ARCHIVED - Transcript / Transcription - St. John's, Newfoundland / (Terre-Neuve) - 2002-12-10
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TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
Call for applications for a broadcasting licence to carry on a radio programming undertaking to serve St. John's, Newfoundland and Labrador
Appel de demandes de licence de radiodiffusion visant l'exploitation d'une entreprise de programmation de radio pour desservir St. John's (Terre-Neuve et Labrador)
HELD AT: TENUE À:
Fairmont Newfoundland Fairmont Newfoundland
115 Cavendish Square 115, carré Cavendish
St. John's, Newfoundland St. John's (T.-N.)
December 10, 2002 Le 10 décembre 2002
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
Call for applications for a broadcasting licence to carry on a radio programming undertaking to serve St. John's, Newfoundland and Labrador
Appel de demandes de licence de radiodiffusion visant l'exploitation d'une entreprise de programmation de radio pour desservir St. John's (Terre-Neuve et Labrador)
BEFORE / DEVANT:
David Colville Chairperson / Président
Andrée Noël Commissioner / Conseillère
Stuart Langford Commissioner / Conseiller
ALSO PRESENT / AUSSI PRÉSENTS:
Steve Foster Hearing Manager / Gérant
Peter McCallum Legal Counsel /
Pierre LeBel Hearing Secretary /
Secrétaire de l'audience
HELD AT: TENUE À:
Fairmont Newfoundland Fairmont Newfoundland
115 Cavendish Square 115, carré Cavendish
St. John's, Newfoundland St. John's (T.-N.)
December 10, 2002 Le 10 décembre 2002
Volume 1TABLE OF CONTENTS / TABLE DES MATIÈRES
PAGE / PARA NO.
PRESENTATION BY / PRÉSENTATION PAR
Andrew Newman and Andrew Bell 8 / 49
Application for 101.1 FM
Newfoundland Broadcasting Company Limited 105 / 659
Application for MY-FM
Newfoundland Broadcasting Company Limited 237 / 1560
Renewal of licence for CJON-TV
INTERVENTION / INTERVENTION
Andrew Newman and Andrew Bell 198 / 1333
Newfoundland Broadcasting Company Limited 210 / 1394
Reply by Newfoundland Broadcasting 214 / 1417
Reply by Andrew Newman and Andrew Bell 223 / 1475
St. John's, Newfoundland / St. John's (Terre-Neuve)
--- Upon commencing on Tuesday, December 10, 2002
at 0935 / L'audience débute le mardi 10
décembre 2002 à 0935
1 THE CHAIRPERSON: Good morning, ladies and gentlemen. I apologize for the confusion and the few-minute late start over the issue of the court reporter.
2 Welcome to this hearing. It is a pleasure for us to be here in St. John's.
3 My name is David Colville. I am Vice-Chairman, Telecommunications, for the CRTC and the Regional Commissioner for the Atlantic Region.
4 I will be chairing this public hearing. I am joined on the panel by my colleagues Andrée Noël, Regional Commissioner for Québec, and National Commissioner Stuart Langford.
5 Commission staff assisting us at this hearing will be:
6 Steve Parker, here in the middle, our Hearing Manager.
7 Peter McCallum, nearest to us, our Legal Counsel.
8 Mike Amodeo, our Chief Advisor for Radio and Television.
9 Steven Harroun, in the middle of the back row, our Senior Analyst.
10 Pierrette Ladouceur, responsible for the Public Hearing Examination Room.
11 Donna Shewfelt, Manager for our Atlantic Regional Office.
12 Pierre LeBel, our Hearing Secretary.
13 Pierre will be pleased to answer any questions you might have about the hearing logistics or any other matters related to it.
14 As I say, we are happy to be here in St. John's, particularly because, as much as possible, the Commission tries to hold public hearings in the regions that are directly concerned with the applications it is examining, which, in this case, include two applications for a new FM radio service for St. John's, followed by the renewal and amendment of the licence for CJON-TV.
15 First, the competing FM applications. The Commission issued a call for the FM applications for this market on December 21, 2001, following the receipt of an application to carry on a radio programming undertaking in St. John's. In response, a second application was submitted to the Commission, which will also be reviewed at this hearing.
16 We will first hear from Andrew Newman and Andrew Bell, who are proposing to operate an English-language FM commercial radio station in St. John's. The station would use the 101.1 MHz frequency and would offer an adult contemporary music format.
17 The second application we will examine was submitted by the Newfoundland Broadcasting Company Limited, which also wishes to operate an English-language FM commercial radio station in St. John's. The application is proposing an easy-listening adult contemporary music format with a focus on contemporary music from Newfoundland. The station would operate on the 95.7 MHz frequency.
18 The Commission will use several criteria for evaluating the two FM radio proposals, notably, how the service will contribute to the objectives of the Broadcasting Act, particularly with respect to the production of local and regional programming. Applicants should demonstrate that there is a demand and a market for their proposal.
19 Other issues that we will study include the following:
20 the competitive state of the market;
21 the quality of the applications;
22 the diversity of editorial voices in the market;
23 the potential impact of one or more new entrants;
24 proposed initiatives for promoting the development of Canadian talent, particularly local and regional talent;
25 market analysis and potential advertising revenue; and
26 the availability of the necessary financial resources to carry out the project.
27 Following the two radio proposals, the hearing will continue with a presentation by Newfoundland Broadcasting Company Limited. Newfoundland Broadcasting wishes to renew the licence of CJON-TV and its transmitters, which expires on February 28, 2003.
28 Newfoundland Broadcasting is also requesting the deletion of the following condition of its licence, which reads as follows:
"The licensee shall operate this broadcasting undertaking as part of the network operated by CTV Television Inc."
29 Finally, the Commission will discuss the methods of calculating Canadian content for the upcoming term of its licence with the licensee, and this relates to the unique time zone situation which exists in Newfoundland.
30 As this hearing should take about a day and a half, we expect to continue tomorrow morning, depending on how we progress today. We will break for lunch between 12:30 and 2:00, or at about that time. We will also take a break in the morning and the afternoon. We will inform you of any changes in the schedule as they arise.
31 I would ask you to turn off your cellphones or pagers when you are in the hearing room, as they are a bit of an unwelcome distraction for participants and the commissioners.
32 Before we start, I will invite the secretary, Mr. Pierre LeBel, to explain the procedures we will follow.
33 MR. LEBEL: Thank you, Mr. Chairman.
34 Before we begin, I have a few housekeeping matters.
35 First, I would like to indicate that the Commission's Examination Room is located in Salon C, which is down the hall from the public hearing room. Public files of the applications being considered at this hearing can be examined there.
36 Secondly, there is a verbatim transcript of this public hearing being taken by the court reporter at the table to my left, at the end. If you have any questions on how to obtain this transcript, in whole or in part, please approach the court reporter during a break for information.
37 If you want to have messages taken, we will be happy to post them outside the Public Examination Room. The phone number in our Public Examination Room is (709) 772-8448.
38 If you have any further questions, don't hesitate to contact me or the Examination Room Officer. We will be more than pleased to assist you where we can.
39 Now, Mr. Chairman, we will proceed with Items 1 and 2 on the agenda.
40 These applications are competing and we will proceed as follows:
41 First, we will hear each applicant in the agenda order and each applicant will be granted 20 minutes to make their presentation. Questions from the Commission will follow each presentation.
42 In Phase II, the applicants reappear in the same order as they presented their application to intervene against the other applicant. Ten minutes are allowed for this purpose. Questions from the Commission may follow each intervention.
43 Since there are no other appearing intervenors, there will be no Phase III.
44 Phase IV will provide an opportunity for each applicant to reply to all interventions submitted to their application. Applicants appear in reverse order than listed in the agenda, and ten minutes are allowed for this reply. Questions may follow from the Commission.
45 We will now hear the first application, which is an application by Andrew Newman and Andrew Bell on behalf of a corporation to be incorporated for a licence to operate an English-language commercial FM radio station in St. John's. The new station would operate on frequency 101.1 MHz, channel 266C.
46 Mr. Chairman, I would like to indicate for the record that Notice of Public Hearing CRTC 2002-11 indicates that the new station would operate with an effective radiated power of 100,000 watts. However, Industry Canada required, and subsequently approved, a reduction of the effective radiated power to 20,000 watts. The applicant is proposing an adult contemporary music format.
47 Appearing for the applicant are Messrs. Andrew Newman, Andrew Bell and Damian Follett.
48 You have 20 minutes to make your presentation.
PRESENTATION / PRÉSENTATION
49 MR. BELL: Thank you.
50 I want to start by saying good morning to everyone.
51 Mr. Chair, Members of the Commission, thanks for coming to St. John's. We appreciate you coming here to make what we consider a very important decision for the future of the people of Newfoundland and Labrador.
52 I want to start today by talking about the application. The application is for a Category 2 FM licence, frequency 101.1 FM, reaching 42 per cent of the population of Newfoundland and Labrador, in the adult contemporary format, targeting the 25-54 age group, the largest demographic in the market.
53 The partners are Andrew Bell and Andrew Newman. Let's talk about Andrew Newman. He has 20 years of experience in the radio industry, working for five different radio stations in three different provinces. He has produced live-to-air radio specials featuring local artists and co-produced large community cultural events.
54 In addition, he has hosted the Children's Miracle Network Telethon on CBC for the last ten years and has helped raise over $2 million annually in this province.
55 He has programmed CJYQ to the highest rating share in station history, quadrupled his day part ratings on CHTN in six months, and was instrumental in making CIGO Port Hawkesbury profitable.
56 He was also involved in the planning committee for the ECMAs and the AABs. He currently owns and operates a profitable multimedia consultancy firm.
57 I'm Andrew Bell. I have over 15 years of business experience. I am the past president of the Rotary Club of St. John's East and a past director of the St. John's Board of Trade.
58 I am a graduate of the Queen's University Executive Program, and I currently own and operate multiple business units involved in retail, wholesale and real estate development, where we employ in excess of 250 employees.
59 I have won national sales awards for international companies such as Nabisco Brand, received national recognition for marketing initiatives and strategies, and appeared on the cover of a national publication for winning marketing campaigns.
60 In addition to this, I also have 11 years of media buying experience.
61 The question that we are going to face today is: Can St. John's support another operator? Let's review the facts.
62 First of all, the population by census -- this is November 2001 -- by geographical division of Newfoundland and Labrador. Clearly it can be seen that the Avalon Peninsula, the region we want to target, is by far and away and over five times greater than any other region in Newfoundland and Labrador. In addition, it has maintained a stable population, where other geographic regions have had continued decline over the last five years.
63 Out-migration versus in-migration, long a concern of the province of Newfoundland and Labrador -- I am happy to say that in 1997-98 we hit a point where out-migration began a decline and in-migration began to increase. Today, in 2001-2002, we see the largest in-migration in Newfoundland's history. This is good news for this province.
64 Population counts for census in metropolitan areas -- again, clearly, one can see that St. John's is by far and away the largest metropolitan area in this province.
65 2001 census population by age and sex -- again, the Avalon Peninsula, our target market, 25-54, the demographic we would like to seek and go after, is the largest and over 50 per cent of the total population of the Avalon Peninsula.
66 Retail sales for Newfoundland and Labrador -- in 1997 they were $3.9 billion; today, projected for 2002, $5.1 billion. That is an increase of $1.3 billion or 34 per cent over that period of time.
67 It's great to look at facts and figures on paper, but I think what you also have to do is get out and around the city and see the construction, see what is happening in St. John's today. We put together a video presentation to try to show you exactly what is happening.
--- Video presentation / Présentation vidéo
68 MR. NEWMAN: Good morning, ladies and gentlemen, members of the panel. My name is Andy Newman.
69 Some of you have had the opportunity to be here in St. John's since Saturday, I understand, and will likely be here for a few more days, so I guess you will have a chance to do some dial tuning and have a listen to see exactly what is going on here in the market of St. John's.
70 You have commercial radio formats that are currently here, which I will bring back up on the screen for you.
71 Our commercial formats currently in St. John's include VOCM-FM, 97.5 K-Rock, operating a classic rock format, targeted primarily to males 18 to 44; CKIX, HITS-FM, contemporary hit radio, targeting females 12 to 24; OZ-FM, CHR, a classic rock mixture, targeting persons 12 to 44. VOCM-AM is a full service talk station. They play a mixture of country music and middle-of-the-road music, and they pretty well target persons 40-plus. CJYQ -- you will remember this from a year ago -- is now Radio Newfoundland and plays a mixture of Newfoundland music and east coast music, and it pretty well targets all persons in all demographics.
72 We were the original applicants for this market. It was May 21, 2001 that we filed our application. Prior to that we conducted some research to see if our beliefs bore any fruit. We interviewed 400 people between the ages of 18 and 49 in the St. John's central market area. We asked them a number of questions.
73 It should be noted that cluster analysis is an accurate market tool to determine not only listeners' tastes but format holes that may exist.
74 We examined seven different clusters. I will give you an example. We asked the question: On a scale of 1 to 5, would you listen to a radio station that played music by Celine Dion, Jan Arden, Roch Voisine or Diana Krall? On a scale of 1 to 5, would you listen to a radio station that played music by AC/DC, Led Zepplin, Pink Floyd, Jimi Hendrix?
75 Our market research is on file with the Commission, and we thank them for their request.
76 The final analysis from our standpoint was that of persons aged 25 to 49. Of those, 59.5 per cent preferred to listen to the adult contemporary cluster, and 69.4 per cent of females preferred the adult contemporary cluster. The problem was, that didn't exist in St. John's. That's what is missing -- an adult contemporary radio station designed for the largest demographic in the region, adults 25 to 54.
77 101.1 will satisfy the audience demand in St. John's, and here is our plan, ladies and gentlemen.
78 Currently the existing operators use heavy automation. We don't plan to go down that road. We intend to utilize live-to-air announcers during key day parts to provide current, relevant information that that demographic demands: breakfast, midday, drive, early evening and weekends.
79 We commit to providing 3.15 hours minimum of locally produced news weekly. That doesn't include any breaking stories, weather or traffic updates.
80 We commit to the development of news stringers. This, of course, will assist us in providing a distinct editorial voice.
81 We are committing to live coverage of community events, and not just on the weekends or during the summer months. We will have a state of the art remote broadcasting system for high quality, on-site broadcasts. Our announcers will be entertaining and will discuss relevant topics, primarily targeted to adults 25 to 54.
82 Our broadcast facility will feature a performance area for live local musicians. We recognize that we are this far out east and we don't get a lot of flow-through traffic with artists. We would like to give the opportunity for our local musicians to come on the radio station and play their music live.
83 We intend to foster partnerships with other media -- for example, Rogers Television -- to further promote artists and community events that are unique to St. John's and the surrounding area.
84 We are committing to a weekly live-to-air program from various venues in the St. John's region with local artists.
85 We are committing to balanced levels of Canadian and local artists throughout the day and throughout the week, every day and every week.
86 The adult contemporary format means more exposure to a wider range of local artists. We will not be confined to traditional or roots artists.
87 We intend to foster internships for journalism and broadcasting students from facilities like the Atlantic Media Institute in Halifax, or, locally here, Lawrence College and the College of the North Atlantic. We intend to help develop the next generation of broadcasters.
88 We are offering a community access program for local high schools, so they can get their messages out; a state of the art broadcast facility that will be ready when the Commission decides to roll digital out in St. John's.
89 We will have a reliable high end transmission facility that will be shared with the CBC, and we are committing to have an active membership and a role in the Atlantic Association of Broadcasters and the CAB.
90 Importantly, we are committed to employment equity.
91 All of these are very lovely, but we do have to have a solid business plan to pay for them. Again we will note that our application date was May 21, 2001, and that is what our rates in our application reflect. The rates for our existing operators in the market are now 20 per cent higher than they were when we filed our application. It makes good business sense that we would sell what the market is, not less.
92 We are forecasting a conservative revenue stream, with realistic increases over the seven-year duration of the licence, and liberal expenses that are based on knowledge in similar sized operations.
93 The 101.1 business plan has no appreciable impact on the existing operators' ability to fulfil their mandates.
94 We intend to have new listeners, new advertisers and new revenues.
95 Steele Communications' sales currently exceed $12 million. OZ' sales exceed $3 million. Now, those are estimates based on market share. That information is not available to us directly. 101.1's impact we estimate to be less than 2 per cent on those operators.
96 101.1 will not affect the existing operators' ability to meet their promises of performance. We plan to focus directly on St. John's and not rural Newfoundland and Labrador.
97 We recognize that Canadian talent development initiatives are very important to the Commission, to the people of Newfoundland and Labrador, and to the artists. For this market the mandated third party donation is $3,000, and we commit to donating that directly to the Music Industry Association of Newfoundland and Labrador.
98 We are offering a live performance area in our broadcast suite. Artists will be able to come in, perform live on the radio, and walk out with a CD recording that they can use for whatever purpose they desire.
99 We are promising a weekly live-to-air program, daily broadcasts of an entertainment guide that will allow fans of local musicians to find out where they are playing, and internships for broadcasters, because we believe that broadcasters are artists as well.
100 The dollars and cents for our Canadian talent development initiatives:
101 Our weekly live-to-air program is estimated to cost $94,900 on an annual basis. Those are our hard costs, plus the airtime. Then we have our mandated donation of $3,000, as well as our entertainment guide cost of $36,500 in airtime on an annual basis.
102 Those figures, by the way, are not adjusted for any possible rate increases over our seven-year licence term.
103 Our recording facilities we are going to leave attached to our capital costs. We are not going to include those in our figures for our Canadian talent development initiative.
104 All told, over the seven-year licence term of 101.1, our Canadian talent development initiatives will total $940,800.
105 We have received overwhelming support from members of the community from all areas, some of which the Commission has on file -- people in the grocery business, car sales, the offshore oil industry, municipal government, real estate, information technology, consulting services, marketing and communications professionals, the food service industry, wholesalers, lawyers, financial planners, speech pathologists, municipal and provincial government representatives, and marketing experts. We have received overwhelming support for our initiative from the general public because they believe, like we believe, that there is a need for another radio station in the St. John's market.
106 Let's take a listen to what you can expect when you turn on our frequency of 101.1 FM.
--- Audio clip / Clip audio
107 MR. NEWMAN: Again, it is unfortunate that the presentation was designed for our commissioners and the speakers are facing in the other direction, but thank you for your attention.
108 We would like to say that 101.1 is represented by two operators, myself and Andrew Bell, with both business and radio experience. 101.1 has a strong commitment to Canadian talent development and we plan to offer a distinct editorial voice. But most importantly, we feel that 101.1 will be great radio for the people of Newfoundland and Labrador, and specifically the people of St. John's.
109 We would like to thank the commissioners for their time today, for hearing our presentation, and we encourage you to look deep into our application and grant the next FM licence for Canada to 101.1. Put it where it belongs. Thank you very much.
110 THE CHAIRPERSON: Thank you, Mr. Newman and Mr. Bell. I guess it's 101.1.
111 Thanks for your presentation. I think this is probably one of the first times that we have had a PowerPoint presentation for this sort of thing and it actually worked. I have seen so many of these things fail over the years at conferences and whatnot.
112 I will turn the questioning over to Commissioner Langford.
113 COMMISSIONER LANGFORD: Thank you, Mr. Chairman.
114 I have an opening question. I have you, Mr. Bell, Andrew Bell, and Mr. Newman, and I have missed your name -- the third gentleman at the table.
115 MR. FOLLETT: Damian Follett.
116 COMMISSIONER LANGFORD: Where do you fit in in this mix?
117 MR. FOLLETT: I am a local musician, actually.
118 COMMISSIONER LANGFORD: Great. Thank you. It is always interesting to see the silent type. You wonder, h'm, when are they bringing out the big guns?
--- Laughter / Rires
119 COMMISSIONER LANGFORD: We are, as you have invited us to do, going to dig into your application. I think, to get started, we will operate, first of all, on the assumption that the St. John's market is, as you said, capable of absorbing a new player. We may go back and look into it a little more at the end, but I want to get right into the application itself first.
120 What I want to do is, I want to look at a number of areas. First of all, I want to get a better understanding of your live programming. You have given us a little more information today even than in the application and in the follow-up interrogatories. I want to flesh that out a little more.
121 Then I want to look at the area of money. I want to look at what you are spending, and I want to look at what you anticipate earning, and then we will look at some smaller clean-up matters. And if there is time at the end, and if those questions lead to some doubts, we may get back into the St. John's market.
122 I take your point. I think it was Moses Znaimer who said that he evaluates these cities by walking around. I think that is a similar point that you made today, and it is a very vibrant city indeed. But we may look, a little bit later, at the projections into the future.
123 Let's get, if we can, right into your focus -- your main focus -- which seems, if I can put it this way, to be a kind of "back to the future" approach to radio, and that is a lot more live. I guess we had better break down the pieces one at a time.
124 Why don't we start with news. You have cleared up one question in the sense of saying 3.15 hours, but then added a little bit, and some other stuff as needed.
125 Can we go into the news area? And try to give me some idea, on a daily basis, of what we are looking at.
126 MR. NEWMAN: First off, it is important to note from a news standpoint that there are two market leaders on the AM band, that being CBC and VOCM. Both of those operators do a good job of being a full service news operation.
127 The experiment of attempting to take either of those out over the years has been an expensive one that has been tried by other operators and has failed.
128 COMMISSIONER LANGFORD: When you say "take out", do you mean compete with them?
129 MR. NEWMAN: Compete with, yes.
130 My apologies for my vernacular.
131 COMMISSIONER LANGFORD: That's fine. I just wanted to make sure that we were singing from the same hymn book.
132 MR. NEWMAN: The adult 25-54 is in a much different lifestyle than, say, a teenager. They are a little more demanding of what information they get. They want to find out what is happening with their schools. Are their schools open? Are their kids' soccer games going ahead? Are the roads fit to drive on?
133 As you can appreciate here, our weather changes at a whim. We are a very unique area geographically as well as in terms of population.
134 Our news will focus primarily on the local events of the surrounding area cities of St. John's -- Mount Pearl, Conception Bay South and Paradise. The events that happen include a very dynamic City Hall here in St. John's, one that actually caused a lot of national attention when it was broadcast on television. They are quite an interesting group of characters -- very entertaining.
135 They also, ultimately, make some very powerful decisions. So we intend to cover City Hall on a regular basis.
136 News can run the gambit, if you watch NewsWorld, from targeting Iraq terrorism to someone's child being found frozen in someone's backyard. To discuss specific news topics I guess would be difficult, other than to say that if it happens in St. John's we would like to broadcast it.
137 COMMISSIONER LANGFORD: Let's look at the presentation you gave us this morning. They are not numbered, but I assume that you have pretty well got it down by heart.
138 You talk about the on-air product. "We are going to use live-to-air announcers during key day parts to provide current relevant information at breakfast, midday, drive, early evening and weekends."
139 Can you give us some idea of how you are going to break that down? What kind of shows are you going to have at breakfast?
140 Is it going to be all live-to-air announcers through these periods? How do you break it down? How much would be news; how much would be weather?
141 I don't expect you to have it second by second, but if you could give me some idea of what I would be hearing.
142 MR. NEWMAN: Now I understand a little more clearly what you expect from a news standpoint and how you would like me to break it down from an hour-by-hour basis.
143 COMMISSIONER LANGFORD: As I say, it doesn't have to be to the minute, but I am trying to get a sense of what people are going to hear and what you are delivering.
144 MR. NEWMAN: You are looking at, probably, a three-minute actual newscast at the top and bottom of the hours. We are going to then follow that up with some sports, and we hope to include local sports in that. That is one of the areas that is missing in the market; things like high school basketball scores.
145 And then, of course, there will be the weather.
146 The format, of course, will depend on how we fine tune it -- tailor it. How we get in and out, I guess, is irrelevant, but you wanted to hear a little bit more on how we are going to do it.
147 If we get a situation where there is a breaking story, then we can interrupt our programming and allow our reporter or our announcer to bring the public up to date with what is going on.
148 COMMISSIONER LANGFORD: And that will be provided by the host, or will you have a news anchor -- a news person?
149 MR. NEWMAN: During the breakfast show we intend to have a news anchor, who will also have the role of news director. And in the afternoons we will also have a news anchor.
150 COMMISSIONER LANGFORD: That's the drive period.
151 MR. NEWMAN: Yes. So from six in the morning until noon, that shift will be covered by the news director. And then, in the afternoon, it will be covered by another person designated to the news department.
152 COMMISSIONER LANGFORD: And you will have an anchor as well.
153 MR. NEWMAN: That person will also generate the news and anchor it -- the afternoon person.
154 COMMISSIONER LANGFORD: I'm sorry. Bear with me.
155 Let's take the breakfast show. That will have a host.
156 MR. NEWMAN: The breakfast show itself will have at least one host and a news person to read the news.
157 COMMISSIONER LANGFORD: All right, so two people there.
158 MR. NEWMAN: Yes, at a minimum.
159 COMMISSIONER LANGFORD: And midday?
160 MR. NEWMAN: Midday we will have a host, and an additional voice will be the person from the morning show. The morning show news reader will read the news in the midday.
161 COMMISSIONER LANGFORD: And the host would give -- you wouldn't bring in the news person, I assume, if you have just heard about a traffic accident or something.
162 MR. NEWMAN: No, the host would provide that.
163 There would be scheduled news that the news reader would be reading at scheduled news times.
164 COMMISSIONER LANGFORD: And this would be the pattern through the drive period and early evening?
165 MR. NEWMAN: Yes.
166 COMMISSIONER LANGFORD: We are talking about, you said, in the morning, through the breakfast period, three-minute news, top and bottom, plus sports, national and local, plus weather, and I guess, probably, plus some driving conditions. Or does that go to the host?
167 MR. NEWMAN: I think that goes to the host's role more so. It is something that changes a little more often. They can be discussing things with the listeners on the phone.
168 COMMISSIONER LANGFORD: How much more than three minutes, then? Would we be looking at five minutes, top and bottom, by the time you did the weather and sports, or four minutes? Or do you have a sense of that?
169 MR. NEWMAN: I think, obviously, in the middle of the summer the traffic conditions aren't as much of an issue as they are certainly at this time of year. I think the average would probably be four and a half to five minutes.
170 COMMISSIONER LANGFORD: Can you take me to the midday and drive periods? Can you give me some sense of what happens there, just in news, sports and weather?
171 MR. NEWMAN: Sure. We will schedule a newscast at noontime. So our last scheduled newscast will be 9:00 a.m. Between 9:00 a.m. and noon it will be covered by the host, unless it is a major news item, and then the news reader will come in and assist the host in covering the issue.
172 Then at 4:30 and 5:30 in the afternoon we will also have a scheduled newscast.
173 COMMISSIONER LANGFORD: The last one is at 5:30? The scheduled newscast?
174 MR. NEWMAN: The traffic pattern in St. John's -- pretty well everyone is done the afternoon drive by 5:30 or 6:00.
175 If the market demands it, we would be willing to extend it to 6:30.
176 COMMISSIONER LANGFORD: Would these newscasts be running news, sports and weather around four to five minutes as well?
