ARCHIVÉ - Transcription, Audience du 5 avril 2011

Abrégée de Rogers

TRANSCRIPTION DES AUDIENCES DEVANT LE CONSEIL DE LA RADIODIFFUSION ET DES TÉLÉCOMMUNICATIONS CANADIENNES

SUJET:

Afin d'étudier les demandes de renouvellement de licences par groupe de propriété pour les groupes de télévision de langue anglaise décrites dans l'Avis de consultation de radiodiffusion CRTC 2010-952, 2010-952-1, 2010-952-2 et 2010 952-3

TENUE À:

Salon Outaouais

Centre des conférences

140, Promenade du Portage

Gatineau (Québec)

Transcription

Afin de rencontrer les exigences de la Loi sur les langues officielles, les procès-verbaux pour le Conseil seront bilingues en ce qui a trait à la page couverture, la liste des membres et du personnel du CRTC participant à l'audience publique ainsi que la table des matières.

Toutefois, la publication susmentionnée est un compte rendu textuel des délibérations et, en tant que tel, est enregistrée et transcrite dans l'une ou l'autre des deux langues officielles, compte tenu de la langue utilisée par le participant à l'audience publique.

Conseil de la radiodiffusion et des télécommunications canadiennes

Transcription abrégée de Rogers

Afin d'étudier les demandes de renouvellement de licences par groupe de propriété pour les groupes de télévision de langue anglaise décrites dans l'Avis de consultation de radiodiffusion CRTC 2010-952, 2010-952-1, 2010-952-2 et 2010 952-3

DEVANT:

AUSSI PRÉSENTS:

TENUE À:

Salon Outaouais

Centre des conférences

140 Promenade du Portage

Gatineau (Québec)

5 April 2011

- iv -

TABLE DES MATIÈRES

PAGE / PARA

PHASE I

PRÉSENTATION PAR:

- v -

ENGAGEMENTS

PAGE / PARA

Gatineau (Québec)

--- L'audience reprend le mardi 5 avril 2011 à 1145

513    THE SECRETARY: Mr. Chairman, we are now ready to proceed with the in camera session.

514    THE CHAIRPERSON: Okay.

515    Thank you very much for filing with us these two pages, which was in response to yesterday.

516    Would one of you want to walk us through these pages?

517    MS VALLIANT: Sure.

518    We will look at the first page, which is the Rogers proposal. It has the 25 percent group CPE at the top.

519    THE CHAIRPERSON: Yes.

520    MS VALLIANT: What we did, for ease of reference for you, is there's a couple of different variables that we have been talking about.

521    THE CHAIRPERSON: Yes.

522    MS VALLIANT: One is the fixed group CPE, the second is the fixed conventional CPE, and then the three-year smoothing versus basing it on the previous year's revenue for the first year.

523    So Scenario A is the fixed group CPE of 25 percent based on the three-year smoothing period that is filed. So we show you over the five-year broadcast term the amount on Canadian programming for each of those five years. So the total spending in that scenario is $XXXXXXXX approximately.

524    Our Scenario B is exactly the same in terms of a fixed group CPE at 25 percent, but we are simply basing 2012 on the prior year's revenue rather than the three-year smoothing. So you will see the only number that differs in Scenario B from Scenario A is the Canadian spending in the first year. It is about $XXXXXXXX. And the total for Scenario B is about $XXXXXXXXX on Canadian programming.

525    And then Scenario C goes into the new way you wanted us to look at this, fixing the conventional CPE based on the three-year smoothing period. So that is Scenario C, and so since we are using a three-year period, the fixed conventional CPE is XX% percent and the amount over the five-year broadcast term is about $XXXXXXXX.

526    Now, if we use the three-year -- if we simply use the previous year's revenue, the fixed conventional CPE will be slightly higher because the previous year's revenue was slightly higher than the three-year average. So again, for the five-year term that amount is about $XXXXXXXX.

527    So we wanted to lay out those four scenarios to you so you had all sort of the different combinations and permutations.

528    And then below, in the second part of the chart, we have answered your specific questions.

529    So your first question, 1(a), was: What if you used a fixed conventional CPE based on revenue of the previous year?

530    And so that is the Scenario D that we laid out above. So in total the amount of spending over the term is about XXXXXXXXXX.

531    Your second question was: What if you adjusted that to include all LPIF?

532    Now, Winnipeg is the only station where we get LPIF and it is about XXXXXXXX a year. So, frankly, the impact for us is immaterial. So the total in that scenario is about XXXXXXXXX.

