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ARCHIVED -  Decision CRTC 94-284

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Decision

Ottawa, 6 June 1994
Decision CRTC 94-284
The Partners of MH Radio/Rawlco Partnership
Across Canada - 931510200
"The Country Network" - a country music video service - Approved
Following a Public Hearing held in the National Capital Region beginning on 14 February 1994, the
Commission approves the application by the partners of MH Radio/Rawlco Partnership (the Partnership) for a broadcasting licence to carry on a national, English-language programming undertaking (Specialty Television Service). Since this service will be offered free of charge when distributed as part of the basic service, it will be made available to cable television affiliates across the country for distribution on a dual status basis as explained in Public Notice CRTC 1994-59 which introduces this and the other decisions issued today, and in accordance with the provisions outlined in the distribution and linkage public notice accompanying this decision (Public Notice CRTC 1994-60).
The Commission will issue a licence to the partners of the Partnership expiring 31 August 2000, subject to the conditions specified in the appendix to this decision and in the licence to be issued.
Ownership
Through its 60% partnership interest, CFCN Productions Limited (CFCN) controls the Partnership. CFCN itself is ultimately controlled by Maclean Hunter Limited (MH). 566684 Alberta Ltd., which holds the remaining 40% partnership interest, is owned and controlled by Rawlco Communications Ltd. (Rawlco).
MH has extensive holdings in the cable, radio and television sectors of the Canadian broadcasting system. At the hearing, MH stated that it has a responsibility not to discriminate against any service and to treat all services fairly and that it would adhere to the access guidelines set down by the Canadian Cable Television Association (CCTA). The Commission expects MH to adhere to this commitment.
Nature of Service
The Country Network will offer a country music video service, based in Calgary, that will target viewers aged 18 years and over. As described by the applicant, and as set out as conditions of licence in the appendix to this decision, a minimum of 90% of all the programming offered by The Country Network shall be from program category 8(b) (music video clips), as defined in the Specialty Services Regulations, 1990. In addition, a minimum of 70% of all video clips broadcast shall feature musical selections from music content subcategory 22 (country and country-oriented), as defined in Public Notice CRTC 1990-111 dated 17 December 1990.
Programming
The Country Network will offer a 24-hour-a-day country music video service, which will be presented in a radio-style format, but with no on-air personalities or "video jockeys". Described as a "Video Plus" format, the service will offer music videos, almost exclusively, interwoven with short, self-contained programming segments consisting of documentaries, variety programs, artist features and interviews. The applicant plans to use these program features to promote Canadian country music artists. At the hearing, the applicant indicated that each hour of programming will contain approximately fourteen music videos, four of which will be Canadian, as well as three or four program features.
During the first year of the licence term, a minimum of 30% of the music video clips exhibited on a weekly basis, will be Canadian, increasing by 2% each year, to a minimum of 40% by year six. Adherence to these levels shall be required by condition of licence.
According to the applicant, there are currently between 77 and 120 Canadian country music video clips of acceptable quality available for broadcast on The Country Network. To increase the number of quality Canadian country music video clips, the applicant made a commitment that, upon approval of this application, it will contribute $300,000 to the production of Canadian country music videos. The applicant is required, by condition of licence, to adhere to this commitment.
This initiative which the applicant identified as "Operation Kick Start" will provide a maximum of $15,000 for each video to be produced. The applicant expects this investment to result in the production of 20 Canadian country music videos to be available during the service's first year of operation.
The applicant also proposed a "Video Incentive Program" to further encourage the production of Canadian country music videos. The applicant made a commitment to provide $1,755,000 in its first year of operation, increasing to $2,340,000 by the sixth year, to Canadian artists for the use of their videos. The applicant is required, by condition of licence, to adhere to this commitment.
Under The Country Network's guaranteed airplay commitment, the proposed service will broadcast, a minimum of 30 times, every professionnally-made, broadcast quality music video it receives. The Country Network will pay Canadian artists that produce broadcast-quality music videos $150 per play for each video, subject to a minimum of $4,500 to a maximum of $15,000.
The applicant expects that its investment and its commitment to guarantee airplay to Canadian artists should encourage the production of approximately 100 Canadian country music videos each year.
The Commission notes that The Country Network will have no production facilities and will rely totally on the independent production community for its Canadian programming.
The Commission notes the applicant's plans to undertake six mini-tours each year in various regions of Canada as part of The Country Network's "Road Show". At the hearing, the applicant described the Road Show as the "extended marketing arm for The Country Network" and stated that it will showcase talent at the local community level. According to the applicant, the "Road Show" will allow it to "reach out to a lot of smaller towns and cities and be there in person".
Further, under The Country Network's talent search initiative, the applicant will request new artists to submit video clips of their performances. Every second month, the network will broadcast the "Country Network Talent Weekend" during which the service will air the best five videos of the past two months.
Financial Matters
The Partnership will provide $26,000,000 in advance funding for the service. Both MH and Rawlco submitted documentation to the Commission confirming the availability of additional financial resources, should they be required.
The applicant projected that, should The Country Network be distributed on basic cable service, it would, by the second year of the licence term, reach 100% of English-language cable subscribers. Under such a scenario, the applicant's business plan anticipates that it would generate sufficient advertising revenues to allow it to be distributed free on basic service.
