control will be maintained over the broadcast assets.
LISTNUM
1 \l 12078 On
behalf of our members in the heart of Canada, thank you for giving us a chance
to address our concerns with you today.
If MMPIA and AMPIA were not asked to speak at this hearing there would
have been no one to address the concerns of regional producers and many of our
issues wouldn't have been raised.
LISTNUM
1 \l 12079 Thank
you again for this opportunity.
LISTNUM
1 \l 12080 THE
CHAIRPERSON: Thank you for your
comments.
LISTNUM
1 \l 12081 I'm
sorry. I forgot your name, the gentleman from the Canadian Association of Film
Distributors?
LISTNUM
1 \l 12082 MR. EAST: Ted East.
LISTNUM
1 \l 12083 THE
CHAIRPERSON: Mr. East, you ended up
by saying we should ensure that Showcase returns to its original mission in
being a channel that plays Canadian films.
And I forgot your exact words, but in effect you felt it had lost its
way. How do we do this? What is your suggestion?
LISTNUM
1 \l 12084 MR. EAST: I think that you go back to the original
application and, I mean, I don't know your job specifically but I think that
you can certainly give them a condition of licence to support Canadian films,
certainly, and hopefully other international films as well that are not
typically available in other broadcast outlets.
LISTNUM
1 \l 12085 THE
CHAIRPERSON: I mean, I assume they are
living up to their present terms of ‑‑
LISTNUM
1 \l 12086 MR. EAST: Well, the problem is a film gets lumped in
with films, drama, so there is nothing to distinguish from doing a dramatic
series and a feature film, unfortunately.
LISTNUM
1 \l 12087 I
mean, I think in the History licence there is a cap on the number of hours they
can do on feature films but there is no specific minimums, and that's something
that concerns us.
LISTNUM
1 \l 12088 THE
CHAIRPERSON: I was being very
pragmatic. If I understand it correctly,
you suggest next renewal of the licence for Showcase, being very specific and
refine it to exactly what you just said.
LISTNUM
1 \l 12089 MR. EAST: Yes, I think that we would recommend a
minimum number of feature films that are Canadian on both channels.
LISTNUM
1 \l 12090 THE
CHAIRPERSON: Okay, thank you.
LISTNUM
1 \l 12091 And
from MMPIA, I am somewhat surprised by your intervention. I mean, I always thought that CanWest as the
champion of the West and certainly Leonard Asper was ‑‑ well,
who I knew personally was certainly very proud of being Western and always
mentioned Winnipeg in every conversation.
And so you obviously feel that CanWest is no longer sort of Winnipeg‑centric
but now has become Toronto‑centric, and the very suggestion that you have
made.
LISTNUM
1 \l 12092 Have
you discussed with CanWest prior to this application ‑‑ I
mean, when this transaction was announced you knew there would be benefits and
there would be conditions, et cetera, so has there been negotiations between
you and CanWest where you have put these ideas on the table?
LISTNUM
1 \l 12093 MS
WALKER: I tried to but, unfortunately, I
didn't get through to the right executive who happened to be a Toronto‑based
person. I tried with my local contact.
LISTNUM
1 \l 12094 MS
von HELMOLT: For how long?
LISTNUM
1 \l 12095 MS
WALKER: Oh, I'm not certain.
LISTNUM
1 \l 12096 MS
von HELMOLT: No?
LISTNUM
1 \l 12097 MS
WALKER: I know of other applications that
came from Winnipeg‑based organizations that were bypassed for similar
proposals from Toronto‑based organizations. So our experience, you know, is one but there
were others.
LISTNUM
1 \l 12098 THE
CHAIRPERSON: Okay, thank you.
LISTNUM
1 \l 12099 Vice‑Chairman
Arpin, you have some questions for the distributors?
LISTNUM
1 \l 12100 COMMISSIONER
KATZ: No.
LISTNUM
1 \l 12101 THE
CHAIRPERSON: No?
LISTNUM
1 \l 12102 Commissioner
Duncan.
LISTNUM
1 \l 12103 COMMISSIONER
DUNCAN: Okay. I have a number of questions for you.
LISTNUM
1 \l 12104 In
regards to your mention in your written submission to do with the terms of
trade agreement, I'm just wondering what the current status of your
negotiations are with each of CanWest and Alliance Atlantis?
LISTNUM
1 \l 12105 MS
von HELMOT: Actually, those negotiations
are simply being carried on by individual producers as they confront what those
individual broadcasters are asking for.
There is no general terms of trade.
LISTNUM
1 \l 12106 So
what's happening is we are relying on our association, which you just heard
from, to negotiate terms of trade for our industry and for independent
producers who simply don't have the clout ‑‑
LISTNUM
1 \l 12107 COMMISSIONER
DUNCAN: Right.
LISTNUM
1 \l 12108 MS
von HELMOT: ‑‑ to take on a major broadcaster.
LISTNUM
1 \l 12109 MS
WALKER: That's the CFTPA, being the
association.
LISTNUM
1 \l 12110 COMMISSIONER
DUNCAN: But you have recommended that
the Commission require a terms of trade agreement. That's in support of what the CFTPA has put
forward?
LISTNUM
1 \l 12111 MS
WALKER: Yes, yes, absolutely.
LISTNUM
1 \l 12112 COMMISSIONER
DUNCAN: I am just curious then, just
following along ‑‑ I know they were in front of us a moment
ago ‑‑ but if the Commission were to impose such a requirement
what would be a reasonable timeframe to expect to have that agreement in place?
LISTNUM
1 \l 12113 MS
WALKER: I think you should ask the CFTPA
that question.
LISTNUM
1 \l 12114 COMMISSIONER
DUNCAN: I think I have missed my window
to do that.
LISTNUM
1 \l 12115 MS
von HELMOT: Okay.
LISTNUM
1 \l 12116 COMMISSIONER
DUNCAN: Do you have an idea; do you
have ‑‑
LISTNUM
1 \l 12117 MS
von HELMOT: Really, I don't think we
should speak for the CFTPA, and as an independent producer, again, those things
could be ‑‑ you know, really that's the CFTPA.
LISTNUM
1 \l 12118 COMMISSIONER
DUNCAN: The Chairman assures me they
will let us know.
‑‑‑ Laughter /
Rires
LISTNUM
1 \l 12119 MS
von HELMOT: I'm sure.
LISTNUM
1 \l 12120 COMMISSIONER
DUNCAN: All right.
LISTNUM
1 \l 12121 Well,
then I won't ask my ‑‑ well, I will ask the other question in
case they want to add that to their answer when they do it, because the
question I had was because you are expecting this agreement to come about, if
there are problems with negotiations what role would you see the Commission
playing in those negotiations?
LISTNUM
1 \l 12122 MS
von HELMOT: Again, a question for the
CFTPA.
LISTNUM
1 \l 12123 COMMISSIONER
DUNCAN: Okay. Hopefully, they will answer that.
LISTNUM
1 \l 12124 I
want to talk about the regional aspect of the programming. And CanWest in their response August
20th ‑‑ I don't know if you had a chance to look at that ‑‑
they emphasize that they will actively seek the best domestic programming
wherever the relevant production company is located and that the benefits activities
will take place throughout Canada and "will be appropriately reliant on
talent and execution and not geography".
LISTNUM
1 \l 12125 MS
von HELMOT: The only issue ‑‑
I totally agree that that will be their intention. The problem is access.
LISTNUM
1 \l 12126 So
while there may be producers outside of Toronto with good ides with experience
to carry them out, getting to see Christine or Barbara on a regular basis at
socials, even just kind of even in the same sort of situation is very, very
difficult for regional producers unless there is an actual concentrated effort
to get out there and meet with these people and hear what they have to say.
LISTNUM
1 \l 12127 One
of the best ways to do that is to have a dedicated development officer in the
regions.
LISTNUM
1 \l 12128 COMMISSIONER
DUNCAN: I notice in your written
submission that you had quite a layout of the scope of what the Winnipeg office
should be, and also that you mentioned that there should be, I believe, offices
located across the country.
LISTNUM
1 \l 12129 I
was wondering where you thought the other offices should be located and if you
thought the scope of those should be on the same scale as you are proposing for
the Winnipeg office.
LISTNUM
1 \l 12130 MS
von HELMOT: Well, I think that the model
that you are looking at is what CTV originally did, where they put offices in
places where there is a lot of production but it's not central. So you would have someone in Winnipeg who
also perhaps represented Saskatchewan and Alberta. There is obviously going to be someone in
British Columbia. Ontario is not a
problem.
LISTNUM
1 \l 12131 Again,
we are MMPIA. We are speaking for
Manitoba and while I am not saying that every other province should speak for
themselves, again, I can only address the issues that we have in Manitoba.
LISTNUM
1 \l 12132 COMMISSIONER
DUNCAN: Just following on your point
about the commitment to APTN and that the amount CanWest has committed is
insufficient, what would you suggest would be the proper amount?
LISTNUM
1 \l 12133 MS
WALKER: I am sure that APTN could have
suggested an amount.
LISTNUM
1 \l 12134 COMMISSIONER
DUNCAN: They seemed satisfied. So I am just ‑‑ meaning if
some of the dollars were to be reallocated.
LISTNUM
1 \l 12135 MS
WALKER: Yes, we could get back to you
with a suggestion.
LISTNUM
1 \l 12136 COMMISSIONER
DUNCAN: Okay, that's fine if you could
do that. It would have to be shortly, I
guess.
LISTNUM
1 \l 12137 Yes,
that would be great. Thanks.
LISTNUM
1 \l 12138 THE
CHAIRPERSON: Okay. Thank you very much for your questions.
LISTNUM
1 \l 12139 COMMISSIONER
DUNCAN: Thank you.
LISTNUM
1 \l 12140 THE
CHAIRPERSON: Who is next, Madam Roy?
LISTNUM
1 \l 12141 THE
SECRETARY: I will now call the Writers
Guild of Canada.
‑‑‑ Pause
LISTNUM
1 \l 12142 THE
SECRETARY: Please introduce yourself and
your colleagues. You will then have 10
minutes for your presentation.
INTERVENTION
LISTNUM
1 \l 12143 MS
PARKER: Good morning, Mr. Chairman
and Members of the Panel. My name is
Maureen Parker, and I am the Executive Director of the Writers Guild of Canada.
LISTNUM
1 \l 12144 To
my left is Kelly Lynne Ashton, Director of Industrial and Policy Research at
the Writers Guild, and Bob Buchan, our legal counsel from Fasken Martineau.
LISTNUM
1 \l 12145 The
Writers Guild of Canada is a national association representing more than 1,800
professional screenwriters working in film, television, radio and digital
production in Canada.
LISTNUM
1 \l 12146 We
are here today to advocate for a healthy and balanced Canadian broadcasting
system, and, in particular, one that is Canadian owned.
LISTNUM
1 \l 12147 The
WGC does not support CanWest's application to acquire the Alliance Atlantis
Communications' broadcast assets.
LISTNUM
1 \l 12148 As
part of the Coalition of Canadian Audio‑Visual Unions, the CCAU, we have
submitted a brief and a supplementary intervention detailing our objections to
the transaction.
LISTNUM
1 \l 12149 Despite
CanWest's attempt to abide by the letter of the law by maintaining American
equity investor Goldman Sachs in a minority voting shareholder position in a
newly amalgamated company, we believe that Goldman Sachs will have control in
fact.
LISTNUM
1 \l 12150 As
the CCAU outlined in detail in its submission, as the majority financial
partner, Goldman Sachs will be taking the majority of the financial risk for
the transaction, and will earn the majority of the financial rewards.
LISTNUM
1 \l 12151 Given
those facts, Goldman Sachs will control the strategic direction of the new
company, and no amount of legal manoeuvring can obscure that it has control in
fact.
LISTNUM
1 \l 12152 The
success of Alliance Atlantis Communications has been one of the highlights of
the Canadian broadcasting industry. This
success would not have happened without the financial support of the Canadian
taxpayer.
LISTNUM
1 \l 12153 The
three principals of Atlantis started the company in 1978. The company grew with the support of many
government programs, such as Telefilm Canada, Canada Revenue tax shelters and
tax credits, the Canadian Television Fund, and the Commission's Conditions of
Licence and policies that encourage broadcasters to license Canadian
programming.
LISTNUM
1 \l 12154 Atlantis
won an Oscar, Emmy awards, and countless Gemini awards, as they grew to become
a multinational production and distribution company.
LISTNUM
1 \l 12155 Meanwhile,
Robert Lantos had founded Alliance Entertainment and grew that company to a
position of global prominence with the same government support, producing and
distributing countless feature films and television series.
LISTNUM
1 \l 12156 When
the CRTC decided to license the new specialty channels in 1994, both Alliance
and Atlantis jumped on the opportunity and became broadcasters.
LISTNUM
1 \l 12157 In
1998 these two powerhouses merged to form Alliance Atlantis
Communications. With their combined
strength, they were able to create a broadcasting empire and became an asset
worth acquiring.
LISTNUM
1 \l 12158 The
Writers Guild feels that it is important to recount this history so that we do
not lose sight of what is at stake here.
Canadian taxpayers supported Alliance Atlantis for decades, with the
belief that only with strong production and distribution companies could we
expect to have our own indigenous industry.
LISTNUM
1 \l 12159 Over
the years thousands of hours of film and television were produced and distributed
around the world, and thousands of people, including many in this room,
developed their careers at Alliance Atlantis or its predecessors.
LISTNUM
1 \l 12160 If
this transaction is approved, all of those years of government support will go
to benefit a U.S. company, who will not only have control in fact of Alliance
Atlantis, but who will also earn 64 percent of the profit from its operations.
LISTNUM
1 \l 12161 As
CanWest has stated, in order to continue to compete in the Canadian
broadcasting system, they need to quickly develop their specialty business,
while trying to strengthen their conventional business. They chose to solve this problem by acquiring
the Alliance Atlantis specialty channels.
We do not have a problem with this.
LISTNUM
1 \l 12162 Had
they chosen to partner with a Canadian financial institution, or even a foreign
partner with less than 50 percent of equity and debt, we would not be here
today.
LISTNUM
1 \l 12163 Because
CanWest needed this deal very badly, it agreed to onerous conditions as the
price of the Goldman Sachs financing.
These conditions set the strategic direction of the company until the
combination date of 2011.
LISTNUM
1 \l 12164 The
way we see it is like this. I have a
partner who loves to shop. In order to
stop bickering about this, we need a deal.
At the end of the year, if he saved $10,000 and had not increased his
line of credit, I would agree to buy him an HD flat‑screen TV.
LISTNUM
1 \l 12165 However,
he still has household responsibilities, one of which is paying for
groceries. The only way he can get his
flat screen and meet his obligations is if he stops buying his suits at Hugo
Boss and feeds us spaghetti every night instead of filet mignon.
LISTNUM
1 \l 12166 So
you can see that while I am not specifically dictating what he can buy, I am
influencing what he can buy, and there's the rub.
‑‑‑ Laughter /
Rires
LISTNUM
1 \l 12167 MS
ASHTON: The Writers Guild wishes to be
very clear. It is our view that no
amount of money can compensate the system by handing over a major component of
the Canadian broadcasting system to foreign control.
LISTNUM
1 \l 12168 However,
the Writers Guild has comments on the proposed benefits package. Specifically, we recommend:
LISTNUM
1 \l 12169 One,
requirements that will ensure a diversity of voices and no net loss of original
priority programming on the Canadian broadcasting system;
LISTNUM
1 \l 12170 Two,
reallocation of certain programs within the benefits package to the scripted
drama production initiative;
LISTNUM
1 \l 12171 And
three, less money on training and more money on production.