533    Your third question was: What is the impact of the three-year smoothing proposal under the fixed group CPE scenario?

534    So in parentheses, we just -- for your ease of reference, it is basically subtracting Scenario B from Scenario A above. And again, as I mentioned, the only impact that has is in the first year of the licence period. It's about XXXXXXXXX, simply because a three-year average gives us a lower number in the first year.

535    And then you didn't ask this specifically but just so you would have it: What is the impact of a three-year smoothing if we use a fixed conventional CPE?

536    So this difference is Scenario D minus Scenario C above, in case you want to move there, and the difference in the first year is about the same but we have a slight incremental difference in each of the following four years simply because our fixed conventional CPE based on previous year's revenue is XXXXXXXXXXX if you go back to Scenario C and Scenario D. So in total, the difference between those two scenarios is closer to XXXXXXXX.

537    Then your question 2(b) is: What is the difference between a fixed group versus a fixed conventional CPE?

538    And we assumed we would look at that using the three-year smoothing model, and that is the difference between Scenarios A and C above. So over the term that is about #########.

539    And then your last question, 2(c), was: What is the impact of LPIF on CPE under the three-year smoothing model?

540    And because we have about XXXXXXXXX a year at about a XX percent, XX percent CPE, it is about XXXXXXX a year. So over the term it is just over XXXXXXXX.

541    And then we also did it based on the previous year's revenue, not just the smoothing model, and it is virtually the same, about XXXXXXXXX.

542    So we have answered all your questions but we also thought it would be useful to lay out all those scenarios so you can get a sense as to the impact each of those variables has.

543    Would you like to go through the 30 percent CPE version as well, which is --

544    THE CHAIRPERSON: Well, I presume it is the same thing, just you are using 30 percent rather than 25?

545    MS VALLIANT: Yes, the exact same methodology. You will see the same movement in the numbers but they will all be slightly higher given the incremental percentage.

546    Would you like me to walk you through that or is that useful?

547    THE CHAIRPERSON: I think it is clear what you have been doing.

548    MS VALLIANT: Okay.

549    THE CHAIRPERSON: Now tell me, my colleague Suzanne asked me very clearly -- we are trying to move you towards having more Canadian content. You are telling us because of your asset mix that PNI is very difficult for you and you really want to spend it on local.

550    But if that is the case, if you are going to spend more on local, why is your CPE still at XX?

551    That is what I don't get. I can understand that you have a problem with the PNI given the specific asset mix, but I heard Mr. Pelley say at least three times, our future is in local, we are not a network, we are basically a local big station.

552    So wouldn't that mean by necessity, by definition, that you have to increase your local spending?

553    MS VALLIANT: I think that speaks to the PNI piece in terms of where we want to spend our CPE. We would prefer to spend it on local rather than PNI, based on the type of assets we have.

554    But it is critically important that you understand the impact of the mix of our services on what is an appropriate CPE. So I am worried I didn't explain how this impacts us.

555    In terms of if you have a lot of specialty services -- let's take the extreme example if you have all specialty services today, your spending on Canadian programming is above 30 percent for sure. You know, 35 to 40 percent is not unusual in terms of what would be imposed on you for specialty services.

556    THE CHAIRPERSON: Right.

557    MS VALLIANT: If you have just conventional and no specialty you are in the low 20 percent range for CPE. So, you know, it's --

558    THE CHAIRPERSON: Except you weren't. Except you weren't.

559    MS VALLIANT: I understand why that optically is confusing, but you have to look at the specific circumstances in those years, and, you know, those were not typical of a viable business. We had the recession, which significantly impacted our revenue. So we were trying to take costs out of the business.

560    Our Canadian programming expenditures were virtually flat through that period, XXX, XXX XXXXX, but our revenue was falling more dramatically, and so our CPE percentage was inflated through that period.

561    So I think that 2011, the economy has come back, our revenue is coming back. This year is not a bad benchmark in terms of what is possible for us as a group.

562    And as a group this year we are at XX percent CPE, but the conventional part of our business is only at XX, but because it has such a significant weighting, it really is an important factor.

563    MR. PELLEY: I think --

564    THE CHAIRPERSON: But aren't you saying -- I mean our model was carefully constructed on the basis of historical expenditures because we didn't want to impose upon you something that you hadn't done before, and you are telling me, sorry, we have historically run at a loss, therefore that doesn't work for us.