The applicant submitted a business plan that indicated that, where The Country Network is carried by a cable affiliate on a discretionary tier with potentially fewer subscribers, a wholesale fee of $0.07 per subscriber per month would be charged. The $0.07 rate was calculated by the applicant as the rate required to compensate the service for the decrease in advertising revenues associated with the lower penetration of the discretionary tier.
With regard to advertising, the applicant proposed, and is hereby authorized by condition of licence, to distribute a maximum of eight minutes of paid national advertising during each clock hour.
The Commission notes that the Partnership's financial projections and programming commitments for The Country Network are based on the foregoing assumptions.
The Commission is satisfied that the Partnership has sufficient resources to maintain the service in operation until it achieves a positive cash flow. Furthermore, based on the evidence presented at the hearing, the Commission is satisfied that there is a significant consumer demand for the proposed service.
Other Matters
The Commission notes the applicant's commitment to seek out, for distribution on its service, country music videos that contain closed captioning.
The applicant requested that the Commission delete Country Music Television (CMT), a U.S. service in a competitive format, from the Commission's lists of eligible satellite services. As stated in Public Notice CRTC 1994-61 issued today, entitled "Revised Lists of Eligible Satellite Services", it is the Commission's policy that, where a Canadian service is licensed in a format competitive to that of an authorized non-Canadian satellite service, the authority for the cable carriage of the non-Canadian service could be terminated. Accordingly, in that notice, the Commission has authorized cable licensees to continue to distribute CMT only until such time as The Country Network's service first becomes available for distribution to affiliates.
In Public Notice CRTC 1992-59 dated 1 September 1992 and entitled "Implementation of an Employment Equity Policy", the Commission announced that the employment equity practices of broadcasters would be subject to examination by the Commission. In its application, the Partnership indicated that it would follow CFCN's corporate plan for employment equity. The Commission encourages the applicant to promote equitable representation in voice-overs of commercial messages it produces.
In licensing this new specialty service, the Commission is satisfied that it will contribute significantly to achieving the objective of increasing the diversity of programming available to Canadians, at little or no incremental cost to individual subscribers. The Commission has also noted the applicant's substantial commitments to pay Canadian artists for the use of their videos. Furthermore, the Commission is satisfied that the applicant has demonstrated that the proposed service meets the Commission's criteria regarding financial viability. The Commission also notes the market demand, as demonstrated, and is satisfied that the new programming undertaking will not have a significant negative impact on existing licensees.
Allan J. Darling
Secretary General
APPENDIX / ANNEXE
Conditions of Licence for The Country Network
For the purpose of measuring compliance with conditions of licence 1 and 2 set out below, the first broadcast year of the licence term will be deemed to commence on 1 September 1994.
1. (a) A minimum of 90% of all programming broadcast by The Country Network shall be from category 8(b) (music video clips) as defined in the Specialty Services Regulations, 1990.
 (b) A minimum of 70% of all video clips broadcast by The Country Network shall feature musical selections from music content subcategory 22 (country and country-oriented), as defined in Public Notice CRTC 1990-111 dated 17 December 1990.
2. During the first year of the licence term, the licensee shall broadcast, on a weekly basis, a minimum of 30% Canadian music clips, and shall increase this level by 2% increments each year to a minimum of 40% in the sixth year of the licence term.
3. In each of the broadcast years of the licence term, the licensee shall expend no less than the following amounts on payments to Canadian artists for the use of their videos:
 (a) from commencement of the service until 31 August 1995, $1,755,000;
(b) from 1 September 1995 until 31 August 1996, $1,872,000;
(c) from 1 September 1996 until 31 August 1997, $1,989,000;
(d) from 1 September 1997 until 31 August 1998, $2,106,000;
(e) from 1 September 1998 until 31 August 1999, $2,223,000; and
(f) from 1 September 1999 until 31 August 2000, $2,340,000.
4. From the date of this decision until 31 August 1995, the licensee shall spend no less than $300,000 on the production of Canadian country music videos.
5. (a) Subject to subsection (b) the licensee shall not distribute more than eight minutes of advertising material during each clock hour.
 (b) In addition to the eight minutes of advertising material referred to in subsection (a), the licensee may distribute, during each clock hour, a maximum of 30 seconds of additional advertising material that consists of unpaid public service announcements.
 (c) The licensee shall not distribute any paid advertising material other than paid national advertising.
6. The licensee shall adhere to the guidelines on gender portrayal set out in the Canadian Association of Broadcasters' (CAB) "Sex-Role Portrayal Code for Television and Radio Programming", as amended from time to time and approved by the Commission.
7. The licensee shall adhere to the provisions of the CAB's "Broadcast Code for Advertising to Children", as amended from time to time and approved by the Commission.
8. The licensee shall adhere to the guidelines on the depiction of violence in television programming set out in the CAB's "Voluntary Code Regarding Violence in Television Programming", as  amended from time to time and approved by the Commission.
For the purpose of these conditions of licence, the terms "broadcast day", "broadcast month", "broadcast year" and "clock hour" shall have the same meaning as those set out in the Television Broadcasting Regulations, 1987; and "paid national advertising" shall mean advertising that is purchased at a national rate and receives national distribution on the service.