ARCHIVED - Transcript / Transcription - Gatineau, Quebec - 2002-05-06
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TRANSCRIPT OF PROCEEDINGS FOR THE CANADIAN RADIO-TELEVISION AND TELECOMMUNICATIONS COMMISSION TRANSCRIPTION DES AUDIENCES DU CONSEIL DE LA RADIODIFFUSION ET DES TÉLÉCOMMUNICATIONS CANADIENNES SUBJECT / SUJET: APPLICATIONS FOR TELEVISION LICENCE RENEWALS DEMANDES DE RENOUVELLEMENT DE LICENCES DE TÉLÉVISION HELD AT: TENUE À: Conference Centre Centre de Conférences Portage IV Portage IV Outaouais Room Salle Outaouais Gatineau, Quebec Gatineau (Québec) May 6, 2002 Le 6 mai 2002 Volume 1 Transcripts 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 Contents. 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. Transcription 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 Telecommunications Commission Conseil de la radiodiffusion et des télécommunications canadiennes Transcript / Transcription APPLICATIONS FOR TELEVISION LICENCE RENEWALS DEMANDES DE RENOUVELLEMENT DE LICENCES DE TÉLÉVISION BEFORE / DEVANT: Charles Dalfen Chairperson / Président Andrée Wylie Commissioner / Conseillère Cindy Grauer Commissioner / Conseillère Andrew Cardozo Commissioner / Conseiller Stuart Langford Commissioner / Conseiller ALSO PRESENT / AUSSI PRÉSENTS: William Howard Legal Counsel / Leanne Bennett Conseillers juridiques Michael McWhinney Hearing Coordinator / Coordonnateur de l'audience Pierre LeBel Secretary / Secrétaire HELD AT: TENUE À: Conference Centre Centre de Conférences Portage IV Portage IV Outaouais Room Salle Outaouais Gatineau, Quebec Gatineau (Québec) May 6, 2002 Le 6 mai 2002 Volume 1 TABLE OF CONTENTS / TABLE DES MATIÈRES PAGE / PARA PHASE I PRESENTATION BY CHUM LIMITED / 8 / 40 PRÉSENTATION PAR CHUM LIMITÉE Application No. / No de demande 2001--1327-5 Application No. / No de demande 2001-1323-3 Application Nos. / Nos de demandes 2001-1326-7, 2001-1388-7 Application No. / No de demande 2001-3121-7 Application No. / No de demande 2001-3125-9 Application No. / No de demande 2001-3124-1 Application No. / No de demande 2001-3122-5
1 Gatineau, Quebec / Gatineau (Québec) 2 --- Upon commencing on Monday, May 6, 2002 3 at 0930 / L'audience débute le lundi 4 6 mai 2002 à 0930 5 1 THE CHAIRPERSON: À l'ordre, s'il 6 vous plaît. Order, please. 7 2 Good morning ladies and gentlemen. 8 My name is Charles Dalfen and I am the Chairman of the 9 CRTC. I will be chairing this hearing. 10 3 I will be joined by my colleagues, 11 Andrée Wylie, to my right, Vice-Chair, Broadcasting; 12 Cindy Grauer, to my left, Regional Commissioner for 13 British Columbia and the Yukon; and Commissioners 14 Andrew Cardozo, to Andrée's right, and Stuart Langford 15 to Cindy's left. 16 4 The public hearing will consider the 17 applications by CHUM Limited to renew the licences for 18 seven television stations that it owns in Toronto, 19 Vancouver, Ottawa and other cities across Ontario. 20 5 Following these items, we will review 21 the licence renewal application for the national 22 specialty ethnic television service, Telelatino. 23 6 Finally, we will hear representatives 24 of the Cable Public Affairs Channel Inc., or CPAC, on 25 renewing the licences for its English- and
1 French-language programming undertakings. 2 7 Commission staff assisting us at this 3 hearing are Michael McWhinney, Hearing Coordinator; 4 William Howard and Leanne Bennett, Legal Counsel; and 5 Pierre LeBel, Hearing Secretary. 6 8 The CRTC released its most recent 7 television policy in 1999. In it, the Commission said 8 it would renew all conventional television licences 9 held or controlled by a group at the same time. This 10 hearing will give us the opportunity to consider the 11 renewal of CHUMs conventional television licences in 12 light of this policy and, of course, under the policy 13 objectives set out in the Broadcasting Act that outline 14 the Commission's mandate. 15 9 In Notice of Public Hearing CRTC 16 2002-2, the Commission pointed out that station groups 17 like CHUM generally offer program schedules that differ 18 from those of the largest groups. As set out in the 19 TV Policy, the Commission encourages these groups to 20 remain distinctive and to experiment with new genres of 21 programming. It also encourages them to find 22 innovative ways to meet the needs of their audiences. 23 10 The policy calls for the Commission 24 to consider various elements when considering the 25 renewal of television station licences such as those
1 operated by CHUM. For example, we will examine CHUM's 2 corporate strategy and how it will be implemented at 3 the individual station level. We will also examine how 4 the strategies for the NewNet stations differ from 5 CHUM's approach for CITY-TV Toronto and CKVU-TV 6 Vancouver, their larger market stations. 7 11 The renewal of CHUM's 8 non-conventional broadcasting licences will not be 9 examined at this hearing, nor will we be looking at the 10 renewal of the new conventional station, CIVI-TV 11 Victoria, since it has only been on air since 12 October 4, 2001. 13 12 Nevertheless, consistent with the 14 TV policy, the panel will examine the contributions of 15 all aspects of CHUM's operations to the broadcasting 16 system. 17 13 Next, we will hear from 18 representatives of the Telelatino Network on its 19 application to renew its national ethnic specialty 20 television service, which provides programming directed 21 to Italian and Spanish-speaking audiences. 22 14 The panel will also examine the 23 licensee's request to amend two of its conditions of 24 licence. 25 15 Telelatino proposes to reduce the
1 amount of Italian and Spanish third-language 2 programming from 85 per cent to 75 per cent. It also 3 proposes to increase the maximum level of ethnic 4 programming in the official languages directed to 5 Italian and Spanish-speaking audiences from 15 per cent 6 to 25 per cent. Telelatino also proposes a minimum 7 evening Canadian programming level of 15 per cent. 8 16 The panel will examine Telelatino's 9 overall Canadian content level and the level of its 10 Canadian programming expenditures, as well as 11 programming concerns which were raised in various 12 interventions. 13 17 Finally, we will hear from 14 representatives of CPAC regarding its application to 15 renew the broadcasting licences of its English- and 16 French-language satellite-to-cable programming 17 undertakings. 18 18 The panel will examine CPAC's request 19 to broaden its definition of "nature of service", by 20 adding new programming categories. 21 19 The panel will also consider 22 CPAC's request to charge a graduated wholesale fee of 23 $0.10 per month for the first two years of the new 24 licence term, and of $0.11 per month starting in the 25 third year.
1 20 CPAC proposes that $0.03 of these 2 amounts would be paid by CPAC affiliates, while the 3 remaining $0.07 and then $0.08 would be paid by 4 subscribers. 5 21 Lastly, the panel will examine CPAC's 6 proposal that its service be authorized for 7 distribution on a dual status basis, that is, that it 8 be carried by cable systems as part of the basic 9 service, unless it agrees to carriage on a tier. 10 22 This hearing will run for 11 approximately three and a half days. As soon as this 12 hearing ends, it will be followed immediately by 13 another hearing which should last approximately a day 14 and a half. 15 23 During the second hearing, the 16 Commission will reconsider the application of World 17 Television Network/Le réseau Télémonde to obtain a 18 licence to operate two national specialty television 19 services. 20 24 We should inform you that this 21 proceeding will be heard by Commissioners who did not 22 participate in the two previous Commission hearings on 23 the applications presented by World Television 24 Network/Le réseau Télémonde. 25 25 We will begin each day at 9:30 a.m.
1 and finish at approximately 5:00 p.m. You will be 2 advised as soon as possible of any change in the 3 schedule that may occur as we proceed. 4 26 Please turn off cellular phones and 5 beepers when you are in the hearing room, as they are 6 an unwelcome distraction for participants and 7 Commissioners. We would appreciate your cooperation in 8 this regard at all times during the hearing. 9 27 Now, before we begin, I will turn 10 things over to our Hearing Secretary, Pierre LeBel, to 11 explain the process that we will be following. 12 28 Mr. LeBel. 13 29 MR. LEBEL: Thank you, Mr. Chairman. 14 30 Before we begin, just a few 15 housekeeping matters. 16 31 First, I would like to indicate that 17 the Commission's examination room is located in the 18 Papineau Room adjacent to the public hearing room. 19 Public files of the applications being considered at 20 this hearing can be examined there. 21 32 Second, there is a verbatim 22 transcript of this hearing being taken by court 23 reporters at the table to my left at the centre. If 24 you have any questions about how to obtain all or part 25 of this transcript, please approach the court reporter
1 during a break for information. 2 33 Finally, if you want to have messages 3 taken, we will be happy to post them outside the public 4 examination room. The phone number in our examination 5 room is area code (819) 953-3168. If you have any 6 further questions, don't hesitate to contact me or the 7 examination room officer. We will be more than pleased 8 to assist you where we can. 9 34 Now, Mr. Chairman, we will proceed 10 with items 1 through 7 on the Agenda. These are 11 renewal applications for seven local television 12 stations owned by CHUM Limited. 13 35 We will proceed as follows: 14 36 First, we will hear the applicant in 15 three different presentations. Questions from the 16 Commission will follow each presentation. 17 37 In Phase II, the appearing 18 intervenors listed in the Agenda will be granted 19 10 minutes to present their intervention and there may 20 be questions from the Commission following each 21 presentation. 22 38 In the last phase, the applicant will 23 be provided with an opportunity to respond to the 24 interventions submitted to its applications. Ten 25 minutes will be granted for this reply and, again,
1 questions may follow. 2 39 Now, Mr. Chairman, we will hear the 3 first presentation by CHUM and I will ask Mr. Switzer 4 to introduce his colleagues. 5 PRESENTATION / PRESENTATION 6 40 MR. SWITZER: Thank you. 7 41 Good morning, Mr. Chair, Madam 8 Vice-Chair, Members of the Commission. My name is Jay 9 Switzer, President of CHUM Television. 10 42 Before beginning the formal part of 11 our presentation, please let me introduce our panel to 12 you. 13 43 Starting with this first row, on your 14 far left is Sarah Crawford, Vice-President Public 15 Affairs for CHUM Television. 16 44 Next to Sarah is Prem Gill, Manager 17 of Public Affairs for CKVU Vancouver. 18 45 Next, on my right here, is Moses 19 Znaimer, who has, among other titles, the 20 responsibility as Vice-President Corporate Development 21 for CHUM Limited. 22 46 Continuing to your right, next to me 23 is Peter Miller, Vice-President Planning and Regulatory 24 Affairs for CHUM Television. 25 47 On your far right, Diane Boehme,
1 Director of Independent Production for CHUM Television. 2 48 In our second row -- and I know the 3 map will make it a little easier for you -- starting on 4 your far left, to your right is David Kirkwood, 5 Vice-President Sales and Marketing for CHUM Television. 6 49 Next is Dan Hamilton, Vice-President 7 National Sales, Conventional, CHUM Television. 8 50 Next is Peter Palframan, 9 Vice-President Finance and Administration, CHUM 10 Television. 11 51 Next should be and is Rob Waters, 12 Executive Vice-President, CHUM Limited. 13 52 Next to him I sure hope is Fred 14 Sherratt, Vice-Chairman, CHUM Limited. 15 53 On your far right of the second row, 16 Marcia Martin, Vice-President of Production, Citytv. 17 54 At our side table, from your left to 18 your right, David Caporicci, Director, Sales 19 Administration for CHUM Television. 20 55 Next, Daphne Hubble, Director of 21 Marketing and Research for CHUM Television. 22 56 Next, Paul Gratton, Senior 23 Programming Executive, CHUM Television. 24 57 And, on the right, Brigitte Davlut, 25 Manager, Regulatory Affairs for CHUM Television.
1 58 In the audience, I would also like to 2 mention joining us is Lenny Lombardi, the President of 3 CHIN Radio and Television, and a long-time friend and 4 production partner of CHUM. 5 59 To start our presentation, I would 6 like to invite Fred Sherratt to make a few short 7 comments. 8 60 MR. SHERRATT: Mr. Chairman, Madam 9 Vice-Chair, Members of the Commission, while I stepped 10 back from the day to day operations of CHUM last year I 11 wanted to be at this hearing for three important 12 reasons. 13 61 The first was, to keep my record 14 intact. Over the past half century I have appeared 15 before the chair of every Canadian broadcast regulator. 16 It started with Davidson Dunton at the CBC Board of 17 Governors, then Andrew Stewart of the BBG and, since 18 1968, every chair of the CRTC. 19 62 Second, Mr. Chairman, this is CHUMs 20 first appearance before you since your appointment and 21 I wanted to be the one, on behalf of CHUM, to welcome 22 you in your new role and to thank you for making the 23 commitment to lead the Commission at what is a very 24 crucial time in Canadian Broadcasting. While we face a 25 lot of challenges, we are comforted by your presence.
