TRANSCRIPT OF PROCEEDINGS
FOR THE CANADIAN RADIO-TELEVISION AND
TRANSCRIPTION DES AUDIENCES DU
CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
BROADCASTING APPLICATIONS AND LICENCES/
DEMANDES ET LICENCES EN RADIODIFFUSION
HELD AT: TENUE À:
Vancouver Trade Vancouver Trade
& Convention Centre & Convention Centre
Room 8-15 Salle 8-15
999 Canada Place 999, Canada Place
British Columbia (Colombie-Britannique)
February 22, 2000 Le 22 février 2000
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
Public Hearing / Audience publique
Broadcasting Applications and Licences/
Demandes et licences en radiodiffusion
BEFORE / DEVANT:
Françoise Bertrand Présidente/Chairperson
Présidente du Conseil/
Chairperson of the Commission
Andrée Wylie Conseillère/Commissioner
Stuart Langford Commissioner/Conseiller
Cindy Grauer Commissioner/Conseillère
Barbara Cram Commissioner/Conseillère
ALSO PRESENT / AUSSI PRÉSENTS:
Lori Assheton-Smith Legal Counsel/
Michael Burnside Hearing Manager/ Gérant de l'audience
Marguerite Vogel Secrétaire de l'audience/
HELD AT: TENUE À:
Vancouver Trade Vancouver Trade
& Convention Centre & Convention Centre
Room 8-15 Salle 8-15
999 Canada Place 999, Canada Place
British Columbia (Colombie-Britannique)
February 22, 2000 Le 22 février 2000
TABLE OF CONTENTS / TABLE DES MATIÈRES
PRESENTATION BY / PRÉSENTATION PAR
CHUM Limited 373
Craig Broadcasting Systems Inc. 451
PHASE II - INTERVENTION BY / PAR
CHUM Limited 517
Trinity Television Inc. 526
CHUM Limited 530
Craig Broadcasting Systems Inc. 539
PHASE III - INTERVENTION BY / PAR
BCTV and CHEK-TV 547
Global Television Network 585
CTV Television Inc. 624
IT Productions Limited 643
Fairchild Television Limited 664
The Canadian Film and Television
Production Association and the
CFTPA B.C. Producers Branch 685
Vancouver, British Columbia / Vancouver (C.-B.)
--- Upon resuming on Tuesday, February 22, 2000
at 0800 / L'audience reprend le mardi
22 février à 0800
2231 CHAIRPERSON OF THE COMMISSION: Good morning, everybody.
2232 I would ask Madam Secretary to present us with the applicant, please.
2233 MS VOGEL: Thank you, Madam Chairperson.
2234 Our next applicant is CHUM Limited. They are applying for a broadcasting licence to carry on an English language television programming undertaking at Vancouver. The new station would operate on channel 53 with an effective radiated power of 12,000 watts. The applicant is also proposing a rebroadcasting transmitter in Vancouver on channel 17 with an effective radiated power of 44,000 watts.
2235 Whenever you are ready.
PRESENTATION / PRÉSENTATION
2236 MR. SHERRATT: Thank you. Good morning, Madam Chair, Members of the Commission. You met most of our team yesterday, or many of them, so in the interest of time, I thought I would just introduce the new faces that are at the table this morning.
2237 On my far left is Laura Acton. Laura is an active, involved member of the Victoria community and has been our pulse on the Island since last fall. Beside Laura is Clint Nickerson. Clint is Senior Producer, City Pulse and CP24. He is a Victoria native and has been very involved in the thrust of this application.
2238 Behind me on the outside right is Mark Rubinstein, Senior Vice-President and General Manager of CHUM City Television Group. Behind Mark at the far end of that table is Greg Mudry who is Vice-President, General Manager, of the New PL, the New WI and the New NX.
2239 Madam Chair, Members of the Commission, CHUM's roots are in local broadcasting. I have my broadcasting roots in Atlantic Canada and it's a pleasure for me to come to the other coast of this great country with a proposal for local broadcasting in Victoria and Vancouver Island.
2240 While CHUM's local television may be best known for Citytv, our passion for local, community-based broadcasting had its beginnings in medium and small markets. Long before we acquired Citytv in the seventies, we built local television in the Maritimes by demonstrating that quality local television could be provided in smaller markets. Perhaps it was because we were a radio company first, we lived local both in programming and in revenue.
2241 Selling our Atlantic stations to Baton in 1997 was one of the most difficult decisions I have ever made, but it was the right decision in that it allowed CTV to finally have one owner.
2242 It also allowed us to bring our medium and small market experience to more Ontario city and towns -- Wingham, Windsor, London, Pembroke and Ottawa. Today these stations, joined by the NewVR in Barrie, provide local service to most of Southern Ontario. Now we are asking you to allow us to bring that experience and expertise to Victoria and the Island.
2243 The argument for a new local station in British Columbia's capital is compelling. Many Canadian markets this size have two or even more stations. The people of Victoria and the Island have told us they want a new, intensely local television station to serve their community.
2244 From all that we have learned in our consultation on the Island, two things come through loud and clear. Islanders want a new television service and they want it to be one designed to serve the Island's needs, not one that while situated there, really has its eyes on Vancouver. That's the reason we have applied for two different stations in this process.
2245 Even though the national advertising community treats Victoria and Vancouver as a single market, they are two very distinctly different communities. By having a Victoria station and a separate and distinct Vancouver station, each will be able to focus on the local needs and interests of the communities they are designed to serve, while at the same time contributing to the national public interest commensurate with their resources.
2246 To speak to how CIVI Victoria has been received and its plans honed locally, allow me to now introduce Laura Acton, who has served as our local Victoria and Island community advisor.
2247 MS ACTON: Good morning, Madam Chair and Members of the Commission.
2248 I would like to begin by saying it is a privilege and an honour for me to participate in this CRTC process. The fact that CHUM has asked me to get involved in this hearing as a part of their team speaks volumes for their commitment to community involvement.
2249 My experience with CHUM over the past month has assured me that they have the vision, commitment and ability to meet the needs of viewers on Vancouver Island.
2250 My family and I have lived in Victoria for 24 years. I am the daughter of an immigrant and grew up in a rural town in Southwestern Saskatchewan. Both these factors instilled in me that it was a privilege to be a Canadian citizen and that everyone had a responsibility to contribute to building a sense of community where people cared about each other. It is with this background that I became active in the community of Victoria.
2251 My community service experiences include James Bay Co-operative Preschool, James Bay Community School Society, Trustee of the Greater Victoria School Board, Councillor for the City of Victoria, Director on the Capital Regional District Board, member of the Provincial Capital Commission and member of the Capital Health Board. These experiences have given me a good understanding of how to address the needs of an active, involved and diverse community, not only in Victoria but on the rest of the Island as well.
2252 When I was approached by CHUM, I had to admit that I did not watch a lot of television and when I did, I was a CBC viewer and a strong supporter of public broadcasting. I was given information on the company and I also did my own due diligence research. I wanted to make sure that any work that I took on was consistent with the public values that I advocated throughout my community service. It was very important to me that we agreed on key principles. We did, and they are attached to this opening statement.
2253 I was responsible for the community consultation process, the beginning of a dialogue with the community. What we heard first and foremost was a great deal of dissatisfaction with the present level of service from CHEK Television and consensus on the need for choice in the marketplace to maximize the diversity of local based programming. And what we also heard was tremendous support for the principles that we had developed from a broad base of interests: First Nations, multicultural, ecology, arts and culture, production, youth, and more.
2254 Most gratifying for me was the part of the feedback -- verbal, in the media and stated in letters of support that our efforts to consult with the community were recognized and seen as a genuine effort to find out what the community needs were.
2255 In closing, I believe CHUM Television is the best choice for Victoria and the Island. CHUM's reputation as visionary leaders in the Canadian broadcasting industry and their efforts to democratize television is extraordinary.
2256 We need that alternative choice that will reflect the vibrancy, diversity, eccentricity and creativity of Victoria and Island residents. This in turn will be reflected nationally and internationally as well through CHUM specialty channels such as Bravo!, MuchMusic and MuchMoreMusic, Star!, Space and Canadian Learning Television.
2257 Thank you very much.
2258 MR. ZNAIMER: As a locally managed independent television station within the CHUM Television group, CIVI Victoria and the Island will be built on the following strengths.
2259 We are the original creators of the downtown, street level, interactive approach to local television. We are known for our service to all kinds of communities, large and small, across Canada and around the world.
2260 We are proud of our track record of voluntarily and proactively addressing issues of cultural diversity, media literacy and social responsibility. We have a proven ability to recognize and develop local talent, particularly among the young.
2261 We have a growing national international web of affiliated services and programs that enable synergies in production, promotion and distribution. And, lest we forget that what we also do is show business, we bring energy, excitement and glamour to the business of local television. In a word, we have the showmanship that people want.
2262 The specific elements of our plan for CIVI Victoria and the Island are 104 new, knowledge based local jobs to start; 26 hours per week of original local programming, including six and a half hours a week of non-news programming; locally produced programs showcasing, among other things, lifelong learning and entrepreneurship and First Nations cultures; deep coverage of Victoria and the Island's news, views, events and personalities, and eight hours of priority programming per week in peak time from day one.
2263 This is a very ambitious proposal for a station whose first year revenues are not expected to hit $10 million, but we believe these are the commitments that are necessary if we are to serve both the local community and support the CRTC's television policy.
2264 These commitments are validated. They are backed up by the precision of a defined schedule, a schedule for which we either already own or can readily access Victoria and Island rights and that, therefore, will not further drive up the cost of imported U.S. programming.
2265 Even without a local station here, in the past decade CHUM has spent over $10 million on B.C. produced feature film, drama and documentary. With a local station in Victoria and the Island, we will do so much more. We have already started laying the foundation for that.
2266 In an unconditional grant to the Greater Victoria Film Commission, we gave $50,000 to help kick off their fundraising campaign for long term stable funding. We have also sponsored the Victoria Independent Film Festival's first ever First Canadian Feature Award. With a station in Victoria and on the Island, we will be able to build on these relationships the better to advance the long term sustainable development of a production industry in Victoria and the Island.
2267 In our many visits, we have found that what excites people is our reputation for optimism, for creative innovation and for technological novelty. What they want most from us is that we get the Victoria and Island story out, first to the communities themselves, then to the rest of Canada and, finally, to the world. They want to speak to the world.
2268 I think we have come together because they have come to the right place. We have the instruments, we have the interest to act as the catalyst that will finally give the political capital of British Columbia its proper television due.
2269 Roll it.
--- Video Presentation / Présentation vidéo
2270 MR. NICKERSON: Madam Chair, Members of the Commission, my name is Clint Nickerson. Good morning.
2271 I am a native Victorian, raised and educated and eventually frustrated in Victoria, having realized that if I were to achieve anything approaching my goals in broadcasting, I would have to leave my beautiful home town to find the challenges and successes that I so badly wanted.
2272 I am also a senior producer for Citytv where, for the past 20 years, I have been one of the new fortunate people to see a vision of a diverse, scrappy, intensely local, visually smart television station grow into the world renowned competitive success that it is today. Still, I have kept my roots in Victoria, maintaining an apartment there and returning numerous times each year.
2273 Lucky, really, because after three jobs in three years, my choice of career took me off the Island. As coincidence would have it, I joined CHUM in Vancouver as it began its first business in B.C., buying CKVN and bringing home the old and very much loved call letters CFUN.
2274 At the same time as I was leaving Victoria, forlorn, Time Magazine was publishing this issue on a daring new concept in television, just licensed for Toronto. I would like to quote a couple of sentences, if I might:
"Their task will be to go into the community and discover how events touch the lives of real people ... what it's like to live in this city on a particular day may very well not include a speech by the mayor. What Mrs. Jones says may be more significant. "
2275 In conclusion:
2276 "This low budget, community participation approach seems to be just what the Canadian Radio-television Commission wants to see more of. If CITY works, it could well become a harbinger for UHF stations across the country."
2277 This is from August 14, 1972. This magazine, by the way, was offered up just last month at one of those community consultations that Laura just told you about by a Victoria supporter who was so passionate about the prospect of our being licensed that he gave up his souvenir.
2278 For the past 18 months, I have also helped to oversee the evolution of the NewPL, the NewNX and the NewWI, our stations in Southern Ontario, involved in the implementation of our different approach to news: more local content, updated technique and a more informal and dynamic presentation.
2279 Similarly, in the course of our extensive community consultations and discussions, we have honed CIVI Victoria and the Island's program schedule to address the programming areas of greatest priority to local residents.
2280 For example, we can confirm that newscasts will feature regular segments on arts and culture, sports and recreation and the ecology and the environment with on-staff specialists in these areas. Regular hour long TalkTV log in/phone-in shows will provide forums on the important issues of the day. Local non-news programming will also include a weekly amateur sports and recreation show, a weekly ecology and environmental show and programming showcasing youth culture and ideas.
2281 CIVI Victoria and the Island will address the demands for up-island coverage with the establishment of a Nanaimo bureau, the establishment of a stringer network by means of widespread distribution of digital handicams to the outlying communities. Over time, additional people, cameras and resources will be devoted to the Nanaimo bureau, producing Nanaimo and up-island programming sooner rather than later.
2282 CIVI will give the people of Victoria and the Island a chance to meet, to relate to and identify with their neighbours: the First Peoples, the artists, the athletes, the activists, the issues and the stories that are always reflected by our mirror.
2283 MR. SHERRATT: There are many questions that we, and ultimately you, have to answer in deciding on a new local station to serve Victoria and the Island.
2284 Is there clear local demand? We believe unquestionably yes.
2285 Is the applicant committed to strong local service? Yes. CHUM has based its plans on a precise schedule and financials that will ensure local programming is faithfully geared to Victoria and Island residents, not the lower mainland.
2286 Which applicant will best enhance the Commission's TV policy objectives? In our respectful submission, we believe that CHUM's proposal is the answer to that question.
2287 CIVI Victoria licensed in concert with CHUM Television Vancouver will, first, serve both Vancouver and Victoria with strong, separate, local and culturally diverse programming. Second, immediately increase to eight hours of priority programming per week in peak time on all CHUM Television stations and, third, guarantee ownership diversity in the system by building a strong CHUM Television which will complement the two national private networks in a way that furthers the objectives of the Commission's Television Policy.
2288 Thank you. We invite your questions.
2289 CHAIRPERSON OF THE COMMISSION: Thank you very much. I would ask Commissioner Langford to be addressing the questions for the Commission.
2290 COMMISSIONER LANGFORD: Thank you, Madam Chair. I want to tell you that I had lunch at the Swan's Hotel on Sunday and everything is pretty well back together now. If you just bring back the beer glasses, there will be no questions asked. Oh, and the televisions, yes.
2291 That was interesting. It kind of makes me want to throw away my questions and just start with what I have got here. I think -- perhaps that's never wise. I'm kind of interested, Ms Acton, about the statement you make at the Swan's Hotel introduction. I think that was you.
2292 They are not here to tell you what they think a local station should look like. They are here to hear from you. I think that's what you said, or pretty close anyway. Do you think that's right, actually? I mean it's a good thing to say and people like to hear it, but isn't there a kind of a model, an RO model if I can call it that, that we are bringing here? Where's the balance?
2293 MS ACTON: Thank you, Commissioner Langford.
2294 CHUM came into Victoria with a framework of an application for a new locally based television station for Victoria and the Island. What they wanted to do was to talk to -- have a dialogue with the community to get the community's feedback on what they thought a locally based television should look like.
2295 As Clint has outlined in his presentation, as a result of those community consultations, they honed their proposal and took some of the feedback that they did receive from the community. The essence of our campaign was to have this dialogue with the community, to get the feedback from the community and marry it with the framework of an application that they had already established.
2296 One of the issues that came out certainly during our consultations was with the environmental community. We met with about ten representatives of the environmental community. It was very important to them that there be balanced representation of environmental issues on the Island. It was important to them to have a specialist from the environmental community reporting on environmental issues as a regular part of the news program. The same with a representative of the arts and culture community.
2297 Certainly one area that really came out as being underserved in Victoria and the Island was youth culture and ideas. We convened a forum, a youth forum, at the University of Victoria with about 50 young people. The ideas that they had to bring forward were just really exciting. I think the process was very engaging with all the young people that were there. They came up with ideas for programming for the new station and they were very excited about it. I was very excited just watching the whole process and watching these young people engage and talking about how they do not feel that their culture is represented through our locally based station that is in Victoria now.
2298 COMMISSIONER LANGFORD: These questions are for anybody.
2299 MR. ZNAIMER: Mr. Langford, may I?
2300 COMMISSIONER LANGFORD: Absolutely. Fire away.
2301 MR. ZNAIMER: I think this is a hugely important question. I guess I thank you for the opportunity of trying to clarify.
2302 Both in the case of this model that you mentioned, the RO model, and in the case of the Citytv model, it has been a chore for us to get across the idea that while we bring an aesthetic and a business framework, we don't bring local content. We don't bring Toronto stuff and put it into the newscasts and the specialty components which you see on the weekends from the one community to the other.
2303 In fact, what we are proposing is a machine, a new way of organizing the television factory which is so sensitive that what you might think is a model which we internally call the NewNet, one that connects the New RO with the New VR and with the New PL, the New NX and so on.
2304 This model is so sensitive that even within that system, these stations are not identical one to the other. What they seek to do is to bring out precisely the particularity of the area, so the New VR will naturally be occupied with sports and recreation because that's the dominant industry and culture in that area.
2305 The station in Ottawa will bring out obviously politics and the new -- well, the new media sector that is emerging in Ottawa. The station in the southwest is dealing with issues of community and environment and agriculture. Of course, in Windsor they are preoccupied with industry and with labour issues. Each one of these stations shares a framework that allows them to survive because previous efforts on a stand alone basis have been chaotic and typically not successful. That's why there are so few independent stations around.
2306 COMMISSIONER LANGFORD: I don't question the value of anything you are saying, but I am going to pursue this a little bit.
2307 MR. ZNAIMER: Please.
2308 COMMISSIONER LANGFORD: I don't want to pursue it in a critical way because it's a sound application in answer to a lot of questions. I am going to even ask some questions I have thought of at the end, so that helps me.
2309 I do want to pursue this a little bit and I want to in pursuing, I will probably get back to just a little bit on severability a little later so you won't think I'm sneaking around the back here and then coming in the back door.
2310 I take your point on what you say. Clearly what plays in Barrie isn't going to play in Victoria, but there is a certain mould in which you put the pieces, isn't there? There's a certain energy that comes out just from this three minute and 38 second thing. There's a CHUM energy if you have walked down Queen Street when you are having one of your outside concerns, it's there. If you go by the window when the kids are in dancing, whatever, there's a certain energy.
2311 Without trying to pick up on tiny points, but I found it interesting, and Ms Acton spoke about talking to the University of Victoria students. We have our University of Victoria graduate here, so we have inhouse expertise in our inhouse counsel.
2312 Like a lot of University of Victoria graduates, Ms Assheton-Smith did not come from Victoria. She came from away, as they say in Ireland. So I wonder how accurate that is. I'm not saying it's not useful. They are there. They are there eight months a year. They are part of audience, they are part of your viewing. But, is it useful in trying to understand what Victoria wants?
2313 Are you giving me a little of environmental, a little bit of craft show, a little bit of local news, a little bit of this, but in fact just dropping those small pieces into a model that works a lot better in Toronto or Ottawa than it would work in Victoria?
2314 MR. ZNAIMER: Well, we don't believe so. There are so many aspects in the answer to this question.
2315 First of all, we evoke a certain frame of mind. It's not true that all the hip people are in the big cities and all the hick people are in the small cities, but that there are hip and hick people in both places. We attract the viewership that is rather more interested in the progressive thing and that seems reasonable because there are already stations there that do the conventional and conservative thing.
2316 A subtler point, and one that we have had great trouble getting across, is we think we can make a world-wide business out of the science of local reflection because it's a hard thing to do. While the reflex is to believe that a local ownership will give you local content, it doesn't stand the test of analysis. I mean CHEK was locally owned for 40 years. It has been -- I have never actually run a condemnation that has been its focus as unanimous as that.
2317 COMMISSIONER LANGFORD: But by your figures, they are not doing that badly, are they, by your own figures and your application?
2318 MR. ZNAIMER: Whose that? CHEK.
2319 COMMISSIONER LANGFORD: Yes.
2320 MR. ZNAIMER: Oh, as a business, sure. I'm talking about its ability to really function as a local voice and it has had that monopoly role and the responsibility for so many years. We are not here to knock CHEK. We are here to offer a new kind of thing and explain how it works. One of the hurdles we have had is to get across this idea that because it's tough work -- it's a corporate specialty and it has taken us a long time to figure out how to do it.
2321 Because we have -- that's your guarantee of performance because, well, people don't set out to lie, but obviously results have frequently deviated from the expectations that the Commission may have had when it licenses one local group or another.
2322 This argument of ours has been recognized on a world-wide basis because as the rest of the world approaches the level of service that we have had in Canada for some time, they all come to the metropolitan question. They all come to -- we have got a Colombian network or two or three and they are kind of all the same, and what do we do about Bogota?
2323 Somebody gets the licence and then they try and figure out how it works. They can't because nobody has experience in this kind of thing elsewhere in the world. So they find themselves sooner or later at the corner of Queen and John. One of the questions they ask us is "If this is so smart, and we think it is and it looks great and we want it in Barcelona, how come you haven't got another one in Canada?"
2324 MR. SHERRATT: Commissioner Langford, your point about, you know, it's the RO format or whatever it is and the intensity. That's true but, you know, newspapers have limited formats. You are either a broadsheet or you are a tabloid, but the content of newspapers is dramatically different wherever you go in any community.
2325 COMMISSIONER LANGFORD: Mr. Black is levelling that out?
2326 MR. SHERRATT: Just to carry on. The actual forum that took place at the University of British Columbia was set up and instigated by a local Victoria chap who I think is coming over to speak to you later in the week.
2327 We were at a gathering in Victoria last week with a number of community leaders and his name came up. Everybody who had anything to do with City Council, with any board in the City of Victoria knew him because he is a very young community activist who has accomplished a number of things. So it was a local group that gathered there. We talked to people of all ages.
2328 One of the things that is quite revealing in what we do in communities is we ask through community consultations what people would like to see reflected, what elements they would like to see in the television station.
2329 We also do market research on that. The market research that was done in Victoria gave us quite different answers than the market research that was done in Vancouver. That happens from community to community and you get input that way.
2330 The pace that you refer to, go from community to community and you will discover if you had a meter, the pace is quite different between communities. The pace in Ottawa is different than the pace in London of the station. Each is geared in very subtle ways to try and capture the mood and the pace of the community as well as reflect the content of that community.
2331 MR. ZNAIMER: I would like to just get a last word in there.
2332 COMMISSIONER LANGFORD: Oh, there's lots of words.
2333 MS ACTON: No, I can't get the last word. That is our NewNet title is consciously different from the City title. Borrowing some metaphors from Ray, the Victoria station is not going to be a rock and roll station. It's not the city pace that we are talking about. We are talking about a more mainstream station. It will be rooted in series, not in film format. There will be some film on it, but it's a series based station.
2334 We understand that Victoria has that different rhythm. In fact, I would say we are about as sensitive to that kind of thing as just about any television formation in the world.
2335 MR. SHERRATT: Peter Miller has lived with Clint and Laura for quite a while in this project and has been involved in the research. Peter, you might want to comment.
2336 MR. MILLER: Thanks. Commissioner Langford, I think the process we went through is important to understand. When the call was issued, we took it as a given based on the public record of the last proceeding. There was demand for a local station.
2337 First of all, we don't need to get a 60,000 name petition. That has already been done. The question we thought was important is what does the community want? The first thing we did was public opinion research with Polara. We asked a series of questions. I can assure you, we didn't know the answers to those questions. We had our hunches, but we asked questions like "Do you want to see more environmental coverage?", "Do you want to see more on education, life-long learning, retirement planning?", those kinds of things.
2338 The research was very revealing. We summarize some of these findings in our Schedule 39. Just, for example, to get some specifics, 72 per cent of Victoria residents showed strong support for noon, early evening and daytime newscasts. Seventy-seven per cent wanted coverage of environmental issues. Sixty-eight per cent on health, recreation and fitness and 54 per cent on the job market employment issues.
2339 What that helped us do was set a framework for the application and allow us to make the decision to commit to as much local programming as we could, so we committed to 26 hours of local programming, of which six and a half hours was non-news programming.
2340 In terms of the specifics of that six and a half hours and exactly what we do in our newscasts, we didn't make any final decisions. We went out into the community, and this was key, and we asked the question "What is it you want to see?" A subject like environment, which is easy to appreciate the people on the Island are going to be interested in the environment. What does that mean?
2341 We had a number of tables and this is a genuine approach. We said "What do you want to see?" It was interesting what they said. They want to see specialists. Many of them knew, for example, that we had hired the co-founder of Greenpeace, Bob Hunter, to be our environmental specialist at City. They thought "That's what we want, a specialist".
2342 The other thing they wanted assurance on is that when we covered the issues, we wouldn't automatically -- if the contrary corporate viewpoint came to bear, retract. We talked about our track record as a corporate entity, especially with our news stories.
2343 Those discussions were very, very important and allowed us to take that framework and get more specific. It is a different approach. The sample of the people, and this is what was so key about working with Laura because she was from the community, she knows the community, and similarly Clint. We can get into that level of detail on it.
2344 COMMISSIONER LANGFORD: I want to get back to that. I do want to say that at the end of my questions I want to -- just so I won't be blindsiding you -- I want to work with our legal counsel and just lock down which one of these commitments and proposals you would be prepared to see as a condition of licence.
2345 I don't see this as some kind of bidding war. I want you to be comfortable with it. I would rather do it at the end because if you change your mind in these discussions, that's okay too. Better to change your mind now than to come to us in three years and say "We're sorry".
2346 Now, Polara, I read that survey. Again, I'm not trying to be confrontational, but it seemed to me that you didn't quite listen to all of it, that you sort of cherry picked. I may only reveal here that I don't know how to read surveys. That's fine too.
2347 If I look at page 1 of the executive survey -- now, unfortunately my copy has three different numbers. It's number 00111. It's number one and it's number 99. I don't know. Everyone has had a go at numbering this. It's called executive summary. At the very bottom of that page, I don't know if you are with me yet -- I can read it to you.
2348 In contrast to this support, you go over what people want. More or less you just gave us that list.
In contrast to this support for certain programs, it is clear that the Victoria television viewing audience does not want programming which is similar to the other stations available on the market. That is programs such as sitcoms, sports and talk shows."
2349 Then I went trotting over to your page 11 and looked at a Table 1 called "Expressed interest for programmings" and found that news, sports and sitcoms were the top runners. I don't "By jove, Carruthers", I'm not going to drop my monocle and say "I have caught you". I just wonder. If I read this correctly, they were popular but you made a conscious effort or a decision not to go there. I would just like you to share with me why you did that, if I have it correct.
2350 MR. ZNAIMER: I'm going to pass to Peter in a minute, but the way I read it was "They are popular, but we have enough of it. We don't need you to bring more of it. What we would like from you is these different things".
2351 MR. MILLER: I think that's a valid point and I think, as the Chair knows well, public opinion research is a useful tool, but it doesn't give you all the answers. For example, let's look at sports. When someone says --
2352 CHAIRPERSON OF THE COMMISSION: Only the ones you are seeking.
2353 MR. MILLER: When someone says "I'm not interested in sports", how do they answer that question? "I have got enough sports". They probably mean the sports coverage they get on TSN of national sports.
2354 When we went to the community and said "What do you want to see?", they said "Hey, this is the amateur sports capital of Canada. The leading teams in lacrosse and other sports are here. We want to celebrate that".
2355 Again, you have to get behind the research to understand what it means. Talk shows. When people say "We don't want talk shows", I think what they are saying is we have got enough Jerry Springer. It doesn't mean they don't want community consultations.
2356 COMMISSIONER LANGFORD: How did you get behind?
2357 MR. MILLER: By going to the communities.
2358 COMMISSIONER LANGFORD: You did focus groups? I'm just trying to figure out how you did this.
2359 MR. MILLER: To be honest, it was individuals meeting with individuals. It's based on, first and foremost, the experience Nick Nickerson had in the community as a resident, as someone who keeps an apartment there, and then working with Laura and others. It was this notion of getting behind the research which did give us a bit of a framework that we weren't just going to lock in the schedule based on what that research said.
2360 MR. NICKERSON: Commissioner Langford, we have actually quantified the groups that we have met with and filed this Appendix B in the opening statement. There are some 50 to 60 groups there.
2361 MS ACTON: Commissioner Langford, I would also just like to clarify. When I did say that the youth forum was at the University of Victoria, the University of Victoria was the venue. It wasn't all university students. It was a diverse group of young people from the Greater Victoria Area.
2362 As Peter has mentioned, we did -- the fundamental tenant of our community consultation process was to raise awareness of CHUM's application in community number one. Number two was to meet with the lead community leader's groups, representatives of the community of all sectors to get their feedback on what they thought a locally based station should look like and also to seek letters of support for the application.
2363 We met with the aboriginal community leaders, we met with arts and culture leaders, we met with business, we met with the environment, we met with education, we met with government, we met with neighbourhood associations, with the multiculture community, sports and recreation representatives and the youth forum and a number of individuals who gave us feedback as well.
2364 We had a short timeframe. Within that timeframe it was very important. This is where I believe that CHUM was very committed to coming into the community to get feedback from the community on their application and to refine it to reflect that local community.
2365 We do have a locally based station. There are a lot of residents of Victoria and the Island who have a lot of stories to tell. One station can't do it all. I think what we clearly, clearly heard from our consultations and the feedback that we got and the letters of support that we got is that people do want to have choice in the marketplace so that locally based programming will be maximized.
2366 COMMISSIONER LANGFORD: I'm just trying to learn here. When you say topping the list for what they wish to see more of is news 15 per cent, sports 14 per cent, closely followed by comedy sitcoms 12 per cent, and then you go back to saying on page 1:
"It is clear that the Victoria television viewing audience does not want to see two of those three tops."
2367 Does that conclusion come from taking the Polara numbers and then trying to put a face on them or go behind them or whatever? The numbers are right. Have I read the numbers right anyway and then there's more that you added to it?
2368 MR. SHERRATT: Maybe would get Duncan McKie who did that part of it to clarify that part and then we can move on.
2369 COMMISSIONER LANGFORD: I'm not saying you should show sitcoms. I'm just trying to figure out why -- you know, going back to the notion of whether we are importing here a kind of a frame. That may be a good thing too, but I just want to find out what we are doing here.
2370 MR. SHERRATT: Duncan, can you give it a help.
2371 MR. McKIE: Let me talk about why we did the research in the way that we did, first of all, what I think the implications are since our company did it. We put a little bit of it over the past couple of days about the value of research and these kinds of --
2372 COMMISSIONER LANGFORD: You might want to move that microphone a little closer to you. I think people are having a bit of trouble.
2373 MR. McKIE: I would rather not use it, frankly. They haven't been working that well.
2374 I have been in the media research business for about 25 years, starting at TV Ontario in the late seventies. I worked with the CBC and worked with BBM. These types of open ended questions are intended to get top of mind responses within the marketplace to what's available on television today. That's why the percentages are rather small. As you notice, 15, 16, 12, 11.
2375 We go on further in the document to discuss people's specific ideas that the programmers have had within the CHUM group and one of that in the marketplace. I think that's fair because obviously audiences, although they can express desires and needs, they are not programmers. They don't come up with the ideas. The programmers do and you go in the marketplace and you test them specifically.
2376 What this research says essentially is exactly what it says literally. Some people want to see less of some things, but other people want to see more of the same thing. I mean it makes eminent sense, you know.
2377 Then you look at that and you say "Is there pent-up demand for a certain type of programming in this marketplace amongst a large enough group of people who, when you allow them to express it spontaneously, will say "We would like to say more news". In fact, 11 per cent said "We would like to see some more local programming and some more nature programming".
2378 I think it has to be interpreted that way. You have to be fairly loose in the interpretation of these open-ended responses. You go on later to pin this down with very specific questions about very specific types of programming in the areas of the environment, local music and culture and you get responses like 84 per cent of these people would like to see more on the environment, 79 per cent would like to see more of the local music and culture reflected in local programming and a significant number would like to see that reflected around the world because I think they are proud of the fact that within this environment, they have so much local talent to offer beyond Vancouver or Victoria and Vancouver Island. You saw that I think in the tape.
2379 I think that the results are pretty consistent with, from what I can see it anyway, the approach the programmers are taking to try to meet that demand. It should be taken quite literally.
2380 MR. SHERRATT: It's a bit to me like a great chef. It's one of the ingredients that you put in the cake, but it's all in putting it together. You determine along the way whether the end consumer is going to want a chocolate cake or a lemon cake. Some of the ingredients are very much the same, but the result is quite different.
2381 COMMISSIONER LANGFORD: You can get too much chocolate in there early on though and it's going to take a lot of lemons. My apologies to the transcript, folks. I don't know how you are going to put that together.
2382 Well, I don't know. I don't want to put anybody out of work here, but I don't know how many of you stayed for the Trinity proposals yesterday, but they have sort of given up on these sorts of surveys. I'm beginning to think they might be on to something.
2383 We have decided what the people want and you have got your kind of variations on RO, if that's a fair enough way to put it. I'm just trying to find a way to look at it. Now I want to come around to what could impact on that. I want to get back to a little bit, and I don't want to do it in depth because the Chair did it yesterday in heavy depth, but I want to look at this notion of what we have come to call severability.
2384 It seems to me that it is conceivable that you could come out of this, and I don't have any pipeline to any final decisions here or anything -- I'm just saying it is obviously conceivable that you could come away from this process with one rather than two. I suppose you could come away with none. Yes, none, one, two. I don't think we could give you three, could we? No. So those are the options.
2385 Let's assume just for the sake of argument because I want to sort of think about your commitment here, I want to be transparent about this, that you come away from this process with this application, but not the Vancouver one. What happens then? Does it stay exactly as it is or would you make changes?
2386 MR. SHERRATT: Commissioner Langford, we looked at these scenarios at the beginning of the process, through the process and as recently on the weekend. It was one of the things that the Chair and I discussed yesterday that brought to us to where we are. It was the feedback we got from these communities and what we know about them and have learned in the past four or five years when we first started this process, that Victoria's needs and Vancouver's needs in local television are different.
2387 To properly serve the community, we went down what we knew was going to be perhaps a little bit more difficult road both for us and for the Commission in saying what we really need to do here is have two distinctly different services and use the synergies that are available to make that possible within the revenue pie that's available. That's why we got to where we are.
2388 Now, to answer the question, we have looked at all of the possibilities. Some scenarios are doable, some scenarios would change certain of the parameters and some scenarios aren't doable. Ron Waters has the breakdown of that.
2389 Ron, perhaps you could go specifically to Commissioner Langford's question about if we just got the Victoria station.
2390 MR. WATERS: We certainly don't have to do all the scenarios because you really went over that very carefully yesterday, but I am interested, now that we are talking about programming, and I want to be clear on this, and what your investigative reporters here have found that people want and what your surveyor found and how you went behind everybody and found other things. I just want to see how that stands up in a model where you got Victoria only.
2391 MR. SHERRATT: This scenario would have the greatest impact as opposed to the other one if we just got Vancouver. There wouldn't be a big change.
2393 MR. WATERS: Thank you. I was very confused with these "what ifs" that we talked about prior to coming here. I kept saying we needed a chart, we needed a chart, we got to figure this out. They gave me the chart. I think I'm the only one with the chart. That's why I am answering the question. I was the most confused in this scenario.
2394 I think the important answer to your question is if we have Victoria alone, as you know, in our revenue projection we assumed we would have Vancouver. When you put the two revenues together, you are just under $30 million and for our Vancouver and our Victoria application.
2395 If we have Victoria alone, I'm assuming there's no other station licensed in that scenario. Is that what I should assume? I'm not trying to ask you the question --
2396 COMMISSIONER LANGFORD: No other licence. Let's assume there's certainly no other licence in Victoria, Victoria rebroadcast Van. There might be another station in Vancouver. I mean there are applications, so that would change it yet again.
2397 Well, let's just try to deal as narrowly as we can. Again, I'm not going to jump on you and go --
2398 MR. WATERS: I will just give you the one.
2399 COMMISSIONER LANGFORD: Let's assume you get Victoria and somebody else gets Vancouver.
2400 MR. ZNAIMER: Which one?
2401 COMMISSIONER LANGFORD: Well, if someone else gets one, it would be the best applicant.
2402 MR. ZNAIMER: So that's us.
2403 COMMISSIONER LANGFORD: Oh, very clever. All right.
2404 MR. SHERRATT: That takes us back to our original line.
2405 COMMISSIONER LANGFORD: Carry on, Mr. Waters.
2406 MR. WATERS: Let's do Victoria alone and then we can give you the other one.
2407 MR. SHERRATT: The other one we would be talking about is the multilingual station.
2408 MR. WATERS: I will give you Victoria alone, okay, if nothing else is licensed.
2409 COMMISSIONER LANGFORD: Excellent. That might be easier. All right. Do it that way.
2410 MR. WATERS: I'm happy to give you the one after too.
2411 COMMISSIONER LANGFORD: I'm really trying to get a sense here of programming and stuff. I think that's probably the safest and cleanest model. Victoria alone.