LISTNUM
1 \l 12172 CanWest
has expressed a desire to experience programming synergies by airing
programming on both networks, thereby increasing the audiences on both. We do not have a problem with this.
LISTNUM
1 \l 12173 However,
the benefit of enlarging the potential audience must be weighed against the
loss of original programming that would result from repeat airings of the same
program over the two station groups.
LISTNUM
1 \l 12174 This
is of particular concern in this transaction, as CanWest's priority will be to
lower its costs so as to meet the profit target set by Goldman Sachs necessary
to trigger CanWest's increased equity position in 2011.
LISTNUM
1 \l 12175 We
also have a problem with the term of the proposed benefits package. Benefits packages have traditionally been for
a 7‑year term. This has worked for
CHUM, CTVglobemedia, BCE and countless others who have committed to spend the
money over that timeframe.
LISTNUM
1 \l 12176 CanWest,
however, wants to spread the expenditure over an unprecedented 10‑year
term instead. Their rationale is that it
takes that long to develop good Canadian drama, with a new pool of showrunners.
LISTNUM
1 \l 12177 As
the guild representing Canadian showrunners, we are here to tell you that today
there are plenty of great ideas and great projects that will not take 10 years
to develop and produce.
LISTNUM
1 \l 12178 The
average project takes three years from concept to broadcast. It is important to remember that broadcasters
determine how quickly a project moves from development to production to
broadcast.
LISTNUM
1 \l 12179 Experience
has also shown us that it is important to ensure that a benefits package is
evenly distributed throughout its term and not left for a subsequent purchaser.
LISTNUM
1 \l 12180 Given
that CanWest is motivated to increase its profit in the next four years in
order to trigger the equity transfer from Goldman Sachs in 2011, the Writers
Guild is very concerned that, without strict requirements and enforcement, any
benefits package spending will be postponed until after 2011.
LISTNUM
1 \l 12181 Broadcasters
should not be able to use them to manipulate their bottom line. We, therefore, strongly recommend that the
Commission require that CanWest spend at least 14 percent of the package in
each of the 7 years of the term, which could be averaged for the first two
startup years of the term.
LISTNUM
1 \l 12182 The
Commission made a similar decision recently when it required Rogers to spend
its benefits package, as well as the leftover Craig benefits, equally over
their terms.
LISTNUM
1 \l 12183 At
a minimum, we request that the Commission impose CanWest's proposed benefits
payment schedule contained in their August 20th, 2007 reply letter as a
condition of the transaction.
LISTNUM
1 \l 12184 MS
PARKER: We were very concerned to hear
yesterday CanWest's plans for its scripted drama production initiative. CanWest had proposed that 60 percent of the
drama spend would be on 10 Point Canadian drama.
LISTNUM
1 \l 12185 Commissioner
Duncan clarified CanWest's intention to spend as much as possible of the rest
of the funding on 6 Point drama.
LISTNUM
1 \l 12186 6
Point production is minimally a Canadian production. In the past, we have had 6 Point series like
Andromeda, Mutant X and Sue Thomas: F.B.Eye.
These are not Canadian stories.
They are generally written by Americans for U.S. cable broadcasters who
co‑finance the project.
LISTNUM
1 \l 12187 And,
by the way, this financing model doesn't work any more. Whereas we used to have many of these
programs, I believe we only have one or two produced in our jurisdiction. I can elaborate on that if you want.
LISTNUM
1 \l 12188 This
is the financing that yesterday CanWest said they wanted the flexibility to
attract. Benefit packages are meant to
benefit the Canadian broadcasting system, not to provide U.S. cable companies
with cheap programming.
LISTNUM
1 \l 12189 Benefit
packages are meant to fund activities that would not otherwise be undertaken.
LISTNUM
1 \l 12190 Within
the proposed benefits package there are allocations that are inappropriate.
LISTNUM
1 \l 12191 We
recommend that these be shifted to the scripted drama production initiative for
10 Point drama.
LISTNUM
1 \l 12192 The
first of these is the award show "Red Carpet Tributes" initiative. Every broadcaster, and, in particular, Global
and E! Channel, are already producing award shows, so these programs are
already being made.
LISTNUM
1 \l 12193 These
types of shows are generally inexpensive in‑house productions. It would be more appropriate to allocate the
bulk of that initiative to 10 Point scripted drama. We are suggesting that $11.5 million of the
$13.5 million be added to scripted drama.
LISTNUM
1 \l 12194 CanWest
has also proposed spending $10 million on additional news bureaus. This allocation is clearly intended to
benefit CanWest, and only CanWest, as Alliance Atlantis does not have a news
division. Again, no independent
producers or other third parties would benefit from this initiative.
LISTNUM
1 \l 12195 In
fact, it appears as if the beneficiaries would include other CanWest
affiliates, such as the National Post and Canada.com online news portal.
LISTNUM
1 \l 12196 The
$5 million proposed to be spent on digitizing CanWest's news footage is another
allocation which benefits only CanWest and not Alliance Atlantis or the
broadcasting system.
LISTNUM
1 \l 12197 CanWest
is clearly reaching when they argue that these amounts are legitimate
allocations of the benefits package because they are system‑wide
benefits.
LISTNUM
1 \l 12198 The
entire $10 million for news bureaus and the $5 million for digitizing Canadian
CanWest news should be transferred to the scripted drama initiative for 10
point production.
LISTNUM
1 \l 12199 Finally,
the WGC would like to address the issue of funding for training. While we do not object to training per se, we
are concerned that as an industry we are training people for jobs that do not
exist. Institutions such as the Canadian
Film Centre, the National Screen Institute and the Banff Centre, as well as
university and colleges across the country are all training writers, directors
and producers. You heard yesterday that
these programs are oversubscribed. This
is true, but it is irresponsible to take tuition from more young Canadians who
are very unlikely to find employment once they graduate.
LISTNUM
1 \l 12200 So,
where will all these newly trained talented people work? Without a resurgence in drama production, the
time and money taken to develop their skills will be wasted, and the fact is
the most valuable training for television production occurs on the job, in
production, on real shows, with all the attendant pressures of real time, money
and institutional and personal challenges, not in classroom situations or
artificial simulations.
LISTNUM
1 \l 12201 In
conclusion, the WGC would like to reiterate its objection to this transaction
on the grounds that it contravenes the foreign ownership rules under the
Broadcasting Act. We agree that CanWest
needs to grow its business and stay competitive, but that should not be at the
expense of the Canadian public's interests.
LISTNUM
1 \l 12202 We
will be please to answer any questions you may have.
LISTNUM
1 \l 12203 THE
CHAIRPERSON: Thank you.
LISTNUM
1 \l 12204 You
are very clear. You say no amount of
money can compensate the system for handing over a major component of the
Canadian broadcasting system to foreign control. But in the previous part, really your main
concern is that all the money comes from CanWest.
LISTNUM
1 \l 12205 So
I am asking you the same thing as I asked the previous intervenor: What will it take to fix this in terms of
money?
LISTNUM
1 \l 12206 MS
PARKER: What we think it will take to
fix this is to go back and revise the deal and to lower the foreign equity
proportion to something below 50 per cent.
LISTNUM
1 \l 12207 THE
CHAIRPERSON: So, in effect, to comply
with the Broadcasting Act, in your view, the total equity has to be under 50?
LISTNUM
1 \l 12208 MS
PARKER: Yes, debt and equity.
LISTNUM
1 \l 12209 THE
CHAIRPERSON: Debt and equity?
LISTNUM
1 \l 12210 MS
PARKER: Debt and equity.
LISTNUM
1 \l 12211 THE
CHAIRPERSON: Mr. Buchan.
LISTNUM
1 \l 12212 MR. BUCHAN: As I mentioned, Mr. Chairman, the
coalition has made a submission and we didn't get into a proposed fix, but I
haven't had an opportunity to discuss with Ms Parker this distinction between
debt and equity.
LISTNUM
1 \l 12213 Debt
and equity certainly go to the issue of control, in fact. If the position of the Writers' Guild is that
50 per cent debt and equity is where they would feel comfortable in terms of
perceived control, in fact, then that is the position of the Writers' Guild.
LISTNUM
1 \l 12214 It
is not a position that I have ‑‑ it gives me a great deal of
discomforture on the possibility of 33 and a third per cent of the holding
company, 20 per cent of an operating company if a non‑Canadian
shareholder can hold 46 and two‑thirds per cent and still be considered
to be eligible. Then we get up to around
50 per cent, including debt and equity, and that is their position. It isn't a position that has been thoroughly
discussed with all the members of the coalition. But it is still the same issue.
LISTNUM
1 \l 12215 THE
CHAIRPERSON: You mentioned before that
the Persona case was an aberration, it really was done because it was a company
in financial distress.
LISTNUM
1 \l 12216 MR. BUCHAN: I think I might have said anomaly. I don't think I said aberration.
LISTNUM
1 \l 12217 THE
CHAIRPERSON: I certainly don't want to
put words in your mouth.
LISTNUM
1 \l 12218 MR. BUCHAN: Thank you.
LISTNUM
1 \l 12219 THE
CHAIRPERSON: But you or your firm were
involved in that. Is that how you
presented it to the CRTC, that it was a company in distress and, therefore, it
should be allowed on that basis?
LISTNUM
1 \l 12220 MR. BUCHAN: I was personally not involved in it. I am not saying that to remove myself from
that.
LISTNUM
1 \l 12221 THE
CHAIRPERSON: No, I am just trying to
figure out ‑‑
LISTNUM
1 \l 12222 MR. BUCHAN: Our firm at the time was involved. I wasn't personally involved, and I didn't
know all of the facts. I knew that it
was going back and forth with the Commission in discussion and deficiencies and
concessions that were made by Hicks Muse.
We were representing Hicks Muse, the non‑Canadian. There certainly was the overhanging
possibility that it was going to go into receivership.
LISTNUM
1 \l 12223 I
haven't checked with Mr. Johnson, who acted for Hicks Muse. I accepted the description that was given in
the CanWest reply, the description of the facts as they were. I talked to someone else in the firm who was
involved with it, and I was told that that was a pretty accurate description of
the facts as they were.
LISTNUM
1 \l 12224 THE
CHAIRPERSON: I am not interested in
your ‑‑ was it presented and "sold" to the CRTC on
the terms that this was a distress situation?
LISTNUM
1 \l 12225 MR. BUCHAN: Yes.
My understanding is that it definitely was.
LISTNUM
1 \l 12226 THE
CHAIRPERSON: Thank you.
LISTNUM
1 \l 12227 MR. BUCHAN: Is my understanding understood not to be
correct or otherwise? When you ask that
question I wonder ‑‑
LISTNUM
1 \l 12228 THE
CHAIRPERSON: I wasn't here obviously,
and you were. That is why I am asking
you, since you refer to that Persona decision.
LISTNUM
1 \l 12229 MR. BUCHAN: I am not challenging what CanWest has said
about Persona.
LISTNUM
1 \l 12230 MS
PARKER: Can I just go back to that,
Mr. Chair, because it is on page 4 of our actual oral presentation, our
position. Yesterday you raised several
times the question whether we would object to it being a Royal Bank. So we wanted to clarify our position on
that. It is in our brief.
LISTNUM
1 \l 12231 THE
CHAIRPERSON: Yes, I see that. Thank you.
LISTNUM
1 \l 12232 Commissioner
Duncan, you have some questions?
LISTNUM
1 \l 12233 COMMISSIONER
DUNCAN: I do. As the Chairman said, your written comments
and your oral presentation were very clear, your points are very clear.
LISTNUM
1 \l 12234 I
do have a couple of questions. On your
suggestion that there be no overlap on priority programming on an annual basis,
which I believe CanWest has agreed to, but you then go on to say that CanWest
would be able to air the programs on the alternate channel in the second window
the following year. I don't see why it
would be an advantage to the producers to wait one full year. Wouldn't you want to get the momentum while
it's going and build on that?
LISTNUM
1 \l 12235 MS
PARKER: We slightly revised our position
just listening to the hearing this week.
That is why it is great to be in the room for the entire time.
LISTNUM
1 \l 12236 What
we are most concerned about is what the producers are concerned about, the
directors and the performers, and that is to ensure that there is not a net
loss of programming.
LISTNUM
1 \l 12237 What
generally happens with consolidation and what we are so worried about in this
system is that we are not going to lose the opportunity to make Canadian
programs. So, we want to ensure that
there is no net loss in original programming and that these benefits are
incremental, that there is more programming, not less.
LISTNUM
1 \l 12238 So,
to answer your question more directly, no, you are right, it can show up on
either. We would like to afford them
that flexibility to either show broadcast on CanWest or AAC, as long as it is
incremental programming and new programming, new original programming to the
system, that we are not watching repeats from one to the other. That is our biggest concern.
LISTNUM
1 \l 12239 COMMISSIONER
DUNCAN: Thank you.
LISTNUM
1 \l 12240 One
other question. I would appreciate for
my own education if you would elaborate on your point about the 6 point drama,
and you said that this model doesn't work any more. I would appreciate if you can elaborate on
that.
LISTNUM
1 \l 12241 MS
PARKER: Several years ago we had a
number of these types of series in production.
Over the last seven years we have seen that type of production, what we
call 6 point production, dwindle for many reasons.
LISTNUM
1 \l 12242 Basically
6 point production means that it is not written by a Canadian, that it is
written generally by Americans. So,
Americans write for their marketplace.
It is international products. It
is financed between a Canadian broadcaster and generally an American cable
broadcaster. It is sold around the
world.
LISTNUM
1 \l 12243 That
type of programming no longer sells very well.
That is because countries around the world, through their own
initiatives, are buying their own domestic product. This is not product that is sought after any
longer, and is not generating a lot of international sales activity. So, those
distribution advances that used to finance that type of production, which is on
top of licence fees, have shrunk and these programs are very difficult to make.
LISTNUM
1 \l 12244 They
are generally a higher budget program as well, science fiction and so
forth. So, that is the problem.
LISTNUM
1 \l 12245 Our
problem is that they are written by Americans.
They are not Canadian stories.
They are generic content. They
use valuable resources from our industry to make them. They don't have Canadian leads. It is less profile; it is less work; and we
don't see this as indigenous production, although technically the CRTC
qualifies this as Canadian production.
But those guidelines have not been revised in over 30 years, when the
industry was quite a different place.
LISTNUM
1 \l 12246 COMMISSIONER
DUNCAN: I just have three points. First, thank you for the explanation.
LISTNUM
1 \l 12247 I
didn't come away with the understanding that they were saying that they wanted
to spend as much as possible of the rest of the funding on 6 point drama. I came away with the understanding that they
wanted the flexibility to. That was my
number one point.
LISTNUM
1 \l 12248 My
second point is that where I was headed when I asked the question was would
they be satisfied or would they be willing to commit to that balance, that 40
per cent, being to no less than 8 point production. I just wondered what your reaction to that
would be if they were prepared to agree to that?
LISTNUM
1 \l 12249 MS
PARKER: Yes, I did hear that. We think it should be 10 point. I understand why you are proposing 8 point,
but we are not advocating an 8 point system.
That means that there is either perhaps a writer or a director or a
performer, lead performer not working on that show.
LISTNUM
1 \l 12250 We
have plenty of those talented people working in Canada, and I see no need to
reduce the point count from 10 to 8, absolutely none. In fact, the best programs, the ones that
sell the most and garner the highest ratings.
Corner Gas, Little Mosque are all 10 point programs. So it doesn't even make sense in terms of
attracting an audience.
LISTNUM
1 \l 12251 COMMISSIONER
DUNCAN: I guess then we will be
comforted by the fact they are in business and so they will make the right
decision, taking that into consideration, I would expect anyway.