1 63 The third is the fact that this is a 2 very important hearing for CHUM. The Canadian 3 television landscape has undergone a major change in 4 the last few weeks and we, as a company, are facing a 5 much more difficult future than when we filed our 6 renewal applications. 7 64 As you know, CHUM Limited is a 8 publicly traded company with significant family 9 ownership. The company had its beginning in 1954 when 10 Allan Waters purchased a daytime AM station in Toronto, 11 1050 CHUM. We have grown considerably in the 12 intervening 48 years to become a strong mid-sized 13 broadcaster, but we still remain overwhelming 14 Canadian-owned. 15 65 In the early days, CHUM focused on 16 radio. In 1965 we became part of the television scene 17 when we acquired an interest in CKVR-TV Barrie, at that 18 time, one of the country's largest privately owned CBC 19 affiliates. 20 66 In 1970 we acquired CJCH-TV Halifax 21 and became a partner in CTV. By 1971 we had taken 22 CJCB-TV Sydney and CKCW-TV Moncton/St. John under our 23 wing and launched the Atlantic Television System, ATV. 24 From that base, with the launch of Anik A3 we 25 established a "World Television First", the Satellite
1 Network, ASN. 2 67 One of our key milestones occurred in 3 1978 when CHUM acquired a truly original voice in 4 broadcasting, Citytv Toronto. Low-powered, low-cost, 5 locally focused and committed to reflecting cultural 6 and racial diversity, Citytv broke the mould from the 7 very beginning. 8 68 Now, Ron Waters will start the 9 process of giving you further insight on how we have 10 built on those beginnings. 11 69 MR. WATERS: Mr. Chair, Members of 12 the Commission, we welcome the opportunity to spend 13 some time today telling you the CHUM Television story, 14 our successes, our challenges and the exciting 15 opportunities we see to develop our business and 16 contribute to the Canadian broadcasting system. 17 70 We have grown our business by 18 building on what we started with: CKVR, a CBC 19 affiliate; ATV, a CTV affiliate; and Citytv, an 20 independent, to now eight local stations in Ontario and 21 British Columbia, all independent. We began with a 22 commitment to local service and we have continued to 23 invest more in local. 24 71 In the last four years CHUM 25 Television has undergone dramatic changes. We are no
1 longer involved in CTV or in Maritime Television. In 2 the last few years we have focused on the re-launch of 3 what were defacto "repeaters" and network affiliates in 4 Ontario as strong local independent stations and most 5 recently the launch of the new station in Victoria. 6 72 The result is what is known as 7 "The NewNet", which comprises local stations in 8 Ottawa/Pembroke, Barrie, London/Wingham/Windsor and, 9 since last October, CIVI, serving Victoria and the 10 Island. 11 73 Our other focus, more urban and 12 culturally diverse, grows from Citytv Toronto and now 13 encompasses Vancouver with the recent acquisition of 14 CKVU. Many stations are still very much a "work in 15 progress", particularly in Ottawa and British Columbia. 16 74 We have always invested in local with 17 a view to the long-term, and our slow but steady 18 expansion has in large part been due to sound public 19 policy and regulators committed to growing a strong, 20 vital, distinct Canadian broadcasting system. 21 75 The addition of the two new stations 22 in Toronto will mean a serious revenue blow to our 23 southern Ontario stations and, therefore, to our 24 television group as a whole. 25 76 So as we welcome the chance to tell
1 you the CHUM story, we must point out that today the 2 way in which we see our story unfolding in the future 3 looks very different from what we imagined when we 4 filed our renewal applications some months ago. 5 77 Now, to cover the details, I will 6 turn the panel over to CHUM Television President, Jay 7 Switzer, who will act as our quarterback today. 8 78 MR. SWITZER: To start, I would like 9 to give you a road map of our approach here today and 10 tomorrow. 11 79 First, we will spend some time 12 discussing our corporate approach and philosophy. 13 80 We will not now go into great detail 14 about local programming. That discussion, we believe, 15 should most appropriately take place with each of our 16 local teams where the decisions regarding local 17 reflection are actually made. 18 81 After our discussion with you on 19 corporate matters, we will introduce the teams from 20 Citytv Toronto and our newest station, CKVU Vancouver. 21 These two stations serve the largest English markets in 22 Canada. They share similar national programming, 23 including emphasis on long-form and feature film, and 24 have the responsibility of reflection of their highly 25 urban multicultural audience.
1 82 After that discussion, we will 2 introduce the teams from our five stations in Ontario, 3 and our newest member -- not up for renewal but 4 obviously a key part of our expanded "NewNet" group of 5 stations -- the "NewVI" serving Victoria and the 6 Island. 7 83 We developed this approach with the 8 helpful guidance of your staff, and believe it will 9 give you the best possible overview of what we do and 10 the commitment and expertise of our people. 11 84 One of the most important roles that 12 the Canadian broadcasters play, is telling people's 13 stories, both reality and fiction. Everyone has a 14 personal story. Here is mine. 15 85 I was a TV brat. I joined Citytv in 16 1983. My mother, Phyllis, co-founded Citytv with Moses 17 in 1972. My father Israel, or Sruki, is an engineer 18 whose many successes include building major cable 19 systems around the world. I grew up talking television 20 around the dinner table. My first job in television 21 was on switchboard. 22 86 There are many on our team who, like 23 me, have been here for 10, 20 or 30 or more years. 24 Some are much newer. Each one of our stories involves 25 making a significant contribution to our broadcasting
1 system. Together, these stories comprise the CHUM 2 Television story. 3 87 MR. ZNAIMER: Though it wasn't always 4 the case, today the things that we have always 5 championed, the things that we started decades ago -- 6 localism, cultural diversity, long-form drama -- are 7 recognized as "important". Indeed, in many ways public 8 policy now seeks to impose on other players in the 9 Canadian broadcasting system the very things we have 10 always done voluntarily. 11 88 We want to continue to improve and 12 expand our kind of local television, both in the 13 markets we currently serve and in still other markets 14 across the country. So we come before you with these 15 simple propositions: 16 89 If you want us to continue to 17 emphasize local, please make sure we have the tools, 18 flexibility and the revenue opportunities to make our 19 stations profitable and grow; 20 90 If you want cultural diversity, 21 please assure that those who know it and live it 22 and have done it for literally decades can continue to 23 do so; 24 91 If you want more popular Canadian 25 movies, we will do that job, through a combination of
1 in-house and truly "independent" production; and 2 92 If you want risk-taking -- 3 particularly if, Mr. Chairman, you want a response to 4 your "Book Mark" challenge of taking U.S. prime time 5 head on -- please recognize in us a team who are 6 itching to put ourselves in a position to take up that 7 challenge. 8 93 When my partners and I launched 9 Citytv in 1972, we did it with a combination of dreams, 10 chutzpa and progressive ideas. 11 94 Let me read a short paragraph from 12 the original license application I wrote on my kitchen 13 table in 1971: 14 "...there is a brilliant rainbow 15 of religion, race, and ethnicity 16 that animates this city and 17 [channel] Seventy-nine will 18 acknowledge this fact on the 19 television air..." 20 95 We saw then that the real face of 21 Toronto, the urban multicultural face, was not 22 reflected on mainstream television and needed to be. 23 That became our mission! 24 96 Citytv was then, and has remained, 25 the heart of Toronto: The Peoples' Station. An
1 alternative to the generalist conventional networks, 2 recognized for our pioneering commitment to intensely 3 local positive, accessible, culturally and racially 4 diverse television. Streetfront. Storefront. 5 Engaged. Open to new talent. Breaking down barriers. 6 97 To sum it up with one of our 7 oft-used, oft-quoted, slogans: "Everybody's Welcome. 8 Everyone Belongs". 9 98 These core values and commitments 10 have endured and have been extended to all our local 11 CHUM Television stations. 12 99 MS GILL: I first appeared before you 13 in Vancouver just over two years ago as part of CHUM's 14 application team for CITT Vancouver. 15 100 While that application did not meet 16 your approval, our application for CIVI Victoria did. 17 101 That station launched just last year, 18 on October 4, 2001. Less than two weeks later, on 19 October 15th, you approved CHUM's application for 20 transfer of ownership of CKVU Vancouver, the station 21 where I am proud to work, and from which I also assist 22 at the CHUM Corporate level in serving and reflecting 23 the needs of multicultural youth. 24 102 Almost overnight CHUM has arrived in 25 B.C. with a bang and, in the process, gone from serving
1 roughly 40 per cent to over 50 per cent of English 2 language households across Canada. 3 103 We are early days yet at CKVU, but 4 our style, our approach to local and, most important, 5 our commitment to cultural diversity, is already being 6 felt. 7 104 While details will not be announced 8 until June 6th, we will be returning CKVU to its roots 9 as a distinctive, culturally diverse, local station: 10 Citytv Vancouver. In this case, "City" meaning 11 Vancouver, and joining Citytv Bogota, Citytv Barcelona 12 and Citytv Toronto as the fourth major market local, 13 movie-based, culturally diverse "Citytv" in the world. 14 105 Together, Vancouver and Victoria, the 15 Lower Mainland and the Island, are now getting a taste 16 of CHUM's style of television. We, and our 17 communities, could not be happier with the results. 18 106 At a time when the British Columbia 19 economy is not exactly booming, this company has 20 invested close to $160 million dollars in 21 infrastructure, 250 television jobs, and 54 hours of 22 local programming a week. 23 107 MR. SWITZER: Our job today is to 24 give you a sense of our business and a sense that our 25 business is and needs to be different if we are to
1 succeed. 2 108 Thankfully, you have created a public 3 policy framework that encourages difference, a TV 4 framework that recognizes that what the CBC's and CTV's 5 and Global's do is, and should be, different from what 6 we do. 7 109 But we hope you also recognize that 8 our aspirations and our business potential do not exist 9 in a vacuum. So as we talk about what we want to do, 10 we hope you recognize that that discussion will be in 11 the context of what we can do and what we need from you 12 in the much changed environment in which we now find 13 ourselves. 14 110 For example, our appetite for local 15 programming, and our sense of the business opportunity 16 there, is directly dependent on the market conditions 17 in which we operate, market conditions that depend in 18 turn on what the economy is like, what our competitors 19 do, and what you do. 20 111 As Ron said earlier, with the pending 21 launch of the two new stations in the greater Toronto 22 area, our southern Ontario stations have been struck a 23 serious revenue blow. Therefore, so has our television 24 group as a whole. We estimate direct revenue losses of 25 $12 million annually in the 2003/2004 broadcast year,
1 not taking into account losses caused by the loss of 2 popular programming to these new competitors or 3 increased U.S. programming costs due to the bidding up 4 of U.S. rights. 5 112 As we look at our operations, and 6 what we will need to do to respond to those revenue 7 losses, we find we have very little choice but to look 8 at local programming. 9 113 We can't really cut Canadian national 10 programming, because of our commitments to priority 11 programming and our need to invest more and more in 12 that area 13 114 We can't cut U.S. programming costs. 14 In fact, it is already evident that those costs, as 15 forecast, will rise. Indeed, in the first 21 days 16 since the licensing decisions, our U.S. programming 17 costs for next year already have increased by over 18 $1.5 million. That is just on a couple of our acquired 19 shows at the beginning of the buying process. 20 115 So what is left to cut? What is left 21 to rationalize? It is local. 22 116 We have to make it more 23 cost-effective. We have to make it more efficient. 24 And, yes, we may have to cut the number of hours. We 25 hope you will appreciate that we must have that
1 flexibility. 2 117 We must be in a position to continue 3 to evaluate our options. The condition of licence 4 proposals we have set forth are absolute minimums. It 5 is not our intention to arbitrarily cut any local 6 service. Local service is what we have built our 7 stations on. However, in this vastly changed 8 environment, we must be in a position to act. The 9 ability to do so is in the best interests of the 10 stations and, thus, in the best interests of the 11 communities they serve. 12 118 That being said, we listened very 13 hard to our viewers in Wingham and Windsor and came to 14 a decision. Rather than completely cutting separate 15 Windsor and Wingham News, as we had said we would do or 16 that we would have to do if you licensed what we called 17 the "worst-case scenario", we will keep commitments for 18 those communities as filed for a least two years. 19 119 As you will discover in your 20 discussion with the New PL/WI/NX team, these 21 commitments still give us the ability to effect some 22 rationalization and make our news operations more 23 efficient but, most important, they mean viewers of 24 Wingham and Windsor will not see any real reduction in 25 local service.
1 120 MS CRAWFORD: You already know of our 2 30 years of leadership in the area of cultural 3 diversity. I would like to touch on a few recent 4 initiatives. 5 121 Two and a half years ago, we marked a 6 first in Canadian broadcasting by voluntarily putting 7 our commitment to cultural diversity in writing. Our 8 Corporate Statement of Cultural Diversity Best 9 Practices codifies successful practices and articulates 10 core values in a set of guidelines that we 11 systematically extend across all of our television 12 stations. 13 122 In March 2001 we convened, produced 14 and televised the CHUM Television Colloquium on 15 Cultural Diversity in the Media. This five-hour, live, 16 national dialogue on diversity in the print and 17 electronic media was webcast on our corporate site, 18 telecast live on Canadian Living Television and made 19 available free to other interested broadcasters. 20 Vision, APTN and CPAC all carried the program that 21 included phone, fax and e-mail participation from 22 Canadians coast to coast. 23 123 The Colloquium was shaped by a 24 nine-person, national, community-based steering 25 committee, and included 27 stakeholder participants. A
1 one-hour "highlights" version of the show has been 2 telecast on all our local stations and is made 3 available free to educators, complete with Study Guide 4 for in-class use. 5 124 You have all asked all corporate 6 groups, large and small, at group licence renewal to 7 provide their plans for cultural diversity. Since our 8 plan springs from our living, breathing philosophy and 9 business practices, rather than filing a document after 10 the hearing we have already provided you with a draft 11 of our corporate plan. 12 125 The plan includes a commitment to 13 ensure that on-air and behind the scenes staff are, at 14 minimum, reflective of the community each station 15 services. 16 126 The plan also outlines objectives, 17 strategies, tactics and specific goals in areas such as 18 corporate accountability, community input and feedback, 19 and on-air reflection. In doing so, it provides more 20 formal mechanisms for implementing our Best Practices. 21 127 MS BOEHME: Our commitment to 22 independent production is strong. We don't have the 23 largest budgets, but we move quickly, we move with 24 respect and what we do is top-notch. 25 128 We are proud of our relationships
1 with independent producers, as epitomized by the many 2 solid, positive interventions received in this 3 proceeding, including that of the CFTPA. 4 129 Allow me to red from just one such 5 intervention -- that of Robin Cass of Triptych Media. 6 I quote: 7 "CHUM provides a very important 8 means by which many communities 9 across the country can access a 10 whole range of films by Canadian 11 filmmakers. Often these films 12 are not even available in their 13 local multi-plex and thus, their 14 broadcast services can be seen 15 to be contributing to the 16 expansion of a national audience 17 and an awareness of our domestic 18 cinematic storytelling. Given 19 Canada's vast geography there is 20 much that broadcasters can do to 21 offer audiences opportunities to 22 view new and classic Canadian 23 films. CHUM are indeed leading 24 players in this arena." 25 130 End quote.
1 131 Our commitments include specific 2 script and concept development moneys at the local 3 level and serious staff liaison, from me, as Director 4 Independent Production for all of CHUM Television, and 5 from our development officers located at each station 6 in the CHUM Television group. 7 132 MR. SWITZER: Despite the fact that 8 we are not a large multi-station group we have, over 9 the last two years, voluntarily accepted the eight 10 hours priority programming threshold on all our 11 stations, except Citytv. This is a significant 12 undertaking on our part because, in effect, it means we 13 as a group have committed to 16 hours of unduplicated 14 priority programming on a revenue base that is roughly 15 one-third that of the larger multi-station groups. 16 133 We will continue to increase, on a 17 case-by-case basis, spending on independent production 18 in priority programming categories as appropriate and 19 as we move forward with our priority programming plans. 20 In particular with Citytv Toronto, we will commit to 21 growing priority programming from the current level of 22 approximately five hours to six hours for the first 23 three years of a new license term and seven hours 24 thereafter. 25 134 In sum, consistent with your TV
1 policy, our unique place in the broadcasting system, 2 and the significant changes to the environment in which 3 we operate, we seek four key measures from you, two of 4 which we will be discussing in our station 5 presentations and two of which we have touched on this 6 morning: 7 135 1) A direction to cable operators 8 to continue to distribute CKVR-TV, Barrie, on a channel 9 position no higher than channel 25, as initially 10 mandated in the Commission's disaffiliation decision 11 of 1994; 12 136 2) Approval of our "split feed" 13 application for CHRO Pembroke/Ottawa, in recognition of 14 the unique history of local service at that station and 15 in accordance with your policy of requiring local 16 programming and a local presence in order to access 17 local advertising; 18 137 3) Approval of our minimum 19 commitments for local and regional programming on our 20 Ontario stations; and 21 138 4) Approval of our priority 22 programming plans, including those of Citytv Toronto, 23 and flexibility with respect to the mix between 24 in-house and independent production. 25 139 Mr. Chair, Madam Vice-Chair, Members
1 of the Commission, while the challenges facing us are 2 big and real, we want to assure you that we want to 3 continue our leadership role in local programming and 4 in reflecting cultural diversity. We want to be 5 leaders in innovative priority programming, original 6 and independent production. These are our core 7 strengths. 8 140 We cite our track record of exceeding 9 conditions of licence and commitments in the past as 10 your best assurance that we will, if we can. 11 141 We want to do more, but we can only 12 do more if the business climate, the regulatory 13 framework and market conditions allow. 14 142 Thank you very much. 15 143 We look forward to your questions. 16 144 THE CHAIRPERSON: Thank you very 17 much. 18 145 I believe counsel has an item. 19 146 MR. HOWARD: Thank you, Mr. Chairman. 20 147 Just a matter to clear up. 21 148 On May 3rd you filed some more 22 documentation with the Commission consisting of revised 23 financial statements, draft cultural diversity 24 corporate plan and CKVU-TV update of transfer benefits. 25 That is correct?