565    MR. PELLEY: Let me --

566    THE CHAIRPERSON: That is basically what you are saying, and we now want to run at a profit and we can only do that by spending less on Canadian content and more on American content. That is really what it boils down to.

567    MR. PELLEY: Yes. You know what, Mr. Chair, I think you are right. I think the case was that this network was run poorly and it was failing miserably. And now Rogers bought it because they believed in Canadian content, they wanted to build it back.

568    But it was failing miserably and we inherited it and we inherited a lot of bad contracts, contracts that we couldn't get out of. In fact, we couldn't start to get out of them until 2010, and then you hit a recession.

569    And so you add it all up and you look at the historical CPE, you go, my goodness, you know. If you had that, it's just not a viable business.

570    And, you know, something that I don't know if we have explained, we are not looking for a different conventional CPE. We really aren't. I just think that we are looking for one that makes sense for us to grow it.

571    And, Mr. Chair, I will tell you, you are totally right. We had to change things and the historical CPE was making it a not viable business and it was not run very well.

572    MS VALLIANT: I think it is important to note that first three-year period where you are assessing what a normal CPE was, was our first three years or owning the business.

573    This is something we inherited. We had to understand what it is we had. We had to take costs out of the business. We were hit with a writers' strike, so we couldn't improve our programming schedule, which wasn't that great. And then once we started getting our arms around that, we were hit by the recession.

574    So, you know, the first three years or this three-year period that you are looking at for what is a normalized CPE was not a normal business for us in terms of what we were running at. We were really just getting our arms around it. I feel like we are getting to that point now, but the last three years we certainly weren't there.

575    THE CHAIRPERSON: Okay. I will pass you on to my colleague, but I just want to leave you with this thought.

576    We appreciated that this would cause -- because of that, I mean we are not unaware of City's plight that there would be some problems. So our thought was -- and I would like to say, how can we make you grow into this, how to give you a transition period to get there, not to change the rule for you, and that is what you are asking me to do here.

577    That is my problem, you know, giving you a transition period or making a modification to the policy on the edges so as to give you more flexibility, given your specialties.

578    That is what this hearing is all about but it was not to basically break the basic tenet, the two basic tenets of the policy, which is 30 percent CPE and 5 percent PNI.

579    MS WHEELER: Mr. Chair, if I may, the historical expenditures, when you are looking at them from a percentage of revenue point of view, you are absolutely right, it does bring us into the 30 percent area and I think my colleagues have explained to you why that is, because our revenues were artificially low.

580    But in terms of maintaining and building on our commitment to Canadian programming, that is exactly what we have proposed. We haven't proposed to reduce in terms of total dollars spent on Canadian --

581    THE CHAIRPERSON: No, but if you took that chart there and you put the percentage chart on there, it would be going down this way. These are dollars on the right-hand side. If you actually --

582    MS WHEELER: I think it would go down and then it would go up.

583    THE CHAIRPERSON: Well, it is your chart. You put it on.

--- Rires

584    MS WHEELER: The only other thing that I guess I want to address is the idea that you are giving us a break. By giving everyone the same number, you would be penalizing us and you would be giving the others a break is I guess what we are trying to tell you here today. So that is why the one-size-fits-all doesn't work.

585    THE CHAIRPERSON: We are not trying to give anybody a break. We are asking -- not asking but trying to have a policy and make adjustments given there is a different asset mix for different companies, you know, but you are asking for more that.

586    But anyway, let's -- Suzanne, you are the numbers person on this file.

587    COMMISSIONER LAMARRE: I am not going to really ask a number of questions, quite frankly. I think the chart is clear.

588    But I do have a question to ask regarding Scenario 1b because you -- well, the answer to the question wouldn't be what we asked because you said you have included on those numbers the LPIF revenues and you made the comment that, you know, you only have Winnipeg that benefits from LPIF, so that at this point in time the difference may not seem significant, but it doesn't mean to say that those are the only revenues you will ever get from LPIF.

589    If everything stays the same for the next five years, yes, that is how it is going to remain, but things may change, you may acquire other stations and end up with a different situation.

590    So as a matter of principle, do you see any issue with including all revenues in those calculations, whatever the percentage we decide to choose for you, be it LPIF or special events -- like you may, you know, decide to bid on the Olympic Games or whatever -- as CTV is?

591    You know, CTV is clearly opposed to including LPIF and Olympic revenues in the calculations. Would you be the same or different?