LISTNUM
1 \l 12252 Thank
you very much.
LISTNUM
1 \l 12253 Those
are my questions, Mr. Chairman.
LISTNUM
1 \l 12254 COMMISSIONER
KATZ: I just have one question, and it
is back to the issue of equity and debt and voting control.
LISTNUM
1 \l 12255 In
your view, and I guess this is to Mr. Buchan, is there a distinction
between equity control and voting control within the confines of the
Regulations and the Act?
LISTNUM
1 \l 12256 MR. BUCHAN: Very definitely there is distinction. In fact, I think yesterday the example, for instance,
of Rogers was raised, one that some of us are familiar with in the room, and I
certainly am familiar with that situation.
LISTNUM
1 \l 12257 Most
of the large Canadian broadcasting companies, as you know, are controlled
through voting shares and there is a voting and non‑voting share
structure. Through the voting shares,
whether they are multiple voting shares, sometimes the controlled shares have
got ten votes attached to each share, the controlling shareholder, and I use
the case of Rogers, Ted Rogers through trusts and whatever, is able to control
and have clear voting control of Rogers the same way as the Waters family had
clear voting control of CHUM, and I could go on; I don't need to do that.
LISTNUM
1 \l 12258 Then
there are non‑voting shares. But
they are all equity shares, and they have attached to the non‑voting
shares certain other rights, sometimes rights of votes in certain circumstances
and whatever. There are interests that
are associated with them.
LISTNUM
1 \l 12259 But
the question of whether or not there is a level at which non‑voting
shares are considered because of all of the various rights associated with them
could rise to the level of control in fact has been examined by different
agencies at different times. I read from
that National Transportation Agency decision yesterday that suggested that when
the shares increase above 25 per cent, such shareholdings become of increased
importance in determining where control in fact lies.
LISTNUM
1 \l 12260 With
regard to debt, it depends on the covenants that go with the debt, the
protection for the debt holder as to whether there should be control through
the debt instruments. So, they all have
to be taken into account; they all have to be looked at.
LISTNUM
1 \l 12261 I
just want to mention one issue that has also been raised that I think the
Chairman put on the table yesterday, this issue of the Royal Bank, how would
you feel if it was the Royal Bank rather than Goldman Sachs, and I think I said
yesterday there is a major distinction in our mind because Goldman Sachs is non‑Canadian,
Royal Bank is Canadian. So we are
dealing with the direction, the Cabinet direction to the CRTC on foreign
ownership, and that raises an issue that wouldn't come up if it were the Royal
Bank.
LISTNUM
1 \l 12262 Then
I thought, how would the Commission feel if this same deal were
structured ‑‑ because this is a hypothetical example ‑‑
involving CTV Bell Globemedia, however it is characterized today by initials,
and the Royal Bank, and they came forward with this same deal with 65 per cent
of the total issued equity of CTV Bell Globemedia. The foreign ownership issue wouldn't be on
the table and it wouldn't be a consideration.
What would be a consideration is that in the interest of the Canadian
broadcasting system, and in the public interest, to have a bank as a sole
shareholder with that level of total equity, and that would be a decision for
the Commission to make and determine.
LISTNUM
1 \l 12263 I
know the past is the past, but historically in ownership policy of the
Commission, it was considered that banks were not to be in control of
broadcasting ‑‑
LISTNUM
1 \l 12264 THE
CHAIRPERSON: Then don't use the Royal
Bank. Use Onex or use the Demarais
family or something like that. It wasn't
the issue of the bank. It was the issue
of a Canadian investor as opposed to a foreign investor.
LISTNUM
1 \l 12265 MR. BUCHAN: An eligible Canadian investor. Say it was an eligible Canadian
investor. Power Corporation is probably
a good example because in the mid‑eighties, as you know, they almost
ventured into the Canadian broadcasting system through an acquisition of
Telemetropole that was turned down by the Commission because it was considered
not to be in the public interest. Mr. Arpin
will remember that decision, and it really had to do with benefits and the
level of proposed benefits, not because the Commission didn't want Power Corp.
into the business.
LISTNUM
1 \l 12266 If
it was Power Corp. that came along at 65 per cent to purchase CTV, I would
predict, but I don't know, that it would probably be found to be in the public
interest. If it is a bank, it may not be
for other reasons, other concerns that the Commission has with regard to banks,
banking, other broadcasting interests, information flows and all kinds of things.
LISTNUM
1 \l 12267 But
the fundamental issue is at the certain level of total equity, it is for the
Commission to determine whether or not there is control in fact.
LISTNUM
1 \l 12268 COMMISSIONER
KATZ: There could be a new regulation,
if I can call it that, because in the past the Commission has not dealt with
control from an equity investment perspective.
They dealt with it from a voting perspective.
LISTNUM
1 \l 12269 MR. BUCHAN: When you say in the past, when you go back to
I guess it was 1997 when the paid up capital test was taken out of the
direction and out of the Regulations, paid up capital was in there because the
ownership was being taken into account, as well as control.
LISTNUM
1 \l 12270 Paid
up capital came out because the concept of paid up capital came out of the
Canada Business Corporations Act and was replaced by something called stated
capital. Stated capital companies
started to ascribe different levels of stated capital to different classes of
shares.
LISTNUM
1 \l 12271 But
originally, because of the concern about ownership as well as control, in the
regulations, in the law governing the Canadian broadcasting system, paid up
capital was taken into account; ownership was taken into account, not just
strict voting control.
LISTNUM
1 \l 12272 THE
CHAIRPERSON: But Mr. Buchan, you
raised the example of Rogers and the various transactions involving Rogers that
have been approved in the past in which your company was involved, and you
cannot tell me that it met this test which your client is now proposing that
the foreign partner would have less than 50 per cent equity and debt.
LISTNUM
1 \l 12273 This
is a new test, as my colleague points out.
LISTNUM
1 \l 12274 MR. BUCHAN: There is certainly no question in my mind
with regard to equity that Rogers has never been over 50 per cent in the hands
of non‑Canadians.
LISTNUM
1 \l 12275 THE
CHAIRPERSON: Are you talking voter
control or equity?
LISTNUM
1 \l 12276 MR. BUCHAN: I'm talking total equity.
LISTNUM
1 \l 12277 THE
CHAIRPERSON: So you are suggesting this would
be the first time, other than Persona, where more than 50 per cent of the
equity would be in the hands of a non‑Canadian?
LISTNUM
1 \l 12278 MR. BUCHAN: I can't speak for all the companies that are
in the Canadian broadcasting system, but ‑‑
LISTNUM
1 \l 12279 THE
CHAIRPERSON: Let's stick to Rogers,
which you raised.
LISTNUM
1 \l 12280 MR. BUCHAN: In the case of Rogers, for instance, what I
do know is shares are traded for Rogers, for Shaw, I think they were for
Vidéotron. I don't know how many others on
the New York Stock Exchange, and there is relatively light trading in the
United States and through American equity markets compared to what there is in
Canada.
LISTNUM
1 \l 12281 The
Rogers shareholdings have never approached 50 per cent. To my knowledge, they have never exceeded 25
per cent, but I am not privy to ‑‑ the shares that are traded,
non‑voting shares are traded in bearer form. So it is hard to say today whether they are
being held by Mr. Katz or Mr. Arpin because they are in bearer form,
but there is a way of monitoring and measuring these things.
LISTNUM
1 \l 12282 The
suggestion is that over 25 per cent is shocking.
LISTNUM
1 \l 12283 THE
CHAIRPERSON: We have a test to
apply. The test is control, control of
these things. I think I heard you say
you look at the totality of all of these.
You look at the equity, you look at the debt, you look at the voting
control, you look at the covenants in the various documents. As a result of this total amalgam, we have to
come to a conclusion. It is not a test
based purely on equity. Are we in
agreement on that?
LISTNUM
1 \l 12284 MR. BUCHAN: Yes, we are in agreement on that.
LISTNUM
1 \l 12285 THE
CHAIRPERSON: Thank you.
LISTNUM
1 \l 12286 Any
other questions? Thank you very much for
your intervention.
LISTNUM
1 \l 12287 THE
SECRETARY: I will now call the Alberta
Motion Picture Industry Association.
LISTNUM
1 \l 12288 Please
introduce yourself, and you have ten minutes for your presentation.
INTERVENTION
LISTNUM
1 \l 12289 MR. BROOKS: Mr. Chairman, Mr. Vice‑Chairman,
Commissioners, we very much appreciate this opportunity to speak with you today
and to express our concerns about this application. My name is Alan Brooks. I am the Executive Director of the Alberta
Motion Picture Industry Association, also known as AMPIA.
LISTNUM
1 \l 12290 AMPIA
is a non‑profit association. We
have proudly represented Alberta's independent production community for over 34
years. In fact, AMPIA was the first
provincial organization of its kind in Canada.
From producers, directors and screenwriters, to cinematographers,
composers and now new media producers, AMPIA's mandate is to help ensure the
continued growth and development of Alberta's film, television and web‑based
digital production industry at all creative levels.
LISTNUM
1 \l 12291 We
are here today because we have experienced changes in the industry, and we have
learned that we need to take these opportunities to voice our concerns.
LISTNUM
1 \l 12292 To
begin, we strongly endorse the CFTPA's position, including the requirement that
a clear determination is necessary to ensure to the Commission's satisfaction
that AAC's broadcast undertakings will truly be under Canadian control.
LISTNUM
1 \l 12293 As
Albertans, we live in a province that is well aware of the importance of foreign
investment in business. However, we also
believe in the essential importance of protecting our Canadian cultural
industries as set out in the Broadcast Act.
LISTNUM
1 \l 12294 The
financial arrangements between CanWest and Goldman Sachs raise serious issues
of Canadian control and create concerns about further consolidation in the
future.
LISTNUM
1 \l 12295 The
specialty channels of Alliance Atlantis are extremely important to producers in
our province. Alberta produces series
such as Thirsty Traveler, X‑Weighted and Fixing Dinner, plus many
documentary specials have attracted significant viewers to the AAC
channels. In addition, our producers
have been successful in marketing and exporting these programs internationally. With these opportunities our producers are
now able to move into other areas of programming using new digital
technologies.
LISTNUM
1 \l 12296 Our
major concern in this application is the serious omission of an overall
strategy for commissioning and showcasing Canadian programming. What will a merged CanWest/AAC look like in
four years in 2011, or in seven years, in 2014?
Consolidation has rarely had a more serious impact on diversity of
Canadian programming.
LISTNUM
1 \l 12297 AAC
has controlling ownership in 13 specialty channels and interests in five
others. Could we be looking at 13 or 18
commissioning outlets now being reduced to one?
We strongly believe that the CRTC must establish safeguards to ensure distinct
and separate programming strategies be maintained for these channels, and that
all independent producers have access in a fair and transparent process.
LISTNUM
1 \l 12298 This
consolidation will make CanWest one of English Canada's largest broadcasters
with a large imbalance of power in dealing with program producers. Our concern is that this merger may actually
result in fewer opportunities for our production community, as the broadcaster
may insist on multiple telecasts, on multiple channels at reduced licence fees,
and independent producers will have very few alternatives.
LISTNUM
1 \l 12299 However,
these concerns could begin to be addressed by a fair and reasonable terms of
trade agreement between the broadcasters and the independent producers. An agreement negotiated by the CFTPA would
establish clear rules and procedures for program development, production and
acquisitions, and ensure separate negotiated licence fees for the different
tiers of broadcast rights. We
respectfully recommend that the Commission require that CanWest take a
leadership role on this issue, and commit to concluding a terms of trade
agreement with the CFTPA no later than December 31st, 2009.
LISTNUM
1 \l 12300 As
we have stated at previous hearings, it is AMPIA's belief that it is
independent producers from regions like Alberta who provide true diversity to
the Canadian broadcasting system, creating and producing a wide range of high
quality programming. We have built
remarkable co‑production partnerships and we work hard to grow and
develop our industry, but we continue to face a number of challenges, the main
one being that we are 1500 kilometres from the nearest decision maker.
LISTNUM
1 \l 12301 Although
CanWest has an executive in Vancouver to deal with documentaries, we ask that
the CRTC request from CanWest a commitment to have their program decision
makers travel to the regions at the minimum twice per year for meaningful
meetings with producers.
LISTNUM
1 \l 12302 AMPIA
agrees with other intervenors that some of the proposed benefits should be
declared not eligible, specifically the in‑house productions listed as
Building a Star system, the news and current affairs initiatives and the
archiving project. We also believe that
pre‑assigning benefits to projects currently underway should not be
considered incremental and should also be declared not eligible.
LISTNUM
1 \l 12303 We
respectfully recommend that these dollars be instead invested with the
independent producers in areas of development, pilot programs, new media
concepts, scripted dramas and documentaries.
Although CanWest has made its largest commitment to independent
production, the amounts spread over ten years is insufficient. The $55 million promised for scripted drama
spread over ten years would, at best, only result in one 13‑episode hour‑long
series per year, and that is assuming the producer is able to leverage a
matching amount from other sources.
LISTNUM
1 \l 12304 On
behalf of our members, we must disagree with the proposed ten‑year
term. The future is extremely uncertain
and the 2011 date on the financing agreement with Goldman Sachs is
significant. Alberta producers have
experienced how changes in ownership have stalled benefit programs in the
past. We strongly recommend that the
Commission require that benefits be paid out over a shorter term. AMPIA recommends a maximum term of five or
seven years.
LISTNUM
1 \l 12305 We
are also compelled to address a major change in the proposed delivery of the
benefit flowing from this transaction.
In previous transactions CanWest Global has supported our production
community through third party directed benefits administrated in the
region. This has been very beneficial to
independent producers in Alberta, as it almost guarantees that the promised
benefit will be delivered.
LISTNUM
1 \l 12306 AMPIA
recommends as a condition of licence, if approved, that CanWest be required to
return to a benefits policy requiring third party administration. In reviewing the new initiatives by CanWest,
AMPIA is very pleased to see support for the Banff World Television Festival,
but also highly recommend additional support for other very meaningful Alberta
events, including the annual Alberta Film and Television Awards Festival and
the international film festivals in Calgary and Edmonton. These events attract significant audiences
and showcase the achievements of Alberta producers to the local community.
LISTNUM
1 \l 12307 In
summary, AMPIA supports the application, but subject to the following. A clear determination that the transaction
meets the requirements for Canadian control; a commitment to negotiated terms of
trade agreement with the CFTPA no later than December 31st, 2009; a commitment
to travel to the regions at least twice per year for meaningful meetings with
producers; the filing of a revised benefits package reallocating some of the
proposed benefits to independent producers; a benefits policy required third
party administration; a shorter licence term; and the filing of a strategy for
the programming commissioning of projects from independent producers both in
the short term and in the long term after 2011.
LISTNUM
1 \l 12308 AMPIA
has enjoyed a very positive relationship with CanWest Global over many years,
especially with the management teams in Calgary and Edmonton. We acknowledge their support in helping us to
develop and grow our industry in Alberta.
We believe this application, with adjustments, has the potential to help
in this growth.
LISTNUM
1 \l 12309 Thank
you for the opportunity to share our views this morning.
LISTNUM
1 \l 12310 THE
CHAIRPERSON: Thank you very much.
LISTNUM
1 \l 12311 When
you say a benefits policy requiring third party administration but for
production for the benefit of CanWest or Alliance Atlantis, or do you mean for
anybody?
LISTNUM
1 \l 12312 MR. BROOKS: I think for the benefit of the system.
LISTNUM
1 \l 12313 THE
CHAIRPERSON: So, not only would CanWest
lose control over the administration, but they would not necessarily reap the
benefits of any money that is being placed in the production community?