1 149 MR. MILLER: That is correct. 2 150 MR. HOWARD: I think you sought 3 confidentiality with regard to part of the revised 4 financial statements, namely the column which was for 5 the current year. 6 151 MR. MILLER: That is correct. 7 152 MR. HOWARD: The Commission has 8 granted confidentiality to that, so I believe what you 9 have now filed as a revised document, which is now 10 public, which has severed that particular column. Is 11 that correct? 12 153 MR. MILLER: Precisely. 13 154 MR. HOWARD: These are available to 14 intervenors? 15 155 MR. MILLER: Yes. I have provided 16 copies to the Secretary. 17 156 MR. HOWARD: Great. 18 157 I believe the panel has decided that 19 intervenors would have 10 days to make comments upon 20 that, if that is acceptable to yourself. 21 158 MR. MILLER: Certainly. 22 159 MR. HOWARD: And three days to 23 yourself to make replies to any of those comments 24 afterwards. 25 160 MR. MILLER: Certainly.
1 161 MR. HOWARD: Within the confidential 2 documents, at least the ones that the Commission 3 received, there was a transmission error with regard to 4 the results for the station in London. I understand 5 that now the documents you have filed have corrected 6 this. The full page is there for that, on the record, 7 for intervenors now? 8 162 MR. MILLER: That is correct. 9 163 MR. HOWARD: Great. Thank you very 10 much. 11 164 THE CHAIRPERSON: Mr. Switzer, just 12 before we begin, are the messages in square brackets 13 meant to be subliminal messages? 14 --- Laughter / Rires 15 165 MR. SWITZER: We sometimes edit on 16 the fly, Mr. Chair, for time. 17 166 THE CHAIRPERSON: Thank you. 18 167 I am going to try to see if I can 19 understand the point that you make about market impact 20 of the new Toronto licences, among other things. 21 168 I will use your newly filed financial 22 statements. You will forgive me for perhaps not being 23 as familiar with them as I might be because they were 24 only recently filed, but you will perhaps help me go 25 through them. The point that Mr. Waters raised about
1 the stations being a serious revenue blow. 2 169 I guess what I would like you to help 3 me with is how you begin to get the base from which you 4 then gauge the impact. In other words, do you assume a 5 size of the Toronto market based on growth 6 year-over-year of which you have a share and then with 7 the licensing of new stations that share is then 8 eroded? 9 170 If that is the path you follow, could 10 you guide me through it step-by-step? 11 171 MR. SWITZER: Yes, Mr. Chair. 12 172 This work began as homework for the 13 previous Hamilton hearing and there was an awful lot of 14 line-by-line analysis and work done in preparing these 15 revenue estimates. In the revised financial tables, 16 which you have, we have brought everything up to date, 17 including every bit of information that we know at 18 present. Our gang is happy to take you through 19 top-line information or line-by-line. 20 173 It was not simply a case of looking 21 at market size and market share, but a detailed program 22 schedule analysis effect of pricing in the market, 23 effect of supply and demand, and we are happy to take 24 you through whatever you require. 25 174 THE CHAIRPERSON: Okay. To look at
1 your 2002/2003 revenues -- year one I assume is 2 2002/2003 -- you have revenues of $175 million. 3 175 Is that right. 4 176 MR. SWITZER: Yes. 5 177 THE CHAIRPERSON: Right. What I 6 would like you to do is to start as to how you grew the 7 market for 2002/2003, based on what base year, assuming 8 what percentage of growth, how large a market, what was 9 CHUM's share, and then what was CHUM's share as a 10 result of the impact of the new licences. 11 178 I appreciate that when you do all 12 stations -- and I am looking at the "All Stations" 13 chart here -- so I assume that you are looking at both 14 Ontario and British Columbia? 15 179 MR. SWITZER: Yes. I would like to 16 ask Peter Palframan to assist, as the Vice-President of 17 Finance. 18 180 All of the information that we are 19 going to talk about has been filed in various 20 assumption tables in terms of percentage increases. It 21 was certainly done station-by-station you will note, 22 and Peter will talk about baseline revenue assumptions 23 for stations such as CKVU in Vancouver and the NewRO in 24 Ottawa are growing in the early years at much higher 25 numbers than some of the more mature stations.
1 181 Peter, can you add some detail? 2 182 MR. PALFRAMAN: Yes. Good morning, 3 Mr. Chair. 4 183 I guess the important thing in 5 looking at the revised financial projections is to take 6 it back a step to what we filed originally. Because 7 what we filed originally obviously took into account 8 our normal expectations for growth in the market, 9 inflationary increases, and so on. 10 184 So just to establish that as starting 11 point, what I can reflect is that in our original 12 filings we showed revenues going from the current of 13 $170 million to $177 million in the first year of the 14 projected new license period 2002/2003. 15 185 So that showed what we would have 16 considered normal growth, growth in the market and the 17 efforts that our sales team put together and all the 18 work that they did in enabling us to come up with 19 realistic financial projections. 20 186 Four weeks ago, of course, we got 21 news that that whole market scenario was going to 22 change and we then revisited our projections. So what 23 you have today are the revised financial projections 24 based on that. 25 187 I think it will be a discussion that
1 we will need to develop with our sales team as to how 2 they came up with the impact of that and how it gets 3 reflected in the financial projections. 4 188 But on that top page we have actually 5 done a reconciliation from what we originally filed, 6 the $176 million in the first year of the new license 7 period and then showing the revenue losses that we are 8 projecting. 9 189 THE CHAIRPERSON: Yes, I do have both 10 sheets before me so I am able to follow along with you. 11 190 MR. PALFRAMAN: Okay. 12 191 THE CHAIRPERSON: I didn't want to 13 quite get to impact just yet, I wanted to get to total 14 market size first. 15 192 MR. PALFRAMAN: All right. 16 193 THE CHAIRPERSON: Thank you. 17 194 MR. PALFRAMAN: Okay. Thank you. 18 195 MR. MILLER: Can I, Mr. Chair, just 19 add a couple of other dimensions. 20 196 First of all, as Mr. Switzer said, we 21 started this analysis of impact at the Toronto/Hamilton 22 hearing. We did it in two ways. We did a bottom-up 23 analysis with our sales team, where they went through 24 the proposed program schedules of the applicant's and 25 on a case-by-case program-by-program basis estimated
1 the impact on our stations. 2 197 We also did a top-down analysis that 3 was an outside consultant's report prepared by Hans 4 Jansen that looked more at the factors that you raised 5 in your question, the size of the market, the likely 6 share of competitors. 7 198 Each was complimentary, but 8 differently arrived at so that we could estimate these 9 initial impact numbers that then we used here. We will 10 talk a little later about how we used them here to 11 develop the impact projections. 12 199 In terms of the overall market 13 again -- and our sales team can obviously speak to 14 that -- we have projected largely flat, conventional 15 growth. Again, there are some differences in early 16 years than later years. That is also consistent with 17 the Jansen report that was filed both in the Hamilton 18 hearing and in this hearing. 19 200 THE CHAIRPERSON: Right. So can you 20 help me build it up then? 21 201 MR. PALFRAMAN: Yes. In the 22 assumptions that we originally filed, what it indicated 23 was, as Peter said, that the Toronto market would be 24 flat in the first three or four years. So we have 25 projected zero growth in the first year for CITY-TV
1 Toronto, and then that grows to 1 per cent in years 2 two, three and four, and then 2 per cent through 3 years five, six and seven. Then it varies in the 4 different markets. 5 202 So for example Barrie we are 6 projecting 2 per cent growth throughout the new license 7 period. 8 203 For CHRO in Ottawa, where we have 9 been growing that market, we are expecting our revenues 10 to increase at much higher levels in the first three 11 years: 15.8 per cent in year one, 14 per cent in year 12 two, 12.8 per cent in year three, and then it starts to 13 level off and goes to 6 per cent and 4 per cent in 14 years five, six and seven. 15 204 In the CFPL/CHWI/CKNX 16 London/Windsor/Wingham group, in general we are 17 expecting market growth in the order of 4 per cent to 18 3.5 per cent for the first three or four years and then 19 2 per cent for years five, six and seven. 20 205 Victoria and Vancouver we are 21 obviously expecting higher growth in the first couple 22 of years as they are new stations or re-launched 23 stations. 24 206 So for Victoria we are projecting 25 10 per cent for the first year, 9 per cent growth in
1 the second year, 7 per cent growth in the third year, 2 and then it levels off to about 3 per cent and 2 per 3 cent for years five, six and seven. 4 207 For Vancouver, 8.5 per cent in the 5 first year, 7 per cent in the second year, 4 per cent 6 in the third year and then it levels off also at about 7 2 per cent. 8 208 So as you can see, we have different 9 scenarios for each market, having looked at them and 10 recognizing that each market is growing and is 11 projected to grow at different rates. And each of our 12 stations are different and are at different stages in 13 their growth. 14 209 So we have tried to take as precise a 15 view -- and, as I say, that goes back to our original 16 filings in November, at which time we were able to do 17 that analysis. 18 210 I'm not sure if that is helpful. 19 211 THE CHAIRPERSON: Well, we are both 20 trying to kind of grope to get there. 21 212 I guess I am trying to understand, 22 your year one I guess in all of these charts is 23 2002/2003? 24 213 MR. PALFRAMAN: Right. 25 214 THE CHAIRPERSON: I guess looking at
1 your six months statements of February 28th I note 2 that, for the group anyhow -- I guess it isn't broken 3 out by conventional stations, but there is a healthy 4 growth of the company's revenues. 5 215 I guess also the assumptions that 6 would have been made back at the time you filed your 7 intervention would probably have been quite different 8 about GDP growth in Canada, and in Ontario in 9 particular, than they are now, let's say, or that they 10 have been for the last few weeks or month. 11 216 I have Conference Board numbers that 12 show approximately 6 per cent GDP growth rates for 13 Ontario and British Columbia 2002/2003 and going 14 forward and I'm just wondering the extent to which 15 those are factored into these tables. 16 217 MR. PALFRAMAN: Yes, we do look at 17 all of those statistics and of course we look at all 18 the TVB data that gives us an even more precise reading 19 of the advertising market. 20 218 Obviously at the time that we did our 21 original projections as well, we also were in a period 22 of uncertainty economically for a variety of reasons. 23 Certainly it has been well publicized that advertising 24 revenues have been under pressure. I think we are 25 emerging from that and, in fact, as Jay indicated, in
1 filing our revised financial projections we were able 2 to take some of that apparent turnaround into account. 3 So some of those revised assessments have been taken 4 into account now. 5 219 But it may be helpful for Dave 6 Kirkwood just to give you some idea of some of the 7 additional data that we do take into account in 8 assessing what the market is like. 9 220 MR. KIRKWOOD: We are dealing with a 10 market reality that dictates that there is no growth 11 really in conventional television advertising. If 12 there is within that category it is reserved for big 13 network advertising and it has become fairly common 14 knowledge that local television advertising is actually 15 on a decline. The Toronto market is no different than 16 any other. It may be a little bit more in decline. 17 221 The TD Newcrest and the 18 Pricewaterhouse papers both indicate that this is the 19 case and aren't as optimistic as the Conference Board 20 is about the future. 21 222 Because we represent specialty 22 television, we are well aware that the growth is there. 23 I believe within network television the growth is 24 something -- last year it was 18 per cent in that 25 category. But such is not the case for local. In
1 fact, last year it returned to, I think, 1996 levels. 2 223 You are probably acquainted with the 3 TVB's time sales report that also indicates that sort 4 of high is the reality we live with. 5 224 MR. WATERS: Mr. Chair, if I could 6 just add to Mr. Kirkwood's comments, I think the 7 important thing in these new numbers you have received 8 is that the year that we are in currently, these are 9 the latest and most up-to-date numbers we have compared 10 to November when we filed. It was the beginning of the 11 year, we had had September 11th. 12 225 So as you can see from those new 13 numbers and if you go to individual stations, 14 particularly Victoria and Vancouver where we just 15 launched them in October and received the other one in 16 November, we weren't quite too sure how they were going 17 to do. They were brand new stations to us with 18 different formats. 19 226 So these new numbers are much more 20 accurate for those two stations and even for some of 21 the ones in Ontario. 22 227 I think what the key is, the first 23 year number that you are talking about in these new 24 projections, we take into account only one new station 25 in Toronto and that is the Rogers station. Then in the
1 year two we take in two new stations in Toronto, which 2 includes the Craig station. 3 228 So that is why you see those revenue 4 losses go from $2.3 million in year one to 5 $11.9 million in year two. 6 229 MR. HAMILTON: If I could just add to 7 what Ron said, we have the most up-to-date TVB time 8 sales survey right through September 1st to March 2002. 9 If you look at television across the country broad 10 landscape, total TV is down 3.3 per cent, network is 11 down 2.6 per cent, specialty is up 6.4 per cent and 12 spot, which is mostly what we trade in in our local 13 stations across the country, is down 6.1 per cent. 14 230 So that gives you some sense of the 15 current situation relative to advertising spent. 16 231 THE CHAIRPERSON: Right. It is 17 difficult, though, to try to assess these without the 18 detailed assumptions in particular underlying your 19 figures. 20 232 Your first line, Mr. Waters, is of 21 course confidential so I don't want to go into how 22 those numbers are derived but, as you said, your 23 Vancouver station, consistent, I suppose, with 24 start-up, takeover and the rest, put a downward impact 25 on the numbers. That is to some extent counteracted by
1 Toronto and by growth. 2 233 I guess one can't assess it without 3 perhaps going back -- without trying to belabour it -- 4 and getting total market size for your assumptions in 5 regard to total market size for year one, and so on, 6 that is on the public record, and then deriving the 7 share. So I am kind of back to my original question. 8 234 It may be that you don't have all the 9 numbers handy and that you may want to file something 10 as to going through the steps of deriving those numbers 11 and then factoring in the impact numbers as you like. 12 235 But I guess in the face of the GDP 13 growth, both on the part of the Conference Board, the 14 Bank of Montreal and others, up towards the 6 per cent 15 range, I am just wondering whether the extent of any 16 impact that the licensing of the new stations might 17 have on you might, to a large degree, be counteracted 18 by general growth in the economy that arise. 19 236 MR. SWITZER: Let me begin, 20 Mr. Chair. This is a obviously a very important matter 21 and maybe I can try to explain why it has always been 22 our preference in history to do effectively 23 line-by-line, city-by-city, client-by-client analysis 24 as opposed to a larger market share approach, which we 25 do and have filed some supporting third party work from
1 some consultants certainly to give the Commission 2 comfort. 3 237 Advertising is bought and sold first 4 to the larger players, to the big network players, to 5 the CTVs and Globals. They earn a disproportionate 6 share of revenue to their tuning. So it is very 7 important that we not be saddled or injured, if you 8 will, by market average analysis. The hit shows on the 9 CTVs and Globals are bought first. 10 238 For example -- and this is just a 11 hypothetical number -- if the CTV or Global share is 12 perhaps, in any given province, 12 per cent of tuning, 13 they might enjoy 18 or 20 per cent of advertising, 14 because they are the ones being bought first. 15 239 So a more specific and detailed 16 station-by-station bottom-up approach in addition to a 17 top-down temperature check of whether it makes sense 18 and has comfort has been more useful to us because that 19 is the way our stations operate. That is the 20 environment we work in. 21 240 Certainly in markets like Ottawa, 22 which we are doing very well, and markets like 23 Vancouver and Victoria which are yet to come, we have 24 assumed growth rates, as Peter discussed, up to 14 per 25 cent and 15 per cent per year. That is set against
1 what we know as a much, much lower average in markets 2 where there is going to be tough competition in terms 3 of the no growth models in some other. 4 241 So an industry kind of economic 5 factor might be good at a macro level, but we are 6 dealing day-to-day fighting for advertising after the 7 agencies and advertisers have spent their money 8 nationally. 9 242 THE CHAIRPERSON: So you are saying 10 you don't get your revenue share that is correlative to 11 your tuning share? 12 243 MR. SWITZER: This team will, I'm 13 sure, add much more professional comments, but no, we 14 do not. Others are able to get a larger share of 15 advertising relative to their share of tuning because 16 they have top 20 hit programs and we are more 17 local-driven. 18 244 THE CHAIRPERSON: Gentlemen, you have 19 sold your management on that. Congratulations. 20 --- Laughter / Rires 21 245 MR. KIRKWOOD: Typically the larger 22 shows, obviously "The West Wings" and such, command 23 premiums and as such get a larger share of the revenue 24 than their share of tuning would suggest. That is just 25 the way the market has been for some time.