592    MR. PELLEY: So for LPIF, absolutely, if we continue with LPIF, which is a whole different discussion, which we are not really sure that we should, but LPIF, we would include it.

593    I think your question, Madam Commissioner, is if in fact we are to acquire a service or to build a service, would those revenues include it? The answer then is yes.

594    COMMISSIONER LAMARRE: Okay. Okay. So that is clear enough. Okay.

595    I don't have any more questions for the data. Thank you.

596    COMMISSIONER KATZ: Just two questions. I will come back to my U.S. data in a minute.

597    The smoothing proposal in the first year only exists for the first year and then you rely on the previous years. Is there a benefit from a planning perspective, from your view, if it was smooth for every single year so you were always having the benefit of some degree of consistency using a three or a five year, whatever that may be?

598    MS VALLIANT: I think it would eliminate any of the anomalies like we have seen in the past couple of years. So it's certainly something we think should be considered.

599    COMMISSIONER KATZ: Okay.

600    The second question is, American data, foreign data, we have got on there the '08, '09 and 10 historical and then the projections as well. Can you provide us with the non-Canadian amounts of money for each of those years --

601    MS VALLIANT: Yeah.

602    COMMISSIONER KATZ: -- including the five-year forecast as well?

603    MS VALLIANT: Sure. So the U.S. programming figures that tie to that chart would be XXXXXXXXX in 2009, XXXXXXXXX in 2010, XXXXXXXX in 2011, $XXXXXXXXX in 2012, XXXXXXXXX in 2013, XXXXXXXXX in 2014, XXXXXXXXXX in 2015 and XXXXXXXXXX in 2016.

604    So we are investing --

605    THE CHAIRPERSON: I can't write that fast. Can you start from the beginning?

606    MS VALLIANT: Oh, sorry. Okay, XX, XXX --

607    THE CHAIRPERSON: That's XX for '11 or '12?

608    MS VALLIANT: No, for 2009.

609    THE CHAIRPERSON: 2009, okay, XX

610    MS VALLIANT: 2008-2009.

611    THE CHAIRPERSON: Yes.

612    MS VALLIANT: Then XXX.

613    THE CHAIRPERSON: Yes.

614    MS VALLIANT: XXX.

615    THE CHAIRPERSON: Yes.

616    MS VALLIANT: XXX.

617    THE CHAIRPERSON: M'hmm.

618    MS VALLIANT: XXX, XXX, XXX.

619    THE CHAIRPERSON: Yeah.

620    MS VALLIANT: And XXX.

621    THE CHAIRPERSON: Okay.

622    MS VALLIANT: So we are investing in U.S. programming to Commissioner Pentefountas' comment to allow us to generate profitability in order to invest in Canadian programming. That's essentially what funds our business and allows us to make the contributions that you see on that chart.

623    COMMISSIONER KATZ: So if I can pick up on that, in the three actual years there, your CPE was flat at roughly $XXXXXXXX but your purchase of non-Canadian programming went from $XXXXXXXXX to XXXXXXXX an increase of almost XX, more than XXXX XX XX

624    MS VALLIANT: Yeah, and that was part of our programming strategy as it related to turning around the program schedule we had for City Television, making audiences come back. Frankly, that's what has driven the revenue growth we have seen over the past couple of years.

625    COMMISSIONER KATZ: So your entire business is predicated on non-Canadian programming and, I guess, as Vice-Chair of Broadcasting said earlier, you are using Canada just as a loss leader. You have got to do this so you do it and you will do the minimum amount necessary, but that's it.

626    MS VALLIANT: That's what all the broadcasters do.

627    MR. MANSURI: Just to add, during that same period we mentioned the U.S. programming increase.

628    In that same time period we were able to grow our revenues by almost $XXXXXXXX which we then used to fund our investment in additional Canadian programming.

629    COMMISSIONER PENTEFOUNTAS: Your revenues grew but none of that money was reinvested in Canadian programming here. You are flat-lining there.

630    MS VALLIANT: It was primarily because of the recession. We were taking costs out of our business.

631    You know, the Canadian -- Canada is where we operate.

632    MR. PELLEY: The answer is yes. The answer is -- you are correct.

633    COMMISSIONER PENTEFOUNTAS: Thank you.

634    MR. PELLEY: You are okay.

635    COMMISSIONER PENTEFOUNTAS: Okay.

636    THE CHAIRPERSON: Now, we all understand the very first time when Rogers came before me to buy City and they said very simply exactly what you just said.

