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TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO‑TELEVISION AND
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
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès‑verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
Canadian Radio‑television and
Conseil de la radiodiffusion et des
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
Canadian Association of Film Distributors and 360 / 2015
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.
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?
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?
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
LISTNUM 1 \l 12142 THE SECRETARY: Please introduce yourself and your colleagues. You will then have 10 minutes for your presentation.
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.
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.
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?
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.
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.