1 246 I am just thinking as you speak of 2 market sizes, we are really dealing with two, the 3 market size of tuning and the market size of revenue. 4 The market size of tuning has remained the same 5 basically, regardless of how many channels have been 6 introduced to the market. So we are dealing with an 7 average, say, of 22 hours a week of tuning. So 8 regardless, we have some cost -- we have a loss there 9 of tuning with the further fragmentation. 10 247 The revenue has been such that it has 11 not increased in any significant way for years. In 12 fact, television's share of the overall advertising pie 13 has actually been in decline. Even if there were a 14 6 per cent increase in, say, the local area, and all of 15 that was applied to the local dollars in Canada, it 16 would still only return us to 1999 status. 17 248 So even with those which we consider 18 to be ambitious projections we are not exactly moving 19 forward. 20 249 MR. MILLER: Mr. Chair, maybe I could 21 just also help and divide these various factors up in a 22 way that may be helpful. 23 250 First of all, just to look at the 24 impact. Again, to be clear, the detailed impact that 25 we filed from our sales team that became the basis for
1 the impact here, did not depend on the financial 2 projections of the applicants but our detailed 3 program-by-program analysis of what those stations do 4 to us. 5 251 I should say that that impact 6 analysis was unchallenged in the Toronto/Hamilton 7 hearing. What we did for the purpose of Friday's 8 filing and our comments leading up to this hearing is 9 figure out how the combination of two stations rather 10 than just one has an additional impact. We can get 11 into that later. 12 252 That I think is clear. 13 253 THE CHAIRPERSON: We will get into 14 that later. 15 254 MR. MILLER: In terms of your issue 16 of the base, first of all let's again remember where we 17 are coming from. As we pointed out in our corporate 18 statement at page 31, CITY-TV, for example, hit its 19 peak in revenues of $84 million in 1997-1998. We went 20 down to the $76-$77 million range and we are just 21 coming up a little bit. 22 255 Why? Because CITY-TV is a format, 23 movie-driven, local, that is under tremendous threat. 24 Superstations such as the Superstation channel 47 are 25 carrying a lot more movies. They have a real impact on
1 CITY. The National Network has been re-launched as The 2 National Network and is carrying a lot of "Star Trek" 3 programming that we carry. 4 256 So our stations, when we look at it 5 and the challenges we face, we have a history of major 6 challenges and we see that going forward. 7 257 Thirdly, the market conditions. In 8 addition to the sales analysis in the Jansen report 9 that we filed, because we realized this was such an 10 important issue we asked PWC to look at the market 11 condition, look at where our conventional is going, 12 look at where our specialty is going. Again they point 13 out -- and I could point to their slide page 11 where 14 they show that the advertising growth of the Toronto 15 stations has slowed dramatically and our stake, our 16 part within it is even greater impacted. 17 258 So to conclude, while we obviously 18 accept the overall evidence of the Toronto market and 19 the profitability of the Toronto broadcasters as a 20 whole, we regrettably haven't shared in those profits. 21 In fact, not only has City lost revenue and we are in a 22 real turnaround situation with City, absent new 23 licensing, our Ontario NewNet stations, if I remember 24 correctly, lost something like $46 million since 1997. 25 259 So even before the Toronto licensing
1 decision we were in a turnaround situation with our 2 stations and trying to grow them. The Toronto decision 3 and the two licences that have been granted obviously 4 create an additional setback that then we have now 5 reflected in these new financials. 6 260 THE CHAIRPERSON: Thank you. 7 261 We will go into the impact analysis 8 in a moment. I am interested in how you derived that. 9 262 But I guess I am still a little stuck 10 on this issue of market size and how you established 11 the size of the market on which to base your own 12 projections. 13 263 I appreciate you do a bottom-up 14 analysis as well as the top-down, but in your top -- 15 have you done a top-down analysis to back up the 16 revenue projections? 17 264 MR. MILLER: When we initially 18 filed, yes. 19 265 Go ahead, I'm sorry. 20 266 MR. PALFRAMAN: Yes, Mr. Chair, 21 perhaps just as a starting point and then Peter can add 22 to it. 23 267 Just in a simplistic way, the way we 24 have done the projections is based on two things. It 25 is based initially on what we really know. What we
1 really know is what we did, what our actual was, our 2 most recently completed actual year, which was August 3 2001. That was our starting base for our revenues. 4 268 Then we did all the analysis, and the 5 sales team do all their work in determining what a 6 reasonable level of growth is, taking all of those 7 factors into account. 8 269 So our starting base point for all 9 the revenue projections is August 2001. Then we take 10 into account those growth factors and from that it is 11 really just a calculation of moving forward to what we 12 think will be a realistic projection based on what we 13 know and based on what can reasonably expect. The 14 first year out obviously you can always be more 15 precise, further out years are a little tougher. 16 270 So the 2001/2002 projections that you 17 have in the first column, those are based on the 2001 18 actuals and then the growth factors that we have 19 calculated based on all the information we have. 20 271 So we have that on one side and that 21 is our starting point. 22 272 Then we validate that with all of the 23 detailed calculations that we go through on the 24 bottom-up basis to make sure that the schedules we have 25 and what we think we are going to deliver in
1 advertising supports that project that we have. 2 273 So it is not terribly magical. It is 3 based on something that is an actual and that we know 4 we have done and then our best estimate and our 5 experience of what that might lead to in the very next 6 year. So there is nothing terribly magical about it, 7 except that we do validate it. 8 274 I don't want to take away from the 9 great work that the sales team do, but we do then 10 validate that based on what we know we will deliver. 11 275 THE CHAIRPERSON: When I look at your 12 national versus local numbers, it is about a six-to-one 13 ratio. Is that about right? Fifteen to 20 per cent 14 local to 85 per cent national? 15 276 MR. PALFRAMAN: Yes, it is about 16 80/20, that's right. 17 277 THE CHAIRPERSON: So that would 18 suggest to me that Canadian GDP numbers would be 19 relevant in the sense that national advertising would 20 account for over 80 per cent of your revenues. 21 278 I guess what I'm not hearing is how 22 those macro statistics get factored into projections 23 going forward when one has projections from a variety 24 of institutions that are showing fairly optimistic 25 growth rates.
1 279 I take your point about "The West 2 Wing" capturing a premium, but I have always been 3 taught that basically if you can't get your revenue 4 share to roughly match your tuning share, change your 5 marketing department. 6 --- Laughter / Rires 7 280 THE CHAIRPERSON: CITY and your 8 stations may be a notable exception to that, but 9 "grosso modo" I would have thought that there were some 10 correlations in that that would hold. 11 281 MR. SWITZER: Great, lots of people 12 want to contribute. 13 282 MR. HAMILTON: I want to make a 14 comment relative to the ratio of local to national. In 15 the case of CITY-TV local and national are reported 16 together, so it understates the total percentage of 17 local. In fact, in the case of CITY-TV we are quite 18 proud that our local represents about 25 per cent of 19 our overall revenue. 20 283 If you adjust our numbers then 21 accordingly and add those revenues back into the total, 22 we actually represent about 30 per cent of our sales 23 would be local. 24 284 Three years ago we just made the 25 decision to bring our CITY-TV retail and national sales
1 teams together as one unit. That did not mean we were 2 abandoning local, it just meant we were taking on a 3 different sales and marketing strategy. In fact we 4 created a new business development team who were doing 5 both local new business development and national and 6 giving us more of a broader emphasis on developing new 7 dollars. 8 285 So we didn't abandon local. Local is 9 still a big part of what CITY-TV is all about, but we 10 report the numbers as one number 11 286 THE CHAIRPERSON: Mr. Hamilton, I am 12 having a hard enough time, don't complicate -- 13 --- Laughter / Rires 14 287 THE CHAIRPERSON: I have to go by 15 what you have filed, by what you filed here. 16 288 MR. HAMILTON: Yes, I know. I am 17 just trying to give you some sense of what those -- at 18 least in the case of CITY-TV, what those number mean. 19 289 We used to really confuse you in 20 terms of we used to have national, regional and local 21 dollars. We had three divisions generating revenue on 22 behalf of our organization. We felt it would be better 23 to streamline it in the case of CITY-TV into one 24 organization, but we do keep track of our local versus 25 our national numbers, and local does represent about
1 25 per cent of CITY-TVs revenues. 2 290 MR. SWITZER: Mr. Chair, specifically 3 to your question, we have always preferred the 4 precision of the detail of the specifics. 5 291 For example, early on in the buying 6 process the big Globals and CTVs will be at the major 7 agencies doing very large national deals, $50 million 8 deals, $100 million deals. We are not fortunate enough 9 to be part of that club as mid-sized players. We do 10 not play in that upfront national business. The team 11 will use much more carefully crafted words. That is 12 their business. 13 292 We may have national advertisers, but 14 they are done on a spot basis. Those kinds of macro 15 effects as to whether the General Motors and Labatt's 16 beer and Tide detergents spend 3 per cent more or 2 per 17 cent less is a much bigger factor to the national 18 players than it is to the mid-sized players who are 19 effectively fighting for what is left over. 20 293 THE CHAIRPERSON: Mr. Switzer, let me 21 try it another way. 22 294 Your revenues of all stations of 23 $175 million for year one represent what share of what 24 you believe those total markets are going to be? 25 295 MR. MILLER: We can calculate that
1 for you, but I guess what we are saying is that is not 2 the way we have developed these estimates. We have 3 developed them based on -- 4 296 THE CHAIRPERSON: No, no, I 5 understand that. 6 297 MR. MILLER: But we could certainly 7 calculate that for you fairly quickly. 8 298 THE CHAIRPERSON: Right. 9 299 MR. MILLER: But if I can give you a 10 couple of sanity checks, because maybe that will help 11 in the -- 12 300 THE CHAIRPERSON: Comfort checks. 13 301 MR. MILLER: Yes, comfort checks, 14 sanity checks, whatever is the right word. 15 --- Laughter / Rires 16 302 MR. MILLER: In the global and CTV 17 renewals, they projected fairly flat 2-2.5 per cent 18 increases. That was unchallenged. What we are saying 19 is, given the nature of our stations -- 20 303 THE CHAIRPERSON: New people, new 21 challenges, Mr. Miller. 22 304 MR. MILLER: I'm sorry? 23 305 MR. SWITZER: New challenges. 24 306 THE CHAIRPERSON: New people, new 25 challenges.
1 307 MR. MILLER: New challenges, yes. 2 308 Given the nature of our stations the 3 niches that they occupy, given the way we sell 4 advertising and, again, how the buying process is, and 5 also given the fact that we don't have the top 20, 6 top 30 shows which really drive the revenues for the 7 major players, we are different. 8 309 So you can't do the traditional 9 analysis of saying: If the pie is going to grow like 10 this, we are going to get this chunk of it. It doesn't 11 work for us. 12 310 What we are trying to show to you, 13 demonstrate to you, is the way we do it, based on our 14 history, based on our understanding of the market and 15 based on what the competition will be, is the more 16 accurate way. 17 311 Because what we are going to face now 18 is two new entrants who are not competing with CTV and 19 Global for programming, they are not competing with CTV 20 and Global for advertisers, they are competing with us, 21 because we have similar programming, similar 22 advertising sales ability. So that is why the revenue 23 will come from us. 24 312 Again, what is the right -- it's not 25 sanity check, what did we --
1 313 MR. SWITZER: Comfort check. 2 314 MR. MILLER: Comfort check. 3 --- Laughter / Rires 4 315 MR. MILLER: If we had compared the 5 impacts on us with what the revenue projections of the 6 others were -- and we did this comparison -- in the 7 early years roughly 25 per cent -- again, just a 8 comfort check, we are not talking a direct move, but 9 basically the impact on us in the early years 10 represents about 25 per cent of the revenue projected 11 by the applicants. In the later years it represents 12 only about 17 per cent. 13 316 So again, as a comfort check we are 14 not suggesting relative to what those players will do, 15 we think an overly aggressive impact, it is 16 unfortunately simply the reality of our business. 17 While averages are very useful, averages don't tell the 18 story, I think, for us. 19 317 MR. KIRKWOOD: I have to share 20 information that you are looking for. It will also 21 redeem the sales department. 22 --- Laughter / Rires 23 318 THE CHAIRPERSON: Boy they act 24 quickly. 25 --- Laughter / Rires
1 319 MR. KIRKWOOD: Their jobs are on 2 the line. 3 --- Laughter / Rires 4 320 MR. KIRKWOOD: CITY-TV's share -- at 5 least we can base it on the one station -- in the fall 6 of 1998 was 6.3 per cent. Basically that share of 7 tuning -- that is what that is, 6.3 -- fell 14 per cent 8 to today. Our share of revenue, without revealing the 9 confidential information of this year, year-to-date, 10 has only dropped 1.9 per cent. 11 321 So our return of revenue per share 12 point has actually increased 14 per cent. 13 322 So in the headwind, let's say, of 14 changing buying paradigms that have favoured specialty 15 national network television and top 20 programming, we 16 have still been able to take CITY-TV, which depends 17 largely on local and national spot local, and mine our 18 resources to get a stronger revenue return. 19 323 THE CHAIRPERSON: Peter Miller 20 mentioned historic figures that prove that your share 21 of revenues don't correlate with your share of 22 tuning -- am I interpreting you correctly -- on 23 anywhere near a one-to-one basis? 24 324 MR. KIRKWOOD: We don't have that 25 particular item here, but we could produce that.
