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ARCHIVED -  Decision CRTC 87-589

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Decision

Ottawa, 30 July 1987
Decision CRTC 87-589
Rawlco Communications Ltd.
Ottawa, Ontario - 870441300
Following a Public Hearing in Toronto on 28 April 1987, the Commission approves an application by Rawlco Communications Ltd. for approval to acquire the assets and for a licence to continue the operation of CFGO Ottawa.
The Commission will issue a licence to Rawlco Communications Ltd. (Rawlco) upon surrender of the current licence. The new licence will expire 30 September 1990 and will be subject to the conditions specified in the licence to be issued. This term will enable the Commission to consider the renewal of this licence at the same time as that of other radio stations in the area.
CFGO Radio Limited, the licensee of CFGO, is a wholly-owned subsidiary of CFTO-TV Limited which is, in turn, a wholly-owned subsidiary of Baton Broadcasting Incorporated (Baton), a diversified Canadian communications company effectively controlled indirectly by Eaton's of Canada Limited. Baton also indirectly holds the licences of numerous radio and television stations located throughout the province of Saskatchewan as well as CFTO-TV Toronto, the flagship station of the CTV network.
Mr. Douglas Bassett, President of Baton, stated the company's rationale for selling the assets of CFGO:
While the heritage of Baton includes both radio and television broadcasting, the past few years have seen an evolution of our company toward the development and expansion of television services ... As a result of this evolution, more and more of our resources, both human and financial, have been dedicated to the development of more and better television programming [and] ... has left us less well equipped than in the past to handle the challenges of succeeding in highly competitive radio markets like Ottawa ... I am fully confident that Rawlco has the resources and commitment to provide a first rate broadcasting service to Ottawa and to build on the CFGO heritage.
Rawlco, which is controlled by Mr. Gordon Rawlinson of Regina, is the licensee of radio stations in Regina, Saskatoon and Calgary. Mr. Rawlinson also controls Northwestern Broadcasting Company, the licensee of CJNB North Battleford and CJNS Meadow Lake, Saskatchewan.
At the hearing, Mr. Rawlinson stated:
We are still a young company but with a strong commitment to providing the best quality radio service through the development of stations unique to their communities and listeners. That commitment has helped us develop successful community-oriented radio stations in the west and we look forward to putting our experience and knowledge to work in eastern Canada. We regard our application to acquire CFGO as a challenge for which we are prepared and an opportunity to improve the broadcasting service provided by the station to young people in the Ottawa area.
The Commission notes that the purchase price of $2.8 million represents the approximate book value of the company and its assets. The purchase is to be financed by a $3 million loan from the Canadian Imperial Bank of Commerce and is secured by means of a debenture on the assets of the company. Further, the Commission notes that Rawlco has access to a sizeable line of credit with the bank which may be drawn on should there be any shortfalls in the applicant's projected revenues. In this regard, the Commission notes Mr. Rawlinson's statement at the hearing that the station lost money last year and that it is projecting to spend "almost 50% more" on programming in the first year of operation than CFGO spent in 1986. The Commission has no concern with respect to the availability or adequacy of the required financing.
The Commission has considered the significant benefits to be derived from this transfer of ownership and has given considerable weight to Rawlco's commitment to "stand 100% behind this radio station for the long haul".
As stated in a number of decisions relating to applications for authority to transfer ownership or effective control of licensee companies, and because the Commission does not solicit applications for such transfers, the onus is on the applicant to demonstrate to the Commission that the application filed is the best possible proposal under the circumstances, taking into account the Commission's general concerns with respect to transactions of this nature.
The Commission reaffirms that the first test any applicant must meet is that the proposed transfers of ownership or control yield significant and unequivocal benefits to the communities served by the broadcasting undertakings and to the Canadian broadcasting system as a whole and that it is in the public interest.
In particular, the Commission must be satisfied that the benefits, both those that can be quantified in monetary terms and others which may not easily be measurable in terms of their dollar value, are commensurate with the size of the transaction and that they take into account the responsibilities to be assumed, the characteristics and viability of the broadcasting undertakings in question, and the scale of the programming, management, financial and technical resources available to the purchaser.
