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ARCHIVED -  Decision CRTC 99-109

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Decision

Ottawa, 21 May 1999

Decision CRTC 99-109

Alliance Atlantis Communications inc. and Premier Choix Networks Inc., on behalf of a company to be incorporated - Canal Fiction

Across Canada - 199713128

7 December1998 Public Hearing in Montréal

Summary

The Commission approvesa new French-language specialty television service called "Canal Fiction", to be available to distribution undertakings across Canada. This service will be devoted to great drama programs of yesterday and today, Canadian and foreign, of which a maximum of 20% will be from U.S. sources. In addition, this service will encourage Canadian creators and independent producers. The licence will expire on 31 August 2005.

The new service will enhance the Canadian broadcasting system by the distinct nature of its programming and the synergies resulting from the proposed partnership of Canal Fiction and the English-language specialty service Showcase. In addition, the large budget to be devoted to the production of 12 Canadian movies for television a year will provide very significant support for creators and the independent production industry.

In French-language markets, Canal Fiction will be offered on a discretionary tier consisting solely of French-language services, including at least this service and the three other services approved today (Decisions CRTC 99-110, 99-111 and 99-112). In other markets, Canal Fiction will be offered on a discretionary basis unless the licensee agrees with the distribution undertaking to have it distributed on the basic service.

Programming

Nature of service

1. The licensee is proposing a service of drama programs with two components: Canadian programming and international programming. The Canadian programming will consist mainly of programs that viewers have not seen for several years. Each year, twelve original television movies produced for Canal Fiction will also be broadcast. The international programming will consist mainly of drama programs and series that have never been broadcast on French-language Canadian television. In accordance with its commitment, the licensee will limit its level of programs from U.S. sources to 20%. The Commission expects the licensee to adhere to this commitment. The programs will be targeted to the population as a whole, but will particularly target viewers between the ages of 25 and 54.

2. Consistent with the application, it is a condition of licence that the licensee offer a national French-language specialty service devoted at least 95% to programs drawn exclusively from category 7, as set out in Schedule I of the Specialty Services Regulations, 1990. It is a condition of licence that, with the exception of categories 7c (Specials, mini-series or made-for-TV feature films) and 7d (Feature films, theatrical releases), the Canadian drama programs shall not be recent works; that is, they must have been copyrighted for at least 10 years. Canadian programs in category 7d must have been copyrighted for at least 7 years.

3. The daily schedule shall consist of three blocks of eight hours; one block of original programs and two blocks of repeat programs. The service shall be on the air 24 hours a day, 7 days a week.

Canadian content

4. The licensee committed to broadcast a minimum of 25% Canadian content from 6 a.m. to midnight, and of 25% from 6 p.m. to midnight. The licensee is required to adhere to this commitment by condition of licence. At the hearing, the licensee explained that it realizes the level of Canadian content is relatively low. However, it argued that its philosophy is to [translation] "offer the maximum possible quality Canadian content consistent with the concept, while ensuring that the concept addresses clearly identified expectations and truly contributes to greater diversity in the programming available to viewers". In addition, the $6.3 milion which the licenseee proposes to allocate, over the service's first seven years of operation, to the production of 12 Canadian movies for television each year is significant.

Canadian programming expenditures

5. Consistent with the approach outlined by the Commission in Public Notices CRTC 1992-28, 1993-93 and 1993-174 concerning requirements for Canadian programming expenditures, the licensee is required to expend a minimum of $2,710,000 on the acquisition of and/or investment in Canadian programs in the broadcast year following the first year of operation, as defined in the condition of licence set out in the attached appendix. Further, in each subsequent broadcast year the licensee shall expend on Canadian programs a minimum of 22% of the previous year's gross revenues derived from the operation of the service. This percentage includes the following three commitments made by the licensee:

· The licensee shall spend at least $900,000 each year to fund original French-language Canadian television movies, produced under official co-production agreements with France or other French-speaking countries. The purpose of this commitment is to encourage reciprocity agreements with networks in French-speaking countries and, in return, to open up new international outlets for Quebec fiction, thereby creating new opportunities and revenue sources for Canadian creative talent and program producers. By this means the licensee plans to fund twelve Canadian original television movies per year, to be broadcast on Canal Fiction. It suggested that the English-language specialty television service Showcase acquire the broadcasting rights for these television movies, in dubbed or subtitled versions, for English Canada.