177 MR. NEWMAN: Yes.
178 COMMISSIONER LANGFORD: This news, would it be national, international?
179 You spoke a bit about Iraq.
180 MR. NEWMAN: No, I think --
181 COMMISSIONER LANGFORD: Or would it be all local?
182 MR. NEWMAN: I think the focus is going to be as much on local as possible. As I mentioned, both CBC and VOCM deal in national and international on a regular basis, especially CBC.
183 I think what we are looking to do here is target the information to the demographic, which is 25-54, and give them the local information first and foremost, followed by any national or international, or regional in fact, news that we or the news director deems is of value to them.
184 COMMISSIONER LANGFORD: I would like to be in that demographic, but I'm not any more. But despite old age setting in, I still remember being in it, and I wouldn't mind having a little news. So if I were in that demographic and I were listening to your station and I wanted a little more national/international, is it good business to let me go over to CBC for a while to listen to it, or to go over to one of the other competitors and hope I will come back?
185 MR. NEWMAN: I guess it speaks to the fact that you cannot be all things to all people. I think that you reasonably have to pick a segment of the market that you are going to attract and focus on that segment.
186 The reality is that yourself, Mr. Colville and Ms Noël may all have different opinions as to how much news you would like to hear, and yet all three of you may fall into what we would consider our capture audience.
187 We would like to think that, after you have your news, your international and national fix, and maybe even some "As It Happens", you would decide that you would like to hear more music and more entertainment and come back to us.
188 COMMISSIONER LANGFORD: We will get into some of your other shows in a minute, but I want to make sure that I understand the live-to-air concept.
189 Once you have finished, you have gone from basically six in the morning until 5:30 in the evening -- we haven't done weekends yet, we are just talking about Monday to Friday -- does it then go into pre-canned music -- taped music?
190 MR. NEWMAN: I have suggested that this market lacks an evening show. If we were going to be doing a contemporary format targeting teens, I would suggest strongly that resources be put into the evenings.
191 The adult market tends not to use radio heavily in the evening. The early evening, which I consider eight o'clock, will still be staffed by a live announcer. At eight o'clock, then we will consider going to an automated program, or recorded earlier in the day.
192 COMMISSIONER LANGFORD: So we are going with live announcers from six in the morning straight through until eight in the evening? That's the plan?
193 MR. NEWMAN: Yes.
194 COMMISSIONER LANGFORD: Okay. Let's look at some of the shows we will be doing.
195 I want to do these little summaries as we go along to make sure that I have it.
196 MR. NEWMAN: Sure.
197 COMMISSIONER LANGFORD: We are going to be doing four to five minutes of news, weather and sports during your breakfast, six to nine. Then we are going to have hosted midday -- or through to midday, nine to noon.
198 Did you say there would be news at noon?
199 MR. NEWMAN: Yes.
200 COMMISSIONER LANGFORD: News at noon, and then hosted right through to eight o'clock, but news -- at this point, more four to five-minute news, weather and sports shows, 4:30 and 5:30.
201 Is that the plan at this point?
202 MR. NEWMAN: Right.
203 COMMISSIONER LANGFORD: You may expand it, you said, if there is a need.
204 Could we do the weekend news while we are at it and finish that category?
205 MR. NEWMAN: Sure. Actually, the weekend -- it is our intention to provide the identical coverage on the weekend.
206 COMMISSIONER LANGFORD: Identical, just as though people were driving to their office jobs? Because I guess that a lot of people are driving to their commercial jobs.
207 MR. NEWMAN: On Saturday morning this is a fairly busy city, yes.
208 COMMISSIONER LANGFORD: Okay. Thank you for that. So we are going seven days a week.
209 Let's look at some of your other live-to-air programming. One of the ones you spoke about was the "Feedback" feature. Could you explain a bit about how that would work?
210 MR. NEWMAN: The interaction with the announcers? Is that what you are referring to?
211 COMMISSIONER LANGFORD: I wasn't sure, to be honest.
212 Is "Feedback" a special show, a kind of half-hour phone-in show, or is it something that happens all the time?
213 Quite frankly, that was something that I wasn't clear on in reading your application. I may have missed it. There may be a very clear explanation of it, but if there is I have missed it, so perhaps you could take me through it.
214 MR. NEWMAN: That is an opportunity for listeners to call in and let their viewpoints be known. They will call into a recorded -- or a recording situation -- a device that will allow them to spew their information and let their thoughts be known. Our host, then, will cull all of the feedback items and produce them into a 90-second or a two-minute response.
215 So you will have more than one person offering their feedback in a concise fashion.
216 COMMISSIONER LANGFORD: I see. So this isn't a phone-in show, as such.
217 MR. NEWMAN: No.
218 COMMISSIONER LANGFORD: This is, as you say, a kind of pick and choose of recorded snippets.
219 MR. NEWMAN: Much like a speaker's corner, I guess, to go back to Mr. Znaimer.
220 COMMISSIONER LANGFORD: To go back to Mr. Znaimer; right.
221 You are talking about 90-second segments of this. How often through the day do you foresee this --
222 MR. NEWMAN: Twice.
223 COMMISSIONER LANGFORD: Twice a day.
224 MR. NEWMAN: In the midday portion, around the lunch hour, and in the afternoon portion on the drive home.
225 COMMISSIONER LANGFORD: So at lunch and at drive-home we get a minute and a half of people's views.
226 How do you see that cut up? Do you have some experience in this? Is it going to be kind of a 30-second rant, or is it going to be "I'm mad as hell and I don't want to take it any more"?
227 MR. NEWMAN: Actually, it is done very successfully in several other markets, notably Halifax, on one of the NewCap stations. It's called "Citizen Q", and it's done quite effectively.
228 They are given a question of the day, or they are certainly given a starting point or a topic for them to comment on, and the announcer edits in three, four or five, depending on what the topics are and how many opinions they can get into the time allotted.
229 COMMISSIONER LANGFORD: One of the certain benefits is that it enables you, as you say, to cull through it and get the Ernst Zundels out of the way quickly and file them where they belong and get on to perhaps people that give more constructive views on how to change the world.
230 All right. Now we get to your broadcast live once a week from a local club.
231 Actually, I would like to skip that one, because you did give us quite a lot on that in your March 15th letter. I would like to go, first of all, to the high school community access programming. Can you give me a little bit of an idea of how that would work and how long it would be?
232 MR. NEWMAN: Absolutely.
233 Probably on a weekend. I would suggest that is probably most beneficial to a high school student's schedule, from a scholastic standpoint. On a Saturday or Sunday afternoon we will designate an hour for an individual high school to come in with a group of students. They will be permitted to pick some music they would like to have played and will be basically handed over the microphones. We will provide an operator. They will be allowed to share with the community the events that are happening in their high schools, how their sports teams are doing, some of the fundraising events that they may have.
234 The sidebar to this is that students have parents; parents will listen to the radio if their students are on it.
235 COMMISSIONER LANGFORD: I did wonder about that, because your demographic is 25 to 54 and it doesn't strike me -- it is not an automatic fit for me that a 48 year old is going to care what is going on at the high school around the corner, but you think the connection is through the 48 year old's child.
236 MR. NEWMAN: Absolutely.
237 COMMISSIONER LANGFORD: What kinds of things would be on for a full hour? What do you envisage?
238 MR. NEWMAN: Again, you would intersperse it with some music, as well. And hopefully it would be some of the music that is produced by some of the students. There are a lot of active music programs in our high schools right now.
239 COMMISSIONER LANGFORD: Is that part of your CD -- help them make a CD stuff? Or is that something separate?
240 MR. NEWMAN: That would be simply a bonus. That would be something extra.
241 There are a lot of interesting things that go on in our high schools, whether it is co-op programs that they can speak to --
242 Gonzaga High School offers, for example, a media internship program. They have a law program where they co-opt some law students.
243 I think there are some very interesting topics that a high school student could share with an adult listener, that I think they would be very interested in, in addition to allowing them to promote some of their own festival events, whether it is a drama festival or a sports event, be it a hockey tournament or maybe one of their teams going off to a national volleyball tournament.
244 I think there is a great opportunity to get some of the information that may not be heard on a regular basis out into the public domain.
245 COMMISSIONER LANGFORD: The live segment that I think you refer to as -- I guess it is the one where you go to the local club. You go to some local, I guess, bar is it? Or something. I am not sure where you are going on this.
246 Can you give me a little more information on your "Live Once a Week"?
247 Now you did answer an interrogatory. You sent us a letter dated March 15th where you set out a budget of approximately -- I think it is $94,900 a year which is committed to this.
248 MR. NEWMAN: Yes.
249 COMMISSIONER LANGFORD: Can you break that down a little bit for us; how exactly you are going to do it?
250 MR. NEWMAN: Absolutely.
251 First off, there will be hard costs involved for us to take a program out of the studio environment into a live venue. I don't know if you have had the opportunity to wander our famous George Street, but there are numerous outlets for live entertainment in the market.
252 Traditionally, remotes in the city are done with cellphones. We intend to utilize the state of the art Kodak system, where we can go into a club and actually provide a live, broadcast-quality feed directly from the venue soundboard. That will allow large artists and small artists to play their material through our system and have it broadcast on the air.
253 In addition to that, what we propose is that we put an on-air host at the facility so that they can conduct an interview with the talent. It gives not only the studio audience, as it were, an opportunity to see a little something different, but it will give the artists an opportunity to have their music played to a wider audience.
254 The hard costs, obviously, are the technical requirements, in terms of the on-air system, whether it is a phone line that has to be installed for the Kodak, or an RPU -- a microwave system that will need to be installed.
255 The other thing is, obviously, our talent cost. We are paying for the host to go down and do that.
256 And then we fully intend to put this on without commercials, so that is going to run for -- well, the average musician's set is probably 50 minutes, so we will say that is close to an hour. So there is an hour's worth of airtime there, as well.
257 COMMISSIONER LANGFORD: And that is commercial free.
258 I am looking at your March 15th, 2002 reply to some interrogatories from our professional staff, and I want to read this paragraph to you, where you are coming up to a summation. You go through the time, host costs, $7,800, and technical, $5,200. You break it down that way, promo time and actual air. And then you say:
"We feel this fits the definition of Canadian talent development. However, due to possible venue changes, patron patterns, and audience trends, we prefer to keep this as a programming feature rather than a Canadian talent development commitment. It would be impossible to commit for the duration of the licence due to issues that may be out of our hands. However, we wish to make the Commission aware of our intent." (As read)
259 What precisely do you mean? You seem to be saying that you may not be able to do this for the whole licence term. This is something of an experiment and, therefore, you don't want to be bound to do it in case it doesn't work.
260 Am I reading that correctly?
261 MR. NEWMAN: I would be very uncomfortable standing up in front of you and committing to something at a venue that I have no control over.
262 The reality is that I wouldn't want to stand in front of you after our seven-year licence term for renewal and have you question us on our Canadian talent development because a club owner decided to close his club and we lost our venue. I prefer just to be straight up with the Commission and be quite honest. This is something that we want to do. We feel that it fits the Canadian talent development initiative. More importantly, we think it's good radio. We think it is going to be good for the community; we think that it is going to be good for our listeners.
263 In three years' time one of our venues could decide that their patrons are starting to roll off a little bit, that the traffic pattern for the club has changed, and that maybe they don't want us there any longer. It may take us a little while to find another venue. That might impact on us making a seven-year commitment.
264 That merely was what I meant. That was my intention.
265 COMMISSIONER LANGFORD: I don't want to put words in your mouth, but you are talking about in three years' time --
266 Are you saying today that you foresee that, come hell or high water, this thing is good for at least three years?
267 I am just trying to get a sense of what you see out there and what you feel you can commit to.
268 There is nothing I can do, I suppose, to tie your hands or to nail your feet to some club that is closed, but, at the same time, what is your sense of the community -- of this George Street club scene and its health and vigour and your commitment to spend -- what is it -- almost $95,000 a year on this?
269 MR. NEWMAN: The entertainment market in St. John's has an ebb and flow, as any other industry does. Currently it is fairly strong.
270 The timeframe -- do I want to say to you here today that it is going to go for 18 months, three years, four years? That is the intangible. It is the only part that I couldn't guarantee.
271 If it was an initiative that we were going to produce on our property, in our studio, I would be more than willing to say yes, this is something I am prepared to commit to for seven years, because it is a fabulous idea. However, you are asking me to comment on individuals that I don't have control over.
272 I think it is a fabulous idea, and it is something that we are going to forth and give it a good run on.
273 COMMISSIONER LANGFORD: Let's look at that a little bit more closely, because, in a sense, this one program captures -- and I don't want to focus on the negative here, but I have to poke and prod a little bit. I hope you will take that. And at the end, when I am finished poking and prodding, I will give you a chance -- I will throw you a big, soft ball to hit out of the park about why you think you are wonderful or something.
274 I will try to make it up to you.
275 MR. NEWMAN: There is a lot on the line, Mr. Langford; I appreciate that.
276 COMMISSIONER LANGFORD: I know that, and I don't want to minimize or appear to be minimizing your sense of overall commitment, the energy that you obviously both have, and it comes through from your printed documents, it comes through from what you are saying today.
277 As Chairman Colville said, you actually got a PowerPoint to work, which is amazing. So you are people who can get things done. But, at the same time, we are dealing with a very valuable piece of public property -- a nice, exclusive use of the airwaves. So we have to decide -- we are charged with deciding who we give that to. So I have to ask these questions that may seem a little negative.
278 I am sorry to go on so long, but, really, herein lies the direction I am going to take over the next little bit. If you don't commit to this because of something, let's say, beyond your control, and legitimately so, what is your commitment level to everything else?
279 You, as I say, come to us with an application that is a refreshing trip back to the future. You want to bring live-to-air back to radio. You want to bring back something to this community which you sense is missing, and has been missing for some time, and at the same time bring some diversity. I don't want to make your pitch for you, but that's it.
280 What happens if you decide, for something outside of your control, that this just isn't working? What happens if, though you have this wonderful idea, at the end of 18 months you figure out why no one else is doing it, because it's too expensive or something? What kind of commitment level do we have on all of these live-to-air programs that run from six in the morning through to eight o'clock at night?
281 MR. NEWMAN: Let me address that by, first off, noting that the application isn't encumbered by the high capital costs that were once associated with putting an FM licence on the air.
282 Our business plan over the course of the seven years has a very conservative revenue stream. We wanted to be sure, primarily for ourselves, and secondly for the Commission, that we could make a solid go of this. Our projections were done with conservatism in mind; the reality that we likely will not be the market leader in the initial stages, possibly ever; the reality that we have potentially two very large competitors in Newfoundland Broadcasting and Steele Communications, both with admittedly rather deep pockets.
283 So we went about this with a very, very realistic look, because it is very important to us as the investors and operators that at the end of the day we still have money in our pockets, and that we can make our commitments to the CRTC.
284 When you look at our business plan in terms of our expenses, our expenses have been fairly liberal. They are based on a similar sized operation. Meeting those commitments and the commitments of Canadian talent development we do not foresee being a problem.
285 The mandated donation for this market is $3,000. It is accepted by the industry that we all have to do a little better than that.
286 We have the full intention of meeting our commitments to Canadian talent development through other initiatives, such as the live-to-air performance area in our broadcast suite, and through our entertainment guide.
287 The part that makes us a little bit queasy is the fact that we want to do this live-to-air program. Ultimately we will have to do it on someone else's doorstep. They may decide at some point to come along and ask us to leave their doorstep.
288 I don't want to rehash the fact that we don't want to commit, but that is the only part of our application that we are not prepared to commit to.
289 Our business plan is very solid; again, a very conservative revenue stream. Our expenses are very legitimate, and we have accounted for putting those live bodies in. We have accounted for developing the news stringers and we have accounted for having a live-to-air program on a regular basis.
290 We think, most importantly, that it is going to make us more competitive in the marketplace and that it could actually lead to us having more revenue.
291 So we don't see our commitments outside this one particular issue as being anything negative at all.
292 COMMISSIONER LANGFORD: Let's look at some of the accounting for expenses, if we could move to that.
293 MR. NEWMAN: Sure.
294 COMMISSIONER LANGFORD: If I understand your application and some of the answers to staff interrogatories, you are going to have programming expenses annually of $356,700. If we take out of that --
295 MR. NEWMAN: I believe that is in year 7.
296 COMMISSIONER LANGFORD: That is in year 7. So starting off -- right, $296,400, year 1. If we take out of that the $94,900 for the weekly live show --
297 MR. NEWMAN: Those figures aren't included in that programming number. The $94,900 is not included in that number.
298 COMMISSIONER LANGFORD: You are going to have to show me where they are then, because I have your application here and I am looking at Schedule 3, paragraph 3.1 of your application. Help me, please. I have total programming expenses of $296,400 for year 1.
299 MR. NEWMAN: Yes.
300 COMMISSIONER LANGFORD: If that doesn't include the $94,900, where do I find the $94,900?
301 MR. NEWMAN: The $94,900 is a combination of hard costs, some of that being technical, and some of the announcer costs, which I broke out in the letter of March 15th.
302 We did not expense the airtime costs into our programming costs.
303 COMMISSIONER LANGFORD: So if I am trying to figure out, from a total year 1 expenditure on programming of $296,400 --
304 That's still correct?
305 MR. NEWMAN: Yes.
306 COMMISSIONER LANGFORD: I am trying to figure out how much is left after -- I'm sorry, I have more stickies in this than is probably helpful.
307 If I am trying to expense out of that the amounts devoted to the live weekly show, which are listed in your March 15th letter, how much do I reduce the $296,400 by?
308 MR. NEWMAN: I will give you that exact number in a moment.
--- Pause / Pause
309 MR. NEWMAN: The reductions would be the talent costs -- the costs for the announcer -- for the host.
310 COMMISSIONER LANGFORD: Seventy-eight hundred dollars?
311 MR. NEWMAN: Yes.
312 COMMISSIONER LANGFORD: Technical?
313 MR. NEWMAN: No, the technical costs would be expensed into our technical operations.
314 COMMISSIONER LANGFORD: Promo time?
315 MR. NEWMAN: I don't believe that we would write an invoice to ourselves, although obviously we would keep track of it because it is a cost. It wouldn't be a cash cost, and these pro forma statements we based on cash costs. It's our product that we are giving away, so we did not attach an actual expense to it.
316 COMMISSIONER LANGFORD: So other than phone lines -- whatever -- gasoline for your truck, we are talking about $7,800. That is the real outlay -- out of pocket -- that you would spend.
317 MR. NEWMAN: That would be the actual cash out of pocket.
318 COMMISSIONER LANGFORD: Cash outlay.
319 MR. NEWMAN: In addition to that, obviously, the airtime does have a value to it, but it's not a direct cost to us.
320 COMMISSIONER LANGFORD: Then how are we breaking down the expenses?
321 There are no tricks here, by the way. I am just trying to get an understanding. I am not going to "By Jove, Carruthers!", drop my monocle and claim to have caught you out. That is not my plan here. I am trying to understand --
322 MR. NEWMAN: I believe that you just found another deduction for our income tax. Thank you.
323 COMMISSIONER LANGFORD: Maybe I am in the wrong business. If Arthur Andersen can be accountants, anyone can, I suppose.
324 What I am trying to understand is --
325 MR. NEWMAN: How we arrived at the $94,000?
326 COMMISSIONER LANGFORD: I guess the general question is: How do we arrive at $296,400? Or, if we take this out, somewhere around $290,000 for all of your programming except the stuff that you go out to the club for. Somewhere in that neighbourhood --
327 MR. NEWMAN: These are our hard staff costs.
328 COMMISSIONER LANGFORD: This is all salaries?
329 MR. NEWMAN: All on-air salaries.
330 COMMISSIONER LANGFORD: It seems to me that somewhere I read that things like expenditures to SOCAN and whatnot might be included in this.
331 Do they have a separate line item?
332 Again, I am looking at your --
333 MR. NEWMAN: We may have actually included the SOCAN numbers in that.
334 I am just looking at it. We have two separate sheets. We did a more expanded version, Schedule 11, of our actual breakdown of expenses, year to year, and then consolidated that into the short format on the CRTC's online application.
335 So what you are looking at in programming expenses is a blend of some of our actual expenses.
336 For example, programming expenses would be salaries on-air plus SOCAN.
337 COMMISSIONER LANGFORD: Plus SOCAN. Nothing else?
338 MR. NEWMAN: We also may include there, possibly, some of our professional fees from a consultancy standpoint.
339 COMMISSIONER LANGFORD: What would SOCAN run in year 1? Can you give me an estimation?
340 MR. NEWMAN: We are estimating it because it is based on revenue, obviously. We are estimating that it will be $39,400, based on a revenue of $788,000.
341 COMMISSIONER LANGFORD: Thirty-nine thousand, four hundred.
342 MR. NEWMAN: Yes, and that is in Schedule No. 11.
343 COMMISSIONER LANGFORD: I hope that someone on the staff has a calculator and can help me with this.
344 We have $296,400. We are reducing that by $7,800 for the host. That is the host who goes out weekly.
345 MR. NEWMAN: Right.
346 COMMISSIONER LANGFORD: Then we are reducing it by $39,400 for SOCAN.
347 Is there anything else that we should reduce it by, or is the rest of it all salaries?
348 MR. NEWMAN: It would be fair to say that the rest of it is all salaries.
349 COMMISSIONER LANGFORD: So we have somewhere around $250,000 a year?
350 I am getting a nod from staff.
351 MR. NEWMAN: Two hundred and forty-five thousand is our budget for year 1 for on-air salaries.
352 COMMISSIONER LANGFORD: Two hundred and forty-five for salaries.
353 We are pretty close. I suppose that I could have just asked that, rather than taking the long route around. But, still, it's helpful.
354 MR. NEWMAN: Schedule 11 has a complete breakout, by year, of all of our expenses.
355 COMMISSIONER LANGFORD: If you don't mind, I will stick with the ones I have highlighted, so that I have the benefit -- or the liability, I'm not sure at this point -- of some of my own notes.
356 How much staff does that account for? Is that the seven permanent and four part-time?
357 MR. NEWMAN: Our on-air staff will feature 11 individuals -- Schedule 12. There will be a program director, a morning show host, a co-host for the morning show, a news director, a news host, a midday announcer, an afternoon announcer, an evening announcer, and then we will have some part-time announcers to take care of, possibly, a summer cruiser position, weekend part-time and a weekend swing shift.
358 COMMISSIONER LANGFORD: So other than the ones you just listed, the seven full-time, are the ones numbered on Schedule 12 of your application -- that would be, No. 8, the weekend swing announcer, No. 9, the weekend part-time, No. 10, summer cruiser, and No. 11, summer student.
359 Those are part-time?
360 MR. NEWMAN: Yes.
361 The weekend swing announcer may have enough hours to be classified as full-time.
362 COMMISSIONER LANGFORD: He might make it to full-time. So we might have eight full-time, three part-time.
363 Before I go on, why are the morning show co-host and the afternoon drive announcer typified as "creative"? What does that mean?
364 MR. NEWMAN: They will share duties. Obviously, the afternoon drive shift is four or five hours long. The standard is an eight-hour day. They would have duties that they would perform in the morning, prior to their on-air shift, and they would be voicing radio commercials, possibly writing radio commercials.
365 COMMISSIONER LANGFORD: Okay. Doing some canned announcing. Maybe getting those 90-minute phone-in things together or something?
366 MR. NEWMAN: Exactly.
367 COMMISSIONER LANGFORD: Ninety-second, I should say.
368 Ninety minutes! God help us.
--- Laughter / Rires
369 MR. NEWMAN: I am not prepared to commit to 90 minutes, thank you.
370 COMMISSIONER LANGFORD: And we are glad, probably. Although you never know. You could get some pretty good rants in over an hour and a half.
371 So we are at possibly eight permanent, three part-time, and we have $245,000 to pay them.
372 MR. NEWMAN: Yes. I see exactly where you are going.
373 COMMISSIONER LANGFORD: I would see it, too. I don't see a lineup outside your door, unless the market in St. John's is not as robust as you have been telling us.
374 MR. NEWMAN: No, in fact there are a lot of highly overpaid individuals working in the market. This is a very expensive market for some people, and some announcers are being paid very poorly.
375 We are obviously going to be a start-up operation. We do have some partnerships with other organizations, but we certainly don't have the network of affiliations that, say, CHUM would have.
376 In other words, people aren't going to come to work for us in order to go through the corporate ladder upstream to, say, Toronto, Vancouver or Montreal. They are going to come to work for us because they enjoy working in St. John's, because they enjoy the type of product that we are going to deliver, and this is a stepping stone in their career.
377 When I started I was making $3.50 an hour, I don't mind saying, and my last salary was fairly healthy.
378 COMMISSIONER LANGFORD: Yes, but steak was 10 cents a pound, if you don't mind me saying it. They have to eat as well, and I am looking at salaries that are in the twenties.
379 Assuming, just for the sake of argument, that they all get paid the same, which I know isn't right, we are looking at $24,000 or $25,000 a person.
380 MR. NEWMAN: Yes.
381 COMMISSIONER LANGFORD: Is that enough?
382 MR. NEWMAN: We think so.
383 For example, as a partner I will be, obviously, one of those positions. It's very likely that in the early stages I won't be taking a salary. I won't need to take a salary.
384 You take that out of the equation, you can split up that $20,000 through --
385 COMMISSIONER LANGFORD: Why wouldn't you need to take a salary? This thing isn't going to start making money until about year 3 or year 4.
386 MR. NEWMAN: I think that it makes good business sense in the early stages to ensure that the operation is running as smoothly as it can before you start to reap some of the benefits from it.
387 COMMISSIONER LANGFORD: When I go to the supermarket, sir, I like to have some money in my pocket. So I will leave that to you and your family, how they are going to eat over the next three or four years, but it does seem a little tenuous.
388 MR. NEWMAN: I appreciate your concern for my well-being. My current business is fairly successful and this will allow me to actually further it.
389 COMMISSIONER LANGFORD: Okay, so there will be another source of income.
390 MR. NEWMAN: Absolutely.
391 COMMISSIONER LANGFORD: The kids will go to camp. I'm glad to hear that.
392 Let's get back to the people who are drawing a salary. Assuming that you and your partner draw none, we can crank them up to about $30,000 that way.
393 I am now going to your rather extensive market survey. I have to say that it is one of the most extensive market surveys that I have seen, and it has a very interesting aspect to it -- many interesting aspects, but one of them pertinent to this line of question, and that is, you ask the 400 people surveyed to mention, I guess, their favourite or their off-the-top-of-the-head radio host or radio personality, and the same three or four come up pretty well across the board. I am just choosing one sheet, because it is asked in different ways. Certainly Randy Snow, Larry Jay, Deborah Birmingham -- and the fourth one varies a little, but Paul Raines is up there as well, and Bill Rowe -- these names keep coming up over and over and over, no matter how you ask the question. I just wonder whether you have checked the salaries on these people, because these are the people you are going head to head with. These are the people whose lunch you are going to be trying to eat. Are they making --
394 MR. NEWMAN: A lot of them are making exceptional amounts of money, in fact.
395 The market leaders are those first three people. It should be noted that Mr. Rowe also has another source of income, or two or three. He is a well known politician, lawyer, CBC analyst, and happens to host a show on VOCM.