LISTNUM
1 \l 12314 MR. BROOKS: In the third party administration, all
producers would have the benefit for all broadcasters. It would not necessarily be just for Global
properties or CanWest Global properties.
LISTNUM
1 \l 12315 THE
CHAIRPERSON: Thank you.
LISTNUM
1 \l 12316 Commissioner
Arpin.
LISTNUM
1 \l 12317 COMMISSIONER
ARPIN: Continuing on the same question,
is CTF meeting your definition of a third party organization for this instance?
LISTNUM
1 \l 12318 MR. BROOKS: Yes.
LISTNUM
1 \l 12319 COMMISSIONER
ARPIN: Even if they are based in
Toronto?
LISTNUM
1 \l 12320 MR. BROOKS: Oh sure, yes.
LISTNUM
1 \l 12321 COMMISSIONER
ARPIN: Back to the terms of trade and
the discussion. Obviously there has been
discussion that the producers association have been bringing before the
Commission for some time. Now you are
coming up with a new request that those negotiations be terminated no later
than December 31st, 2009. Is that date
realistic, because I think the issue is not an issue for Global; it is an issue
for an industry.
LISTNUM
1 \l 12322 MR. BROOKS: That is true.
We just think that there has to be a milestone, a benchmark to have it
done, otherwise it will drag on for many, many years. We think two years is a reasonable time to
determine a fair and reasonable terms of trade agreement.
LISTNUM
1 \l 12323 COMMISSIONER
ARPIN: This position that you are taking
here, is it something that is shared by the other regional producers
association and the CFTPA because this is the first time I am hearing that
date.
LISTNUM
1 \l 12324 MR. BROOKS: In verbal conversation this morning, it was
agreed to. They thought it was a very
good idea. There is nothing
official. This morning I mentioned that
I was going to say this, and they said that is a reasonable amount of time.
LISTNUM
1 \l 12325 COMMISSIONER
ARPIN: Obviously we will hear from
CanWest later, when they will come up for reply, but currently you have terms
of trade in place with the CBC, I understand.
Are there terms of trade in place with other organizations?
LISTNUM
1 \l 12326 MR. BROOKS: Not to my knowledge.
LISTNUM
1 \l 12327 COMMISSIONER
ARPIN: Are there any discussions taking
place?
LISTNUM
1 \l 12328 MR. BROOKS: Again, not to my knowledge.
LISTNUM
1 \l 12329 COMMISSIONER
ARPIN: Not to your knowledge. These questions could have been much better
answered by CFTPA, which is leading the discussion.
LISTNUM
1 \l 12330 MR. BROOKS: That is true.
LISTNUM
1 \l 12331 COMMISSIONER
ARPIN: You are asking CanWest to make
sure that their programming people travel throughout the region while your
Manitoba counterpart is asking for an office to be located, as they said, in
Winnipeg. You seem to have divergent
views.
LISTNUM
1 \l 12332 Why
do you think people travelling to Calgary and Edmonton will meet your needs,
while another organization thinks there has to be an office there, right in the
middle of their territory?
LISTNUM
1 \l 12333 MR. BROOKS: From our experience in Alberta, the
development officers that are placed in the province are really just dropping
off points. They don't have decision
making. The decisions are still made by
executives in Toronto. So, it is almost
like window dressing where it is another stop you have to make, but ultimately
you do have to get to Toronto, you have to talk to the Toronto decision maker.
LISTNUM
1 \l 12334 It
is that $1,500 cup of coffee that we have talked about in the past.
LISTNUM
1 \l 12335 What
we are suggesting is that CanWest could make a commitment to at least come to
the regions and talk to us, have some serious meetings where we actually get a
chance to talk to the broadcaster and the decision‑maker without having
to have the expense of travelling.
LISTNUM
1 \l 12336 COMMISSIONER
ARPIN: I understand what you are saying.
LISTNUM
1 \l 12337 Now,
the question has been asked to other interveners, usually the benefit package
applies to the purchasee, not to the purchaser, and in this instance there are
some benefits that are applying to the purchaser. There have been some requests that a lot of
things be denied but the benefits be repackaged.
LISTNUM
1 \l 12338 I
have heard what you said about your concern regarding the Alliance Atlantis
current specialty services and your concern that they be shrunk to only one.
LISTNUM
1 \l 12339 What
are your views regarding the benefit package?
Should it be only for the benefit of the purchased outlets or could it
be shared with the incumbent?
LISTNUM
1 \l 12340 MR. BROOKS: I think the benefit package should be an open
situation where it is of interest and of benefit to the broadcasting system as
a whole.
LISTNUM
1 \l 12341 COMMISSIONER
ARPIN: Obviously, in asking that
question, I am thinking of self‑administered benefits as proposed.
LISTNUM
1 \l 12342 So
in your own view, it could go either way, it doesn't matter as long as it is
spent over a fairly short period of time, as you are suggesting, five, and
seven years will be acceptable?
LISTNUM
1 \l 12343 MR. BROOKS: I mean we strongly believe that having the
benefits administered by a third party is, again, of benefit to the system and
then having it done in a shorter period of time makes much more sense.
LISTNUM
1 \l 12344 COMMISSIONER
ARPIN: Okay, thank you very much.
LISTNUM
1 \l 12345 THE
CHAIRPERSON: Thank you very much.
LISTNUM
1 \l 12346 COMMISSIONER
KATZ: I have a question.
LISTNUM
1 \l 12347 THE
CHAIRPERSON: Yes, go ahead.
LISTNUM
1 \l 12348 COMMISSIONER
KATZ: Sorry about that,
Mr. Chairman.
LISTNUM
1 \l 12349 On
page 2, your third paragraph down, there is a sentence, the back end of it,
saying:
"The financial arrangements
between CanWest and Goldman Sachs raises serious issues of Canadian control and
creates certain concerns about further consolidation in the future." (As
read)
LISTNUM
1 \l 12350 Are
your concerns about further consolidation a general statement or is it with
regard to foreign equity investment?
LISTNUM
1 \l 12351 MR. BROOKS: It is in regard to the foreign equity
possibility.
LISTNUM
1 \l 12352 COMMISSIONER
KATZ: Thank you.
LISTNUM
1 \l 12353 THE
CHAIRPERSON: Thank you.
LISTNUM
1 \l 12354 COMMISSIONER
DUNCAN: Mr. Chairman, I have a
question.
LISTNUM
1 \l 12355 THE
CHAIRPERSON: Go ahead.
LISTNUM
1 \l 12356 COMMISSIONER
DUNCAN: It is with respect to page 3 and
you make the statement:
"We believe the CRTC must
establish safeguards to ensure distinct and separate programming
strategies." (As read)
LISTNUM
1 \l 12357 I
notice that CanWest has emphasized that they have not applied for any changes
to the COLs of the various AAC channels.
LISTNUM
1 \l 12358 I
just wonder if you think there is more required than that because the licence
renewals will be an opportunity to address.
LISTNUM
1 \l 12359 MR. BROOKS: I guess it is just a reinforcement if this transaction
is approved, a reinforcement of maintaining the distinctiveness of the
different channels.
LISTNUM
1 \l 12360 COMMISSIONER
DUNCAN: Okay, thank you.
LISTNUM
1 \l 12361 Thanks,
Mr. Chairman.
LISTNUM
1 \l 12362 THE
CHAIRPERSON: Okay, thank you.
LISTNUM
1 \l 12363 We
have a few follow‑up questions for CanWest and then we will break for
lunch. So let's take a five‑minute
break, we will ask you the questions and then we will go for lunch.
‑‑‑ Recessed at
1204 / Suspension à 1204
‑‑‑ Resumed at
1211 / Reprise à 1211
LISTNUM
1 \l 12364 THE
SECRETARY: Please take your seats.
LISTNUM
1 \l 12365 THE
CHAIRPERSON: Mr. Asper, you have
heard all day today people talk about equity.
Obviously, the equity that you bring in is 35 percent, we know, but we
know in 2011 you will also be bringing in the contributed businesses, which is
going to be a large amount and which, in effect, you commit yourself right now
also to organize, in effect, in a combined way, together with the assets to be
acquired.
LISTNUM
1 \l 12366 Now,
I don't want you to say anything publicly that would hurt your business but on
the other hand it would be very valuable for us if we could know what is the
value of this contributed business today.
Maybe you could give us that answer by way of a confidential interrogatory
because I am sure it had to be valued for this transaction.
LISTNUM
1 \l 12367 I
realize it will be devalued in 2011 but what is the value of it today?
LISTNUM
1 \l 12368 MR. ASPER: Okay.
LISTNUM
1 \l 12369 THE
CHAIRPERSON: Secondly, I wanted to speak
to you about programming.
LISTNUM
1 \l 12370 You
have heard various people today talk about that, in effect, specialty channels
are different from over‑the‑air broadcasters, that they want to
have more than one door to knock on and they want the programmer to make the
decision on the basis of what are the needs of a specialty channel or the needs
of an overall broadcaster.
LISTNUM
1 \l 12371 You
have not made that suggestion in your plans and I would like to know (a) why
not and (b) whether you would think this would be a very onerous provision to
impose on you.
LISTNUM
1 \l 12372 I
don't know whether you want to answer it now or later on.
LISTNUM
1 \l 12373 MR. ASPER: We were under the understanding we would be
receiving a series of questions and we will take the break to come up with an
answer.
LISTNUM
1 \l 12374 THE
CHAIRPERSON: Okay.
LISTNUM
1 \l 12375 MR. ASPER: Can I just make sure I understand the
question?
LISTNUM
1 \l 12376 MS
BELL: We understand it.
LISTNUM
1 \l 12377 MR. ASPER: You are clear?
LISTNUM
1 \l 12378 MS
BELL: We have got it.
LISTNUM
1 \l 12379 MR. ASPER: You have taken good notes?
LISTNUM
1 \l 12380 MS
BELL: Yes.
LISTNUM
1 \l 12381 MR. ASPER: Thank you.
LISTNUM
1 \l 12382 THE
CHAIRPERSON: And lastly is the issue of
programming decisions and obviously this is key. You have an independent programming
committee. It will be only your
employees. If I understand, it will be
five, four of which will be Canadian, one will be your CEO, who is an American
but your employee, et cetera. They will
make all the programming decisions.
LISTNUM
1 \l 12383 The
definition of programming decision that you have offered in your June 26th
letter says:
"Programming decision means all
decisions of any kind relating to or affecting television programming
broadcasting by the licence undertakings and includes all decisions relating to
the content and presentation of the licence undertaking programming." (As
read)
LISTNUM
1 \l 12384 I
have no problem with that definition except it stops short. It doesn't say anything about the money.
LISTNUM
1 \l 12385 I
think you should use the programming decision definition that we have used in
the past in such transactions as, for instance, in Look Communications:
"...and also includes all
decisions respecting the funding of programming or the making of programming
contributions by the licence undertaking." (As read)
LISTNUM
1 \l 12386 So
it is clear ‑‑ I think that is your intent anyway ‑‑
that these programming people, they make the programming decisions but they
also make ‑‑ it is not just the decisions, they also dispose
of the funds. Presumably, there is a
fund allocated for their purposes and from that they can ‑‑
anyway, I would like you to clarify that.
LISTNUM
1 \l 12387 MR. ASPER: Okay.
LISTNUM
1 \l 12388 THE
CHAIRPERSON: Those are my questions.
LISTNUM
1 \l 12389 Everybody
else has some other questions. I will
start with Vice‑Chairman Arpin.
‑‑‑ Pause
LISTNUM
1 \l 12390 THE
CHAIRPERSON: I am sorry, Vice‑Chairman
Katz?
LISTNUM
1 \l 12391 COMMISSIONER
KATZ: Thank you, Mr. Chairman.
LISTNUM
1 \l 12392 We
heard yesterday afternoon and again this morning questions about CanWest's
financial situation and in light of this acquisition the fact that there is
also an imputed rate of return by Goldman Sachs as well.
LISTNUM
1 \l 12393 What
assurances can you give the Commission that the business will not be
compromising the Canadian programming as you try and achieve these hurdles and
these rates of return?
LISTNUM
1 \l 12394 That
would be one of the questions that I have for you.
LISTNUM
1 \l 12395 The
second one is: I have heard a lot about
equity and control. Just for our
purposes, and you may have to file this in confidence, how much additional
equity would it require you to invest in order to get down to that 50 percent
level? Just so we have that for our own
purposes at the Commission as well.
LISTNUM
1 \l 12396 Okay? Those are my questions.
LISTNUM
1 \l 12397 THE
CHAIRPERSON: Commissioner Duncan?
LISTNUM
1 \l 12398 COMMISSIONER
DUNCAN: I just have one question. It follows along the line of Vice‑Chairman
Katz.
LISTNUM
1 \l 12399 Yesterday,
Barb Williams, I understood her comment to be that in regards to the benefit
spending that if a worthwhile project came along that she would be free to
undertake it.
LISTNUM
1 \l 12400 Say,
for example, it came along in the first four years she would be free to
undertake it. It wouldn't have to wait
till year eight or nine ‑‑ my example, not hers. But her message was clear, she could do it
when it came along. It wasn't going to
be delayed as a result of you trying to reach the requirements to satisfy the
Goldman Sachs transaction.
LISTNUM
1 \l 12401 I
just want to make sure that you are on side with that, Mr. Asper.
LISTNUM
1 \l 12402 THE
CHAIRPERSON: Vice‑Chairman Arpin?
LISTNUM
1 \l 12403 COMMISSIONER
ARPIN: We have a few questions.
LISTNUM
1 \l 12404 First,
obviously, the proposal that is put before us involves a foreign investor but
have you searched for a Canadian investor, and if yes or no, we want to ‑‑
but if yes, what were the reasons why you chose to come up with, finally,
Goldman Sachs.
LISTNUM
1 \l 12405 Second,
if the Commission was to deny your application, what will be the impact on the
current assets of Alliance Atlantis, second, on CanWest, third, on Goldman
Sachs? Will there be break‑up
fees?
LISTNUM
1 \l 12406 THE
CHAIRPERSON: Okay, those are our
questions.
LISTNUM
1 \l 12407 I
suggest we take an hour and a half lunch if that is enough time for you and
then you can answer those rather than taking them out of context with the other
answers that you have prepared.
LISTNUM
1 \l 12408 MR. ASPER: Yes, it is, thank you. We will see you in an hour and a half.
LISTNUM
1 \l 12409 THE
CHAIRPERSON: Okay. So we will start at a quarter to two then.
LISTNUM
1 \l 12410 Thank
you very much.
‑‑‑ Recessed at
1219 / Suspension à 1219
‑‑‑ Resumed at
1351 / Reprise à 1351
LISTNUM
1 \l 12411 THE
SECRETARY: So, you have 10 minutes to
make your reply and final comments, but if you want you can start with either
answering the question that the Panel asked you before lunch.
LISTNUM
1 \l 12412 Thank
you.
REPLY / RÉPLIQUE
LISTNUM
1 \l 12413 MR. ASPER: With your indulgence, Mr. Chairman, what
I'd like to do is start by answering the questions you asked us today prior to
lunch.
LISTNUM
1 \l 12414 THE
CHAIRPERSON: Mm‑hmm.
LISTNUM
1 \l 12415 MR. ASPER: And then go into my prepared final remarks
which include far less than 10 minutes of an actual reply to the interveners
and then we'll follow with the responses to your concerns and comments you made
yesterday when we were here before you.
LISTNUM
1 \l 12416 THE
CHAIRPERSON: It is your show, go ahead.
LISTNUM
1 \l 12417 MR. ASPER: It didn't sound quite that liberal with Madam
Roy, but thank you.