· The licensee will contribute actively to the development of Canadian creative talent and young artists by making an annual grant of $125,000 to the Institut national de l'image et du son (INIS).

· The licensee will also make an annual grant of $100,000 to the Cinémathèque québécoise, specifically for the preservation, restoration and computer archiving of Quebec's and Canada's television heritage.

6. It is a condition of licence that the licensee adhere to the Commission's requirements respecting Canadian program expenditures. The Commission has provided for some flexibility in the accounting of these expenditures in the applicable condition of licence set out in the appendix to this decision.

7. At the hearing, the Commission expressed concerns regarding the possibility of double-counting of expenditures on Canadian programs for Showcase and Canal Fiction. In response, the licensee indicated that it would accept a condition of licence in this respect. This issue which was discussed in Public Notice CRTC 1993-93, is covered by the condition of licence governing expenditures on Canadian programs set out in the appendix to this decision.

Advertising

8. Consistent with the licensee's plans, Canal Fiction may distribute a maximum of 12 minutes of national advertising material, plus a maximum of 30 seconds of unpaid public service announcements, in each clock hour of the broadcast day. Some flexibility for the placement of advertising material in longer programs is provided. The relevant conditions of licence are set out in the appendix to this decision.

Ownership

9. The licensee, a business corporation, will have two shareholders: Les Réseaux Premier Choix inc. (Premier Choix) and Alliance Atlantis Communications inc. (Alliance/Atlantis). Initially, Premier Choix's partner was the Alliance Communications Corporation (Alliance). However, in Decision CRTC 99-106 dated 20 May 1999, the Commission approved the merger of Alliance and Atlantis Communications inc. to form the new entity Alliance/Atlantis.

10. Each shareholder will hold 50% of the shares in the licensee. It will be governed by a board of directors consisting of three directors appointed by each shareholder.

11. Premier Choix is licensee of a French-language pay television service, Super Écran, and two French-language specialty services, Canal Famille and Canal D. Premier Choix is also a subsidiary of Groupe de radiodiffusion Astral inc. (Astral), which is involved, alone or with others, in managing ten specialty, pay or pay-per-view television services. Astral's direct or indirect interest in a large number of specialty services raises the question of concentration of ownership in French-language specialty services.

12. Following the merger, Alliance/Atlantis has become the largest Canadian undertaking in the independent production, distribution and export of feature films and television programs. It is the parent corporation of Alliance Atlantis Broadcasting Inc., licensee of four English-language specialty services: Showcase, History & Entertainment Network, Home & Garden Television, and Life Network. Alliance Atlantis Broadcasting Inc. is also an equal partner with Shaw Communications Inc. in a national video-on-demand service. In addition, Alliance/Atlantis is one of the shareholders of Canal Histoire, approved today.

13. Although the involvement of Astral and Alliance/Atlantis raises the issue of concentration of ownership in specialty services, the Commission is of the view that the resources and experience of these corporations and the synergies to be derived from their partnership will ensure that the proposed programming will feature diversity and high quality, will appeal to consumers, and will promote healthy competition among French-language specialty services.

14. In light of the ownership of the Canal Fiction service described above, the Commission must make certain that there are competitive guarantee mechanisms to protect the interests of independent producers. Canadian independent producers who are not shareholders of Canal Fiction must have an equitable opportunity to provide programs for the service. In reply to the Commission's concern in this connection, the licensee stated that it would acquire all the distribution rights other than ownership for the feature films from Canadian independent distributors, that it would treat all Canadian producers and distributors without discrimination, and that it would not give any preferential treatment to programs produced or distributed by Alliance/Atlantis. To that end, Alliance/Atlantis committed at the hearing to limit to 25% annually its expenditures to acquire the rights to Canadian original programs devoted to programs produced by the corporations holding shares in the service or its affiliates. The licensee is required to adhere to this commitment by condition of licence.