2412 MR. WATERS: So Victoria alone, we think that our revenue projections would go up about 25 to 30 per cent, so we would come in around thirteen and a half million dollars. The reason obviously the revenue projection would go up is there isn't another station in the market, so there is no competitor, less fragmented. We might to a little better in the rating games.
2413 We might take some of the programming that we had on the Vancouver station, some of that, and put it over on to Victoria. Obviously we would have a higher sell-out percentage and that's why we do that increase I mention. That's the simple Victoria alone.
2414 MR. SHERRATT: I think, Ron, it's important to point out that in getting to that number, they actually built a model. We built a television station just a we did with each of the other applications so they were able to run hard numbers against the audience estimates.
2415 COMMISSIONER LANGFORD: This is very helpful. Can we just stay with that first statement a minute. I follow you on the money going up because you are not competing with yourself, so that makes sense and that explains, I would suggest, why your revenues in Victoria are lower than the competing application. Is that a fair explanation?
2416 MR. ZNAIMER: Yes. That's correct.
2417 COMMISSIONER LANGFORD: I follow the ratings going up because again there is no competition and being, what do you call it, being zippy and zesty or whatever you go around and eat everyone's lunch, so that makes sense.
2418 I follow the programs coming from Vancouver because I guess you are going to repatriate -- the Constitution is everywhere in this country, isn't it? May I suggest you don't repatriate. It didn't work so well for the others. Anyway, you are going to repatriate some of your KVOS and some of your other programming and you will have to use it somewhere.
2419 You talked very clearly yesterday about economies of scale and national rights, so that makes sense, but that does raise some interesting questions, not necessarily what programs but what types of programs, or more to the point, what would survive? What of the Victoria proposals that I see here -- local, local, local, heart and soul, as you call it -- what would survive?
2420 MR. ZNAIMER: All of it. All of it.
2421 COMMISSIONER LANGFORD: All of it?
2422 MR. ZNAIMER: Yes. When Ron says we might get some improvement of programming, he's talking about some of the imported entertainment. We might be able to move a couple of the better motion pictures over to the schedule, but we would not in any way adjust the local programming schedule.
2423 COMMISSIONER LANGFORD: Well, that's interesting because -- let me make a proposal or suggestion to you. You would be in a situation with Victoria alone where, according to your own figures, you would be looking for anywhere between $3 and $5 in advertising revenue for every dollar -- in Vancouver -- for every dollar you are able to attract in Victoria. Is that fair? Somewhere like that. There's quite a spread.
2424 Therefore, wouldn't you be tempted to start to whittle away at the Victoria content and put in more Vancouver content because you are out there trying to get local ad dollars? Local ad dollars are a big part of your revenue base.
2425 MR. SHERRATT: That is precisely the reason we have the two applications before you.
2426 COMMISSIONER LANGFORD: Oh, I don't doubt that. The reason is clear, but I'm talking about this scenario in the sense that if you don't get the whole enchilada, we are now talking about half of it --
2427 MR. SHERRATT: The part that we are committed to and this model would reflect is that the local programming would be as we have set it out in this application, directed to the Island, directed to Victoria and the audience that you might gain in Vancouver would be against entertainment programming.
2428 It's a bit like the VR situation back into Toronto and Ontario. We don't do any Toronto news on CKVR. That's not the raison d'etre of the station. It is designed to serve its own community just as this station is designed to serve the Island. We do get some audience against entertainment programming in Toronto and that's what helps drive the revenue to allow us to do that, and that would be the same kind of scenario.
2429 MR. ZNAIMER: But I have to admit you are making a good point. If that were the result of the licensing scenario, we would have to think through what you might have meant by not providing for a station in Vancouver. In fact, we make the argument you are making in our comparison between ourselves and the Craigs. You are right in that the temptation would be severe. It's difficult to put ourselves in that frame of mind because we have rejected that way forward.
2430 COMMISSIONER LANGFORD: Because you would know better than anyone here what happened to CHRO before you bought it. I'm not pointing any fingers at you folks, but there was a movement from Pembroke to Ottawa and soon it will be in the marketplace if you can straighten out your problems with the lawyers.
2431 Assuming you can turn that old bakery into whatever you are going to turn it into, it's going to be there. It would take a fair optimistic stretch, I think it would be fair to say, to call that a Pembroke station.
2432 MR. ZNAIMER: I have to admit that you are right which is why we have come forward with the two station model. I think a single station model resident in Victoria is subject to temptation.
2433 MR. SHERRATT: There's a big difference here between Pembroke though and Ottawa and that is the size of the communities and the base of the community. Pembroke was always too small to have a television station. It just never made any economic sense. That was recognized by the Commission before we owned it and it was licensed to go back to Ottawa at that time and that's what we are doing now.
2434 Victoria and the Island is different. Victoria is 300,000 people. The Island is between 700,000 and 800,000 people. This is a large economic group. It is in Vancouver, no question about that, but it's quite different than the situation in Pembroke. We believe it should have it's own station.
2435 COMMISSIONER LANGFORD: I want to get back to the temptation of Moses in a minute. There's a biblical sense to it. Before that, I just wanted to --
2436 MR. SHERRATT: You have seen the bulrushes moving, have you?
2437 COMMISSIONER LANGFORD: Before I do that, I wanted to ask something coming out of your last statement, sir. That was the notion of a pure Victoria station. That was batted about by the CTV folks the last time around. I think, I don't want to quote them, but I think they said something like they would not object or intervene against someone who came with a pure Island application. Have you ever looked at that model?
2438 MR. SHERRATT: Yes, we did.
2439 COMMISSIONER LANGFORD: I don't see anybody jumping for joy here.
2440 MR. SHERRATT: We looked at all of the scenarios. The scenario you find based on what is considered to be the Vancouver market is two distinct communities, each with their own interest and each with needs, each needing a specific kind of local television service, so we did look at it.
2441 COMMISSIONER LANGFORD: Do I read your application right in coming to the conclusion that you need the dollars from Vancouver to run this one, to run an Island station, that they just couldn't support itself? You were saying it's not Pembroke, it's a big, bustling, thriving community. I gather it's not quite bustling enough, is that it?
2442 MR. SHERRATT: The difference is the dollars you need that are attributable to Vancouver are against entertainment programming and not nearly of the magnitude that are required for Pembroke and you can, we believe, continue to focus on Vancouver Island successfully, which is what we do in the Barrie example.
2443 MR. ZNAIMER: We do believe and in a sense agree with you that the best guarantee of a focus service for Victoria is two licences.
2444 MR. MILLER: When we looked at it, it is obviously theoretically possible for someone to come up with an application that would just serve Vancouver Island, but the economics would be such that they couldn't commit to the same level of local programming that we are able to commit to by virtue of the revenues from the broader Vancouver area, so for us it was a balancing of how do you provide local service and sustain that on a reasonable revenue base. We felt this was the best approach.
2445 COMMISSIONER LANGFORD: Thanks. That's good.
2446 MR. ZNAIMER: The temptation also can be found in the money, follow the money.
2447 COMMISSIONER LANGFORD: You always do.
2448 MR. ZNAIMER: Yes. We have projected a level of revenue for our version of that Victoria station which can be harvested in the ambit of the station if you project on the basis of a Victoria-Island station. A larger amount of revenue, you are driven that much more forcibly towards the temptation.
2449 MS ACTON: Commissioner Langford, I must say that I was one of the people that was concerned about CHUM applying for two stations. The perception for many of us in Victoria was "Oh, is this just your way to get into the Vancouver market and how serious are you about a locally based station for Victoria".
2450 I have heard this from many people in Victoria who have made themselves become more informed about the both applications and we have a couple of letters of support that address this as well.
2451 I have come round to accepting that I think that the best scenario for Victoria would be the licensing of both the Vancouver and the Victoria application because I believe that there are a lot of synergies that we in Victoria and the Island can gain from having the both stations. I think certainly it makes sense for long term economic sustainability and socially and culturally as well.
2452 I think there would be more resources coming into Victoria for film production, for example. We would have the best of both worlds having the feature film documentaries as part of the Vancouver station and the series as part of Victoria and the locally based programming.
2453 I for one am very excited about the possibility of having both stations. I have come around on that.
2454 COMMISSIONER LANGFORD: Nothing like the enthusiasm of a convert, is there? Well, thank you for that.
2455 Following that comment, maybe I could ask this question. If you were to have them both, to look at the other side of it, are there economies of scale that you perhaps haven't been able to build into your model? Could we contemplate, in fact, the horrible fact that you won't need to hire 104 people in Victoria because you will figure out "Holy mackerel, with all these people in Vancouver and what not, we can send the crews over on the helijet and we don't need them".
2456 How hard are those numbers? How hard have you looked at the benefits for the community numbers?
2457 MR. SHERRATT: Those numbers were developed and all of the projections developed on the premise of having the two stations. Ron made the point that if we were licensed for Victoria alone, the revenues would go up, but so would the costs. The kinds of synergies that are immediately and readily apparent are the fact that if we have the station in Vancouver, any station on the Island is going to have to have news from Vancouver that relates to the Island. Many things happen here that relate to it, but we wouldn't have to have anybody here. That would be available from the Vancouver station. Those kinds of things.
2458 The sales effort, there would be synergies there with the sales people. The people that are projected in the direct sales numbers for Victoria are people based on the Island. The people in Vancouver who would work on behalf of the Island station are part of the Vancouver situation.
2459 So the costs would go up. Those are the kinds of synergies that have been built in, but we know we need the 200 plus people to do both jobs.
2460 COMMISSIONER LANGFORD: Again not to belabour the negative, but I want to get back to the temptations because in the end I am going to ask you to commit to things and I think it's fair that you know that our minds have been working down all kinds of different tangents as well. The last thing we want is anybody to commit, you know, so even if you commit saying we would commit to this if we got two, but perhaps something different if we got one, that would help us as well.
2461 In working towards that kind of goal, I want to come back to the temptations in this sense because I still do have a little trouble with one element. It may just be that I don't have the sexiness and the zippiness and the zappiness or whatever it is that you guys have.
2462 You are going to have local, local, local, I think you call it, or maybe it's only two locals, and that is the heart and soul to quote from the thing. It seems to me that in the scenario where you would be granted just the one application in Victoria, the heart and soul could quickly become the ball and chain, if I may mix my metaphors, because you are going to be selling to Vancouver.
2463 I think it seems to be axiomatic that if you were selling a Vancouver product, you could sell more of it. Help me with the temptation here. How do you fend it off? How do you say get thee behind me, Vancouver?
2464 MR. ZNAIMER: I can't make a good argument because that's not the way forward that we have selected. We agree with you. A B.C. station with headquarters in Victoria will inevitably face that drift and the more they project for revenue, the more they will be faced with that temptation, so you are putting me in the strange position of having to argue a position that we really haven't considered as the optimal one.
2465 We would accept such a licence if that was what you offered and we are trying to think through what some of the obvious adjustments would be, but we are not good advocates of that position.
2466 MR. NICKERSON: Commissioner Langford, could I just suggest --
2467 COMMISSIONER LANGFORD: But you have answered my question which I thank you for.
2468 MR. NICKERSON: From a programming standpoint, we pride ourselves on being clearly defined niche programmers. If you can imagine the Barrie scenario, for example, the New VR is reflective of recreation and sports, amateur sport, outdoor activities, because that is the perception that most people who live in Toronto have of Barrie. It is what it is.
2469 I think most people in Vancouver when they think of Vancouver Island think of recreation and the environment. It's where the mainlanders tend to go on the weekends to unwind. I think if you look at it from a programming standpoint and imagine a channel that reflects participation, environment, recreation, it might be very attractive in Vancouver without sacrificing any of its inherent programming value. It would be attractive to a Vancouver viewer to drop over to the Island channel and get a look at Long Beach for a couple of minutes. Just relaxing on a Wednesday night, "Oh, there's Long Beach".
2470 So programming, it's not necessarily exclusive to one market or the other.
2471 MR. SHERRATT: I'm trying to get it into focus because the area that we see if this was to be the scenario, we have said it to ourselves and we say it to you and we have been through all the scenarios.
2472 Coming into Vancouver through the back door might be a temptation. It would be a temptation to everyone. But, clearly the kind of station that we are committed to put on in Victoria is designed for the Island.
2473 The Vancouver revenue that you could generate against that station if there was no new Vancouver station would really be national selective dollars by and large. There aren't a lot of retailers in Vancouver who are going to spend a lot of money on the Island at retail, certainly not to get back to Vancouver because they are not going to be watching the Victoria based newscasts. The local programmers that are designed for the Island, the Islanders are going to watch those.
2474 National selective dollars, a rating point is a rating point is a rating point. It's just to those advertisers you are just another commodity. That's what it is and that's what they buy. It's like buying wheat futures. If you have got the number, that's what they buy and what they pay for.
2475 If the entertainment programming, albeit it foreign or Canadian, attracts an audience in Vancouver, then you can get value for that person, that viewer, but if you remain true to what you are and keep a personality on the station, we are not just the kind of people who build the kind of local programming that's going to attract the world or all of British Columbia. None of our stations operate that way. It's not the way we do it.
2476 That's probably the greatest assurance you have, that we do what we do and we do the same thing everywhere and that's what we do here. BCTV have one of the most successful local news operations in this country. They have owned Vancouver and British Columbia for decades, but it's all of British Columbia. They serve and focus broadly on all of British Columbia.
2477 That's not our style. We are never going to make headway against them if we try to take them on head to head. That wouldn't be smart business on our part and it wouldn't serve the needs of the community. The niche here clearly, if you have a licence just for the Island, is to focus on the Island. It would be not only, you know, good for the system, it would be good business.
2478 MR. NICKERSON: Can I just maybe try to get back to your question which was, you know, having a Victoria alone station and being sure that we stay true to Victoria.
2479 I think what we are suggesting because what you could do if we were so fortunate to get that application, we would be happy to commit to the local Victoria and Island hours in local programming and the local news. We would not deviate from that local commitment to try to go after that Vancouver money.
2480 MR. MILLER: There's two other aspects we tried to build in on this very point. First of all, because our revenue projections are conservative, because our commitments are based on a Victoria and Island station, we won't have over-committed and, therefore, be immediately drawn into trying to get revenues from Vancouver.
2481 Secondly, if there are creative ways of defining local news and non-news programming in Victoria and Island as meeting for the Island, we would be prepared to do that. We didn't come up with an easy way to do it because you have never done anything like that to the best of our knowledge, although perhaps your definition of regional programming offers some use.
2482 We are certainly prepared to work with counsel or the Commission to figure out a way that we would commit because it is absolutely our intention and our history and our practice to make sure that when we are saying in a community we are committed to local news and non-news programming, it is devoted to that community.
2483 MR. SHERRATT: We clearly don't think it's the best answer.
2484 COMMISSIONER LANGFORD: Pardon?
2485 MR. SHERRATT: We clearly don't think it's the best answer.
2486 COMMISSIONER LANGFORD: Oh, that's obvious and I have said a dozen times, but for the record I say it again, there's no predisposition on this side of the table, but it's a good way to explore it I find and I don't want to alarm anyone, but it's a useful way to say "Look, here it is. Here's a reality. How committed are you?" If we hear that kind of commitment, that strikes me as fairly strong.
2487 MR. SHERRATT: We would much rather have this discussion than not have it.
2488 COMMISSIONER LANGFORD: Oh, good, because you are having it and I guess there's not much you can do about it.
2489 I'm almost done. I am going to get down to sort of nitty-gritty commitments. Of course, if you feel I have missed anything when I am done, you know, we have been a little quicker this morning, but I don't want you to think I am giving this application short shrift. It's just that I feel a lot of the ground was covered yesterday in the general approach.
2490 A couple of little areas, maybe not so little. I have a sense when I read this application, and this time I don't say it sort of facetiously or jokingly, there is a lot of energy here. There's a lot of drive, there's a lot of expertise, a lot of commitment, a lot of careful study. You have done your studies with Polaris, and the other applicants have as well, but you have done yours and we are dealing with yours now.
2491 You have done your projections, you have done your revenues and your ad sources and what not, your rating dreams and proposals. I must say you are very down on yourself. I would have thought the figures would have been higher for revenues.
2492 I understand you are working with two and that does balance it, and I would have thought they would have been higher for ratings. When I read sort of the introduction to your Polaris studies, it seems to me that you are coming into a kind of virtual wasteland. I don't say this to be critical of the people who are there. I'm just saying to catch the flavour of this study, there is this enormous unfilled appetite and you are there with your cornucopia overflowing to fill everybody's every dream.
2493 When I look at your rating projections and your revenue projections, they're okay, but I would have thought they would have been higher. Can you help me with that?
2494 MR. SHERRATT: Yes. We would be delighted to. You are right. A quick aside. There is a fellow who does consulting in the U.S. for radio stations. He has a wonderful speech he goes through. He talks to radio people and he said "You know, people on radio get all this enthusiasm and they do these things day in and day out and they think that all people have to do in life is to turn on that radio and listen to their station morning, noon and night". There's a long pause and he said "You know, they really don't care".
2495 It's not the biggest thing in their lives. It takes time. It's a part of their lives. It fulfils a need in everybody's life every day, but it isn't the biggest thing in their lives. It's the biggest thing in all of our lives, fulfilling the need that they have for that kind of information and entertainment, but it takes time.
2496 You go into a community, you work within the community, you become a part of the community. What you do on the air is reflected in the community. You get good entertainment programming, but even that takes a while to grow audiences against.
2497 The day of getting big double digit share numbers for a new television station are gone. We are fragmented. There are a lot more television services here now than there were four years ago when we last went through this process, a lot more viewing options. By the time we get on the air, there will be still more viewing options available to people.
2498 That won't take away the need, we think, for quite a long time for local television and local basic service to communities. It will be diminished, it will be fragmented and it will change. It's a constant evolutionary process, but it does take time.
2499 The projections are $30 million in our first year for these two stations out of a market of just $300 million, so that's 10 per cent of the revenue. That's reasonably ambitious, given the competitive environment of television today.
2500 We believe irrevocably that those projections are accurate. We have come before you with schedules that are doable, real programs, programs for which we have the rights and we can put on the air in this market. We take the projected audience shares that our people can do against those based on experience with those programs.
2501 With many of them, what they do here now on either Bellingham or on the CTV station here in Vancouver because that's where many of them are playing. These are real, not inflated, grandiose projections to try and influence you beyond our capacity to do it. This is what we believe and all of the studies show we can do out of the blocks and how we can grow the business and the commitments we can make against it.
2502 MR. MILLER: I should point out for the record, Commissioner Langford, though, just as I indicated yesterday, we had actually filed share numbers that were slightly incorrect. We discovered a similar error in our Victoria shares. While it's very similar, just for the record we filed on the Victoria transmitter alone shares going from 2.2 to 2.5 per cent. They are actually 2.6 to 3.1.
2503 There is a similar small increase on the overall. I will be filing with staff those revised numbers.
2504 MR. SHERRATT: And that's a much smaller number -- that's a smaller number than the one for the Vancouver station, but that share isn't against Victoria and the Island. That's against the total Vancouver extended market. We are just a piece of the puzzle.
2505 MR. WATERS: Can I give an example. A little bit of that Victoria -- it was an interesting exercise we did when we were projecting out all the schedules. I thought we were getting back to Victoria alone.
2506 This might help you just to compare Victoria 6:00 p.m. news for an hour and the Vancouver 6:00 p.m. news for an hour. The revenue projection in the first year in Victoria, we hoped to do about $200,000 in the first year. In Vancouver, in that one hour six o'clock news, we hoped to do $1.2 million.
2507 You can see the difference in those two operations. A true Victoria newscast, we would be dealing mainly with local advertisers on the Island. We would have really no ratings there because there's no ratings particularly for Victoria -- in Vancouver.
2508 I thought that might help in just understanding the difference in those two projections in Victoria, in Vancouver and the, you know, the $10 million to about the $19 million.
2509 MR. SHERRATT: Perhaps one other example we can give you is that in Barrie, since we disaffiliated and they are an independent local station up there, delivering Toronto rating points, we have not been able to get the revenue to $20 million. That's against the Toronto market for the entertainment programming. We just can't get it there.
2510 COMMISSIONER LANGFORD: Those are my questions. I wanted to get into the condition of licence. Before I do, maybe there are --
2511 MR. MILLER: Commissioner Langford, I think the one more general one I think before we get into the conditions of licence is on the Victoria alone scenario.
2512 We have talked about the revenues. We have not yet talked about other potential commitments. If I can step back, as you are well aware, because of the two applications we filed and because Vancouver has such higher revenue projections than Victoria, we were able to commit to special programming commitments in the Vancouver application that we are unable to do on Victoria, given the lower revenues and given our desire to provide optimal local service.
2513 In Vancouver, you will recall, we have an $18 million commitment to feature film, plus the $6.7 million commitment to the dramatic serial for a total of $24.7 million.
2514 In looking at the revenue that we would generate on the Victoria alone scenario, we are comfortable with bringing some of those commitments over to the Victoria alone scenario. The commitment we would be prepared to make is a $12 million special Canadian programming commitment on the Victoria alone scenario.
2515 We would further be prepared to commit, because we think it's an important cornerstone of your policy, that 50 per cent of that would be spent on production that falls within the definition of regional programming, i.e. for practical purposes a maximum of 50 per cent would be Vancouver based production.
2516 This is what we feel would be the optimal way we could contribute, the maximum we could contribute given the revenue generated and the best way to contribute to your television policy.
2517 MR. SHERRATT: That commitment --
2518 COMMISSIONER LANGFORD: You have got him nervous now, you know.
2519 MR. SHERRATT: He has. That scenario was drafted against the premise that our Victoria station was the only licence that you granted, the only licence overall. Otherwise, you have another set of figures that we haven't gone into that take more money out of the pie and reduces the available pie.
2520 COMMISSIONER LANGFORD: Well, now I would like to -- if you have something to say, go ahead, but I want to step back though and look at this as a pure stand alone application in combination as you gave it to us, but if you have other scenarios you want to put out there, that's fine.
2521 MR. ZNAIMER: I was going to add that you then had two more possible combinations, the licence in Victoria and the Island for us and then either a multilingual operation or a religious operation. Obviously those two have very different levels of impact and result in different levels of operation commitment.
2522 COMMISSIONER LANGFORD: Does the religious one have that much impact on you, to be honest?
2523 MR. SHERRATT: No, it doesn't.
2524 COMMISSIONER LANGFORD: So can we rule that one out as something as something to worry about, at least at this stage? Not ruling them out as an application, but just in a sense of looking at where you are --
2525 MR. SHERRATT: They are all a little bump on the road, but they have got to be on demand somewhere. Maybe they will displace another competitor from the U.S., so they might even be a help.
2526 MR. MILLER: I think that is conditional of them committing to a true religious format because we have had some experience in the Toronto market where a station there quite frankly is starting to be more competitive with what we would call family programming, not religious programming.
2527 We do understand what Trinity has committed is 100 per cent religious schedule, so if they are true to that then this is a comfort.
2528 COMMISSIONER LANGFORD: They are certainly not zippy and sexy, I can tell you that.
2529 MR. ZNAIMER: Not yet.
2530 COMMISSIONER LANGFORD: Not yet. Okay, if we could just look at some of the proposals you made and we can sell it up with that, again if there is something you want to add by way of afterward or if my colleagues have questions, that's another matter.
2531 How best to do this. Lori, do you want to step in here or do you want me to carry on? You have got local news. You have got whatever. Lori Assheton-Smith, my Victoria trained lawyer will take over at this point.
2532 MS ASSHETON-SMITH: Thank you, Commissioner Langford. I'm afraid it won't be quite as entertaining, but do bear with me as I go through a number of other things from yesterday as well.
2533 You mentioned that there are revised audience projections. Just to get that on the record, you will file those with the Secretary, please.
2534 MR. MILLER: Absolutely.
2535 MS ASSHETON-SMITH: Just picking up on the last conversation you were having with Commissioner Langford about the commitments on spending in the Victoria alone. You indicated that the licensing of Trinity would not have an impact on that. Perhaps I missed this, but did you indicate whether the licensing of the Rogers application would have an impact on that?
2536 MR. SHERRATT: It would have significant.
2537 MS ASSHETON-SMITH: Okay. Thank you. Just to go through your programming commitments, I want to just clarify a few things.
2538 You have indicated that you will commit to 19.5 hours a week of original local news and six and a half hours a week of original local non-news. In the opening remarks today, you mentioned that you will include in local non-news a weekly amateur sports and recreation show and a weekly ecology and environmental show.
2539 The block schedule shows the amateur sports and recreation. It doesn't show an environmental show. Is this a new hour that you would add to your block schedule or does it increase your local non-news commitment?
2540 MR. SWITZER: It's just a title difference. It shows up in the schedule as Island weekend Saturday evenings at 7:00 p.m. It's loosely described as information of interest to Victoria and Island residents and based on consultations in the community. That's the block that is expected to carry a considerable amount of this material.
2541 MS ASSHETON-SMITH: Okay. So that would be part of your 6.5 hours.
2542 MR. SWITZER: Yes.
2543 MS ASSHETON-SMITH: Along the same lines, in Schedule B the schedule indicates that only five hours a week will be original programming and an hour and a half will be repeat. Can you confirm the minimum amount of original local programming that you will do?
2544 MR. SWITZER: Yes. Five and a half and one.
2545 MS ASSHETON-SMITH: That's five and a half original and one repeat.
2546 MR. SWITZER: And one repeat, yes.
2547 MS ASSHETON-SMITH: Thank you. The determinants of your programming in peak time --
2548 MR. SWITZER: I'm sorry, counsel. I'm just checking my additions here. If you give me two seconds. I want to be very precise. Let me just look. Victoria to date, two and a half, three and a half, checking my tables.
2549 No, it is all original and there is an additional one hour of repeat. Six and a half is original non-news local programming per week as filed, both on Schedule A and Schedule B, two and a half hours Victoria Today weekdays at 12:30, the local and sports recreation magazine, Island Weekend, Speaker's Corner, Nanaimo Speaks and our First Nations programming.
2550 There is additional repeats 11:30 p.m. on the weekends. That adds up to six and a half hours, if I'm not mistaken, plus the hour repeat.
2551 MS ASSHETON-SMITH: Okay. So will just confirm then that the minimum amount of original local non-news is six and a half hours per week.
2552 MR. SWITZER: Yes.
2553 MS ASSHETON-SMITH: And you would accept those programming commitments as conditions of licence whether or not both stations were licensed.
2554 MR. SHERRATT: Yes.
2555 MR. SWITZER: Yes.
2556 MS ASSHETON-SMITH: Now, the programming peak time, you have indicated that you will provide eight hours a week priority programming in peak time. Now, if only Victoria was licensed, I understand that your promise to increase to eight hours on all of the CHUM stations as conditional on both.
2557 If only Victoria was licensed, would there be a possibility of increasing on the NewNet stations?
2558 MR. SHERRATT: Yes.
2559 MS ASSHETON-SMITH: You would undertake to do that.
2560 MR. SHERRATT: Yes.
2561 MR. MILLER: Both would be eight hours. If only Victoria was licensed, we would commit to Victoria for eight hours and the NewNet station.
2562 MS ASSHETON-SMITH: And the NewNet station as well for eight hours. Okay.
2563 MR. SHERRATT: Yes.
2564 MS ASSHETON-SMITH: And the eight hours a week of priority programming in peak time, you would accept that as a condition of licence, I take it.
2565 MR. SHERRATT: Yes.
2566 MS ASSHETON-SMITH: The fall block schedule, you have two hours a week of local programming in peak time. Is that also acceptable as a condition of licence?
2567 MR. SWITZER: We haven't specifically discussed, but you are correct, that's as filed. I don't think we have a problem with that. That's fine.
2568 MS ASSHETON-SMITH: That's okay? Just a few more left here. You have indicated that you will be providing a weekly program. It's not titled yet, but focusing on aboriginal issues and this will be broadcast in peak time. Would you commit to having a native programming presence in peak time throughout the entire licence term?
2569 MR. SWITZER: It's in our draft schedule. Yes.
2570 MS ASSHETON-SMITH: That's something that would remain. Would you take that as a condition of licence?
2571 MR. SWITZER: Absolutely.
2572 MS ASSHETON-SMITH: Two more quick questions. Over the course of your licence term, what proportion of your Canadian programming do you think will be independently produced?
2573 MR. SWITZER: It's hard for me to come up with an exact percentage. Almost all of our Canadian entertainment programming in the schedule is from independent producers. Much of the local programming, of course, is done at the station.
2574 I believe in the draft schedule it would be by far in excess the majority. I'm not sure if we want to talk about percentage, but it's a very significant percentage.
2575 MS ASSHETON-SMITH: Over 50 per cent?
2576 MR. SWITZER: Yes, of our Canadian dramatic entertainment programming is produced by independent producers.
2577 MS ASSHETON-SMITH: Just one more technical question and then a final concluding question. As I mentioned yesterday, there was some technical mutual exclusivity with the station. This is another issue here in Victoria. More than one applicant has indicated that it plans to use channel 53. In the event that channel 53 was not available, you would be ready, willing and able to use another channel.
2578 MR. SHERRATT: We'll find a way.
2579 MS ASSHETON-SMITH: Okay. And my final question, and it comes back to the spending commitments, you have indicated what your spending commitments will be if Victoria alone, if Victoria-Vancouver, in either of those cases, would you be prepared to commit to those spending commitments to condition of licence?
2580 MR. MILLER: Are you speaking to the specific special Canadian programming?
2581 MS ASSHETON-SMITH: Yes, I am.
2582 MR. MILLER: Yes.
2583 MS ASSHETON-SMITH: Thank you.
2584 CHAIRPERSON OF THE COMMISSION: Thank you. Madam Cram has a question for you.
2585 COMMISSIONER CRAM: Excuse me, I think I missed scenario three or four. I heard joint commitment, I heard Victoria alone commitment, I heard Victoria and Trinity commitment and you said there would be an impact if Rogers were licensed and Victoria -- about Victoria, but does that change your monetary commitments?
2586 MR. ZNAIMER: Yes, the significance of the Rogers presence is significant and Ron can run through that with you.
2587 COMMISSIONER CRAM: That monetary commitment then changes again if Rogers is --
2588 MR. ZNAIMER: With the programming fund.
2589 COMMISSIONER CRAM: The programming.
2590 MR. ZNAIMER: Yes.
2591 CHAIRPERSON OF THE COMMISSION: The programming fund.
2592 COMMISSIONER CRAM: Yes. The programming amounts.
2593 MR. SHERRATT: You mean the $12 million.
2594 COMMISSIONER CRAM: That's right. That changes again.
2595 MR. SHERRATT: We don't have that number, do we, Ron?
2596 MR. WATERS: I guess the example with Rogers is pretty simple because it's very similar to what we suggest, which is our station in Victoria and our station in Vancouver. Their projections are to take about the same sort of revenue out of Vancouver we project to come out of Vancouver with our application, so we would leave our projections and our promises the same in Victoria if you licensed Rogers in Vancouver.
2597 MR. SHERRATT: As they are if you license us. Exactly what's in the application.
2598 MR. MILLER: As filed.
2599 MR. SHERRATT: As filed.
2600 COMMISSIONER CRAM: So there would be no change then.
2601 MR. SHERRATT: No change to what's filed in the application, but a change to the $12 million because it wouldn't be there, what we just talked about. It would be what's in the application.
2602 COMMISSIONER CRAM: Okay.
2603 MR. SHERRATT: Okay.
2604 COMMISSIONER CRAM: I hope I understand. There won't be the extra. That's the idea.
2605 CHAIRPERSON OF THE COMMISSION: The extra was coming if the Vancouver application was not licensed.
2606 COMMISSIONER CRAM: That's right.
2607 MR. SHERRATT: It's a million dollars
2608 COMMISSIONER CRAM: Okay. Thank you.
2609 CHAIRPERSON OF THE COMMISSION: One more question?
2610 COMMISSIONER LANGFORD: I have one more question. I just forgot. This was the most important question of all.
2611 Isn't it always the way, and it's to you, Ms Acton, what town in southwest Saskatchewan? It's not Indian Head, is it?
2612 MS ACTON: No, not Indian Head. Cavell, Saskatchewan, 75 miles southwest of Regina.
2613 COMMISSIONER LANGFORD: Barb Cram is from Indian Head. We have a special place in our heart for Indian Head. Thank you for bringing that up. We thank you one and all.
2614 MR. SHERRATT: We know that Mrs. Acton is from Saskatchewan because she proved it to us the other day when she told us a story on the Prime Minister, I think, which was that he made the comment that Saskatchewan was the place that if your dog ran away from home, you could watch it for the next three days.
2615 COMMISSIONER LANGFORD: Can't do anything with that. Over to you, Madam Chair.
2616 CHAIRPERSON OF THE COMMISSION: Well, mesdames, gentlemen, thank you very much.
2617 We will take a pause and we will be back at ten.
--- Recess at 0940 / Suspension à 0940
--- Upon resuming at 1005 / Reprise à 1005
2618 CHAIRPERSON OF THE COMMISSION: Last applicant.
2619 MS VOGEL: Thank you, Madam Chairperson.
2620 Our fifth applicant is Craig Broadcasting Systems Inc. They are applying for a broadcasting licence to carry on an English language television programming undertaking at Victoria.
2621 The new station would operate on channel 53 with an effective radiated power of 779,300 watts. The applicant is also proposing a rebroadcasting transmitter in Campbell River, British Columbia, on channel 4, with an effective radiated power of 6,680 watts.
2622 In addition, the applicant has proposed a digital television rebroadcasting transmitter in Victoria on channel 43, with an effective radiated power of 3,000 watts.
2623 The Commission notes that it is not in a position to consider issues relating to digital television broadcasting at this time. Consequently, the Commission will not consider this aspect of the application at this hearing.
2624 Whenever you are ready.
PRESENTATION / PRÉSENTATION
2625 MR. CRAIG: Good morning, Madam Chair and Members of the Commission. Before we start our presentation, permit me to introduce our group.
2626 My name is Drew Craig, President of Craig Broadcast Systems Inc. In the front row with me are members of our management team that have been actively involved in putting our application together.
2627 To my right is Jim Nicholl, who we propose will be the General Manager of A-Channel on the Island. To my left is Wayne Sterloff, the former President of BC Film. Wayne is the President of A-Channel Entertainment, our newly established distribution arm. If we are licensed, Wayne will help set up our Priority Program Fund for independent producers.
2628 To Wayne's left is Joanne Levy, the Executive Director of the A-Channel Drama Fund, based in Calgary and Edmonton. And to my far right is Mark Campbell, Executive Producer, News and Entertainment Programming for A-Channel.
2629 Now to the row behind us. To your right and my left is Moira Silcox, the Vice-President and General Manager of Canadian Facts, Vancouver. Next to Moira is Peter Grant, our legal counsel, from McCarthy Tetrault.
2630 Then we have Debra McLaughlin, the President of Strategic Inc., Toronto. Next to Debra is Cam Cowie, General Sales Manager for A-Channel. And next to Cam is Lisa Meeches, Executive Producer of Eaglevision Inc., an independent company which produces the television series "The Sharing Circle".
2631 I would also like to introduce some people sitting in the third row.
2632 To your far right is Al Thorgeirson, Manager, Stations Operations for A-Channel. We soon expect Steve Dent from TD Capital Group Ltd. -- he should be arriving shortly -- which joined Craig Broadcast Systems to help fund this application. And next is Linda Noto from Brandon, the Chief Financial Officer of Craig Broadcast Systems. That introduces our team.
2633 We are here today to present our application for what we call A-Channel on the Island. This application was filed last year at a very crucial time for our company. Craig Broadcast Systems, as you know, was founded over 50 years ago by my grandfather. My father, Stuart Craig, took over control some 30 years ago. Last year, with his death, the company has passed into the hands of the third generation, my brothers and myself.
2634 We had a unique upbringing in western Canada. We literally grew up with this company as the Canadian broadcasting system grew up. We were all involved as we took the company from its Brandon roots to the fourth television service in Portage la Prairie/Winnipeg in 1986 and to the A-Channel service in Calgary and Edmonton in 1996.
2635 Stuart Craig's legacy has become our inspiration. A-Channel, which is the name we now use in both Alberta and Manitoba, has been an incredible success. The A-Channel concept combines responsive local and regional television with a western Canada-based green light for Canadian creative talent. And that is what we intend to bring to a new station on Vancouver Island.
2636 To help us turn our concept into a reality, we added Jim Nicholl to our team. Jim has lived on Vancouver Island for the past 28 years, working as a creator, writer and producer of Canadian television. Until the spring of 1997, Jim was General Manager of CHEK-TV and BCTV's Vice-President for Vancouver Island Operations.
2638 MR. NICHOLL: Good morning, Madam Chair and Members of the Commission.
2639 Since leaving CHEK-TV almost three years ago, I have watched from the sidelines along with 700,000 residents of Vancouver Island and seen the steady decline of local television in our area. I believe my former TV station, now largely managed from Vancouver, has lost its Island focus and largely abandoned its home market. That is why I am here this morning as part of the Craig Broadcast team.