‑‑‑ Laughter /
Rires
LISTNUM
1 \l 12418 THE
SECRETARY: It's okay. I agree.
LISTNUM
1 \l 12419 MR. ASPER: If the Chairman says it's my show, I'll
agree.
LISTNUM
1 \l 12420 THE
SECRETARY: Okay.
LISTNUM
1 \l 12421 MR. ASPER: Thank you.
LISTNUM
1 \l 12422 So,
what I'd like to do if I could is try to at least re‑read or paraphrase
the questions to the best of my ability from what you said at lunch and, if I
do get those wrong, please stop and make sure I've ‑‑ feel
free to correct me.
LISTNUM
1 \l 12423 So,
the first question was the value of the business today and you did suggest, I
think Mr. Katz, that we could file such confidentially and, so, what we
will do is commit to file that with you by nine a.m. tomorrow on a confidential
basis.
LISTNUM
1 \l 12424 The
second question was, you asked about programming and asked, if I could again
paraphrase, why we didn't suggest or volunteer to have separate structures
between specialty and conventional and why that would be onerous if we were to
have that.
LISTNUM
1 \l 12425 And
I'd like to ask Kathy Dore and Barb Williams and others to respond to that,
please.
LISTNUM
1 \l 12426 MS
DORE: Thank you.
LISTNUM
1 \l 12427 We
don't run our business that way today at CanWest. We have one integrated programming team and
we have the same for marketing and the same for sales and, as a matter of fact,
Alliance Atlantis also runs a single programming team and many other Canadian
broadcasters do the same.
LISTNUM
1 \l 12428 I
think that it's a question of it being critical to have in this environment, in
this marketplace with the challenges that we have on all television networks,
it's critical to have a larger and a more common point of view at the level of
programming strategy.
LISTNUM
1 \l 12429 It
ensures, if we have one programming team, that we make the best use of talent
and, at the end of the day, I strongly believe that programming is a creative
and collaborative undertaking.
LISTNUM
1 \l 12430 Obviously
CanWest has both conventional and specialty assets now. I don't believe that having a single team, it
certainly hasn't harmed our commitment to Canadian content or Canadian drama. We've produced and aired more and better
Canadian drama on our conventional platform in the last years than ever before.
LISTNUM
1 \l 12431 Certainly
our specialty networks have not been marginalized. TVtropolis has become one of the top five
analogue networks over the past 24 months and Mystery has become the top No. 1
digital network.
LISTNUM
1 \l 12432 And,
in addition, I think that we would say that this common platform and this
integrated programming team has also enabled us to create very distinct brands,
to maintain our commitment to nature of service on all of our specialty
networks and to program them in a very distinct way.
LISTNUM
1 \l 12433 Now,
all that said, we may decide at some point that that's not the best way to run
our programming unit and that may be in response to competition or in order to
enable us to better exploit new platforms or whatever, but we would certainly
maintain that it was a decision that should be left to the discretion of
management.
LISTNUM
1 \l 12434 And
I'd like to ask both Barb and Walter to give you a little more flavour for how
we do that, how we do what we do today and why that works.
LISTNUM
1 \l 12435 MS
WILLIAMS: Thanks, Kathy.
LISTNUM
1 \l 12436 I
think I'd like to start by suggesting that from my personal point of view,
having spent a number of years proudly building the brands of Alliance Atlantis
on many of their channels and having spent the last number of years at CanWest
proudly building the programming schedules of conventional networks, that I can
say that there is nothing inherently different about the two.
LISTNUM
1 \l 12437 They
require the same skill sets. You need to
know your audience, you need to know what your programming schedule is trying
to do, you need to understand the brand and the personality of that channel and
you need to be ‑‑ you know, you need to have the skills of
making good programs.
LISTNUM
1 \l 12438 And
that's the same whether you're putting that show on Slice or you're putting it
on E!.
LISTNUM
1 \l 12439 And
I think what we have come to understand at CanWest is that the most successful
strategy is to group together the expertise that you have in‑house and
take full advantage of that expertise.
LISTNUM
1 \l 12440 And
sometimes that expertise might be most usefully aligned around a channel, but
sometimes it might be more usefully aligned around a skill set like scheduling,
or sometimes it might be that you've got a real expertise in making drama and
no matter where that drama is going to run, the skill to be able to commission
and help craft a drama is a skill you want to collect and use to the best
advantage.
LISTNUM
1 \l 12441 So,
I think what we see as a programming team is that we really want to be able to
organize the work to take full advantage of how those areas of expertise line
up and be able then to distribute that expertise, if you will, across the
collective group of channels.
LISTNUM
1 \l 12442 I
think there's a couple of examples that may really help bring this home.
LISTNUM
1 \l 12443 When
you think of History Television you think of the expertise that they have in‑house
on making documentaries. Some of the
finest documentaries in this country I think have been commissioned by that
channel.
LISTNUM
1 \l 12444 Likewise
at CanWest, we have some real expertise on the documentary side that oversees
the production of our independent documentaries for our Strand Global currents.
LISTNUM
1 \l 12445 To
forego the opportunity to bring together that collective documentary
experience, the collective knowledge of that documentary community, the
collective knowledge of what's been done, how it's been done, how to make it
the best it would be, to somehow force that those two groups of experts don't
come together to make the best docs possible would seem to me fool hearty,
frankly, when the ultimate goal here is to make the best Canadian programming
we can and then to schedule it in the best places, at the best times, in the
best ways to make it successful.
LISTNUM
1 \l 12446 So,
it feels to us that what we need to appreciate here is that, first of all, it's
not just one person. I mean, proud as
Christine and I are of all the things that have been said about us this
morning, there's a way more than just Christine and me that are doing this work
at CanWest and when we add in a large group of really strong programming
professionals who organize that group and make sure that that group's expertise
is being used most effectively.
LISTNUM
1 \l 12447 And
I think where it really comes down to is that even within ‑‑
within any kind of broadcasting organization, programming does get to play a
very, very central role and we're proud of that, but we don't do it alone and
part of making any channel successful, be it specialty or conventional, is to
really work lock‑step with the marketing group and be sure that that
brand fit is there with the program schedule.
LISTNUM
1 \l 12448 And
that's why I think there's some similarity in Walter's world to how he also
thinks about organizing his team.
LISTNUM
1 \l 12449 MR. LEVITT: Yeah, thanks, Barb.
LISTNUM
1 \l 12450 You're
right. I mean, you know, clearly one of
my focuses as a marketing person is to make sure that each of the brands is
distinctive and clear and that we understand our distinct viewers and each
brand.
LISTNUM
1 \l 12451 And
I think the way you do that is you have the best, smartest, most strategic people
focused on building those brands and then building the audiences for the
programming on the brands, obviously the original Canadian programming as well.
LISTNUM
1 \l 12452 And
I think back even to my experience at Alliance Atlantis. Frankly, over time it was done
differently. There was a time when we
had the same marketing people responsible for HGTV and Food Network, and then
there was a time in the development of Food Network that we realized we needed
a slightly different skill set and so we had a separate person managing Food
Network.
LISTNUM
1 \l 12453 And
so to have, in a sense, artificially forced them to be separate would not have
made sense.
LISTNUM
1 \l 12454 And
I'll take Barb's analogy I guess a step further. You know, we talked I believe yesterday about
some of the daytime lifestyle programming that we have on Global and E! and,
frankly, I think it would be to the advantage of that original Canadian
programming to tap into the expertise of those marketing experts that market
original lifestyle programming on HGTV or on Food Network or on Slice and to
use their expertise to grow the audiences of that programming on Global and E!.
LISTNUM
1 \l 12455 So,
I guess my point of view is I think the best opportunity for us as a
broadcaster is to have a structure that allows us to have the best people with
the best expertise focused in the right places so that we can ultimately grow
the brands, grow the original programming audiences and help the system
overall.
LISTNUM
1 \l 12456 THE
CHAIRPERSON: So, all of the submissions
that we heard yesterday and today which were quite to the opposite of what you
just said, to what do you attribute this difference of opinion? Do they not know what they are talking about? Is there some self interest here that is not
pronounced or what?
LISTNUM
1 \l 12457 I
mean, we heard some very strong submissions that there is a real requirement
for the separate programming to make sure that the lustre and the shine and the
success of Alliance Atlantis does not get merged and does not get homogenized,
I think was the words of those being used.
LISTNUM
1 \l 12458 MS
WILLIAMS: Well, there's a few thoughts
about that. One would be that I think,
just from a practical point of view, it would be odd ‑‑ if
there is in fact something about separating specialty and conventional, it
would be very odd to have the eight speciality channels of CanWest sitting
isolated off in some other group.
LISTNUM
1 \l 12459 I'm
not quite sure what their point of view is about what should happen with those
specialty channels or how they acknowledge the success of those channels within
the CanWest world today.
LISTNUM
1 \l 12460 I
think part of it though is to understand that what we have probably done most
successfully I would say at CanWest in these last few years is build the
distinct brands of the channels we have, be they specialty or conventional, and
that that is probably what is in many ways behind the real growth and success
we've had, is to really work at understanding what those separate audiences are
on each of those channels and how to programming them successfully, how to
commission successfully for each of those brands. And to not sort of acknowledge what we have
done there, I think would be a mistake.
LISTNUM
1 \l 12461 I
think also one needs to think beyond just what ‑‑ I mean,
there's a sense of protection around Alliance Atlantis that I understand, but
if you step outside of that and look to what CTV has accomplished with their
specialty channels under one programming team, look at what CHUM accomplished
with their specialty channels and their conventional channels under one
programming team.
LISTNUM
1 \l 12462 There
is actually, you know, a lot of I think really relevant precedent for why it
works and why companies who are trying to manage their business the best way
they can, why they do it that way.
LISTNUM
1 \l 12463 And
yet we all know what Bravo is and we all know what Space is and we all clearly
understand what Comedy Network is, the fact that those channels have been, you
know, under a single programming entity has not in any way diminished their
brand or their clarity in the marketplace.
LISTNUM
1 \l 12464 So,
my guess honestly is that there's a little bit of fear of change as opposed to
a genuine openness to see the potential.
LISTNUM
1 \l 12465 THE
CHAIRPERSON: The second part of the
question was: What would be the cost or
what would it do to you if we insisted on it.
LISTNUM
1 \l 12466 I
haven't heard anything in response to that.
LISTNUM
1 \l 12467 MS
WILLIAMS: The cost would be that those
advantages that we talked about so much yesterday would not be there.
LISTNUM
1 \l 12468 The
opportunity to take the show that is the potential hit and see it for what it
is and recognize it and move it over the appropriate time and schedule it in
the appropriate way wouldn't be there.
LISTNUM
1 \l 12469 The
opportunity to build the cross‑promotional opportunity to really
understand how you take a show and you build it to a certain degree here and
then you take it to its next level there and you do that cooperatively, you'd lose
that opportunity.
LISTNUM
1 \l 12470 You
end up with teams inside that are competing with each other rather than
cooperatively trying to build programs.
You end up with a system much of what we have today which is sometimes a
conventional network and a specialty network come together today in different
companies to successfully finance a show, but then they go out and they try and
kill each other with it and see if we can make ours run better than yours and
make our program ‑‑ you know, our marketing campaign wreck
yours and see if we can, you know, squash the impact of each instead of
collectively growing the show.
LISTNUM
1 \l 12471 You'd
set up that same dynamic inside and really you miss the whole point.
LISTNUM
1 \l 12472 MR. ASPER: I think if I could just add one final
sentence on that, I think the cost, if you want to try to ‑‑ I
don't know if we could quantify it, there will certainly be a cost in the
operating cost of the businesses, so that's for sure, and I think the other
costs will be Canadian audiences will not have the same chance to see certain
programming and I think in the end that may or may not make the difference
between that programming being a hit, being recommissioned and that producer
continuing on with that program, and I think Laslo Barna said it very well in
his submission.
LISTNUM
1 \l 12473 I'll
go on if I can, Mr. Chairman, to No. 3.
You mentioned ‑‑ you asked about the programming
committee and our position on that is that subject to the Board's
responsibility to set the overall gross budget for the programming committee,
it would have the discretion to allocate the funds howsoever it saw fit.
LISTNUM
1 \l 12474 We
are filing a new resolution about the programming committee based on our
conversation tomorrow, I will refer to it in my subsequent comments and that
will include the statement I just made.
LISTNUM
1 \l 12475 No.
4, you asked, Commission, what assurances could we give that we will not
compromise Canadian programming in order to achieve the rate of return
requirements of the transaction with Goldman Sachs.
LISTNUM
1 \l 12476 I
guess my first comment with that is we factored in those needs, we factored in
the conditions of licence that each Alliance Atlantis specialty channel has,
its spending requirements, its percentages, we factored in our own, obviously,
on our own channels, on our specialty channels and we factored in the
requirement that we have to do eight hours of priority programming and all of
the content requirements that apply to the conventional channels when we did this
transaction.
LISTNUM
1 \l 12477 We
believe that the objectives we set for ourselves and the targets we've set are
eminently achievable and they are particularly achievable because of the
synergy that we do get and the value we unlock from putting these two assets
together.
LISTNUM
1 \l 12478 So,
we certainly didn't do this transaction with the expectation that we would
suddenly have to make those kinds of compromises.
LISTNUM
1 \l 12479 I
would also point out that in 30 years of doing business, no matter what the
financial challenges have been for this company ‑‑ and they've
been sometimes strong, sometimes non‑existent ‑‑ we've
had many years of great success, but some years of challenge, especially in the
beginning years of Global, we have never not ‑‑ we have always
complied with our conditions of licence, our percentage ‑‑ our
spending requirements, where we've had them, and our overall commitments and,
in some cases, we've well over performed.
LISTNUM
1 \l 12480 We
don't intend to change that pattern of behaviour.
LISTNUM
1 \l 12481 I
hope that answers the question.
LISTNUM
1 \l 12482 No.
5, you asked how much we would have to invest to get to over 50 per cent of the
equity or to essentially have Goldman be below 50 per cent. The number is $110‑million.
LISTNUM
1 \l 12483 We
would also point out that the Commission, partially in response to some of the
interveners, that the Commission has approved other situations where a
foreigner had over 65 ‑‑ over 50 per cent, close to 65 per
cent in many cases.
LISTNUM
1 \l 12484 I
cite some, but the ones I know of are Fundy, the Fundy Cable, the Persona case
which was referred to.
LISTNUM
1 \l 12485 In
other regulatory situations, not where the same rules applied, a control and
fact test, there were situations in the Canadian Airlines, Air Canada and, more
recently, the take‑over of Telesat by a company called Loral has been
announced and it has ‑‑ Loral had a 64 or 65 per cent equity
percentage holding.
LISTNUM
1 \l 12486 So,
there are I think other precedents in the regulatory world where this
test ‑‑ same test exists, but the number for us is $110‑million.
LISTNUM
1 \l 12487 I
would also point out the context of that in CanWest's situation is that to
write a cheque for $110‑million today would put us at about five times
leverage in our business, other things being equal.
LISTNUM
1 \l 12488 Our
covenant with our banks will step down from six times to 5.5 times on February
28th, 2008, so we will be within half a turn of EBITDA or about $100‑million ‑‑
or less than $100‑million of reaching those covenants.
LISTNUM
1 \l 12489 So,
I would put it to the interveners and those who have suggested such that if
they think we were under pressure now, we would be under significant
pressure ‑‑ I don't know what the word would be ‑‑
it would be far more pressure ‑‑
LISTNUM
1 \l 12490 MR. LEVITT: Highly motivated.
LISTNUM
1 \l 12491 MR. ASPER: That would be ‑‑ we
structured this transaction so as not to bet the farm, but if they want to
define betting the farm, that would take us certainly closer to that rather
intangible statement.