637    I mean, you make the business on the American content. That's where you make the profit. And the Canadian one is essentially you look at it as a cost of doing business. Those are the realities and we are not going to change them whether we like it or not.

638    But that's why we carefully constructed this group-based licensing system, looking at your historical records, seeing what you have done, et cetera, trying to come up with both CPE and a PNI to CPE so there wouldn't be constant erosion. If we go back you will remember CTV was spending a huge amount and then CanWest tried to duplicate them and passed themselves right into bankruptcy.

639    MR. PELLEY: Correct.

640    THE CHAIRPERSON: There was one and the secondary Canadian creative industry said, "We have less and less opportunities to produce drama in Canada and drama is the lifeblood for the creativity so we need a guaranteed amount". So we said, "Fine, this exhibition and this micromanaging of priorities probably much -- doesn't make sense".

641    So what really -- what drives this business is the dollars. So let's focus on the dollars. Here, we will freeze you on your historical ones which is 30. And here is the PNI, et cetera and tell us you can do better. That was supposed to be what this discussion was about.

642    You are now coming in and saying, "Yeah, that's fine but you made a basic mistake. What you wanted to freeze was unrealistic. I can't deliver this so therefore let's basically readjust everything downwards by 5 percent in terms of CPE and 2.5 percent in terms of PNI".

643    MS VALLIANT: We actually thought you might have figured out our mix argument based on the questions that you asked yesterday because if you fix the conventional CPE for all of the broadcasters that would go a long way in terms of leveling the playing field so that we are all on similar footing.

644    Putting us on a fixed group CPE doesn't take this mix argument into consideration.

645    MR. PELLEY: And if you look at -- like I said, we are not looking for a different conventional CPE. I think Shaw's CPE right now is 22 percent and I think Bell's conventional is 25 or 26 percent.

646    We are not looking for a different conventional CPE. But I can tell you, though, if you were Corus and you had a group CPE at 30 percent this is how quick you put your hand up, as quick as you possibly can.

647    THE CHAIRPERSON: We will hear from then this afternoon.

648    MR. PELLEY: Yeah.

649    MS VALLIANT: Well, you will see that.

650    MR. PELLEY: You should, and at that particular mix where they are already at 34 percent, you know --

651    THE CHAIRPERSON: What you are saying is use the formula to fix the conventional CPE?

652    MS VALLIANT: I think that eliminates the mix problem.

653    MR. PELLEY: That eliminates the mix problem. It does.

654    Now, yes, it does. It does and it would basically -- if we were all at a 22 percent CPE then you are correct that fixes the mix problem.

655    You know, are we disadvantaged because we should -- I think, personally, we should have a lower conventional CPE based on our circumstances, but it's tough for me to talk out of this side and this side.

656    THE CHAIRPERSON: Yes.

657    MR. PELLEY: Right?

658    THE CHAIRPERSON: You are unique in this industry.

--- Rires

659    MR. PELLEY: Well, right? But it's tough, you know.

660    But I do think we should be -- having said that, I do.

661    MS VALLIANT: They do have some inherent advantages given their size and scale and purchasing power. You know we hope to get there one day.

662    THE CHAIRPERSON: But that is not really what you put forward, but that's what you suggest if we want to maintain -- I want to understand what you are saying. I'm not suggesting, just repeating what I think I heard.

663    So you say if you want to really save the integrity of the group-based licensing policy, use all these calculations to fix the conventional portion which comes uniformly across whatever, whatever, roughly 22 or something like that, and then have a different CPE for the difference, depending on the different asset mix of what people have --

664    MR. PELLEY: That's --

665    MS VALLIANT: Let the group float.

666    MR. PELLEY: That's it, yeah.

667    MS VALLIANT: Yeah.

668    MR. PELLEY: If you wanted to amend where you originally wanted to go, and you wanted to go to a fixed conventional and a floating group CPE --

669    THE CHAIRPERSON: Right.

670    MR. PELLEY: -- then, to be honest with you it is more fair.

671    Like the current scenario with a 30 percent it's -- I'm just telling you it's not really that -- it's not fair based on where we are.