2640 Some ten months ago I sat down with Drew Craig in Calgary and we talked about the sad state of local television on Vancouver Island: No choice from where to get local TV news or information, a market the size of Winnipeg but with one TV station, a community rich in heritage and history in a stunning natural setting, yet seldom does it see itself on local television.
2641 We talked and we agreed. The people of Vancouver Island deserve better. They deserve their own independent TV service, locally produced, locally managed, locally focused. That is what our A-Channel on the Island TV service is all about.
2642 What we promise is to put the people of Vancouver Island back on local television. On the live "Big Breakfast" show, weekday mornings, and on the prime time shows such as the weekly "This is Business" which will air Saturday evening, and on "Capital Matters" and "Entertainment West" which will air on Sunday evening.
2643 Again in prime time, and every night, Monday to Friday at 10:30 p.m., we will also feature new Canadian talent on a program we call "250". This will be a showcase for performing artists and musicians as well as digital content creators, designers and performers, all of whom are embracing the new way the world communicates.
2644 To talk further about the local news component of our A-Channel on the Island service, I would now like to turn to Mark Campbell.
2645 MR. CAMPBELL: Good morning, Madam Chair.
2646 The involvement of the Craigs in local television news in markets and western Canada goes back to 1955. But a lot has changed since then and today A-Channel reflects these changes.
2647 A-Channel on the Island will start each day with "The Big Breakfast", a live and lively two hour morning show produced from our street level downtown Victoria storefront studio.
2648 Later in the day we also propose Vancouver Island's only live and local and six o'clock newscast, a thoughtful and thought-provoking hour that truly reflects a day in the life of Vancouver Island. Still later at ten o'clock every night, in prime A-Channel's News@Night will go beyond today's headlines to put the day's local news in perspective.
2649 To do this professionally, we will have a dedicated news and production staff of 104. A news bureau will be based in Nanaimo with a state of the art satellite truck to provide live and late breaking coverage up-Island. We are also committed to opening three sub-bureaus north of the Malahat, one in Duncan, one in Campbell River, one in Port Alberni.
2650 With ten complete digital camera crews based on the Island, this will ensure that A-Channel on the Island remains a true Island service.
2651 In two short years in Alberta, A-Channel News@Six has already proven itself. In 1999, A-Channel News@Six was voted best daily news in Canada at Canpro, the broad industry's award show. And in the same year, A-Channel News@Six in Edmonton won the CAB Gold Ribbon Award for best coverage of a breaking news story.
2652 We believe our experience in small and medium markets in western Canada gives us a unique foundation to draw on in launching a new service on Vancouver Island.
2653 MR. CRAIG: Thank you, Mark.
2654 I will now turn to our proposals for the support of B.C. Drama and long form documentaries. First, Joanne Levy will you about our A-Channel Drama Fund in Alberta.
2656 MS LEVY: Good morning, Madam Chair.
2657 As you know, the A-Channel Drama Fund arose from a Craig commitment to spend $14 million on TV movies, feature films and miniseries made in Alberta.
2658 We hit the ground in the spring of 1997. Since then 11 movies have been made with our national licence fees and another four have outstanding commitments from A-Channel. The budgets add up to a total of $47 million. We have also supported 25 scripts with development grants.
2659 One of the movies we licensed is the middle of a North American theatrical release. "Grizzly Falls" is the story of a bear and a boy. It also shows off Alberta's Rocky Mountain scenery in spectacular fashion.
2660 In just a few years, the Drama Fund has given writers such as Kim Hogan the chance for a Genie nomination for her feature film "Heart of the Sun". A young Calgary filmmaker, John Hazlett, got a chance to do his first feature film called "Bad Money". And a classic novel in Canadian literature, "Children of My Heart" by Gabrielle Roy has been adapted for the screen by a western Canadian co-producer.
2661 Most all, the Z-Channel Drama Fund is giving our viewers and all Canadians fresh choices and new Canadian stories. I am very excited to see the Drama Fund model refined and expanded to draw directly on the very prodigious talents available in British Columbia.
2662 For more on that, I turn over to my colleague, Wayne Sterloff.
2663 MR. STERLOFF: Thanks, Joanne. Good morning, Madam Chair and Commissioners.
2664 An important part of the A-Channel commitment to local programming will be our commissioning of original movies and feature documentaries from independent B.C. producers. As Joanne has made it clear this morning, you don't have to be from Toronto to support Canadian films.
2665 Just as we do in Alberta, our Island schedule will ensure that shelf space is available for these stories that speak most uniquely to the Canadian experience.
2666 As the former Manager of Telefilm Canada's western operations and former President of BC Film for ten years, I know that our proposal will effectively boost local independent productions and showcase the talent of BC actors, writers, directors and producers.
2667 As a person who has waited days, weeks, even months for project approvals from Toronto based gatekeepers, I know that our local development office and regional decision-making will be a powerful tool in helping to ensure accurate and local reflection.
2668 Our A-Channel proposal will see the doubling of the annual indigenous feature film output of B.C. producers. Our commitment to high quality prime time feature documentaries will provide a new window for this under-represented category of programming.
2669 Original B.C. programs sparked by our commitments will not only increase viewer choice and diversity on the Island, but across the country as our national licence fees will allow us to place these western Canadian priority programs on the air with broadcasters from coast to coast.
2670 MR. CRAIG: Thank you, Wayne.
2671 I would now like to introduce Lisa Meeches. She is the executive producer, writer and co-host of "The Sharing Circle", a television series that originated with our Manitoba station eight years ago and now airs weekly across the country on all A-Channel stations, as well as on APTN and SCN.
2673 MS MEECHES: Thank you, Drew. Good morning, Madam Chair.
2674 I got my start producing "The Sharing Circle" for Craig Broad Systems and A-Channel has been instrumental in guiding the show and in supporting its development. Now in its ninth season, the program is Canada's longest running and most successful half hour aboriginal magazine program produced, directed and written by First Nations people.
2675 "The Sharing Circle" has been able to instill pride and strength back to First Nations people. It has also introduced those people to a non-native general audience, at the same time breaking stereotypes.
2676 With the licensing of A-Channel on the Island, it will be possible to expand the scope and coverage of the program to embrace aboriginal communities in British Columbia generally and on the Island specifically.
2677 There are many stories that warrant the attention of our show. The controversy over the Haida Whale Hunt, for example, demonstrated the lack of understanding of the native perspective in the mainstream media.
2678 A-Channel not only supports "The Sharing Circle" through licence fees, but also contributes reporting staff and resources in each of its stations, making it possible to increase the quality of the programs. The series simply could not be done without the A-Channel support.
2679 "The Sharing Circle" enlightens aboriginal and general audiences alike, and attempts to raise cross-cultural understanding. Given the importance of all of these issues in this province, I think there is a crying need for a such a program like this in British Columbia.
2680 MR. CRAIG: Thank you, Lisa.
2681 In addition to "The Sharing Circle", Z-Channel on the Island will provide input into other regional programming which will appear not only on the Island outlet, but on other A-Channel stations in western Canada. These programs include "Real Time", "Entertainment West" and "Great Big Saturday Morning".
2682 When we filed our application last September, we indicated that we would reach eight hours of priority programming per week by the end of our licence period. Since our application was gazetted, however, the Commission has clarified that Victoria will qualify as a regional centre. On that basis, we now to expect to reach that eight hour target two years earlier. If "250", a local production we are developing, qualifies as priority programming, we will be at eight hours day one.
2683 You have heard a lot about our program ideas and our game plan for serving the Island. Here now is a brief presentation to give you an idea of what our station will look like.
--- Video Presentation / Présentation Vidéo
2684 MR. CRAIG: We know that the market here will respond positively to the A-Channel on the Island concept. When this concept was described to Island residents in an independent survey, over 90 per cent felt that our station would be different from their present choices on television. Fully 60 per cent thought we would be very different and over 92 per of respondents on the Island said they were likely to watch the station.
2685 Since our application was gazetted, over 1,000 intervenors have written in to support it, far more than the support garnered by any other applicant.
2686 We think we bring something quite special to the broadcasting system. We are uniquely experienced in markets in western Canada. In 1997, we successfully launched major television stations in Calgary and Edmonton within two days of each other, something no other broadcaster has ever done.
2687 As I mentioned at the outset, this is a critical time for our company. The A-Channel concept has been an incredible success. But we also need to grow to succeed. To support our mission, to combine responsive local and regional television with a western Canada based green light for Canadian creative talent, we need access to the Vancouver extended market.
2688 With this approval, we would increase the coverage of the Craig stations in English Canada from a current level of about 22 per cent to about 38 per cent. This is still far below the 70 per cent plus level reached by CanWest and CTV, but would be very close to the 40 per cent level currently reached by CHUM.
2689 The Canadian broadcasting system will be better served by having strong regional players. We should have regional broadcasters with the critical mass to do projects entirely on their own, or to work with other broadcasters on projects of mutual benefit from a position of strength.
2690 Our application provides an innovative way to achieve this goal. It combines an Island based station that will provide a tremendous local service with an incredible support structure by the A-Channel group for films and feature documentaries coming out of western Canada and does it with a company owned and operated from the west. We are ready to building something truly innovative in British Columbia. We know we are ready for the challenge.
2691 Thank you, Madam Chair and Members of the Commission. We look forward to your questions.
2692 CHAIRPERSON OF THE COMMISSION: Thank you.
2693 I would ask Commissioner Grauer to address the questions, please.
2694 COMMISSIONER GRAUER: Thank you, Madam Chair. Welcome.
2695 MR. CRAIG: Thank you.
2696 COMMISSIONER GRAUER: My questions today will be in the area of finance and advertising revenues, your business plan, programming and Canadian program expenditures.
2697 I just start with a question on finance. From the figures you have submitted to us, we have done some calculations and note that your station is projected to reach maturity by about year five.
2698 MR. CRAIG: Correct.
2699 COMMISSIONER GRAUER: And we have calculated a PBIT margin of 8 per cent at the end of year five. I don't know if you have done your own calculations on PBIT, but the 8 per cent would be about 26 per cent of the 98 PBIT for Vancouver stations. You would appear to have a very high level of program expenditures.
2700 I wanted to know if you were awarded this licence, one might question the extent to which you would be satisfied with a PBIT of this level. I wonder if you could comment.
2701 MR. CRAIG: Well, we certainly -- we have taken a look at the model. We have obviously -- we have a partner, I don't think he is here yet. TD Capital Group is our partner to help fund this application from an equity standpoint. They are very satisfied with that performance level.
2702 I think from Craig's perspective, I think we are a little bit different in the sense that we are a private company. We are in this game for the long term. The only outside shareholder we have to impress is TV Capital Group.
2703 COMMISSIONER GRAUER: Well --
2704 MR. CRAIG: They are obviously satisfied and they have demonstrated that. You know, they were originally involved in our Alberta applications and they are here today with us as part of this application.
2705 From our perspective, you know, we think it's critical to have a high level of program expenditure at the outset to get a longer term benefit. I guess the answer is we're happy with that return.
2706 COMMISSIONER GRAUER: That was my question, so the answer is yes.
2707 MR. CRAIG: Yes.
2708 COMMISSIONER GRAUER: I know you have drawn on your A-Channel experience in making your projections that you are split with respect to advertising revenue and the national-local split is 75/25. I'm sure you know the Vancouver market is anomalous with respect to the split in national-local. Just over one third of the revenues are from local advertisers.
2709 I wonder if you could elaborate a bit on your strategy that would see you achieving these increased national revenues, particularly given the 6 per cent drop we saw in national revenues in 1998. Maybe you could also comment on that. Some of the other applicants have done so.
2710 MR. CRAIG: Sure. I think probably this question is best answered by Cam Cowie. I will ask Cam to respond to this question.
2711 MR. COWIE: Thank you, Drew.
2712 Commissioner Grauer, I think one of the big differences is in the definition of what is retail, regional and national. It can be swung by a few clients. Dairy Queen would be an example. It would be classified as retail in some cases, regional in some cases, national in some cases, depending on the broadcaster's own internal definition.
2713 What we drew on is our experiences in the Alberta market and how we classify the information. Based on our internal local, regional and national definitions, we tend to skew more to a 75/25, but if the definitions were changed slightly, allowing some of what other broadcasters may claim as retail, that may swing back.
2714 COMMISSIONER GRAUER: Could you define for me what you mean by regional, how it is split out for you?
2715 MR. COWIE: Sure. We would define local as local storefront, single outlet. We would define regional as multi-outlet, single market. We would define national as multi-outlet, multimarket.
2716 COMMISSIONER GRAUER: For instance, if we are looking at Vancouver Island --
2717 MR. COWIE: Yes.
2718 COMMISSIONER GRAUER: Clearly your local sales, if I understand you correctly, would be local Vancouver Island sales.
2719 MR. COWIE: Correct.
2720 COMMISSIONER GRAUER: And regional could be both Vancouver extended market and Vancouver Island.
2721 MR. COWIE: Correct.
2722 COMMISSIONER GRAUER: And then national of course is the traditional.
2723 MR. COWIE: Correct.
2724 COMMISSIONER GRAUER: Okay. I wonder if you could comment on the 6 per cent drop that we have seen in B.C. in 1998.
2725 MR. COWIE: I would be happy to. We have heard the blip theory, we have heard the anomaly theory. We would suggest that it is a correction theory. There are probably three things that accounted for the correction in the marketplace.
2726 First and foremost would be the switch from the diary to meters in the marketplace. No question there was a drop in the available rating points and the redistribution of what was remaining. A similar thing happened in Toronto. Because of the hot aspect of the marketplace and the demand, there was a stand-offish component between the incumbent broadcasters and the agencies. That's documented in our research and our conversations with them.
2727 What we have seen over the last 11 months, the first eight months is where the major drop happened and over the last three months or over the first three months of the current broadcast year is the growth in the marketplace has gone back up to positive. I think it is 2 per cent.
2728 You can break those numbers down even further. The national spot has now increased back to a positive growth of 1 per cent. The network, which would include the specialty, has a 17 per cent, showing that there still is demand in this market that isn't being met with supply, the shifting over.
2729 I think it was mentioned yesterday that the local component continues to go down. A lot of that has to do with the cost increases in the marketplace, but also the fact that they don't have access. The Vancouver market is now bought first, so the local retail component, even some of the regional stuff that is booked in a quasi-national, regional area in B.C. did not have access to the inventory and were basically left standing at the door when all the avails were placed.
2730 COMMISSIONER GRAUER: You mean that the flat -- you are talking about the flat local sales then. It hasn't been growing because --
2731 MR. COWIE: Actually, it continues. The local component, according to the TVB Times sales reports continues to show a decline where the national spot in network has rebounded.
2732 COMMISSIONER GRAUER: Now, just to help me with this. Are talking about local-national with regional broken out the way it would be, not with your --
2733 MR. COWIE: No. This would be how TVB breaks it out. They don't define a regional component. They refer to it specifically as local --
2734 COMMISSIONER GRAUER: Right.
2735 MR. COWIE: -- national spot and network.
2736 COMMISSIONER GRAUER: Thanks. Just to go back because I'm just not entirely clear. Your sales strategy with respect to national, local, regional, could you break out for me -- you have got your 75/25, I think it is. It's still considerably higher than the rest of the stations in the market.
2737 MR. COWIE: You are talking about the national component.
2738 COMMISSIONER GRAUER: Yes, your national component. Is that correct?
2739 MR. COWIE: Again, it goes to definition. If we were to switch the definitions around, I think most stations operate on a 35/65. We have also gone back and looked at our Alberta revenue for the first three years and how we coated it.
2740 COMMISSIONER GRAUER: Right.
2741 MR. COWIE: So we are very comfortable with that definition, but it's an internal definition.
2742 COMMISSIONER GRAUER: Right.
2743 MR. COWIE: And would be very different than a BCTV definition.
2744 COMMISSIONER GRAUER: Right. But if we wanted to look at your proposals against the market as it stands, right, the existing market -- if we look at the market in Vancouver now --
2745 MR. COWIE: Yes.
2746 COMMISSIONER GRAUER: -- we have got -- the average per station is -- let's say B.C., 63 national, 31 local. Right?
2747 MR. COWIE: Okay.
2748 COMMISSIONER GRAUER: If you take your -- what will yours be using just national and local, taking out the regional category, washing it into --
2749 MR. COWIE: Well, the regional would wash into the local.
2750 COMMISSIONER GRAUER: Okay. Regional washes into local.
2751 MR. COWIE: Yes.
2752 COMMISSIONER GRAUER: Sorry if I didn't seem very clear on that. What I would like to do is talk a little about your projected audience share.
2753 You predict an audience share of 5 to 6 per cent in years one and two of a new service. These are similar to the shares achieved by the new Vancouver station, but I think if you look at CHEK, which has been in the market for several years, their share does not reach the level of a mature Vancouver station, but in fact has a lower share. What have you based your projected share for the market on?
2754 MR. COWIE: We have taken a look at all the combinations of our program schedule and what it would deliver and how it would deliver it. I guess the difference would be that this would be a complementary system to the marketplace. I'm not sure that CHEK and CHAN are completely the best example in terms of comparing share.
2755 We also looked at the influence in a new station being licensed. In this market we also looked at the influences of a new station in Calgary and Edmonton. We think that a beginning share of five is a reasonable share.
2756 COMMISSIONER GRAUER: Is it based on another station being licensed or one station? What is it based on in terms of that licensing scenario?
2757 MR. COWIE: We based on what we believe would happen with our program schedule with one licence.
2758 COMMISSIONER GRAUER: One licence. So when you talk about the unique addition to the market, could you tell me a bit about your strategy with respect to your local programming and who it is designed to appeal to. I know you are a Vancouver Island-Victoria service.
2759 As you know, Commissioner Langford had an earlier discussion with CHUM with respect to their Victoria proposal. I wonder if you could maybe elaborate a bit on your strategy with respect to Victoria-Vancouver Island vis-à-vis the Vancouver extended market.
2760 MR. CRAIG: Sure. First of all, it hasn't been made clear that the focus will be true to Vancouver Island in terms of its local reflection and the local programs. That's the only audience that there is for the local shows.
2761 If people in Vancouver and the lower mainland watch the shows, it's a bonus. We haven't contemplated any audience for those shows. Our focus for this service for the local and regional component of it is on the Island.
2762 In the non-regional and local program areas, in the entertainment program areas, it's focused on the extended market area the same way every other station is in this market.
2763 COMMISSIONER GRAUER: And yet you do still expect to achieve those share numbers in the Vancouver extended market.
2764 MR. CRAIG: Yes, we do.
2765 COMMISSIONER GRAUER: Your surveys reflect a strong demand for a new service for Vancouver Island residents. You report I think that 71 per cent strongly disagreed with the suggestion that Vancouver Island might be too small to support a second commercial station.
2766 I'm not quite sure what that means. In other words, is this audience, is it advertisers? What is that?
2767 MR. CRAIG: This was part of a study done by Canadian Facts. I would like to introduce Moira Silcox from Canadian Facts who did the work for us and she would be happy to have some discussion with you on this subject.
2768 MS SILCOX: There's a couple of points about the research that I would like to make with you. As Drew has suggested, when Drew and Jim Nicholl came to us and said they wanted to do this study, it was very much a Vancouver Island focus.
2769 There were a couple of things we did in implementing the work that I think gives them some cause for encouragement about this concept. One of the things we did was pay specific attention to the sample design. This survey -- in this survey we did over a thousand interviews, but in fact the majority of them, 670, were with people on the Island.
2770 In those interviews on the Island, only half of the interviews were with people who live in the Greater Victoria Area. We feel that we really heard the voice of the entire Vancouver Island. That was a very concerted plan.
2771 Secondly, when we sat down to craft the questionnaire, to talk to people in the extended market, we didn't sort of ask them "What's your wish list for what you would like to see". We had very specific program ideas and content. We also, based on the success of the A-Channel concept in other markets, asked people about some core values that would be associated with the new station.
2772 After we had the discussion about program ideas and core values and so on, only then did we present them with the full concept and we got a reaction. It was a very strong reaction. I mean, to do a survey and get over 90 per cent saying "Yes, this sounds different" and "Yes, this is something I would watch" is very, very positive. I mean if I had done this survey for Telus or Kraft or whatever on a new product idea, they would be very pleased and see that as a green light to proceed.
2773 COMMISSIONER GRAUER: What I am interested in here is -- you know, we have had a bit of talk about surveys, they are being asked about something they are not going to have to pay for, it's a free over the air service. Without meaning to -- I appreciate the demand shown by people in support, but when it talks about whether the Island might be too small to support another commercial station, I think there are issues like revenues.
2774 We know from your own proposal and everybody else that the Island can't financially support one that is only for Vancouver Island residents. When this question is asked, you know, is it to advertisers or will viewers watch the station? I guess that's really what I'm asking.
2775 MR. SILCOX: We weren't asking the residents of the island to make those sort of economic judgments. What we did do I think in our research was identify that there is a gap, there is a gap in consumer demand.
2776 This particular concept that we presented to them, a concept of a station that would reflect the distinct character of the Island, the whole Island -- not just Victoria -- we got a very, very positive result -- reaction from them. But we weren't seeking to determine to test residents or challenge them to offer a judgment.
2777 COMMISSIONER GRAUER: Or to advertisers, for instance, "Would you advertise here?"
2778 MS SILCOX: No.
2779 COMMISSIONER GRAUER: No.
2780 MR. NICHOLL: Commissioner Grauer, if I could just add to that. One of the things that may not be evident at a distance about the Island is that while there are 300,000, 310,000 in the Greater Victoria Area, north of the Malahat there's another 400,000 people. Those people are spread out through 15 significant towns and cities from the tip in Victoria all the way up to Port Hardy.
2781 We travelled and we talked to them, found out in their words, if there was a station that truly was providing a unifying service that was local and told them about those communities and did this on a regular basis, there was a real need, a real absence there, they would respond favourably if that service was available.
2782 Seven hundred thousand people with that kind of favourable response can turn into very significant numbers, even measured in the EMA. I think that was -- I mean we were pleased with Moira's survey results, but even meeting the people one to one, this was another way of just getting an idea of what people wanted, what was missing and what they needed on the Island. That was strengthening into our proposal as well.
2783 COMMISSIONER GRAUER: But you know, Mr. Nicholl, as you know, I am fairly familiar with Vancouver Island. Those of us who live here are. It is very distinctive and it is very different from the lower mainland in almost every way, but it has unique challenges too. I mean it's a very large geographic area. It is not -- I mean it's interesting to think of it as a market because it's, you know, geographically huge in terms of -- what do I want to call it.
2784 MR. CRAIG: It's not a challenge that we are familiar with. I mean, if you look at where we come from and you look at Manitoba, I mean Manitoba is a large geographic area as well and more sparsely populated than the Island. To cover that responsibly as a broadcaster is a challenge, but, you know, we have years of experience, decades of experience covering areas like that.
2785 While it looks like a challenge to some, we view it as a great opportunity when there is that amount of population with virtually no or little service.
2786 MR. NICHOLL: I would add to that. What I would add to that, Commissioner Grauer, with only one station there, you will never know what somebody else could do. You have to more or less take the outcome of that station. It's the only measure you have.
2787 If there was another station, one that could give the resources, the commitment on a continuing basis that would turn these 700,000 people into viewers, then you would have something to compare what one would approach will produce as opposed to another approach.
2788 MR. STERLOFF: Commissioner Grauer, we are also employing technology to deal with this to some degree. For example, you will notice that the main transmitter is a very powerful transmitter. It is located in the Gulf Islands. Our rebroadcaster again is a powerful unit that is located near Campbell River.
2789 The nature and the quality of the signal that we are going to deliver to the population I think is a bonus for us.
2790 COMMISSIONER GRAUER: What I would like to do is, getting back a bit to the revenues and also your business plan, is to get a better understanding of your strategy with respect to KVOS. You have according to page 1 of your revenue assumptions referred to the unique vulnerability of KVOS to the station we propose.
2791 You have a very aggressive revenue repatriation strategy with respect to the U.S. border stations. I assume that means KVOS. If there's others, you know, I would like to talk about that. You are projecting 30 per cent of your revenues for year one to come from KVOS.
2792 The strategy is based on acquiring Canadian rights programming, if I'm correct, being sold in the U.S. and having the ability to simulcast those and other programming acquisitions is what you say on page 1 of the revenue assumptions. Could you elaborate on that?
2793 MR. CRAIG: Well, I'll start from a programming point of view and I will let Cam take over and Debra may want to comment as well.
2794 I think it's really important to understand how KVOS positions themselves and how they have positioned themselves in terms of their ability to acquire programming. We like to call them a bit of an illegal alien. They are here. They serve this market. They are an American station, but they buy Canadian program rights and put them on an American station.
2795 It's important to understand that they are actually buying Vancouver rights in competition with everybody in the extended market area and they are handicapped in many respects because they are in the U.S. They cannot buy any network programs and they cannot buy any programs that are shown on any U.S. cable channels. They have a core of programs that generate the bulk of their revenue.
2796 Because they are one outlet with this unique status in Canada, no other border station actually buys local rights like KVOS. They are unique. Because they have one outlet they have no leverage in terms of program acquisition. We would have the leverage of serving almost 40 per cent of English Canada.
2797 From our perspective, any show that they have that's coming off contract or any future program would be ours, using the leverage that we have in Alberta and Manitoba.
2798 COMMISSIONER GRAUER: You know they are not a stand-alone station. They are part of ACRILE which is several stations. Are you saying that they are unique with respect to being a border station with this strategy?
2799 MR. CRAIG: The leverage they have is part of ACRILE. It does not do them any good when they want to buy Canadian rights. The Canadian division of VIACOM or Warner Brothers internationally sells those shows in Canada. Their leverage in the U.S. doesn't give them any ability to deal with the programs in the local market.
2800 COMMISSIONER GRAUER: Then let's put it into two categories. I gather you are planning to repatriate or get the rights for both Canadian shows and foreign programming, or just Canadian rights for the station.
2801 MR. CRAIG: From KVOS?
2802 COMMISSIONER GRAUER: Yes.
2803 MR. CRAIG: We would be seeking the Vancouver rights for those programs.
2804 COMMISSIONER GRAUER: For Canadian programs.
2805 MR. CRAIG: For American programs.
2806 COMMISSIONER GRAUER: For American programs.
2807 MR. CRAIG: Foreign programs.
2808 COMMISSIONER GRAUER: Foreign programs. So you are not looking to get the Vancouver rights for the Canadian programs that are on KVOS.
2809 MR. CRAIG: You know, I think they do have some Canadian shows. Obviously we are interested in taking a look at those Canadian shows as well. I mean I think that broadcasters tend to put Canadian shows on KVOS as a last resort.
2810 COMMISSIONER GRAUER: Just so I understand, it's mainly the foreign shows you are looking to.
2811 MR. CRAIG: I think that's where the bulk of the repatriation is going to come from is what I am saying.
2812 COMMISSIONER GRAUER: Now, you also referred in your revenue assumptions to having the ability to simulcast those and other programming acquisitions.
2813 MR. CRAIG: Correct.
2814 COMMISSIONER GRAUER: Could you maybe elaborate on that for me as well.
2815 MR. CRAIG: Well, if you take a look at our program schedule in our seven to eight block as an example, there would be an opportunity to simulcast some programs with American networks that KVOS doesn't have the ability to do either.
2816 MR. COWIE: I can give you an example of one program, just a real quick example. If you took a fringe program like "Jenny Jones" which we believe would be readily available to us, it does a one rating on KVOS at a fringe cost per point of roughly $150. It's just short of $950,000 worth of potential revenue.
2817 If you turn around and take that to a Canadian station and have the ability to simulcast it against the U.S. delivery, something that KVOS cannot do, it adds another half a rating point. In essence, you are adding roughly another half million dollars of potential inventory, just on one simple fringe program.
2818 If you go into the prime time and you take a look at a half hour strip program, you are repatriating first of all the audience for the program itself. Then you have the ability of multiplying that by repatriating audience that an American station is taking out of the marketplace by having the ability to simulcast.
2819 COMMISSIONER GRAUER: So just so I understand this though, this U.S. programming that you are going to simulcast would be where right now in the U.S.? What U.S. station would you be simulcasting this "Jenny Jones" show?
2820 MR. COWIE: U.S. network.
2821 COMMISSIONER GRAUER: Pardon me?
2822 MR. COWIE: U.S. network. It would be an ABC, NBC, CBS, FOX. I'm not sure which one "Jenny Jones" is on, but it comes into the marketplace on U.S. network. You take the program from KVOS, you bring it back to the Canadian station, then you play it in the same time period as the U.S. station spilling across the border and you have a multiplying effect.
2823 COMMISSIONER GRAUER: Thanks.
2824 MR. STERLOFF: Commissioner, I wonder if before we move on to the next one if we could expand the conversation beyond just KVOS.
2825 COMMISSIONER GRAUER: Yes.
2826 MR. STERLOFF: In our town hall meetings with the media, consumers, the West Coast Media Society, French Canadian Broadcasting, et cetera, it was curious to us as to why the patterns, the viewing patterns, on the Island were changing so significantly and why were they watching A&E, why were they watching King and Como.
2827 It lead to our decision to commit a substantial amount of money to the development and commissioning of these prime time documentaries that are going to deal with very specific subjects of interest to the Island. While you don't see a lot of that on KVOS, there certainly is a large pick-up of audience from the American specialties and the Seattle conventionals to this kind of high quality programming dealing with specific issues.
2828 While it may not repatriate a significant amount of advertising revenue, it certainly will in terms of audience. It really is one of the bedrock values in terms of how should we spend our independent production funding, focus on high quality, prime time feature documentaries.
2829 MR. CRAIG: One other note, and Cam may want to speak to this, on the KVOS factor. I think, as you have heard before from a lot of other applicants, advertisers tell us they would far rather deal with a Canadian outlet than an American outlet.
2830 Not only are you going to get the benefit from this handful of shows that generate a lot of audience and a lot of revenue that are going to come over, but you also are going to repatriate dollars because you can be a Canadian station and you can package and do business with a Canadian station. So a lot of those dollars will move over as a result of having a Canadian player that the advertiser can deal with as opposed to an American player.
2831 MR. COWIE: It's also a scenario of leverage. We talked about leverage in programming, but with a consolidation of the supplier and the consolidation of the buyer, there are opportunities to use other markets and most of the broadcasters and most of the agencies get into this debate, usually around the middle of May, in terms of how they are going to package the inventory, what percentage of the inventory would be available for packaging and so on.
2832 That's something we have learned as we have grown from a stand-alone station basically in Manitoba to growth in western Canada, that that leverage is a good thing for us. I mean I think now four of the agencies or five of the agencies control about 65 per cent of the spending in Canada. With the leverage of programming also comes the leverage of the ability to take and extend opportunities across different stations.
2833 COMMISSIONER GRAUER: With respect to KVOS though, as I'm sure you know, their entire strategy is based on pricing their ads at rates that advertisers can't afford, you know, big city stations. I'm just wondering how your pricing strategy is designed. Will you be able to lure those people away?
2834 MR. COWIE: The pricing strategy is twofold. One, they have to have the ability to track the revenue, but they also have to contend with BLC 58. They have to provide a discount to the advertiser in order for it to make it a reasonable difference, but in order to do that, they still have to have the inventory.
2835 We are suggesting that we are not going to go down with a wheelbarrow and take the revenue. We are going to take the programming, bring it back to Canada, make it available to Canadian advertisers. So that's really the difference.
2836 I mean, repatriation is two components. You have to be able to do both. You have to be able to repatriate the audience first before you can repatriate the dollars. Yes, they will have some inventory left, but taking programs such as "Jenny Jones" off their schedule, they will have a very difficult time replacing that inventory.
2837 MR. CRAIG: To that point, I think that KVOS has been diminished in terms of its impact on the market when VTV was launched. They are still kind of hanging in there. They have a handful of shows that generates a decent audience. They are still generating considerable revenue.
2838 It's our contention that if another station came in here and took those shows away, they move further down the ladder of priority in terms of Canadian advertisers needing them or wanting them.
2839 COMMISSIONER GRAUER: But to repatriate $6 million in year one, it's pretty ambitious, would you say?
2840 MR. COWIE: As I mentioned, if you take "Jenny Jones", there is the opportunity for about $1.5 million just with that one hour program. It's not totally ambitious, it's totally realistic.
2841 They did not feel the full brunt of the incursion of VTV into the marketplace. VTV took a different program strategy. They moved some of the CTV programs over and so on which left KVOS the opportunity to still acquire those Vancouver EM rights for some pretty decent programming.
2842 We suggest that when a new player comes into that marketplace, they won't have that luxury. I think everybody has anticipated about -- we suggest about 30 per cent of their revenue would be available to bring back to Canada.
2843 COMMISSIONER GRAUER: I am still on KVOS. Do you know how much of the revenue going is local and how much is national? Do you have any sense of that?
2844 MR. COWIE: No, but I can get you that in about one second. It won't be more than one second.
2845 COMMISSIONER GRAUER: Two?
2846 MR. COWIE: Maybe seven seconds. In excess of 80 per cent would be national.
2847 COMMISSIONER GRAUER: National?
2848 MR. COWIE: Yes, for KVOS, booked mainly from Toronto, brand advertisers. They don't produce anything local that goes into the marketplaces. I believe that's accurate.
2849 COMMISSIONER GRAUER: I think we may have talked about this with respect to your foreign programming. I know you said your purchase of foreign programming will be complementary and you will avoid bidding wars. You will seek alternate suppliers and alternate programs that -- primarily then to keep KVOS programming we have been talking about.
2850 MR. CRAIG: That would form part of our program, yes. That would form part of our program schedule.
2851 COMMISSIONER GRAUER: And what about the rest of the foreign programming?
2852 MR. CRAIG: It would come from a variety of sources. We have been programming an independent station since 1986 in Winnipeg when we started there and we deal with a number of suppliers. Some are other national rights holders. Some are partners on regional buys that we put together and cobble together cooperatively. Some of the programs we buy directly from the supplier purely on a market by market syndicated basis.
2853 COMMISSIONER GRAUER: Now, with respect to your non-local Canadian programming, I know you described your acquired non-local Canadian programming as being again sort of to complement other material available to local audience, purchased from a range of suppliers, including alternate distribution sources. Again, I wonder if you could, you know, elaborate for me a bit on that.
2854 MR. CRAIG: Well, I think that in Alberta our schedule is very movie-rich. Obviously our local production initiatives are focused on that genre. We would expect that we would seek out opportunities in that area for this new station.
2855 Those are coming from a variety of sources. Right now in Alberta, as an example, we have about 130 films under contract. About 15 of those titles we have produced through our Drama Fund, which we haven't aired yet. We are looking for other homes for those before we expose them to see what opportunities there might be nationally.
2856 We do purchase films nationally out of that mix. About 25 of those would come from other broadcasters. The rest would be purchased independently through independent producers specifically for our market.
2857 COMMISSIONER GRAUER: If we were to look at different licensing scenarios, I don't know, for instance -- if we were to license CHUM in Vancouver, for instance, how would that affect your acquisition of Canadian non-local programming?
2858 MR. CRAIG: Well, I think CHUM has indicated that they have two schedules that they buy national rights for their Ontario stations, so they might be a supply source for us. There may be other opportunities. We don't know how the world is going to unfold in Southern Ontario. We would like to think that there would be another independent player there that we might be able to deal with.
2859 From our perspective, it wouldn't impact our plans if CHUM were to have a Vancouver licence. We firmly believe if they were given that opportunity, we could certainly find enough programming to do what we need to do.
2860 COMMISSIONER GRAUER: How would the licensing of, you know, the other licensing scenarios, how would they affect your business plan?
2861 MR. CRAIG: Well, first of all, in terms of the Trinity application, we have looked at their application. We don't view their application as being a problem in the sense that it wouldn't affect our business plan materially.
2862 You know, we have heard a lot of discussion this morning about "what if" scenarios. Some of them are hard to contemplate. We have also had an opportunity to hear about, you know, what might come on the table, what might go off the table under the different scenarios.
2863 We have discussed it in the break. I think our preference would be to deal with that issue in reply so that we have a little bit of time to digest what our colleagues and friends at CHUM put on the record this morning and see how that might affect our position.
2864 COMMISSIONER GRAUER: We, as you know, have many commitments. In looking at this, how would you think this would be the most effective? We would hold the successful applicant accountable over the period of the licence. I wonder if you have given that some thought.
2865 MR. CRAIG: We have and we can only speak for ourselves, but we would think that -- first of all, we have made what we think is a very aggressive commitment in terms of the priority programming based on a relative size. We are prepared to live with that and stand by that.
2866 We also understand that the Commission may want to ask us to commit as a condition of licence to our priority program fund. We would fully expect that. In a new licence proceeding where the applicant doesn't have a track record, we are fully prepared to accept as a condition of licence an expenditures requirement based on the business plan that we have put before you.
2867 COMMISSIONER GRAUER: Thank you. I wonder if you could talk to me a bit about how your current application would fit into, you know, a broad conventional television strategy for Craig. If you were successful here, do you see this developing into more applications? You could just talk a bit about your long term view.