396 Mr. Brown is also a CBC employee.
397 COMMISSIONER LANGFORD: Let's take a commercial one. What about Randy Snow, or Deborah Birmingham? Are they CBC or commercial?
398 MR. NEWMAN: Deborah, Larry and Randy are all commercial. They work for Newfoundland Broadcasting.
399 COMMISSIONER LANGFORD: And would you think it fair to say that their salaries exceed the $25,000 to $30,000 mark?
400 MR. NEWMAN: Actually, our average number works out to about $41,000, when you divide the $250,000 by six people on a full-time basis.
401 COMMISSIONER LANGFORD: But you have to have something for the poor guy in the cruiser, don't you?
402 MR. NEWMAN: Yes, that's an average. You have some junior people there who may start working in the evening time, the non-peak time, who may be fresh out of college, and to them $20,000 a year is an awful lot of money.
403 COMMISSIONER LANGFORD: Okay. Let's give three of them $20,000. We are down to $200,000 then.
404 MR. NEWMAN: The other thing that should be noted is that those numbers were based on 2001. They are not current numbers.
405 I wouldn't want to perpetuate any rumours as to how much Mr. Snow or Mr. Jay or Ms Birmingham are making. I understand that it is a significant amount of money.
406 I should also note that they are the three primary announcers on one particular radio station, and that particular station doesn't seem to have any other live announcers on it. They have people who are designated to do other jobs doing voice tracking.
407 COMMISSIONER LANGFORD: But you want 17 per cent market share first year. You predict 17 per cent the first year, and the second year dropping to 14, once the novelty wears off a little bit, and staying at 14, but for a possible dip if more stations come online.
408 Is that fair?
409 MR. NEWMAN: That's fair.
410 COMMISSIONER LANGFORD: Do you think it is realistic to bring in first-job announcers, or something close to that -- people cutting their teeth in the industry -- going head to head with these pros and expect them to pull in that type of market share?
411 MR. NEWMAN: Not certainly in the key day parts. Again, that is an average that you are looking at.
412 There are a lot of exceptional young broadcasters out there. There are a lot of people who would think that working in St. John's is as good as working in Toronto. The cost of living for an expatriate to come back to St. John's from a market like Toronto or Montreal -- someone who has maybe been displaced -- the opportunity to come back home and work, doing something that they love to do, could very well be an incentive.
413 I don't think that we are talking about an out-of-whack set of numbers.
414 To be honest, I came here for $27,000 a year --
415 COMMISSIONER LANGFORD: When?
416 MR. NEWMAN: In 1990, and I was thrilled because it was a $10,000 increase and I was working nine to five.
417 That's just my own personal experience. I am sure there are other people out there who are like that.
418 COMMISSIONER LANGFORD: Mr. Newman, I hate to harp on this, but unfortunately it is my job. I have to look at how realistic these figures are, and what you were being paid 12 or 13 years ago is what you are offering.
419 It's all well and good to hear the call of the rock and want to come home from Toronto. I can understand the magnetism. But, to put it bluntly, you still have to put a roof over your head and you still have to feed yourself and your family. Is $27,000, or even $30,000, if we can get it up that high, going to do that?
420 Because once we pay these students and summer cruisers and whatnot, we are down to a little under $200,000 for the six caballeros, and the people who are going to eat Randy Snow's lunch and put you into a 17 per cent market share.
421 I have asked you, and you are sticking with your answer, but you can see that I am a little troubled by it, I hope.
422 I am a little troubled by it, to be honest. I don't want to add too much of an editorial comment, but it does seem a little difficult. It seems to me that it will make your job a little more difficult, if I can just go that far editorially.
423 One of our legalists may throw a shoe at me if I go any further, but it does seem a little difficult.
424 You may want to think about that and --
425 MR. NEWMAN: As we said, our numbers are based on similar sized operations and adjusted somewhat for the market.
426 The opportunities for aspiring broadcasters are few. We think that it is an employer's market.
427 Now that doesn't mean that we are going to run a sweatshop. These are figures that we put together as, again, an educated guess. These figures were put together in 2001. We do stand by them.
428 Will it be $245,000? Will it be $265,000? Will it cost us another $20,000 a year to get the person we want?
429 Will Mr. Snow come to work for us? That will put a big dent in our budget, but it might buy us that 17 per cent share. And that is something that, if we are granted the licence, we will have to consider in terms of our actual strategy.
430 Is the 17 per cent share going to translate directly to revenue? If the answer is yes, then we may have to up our on-air salaries.
431 COMMISSIONER LANGFORD: The Chairman would like us to take a break in a couple of minutes, and I will certainly accede to that, I love taking breaks. But I want to leave you with something, because when we get back -- I want to leave you with a thought. You needn't answer it now; we can talk about it after the break. When we get back we will look at the revenue side of the ledger.
432 You will recall that I said to you with regard to the live programming that one of the concerns I have is that if you don't commit to it in some ways we don't have a sense of what we are licensing. Because you come in here, and to use a short of humble analogy, you show us a Mercedes Benz, but we might be getting a Chev Cavalier. And it isn't because it is any flim-flammery or any trickery. I am certainly not going there, as my kids say. What I am saying is, the realities may be such that though you have painted us this picture of live-to-air, and this back-to-the-future radio, you just may not be able to deliver it. That is where I am coming from.
433 You talked about a sweatshop. This isn't a human rights tribunal. There are other tribunals that will get after you if you start that. That's not our job, although I may have some questions about employment equity after.
434 That is not our job here today. Our job is to try to figure out what product you are offering, and to try to figure out what the chances are of you delivering that product.
435 That is where I am coming from with this line of questioning.
436 We will take a break -- or the Chairman will do that -- he calls breaks better than I do -- and then we will come back to it a little later.
437 THE CHAIRPERSON: Thank you, Commissioner Langford.
438 We will let you ponder that over the next few minutes and we will take our morning break and reconvene at 11:15 or shortly thereafter.
--- Recess at 1100 / Suspension à 1100
--- Upon resuming at 1115 / Reprise à 1115
439 THE CHAIRPERSON: We will return to our proceeding now, and I will return the questioning to Commissioner Langford.
440 COMMISSIONER LANGFORD: Before we talked about the money going out and now I would like to talk about the money coming in.
441 I did throw a general question to you before the break, or a general observation, and if there is anything that you want to say in reaction to that, of course, it is only fair to --
442 MR. NEWMAN: That would be the discussion on our salaries?
443 COMMISSIONER LANGFORD: It is the discussion on salaries --
444 MR. NEWMAN: And our commitment --
445 COMMISSIONER LANGFORD: -- leading to the concept of how firm this commitment is, and how realistic it is, I suppose, to put it bluntly.
446 MR. NEWMAN: Quite honestly, Mr. Langford, we stand by our numbers. We feel that our salaries are fair. It is a start-up business. We are projecting a 17 per cent share and we have certain revenue projections. I think it would be fair to assume that if our growth exceeds our expectations, we are going to pay our people more.
447 This is an industry where people are paid on performance. They are paid on ratings points. They are paid on how much revenue they generate, if they are in the sales field.
448 If our growth exceeds our expectations, and our business grows at a faster rate than we have projected, then obviously we are going to take care of our people a little bit better.
449 COMMISSIONER LANGFORD: The other side of the coin being, of course, that there are two ways to make a profit. One is to sell more and earn more, and the other, of course, is to pay less and cut. Are you not afraid, should this beautiful plan of yours not work, that what you will end up in a sense offering by way of diversity is, yes, a format with holes filled, but filled in the same way that everyone else is filling their format holes?
450 MR. NEWMAN: I don't think that that is the route to take; that markets, especially in Atlantic Canada, have taken that approach to cutting back rather than improving their selling techniques.
451 I think, in fact, the radio industry as a whole has suffered from that mentality for a long time. I know there have been many initiatives by the CAB and the AAB to improve radio's ability to sell itself. Radio tends to be undervalued in many markets, this one included.
452 Radio often is sold much less than its competitors in television and newspaper. Sometimes the perception is that newspaper is a better buy, a more effective advertising tool than radio.
453 I think that we need to focus more on selling radio better and selling, for example, our product better, rather than cutting back on the expenses.
454 One of the keys to our success is going to be meeting the needs of adults 25 to 54. We feel that we need to have that number of people to make it work. We feel that that number of people is key to not only our rating success, but our revenue stream as well.
455 The chicken or the egg, which comes first? I think, in this case, both have to come.
456 COMMISSIONER LANGFORD: Thank you for that.
457 I see, Mr. Bell, that occasionally you hand notes to your colleague and partner, and that's fine, but you also must feel free to speak up, if there is anything you want to say. We allow everyone to have a voice here.
458 MR. BELL: Absolutely. What I was referring to, actually, with Andy was that it is not only about people. I think that your comment about Randy Snow and, as you put it, eating Randy's lunch -- this is also about the product you are going to put on the air. And I believe that we are going to take share instantly by the product we put on the air.
459 There are people now that aren't being served in this market from the programming that is on the air. I think it is fair to say, Mr. Langford, that if you were not satisfied completely with the stations that were on the air and someone put music to your taste, news to your taste, programming essentially to your taste, you would move before you would consider the people that were delivering that programming.
460 That is my feeling on this. I believe that we are going to gain share right off the bat on the basis of the product we put on the air and the people that are not being served currently in this marketplace.
461 COMMISSIONER LANGFORD: That is certainly a nice segue into our next area. My next question was, obviously, to ask you how you expect to grab such a significant market share so quickly. And 17 per cent is not insignificant.
462 I just don't quite see -- I see your energy and I see your desire, but I am not quite sure that I see the plan -- the strategy. Why is this going to take such a huge slice of the market so quickly?
463 MR. BELL: The biggest demographic -- and I will repeat this -- is 29 to 54. It is also the biggest spending demographic that exists in society today. Retailers that exist out there, of which I am also one, right now have not found a format that targets their target market.
464 So I believe that we will see revenue gains considerably from people coming in and purchasing this, on the basis that we will be serving the 54 per cent -- the largest demographic that exists in the market.
465 The law of averages would tell you that if you go after the largest demographic you are going to take a larger share than you would by going after the smaller demographic.
466 COMMISSIONER LANGFORD: And yet, if you are successful, one of your soon-to-be competitors, and a highly experienced, successful broadcaster, has walked away from that very demographic recently. How do you explain that?
467 MR. NEWMAN: Obviously, when you look at how they were executing their particular format, and how the actual pieces of the puzzle were put together in that particular case, they weren't exactly doing the adult contemporary format. They certainly weren't doing it with the enthusiasm and the energy that 101.1 will.
468 Also, when you look at the strategy that they have undertaken, with their format changes from country to top 40, that takes away some of OZ-FM's market share.
469 When you take a look at the changes they made from VOCM-FM, from -- and I will call it adult contemporary because you did -- from that format to the classic rock format, that attacked OZ' classic rock component.
470 When you take away some of OZ' strength, you also make VOCM's product look that much better in the ratings.
471 When you look at the Steele Communications group, it is a group of four stations in St. John's, and that is only St. John's, not to mention what these changes in format have done outside the city.
472 Strategically that was the best thing to do, to weaken OZ and make the Steele group look that much better in terms of their own market share and their sales. So to say that they have abandoned it is probably a harsher word than it needs to be.
473 Strategically they felt that there was another format that they could execute -- and this is strictly an outsider making an observation. Obviously they felt that, strategically, by making format changes, they could greater impact the losses on their competitor and make their own products look that much stronger.
474 Currently they reach -- and this is from one of their own print pieces -- 82 per cent of the market of Newfoundland and Labrador. If you can have 83 per cent, well, I guess you are going to do your best to do that.
475 So to say that they have abandoned the adult contemporary format I don't think is correct. They have also abandoned the country music format.
476 When you take away the country music format and you take away the adult contemporary format, obviously those two would have some audience sharing. That leaves a clear segment of the audience -- a clear segment of the market -- that is not being served, and that is the adult contemporary market.
477 COMMISSIONER LANGFORD: And this you feel will draw advertisers. Your figures, if I understand them correctly, are that you will draw, with your format in year 1, $788,000 in revenue in total.
478 MR. NEWMAN: Yes.
479 COMMISSIONER LANGFORD: I have some questions about where some of that might come from.
480 Thirty per cent from existing local market. I guess about all I can say is "perhaps". It is up to you to get out and sell it, I suppose.
481 Increase in advertising budgets, another 28 to 35 per cent. Precisely who is going to be increasing their advertising budget? Who isn't advertising now?
482 MR. NEWMAN: Right now you have a host of national chains that are trying to reach the segment of the audience that is not being served on radio.
483 If you are a national buyer, Atlantic Canada is a tertiary buy.
484 If your product is targeted at adults 25 to 54 and you can't reach those people with the existing formats, then you are not going to spend your money, you are going to put it into newspaper, or you are going to put it into television, or you are going to explore some of the new media.
485 If in St. John's you can't buy the format and the demographic that the media buyers feel you need, then you are just not going to spend the money.
486 That's where the money is going to come from. There is no audience -- there is no property reaching the adult 25 to 54 market on an efficient basis.
487 MR. BELL: In addition to that, if I might, Mr. Langford, speaking from personal experience, for the first time in my 11 years of media buying experience, on a regular basis I am seeing inventory sold out this fall, both in TV and radio. That tells me that there is advertising revenue going unspent because the market currently cannot handle the additional revenue.
488 COMMISSIONER LANGFORD: Did I understand you, Mr. Newman, to say that you expect this mostly to come on the national front, or is that just partially?
489 MR. NEWMAN: No, that is just partial.
490 COMMISSIONER LANGFORD: Because my understanding -- and I am flipping through, looking for it -- I am not finding it, but my recollection is that your national projections were modest. Let's put it that way.
491 MR. NEWMAN: Yes. Traditionally the Newfoundland market has been difficult to buy -- actually, difficult to sell because it has been difficult to buy.
492 The way that the Newfoundland market is presented to a national buyer is somewhat complex when it comes to the way the Bureau of Broadcast Measurement handles its breakdown of how St. John's, how Gander, how Grand Falls and how Newfoundland and Labrador as a whole are distributed.
493 It has only been recently, with Steele Communications' takeover of VOCM, that everything has become a little clearer.
494 It has been difficult for a media buyer to buy just St. John's. For example, to buy OZ-FM, you are covering the entire island. To buy Steele Communications, it has only been recently with some of their format changes that you have been able to buy just St. John's. They have been selling their entire network primarily.
495 So from a national level we do expect it to be modest, but we do expect it to grow because it has become easier to buy just St. John's.
496 COMMISSIONER LANGFORD: To nitpick for a second -- and I don't object in theory to what you are saying -- you have a separate line of $39,400 projected year 1 for national advertising. The line I was referring to is the increase in advertising budgets, which I took to mean local advertising budgets, the sort of thing that Mr. Bell was talking about, people who can't find time. But that is still quite large.
497 Is there $220,640 worth of advertising going begging out there?
498 MR. NEWMAN: If you want to advertise on television right now for Christmas, you very likely would be out of luck to buy a peak program or a slightly off-peak program. If you wanted to advertise at six in the morning --
499 As a matter of fact, this morning, in preparation for the hearing, in my office I had the local CBC outlet on and I noticed three local advertisers on in that particular day part.
500 The ability to buy radio as we approach Christmas becomes more and more difficult, as the formats become tighter -- and as a programmer we like to hold the line on how many commercial minutes we allow. As they become tighter, yes, those dollars are out there. I think it is probably fair to say that those dollars are larger.
501 COMMISSIONER LANGFORD: I certainly hope for your sake that they are.
502 You are talking about television and you made a comment in your March 15th letter, I believe it was, that I frankly had a little difficulty understanding.
503 Yes, in your letter of March 15th you say -- and the pages aren't numbered on my copy. It's an addendum to the March 15th letter, Schedule 13. You say:
"In addition to CBC cutting local commercial production for television, NTV has begun contracting out commercial production, a move that may increase the dollars available for radio in the market." (As read)
504 Before I get to the CBC, I don't quite understand how that works. NTV, you say, has begun contracting out commercial production. How does that increase advertising dollars?
505 MR. NEWMAN: Since I am in the business of advertising production, I can tell you that my rates and the rates of advertising agencies to produce radio and television commercials are significantly higher than an operation such as CBC or NTV.
506 In other words, if you were to come with a product and say that you wished to buy some advertising, in most cases they would cover the cost of your production.
507 They have, on several occasions, contracted out their production, similar to what CBC does.
508 For example, what would cost you nothing to produce an ad may now cost you upwards of $2,000.
509 So if I am an advertiser and I have $20,000 to spend on a television campaign and $2,000 of that has to go toward production, I may think twice about producing a television commercial. I may think twice of having a television commercial aired.
510 COMMISSIONER LANGFORD: Help me here, because this isn't my world.
511 What you seem to be saying to me is that the cost of having NTV produce a television ad adds another 10 per cent or something to it. Therefore --
512 MR. NEWMAN: Often -- and I guess it is done on a client-by-client basis -- and I am not speaking specifics, I am speaking in general terms -- NTV would produce your commercial for no charge. However, of late they have been contracting out their production.
513 In other words, saying to you, "Mr. Langford, I am sorry, we can't provide that service any more. Here are the names of some people who will produce a commercial for you."
514 COMMISSIONER LANGFORD: So that extra cost will then drive them to radio, possibly.
515 MR. NEWMAN: It's conceivable.
516 MR. BELL: Mr. Langford, it's the situation, too, where some small operators may only pick TV in the fall. So they may have a $5,000 to $10,000 budget for TV.
517 Let's just say that a small operator on Water Street had a $5,000 budget for TV. They could get a TV spot produced, with a Christmas theme, and put it to air for that period. The commercial would be produced for free.
518 Now, all of a sudden, there is a $2,000 charge attached to it. You have $3,000 worth of airtime. It may not be worth your while to air a TV commercial at all. You could take those funds or that investment and put it toward radio and get more coverage, more frequency, at better peak times.
519 Because for peak times now, actually, the rates have increased dramatically. The rates are now upwards of $1,000 on TV during the news, which they haven't been in previous years.
520 COMMISSIONER LANGFORD: I see. For the CBC, what you seem to be saying there is that the surplus advertising dollars --
521 "In addition to CBC cutting local commercial production..." Is that the same equation?
522 MR. NEWMAN: Exactly. Actually, CBC did that prior to NTV's experiment with it. I'm not sure if NTV is continuing to do that now, but they did experiment with it.
523 CBC cut local commercial production some time ago and provided their clients with a list of production houses or advertising agencies that would produce their television commercials for them.
524 Again, this is a situation where smaller advertisers, who may not have the budget to produce a television commercial, may be looking at their advertising budgets and saying "Let's not use television."
525 The other thing to note is that CBC Television has cut back the number of available minutes in some of their key programs.
526 So, again, speaking to Mr. Bell's issue about available inventory, for instance, buying the news is no longer as easy as it was. CBC St. John's supper hour news used to be the top rated supper hour news program in the province. That has shifted now to NTV. NTV has now raised their rates, but they can because there is no inventory to sell. They are running in a sold-out situation in their peak times, which I think speaks to the health and the viability of the market, as much as it does to the strength of the respective broadcasters.
527 COMMISSIONER LANGFORD: That's the thought between your 15 per cent chunk of your advertising revenue, the $118,200, that there are advertisers who used to be on TV --
528 MR. NEWMAN: I think there is money being left on the table.
529 COMMISSIONER LANGFORD: It's being left on the table, to use that phrase.
530 MR. BELL: There are also a number of new national advertisers coming into the market. Sport Chek is now here, up in the business park, as well as Winners, which is now building a new store up there. They have been in the village, but they are coming with a new location. Chapters has recently come in, in the last two or three years.
531 So a number of national retailers are now seeing Newfoundland as an opportunity, and St. John's specifically, and they are now coming here and bringing their advertising dollars to bear in this market.
532 COMMISSIONER LANGFORD: So that's the people saving money and looking for space that is unavailable to them on the television side. Then we go over to the other side of the equation with local newspapers. Surely they are not going to save money coming from a local newspaper to you.
533 MR. NEWMAN: The price of running a full page ad is fairly expensive. Newspaper, unlike television, can just print more pages. The newspaper industry in this market has been exceptionally healthy. The Telegram has been sold twice in recent history.
534 COMMISSIONER LANGFORD: One of your papers had not been doing well up until the last year.
535 MR. NEWMAN: Yes, The Express, which up until -- and I will note that when the application was written, Newfoundland Capital Corporation, the parent company of NewCap Broadcasting and Steele Communications -- when we wrote the application, they were the owners and operators of The Express newspaper. They recently, in the past few months, have changed their operations and have sold off.
536 But, yes, in 2001-2002 The Express turned the corner and made money for the first time.
537 COMMISSIONER LANGFORD: But that's not a long track record, is it? They still could be battling pretty hard for those ad dollars if they are so close to the edge.
538 Still, I take your point. They are on the right side of the ledger, at least today.
539 MR. NEWMAN: The figures being tossed around in the marketplace, from a newspaper standpoint, are that The Telegram gleans about $14 million a year in local ad revenue.
540 MR. BELL: There is no doubt about it, it is an overpriced product for the market. It's in that position.
541 COMMISSIONER LANGFORD: You can compete with that, quite easily, you feel.
542 MR. NEWMAN: We think there is more than ample opportunity there.
543 COMMISSIONER LANGFORD: You said today when you were giving your PowerPoint presentation that you weren't going to undercut the advertising rates, but I don't believe that is what you implied in your original application.
544 I could go hunting for it, but I think -- I mean if I'm wrong, tell me I'm wrong, but I believe -- it's just the power of recollection. I'm outside the 54 demographic, remember, so it may not be perfect, but I believe that you did say --
545 MR. NEWMAN: We would let you listen to the radio station, it's okay.
546 COMMISSIONER LANGFORD: I believe you did say that you were going to undercut them in your application.
547 So that seems to me to be a change of heart.
548 MR. NEWMAN: I believe that what we suggested was that we were planning for a certain rate, and the rate was based on what was the going rate in the market at the time.
549 In April of 2001 you could buy OZ-FM for $25 on an ROS campaign for a 30-second commercial. VOCM-FM was available at the time for $28.
550 Since then, of course, the rates have risen by 20 per cent, roughly.
551 COMMISSIONER LANGFORD: Aren't they up around $71? Isn't that the figure --
552 MR. NEWMAN: That's in the 60-second bracket. Primarily in this market radio commercials are bought and sold in 30-second increments as opposed to 60-second. But, yes, if you double that you will get your rate per minute.
553 The fact that we said we were keeping our projections at a conservative level has probably led to the misconception that we were going to come into the market and cut our rates.
554 The market leader, which is Steele Communications, ultimately will set the rate. If the market leader decides that $35 is no longer enough and is going to push it up to $40, and the market can bear $40, then we will certainly sell it at $40.
555 However, recognizing that the market leader does set the tone on the street, if the market leader decides "We are going to push down a little bit and push you back to $28", then obviously we are going to have to go where the market leader sets us.
556 I don't foresee us being in a market leading position, certainly in the first few years, to determine what the rates on the street are, but it would only make good business sense that if the market is selling now at $35 for 30 seconds, that that's how we would sell ours.
557 COMMISSIONER LANGFORD: But am I right in suggesting that you did imply somewhere -- and I am hunting for it and not finding it, but I have some helper elves to my left who may help me find it.
558 Did you not imply in the discussion of the current rates -- and you are free to change your mind on that point. I am not trying to lock you into cement.
559 Did you not imply that you would undercut --
560 MR. NEWMAN: Actually, I will read -- Mr. Steele quoted from the section in his letter of intervention. His comments were that he felt that we were going to destabilize the market.
561 Our application, as we said, was crafted back in 2001. In order to prove to ourselves and to prove to the Commission that another outlet in the St. John's market was viable, we chose to be conservative in our rates. Since our application has been filed, the rates in the market have gone up.
562 However, we want to be sure, if for some reason the market rates happen to drop back down to those 2001 levels, that we are in a position to continue the viability of our operation.
563 Ultimately the market leaders could push us into a price war, because they have that power. I don't think that that is something a start-up operation is going to do. I think that if we can sell it at $35 a spot, I would encourage my sales people to do just that.
564 COMMISSIONER LANGFORD: So not necessarily war, but war if necessary.
565 MR. NEWMAN: I don't think it's an initiation, Mr. Langford, as much as it would be a response to what the market might demand.
566 Again, that market is driven by the acknowledged leaders.
567 COMMISSIONER LANGFORD: I have found that statement now. It is in your Schedule 13 of March 15th.
"Despite the increase in average rates in the marketplace, our revenue projections are remaining the same due to the anticipated lowering of average rates with an additional competitor in the market." (As read)
568 So it is as you characterized it, and I apologize for --
569 MR. NEWMAN: I think it is only fair -- it is only smart business practice to be prepared in the event that --
570 We are going to be a competitor. It is only fair to be prepared for how our competitors may respond.
571 COMMISSIONER LANGFORD: Right. Well, I did say that I was outside the demographic. I recalled it incorrectly.
572 Thank you for clearing that up for me.
573 MR. NEWMAN: Thank you for giving me the opportunity.
574 COMMISSIONER LANGFORD: I want to talk very, very quickly about your standalone situation. How much of a handicap is that?
575 I would remind you that in your own application and in interrogatory responses you anticipate a newcomer coming into the market --
576 MR. NEWMAN: We don't anticipate a new operator, but when you look at the history of CJYQ, Radio Newfoundland, and you look at its current market share, and you look at the commitment that Steele Communications made in 1999 -- in December actually -- it was about this time in 1999 -- they made the commitment to the CRTC to run an all Newfoundland, east coast format as a carrot to the Commission for allowing them to keep the fourth licence in this rather unique market. We don't dispute the validity of having a station like that on the air; however, when you look at their market share and their performance under the Radio Newfoundland format, it would only make good business sense, when you look at how they have made format changes in other stations, that at some point they are going to look at the expense of running CJYQ and come back to the Commission and ask to make a change, either in the format or the frequency, to run their business more successfully. I think that is a realistic business outlook, and I think that is something that we need to be prepared for down the road.
577 Their current licence will expire, I believe, in five years. In five years' time they could come back to the Commission and request a change in their position, in their format, or make application to flip to FM.
578 I think that to not see that down the road would be shortsighted on our behalf.
579 And while the Commission may decide when they come up for renewal not to -- they may decide, actually, not to make any changes to it, and that would be great for the entire market.
580 I think, personally, that it is a great product and it should remain. It is unfortunate that it doesn't have a greater market share.
581 COMMISSIONER LANGFORD: I am not doing well in the recollection business this morning, so I might as well try it one more time.