672    THE CHAIRPERSON: Because everybody is a different mix.

673    MR. PELLEY: M'hmm.

674    THE CHAIRPERSON: But if you are on conventional you are basically members of the same group so the same conditions should apply to you. That's really the underlying --

675    MS VALLIANT: Correct.

676    MR. PELLEY: That's what we are -- that's what we are saying.

677    MS VALLIANT: And that would be consistent with the approach that you have taken for specialty services as well.

678    MR. PELLEY: But now if the Commission did feel it necessary for us to have a little less conventional CPE just in the short term, just in the short term --

679    COMMISSIONER PENTEFOUNTAS: He doesn't give up.

--- Rires

680    COMMISSIONER PENTEFOUNTAS: It's coming and coming and coming.

--- Rires

681    MS VALLIANT: It can't hurt to ask.

682    COMMISSIONER KATZ: What you are advocating doesn't -- because it's complicated by the fact that we have a flexible system here as well. We have provided you with the flexibility to move stuff between conventional and specialty which wouldn't work in that regime.

683    MS WHEELER: I think it would still work, Commissioner Katz, because the majority of the revenue that is derived from our group will stay in OTA because of the formula that the framework provides for and where you can only share 25 percent of your OTA CPE with the other specialty services.

684    In our case, the majority of the revenue is coming from OTA so the majority of the Canadian spend will stay on OTA. And it goes back to Commissioner Lamarre's earlier comment about ensuring --

685    COMMISSIONER KATZ: But your case is one case.

686    MS WHEELER: -- Canadian programming is accessible to a wide -- on a wide basis to --

687    COMMISSIONER KATZ: Yeah, but your case is unique to you. We have got a group licensing policy that extends to everybody equitably.

688    MS WHEELER: Yeah, but I think that it can apply to everyone equitably. All of the groups have an OTA portion of their group and all of them have specialties.

689    We have 40, 41, 40 percent CPE for our specialties compared to the other specialty services owned by CTV and Global.

690    We will have a 22 CPE on OTA compared to Global's 22 CPE and I'm not entirely sure what CTV's is.

691    MR. PELLEY: 26.

692    THE CHAIRPERSON: Yes, but we are exploring here obviously.

693    MR. PELLEY: Yeah.

694    THE CHAIRPERSON: So what you are basically saying, Ms Wheeler, if I understand, is you suggest you amend the group-based licensing or you apply it as far as saying OTA is -- everybody has 22 percent as a cost. You use all of these formulas, what we talked about before, to find what the overall CPE and that depends on the proper asset mix. So in your case what you suggest comes out to 25 CTV, maybe 31 Shaw, maybe 29 or whatever.

695    But what you have done --

696    MR. PELLEY: Yes.

697    THE CHAIRPERSON: -- through that policy, you made mention -- first of all, you ensured that everybody spends 22 percent on OTA and so OTA has hopefully a more secure picture.

698    And you also still have the PNI. We haven't dealt with PNI yet but you -- at least you have taken into account the application of this policy.

699    MR. PELLEY: Yeah.

700    THE CHAIRPERSON: Looking at the underlying asset mix, which will change -- which by the way if you purchase Astral will totally change.

701    MR. PELLEY: Yes. Yes, of course that would.

--- Rires

702    MR. PELLEY: But yes, I would say -- I totally concur that that is a model that I believe is fair.

703    THE CHAIRPERSON: Okay, and on PNI?

704    MR. PELLEY: On PNI, you know, I think we have given our thoughts on PNI. We are not -- I can tell you the CMF is a way bigger, bigger story and a bigger challenge than even maybe we have given it credence today.

705    I think just from a PNI perspective, I just don't think we are equipped at this particular time to do it based on our assets and what we have in terms of CMF and the lack thereof, of different networks to actually place it on.

706    MS VALLIANT: It doesn't change the total amount we spend on Canadian programming. It's just a matter of where it gets allocated.

707    MR. PELLEY: Yeah, I think that's fair.

708    THE CHAIRPERSON: Peter, go ahead.

709    COMMISSIONER MENZIES: How much of -- if hypothetically the current system of protecting genres that aren't really genres goes away, what would this look like?

710    What would your presentation look like if you -- if specialties was a relatively open entry, non-genre protected area, given that you have a cable company that might be disposed to carrying some of them?

711    MS WHEELER: I don't think it will have any bearing because our expenditures would probably remain the same. I think the only difference is that --

712    COMMISSIONER MENZIES: Your expenditures would -- how much would you still be special, right?

713    Your case is that you are different, right? Why would you be -- if there was no genre protection and you could launch as many specialty channels as you wanted to, how much --

714    MR. PELLEY: Yes, and as I just whispered to Susan, short term there wouldn't be any. Long term there could be.

715    COMMISSIONER MENZIES: If you are any good at it.

716    MR. PELLEY: Yeah, that's -- I think that's fair.

--- Rires

717    MS WHEELER: And that's why the group-based framework actually does work quite well because it is adaptable to future growth and future acquisitions as we get larger and we are able to spend more and contribute more we will under this framework.