2868 MR. CRAIG: Certainly. First of all, from our standpoint, the ability for us to get into the Vancouver extended market area would, as I mentioned in the oral presentation, put us to the point where we are close to 40 per cent reach of English Canada. That's very significant on a number of fronts, mainly from the standpoint that we could effect more program decisions.
2869 When we are a small player, we are often in a junior position when we buy programs on a national basis. We have a little bit of say, but not much more than that. This would put us in a position -- we could effect more program decision-making locally. We could be instrumental in buying national rights and selling it to other players. We could also be in a position, as we have indicated in our application, to produce regional programs for our entire system.
2870 Instead of taking another broadcaster's daytime show as an example, we would have, if we were licensed in this market, a big enough critical mass that we could actually produce our own daytime television programming that would be unique and that would be incremental to the programming that we produce in all of our stations. I think that would be an exciting opportunity for us.
2871 In terms of where we want to go, certainly everybody knows that the real big carrot is in Southern Ontario. It would be nice to be in Southern Ontario. It may be necessary for us at some point. We don't know. But certainly our ambition is a long term vision. We agree with the other applicants when they say that you need bigger players, you need stronger players with ambitions.
2872 We are not going to stop here. We want to keep going. We have identified other Canadian markets too that we would like to serve and that we think are under-represented by local broadcasters.
2873 We have a big vision, a long term vision. This would represent an exciting opportunity for us.
2874 COMMISSIONER GRAUER: One of the things when I was reading through your application that struck me was your discussion of -- I know we touched on this earlier -- local, regional and national with respect to your programming. I wonder if you could just elaborate for me -- then there's the western Canadian and I wasn't quite sure which. There's sort of the Victoria-Vancouver Island local. Then there's the Vancouver area or B.C. regional which is referred to and then, of course, there's the western Canada. I wonder if you could just talk a bit about it.
2875 MR. CRAIG: Well, there's basically two components to the home-made strategy in terms of what we produce inhouse. There's the local programming which we have identified as being 24 hours a week of straight Vancouver Island unequivocal local service that's going to serve Vancouver Island. Then additionally we have identified some other program concepts that we would -- that the Vancouver Island station would make a contribution to, but would also air on the other stations in our system.
2876 Those programs include "Real Time", which is a daytime concept that we are working on, our "Kids Block" Saturday morning and also a program called "Entertainment West". That's probably a good example of what we could do as a system. It would be an entertainment magazine show with a western sensitivity that would take elements from each one of our markets and mould them into a show that's incremental to what we put on the air as a local station, but with local input.
2877 That's what we refer to when we talk about a regional commitment. Wayne may want to elaborate further on this in terms of the commitment that we have made to B.C. producers. All of that content would be produced in B.C. Some of it would be produced on the Island, but some of it would be -- some of those dollars and some of that commitment available to producers in other regions of the province.
2878 MR. STERLOFF: Yes. And I think that we should when we talk about that regional programming add important programs like "Sharing Circle" which is a longstanding program that the Craig system has supported.
2879 Certainly the priority program fund is a $12.7 million commitment to independent B.C. producers. All of that programming would be broadcast across the Craig system. Because we pay national licence fees for the documentaries and the drama, we would be placing those with broadcasters from coast to coast. That's basically what I have been doing for the last while, is taking some of the movies that Joanne's team have put together and getting them on the air coast to coast.
2880 That will have a pretty sizeable impact, I would think, on getting the work of B.C.'s independent producers out into the regional and national system.
2881 COMMISSIONER GRAUER: And how is that going?
2882 MR. STERLOFF: Very well, very well indeed.
2883 COMMISSIONER GRAUER: So you are making some sales to some other broadcasters.
2884 MR. STERLOFF: Yes. As a matter of fact, yes.
2885 COMMISSIONER GRAUER: Have you started doing any of your export workings there? Is that what you are doing?
2886 MR. STERLOFF: Yes. As a matter of fact, we made our first venture into the export realm. Went down to NAPI and had our first round of meetings with program buyers. There's a terrific enthusiasm because the titles that the Alberta Drama Fund has been financing are high quality story-driven titles. They are not genre pieces. They will be important parts of schedules in the U.K., France and America.
2887 We are right at the beginning of that arc, but I have a good feeling that this is going to be a very successful venture.
2888 MR. CRAIG: Commissioner Grauer, if I could. I would like to ask Lisa Meeches to talk about "The Sharing Circle". It's kind of a unique program in the sense that we started this show as a local show in Brandon eight years ago when Lisa worked for us. Now we pay Lisa a licence fee for the show. It's her show. We also use our facilities and some of our reporters as well.
2889 I will just maybe ask Lisa to let you know what the extension of this show into the market would do for "The Sharing Circle".
2890 MS MEECHES: What I would like to see as an independent, especially for this market, is to see the A-Channel concept in what we have done in Manitoba and Alberta of course brought here for the aboriginal people, but of course for the non-aboriginal people as well because we have -- it has taken me a long time to, I guess, break round in the non-native audience.
2891 The strategy that I have taken is so that people understand that we are crossing culturally as well as re-educating our own people. As an independent, it has been a struggle, I guess, to maintain the look of the show without the Craig dollars, but it has also been very great in its own aspect as well because with the Craig influence, I have been able to maintain the quality of the show because of the reporters that are situated in the Craig networks. These people who are First Nation also act as median liaison.
2892 Also, what we have been able to do, myself and my team, in terms of creating a viable product is that, you know, for I guess the first seven years that we have done the show, the company has poured in many, many dollars to see the show sustain itself. It has taken us this long before I was able to get a corporate sponsor to realize the viability in this program and what it has been able to do for First Nations people and non-First Nations people.
2893 My relationship with the Craigs is a very unique one. Like Drew said, I started out as a news reporter. Nine months later I started producing the show, you know, to what it is today. When I first took the show over, one of the things that Drew said to me, Drew and Boyd, was "We have been benefiting from the look of the show and what you have done for us. Now we would like to do something for you. We want to sell you the show".
2894 I then at that time felt very proud to be a Canadian producer, to be a First Nations producer and to be part of this family. As an independent, I realized the benefits of understanding that type of relationship, I guess in a sense that what broadcasters can make to First Nations people.
2895 Producing a First Nations show, it's actually easier said than done because when broadcasters realize that it's difficult to make money from this project, it suddenly gets dropped. I haven't seen that. This company has stood by me. They have stood by the people and, like myself, this company are visionaries. We see the big picture. We see the benefits. We see the stories. We know the healing needs to take place. We haven't focused on the negatives, but have talked about the positives of what the next seven generations can do and how they can benefit from this show.
2896 COMMISSIONER GRAUER: How do you see the show evolving then? It will grow with this addition and then more?
2897 MS MEECHES: Yes. It sure would be nice to have a separate show strictly for this region, but in terms of like I mentioned before, making it viable to a specific region and having a corporate sponsor realize that is always difficult. They need to realize that we as First Nations people are viable. You know, I guess the BBMs haven't really been very complimentary to, I guess, seeing the show the way we do.
2898 It would be nice to have it, you know, a regional show for B.C., but at this point it would also be nice to have a mesh of regions in the one program. Perhaps, Debra, you can elaborate on some of the research that you have done with the show in the non-native community.
2899 MS McLAUGHLIN: I was privileged to work on the APTN application. In the course of researching their proposal, we did focus groups across Canada with native and non-native persons. One of the things that struck us was this tiny program that started in Winnipeg actually had travelled throughout the native community as being a good program and we were actually questioned if we could provide that to them through the network.
2900 Although it wasn't at that time available on the A-Channels in Calgary and Edmonton, it had already had an audience waiting for it.
2901 In terms of presenting what APTN could be for a non-native population, we were able to show clips of "The Sharing Circle" and part of Lisa's vision with them. It was probably one of the lead programs in terms of demand. It certainly gave the impression of what the channel could be for a group of people who had no concept, so it was very well received in both native and non-native groups.
2902 MR. STERLOFF: In a previous life, one that you are aware of, I was responsible for trying to stimulate the development of work, particularly documentaries, drama and variety, from aboriginal film makers. On the Island in particular, there is a real difficulty in terms of their skills training in the area. I was delighted when Drew put on the table during our early negotiations a substantial amount of money that is going to allow us to immediately involve ourselves with advanced skills training, not just for First Nations but all of the visible minorities on the Island.
2903 This is going to involve producer training and also advanced script writing skills and directing. My hope is that when we talk about our overall commitment to independent producers, it's going to be a pretty significant impact in terms of commissioning the feature documentaries from the visible minority communities as well as the drama, like "Mina Shum" for example.
2904 These stories make fantastic dramas. We are all looking forward to immersing ourselves in that and perhaps stimulating it through the use of these advanced skills training funds that we are bringing to the table.
2905 MS LEVY: I should just add that as a result of some of the money that I have in the Drama Fund Program in Alberta, we have been able to contribute to a very significant initiative by the Alberta Motion Picture Industries Association for again advanced skills business training for producers. We have also been able to contribute to the National Screen Institute's first feature program which is a very exciting initiative to get people trained in the art of creating long form drama. In fact, we just licensed a movie from a first time director that came through the first features first process. You know, we are starting to see the benefit further down the line as well.
2906 MR. NICHOLL: If I can just add a little bit of local Island perspective to this whole discussion. I have a background in production as well and the last two years I was sitting on the local Victoria Film Commission. I know of their interest, their desire to really establish more of a film and television industry on the Island.
2907 We found this as we travelled up the Island, that there were small film commissions, volunteers often that didn't have the money but were very interested in getting more of an industry on the Island. The whole issue that frustrates this ambition is there are not enough resident crews, there is not enough work that keeps these people at home. They have to go to Vancouver to work because that's where the work is.
2908 It's these type of I think initiatives, indigenous production which will fill out the crew capable of living and doing its production on the Island that will really grow that industry and that ambition of the Island to be a part of that film and television production industry.
2909 COMMISSIONER GRAUER: Thank you. I just have one more question and it's actually again back to the programming. I'm interested to the extent to which you are acquiring national rights to Canadian and foreign programming and if you have been sublicensing any of that in Vancouver.
2910 MR. CRAIG: Yes, we have.
2911 COMMISSIONER GRAUER: And to whom and to what extent?
2912 MR. CRAIG: I will let Wayne elaborate on that, please.
2913 MR. STERLOFF: We have been selling movie titles, for example, to BCTV, CHEK and other broadcasters across Canada. These are Canadian content drama titles that are working themselves into the schedules already in British Columbia.
2914 COMMISSIONER GRAUER: Thanks.
2915 MR. STERLOFF: I should add to that also children's and youth programming, for example, "Shirley Holmes", a youth oriented series. We have just concluded a deal that will have 52 half hour episodes of that program being rebroadcast again into the market.
2916 MR. CRAIG: Just one other point to add there. When VTV was licensed, one of the commitments that they made was to support the drama initiatives from Alberta. We fully expect when these movies finish their pay cycles, which Wayne has been very successful in getting them on to a pay window, that a natural home for that product in this market could be VTV.
2917 In fact, CTV, to their credit, licensed the very first A-Channel drama fund initiative, so the very first movie that we did, as soon as it came off the finish line, CTV stepped up to the plate and bought it for the network.
2918 COMMISSIONER GRAUER: Great. I actually don't have any more questions. I know that legal staff have some. I wonder if you want to take a few questions I didn't ask. Last chance for a sales pitch.
2919 MR. NICHOLL: Well, I guess that's an opening I can't turn down. I have lived on the Island, as we said in the introduction, 28 years. I think that this is an opportunity really to give the Island a television station, a television service, that is not independent, that is not separate from this attractive luring market of Vancouver.
2920 It just will not remember to stay true to its roots. I think that in the hands of broadcasters, multigenerational broadcasters like the Craigs, you have got that assurance that they know what they are doing. They have looked at this market more than once. I think the commitment, the fit of this group to the Island and its needs and its special situation in this part of Canada, I can't wait to get working on this.
2921 We hope that the people of Vancouver Island will really have a service that will make them proud again of local television. You are going to be hearing a lot of them because they are coming forward, not necessarily in support of us, but just about the need.
2922 We really think this opportunity to address that need is an opportunity that fits our ambitions, our sort of vision and what the Island needs because as one who lives there, I know it all too well.
2923 Thank you.
2924 MR. CRAIG: I just have one sort of final comment. This is an interesting time for our company. It's going in several different directions. I'm very happy and proud of the fact that we are building a very solid team of people. Some of them you have seen today. We have others as well that aren't here. They are back running the stores that we have.
2925 We like being in this business. It's a great business. We have ambitions to also get into the specialty channel side of things. You will see us in this next round.
2926 I think in terms of what we have to offer is some fresh blood, some new blood with some experience as well. I think that we can play a very key role, not only in the local markets that we serve, but also in the context of the entire system as a whole.
2927 CHAIRPERSON OF THE COMMISSION: Thank you very much.
2928 Madam Wylie would have a question for you.
2929 COMMISSIONER WYLIE: Mr. Craig, you mentioned that being a broadcaster in Southern Ontario may appeal to you. I don't know if you know that Mayor Lastman advertised Toronto lately north and east couldn't go south because there was a lake, but I understand he is moving west so you may end up a broadcaster in Southern Ontario without moving your transmitter.
2930 MR. CRAIG: There we go. It would be the easy way to do it.
2931 CHAIRPERSON OF THE COMMISSION: Oui. Madam Assheton-Smith has a few questions for you.
2932 MS ASSHETON-SMITH: Thank you, Madam Chairperson.
2933 I just want to confirm a few of the specific programming commitments. You have indicated that 24 hours of original local programming is what you are committing to and of this, from what we understand, 15.5 hours will be news and eight and a half hours will be non-news local programming. Is that correct?
2934 MR. CRAIG: That's correct.
2935 MS ASSHETON-SMITH: It looks like from your schedule that you are including in the local news computation but one hour of these A-Channel actives.
2936 MR. CRAIG: Yes.
2937 MS ASSHETON-SMITH: Can you tell us a little bit more about what these bulletins consist of and why they should be included as local news?
2938 MR. CRAIG: They would be local news items that would be produced -- I will let Mark Campbell, our news --
2939 MR. CAMPBELL: This seems to be working now.
2940 What a news active consists of, it's a summary of the newscasts that we play every hour within our programming as an opportunity to bring viewers that don't traditionally watch supper hour news but they do watch our other programs to bring them up to date with the stories that are affecting them in the local community.
2941 These range anywhere between one and three minutes long and they will be played every hour during our schedule from 6:00 a.m. until midnight.
2942 MS ASSHETON-SMITH: So they will be going beyond just promoting the upcoming news hour. They will actually contain news.
2943 MR. CAMPBELL: Yes. They are content driven. They are not teases for stories.
2944 MS ASSHETON-SMITH: Okay. Would you be prepared to accept a condition of licence with respect to your original local programming commitments?
2945 MR. CRAIG: Yes, we would.
2946 MS ASSHETON-SMITH: In terms of priority programming, you indicated today in your opening remarks that you now expect to be able to reach the eight hour priority program target two years earlier than you indicated in your application, which was the end of your licence term.
2947 Then you mentioned that if "250" counts as part of the programming, you could achieve that in year one. Is there any reason why you are aware of that you think it might not count as priority counting or why do you think it might not count as priority programming?
2948 MR. CRAIG: We are still trying to fully flesh out the concept, but we are assuming it's in the non-news category and human interest category, so it would at this point qualify.
2949 MS ASSHETON-SMITH: In the event that it did not, you would be reaching the eight hours in year five. You previously indicated that you would start at five hours and work up half an hour every year up to year seven. Would your starting point change as well?
2950 MR. CRAIG: It would start at five and a half.
2951 MS ASSHETON-SMITH: It would start at five and a half and go up by half an hour every year.
2952 MR. CRAIG: Right.
2953 MS ASSHETON-SMITH: So five and a half in year one, six in year two, six and a half in year three, seven in year four and then eight in year five. Would that be correct?
2954 MR. CRAIG: That's right.
2955 MS ASSHETON-SMITH: Is this something that you would be willing to make a condition of licence?
2956 MR. CRAIG: Yes.
2957 MS ASSHETON-SMITH: Okay. You have also indicated in Schedule B that you are planning to air three and a half hours per week of local programming in peak time. Is this something that you would be prepared to accept as a condition of licence?
2958 MR. CRAIG: Yes.
2959 MS ASSHETON-SMITH: Throughout your licence term that we clarified.
2960 MR. CRAIG: Yes.
2961 MS ASSHETON-SMITH: You state in your supplementary brief, and I am quoting here:
"Unlike the other stations in B.C., we expect that a majority of our Canadian priority programs will emanate from western Canada."
2962 Do I take it here that you are making a commitment that more than 50 per cent of your Canadian programs will be produced in western Canada?
2963 MR. CRAIG: Yes.
2964 MS ASSHETON-SMITH: Two more final questions. Pursuant to Public Notice 1995-48, English language private conventional television stations are required to achieve, the large ones are required to achieve close captioning 90 per cent by year two of their licence term. Given your projected revenues, can you give us some reason why A-Channel on the Island would not be subject or should not be subject to this requirement to close caption 90 per cent of local programming by the end of year two?
2965 MR. CRAIG: We would commit to do that by year two.
2966 MS ASSHETON-SMITH: You would commit to be there at the end of year two?
2967 MR. CRAIG: As a condition.
2968 MS ASSHETON-SMITH: Finally, as we have discussed with other applicants, other applicants wish to use channel 53 in Victoria. In addition, the CBC has objected to your proposed channel use of channel 4 in Campbell River.
2969 MR. CRAIG: Yes.
2970 MS ASSHETON-SMITH: If for any reason channel 53 in Victoria and/or channel 4 in Campbell River was not available, would you be ready, willing and able to use another channel in either of these locations?
2971 MR. CRAIG: We have looked at other options and we would be prepared to live with that as a condition.
2972 MS ASSHETON-SMITH: Thank you very much. Those are all my questions.
2973 MR. CRAIG: Thank you.
2974 CHAIRPERSON OF THE COMMISSION: Mesdames, messieurs, thank you very much.
2975 I have now two news. A good one, we will stop for lunch. We will come back at 1:30. Bad news, we will start at eight o'clock tomorrow morning.
--- Recess at 1145 / Suspension à 1145
--- Upon resuming at 1335 / Reprise à 1335
2976 CHAIRPERSON OF THE COMMISSION: Alors. Madam Vogel, would you please introduce this phase of the hearing and introduce the first intervenor.
2977 MS VOGEL: Thank you, Madam Chairperson.
2978 We are starting Phase II of the four phases of this part of the hearing. Phase II is when the applicants reappear as intervenors against each other.
2979 A reminder that each intervenor is given ten minutes maximum for the presentation. Our first intervenor of Phase II is CHUM Limited. Whenever you are ready.
INTERVENTION / INTERVENTION
2980 MR. RUBINSTEIN: Thank you very much. Good afternoon, Commission.
2981 This is the intervention by CHUM Limited against the application by Rogers Broadcasting for a new ethnic television station in Vancouver and the lower mainland.
2982 CHUM believes the Commission should deny the Rogers application for the following reasons. First, approval of the Rogers application would result in an undue concentration of ownership of ethnic television service that is not in the public interest.
2983 Second, Rogers proposal does not result in the maximum contribution to Canadian programming as outlined in both your television and ethnic policies that must be required as a condition precedent for the privilege to operate ethnic television services in both Vancouver and Toronto.
2984 Third, Rogers approach to ethnic programming, the CFMT model, is no longer the most relevant model to best serve new generation ethnic Vancouverites.
2985 In CHUM's respectful submission, approval of Rogers application will lead to Rogers having undue market power in ethnic television. As you know, in the Vancouver market, Rogers owns and operates the two widely distributed television services that provide ethnic programming. These are Rogers multicultural channel and community channel, both distributed on analog basic cable. In addition of course, as the Commission is aware, Rogers operates all the cable systems in Vancouver that would distribute their own services.
2986 Should the Commission license LMTV, Rogers will be securing a virtual monopoly on the provision of broadly distributed, free ethnic television in Vancouver. Although some third party ethnic services are also available, such as Fairchild and TalentVision, the Commission should note that these services are distributed only on a narrow pay or digital tier at some additional cost to viewers.
2987 Since Rogers has chosen to provide broad analog distribution only to those ethnic services which it owns and operates, also licensing LMTV would give Rogers a virtual stranglehold on basic cable ethnic television.
2988 We believe that such a result is negative for the communities involved as no one likes to be in the hands of a monopoly. It is also inconsistent with the Commission's longstanding preference that there be some fair level of diversity of ownership in the system.
2989 MR. MILLER: Yesterday, during your examination of the Rogers proposal, you indicated that it is the role of the Commission to get the maximum benefits possible for the public in a licensing process. We agree.
2990 To this end, we note that the CRTC's ethnic policy confirms that ethnic television stations should broadcast the same minimum Canadian content levels as non-ethnic stations. As the Commission well knows, the minimum Canadian content commitment is 60 per cent overall. Rogers has proposed a 50 per cent Canadian content level for their LMTV service.
2991 As opposed to raising the bar to maximize the Canadian programming on this proposed service, Rogers instead seeks the same reduced commitment as they have secured at CFMT Toronto.
2992 We note that the Rogers application does little to advance the primary objectives of your television policy. They offer minimal priority programming/peak viewing hour commitments as compared to other applicants.
2993 Rogers proposals for priority programming appear to be limited to documentaries. Moreover, we see no hour commitments to priority programming in peak time. They do nothing for Canadian feature films, Canadian drama or the Canadian star system.
2994 Notwithstanding the material synergies that will result from Rogers proposal to own two ethnic television services in the largest television markets in Canada, Rogers has not offered sufficient benefits to the broadcasting system.
2995 The CRTC's ethnic policy also requires that a "primary responsibility of over-the-air ethnic radio and television stations should be to serve and reflect their local community. Yet, out of 75 hours, the LMTV proposal appears to propose only 18 hours of local original programming a week.
2996 The remaining twenty-one and a half hours of so-called local programming is in fact CFMT produced programming from Toronto. In addition, LMTV plans to air 18 hours of non-Canadian acquired ethnic programming, directly competing with existing third party ethnic services and directly cutting into their market share. the rest would apparently be repeat programming.
2997 This total of 18 hours of original, local ethnic programming on LMTV contrasts with the 42 hours a week of Vancouver-produced original culturally diverse programming a week proposed by CHUM Vancouver, of which a full 15 hours is original ethnic programming.
2998 MR. HO: Rogers proposed service follows a traditional ethnic programming model. It is not specifically designed to build bridges between communities, but to serve them individually through separate and segregated language blocks. Vancouver residents are now already served with this style of ethnic programming by several longstanding ethnic television services, including Rogers own multicultural channel. In addition, there is a group of foreign multicultural services now offered on Rogers digital box.
2999 As compared to such an ethnic service, a more effective model for today includes cultural diversity reflected in all programming, ethnic and otherwise.
3000 Vancouver needs a new television station to facilitate cross-cultural understanding and build bridges within communities and beyond them. Vancouver needs to make third language programming accessible to other language groups and facilitate interaction. Unfortunately, the Rogers model does not best achieve these objectives.
3001 MR. RUBINSTEIN: This concludes our intervention regarding Rogers and we have no comments with respect to the application by Trinity.
3002 Thank you very much.
3003 CHAIRPERSON OF THE COMMISSION: Oui. Madam Lori Assheton-Smith has a few questions for you.
3004 MS ASSHETON-SMITH: This isn't actually related to the intervention. I just wanted to get something on the record following up from your discussion with Commissioner Langford this morning and it is in relation to one of the licensing scenarios.
3005 In the event that only Victoria was licensed and not Vancouver, you indicated that the spending commitment would increase from $1 million to $12 million. I just wanted to get a little bit of detail in respect of whether that additional $11 million would be targeted to producers on Vancouver Island and Victoria or if it would go to producers in the Vancouver and B.C. region.
3006 MR. MILLER: I indicated on the record this morning that first and foremost, that $12 million in total would be the B.C. based producers. A maximum of 50 per cent would go to Vancouver based producers or, if you wished to look at it in the converse, a minimum of 50 per cent would fall under the new regional priority programming definition that the Commission has established.
3007 MS ASSHETON-SMITH: Thank you. That's the question. Thank you.
3008 CHAIRPERSON OF THE COMMISSION: Thank you very much.
--- Pause / Pause
3009 COMMISSIONER LANGFORD: It's getting like the O.J. trial now. We are having sidebars. F. Lee Bailey walks in here, I'm out of here. That's it. It looks like night court in here anyway, doesn't it, all these people waiting. If anybody is ready to plead, step forward. These people all came here. They flew business class, they expect a little something, you know.
3010 CHAIRPERSON OF THE COMMISSION: I apologize -- not for him. I apologize. Not him but for myself because I was a bit confused in the order.
3011 Madam Vogel.
3012 MS VOGEL: Thank you, Madam Chairman.
3013 Our next intervenor is CFMT. Whenever you are ready.
INTERVENTION / INTERVENTION
3014 MR. SOLE: Madame la Présidente, Members of the Commission.
3015 We filed written interventions with respect to the applications by Trinity, Craig and CHUM for new television stations in this market. Nothing that we have heard so far in this proceeding would cause us to change the views that we expressed in those interventions.
3016 We do not oppose the application by Trinity. The Trinity application is not technically mutually exclusive with our application. The new television service that Trinity is proposing would likely have very little impact on our ability to introduce and operate a new multilingual television service in this market.
3017 We oppose the applications by Craig and CHUM because they are technically mutually exclusive with our application and because they would not respond to what we believe the most urgent needs are in this market.
3018 They would not provide the large and rapidly growing ethnic population with access to a full, local multilingual television, a service for which we believe there is intense demand which would provide immense social value.
3019 In addition, I would like to clarify some information that was put on the record this morning with respect to airtime revenues.
3020 The CHUM group earlier today suggested that LMTV would take the same amount of revenues out of Vancouver as their proposed new Vancouver application. CHUM is projecting $193 million in advertising revenues.
3021 We have projected total airtime for LMTV of $152 million over the licence term of which $125 million would be derived form English language advertising. Therefore, CHUM is taking 53 per cent more money in their Vancouver application than we are for LMTV.
3022 Thank you.
3023 CHAIRPERSON OF THE COMMISSION: More questions? No.
3024 Thank you very much.
3025 MS VOGEL: Our third intervenor this afternoon will be Trinity Television Inc. I invite them to come forward.
3026 CHAIRPERSON OF THE COMMISSION: Welcome back.
INTERVENTION / INTERVENTION
3027 MR. THIESSEN: Thank you very much.
3028 Madam Chairperson, thank you for the opportunity to give our perspective on the applications which are before you for Vancouver and Victoria. For the record, my name is William Thiessen. I have with me John Reinber, Epp and Albert Lowe.
3029 I will begin by confirming that Trinity Television has intervened in favour of all the applicants before you today in the interests of diversity within the Canadian broadcasting system. Our application is not in technical competition with any of these applications.
3030 We believe that our proposal is dramatically different enough in terms of geography, programming and target market that we will not meaningfully impact the other proposed services, nor will they negatively impact us in any significant way. We would be pleased if any of these applications were licensed alongside Trinity's proposed service.
3031 We also wish to put on the public record our appreciation of Rogers letter of intervention in support of Trinity's application.
3032 With respect to the applications by Craig Broadcasting and CHUM in Victoria, we feel that the Commission stated quite clearly in its recent decision to license VTV that the Victoria market was underserved. For this reason and again in the interests of diversity of the viewing public, we are fully in support of a Victoria based service which will truly and unconditionally reflect and serve that local market.
3033 We feel that such a service would be valuable to the Victoria community in the same way that Trinity's proposed local service would meet the needs of the 825,000 inhabitants of the underserved local market in the Fraser Valley.
3034 With respect to the CHUM application to serve Vancouver, while CHUM has not formally intervened in respect of our application, we concur with their statements made this morning confirming that our respective services are not competitively technically competitive, technically or in terms of programming.
3035 We were pleased to hear that CHUM believes that Trinity's service might even be complementary to their service in some ways. We also agree with their assessment that Trinity will have no discernible detrimental impact on CHUM's proposed service.
3036 Nevertheless, we feel constrained to address a number of statements made about Trinity by CHUM in the course of their written reply to the interventions by WIC and Global. We have not had opportunity to respond to those comments in writing and they are somewhat inconsistent with the statements which CHUM made today.
3037 Specifically, CHUM reiterated WIC's fear that Trinity will "morph from a religious station into a `family oriented station'". We have already put our reply to this allegation on the public record and in our reply to the WIC intervention against Trinity and we will not repeat it here.
3038 However, CHUM goes on to say that "an ethnic or religious station will not automatically have less impact on incumbents than an independent station". Based on the comments made by CHUM this morning, it would appear that they have determined that Trinity will indeed have less impact than independent applicants. This would be consistent with the position taken by all the other intervenors, including WIC and Global.
3039 We trust that by its comments this morning, CHUM intended to dispel any ambiguities which may have been created in their letter. Clearly a thoughtful analysis of our application reveals that it will not impact on the market in the same level as that of Rogers, CHUM or any conventional broadcasters.
3040 Having said this, although we may be neither zany or sexy, we will be thought provoking, challenging, interesting and attractive to our viewers in our own assuming way.
3041 Thank you very much.
3042 CHAIRPERSON OF THE COMMISSION: You must be out of breath now. You are really doing well under the ten minutes, believe me.
3043 Thank you very much. I don't think we have any questions.
3044 Thank you.
3045 MS VOGEL: Our next intervenor in Phase II is CHUM Limited for Victoria.
INTERVENTION / INTERVENTION
3046 MR. SHERRATT: Madam Chair, Members of the Commission, for me this is the difficult part of these proceedings. We know and work with the Craigs. I knew their father for many, many years. They are good people. However, I would also point out that we supported their applications in Alberta four years ago.
3047 However, there are some elements of their application and presentation that really should be put into perspective.
3048 MR. WATERS: We believe that three key issues must be kept front and centre in your review of the Craig proposal.
3049 First, what is the nature of Craig's complete program schedule and where will they acquire the rights to most of the highly rated programming they need to support their service?
3050 Second, have they reasonably demonstrated that they can secure the ambitious revenues projected in their application?
3051 Third, does the Craig proposal maximize contribution to Canadian entertainment programming locally and nationally?
3052 In reviewing the Craig proposal, we note that they failed to file a detailed program schedule outlining the specific Canadian and foreign programs to be aired.
3053 This information is central to determining the ability of Craig to offer Island residents a truly distinctive television service and seriously questions just what kind of programming service you would be licensing.
3054 In the absence of such information, it is appropriate to examine the program schedules of the stations they now operate in Manitoba and Alberta for, as they indicated, they seek to apply this same model to their proposed Island station. The analysis is revealing.
3055 That analysis shows that Craig is significantly reliant upon CHUM for rights to a large portion of their schedules. The current program schedule of A-Channel in Alberta reveals that a full 45 per cent of their non-news programming is sublicensed from CHUM.
3056 In the area of Canadian feature film, a key component of their proposal, ChumCity has over 140 Canadian films under license. A-Channel Alberta, also feature film driven, has the vast majority of these Canadian films under license from us.
3057 In the category of foreign movies, although we are not their only supplier, we believe we are the largest.
3058 Commissioners, in the absence of an actual program schedule and based upon their track record to date, one can reasonably conclude that Craig would be significantly dependent upon CHUM to build their schedule. Since we have no intention of licensing programming to Craig should they be successful with their application, it is not credible to believe that Craig will be able to secure programming of comparable quality, especially in the area of feature film.
3059 We suggest it would be difficult to license an applicant whose proposal appears conditional upon obtaining large segments of programming from other broadcasters who are in direct competition, either as existing players or as applicants seeking to serve the same communities.
3060 It is true that Craig could attempt to become a national rights buyer itself, but all that would do is drive up the cost of U.S. programming. More money going down south, less staying in Canada for Canadian programming.
3061 MR. MILLER: As the Chair indicated at the start of this hearing, it is incumbent upon applicants for new television services to demonstrate that their revenues projected are realistic and achievable. This must be established to ensure that the programming commitments, level of service and primary orientation of the proposed station are not compromised.
3062 While CHUM's application as filed projects under $10 million in first year revenues for Victoria, the Craig's project almost doubles that with just under $19 million, almost identical to the first year revenues projected on our proposed Vancouver station.
3063 Even assuming that CHUM's proposed Vancouver application were not successful and that you licensed us for Victoria alone and no other application except possibly the Trinity application, we project no more than $13 million in the first year of operation or $148 million over the licence term. By comparison, the Craig's application projects revenues of $192 million or $44 million higher than ours. This disparity in our view can only lead to two conclusions.
3064 First, that Craig's revenue projections and assumptions are fundamentally flawed. Unlike CHUM, Craig filed no detailed program schedule and, therefore, could not perform a show by show rating revenue analysis. Without detailing what programming would be telecast on their proposed station, it appears that they have simply assumed they would capture some arbitrary percentage of the overall advertising market.
3065 Since it is not likely that Craig could secure this level of revenue, their Canadian, local and other programming commitments would be extremely difficult to sustain.
3066 Madam Chair, we believe that Craig have seriously overstated their revenue and would face a major shortfall in revenues which would bring them face to face with the temptation Commissioner Langford spoke about this morning and would lead them to increasingly orient their proposed new station to Vancouver and the lower mainland, away from the Island. The greater the pressure of shortfalls in revenue, the more focused on Vancouver they will have to become. In turn, a faithfully local television service for the Island will be compromised.
3067 MR. SWITZER: A fundamental objective of the CRTC's new TV policy is maximize the amount of quality Canadian entertainment programming in peak viewing hours. Notwithstanding the commitments made by Craig in the area of Canadian dramatic programming, unlike CHUM, these initiatives do not guarantee eight hours of priority programming in peak time at launch. Moreover, the Craigs have significantly overstated their ability to support Canadian priority programming on a national scale.
3068 Their Schedule E states:
"National rights licence fees will trigger additional funding from other sources...and enhance the export potential of the Canadian product."
3069 Good words, but what do they really mean? They probably don't mean public funding. To the best of our knowledge, only one of their 11 MOW projects has received Telefilm funding.
3070 The Schedule C states:
"A-Channel's support of national programming initiatives in Alberta and Manitoba has already resulted in success through the licensing of Canadian dramatic series such as `The Adventures of Shirley Holmes', `First Wave', `Dead Man's Gun' and `Relic Hunter'."
3071 In the case of the last three series, `First Wave', `Dead Man's Gun' and `Relic Hunter', these are all CHUM series. These are series developed by us. We are in contact with the producers every week. We triggered them. We are paying national license fees and the Craigs have merely sublicensed the series them from us.
3072 MR. ZNAIMER: Watching the Craig tape, I had to laugh because judging from the shot structure, the music, the ideas, the titles, the slogans, what Craig appears to be proposing for Victoria and the Island is Citytv.
3073 Well, we know something about that format and we don't think that's right. The drive and the look and the essential subject matter of a Citytv is not appropriate to Victoria and the Island, which is a kinder and gentler place and for which we have prescribed a calmer, more mainstream, series driven station which will respect the Island's core demographic while still bringing a more modern TV style.
3074 What Victoria and the Island needs is a second television station that is not too hip, not too hick, but, like Goldilocks, just right.
3075 For the foregoing reasons, we submit that the Craig application should not be approved.
3076 Thank you.
3077 CHAIRPERSON OF THE COMMISSION: Commissioner Cram has a question for you and so has Commissioner Langford.
3078 COMMISSIONER CRAM: If I can go to page 3, and I don't know of this latest -- was it you, Mr. Waters who was speaking? In the second last paragraph you say:
"-- since we have no intention of licensing programming Craig should they be successful in their application."
3079 Is there a reason for that, aside from the fact that you lost?
3080 MR. WATERS: Yes. I think we have to finally lay down the law. We have been very good in cooperating with the Craigs in Winnipeg and delighted and we supported them, as we said, in Alberta, but we also said at the beginning of our presentation how important this Vancouver and Victoria market meant to CHUM from a business standpoint. It means a lot to us. We finally have to lay down the law and say "No, they can't have that any more".
3081 COMMISSIONER CRAM: Did I misunderstand you then when you first made your presentation that you, I thought, were talking initially about the high cost of national rights and the need to amortize it over. It would seem that business sense would be that if Craig kept the licence that you would still need to amortize some of those rights and you would still need to sell those rights to somebody.
3082 MR. WATERS: There are still other players to sell those rights to.
3083 COMMISSIONER CRAM: I see.
3084 Thank you.
3085 MR. SHERRATT: However, the other point we made in the presentation, particularly yesterday, was that if we aren't able to do it ourselves, we probably won't be able to continue buying those national rights and we would have another player chasing those same rights.
3086 COMMISSIONER CRAM: So you wouldn't have anything to sell anyway. Is that it?
3087 MR. SHERRATT: It's a possibility.
3088 COMMISSIONER CRAM: That's where the circle leads.
3089 MR. SWITZER: Frankly, Commissioner Cram, if I can just a little bit from a programming point of view, we might think about taking some short term money from them and we probably would not because we would be hurting ourselves in the long term. We would be getting a little bit of cash in the short term and creating effectively a larger competitor in the long term. That's why we wouldn't do it to a great extent.