LISTNUM
1 \l 12492 No.
6, you asked if I concurred with I believe Barb Williams' position on the
position that she took on the flexibility to spend benefits money before the
four‑year period to 2011, and I do concur with that statement.
LISTNUM
1 \l 12493 No.
7, you asked if we ‑‑ sorry.
LISTNUM
1 \l 12494 THE
CHAIRPERSON: Can you repeat that?
LISTNUM
1 \l 12495 MR. ASPER: I do concur with Barb Williams' statement
that there would be flexibility to spend the benefits money, you know, as she
saw fit effectively within the four‑year period, from 2011 ‑‑
or after of course, but I think that was the question; correct?
LISTNUM
1 \l 12496 Charlotte,
do you have...?
LISTNUM
1 \l 12497 THE
CHAIRPERSON: What was the question, I'm
sorry.
LISTNUM
1 \l 12498 COMMISSIONER
DUNCAN: That's what I asked. I referred to Barb, the day before she had
commented that she would have the flexibility, despite what their schedule was,
if a good program came along she could do it, my choice, year two as opposed to
waiting to year seven, she would have complete flexibility.
LISTNUM
1 \l 12499 And
I just want to make sure that Mr. Asper agreed with that, and he is saying
he does.
LISTNUM
1 \l 12500 Thank
you.
LISTNUM
1 \l 12501 MR. ASPER: Thank you.
LISTNUM
1 \l 12502 Number
seven, you asked if we had approached Canadian investors. The answer is, yes, we had.
LISTNUM
1 \l 12503 But
I want to go over the timeline here.
Over the period leading up to the announcement of the auction on
December 12th, 2006 we had approached Canadian banks about investing in the
specialty sector generally. You may
recall that CHUM was sold probably earlier that year and so there was some
expectation that there were going to be other transactions possible and we have
obviously been ‑‑ fallen into the opportunity to acquire
Alliance or other groups in the specialty sector for a number of years.
LISTNUM
1 \l 12504 So
we did approach them. But the Canadian
banking system is very limited. It's
made up of five banks, as you know, most of whom have credit limits that they
can offer to any one company. Our
experience is that doesn't exceed between $200 and $250 million to any one
company and others may ‑‑ other larger companies may have more
access to that kind of capital. But in a
transaction of $2.5 billion, quite simply the Canadian bank system cannot
support a transaction of this size. One
needs to finance outside of the Canadian banking system.
LISTNUM
1 \l 12505 The
second part of that is that ‑‑ the other investors who can
invest capital of this amount in the Canadian system are the large, super large
pension funds. There is a tier and then
there is a second tier of pension funds; names you know, Teachers, the Caisse
de dépôt and others.
LISTNUM
1 \l 12506 And
two of those large pension ‑‑ there really are only three
pension funds that have private equity envelopes that can invest in businesses
of this size. Two of them own Canadian
media companies already, large positions in Canadian media companies. I'm sure you can figure out who those
are. The third one is ‑‑
and then the pension funds in general simply do not write cheques of this size
in one week. They have a process. They have certain responsibilities and
fiduciary duties and constituencies that require a much longer timeframe in
which to invest to commit to investing on a scale this large.
LISTNUM
1 \l 12507 So
then we were down to ‑‑ again, with one week to put together a
bid ‑‑ private equity, who could write a cheque of this size,
and that took us to ‑‑ we tried to ‑‑ we
approached three parties. We set out
criteria for ourselves which if they were not met would not ‑‑
would mean we would not pursue the transaction.
One of those criteria was, as I think I said in my opening remarks, was
that somebody would have to come along and take motion picture distribution and
the CSI franchise and we would not have to purchase those at all.
LISTNUM
1 \l 12508 The
second one was that we would have the investment and the broadcast subsidiary
would have no recourse; in other words, no claim on any assets of CanWest that
we own outside of the broadcast business, so our newspaper group, Australia and
New Zealand at the time. So we wanted to
make sure that any investor should things go wrong would not have any way to influence
CanWest at the parent company or cause us to do anything with our assets that
we wouldn't otherwise want to do.
LISTNUM
1 \l 12509 Obviously,
it had to be someone who would give us control and who would likely want to
exit sooner rather than later so that we could ultimately buy the 100 percent. Because remember, we only went to someone
because we couldn't buy 100 percent ourselves at the time.
LISTNUM
1 \l 12510 And
the final thing was they had to accept our value, our view of the value of
Global because it was a factor in this transaction in terms of the overall
amount required and the desire to contribute the business at a certain
valuation at a certain period of time.
LISTNUM
1 \l 12511 So
the party that met those criteria within one week was Goldman Sachs and that's
how we ended up where we ended up.
LISTNUM
1 \l 12512 The
eighth question was if you deny, what are the consequences to Alliance and to
Canwest and to Goldman Sachs?
LISTNUM
1 \l 12513 So
I will start with Alliance Atlantis.
LISTNUM
1 \l 12514 I
think if Phyllis Yaffe could be up here she would be supporting these comments,
but trying to manage a business that's in limbo for a year is very
difficult. There will be inevitable
deterioration.
LISTNUM
1 \l 12515 They
have ‑‑ to their credit, Phyllis and the trustee, Jim
MacDonald and others perform admirably in keeping this thing together, keeping
the company together in the last year.
But essentially, you have seen that an auction of a business with a CRTC
process involved as well ‑‑ and I commend the CRTC on
accelerating the process because it is much faster than it used to be but it is
a year. So we are talking about Alliance
Atlantis being in limbo for another year.
LISTNUM
1 \l 12516 And
already we have seen programming decisions being held up in a company,
strategic decisions. There was a renewal
of a licence with one of the other partners, you know, that there was a
question about how that decision got made and it took a long time for it to get
made because people didn't have any strategic direction.
LISTNUM
1 \l 12517 So
it's just a question of things will get held up in Alliance Atlantis, and I
think the business will deteriorate and the value of its channels will
deteriorate.
LISTNUM
1 \l 12518 And
I think when we then go to sell the business, if we were denied we would
receive a lower price than we paid for it because we already paid the highest
price. We already went through an
auction. And I think that some
intervenors should remember there was an auction and all of the major potential
buyers who would be interested in this asset again participated in that auction
and we outbid them.
LISTNUM
1 \l 12519 So
I would see no reason why we wouldn't receive a lower price ‑‑
the trustee wouldn't receive a lower price selling his business. And a lower price would also be likely
because ‑‑ not only of our past experience do we know that,
but we know that we as a conventional broadcaster bring the most synergies to
this, which is we are able to pay the highest price.
LISTNUM
1 \l 12520 So
there would be a loss on the sale and the lower price, really, from Alliance
Atlantis' perspective and the system's perspective would be there would be less
benefits as of 10 percent of whatever that lower purchase price is. So I think the system will suffer.
LISTNUM
1 \l 12521 So
the company will suffer from the delay.
The system will suffer from what I think will be ‑‑
what I predict would be a lower purchase price.
LISTNUM
1 \l 12522 From
CanWest's perspective I think not having the Alliance Atlantis business will
accelerate the ratings decline on our conventional stations. I think we would have to continue to look at
our cost base and it would probably accelerate any further cost cuts we would
want to make, and I think we would have to look at the lowest return portions
of our business and wonder ‑‑ and certainly look at trimming
the investment in those areas.
LISTNUM
1 \l 12523 That
is what happens in ‑‑ you know, businesses are either in
virtuous circles or vicious cycles, and when you are in a declining or flat
business you have to make the hard decisions on the cost side because you have
no way to generate revenue to create the growth that shareholders require and
the CanWest shareholders ‑‑ not the Aspers but the public
shareholders ‑‑ certainly, the Aspers as well. I don't want to ignore my brother and sister
and their desires.
LISTNUM
1 \l 12524 The
bottom line is, you know, you get into a point where you have to look at the
costs out of the business again.
LISTNUM
1 \l 12525 I
think the other point to make is that when we acquired or announced the deal in
January, and then if you go to August the CanWest stock price has suffered a
significant decline since that time. In
particular, once the spectre of putting additional equity became a public thing
and became mooted publicly that specifically has spooked investors and it cost
CanWest ‑‑ when you ask what is the cost to CanWest, every
dollar decline in our share is $178 million decline in the value of the
company.
LISTNUM
1 \l 12526 So
we have lost about $4 a share since July, not all of which can necessarily be
attributed to Alliance Atlantis. There
was another ‑‑ external factors like the credit markets
declining and things like that. But
certainly if you look even in the last week as the hearings have approached,
with no other external factors to speak of, stock has even declined a dollar
since that time as people on Bay Street have speculated that the inclusion of
additional equity and the writing of another $110 million cheque for CanWest
would be potentially a reality.
LISTNUM
1 \l 12527 So
those are certainly evidentiary or certainly indicative factors of what the
cost to CanWest would be or has been, already just on a speculation of a denial
or a further ‑‑ the injection of further equity.
LISTNUM
1 \l 12528 In
terms of Goldman Sachs I think it was asked whether there was a
breakthrough. The answer is
"no". The only other thing I
would add there is that, again, both parties would likely suffer a loss on the
sale, the subsequent sale of the asset.
LISTNUM
1 \l 12529 I
am sorry. I was just handed a note, if
you don't mind?
‑‑‑ Pause
LISTNUM
1 \l 12530 MR. ASPER: I just would refer the Commission to section
6.12. You don't have to look at it now
but I will just indicate what it says.
LISTNUM
1 \l 12531 The
shareholders' agreement, section 6.12 does allow the parties to ‑‑
and particularly, I think, applicable to Goldman Sachs ‑‑ the
ability to walk away from the transaction effectively if it is granted on terms
that are not satisfactory to them. So
it's worth noting that that is a factor in ‑‑ it would be a
factor in people's thinking after the decision is rendered.
LISTNUM
1 \l 12532 So
that is part one. Those are my answers
to the questions posed before lunch.
LISTNUM
1 \l 12533 I
would now like to turn to ‑‑ I think before our closing
remarks, and I believe ‑‑ I am just asking Charlotte Bell here
out loud if the Commission has a copy of those remarks in front of them, or no?
LISTNUM
1 \l 12534 MS
BELL: Yes, they do.
LISTNUM
1 \l 12535 MR. ASPER: Okay.
LISTNUM
1 \l 12536 MS
BELL: We are going to have to ask for
confidentiality for this on the record.
LISTNUM
1 \l 12537 MR. ASPER: Okay, so at the end I will do that.
LISTNUM
1 \l 12538 Well,
and there is ‑‑ and in the remarks there is a ‑‑
LISTNUM
1 \l 12539 MS
BELL: There is a separate document.
LISTNUM
1 \l 12540 MR. ASPER: There is a separate ‑‑ where
we filed with the Commission a separate document which lays out the debt
schedule that was asked for about who is holding both the senior debt and the
bridge debt. And so we have filed that
with the Commission and we are requesting confidentiality over that.
LISTNUM
1 \l 12541 So
we won't address that specifically here, but you do have that or should have
that information.
LISTNUM
1 \l 12542 MS
BELL: I do.
LISTNUM
1 \l 12543 THE
CHAIRPERSON: Could you elaborate on
that, why you are asking for confidentiality for these schedules? You weren't quite clear why before.
LISTNUM
1 \l 12544 MR. MAGUIRE: I will speak to that if I may?
LISTNUM
1 \l 12545 Yes,
the lenders in the syndicate; specifically the syndication agents, have
requested confidentiality because these are ‑‑ there could be
commercial implications to both lenders and the borrower if other lenders were
to know who the other lenders are. This
debt is traded publicly and from a trading perspective, and, as well, in
situations where the borrower ‑‑ us ‑‑ may
want to request amendments to the terms of the agreements, it is in our
interest that the other lenders do not know who the entire group is.
LISTNUM
1 \l 12546 THE
CHAIRPERSON: I don't understand. If it is traded publicly, why do you want it
to be confidential?
LISTNUM
1 \l 12547 MR. ASPER: The holders are not known publicly. Anybody can trade debt publicly and it
wouldn't be necessarily known who the sellers and the buyers are. They trade through other parties.
LISTNUM
1 \l 12548 Is
that correct, John?
LISTNUM
1 \l 12549 MR. MAGUIRE: That's correct.
LISTNUM
1 \l 12550 COMMISSIONER
KATZ: Would not these companies, when
they issue their prospectus to their shareholders, identify what their holdings
are?
LISTNUM
1 \l 12551 MR. MAGUIRE: Typically, this debt would be held by hedge
funds or private investment groups that do not have to make those disclosures.
‑‑‑ Pause
LISTNUM
1 \l 12552 THE
CHAIRPERSON: Okay. We will accept it on that basis. We reserve the right, obviously, in our
decision, to make reference to it, but we will do it in a redacted version, not
to ‑‑
LISTNUM
1 \l 12553 If
there is something in here which bothers us, et cetera, we will try to make the
comment in such a way ‑‑ without breaking your
confidentiality, but making it clear what it was that caused us a concern.
LISTNUM
1 \l 12554 MR. ASPER: Okay.
That's fine. Thank you.
LISTNUM
1 \l 12555 I
will turn to our general comments, our reply, and then our response to some of
the comments or questions raised ‑‑ or concerns raised
yesterday by the Chairman and the Commission.
LISTNUM
1 \l 12556 I
won't go through the lengthy process of reintroducing our panel in this final
phase, but we have actually attached a chart at the back of our presentation
which clearly identifies the members of our panel, according to our seating
arrangement.
LISTNUM
1 \l 12557 First
and foremost, we would like to thank the 270 parties who filed letters
supporting this proposal, most of whom are from the independent production
sector. Indeed, from our perspective,
this speaks volumes of the efforts we have made in developing good
relationships with the production community, as well as the quality of the
benefits package that you have before you.
LISTNUM
1 \l 12558 We
have also carefully listened to the parties who expressed concerns regarding
this transaction, and have taken their comments into consideration in preparing
this reply.
LISTNUM
1 \l 12559 At
this point we would also like to thank the Commission and the Commission Staff
for their professionalism and hard work throughout this process. The Commission undertook a very thorough
examination of this application to ensure that it meets the requirements of the
direction on foreign ownership and the other aspects of Canadian broadcast
policy. As a result, an unprecedented
volume of materials has been put on the public record.
LISTNUM
1 \l 12560 That,
effectively, concludes our reply to the interventions. We would now like to address a number of
follow‑up items flowing from our appearance before you yesterday.
LISTNUM
1 \l 12561 To
begin with, we were pleased to hear the Chairman endorse the control in fact
test in the Canadian Airlines case, as cited in the Unitel decision. A key phrase in that decision states:
"There is no one standard
definition of control‑in‑fact but generally, it can be viewed as
the ongoing power or ability, whether exercised or not, to determine or decide
the strategic decision‑making activities of an enterprise. It can also be viewed as the ability to
manage and run the day‑to‑day operations of an enterprise. Minority shareholders and their designated
directors normally have the ability to influence a company, as do others, such
as bankers and employees."
LISTNUM
1 \l 12562 In
the context of minority investor protections, the decision went on to observe
that:
"The mere fact that a minority
shareholder may block certain major transactions or actions will not
necessarily lead to a conclusion of de facto control in the absence of the
ability to thereby positively or negatively determine a corporation's policies
and operations."
LISTNUM
1 \l 12563 There
has been considerable discussion of the Canadian Airlines test, and we believe
that test is helpful, as it provides broadcasters with a measure by which to
assess control in fact.
LISTNUM
1 \l 12564 Indeed,
the test dovetails with our own requirement, in the selection of a financial
backer, that CanWest be firmly in control of this investment.