Method of distribution

15. Canal Fiction will be delivered via satellite to all broadcasting distribution undertakings across the country. The distribution arrangements are described in Public Notice CRTC 1999-89, in the preamble to this decision, and also in Public Notice CRTC 1999-90 concerning distribution and linkage, which accompanies the decisions realeased today.

16. In French-language markets, Class 1 licensees and Class 2 licensees that distribute this service must distribute it on a discretionary basis only, in a tier consisting solely of French-language programming services. This tier must include, at a minimum, Canal Histoire, Canal Z and Canal Évasion, also approved today.

17. In other markets, Class 1 and Class 2 licensees may offer it on a modified dual-status basis.

18. With respect to distribution on a discretionary tier, especially in francophone markets, the Commission notes that, in its business plan, the licensee proposed a wholesale rate of $0.75. The Commission expects the licensee to negotiate with distributors and that such negotiations will permit the licensee to implement its plans and to broadcast programming of the quality contemplated in its application, according to its business plan. The Commission will monitor the situation closely.

Implementation

19. This approval is subject to the condition that the service be in operation by 10 January 2000 or, where the applicant applies to the Commission prior to that date and demonstrates that it cannot begin operating the service before that date and that an extension is in the public interest, within such additional time as the Commission shall approve in writing. The licence shall not be issued unless the service is implemented within the authorized period or unless the Commission grants an extension.

20. The Broadcasting Distribution Regulations require a distribution undertaking to provide sixty (60) days' notice to the programming services affected by a channel realignment. The Commission, accordingly, expects the licensee to inform distribution undertakings at least ninety (90) days before the date on which Canal Fiction begins broadcasting.

21. This authority will only be effective and the Commission will only issue the licence at such time as it receives documentation establishing that an eligible Canadian corporation has been incorporated in accordance with the application in all material respects and that this corporation may be issued a licence.

Other matters

Closed captioning

22. The licensee made a commitment to distribute 1,400 hours of closed captioned programming for the deaf and hearing impaired during the first year of operation, and to increase this gradually to a level of 1,620 hours in the seventh year. The licensee will spend a total of $755,000 for closed captioning during the licence term.

23. The Commission expects the licensee to adhere to its commitments. The Commission also encourages the licensee to exceed these commitments over the licence term and to monitor the quality of captions during exhibition.

24. The Commission notes that, from the start of operations, the licensee will have a telecommunication device for the deaf (TDD), and will ensure that the TDD number is well publicized.

Employment equity

25. 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 this regard, the Commission encourages the licensee to consider employment equity issues in its hiring practices and in all other aspects of its management of human resources.

Conclusion

26. The Commission is satisfied that Canal Fiction will offer attractive, high-quality French-language programs that will promote Quebec's and Canada's television heritage and open up a window on world heritage. In approving this application, the Commission is satisfied that there is a clear demand for a service such as that proposed, and that the commitments by the licensee will result in new opportunities and new funding sources for Canadian talent and independent producers. Finally, the Commission considers that the proposed partnership between Canal Fiction and Showcase will result in synergy that will make it possible to finance quality programs that can make their mark both nationally and internationally.

27. The Commission acknowledges and has considered the interventions submitted with respect to this application.

Secretary General

This decision is to be appended to the licence. It is available in alternative format upon request, and may also be viewed at the following Internet site:

www.crtc.gc.ca

Appendix to Decision CRTC 99-109

Conditions of licence for "Canal Fiction"

Nature of the service

1. (a) The licensee shall offer a national, French-language specialty television service devoted to drama;

(b) at least 95% of the programming must belong exclusively to category 7, as set out in Schedule I to the Specialty Services Regulations, 1990.

(c) Except for programs in categories 7c (Specials, mini-series or made-for-TV feature films) and 7d (Feature films, theatrical releases), the Canadian programs broadcast on Canal Fiction must have been copyrighted at least 10 years before the date of broadcast. The program logs must make it possible to identify the dates.

(d) The Canadian programs in category 7d broadcast on Canal Fiction must have been copyrighted at least 7 years before the date of broadcast. The program logs must make it possible to identify the dates.

