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ARCHIVED -  Decision CRTC 92-630

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Decision

Ottawa, 25 August 1992
Decision CRTC 92-630
Métromédia CMR Inc. (formerly 2774062 Canada Inc.)
Verdun, Quebec - 920094000 - 920095700
Following a Public Hearing in Quebec City beginning on 19 May 1992, the Commission approves by majority decision the applications for authority to acquire the assets of radio stations CKVL and CKOI-FM Verdun, currently owned by Radio Futura Ltée, and for broadcasting licences to continue to operate the undertakings under the same terms and conditions as the existing licences.
The Commission will issue licences to Métromédia CMR Inc. expiring on 31 August 1998 upon surrender of the current licences. The new licences will be subject to the same conditions as those specified in the current licences, as well as to any other condition set out in the licences to be issued.
Métromédia CMR Inc. (Métromédia) is owned by two shareholders: 60% by a company to be incorporated, whose principal shareholders will be Pierre Béland and Pierre Arcand, and which will be controlled by Mr. Béland; and 40% by Royal Trustco Limited, the source of financing for this transaction.
Mr. Béland and Mr. Arcand have acquired considerable experience in the broadcasting industry in Montréal over a period of several years. Through Mount Royal Broadcasting Inc. (Mount Royal), they are licensed to operate two English-language radio stations, CIQC and CFQR-FM Montréal (Decision CRTC 88-583). Since May 1990, they have also provided interim management to CKVL and CKOI-FM, two French-language stations serving the greater Montréal area.
Radio Futura Ltée is indirectly controlled by Jack Tietolman, one of the pioneers of broadcasting in Montréal. Mr. Tietolman, through Radio Futura, has operated CKVL and CKOI-FM since 1946 and 1950, respectively. The two stations dominated the Montréal market through the 1950s, 1960s and 1970s, but slipped from this dominant position during the 1980s. The stations lost over $9 million from 1988 to 1991 inclusive; in view of his age, Mr. Tietolman has decided to give up onwership of the stations in favour of a group that he considers will ensure their continued operation and development.
The purchase price relating to this transaction is $10 million, plus additional consideration representing an amount equal to 10% of the combined before-tax profits of Métromédia and Mount Royal, over a period of ten years.
At the public hearing the Commission examined with the applicant the financing arrangements for, and the obligations arising from, the transaction to ensure that these obligations would not become such a financial burden for the purchasers that they would be unable to provide a quality service or continue to fulfil their requirements under the Broadcasting Act. The Commission also examined the financial projections filed with the applications within the framework of the recovery plan developed by the purchasers during their interim management.
Having examined all available financial data, the Commission has concluded that the financial structure put in place by the applicant is viable and that the revenue projections are reasonable in the circumstances. In its examination, the Commission accorded considerable importance to the experience of Mr. Béland and Mr. Arcand and their intimate knowledge of the Montréal broadcasting industry. It also took account of the purchasers' statement at the hearing that their recovery plan had halted the decline in revenues and increased the stations' market share from 15 in the spring of 1990 to 23.7 in the fall of 1991. They also stated that the company's revenues have grown for the first time in five years, and it should end the 1991-1992 fiscal year with no operating loss, and might even have a surplus of approximately $200,000.
Because the Commission does not solicit competing applications for authority to transfer effective control of broadcasting undertakings, 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. As a first test, the applicant must demonstrate that the proposed transfer will yield significant and unequivocal benefits to the community served by the broadcasting undertaking 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 that may not easily be measured in terms of dollar value, are commensurate with the size of the transaction and 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.
The Commission has assessed the initiatives proposed by Métromédia as benefits arising from the transaction. The Commission is generally satisfied that the proposals constitute a significant and unequivocal package of benefits, and considers that approval of these applications is in the public interest.
In the applicant's view, the primary intangible benefit resulting from the transaction will be elimination of the uncertainty regarding the future of the two stations that has existed for several years, and the introduction of a new, skilled and experienced management team. It also pointed to the synergy that will benefit all four stations managed by Mr. Béland and Mr. Arcand, and the economies of scale to be achieved in the areas of engineering, accounting, computer services and administration. In this regard the Commission notes the commitment by the applicants at the hearing to continue operating all four stations, even should the financial situation be worse than forecast.