LISTNUM
1 \l 12565 And,
Commissioners, we are absolutely certain here that CanWest does have control in
fact of this investment.
LISTNUM
1 \l 12566 Mr. Chairman,
yesterday you invited us to consider providing some additional precision around
a number of areas in the Shareholders' Agreement. After careful reflection and discussion with
Goldman Sachs, we are proposing a number of changes to the Shareholders'
Agreement which responded to the issues that you raised specifically.
LISTNUM
1 \l 12567 This
morning we filed, for your consideration, a black‑lined version of the
portions of the Shareholders' Agreement reflecting those proposed changes, as
well as additional materials that we undertook yesterday to provide to the
Commission, and which I will discuss here.
LISTNUM
1 \l 12568 With
regards to the reporting committee, we should be clear that the sole purpose of
this committee is to provide Goldman Sachs with an opportunity to obtain
information about the ongoing progress of the business in which it is
investing. The reporting committee is
the only window through which Goldman Sachs can receive information concerning
CanWest's broadcasting undertakings prior to the combination date.
LISTNUM
1 \l 12569 The
committee has no decision‑making power and no ability to influence the
operations of the entities, and it is not an executive committee. An executive committee is a committee that
has been delegated defined authorities by a board of directors.
LISTNUM
1 \l 12570 You
asked us to provide more precision concerning the procedures and operations of
the reporting committee, and we have done so in the proposed revisions to
Section 4.8 and in Schedule 4.8(b) of the Shareholders' Agreement that we
provided to you earlier today.
LISTNUM
1 \l 12571 For
example, we have proposed procedures related to notice of meetings, quorum
requirements, committee chair and secretary, the holding of telephone meetings,
and keeping minutes, all of which are designed to increase the transparency of
this committee's operation.
LISTNUM
1 \l 12572 Mr. Chairman,
you also raised a question concerning the appropriateness of giving both of
Goldman Sachs' directors the opportunity to veto decisions under Section 4.7(b)
of the Shareholders' Agreement. To
address this concern, CanWest and Goldman Sachs propose to amend this section
as follows ‑‑ and I am reading from the exact words that we
have inserted:
"... no decision will be made
and no action taken by or with respect to the Corporation or any of its
Subsidiaries (or any of their respective properties or assets) with respect to
the following matters without the approval of a majority of the Directors
nominated by CanWest and at least one of the Directors nominated by
GSCP..."
LISTNUM
1 \l 12573 And
we have added emphasis with respect to the changes we have made.
LISTNUM
1 \l 12574 We
are also proposing changes to Section 4.4 of the Shareholders' Agreement to be
clear that a quorum of directors cannot be constituted without CanWest forming
a majority of those present.
LISTNUM
1 \l 12575 You
also invited us to clarify what we would consider to be the ordinary course of
business ‑‑ again, the words "ordinary course of business,"
as those are defined in the Shareholders' Agreement ‑‑ and to
contemplate raising certain threshold amounts applicable to certain possible
transactions that would be outside of the ordinary course of business, as
referred to in Sections 4.7 and 5.5 of the Shareholders' Agreement.
LISTNUM
1 \l 12576 First,
although CanWest and Goldman Sachs already have a common understanding as to
what we consider to be within the ordinary course of business, we have proposed
a definition of this term in the Shareholders' Agreement. You will see from the proposed language that
it provides CanWest with the necessary flexibility in all of the major and
usual activities in which we are engaged in the operation of both the contributed
business and the Alliance Atlantis businesses on a day‑to‑day
basis.
LISTNUM
1 \l 12577 The
revised language concerning the ordinary course of business would include, but
not be limited to, program production, program acquisitions, program sales,
affiliation agreements with broadcast distribution undertakings, advertising
contracts, capital expenditures related to the operations of the television
assets, as well as ancillary activities related to any of the television
assets.
LISTNUM
1 \l 12578 This
means that Goldman Sachs has no veto over any of these items,
irrespective ‑‑ and I emphasize the word ‑‑
irrespective of the threshold amounts.
LISTNUM
1 \l 12579 We
note that these examples are, of course, not intended to be an exhaustive list
of activities, but we believe they are indicative.
LISTNUM
1 \l 12580 In
terms of the threshold amounts, we confirmed with Alliance Atlantis how many
times in the last five years it had entered into transactions that would have
been curtailed by the current threshold amounts in Section 4.7 of the
Shareholders' Agreement. We have been
informed that, in fact, only one such transaction in the last five years has
occurred ‑‑ the acquisition of the remaining 12 percent of
History Television for $21.5 million, and that transaction occurred almost
exactly five years ago.
LISTNUM
1 \l 12581 With
the exception of the transaction before you today, the contributed
business ‑‑ in other words, the Global group of
companies ‑‑ has not in the last five years purchased or
disposed of any television business that would have been in excess of the
current threshold limits set out in Section 5.5 of the Shareholders' Agreement.
LISTNUM
1 \l 12582 In
summary, we have ample room to ensure that only extraordinary transactions
would be captured by these clauses. Our
respective track records have shown that the current thresholds are more than
sufficient.
LISTNUM
1 \l 12583 Finally,
we have provided for your consideration a more precise definition of
"ordinary course of events" that would be excluded from the Goldman
Sachs veto powers.
LISTNUM
1 \l 12584 To
further address your concerns, however, the parties have agreed to double the
threshold amounts in each of these clauses.
Where a threshold is now $10 million, it is proposed that it be $20
million. Where it is now $15 million, it
is proposed that it be $30 million. And
post‑combination, where the threshold is now set at $22.5 million, it is
proposed that it be $45 million.
LISTNUM
1 \l 12585 You
also asked us to explain the business rationale for Section 5.5(d) of the
Shareholders' Agreement. We call this an
anti‑gaming clause because it is specifically designed to protect Goldman
Sachs from any attempt by CanWest to manipulate the EBITDA, the operating
profits, of the contributed business in such a way as to lower Goldman Sachs'
equity stake in the combined company.
LISTNUM
1 \l 12586 We
thought of an example of where this could happen.
LISTNUM
1 \l 12587 If
CanWest were to sell part of the contributed business immediately before the
combination date, it would receive full credit for the EBITDA of the sold
business in the formula to determine the equity percentages for the combined
business, and we would receive 100 percent of the proceeds from the sale.
LISTNUM
1 \l 12588 In
that case, Goldman Sachs would receive an asset that had lower EBITDA than would
be reflected by the percentage ownership they were granted by the agreed‑upon
formula and they would be denied their portion of the proceeds of the business
that was sold.
LISTNUM
1 \l 12589 I
caution you that in the copy in front of you I have added the words "the
proceeds of the business", because we omitted to put that there. So the record should stand as I have read it,
not as it would appear in front of you.
LISTNUM
1 \l 12590 I
will read it again. I will go back to
the sentence again and I will say:
"In that case, Goldman Sachs
would receive an asset that had lower EBITDA than would be reflected by the
percentage ownership they were granted by the agreed‑upon formula and
they would be denied their portion of the proceeds of the business that was
sold."
LISTNUM
1 \l 12591 In
short, this is one of the clauses that recognizes that CanWest alone controls
the contributed business and would be in a position to take actions that might
adversely affect Goldman Sachs' ability to realize the value of its investment.
LISTNUM
1 \l 12592 You
have requested that we file a definition of "material liability", as
a defined term, which clarifies the meaning of that term as it is found in
Sections 4.7(b)(vi) and 5.5(e). We have
done so in the proposed revisions to the Shareholders Agreement.
LISTNUM
1 \l 12593 You
have also asked that we consider some changes related to the programming
committee. I spoke about these earlier
in my answer to your questions posed before lunch but in particular you
questioned whether the board of CW Media Inc., which includes representation
from Goldman Sachs, should have the ability to remove members of the
programming committee.
LISTNUM
1 \l 12594 We
are therefore proposing to amend our Shareholders Agreement to provide for the
adoption of a shareholder declaration whereby the shareholders will resolve and
declare that the programming committee be created and constituted only with
employees of CanWest or CW Media and nominated by CanWest or CW Media in order
to ensure that the programming committee's composition is in the hands of
CanWest alone and with no input from Goldman Sachs.
LISTNUM
1 \l 12595 Consistent
with Response 17 to the Commission's June 26th deficiency letter, we included
the following language in the declaration:
"No member of the Programming
Committee shall be a member of the Board of Directors of any non‑Canadian
shareholder of CW Investments Co."
LISTNUM
1 \l 12596 Finally,
the Declaration proposed to be included in our Shareholders Agreement is
reflective of our comments yesterday morning, namely, that the programming
committee will consist of at least five members, all employees of CanWest or CW
Media, and that the composition of the programming committee will reflect the
requirements of the direction.
LISTNUM
1 \l 12597 Turning
to some of the benefits issues that were raised yesterday, in terms of the
possibility of including French‑language documentaries in the Hot Docs
funding envelope, we believe that the funds could include documentaries with a
French‑language window.
LISTNUM
1 \l 12598 However,
it is our belief that the projects would be primarily in the English language
since there are many existing funding sources for French‑language
documentaries which are subsidized by a number of government agencies and tax
credits.
LISTNUM
1 \l 12599 Simply
put, the funding gaps that exist for the production of English‑language
documentaries are greater than those in the French‑language market and at
the end of the day, however, it will be Hot Docs itself that determines where
the funds will be allocated.
LISTNUM
1 \l 12600 Commissioner
Arpin, you asked us to review the Astral‑Standard transaction to
determine whether our proposed benefit entitled "The CanWest Broadcast
Diversity Journalism Program" should still qualify under the Commission's
Benefits Policy. We undertook that
exercise last night.
LISTNUM
1 \l 12601 The
underlying benefits proposed by Astral and rejected by the Commission,
particularly the Astral Media Small‑Market Internship Program, are
distinct from our proposed Diversity Journalism Program.
LISTNUM
1 \l 12602 We
have extended our benefit not just to CanWest employees but also to the
Aboriginal Peoples Television Network, the CBC and to local students in
postsecondary broadcast and journalism programs. So it is difficult to see from our
perspective how this diversity initiative is self‑serving when it is
extended to multiple parties outside of our walls.
LISTNUM
1 \l 12603 Moreover,
it is clearly incremental to the numerous diversity‑related activities
that we already undertake each year and that too is an integral part of the
benefits test.
LISTNUM
1 \l 12604 In
addition to the revised Shareholders Agreement, we have also provided to the
Commission a number of other documents that you requested yesterday.
LISTNUM
1 \l 12605 On
a confidential basis, we provided detailed lists of participants in the Senior
Credit and Bridge Deficit release, which we discussed at the outset, with
attendant allocation percentages.
LISTNUM
1 \l 12606 The
Commission will note that Goldman Sachs is not the lead participant in either
of those facilities and in fact there are participants in each case with far
larger allocations.
LISTNUM
1 \l 12607 Further,
in response to Commissioner Duncan's questions we have provided reconciliations
of debt and cash and a revised analysis of operating lease commitments that
updates earlier numbers filed with the Commission on June 22, well before the
August 15 closing date.
LISTNUM
1 \l 12608 The
operating lease numbers have also been provided on a gross and present value
basis.
LISTNUM
1 \l 12609 Finally,
we provided a worksheet entitled "Summary of the purchase price valuation
and benefit calculation" that indicated the precise amount of overpayment
of benefits in our current proposal.
LISTNUM
1 \l 12610 In
short, for reasons we explained on October 22, the purchase price on August 15
was lower than the number we used much earlier in the process. So we now exceed the required 10 percent
benefits level by nearly $4.4 million.
LISTNUM
1 \l 12611 Commissioners,
at this time we are not asking for a reduction in our proposed benefits package
from $136.9 million even though the revised purchase price would suggest that
an adjustment would be appropriate but we are asking you to remember this
overpayment when you consider including such items as operating leases.
LISTNUM
1 \l 12612 As
you know, we philosophically oppose the inclusion of those operating leases in
the valuation process, a position supported by our independent valuator Ernst
& Young and others, but if you do proceed down that path, we think it would
be appropriate to offset that amount within our overpayment of $4.4 million and
not to increase a number that is already too high.
LISTNUM
1 \l 12613 Commissioners,
this has been a very rigorous process and we recognize that this is a complex
transaction that required your close attention.
We respect your diligence on this file.
LISTNUM
1 \l 12614 We
firmly believe we have demonstrated that this is indeed the best transaction
under the circumstances and it is not just good for CanWest and the Alliance
Atlantis broadcasting assets but also for the Canadian broadcasting system.
LISTNUM
1 \l 12615 As
you know, we have answered many questions but we are always ready to answer
more if you have them. Thank you very
much.
LISTNUM
1 \l 12616 THE
CHAIRPERSON: Thank you.
LISTNUM
1 \l 12617 I
notice you haven't commented at all on the benefits period which you put at 10
and everybody who intervened said it should be seven or five.
LISTNUM
1 \l 12618 Have
you any views on that in light of the interventions?
LISTNUM
1 \l 12619 MR. ASPER: I think Barb and Kathy may have some
views. We all do but I will let them
express them ‑‑
‑‑‑ Laughter /
Rires
LISTNUM
1 \l 12620 MR. ASPER:
‑‑ more moderately than I will.
LISTNUM
1 \l 12621 MS
WILLIAMS: I do actually have one thought
that I wanted to share out of the interventions this morning. I think it is fair to say that we firmly
believe that the creative process that will be encouraged by the extension of
these benefits over 10 years is the right thing to do.
LISTNUM
1 \l 12622 We
have not had our minds changed in that regard at all by the intervenors but it
was interesting to hear one of the intervenors this morning speak quite
definitively about the length of time it takes in fact to get a big drama
project under way and I believe she spoke specifically about a minimum of three
years to get a project from conception to production. I think that actually speaks to exactly our
point.
LISTNUM
1 \l 12623 When
it takes at least three years to get a drama project going, if one starts to constrain
the amount of time over which this vast number of dollars needs to be spent,
you very quickly put yourself in a position of having to take projects as they
come in the door, whether they really are the right projects or not, just in an
effort to get this money spent.
LISTNUM
1 \l 12624 I
think that really goes against the grain, frankly, of what we are really trying
to accomplish here, is to really build some hits because when you take that
three‑year period that has been acknowledged and you add to that a pilot
project, which I think in the creative community almost everyone would agree
would be a really substantial and important addition to the process, you have
now pushed that three years to three and a half, to four.
LISTNUM
1 \l 12625 And
that is appropriate. It is
important. It is what makes shows
successful. But there is no way to start
collapsing this amount of money down into a shorter period of time and still
allow for that timeline to get a significant number of projects happening.
LISTNUM
1 \l 12626 I
think it is also fair to say that the seven years that has been repeated so
often is a bit of a ‑‑ I don't understand where this number
came from. It doesn't tie to anything in
our world today. It is not attached to a
licence term. It doesn't line up neatly
with anything.
LISTNUM
1 \l 12627 I
guess there has been some historical precedent set for it that maybe was tied
to licence renewals and terms in the past but it is not the case today. So it is kind of pulled out of thin air and I
actually think what we did was put some real rationale behind a time frame that
I think really will ensure some terrific Canadian programming out of the
process.
LISTNUM
1 \l 12628 MR. ASPER: I think one additional factor was that we did
note the other day that there were other transactions which had seven‑year
benefit periods attached to them that just were approved and we thought from
the production community's perspective it would be better to have money
continuing into the system instead of it all falling off a cliff at the end of
seven years and all these benefit moneys ending.
LISTNUM
1 \l 12629 There
is nothing really in our ‑‑ we were accused of having that
being self‑serving but we thought it was better for the production
community and there is nothing, I think, in the benefits policy that says there
can't be multiple beneficiaries.