582 Did you not say -- and again I am searching -- did you not say in explaining why you felt that your market share might dip in year 4 that you expected Newfoundland Broadcasting to come back and perhaps be successful in applying for a station at that time? Was that not part of the equation?
583 MR. NEWMAN: At that time we were the only applicant. Our application was the one that triggered the open call.
584 At that time Newfoundland Broadcasting was not part of any of these proceedings, and we assumed, again as business operators, that after a few years of having another competitor in the market they may see fit -- and the market may in fact grow to support another operator.
585 I think that, again, they weren't part of the equation when we wrote the application. Subsequently the open call, and they will be on the docket later today.
586 COMMISSIONER LANGFORD: But assuming that you are right, and assuming for a moment that you are successful here today, you are still a standalone. You are up against NewCap, which is far from a standalone. You are up against Newfoundland Broadcasting, which at least has the synergies of television and print, which may, as you say, come back in three or four years' time and look for another competitive venue.
587 Where does that leave you?
588 You have all of the expenses, with nobody to share them with, and fighting for revenue with people who can offer some pretty attractive packages.
589 MR. NEWMAN: As I stated earlier, we have the advantage of not being encumbered by a large amount of capital debt.
590 Steele Communications, obviously being part of a larger organization, NewCap Broadcasting, also has the disadvantage of having recently purchased the aging CFCB network and the VOCM network. Yes, they have some synergies there because of the size of their operation.
591 Newfoundland Broadcasting, again, they have two licences and a newspaper operation and their associated websites. They have a steady revenue stream. They also have capital issues that they will have to address.
592 There are many very successful standalone operations in this country. I will use for an example, because he is a good personal friend of mine, Bob MacEachern at CIJO in Port Hawkesbury. There is a town that was expected to die when major industry pulled out. There was a radio station that was in fact in receivership at one point.
593 Mr. MacEachern has turned it around into an FM licence. He has put together some partnerships with other standalone operations. There is a loose -- I don't want to use the word "consortium", but there is a loose organization of independents out there that are sold on a national level. There are Atlantic partnerships, possibly even with independents, or possibly with other groups.
594 There is Maritime Broadcasting, that may be interested and have some of their clients that may like to expand into St. John's, that may like to take advantage of a partnership arrangement.
595 I don't think that a standalone situation impedes us. Again, we are not encumbered by a huge amount of capital that we have to finance. We are sharing our transmission facility with CBC.
596 When CBC does something, they do something times three. I mean there are redundancies built in.
597 We are not concerned about any issues of our tower collapsing. We are not putting up a makeshift transmission facility. The technologies in building an on-air facility -- a broadcasting facility -- the efficiencies with technology have come down so much in the past five years alone that what was a $40,000 control board is now a $15,000 or $10,000 expense.
598 So we have all of these advantages of being a new operator and putting up a brand new operation in our financial picture.
599 And I think that as we grow there are going to be people who are going to want to put partnerships in place with us, because they are going to see that we are running a tight ship. We are not driving a Mercedes. I hate to use the analogy, but it was used on me many times and it stuck. We are going to drive a Neon. We are going to get there at the same speed; we are just going to do it more efficiently.
600 MR. BELL: If I might add to that, speaking from experience and working with a business that has over 250 employees, there is a tremendous amount of overhead that comes with that that one has to cost before they can start making money. And in a small operation like this, I actually see it as an advantage to not have to cover the cost of a human resources department, an accounting department, a marketing department, and all of these things, where one can contract some of these services out and cut their costs back, rather than dealing with the overhead on a day-to-day basis with those departments and the costs that come with them.
601 So I think that is a very important point that one can look at both ways and say that there are synergies, but if one looks at a radio station, a TV station and a print facility, they are very different operations with very different equipment. They still have to then maintain and pay for the overhead of the general manager of all three properties, of the CEO, the chairman, the president, the human resources and accounting departments of all of these organizations, where we can see some synergies from that standpoint.
602 COMMISSIONER LANGFORD: I notice from your application that you both come from the town of Paradise, so you may have some other interventions that are more powerful than even the Steele family can muster.
--- Laughter / Rires
603 COMMISSIONER LANGFORD: I have a few very short questions before I throw you your big home run ball and let you hit it out of the park. I have a couple of small ones that perhaps are not unimportant but don't quite fit into the bigger picture.
604 You talk in your draft by-laws -- and, as I say, I am going to be all over the place on these because they are just small questions I have that don't fit into the bigger issues.
605 You talk in your draft by-laws -- at section 3.02 you say that a majority of the directors shall be resident Canadians; however, CRTC rules are such that 80 per cent of the directors shall be resident Canadians. I would like to suggest to you a wording that would be more appropriate. I don't think that you have to write it down now, but perhaps you could work with legal counsel or the secretary afterwards and get a copy of this.
606 For the record, I think perhaps the preferable wording, if you find this acceptable, would be:
"Except where the corporation is a non-resident corporation, 80 per cent of the directors shall be resident Canadians, but where the corporation has only one or two directors, that director, or both directors, as the case may be, shall be a resident Canadian." (As read)
607 Do you have any problem with that wording?
608 MR. NEWMAN: We have no issues with this.
609 COMMISSIONER LANGFORD: Fine. Thank you. I will let you get a copy of that from the secretary and you can work with your lawyers on that one.
610 You mentioned in your application -- and I think this must be typographical, but I want to check it -- "average number of commercial minutes expected to be sold per hour in the first year, 30". Do you mean 30 per cent?
611 MR. NEWMAN: That's 30 per cent, yes.
612 COMMISSIONER LANGFORD: Thirty per cent. So 35 minutes in year 7 would be 35 per cent.
613 MR. NEWMAN: Yes.
614 COMMISSIONER LANGFORD: It was very optimistic, I thought. I just wanted to make sure that we had that right.
615 MR. BELL: This is not a radio station of all advertising all the time.
616 COMMISSIONER LANGFORD: Well, one has to ask; they are your figures.
617 I wanted to ask you a little bit about cultural diversity. I understand that you are very clear in your application that you have a very small payroll and the rules don't apply to you as they would to someone with a payroll of over 100 employees. At the same time, in the area of cultural diversity, employment equity, in those areas, you did mention in your application, basically, that you would do your best in those areas, and you mentioned it again today in your PowerPoint presentation.
618 Can you flesh that out a little bit? Do you actually have some plans in those areas, or are you going to work on some?
619 MR. NEWMAN: Absolutely. Our geographical location limits us in terms of the number of landed immigrants. This is not a spot where a lot of people land and choose to stay.
620 The nature of our history, in terms of aboriginal peoples -- the Beothuk were wiped out, so we don't have a large aboriginal population in the city of St. John's.
621 It is very difficult, then, to draw from those two populations and offer what it is you are asking.
622 However, we intend to operate on a ground-floor access. Our facility is going to be on the ground floor, with ample parking and easy access from a physically challenged basis. We would like to take advantage of some of the opportunities that our provincial and federal governments have for making some of these people more employable. We have no issue with anyone's physical disability.
623 So those are some of the areas that we intend to move forward on.
624 In terms of cultural diversity, it is something that we didn't note, but according to my records of birth I am a designated Métis in Nova Scotia. So I actually personally cover the category of cultural diversity.
625 COMMISSIONER LANGFORD: Well, you're a start.
626 MR. NEWMAN: I hope to be.
627 We are not bound, because of the size of our operation, by any of those initiatives. Again, we are not bound, but we are on the record as saying that we are going to do our best to make sure that we can assist some of these groups.
628 I believe, quite frankly, that talent is talent, regardless of the circumstance.
629 COMMISSIONER LANGFORD: I don't mean this in any way to be threatening. Honestly, I don't. That is a perfectly adequate answer at this stage, but it is also larded with some very enthusiastic, optimistic and hopeful adjectives, and that is the sort of thing that might come back and bite you a little bit in seven years' time, if you are successful.
630 So I am sure that when I come back here in seven years' time, and Mr. Colville and Ms Noël and I are sitting here and we want to know how you are doing, should you be successful, we will look a little more deeply into those very enthusiastic --
631 MR. NEWMAN: Perhaps we could schedule a hearing in a more southern climate.
632 COMMISSIONER LANGFORD: Oh, we always come to you. We come to you, as much as possible.
633 I think that does it for particular questions. If I have missed anything, our legal beagle will have it.
634 Perhaps we could let legal counsel ask the questions that he has, and then you could sum up with a minute or two on why you think, having heard the questions, that we should consider your application favourably.
635 THE CHAIRPERSON: Thank you, Commissioner Langford.
637 MR. McCALLUM: In your view, do you think that the St. John's market could support the licensing of two new radio stations at this time?
638 MR. NEWMAN: We don't think that today the market can support two additional radio stations. That doesn't rule out that if the growth patterns continue here in St. John's at the trends we have seen that down the road an additional station could be licensed.
639 MR. McCALLUM: So you are suggesting that, for marketing reasons, the licensing of one of the applicants in today's process would likely preclude the licensing of the other. Is that correct?
640 MR. NEWMAN: Yes.
641 MR. McCALLUM: Thank you, Mr. Chair.
642 THE CHAIRPERSON: Thank you, counsel.
643 I can throw this lob ball at you that Commissioner Langford was going to throw and give you an opportunity to sum up and say, in light of the competitive circumstance, why you think you are the best applicant, particularly given the answer that you just gave that, at this time at least, you believe that the market can only sustain one new player.
644 MR. NEWMAN: When you look around and you listen to the radio stations in the St. John's market, on the surface it appears that there is plenty of choice. The reality is, in a market as diverse and as vibrant as St. John's, there are only two operators: one that operators four of the five commercial radio stations in St. John's; the other that not only operates the other licence, but operates a newspaper and a television station.
645 We have examined their numbers, and we thank the Commission for poking and prodding, as it were. We stand by our estimates.
646 We would like to say that this market cannot only support another radio station, but that it needs an additional operator. It is our opinion that granting the licence to Newfoundland Broadcasting would not meet the CRTC's criteria for items such as diverse news voices and editorial content. The listeners and the advertisers in St. John's deserve an additional choice, and we feel that our application offers many of the key ingredients that are needed to make sure that that choice is available in the St. John's market.
647 We thank the Commission for their time.
648 THE CHAIRPERSON: I thank you very much, gentlemen. We will see you later on in the process.
649 In light of the hour, I would suggest that we take our lunch break now, rather than have Newfoundland Broadcasting come forward and do their presentation, and then we would have to break in the middle of it.
650 So we will take our lunch break now and we will reconvene at 1:30, at which point Newfoundland Broadcasting will do their presentation for their FM application, and we will question them at that time.
651 Thank you. We will reconvene at 1:30.
--- Luncheon recess at 1200 / Suspension à 1200
--- Upon resuming at 1330 / Reprise à 1330
652 THE CHAIRPERSON: Ladies and gentlemen, we will now hear the second of the two radio applications that we have before us.
653 I will turn it over to you, Mr. Secretary.
654 MR. LEBEL: Thank you, Mr. Chairman.
655 Item 2 on the agenda is an application by Newfoundland Broadcasting Company Limited for a licence to operate an English-language FM commercial radio station in St. John's. The new station would operate on frequency 95.7 MHz, channel 239C, with an effective radiated power of 100,000 watts.
656 The applicant is proposing an easy-listening adult contemporary music format with a focus on contemporary Newfoundland music.
657 Mr. Scott Stirling will introduce his colleagues.
658 You have 20 minutes to make your presentation.
PRESENTATION / PRÉSENTATION
659 MR. G. STIRLING: My name is Geoff Stirling and I am the Chairman of the Board of Newfoundland Broadcasting. I certainly welcome the Commission to Newfoundland. It is very convenient to have you here and to have the opportunity to make this presentation.
660 I would like to introduce the president, Scott Stirling, who will make the presentation.
661 MR. S. STIRLING: Good afternoon. I am Scott Stirling, President and CEO of Newfoundland Broadcasting. With me today, on my immediate right, is Doug Neal, the General Manager of Newfoundland Broadcasting.
662 You know Mr. Stirling.
663 Lorraine Pope-Janes is the Sales Manager for Newfoundland Broadcasting.
664 At the back table we have Paul Kinsman, who is the Program Director of OZ-FM.
665 In the middle we have Lisa Gushue, who is the Marketing Director for Newfoundland Broadcasting.
666 And we have Mr. Scott Prescott of Johnston & Buchan, our legal counsel.
667 Over at the other table we have, on the right-hand side, Frank Collins, who is the CFO of Newfoundland Broadcasting, and we also have Mr. Norm Cook, Broadcast Consultant Engineer.
668 We are pleased to appear before you today to present our application for MY-FM. Our objective is to provide the people of St. John's with an adult contemporary radio station that will be heavily weighted toward Newfoundland artists and their music. MY-FM will appeal to a broad cross-section of the community and will be programmed to meet the specific needs of those female radio listeners in St. John's who have been forgotten in the recent shuffling of radio formats that has gone on in this market.
669 We are confident that approval of our application would serve the interests of the residents of St. John's and further the objectives of the Broadcasting Act. In particular, it would:
670 1. address the needs of under-served female listeners in St. John's;
671 2. increase choice and diversity for all listeners in this community;
672 3. make substantial contributions to local talent development through direct expenditures, "in kind" contributions and significant exposure for local artists and musicians;
673 4. hasten the introduction of new technologies in Newfoundland, such as digital audio broadcasting; and
674 5. address the competitive imbalance in the Newfoundland radio market, without threatening the financial stability of existing radio stations.
675 Before we examine each of the benefits associated with licensing MY-FM, we would like to briefly outline for the Commission the depth of broadcasting experience that Newfoundland Broadcasting brings to this application.
676 Newfoundland Broadcasting is the licensee of OZ-FM St. John's and its network of eight repeaters that operate throughout Newfoundland. We also operate CJON-TV and its 15 rebroadcasting stations.
677 Newfoundland Broadcasting received its first radio licence, for CJON Radio, over 50 years ago. In 1955 our company was granted a licence to operate CJON-TV, and in 1977 was granted Newfoundland's first FM licence for OZ-FM.
678 Since its very beginning Newfoundland Broadcasting has tried hard to develop and operate broadcasting services that meet the particular needs of the people of Newfoundland and Labrador. To date, we have had our share of success. And while the other licensed broadcasting stations operating in this market have all undergone changes in ownership over the past 10 to 15 years, the two stations licensed to Newfoundland Broadcasting have continued to be guided by the steady hand of Mr. Geoffrey Stirling.
679 Newfoundland Broadcasting has a commendable record of providing local radio service in this province. We are particularly proud of our programming policy of investing in and developing local talent. Our record speaks for itself. Exposure and airplay on OZ-FM has made an important contribution to the success of numerous local artists and musicians. Newfoundland Broadcasting wants to expand on that tradition and ensure that it can continue to provide quality radio service in St. John's and throughout Newfoundland and Labrador. MY-FM is vital to the achievement of this mission.
680 I would like to pass it on now to Lisa Gushue, the Marketing Director for Newfoundland Broadcasting.
681 MS GUSHUE: As noted, MY-FM will provide an adult contemporary format and will include on its playlist a significant amount of contemporary Newfoundland music.
682 The new station will consist of a mix of musical selections ranging from soft romantic songs to rock and pop songs. Its playlist will include music from the eighties and nineties, music which is played mainly on OZ-FM. It will also include today's music and will be drawn from local, national and international artists, designed to create the unique MY-FM listening experience.
683 In addition to music, MY-FM will also provide listeners with an additional source for news and information programming.
684 With the recent switch by VOCM-FM to a classic rock format, there is no longer an AC formatted FM station in St. John's.
685 As you know, the adult contemporary format is available in almost every major market in Canada. The absence of such a station in St. John's is, therefore, somewhat of an oddity. We believe that there is clearly a need for an AC station in this market.
686 Our goal is to target those people in the community who are looking for a less strident sound. Our research indicates that women are most likely to gravitate to this sound. For that reason, we expect that our audience will be predominately female, but also know that many males will also enjoy this format.
687 Historically, OZ-FM has been able to consistently attract large numbers of both male and female listeners. With the recent radical format changes that NewCap has implemented in this market, however, OZ-FM's share of the male audience has declined.
688 One of NewCap's FM stations, VOCM-FM, recently changed to a classic rock format in order to target OZ-FM's historic male audience. When VOCM-FM became K-Rock many of OZ-FM's historic male audience migrated to the station.
689 Similarly, CKIX, which was a country station, has changed recently and is now playing contemporary hits radio. That station, now referred to as Hits99, has a sound that is similar to OZ and also appears to appeal to younger audiences and women in this market.
690 The erosion of our male audience combined with the increased competition for female listeners has forced OZ-FM to try to be all things to all people. Even though we have had to create a more broad-based sound to compete with these formats, we have reached the conclusion that a composite sound cannot satisfy completely either segment of the market.
691 MR. KINSMAN: Newfoundland Broadcasting believes that in order to compete with the NewCap stations in St. John's that have undergone radical format changes, we need to provide two radio stations with two distinctly different sounds. Our new station will be a natural complement to OZ-FM.
692 MY-FM will appeal predominately to female audiences, with a softer sound, while the format of OZ-FM will appeal to a predominately male audience, with louder and more strident sounds.
693 In addition to filling the void left in the market by developing a new radio station that provides an adult contemporary sound, it is also important to point out that MY-FM will air a significant amount of contemporary local music. OZ-FM is currently airing a substantial amount of contemporary local music as it is.
694 The re-formatting of VOCM-FM and NewCap's other stations to a classic rock format has all but eliminated the play of local musicians and artists by those stations.
695 At the same time, while the playlist for CJYQ-AM does include a limited amount of contemporary music, the bulk of its songs are traditional hits from years gone by.
696 With the exception of OZ-FM, the current market configuration provides Newfoundland's local artists with very few opportunities to have their music played on radio in this province. The playlist for MY-FM will include significant numbers of local artists and musicians.
697 Newfoundland Broadcasting firmly believes that there is a need and a demand for a second radio station that will play contemporary local artists.
698 This brief description of MY-FM is intended to provide the Commission with a better understanding of the manner in which the new radio station will enhance diversity and choice in St. John's.
699 Newfoundland Broadcasting will ensure that MY-FM provides listeners in St. John's with a distinct radio voice. The sound of MY-FM will be distinct from that of OZ-FM and any other station operating now in St. John's.
700 The new station will also maintain editorial independence from Newfoundland Broadcasting's other stations. It will have its own news director, who will be ultimately responsible for the manner in which MY-FM delivers news and information programming.
701 While Newfoundland Broadcasting does expect that there will be some economies between the new radio station and our existing broadcasting properties, particularly in the gathering of raw news data, these economies will not affect the editorial independence of the new radio station.
702 MR. S. STIRLING: In order to highlight our commitment to the St. John's community we have proposed substantial contributions to local talent development in this province.
703 Newfoundland Broadcasting fully supports the CAB's Canadian talent development plan and will accept as a condition of licence, as it does for OZ-FM, full participation by the new station in the plan.
704 We have not set forth in our application the specific projects or activities that we intend to support under the CTD plan because we believe that it is important to maintain flexibility to respond to the specific needs of the local community and the artists as they arise. Rest assured, however, that we will meet our commitments.
705 We would also point out that Newfoundland Broadcasting's commitment to the development of local talent is not limited to cash contributions. We have estimated that following the licensing of MY-FM, Newfoundland Broadcasting will be able to make "in kind" contributions to local talent development of approximately $455,000 over the course of the licence term.
706 Frequent airplay is one type of "in kind" contribution that provides local artists with a huge advantage and has an enormous impact on their careers.
707 MY-FM will also participate in events like "Concert in the Park" and the popular "George Street Festival", which were both founded by OZ-FM. These events provide a showcase for up and coming local musicians.
708 MY-FM will also create its own venues for local artists.
709 As noted earlier, a significant portion of MY-FM's playlist will consist of music from local artists. The value of radio play to local artists/musicians cannot be overstated. Frequent airplay on MY-FM and OZ-FM, coupled with extensive exposure through advertising and airing of music videos on NTV, will significantly enhance the exposure of local artists.
710 In addition, MY-FM is committed to devoting six hours on weekends to airplay of locally produced radio, featuring interviews with local artists and their music. For several years we have provided a similar program for OZ-FM, the renowned "Jigg's Breakfast Show". The success of that program has confirmed our belief that this kind of programming appeals to St. John's radio listeners.
711 MR. NEAL: Approval of our new station will also provide Newfoundland Broadcasting with the ability to implement significant infrastructure improvements, which will ensure that the highest quality radio signals are delivered to the residents of Newfoundland, using the best possible technologies available.
712 In particular, revenues from the second radio station will provide Newfoundland Broadcasting with the stability that we require to upgrade our aging transmitter network and provide for the future expansion of OZ-FM transmitters.
713 Newfoundland Broadcasting's network of radio transmitters is almost 25 years old and in need of substantial capital upgrades.
714 We are also interested in extending OZ-FM's signal into Labrador and the Northern Peninsula of Newfoundland. These service extensions would be capital intensive and would require the additional revenues of a second radio station to complete.
715 In addition, as part of our application, Newfoundland Broadcasting has committed to applying for licences to re-transmit the signals of OZ-FM and MY-FM as digital radio services in the St. John's area. Newfoundland Broadcasting expects to be in a position to apply for a licence and to launch these digital services approximately five years into the initial licence term of MY-FM.
716 This will allow time to establish the new service before taking on the additional financial commitments required to launch digital service.
717 As the Commission is aware, Newfoundland Broadcasting has long been an innovator of new services, starting with the introduction of a local television station in 1955, followed by the first commercial FM radio service in 1977, and the use of satellite delivery for radio and television services in 1993. We see the launch of digital audio broadcasting in this province to be just one more step in the evolution of our radio services.
718 These infrastructure investments, supported in part by revenues from an additional radio service, will ensure that Newfoundland Broadcasting continues to have the infrastructure necessary to provide quality service to rural and remote regions of the province.
719 MR. S. STIRLING: Another key reason why we believe that MY-FM should be licensed is that approval of our application will allow us to address the competitive imbalance that currently exists in the Newfoundland radio market without threatening the financial stability of existing radio stations operating in this province.
720 As the Commission is aware, the ownership of the five commercial radio stations operating in St. John's is currently divided between two companies. Our company, Newfoundland Broadcasting, holds a licence for one commercial radio station, OZ-FM. NewCap, which is owned and controlled by Steele Communications, holds the licences for four stations in St. John's: CJYQ-AM, CKIX-FM, VOCM-AM and VOCM-FM.
721 NewCap is also the licensee of 11 additional radio stations in rural Newfoundland and operates a network of 16 rebroadcasters in Newfoundland and three rebroadcasters in Labrador.
722 In addition, the NewCap station CHVO-AM, in Carbonear, Newfoundland, can also be picked up by listeners in St. John's.
723 In its application to acquire VOCM-AM and VOCM-FM, NewCap presented data which indicated that the Newfoundland market could not support three independent radio companies. At the hearing, NewCap emphasized that "there is not room for three competitors in St. John's or across the province and that to continue the level of service that Newfoundlanders have come to deserve and expect, we need to join the stations together".
724 We would also note, as an aside, that in this current proceeding Steele Communications has supported our application and reiterated its concerns about allowing a third competitor into the St. John's market.
725 In approving NewCap's application to acquire the VOCM stations, the Commission stated that it had been "persuaded by NewCap's arguments that the Newfoundland radio market, and the province's economy as a whole, present a special set of circumstances, and that these circumstances justify the policy exception".
726 The Commission also recognized in the decision the critical relationship that exists in Newfoundland and Labrador between the revenues earned by the radio stations operating in St. John's and the ability of the owners of those stations to extend radio services to many of the smaller communities throughout the province. Without a doubt, rural radio service in this province is linked to the financial success of the stations operating in St. John's.
727 Since the Commission approved NewCap's application in May 2000, the financial performance of radio stations operating in this market has improved significantly. In 2000 the PBIT for all radio stations operating in Newfoundland increased to almost $1.3 million. The PBIT was up once again in 2001 to more than $1.8 million. This is despite the fact that radio advertising revenues were down from $15 million in the year 2000 to just over $13.5 million in 2001.
728 Based on these results it is readily apparent that the consolidation that has occurred in the St. John's and Newfoundland markets has vastly improved the viability of radio stations operating in the province. The financial stability and price integrity that has been evident in the market recently would appear to confirm that the Commission made the correct decision when it authorized NewCap to increase its ownership of stations in St. John's.
729 Having said that, it is also important for the Commission to recognize that the benefits of consolidation have, for the most part, flowed exclusively to NewCap.
730 As a result of its acquisition of the two VOCM radio stations, NewCap has capitalized on new operating efficiencies and has significantly enhanced its influence over the advertising market. With only one radio station, it has proven to be very difficult for Newfoundland Broadcasting to compete against NewCap's much larger block of stations in St. John's and, indeed, throughout the province.
731 In St. John's the ratio of NewCap radio signals to Newfoundland Broadcasting radio signals is 4:1. This ratio varies from 2:1 to 3:1 in other parts of the province where NewCap operates additional radio stations and rebroadcasting facilities and Newfoundland Broadcasting provides the OZ-FM radio network.
732 The acquisition by NewCap of VOCM's St. John's radio stations has therefore created a serious competitive imbalance in the St. John's market. The combination of NewCap's four radio stations is an attractive sales package for prospective advertisers. It is very difficult for a single station to compete against a bundled package of stations.
733 Local advertising is the lifeblood of radio stations in St. John's. Almost 85 per cent of OZ-FM's revenues come from local sales.
734 The problem with having only one radio station in this market is that local advertisers are typically interested in obtaining coverage of the entire market by acquiring multiple spots on a group of radio stations. With only one station, Newfoundland Broadcasting has only one-quarter of the advertising spots that NewCap makes available to advertisers.
735 At the same time, by offering multiple spots on a number of its stations, NewCap is able to offer potential advertisers complete coverage of the market through the combined reach of multiple formats. Our only radio station, OZ-FM, simply cannot match those advantages.
736 NewCap also has the ability to spread its costs across numerous radio stations, thereby providing it with additional efficiencies and the flexibility to either discount prices for individual spots or offer a combined price for multiple spots. As it stands today, OZ-FM has no way to combat this disadvantage in the marketplace.
737 By approving our application for MY-FM, we are confident that we will address this competitive imbalance, thereby building on the recent financial achievements that have occurred in the Newfoundland market.
738 In summary, Mr. Chairman and members of the Commission, we are confident that approval of our application for MY-FM would provide St. John's with an additional high quality radio service that would fill a void in the marketplace and contribute to the development of local talent in this province. Approving our application would also provide the community with a financially stable radio station that would not threaten the viability of other stations operating in this market.
739 MY-FM will benefit from Newfoundland Broadcasting's vast experience in operating broadcasting stations in St. John's and will provide the community with the following specific benefits.
740 First, MY-FM will address the needs and interests of the community, and in particular under-served female listeners, by offering them an adult contemporary radio station.
741 Two, MY-FM will enhance choice and diversity for the residents of St. John's by providing them with a radio station that has its own unique sound and an independent editorial news voice.