Exhibition of Canadian programs

2. In each broadcast year, the licensee shall devote to the distribution of Canadian programs not less than 25% of the broadcast day and not less than 25% of the evening broadcast period.

Expenditures on Canadian programs

3. In accordance with the Commission's position on Canadian programming expenditures as set out in Public Notices CRTC 1992-28,1993-93 and 1993-174:

(a) In the broadcast year following the first year of operation, the licensee shall expend on Canadian programs not less than $2,710,000, including expenditures on contributions to the development of young artists (INIS or a similar organization) and to the preservation and promotion of the television heritage.

(b) In each subsequent broadcast year, the licensee shall expend on Canadian programs, including script and concept development expenditures for Canadian programs that are not broadcast, expenditures on contributions to the development of young artists and the preservation and promotion of the television heritage, not less than 22% of the previous broadcast year's gross revenues derived from the operation of the service.

(c) In the broadcast year following its first year of operation, and in each subsequent broadcast year, excluding the final year, the licensee may expend an amount on Canadian programs that is up to five percent (5%) less than the minimum required expenditure for that year set out in or calculated in accordance with this condition; in such case, the licensee shall expend in the next year of the licence term, in addition to the minimum required expenditure for that year, the full amount of the previous year's underexpenditure.

(d) In the broadcast year following the first year of operation, and in each subsequent broadcast year, where the licensee expends an amount on Canadian programs that is greater than the minimum required expenditure for that year set out in or calculated in accordance with this condition, the licensee may deduct:

(i) from the minimum required expenditure for the next year of the licence term, an amount not exceeding the amount of the previous year's overexpenditure; and

(ii) from the minimum required expenditure for any subsequent year of the licence term, an amount not exceeding the difference between the overexpenditure and any amount deducted under paragraph (i) above.

(e) Notwithstanding paragraphs (c) and (d) above, during the licence term, the licensee shall expend on Canadian programs, at a minimum, the total of the minimum required expenditures set out in or calculated in accordance with the licensee's condition of licence.

4. The licensee shall limit to 25% annually its expenditures to acquire the rights to Canadian original programs devoted to programs produced by the corporations that are shareholders in the service or affiliates.

Advertising

5. (a) Subject to subsections (b), (d) and (e), the licensee shall not distribute more than twelve (12) minutes of advertising material during each clock hour;

(b) In addition to the twelve 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 national paid advertising;

(d) Where a program occupies time in two or more consecutive clock hours, the licensee may exceed the maximum number of minutes of advertising material allowed in those clock hours if the average number of minutes of advertising material in the clock hours occupied by the program does not exceed the maximum number of minutes that would otherwise be allowed per clock hour;

(e) In addition to the twelve minutes of advertising material referred to in subsection (a), the licensee may broadcast partisan political advertising during an election period;

(f) For the purpose of this condition, advertising material does not include a promotion for a Canadian program to be broadcast by the licensee, notwithstanding that a sponsor is identified in the title of the program or is identified as a sponsor of that program, where the identification is limited to the name of the sponsor only and does not include a description or representation of the products or services or any attributes of the sponsor's products or services.

Rate

6. From the date of commencement of service, the licensee shall charge each exhibitor of this service in Francophone markets a maximum wholesale rate of $0.45 per subscriber per month, when the service is distributed as part of the basic service.

Adherence to industry codes

7. 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.

8. The licensee shall adhere to the provisions of the CAB's Broadcast Code for Advertising to Children, as amended from time to time and approuved by the Commission.

9. 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.

Definitions

For the purpose of these conditions of licence, all time periods shall be reckoned according to the eastern time zone; "broadcast day" shall mean a period of 24 consecutive hours commencing each day at 6 a.m.; the terms, "broadcast year", "broadcast day", "evening broadcast period" and "clock hour" shall have the same meanings as those set out in the Television Broadcasting Regulations, 1987; "broadcast week" shall have the same meaning as that set out in the Radio Regulations, 1986; "first year of operation" shall mean the first broadcast year in which Canal Fiction is in operation for a period exceeding 90 days, excluding any free trial period; and "paid national advertising" shall mean advertising material as defined under the Specialty Services Regulations, 1990 and that is purchased at a national rate and receives national distribution on the service.