1 325 We wouldn't be the only ones. When 2 you consider -- in fact, I don't think there is a media 3 director who would disagree with this because I have 4 confronted a number of them with it, that their buying 5 plan now, especially where there are more stations to 6 buy, and they have fewer people to do it and shrinking 7 margins themselves, they want to make it as convenient 8 and easy as possible. 9 326 They lay out a huge base of national 10 network, regional network buys. That covers off a lot 11 of smaller markets and selective buys. Then they go to 12 specialty more often now than they used to, right 13 around the time they do the network buys, where they 14 can buy at a currency that is -- I'm not proud to 15 say -- about half of what it is buying average 16 conventional television. That compensates for the 17 premium that they have paid on the big guys. 18 327 What is left, then, are the people in 19 between. As Jay called us, the mid-sized players. 20 328 So the efficiencies we come up with 21 there are very, let's say, competitive. I think that 22 any other mid-sized player would find the same thing. 23 329 Specialty channels also have smaller 24 shares. They don't get the same level of currency, of 25 return on their share points as a big player. We can't
1 all have greater than our share and unfortunately that 2 privilege belongs to the biggest. 3 330 THE CHAIRPERSON: Have you done any 4 correlation between GDP and total Toronto market, 5 national sales? 6 331 MR. KIRKWOOD: No. 7 332 THE CHAIRPERSON: Growth figures 8 in each? 9 333 MR. KIRKWOOD: No. You mean 10 specifically what the GDP has been and -- 11 334 THE CHAIRPERSON: GDP might not be a 12 bad proxy for total national dollars in the Toronto 13 market year-over-year in any period. 14 335 MR. KIRKWOOD: We don't have that 15 figure, but that would be an interesting correlation. 16 336 THE CHAIRPERSON: If you want to file 17 supplementary material, as they say, on -- 18 337 MR. KIRKWOOD: We would be delighted. 19 338 THE CHAIRPERSON: Anything that can 20 enlighten this discussion would be helpful, because I 21 was struck by that, as I say. 22 339 Turning to your revenue changes based 23 on updated projections, you have numbers in years one 24 and two of $580 and $1,481. I guess those represent, 25 what, half a per cent, .3 per cent and under 1 per
1 cent, increases year-over-year from your overall 2 revenues? 3 340 MR. SWITZER: Yes. Those are in 4 addition to the base increases that were part of the 5 base model. These are the changes compared to the 6 previous filing. 7 341 THE CHAIRPERSON: Right. When we 8 turn to that impact analysis, -- which is I guess what 9 you filed the 16th of April? 10 342 MR. MILLER: That is correct. 11 343 THE CHAIRPERSON: Right. I take it 12 what you did was you took your intervention document 13 figures from the Toronto/Hamilton hearing, you combined 14 what you had as impacts of licensing a Craig station, 15 added to a Rogers station, and you got a total impact 16 on CHUM of $8.3 million. Then you added an additional 17 impact factor of some $23.1 million for your total of 18 $11.5 million. 19 344 I have read your methodology which 20 you filed with that, but I am not clear about a number 21 of the points in it. 22 345 Seven per cent for daytime I believe 23 was a number that you used? 24 346 I'm looking at the page that doesn't 25 have a number, but up at the top right is "2002-04-17,
1 Advertising Sales Impact as per Intervention". 2 347 MR. CAPORICCI: Yes, that was the 3 original impact analysis that was done at the 4 intervention stage. 5 348 THE CHAIRPERSON: Right. I guess 6 when I look at the footnotes under "CITY": 7 "7 per cent impact on daytime, 8 6:00 to 7:00 p.m. due to high 9 percent of foreign acquired; 10 5 per cent impact in prime-time 11 due to a high percent of foreign 12 acquired; and 13 5 per cent impact in late news 14 and late-night due to high 15 percent of foreign acquired." 16 (As read) 17 349 I'm not sure I follow that. 18 350 First of all, how were those numbers 19 derived and could you explain how you expect that that 20 would work? 21 351 MR. CAPORICCI: What we started out 22 with was, we have a detailed line-by-line, show-by-show 23 revenue forecast that we do at the beginning of each 24 season, and then what we did was basically lined up 25 each -- at the time of the intervention for each
1 application, so we did it six times. We lined up their 2 draft program schedule and looked at what type of 3 programming they had. 4 352 So depending on the applicant, in 5 some cases if it was mostly Canadian programming or the 6 type of programming, we estimated what we thought the 7 rating would be and what effect it would be on us 8 specifically for each day part. 9 353 So when we talk about a 7 per cent 10 impact, it was based on -- it was all relative. A 11 7 per cent impact was higher than most others and that 12 was when we were assuming a high foreign percent 13 acquired. 14 354 THE CHAIRPERSON: Seven, five and 15 five sound kind of precise as numbers. 16 355 MR. CAPORICCI: Yes, they do. I 17 think the easiest way to explain it is, we used precise 18 figures, but really what we are estimating is it is an 19 estimated impact. So really it is in a range more 20 often than not. 21 356 I could never state that we are that 22 precise that it is exactly going to be 7 per cent, but 23 roughly 7 per cent, yes. 24 357 THE CHAIRPERSON: Right. Those were 25 taken on the basis of draft schedules that were put in
1 the application. 2 358 MR. CAPORICCI: That is correct. 3 359 THE CHAIRPERSON: So I guess 4 (a) those may not necessarily be the programs in the 5 schedule; and (b) you have Messrs Znaimer and other 6 programmers who will presumably counter program to 7 mitigate the impact of that. 8 360 Did you factor any of that into it? 9 361 MR. SWITZER: Yes. Mr. Chair, these 10 are both experienced broadcasters and in the case of 11 one have already begun acquiring programs for their 12 pending launch. 13 362 In one particular case, we have 14 already lost a very popular significant daily U.S. 15 syndicated show to one of the competitors. So not only 16 do we have problem of replacing it, they are going to 17 have known estimates. 18 363 The analysis was precise in that and 19 we used historical day parts presuming that they would 20 have a mix of good, medium and bad spread across 21 critical time periods, that they would put their best 22 programming in the day parts that would generate the 23 most revenue to them, and line-by-line, case-by-case in 24 terms of the things that they both said and showed in 25 their draft schedule and reasonable assumptions as to
1 the mix of, in the case of Rogers, what they are 2 already doing, and in the case of Craig to the best of 3 our ability what they are already doing and what they 4 said they would do. 5 364 So there is no explosion or huge 6 assumptions, it was, within a category of program, 7 damage line-by-line. 8 365 MR. MILLER: If I could add, 9 Mr. Chair, because I remember working -- this is 10 obviously not my expertise, but I remember working with 11 the sales team on this and I was stunned at how low the 12 numbers were. 13 366 But what they did is, they took the 14 schedules -- and some of the members that were on that 15 panel, remember the schedules didn't have a lot of 16 detail. So, first of all, we weren't actually dealing 17 with very detailed program schedules, it was mostly our 18 sense of what they would do in the various time periods 19 given the commitments they made. 20 367 Obviously with Rogers we know from 21 8:00 to 10:00 it is an ethnic block. With Craig 22 application we knew they had Toronto One in the 23 schedule so we could make judgments accordingly. 24 368 I keep on coming up with the word 25 sanity check because I keep on forgetting the other
1 word. We also had, of course, the Hans Jansen analysis 2 which we refiled in this proceeding as part of 3 January 18th filing. I don't need to take you to it, 4 but if I read from it, for example he did the top-down. 5 369 So he estimated that Craig would 6 achieve something like a 3.1 per cent share of tuning, 7 and then based on that said that the impact should be 8 in the neighbourhood of the $10 million range. 9 370 So again, it was part of our way to 10 try to come to a figure that made sense in the 11 broadest context. 12 371 THE CHAIRPERSON: Was that the Bay 13 Consulting Report? 14 372 MR. MILLER: Precisely, yes. 15 373 THE CHAIRPERSON: I remember looking 16 at that in another lifetime and not being able to find 17 underlying reasoning for those figures. I am going by 18 memory, but did he provide a rationale for those 19 numbers? 20 374 MR. MILLER: He had to estimate share 21 of the tuning of the new applicants. Again, there is 22 no science to that. It is kind of an art based on what 23 they filed in terms of revenue projections. But if I 24 remember correctly, he made sure that his share 25 estimate was roughly consistent with his -- the revenue
1 estimates sort of, in a sense the more traditional 2 analysis that we were talking about earlier today. 3 375 THE CHAIRPERSON: I appreciate what 4 you have tried to do here on the bottom-up, it is just 5 strange that you would attach a 5 per cent number due 6 to a high percentage of foreign acquired for one 7 category and then 12 per cent for another. I guess it 8 is, at the end of the day, touch and feel and a moving 9 target. Would that be -- 10 376 MR. CAPORICCI: Yes. Our ratings 11 in -- on CITY-TV specifically we have, I guess it is a 12 disproportionate amount of fringe ratings versus 13 prime-time ratings versus other broadcasters. Other 14 broadcasters have a higher percentage in prime of their 15 ratings and in fringe we have -- and they have a lower 16 percentage in fringe. 17 377 We don't have that gap. So the 18 effect on daytime is going to be larger than it would 19 be in prime-time. We think we can maintain our ratings 20 moreso there with the increased competition than in 21 fringe where we are more susceptible. 22 378 MR. MILLER: If I could translate 23 that, Mr. Chairman. 24 --- Laughter / Rires 25 379 MR. MILLER: Here is a perfect
1 example of the two different stations. The NewNet is a 2 more lower rated station with less popular U.S. 3 programming. So the impact of a new entity that has 4 programming more similar to it is going to be higher, 5 hence 12 per cent. CITY-TV is a stronger station. A 6 new station is unlikely to get as high quality 7 programming as CITY-TV so the impact is lower. 8 380 I guess these gentlemen live and 9 breathe this and so they could come up with these 10 numbers. I couldn't come up with these numbers. What 11 I tried to do is make sure when it all came together it 12 passed all the necessary smell tests, if you will, and 13 that we were being consistent. 14 381 So when we looked at it at every 15 possible level it all seems to make sense. Again, from 16 the expertise of our sales department, it is consistent 17 with their experience. 18 382 THE CHAIRPERSON: How was the 19 additional impact gauged? I think you have 3 per cent 20 on CITY's existing sales. 21 383 MR. CAPORICCI: It was based 22 entirely on the supply, the increase in supply. Our 23 entire industry is based on supply and demand, so when 24 we did the original impacts they were based on one 25 station being licensed. With the two stations being
1 licensed, we see it as more of a flood of avails into 2 the market so it is entirely based on supply. We 3 calculated it to be based on draft schedules, again 4 45 per cent more 30s, 30-second actual units available 5 in prime-time alone. 6 384 So what we are saying as an impact 7 is, it is not a direct revenue flow to the two new 8 licences, it is a depressing of the entire market. 9 Again, we are more susceptible to that than our 10 competitors because of where we are in the pecking 11 order in the buying process. 12 385 THE CHAIRPERSON: But I had assumed 13 that you would do supply with Craig and supply with 14 Rogers. Why am I getting the funny feeling that one 15 plus one equals 2.3? 16 386 MR. CAPORICCI: You are correct. We 17 did take into -- at the intervention stage we took into 18 account supply, we took into account the decrease in 19 our ratings with more competition. 20 387 But again, I can't emphasize enough, 21 when you have that many more avails coming into a 22 market in an already really fragmented, cluttered 23 market, we are basically at the mercy of the market. 24 So now agencies, our buyers and clients, they are able 25 to be more in control. They can now control price
1 moreso with two stations than if it was just one. With 2 one we felt we could have stemmed the tide on the 3 supply side, but when you have two new stations with 4 that much more actual 30-second units available in the 5 market, we lose our ability -- it is a paradigm shift 6 basically. 7 388 Now we are looking at more -- 8 agencies can hold us more at ransom, I guess is the 9 best way to put it, be it on upfront pricing -- our 10 initial pricing when we get to year two with two 11 stations in the market, we are going to have revisit 12 how we do that and where the market is trading. We may 13 be looking at 5 per cent to 10 per cent decrease in 14 upfront pricing before the market even takes hold and 15 drives us down further. 16 389 THE CHAIRPERSON: I can understand 17 where the sudden flood of supply would perhaps have a 18 temporary effect on the market, but you are not saying 19 that. You have already fully accounted for a Craig and 20 fully accounted for a Rogers and now you are saying the 21 sudden rush of supply is going to extend for seven 22 years. I can't quite figure it out. 23 390 MR. MILLER: Actually, we are not 24 saying that, Mr. Chair, but we have built that into 25 second year because, again, we have assumed for the
1 purpose of these revised financials that only Rogers 2 launches this September, Craig launches the following 3 September. That is where we have that sudden influx 4 which comes to 11.9, if memory serves. 5 391 But then that factor decreases to 6 zero over the seven years. So by the time you get out 7 to the seven year, all we have is the mathematical 8 addition of the impacts as we project them out in 9 accordance with the same percentage revenue estimates 10 of the applicant's revenue projections. 11 392 THE CHAIRPERSON: I see. I didn't 12 see how you would get that. I do see that you are only 13 factoring in 2.3 for the first year as a revenue loss 14 and then 11.9. But I guess the 11.9, does that not 15 include the additional impact? 16 393 MR. MILLER: The 11.9 in the second 17 year does. 18 394 THE CHAIRPERSON: Right. 19 395 MR. MILLER: But by the seventh year 20 that additional impact is no longer there. So if staff 21 wanted to verify -- 22 396 THE CHAIRPERSON: Oh, I see what you 23 are saying. 24 397 MR. MILLER: -- the projections that 25 we filed for the individual new licences in terms of
1 their revenue and what the percentage impact would be 2 by the seventh year, we have just done the 3 mathematical -- 4 398 THE CHAIRPERSON: When does it go to 5 zero? 6 399 MR. MILLER: It goes to zero in the 7 seventh year. 8 400 THE CHAIRPERSON: That's what I said. 9 401 MR. MILLER: It is a slow decline. 10 402 THE CHAIRPERSON: It is seven years 11 that additional -- 12 403 MR. MILLER: But it declines to zero. 13 It doesn't go overnight to zero, but basically we are 14 saying it is going to take that long for the market to 15 absorb all this additional inventory and for it not to 16 have that kind of effect. Because remember -- 17 404 THE CHAIRPERSON: Seven year trauma. 18 You are only going to come out in seven years as a 19 result of the two versus one licensing scenario. So 20 that the $3 million -- I don't have the numbers here 21 because they are not broken out on what you have 22 filed -- I don't think they are -- but if you did you 23 would show $3.1 million declining slowly to zero over 24 seven years. 25 405 What is it in year three for
1 instance? Or year four, three or four? 2 406 MR. MILLER: I just think we do a 3 mathematical decline, so by year four it is something 4 like $2 million. 5 407 I think it is a straight decline. Am 6 I correct? 7 408 MR. PALFRAMAN: Yes. 8 409 By year seven, as Peter said, it is 9 just a straight addition of Rogers and Craig. For 10 example, if you go to year three, the total revenue 11 change is $12.6 million. The straight addition of 12 Rogers and Craig would be just over $11 million. So it 13 $1.6 million at that point. The additional amount has 14 gone down by the second year to $1.6 million. 15 410 In year four, the straight addition 16 of Rogers and Craig would be $12.3 million based on 17 what we filed, the seven year spin-out of what we 18 filed. So that would be $12.2 million. Our actual 19 revenue losses are $13.3 million. So you can see it is 20 coming down slightly. 21 411 Then by year seven the addition of 22 Rogers and Craig, the straight mathematical addition of 23 those two is $15.2 million and we have $15.6 million. 24 The $400,000 difference is the NewNet impact that we 25 have now applied.