742 Three, MY-FM will make a substantial contribution to local Canadian talent development.
743 Four, MY-FM will provide Newfoundland Broadcasting with the additional revenues needed to upgrade existing facilities and introduce new technologies in Newfoundland, such as digital audio broadcasting.
744 Five, MY-FM will address the competitive imbalance in the Newfoundland radio market, without threatening the financial stability of existing radio stations.
745 For all of these reasons we believe that the approval of our application for MY-FM would be in the public interest.
746 We look forward to responding to any questions that you may have. Thank you.
747 THE CHAIRPERSON: Thank you, Mr. Geoff Stirling and the rest of your panel.
748 I will turn the questioning for your application over to Commissioner Noël.
749 COMMISSIONER NOËL: Good afternoon. I will not ask all of my questions in French. I think that the Secretary of the hearing would be devastated.
750 I have a number of questions to ask you this afternoon revolving around the following themes.
751 There is the music format that you have proposed for this new station, and how you will achieve the objectives that you have put forth.
752 Then there are the available synergies and the diversity of news voices created by the combination of your existing FM station and your TV station and the new station you are proposing.
753 There is the Canadian talent development aspect, cultural diversity, the market share that you are looking at, and the projected audience, your advertising revenue projections, and the impact of the station that you propose on existing stations, if we grant you the licence.
754 We will also discuss diversity of news voices and editorial independence.
755 Finally, we will have, I think, a little discussion on technical issues, namely, the CBC issues.
756 I will take you to your supplementary brief on page 1, and then on page 13.
757 On page 1 you say: "An easy-listening adult contemporary music station with a heavy weighting" -- and you repeated that, by the way, in your presentation today -- "a heavy weighting on contemporary Newfoundland music."
758 You have also repeated this afternoon that you have a general commitment to provide six hours of local programming to air Saturday and Sunday mornings. That is in your presentation, and it is on page 13 of your supplementary brief at paragraph 38.
759 Six hours of local programming to air Saturday and Sunday mornings, that would feature local contemporary Newfoundland artists and their music.
760 You state that these programs would be similar in nature to the "Jigg's Breakfast Show" that is broadcast on your existing OZ-FM station.
761 However, although I carefully read your application, I could not find any reference in your application to how you would achieve a heavy weighting of contemporary Newfoundland music during your regular weekly music programming. You state that you will do a heavy weighting of local music programming, but there are no figures anywhere.
762 Would you elaborate on your plans to incorporate contemporary Newfoundland music in your daily Monday to Friday music mix?
763 MR. S. STIRLING: I could pass it on to our program director, and I do want to spread around the answers, but that particular question has a very straightforward answer.
764 We have to play 35 per cent Canadian, so our feeling here is that the more local music we play, as opposed to maybe a brand new hit from an artist in Calgary, it would be much smarter to play as much of that 35 per cent Canadian with local artists.
765 That is really what we are talking about in terms of weighting with local artists, as opposed to other Canadian artists.
766 COMMISSIONER NOËL: If we do a percentage-type thing, out of the 35 per cent, what amount of that 35 per cent Canadian music would be Newfoundland contemporary music?
767 MR. S. STIRLING: I would say half of our Canadian content. We would try to make it as much Newfoundland music as possible, for sure.
768 COMMISSIONER NOËL: And that would be aired during the 6:00 a.m. to 6:00 p.m., Monday to Friday --
769 MR. S. STIRLING: Yes, indeed. The full 18-hour day, yes.
770 COMMISSIONER NOËL: So 50 per cent of the 35.
771 MR. S. STIRLING: That's what we would attempt to do.
772 COMMISSIONER NOËL: Roughly 17 per cent of the overall music aired during the broadcast day would be Newfoundland music.
773 MR. S. STIRLING: Yes. We would attempt to do that.
774 It depends on -- like right now, for example, there is a lot of good local music that is out. Great Big Sea has a CD. The Timbers have a CD out. Billy and the Bruisers have a CD out. So it would be easier for us at certain times than other times, but that is how we plan to do it.
775 COMMISSIONER NOËL: If we turn to weekends, Saturday and Sunday mornings, you mentioned that there would be feature interviews with local artists and their music. Could you elaborate on the nature and content of this programming initiative? Would it be live-on-air?
776 MR. S. STIRLING: It would probably not be live, it would probably be taped, but it would be an interview that --
777 For example, Great Big Sea, with their new CD. So for that particular hour there would be interviews with Great Big Sea, we would play the new CD, and that would be the whole hour. It would be that kind of approach.
778 COMMISSIONER NOËL: One hour devoted to one --
779 MR. S. STIRLING: In that particular example. Other hours may feature two or three artists. Not every artist is of the same calibre and would require or deserve --
780 COMMISSIONER NOËL: So that programming initiative would take one hour of the morning, either on the Saturday or the Sunday, or on each of those two days?
781 MR. S. STIRLING: We are talking six hours on the weekend, so there would be three hours on Saturday and three hours on Sunday.
782 COMMISSIONER NOËL: Okay, but one hour of that would be interviews.
783 MR. S. STIRLING: Interviews and music mixed.
784 COMMISSIONER NOËL: And music mixed.
785 MR. S. STIRLING: Yes.
786 COMMISSIONER NOËL: And what would be the amount of spoken word as opposed to music in that mix?
787 MR. S. STIRLING: I would probably guess that you would probably have 12 or 13 minutes of spoken word with the interviews, and probably the majority of the show would be featuring their music.
788 COMMISSIONER NOËL: So one-fifth would be spoken word. One-fifth of the one hour.
789 MR. S. STIRLING: Yes.
790 Again, when you are doing this, some artists will talk more. Great Big Sea has four or five artists, so they would all speak perhaps, where another time there might be just a single artist.
791 It is hard to nail down an exact percentage and commit to it.
792 COMMISSIONER NOËL: Is that programming to be aired also on OZ-FM, or would they be different artists?
793 MR. S. STIRLING: No, OZ-FM is different. OZ is "Jigg's Breakfast Show", which we referred to. That is more traditional Irish/Newfoundland music going back 20 years. This would attempt to make as much of it as contemporary as possible.
794 There is not enough Newfoundland music coming out every week to fill six hours every week with new music, so we would obviously have to go back historically, but we would try to make it much more contemporary, as opposed to the "Jigg's Breakfast Show" concept, which is traditional music.
795 So it's a different kind of artist and a different kind of music that we would be featuring than OZ does.
796 COMMISSIONER NOËL: Who would produce that stuff?
797 It would be the new station --
798 MR. S. STIRLING: The new station, yes.
799 COMMISSIONER NOËL: -- that would produce that type of programming.
800 MR. S. STIRLING: Yes.
801 COMMISSIONER NOËL: In cross-promotional synergies, you mentioned that they would be available between the proposed station and the existing broadcast properties -- and they were identified as cross-over airplay between the proposed adult contemporary format station and the CHR format of OZ-FM -- and that there would be extensive advertising and airing of local artists' music videos on NTV.
802 If we go to page 12 of your supplementary brief, and it is paragraph 36 --
"Furthermore, this airplay will be coupled with extensive exposure to advertising and airing of music videos on NTV. Newfoundland Broadcasting will use NTV to promote MY-FM along with OZ-FM, airing music videos that will encompass the broad spectrum of music selections covered by the two formats offered by MY-FM and OZ-FM." (As read)
803 Given how tightly the radio formats and music playlists are programmed, am I to understand that, as a rule, the number of selections that enjoy format cross-over are relatively small and that the songs that are on the two playlists are usually released by major artists? Or is there another way of functioning here in Newfoundland?
804 MR. S. STIRLING: I'm sorry, I am not understanding your question.
805 COMMISSIONER NOËL: The playlists are quite different, unless you have a very big star --
806 MR. S. STIRLING: Between the two stations, yes.
807 COMMISSIONER NOËL: -- that can cross over --
808 MR. S. STIRLING: Right.
809 COMMISSIONER NOËL: But you are referring to cross-over in the value added of your proposal.
810 MR. S. STIRLING: Right.
811 COMMISSIONER NOËL: What will be the artists that will be in that cross-over? Major Newfoundland artists?
812 MR. S. STIRLING: Yes.
813 For example, the Ennis Sisters are very big here in Newfoundland, and now nationally. They even have an American contract. That is the kind of music that MY-FM would play, whereas OZ would probably play Timber, which is a rock group here locally.
814 So on television we would have MY-FM show a music video of the Ennis Sisters, and OZ-FM would show a music video of Timber.
815 Each of those groups would feel more at home on one of those particular stations.
816 COMMISSIONER NOËL: Okay. So the TV station would play from the playlist of both. It wouldn't be a mix on the stations.
817 MR. S. STIRLING: No, they would be totally separate.
818 If you are watching a show, suddenly it might say the Ennis Sisters, and it would be presented by MY-FM. Or another show you might be watching and it would come on "Timber: presented by OZ-FM".
819 And Great Big Sea would be on both. That's the cross-over we are talking about.
820 COMMISSIONER NOËL: Okay. That's the cross-over type.
821 For video -- you mentioned that those artists will be presented on TV with their videos. Local artists, do they have the capacity to produce quality videos that can be aired on TV?
822 MR. S. STIRLING: The top artists do, so we use those. Kim Stockwood, Great Big Sea -- those are produced by a mainland company, for example, and they would air on MuchMusic or MTV, so we would get that video.
823 Locally, what we have done in the past is, we would present a concert. We talked about "Concerts in the Park" in here and the "George Street Festival" concert.
824 We have also sponsored in the past the St. John's Folk Festival. We would send our cameras down, videotape the actual performers --
825 COMMISSIONER NOËL: So it was a live performance.
826 MR. S. STIRLING: A live performance. And then we would package that into a music video.
827 COMMISSIONER NOËL: So those artists that would be seen on ready-made videos would be the ones that already have --
828 MR. S. STIRLING: The more elaborate videos would be the bigger groups --
829 COMMISSIONER NOËL: Great Big Sea, the Ennis Sisters and the Kim Stockwoods of this world.
830 MR. S. STIRLING: Yes. They would have the big, Hollywood-type productions. But the others would have a live performance that would also get lots of coverage.
831 COMMISSIONER NOËL: And all of the other ones that I found on your website, do they have videos available to be displayed on NTV -- Shawn Wiseman, Crush, Kathy Phippard, and Rasa?
832 MR. KINSMAN: If I may address that, there has been an explosion on the Newfoundland music scene in the last 10 years. With monies that have been made available by Factor and VideoFact, these funds are available now for artists, and the Music Industry Association of Newfoundland and Labrador has been very helpful in aiding local artists to apply for this money and to know where to go to look for funding to create videos.
833 So now there are more videos than ever before of Newfoundland artists, including Kathy Phippard and Crush and the Fables, and some of the second-tier groups who are trying to get to the level that has been achieved by Great Big Sea and the Ennis Sisters.
834 COMMISSIONER NOËL: So it is more than just the big ones, the Ennis Sisters and Great Big Sea and Stockwood.
835 MR. KINSMAN: Yes.
836 COMMISSIONER NOËL: There is more video available of television quality to be aired on NTV.
837 MR. KINSMAN: Absolutely.
838 COMMISSIONER NOËL: How does NTV actually, at this time, advertise or promote Newfoundland artists? Does NTV do some promotion of Newfoundland artists?
839 MR. S. STIRLING: In conjunction with our radio stations?
840 COMMISSIONER NOËL: Yes, with the existing stations.
841 MR. S. STIRLING: Very similar to what we are saying for MY-FM. That is happening now and has been happening for years with OZ-FM.
842 So we have a lot of local artists who have been promoted for years.
843 COMMISSIONER NOËL: But currently NTV is doing that kind of work with OZ-FM.
844 MR. S. STIRLING: We have been doing that for many years, yes.
845 COMMISSIONER NOËL: So it would not be a new thing.
846 MR. S. STIRLING: No, a continuation of what we have been doing. An expansion.
847 COMMISSIONER NOËL: If we go to something else on the format -- and I understand that there is no cross-over of the playlists, except for Great Big Sea or something of that kind.
848 MR. S. STIRLING: Are you talking about music videos or the playlist itself?
849 COMMISSIONER NOËL: There is no cross-over of the playlist.
850 So the music will be totally different on --
851 MR. S. STIRLING: The music will be different. There will be some tracks that will be the same, as you just said, yes.
852 But, in general, the image, the atmosphere -- I don't like to say the vibration, but the atmosphere --
853 If you listen for an hour to one and you listen for an hour to the other, there would be a big difference. But at any one particular moment they might even have the same song.
854 COMMISSIONER NOËL: Let's go to local programming. Your application is a little broad in terms of what your local programming will be, and your local spoken word programming more particularly.
855 Maybe we could have a look at what you have in mind more particularly.
856 You allude in your application to providing relevant local spoken word programming, such as news, weather, the promotion of local activities and events, and Newfoundland artist interview features. I assume that your station is primarily a music station.
857 MR. S. STIRLING: It would be. There would be a newscast at six o'clock and seven o'clock and eight o'clock and nine o'clock in the morning -- probably actually two newscasts, on the half-hour. It's a morning show.
858 There would be one at noon, one at one, one at two o'clock, and then again at four, five and six.
859 COMMISSIONER NOËL: So approximately how much would there be of news?
860 MR. S. STIRLING: I would say that it would be a five-minute newscast. It works out to over four hours a week.
861 COMMISSIONER NOËL: Four hours a week.
862 MR. S. STIRLING: That is mainly weekdays. We would also have news on the weekends -- some news on the weekends as well.
863 COMMISSIONER NOËL: How much on the weekends?
864 MR. S. STIRLING: Right now we are proposing a Saturday afternoon show that would have news in it. It would be live.
865 COMMISSIONER NOËL: It would be live?
866 MR. S. STIRLING: It would be the same thing.
867 COMMISSIONER NOËL: So it would be newscasts, or just --
868 MR. S. STIRLING: There would be a five-minute newscast.
869 COMMISSIONER NOËL: A five-minute newscast in the afternoon --
870 MR. S. STIRLING: Yes, at the same times: four, five and six.
871 COMMISSIONER NOËL: Four, five and six. Okay.
872 So that is 15 minutes on Saturday. And nothing on Sunday.
873 MR. S. STIRLING: At this point we haven't put that in our plans. We have a newscast on Sunday on OZ.
874 COMMISSIONER NOËL: Okay. So we are talking four hours and 15 minutes of news. What about entire spoken word? How much would there be in spoken word other than news -- interviews of artists and stuff of that kind?
875 MR. S. STIRLING: There would be about 10 or 12 minutes an hour.
876 COMMISSIONER NOËL: Ten to 12 minutes an hour. And your broadcast week would be 100 and --
877 MR. S. STIRLING: Add that all together you mean?
878 COMMISSIONER NOËL: Yes.
879 MR. S. STIRLING: I don't know. I will have to see who has a --
880 COMMISSIONER NOËL: Your schedule is for overnight, or is it just from six to --
881 MR. S. STIRLING: It would be 24 hours, but --
882 COMMISSIONER NOËL: Twenty-four hours. That's what I wanted to know. Twenty-four hours.
883 MR. S. STIRLING: Eighteen-hour broadcast day; 24-hour radio service.
884 COMMISSIONER NOËL: That's right.
885 The other applicant mentioned that the newscasts in his case would exclude the local weather, traffic, et cetera. Would yours include local traffic and weather?
886 MR. S. STIRLING: One of the disadvantages that OZ has is that it is a province-wide station, so when we give the weather we have to give the weather everywhere. And when we talk about community events, we have to talk about the whole island.
887 This station would allow us to concentrate much more on St. John's -- to talk about St. John's weather, St. John's news, St. John's sports, St. John's events, community organizations -- and we would be able to get much more involved in St. John's than OZ-FM can.
888 Right now, if we take a lot of time in the morning to talk about traffic around St. John's, people in Corner Brook don't have any interest in that.
889 COMMISSIONER NOËL: But my question was: Will your weather and traffic reports in the proposed station, MY station -- will that be included in your four hours and 15 minutes of news?
890 MR. S. STIRLING: Yes, it would.
891 COMMISSIONER NOËL: It would be included in the news.
892 MR. S. STIRLING: Yes, it would.
893 COMMISSIONER NOËL: It's not on top of the four hours and 15 minutes.
894 MR. S. STIRLING: No.
895 COMMISSIONER NOËL: So it's included --
896 MR. S. STIRLING: There would be five-minute newscasts with weather --
897 COMMISSIONER NOËL: With an update on weather and traffic.
898 MR. S. STIRLING: -- and traffic, yes.
899 COMMISSIONER NOËL: If we go to synergies, you stated in your application that the viability of the proposed station is based on the ability of Newfoundland Broadcasting to share creative on-air talent, managerial and other human resources freely between the proposed station and its existing St. John's properties, namely, OZ-FM and NTV.
900 You have also stated that automation will be used extensively and that the voice tracking of local DJs would predominate the daily program lineup.
901 I believe that these practices are common in the St. John's market and in other Canadian markets, as well, but I would like to see how you would use these programming practices in more detail.
902 You have mentioned in your application that some live-to-air segments would also be incorporated in your programming. Can you provide us with some idea of how many hours per week would be devoted to live-to-air programming, to voice track programming and to automation?
903 Give me a breakdown.
904 MR. S. STIRLING: We think that the morning show would be live, and that would be 15 hours right there -- five days a week, three hours.
905 I really want to address this issue of automation, because it was brought up by the competing applicant today and makes it sound as if we are automated -- that OZ-FM is automated. That is not so. It is live-assist.
906 In other words, it used to be that you would have an operator over there and a DJ sitting here, and he would play the records and he would talk. Then it became that one person could do both. Now there is a machine that can change the records.
907 We have a specific DJ for all of those time blocks. There is a DJ in the daytime --
908 COMMISSIONER NOËL: Flesh and bone you mean.
909 MR. S. STIRLING: Flesh and bone is right there, but we don't feel it is necessary for him to sit there and push a button to put the record on. It is called live-assist.
910 They would talk about whatever is happening, and that voice track that he just taped might actually play 45 minutes later. But he has that show. That's his show. He comes in, he is there, and if something happens he will go live. For example, in a snowstorm he will go live. If we have a contest and he wants to take callers he will go live.
911 Saturday afternoon, right now, OZ-FM is completely live.
912 So I don't want you to get the wrong impression that OZ-FM is automated and this new station is going to be automated. It is just that technology has allowed our DJs to do other things.
913 This also means that they can research more their show. If they are going to have a one-minute voice spot, he has researched that. He doesn't have to be sitting mechanically doing things. That means you get a higher calibre of staff, as well, who can do other things.
914 I take issue with the word automation.
915 Overnight we are automated. From midnight to 6:00 a.m. it is automated.
916 COMMISSIONER NOËL: There is no voice coming over --
917 MR. S. STIRLING: There is no person there. It's a machine.
918 But all of the 18-hour broadcast day is all run by people, but we are having the assistance of these machines.
919 COMMISSIONER NOËL: You indicated that on-air personalities would be shared with OZ-FM and NTV in your supplementary brief. Would the proposed station have their own on-air person, or would it be all shared resources? You would have the same person appearing on the screen and then jumping into an OZ function or a MY function?
920 MR. S. STIRLING: The stars, if we could call them that --
921 COMMISSIONER NOËL: Yes, that's what I mean, the stars.
922 MR. S. STIRLING: The DJs, the stars, would be exclusive to MY-FM.
923 COMMISSIONER NOËL: Exclusive.
924 MR. S. STIRLING: Now, that doesn't mean that they can't voice a commercial that might go on television, but as far as them being developed as stars, they would be MY-FM personalities.
925 COMMISSIONER NOËL: Okay. So you would have a DJ that would be exclusively on MY-FM -- dedicated to the MY-FM station.
926 MR. S. STIRLING: Yes. That is exactly how we are doing it now with OZ-FM.
927 COMMISSIONER NOËL: It wasn't clear. From what I read it wasn't clear.
928 MR. S. STIRLING: This morning it was brought up that Randy Snow and Deborah Birmingham and Larry Jay, the three top DJs -- those are all hosts of OZ-FM's "Dawn Patrol", the morning show, and yet they also can voice commercials.
929 You might hear Randy Snow's voice on television, but he himself is --
930 COMMISSIONER NOËL: No, but, I mean, from your application, I thought they were coming from one chair to the next --
931 MR. S. STIRLING: No, it wouldn't work that way.
932 COMMISSIONER NOËL: Which made it difficult to see how your station could be different from the others.
933 MR. S. STIRLING: That's right. It has to be different.
934 We have designated six people that would be exclusively for MY-FM.
935 And we do have a lot of synergies and that is why we are able to make this application. We have a large sales force for Newfoundland Broadcasting, so they can help us sell. We have a traffic department, we have a credit department, we have administration and management. We have a lot of synergies that can help us do this, that will give it a full radio service, that nobody else could do unless they had this kind of infrastructure.
936 COMMISSIONER NOËL: You just mentioned that you would have six people that would be dedicated to MY-FM.
937 MR. S. STIRLING: That's right.
938 COMMISSIONER NOËL: Would those people include people that are doing the news, or would the news organization be a common organization between --
939 MR. S. STIRLING: It would have its own news director, just like OZ-FM has its own news director.
940 COMMISSIONER NOËL: So the gathering would be done --
941 MR. S. STIRLING: The gathering would be -- we may share in the gathering, yes. If there was a press conference, we would not send three people down to record the press conference.
942 COMMISSIONER NOËL: You are not the CBC.
--- Laughter / Rires
943 MR. S. STIRLING: We wish that we could afford it.
944 As far as the writing of the news, the way it is presented, what is picked, that would be the responsibility of the news director.
945 COMMISSIONER NOËL: Okay.
946 Could you tell me if the production would be different?
947 MR. S. STIRLING: The production would be different.
948 COMMISSIONER NOËL: So it would be independent of the news --
949 MR. S. STIRLING: To make it more simple for you, we have four announcers, we have one producer, and we also have a news director. We also have a technical person.
950 COMMISSIONER NOËL: So those six, and then the technical would be a shared resource?
951 MR. S. STIRLING: Yes.
952 COMMISSIONER NOËL: So four announcers, one producer and one news person, for a total of six.
953 MR. S. STIRLING: Right, yes.
954 COMMISSIONER NOËL: And then all technical would be shared.
955 MR. S. STIRLING: Yes.
956 MR. NEAL: I would just like to say that the producer's job would also be a morning man. In other words, the morning man would be able to go to work, be the morning man, and then he could also do production at the same time as the other part of his day.
957 COMMISSIONER NOËL: Because the morning doesn't make up for an eight-hour day.
958 MR. NEAL: No, it doesn't make a full day.
959 MR. S. STIRLING: It doesn't make up a full day.
960 Also, the morning show requires more production than any other show, so that person would have to have that skill.
961 COMMISSIONER NOËL: Because the morning show is the one that is live on air, more or less.
962 MR. S. STIRLING: Yes.
963 COMMISSIONER NOËL: I am doing well here. I am getting ahead of myself.
964 Now we get to CTD, Canadian talent development. You mention in your application that you would participate in the CAB plan of $3,000 per year, but you haven't mentioned to which eligible party this would be given, and again this afternoon you said that you wanted flexibility. Can you give us some indication of who would be eligible beneficiaries of your largesse?
965 MR. S. STIRLING: This year OZ-FM put out a CD, "25 Years of Newfoundland Artists", and we have put out several CDs over the years. We have put on concerts.
966 So those are the kinds of things -- direct contribution to the actual artists, as opposed to an industry organization.
967 COMMISSIONER NOËL: So it would be for individual artists, rather than --
968 MR. S. STIRLING: Yes.
969 COMMISSIONER NOËL: And you are not in a position to tell us which of these individual artists --
970 MR. S. STIRLING: No. Just to make it simple, we probably should be just saying to you that we are going to give it to the Newfoundland music industry, but we have tried to make it more specific than that.
971 COMMISSIONER NOËL: Thank you.
972 Cultural diversity and employment equity.
973 I know that you are under the threshold and you don't have to file a report to the human rights people, but how do you intend to incorporate the cultural diversity and the programming and employment practices that are reflected in our commercial radio policy into your operation of this new radio station, if you are granted the licence?
974 I am talking employment practices for ethnic, racial, aboriginal diversity, women.
975 Do you have a plan of some sort?
976 MR. NEAL: We have a plan which we filed for Newfoundland Broadcasting which is for OZ-FM. I believe that it was filed with the application for OZ-FM. It was recently approved. And for NTV we have the same plan.
977 COMMISSIONER NOËL: Oh, you have a plan filed.
978 MR. NEAL: There is a plan, yes, with the Commission. We have filed that.
979 COMMISSIONER NOËL: Thank you.
980 Now we are going to go to market share. Can you explain how you derived the projected 6 per cent share of listening in St. John's for your first year of operations?
981 How do you get to that number?
982 MR. NEAL: I probably should speak to that.
983 It came from an examination of the radio stations in the market specifically. It is a pretty good estimate, we believe, of what the share may be in the first year, based on an examination of the BBM share percentages that exist in the market and determining how we would probably fit into that, because it is an estimation.
984 COMMISSIONER NOËL: How much of the audience would come from your existing stations?
985 I am referring to your letter of May 28, which was an answer to our letter of deficiency of April 18.
986 I will have to find it, too.
987 MR. NEAL: I think that I have that letter.
988 COMMISSIONER NOËL: You mentioned 5 to 10 per cent. I can't find it right now, but you mentioned in one of your answers the 5 to 10 per cent cannibalization factor.
989 MR. PRESCOTT: That is the last paragraph on page 7 of that intervention.
990 MR. NEAL: Yes. The last paragraph on page 7 perhaps is what you are referring to.
991 COMMISSIONER NOËL: Yes, I am trying to find it. I thought that I had marked it, but my little mark has disappeared.
992 You mentioned a 5 to 10 per cent cannibalization factor. Could you tell us how you arrived at that number -- that you would draw 5 to 10 per cent of your OZ audience to the new station?
993 MR. NEAL: What we said here was, looking ahead and using this information -- which I assume was our market study -- as the basis, we estimate that between 5 and 10 per cent of OZ audiences that existed prior to the launch of K-Rock would migrate back to MY-FM.
994 So we are looking at the audiences that OZ had prior to the launch of K-Rock. Of course, what happened was that there was an outgrowth of people that came as a result of the K-Rock phenomenon, and we would repatriate some of those listeners.
995 COMMISSIONER NOËL: But the net figure, after you repatriate. What would be the net figure of listeners that you would lose from the OZ station to the MY station?
996 MS POPE-JANES: Doug, may I add to that?
997 One of the other things that contributed to that analysis was that in order for OZ to compete with the imbalance in the marketplace, it would need to change and tweak its format to cater to more of a male audience, and MY-FM radio station would target a more female audience. So most of the audience that OZ would lose would be the females that we currently have, when we fine tune the CHR format to accommodate the male audience.