3090 COMMISSIONER CRAM: Thank you.
3091 CHAIRPERSON OF THE COMMISSION: And Commissioner Langford was answered by the exchange between you and Commissioner Cram, so no more questions.
3092 Thank you very much.
3093 COMMISSIONER LANGFORD: I thought that Goldilocks was a bit obvious and I felt left out, but anyway --
3094 MS VOGEL: Our final intervenor for Phase II is Craig Broadcasting. Whenever you are ready.
INTERVENTION / INTERVENTION
3095 MR. CRAIG: Good afternoon. I will be presenting our intervention to the other four applications for television stations.
3096 One of these applications is for a religious station based in Fraser Valley. As I mentioned to Commissioner Grauer this morning, we do not see this as competitive with our application. We, therefore, do not intend to comment on it further.
3097 Before we address the CHUM and Rogers applications, permit me to say a few things about priorities. In our view, the most pressing need in this market is for a new television station based on Vancouver Island with Island specific local programming.
3098 The Commission noted, and I quote,"the need for a second local television service targeted specifically to viewers in Victoria and on Vancouver Island" in its 1997 decision licensing VTV.
3099 So here we are three years later. The need for a second Island outlet has not diminished. If anything, it has increased. The consumer surveys show this. The interventions show this. So the first priority should be to license a second station based on the Island.
3100 Now let me turn to the other three applications.
3101 The Rogers application is in our view seriously flawed. First, it is not shown that the relevant ethnic audience is underserved given the presence of the full time Rogers multilingual channel on basic cable and the availability of the ethnic pay and specialty ethnic services.
3102 When ethnic respondents were asked in CHUM's research if the local TV stations already cover enough ethnic and cultural events, half of them said that they do. That is not a resounding endorsement for additional service.
3103 Second, the Rogers application is not truly responsive to the local ethnic community. As it was pointed out yesterday, Rogers would produce remarkably little original content here in Vancouver for the Chinese community, referring to funnel-in material produced in Toronto.
3104 At the same time, the Rogers application proposes that all its English language foreign programming will be U.S. syndicated material, targeted not to an ethnic audience at all, but to the mainstream Vancouver market. The resulting revenue diversion will seriously prejudice the ability of a new Island station to meet its commitments. Is it worth it get a small amount of additional ethnic Rogers proposes? We don't think so.
3105 I will now turn to the CHUM applications. To start with, there is the minor problem of the Commission policy against having two TV licences in the Vancouver extended market area. We thought the Commission made it very clear in 1997 and again in 1999 that this was not in the cards. CHUM wants an exception, but it had no rationale for departure from that policy other than pure self-interest.
3106 That being said, however, we consider that neither of the CHUM applications warrant a licence and our reasons are as follows.
3107 First, the CHUM application for a Vancouver based station. In looking at this application, it's useful to recall that CHUM applied for a mainstream station based in Vancouver three years ago. So did we. We all showed up at this very convention centre to argue our case. Baton, now CTV, won the licence.
3108 The question that has to be asked is this: Is there room at this time for an additional mainstream station based in Vancouver when a licence of that kind has literally just been granted? To add another Vancouver based mainstream station at this time would in our view be premature and disruptive. In Toronto, a market twice the size of Vancouver, there are only four Toronto based mainstream stations.
3109 With the licensing of VTV in 1997, Vancouver also has four Vancouver based mainstream stations. CHUM's application proposes to add a fifth. But the need here is for an Island station, not another Vancouver station.
3110 CHUM's application positions this as a station intended to support cultural diversity and to support Canadian film, but it became very clear from the discussion yesterday that its real purpose was simply to ensure that all of the national rights programming bought by CHUM for Citytv Toronto can be seen in Vancouver.
3111 Again, this is not a compelling reason to grant a new licence. If CHUM buys good foreign programming, it will always have a buyer for that programming in the Vancouver market.
3112 As for their library of Canadian films which do deserve a western window, we already exhibit them on the A-Channel stations in Manitoba and we would be delighted to exhibit them on A-Channel on the Island. We think the CHUM application has very little to do with Vancouver and everything to do with recycling Citytv.
3113 That brings me to CHUM's application for a station based in Victoria. Here we do have common cause. There is need for such a station, but in our view, the CHUM application does not deserve the nod. The CHUM application simply does not do justice to the Island.
3114 Let's start with the question of coverage. CHUM proposes a low power transmitter in Victoria and no other transmitter anywhere on the Island. We propose high power transmitters in Victoria and Campbell River. We will reach 85 per cent of the Island off air. CHUM will reach less than half. It is entirely dependent on cable to reach anyone beyond Victoria.
3115 The same issue comes up in regard to the research. CHUM did its consumer research in a very limited way. It confined its survey to respondents in Greater Victoria. The research ignored the majority of Island residents who live up-Island. By contrast, we surveyed the whole Island. More than half of the Island population lives outside of Greater Victoria.
3116 Then we come to the question of local programming. Surely the key test is whether the station is doing what it should for Island residents. CHUM Victoria proposes fewer local originated hours than A-Channel on the Island, only 26 hours. Compare with over 30 hours per week for A-Channel on the Island.
3117 Nor will CHUM Victoria have the local resources to do the kind of job we think is necessary. They would have 104 full time jobs, we would have 136. They have a budget for Island news and information programming of $32 million over seven years. We have a local news and information programming budget of $40 million, 25 per cent higher.
3118 Finally, we come to the issue of support for B.C. independent producers. In its original Victoria application as filed, CHUM earmarks in script and development money, but no license fees at all for B.C. independent producers. Then, in an eleventh hour conversion, CHUM has suddenly decided that perhaps it can spend $12 million for independent production, conditional on its Vancouver based application being turned down.
3119 Essentially, faced with the prospect that the Commission will not give two licences in the same market, CHUM has tried to amend its Victoria application to make it more in line with ours. Following the lead of our application, CHUM would now have its Victoria only based station support independent film and documentaries, just as we have already proposed to do.
3120 We should start by characterizing this for what it is. A last minute amendment to the CHUM Victoria application is grossly unfair. In effect, CHUM is trying to change its application on the fly. They have conceded that if they only get the Victoria station, their careful plan about moving all of the Pembroke and Barrie programming to Vancouver. Island would go out the window. Instead, we would see most of the foreign programming moved to the Island station coming from Citytv in Toronto.
3121 Of course, revenues and ratings would increase for the Victoria station under this scenario, but CHUM has not provided a coherent business plan. CHUM says it might add $12 million to independent production, but out of how much additional revenue? We are not sure.
3122 If they are increasing their revenue, why is there no commensurate increase in local programming? These questions underline the fact that the amendment of this kind should not be accepted by the Commission or relied upon in granting a licence. CHUM had every opportunity to present its scenario that was compliant with the established CRTC policy, one licence to a market in its original filing.
3123 For all these reasons, we think the CHUM Victoria application is inadequate and does not do justice to either the needs of the Island or the needs of the B.C. independent production sector.
3124 Thank you, Madam Chair.
3125 CHAIRPERSON OF THE COMMISSION: Thank you very much.
3126 Madam Vogel.
3127 MS VOGEL: Thank you, Madam Chairperson.
3128 Those are all the intervenors for Phase II. We are ready to move on to Phase III. The first intervenor in Phase III is BCTV and
CHEK-TV. I would invite them to come forward, please.
3129 CHAIRPERSON OF THE COMMISSION: Hello. Welcome.
INTERVENTION / INTERVENTION
3130 MR. BUCHANAN: Thank you, Madam Chairperson, Members of the Commission and staff.
3131 My name is Grant Buchanan. I am the Vice-President, Corporate and Regulatory Affairs of WIC Western International Communications Ltd. With me today is Art Reitmayer, President and CEO of WIC Television and also of BCTV and CHEK.
3132 On my right is Ken Goldstein, whose firm Communications Management Inc., prepared the market analysis which accompanied our written intervention. In the back row are Jeanette McPhee, Vice-President, Finance, of BCTV/CHEK; Brett Manlove, Vice-President, Sales and Marketing and AGM for BCTV/CHEK, and Ron Eberle, General Manager/VP Sales of CHEK Victoria.
3133 Our fundamental purpose in appearing you today is to persuade you that the Vancouver-Victoria market is not capable of supporting the introduction of yet another new conventional television service at this time.
3134 MR. REITMAYER: As a matter of convenience, WIC, CTV and CanWest each had their local stations here provide their 1998-1999 CRTC returns and their 1999-2000 year to date advertising revenues to Mr. Goldstein's firm. Our goal was to facilitate a discussion of the future of the market based on real numbers.
3135 The upshot of that exercise proved that the market is in decline and that the four incumbent stations have aggregate local and national revenues of about $172 million. If the revenues of CBC and KVOS are included in the aggregate local, a national figure for the market comes in just under $200 million.
3136 This is a far cry from the much higher numbers put forward by the applicants, numbers which we think are simply erroneous in terms of the accessible market. The market can be sliced up any number of ways, but the key is to determine the size of the market that Craig, Rogers and CHUM will have access to.
3137 The Bay Consulting Group, in the study that accompanied the CHUM applications, said that the correct definition of the accessible market is local plus national revenues. We agreed with that. So did CMI. Now CHUM has reversed field and is trying to suggest that the accessible market is much larger, more like $300 million compared to the $200 million we have demonstrated.
3138 We would be pleased to have the opportunity in the question period to indicate why the suggestions now being made by the applicants as to the size of the accessible market are unrealistic. For now we would note that the market the applicants want you to focus on goes well beyond the accessible market and includes specialty services and networks, for example.
3139 Thanks to skyrocketing specialty service revenues, that segment of the market is indeed growing and the Commission has already chosen to license more services into that market as indicated in its recent call. The conventional television component of the market, however, is contracting. The Commission has never, as far as we know, licensed into a declining market and we don't think that now is the occasion to be doing so.
3140 It seems clear that approval of any of the Rogers, Craig or CHUM applications would very quickly result in at least a $20 to $30 million service driven by English language revenues from the Vancouver market. Yet, in addition to overestimating the size of the accessible market, the applicants have also understandably chosen to minimize the projected negative impact on incumbents.
3141 We believe that the most likely result, should a licence be issued after this hearing, would be that 85 per cent of the revenues of a new station would come from the incumbent stations in the market that currently attract 85 per cent of the revenues in the market.
3142 That, of course, is our worst nightmare. CTV's start-up here, CIVT, did not just slip into town unnoticed. Mercifully, the year of CIVT's arrival featured revenue growth that papered over some very serious cracks.
3143 The Vancouver EM profitability now sits at 18 per cent versus 30 per cent in 1997 when you licensed CIVT and the market is still in decline. In dollar terms, as noted by CMI, combined PBIT for the three established stations fell by 19 per cent from 1998 to 1999.
3144 As noted in our written materials, BCTV/CHEK's airtime revenues fell by more than $8 million in the year following CIVT's launch and by another $5 million in 1999. When revenues not only fail to increase but actually drop, significant measures are needed. Our operating profitability between 1998 and 1999 fell by almost 20 per cent.
3145 Regrettably, there was only one clear way to compete and that was to reduce overheads by reassessing every aspect of the business with a view to shrinking and realigning. Between 1997 and 1999, BCTV/CHEK was forced to reduce its workforce by over 130 full time positions and re-examine every conceivable type of expense. But those alternatives are no longer available.
3146 As we said in our written intervention, if a new licence were to be granted as a result of this proceeding, further economies don't exist. CHEK and BCTV would have to make some very serious programming choices. This is our key point.
3147 While the story of the Vancouver EM is not one of abject poverty, there obviously comes a time when thresholds are reached and it becomes difficult, if not impossible, to take major initiatives.
3148 These would include certain types of quality priority programming envisaged in the Commission's TV policy and to which stations in station groups have yet to adjust. Stations survive, but need whatever resources they are left with simply to get their news on the air and cover their most basic requirements.
3149 MR. BUCHANAN: I will now address certain aspects of the application from our colleagues at the Rogers group. The intervention process produced what we consider to be some rather courageous commentary from fledgling ethnic specialty services that have apparently had carriage difficulties with Rogers for years and now are being relegated to digital. Some might say that rewarding this applicant in these circumstances by giving the least basic analog licence might appear a little anomalous.
3150 Notwithstanding the protestations by the applicant to the contrary, it seems intuitively obvious that licensing this applicant would indeed have a detrimental impact on each of Fairchild, Odyssey and South Asian Television. They certainly think so, judging from their interventions. Licensing this applicant may even render virtually irrelevant, at least as far as ethnic applications are concerned, the Commission's recently announced call for specialty and pay applications.
3151 If licensed, the applicant will reach over 75 per cent of Canada's Chinese speaking population and will have a privileged position on basic cable, which would provide a huge advantage over Fairchild in assessing Chinese language ad revenues.
3152 Yet we have an even more disconcerting statistic. As you know, every year the Commission receives the BBM data file and your staff codes each program according to type of program and country of origin. The resulting coded file then goes to StatsCan.
3153 The most recent data from that coded file are for Fall 1998 and they reveal the following.
3154 The applicant's CFMT station had total weekly tuning of 5,794,000 hours. Of that total, 411,000 hours, or about 7 per cent, were tuned to Canadian programs on CFMT. The balance, of course, was non-Canadian. By way of comparison, BCTV's percentage tuning to Canadian programs is over 58 per cent.
3155 In the same ratings period, Fairchild had total weekly tuning of 1,675,000 hours. Of that total Fairchild delivered 557,000 hours of tuning to Canadian programming.
3156 In other words, the tiny Fairchild specialty service actually delivered more tuning to Canadian programs than the much larger station owned by the applicant, not only in percentage terms but in absolute terms.
3157 The applicant's own financial projections show what is effectively an American English language service to the tune of 81 per cent of its revenues. Meanwhile, its Toronto service features 7 per cent -- that would be 7 per cent -- tuning to Canadian programs. Yet, despite its own predictions that 81 per cent of its revenues come from U.S. programs and despite a 7 per cent tuning figure to Canadian programs based on CFMT's results, LMTV still characterizes itself as intensely local.
3158 Based on our assessment, approval of this application would appear to result in less tuning to Canadian programs and, ultimately, less ethnic programming while at the same time negatively impacting the existing English language stations in the Vancouver market.
3159 MR. REITMAYER: In conclusion, we would like to return to our central issue which is that this market cannot support a new entrant at this time. Based on the discussion so far this hearing, the market impact issue seems to boil down to four key questions as follows.
3160 One, do new stations automatically and permanently increase the advertising pie? Two, is the decline in Vancouver advertising market a blip or is it structural? Three, can the applicants really repatriate the revenues they say from KVOS? Four, is it reasonable to expect a new conventional station in Vancouver with a 4 per cent share to change the flow of revenues that is currently moving toward specialty services?
3161 Unless the Commission has confidence that the answer to all four of these questions is yes, and it will not surprise you to learn that the answer is no to all four, then we believe it would be inappropriate for the Commission to issue the first licence in history into a declining market segment.
3162 We look forward to discussing these questions with you today. That concludes our oral presentation.
3163 CHAIRPERSON OF THE COMMISSION: Thank you very much. I would ask Madam Wylie to ask you the questions.
3164 COMMISSIONER WYLIE: Good afternoon, lady and gentlemen.
3165 I have the dubious privilege of addressing the first intervenor to whose intervention was attached the Communications Management Report. Of course, I read it carefully. I also looked at the Bay Consulting Strategic Inc., a Media Edge Report, and also, of course, our own staff's analysis based on our own financial database.
3166 As I have mentioned before in public, every time we have a competitive hearing, the exercise of looking at all these reports reminds me of my two grandchildren who are both in grade five and somehow using the same numbers and the same facts to resolve a problem, arrive at completely different answers. I'm glad to report that the girl usually gets it right and to the boy I say "If part of your answer is that your father is 105 and your twin sister is 38 while you are still 10, go back to the drawing board. Something went wrong. Either you miscalculated or what you put in the hopper in the beginning was not complete or was incorrect".
3167 Well, this sophisticated introduction should indicate to you that I will not argue about reconciling these various reports which were prepared, all of them, by highly intelligent, highly professional and, except for our staff reports, highly paid individuals.
3168 I do want, however, your comments on the basic results and their impact on your analysis. I also want to ask you whether you factored in certain circumstances in your analysis.
3169 First, I would like to go to your comment that the Vancouver extended market, TV ad market, is in decline. The table I have here shows that between 1992 and 1991 it grew by $6.3 million -- between 1991 and 1992 -- 1992 and 1993, $3.9 million, $3.9 million, 1993-1994 $7.5 million, 1995 to 1996 $10.8 million, 1996 to 1997 $16.2 million and 1997 to 1998 a decrease of about $7 million.
3170 If I go then to the 1999 figures, I find that the advertising revenues of that year for the Vancouver market station as between 1997 and 1999 is still an increase of $19.1 million. In other words, we are talking about do we have a blip here or can we project a decline into the future in the manner that you do?
3171 It's simply to show that there is a dramatic increase in revenues from 1991 to 1997, a decrease in 1998, but you still have a huge increase even if you take the 1999 figures as compared to the 1997 figures despite the decrease in 1998. Wouldn't that tell you that the Vancouver market is still a strong market and maybe that is a blip, or have you considered the possibility that it's a correction?
3172 MR. BUCHANAN: Well, we are very happy to address that question. We are not quite sure which numbers you are dealing though that show there's a big increase over from 1997 to 1999.
3173 COMMISSIONER WYLIE: Well, I'm using the CRTC financial database. The advertising revenues of the four Vancouver stations, including CIVT, and the increase in the size of that revenue from year to year, showing a decrease, of course, in 1998, but in 1999, even if the figure is still much higher than in 1997 before the blip.
3174 MR. GOLDSTEIN: May I address this?
3175 COMMISSIONER WYLIE: Yes, and I want to know how when you look at this, one wouldn't suggest that perhaps it is a blip and a correction to a market that is overly heated.
3176 MR. GOLDSTEIN: The first question I would have to ask is did I hear you correctly when you said that there was a decline in 1998 because I believe there was an increase in 1998.
3177 COMMISSIONER WYLIE: I said between 1998 and 1999.
3178 MR. GOLDSTEIN: Okay. So the number went up. Now, we have on page 7, Table 4, of our study the same four annual returns added up that you have. When I add the local plus national revenues together, I find that in 1998, which was the first year of a new station, there was local and national for those four stations 184,995. Does that come to the same total as you have?
3179 COMMISSIONER WYLIE: The advantage of being a Commissioner, there aren't many, is that you ask questions.
3180 MR. GOLDSTEIN: Understood. Then in 1999 I have a hundred and seventy-seven for the local and national combined, which is a decline. Then based on what the four licensees have told me and have given me their figures for the first four months of the year, we are projecting a further decline in this fiscal year, the year 2000, of local and national down to one seventy-one seven.
3181 Now, I can address the question of blip or not blip going forward if you would like. In our projections in our report, we did not project a decline forever. We said that it would flatten out and then return to modest growth. So we do think there is a structural change occurring in the marketplace and I think I can demonstrate that to you if you would like me to get into that now.
3182 COMMISSIONER WYLIE: But the fact that the advertising revenues in 1999 as compared to 1997, even taking into consideration the decline, is still a large increase.
3183 MR. GOLDSTEIN: The increase in 1999 over 1997, if you take the two year jump, is approximately $18 million. That, however, is less than the revenues of the new station in the market. If you are going to put a new station in the market and say "This will grow the pie" and one of these applicants comes into the market and says they are going to take $20 million, $25 million or $30 million and you grow the pie by $5 million, I'm not sure that's the desirable outcome.
3184 That's exactly what you can see happening here. That's exactly what happened in Calgary. That's exactly what happened in Edmonton. You had in the first year of the new station a little bit -- that's where the blip is. The blip is actually in the increases, not in the declines. You had in the first year of each of those market's new stations an increase in the market, although not enough to compensate for the first year revenue of the new station.
3185 Then in the second year in each market, you had a decline. That is not clear cut evidence that the pie automatically grows when a new station comes into the market.
3186 COMMISSIONER WYLIE: Are you suggesting that the blip was the very large increase from year to year between 1991 and 1999 rather than a recent decrease from which we should project continuing decrease into the future?
3187 MR. GOLDSTEIN: We should not necessarily -- I'm suggesting that --
3188 COMMISSIONER WYLIE: Rather than a correction of the market that was perhaps artificially high compared to the rest of the country to the benefit of the incumbents, of course, at the time.
3189 MR. GOLDSTEIN: Yes. There were increases 1991 to 1997 and there was a good increase in 1998, that's absolutely correct, but other things have been happening at the same time, namely the rise in specialty services.
3190 Something happened in 1999 that hasn't happened before. All across Canada conventional television went down, not because there were meters all across Canada, not because of the economic situation in Asia. All across Canada conventional television went down, at a time of a good Canadian economy, and specialty services went up.
3191 In this fiscal year, exactly the same thing is happening. You look at the quarterly reports from the various publicly traded broadcasters, you will see what they are saying. It's going down. Something different is happening out there. It's not just Vancouver.
3192 COMMISSIONER WYLIE: Is there not a danger, Mr. Goldstein, of taking a macro situation and applying it to the point where the micro situation of Vancouver as always performing better is landed into the macro analysis without focusing sufficiently on that market and its indicators in particular?
3193 MR. GOLDSTEIN: Well, if you want to focus only on Vancouver, then I believe it follows from that you should focus only on the revenues that are actually accessible in this market.
3194 COMMISSIONER WYLIE: Well, of course, that's another question. I am talking generalities, that you have to look at the indicators that are specific to a particular market as well, of course, as the macro situation.
3195 If you do that and you look at a comparison of key financial indicators, according to our database, you find that the market, PBIT, even in 1999 of the Vancouver station, the percentage is 18.3. Only Toronto is higher. In fact, it's still almost twice that of the average in Canada.
3196 I'm trying to look at whether in doing this analysis one misses perhaps the obvious which is that there are other circumstances that have to be factored in that may be specific to a market. I'm anxious to know whether you factored them in.
3197 The first one I am suggesting is that the indicators may be that that market had a bubble, so to speak, for various reasons and its decline is a correction and, therefore, the situation is not quite as dramatic as one would find if one didn't consider that and simply applied general principles of measuring the decline and saying that's what's going to happen into the future, this is how we project it, rather than saying it was an overheated market before perhaps according to the indicators and this is a correction to normalcy and not a dire prediction and normalcy being higher than anywhere else and, therefore, the market may be able to absorb more pressure.
3198 MR. GOLDSTEIN: I think we have got a mixture here of micro and macro that perhaps I might --
3199 COMMISSIONER WYLIE: I told you it would be unsophisticated, but sometimes one's intuitions leads you to a more simple -- well, some sophisticated intuition too because we have sophisticated economists who have given us completely different analyses using the same figures. That's what brings my grandchildren to my mind.
3200 MR. GOLDSTEIN: Okay. Let me deal with this intuitively then.
3201 COMMISSIONER WYLIE: You deal with it as you want.
3202 MR. GOLDSTEIN: If you see a decline in a given market and you say perhaps this market was overheated and it's just a correction, then why would --
3203 COMMISSIONER WYLIE: Not just in part.
3204 MR. GOLDSTEIN: In part a correction. and then you go to other markets across the country and the same correction is occurring, but it wasn't overheated, then intuitively one would say maybe something is going on here that's bigger here than just Vancouver.
3205 Now, in terms of our particular projections and analysis of this market, we focus very clearly on Vancouver. I can address for you where any difference in numbers between TVB and between the annual returns and I can address for you the estimates of KVOS, if you would like. We have some very interesting information about that.
3206 The fact is that if this was only a Vancouver phenomenon, you wouldn't have had the decline across the rest of the country, so it's not a question of micro and macro. It's the same kind of intuitive reasoning.
3207 COMMISSIONER WYLIE: I don't think you understood my point. My point is what is happening on a macro level everywhere will have a different effect on different markets -- that's where the micro comes in -- depending on the situation that they were experiencing when the macro decline starts is more my point.
3208 If you had an overly healthy market that could stand more competition, the decline that is occurring across the board may not have the same effect on that market as it has on others is my point.
3209 MR. GOLDSTEIN: Well, actually --
3210 COMMISSIONER WYLIE: By micro, I mean let's look at what the Vancouver market may have looked like when a general decline, assuming that I buy your projections on that front, may have a different effect depending on the circumstances of the market and the indicators that somehow measured those circumstances, such as a high PBIT, larger revenues, more profitability than in most markets.
3211 MR. GOLDSTEIN: Okay. Let me deal specifically with that. I would agree completely that if you have markets of different sizes, the amount that each will be impacted by a national or overall structural trend will obviously be different.
3212 COMMISSIONER WYLIE: Mr. Goldstein, I don't mean only different sizes. If there weren't enough stations in Vancouver compared to this capacity to absorb them, they would be in a different situation, wouldn't they and what would be the indicators of that high profitability? Higher PBITs, et cetera.
3213 That's the type of thing I would like you to address. Is there not a different market when you look at the indicators, that it was living different economic circumstances.
3214 MR. BUCHANAN: Maybe while Mr. Goldstein is thinking about his response to that, I would suggest that the Commission took care of the high profitability in 1997 by licensing the new station into the market. The year that you picked to discuss the 1997 to 1999, yes, it was $159 million for local plus national, it shot up and it went back down last year and it's headed back down this year.
3215 We are not suggesting it is going to get quite far enough to cross back over, but what we have now this year is a market in local and national that is $10 million bigger than it was when you licensed the station that is currently taking $30 million out of the market by our estimation.
3216 That accounts for why profitability has dropped from 30 per cent to 18 per cent and we are not sure we're finished.
3217 COMMISSIONER WYLIE: I can certainly say that I scare my grandchildren faster than you.
3218 Now, let's talk about CIVT. CIVT was introduced into the market. The staff has prepared for us an analysis of its projections in 1996 when it applied for and was granted a licence and its performance, its actual performance, in year one and two of its licence and the difference between the two.
3219 It had projected national revenues which were exceeded -- which were doubled. The measured performance in year one were doubled. Its projected as opposed to actual local revenues were also doubled in its first year, or practically doubled. Its operating expenses, however, were also doubled which then, of course, would account for its PBIT. Right?
3220 What we see is a new performer in the market which in the first year doubled the revenues it had projected.
3221 MR. BUCHANAN: You are asking us for the message?
3222 COMMISSIONER WYLIE: Well, isn't that how --
3223 MR. BUCHANAN: The message to us is that applicants always lowball their revenue projections.
3224 COMMISSIONER WYLIE: By half? That's interesting for what we are hearing now. But it certainly means that the profitability of CVIT and the arguments that the Commission shouldn't license until it's more profitable makes me ask myself why are expenses so high and wasn't that a pretty rich market when in its first year it doubled its expected revenues and in its second year, of course, they are not quite as low.
3225 Isn't that another index of a market that could absorb CIVT easily and possibly there is still room in the market for some pressure.
3226 MR. GOLDSTEIN: Well, the market is absorbing CIVT. It's in the process of still being in the early part of absorbing CIVT. CIVT received the revenue it received because it received a certain audience and it costed a certain amount of money to receive that audience. That explains the higher revenues and it explains the higher expenses.
3227 It seems to me that there is implicit in this question the notion that unless we drive the percentages down on the PBIT line, we haven't fully satisfied ourself that a market is saturated. I don't think any of the applicants here would agree with that and I don't think any broadcaster in Canada would agree with that.
3228 I think that when you look at good percentages, you also have to look at the absolute value of the PBIT amounts and whether they are enough for future investment and ultimately whether the return at that station is enough to fulfil the public interest obligations demanded by the Commission.
3229 COMMISSIONER WYLIE: Yes. And conversely, we have a responsibility when there are applications before us to look at whether in fact there is a possibility of adding diversity, adding new services and the incumbents hire people to say "No, there is not one cent left in the market. Not only will you not get more diversity, but we will stop performing because we won't be able to manage" and the new applicants, as you say, lowball their revenues and highball the capacity of the market to absorb them.
3230 Somehow or other, somewhere we have to find a balance that enables us to answer the question can we add another service. All I'm doing is looking at some of the indices and wondering whether you took them into consideration.
3231 For example, also, did you take into consideration the fact that it is quite known to everyone that the cost of advertising in Vancouver is very high? Is that to you a sign that perhaps an inventory is very low? We have heard people say they have to buy a year ahead to get on the air.
3232 Would those be some of the circumstances that you would put into the hopper in making your analysis?
3233 MR. GOLDSTEIN: Well, we took all of these factors into account, but I find it absolutely fascinating that we hear that they are sold out, we hear that they are commanding wonderful prices, yet your staff and I have added up the same annual returns and they went down.
3234 I don't know that the question of prices and inventory is quite as relevant as the fact that when all of these things played out at the end of the day, there was less revenue in the market in 1999 than there was in 1998 and at the end of the day there will be less revenue in the market in 2000 than there was in 1999.
3235 Those aren't estimates. Those are using this and the annual returns.
3236 COMMISSIONER WYLIE: But projections though. They are based on the factors that you put together. Whether you adjust this way, that way, which is obviously what various other consulting groups who present us reports have calculators like yours and mine -- maybe they know how to use theirs.
3237 MR. BUCHANAN: Yes. And one of the constants in these fun get-togethers that we have is that the --
3238 COMMISSIONER WYLIE: Wouldn't you like to be my grandchild?
3239 COMMISSIONER LANGFORD: He feels about the same age, I can tell you.
3240 MR. BUCHANAN: I think what we have to do and what we would like to spend some minutes with you, if you would permit, is explain what we think the differences are between the way we came at the numbers which got us to a $200 million local plus national number and the $300 million number or variations between $200 and $300 that the applicants put forward.
3241 There is a relatively simple explanation for the different numbers. Then we can talk about whether it's realistic to think that the applicants will be able to tap into the different moneys between $200 and $300 in order to fund the promises they are putting forward to you.
3242 COMMISSIONER WYLIE: I will go down my list of other factors that I wonder whether they were in the hopper and then you can go ahead.
3243 Also, one of the things that I find fascinating is between 1997 and 1998 there was a large increase in advertising revenues, despite the fact that CHAN and CHEK declined by $7.5 million. So somebody was getting a lot of advertising revenues. Right?
3244 This is from our financial database. It leads me to ask did you take into consideration, for example, that these declines may have been affected by the ownership or corporate situations of certain of the players?
3245 MR. REITMAYER: If you are speaking to the years 1997, 1998, that would be the new entry into the market. While you had growth in the market, you also had some transferred revenues with the programming you were looking at earlier.
3246 COMMISSIONER WYLIE: But there's an overall growth of quite large proportion between 1997 and 1998.
3247 MR. REITMAYER: Yes, and there's --
3248 COMMISSIONER WYLIE: Despite which would lead me to -- despite a decline.
3249 MR. REITMAYER: But there's also a new station that enters the market at that point and along with that you were commenting earlier that there was significant growth in the CIVT entry into the market.
3250 At that hearing it was outlined that there was a large amount of programming at that point that was acquired through the CTV relationship that transferred across the street. Well, that audience would have moved over and that would have brought the new entrant a significant --
3251 COMMISSIONER WYLIE: But the increase is a real increase despite the fact of CIVT and despite the decline in the performance of CHEK/CHAN, there is still a real increase of some 26 per cent.
3252 MR. REITMAYER: There is absolutely.
3253 COMMISSIONER WYLIE: And I am wondering whether you factored in the possibility that it would have been even greater despite the -- with the CIVT or if some of the stations had not had an uncertain financial or corporate status and whether that may have had any effect.
3254 MR. GOLDSTEIN: I don't think this was a question of uncertain financial status or corporate status in that given period. Those stations were operating. They were doing business.
3255 COMMISSIONER WYLIE: This was before you arrived, Mr. Reitmayer.
3256 MR. REITMAYER: Actually it wasn't.
3257 MR. GOLDSTEIN: What happens in a situation like this is programming moved. When programming moves, the relative position of each of the players changes. Therefore, you had an overall growth in the market that was slightly less than the amount that the new station took and the other stations were now in different relative positions, not only to the new station but to each other.
3258 You could also have not necessarily an absolute decline in all of them. You could have some declining more, some even going up and the whole thing rebalances.
3259 COMMISSIONER WYLIE: But in fact there's an actual increase of TV advertising revenue overall in the market.
3260 MR. GOLDSTEIN: Yes.
3261 COMMISSIONER WYLIE: And my point is can we not factor in the possibility that looking at the other factors I was looking at that there is still a possibility for expansion of that market.
3262 Your analysis, if I understand it, is based on the fact that the TV stations take 85 per cent of the market, so anything that will be taken out by a new station would be taken out of that 85 per cent of the market number.
3263 I'm wondering whether these indicators support that, that with a new player there isn't the possibility of an expanded market, a movement of advertising moneys and expansion because that shows an expansion, doesn't it, not just a reorganization. There was more.
3264 MR. GOLDSTEIN: Well, if you focus on just the four private stations, which I believe is the case in this instance, the CBC has suffered. Some money has come from the CBC station in Vancouver. Some money has come from KVOS. The question is once it has come from them, can it come from them again?
3265 That's why we think going forward it's reasonable to assume that the impact will be in proportion to the current ratio between the four private stations and the other two stations in the market.
3266 Now, there was a discussion, of course, of adding all sorts of new revenue that was going to be from specialty services and I hope we will have some time talk about the real size of KVOS, but the fact is we think the reality is that the impact will be roughly in proportion.
3267 COMMISSIONER WYLIE: And you see no possibility that there would be an expansion of the advertising market, that there would be more TV revenues in the market that can be tapped.
3268 MR. GOLDSTEIN: Our projections, of course, do show increases beginning after about 2002. They are quite modest. To pick up on a previous point you made, we did that in conjunction with estimating economic indicators such as retail trade and personal disposable income, so the whole thing is linked.
3269 Do we think that there would be an expansion in the market, a sustainable expansion in the market, even approaching the levels that the new stations have projected? The answer is no.
3270 COMMISSIONER WYLIE: So despite all the proposals we have heard, you don't think it is possible in this type of market, with the indicators we can look at, that more local TV, for example, even better TV may indeed have a positive effect on the market rather than a negative one and that it wouldn't necessarily be a question of shift. It would be a question of tapping more.
3271 You know, with regard to the specialty services, one of the things I would look at in my grandmotherly way would be to say yes, on a macro there's a shift, this what is tipping you call it, is it as major in Vancouver considering that they pitch their programming for eastern time slots? Will the effect of specialty services be as dramatic here when you look at that because they are national services that are scheduled nationally?
3272 Are these things not also factored as that one has to intuitively perhaps, not with the calculator, use to project a work? I don't think it's you who have said that. I think it may have been in the Bay Consulting. It says one thing we know is that projecting what will happen is not an exact science.
3273 I am trying to look at the less than exact factors to see whether you factor them in.
3274 MR. BUCHANAN: Before Mr. Goldstein picks it up, the year that we are isn't a guess. I mean this is the end of February. By this time any year most broadcasters have an awfully good idea where their year is coming in. We certainly do and a number of other broadcasters who are reporting results are.
3275 Last year wasn't an accident. This thing is still headed south. Specialties are still headed the other direction. The other broadcasters in the room are all experiencing the same thing. We can hope that there is, I guess, some kind of stimulative effect, if that's what you are thinking of, that the arrival of a new station will generate some kind of buzz that will bring new advertisers into the market, that the local influence may do that.
3276 We will speak in a moment to the situation, for example, of the CHUM stations in Ontario in that regard. This station already or this city already has a huge percentage of local advertising compared to Ontario. It's not like you are coming into an underserved local market here that can be stimulated by someone with a lot of local experience.
3277 The last things we want to do is fall to Ontario levels here. You know, do we consider these things? Yes. But the real life, what we have seen, the stimulative effect of the latest entrant of the market isn't there. I mean, we are $10 million higher than we were three years ago and the stations -- you have their numbers, we don't, but I assume it is in the $30 million range.
3278 It didn't cover it enough to cover its entry is what our point was. By our calculations, the percentage that they took from us was almost exactly proportional to our share of the market. What a surprise.
3279 MR. GOLDSTEIN: I would just like to add before you get at your calculator --
3280 COMMISSIONER WYLIE: Just trying to scare you.
3281 MR. GOLDSTEIN: No, that's okay. That's okay. Wait until the grandchildren are on the computer, surfing, listening to music and watching TV at the same time. That's scary.
3282 The fact is that specialty audiences in this market are already higher than across the country generally. Use of the VCR in this market is already higher than across the country generally. This is a very different market in many respects.
3283 The market is affected by broad national trends, but it is affected by those broad national trends, but unfortunately the differences in this market are precisely the differences that pick up on those national trends. If specialty is already higher in Vancouver than in the rest of the country, the impact of a shift towards specialty and revenues by the advertising community will be felt here more, not less. Vancouver was already farther down the road to the future.
3284 COMMISSIONER WYLIE: The difference i have from my database of the revenues from the four private conventional stations in Vancouver between 1997 and 1999, despite the blip in between, the decline is $1.1 million more between 1997 and 1999.