718    COMMISSIONER MENZIES: Okay, thank you.

719    MR. PELLEY: You know, I think -- and Susan might hit me for this, but I think we would be willing to look at our PNI if our asset mix was to change dramatically over the license term and we all of a sudden had the scale for whatever reason of our competitors. Then I think that would be fair for us to look at.

720    THE CHAIRPERSON: Five-year license, you know, we could build in a midterm review. You are launching four or five specialty. You hope they will be brilliant successes. Let's assume they are and your asset mix will be quite different than what it is right now.

721    MS VALLIANT: We are starting from scratch, though, and launching three a year. It will change. It will take some time.

722    MR. PELLEY: I understand what the Chair is asking and respect that.

723    THE CHAIRPERSON: We are just groping here because you know I don't want to see you go bankrupt. That doesn't -- because of our regulatory --

724    MR. PELLEY: And I can tell you, we are totally in camera here. Here we are at Rogers Media.

725    Oh, there is a transcript. Oh, okay. I will vary that just a little.

--- Rires

726    THE CHAIRPERSON: No, the transcript is not made public. We will issue a redacted version with your consent.

727    MR. PELLEY: But here is how -- here is how I have come in and here is the way that I am looking at Rogers Media.

728    Rogers Media is a completely different vertical within RCI and it is a diverse portfolio, more diverse than the others. You know, we have radio channels. We have got a shopping channel. We have got the Toronto Blue Jays. We have got Rogers Centre. We have publishing in 74 magazines. Then we have television.

729    But, overall, Rogers Media is not at the same profit level as Shaw and as Bell. I know the mandate that is coming down from above is, "Grow Rogers Media from a profitable perspective and grow it's EBITDA, grow its revenue" and as I have said to all the group, we want to focus on television as being one of the areas where we can grow.

730    Hence, the reason that we came in with what we thought was a fair proposal based on we want to make that a huge massive gargantuan priority for Rogers Media and not to turn our full attention to digital and local, digital services and ad networks and publishing and the transition to digital.

731    We want television to be a core part of the growth of Rogers Media. But the mandate that we have is to grow it.

732    THE CHAIRPERSON: Well, you happen to have another little network called OMNI.

733    MR. PELLEY: Yes.

734    THE CHAIRPERSON: And we talked earlier about 10 percent overlap, et cetera.

735    Have you ever given any idea of whether part of the asset mix problem could be overcome by throwing OMNI in the mix either lowering what Rita was talking about, the 10 percent overlap, or by counting some of OMNI's spending or something?

736    MS WHEELER: I think it would just exacerbate the problem.

737    And the other thing I just want to make sure you understand is that currently there is a restriction that OMNI can't show any of its third-language programming with City and the majority 80 to 90 percent of OMNI's Canadian program expenditures is on third-language programming. So that basic, that limitation itself takes it out of the equation.

738    MR. STRATI: One more thing, Commissioner, also on the other side is we particularly have -- as Susan mentioned, we are on a third-language Canadian programming area.

739    We also -- as the Commission is aware, restrictions on the carriage of American programming in primetime. So we are -- OMNI is very different both from a Canadian and an American perspective.

740    THE CHAIRPERSON: I am just groping for straws here.

741    MS WHEELER: Yeah, looking for solutions.

742    THE CHAIRPERSON: Okay, well, you know where we are coming from with -- I have explained it to you very much. You have made your point clear.

743    Let's both go back and re-think about it, et cetera. At the end of the hearing you can do further submissions, et cetera, you know.

744    As I say, our primary -- we constructed this policy very carefully trying to make sure it would fit everybody and would not do an injustice and, as you read, was very hard. We wanted to have a transition mechanism. You are now telling me because of your asset mix a transition mechanism doesn't work. That's what -- the message I am taking from what you are saying.

745    MR. PELLEY: Correct.

746    THE CHAIRPERSON: Yeah.

747    Tom, please?

748    COMMISSIONER PENTEFOUNTAS: Were revenues and expenses and profit before tax requested from the Rogers Broadcasting Group?