LISTNUM
1 \l 12630 THE
CHAIRPERSON: I notice all the changes
you have made to the governance.
Clearly, you have heard us and have tried to address the concerns and
that is very much appreciated.
LISTNUM
1 \l 12631 Just
tell me what was the rationale that went into doubling the various
thresholds. I mean we had long
discussions on them, et cetera, and I talked to you about two options. You chose neither, not surprisingly. I just would like to know why you chose this
one and what is the rationale for it.
LISTNUM
1 \l 12632 MR. ASPER: I think it comes back to ‑‑
if you look at the number you had suggested, we did consider it but if you
think of what that is, it is about $75 million which would be ‑‑
if you put that in context, it is about three‑quarters or more than three‑quarters
of the entire EBITDA of Alliance Atlantis, its annual EBITDA.
LISTNUM
1 \l 12633 So
I think to give ‑‑ again, factoring in our partner and some of
their requirements about just having some fettering of our discretion on the
amount we can spend without coming to them, we think that that would ‑‑
going to that level would probably have to cause a different kind of a
negotiation in this contract.
LISTNUM
1 \l 12634 This
was something they agreed to without any cost to CanWest or any change in the
contract. I think I can speak for them
in saying if we wanted to go that high, it would not be accepted as readily as
going to 30.
LISTNUM
1 \l 12635 When
we look at the transactions ‑‑ as I think we tried to say with
the $15 million, when we look at what we have done or think we could
conceivably do that is outside of the ordinary course of business, as we have
defined it, we can't see any need to raise them any further and we think it
provides all of the flexibility we would need going forward.
LISTNUM
1 \l 12636 THE
CHAIRPERSON: And the alternative
approach that I put to you, which, as I said, the way I look at is Goldman
Sachs is betting on you. It is saying
you are the broadcaster, you know your business, you have a successful track
record, we are prepared to invest in you but prepare to invest the business
that you are having, if you take a major component and sell it, be it a
specialty channel or be it a station, then I have a veto right. That seems to me a perfectly logical
approach.
LISTNUM
1 \l 12637 But
you chose not to do it. You chose to use
these ceilings. If you could explain to
me why that approach didn't appeal to you.
LISTNUM
1 \l 12638 MR. ASPER: Using simply a veto over anything? I am not sure ‑‑ I am trying
to remember what you proposed.
LISTNUM
1 \l 12639 THE
CHAIRPERSON: I said yesterday it seems
to me you can look at it in one or two ways.
Either you take a figure, as you have done, or alternatively, you say
what is this really all about? This is
investing in a broadcaster. What does he
have? He has conventional stations and
he has specialty channels.
LISTNUM
1 \l 12640 Well,
you know, those are the assets on which I expect you to generate the returns
that, as the investor, I expect from you.
So if you sell one of those, you need previous consent.
LISTNUM
1 \l 12641 MR. ASPER: I think that would restrict us more. I am sorry, just give me a second.
‑‑‑ Pause
LISTNUM
1 \l 12642 THE
CHAIRPERSON: If you want to reflect on
it and come back to us, that is fine.
There are some other documents you need to give to us anyway.
LISTNUM
1 \l 12643 MR. ASPER: Chairman, I was just trying to recall our
conversation of last night. Certainly I
will make the general comment that would make it more restrictive on us. I can try to elaborate, but the bottom line
is we have had much more latitude with certain dollar value thresholds. There are a lot of channels that fall under
that threshold. So we would have more
room to swap channels or buy and sell other ones.
LISTNUM
1 \l 12644 THE
CHAIRPERSON: Okay. Commissioner Arpin.
LISTNUM
1 \l 12645 COMMISSIONER
ARPIN: I have a few questions that come
down to what we heard yesterday afternoon and this morning regarding some
programming issues or producer concerns ‑‑ not necessarily
programming issues. One of them was
terms of trade.
LISTNUM
1 \l 12646 Obviously
we heard the Alberta Motion Picture Industry Association suggesting that terms
of trade should be put in place for August 31st, 2009. I know that the CFTPA position is not that,
but are there any discussions between Global and the producer associations
regarding terms of trade? The Commission
referred to some expectation regarding terms of trade like we did in the Rogers
CityTV decision.
LISTNUM
1 \l 12647 MR. ASPER: I think I will let Barb Williams respond to
that. Thank you.
LISTNUM
1 \l 12648 MS
WILLIAMS: The CFTPA came and formally
requested our involvement in conversations regarding the terms of trade in
August. It was one of those
conversations, why don't you come and ask us if we would like to do that. They said, maybe we should do, and so they
did, and we said, sure.
LISTNUM
1 \l 12649 So,
then on paper, in fact last week, we did get a formal on paper request to
engage in some conversations with them, which we formally on paper acknowledged
before we came here actually and said, yes, of course we would engage in those
conversations.
LISTNUM
1 \l 12650 There
has not been resistance on our part to participate in conversations around
terms of trade. Because we haven't begun
those conversations yet, I think it is very difficult for us to foresee a time
line. I can appreciate that at some
point one needs to put some sense of time line on it, but we have not begun
those conversations yet. It is tough to
say for sure how quickly we might be able to accomplish that.
LISTNUM
1 \l 12651 COMMISSIONER
ARPIN: But what you are saying to me is
that it is high or low on your priority list?
LISTNUM
1 \l 12652 MS
WILLIAMS: I am saying that at the very
first moment that they asked us to have those conversations we said yes.
LISTNUM
1 \l 12653 COMMISSIONER
ARPIN: But other than saying yes, you
did receive a proposal but you haven't yet formally met to discuss?
LISTNUM
1 \l 12654 MS
WILLIAMS: No, but we have not resisted
that first formal meeting in any way.
LISTNUM
1 \l 12655 THE
CHAIRPERSON: They gave a deadline of
December 2009 and also they didn't spell it out. Assuming if by December 2009 no agreement is
reached, then are they expecting us to arbitrate or impose an agreement, et
cetera? Do you think that is a
reasonable time frame?
LISTNUM
1 \l 12656 MR. ASPER: Philosophically I have to say I have some
trouble. I think we all have some
trouble with having a standard industry contract, if that is what I understand
terms of trade to be, because every production, every program has different
characteristics which would necessitate their being a different licence fee or
different set of rights being negotiated.
So, at the outset I have to certainly state I don't agree with that
approach.
LISTNUM
1 \l 12657 However,
if that is where the Commission thinks the industry should go or it doesn't go
such ‑‑
LISTNUM
1 \l 12658 COMMISSIONER
ARPIN: I don't think the Commission has
any view, but we have been faced with the request by the various producer
associations that the Commission shall not necessarily get involved, but shall
make itself available to mediate at some point in time. That is why we are seeking your views.
LISTNUM
1 \l 12659 I
am not suggesting that the Commission has any particular view at this stage.
LISTNUM
1 \l 12660 THE
CHAIRPERSON: On the arbitration, we have
been abundantly clear that these ‑‑ that they should be
negotiated. We have spelled out a clear
expectation in the Rogers approval, and the question we are asking is if you
have any problem in doing it in your case, and I gather you have not.
LISTNUM
1 \l 12661 So,
the only follow‑up is the question:
What happens if 2009 rolls around and there is no agreement?
LISTNUM
1 \l 12662 MR. ASPER: Barb has got the okay to answer this.
LISTNUM
1 \l 12663 MS
WILLIAMS: With that okay, I would say
that we would endeavour to come to a good negotiation successfully by 2009.
LISTNUM
1 \l 12664 COMMISSIONER
ARPIN: Another set of intervenors, the
associations, we heard the Manitoba Producers Association seeking a regional
office from Global into Winnipeg, but we also heard the Alberta Motion Picture
Industry Association saying that it is not an office that they need, they want
to have the visit of the senior programming officer going into the regions at
least twice a year.
LISTNUM
1 \l 12665 Do
you have any comments to make in trying to specifically reply to these
proposals, contradictory proposals, I would say.
LISTNUM
1 \l 12666 MS
SHIPTON: I will comment on that,
Commissioner, because it is primarily me and my team that gets out there and
goes to see as many producers as we can across the country.
LISTNUM
1 \l 12667 In
the last 24 months we have made tremendous effort to visit every province, not
just the west, but a considered effort to have a presence down in the east
which had been under served, in my mind, by CanWest.
LISTNUM
1 \l 12668 So,
we have made every effort. I think our
track record in terms of the numbers of visits we have made, not only to
festivals, but any time provincial governments have held sessions for
broadcaster educational seminars with the producers in each area.
LISTNUM
1 \l 12669 As
one of the intervenors did mention, one of my production executives is based in
Vancouver and has been there for three or four years, and is a great resource
to me in terms of making sure I know what's going on on the west coast. I am really proud of our track record,
especially with one‑off documentaries which are, I think, the hardest to
get up off the ground and it is often with very small companies. They are the ones that do worry about that
$1500 cup of coffee, as Al was talking about.
But in the past years, two seasons, we have made a concerted effort and
over ten of our Global currents are specifically from the Alberta, Saskatchewan
and Manitoba provinces.
LISTNUM
1 \l 12670 We
have heard the producers on this, and we make every effort to take that into
account.
LISTNUM
1 \l 12671 MR. ASPER: Mr. Commissioner, I just wanted to add a
few comments about the presentation from the people from Manitoba. I can't let this go by unfortunately because,
number one, a little known fact is that the show Falcon Beach was shot in
Winnipeg. That is well known, shot in
Winnipeg Beach. Once every ten years I
personally get involved in a programming decision. That was it.
LISTNUM
1 \l 12672 That
was to be shot at Wasaga Beach in Toronto and much to the chagrin of the people
to my right and to your left, people who have a very strong interest in the
business of the province of Manitoba overruled them and caused this to be shot
in Winnipeg and at Winnipeg Beach.
LISTNUM
1 \l 12673 To
Laslo Barna's point, and I don't know if he made this point exactly, but it was
only mostly because ABC, the American partner pulled out, but partly because we
didn't have those other specialty channels on which to air multiple episodes of
that show that it didn't continue.
LISTNUM
1 \l 12674 But
I just wanted to certainly assure the people of Manitoba that regardless of
where I spend my time, I am doing my best to look after the province, so much
so that I skipped the part of our rehearsal on Sunday to watch the Blue Bomber
game. But that is another issue.
LISTNUM
1 \l 12675 COMMISSIONER
ARPIN: Well, you will have another
opportunity to watch them next weekend.
LISTNUM
1 \l 12676 MR. ASPER: Exactly.
The other comment I would make, I was very disappointed that people from
Manitoba referred to Ontario as central Canada because in Manitoba we know well
that the longitudinal centre of Canada is 12 miles east of Winnipeg and
Manitoba is central Canada. So, for
Manitobans to be saying that, I am quite disappointed in them as well.
LISTNUM
1 \l 12677 COMMISSIONER
ARPIN: My last question is much more
technical. It will probably be answered
by Ms Bell.
LISTNUM
1 \l 12678 In
your August 20th reply, in paragraph 138, and it deals with incrementality, you
quoted the CTV Globemedia decisions regarding CHUM Limited, in which you say
that you are ready to accept a similar condition of licence. Only for the record, could you confirm to me
that you will accept a condition of licence of the same nature.
LISTNUM
1 \l 12679 MS
BELL: Absolutely.
LISTNUM
1 \l 12680 COMMISSIONER
ARPIN: Using similar wording?
LISTNUM
1 \l 12681 MS
BELL: Yes.
LISTNUM
1 \l 12682 COMMISSIONER
ARPIN: Thank you very much. Those are my questions, Mr. Chairman.
LISTNUM
1 \l 12683 COMMISSIONER
KATZ: I have one follow‑up
question, thank you.
LISTNUM
1 \l 12684 It
is with regard to the definition of ordinary course of business. I have no doubt that people spent a lot of
time, legal time in coming up with this.
There is a term in here called ancillary businesses. I harken back to our discussion yesterday,
Mr. Asper, with regard to what is or what is not a core business. I guess new media was one that comes to my mind
as well.
LISTNUM
1 \l 12685 I
just want some clarification from both yourself and perhaps even from
Mr. Cardinale as to whether products like new media would fit into the
definition of ordinary course of business.
LISTNUM
1 \l 12686 MR. ASPER: The point is that ancillary includes a wider
definition than just new media. So that
was why from our perspective it was satisfactory. So we would say it does include new media but
is not limited to new media.
LISTNUM
1 \l 12687 COMMISSIONER
KATZ: Licensed or unlicensed?
LISTNUM
1 \l 12688 MR. ASPER: Is any new media licensed? Licensed businesses or new media ‑‑
LISTNUM
1 \l 12689 COMMISSIONER
KATZ: Except that new media does not
come to the CRTC. We don't regulate it.
LISTNUM
1 \l 12690 MR. ASPER: Yes, licensed and unlicensed.
LISTNUM
1 \l 12691 COMMISSIONER
KATZ: Mr. Cardinale.
LISTNUM
1 \l 12692 MR. CARDINALE: I concur.
LISTNUM
1 \l 12693 COMMISSIONER
KATZ: Thank you.
LISTNUM
1 \l 12694 THE
CHAIRPERSON: Presumably you could make
the definition to spell that out, given that there is a fairly high visibility
of new media these days. I think it
would be very useful, including for greater certainty without limiting the
foregoing new media or something like that.
LISTNUM
1 \l 12695 MR. ASPER: Yes, I guess we could do. That.
LISTNUM
1 \l 12696 THE
CHAIRPERSON: Counsel, do you have any
questions?
LISTNUM
1 \l 12697 MR. WILSON: I just wanted to confirm, Mr. Chairman,
the subsequent filings you are going to give to us. Those will be given to us tomorrow, I believe
you indicated?
LISTNUM
1 \l 12698 MS
BELL: Yes. Do you want to confirm what we are
filing? We are advising the programming
committee ‑‑
LISTNUM
1 \l 12699 MR. WILSON: Right.
The filing of the present value of the contributed businesses. That was for I think you said 9:00 a.m.
tomorrow.
LISTNUM
1 \l 12700 MS
BELL: Yes.
LISTNUM
1 \l 12701 MR. ASPER: The evaluation Global.
LISTNUM
1 \l 12702 THE
CHAIRPERSON: Those are all our
questions. I thank you very much for
your responses. Clearly you have moved a
lot, et cetera. There are concerns that
we have that we have to address, and we will deliberate.
LISTNUM
1 \l 12703 It
has been a very fruitful hearing and I am delighted that, notwithstanding the
complexity of this transaction, we managed to do it in such a relatively quick time
because, like you, I am very much concerned about having companies in limbo and
the approval is being sought and we will try to endeavour to render a decision
as soon as possible.
LISTNUM
1 \l 12704 Madam
Roy, I believe you have some closing remarks, but before you do, I want to
thank everybody, especially my staff, for doing an excellent job for preparing
us for this hearing.
LISTNUM
1 \l 12705 Thank
you very much.
LISTNUM
1 \l 12706 THE
SECRETARY: Thank you, Mr. Chairman.
LISTNUM
1 \l 12707 The
panel will consider all interventions submitted in this process, along with the
application and a decision will be rendered at a later date.
LISTNUM
1 \l 12708 This
completes the agenda of this public hearing.
The hearing is adjourned.
LISTNUM
1 \l 12709 Thank
you.
‑‑‑ Whereupon the
hearing adjourned at 1505/
L'audience se termine à 1505
REPORTERS
______________________ ______________________
Johanne Morin Fiona Potvin
______________________ ______________________
Jean Desaulniers Barbara Neuberger
______________________ ______________________
Sue Villeneuve Monique Mahoney
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