1 412 MR. SWITZER: Mr. Chair, we have had 2 some experience with fundamental changes in market 3 conditions with the flooding of new channels and I have 4 had to live and grow through them. 5 413 Maybe Mr. Kirkwood can add some 6 detail. 7 414 MR. KIRKWOOD: Yes. We have had a 8 history with this in the area of specialty television. 9 Actually, I was fortunate to be there at the beginning 10 of MuchMusic and when there was just MuchMusic and TSN 11 we enjoyed selling advertising at cost per thousand 12 currencies that were comparable to broadcast. When 13 that specialty group tiered up to 1995 and achieved a 14 certain critical mass, the cost per thousands actually 15 started dropping. 16 415 I don't think anything affects price 17 so much in this business as supply. When there was 18 that mass to deal with the competition, for some pretty 19 ambitious budgets, had prices dropping precipitously. 20 Much to the concern of conventional broadcasters at the 21 time, we still have not seen those actually come back 22 up. In 1997 another tier of specialty channels. 23 416 The advertisers have benefitted and 24 that is part of the reason I think we haven't actually 25 seen so much growth in advertising, overall television
1 advertising dollars. 2 417 That is by way of explaining the 3 additional impact, when it reaches that critical mass 4 it is at a certain tipping point. 5 418 THE CHAIRPERSON: Another question on 6 share, going back to the Rogers and Craig impacts. I 7 gather that you projected that 16 per cent of the full 8 impact of awarding a licence to Rogers would be 9 incurred by CHUM and 19 per cent of awarding a new 10 licence to Craig would be directed towards CHUM 11 stations in your original analysis. 12 419 How did you arrive at these 13 percentages? 14 420 MR. MILLER: I believe they were what 15 the result was. We didn't start with those numbers, 16 they were what the result was when we did our sales 17 analysis. 18 421 THE CHAIRPERSON: That kind of 19 analysis. 20 422 MR. CAPORICCI: Yes. We didn't even 21 look at what they had filed as their revenue 22 projections. We did it based on the impact it would 23 have to us. 24 423 Again, it is not a direct revenue 25 flow to those two stations, it is the effect on the
1 entire market. 2 424 If I can just add one other thing in 3 terms of the specialty experience. You had asked 4 earlier about share of tuning versus share of revenues 5 and specialty is the perfect example to explain that. 6 425 Specialty has, let's say it is a 7 30 per cent to 35 per cent share of tuning. Because of 8 the amount of supply with all of those specialty 9 stations, specialty only garners about 15 per cent, 10 16 per cent of the total advertising pie. 11 426 So that is the best example I think 12 that puts it back -- that talks specifically to supply. 13 427 THE CHAIRPERSON: You mean adding the 14 revenues of specialties together with the revenues of 15 conventional you would find that the shares of tuning 16 are twice as high for specialties than their percentage 17 of that total revenue pot? 18 428 MR. CAPORICCI: That is correct. 19 429 THE CHAIRPERSON: And conventional 20 would be the reverse? 21 430 MR. CAPORICCI: Yes. Especially when 22 we are talking about -- that is when we get into the 23 CHUM -- 24 431 THE CHAIRPERSON: All the more reason 25 for being optimistic about conventional stations.
1 432 MR. CAPORICCI: But that is why it 2 goes back to the effect that it has on CHUM 3 specifically back to the advertising buying patterns. 4 The effect on a mid-sized player -- when we talked 5 earlier I think David had mentioned the pecking order 6 of the buying process. So you start with your big 7 national networks that have the high profile 8 programming, then, so slowly but surely, that is 9 inching up the specialty share of revenue. Specialty 10 is moving up the pecking order in terms of when it is 11 bought. A mid-sized player like ourselves, with our 12 type of programming, is falling down further in the 13 pecking order. 14 433 THE CHAIRPERSON: Thank you. 15 434 We will break now for 15 minutes. 16 Nous reprendrons dans 15 minutes. 17 --- Upon recessing at 1100 / Suspension à 1100 18 --- Upon resuming at 1115 / Reprise à 1115 19 435 THE CHAIRPERSON: Order, please. A 20 l'ordre, s'il vous plaît. 21 436 Moving right along, I am looking 22 now at your projections at the "Programming Increases" 23 line, "Impact of the Two New Stations". I didn't see 24 an explanation for how those estimates were calculated. 25 You estimate that they will reach $4,743,000 in
1 year two. 2 437 Could you explain how those were 3 arrived at? 4 438 MR. SWITZER: Mr. Chair, yes, of 5 course. 6 439 We are basing it on our early 7 experience, as I said earlier, in our first three or 8 four weeks of our program renewals. These renewals are 9 not for prime-time blocks for the NewNet stations or 10 for CITY-TV, but simply for what are normal considered 11 orderly renewals for daytime programs. 12 440 We have already lost one significant 13 program that has been acquired by one of the new 14 licensees. We have increases on a daytime program 15 already, one simple renewal that would normally be 16 2 per cent or 3 per cent that has come in at 12 per 17 cent or 14 per cent and is already about a $500,000 18 increased number. 19 441 We have two other renewals that we 20 are in negotiations on. The normal asking price is 21 2 per cent, 3 per cent or 4 per cent. Because of 22 pending launch of the two new licensees the initial 23 asking price by particular studios have come in at 24 20 per cent. Basically they have said to us "If you 25 pay us 20 per cent we won't go to market with these
1 renewals, otherwise we may go to market". So of course 2 we may not end up there. 3 442 So to be precise, we have estimated 4 a programming increase effect of about $2.5 million 5 next year and with the expected launch in the second 6 year of the second station about $4.7 million. That 7 never goes away and that effectively continues for the 8 length of this. 9 443 THE CHAIRPERSON: So your answer is 10 basically market experience and you took -- 11 444 MR. SWITZER: Market experience, 12 specific experience in the first three or four weeks, 13 and very reasonable expectations. 14 445 With my principals here I wouldn't 15 suggest that that number could be considerably higher 16 than that. That is a very fair and conservative 17 number. We are already at, with some specificity, 18 about $1.5 million. 19 446 THE CHAIRPERSON: So you hit the 20 $4.7 million and then projected forward on a percentage 21 basis. Is that right? 22 447 MR. SWITZER: Correct. That 23 raises base prices for some of these programs and it is 24 very difficult with two new players to ever see those 25 go backwards.
1 448 THE CHAIRPERSON: They do go down a 2 bit, I guess, over the period. 3 449 MR. SWITZER: Yes. 4 450 THE CHAIRPERSON: They kind of 5 flatten, start to decline after year three. 6 451 MR. SWITZER: Yes. 7 452 THE CHAIRPERSON: I'm just wondering 8 how you derive the shape of that curve. 9 453 MR. SWITZER: We have some comfort 10 with what we expect over the first three years, the 11 first year with the launch of one station, the 12 following year the second, and the third year some 13 comfort. As we, of course, get further out in the 14 model it becomes a little more difficult. The 15 important thing is, we believe the order of magnitude 16 is somewhere between $4.5 million and $5 million. 17 454 THE CHAIRPERSON: So the assumptions 18 for the derivation of that curve you can't share with 19 me as to how those precise numbers were derived? 20 455 MR. SWITZER: Yes, I am happy to give 21 you specifics as to the model in the later years. 22 Mr. Palframan will add detail. 23 456 The most important crucial steps were 24 how we ramp up the $1.5 million we have experienced to 25 date in the first few weeks, the expected roughly
1 $2.5 million in the first year, rising to $4.7 million 2 in the second, and then small fluctuations beyond that. 3 457 Peter, can you add something? 4 458 MR. PALFRAMAN: Yes. All I would add 5 is that Jay is exactly right, it is our experience and 6 our best estimates. Obviously, as with any 7 projections, you are using your best estimate of what 8 you expect might happen. 9 459 As general barometer starting out in 10 looking at programming increases, and based on 11 discussions with the programming people who do all the 12 major buying, it was my sense that we could face as 13 much as a 10 per cent increase. So my starting point 14 was a 10 per cent increase in costs on our non-Canadian 15 applied programming. 16 460 So that was the basis assumption I 17 started out with. In fact, then we decreased that 18 based on my discussions with them and our best estimate 19 of the particular programs that would be most affected. 20 461 So it came in generally between 21 5 per cent and 7 per cent as an increase, which was 22 consistent with what I thought would be reasonable. 23 So just to give additional background to those 24 assumptions. 25 462 MR. SWITZER: Mr. Chair, to give you
1 extra comfort, and I know it was discussed at a 2 previous hearing, but although there are available 3 unsold programs in the market that are not now being 4 broadcast by Canadian broadcasters, some of the early 5 activity we have seen from one of the new applicants 6 has in fact -- unfortunately, as we discussed -- not 7 gone after some of the unsold stuff but has been 8 direct-to-tax on existing programs that are already in 9 the market on existing Canadian broadcasters. So that 10 has unfortunately resulted in some early damage. 11 463 THE CHAIRPERSON: That would be 12 appreciated, if you could file how you derived that. 13 464 Your note that one of the synergies 14 between your conventional and specialty TV business 15 segments is the expanded ability to amortize the cost 16 of purchasing programming rights. 17 465 In the supplementary brief I think 18 you raised concerns about your ability, as you said 19 today, to compete for program rights with the new 20 Toronto station or stations. 21 466 To what extent does the synergy that 22 you note mitigate this concern? 23 467 MR. SWITZER: There are tremendous 24 synergies that are already in place, Mr. Chair, and 25 obviously it is that strength, it is that combination
1 of deciding more than 15 years ago to invest in 2 specialty a one of our core business that has allowed 3 us to get to the point where we are today. Certainly 4 the investments in capital and people and some of the 5 operating losses that these conventional stations have 6 suffered and are going through has been in part been 7 possible because of the strength and contribution that 8 the specialty channels offer us. 9 468 There is an existing amount of 10 program synergy in place. There has been with every 11 station. Those costs and effects are already part of 12 these models and separately or part of our specialty 13 channel businesses. Obviously we can always do more 14 with new channels. 15 469 The importance of this conventional 16 group is now ways for us to figure out east and west, 17 how these channels can continue to cooperate, share 18 programs, expose programs in both directions. The 19 specialty synergies are there, they remain, they 20 continue. There is no change or factor that is 21 material here. 22 470 THE CHAIRPERSON: So nothing was 23 changed from the time you filed your original 24 projections to the ones the other day in that regard? 25 471 MR. MILLER: No, essentially what the
1 synergies allow us to do is to mitigate the damage. 2 For example, what we are essentially assuming is that 3 we are going to have to pay more for some of this 4 programming, but overall we will ensure equal program 5 quality. Without those synergies we wouldn't be able 6 to have that assurance that we could at least make sure 7 we get programming of equal or better quality. 8 472 THE CHAIRPERSON: (Of microphone) 9 ...try to compare your operating expense levels to 10 other large TV groups and overall averages for Canadian 11 conventional TV. 12 473 The results we got were that as a 13 percentage of group revenues the CHUM Group expended 14 significantly more on programming than the other groups 15 in the industry. For example, in 2001, 76 per cent of 16 your revenues were expended on programming as compared 17 to an industry norm of 58 per cent, a larger amount 18 also significantly on news, other information, human 19 interest, Canadian programs and non-Canadian 20 programming. 21 474 Does this accord with your own 22 analyses and do you have any comments on that ? 23 475 MR. SWITZER: I would be happy to 24 begin, Mr. Chair. 25 476 Of course we have historical data,
1 I'm sure as do you, and yes, we have historically spent 2 more on programming than the industry average. That 3 has been precisely part of the difference that we bring 4 to the table. 5 477 Our difference has been primarily 6 because of our intensely local focus in every station. 7 In general you will see a higher percentage of 8 programming costs overall and within that a higher 9 percentage of in-house programming costs on shows that 10 we produce ourselves locally in each market to be 11 relevant and connected to each community. 12 478 But on top of that, we have 13 additional newer stations, stations that have either 14 re-launched, changed affiliations. In the case of 15 Ottawa and Pembroke, completely started up, again and 16 so you have certain fixed costs. You decide to launch 17 a new morning show in London, Wingham and Windsor. 18 That doesn't result in immediate revenue gains but your 19 costs certainly go up right away. 20 479 Significant costs in Ottawa in the 21 last few years with an investment in staff and new 22 programming. The revenue growths have been slower to 23 date than the programming costs and so, quite rightly, 24 those costs as percentage of revenue are in fact higher 25 than our competitors.
1 480 MR. MILLER: The other large factor 2 is the acquisition of Canadian and U.S. programming 3 where we buy national rights, but because we are a 4 smaller group we can't amortize those costs across as 5 many stations and the whole country as CTV and Global 6 do. Obviously the addition of Victoria and Vancouver 7 has already improved that situation considerably. 8 481 We will lose a lot of those benefits, 9 unfortunately, through the increased programming 10 costs of the licensing of the two new stations. But 11 generally speaking, as we are able to grow as a 12 conventional group, those largely fixed national 13 programming costs can be amortized that much more 14 effectively. That will also help bring down our 15 ratio of operational costs to closer to some of 16 the larger groups. 17 482 MR. SWITZER: To add another specific 18 example or two, when we make a commitment to a new 19 Canadian feature film it is national rights, it might 20 be a theatrical film or a made-for-television film. 21 This is Diane's life, it is what she does every day. 22 If we are out licensing national rights for $200,000 or 23 $300,000 or even $400,000, we share it amongst our 24 group and amongst our station. We make it available to 25 other broadcasters where we don't operate. Those
1 license fees are not generally significant. We are 2 left with a much larger piece in each of these 3 individual stations than would be the case on 4 percentage terms with a CanWest or a CTV. 5 483 We are certainly not complaining 6 about it, it is part of the cost of being a 7 mid-sized player and trying to grow and do some 8 things nationally. 9 484 THE CHAIRPERSON: I guess when we 10 analyzed your specialty services the numbers came in 11 the opposite way, that you were below the industry 12 norms in terms of the programming expenses incurred by 13 the specialty services, with or without the inclusion 14 of the video services. So it appears that of a given 15 dollar a larger chunk is allocated to conventional and 16 a much smaller to your specialty than is common in 17 the industry. 18 485 MR. SWITZER: You use the word 19 "allocated". I don't think we operate or set up our 20 businesses or our channels that way. We set out to do 21 a job, to produce a particular range of programs, 22 whether it be for conventional or specialty. 23 486 Obviously we want to have a positive 24 bottom line. We don't in a meeting say "Well, to have 25 a good business thou shalt not spend more than 46.8 per
1 cent of your revenues on programming". We go out to 2 get the job done, knowing that if we build our 3 viewership and build our ratings in each local 4 community the revenues will follow. In some cases it 5 is many years and we have been fortunate enough to 6 have that. 7 487 THE CHAIRPERSON: Right. In arms' 8 length transactions I understand when you are 9 amortizing to a third party -- 10 488 MR. SWITZER: Yes. 11 489 THE CHAIRPERSON: -- or selling to a 12 third party, but when you are distributing the costs 13 within the CHUM Group I would have thought that is a 14 judgment call as to how much you allocate to CITY-TV, 15 how much to Bravo! and so on and so forth. Is that not 16 correct? 17 490 MR. SWITZER: Two things. One, there 18 is a lag in the ratio in the percentages because the 19 revenues follow the growth in ratings. 20 491 In Ottawa, for example, we made a 21 significant investment. Those costs of what is a first 22 class and, frankly, an expensive morning show, are now 23 paying fruit. It is a one-year delay between revenue 24 growth, which we have seen and have filed in our 25 revisions, but the costs were there last year.