998 That is one of the analogies as to why we would lose some audience on OZ with the MY-FM format.
999 COMMISSIONER NOËL: You were right, it's page 7 of 12. I couldn't find it in the letter because I had taken it out. I just realized that I had it right here.
1000 You say here:
"Looking ahead and using this information as the basis, we estimate that between 5 and 10 per cent of the OZ-FM audience, as it existed prior to the launch of K-Rock, would migrate to MY-FM." (As read)
1001 So that would take care of the new formatting of OZ-FM. The net result would be 5 to 10 per cent.
1002 MR. S. STIRLING: That's the estimate, yes.
1003 MR. NEAL: That's our estimate.
1004 As you can probably see in here, if you look at these graphs, you can see how the audience is skewing as a result of these various rating periods. What we are doing is looking back at OZ' historic female/male audience and saying "Here is what has happened in the marketplace, and here is what we believe will be repatriated".
1005 COMMISSIONER NOËL: So because you will re-tweak OZ to more male-type music, you will take some back from the OCM FM.
1006 I don't want to be confused in all of these little letters here.
1007 And then your more female-oriented audience would move to --
1008 MR. NEAL: That's right, would move to MY-FM.
1009 COMMISSIONER NOËL: -- MY-FM, and the net result would be about a 5 to 10 per cent loss of your OZ audience, on a net basis.
1010 MR. NEAL: Yes.
1011 The common thread through here today is that we can't be all things to all people.
1012 COMMISSIONER NOËL: Oh, I have heard that before.
1013 MR. NEAL: That's right.
1014 We believe that. Of course, that is one of the bases why we are applying. We see that we can't fill what is necessary now, because --
1015 COMMISSIONER NOËL: So you want to differentiate your two radio properties to cater to different audiences.
1016 MR. NEAL: Absolutely, yes.
1017 MR. S. STIRLING: If I may add, the market studies which were done were done when the market was much different. There have been two substantial changes to two stations here in this market.
1018 In fact, the rating which just came out last week was the very first rating on the new station -- the hit station -- the top 40 station, which did very well.
1019 So a lot of the assumptions and a lot of the percentages and all of those things were snapshots taken at a particular time in the past, and things have changed dramatically since then.
1020 MR. NEAL: On the back of the oral presentation that we submitted to you there is a graph that shows the condition of the market --
1021 COMMISSIONER NOËL: Yes, I have seen the graph.
1022 If we go to advertising projections, you are projecting year-over-year growth in advertising revenues of almost 18 per cent.
1023 Could you tell us how you arrived at such a healthy growth projection?
1024 MR. S. STIRLING: The growth from year 1 to year 2 has to do with getting a rating. So you figure that once you have a rating, now you have something to sell. That is why it spikes so high in the beginning.
1025 It's all about ratings.
1026 COMMISSIONER NOËL: Yes. I calculated the average, and I think it's 17.8.
1027 Let me find my page here.
1028 I am taking total revenues here. So it's local and national advertising, and there was nothing under the line "Other", so it doesn't really change the mix, but I come to a 21.2 increase in year 2 over year 1 -- and then there is a big dip here -- 14.7 in year 3 over year 2, and then we are back to 19.2, 17.3, 18.8 and 16.2, for an average of 17.5 year over year.
1029 Where are those advertising dollars coming out of? It's a big increase. It's a huge increase.
1030 MR. NEAL: This chart, which is Schedule 13 --
1031 I presume that is the one we are looking at.
1032 COMMISSIONER NOËL: Yes.
1033 MR. NEAL: This chart is based on provincial radio sales which came from the CRTC site. What we have done is taken this and we have estimated -- firstly, we have estimated what the total revenue is going to increase by year after year, and perhaps it's not -- at the time we thought this, I should say, but I see that revenue has declined now, although the PBIT has increased by --
1034 COMMISSIONER NOËL:
--- Off microphone / Sans microphone
1035 MR. NEAL: Yes. That is very, very true.
1036 But at that time our revenue was based on -- our thinking was that this would increase by 2 per cent, 3 per cent, 3 per cent, year after year, and move upwards, and our calculations were estimating that we would have a share. And this is a share, by the way, of the Newfoundland radio audience.
1037 We tried to do it that way so that we could tie it to known figures, because we couldn't establish what is the actual St. John's market worth with respect to this chart. So we tried to tie it back to known figures that the Commission had published. So we took the share and adjusted it down, and then we adjusted it back up again after.
1038 COMMISSIONER NOËL: Advertising revenues would increase, in your view, year after year,
at the rate of 17 to 18 per cent per year -- year over year over year?
1039 MR. NEAL: No, I think that is the net result, isn't it, of what is happening with the market going up.
1040 We are saying that the revenues in the market are going to increase by those amounts --
1041 COMMISSIONER NOËL: Yes. What, in your view, is the total advertising dollar --
1042 The total will increase by how much?
1043 MR. NEAL: That's right. The total is going to increase by that much.
1044 The audience share --
1045 COMMISSIONER NOËL: By how much? The total.
1046 MR. S. STIRLING: The total market.
1047 MR. NEAL: I would have to ask Mr. Collins to talk to that, our CFO.
1048 COMMISSIONER NOËL: Five per cent?
1049 MR. NEAL: Could you calculate that for us?
1050 MR. COLLINS: In the revenue methodology we incorporated a percentage increase in the value of the market, as you see across the top of the chart in Schedule 13, of percentages that were 2 and 3 per cent and 2.5 per cent over the seven years.
1051 Then, further down in the chart you will see that our share had been projected to increase each year, as well as the conversion factor that was used to come up with the dollars that we hope to generate in the market.
1052 I think initially, on the estimated share, we figured that the radio station would not be able to turn all of that share into revenue for the station, so that's why we had an 80 per cent conversion factor, but that conversion factor increases as well, so you have three elements at play here. You have the general percentage increase in the market that we would think would happen -- the 2 and 3 per cent, covering inflation and things of that nature. They would be the general increases, and you have our share and you have our conversion factor.
1053 So it does project out to a pretty healthy number.
1054 Does that answer your question?
1055 COMMISSIONER NOËL: I will have to read your answer.
1056 Your local revenues, where will they be specifically derived from? Will you pick up revenues from existing stations? Will it be new advertisers, incremental spending by existing radio advertisers?
1057 Where is that business coming from?
1058 MS POPE-JANES: We heard this morning that the economy is doing very well, and when an economy does well advertising revenue increases as well, as it has in this province over the last couple of years.
1059 We project a portion of that revenue to come from a stronger economy -- a growing economy.
1060 We also project that a portion of that revenue, in a market where there would be a lot more stations, where competition is tougher -- what radio has done historically is a whole target -- as a source to generate new business. That would be one of the major sources where we could generate revenue for this new formatted station, targeting females.
1061 And the fact that radio tuning will most likely go up with these new formats and stations, giving everyone an average quarter-hour rating. There would be more radio to sell; therefore, more available to the advertisers.
1062 The radio ads, then, should go up in the market.
1063 COMMISSIONER NOËL: What do you think about what we heard this morning, that because of the CBC and NTV outsourcing the production of their commercials -- their TV commercials -- that there was room for new blood in the radio advertising business?
1064 MS POPE-JANES: I am glad to speak to that, because NTV does not contract out production for television. We have a production department that makes available to all of our advertisers the ability to -- or the option of using our production facility.
1065 There have been more start-up production operations in St. John's recently, with CBC closing down their production. There was some talent in the market without jobs, so there were some start-up production houses.
1066 So that statement wasn't accurate. We do not contract it out. We provide that service through the TV station, and because I work for the TV station I can speak to that truthfully.
1067 COMMISSIONER NOËL: So you will not cannibalize your TV station revenue with the new MY station.
1068 MS POPE-JANES: That's not the strategy at this point, no. It wouldn't be smart.
1069 Also, a portion of that revenue, obviously, would come from the existing stations, but it would be a shared loss between the existing stations, which wouldn't have a detrimental effect on one station as opposed to the five commercial stations now in this market.
1070 COMMISSIONER NOËL: Do you plan to package -- you know, sell a whole package? Buy one; get three?
1071 MR. S. STIRLING: That's just what I was going to get at.
1072 First of all, I also want to take advantage of the fact that you mentioned NTV to clear up something, and that is that NTV is not sold out. There is lots of Christmas advertising available.
1073 It is interesting for people to make these statements, but the record should be clear.
1074 The other thing is, if we look at these numbers on a MY-FM stand alone, maybe they do seem very high, but the whole key and the whole point of this is that we can package OZ-FM with this station, so that we do have, as you just said, a package -- a bundle.
1075 That's the whole point, to compete against the other packages.
1076 COMMISSIONER NOËL: When are you going into telephony? Bundles.
1077 Okay, so there would be bundles of advertising. So if you buy on NTV, you buy on MY-FM --
1078 MR. S. STIRLING: No. We find that television and radio and print -- I mean, everyone talks about the synergies and convergence, but the truth is that they are different.
1079 You know, you could say "I am in the automobile industry and I sell cars, and so is he. He sells motorcycles, and he sells trucks, and I sell cars." They are all completely different.
1080 So we have not been successful in being able to go into a client and say: "Would you like to get on television? How about radio and how about print?"
1081 Maybe on a case-by-case basis, but as far as our sales forces are concerned, they are selling different mediums. They are different mediums, they have different efficiencies and all of that.
1082 Now, you can bundle MY-FM and OZ-FM. In fact, they are both going to be 18 to 49. One will be stronger with men, one will be stronger with women, so it's a good fit.
1083 As the market finds that out, then we feel that we will be more successful.
1084 So the numbers on a standalone basis don't fit, but if you look at it as us selling against four other stations that do this, you realize that, okay, now I am starting to see this.
1085 COMMISSIONER NOËL: At this point in time, do you think that the St. John's market could support two new stations?
1086 MR. S. STIRLING: No. Absolutely not.
1087 COMMISSIONER NOËL: Can you tell us why?
1088 MR. S. STIRLING: In our interventions against we will get into a lot of the arguments that we feel need correction from this morning, but the truth of it is, they were saying that they are going to have 18 minutes of commercials per hour in year 1, and then they are going to extend it to 21 minutes of commercials.
1089 OZ has 8 commercials. I don't know of any station in this market that has 21 minutes per hour of commercials.
1090 We broke down their revenue figures into the number of commercials and it comes out to $11 a commercial. That will totally destabilize the pricing.
1091 I think the one thing -- as you said, the profit before income tax and interest has gone up in this market. The only reason is because there has now returned to the market price structure, price stability, price integrity. As soon as you allow another station in that is going to have 21 minutes of $11 commercials, there is no more price stability again and we are right back to where we were two years ago.
1092 COMMISSIONER NOËL: Just to go back to editorial independence and the diversity of news voices, you say on page 1 of your letter of July 25, which was in answer to our letter of deficiency of July 12:
"All provisions of Newfoundland Broadcasting have independent news gathering and presentation mechanisms. The News Director of NTV is Mr. Jim Furlong, while the News Director of OZ-FM is Mr. Larry Jay, while at the Newfoundland Herald Mr. Craig Wescott is the Senior Editor." (As read)
--- Off microphone / Sans microphone
1093 MR. S. STIRLING: It is now Mark Dwyer.
1094 COMMISSIONER NOËL: I will have to update my files.
1095 What guarantees are you able to give us that there will be independent news gathering, that there will be little sharing of information, that there will be no interference from the owners?
1096 What kind of guarantees can you give us that there will be maintained some sort of a separation between all of those outlets?
1097 MR. S. STIRLING: I can give you my word, if you want a guarantee.
1098 I think the best thing is the track record. There is a 50-year track record here. We don't ask for the political persuasion of Mark Dwyer, for example -- you just mentioned the managing editor of the Herald. I don't know whether he is a Liberal or a PC or an NDP.
1099 I think that is the point. We could ask Jim Furlong, the News Director at NTV, to stand up here, or Larry Jay, or any one of those individuals, if you would like them to tell you how independent they are.
1100 I certainly would never, and I am sure that none of us in management would ever try to dictate to the news director what should be news.
1101 COMMISSIONER NOËL: So there wouldn't be a Winnipeg editorial in the Montreal Gazette.
1102 MR. S. STIRLING: No, not at all.
1103 COMMISSIONER NOËL: Do you think that the Commission should impose some sort of a condition of licence on you to make sure that that independence is guaranteed?
1104 MR. S. STIRLING: If you do that as a matter of course on everybody else -- I mean, there are many other companies with much more editorial diversity than us. We are just a small company, relatively speaking.
1105 COMMISSIONER NOËL: And you are not publishing a daily newspaper.
1106 MR. S. STIRLING: And it's not a newspaper, as it was referred to all morning. It is more of an entertainment TV guide.
1107 MR. G. STIRLING: It's a magazine.
1108 MR. S. STIRLING: It's a magazine, once a week.
1109 COMMISSIONER NOËL: Okay. Now I will switch to technical questions. My questions will mostly revolve around the CBC, or the incomprehension that I sort of noticed between you and the CBC -- or misunderstanding, I should say. That would be a more appropriate word.
1110 The CBC has intervened against you, as you are well aware. They have raised an objection to your technical proposal for the use of frequency 95.7 MHz on channel 239C on the ground that it conflicts with their long-range radio plans.
1111 More specifically, they say that it would cause harmful interference to their planned Radio 2 station on channel 238B in Port Rexton, Newfoundland.
1112 I don't know where Port Rexton is, by the way, but I am sure you will tell me. My map wasn't quite as complete.
1113 There has been some correspondence going on and on between the CBC and yourselves, and apparently the final letter from the CBC, dated November 1st, I guess, only got to you a couple of days later, and although your engineers seem to think that there would not be any problem, there seems to be a problem.
1114 Could you tell us, at this point in time, if there are negotiations under way with the CBC to resolve that problem or if those negotiations are dead?
1115 MR. NEAL: I will speak to that.
1116 Those negotiations are far from dead. I last spoke to the CBC -- there was a letter of November 8th, which I wrote to the CBC and assured them that we would do everything in our power to reach accord to resolve this matter.
1117 Given the constraints that we are under -- there are very, very few available C-class channels in the St. John's area. As a matter of fact, most of them are inhibited by fourth adjacency difficulties.
1118 We looked at the available spectrum. We had Mr. Stacey, who did the original technical brief. We perhaps wouldn't have come up with this ourselves, but it was his suggestion, having looked at all of the alternatives, that 95.7 be used as an alternative on this particular tower.
1119 There was an available allotment of 96.7, but that allotment, unfortunately, is a fourth adjacency to an existing radio station and would have meant that MY-FM would have been co-sited with our competition, as a matter of fact.
1120 COMMISSIONER NOËL: If it's not yours, it's the others.
1121 MR. NEAL: Yes.
1122 What we see here is that we would want to use channel 239C, which is 95.7.
1123 Now, of course, if 238 is used by the CBC, there is obviously going to be a conflict. And from the beginning in our technical brief we identified that there was a conflict there, and we also identified an alternative that the CBC could use at very little inconvenience to them and cost to them.
1124 COMMISSIONER NOËL: And you say that you still have negotiations ongoing, because from the letter of November 1st it is not clear that the CBC is ready to go to an alternative. At least they don't mention any alternative; they just say that they strongly oppose your application.
1125 MR. NEAL: The letter doesn't mention that, but I did have conversations with the director of the spectrum --
1126 I'm not quite sure what her title is exactly. I know her by name more than by title.
1127 She indicated, okay, that there was a willingness to find accord, and on that basis --
1128 COMMISSIONER NOËL: Do you mean Madam Lamarre?
1129 MR. NEAL: Suzanne Lamarre, yes.
1130 We have spoken on the phone and we feel that we can work something out.
1131 As a matter of fact, also, given the fact that 292 perhaps has a minor short-spacing deficiency, which Mr. Stacey thought could be overcome by a directional antenna or a slight shift in pattern by the CBC station, when provisioned at Port Rexton -- given that fact, we thought that we would look a little further and we did an additional short-space study on the spectrum available and found two other alternatives which we believe would even work better than the one that was proposed.
1132 COMMISSIONER NOËL: If none of these alternatives are acceptable to the CBC, what would be your solution?
1133 MR. NEAL: I think that we would be faced with looking for an alternative frequency, and we would have to --
1134 We couldn't run it on our existing transmitter site. Our strategy to co-site the two stations would definitely have to be thrown out and --
1135 COMMISSIONER NOËL: When you say co-siting, you also mentioned using the same antenna, so that means that you would be using a diplexer or a combiner?
1136 MR. NEAL: That is correct. Yes, we would be combining both signals into one antenna, on the one tower.
1137 Of course, the constraint that we have with our site is that we have a loading on our tower right now -- a structural loading -- that if we attempted to change the antenna system -- and I probably need to be clear about this --
1138 COMMISSIONER NOËL: We come from the happy world of construction, so you can go ahead.
1139 MR. NEAL: We are going to change the antenna out, but the antenna will be exactly the same design as the one that is there now. You just need to make the modification and change the antenna out so that it is broadbanded enough to encompass the two frequencies.
1140 But that doesn't affect the loading of the tower. Therefore, we can --
1141 COMMISSIONER NOËL: So the structure is not strong enough to bear another antenna.
1142 MR. NEAL: No, and it wouldn't be strong enough -- it would have to be substantially upgraded.
1143 As a matter of fact, it would be financially or economically not feasible to do it. You would want to build another tower.
1144 Of course, that is the alternative we are faced with.
1145 COMMISSIONER NOËL: In terms of cost, what is the difference?
1146 MR. NEAL: I beg your pardon?
1147 COMMISSIONER NOËL: In terms of cost, what would be the differential?
1148 MR. NEAL: To establish another site completely? I would say that you are probably $400,000 to $450,000 -- $500,000 for the tower. And then you have the building on top of that, and you have the acquisition of land, and all of those kinds of things -- the development of that land, power to that, additional generation --
1149 COMMISSIONER NOËL: You couldn't use the same land. You would have to have another --
1150 MR. NEAL: Yes. Because if we put another tower up, we would possibly have some ghosting problems with our television, if they were in an airfield -- another existing tower, right next to it.
1151 We don't have enough land.
1152 COMMISSIONER NOËL: The land is too small to put an additional tower.
1153 MR. NEAL: Yes, absolutely.
1154 COMMISSIONER NOËL: And you are talking $500 for the tower, plus the cost of land, building --
1155 MR. S. STIRLING: Five hundred thousand.
1156 COMMISSIONER NOËL: Yes, that's what I said. For the tower itself. Plus land, building, et cetera.
1157 MR. NEAL: Yes, power --
1158 For example, I remember one site that I developed and it was $100,000 --
1159 COMMISSIONER NOËL: And heating, because you wouldn't have those good old lamp systems any more.
1160 I saw that somewhere.
1161 You are using the heat of lamp transmitters to heat the building?
1162 MR. NEAL: Yes.
1163 COMMISSIONER NOËL: Recuperation.
1164 MR. S. STIRLING: I think one of the points is that we have offered CBC a couple of other frequencies that they could use instead, at no cost to them.
1165 On the one hand it would be very costly for us to switch, and on the other hand it would not cost them to switch, with their plan.
1166 COMMISSIONER NOËL: Okay, but in the worst case scenario, if the CBC says no, are you ready to make the expenses to buy a new piece of land, put a new building, a new tower, a new antenna, on a different frequency, if it resolved all of the technical --
1167 MR. NEAL: If we have to resolve those technical issues, I guess we will have to resolve those technical issues in that way.
1168 COMMISSIONER NOËL: But you would be ready to foot the bill.
1169 MR. NEAL: Oh, yes.
1170 We also have an application in, as well, to hedge our bets, so to speak. We have looked at the possibility -- we would have to find another frequency. That is probably --
1171 COMMISSIONER NOËL: Of co-locating in their tower?
1172 MR. NEAL: Not in their tower, but in the CBC's tower. There are facilities there that --
1173 COMMISSIONER NOËL: That's what I mean, in CBC's tower.
1174 MR. S. STIRLING: Yes.
1175 MR. NEAL: We have spoken to them. It is the difficulty now of finding an actual frequency that will work on their tower.
1176 I don't know why 101.1, for instance, wasn't offered. Perhaps because of the constraints that we were under with bandwidth of the antenna, or perhaps Mr. Stacey knew something that we didn't know, and said, you know, there are issues, obviously, with 101.1. Otherwise, the application was for 100,000 watts.
1177 MR. PRESCOTT: I would like to interject for a second.
1178 I think that what we want is -- MY-FM, we believe, should have this frequency because of the cost involved in changing -- in finding another frequency. And given that there are alternatives available to the CBC, they should be asked to revise their plans so that they can use one of those other frequencies.
1179 COMMISSIONER NOËL: If we were to approve your application in principle, subject to a condition that you find an alternate frequency, you would look into that solution?
1180 You would accept such a condition?
1181 MR. NEAL: I didn't hear that.
1182 COMMISSIONER NOËL: If we were to approve your application in principle, subject to a condition that you find an alternate frequency, would you be ready to accept such a condition?
1183 You would still have a business plan for your radio station, with the increased cost of --
1184 MR. NEAL: But if we were to reach accord with the CBC, would that be --
1185 Is this worst case scenario we are talking?
1186 COMMISSIONER NOËL: Yes, we are talking worst case scenario.
1187 MR. NEAL: In other words, if we could reach an accord with the CBC on this matter, then you are not asking us to find another frequency, you are asking us if we can co-ordinate frequency with the CBC, and it will be at no expense --
1188 COMMISSIONER NOËL: But if you cannot.
1189 MR. NEAL: Oh, if we cannot. Oh, yes.
1190 COMMISSIONER NOËL: The worst case scenario. You cannot come to any kind of agreement with the CBC. Would you be ready to accept approval in principle of your application, on the condition that you find a suitable frequency?
1191 MR. NEAL: Absolutely.
1192 COMMISSIONER NOËL: Okay. That's all I wanted to know.
1193 MR. S. STIRLING: Port Rexton is a very small town.
1194 How far from here is it? Forty minutes?
1195 MR. NEAL: Yes.
1196 MR. S. STIRLING: And it has 2,000 people. So if the CBC can put a frequency out there and there is no extra cost to change, then we think, if they are reasonable people, it should be okay.
1197 Can I put it that way?
1198 MR. NEAL: I think they are reasonable people. My conversations with them have been perfectly civilized, and I don't have any difficulty --
1199 COMMISSIONER NOËL: Oh, I have met Madam Lamarre a number of times, and she knows her stuff.
1200 MR. NEAL: We were able to reach accord on another co-ordination issue, and I think that we can do something with this.
1201 Frequency co-ordination is not an uncommon thing in the industry.
1202 COMMISSIONER NOËL: This is not downtown Toronto either.
1203 MR. NEAL: Yes, I realize that.
1204 COMMISSIONER NOËL: Where frequencies cover three blocks, more or less.
1205 MR. NEAL: But it is getting congested in St. John's, where it isn't congested in Port Rexton. That's the thing.
1206 COMMISSIONER NOËL: I don't have any other questions for you. Thank you.
1207 THE CHAIRPERSON: Thank you, Commissioner Noël.
1208 I believe that Commissioner Langford has a question or two.
1209 COMMISSIONER LANGFORD: Yes, I do, and I don't know how far you want to go in answering it. And if you just don't want to, that's fine.
1210 I think you heard me discussing salaries this morning with an earlier applicant. I don't want to infringe on the privacy -- and I mean this -- I don't want to infringe on the privacy of some of your employees, but is there any way that I can get a sense of what it might take to lure away your three best OZ announcers?
1211 Is there some general way that I could ask this question so that I am --
1212 THE CHAIRPERSON: Short of asking for their pay slips.
1213 COMMISSIONER LANGFORD: Yes, short of asking for their pay slips, but have some sense of what that sum might be.
1214 As I say, if it is not an appropriate question, that's fine, but I am kind of wrestling with this problem.
1215 MR. S. STIRLING: I don't want to reveal their actual salaries, but they are certainly out of the ballpark of the applicant this morning, what he was talking about.
1216 One of the things that I think we should point out is that Newfoundland Broadcasting is unionized. We have a union, so there is a set scale for people that come in.
1217 We are looking at $35,000 for very junior people.
1218 But then we have talent arrangements on top of that with our stars, and depending on how long they have been with us --
1219 The Dawn Patrol has been on the air for about 15 years now, so over the course of that time, obviously, they get paid more, as time goes on.
1220 COMMISSIONER LANGFORD: So if I were to come to your station with $100,000 in my pocket, I couldn't lure away your three best announcers.
1221 MR. S. STIRLING: No. No way.
1222 COMMISSIONER LANGFORD: Thank you very much.
1223 MR. S. STIRLING: I assume that you meant $100,000 for all three of them.
1224 COMMISSIONER LANGFORD: That's right.
1225 THE CHAIRPERSON: Thank you, Commissioner Langford.
1226 Commission counsel.
1227 MR. McCALLUM: Most of my questions are, basically, to clarify the answers to questions that have been previously asked, where I either didn't understand the answer or an aspect of the question may not have been answered at the point of time that you were answering. That is just a lead-up.
1228 Also, I understand that you filed for the record a letter dated December 5th of this year in which you corrected Schedule 3.1 by reducing the expenses by a total of $21,000 over seven years.
1229 MR. S. STIRLING: Yes. I neglected to say this before the presentation, but we provided the CRTC and the other applicant revisions to Schedule 11 and section 3.1 of our application. These revisions corrected minor errors that we discovered in the pro forma statement of changes in financial position. We understand that the CRTC has accepted these corrections and has included them on the public file, and we thank you for that.
1230 MR. McCALLUM: Yes, it will be placed on the public file, and of course you have served a copy on the other party here.
1231 Again, in the context of certain aspects of certain questions where we didn't understand the answer, you had been talking about the six hours of locally produced radio programming on Saturday and Sunday mornings, and you spoke in quite some detail about one of the six hours, in which you would have interviews and feature a local artist and feature the music of that artist, but I didn't quite understand what would be done in the other five of those six hours.
1232 MR. S. STIRLING: That was an example of what the six hours would be. That's not just one show; that was basically the flavour of that kind of programming. It would be block programming.
1233 MR. McCALLUM: So is that to be understood as applying to all six of the hours then; that what you described for that one --
1234 MR. S. STIRLING: That particular kind of example, of playing music with interviews of local artists, yes.
1235 MR. McCALLUM: So, essentially, all six of those hours are interviews with artists, playing local-type music. Is that correct?
1236 MR. S. STIRLING: Yes, that's correct.
1237 MR. McCALLUM: Would that mean that for Saturday morning you would have three different artists on, one for each of the three hours?
1238 MR. S. STIRLING: No, it doesn't, because like Great Big Sea would deserve an hour, but perhaps somebody else would not have enough music to fill a full hour, so maybe it would be a segment in one of those hours.
1239 MR. McCALLUM: Is there a completion to that answer from the back row?
1240 MR. KINSMAN: I think that these programs are useful for the artists to have their music heard and to actually talk about the music. And these things depend on the availability of the artist, and on the availability of new releases. It's kind of a seasonal thing. There is an ebb and flow. There are a lot of new releases now, in the fall, of Newfoundland artists.