3285 MR. GOLDSTEIN: I'm 18 point something.
3286 COMMISSIONER WYLIE: Despite the entry of CIVT and the decline in 1998, you still have an increase of $19 million.
3287 MR. BUCHANAN: Well, you have chosen to stop in 1999. Our point was with 70 per cent of the way into the year that we find ourselves in now --
3288 COMMISSIONER WYLIE: That's the point. Unlike you, all the different consultants project beyond the historical figures, using the historical figures and various adjustments, taking into consideration whatever circumstances they choose, depending on what they want to indicate or establish for their clients to project into the future from different bases. Right?
3289 You don't know what is happening in 2001. Neither do I. The best we can do, and of course you are trained to do it professionally, is to say based on all of this, this is going to be it and you can't license anyone else, it will be a disaster.
3290 The other professionals say based on this, we think what will happen in 2000 and 2001 is X instead of Y and, therefore, license me and we will all do well, thank you very much.
3291 Then we have to ask ourselves what is behind the desire to arrive at these projections which may or may not come to fruition. That's what I'm testing. Everybody has a reason. The incumbents don't want more competition and those who want to expand want to get in and those who want to sell want to have a good value to sell.
3292 We have to take all that into consideration. I'm just trying to test in an unsophisticated way whether all of these factors have been taken into consideration.
3293 MR. GOLDSTEIN: There is one exception to what you said. This lucky gentleman has actuals to December 31. In doing his projections through to August, he already has the biggest selling season of this year in his hands.
3294 We can also tell you, and we have told him, we have our numbers through to February. We know where we are this year and, of course, in broadcasting when you know where you are at the end of February, you know where you are at the end of the year.
3295 We are talking about a year in which we find ourselves. This is not a projection for next year, 2001. When we used the $171 million number to say there is a $10 million difference, not a $17 or $18 million difference, we know our market has shrunk by another $7 in the year we are in the middle of. This isn't next year.
3296 I take your point. I think that -- let me rephrase, however, a different kind of point. If a market cannot increase sufficiently to cover the revenues of the new applicant, is that okay? That's a rhetorical question, not a direct question. I'm not sure it is. I'm certainly not sure it is in the context of this market where to get to this point, people have had to do some pretty severe cutting.
3297 If we say maybe the market will go up by $5 million and somebody comes in and takes $20 million, I mean you have a situation here. You know the revenues of the new station. If we are correct and in this year, for which we have pretty good data because we are through the fall season and into the winter, if it's going to be $171 or $172 million, that now is $12 million higher than it was back in 1997, the year before we started.
3298 That's a lot less than the new station which means all the rest of the stations have a lot less. Do you want to repeat -- sorry -- does one want to repeat that process? I think that's a pretty fundamental question, rhetorically, of course.
3299 COMMISSIONER WYLIE: I have exhausted my questions.
3300 Madam Chair, thank you, and perhaps my colleagues have questions.
3301 Thank you very much.
3302 CHAIRPERSON OF THE COMMISSION: Will you be back, Mr. Goldstein?
3303 COMMISSIONER CRAM: Because your study, Mr. Goldstein, it's not that we don't want you.
3304 CHAIRPERSON OF THE COMMISSION: We are delighted to have you back, but given the study is appearing as really the support of other interventions, will you be around?
3305 COMMISSIONER GRAUER: Yes. I won't try to imitate Arnold Schwarzenegger, but I will be back.
3306 CHAIRPERSON OF THE COMMISSION: Okay. Commissioner Grauer had a question for you.
3307 COMMISSIONER GRAUER: Can you tell me, do you have an insight into why people are tuning higher to specialties and to VCRs in this market?
3308 MR. GOLDSTEIN: No. It's historic. This has always just exhibited those characteristics.
3309 COMMISSIONER GRAUER: Since the introduction of specialties.
3310 MR. GOLDSTEIN: Since the introduction of the VCR.
3311 COMMISSIONER GRAUER: The VCR.
3312 MR. GOLDSTEIN: Yes.
3313 COMMISSIONER GRAUER: I mean, is it possible then that there's a lack of satisfaction from what they are getting from their local conventional stations in terms of programming?
3314 MR. GOLDSTEIN: It's theoretically possible, but it has just been a characteristic of the market.
3315 COMMISSIONER GRAUER: Thanks.
3316 CHAIRPERSON OF THE COMMISSION: Thank you very much.
3317 We will take ten minutes.
--- Recess at 1520 / Suspension à 1520
--- Upon resuming at 1535 / Reprise à 1535
3318 MS VOGEL: Our next intervenor this afternoon is Global Television Network. Whenever you are ready.
INTERVENTION / INTERVENTION
3319 MS BELL: Good afternoon, Madam Chairperson, Members of the Commission, ladies and gentlemen.
3320 My name is Charlotte Bell and I am the Director of Regulatory Affairs for the Global Television Network. With me here today are Jim Rusnak, the President and COO, Western Operations, including CKVU-TV here in Vancouver, Jack Tomik, Vice-President of Sales and Marketing, Western Operations, as well as Glenn O'Farrell, Vice-President of Legal and Regulatory Affairs, Global Television Network. We are also accompanied by Mr. Ken Goldstein, who has been previously introduced to you.
3321 We have a unique perspective as we appear before you today. CanWest has a long history in Vancouver. We have operated a television station here since 1988. Scarcely three years ago, we were before you in a forum similar to this as an applicant for an independent station in Victoria and we expect to be back here in April seeking regulatory approval for the change of control of the WIC Television stations, two of which operate in the Vancouver-Victoria market.
3323 MR. RUSNAK: Thank you, Charlotte.
3324 In other words, we believe that we know this market pretty well. We know how it has performed in the past and we know the challenges that lay ahead and we respectfully submit that this is absolutely not the time to consider adding yet another player to it.
3325 With great interest, we studied the new applicants' plans and were left scratching our heads, wondering if they were talking about the same market that we conduct our business in day in and day out.
3326 As pointed out in our written submission, the future certainly did look brighter back in August of 1998, the point in time when most of the applicants chose to conclude their market research. However, as you know, this is no longer the case.
3327 Let us reiterate. Conventional television revenues were down in 1999 and they will be down again this year. This is not conjecture on our part at this point in our fiscal year. This is a reality.
3328 The effect of specialty television on conventional television in Canada is dramatic. Presently, this new television outlet for advertisers and viewers is nowhere near its maturity. Advertising rates for specialty are 25 to 35 per cent of conventional and will not approach rate parity for years. Viewership to specialty is rising.
3329 Vancouver has yet to absorb the VTV launch of three years ago. It was licensed into a growing market, a market that had some pent-up demand, as we acknowledged three years ago.
3330 This fact, coupled with the success of "SportsNet" in the Vancouver-Victoria market as a result of their ability for regional telecasts of Canucks and Grizzlies games and the ability of local and regional buyers to buy on to that service has de facto introduced two new television entrants into this market, and this is at the micro level of our business. There is no room for another station at this time.
3331 The B.C. economy continues to struggle. The "Asian Tiger" which drives much of the economic activity here is still in recovery mode. Population growth in the province is at a standstill.
3332 The operating profit at Global Vancouver fell by nearly 17 per cent in fiscal 1999 and will decline again in 2000. This again is at the micro level of our businesses. This is a disturbing trend and we, like BCTV, have little room to reduce operating costs without severe impact.
3333 In addition, we face increased pressure on operating results as we move to compliance with the new TV regulatory environment. While we are supportive of the new policy framework, the business reality is that we will be airing fewer hours of foreign programming in favour of more hours of Canadian. And, as you know, there continues to exist a significant difference in terms of financial contribution between the two.
3335 MR. TOMIK: As one of the "Lucky Banditos" that Moses referred to yesterday, I wish I could agree with his assessment of how easy it has been, an effortless rise to prominence in an always hot demand market. Unfortunately, this is far from the truth. From initially flirting with financial disaster at our station, we have carefully and cautiously helped to build a strong market and worked very hard doing it.
3336 Let me address the market as it looks like today. Just over three years ago, we stated our belief that this market could support a new conventional television station and the Commission chose to license VTV.
3337 I could tell you that the market has now absorbed this new entrant and that there is now room for one more, but that wouldn't be the truth either. What I can do is clarify some important facts about the market that I have lived and worked in for so many years.
3338 First, the market size and definition because that seems to be at issue. The market stretches from Hope at the east of the Fraser Valley to Tofino on the west side of Vancouver Island. It starts in the south at Victoria and it goes north on the island to Campbell River and across on the mainland to Powell River. This market of three million people is clearly defined, not just by the advertisers, but to the economy, the broadcasters within it and, most importantly, the viewers that we serve.
3339 The television market does not operate on the same economic basis as the community newspaper business. From an economic, viewer and broadcaster point of view, Vancouver and Victoria are one market tied together.
3340 We cannot undo that reality for the convenience of the applicants in this proceeding. We also note that neither Victoria applicant has chosen to tailor their signal or coverage to exclude the lowe mainland, even though this was suggested in CRTC Decision 1997-39.
3341 Secondly, I would like to address the market revenues for a moment and clearly define the size of them. This market is what it is.
3342 A total of about $300 million is either spent or allocated in television advertising to this market. However, if you operate a conventional station like ours, or the ones that are proposed today, the accessible market is approximately $200 million and declining. The balance of the $100 million is accessible only to CTV Network, CBC Network and, most importantly, the new specialty stations.
3343 Therefore, for the purpose of this proceeding, the market is $200 million. This is the pie that would be accessible to the new entrant to compete for against the other conventional stations in the market.
3344 Thirdly, what do the media buyers, the representatives of the business community, really want? Well, you will hear from the Vancouver Media Directors Council in intervention No. 14, but I would like to leave you with one quote from their written intervention:
"Licensing another station in Vancouver does not mean that viewing to conventional stations in the market will increase. It does not guarantee that the increase in supply of inventory will match demand for specific types of program inventory."
3345 The conventional television pie in Vancouver does not magically grow.
3347 MS BELL: The Commission has been cautious about licensing new services in local markets suffering from economic uncertainty or decline. This longstanding policy minimizes the potential negative impact that a new service would have on incumbents.
3348 In 1993 the Commission was in a position to assess the Alberta market in response to applications for a new television service. In its 1994 decision, the Commission decided not to award a licence and determined that the introduction of a fourth commercial television service in Alberta at that time would have had a "significant impact on the audiences and revenues of existing television and radio broadcasters".
3349 The Commission postponed licensing new services until 1996 when the Alberta market was clearly in a period of economic growth.
3350 Most recently, in its report to the Governor in Council concerning the creation of new national television networks, the Commission concluded that:
"-- there are few, if any, markets in Canada that could sustain the licensing of new local stations without seriously impinging on the ability of existing licensees to fulfil their obligation under the Broadcasting Act."
3351 Studies filed with the Commission in this process provide clear evidence that the downward cycle in the conventional television sector continues. It would be unprecedented for the Commission to change its policy at this time with regard to licensing a new local service.
3353 MR. RUSNAK: Madam Chairperson, the market, economics, not to mention the fact that certain television assets are in flux in this particular market, clearly suggest that now is not the time to add any new stations into the situation. We understand that certainly CanWest has added to these circumstances, but we also hope that our forthcoming hearing in April will bring solutions, not problems.
3354 We would be pleased to answer any questions that you may have.
3355 CHAIRPERSON OF THE COMMISSION: Thank you very much.
3356 Commissioner Wylie has questions.
3357 COMMISSIONER WYLIE: Ms Bell, if you will allow me. Mr. Goldstein -- I feel quite disadvantaged because you have 2000 numbers that I don't have. I'm wondering if your clients have indicated a willingness to supply those 2000 numbers to the Commission ahead of the end of the fiscal year so that we have that information as well. Is that something that --
3358 MR. RUSNAK: We would be pleased to do that, Commissioner Wylie.
3359 COMMISSIONER WYLIE: Well, I was speaking to Mr. Goldstein in the hope that he could speak for all four of his clients.
3360 MR. GOLDSTEIN: There are three clients.
3361 COMMISSIONER WYLIE: Oh, yes, Global.
3362 MR. GOLDSTEIN: I can't speak for them in that regard.
3363 COMMISSIONER WYLIE: Perhaps you can let us know, but Global is prepared to -- I just thought it would be at least on the record for all three.
3364 Thanks. Thank you, Madam Chair.
3365 CHAIRPERSON OF THE COMMISSION: Merci.
3366 Mrs. Cram.
3367 COMMISSIONER CRAM: I wanted to just continue asking Mr. Goldstein a few questions based on what Commissioner Wylie was talking about. First I wanted to get your thesis, if I can understand it.
3368 Do I understand you are saying that there is essentially in Vancouver, in the Vancouver-Victoria market, sort of like a double whammy? One is the impact of a new licence, a new TV licence, and the second is the impact of the tipping or the specialties fragmentation. Is that -- have I summarized that correctly?
3369 MR. GOLDSTEIN: Absolutely.
3370 COMMISSIONER CRAM: So if I then go into your double whammy concept, you say that the impact of licensing an additional television station and, if I heard you correctly, Edmonton, Calgary and Vancouver have all had similar impacts in that there was that initial, I will call it, speculation advertising increase and then a regression, with a minor increase over the year previous to the new licence, but that the increase was never equivalent to the total gross revenues of the new licensee.
3371 MR. GOLDSTEIN: That is correct.
3372 COMMISSIONER CRAM: Is that now a concept that you are proposing, it is something that we should be looking at from now on in terms of conventional licensing across Canada, that that may in fact be a possibility?
3373 MR. GOLDSTEIN: I think it's a very real possibility, particularly because of the one half of the whammy you mentioned, which is the specialty growth, the transference. Specialty services are growing 25, 30 per cent a year. It's got to come from somewhere, so you are faced with a very real dilemma, all of us are faced with a very real dilemma, that do we think that the licensing of a single station in one market can by itself tilt the balance away from specialties?
3374 I don't think that's a realistic expectation. If time permits I can put some other stuff on the public record on that, but my basis thesis is that licensing one station in this market that will get a four or five per cent share isn't going to tilt the entire trend of advertising so that all of a sudden the flow to specialty services stops and reverses itself and comes into that one new station.
3375 COMMISSIONER CRAM: Would your thesis change if we were talking a religious station, the one station, the additional, the blip?
3376 MR. GOLDSTEIN: Well, I think it is very clear from the report we filed that based on their projections, the religious station is simply in a different category.
3377 COMMISSIONER CRAM: And we also heard the Rogers group talking about how they grew the pie. It reminded me somewhat of Mr. Lynn's Unitel argument. You know, the concept of growing the ethnic advertising pie. Did you consider that in this concept of the new licence perhaps effectively expanding the pie?
3378 MR. GOLDSTEIN: I think if that if you want to focus, I take it, on the ethnic market here, you have a situation in the ethnic market in Vancouver which is actually quite unique because the size of one group is so much larger and then the second largest group and then all the other groups are very much smaller.
3379 Think of an ethnic station, if you will, as a kind of a network which pulls together a bunch of disparate pieces and lets them have television time in effect, something they couldn't do on their own. Networks work effectively when you have a bunch of players that all need the network. When one of the groups to be served is so much larger than the other, the network won't work as well. So you can't simply transfer the model.
3380 Indeed, I think your own discussion and your own questioning touched on this. You can't simply transfer the model that worked where there were a lot of groups of, you know, some larger but still a lot more groups of meaningful size, to a market which is very different.
3381 Then, of course, you have got specialty services that are already serving those markets. I think it's at best problematic.
3382 COMMISSIONER CRAM: Thus far we have been talking about the conventional pie. I note, Ms Bell, I think it's in about page 7 of the actual document that you filed, you said we should be considering the radio changes, authorized conversions of two AMs into an FM and granting a new FM and that it will have an impact on the advertising market.
3383 Is that where we come into the second part of the whammy, that conventional is really, and I hate to use that word, the victim here? Can we look at the general broadcasting market? Can we look at radio and the total advertising market or are we talking about a marginalization, if you will, of conventionals and that's the issue.
3384 MR. TOMIK: No, not at all. Not yet. I want to address the specifics of the radio first of all. They were more or less directed at Victoria. As you are well aware, there are two stations over there, one turned from an AM to an FM about 12 or 13 days ago. One in Duncan is also turning very shortly and I believe April 1 is Mel Couver's firing up of a new television station.
3385 What we were trying to refer to was the general state of flux within broadcast and we aren't the only participant in it. Certainly it speaks to the economy of this area. The Vancouver and the British Columbia economy is just not healthy. It certainly was when you made your decisions in 1997 and it changed very quickly.
3386 Not only do you have us looking at a smaller advertising pie, radio is looking at the same thing and having the same kind of experiences in this market to my knowledge, as are other advertising media.
3387 MR. GOLDSTEIN: If I might pick up on it because I think you have connected some important concepts here.
3388 The change that is occurring is from mass to niche. We are in a period now where the mass kind of broadcasters are threatened. The niche can come from radio. The niche is certainly coming from specialty services. The niche can come from the Internet. The latest projection is within two years, Internet advertising in Canada will crack a hundred million dollars. It was nothing three years ago.
3389 So, we are in that trend and we are particularly in that trend with the specialties impacting on conventional in the television market itself.
3390 Now, a couple of the applicants have said, CHUM in particular, "Well, look, we are really a very specialized kind of local service". They have also said, you know, they could repatriate here. You might be interested actually in the fact that if you look at the CHUM annual report for 1999, this is what it says. It says:
"Conventional television sales were flat for fiscal 1999 as a result of a soft market experienced by the television industry in general, due in part to expansion of specialty services."
3391 In CHUM's quarterly report to November 30, 1999, it says:
"Airtime sales and bookings for the first six months to February 29, 2000, remain ahead of those for the same period last year with increases from both radio and specialty television operations."
3392 So there you see the increases from the more specialized kind of media. They then go on to say:
"Conventional television revenues remain at the same levels as last year."
3393 I would suggest to you, although I think CHUM runs terrific television stations, I would suggest to you that this shows that in Ontario where they have these formats, the way they are established, the best they can do is stay even against this onslaught of specialties.
3394 I cannot accept the notion that they are going to plunk a new station in here. It is going to get a 4 per cent share in its first year and all of a sudden that's going to shift the revenues away from specialties. It doesn't make sense.
3395 COMMISSIONER CRAM: So I hear you then as saying that radio is a niche also. You consider radio as a niche issue.
3396 MR. GOLDSTEIN: Radio is also becoming very much a niche player. I don't think in this given instance radio is the biggest part of the impact. It is clearly the specialty service, but no question radio is becoming a niche and the Internet is the ultimate niche media.
3397 COMMISSIONER CRAM: Mr. Rusnak, and I think you have a really good answer to this one because I just finished reading the press release. All we hear is local, local, local, local here and from people saying we don't have enough local. What are you going to do about it? I'm giving you the stage.
3398 MR. RUSNAK: Which market would you like to speak about?
3399 COMMISSIONER CRAM: Well, you can do Vancouver.
3400 MR. RUSNAK: Well, I think, you know, there's a lot of things happening within the industry and within our country. We work very hard to be active in this local market in a variety of ways, whether its through our news and sports programming or community access, city watch, things that we do and all the other things that a bunch of local television stations do. We do that in Winnipeg, Regina and Saskatoon which are the other three stations that I am responsible for.
3401 Part of the equation is that the smaller the market, the more it needs support from a healthy big brother or big sister within the same corporation. Without getting into specifics of what was filed, the theme runs through some of the discussions that we will have in April.
3402 CHAIRPERSON OF THE COMMISSION: That you're not having now.
3403 MR. RUSNAK: That we are not having now.
3404 COMMISSIONER CRAM: The staff asked me to ask this question about why do people keep saying local and how come you haven't done that, so I have to do that.
3405 MR. GOLDSTEIN: Commissioner Cram, may I add a brief word on local?
3406 COMMISSIONER CRAM: Certainly.
3407 COMMISSIONER CRAM: I was listening to the extolling of the virtues of local, local, local. I have no quarrel that local should be a prime focus. I thought it begged the question, of course, how this extensively local focus was going to repatriate dollars from network. I wasn't quite sure how you could do that both at the same time.
3408 Let's talk about some of these projections. I mean we heard CHUM say they were going to take their local revenues from 35 per cent of their total ad revenues to 42 per cent in year seven.
3409 In 1998, the four private stations that are already in this market, their local advertising was 32.8 per cent of their advertising. In 1999 it was 34.1 per cent of the local plus national total. I don't know the precise totals for Citytv in Toronto, but I would be prepared to wager that each of the private stations in this market already gets a higher share of its revenues from local than Citytv does in Toronto. This market is intensely local.
3410 MR. RUSNAK: Commissioner Cram, if I could just add to that. We mention in our written materials, and I suspect you will probably hear it from the next intervenor, the newest local station in town is still trying very hard to establish audiences for its local programming.
3411 One of the things that needs to happen is there needs to be a period of time before yet another factor is heaped up against them.
3412 COMMISSIONER CRAM: I did want to ask you, Mr. Rusnak, you said that your profits will decline again in Vancouver. It was Mr. Rusnak who said that. Can you give us a number? You said it fell by 17 per cent in 1999. Any idea about 2000?
3413 MR. RUSNAK: I don't know what the precise number is going to be, but I guess the reality of the equation is as your revenue declines -- when you have a real decline in revenue year over year, almost all of that comes off of your operating profit line. Right now we are pacing about 4 per cent behind where we were this time last year, year over year on the revenue side.
3414 COMMISSIONER CRAM: And, Ms Bell, on page 6 you were talking about what we required of the GIC, the Governor in Council, talking about impinging on the ability of existing licensees to fulfil their obligation. In that circumstance, are you actually referring to -- well, what you were referring to in your letter on page 5, your letter of intervention, talking about subsidization of the smaller markets. Is that what you meant?
3415 MS BELL: That's part of it, yes.
3416 COMMISSIONER CRAM: And what are the market sizes of the Winnipeg station, the Regina station and the Saskatoon station?
3417 MR. TOMIK: In terms of population?
3418 COMMISSIONER CRAM: Yes.
3419 MR. TOMIK: Regina and Saskatoon are about equal at about 150,000 and Winnipeg is about 1.2 million.
3420 COMMISSIONER CRAM: And those are existing obligations that you have right now to keep those stations.
3421 MR. RUSNAK: Yes. That's correct.
3422 COMMISSIONER CRAM: Thank you. No more questions.
3423 CHAIRPERSON OF THE COMMISSION: Okay. You have questions now?
3424 MS ASSHETON-SMITH: Thank you. I first of all want to confirm that Commission staff has confirmed with Mr. Buchanan that BCTV and CHEK-TV will be filing in confidence the actual revenues from September 1, 1999, to the end of February 29, 2000. If we could get those by March 10, 2000, that would be very helpful to us, and also the TVB for the same period.
3425 I just wanted to follow up with Global and ask that you can confirm that you will be able to file in confidence the actual revenues for the same period for Global.
3426 MR. RUSNAK: Yes, we will.
3427 MS ASSHETON-SMITH: By the same date?
3428 MR. RUSNAK: Yes, we will.
3429 MS ASSHETON-SMITH: Thank you.
3430 Mr. Goldstein, just a few follow-up questions. You discussed with Commissioner Wylie a number of factors that went into the hopper, so to speak. Applicants have mentioned the introduction of people meters as a factor that contributed to the decline in the ad market in 1999 for Vancouver. Do you agree with this and did you take this factor into account when you were arriving at your own figures?
3431 MR. GOLDSTEIN: I took it into account and I disagree with it. There may have been some turmoil when it happened in Toronto, but the industry learned how to deal with that turmoil. People meters weren't introduced in Edmonton and it went down. People meters weren't introduced in Calgary and it went down. I think that's grasping at straws on the part of the applicants.
3432 May I -- sorry, without interrupting any flow here, I notice you mentioned that you were also asking for TVB information. I believe it's important to put something on the record about TBV in this market. I don't know when the appropriate opportunity is, so I will take my guidance form you.
3433 MS ASSHETON-SMITH: Go ahead.
3434 COMMISSIONER CRAM: Thank you. I think we have heard a lot over the last couple of days about TVB data and how important it is and the trends in TVB data. I thought it might be useful that we have on the record a good description of what TVB actually is and what TVB actually does.
3435 Every month TVB gathers data from participating broadcasters. However, all broadcasters do not participate in the TVB survey. For those broadcasters that do not participate, TVB estimates the data.
3436 The data are gathered in three categories: local, national and network and specialty services are included in network. The network numbers are then allocated across the country to various markets and regions according to a formula used by TVB. Thus, TVB provides a good set of estimates on an ongoing basis and is useful as a general indicator of trends to supplement the more precise data that are available from either the Commission or Statistics Canada.
3437 Now, in its written rebuttal, CHUM asked for an explanation of why our market totals for the Vancouver-Victoria market were lower than TVB's for the combined local, plus national revenues. They seem to think that this difference casts some doubt on the validity of our projections.
3438 You should know that KVOS is the only non-Canadian broadcaster included in the TVB survey. It is, therefore, the only broadcaster in the survey on which advertising spending cannot be deducted for tax purposes. For that reason, and this has gone on for many years, the KVOS data that are included in the TVB survey are not the actual revenues of KVOS, but are in fact numbers which are grossed up in an attempt to reflect the different tax treatment.
3439 Because of the gross up factor applied to KVOS, the TVB totals for the Vancouver market will always overstate the actual size of the market. One would have thought that any applicant for this market would have done their homework and that they would know how data are gathered and reported in a market they wish to serve. Well, now they have their explanation.
3440 As you know, we have the actual data for the four private stations in the market for 1998 and 1999. We also have very good estimates for the CBC, so it's interesting to note that the difference between our estimates and the TVB estimates are due solely to the KVOS gross up factor and that difference was lower in 19989 than it was in 1997 and lower again in 1999 than it was in 1998. That can mean only one thing. KVOS is going down. I wanted that on the record.
3441 Thank you.
3442 MS ASSHETON-SMITH: Thank you for that very spontaneous response.
3443 One more follow-up question, Mr. Goldstein. You stated a number of times now that other markets in Canada are also in decline or were in decline in 1999. Our own staff figures seem to contradict what you have suggested.
3444 Can you tell us exactly which major markets in Canada according to your figures were in decline in 1999?
3445 MR. GOLDSTEIN: Oh, there's no question that Calgary and Edmonton were, that they declined from where they were the year before.
3446 MS ASSHETON-SMITH: What about Winnipeg, Toronto and Montreal?
3447 MR. GOLDSTEIN: Winnipeg and Toronto did not have new stations introduced, so I did not look at those. Montreal, it's difficult to isolate out the data just for English Montreal.
3448 MS ASSHETON-SMITH: Just a few more quick questions. At page 5 of your opening remarks that you mentioned today, you indicated that a total -- it's the third paragraph on page 5:
"A total of about $300 million is spent on television advertising in the Vancouver-Victoria market. However, if you operate a conventional station like ours or the ones proposed by the applicants, the accessible market is approximately $200 million, and declining."
3449 Then you go on to say:
"The balance of $100 million is accessible only to CTV, CBC and specialty cable networks."
3450 Can you explain what you mean by this?
3451 MR. TOMIK: Sure. The reference is to the national network portion of the television revenues in this market. Clearly, there are only three players at this moment. One is CTV Network, CBC Network and the fast growing specialty part of the business.
3452 MS ASSHETON-SMITH: Thank you. One last question. That is with respect to population growth in B.C. You have indicated on page 3 that it's your view that population growth in the province is now at a standstill.
3453 The Conference Board of Canada has projected that population growth is going to resume in British Columbia in 2000. Do you agree?
3454 MR. RUSNAK: The comment was meant to apply to the most recent historical data.
3455 MS ASSHETON-SMITH: Thank you very much. Those are all of our questions.
3456 CHAIRPERSON OF THE COMMISSION: Commissioner Wylie.
3457 COMMISSIONER WYLIE: Mr. Goldstein, in my list of things that in my view should be in the hopper and I wanted to know if you would put them in, is the possible exaggeration in the shift of viewership towards the famous tipping. Did I get it right? Towards viewing of specialty services, that it may be exaggerated by the change in gathering viewership measurement towards people meters.
3458 MR. GOLDSTEIN: I understand. I think that's an excellent question.
3459 COMMISSIONER WYLIE: Oh, we're catching on here.
3460 MR. GOLDSTEIN: I have only lived in Ottawa for 18 months, so --
3461 COMMISSIONER WYLIE: You will be political yet.
3462 MR. GOLDSTEIN: Yes. In fact, we used data in our report coming strictly from BBM and the diary method. We noted in our report that had we used data from meters, it would have been worse. In fact, the figures in our report use the least difficult set of figures.
3463 COMMISSIONER WYLIE: Now I see why you thought it was a good question.
3464 CHAIRPERSON OF THE COMMISSION: Because it favours the specialty, the smaller niche players.
3465 MR. GOLDSTEIN: The meters favour the specialties.
3466 CHAIRPERSON OF THE COMMISSION: Yes.
3467 MR. GOLDSTEIN: The diaries don't because of the way the data are gathered.
3468 CHAIRPERSON OF THE COMMISSION: I used to be a broadcaster of --
3469 MR. GOLDSTEIN: Had we used Nielsen data, it would have been much worse.
3470 COMMISSIONER WYLIE: The tipping.
3471 MR. GOLDSTEIN: The tipping.
3472 CHAIRPERSON OF THE COMMISSION: Isn't it true though that when you look at all the figures, the phenomenon of specialty, although kind of increasing every year -- 1998 certainly was like 16 per cent of share, but 1997 was 14, so we are not talking such a difference, yet when the conventional lose some market share, that doesn't mean they lose on their revenue base and even less on their profit base.
3473 MR. GOLDSTEIN: Well, actually there is a period of time and that's why this whole notion of tipping point is so important. There is a period of time when the only way to get the big chunks of audience is to stick with the conventional stations.
3474 In the initial phases of the specialties growing, the conventional stations actually benefit because they can still attract the mass audience. However, what's happened in this particular case, as you start to add up not just our specialties which can take direct advantage of it, but also other viewing choices which are taking away from the conventional, eventually, and we are getting there, you get to a point where advertisers will say "Okay, I'm still going to put a big chunk in conventional, but now instead of getting only conventional, I am going to start getting specialty because the specialty is now big enough to make it worth while for me to consider and also it's cheaper".
3475 CHAIRPERSON OF THE COMMISSION: Yes, but isn't there an interest structurally to have owners that have both and can then influence the way the revenues will be generated in the future and eventually kind of hold the bar so that the conventional doesn't suffer as much?
3476 MR. GOLDSTEIN: I think that there is clearly a corporate interest to have both, but I think the real corporate interest to have both is because we are moving from one to the other rather than using one to maintain the other.
3477 CHAIRPERSON OF THE COMMISSION: Well, depending on who you are and what you have been doing in the last few years then, whether you start fresh or you have been involved in it or you are there and you want to become involved.
3478 Isn't that right to think that structurally it's interesting to have the two and that put together can certainly have a way on the revenues will evolve, although we will all recognize the specialty or the niche phenomenon will still be there and will be increasing with time.
3479 MR. GOLDSTEIN: I think that, if I understand correctly, you are suggesting that if you have the same owner with conventional and specialties, which obviously is a good idea, that they will somehow be able to manipulate the flow of revenues to keep more revenue coming into the conventional than might otherwise be the case if it was a flat out competition.
3480 I'm not sure that would work even in a closed market, but we no longer have a closed market. The kind of pressure that is going to come increasingly on the market, I'm not sure they will have enough control to be able to do that. I think the real value of having the specialties will be that you will have a growing segment to compensate for your declining segment rather than to keep the segment from declining.
3481 CHAIRPERSON OF THE COMMISSION: Well, it plays by rights though, doesn't it?
3482 MR. GOLDSTEIN: In some cases it will help.
3483 MR. TOMIK: Madam Chairperson, I would just like to address the reality of Canadian specialty in this market, the Vancouver and Victoria market.
3484 In the most recent period, the fall period, 14 weeks, Canadian specialty in total had 23.4 per cent of viewing in this market, a substantial amount, more than the low teens we were talking about.
3485 Over the past four years in Canada, specialty television has grown from about 8 per cent of the television revenue to 15 today. I believe it has got three to five years before it matures.
3486 That 15 per cent of television revenues in Canada is predicated on prices that are one quarter to one third the cost of conventional. It's extremely attractive to advertisers and a big concern to conventional broadcasters. They are literally eating our lunch.
3487 CHAIRPERSON OF THE COMMISSION: Well, we are not seeing that yet, I'm sorry. I can certainly recognize and our figures demonstrate the bump in 1999. You say you have figures to show that they are further bumped in 2000, but we are not seeing here a decline. That was what the point was of Commissioner Wylie and Commissioner Cram.
3488 We don't have 1997 and 1998 to 2000 in decline. We have a decline from 1998 to 1999 and 1999 to 2000, but still it's quite high in comparison to what it was. It all started in 1997.
3489 MR. RUSNAK: And we will provide that information, but if you look at the trend and you look at the viewership to specialty channels, as we pointed out in Table 5, Canadian conventional has dropped from 43.7 to 35.5 over the past five years. Canadian specialty has risen from 6.3 to 16.6.
3490 CHAIRPERSON OF THE COMMISSION: In market share.
3491 MR. RUSNAK: In share.
3492 CHAIRPERSON OF THE COMMISSION: Yes.
3493 MR. RUSNAK: And that's the job of the Jack Tomiks of the world, to take the available rating points that you have and go out and convert it into a marketing plan that's attractive to buyers.
3494 CHAIRPERSON OF THE COMMISSION: But in the Vancouver market, the Vancouver viewer has still a lot of value. Isn't it true to say that the inventory was all sold early in the year in Vancouver?
3495 MR. RUSNAK: As we said when VTV was licensed, it was licensed into a market where that presumption was probably accurate. That is no longer an accurate assumption.
3496 What has happened is that the amount of rating points that conventional broadcasters are able to generate is diminishing. It's going down fairly rapidly. I think what the Vancouver Media Directors Council's point is saying is that simply by licensing another station doesn't magically change that equation.
3497 MR. TOMIK: I would also like to add this. When VTV came to air in the fall of 1997, which is fiscal 1998, yes, there was pent-up demand in this market, yes, advertisers did not get what they wanted.
3498 What you saw in fiscal 1998 was the introduction of this revenue because of the new inventory, but I can absolutely promise you that when you see the figures, you will see the two years subsequent to that, 1999 and 2000, going down.
3499 As far as inventory availability in the market, I phoned a station at about 1:30 today, just before we started, and if you want to buy a spot on "Friends" from me this Thursday, the number one show on the market, it's available.
3500 I don't think we have clearly demonstrated just how bad business has been in this market for the last two years. I think it's important to note that.
3501 COMMISSIONER WYLIE: Perhaps the point I'm trying to make is that if I lost an inch in height, it would be more dramatic than if Commissioner Langford lost an inch in height.
3502 MR. RUSNAK: If you lost an inch this year and an inch next year and you weren't sure whether that trend was going to reverse --
3503 COMMISSIONER WYLIE: You don't want me to disappear.
3504 CHAIRPERSON OF THE COMMISSION: I guess, you know, kind of a final comment and that's why we are trying not strictly on figures because you can be lost in figures, but also to understand if the point of view you are putting across is the famous kind of competition belief of just give me one more day in market before you send somebody else. That's what we are trying to understand.
3505 Of course, people who are in this market already are not necessarily welcoming a new player in the market. It's one thing. We are trying to kind of differentiate in the comments and the interventions or in the applications, "Let me come whatever" and "Don't come because we can't".
3506 It's expected that the applicant will say there's space and that the existing or the incumbent player will say there's no space. We are just trying to understand it, always coming back to the objective that Mrs. Wylie was referring to earlier which is at the end, the public interest is to serve the people from Vancouver and from Victoria and to say "What's the net net for them?".
3507 There might be a certain price, but at the end, is it for the best or the worst, but that thinking of the viewer and the consumer.
3508 MR. O'FARRELL: Madam Chairperson, if I may jump in just for a moment on the point that I thank you for raising because, frankly, we gave it a lot of consideration and did not want to appear here today or intervene in this process simply to satisfy an expectation that incumbents oppose the arrival of new stations simply for the sake of opposing.
3509 We did a very serious analysis of the various applications and the studies that support their assumptions and so on. Based on our own reality understanding of the marketplace where it has been, and you are right, if you look back to 1997 you won't see a decline, you will see growth, but then decline has occurred and continues to occur. We will provide you the evidence of that as to the actuals.
3510 Therefore, we said it is incumbent upon us to intervene in this process to assist the Commission in its deliberations as to understanding what really has happened in this marketplace now, but not simply to satisfy the expectation that incumbents oppose new stations.
3511 We had to do so also, frankly, in the context of the comment that Commissioner Cram made about station groups. Station groups have stronger players than players in other markets that are not enjoying the same market realities.
3512 Certainly when we looked at this application, we looked at it first and foremost as it relates to Vancouver and the Vancouver-Victoria market, but top of mind for us was also our ability to continue serving the audiences and the communities that we serve in Saskatoon, Regina, Winnipeg to a large extent and, indeed, the Atlantic also because those stations rely on their brothers and sisters of larger markets to help them do their jobs.