1 492 As to matters between stations, it is 2 always done, of course, on a fair market-value basis 3 with respect to the value of the programs to each 4 channel's ratings and each channel's revenues and 5 sometimes revenue potential is used as a proxy, in 6 other cases other equivalent pricing. 7 493 THE CHAIRPERSON: Do you have any 8 measure of percentage of your programs that are 9 intended to be shown on both your conventional and your 10 specialty services in terms of what you either produce 11 or purchase? 12 494 What percentage of your programs 13 would you say are produced or acquired for purposes of 14 showing on more than one of your stations, including 15 your specialty stations? 16 495 MR. SWITZER: Well, if we looked at 17 it from the base of these conventional stations -- and 18 perhaps I can speak broadly and I'm certain we can work 19 through whatever you need. 20 496 The very local morning shows have 21 some regional value. The intensely local newscasts 22 primarily, with the exception of southwestern Ontario, 23 do not. Some of the local community access, perhaps a 24 local agriculture show or a local charity Bingo show or 25 a local show with a local hospital or a multi-faith
1 religious group may not have value. 2 497 Some of the magazine shows do travel 3 and in fact may be shared both within conventional 4 stations and between conventional and specialty. 5 498 It is not as though we would have a 6 rule and say a third of everything we produce must find 7 a home. They will find a natural platform. 8 499 Book Television is shared between 9 CITY-TV and Bravo!. "The New Music", an important 10 music magazine show showcasing artists, is shared 11 between CITY-TV and MuchMusic. I could go through a 12 lot of examples. 13 500 Where it makes sense, where we 14 want to primarily -- in the shows we produce, 15 primarily where they are about the glamorization of 16 Canadian architecture or photography or movies or 17 television or music, those we want to showcase on as 18 many platforms as possible. It is done in a way that 19 is natural to the quality of the show, not in any 20 forced percentage way. 21 501 THE CHAIRPERSON: Right. What are 22 the allocation methods you use? You can pick the show 23 if you like and give me an example. You can give me 24 overall figures. How do you decide how much is to be 25 allocated to CITY-TV and how much to Bravo! in that
1 example? 2 502 MR. SWITZER: Let's take an example 3 of an acquired high profile movie. CHUM was -- Diane 4 actually, was very instrumental in helping develop and 5 finance the acclaimed Canadian feature film "The Red 6 Violin". That was a film that we purchased. Diane was 7 able to draw various pools of money together from 8 various groups of in-house stations. We were able to 9 not only help it be financed, but actually acquire the 10 rights. 11 503 We called all the programmers 12 together and decided that this was a film which should 13 premier first on Bravo!. So internally amongst 14 themselves on what was the responsibility was 15 fair-market basis. Bravo! gets the first run, it has 16 higher marquis value, higher marketing value, higher 17 advertising value, perhaps CITY-TV has the second run, 18 it may go to the NewNet stations and then back to 19 Bravo!. 20 504 So those programmers have an 21 obligation to take that single sum of money and divide 22 it into percentages, not by formula but by this 23 particular movie for this particular telecast, the 24 value of Bravo! first run has a value of $75,000 and 25 perhaps the CITY-TV second run, perhaps $50,000,
1 et cetera, et cetera. Those numbers are hypothetical, 2 Diane I'm sure could you give more specifics, but it is 3 not done on a predetermined formula basis. 4 505 The important thing is that we can 5 group a bunch of smaller stations together to be able 6 to help finance a movie. 7 506 MR. MILLER: If I could just return 8 to the initial part of your question on this, as to why 9 the operational expenses on specialty might be lower 10 considerably than conventional. There are really two 11 factors. 12 507 One is what Jay has been talking 13 about in terms of the local programming emphasis of our 14 local station. So obviously that creates more in the 15 way of operational expense. Our specialties are, with 16 one very important exception, CP-24, they are national 17 so they operate very differently. 18 508 The other factor is the synergy 19 working to the benefits of the specialties. Because 20 the specialities have been able to be built on the core 21 infrastructure that we already had, their operational 22 expenses are much lower than, say, a standalone. So 23 while an Alliance Atlantis Group would have higher -- 24 they have had to build these operational expenses from 25 nothing, we had buildings, we had infrastructure, we
1 had employees, so that is why our operational expenses 2 for those two reasons are low. 3 509 MR. ZNAIMER: Mr. Chair, if I could 4 intrude? 5 510 THE CHAIRPERSON: I beg your pardon? 6 511 MR. ZNAIMER: I just wanted to make a 7 non-numerate point. 8 512 As we chose the specialty channels 9 that we applied for and eventually launched, we did 10 they specifically as extensions of programming and 11 production in which we were already engaged. 12 513 THE CHAIRPERSON: I understand that 13 point and I take it. 14 514 Does it follow from that, though, 15 that the bulk of any program acquisition costs would be 16 amortized principally on the CITY-TV? 17 515 MR. ZNAIMER: Well, it began with the 18 mothership. These channels at their launch were rather 19 in their infancy. As they have grown in their own 20 strength we get together and we try to reallocate those 21 costs in a more realistic way. Generally speaking 22 there is a lag there. 23 516 MR. SWITZER: I guess to put as much 24 precision as possible, the amount of shared programming 25 that these conventional television stations share with
1 specialty channels, either on an hour count or a dollar 2 count, would not be large in terms of the value to the 3 total groups of the stations. There are lots of 4 examples, we have listed them in this renewal document. 5 We are proud of that sharing and it has let us finance 6 some of these programs. 7 517 But, I don't know what word to use, 8 it would certainly not be material or significant, you 9 know, well under 20 per cent or 15 per cent in terms of 10 hours or dollars, to give you some comfort there. 11 518 THE CHAIRPERSON: That is helpful. 12 Under 15 per cent to 20 per cent. Well, I guess if it 13 is under 15 per cent it is under 20 per cent as well. 14 --- Laughter / Rires 15 519 THE CHAIRPERSON: Okay. Thank you 16 for that. 17 520 On your international sales, revenues 18 derived from international sales and sublicensing, are 19 those deducted from the cost of the program when you 20 complete the Commission's annual return? 21 521 MR. SWITZER: While Mr. Miller looks 22 for notes, we deduct the costs of sales to related 23 parties, and in fact we have, for matters of practice 24 and mechanics, run some of that Canadian syndication 25 through what we call our international division. Those
1 sales do get deducted. 2 522 Sales to third parties of our weekly 3 magazine shows do not get deducted and we believe that 4 is in compliance with CRTC policy. 5 523 MR. MILLER: The specific policy 6 reference there would be 1993-93, page 3. 7 524 THE CHAIRPERSON: You are reading 8 from the Commission Notice? 9 525 MR. MILLER: Yes, CRTC Public 10 Notice -- 11 526 THE CHAIRPERSON: No. I was asking 12 whether you comply with it. 13 527 MR. MILLER: Yes. 14 528 THE CHAIRPERSON: Okay. Thank you. 15 529 MR. MILLER: Yes. 16 530 THE CHAIRPERSON: I wanted to ask 17 you -- again back to the financials -- about the 18 synergies and -- I had it noted here. 19 531 Right. I am quoting here from the 20 May 3rd letter to the Commission, to Mr. Ketchum, where 21 you say on page 2 that: 22 "In developing our projections 23 for revised operating costs we 24 have, in essence, reverse 25 engineered these estimates by
1 focusing on a target we need to 2 achieve with respect to cost 3 reductions in order to bring our 4 stations back to a reasonable 5 level of profitability. As 6 such, beyond the specific 7 direction of operational savings 8 (local programming and the local 9 support infrastructure necessary 10 to support it) and given the 11 limited amount of time that we 12 have had in which to evaluate 13 the situation, we are presently 14 unable to determine precisely 15 where savings will be realized." 16 (As read) 17 532 Then I go to the bottom section of 18 the document that you filed this weekend, the revised 19 financial analysis, analysis of savings. 20 533 That statement would reflect itself 21 where in that bottom table? 22 534 MR. MILLER: Mr. Chair, it is not 23 that we haven't given detail in the financial 24 statements, it is the fact that beyond the first year 25 you can't assume that what we have said there is
1 exactly what will happen. 2 535 To step back, in the last couple of 3 weeks, as we have looked at this and as we got more 4 market information, the relief -- and I can honestly 5 say it was relief -- was to realize that in all 6 likelihood only one of the two stations would launch 7 this September. So what that meant is we can focus on 8 the first year and the finding of savings, which I 9 think we estimated only about $1.2 million for the next 10 broadcast year. 11 536 Then we know we need to find 12 additional savings, considerably more savings when the 13 second station launches. 14 537 It is from that point out when we 15 have made the allocations that we have tried to, within 16 the short time, be reasonable and we think where we 17 have made the operational savings are reasonable and we 18 can speak to exactly how we have done it. But I think 19 what we wanted to signal here is that precise thing is 20 not accurate. 21 538 So while there may be a precise 22 number in the financial statements, if you go to 23 Category 2A in one of our stations and ask us why has 24 this gone down from "X" to "Y", there is no particular 25 reason because we haven't made that precise a level of
1 determination. 2 539 THE CHAIRPERSON: I see. So on that, 3 for example, the reduction in programming commitments 4 is reflected on that table or not? 5 540 MR. MILLER: The general direction of 6 the programming commitments is correct. We can go 7 through again our logic as to how we did that, but what 8 we are trying to signal is a specific reduction at a 9 specific station at a specific point in time may or may 10 not be exactly where we choose to do it. 11 541 It is the reason why we have said 12 reverse engineered. What we have recognized as a group 13 is that we need to realize these savings to turn our 14 bottom line around. We are giving ourselves some time 15 to get there, but we have essentially developed a 16 target of where we think we need to get to and then how 17 we would, given the projections that we have. 18 542 THE CHAIRPERSON: I see. So 19 essentially by year seven you are saying that you 20 basically have to find the money that you absorbed in 21 revenue losses and additional programming costs and 22 this is a rough guess of how that money is going to be 23 distributed or be found and at this stage you can't 24 give us any more detail. Is that a fair analysis? 25 543 MR. SWITZER: That is absolutely
1 correct, Mr. Chairman. 2 544 THE CHAIRPERSON: Okay. Thank you. 3 545 I want to turn for a moment to your 4 six-monthly report for the period ending February 28th 5 of this year. 6 546 I guess it was published after the 7 licensing decision because you speak in there of the 8 impact of the new licences. 9 547 I also note that you note in there, 10 or at least your father, Mr. Waters and Taylor Baden 11 are happy to say that: 12 "It is not anticipated that 13 there will be any major concerns 14 for the licence renewals." 15 (As read) 16 548 MR. MILLER: I can tell you, 17 Mr. Dalfen, I wasn't happy with that choice of wording, 18 but, there you go. 19 549 THE CHAIRPERSON: I hope he is right. 20 550 But the question I wanted to ask is 21 that you in effect show -- I am looking at the 22 statements on page 5, you show a healthy growth, both 23 in revenue and net earnings, as you do when you go 24 farther on in the document and you break out -- this is 25 page 9, you break out television from radio and other.
1 551 I assume television is both specialty 2 and conventional here. 3 552 I guess that raises another question 4 in my mind as to why, in light of what Mr. Waters 5 Senior and Mr. Baden say is a strong revenue growth 6 that the company continues to have, and particularly in 7 television, why one shouldn't expect you to hold to the 8 higher levels of programming consistent with the 9 overall growth in your company and in particular in the 10 television sector. 11 553 MR. SWITZER: Perhaps I can begin, 12 Mr. Chair. 13 554 First of all, it is very important 14 for us to restate that the revenues that we filed on 15 Friday do include, to the best of our ability, as of 16 information internally last week, all of the news that 17 we have that is up to date, including the bad news in 18 some parts of the country and the good news, including 19 some ratings gains, revenue gains, particularly in 20 Toronto and Ottawa. Those are in those numbers and 21 absolutely current in terms of our forecast. 22 555 We did say in that same document, and 23 I will just read from it. Perhaps Ron Waters or Fred 24 Sherratt may want to add. I quote from page 3, and it 25 speaks of "Expectations of Management":
1 "Management of the company 2 anticipates that the granting of 3 these two new licences, 4 particularly the 5 English-language television 6 station licence, will be likely 7 to have an adverse impact on the 8 revenue and profits for CITY-TV 9 and CHUM's other southern 10 Ontario stations." (As read) 11 556 Continuing lower down: 12 "Management anticipates that the 13 impact of the revenues of 14 CITY-TV and CHUM's other 15 southern Ontario stations will 16 be significant". (As read) 17 557 So as a manager, and I'm not 18 principal here, it is not for me and I won't, but these 19 are matters of significance. 20 558 MR. MILLER: To your question, 21 Mr. Sherratt -- 22 559 THE CHAIRPERSON: Mr. Waters, did you 23 want to comment? 24 560 MR. WATERS: I was just going to add 25 to what Mr. Switzer said, and maybe Mr. Sherratt wants
1 to add. 2 561 I think what we as a company were -- 3 I think what we were looking forward to was the 4 opportunity to turn our NewNet stations around in 5 Ontario which, as I think Mr. Miller mentioned, we have 6 lost $46 million. But we do see the light at the end 7 of the tunnel and they are doing a great job here in 8 Ottawa at the NewRO and we can see those huge revenue 9 increases coming. So we hope to break even in the next 10 few years. 11 562 I think that we are so pleased with 12 our new station in Victoria and the approval of our 13 acquisition for CKVU, but we just got on the air in 14 October with Victoria and just got the keys in November 15 for VU, so we were looking as an opportunity, as we 16 talked about, to amortize those programming costs 17 through B.C. as well as Ontario to give us some 18 savings. 19 563 So everything was looking very 20 positive and unfortunately we have some new stations to 21 come to Toronto, and that is okay, you know, we will 22 react and we will do the right things. You mentioned 23 that earlier. We are looking forward to that, but it 24 will just take us a little longer. It is not quite 25 going to turn around as fast as we hope, but we are
1 looking forward to the challenge. 2 564 I think we are here today, as you 3 know, to look for a little bit of flexibility just so 4 we can do that. I think in time we can turn that 5 bottom line around again and see the increases we would 6 like to see. 7 565 MR. MILLER: You did ask, 8 Mr. Chair -- 9 566 THE CHAIRPERSON: I will not let the 10 moment pass without asking Mr. Sherratt if he has any 11 additional comments. 12 --- Laughter / Rires 13 567 MR. SHERRATT: Mr. Chairman, I think 14 Ron's answer did it very well, but we were getting to 15 that day where the payoff of the last four years, we 16 were starting to see some light at the end of the 17 tunnel. 18 568 There has been quite a dramatic 19 change in our television operations in the last four 20 years, out of CTV, out of the Maritimes and, as you 21 know, back when we put the Maritimes together in the 22 good years that we had there, those were very 23 profitable operations. The stations in Ontario are at 24 a low level. Pembroke was in Pembroke and they were 25 trying to get into Ottawa, but not very successfully.