With regard to tangible and quantifiable benefits, Métromédia proposed a package of benefits valued at $4,575,000 over five years.
The initiatives put forward by the applicant as benefits include $1.5 million to move the CKVL and CKOI-FM studios, a $125,000 contribution to the Bureau québécois de la promotion de la radio, and $75,000 to produce jingles for the two stations. It notes, however, that these types of initiatives are among those the Commission generally does not accept as tangible benefits for the reasons outlined in Public Notice CRTC 1989-109 dated 28 September 1989.
The Commission also examined closely the applicant's request that its commitment to allocate $1.5 million over five years for the contest "L'Empire des Futures Stars" be considered a tangible benefit of the transaction. The current licensee has held this contest since 1982 and always claimed it as a contribution to the development of Canadian talent. Moreover, the contest is one of the commitments in the current Promise of Performance of CKOI-FM, and is provided for in the station's 1992-1993 budget. In accordance with the criteria outlined in Public Notice CRTC 1989-109, the Commission rejects as a benefit of this transaction the applicant's proposal on the grounds that it does not represent an incremental benefit, that is, it cannot be viewed as an addition to the existing commitments of the current licensee.
All things considered, and given the present circumstances, the Commission nevertheless considers that the tangible and intangible benefits to result from the transaction are adequate. It expects Métromédia to ensure that the expenditures totalling $4,575,000, as proposed in the benefits package, are made in accordance with the schedule outlined in the applications.
The Commission also expects Métromédia to file a report five years from the date of this decision on the implementation of the benefits proposed in these applications and the costs associated with each.
These applications gave rise to some concern relating to concentration of ownership and multiple ownership of radio stations within the same market. As reiterated in Public Notice CRTC 1990-111 entitled "An FM Policy for the Nineties", the Commission's policy is to grant no more than one licence of the same kind in the same language in the same market to a single operator other than in exceptional circumstances. When asked to comment at the hearing, the applicant noted several factors that should reduce concerns about the fact that four radio stations in the Montréal market are to be operated by the same interests.
The principal arguments put forward by the applicant relate to the fact that the Anglophone and Francophone radio audiences in Montréal constitute two different markets in terms of their listenership ratings and advertising. It added that the French-language stations CKVL and CKOI-FM are separate and distinct from the English-language stations CIQC and CFQR-FM with respect to language of broadcast, programming format and management. It also made a commitment to ensure that the administration of the two groups of stations would remain separate and that each group would retain its distinct cultural and linguistic character, that their news services would remain totally separate, and that each group would have its own independent editorial policy.
After careful consideration of the arguments put forward by the applicant, and taking into account the particular circumstances of the Montréal market, the Commission has determined that Montréal's French- and English-language radio markets constitute what are, in effect, two distinct markets. Thus, approval of the current applications would not be contrary to the policy, nor would it represent an exception thereto. Moreover, taking into account the commitments made by Métromédia, the Commission is of the view that the benefits resulting from approval of this transaction outweigh the concerns about concentration of ownership and multiple ownership in the Montréal area. The Commission has noted the concerns in this regard expressed in the written intervention filed by Radiomutuel Inc.
Further, the Commission notes the extensive programming changes that were instituted at CKVL and CKOI-FM as part of the recovery plan for the two stations. CKVL's schedule consists mainly of public affairs programs, interviews and open-line programs, while CKOI-FM features progressive rock music and comedy programs. With regard to the considerable changes in the news services of both stations, the Commission has also taken into account the concerns outlined at the hearing by the Syndicat général de la radio (FNC/CSN), and the explanation provided in the applicant's reply. The Commission reaffirms the particular importance it attaches to the development of Canadian talent, and notes the annual budget allocations and initiatives contained in the Promises of Performance filed with these applications, including the commitment by Métromédia to continue the contest "L'Empire des Futures Stars". The Commission expects the applicant to adhere to all the commitments contained in both Promises of Performance throughout the new licence term.
As a result of this decision, no further action is required in respect of the licence renewal applications filed by Radio Futura Ltée (920092400 and 920093200) for CKVL and CKOI-FM, which were heard at the Public Hearing in Quebec City beginning on 19 May 1992.
Allan J. Darling
Secretary General