3513 The last comment I would like to make if I could is, and I respect thoroughly the edict that this is not April 25, but there is an undertaking that we have made publicly. It is in the public domain. It's not a matter of confidential treatment. It is that we would undertake to sell a station in this marketplace. Therefore, there are consequences that flow from that.
3514 The second comment is that our plans include to sell a station in this marketplace. Our plans do not include to sell programming to a station in this marketplace, be it an incumbent or a station you may license, simply to put on the record our view of the world because I believe comments were made by the Craig group that there would be programming available for sale from a Hamilton station.
3515 I don't want to assume or presume anything, but I just wanted to let you know what our plans were in that regard.
3516 CHAIRPERSON OF THE COMMISSION: But as you well know, those plans are not at this hearing.
3517 MR. RUSNAK: Madam Chairperson, if I could just add, and I don't have the transcript before me, but when we appeared here in 1996, we had knowledge that the market was buoyant and in fact supported the presumption that competition was a good thing at that time, the addition of another service was a good thing, so we don't come before you just to be negative.
3518 CHAIRPERSON OF THE COMMISSION: But you were an applicant then, weren't you?
3519 MR. RUSNAK: We were an applicant, but we were also an incumbent broadcaster in the marketplace.
3520 COMMISSIONER WYLIE: Did you hire Mr. Goldstein?
3521 MR. RUSNAK: I think we left him at home on that one.
3522 CHAIRPERSON OF THE COMMISSION: Thank you very much.
3523 MS VOGEL: Our next intervenor this afternoon is CTV Television Inc.
INTERVENTION / INTERVENTION
3524 MR. FECAN: Good afternoon, Madam Chairperson, Members of the Commission. For the record, my name is Ivan Fecan, President and Chief Executive Officer of CTV Inc.
3525 To my left is John Festinger, General Manager of CIVT-TV Vancouver. To my immediate right is Robin Fillingham, Executive Vice-President and Chief Financial Officer and Secretary of CTV. Next to Robin is Kathryn Robinson of Goodman, Phillips and Vineber, our legal counsel and a member of CTV's Board of Directors.
3526 As you know, our Vancouver station, CIVT, launched just over two years ago and we are very proud of what John and his Vancouver-based team has accomplished in this short time. For instance, made in Vancouver national series such as "Cold Squad", the "Vicky Gabereau Show", "Double Exposure", "Robert Mason Lee", "On the Edge" and "First Story".
3527 Twenty-six documentaries, such as the award winning "V6A1N6", a brutal exposé on the reality of the east side of Vancouver, and "The Last Street Fighter", the history of the Georgia Strait.
3528 Award winning children's shows such as "The Magician's House", a comedy series such as "Skulduggery and Slightly Bent", which played both on CIVT and the Comedy Network and vibrant local programming, including an average of 15 hours of local news each week, the music variety series "V" and "Pacific Profiles".
3529 All of these programs are the direct result of your decision to grant us a licence in Vancouver. To date at CIVT we spent more than we originally budgeted in the pursuit of making good on our promises. Yes, our revenues are higher too and there is a connection between the higher cost to improve programming and higher revenues.
3530 All of this is in aid of saying that CIVT is still a young station, barely half way into its first licence term and it's not yet profitable.
3531 As you have seen, the market in Vancouver for conventional television advertising revenue is in decline and, frankly, all across Canada in our experience conventional revenues are down or flat for the first time in many years. Whether's it a bump or a trend, only time will tell, but issuing a licence now is making a big bet that it's just a bump. We would rather you didn't do that at this moment because the least established station is the newest in the market, CIVT, and because you have other choices.
3532 We can sympathize with the dilemma you face. Do you, the regulator, choose the best application for the community and the Canadian broadcasting system through this competitive process or by waiting and seeing who CanWest brings forward through a divestiture option?
3533 As the regulator, you control the process by which broadcasters are given the privilege to serve a community. But because the CanWest and Shaw deal kept being delayed, this hearing and the WIC hearing have bumped up against each other. However, in the WIC hearing in April, it is in your power to require CanWest to divest two of the three stations it has been left with as a result of that transaction. After all, you reiterated your policy against ownership of two stations in a market barely eight months ago, providing fair warning for all, including CHUM.
3534 That would mean two of the five applications you have heard here could find a place in Vancouver-Victoria subject to your approval, of course. In this way, there would be more voices and diversities in the market without negatively impacting the existing stations.
3535 We believe the consequences of issuing a new licence now outweigh the benefits of the competitive process.
3536 In conclusion, the Vancouver market is in a state of flux. Conventional advertising revenues are in decline. The newest entrant into the market, CIVT, is still in its infancy and is still unprofitable. The ownership of the remaining conventional stations is yet to be determined.
3537 We strongly believe that with all of these factors at play in the Vancouver market, the licensing of a new conventional television station would be extremely difficult at this time and time means everything.
3538 We thank you for the opportunity and await your questions.
3539 CHAIRPERSON OF THE COMMISSION: Thank you. I will not talk about the study this time. We don't want to talk about what is coming in front of us at the end of April. It is the chicken and egg. Certainly the proceeding had been announced. It was well announced, publicly announced, so we don't feel that we should have waited. We felt that we owed to the fact that we had done the public notice to go ahead. I'm sure if you were back in 1996 in that same situation you would have appreciated that we would have gone according to plan.
3540 Going back to 1996 and your experience now in this market, when we look at the figures that have been gathered with the financial data of the Commission, we find that KVOS has lost some of its market share. In your experience, certainly there is the market in general, not every loss is due to your presence in the market, but certainly a very important part of it is yours.
3541 Can you tell us how come it has happened? What do you see as having been the driver for that loss? Do you think we can do better? I use the "we" given the system, the Canadian broadcasting system. Every time that we repatriate from American broadcasters, I think that the system as a whole is winning and the viewers are winning.
3542 With that in mind, could you tell us how you think it has occurred this time?
3543 MR. FECAN: Before I turn over to John who, of course, has the actual experience, I think generally if you are talking about the blip or whatever in the market, I think specialty is a factor and you have been over that plenty, so I won't pile into that one.
3544 CHAIRPERSON OF THE COMMISSION: One being SportsNet in this market.
3545 MR. FECAN: One being SportsNet in this market and perhaps that's a mixed blessing.
3546 Maybe John could talk about his experience with KVOS.
3547 MR. FESTINGER: Thank you very much, Ivan. I think you are exactly right. It's never one factor or one station so it wouldn't be fair to take credit for the decline.
3548 Before trying to answer the question more specifically, maybe it would be helpful if we gave you some estimates of what we think the decline actually has been.
3549 The common estimate for where KVOS was before CIVT entered the market was about $25 million in revenue. I think in 1998 they were 21, in 1999 they were 18 and this year will be at $16 million. It's a fairly significant decline.
3550 What follows obviously is a question of whether an applicant or how much more another applicant can take out of that, but it has been pretty significant and that suggests that maybe there's not that much left to be repatriated.
3551 In terms of what we have done, I think perhaps Ivan can speak to this better than I can, but my recollection is that Baton was the only applicant who didn't claim that its application was going to make a significant inroad into KVOS and it has never been -- it has obviously been a revenue target and it has been a target in terms of pride. We want to repatriate to the Canadian system, but where it came from was probably movies, strip programming, some of the afternoon shows we repatriated from KVOS, but I don't want to pretend that it was some huge plan, Madam Chairperson. It was something that happened in concert with the market and as part of a new station turning Canadian heads and Vancouver heads and providing another option.
3552 MR. FECAN: And I would like to say that KVOS is owned by a fairly sizeable station group in the U.S. They are not exactly pushovers. They are really competent broadcasters.
3553 I am sure that if "Jenny Jones" crosses the street to Victoria, sure that will be an impact, but these guys aren't just going to let that happen without taking some of their own action. They are not a stand alone station. They are part of a station group with some financial clout.
3554 MR. FESTINGER: And if I may add to that. We have noticed this year KVOS was hurt pretty badly last year. They seem to have bounced back somewhat in the ratings this year.
3555 CHAIRPERSON OF THE COMMISSION: So they would be the only one in 2000 not to be in decline.
3556 MR. FESTINGER: I said ratings, not revenue.
3557 CHAIRPERSON OF THE COMMISSION: You have to be vigilant every day.
3558 Looking at your performance measures for years one and two that have existed in the market, we were referring earlier to the fact that in terms of your projection, there are many things that are now with the reality test a bit different. For one thing, your market share is less than you had anticipated, yet your revenues are higher. Indeed, your expenses are higher as well. You are carrying out your promises through those expenses.
3559 We were wondering, are those expenses, although coming from Vancouver and really in line with those promises, how much of those though help the network situation that aren't combined with other initiatives you may have either at CTV or per se or in other initiatives that you have.
3560 It's an expense that is shown in this station here, but given that you are a larger group and have kind of other interests in the broadcasting system here in Canada, you have a possibility of amortizing it differently.
3561 MR. FECAN: Before I turn it over to Robin. I, of course, recognize the basic truth in what you are saying. However, I think it would be really hard to accurately separate those things out.
3562 What I do think is solid is that if we were not in this particular market, maybe not all but largely all of those shows would not have occurred.
3563 Clearly the connection of being in the market, being given the privilege to service this community and those kinds of program expenditures and creation, there is a direct relationship.
3564 We think that we are a little ahead of our projections obviously, as you know, but we think within a year or so it will start falling in to where we expect it to be.
3565 I think, Robin, you were thinking that year four is going to be about where you thought year four was going to be in our filing three years ago.
3566 MR. FILLINGHAM: Yes, that's correct. In actual fact, by the end of this year, which would be our third year, I think our revenue levels -- we are probably about two years ahead. We had a significant ramp-up fairly quickly, far ahead of projections and then some slower growth, whereas we had I think in our projections indicated a more kind of rapid growth over the first five years. So we are running about two years ahead.
3567 Just to clarify and answer your question on the cost side of the equation side though here, the 40 hour network service revenue and costs have no impact on CIVT, so that's totally separate.
3568 The increased programming costs here at CIVT, which I think we are running ahead over $4 million on our Canadian and a few million I think on our non-Canadian, but those costs are all here on the station and on the screen.
3569 I think that the program schedule that we launched with really was a lot stronger than what our application schedule was. There's a full breakfast show, there's more hours of local news, there was more comedy production, but the costs are not loaded into here, even costed then are spread across the full CTV service. It's just the allocation and I think we were consistent in our -- I think our application dealt with a 15 per cent allocation of any national cost to this station. That has been consistent in our filings.
3570 MR. FECAN: But as we move into the multistation regime, Vancouver will become a very important part of the future of the CTV national service.
3571 CHAIRPERSON OF THE COMMISSION: You are saying that the third year you are then catching up on what were the projections, being this year.
3572 MR. FILLINGHAM: Yes. At the end of our third year we will be running about two years ahead. We are where we thought we would be by year five.
3573 CHAIRPERSON OF THE COMMISSION: Okay. Including profitability.
3574 MR. FILLINGHAM: Not including profitability. No.
3575 CHAIRPERSON OF THE COMMISSION: When do you think profitability will be appearing?
3576 MR. FILLINGHAM: I think it will catch up probably by year seven. I think at the time we filed --
3577 CHAIRPERSON OF THE COMMISSION: A bit further down than you had anticipated.
3578 MR. FILLINGHAM: A couple of years further down. That's correct.
3579 CHAIRPERSON OF THE COMMISSION: Despite better revenues.
3580 MR. FILLINGHAM: That's correct. Again, it's because of the program costs, that we have put in more and invested in the program schedule.
3581 CHAIRPERSON OF THE COMMISSION: But it's a choice.
3582 MR. FILLINGHAM: It's a choice.
3583 CHAIRPERSON OF THE COMMISSION: Okay. I have another question. It's regarding -- let me see -- it's regarding Victoria. When you were here in 1996, you said that if you were licensed, you would undertake to come forward with an application to serve the people of Vancouver Island who have so clearly and eloquently expressed their needs.
3584 Three years have passed since you made this statement and since you were awarded the licence for CIVT. I haven't seen any application for Vancouver Island.
3585 MR. FECAN: I am really -- well, we have internally and I am really glad you asked the question. When we had heard about -- as you know, this hearing has been rumoured for some time that it would take place. We had heard there were one or two parties applying for Victoria-Vancouver Island service. It was not our intention to be competitive with those parties.
3586 However, until their applications were presented, we weren't aware of whether they were Vancouver Island only service or whether it was a Victoria service that also was seen in Vancouver itself. Obviously the two applications before you are the latter.
3587 We still think it is possible to have a Vancouver Island/Victoria service, but on a very different model than what you have seen here. In fact, if we were to come forward with one, it would be the mirror image of what CIVT is, the same programming with the exception of local. The local would be different.
3588 Effectively, you would then be supporting the local programming in that market with the local revenues, and not loading in the whole other infrastructure, which is very different from what everyone else here is applying for. They are applying for a Victoria service that is also seen in Vancouver and that means you have to then start inquiring, national rights to other kinds of programming, foreign and Canadian and so forth, not unlike out situation between Toronto and Kitchener where Toronto and Kitchener, as you know, are exactly the same schedules with the exception of the local programming to the point where the local cable carrier, Shaw and Rogers in the area, applied to you and got permission to take Kitchener off of the Toronto system because it's really a sphere of influence kind of model as opposed to a totally twin stick kind of model.
3589 That would be our perspective on it and our undertaking stands. If at the end of this and if at the end of what we don't talk about on April 25 no one comes forward, we will then come forward with a mirror image kind of model, not unlike Kitchener and Toronto.
3590 CHAIRPERSON OF THE COMMISSION: But my question is why in the last three years haven't you come forward?
3591 MR. FECAN: We have heard so much that there was so many people coming forward and we didn't have an opportunity to read their applications until very recently, so based on the direction you put in our decision, we assumed that people would pick up on the hint and file something similar.
3592 Clearly, you know, anybody who has a station in Vancouver it would seem to us would be in a position to offer such a mirror image station in Victoria, the same except for the local programming on that particular station and then, of course, that station wouldn't need to be in the Vancouver market.
3593 CHAIRPERSON OF THE COMMISSION: I don't have any other questions.
3594 Colleagues? Commissioner Grauer.
3595 COMMISSIONER GRAUER: I wonder if you could just help me a bit more with the KVOS repatriation. I know you repatriated programming and revenues as well. Is that what's happened here?
3596 MR. FECAN: We have repatriated some programming, but not very much.
3597 COMMISSIONER GRAUER: Mostly revenue.
3598 MR. FECAN: Mostly revenue because mostly when we didn't have a station in this market, we off-sold whatever national rights we had, largely to CHAN or CHEK. As we got a station in the market, many of those programs that we off-sold, not all because some are part of the existing CTV network, but the ones that weren't, 60 hours a week approximately moved to VTV.
3599 COMMISSIONER GRAUER: So it has been primarily revenues. Can you tell me the breakdown between national and local?
3600 MR. FESTINGER: Sixty per cent national, 40 per cent local for VTV generally.
3601 COMMISSIONER GRAUER: Yes, but what about the KVOS revenues?
3602 MR. FESTINGER: I have no idea and really wouldn't know how to track that. We would have to know a whole lot more about what KVOS's revenue is, actually where they derived from, and we have never done that study.
3603 COMMISSIONER GRAUER: But of what you repatriated. You don't know. Okay
3604 MR. FESTINGER: We don't know.
3605 COMMISSIONER GRAUER: Okay. thanks.
3606 CHAIRPERSON OF THE COMMISSION: I forgot to ask you a question. Your position for any newcomer, does that apply as well for the Trinity project?
3607 MR. FECAN: Obviously, the theory stands, but in terms of the degree of impact, it has the least impact on our situation. We live in Toronto with the model that some would say that Trinity will morph into and even that model hasn't really had much of an impact for us in Toronto.
--- Fire alarm / Alarme de feu
3608 CHAIRPERSON OF THE COMMISSION: We will break for five minutes.
--- Recess at 1650 / Suspension à 1650
--- Upon resuming at 1700 / Reprise à 1700
3609 CHAIRPERSON OF THE COMMISSION: Commissioner Cram has additional questions.
3610 COMMISSIONER CRAM: I just wanted to get these KVOS numbers. You were talking about $26 million, $21 million. Are those Canadian dollars?
3611 MR. FESTINGER: Yes. Those are Canadian dollars.
3612 COMMISSIONER CRAM: Are those grossed up Canadian dollars, grossed up of tax or net of tax?
3613 MR. FESTINGER: I am going to have to look to Mr. Goldstein because he was the original supplier of those numbers.
3614 CHAIRPERSON OF THE COMMISSION: He is there.
3615 MR. GOLDSTEIN: The estimates for KVOS all are not including the grossed up numbers. It's trying to treat it the same way you would treat a station.
3616 COMMISSIONER CRAM: So they are net Canadian dollars.
3617 MR. GOLDSTEIN: Net Canadian dollars.
3618 COMMISSIONER CRAM: Okay. Thank you.
3619 CHAIRPERSON OF THE COMMISSION: Madam Assheton-Smith has a question for you. I will get back to you.
3620 MS ASSHETON-SMITH: I just wanted to confirm that CVIT has already agreed that it will file in confidence by March 10 its actual revenues from September 1, 1999, to February 29, 2000.
3621 MR. FESTINGER: Yes, we agree.
3622 CHAIRPERSON OF THE COMMISSION: And we wanted to add something for Victoria.
3623 MR. FECAN: Yes. I was just given the opportunity to re-read the decision. What we said at the time was we wouldn't oppose or come forward ourselves. I think you will find somewhere in your files a letter from us on August 9, 1999, not that long ago, reiterating our commitment, but saying because we understood that there are people that are applying for a Victoria licence in this particular round that we step back and see what happens and we are not opposing any of those particular ones, if it's a Vancouver Island-Victoria only service. That would be in your files dated August 9, 1999.
3624 If you would like, we could just supply it for you, reiterating the commitment as well.
3625 COMMISSIONER WYLIE: Since when Mr. Fecan are you afraid of a competitive hearing? It served you quite well the last time around.
3626 MR. FECAN: I didn't say I was afraid of a competitive hearing.
3627 COMMISSIONER WYLIE: Not, but if that's your reason for not applying, isn't that what it means?
3628 MR. FECAN: No. I think we are also open to the idea that there are other voices that may make sense and we don't necessarily want to apply for every single licence that becomes available.
3629 CHAIRPERSON OF THE COMMISSION: Thank you very much.
3630 MR. FECAN: Thank you.
3631 MS VOGEL: For the record, Madam Chairperson, the intervenor No. 4, Asian Television Network International Limited, will not appear before us at the hearing.
3632 I will ask Intervenor No. 5, Kumar Sikka and Nalini Bhui to come forward, please.
3633 CHAIRPERSON OF THE COMMISSION: Not here.
3634 MS VOGEL: Again for the record, if I call intervenors and they don't respond, at the end of the day I will recall the intervenors just in case they were out of the room at the time of the first call.
3635 At this point I would like to invite intervenor No. 6, IT Productions Limited, to come forward.
3636 CHAIRPERSON OF THE COMMISSION: Welcome. Please start.
INTERVENTION / INTERVENTION
3637 MS DATT: Thank you, Madam Chair, Commissioners, ladies and gentlemen. Bonjour.
3638 My name is Shusma Datt. I am a broadcaster by profession. I started my career in broadcasting 35 years ago in London, England, with the British Broadcasting Corporation. I moved to Canada in 1972 and have worked in radio and television since then.
3639 I am one of the founding members of the Multicultural Channel of Vancouver. This channel was licensed in 1979 as a special programming service, then programming for German, Chinese, Italian, South Asian, Japanese, Scandinavian and Greek communities.
3640 In my capacity as a producer and on air host, I am an advocate of diverse yet cohesive programming, programming that brings an entire community together, not subdivide them. I speak six languages. I have programmed in five of these languages on the multicultural channel. On my radio station RimJhim, which was licensed in 1987, we broadcast in these five languages: Hindi, Punjabi, Urdu, Gujarati and English.
3641 While preparing for this presentation, I came across an old archival file of the multicultural channel. Let me take you down memory land tell you what "ethnic programming" was, is and is being proposed now.
3642 Out of the 20 years of multicultural programming, during the first 13 years we were not allowed to show any commercial messages. We could acknowledge our sponsors by only printing their name, address and type of business they ran. The money we charged for this message paid for the programming that we purchased or produced locally.
3643 In 1992 we were allowed to show the inside and outside of a business and also print the telephone number of the sponsor.
3644 Despite all these restrictions, I have produced numerous balanced programs which concerned the community, issues from sex selection, violence against women, children and seniors, generation gap, drug and alcohol addiction, HIV-AIDS awareness, to light hearted community magazine shows like "What's New in Vancouver" or a local music program or fundraising for the Children's Hospital, United Way or the Cancer Society.
3645 Actually, on Sunday I had the pleasure of interview our new Premier designate, Ujjal Dosanjh in Punjabi. Years ago Mr. Dosanjh was a regular contributor to my program.
3646 It is because of producers like me who have a track record that this community was able to hear from the new Premier to be on the same day as the other residents of B.C. and in a language that they can understand.
3647 Through news, documentaries, movies, music videos, fashion programs and even what's new in bridal makeup, I keep the South Asian community abreast of the changes in their countries of origin, all this without the help of corporate money.
3648 I have purchased world class programming from England, India and Pakistan. In fact, CFMT buys Indian news from the same supplier as I do.
3649 It is my hard work that Rogers wants to benefit from. For Rogers, the inclusion of ethnic programming within or along with mainstream media is just a means of keeping third langauge communities happy. How these programs were brought about isn't their headache.
3650 With local segments and stories as an integral part of our program, the shows started getting recognition. We start exchanging programs with Calgary, Montreal and Los Angeles. But today I am eased out of the picture because the market is finally read to support South Asian programming. Now as commercial ethnic programming is a viable proposition, Rogers is ready to mine it.
3651 I would now like to examine CFMT's presentation, proposed programming and schedule of LMTV.
3652 Point one, LMTV states it will meet the broadly based and deep demand in this market for increased access to multilingual television programming.
3653 According to their schedule, Madam Chair, Monday to Friday from 6:00 a.m. to midnight, out of the total 18 hours per day, four hours or maybe five if we count "Asian Pacific Series - ethnic import" are multilingual. The rest, 13 hours, is English language programming.
3654 On Saturday and Sunday ten to 14 hours is language programming. So, out of 126 hours per week, 73 hours is English language programming and 53 hours is language programming. I guess the ratio is 60-40. If this is a multilingual licence application, then why are most of the programs in English? This cannot be called a multilingual service. By the best stretch, it can be an American station with 40 per cent third language programming.
3655 In their presentation, while expressing a need for language programming, LFMT states, and I quote:
"We live without real access to one of the most commonly used media in this country, Canadian television programming in our native languages."
3656 I would say, Madam Chair, one hour of original Punjabi language programming and one hour of original Hindi language programming for the South Asian community hardly constitutes real access.
3657 Further, LMTV goes on to state that they understand the Vancouver ethnocultural community's programming needs, that they are the best people to program for the South Asian community.
3658 I almost fell off my chair when I saw a two hour block scheduled for South Asian movies. Anyone who knows the South Asian movie scene or the Bollywood scene would know that Indian films are a minimum of two and a half hours to three hours long. Maybe LFMT will chop the film and show one half on Saturday at 8:00 p.m. and the second half on Sunday at 1:00 p.m or maybe Rogers is going to produce South Asian movies which will fit the two hour movie block.
3659 Madam Chair, not understanding the logistic of South Asian movies is perhaps a Rogers problem, even though on the Rogers Multicultural Channel from 1979 to 1994, there was "Monday evening at the movies", a three hour movie block every week where South Asian movies were aired by IT Productions.
3660 When Rogers went into their "dynamic" schedule in 1998, they completely ignored their own channel's previous lineup and allotted two and a half hours for South Asian movies. It took me months before a three and half hour block was allotted to enable me to show Hindi films that i had already purchased.
3661 I would like to stress that no matter how hard Rogers tries, Bollywood will not make 90 minute movies so that Rogers can fit them in their two hour movie slot.
3662 The second point, LMTV will make an immense social contribution by providing programming for ethnic audiences that is for them and which gives them a voice in the mainstream of the Canadian broadcasting system.
3663 Yesterday one of the presenters of LMTV mentioned that the new station will station provide the "ethnics" an avenue to watch programming which gives them a voice. The presenter of LMTV was duly impressed by a program on CFMT in Toronto regarding AIDS and concluded that such a program is not available in B.C.
3664 Madam Chair, the first AIDS related program was aired on Rogers Multicultural Channel by IT Productions way back in the mid nineties with subsequent forums and even a play in 1996 and 1997. Or maybe programming on the Rogers multicultural Channel is not worth mentioning.
3665 I could only conclude that the presenter does not speak Punjabi or Hindi and, therefore, could not understand such programs which were shown on Rogers Multicultural Channel or Rogers Multicultural Channel and on my own radio station RimJhim community related topics no matter how sensitive or controversial they are. Madam Chair, my slashed tires after these shows and a bullet through my office window is a witness to that.
3666 Point number three. LMTV will significantly increase the choice and diversity of local programming in the Vancouver television market and will make a substantial contribution to the development of local and regional Canadian creative talent.
3667 I was rather confused by this last goal of LMTV. To me diversity means a professional producer who can produce programming in all the languages of a diverse community. My community is diverse. Hindi, Punjabi, Urdu, Gujarati and English are the main languages spoken here among the main languages spoken here amongst the South Asian community. Bengali and Tamil speakers are also increasing.
3668 For over 20 years I have produced diverse programming for a diverse community and, may I add, very successfully and without bias. Through these programs, families got together to watch educational, entertaining local and purchased programs. It was through these programs that a recognition drive for outstanding performance at school was started in a partnership with Church's Chicken or a youth forum which crossed all cultural boundaries aired on a regular basis in IT Production's lineup of programs.
3669 To me local means local. It means from Vancouver, it means lower mainland, it means British Columbia. I was confused, as I said earlier, when the LMTV presenter stated that the Toronto news is local news because it interests us. Well, by that token programs produced in India could be called local because we have a great interest in them, or for that matter, Indians living in America or Indians living in England could be local because that too is of great interest to us.
3670 Madam Chair, the redefinition of "local" has to be re-examined. I for one will be curious to know what it really means.
3671 I am also a little unclear about the distribution or allocation of the documentary fund, whether the $4.5 million will be spent in B.C. Would "ethnic" documentary makers get a pie of this? Who would oversee the disbursement of the funds? How knowledgeable is that person who is the fund manager and what programming interests and talents are available in the ethnic communities? Is that known to that person?
3672 I also have a problem with a corporate giant of the cable industry getting into broadcasting and hence controlling what we see, when we see, where we see and why we see it.
3673 With their huge resources, they have been able to recruit many newfound supporters in the community. They are able to bring in many of them from around the country to Vancouver. In some cases, I understand that some community organization staff are also under contract to Rogers and have used their positions of trust to convince the community that LMTV will provide them with many hours of ethnic programming.
3674 Yesterday you must have seen some senior citizens sitting here who were under the impression that LMTV is going to present a substantial number of hours of programming for the South Asian community in their language. They were not aware that Punjabi programming is one hour original hour and one hour repeat.
3675 In their reply to my letter, LMTV states that they have been advised by Rogers Multicultural Channel that it has implemented a number of changes to their service to update its look and programming content and to place greater emphasis on community access.
3676 Please note that Rogers Multicultural Channel is a special programming channel and not a cable community access channel. They claim that this approach provides an initial point of entry within the Canadian broadcasting system of a developing base of South Asian producers in Vancouver. Madam Chair, I have been entering for the past 23 years. I wonder when will I finally arrive.
3677 Since 1998, Rogers has deliberately eased me off the multicultural channel, rejecting most of the programs that I have proposed, changed the timing of the shows, accepted the programs that I had proposed and they had rejected. This has disrupted my program schedule and made it hard for me to build a consistent audience for my programming.
3678 They have reduced my shows from ten and a half hours per week to one and a half hours per week. I shudder to think after this intervention, I wouldn't be surprised if it was further reduced to zero.
3679 Madam Chair, 23 years of programming is a long time. I meet young couples in their twenties who bring their children to our studios and tell me that they have been watching me since they were little themselves. I have been honoured by my community, Canadian and South Asian, for my service.
3680 I was given all of British Columbia in 1992. That humbled me. My only regret is that the fruit of my hard work is going to be picked by Rogers.
3681 Madam Chair, it is for all these reasons that it is so important for me to be in front of you, asking you to deny CFMT a licence to operate LMTV.
3682 Thank you.
3683 CHAIRPERSON OF THE COMMISSION: Thank you very much.
3684 I would ask Mrs. Cram to address our questions, please.
3685 COMMISSIONER CRAM: Namastè.
3686 MS DATT: Namastè to you too.
3687 COMMISSIONER CRAM: I have heard a lot of talking today about -- yesterday and today -- about what the Vancouver market needs in terms of ethnic programming. To me there's a couple of issues.
3688 There is the issue of the new arriving immigrant who may speak only Hindi, Punjabi, Gujarati, you know, Bundali. Then there is the issue of the second generation, third generation, who may or may not want to retain his language, but may want to retain his culture.
3689 MS DATT: Yes.
3690 COMMISSIONER CRAM: Where do you think the Vancouver market is? Is it in both places?
3691 MS DATT: Commissioner, yes, they are in both places. There is a large number of South Asians or immigrants of other language groups as well who rely on language programming.
3692 The second and third generation kids, people who have been here for three generations, yes, would like to retain the cultural heritage, but how do you watch these programs?
3693 If the program is music based, they would listen to a radio station more often or watch music videos because that makes sense. Music has no language. But a serious drama or a program in which they are talking about themselves might interest them, but a serious drama would not. They would not be watching that.
3694 For second and third generations, English programming is essential, but if you look at them, they will be watching more of the Canadian stations than watching the multicultural channel.
3695 COMMISSIONER CRAM: I am reminded of how the Ukrainian culture guarded their culture in English. They abandoned the issue of their language. They knew they had to do that, they couldn't retain the language but they could retain the culture through English.
3696 Do you think that that's the type of programming that the English programming on Rogers is directed at, that type of second, third generation, or would you know?
3697 MS DATT: Well, I think Rogers is trying to direct it or think that there is that market directed to them, but the market isn't there. It's not that big a market, not a market to constitute out of 11.5 hours, 7.5 in English language, and out of the rest of the hours that they are saying, there is only one hour in Punjabi which is repeated, one hour repeated, and then two hours of music.
3698 I don't think that 7.5 hours is going to give them the viewership that they are looking at or looking for.
3699 COMMISSIONER CRAM: Commissioner Grauer tried to raise this before. Do you think there is a difference between Toronto and Vancouver in terms of the relative size of first generation and second and third generation? My own personal view is there would be more first generation immigrants in the west, in the west, because of the various immigration laws that existed and more second-third generation in Toronto.
3700 MS DATT: I think it's the other way around.
3701 COMMISSIONER CRAM: Is it?
3702 MS DATT: There are more second and third generation South Asians here and more first generation probably in Toronto. There are -- but immigration is more in British Columbia. I mean the South Asian population is large in Toronto as well, but in the last 20 years, the majority of the population has been in British Columbia. People who come from India come from villages of Punjab.
3703 COMMISSIONER CRAM: Punjabi villages. Yes.
3704 MS DATT: Yes. So the majority of the people who have come here -- in the seventies, I know when I came the East Africans came here.
3705 COMMISSIONER CRAM: The Ugandans, yes.
3706 MS DATT: The Ugandans came here and then in the early eighties the Fijian influx was here, but the Punjabi influx has been here for a long time and it continues to happen through family immigration.
3707 COMMISSIONER CRAM: Through the sponsorship program.
3708 MS DATT: The sponsorship program, and that will continue happening because of the makeup of the community, because of arranged marriages, because of, you know, people wanting to bring a bride for their daughter or their son from India.
3709 COMMISSIONER CRAM: Yes. So there is a continuing resupply of the first generation.
3710 MS DATT: Always.
3711 COMMISSIONER CRAM: That would need that original language program.
3712 MS DATT: Always. I'm sure the Commission is aware of this. There are a lot of satellite channels that are available right now.
3713 COMMISSIONER CRAM: Yes. All right.
3714 MS DATT: These are from America.
3715 COMMISSIONER: I see.
3716 MS DATT: These are programming coming directly from India, ZTV, RBFU -- there's another one, TV Asia. Because of our position where we are and being very near to the border, maybe we can access those channels and there are a lot of households who have gone on these channels since 1998 when the multicultural channel went into that dynamic look with spread-out programming all over the place, so nobody has time from the morning at 9:00 to 11:00 at night to watch a half hour at nine, half an hour at two o'clock and half an hour at 11:30 at night. People have gone to get block programming that they would like to watch.
3717 I would also like to say that when you sit down and watch an English language programming, you would like -- I mean people usually go and put out for themselves. I want to watch in front of the TV set today and watch all my favourite programs. I know that Thursday night is the favourite night for everyone because they watch "Friends" and then "Frasier" and the "ER". There are so many channels to choose from.
3718 COMMISSIONER CRAM: Not to mention the good Canadian programming.
3719 MS DATT: Not to mention the good Canadian programming. So we hop from channel to channel to line up our programming. When the Rogers multicultural channel divided all the programming into half an hour block, where do you hop to? You go half an hour and then you wait for two hours to watch the next South Asian programming. Where do you hop to?
3720 COMMISSIONER CRAM: I don't know. So let's get to the satellites then. Is that what happens?
3721 MS DATT: So that's what people decided to do. There are many people going for the satellite channel and I think many of them are also trying to go for ATN.
3722 COMMISSIONER CRAM: In terms of first generation, second and third generation, would it be about equal in your perception of South Asians in Vancouver, in number?
3723 MS DATT: I haven't done the demographics. When we did it in 1978 -- 1998 for my radio station, we did a survey. We found that 50 per cent of the population was people who spoke Hindi or Punjabi as their first language and there were children who spoke English and also understood a little bit of the language and were more interested in the music programming that was being offered by us at that time.
3724 COMMISSIONER CRAM: And you say the trends are, because our numbers on Hindi, Punjabi speakers are five to one in the Vancouver EM, and you say that there are now more Punjabi than Hindi immigration.
3725 MS DATT: I think that Hindi speaking are also coming, a large influx of people from Fiji and people from England also come here.
3726 COMMISSIONER CRAM: Yes.
3727 MS DATT: The population ratio when I came in 1972 was close to 90 per cent Punjabi speaking people. I wouldn't be surprised if it's at 70-30 now. The population is a good 250,000 to 300,000 in the lower mainland.
3728 COMMISSIONER CRAM: So if you were a Rogers programmer, what would you do on the South Asian front? You don't want to give them free advice.
3729 MS DATT: No. I have always given free advice. Actually the commercials that they run in between the Rogers programming, it was my idea eight years ago. I told them this is your channel, you should promote your own services. So, yes, I gave a lot of free advice.
3730 Yes, I would like to see programming that are in block for a particular community. I know that their statement to that was ghettoizing the community and I couldn't understand how it was ghettoizing the community if that was the only channel available for the community to watch. It's not ghettoization. In fact, they get to watch their programming in one particular day.
3731 I would ask them to do more language programming and I would like them to maybe make their movie time a little longer, by one and a half hours, so that they could also have commercials in it because nobody is going to watch a half an hour movie at eight o'clock at night. That is if they are thinking of cutting the movie in two halves.
3732 COMMISSIONER CRAM: Thank you.
3733 CHAIRPERSON OF THE COMMISSION: Commissioner Grauer.
3734 COMMISSIONER GRAUER: I was intrigued by your suggestion that a lot of the -- I don't know if it's just South Asian or the ethnic communities, immigrant communities are buying dishes and tuning in to the foreign services. Is this something that is quite prevalent in your experience? I guess what I'm really trying to get at, is there such an appetite for language programming that is not being met that people are doing that?
3735 MS DATT: Yes. Yes, there is. You know, India makes over a thousand films a year. The minute a film is released in India, it is released here in Vancouver. There are eight cinema halls in the lower mainland, eight cinema halls that show Indian films daily. That speaks for the need. Otherwise, why would people go and watch a Hindi people in the theatre if the need wasn't there. The need is there.
3736 Yes, I do realize that programming for the second and third generation needs to be there, but what sort of programming would that be? Are they different from the Canadian kids who are here? How different are they? How different are the second and third generation, South Asian kids from Canadian kids of their own age? Why would they be watching an ethnic channel and not a Canadian channel?
3737 COMMISSIONER GRAUER: I think what we have had, if you have been here, is a number of different proposals as to how to meet the needs of the various generations and ethnic groups. We have a number of different proposals in front of us with respect to that.
3738 MS DATT: I understand.
3739 COMMISSIONER GRAUER: One other quick question. Do you sell any of your -- do you sell any programming to ATN at all?
3740 MS DATT: No. Shan and I haven't gotten into that sort of arrangement as yet. It's very difficult for him to run his station the way he is. I would love to help him if I could.