In its application and at the hearing, Rawlco identified several benefits which would accrue from approval of this transaction. It emphasized that by virtue of its being a company whose sole interest is radio broadcasting, it will bring to the Ottawa market resources, commitment and extensive experience and will be in a position to provide improved growth opportunities within Rawlco for the present staff at CFGO. It also spoke of its enthusiasm with respect to the challenge of operating in a competitive major market and cited its operating philosophy that stresses investment before profit, local participation, extensive community orientation and commitment to technical excellence.
The Commission notes that the applicant has built up a strong team of local managers in the various communities that it serves and that in Ottawa, at the outset, both Mr. Gordon Rawlinson and his brother and fellow shareholder, Mr. Douglas Rawlinson, will be personally involved in ensuring CFGO's success in the market. In this regard, Mr. Gordon Rawlinson explained that
We are developing a very competent group of management people that are able to take on more and more of the day-to-day activities of our existing radio stations ... The reason we are hoping to grow is because we have some excess of energy that we would like to devote to new projects.
The Commission has also taken note of the benefits which will accrue in the area of programming. Rawlco has undertaken to commit additional funding for the production of high quality programs and stated that the acquisition of a radio station in eastern Canada will enable it to introduce enhanced east-west dialogue. Specifically, it intends to share information with respect to music trends and new artists, most particularly Canadian artists, and stated that Canadian performers will benefit from wider public exposure of their recordings through such an exchange.
Moreover, Rawlco contends that news and information programming will be enhanced through the exchange of spoken word programming reflecting regional events and opinions. It stated that the newsrooms of its western stations will provide Ottawa listeners with news from a western perspective and that CFGO, for its part, will provide quality coverage of eastern Canada and a direct link with Parliament Hill for western audiences. The applicant stated that it recognizes that first class programming is "expensive but essential" to becoming a successful radio station in a competitive market:
Rawlco is prepared to invest the funds necessary to provide the talent that will result in the best music, information and community programming for Ottawa listeners.
The Commission further notes that those benefits which can be quantified in monetary terms total $375,000 over five years, as specified in the application.
The applicant has undertaken to spend $300,000 during the first five years of operation to effect technical upgrading of broadcasting and recording equipment including a conversion of the station to AM stereo. Rawlco indicated that most of the improvements will be carried out within the first two years of its licence term and, accordingly, the majority of the funds allocated for this purpose will be expended during that time.
At the hearing, Rawlco stated that it did not intend to change CFGO's adult contemporary music format which it termed "the right one for the 12 to 34 year-old listeners the station is targeting", and that it was "pleased to work with a format which maximizes the exposure of new Canadian talent, because of its reliance on contemporary music".
The Commission reaffirms the particular importance it attaches to the development of Canadian talent and notes that Rawlco intends to introduce a cash award program at CFGO. The applicant indicated that each year for five years, three awards of $5,000 will be provided to local artists to cover expenses related to studio recording time, travel and equipment. Rawlco indicated at the hearing that this project will receive extensive promotion and it considers that the awards will have a significant and positive impact on the development of local Canadian talent. In the event that this project is not successful, Rawlco has undertaken to allocate $15,000 per year for other initiatives in this area or to contribute the funds directly to FACTOR/CTL. It has also made a commitment to broadcast a daily, one-hour program entitled "Our Best" which will be devoted exclusively to Canadian music as well as interviews and information relating to Canadian performers.
Having examined the application as submitted and the statements made at the public hearing, the Commission is satisfied that Rawlco has adequately demonstrated that the proposed transfer of ownership is in the public interest and that the benefits to the community to be served are significant and commensurate with the size of the transaction and the viability of the undertaking. It has been impressed by the enthusiasm of the purchaser and considers that the experience which Rawlco will bring to the station, the opportunities for program exchanges and its strong community orientation will result in an attractive service for young Ottawa listeners.
The Commission acknowledges the numerous interventions supporting the application and has taken them into consideration.
Fernand Bélisle
Secretary General