1241 So, obviously, there would be a lot more to talk about this time of year than maybe in the spring when there is not so much new music being released. It is kind of a demand thing.
1242 And we have a very good relationship with the Newfoundland music scene. The artists know when they have a new record to be released and they contact us. They let us know that they have this, and they set up a time -- "We would like to come in and talk about our new record."
1243 I think it would be based on when these artists were actually doing this, but in hours when we didn't have interview segments, there are still a lot of Newfoundland artists who would be playing and talking about their music -- not so formal a presentation as an interview and playing the CD, because there is not always new music to be presented.
1244 MR. McCALLUM: Thank you for completing the answer.
1245 In terms of NTV advertising local Newfoundland artists, or promoting local Newfoundland artists, I still didn't quite understand what NTV does in terms of their cross-promotional activity. What I wondered is whether they use filler programming or interstitials or something else to do the cross-promotionals.
1246 MR. S. STIRLING: NTV uses unsold inventory. It would use promotional time to have a musical video.
1247 OZ-FM and MY-FM would have different venues where artists could be recorded on videotape. That would be packaged and made into a 60-second music video, and then that would be put in the rotation.
1248 MR. McCALLUM: So it could be as an interstitial, for example, or a filler?
1249 MR. S. STIRLING: Yes.
1250 MR. McCALLUM: But there are no regularly scheduled shows, or are there, on NTV, to do such activities?
1251 MR. S. STIRLING: There are occasionally. We actually do have -- like New Year's Eve, for example, we might have the top 10 countdown and that kind of thing, but we are talking about in the daily rotation. Then everybody sees it that way.
1252 MR. KINSMAN: There is also a weekly feature, "NTV Entertainment News", which is hosted by Toni-Marie Wiseman. So there is a weekly half-hour format for that, but that is not always music, sometimes it's theatre as well.
1253 MR. McCALLUM: So exclusive of that half-hour you just described, how many minutes of cross-promotional activities a week would we be talking about?
1254 MR. S. STIRLING: We have really low-balled it, because we have only said $430-something dollars to $1,000, but that really comes out to about two videos a day on television, at the rates we have. So it would be considerably more than that, but we don't want to inflate this to make it seem some grand thing.
1255 But television does have those rates, and if we provide that time for those artists, then that is the value they are getting.
1256 We run them -- probably it averages at least one an hour.
1257 MR. McCALLUM: Thank you.
1258 When you talked in response to Commissioner Noël's questions about the live-to-air segments, you talked about live announcers and voice-assist announcers, and you mentioned, for example, that the morning show has 15 hours a week -- three hours per day for the five days.
1259 Could you give a more global breakdown for a week? I think it is 128 hours of broadcast time. How much would be live-to-air and how much would be voice-assist, or live-assist as you described it?
1260 MR. S. STIRLING: I guess that we have these figures somewhere, but if you want me, just off the top of my head, to try to recall them --
1261 I would say that 70 per cent -- 60 to 75 per cent of the week would be live-assist -- of the broadcast week.
1262 MR. McCALLUM: There will be a subsequent phase in this, after the break, so maybe you could double check that and come back --
1263 MR. S. STIRLING: With something more specific, yes.
1264 MR. McCALLUM: Something more specific, just so we have it on the record.
1265 MR. S. STIRLING: Certainly.
1266 MR. McCALLUM: Thank you.
1267 When you were asked a question about cultural diversity, I think what you did was, you mentioned that you have an employment equity type of plan which is on file. Could you maybe mention where in your EE plan we would find your measures or your plans to incorporate and reflect the reality of Canada's cultural diversity?
1268 MR. NEAL: Unfortunately, I don't have that plan with me today, but I will try to wing it, because it was filed with the previous application, and we made mention of that.
1269 MR. McCALLUM: Which application?
1270 MR. NEAL: It was filed with the OZ-FM radio application, which was filed last year, around last December.
1271 MR. McCALLUM: So we could look at that to see your plans.
1272 MR. NEAL: Oh, yes, that exists.
1273 MR. McCALLUM: Could you, maybe, summarize?
1274 You said that you could give a short summary.
1275 MR. NEAL: I wish that I had the document to refer to. Unfortunately, I don't. I am really at a loss to be able to quote from it and that kind of thing.
1276 MR. S. STIRLING: We could have that faxed over to this building from our station and present it later, if that's agreeable.
1277 MR. McCALLUM: That would be fine. Thank you very much.
1278 You were asked a question about Canadian talent development. You were asked to which eligible third party you would direct your annual $3,000 contribution.
1279 The way I understood your answer was that you wanted flexibility about that, if I understood what you were saying correctly.
1280 If I can bring you to the application form itself, you will recall that question 6.2 of the application form, in referring to Canadian talent development, says, "The applicant undertakes to accept as a condition of licence to participate in the Canadian Talent Development Plan created by the Canadian Association of Broadcasters, as set out in Public Notice 1995-196", and you answered yes to that question.
1281 Of course, it says "If no", and you plan to exceed the minimum requirements, then you set out your alternate plan.
1282 If you go to that public notice, 1995-196, what it says is:
"The Commission wishes to clarify that, in accordance with its current practice, all money going to third parties must be directly connected to the development of Canadian musical and other artistic talent." (As read)
1283 What it was saying was that the money must go to an eligible third party, and it must be outside the station, and if it is related to station production or station activity it would not be considered to be as going to an eligible third party.
1284 So really, for the purpose of Canadian talent development, I want to clarify if really you meant to participate in the plan of the CAB, and, if so, to which eligible outside third party it would be going, or if really your answer is no, how it would be directed in the alternative.
1285 MR. KINSMAN: If I may answer that, OZ-FM and MY-FM would also make direct contributions to the Newfoundland and Labrador Music Industry Association.
1286 We actually just sent a cheque a couple of weeks ago. This has been a regular, ongoing thing for us, as well as the Kiwanis Music Festival, which has been a recipient in the past, and their local charitable organization that sponsors a large music festival for young people every year.
1287 These are two examples of what we have done in making direct contributions.
1288 MR. McCALLUM: For the purposes, for example, of a condition of licence, if the Commission wanted to state that it must go to those same third parties for the case of MY-FM, would that be acceptable to MY-FM?
1289 MR. S. STIRLING: Yes, it would.
1290 MR. McCALLUM: Thank you.
1291 With respect to the question about the increase in revenues of 17 per cent, roughly, per year, in responding to that you referred to -- I think it is Schedule 13 of the application, and the revenue increases are roughly the same figures as the total revenues that are in Appendix 3.1.
1292 Frankly, I didn't really understand the answer that was given, and particularly the reference to the conversion factor.
1293 Could you give more detail as to how the 17 per cent annual increase in revenues was calculated?
1294 MR. COLLINS: Yes, I will address that.
1295 The methodology, first of all, was to look at the market and to apply a percentage increase in the revenues in the market overall. Those are the percentages that you see across the top of the scale, of the 2, 3, 2, 2.5 per cent over the various years. So the market itself is growing by those percentages, covering factors of inflation and so on.
1296 Then we looked at the share that MY-FM would attain for 12-plus, and you will see that that share is growing as well. We estimated 6 as a starting share. From there it would grow to as high as 11 in year 7.
1297 Finally, we recognized that even though you may get a sixth share of the market in the book, that doesn't mean that you can convert it all to revenue, so we applied in the first year a factor of just 80 per cent conversion. But as our sales staff would become more efficient, as we had books that we could rely on and show a trend, we figured that the conversion factor would also improve to -- we use a 1 in year 7.
1298 MR. McCALLUM: So the conversion factor is a factor of discounting the new FM estimated share from 6 per cent down to 80 per cent of 6 per cent?
1299 Is that an example of how it works?
1300 MR. COLLINS: That would be fair, yes, to put it that way.
1301 Maybe I will add a clarification. The share itself, of course, is not changing to 4.8, obviously. It is just that we would not be able to convert the share into revenue necessarily.
1302 MR. McCALLUM: So that effectively accounts for the revenue growth rate of 17 per cent per year.
1303 MR. COLLINS: Yes, it does.
1304 MR. McCALLUM: Further to that, one view of it is that they are aggressive revenue growth projections. Do you have any comments on how you would achieve these revenue increases?
1305 MR. S. STIRLING: As I said previously, the packaging of MY-FM and OZ-FM -- there are five stations now. There would be six stations. We would have two of them.
1306 So if you look at St. John's revenues, and you look at our two shares, you realize that it is not quite out of the ballpark.
1307 For example, in year 2, out of almost $15 million, we are saying that we are going to gross $936,000, and that is for a major station in the capital.
1308 MR. McCALLUM: Finally, if I can ask one last question relating to the worst case scenario vis-à-vis the technical questions that Commissioner Noël asked, it would be the overall impact on the business plan of having to be forced to implement that so-called worst case scenario. I want to just sort of tease out what it would be.
1309 For example, you said that building a new tower would be in the order of $400,000 to $500,000, but then you said that you have to add to that land acquisition costs, power and heating, et cetera. What would be the overall impact on the business plan, including all of those factors, if that worst case scenario were to come about?
1310 MR. S. STIRLING: Mr. Neal can talk to the specifics. I would just say that one thing that we haven't talked about today is digital and the fact that we would like to go ahead with digital in St. John's. So those plans could be affected. If, suddenly, we had to come up with an extra $500,000 for land and towers and so on, that might push back our digital plans.
1311 Another thing we haven't even talked about, but it is really a benefit of MY-FM, is getting on ExpressVu. OZ-FM is one of only a handful of stations on ExpressVu. We helped VOAR, a religious station, get on just last month.
1312 So if we had MY-FM and we could work a deal with ExpressVu, as we have done with these other two stations, then MY-FM would be available in places like Fort McMurray for Newfoundlanders everywhere.
1313 But, again, all of these plans could be impacted, and the timing of them, by that CBC situation.
1314 Do you want to add something to that?
1315 MR. NEAL: You are looking for the overall cost of the development of the site, and I believe -- this is pretty rough. I would guesstimate $700,000 to $800,000 perhaps. In that order.
1316 I just want to say one thing, and I was going to come into this before. There was one site that I was involved in the development of here in Newfoundland -- the station is now on the air -- and it cost us $100,000 before we had even poured a foundation, by the time we put power to it and had a road into it. So that is the kind of stuff that can evolve.
1317 MR. McCALLUM: But, effectively, what we are talking about are capital costs that have to be amortized over their useful life and recovered from revenues over some period of time. Is that correct?
1318 MR. NEAL: That's correct, yes.
1319 MR. McCALLUM: Thank you.
1320 Thank you, Mr. Chair.
1321 MR. COLLINS: If I could add to that, yes, we would be capitalizing that and borrowing long term, so certainly there would be interest and depreciation.
1322 THE CHAIRPERSON: Thank you, counsel.
1323 I believe, Mr. Secretary, that concludes this phase.
1324 Thank you very much, Messrs. Scott, ladies and gentlemen.
1325 That concludes this phase. It is probably a good time for a break.
1326 We will take our afternoon break and proceed to the next phase.
1327 MR. LEBEL: Which is Phase II, and each applicant will be asked to intervene on the competing application at that point.
1328 THE CHAIRPERSON: We will reconvene at ten to four.
--- Recess at 1530 / Suspension à 1530
--- Upon resuming at 1550 / Reprise à 1550
1329 THE CHAIRPERSON: Ladies and gentlemen, we will return to our proceeding now and continue with the consideration of the two competing FM radio applications.
1330 Mr. Secretary.
1331 MR. LEBEL: Thank you, Mr. Chairman.
1332 As was indicated just before the break, we have reached Phase II of the consideration of the two applications, and we will now ask Mr. Andrew Newman and Andrew Bell to intervene on the competing application at this time. You have ten minutes to intervene.
INTERVENTION / INTERVENTION
1333 MR. NEWMAN: Thank you very much.
1334 Ladies and gentlemen of the Commission, of the panel and our guests, much has been said about the frailty of the Newfoundland economy, but overall the economy and the radio market are stronger than they have ever been.
1335 Newfoundland Broadcasting has suggested that it needs another licence to provide stability for its rural service. We would like to point out to the Commission that Newfoundland Broadcasting does not provide local service to any other market besides St. John's. OZ operates a series of repeater transmitters that simply rebroadcast what comes out of the St. John's studio.
1336 By CRTC definition, OZ does not offer any local programming to any of the rural parts of the province.
1337 Furthermore, we note that this is an application for a St. John's radio station. Market forces in Corner Brook or Gander should have no impact on a radio station targeted toward St. John's, yet the applicant has brought rural Newfoundland into the equation.
1338 A new licence for Vancouver should have nothing to do with Kelowna. A new licence for Calgary should have nothing to do with Lethbridge. A new licence for Toronto should have nothing to do with New Liskeard.
1339 The argument that the existing operators need a revenue stream from St. John's to support rural operations is not new. NewCap used it in 1999 to justify owning a fourth licence in St. John's. Newfoundland Broadcasting would have you believe that that argument should also apply here.
1340 The business cycle in broadcasting demands that infrastructure be replaced on a regular basis. Good planning provides a contingency for maintenance of transmitters and towers. Newfoundland Broadcasting's aging transmission system should not be a reason to grant another radio licence to this operator.
1341 Newfoundland Broadcasting's commitment to provide digital service in five years is not really relevant to this particular application. The open call for applications was for an FM licence, not a digital licence. The applicant is merely making a commitment to apply for not one, but two additional licences in five years' time.
1342 Currently OZ broadcasts a single signal to all of its repeaters. On Bell ExpressVu they carry their signal digitally. With the off-the-shelf technology that is available today, Newfoundland Broadcasting could split their signal and provide local inserts to their rural transmitters.
1343 For example, a three-way split, dividing the island into the Avalon Peninsula, central and western Newfoundland, could provide OZ with the opportunity to increase its existing revenue base.
1344 This technology is used very successfully in many other rural areas of the country. For example, OZ could provide local information and market specific advertising. The solicitation of advertising in these markets could not be conducted by OZ itself under CRTC regulations; however, local advertising agencies would be allowed to sell OZ-FM under the existing regulations.
1345 Based on OZ' current market share in rural Newfoundland markets, we estimate -- and this is an estimate based on market share -- that an additional revenue potential of $1,050,000 exists for OZ-FM currently. That is more than enough to provide the stability that Newfoundland Broadcasting purports to require.
1346 This small change in the way that OZ does business would also allow a reduction of the competitive imbalance that they say exists in the market. This would, in effect, give Newfoundland Broadcasting a more level playing field against Steele Communications.
1347 In terms of the competitive imbalance, Newfoundland Broadcasting had the opportunity in 1999 to oppose NewCap's purchase of VOCM. Instead they chose to support it, as the Steele Communications group now supports them.
1348 In that time Newfoundland Broadcasting has had ample time to do research and to refocus OZ-FM. They have chosen to do little in the face of head-on attacks by K-Rock and Hits-FM.
1349 Having seen three recent marketing studies for the St. John's radio market, it appears that Newfoundland Broadcasting has let OZ coast over the past few years and only now, in the face of another competitor, has come to life.
1350 The argument that another operator would impede the existing licence holder's ability to provide service to rural Newfoundland and Labrador and the business model put forth by OZ-FM for the new MY-FM contradict each other. We recognize that Newfoundland Broadcasting has concerns about their own stability; however, we fail to see how giving them an additional outlet would solve that stability issue, given their projection for losses in the first two years and their projected long term debt.
1351 While on the topic of MY-FM's financial forecasts, we didn't have the opportunity to see the relationships and the synergies that would exist because of the confidentiality request to keep OZ' financials private. It is difficult to comment on their business model without seeing all of the figures, except to note that in their application they indicate that any new staff would be shared with OZ and NTV, thus further reducing the number of distinct voices in the market.
1352 They state that their revenues will increase by 3 per cent each year, as we just heard some conversation on, yet when you calculate the change from year 1 to year 2 it is almost 21 per cent. Year 2 to year 3 is 15 per cent.
1353 These increases are not impossible. They are not impossible, but they are not in line with the historical for the market or the applicant's statements earlier.
1354 We would offer that these exaggerated revenue projections could negatively impact the applicant's ability to meet not only its promise of performance, but impact on the stability that it so desperately states it needs.
1355 Newfoundland Broadcasting makes mention of several initiatives that it claims to support with regard to Canadian talent development. We would like to note for the Commission that the OZ-FM "Concert in the Park" has not taken place for at least the past six, if not seven years.
1356 The George Street Bar Owners' Association produces the George Street Festival, and they pay to be advertised on OZ-FM.
1357 MY-FM promises to play local artists in two time blocks, Saturday and Sunday mornings from 6:00 a.m. to 9:00 a.m. -- hardly peak listening times.
1358 In their statements earlier this afternoon they suggested that they be given credit for airplay of local artists, somewhat of a suggestion of pay for play.
1359 Finally, there is the most compelling reason not to grant Newfoundland Broadcasting another licence. The fact that this organization already operates a radio property, a television property, a weekly entertainment magazine, and their associated websites, means that a serious concentration of ownership exists in the St. John's market.
1360 In addition, it should be noted that one man and his family control these outlets on a daily basis.
1361 Synergies do exist in OZ-FM and NTV currently. For example, the OZ-FM news director, Mr. Larry Jay, hosts the NTV Sunday evening news hour and regularly appears as host during the week.
1362 In the past, Deborah Birmingham, the co-host of the Dawn Patrol, has also hosted a midday program on NTV.
1363 We have no issue with Mr. Stirling's beliefs. We do have an issue with the way that he exercises editorial control, and we are alarmed that he could have another outlet for his points of view.
1364 Even as G.W. moves away from his day-to-day operations, we see members of his immediate family move into positions that were once held by outsiders. Nepotism is not a crime, but it does limit choices for listeners.
1365 If there is any doubt about the authority that G.W. Stirling exerts on editorial content, then this example should clear it up. We will take you back a few months ago to the week that the Voisey's Bay nickel mine deal was being debated in our House of Assembly here in St. John's. Mr. Stirling appeared on NTV and OZ and other media outlets condemning the deal and vowing to "bring the full power of his media empire to bear" on scuttling the deal.
1366 Again, we do not take issue with Mr. Stirling's beliefs; we merely express a concern that another outlet for Newfoundland Broadcasting offers nothing new for the listeners of St. John's.
1367 Is there a choice in the market? After all, there are four other commercial radio outlets. Yes, and they are all owned by one company, Steele Communications.
1368 Two operators in a market as diverse and vibrant as St. John's. We believe that the market cannot only support another operator, but that it needs another operator. It is our opinion that granting Newfoundland Broadcasting another licence will only continue the mediocre radio that St. John's has been plagued with -- more automation, more syndicated American programming, and less choice.
1369 The listeners and the advertisers here in St. John's deserve better.
1370 Thank you, ladies and gentlemen.
1371 THE CHAIRPERSON: I believe that Commissioner Langford has a question.
1372 COMMISSIONER LANGFORD: I have one question. I wrote it as quickly as I could, but I may not have an exact quotation.
1373 When you were talking about the 21 per cent and the 15 per cent growth figures, you said "these aren't impossible", "could be done, possibly", and then you said something like this, that it would reduce the stability that OZ-FM says it needs. Something along that line.
1374 Could you go over that point again? I actually didn't understand it.
1375 MR. NEWMAN: Essentially what they are stating in their application -- in the schedule that precedes their financial figures they state that their revenues will increase by 3 per cent each year, yet when we did our calculations -- and by the questions that were asked by the commissioner earlier this afternoon -- there was some question as to what the actual number was.
1376 Mr. Collins alluded to the fact that, in fact, yes, their projections are -- my calculation from year 1 to year 2 is a 21 per cent increase, from year 2 to year 3 it was a 15 per cent increase, and I believe that I added up the total sales, not the local sales. That could be our discrepancy in the 19 per cent or 17 per cent that we asked about earlier.
1377 Those numbers are fairly impressive. We are not saying that it is totally impossible, but we do say that historically it is unlikely, and that if they are basing their revenue projections on a 15 per cent increase, and they are basing their business model on a 15 per cent increase, then, if at the end of the day they are not meeting those projections, how is that impacting their bottom line, and thus impacting their ability to meet any promises for Canadian talent development or any promises for rolling out digital in five years or any of the other promises they made?
1378 It is a question of: Will they have the cash at the end of the day to pay if these projections that seem robust don't come to fruition?
1379 COMMISSIONER LANGFORD: That's what you meant by using the word "stability"?
1380 MR. NEWMAN: They are stating in their intervention against us and in their application that they need greater stability to improve OZ-FM's broadcasting capabilities in Labrador and to replace their aging transmission facilities. Some of them are now 25 years old. They are using the word "stability" in the market. They are suggesting that having another operator come into the market would destabilize the market. Yet by showing these percentage increases, they could in fact destabilize themselves.
--- Off microphone / Sans microphone
1381 MR. NEWMAN: What I am saying, Mr. Langford, is this --
1382 THE CHAIRPERSON: I don't have to answer your question.
1383 COMMISSIONER LANGFORD: I'm sorry.
--- Laughter / Rires
1384 COMMISSIONER LANGFORD: It's that final point. I understand that you are saying that if those revenues aren't there and they can't make them because they are improbable and they are relying on those revenues for their plans to upgrade their infrastructure -- fine. It's the "destabilize themselves" point --
1385 MR. NEWMAN: They are robbing Peter to pay Paul.
1386 COMMISSIONER LANGFORD: Which will inevitably give them the support of Paul.
1387 MR. NEWMAN: But it does nothing to assist them in keeping stability outside St. John's.
1388 COMMISSIONER LANGFORD: Okay. It's that point. The stability is there, then. They are not destabilizing this market as a whole, only their own strategy.
1389 MR. NEWMAN: Yes.
1390 COMMISSIONER LANGFORD: Thank you very much.
1391 THE CHAIRPERSON: Mr. Secretary.
1392 MR. LEBEL: Thank you, Mr. Chairman.
1393 We will now ask Newfoundland Broadcasting Company Limited to intervene at this time against the competing applicant.
INTERVENTION / INTERVENTION
1394 MR. S. STIRLING: Good afternoon. Again, as you know, I am Scott Stirling, President and CEO of Newfoundland Broadcasting Company Limited.
1395 Newfoundland Broadcasting is intervening against the application filed by Andrew Newman and Andrew Bell in this proceeding and we would like to highlight for the Commission a few of the problems that we have identified arising out of that application.
1396 First, on September 30th of this year Mr. Newman sent a letter to the Commission indicating that the effective radiated power of the proposed radio station would be decreased from 100,000 watts to 20,000 watts. The applicant has not, however, altered the business plan for its proposed station to reflect the fact that the decrease in power will undoubtedly affect its revenues. Reducing the radio station's power in the manner proposed by the applicant will limit the coverage area of the radio station and will significantly reduce the quality of its signal, especially in office buildings and apartment complexes. Clearly, that should have an impact on its business plan.
1397 I would also like to compare our commitment to the development of local talent. We propose six hours of quality music and interview programs versus a one-hour high school show and a dance party broadcast on FM from a downtown club, with sound taken from the PA system. These specials are youth oriented, yet their stated target demographic is 25 to 54.
1398 The final issue that we want to raise, with respect, and the most important issue to the Newman/Bell application, is the impact that the proposed station would have on the value of the advertising market in St. John's and their intention to broadcast approximately 20 minutes per hour of advertising.
1399 The proposed station would sell advertising at rates that would be well below the rates that are currently offered in the St. John's market. They have not tied their rates to rating points. This would devalue the advertising market and reduce the revenues of the radio stations that are currently operating in St. John's. The impact of such a devaluation on our existing radio station, in particular, would be devastating.
1400 While the financial situation of the radio stations operating in Newfoundland has improved since the Commission permitted NewCap to consolidate its position in this market, we believe that authorizing an independent third radio competitor to operate in St. John's would set back the development of this market by several years.
1401 It has only been a little more than two and a half years since the Commission made the decision that the elimination of a third competitor from the Newfoundland market would assist the remaining stations to achieve financial stability. In our view, it would cause significant harm to the radio stations currently operating in Newfoundland if the Commission were to now reverse that decision at the first sign that the market is showing signs of improvement.
1402 Those are our comments on the Newman/Bell application. We would be pleased to answer any questions which you may have.
1403 THE CHAIRPERSON: Commissioner Langford.
1404 COMMISSIONER LANGFORD: I have one question with regard to your last point.
1405 Do you take any comfort from the categorical statement made by the Newman/Bell applicants this morning that they would not reduce rates; that they would not start a rate war of any sort; that if someone else did they would have to respond, but if no one else did they wouldn't?
1406 MR. S. STIRLING: The very fact that they are asking for 20 minutes of commercials kind of shows right there what they are going to do.
1407 If they were going to really sell at market rates, then they wouldn't need 20 minutes, they would need, maybe, 8 or 10 minutes.
1408 They are not going to have the numbers of ratings -- if the market, say, is $11 a point and they are going to have two points, that is $22. So if they fill up 20 minutes of commercials with $22 spots, that devalues the market.
1409 COMMISSIONER LANGFORD: So you are not comforted. You wouldn't perhaps just put it up to boyish enthusiasm, their hope to sell 20 minutes?
1410 MR. S. STIRLING: I think, maybe, down the road, if they have real success and get the ratings, but they are going to have to make money right away, and make up money, and they are going to go for market share. Obviously, they are going to take what they can, and they are going to be aggressive, and they are going to go out there, and they are going to try to take advertising.
1411 COMMISSIONER LANGFORD: Thanks very much.
1412 THE CHAIRPERSON: Thank you, Commissioner Langford.
1413 I think that concludes this phase, but don't go away.
1414 Mr. Secretary.
1415 MR. LEBEL: Since there are no other appearing intervenors, Mr. Chairman, we will now proceed to Phase IV and we will provide Newfoundland Broadcasting Company Limited with an opportunity to respond to all of the interventions submitted to their application.
1416 You have ten minutes to respond.
REPLY / RÉPLIQUE
1417 MR. S. STIRLING: We are appearing before you at this time to reply to a number of the issues raised in the intervention that was submitted by Mr. Newman and Mr. Bell.
1418 First, the opposing applicants have suggested that there is no competitive imbalance between Newfoundland Broadcasting and NewCap in the Newfoundland market. The fall BBM numbers do not lie. They indicate that OZ-FM has suffered audience losses as a result of NewCap's presence in this market and the recent format shuffling that has been carried out in St. John's. We absolutely need a second radio station in this market if we are going to remain competitive with NewCap.
1419 Secondly, the issue of diversity of voices was also highlighted by the opposing applicant. MY-FM will provide listeners in St. John's with a distinct new radio voice. The station's adult contemporary sound will be different from any other station in the market, including OZ-FM.
1420 With respect to news, the editorial independence of news and information programming on MY-FM will not be comprised. MY-FM will have its own news reporting structure that will be separate and distinct from OZ-FM and NTV. The management and owners of Newfoundland Broadcasting will not interfere with that process.