3741 COMMISSIONER GRAUER: I just was wondering about any programming you might produce.
3742 Thank you.
3743 MS DATT: Thank you.
3744 CHAIRPERSON OF THE COMMISSION: Thank you very much for taking the time to come here to meet with us.
3745 MS DATT: Thank you very much.
3746 CHAIRPERSON OF THE COMMISSION: Thank you.
3747 MS VOGEL: Our next intervenor this afternoon is Fairchild Television Limited. Could you come forward, please.
3748 CHAIRPERSON OF THE COMMISSION: Good afternoon, and welcome.
INTERVENTION / INTERVENTION
3749 MR. CHAN: Good afternoon, Madam Chair, Members of the Commission. My name is Joe Chan and I am President of Fairchild Television.
3750 We appreciate the opportunity to appear and discuss our concerns regarding some of the applications before you. In particular, Fairchild opposes the application by Rogers for LMTV, a multicultural station serving Vancouver and Victoria, as well as the application by CHUM for television service with an ethnic programming component serving Vancouver.
3751 Licensing either of these stations as proposed would have a profound economic impact on Fairchild's two television services, television and Fairchild Television, and would directly affect our ability to continue serving our audiences.
3752 Our opposition is based on our concern that Vancouver's Chinese language advertising market is saturated and that another service with programming directed to this community cannot be introduced without an adverse impact on existing services.
3753 In addition, we believe that Vancouver's Chinese, Korean and Vietnamese communities are already well served and have no need for additional programming. However, should applicants be prepared to commit to a condition of licence prohibiting the inclusion of Cantonese, Mandarin, Korean and Vietnamese language programming on their services, Fairchild will withdraw its opposition.
3754 Fairchild Television is a national Chinese language ethnic specialty service. The majority of this programming is in Cantonese with limited service in Mandarin. In Vancouver, Fairchild Television has approximately 25,000 subscribers and derives over 50 per cent of its total advertising revenues from the Vancouver market.
3755 TalentVision, our ethnic specialty service serving British Columbia, provides programming primarily in Mandarin, with additional programming in Korean and Vietnamese. It has 13,600 subscribers, almost all of them living in the Greater Vancouver area and this market is critical to its advertising base.
3756 TalentVision has struggled financially since it was acquired by Fairchild, surviving largely due to the ongoing support provided by Fairchild Television. Although its new focus is on predominantly Mandarin programming, it has been a positive move. Its financial position continues to be challenging.
3757 Fairchild is proud of the contribution made by both TalentVision and Fairchild Television through the Vancouver and Victoria communities and the Canadian broadcasting system. Each service devotes 29 per cent of its total revenues to Canadian programming expenditures and approximately 30 per cent of its schedule to Canadian content. Moreover, each undertaking provides strong local service to Vancouver.
3758 TalentVision is intensely local with over ten hours weekly devoted to programming created in and focused on these communities. Each week TalentVision broadcasts seven hours of local news, 1.5 hours of current affairs and two hours of other Canadian programming, all original Vancouver productions.
3759 These shows including "Living Calendar", a program which sees new Mandarin speaking immigrants in adapting to live in Vancouver and British Columbia. Another program, "Business in Vancouver", an up to date minute look at the city's business community.
3760 Fairchild Television has a comparable commitment to Vancouver and Victoria news and information programming with over 12 hours of original Vancouver programming each week. Yet, our commitment extends beyond the significant hours of programming.
3761 We are extremely proud of the quality of our Canadian productions on both services for which we have won a number of broadcasting and generalism awards and which we increasingly export abroad.
3762 In addition, we are gratified by the response to our Canadian programming by viewers. In fall 1998, Fairchild Television delivered 557,000 hours of tuning or 33 per cent to Canadian programs, significantly more than CFMT's 411,000 hours or 7 per cent for the same period.
3763 Although the applicants in the proceeding paint the Vancouver marketplace with a rosy brush, in reality the economy of this region is not as robust as they suggest. A slowdown has been particularly apparent in the Chinese advertising market.
3764 Firstly, the impact from the Asian flu has yet to be recovered. Secondly, immigration patterns have changed and today the majority of new Chinese residents come from mainland China rather than Hong Kong. These immigrants have a very different economic profile from that of the Hong Kong Chinese.
3765 The change in the immigration pattern has negatively impacted the retail economy in the Vancouver Chinese market and we expect this immigration trend to continue.
3766 Fairchild is acutely aware of the challenging dynamics of the Chinese advertising market. Indeed, the limitations of this marketplace have made the common ownership of TalentVision and Fairchild Television a necessity, as the Commission acknowledged when we acquired the original service in 1993. Our experience tells us that the Vancouver Chinese advertising market has little room for growth. On a per capita basis, it already exceeds that of Toronto.
3767 Given the challenges of operating two services in this market, we fail to see how a third could be supported without a significant adverse effect on our ability to continue delivering high quality local programming.
3768 The CHUM applications do not clearly identify the advertising revenues to be derived from its ethnic programming. However, a daily Chinese language prime time newscast could attract considerable Chinese language advertising from our service.
3769 In contrast, LMTV projects substantial revenues from third language programming, starting at $2.6 million in the first year and rising to over $5 million in the final year of the term. Despite these considerable expectations, LMTV states that the introduction of this new service will have no adverse impact on existing ethnic specialty services. In our view, this is highly unlikely.
3770 We believe that approval of the LMTV application could siphon off $1.5 million in revenues from TalentVision and Fairchild Television in the first year alone.
3771 As we have already stated, available Chinese language advertising dollars are limited, yet the LMTV service proposes to serve only the Chinese and South Asian communities in ANITE. As a result, almost all of these third language revenues can be expected to come from these two communities.
3772 LMTV further claims that it will obtain virtually all of its third language advertising revenues from growing the size of the national ethnic advertising pot. In our view, deriving this magnitude of advertising revenue from new money is not plausible. The total Vancouver Chinese advertising market is very close to that of Toronto already. Despite the smaller population base, per capita advertising spending is greater and the percentage of spending on television is almost identical.
3773 We believe these indicators reveal that further growth in this market is highly unlikely, particularly in light of recent immigration trends. Indeed, 16 of the 18 large national advertisers identified in the Media Age Study filed by LMTV currently advertise on Fairchild Television.
3774 The migration of spending from Fairchild Television to LMTV by even a few of these accounts would have a serious financial impact on our services. Furthermore, we believe it is critical to put this application in context. Licensing LMTV in Vancouver in conjunction with CFMT in Toronto would give Rogers access to well over 75 per cent of Chinese viewers through creating a de facto national service. As a result, the ability of Rogers to siphon national revenue from our services would be considerable.
3775 We also want to emphasize that while some ethnic groups in Vancouver and Victoria may be underserved by television, the Chinese community is definitely not among them. Each week there are 247 hours of Chinese television programming and 264 hours of programming on radio. There are also four Chinese language daily newspapers and several magazines directed to the Chinese community.
3776 We fail to see how the 3.5 hours per week of original Vancouver programming proposed by LMTV will add any meaningful diversity to the market. LMTV notes that its survey demonstrates the demand for the proposed service. With respect, this is not surprising that the majority of people said they would be interested in watching additional free programming.
3777 Fairchild believes that actual support for the introduction of another station would be quite different if viewers understood it would result in an overall decline in the level of Chinese language service. Moreover, we looked at the Environics Research filed by LMTV which indicates that 69 per cent of households are satisfied with the existing Chinese programming. In our view, these results fail to reveal any new real demand for additional Chinese programming.
3778 Finally, Fairchild continues to have concerns regarding the common ownership by Rogers of a conventional ethnic television station and a dominant cable system in the market. We believe their situation may create incentives to engage in discriminatory practices over issues such as channel placement or the terms of carriage which could negatively impact TalentVision and Fairchild.
3779 Needless to say, it is not easy for us to intervene against Rogers while the cooperation is so central to our business. However, we believe the potential threat from additional Chinese programming in this market is sufficiently important to raise these matters before the Commission.
3780 In closing, Fairchild submits that the Chinese, Korean and Vietnamese communities are already well served and that no real demand for additional programming has been established. Moreover, our experience reveals that the Vancouver Chinese advertising market is limited and that the addition of new programming directed to these communities would negatively impact TalentVision and Fairchild Television and their continued ability to produce high quality Canadian productions.
3781 Fairchild believes that it is not in the best interests of the Canadian broadcasting system to award a licence to either of these applicants unless they are willing to accept a condition of licence prohibiting the inclusion of Cantonese, Mandarin, Korean and Vietnamese language programming in their schedules.
3782 We thank you for your attention and we will be pleased to answer any questions you may have.
3783 CHAIRPERSON OF THE COMMISSION: Thank you very much. Mrs. Wylie will be asking the questions.
3784 COMMISSIONER WYLIE: Good evening, Mr. Chan.
3785 MR. CHAN: Good evening.
3786 COMMISSIONER WYLIE: The combination of your written intervention and your oral presentation today makes your case quite clear. Of course, life is not that simple for us.
3787 Two of the issues that are brought before us that maybe you can comment on and help us with would be what about the argument that an over the air channel supported by the main language groups allows then some subsidies along with, of course, English language foreign programming, some subsidies to smaller groups who don't have access on your services? That would be an issue we have to worry about, perhaps not you.
3788 The second one is that the proposal is for an over the air station and your services are subscriber -- require a subscriber fee. I would like you to comment on the first issue, how should we weigh in the balance this ability claimed by Rogers to then offer service to groups to ethnic groups that don't have any and are not served by either of your services.
3789 MR. CHAN: Okay. I will try to answer this question. I fully understand and appreciate the rules of the game, the same token as what we are doing with TalentVision, which is a multicultural station. We choose the Chinese langauge programming as the main language whereby we are actually subsidizing the Korean and the Vietnamese programming.
3790 We well appreciate this rule, but then if you look at, you know -- if Rogers, if LMTV, choose, you know, to have Chinese programming and South Asian programming to subsidize the other programming, but the Commission might have to weigh against the negative impact the choosing of Chinese language with LMTV would have on the existing pay service like Fairchild. I think this is one thing the Commission may perhaps to weigh on this as well.
3791 COMMISSIONER WYLIE: With regard to local programming, is there an -- I'm not sure I understood from your comments whether all the local programming was on TalentVision or whether some is on Fairchild service.
3792 MR. CHAN: Okay. Just let me quote about TalentVision which is a local service, we are doing ten hours, slightly over ten hours. All the ten hours are local, local, local programming of which about 80 per cent of them are news and current affairs programs.
3793 With Fairchild, we are doing about 12 hours of local, local programming. One thing I would like to comment on this. Although Fairchild is the national specialty service, we do consider the both markets, Toronto and Vancouver, the importance of these two markets where actually most of the Chinese population are resided. That's the reason why we have installed two production studios, one in Toronto and one in Vancouver of which we split the production of Canadian content sort of evenly. In other words, we are doing about a 50-50 split between Toronto and Vancouver.
3794 Vancouver and Toronto with Fairchild alone totally we provide about 25 hours of original Canadian programming and in Vancouver itself, we produce about 12 hours of local Vancouver programming.
3795 COMMISSIONER WYLIE: How much of that programming is produce in house?
3796 MR. CHAN: All of them are produced in house. This is a good question because for ethnic programming, it's difficult or it's almost impossible that we could acquire it from other sources in Vancouver, so we are the only, so to speak -- maybe added CFMT in Toronto -- we are the only TV service which produces Chinese language Canadian programming, so that is why 100 per cent of the programs are produced in house.
3797 COMMISSIONER WYLIE: As you know, the applicant has proposed quite an extensive program of documentary production. Are you suggesting that in the Chinese area there isn't an availability of independent producers to produce their third language programming, for example?
3798 MR. CHAN: Maybe. You know, there are independent producers out there, but over my experience, over ten years with KEFA and Fairchild, there are Chinese producers out there, but the problem they have in the past is they do not find a market in producing Chinese language documentaries. If they want to sell, the only place that they could sell to us or with CFMT. That is why they have a problem in justifying the production costs.
3799 Sometimes we find it even cheaper to produce in house and we do, you know, produce quality documentaries in house. One documentary we produce and we are still running it today, it's called "Prime Stories". We won two out of the three Jeff Webson awards in the last five years. The same series of documentaries we exported to Asian countries.
3800 COMMISSIONER WYLIE: And it's not your impression that if fund money was provided for this type of production that maybe independent producers of programming in third language could be found if they were supported by that?
3801 MR. CHAN: Yes, but they would still have to find a market to market these programs.
3802 COMMISSIONER WYLIE: Now the second question, the distribution system and the fact that this would be free television. I understood you to say -- I don't have the exact number, but around 25,000 subscribers --
3803 MR. CHAN: Yes.
3804 COMMISSIONER WYLIE: In the Vancouver area or overall?
3805 MR. CHAN: Just the Vancouver area.
3806 COMMISSIONER WYLIE: And 13,000 --
3807 MR. CHAN: With TalentVision.
3808 COMMISSIONER WYLIE: -- subs to TalentVision. How is Fairchild distributed in Vancouver?
3809 MR. CHAN: Okay. The Vancouver signal, it's mainly through cable. Of course, we are also on --
3810 COMMISSIONER WYLIE: On what tier and at what cost to both cases?
3811 MR. CHAN: Okay. Both are on premium TV. We are not on a stand alone basis in the Vancouver market.
3812 COMMISSIONER WYLIE: And how much does it cost a subscriber?
3813 MR. CHAN: For Fairchild alone, it's $19.95 per month. For TalentVision stand alone basis, it's $9.95.
3814 COMMISSIONER WYLIE: Of the 25,000 and 13,000, do you have people who take both services?
3815 MR. CHAN: Yes.
3816 COMMISSIONER WYLIE: How many?
3817 MR. CHAN: That's about 7,000 are taking both.
3818 COMMISSIONER WYLIE: So that's $30 a month over and above.
3819 MR. CHAN: Yes.
3820 COMMISSIONER WYLIE: Dare I ask what the proportion of that money in general terms comes back to Fairchild?
3821 MR. CHAN: It's about 60 per cent.
3822 COMMISSIONER WYLIE: Sixty per cent and 40 per cent flows to the cable company.
3823 MR. CHAN: That's correct.
3824 COMMISSIONER WYLIE: Those are all my questions, Madam Chair.
3825 CHAIRPERSON OF THE COMMISSION: Thank you.
3826 Mrs. Cram, yes.
3827 COMMISSIONER CRAM: You also operate in the Toronto market.
3828 MR. CHAN: Yes, we are.
3829 COMMISSIONER CRAM: Is it fair to say that your uptake as a percentage of the total Chinese speaking, Vietnamese, Korean speaking population is lower in Toronto?
3830 MR. CHAN: For TalentVision, it's a regional service, it's only in Vancouver.
3831 COMMISSIONER CRAM: Yes.
3832 MR. CHAN: The national service is Fairchild, which is 100 per cent Chinese.
3833 COMMISSIONER CRAM: It's Cantonese, didn't you say?
3834 MR. CHAN: Cantonese and Mandarin.
3835 COMMISSIONER CRAM: Okay. So the uptake of Fairchild in Toronto as a percentage of the total population, Chinese population in Toronto, is it lower than in Vancouver?
3836 MR. CHAN: So you mean the hours of prime resulting, the subs.
3837 COMMISSIONER CRAM: It's the number of subs over the total number of Chinese people. So you have 25,000 subs from Fairchild.
3838 MR. CHAN: It's only in Vancouver.
3839 COMMISSIONER CRAM: And there's about 360,000 Chinese, if I understand it --
3840 MR. CHAN: In Toronto.
3841 COMMISSIONER CRAM: -- in the Vancouver EM.
3842 MR. CHAN: That's correct.
3843 COMMISSIONER CRAM: And so in Toronto, how many subs do you have out of a total number of Chinese speaking individuals?
3844 MR. CHAN: In the case of Toronto, we operate slightly different because in Toronto, Fairchild in two areas -- in the Rogers area we are in the premium paid mode. At the moment, we have about 5,000 subscribers in the downtown Toronto area whereas with the other cable system like Shaw, which is the Scarborough and Markham and Richmond Hill area, we are carried on the second tier. The reach in that area is much bigger.
3845 COMMISSIONER CRAM: So there is no way that we can compare then as a percentage of the total population.
3846 MR. CHAN: If you just roughly compare the two markets, Toronto has -- once every two years we did, because we are not on BBM, every two years we have a syndicated study, it's called an A.C. Nielsen study on Chinese media, we are able to compare with, you know -- we have been doing this survey for the last four years, you know, with the Toronto and the Vancouver market so that we could compare the kind of penetration with our service.
3847 In Toronto, naturally, because we are on the second tier, we are able to achieve better penetration, but in the case of Vancouver, although you see that we only have 25,000 subscribers and we have about 80,000 householders in Vancouver, but then if you look at the figures, it's interesting. We are reaching about 50 per cent of the Chinese population in Vancouver. That's one thing that, you know, why by subscribers, we are only about 20, 20-some percent, but how come we have 50 per cent penetration?
3848 We estimated there are areas one paying and one not paying subscribers in Vancouver. That makes our service actually reaching 50 per cent of the Chinese population in Vancouver.
3849 COMMISSIONER CRAM: And you are not doing that in Toronto?
3850 MR. CHAN: Doing --
3851 COMMISSIONER CRAM: Reaching --
3852 MR. CHAN: Oh, we are reaching over 50 per cent in Toronto because we are on the second tier.
3853 COMMISSIONER CRAM: Because of the Shaw.
3854 MR. CHAN: Yes.
3855 COMMISSIONER CRAM: Okay. Thank you.
3856 MR. CHAN: Thank you.
3857 CHAIRPERSON OF THE COMMISSION: Thank you.
3858 MS ASSHETON-SMITH: Good afternoon.
3859 MR. CHAN: Good afternoon.
3860 MS ASSHETON-SMITH: You have indicated in your written intervention and again today, I believe, that Fairchild and TalentVision are being transitioned to digital on the Rogers systems in Vancouver.
3861 MR. CHAN: That's correct.
3862 MS ASSHETON-SMITH: Is it still available on analog at the same time though?
3863 MR. CHAN: In the Toronto area, we have a deadline for turning off analog, March 15 I believe, and then in the case we haven't really started with digital yet. I mean they are still working on the Vancouver market for Fairchild.
3864 MS ASSHETON-SMITH: Analog distribution will be ceased in the Toronto market on --
3865 MR. CHAN: March 15.
3866 MS ASSHETON-SMITH: March 15. Did you agree to this with Rogers?
3867 MR. CHAN: Yes. It's not ready yet. They told us March 15. They keep on postponing that. Supposedly it was September last year.
3868 MS ASSHETON-SMITH: In Rogers' response to your written intervention, or CFMT's response, they said that Rogers Cable has advised them that the transition to digital has been highly successful and that the number of subscribers has increased because of digital technology. Can you confirm that that is the case?
3869 MR. CHAN: In the case of Toronto, we didn't see it yet because there is still analog around, so it's difficult to see whether by terminating analog whether that would repatriate some of the illegal subscribers, so not until March, after March 15, we are really not able to assess that the switching is a successful one.
3870 MS ASSHETON-SMITH: Do you expect you might lose some subscribers who won't have the box then as of March 15?
3871 MR. CHAN: As of yesterday, we were just told by our colleagues in Toronto, saying that they are afraid that some of the area in Toronto is not 100 per cent digital ready, so our concern is once the analog has been switched off, some of the subscribers may be, you know, switching off because of that. We do not know yet.
3872 MS ASSHETON-SMITH: Thank you very much. That's all.
3873 CHAIRPERSON OF THE COMMISSION: Thank you very much.
3874 MR. CHAN: Thank you very much.
3875 CHAIRPERSON OF THE COMMISSION: Because I'm sure people are wondering, we will do two more.
3876 MS VOGEL: Our next intervenor this afternoon is the Directors Guild of Canada. I would invite them to come forward, please. Do we have anyone from the Directors Guild of Canada? I will recall them at another time.
3877 Then I would invite the Canadian Film and Television Production Association and the B.C. Producers Branch to come forward, please.
3878 CHAIRPERSON OF THE COMMISSION: I have been lying. We will stop after that intervenor because the next one has asked to be heard first thing in the morning because it requires an installation.
3879 Gee, an all women panel.
3880 MS McDONALD: It's almost as good as the Commission.
3881 CHAIRPERSON OF THE COMMISSION: That's different.
INTERVENTION / INTERVENTION
3883 MS McDONALD: Thank you and thank you for hearing us this evening.
3884 Madam Chair, Members of the Commission, my name is Elizabeth McDonald and I am the President and Chief Executive Officer of the Canadian Film and Television Production Association.
3885 With me today is Julia Keatley. In her volunteer life, Julia is an active Vancouver-based member of the CFTPA Board. She is the immediate Past Chair of the CFTPA B.C. Producers Branch and remains on its executive. She is one of the two CFTPA member of the Board of the Canadian Television Fund.
3886 In her spare time, Julia is also the Executive Producer of the drama series "Cold Squad" that has recently been renewed by CTV for its fourth season. "Cold Squad" is a police drama series based in Vancouver that has proven itself popular with Canadian and foreign audiences.
3887 Julia and I are joined by Sheila Galati, the Director of Operations and Membership of the CFTPA B.C. Producers Branch.
3888 As the Commission knows, the CFTPA is the national association that represents the interests of over 300 member companies. This year marks the tenth anniversary of the association. Our membership is rich and diverse, ranging from large publicly traded companies to single person shops. Members represent all regions of the country and produce documentaries, children's programs, variety, animation, drama, feature film and industrial programs.
3890 MS KEATLEY: In recognition of the importance of British Columbia as a principal North American production centre, the CFTPA national board created the CFTPA.B.C. Producers Branch. The CFTPA's B.C. Branch has over 60 active member companies involved in the development and production of all genres of Canadian film and television programming.
3891 The B.C. film and television industry is unique as it is made up of two distinct communities. One services the activities of U.S. owned productions and the other creates, develops, produces and exhibits Canadian owned film and television programming that tells Canadian stories destined for audiences here and abroad. Today, our remarks support the needs of this latter group.
3892 Recent data released by both the CFTPA and the B.C. Film Commission point to a very vibrant B.C. production community. In fact, we are leading the rest of the country in terms of the growth of our domestic sector. There are a number of reasons for that growth.
3893 The strength and entrepreneurship of the creative community of British Columbia; the opening of new market opportunities through the new licences granted by the CRTC over the past five years such as VTV and the specialty and pay services who have been dedicated in acquiring from the independent sector and, lastly, investment in development in this province has been an important factor that has lead to the creation of programming such as "Cold Squad", "DaVinci's Inquest", "Better than Chocolate", "Magician's House", "Scoop & Doozie" and "Champions of the Wild", to name but a few programs. Unlike some other provinces, British Columbia Film continues to strongly support development and has been instrumental in the growth of the domestic sector here.
3894 By its very nature, production is a cyclical business. It depends on the commitment of public, private, conventional and specialty broadcasters. As the CRTC well knows, broadcasting is an industry that has been experiencing significant change. Today WIC, an important force for western producers, is about to disappear and the CBC is once more struggling with declining resources and is cancelling B.C. based programs such as the recent cancellation of "Nothing too good for a cowboy".
3895 With those realities in mind, the B.C. production community welcomes the applications that you are considering at this public hearing. As we said in our B.C. Branch intervention:
"The potential licensing of new television undertakings in Vancouver or Victoria is a significant event."
3897 MS McDONALD: In a competitive process such as this, the CFTPA does not believe it is appropriate for it to support any single applicant. However, we can contribute constructively by pointing to a few principles which we hope will guide you in your deliberations.
3898 We recognize that there are those who will see us as trying only to promote a single goal, more work for independent producers. This would be too simplistic an observation. It does not recognize the success that Canadian programs are enjoying in the international marketplace or the complexities of the Canadian market.
3899 Producing for Canadian television, telling Canadian stories, reaching out to Canadian audiences is a risky and difficult business to finance. If we do not strive to provide Canadian stories, we might as well give up on any cultural diversity objectives for this country.
3900 Producers, particularly those who work in English Canada where the challenges are the greatest, believe that if we are going to sustain any type of separate cultural identity, we need a broadcasting system that dedicates significant portions of its schedule to high quality, well promoted Canadian programming scheduled at times when Canadians are available to watch.
3901 In the end, the broadcaster holds the key to achieving this goal. Producers depend on them for access to Canadian audiences to tell their stories. This is a critical partnership and one that the CRTC plays an essential role in making successful.
3902 And, to ensure that the programming available on the system truly reflects Canada to Canadians, it should take every opportunity to reflect the regional reality of the country. In this case, that should mean the development and exhibition of programming from British Columbia.
3904 MS KEATLEY: In order to understand our goals at this hearing, I would like to summarize the key issues that have been covered in the licensing principles found in the two CFTPA interventions.
3905 First, we are looking for a long term strategic commitment to priority programming from the applicants that will complement and enrich the broadcasting system. This process offers a real opportunity to add to the broadcasting system at the local, regional and national levels, a breadth of quality programming originating in British Columbia.
3906 In particular, B.C. producers are seeking national exposure for programming created here. We would ask that the Commission clarify with each of the applicants their definition of the national exposure opportunities and their ability to deliver on these promises.
3907 A strategic approach to licensing also provides us with the chance to fill content gaps that may exist within the system. We encourage the CRTC to look at this process as contributing to the system as a whole.
3908 B.C. producers have a real expertise in the creation of long form drama, feature films and documentaries. B.C. created feature films are regularly showcased at film festivals in Canada and around the world.
3909 Television can play a vital role in terms of providing a venue for Canadians to see these films. There is a groundswell of creative activity in this province that deserves to be given the best opportunity to access audiences across Canada.
3910 Secondly, we are asking the Commission to encourage applicants to make a real contribution to the development of programming, perhaps beyond what has been proposed in their applications. Canadians expect a lot from Canadian programming and it must compete against foreign and mainly U.S. programming in its home market, with higher production budgets and longer incubation periods.
3911 When a U.S. program doesn't work, it can be pulled off the schedule quickly and be replaced. In Canada, we don't have the financial resources that will sustain such a volume of programming. Therefore, at this time the attention and investment in development is vital.
3912 As we outlined in our interventions, investment in development bears fruit for broadcasters, but it still does not guarantee success. For that reason, we are asking that the CRTC use its power of regulatory encouragement to challenge any prospective licensee to increase their investment dollars in development.
3913 In the end, development dollars are money well spent as relatively small amounts can make the difference in terms of how successfully a program can exploit its full audience and market potential.
3914 Finally, the Broadcasting Act calls for diversity of programming. Each of the applicants have referred to the diversity that they believe their application will bring to this market. However, diversity is not only an issue of program type. It draws its vitality from taking full advantage of all the creative resources in the community.
3915 The B.C. production community is well positioned to provide broadcasters with the kind of programming that will guarantee the Commission that any new licensee fulfil both the letter and the spirit of the Broadcasting Act.
3916 We appreciate this opportunity to elaborate on some of the points found in our written interventions and we are happy to respond to your questions.
3917 CHAIRPERSON OF THE COMMISSION: Thank you very much.
3918 I would ask Commissioner Wylie to ask her questions.
3919 COMMISSIONER WYLIE: Good evening, ladies. I may not have many questions if your position is that you want to tell us what principles to apply, but not the details of where you see gaps in the applications or where you see an application or a proposal that is closer to meeting your principles.
3920 The idea of an association such as yours is to help us find the gaps and find the winners, or at least put your five cents in as to where they are. If you are not prepared to do that, I won't have too many questions. I think I understand the principles, how you apply them in a competitive situation to a number of applications is the next step.
3921 MS McDONALD: One of the challenges that faces an association of our type is that we represent people who benefit from access to marketplace through broadcasters. In this hearing we have people who are already in the marketplace and it becomes very difficult for our members through its association to come up with a single answer in terms of picking winners and losers. We have never done that in this competitive situation.
3922 I think what we have tried to do is say there are certain issues or certain guideposts that we would ask you to look at. We have tried to outline them in this. This is not the first time we have taken this approach and it's perhaps the only way that we can approach it because, as the Commission well knows, a number of producers have been here because of their strength in certain areas, saying that from their perspective, that's the best licence -- that's the best person to licence.
3923 Overall though, I think we are saying a couple of things. We are looking for -- we would recommend to you to look at the issue of what national exposure means. I think that that's very important. Exactly what is the past track record and how widely in fact will the programs be seen across the country.
3924 While people talk about it, what is exactly the station availability, the number of eyeballs, the people who will get to see that, what does that national licensing really mean. It's one thing to put the licence fees there. It's another thing to deliver it to the greatest number of Canadians because that maximizes the opportunity for Canadian programming. I think it is to be assured of that.
3925 Another recommendation we are asking you is to look at development. That's really critical because one of the issues or challenges that faces Canadian programming is the fact that it doesn't have the same kind of incubation period that foreign programming gets, yet we have to compete with it.
3926 So, development dollars are relatively small and people will come with numbers at this stage, but if you divide them over the seven years of the licence, you have to ask yourself how much is going to be there, how much flexibility is there for the broadcasters, how much can they be part of it to have some choice and to work with it to make sure as it comes to the screen, it really does work.
3927 Development is key. What may seem a big number at the beginning, if you divide it over the seven years, I think you will find that there could be a lot done, particularly with the absence of expenditure requirements for the broadcasters now.
3928 That's another item I think that we have asked you to look at them and to encourage them. You are in a position to do that. We have said "What is a true commitment to producers from B.C. and independent producers?" I think that's important because the Broadcasting Act still requires a significant contribution from independent producers and to make sure that's well quantified so that we are not here in five years or at another time saying it didn't really happen. It's hard to go back to the future then and a lot can be lost.
3929 Do you have anything?
3930 MS KEATLEY: Just to emphasize the issue of development. I think that in the ever-increasing fragmenting market if we want Canadians to actually be watching Canadian programs on television, the choice for broadcasters to put more money into development means that they actually end up with more choices and stronger choices that are truly going to actually be competing with the variety, the wide variety of programming that Canadians want to be able to choose from.
3931 I would just like to add that.
3932 COMMISSIONER WYLIE: Ms Keatley, you may not want to engage in this discussion considering the position you are taking, but the application where we have heard the most, we have had the most exchange and where the most perhaps emphasis was put on independent B.C. producers was the multilingual application, not that there wasn't also some proposals put forward by the others.
3933 That would -- I don't know if you have comments about the presence of ethnic producers in B.C. and also how the production of that type of programming and the money spent on development and on marketing, et cetera, would fit with your national exposure since by nature it would have a niche target rather than a broad.
3934 I know that documentaries produced in English that are of interest to cultural groups may be of interest to the mainstream as well, but it would seem to me more likely that this whole proposal would target specific audiences rather than a broad mainstream one.
3935 MS KEATLEY: I will respond. I think that multilingual television is the reality in this market. I am a third generation Vancouverite. We have always had an extraordinarily large ethnic community within this city. It's a vibrant part of where the growth is. Of course, we have members who are part of a variety of ethnic communities out there who make programming both in English and French and other languages.
3936 I myself am currently in the early stages of a co-production with a company in Singapore in which we plan to co-produce in a South Asian language in addition to English. This is the future. This is what producers -- we are trying to find new ways of telling stories that cross all kinds of boundaries.
3937 When you look at, you know -- obviously we aren't going to specifically comment on one application, but all of the various applications have said that they have specific commitments towards independent production. It's the different genres that they support within those that we don't want to get into particular difference of because, of course, our members support and work in all of those various genres.
3938 We need different voices and they come from different areas. Canadian audiences want choice and I think independent producers do provide that choice by finding different markets to go to and different ways of telling stories.
3939 COMMISSIONER WYLIE: You ask us to ask for more, but you won't tell us where it is that there is a need to ask for more and how much more. You don't want to comment on where you see gaps or where you see projects that are closer to your principles. I understand that. It will make for a shorter evening.
3940 CHAIRPERSON OF THE COMMISSION: If I may, I have a question. With the experience you have in this market, what's your assessment of the possibility of adding a player in the market? We are not speaking strictly about the Trinity one because, you know, it seems that it has a very niche vocation and it doesn't kind of raise the same kind of projects and doesn't draw from the advertising pie. What's your view?
3941 MS KEATLEY: Well, as a producer in this community, I mean the first round of applications that we had two and a half years ago, the demand for new stations was so strong at that time and there were people who at that time talked about the potential for a second licence being granted at that time. It is yet again being bandied around now.
3942 I find that the proposals put forward are more niche oriented and specific rather than sort of a broader overview, although perhaps some of the Victoria market ones have a broader overview.
3943 I think when you look at a marketplace, it isn't for us to answer about the advertising dollars. Our assumption would be that the number of applicants shows that there's obviously a demand and those people who come forward with proposals and business proposals are thinking that there is a market here for their stations. Therefore, as producers, what we look to is giving Canadian audiences and producers more choices of making programming.
3944 If you choose to license a new station in the Vancouver-Victoria area, or two, that fill different markets, we just want to ensure that as part of that that Canadian programming is part of that. That's what we are really saying.
3945 CHAIRPERSON OF THE COMMISSION: But that's the Broadcasting Act and that's a TV policy, so we sing the same song. Even the applications that are in front of us, and I kind of read into the Trinity project there, every application talks about Canadian programming. I don't think we would be sitting here or for that many hours without having that very definite goal.
3946 MS McDONALD: I think one of our assumptions is actually interesting. We had a discussion whether we would be asked this question before hand. I guess one of the assumptions we have had to make in this is that the amount of interest in this market and the amount of research that has gone into it, these are people who are credible business people who have been in business for a long time. So I don't think they would enter the marketplace with the hope of not being successful, so they would have had to do their homework beforehand.
3947 I think the other thing, since many of them have been already active in other markets, this clearly offers them an opportunity to create new programming, but also amortize it over larger audiences in a larger advertising base cumulatively overall.
3948 We have had to make the assumption that with the -- we didn't think it was probably worth while to invest and counter it because that's usually what you or the other existing broadcasters do, but there must be for them a real business case to come here and to put their proposals forward, to spend as much time in the community as they have, to make the commitments they appear willing to make.
3949 Finally, because there is an opportunity. The more channels that one has, the greater the opportunity is to amortize them at a cost and increase your advertising revenues.
3950 CHAIRPERSON OF THE COMMISSION: And the more clients independent producers have.
3951 MS McDONALD: Well, that would be a good partnership.
3952 CHAIRPERSON OF THE COMMISSION: Because it's a supply and demand.
3953 MS McDONALD: Absolutely.
3954 CHAIRPERSON OF THE COMMISSION: Thank you very much.
3955 Commissioner Cram.
3956 COMMISSIONER CRAM: I just had a couple of questions. This isn't my area. When you are talking about national audience, having the licensing of a national licence is better than a licence for a smaller area. Is that what you are saying? Look for people who license nationally.
3957 MS KEATLEY: I think what we are asking is -- there's a variety of ways in which producers finance programs. They may piece together various pieces of regional licences. That's a very common thing, for instance, in the documentary world.
3958 I think what we are really asking you to look at in terms of the overall commitments is are these licensees actually able to deliver a national audience, even if they are paying a national licence fee.
3959 I think one of the really difficult thing is producers with, for instance, the breakup of WIC, it's happening now because of that fragmentation and the division within CTV. It was a very difficult thing often for western producers in particular that we were often licensed, but those programs never actually saw the light of day in the rest of Canada.
3960 COMMISSIONER CRAM: So that's part of the equation, but not all of the equation.
3961 MS KEATLEY: Absolutely.
3962 COMMISSIONER CRAM: I'm sorry, I didn't understand what you were saying page 14, talking about draws its vitality by taking full advantage of all the creator resources in the community. Are you talking post-production, the whole nine yards? Is that what you are talking?
3963 MS KEATLEY: Yes. I believe so.
3964 COMMISSIONER CRAM: That's what you mean?
3965 MS KEATLEY: Yes, we are. I think there is a significant infrastructure in this province. It's one of the things that as an industry here we have been looking at, a future sort of five year plan and the growth really is going to be in the domestic industry. But we also mean by that as well that it's all of the overall communities, which include the ethnic communities and the franco community, all of those sorts of things as well.
3966 We feel as independent producers by the very nature they have the most ability to bring forward variety to broadcasters.
3967 COMMISSIONER CRAM: Thank you.
3968 CHAIRPERSON OF THE COMMISSION: Thank you very much.
3969 Madam Secretary, I think you want to recall.
3970 MS VOGEL: Yes. Thank you, Madam Chairperson.
3971 I would like to recall intervenor No. 5. That would be Kumar Sikka or Nalini Bhui.
--- Pause / Pause
3972 MS VOGEL: And intervenor No. 8, the Directors Guild of Canada.
--- Pause / Pause
3973 MS VOGEL: Madam Chairperson, that concludes all the intervenors for today.
3974 CHAIRPERSON OF THE COMMISSION: Thank you very much.
3975 We will see you at eight o'clock tomorrow morning.
--- Whereupon the hearing adjourned at 1830, to resume
on Wednesday, February 23, 2000 at 0830 /
L'audience est adjournée à 1830, pour reprendre
le mercredi 23 février 2000 à 0830