749    MS VALLIANT: That was all filed.

750    COMMISSIONER PENTEFOUNTAS: Oh, these are the projections that you filed?

751    MS WHEELER: Yes.

752    THE CHAIRPERSON: Yeah, do you want to...?

753    MS WHEELER: Yeah, the chart is -- sorry. The chart is consistent with the projections that we filed.

754    THE CHAIRPERSON: I think what Tom is asking for can we have a third line here for the PBIT?

755    COMMISSIONER PENTEFOUNTAS: Yeah.

756    MS VALLIANT: Our what?

757    THE CHAIRPERSON: The PBIT for --

758    MR. MANSURI: We did file our five-year aggregate financial projections for both our specialty services and our conventional services all the way down to net income.

759    THE CHAIRPERSON: No, but on the calculations here.

760    MS VALLIANT: Oh, on these, yeah, we can file them for you. Yeah.

ENGAGEMENT

761    COMMISSIONER KATZ: You also filed amended 2011 data with six months of actuals. If that results in a change to your five year forecast you may want to comment on that as well.

762    MR. MANSURI: Yeah, we did file for six months of actuals and forecasts for the next six months just last Friday. It wasn't materially different for the current broadcast year but we can update that as well.

ENGAGEMENT

763    COMMISSIONER KATZ: Okay.

764    THE CHAIRPERSON: I think we should go -- I'm sorry. Do you have another question?

765    COMMISSIONER PENTEFOUNTAS: Yes, actually a question.

766    Why, if you were always -- if you have been losing money the last three years in a row -- I can't remember the exact amounts, but you are consistently losing money and you are still spending 30 percent CPE, if CPE is the -- no, sorry.

767    MS VALLIANT: Yeah, that is correct. You know, we were bringing down our Canadian programming expenditures.

768    If you look at City we brought it down from XXXXXXXX in 2008, XXXXXXXXX in 2009, XXX XXXXXX in 2010. But the problem is our revenue is falling faster than we could take costs out of the business, all costs out of the business because of the recession primarily.

769    So that percentage is inflated for those last three years because the recession -- we were trying to get our arms around the business, rebuilding programming schedules. It really was us turning around City Television and we are only just starting to get there.

770    COMMISSIONER PENTEFOUNTAS: And carrying costs on the debt of actually buying City is not part of your calculations?

771    MS VALLIANT: Correct. We didn't incur debt.

772    MR. MANSURI: Just to add to that, as Shannon mentioned earlier, the way CPE is calculated its current year expenditures over prior year revenues and our revenues in 2010 grew by XX percent compared to the previous year and our costs are still -- this year they are stabilized.

773    So our CPE for this year as a group is XX percent. It's not reflected in what we spent in those three years. And we are still going to lose $XX XXXXXX.

774    MS VALLIANT: Just to confirm, any acquisition costs related to City Television are not reflected anywhere in our financial projections. They are irrelevant for the purposes of this discussion.

775    THE CHAIRPERSON: Okay. So I think we need to go back on the record now and share with the world the undertakings that you just gave.

776    So I think counsel, Mr. Dougherty, has a list.

777    Let's go back on the record.

778    THE SECRETARY: Just one minute so we can put the audio live link back on.

779    So this concludes the in camera session.

780    THE CHAIRPERSON: No, what we do is, we go through it and take out anything that's confidential. We share it with you, ask for your consent and then only if everything is -- we both consider it non-confidential, we make public.

781    MR. PELLEY: I see. I appreciate -- I appreciate clarity on that.

782    THE CHAIRPERSON: Yeah.

783    MR. PELLEY: I could have given you more information then.

784    COMMISSIONER PENTEFOUNTAS: Everything but the whining. Cry me a river.

785    UNIDENTIFIED SPEAKER: You don't want that on the record.

--- Rires

786    MS WHEELER: And when would you like the updated projections? Would the Secretary tell us that?

787    MR. PELLEY: Yesterday?

788    THE CHAIRPERSON: I beg your pardon?

789    MR. PELLEY: When would you like the upgraded projections?

790    THE CHAIRPERSON: As soon as you can file them.

791    MR. PELLEY: Yesterday would have been good.

792    THE CHAIRPERSON: Do you want to go through the list of undertakings or Me Dionne? Are we on?

793    THE SECRETARY: No, we are not on.

794    THE CHAIRPERSON: We are not on. Okay.

--- Suspension à 1224 pour reprendre immédiatement en audience publique

Date de modification :

2011-04-05