1421 Third, the opposing applicant has questioned our commitment to local talent development and local programming. In response, we would point out that we have committed, as I said before, to producing six hours of programming each weekend that would be dedicated to local artists, and we would devote significant portions of our weekly playlist to local musicians.
1422 As for the suggestion that we have not clearly set out our contributions to local talent development, we would note that we have committed to making contributions that are consistent with the Canadian talent development plan.
1423 In addition, Mr. Newman and Mr. Bell also appear to be confused -- and this goes back not necessarily to what they just said, but earlier -- they appear to be confused with respect to our commitment to provide "in kind" contributions to the development of local Canadian talent. They have suggested that our commitment of $455,000 over seven years is not exclusive to MY-FM. We want to confirm for the Commission that the "in kind" contribution of $450,000 will be exclusive to MY-FM.
1424 We also take issue with the opposing applicant's suggestion that our cost estimates and revenue projections for MY-FM are not reasonable. The estimates and projections set out in our application, although aggressive, were developed based on the knowledge and experience that we have gained while operating an FM radio station in the St. John's market for over 25 years.
1425 Unlike Mr. Newman and Mr. Bell, we did not arrive at revenue projections for our station based solely on multiplying the percentage of the Newfoundland population that lives in St. John's by the amount of revenues that are produced in the Newfoundland radio market as a whole. The revenue projections for MY-FM began with the known PBIT for the Newfoundland radio market and for OZ-FM, and then we projected what we think will happen to overall revenue for a new station in this market.
1426 In doing so, we took into account such things as the fact that MY-FM will not have a BBM rating until at least halfway through its first year of operation, and that our experienced sales staff will be able to offer prospective advertisers combined rates for advertising on both MY-FM and OZ-FM.
1427 Finally, in their intervention the opposing applicant suggests that there are untapped millions of dollars in revenue in the Newfoundland market because of our failure to split commercial time on OZ-FM between the various geographic locations in the province. We want to report to the Commission that we have already tried the split-feed model proposed by Mr. Newman and Mr. Bell. Unfortunately, it was not successful.
1428 The problem with their split-feed business model is that it does not take into account the reaction of potential advertisers who would have the opportunity to advertise in only one part of the province. St. John's advertisers, for example, will argue that they want a discounted rate to cover only St. John's.
1429 It has been our experience with OZ-FM that offering another choice or rate card on the same station causes fragmentation and actually lowers the overall profitability of the station. Some advertisers want to buy only outside St. John's, at very reduced rates, while others argue that since they only want to target listeners in St. John's and not the rural areas served by OZ-FM, they should receive a discounted rate.
1430 It was our experience that the overall effect of the split-feed model was an actual reduction in the amount of ad revenues for OZ-FM.
1431 The equipment we installed to implement the split-feed model decayed from lack of use.
1432 In another example, we know of failure in attempting split feeds happening even when the flagship station was networking in the evenings and on weekends to its sister stations that had their own local studios and sales staff.
1433 Then, when Q Radio was owned by CHUM, it also attempted split feeds, resulting once again in the failure of split feeding to deliver the desired results.
1434 There are also a lot of costs with split feeds. There is the technical cost. You have to have more traffic. You have to have a credit department. You have to have sales people out there. You have to produce the commercials. These are very inexpensive, local commercials from outside rural areas, and we have to bring them into St. John's and produce them. There are a lot of costs involved.
1435 Those are our reply comments. We would be pleased to answer any questions you may have.
1436 MR. McCALLUM: Are you able to respond to the two undertakings now, or will you be filing them subsequently?
1437 MR. S. STIRLING: Those two points?
1438 Would you like to speak to that?
--- Pause / Pause
1439 MR. S. STIRLING: We have the information.
1440 MR. NEAL: I would like to be a little more refreshed. I hope you can hear me, because I am having a problem, sometimes, hearing.
1441 I would like to be refreshed a little on what exactly the question was that you wish to ask me about.
1442 It was on employment equity?
--- Off microphone / Sans microphone
1443 MR. NEAL: I have the employment equity policy before me now. As a matter of fact, it has been some time since I looked at that section of the NTV application, but it was filed with that one, which we are going to look at after.
1444 MR. S. STIRLING: Would you like him to read it into the record?
1445 THE CHAIRPERSON: Counsel, do you have a specific question?
1446 As I understand it, the document has been filed in any event, so there is not much point in reading the document into the record.
1447 MR. McCALLUM: Yes. If you could just tell us what pages of the document and where we could find it, then you don't need to read it into the record. That would be sufficient.
1448 MR. NEAL: It is Schedule 9 in the NTV application. It just so happened that it was filed with the NTV application.
1449 We can give you this one, as a matter of fact, right out of here, if you would like to have one.
1450 MR. McCALLUM: If it is Schedule 9 to the NTV application, that should be sufficient.
1451 MR. NEAL: All right.
1452 MR. KINSMAN: And I believe that the other issue was the percentage of live programming that will be proposed for MY-FM.
1453 Right now 19 and a half hours per week will be absolutely live. That works out to 15.5 per cent of the broadcast week, with 84.5 per cent live-assist.
1454 MR. McCALLUM: I'm sorry, what per cent was live-assist?
1455 MR. KINSMAN: Eighty-four point five per cent live-assist.
1456 MR. McCALLUM: So you are not making any distinction between voice-tracked programming and automation, you are covering both of those under live-assist. Is that correct?
1457 MR. KINSMAN: There is a difference.
1458 The 15.5 per cent live includes our morning show, plus the four and a half hours of news per week that was mentioned earlier.
1459 The 84.5 per cent is live-assist and some voice tracking, yes.
1460 MR. McCALLUM: Can you break that down any further between automation and live-assist in that -- and I am rounding -- 85 per cent?
1461 MR. KINSMAN: We can.
--- Pause / Pause
1462 THE CHAIRPERSON: Counsel, it is not clear to me, frankly, what you are asking.
1463 As I understood it from the answers earlier today, the overnight hours are automated.
1464 MR. McCALLUM: The question only references the statement that the applicant made in, I believe, the supplementary brief, in which they said that the station would share creative on-air talent freely between the proposed station and the existing OZ-FM. They stated that automation would be used extensively and voice-tracking of local DJs would predominate the daily program lineup.
1465 So we are seeking details on that quote.
1466 MR. S. STIRLING: I am glad that we have been able to distinguish the difference between live-assist and automation. Up until now I don't think there was that distinction.
1467 During the weekdays we would have live-assist, during the full broadcast day, six to midnight. It would be on the weekends that we would probably have to rely on voice tracking.
1468 MR. McCALLUM: Thank you, Mr. Chair.
1469 THE CHAIRPERSON: Thank you, counsel.
1470 I think that concludes the questioning for Newfoundland Broadcasting for the MY-FM application. I thank you very much, both Mr. Stirlings and the rest of the team. You may step down.
1471 Now we will hear the final submission from the other applicant.
1472 Mr. Secretary.
1473 MR. LEBEL: Thank you, Mr. Chairman.
1474 I would now ask Messrs. Andrew Newman and Andrew Bell to respond to all interventions submitted to their application at this time.
REPLY / RÉPLIQUE
1475 MR. NEWMAN: Ladies and gentlemen, we would like to thank both John Steele and Doug Neal for their comments in their written letters of intervention.
1476 We would like to start by covering off a couple of issues which were brought up this afternoon.
1477 First, on the issue of our coverage area, the reduction in power from 100,000 watts to 20,000 watts was required by NAVCAN. They had concerns of interference issues at the power level we were requesting. We underwent another engineering brief and had conversations at great length with Mr. Brian Sawyer and Mr. Peter Conn from ATS Incorporated, our consulting engineers. The coverage maps that they provided, based on our height on the CBC transmission facility on Kenmount Hill, which I will note is the highest transmission facility in the city, cover not only our immediate central market area adequately, but in fact cover well into the eastern part of Newfoundland.
1478 We have no issue, with the proposed coverage area, with the reduction to 20,000 watts. In fact, the population increase into the central market area -- the population in-migration meant that the change in the census numbers showed we actually had an increase in the number of people that could conceivably hear our signal on a regular basis.
1479 We are not sure where the 18 minutes, escalating to 21 minutes of commercial advertising came from. I would like to point out that on Schedule 13, the second page of Schedule 13 of our application, we state that using an industry historical of 30 per cent sold-out, based on eight minutes of airtime an hour, on an 18-hour clock -- that is how we came to our revenue projections. We are not sure where the other applicants got the 18 to 21 minutes from, so we would like to clear that up for the Commission, and certainly for the other applicants and the other competitors. We certainly don't purport to be selling 18 commercial minutes per hour.
1480 We did not suggest that an imbalance in the market did not exist; we merely indicated that there could be steps taken to ease the imbalance.
1481 Just as a geographical note, Port Rexton is three hours from St. John's, not 40 minutes.
1482 We would like to note for the record that Steele Communications -- and we have had this conversation. We did not receive a copy of the letter of intervention. We did request a copy when it became apparent that they would be intervening, and they graciously obliged us. Mr. Steele graciously came through with the letter for us.
1483 Mr. Steele's comments about our rate projections can be addressed in two ways. Our application was crafted in the spring of 2001 and delivered to the CRTC on the 21st of May 2001. At that time ROS radio commercials were being sold for $25 per 30 seconds by OZ-FM. VOCM-FM was selling for $28 per 30 seconds.
1484 We needed a benchmark to put together our financial projections, and we chose $25. That was it.
1485 We needed to prove to ourselves and to the Commission that another radio station was viable, and we chose to plan low. Rates currently, as we have said, have risen 20 per cent, and we are pleased, as potential business operators, that our bottom line may potentially be increased by 20 per cent.
1486 However, we prefer to be conservative in our planning. The two of us are strong business people. You can bet that we are going to sell our product at the highest possible rate.
1487 The second way to address Mr. Steele's comments is by acknowledging that the market leader sets the rate. We don't foresee ourselves to be in that position for some time. Currently, Steele Communications sets the rate on the street.
1488 Again, we prefer to have a real-life business model, and we have to be prepared in the event the market leader decides to push down a little bit.
1489 Mr. Neal made a comment early in his intervention of November 15th of a third operator upsetting the rural/urban balance of Newfoundland Broadcasting. In our intervention earlier this afternoon we addressed that issue and we offered Mr. Neal an alternative revenue stream. Since the OZ experiment on split-commercial technology has changed dramatically, we would suggest that they revisit the experiment.
1490 With only an estimated 2 per cent of our revenue coming from the existing licence holders, the argument that we will upset the balance of stability in this market is not valid.
1491 In paragraphs 3 and 4 Mr. Neal questions our ability to manage an FM radio station in a market as complex as St. John's. It should be noted that from a business standpoint Mr. Bell has weathered economic storms for 15 years in many parts of this province, including some of the rural areas that have been directly affected by the cod moratorium of the nineties. Mr. Bell has been in the retail industry. He has grown his business. He currently offers stable employment to over 250 Newfoundlanders and Labradorians.
1492 Myself, my proven track record on the air, in programming and management, in three provinces over 20 years -- 12 of those years have been here in St. John's.
1493 Newfoundland Broadcasting's television news director has even chosen me to host NTV's coverage of some significant local events.
1494 Credentials and experience should not be an issue with the Newman/Bell application.
1495 Paragraph 3 lists several key benefits to the MY-FM listener. The first item is their management team; not music, not content, but the management team.
1496 It should be noted that a member of the Stirling family recently replaced the senior manager credited with the success of OZ.
1497 We are offering tangible benefits to the listener and to the advertiser, with entertaining announcers who are live-to-air on a regular basis, the ability for listeners to interact with announcers, a musical selection that suits the needs of the market, and a distinct news voice. We believe that shows our commitment to manage this property.
1498 In paragraph 5, Mr. Neal calls our live-to-air show a "half-hearted intention". He calls into question our on-air product.
1499 We have discussed at length what we feel is the distinction between plain good radio and what some operators term a Canadian talent development mandate. We could have left out our intentions. After all, we have met all of our Canadian talent development criteria simply by donating $3,000 per year to a third source. However, we intend to create great radio; radio that happens to meet the criteria of Canadian talent development.
1500 Our live-to-air show happens to be dependent on third parties and the availability of venues. Projecting a third party's plan over a seven-year term is very difficult, if not impossible. And I can assure you that this will not be a dance party.
1501 We realistically did not want to overcommit to a project that may have a shelf life. It is too easy to promise the moon and then beg for forgiveness at licence renewal time. We are merely being honest with the Commission.
1502 Mr. Neal takes up several paragraphs rehashing rate integrity. We are prepared to commit to working with Newfoundland Broadcasting, Steele Communications, the AAB and the CAB to assist in improving radio as an industry. In St. John's currently, the Telegram and the Express newspapers have huge revenues, and radio is finally coming into its own as an industry. We don't want to see anything that is going to harm that industry, either from a product standpoint or a sales standpoint. We don't want to see more automation, more syndicated programs, and a poor-quality product on the air when we could hear entertaining announcers and relevant local information.
1503 We are proposing a high tech, lean station. We don't have to cover the high costs of a huge network, or a large entourage.
1504 If the Commission feels that we have left out any issues, we would certainly welcome them at this time. We thank the Commission for their time, and, again, thank you for coming to St. John's.
1505 THE CHAIRPERSON: Thank you very much.
1506 Commissioner Langford, I believe, has a question or two.
1507 COMMISSIONER LANGFORD: Just one, I think.
1508 With regard to the understanding with the CBC, do you have anything more than the original letter they provided you with, which I think was in February? Because it certainly wasn't a "you are on board" letter, I think you will agree.
1509 MR. NEWMAN: I can state that since our application -- and the original capital projections included the Bell/Newman application paying for the new broadband antenna -- since that time the Commission has granted CBC an additional French-language FM radio station for St. John's as part of their long term radio plan. The CBC has gone forth without us and purchased the broadband antenna, and could even be installing it as we speak. It was scheduled to be installed in November.
1510 We have had extensive conversations with the outgoing engineer and the incoming engineer to discuss their plans to roll out this new service.
1511 We have discussed at great length the requirements from a back-up power standpoint and what we are going to require.
1512 Do we have a letter stating that "Mr. Newman and Mr. Bell, on a monthly basis you are going to give us X"? Mr. Langford, the answer is no, but there is a clear letter of understanding, and they are very interested in us coming on board.
1513 COMMISSIONER LANGFORD: And you are confident.
1514 MR. NEWMAN: Very confident, yes.
1515 As a matter of fact, it only improves our bottom line.
1516 COMMISSIONER LANGFORD: Because it would be an awful kick in the pants for you if that fell through, wouldn't it?
1517 MR. NEWMAN: As we discussed earlier, we are forward thinking individuals and we like to plan contingencies. When it became apparent to us that CBC was going to pay for the new antenna -- and I should tell you that the cost is in the vicinity of $103,000 U.S. -- we did not take that out of our business plan. We left that capital contingency in there in the event that something went terribly wrong.
1518 We also, when we initiated this process with our engineers, sought out three additional sites. Or, rather, two additional sites. One of those happens to be another CBC tower. Another one is a private operator.
1519 So we do have a contingency plan in place, in the wild event that something happens and goes awry with our CBC agreement.
1520 COMMISSIONER LANGFORD: Thank you very much.
1521 THE CHAIRPERSON: Commissioner Noël.
1522 COMMISSIONER NOËL: To follow up on what was discussed this morning with Commissioner Langford, do you have any statistics as to the cost of living in St. John's as opposed to Montreal, Toronto or Ottawa?
1523 MR. NEWMAN: I can tell you the cost of living between Charlottetown, for example, and St. John's. The cost of living is probably 3 per cent more in St. John's than it is in Charlottetown.
1524 I know that the real estate market in St. John's has been doing exceptionally well. It is not to the point that Toronto is.
1525 Mr. Bell would like to add something.
1526 MR. BELL: I do have those figures, and I have seen those figures. The average household income is less than $30,000. The cost of living in this city --
1527 I can get that information for you, if required. I have all of that at my fingertips, and a lot of the information that, actually, you saw earlier on in our presentation was based on the census information, if you are so inclined.
1528 If you could give me specifics --
1529 COMMISSIONER NOËL: Mr. Legal, would you like to have a commitment that they file some figures for the cost of living in St. John's as opposed to Toronto, Ottawa or Montreal?
1530 MR. McCALLUM: I would suggest that, if the panel requires it, it could be filed, with a copy to the other applicant, Newfoundland Broadcasting.
1531 MR. NEWMAN: Which markets would you like us to compare for you?
1532 COMMISSIONER NOËL: St. John's compared to Montreal, Toronto and Ottawa.
1533 MR. McCALLUM: Are these publicly available figures, incidentally?
1534 MR. NEWMAN: Yes, they would be.
1535 MR. BELL: They are available on websites -- national, federal and provincial websites. I would presume that we could put our hands on them quite quickly. I would, obviously, have to go looking, but I know it is public information.
1536 MR. McCALLUM: You would clearly indicate the source of that --
1537 MR. BELL: Absolutely. On all of our slides this morning you saw that they were noted from statistics from the census of November 2001.
1538 We fully anticipate giving accreditation to where the information came from.
1539 COMMISSIONER NOËL: Thank you.
1540 THE CHAIRPERSON: When would you have that available?
1541 MR. BELL: We could finish that by the end of the week and have it off to the Commission and to the other applicant by the end of the week, if so desired. Absolutely.
1542 THE CHAIRPERSON: That's fine.
1543 I think that concludes your appearance before us today. I thank you very much, Mr. Bell and Mr. Newman, for your appearance and answering the questions that we had for you today.
1544 MR. BELL: Thank you very much. Thanks for your time.
1545 THE CHAIRPERSON: That concludes our consideration of the first two applications.
1546 I must say that I recently learned that I am going to become a grandfather, and it's one of those stages in your life when you learn that you are getting older. And having sat through a day of radio and learning that you don't fit into one of the demographics that anybody is talking about here -- even though you are at a stage where you have a certain amount of disposable income, it's one that advertisers don't give a damn about because they won't advertise on the radio to cater to this demographic -- you really know that you are getting old.
1547 They were interesting applications from both parties, and we will give them careful consideration, with all of the information filed.
1548 Again, I thank you very much.
1549 We will take a short break. It is twenty to five. I propose that we hear the application and the presentation from Newfoundland Television and then we will conclude our work for the day and we will resume tomorrow morning at 8:30, at which point we will go through the questions for Newfoundland Television.
1550 We will take a 10-minute break.
1551 Will that be enough, Mr. Scott Stirling?
1552 MR. S. STIRLING: Yes, that will be fine.
1553 THE CHAIRPERSON: All right. We will take a 10-minute break and we will reconvene at five to five to hear the presentation from NTV.
--- Recess at 1645 / Suspension à 1645
--- Upon resuming at 1655 / Reprise à 1655
1554 THE CHAIRPERSON: Ladies and gentlemen, we will return to our proceeding now.
1555 Mr. Secretary.
1556 MR. LEBEL: Thank you, Mr. Chairman.
1557 We will now hear item 3 on the agenda, which is an application by Newfoundland Broadcasting Company Limited to renew the licence of Television Station CJON-TV, St. John's, and its transmitters, expiring the 28th of February 2003.
1558 The licensee also proposes to amend its licence by deleting a condition of licence, as indicated on our agenda.
1559 You have 20 minutes to make your presentation.
PRESENTATION / PRÉSENTATION
1560 MR. S. STIRLING: Good afternoon, again, Mr. Chairman and commissioners.
1561 You know the panel. I think it is pretty much the same as you have seen. Jesse Stirling, Vice-President of Sales and Marketing, is over here.
1562 We are pleased to have this opportunity to appear before you to discuss our licence renewal application for CJON Television. We will address the two issues that the Commission highlighted in Notice of Public Hearing 2002-11, which include our request to disaffiliate from the CTV network and our request to maintain CJON's condition of licence relating to the manner in which it calculates Canadian content.
1563 Before we do that, however, we believe it is important to provide you with a brief overview of the efforts that have been made by Newfoundland Broadcasting to develop a high quality television station that meets the needs of the residents of Newfoundland and Labrador.
1564 In addition, given that our last licence renewal was granted in July 1995, we thought it would be useful to provide a short video presentation that would give you kind of a feel for the television station that we are operating here in St. John's.
1565 As you are aware, Newfoundland Broadcasting is the licensee of one of the few remaining locally owned and operated television stations in Canada. CJON received its original broadcasting licence in 1955, and today continues to operate a television station in St. John's along with a chain of 15 transmitters all across Newfoundland.
1566 In addition, cable operators and DTH satellite services distribute CJON's signal throughout the province.
1567 The NTV signal is now available to almost 95 per cent of the homes in Newfoundland and Labrador.
1568 The Commission may also recall that Newfoundland Broadcasting was one of the founding members of the CTV television network, and we have maintained our network affiliation with CTV until this year.
1569 As a locally owned and operated television station, CJON has its roots firmly planted in the communities we serve. Throughout our licence term we have been committed to meeting the needs of local viewers and communities.
1570 In particular, NTV is the primary source for televised local news and information programming in the province. In their previous licensing decision, the Commission included an expectation that CJON would broadcast a minimum of seven hours of local news programming each week. CJON has more than doubled that amount and is committed to continue broadcasting close to 15 hours of local news programming each week over the course of this new licence term.
1571 Newfoundland Broadcasting is also proud of our efforts to support local producers. Over the last licence term we expanded our relationship with the local production community. Specifically, we co-produced and licensed many quality programs which have aired or will air on NTV, including programs like "The Fishery Now", "The Untold Story", "Violet", "West Coast Ghosts", and "Fool Proof".
1572 The following video presentation will provide you with additional insights into the operation of our television station and the efforts we have made to improve CJON and to produce distinctly Canadian programming.
--- Video presentation / Présentation vidéo
1573 MR. S. STIRLING: As you have seen, CJON has developed into an interesting and innovative television station that serves the specific needs of viewers in Newfoundland and Labrador. However, the next seven years will pose some additional challenges to us.
1574 The proliferation of Canadian and foreign satellite services, the growth of the Internet, the significant increase in consolidation within the broadcasting industry, and the increased reach and financial power of our competitors will all continue to place enormous pressure on a small, independent television station like CJON.
1575 In addition, it is not yet clear how the evolution to digital technology will affect our television station. As a small independent broadcaster, we have concerns about the cost of the new technology and are aware of the potential for digital technology to further increase the level of competition in this market.
1576 CJON will also be operating in the new licence term without the benefit of a network affiliation agreement with CTV. Instead, we entered into a news supply agreement with CTV, wherein CTV has agreed to provide CJON with certain CTV news programming, including "Canada AM" and the CTV national news, and in return will receive access to CJON's news gathering facilities in Newfoundland.
1577 While far from what we wanted, or expected, when the negotiations with CTV began, the news supply arrangement with CTV does provide us with important benefits. First, it allows us to remain affiliated with CTV and to use the CTV brand for news programming. Second, it allows us to retain the entire commercial inventory for these programs. However, we no longer receive network compensation, which made up a significant portion of our revenues.
1578 One of the significant downsides to having a new supply arrangement with CTV rather than a full network affiliation, however, is that we have to pay the full freight to receive all other CTV programming. This will significantly increase our operating costs.
1579 While the impact on CJON's bottom line of the changes noted above are yet to be fully determined, we believe that our television station will be able to weather the coming storm. By making adjustments to our programming schedule, by continuing to purchase and in some cases produce the best programming available, and by looking for other opportunities to improve our television station, we believe that we will be back before the Commission at our next licence renewal hearing telling you how NTV has triumphed over the difficulties that we have encountered along the way.
1580 One of the adjustments that we proposed in our renewal application is to change the manner in which the Commission calculates the broadcast day and the evening broadcast period for our television station. Specifically, we have proposed reducing by one-half hour the allowance that has been granted to CJON with respect to its Canadian content calculations.
1581 As you know, CJON has, since 1989, been permitted to include within its Canadian content calculation programming received from CTV after 12 midnight Newfoundland time, as well as the CJON local newscast when it is aired immediately after the live CTV broadcast.
1582 Beginning in September of this year, however, CJON has scheduled the CTV national news one hour earlier, which means that it is now airing at 11:30 rather than 12:30. In addition, we have enhanced our late news package so that it runs for one full hour on weekdays, with entertainment news and eyewitness news packages on weekends in the 12 midnight to 1:00 a.m. time slot.
1583 As a result of these changes to CJON's schedule, we have requested that the allowance granted to us for calculating Canadian content be reduced to one hour per day.
1584 As the Commission is aware, this allowance has been granted to CJON under subsection 4(11) of the Regulations, because of the inequities that arise in this market as a result of a time zone that is one and a half hours ahead of Eastern Standard Time. Our unusual time zone makes it very difficult for CJON to maximize its simulcasting opportunities on cable and satellite distributors.
1585 Given that the U.S. signals carried by cable and satellite operators are typically taken from the eastern time zone, we have to schedule our programs so that they match the programs broadcast by the U.S. television networks. This means, for example, that an episode of a U.S. show like "Survivor", which airs at 8:00 eastern time, is distributed by satellite and cable operators in Newfoundland at 9:30. In order to take advantage of simulcasting opportunities, CJON would have to broadcast that show at 9:30 as well.
1586 Given the time zone differences, it is clear that the most advantageous and lucrative time to simulcast CJON programming over U.S. network shows is 9:30 to 12:30 a.m. in Newfoundland. If we were not granted the allowance under subsection 4(11) of the Regulations and were instead forced to schedule our news programming beginning at 10:30 Newfoundland time, CJON would lose two-thirds of the most lucrative simulcasting opportunities. The impact of this on our audience share and our revenues would be significant and could ultimately threaten our very existence.
1587 At the same time, in order to satisfy the 50 per cent Canadian content requirement during the evening broadcast period and the 60 per cent requirement during the broadcast day, it is critical that CJON be permitted to include in its calculation both our early evening newscast, which starts at 6:00 p.m., and our late newscast, which ends at 1:00 a.m.
1588 If the Commission were to redefine CJON's evening broadcast period so that it began at 7:00 or 7:30, CJON would not be able, under its present schedule, to satisfy the 50 per cent Canadian content requirement for the evening broadcast period. In order to meet that requirement, we would have to reschedule our suppertime news hour to air one or one and a half hours later. Such a scheduling change would be contrary to the standard industry practice, and, without a doubt, it would cause a considerable reduction in our viewing audience.
1589 For these reasons, we believe that the Commission should continue to grant an allowance to CJON under subsection 4(11) of the Regulations for the purpose of calculating Canadian content on our station.
1590 Those are our submissions, and we look forward to any questions you may have tomorrow.
1591 THE CHAIRPERSON: Thank you very much, Mr. Stirling. We will pick those questions up tomorrow.
1592 With that, we will adjourn for the day and reconvene tomorrow morning at 8:30 a.m.
--- Whereupon the hearing adjourned at 1715, to resume
on Wednesday, December 11, 2002 at 0830 /
L'audience est ajournée à 1715, pour reprendre
le mercredi 11 décembre 2002 à 0830
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