1 569 So that was a challenge. We saw it 2 as an opportunity and the logical progression of the 3 system. 4 570 We didn't like leaving the 5 Maritimes, but we left the Maritimes after a long 6 heritage there, really, to get on with the system, and 7 the system has always been at the forefront in what we 8 have tried to do. 9 571 We were seeing light at the end of 10 the tunnel and that light is real. I guess it just 11 that the trains -- I don't know whether you say the 12 train is closer or the train is farther away with the 13 launch of new stations in Toronto, but it will come. 14 Our business will continue to be successful. 15 572 Our margins have historically been 16 smaller than many of our competitors. We need to grow 17 those, that is important for the future, but in the 18 conventional group it is essential that we get 19 profitability in those in order that the rest of our 20 businesses can be strong as well. 21 573 MR. MILLER: Mr. Chair, I have now 22 interrupted everyone and I apologize for that, but I 23 did want to get back to your question, which I think 24 was: With our increase in revenue should there be a 25 commensurate increase in our contribution? The answer
1 is yes. 2 574 Indeed, in what we have put on the 3 table with the new stations that are primarily 4 responsible for those increases in revenue are 5 significant increased contributions. Even at this 6 hearing, even with what we are going to suffer in the 7 Toronto market, we are looking to increase our 8 contribution in priority programming over the next 9 license term. 10 575 So we certainly acknowledge that 11 as our revenue grows and as we grow as a station 12 group, that our contribution must commensurately 13 increase as well. 14 576 THE CHAIRPERSON: Thank you. 15 577 Mr. Langford. 16 578 COMMISSIONER LANGFORD: Thank you. 17 579 I am really delighted to have to 18 follow up after the comments of Mr. Sherratt and 19 Mr. Waters because, like Mr. Znaimer, I don't revel in 20 numbers. 21 580 I would like to ask you, Mr. Znaimer 22 a question. 23 581 I am thinking back to not very long 24 ago when we had a kind of similar meeting in Vancouver 25 and your group came to the CRTC looking for two
1 conventional licences on the west coast, one in 2 Victoria and one in Vancouver. You were successful in 3 the former and now have made yourself successful in the 4 latter. Hats off to you I say, and so say all of us I 5 assume. 6 582 But at that time there were people 7 with large, large lists of numbers whose basic message 8 was "Don't do this. For goodness sake, don't do this." 9 583 I think I am going to quote you 10 pretty correctly here. You summed up your approach to 11 market analysis as follows, "I don't really know what 12 the numbers say, but I have been for a walk and let me 13 tell you the joint is jumping." 14 584 What we are hearing here today is 15 kind of some pretty dark scenarios from some of your 16 knowledgeable numbers folks, but what we are hearing 17 generally from the Conference Board and some other 18 soothsayers is that the joint is beginning to jump. I 19 wonder if perhaps your numbers in that sense, your 20 projections in that sense, aren't just a little too 21 dark, using your own formula. 22 585 MR. MILLER: Can I? Moses will 23 follow up with his comments, but I think every market 24 is different, every new entrant is different. 25 586 Our entry into the Vancouver market,
1 whether it had been the two stations that we initially 2 filed for or the one station that we were granted is 3 different for two reasons. The market dynamics are 4 different there. There wasn't a station doing what do. 5 We going into that market does not bid up U.S. 6 programming costs. 7 587 Perhaps the first factor, as between 8 the two markets, times are hot, times are not so hot, 9 at the end of the day may be less material, but the 10 other two factors are very material. 11 588 The two licences issued in Toronto 12 are for stations who will do, at least in one case, a 13 lot of what we do. That creates a different dynamic. 14 Also, that station, because it will be a new purchaser 15 of U.S. rights, will bid up the costs. 16 589 So you have to go beyond the issue of 17 the market and the health of the market and look at 18 what the impact will be on incumbents, given the format 19 of the incumbents and the format of the new stations. 20 590 At the end of the day, I can't tell 21 you that we were surprised that you chose to license in 22 Toronto. I can tell you that we were somewhat 23 surprised with the decisions, but that is the 24 difference. 25 591 MR. ZNAIMER: Specifically in
1 response to your question, we have succeeded in getting 2 into Vancouver not because you issued us a new licence 3 but because we acquired an existing one. So from that 4 point of view, the people who were saying that there 5 isn't additional, or there wasn't additional room in 6 the market for a brand new player were perhaps correct. 7 592 Given that we are there now and we 8 are facing the realities of our revenues in that 9 market, I would have to say that they were correct, 10 that even with an existing licence we are experiencing 11 some difficulty today in the Vancouver market. 12 593 I know these things go in cycles, so 13 at the time that we first launched our application 14 British Columbia was perhaps the most energetic part of 15 Canada. By the time we were able to work our way into 16 the market it is less so. 17 594 COMMISSIONER LANGFORD: Perhaps you 18 were wrong then and you will be wrong now and 19 everything will work out just dandy. 20 595 Mr. Miller spoke about at least one 21 of the stations in Toronto -- I think your words were, 22 I tried to write it down here -- will be doing what we 23 do. That brings me to another intangible that 24 interests me about the group I see before me. 25 596 Don't you do what you do best? Isn't
1 that at this point in the game almost a given in 2 Canadian broadcasting, and why should an imitator be 3 able to eat your lunch? 4 597 MR. ZNAIMER: Nobody is going to eat 5 our lunch, Commissioner Langford, and we are not here 6 asking for a wholesale retreat. All our submissions 7 involve increases over conditions of license which we 8 currently live with. 9 598 I think that is right, Peter, or 10 perhaps in some cases we want to stay pat. But in no 11 case are we looking for a retreat. 12 599 We are simply looking for some 13 flexibility over the near term especially in order to 14 be able to absorb this new information, these new 15 realities. As Mr. Waters said and Mr. Sherratt said, 16 we will respond, but we need a little flexibility in 17 order to craft that response. 18 600 COMMISSIONER LANGFORD: Perhaps later 19 when we get into local programming I will contest the 20 comment with you a little bit about what constitutes a 21 retreat and what constitutes a hold the line. 22 601 But let me just ask you on one other 23 just general subject, the sort of subject that your 24 group and the Chair have been talking about in terms of 25 numbers this morning.
1 602 You have talked again somewhat 2 pessimistically about what is happening already in the 3 market. They are bidding on American programs that you 4 are interested in, you have already lost one. But 5 isn't there more to this than just numbers, isn't there 6 instinct and experience and just smarts in this 7 business and haven't you been at this a long time and 8 aren't there a lot of programs to bid on and might 9 you -- okay, you have lost one here, but don't you have 10 the instincts and the smarts or aren't you confident 11 enough in your smarts and your instincts to get out 12 there and find the next winners? 13 603 Why should this be -- I get the sense 14 that you are arguing the kind of stasis, that the 15 market is now as it is now, that the program numbers 16 are as they are now, the numbers of programs, and that 17 the bidding is for a very finite pool of program 18 resources here. 19 604 That certainly isn't the way I 20 understand the history of your organization, as I read 21 it in your own applications. It seems to me that what 22 I read about is a group that is the sort of group that 23 Mr. Sherratt described, that comes out of the 24 Maritimes, that comes into different areas, that is 25 nimble, it is quick, that has a good instinct for
1 something new and what might sell, and I wonder whether 2 you have factored any of that in. 3 605 MR. ZNAIMER: Yes, we have. 4 606 We are nimble with the things that we 5 can control. We are nimble in the fields where we 6 operate ourselves. 7 607 The discussion about climbing costs 8 focuses on an area where we have been trying over the 9 years to communicate to the Commission that as much as 10 we try to apply rational analysis, it is show business, 11 it is therefore a hit-driven business and there is a 12 premium paid for hits and for known commodities. 13 608 So if we bemoan the loss of a program 14 that we had before, it is because the price that was 15 finally paid, perhaps by a competitor, reflects the 16 fact that its results are already known. 17 609 Our clients don't want to speculate 18 along with us. Our clients are looking for sure 19 things. As a result, there is a premium paid for hit 20 programming, both at our level and at the level of our 21 clients. 22 610 COMMISSIONER LANGFORD: And you have 23 a competitor that is coming in with, counting Toronto, 24 42 per cent, say, of the English-speaking market, you 25 have somewhere very close to 70 per cent, I think it is
1 around 67 per cent. Does that worry you? 2 611 Are you telling me that you can't 3 outbid them if it is a show that you really, really 4 need, or that you don't have the wherewithal to get out 5 and find the next hit as opposed to their ability to 6 outbid you in finding the next one? 7 612 MR. SWITZER: Commissioner, actually 8 because we are talking about the first year, we are 9 talking about the other player, I think, if -- you are 10 right, that will be a fact next year. We are not 11 suggesting that the player I presume you are referring 12 to is actively involved yet. They are not. I want to 13 be very clear about that. 14 613 COMMISSIONER LANGFORD: We can give 15 them names. It is Craig I am talking about. 16 614 MR. SWITZER: Correct. 17 615 COMMISSIONER LANGFORD: It is not a 18 secret any more. 19 616 MR. SWITZER: The Rogers Group 20 certainly has been. 21 617 It is, in many ways, because they are 22 smaller that they must launch with a credible schedule. 23 It puts additional pressure on them to even go above 24 and beyond what would be normal margins because they 25 don't want to wait three or four years and try to find
1 something that is successful and maybe take a shot and 2 have a very small business. 3 618 They need to be credible, and the 4 only way to be credible is to take things that are 5 known commodities, to go for the best. Even though 6 they don't play in the prime-time world, in their world 7 of daytime and what is called access, the hours between 8 5:00 and 8:00 p.m. and the hours between 10:00 p.m. and 9 midnight, I would suggest generate 80 per cent or 10 90 per cent of Rogers revenues for their current 11 station in Toronto and probably for their second. 12 619 There is tremendous pressure that on 13 June 1st when they go into their advertising agencies 14 that they have a credible schedule. That puts pressure 15 on the market overall. 16 620 We are going to get the job done. We 17 are going to absolutely. We have the smartest, 18 brightest, most nimble team around and of course come 19 September 1st we are still going to be on the air and 20 still be in business -- presuming a renewal of course, 21 but -- 22 --- Laughter / Rires 23 621 MR. SWITZER: But yes, we will of 24 course work though it, but -- 25 622 COMMISSIONER LANGFORD: We have
1 surprised you before. 2 --- Laughter / Rires 3 623 MR. SWITZER: But the pressures 4 are real. 5 624 It is not good enough for them to not 6 go after the best. It is only their business nature, 7 their human nature and we must live with that. The 8 effects of that are being felt immediately on the 9 market. 10 625 It doesn't take away from all the 11 other wonderful things we hope we can celebrate with 12 you today in terms of the things we are doing, we are 13 touching on the business reality of -- there aren't 14 20 identical or 30 identical shows, whether you are 15 talking about daytime or the access period or the 16 prime-time. Within each category everybody wants the 17 best, and we are living with it. 18 626 MR. MILLER: To go to your finite 19 argument, it is a finite advertising pie in Toronto. 20 The viewing to conventional TV and to TV overall is 21 finite. So all the evidence suggests that when a new 22 player comes in they take share and advertising -- not 23 all, but in terms of advertising they take from the 24 incumbents. 25 627 All we are saying -- and we are, in
1 our view, being very conservative in our projections -- 2 is that we will need to pay more for our programming to 3 maintain our competitive edge and we will receive less 4 in advertising because of the new players. I think 5 that is uncontested, Commissioner Langford. 6 628 COMMISSIONER LANGFORD: But if the 7 joint starts jumping, there will be new advertisers, 8 there will be new industries. It won't be finite. 9 629 MR. MILLER: The discussion we have 10 had and the evidence that we have filed suggests that 11 when it comes to conventional TV that is not what has 12 happened. Conventional TV is where the -- where the 13 joint jumps is in the hits and the battle here will not 14 be on the hits. So there is no big pot of money that 15 is suddenly going to arrive on everybody's doorstep 16 come this September or next September because new 17 stations arrive. That is the reality of the 18 conventional business. 19 630 MR. SHERRATT: Commissioner Langford, 20 one of the key things I think is that, yes, the joint 21 may be jumping, but there are a lot more places to 22 jump. 23 631 COMMISSIONER LANGFORD: Not necessary 24 a bad thing. 25 632 THE CHAIRPERSON: Commissioner
1 Cardozo. 2 633 COMMISSIONER CARDOZO: Thank you, 3 Mr. Chair. 4 634 I just have one question. It is a 5 bit of a thought and if you would care to I would like 6 to hear your response. 7 635 As I have gone through the material 8 and listened to your conversation with the Chair this 9 morning, it seems to be at odds with your closing 10 remark in your oral presentation. I will just read you 11 this two-line paragraph. 12 "We want to do more, but we can 13 only do more if the business 14 climate, the regulatory 15 framework and market conditions 16 allow." 17 636 So if you take those three factors, 18 the business climate aren't what the Commission sets, 19 that is sort of the international and national state of 20 things. 21 637 The market conditions, I suppose you 22 could say that is what we set in licensing, but that is 23 done. That is over. 24 638 So what we are talking about today 25 and tomorrow is the regulatory framework. What you are
1 asking is for the flexibility to do less, even though 2 you say "We want to do more". 3 639 So I am left perplexed at the end of 4 the day what you want out of this is that the viewers 5 will get less of -- you are asking for the flexibility 6 to do less in terms of programming expenditures and in 7 terms of local programming. 8 640 So just tell me if I am 9 misunderstanding your pitch today. 10 641 MR. SWITZER: That is certainly -- 11 that flexibility that we require is absolutely one of 12 the four points we enunciated as one of the specifics 13 that we are here to talk about and set as part of this 14 renewal. 15 642 Part of the frustration for us is 16 that the effect, the problems, the effect on revenues, 17 the effect on costs are starting to begin right away. 18 We will live with, we certainly hope, for seven years 19 the rules, the conditions, the discussion, the 20 expectations that we will presumably set this week. 21 643 We have shown over the last seven 22 years, in part because of the regulatory framework and 23 the environment, that we have vastly exceeded, that we 24 have grown. We have done it voluntarily, I believe. 25 644 Our commitment on CITY-TV in total is
1 for 13 hours and change. We have grown up and down 2 with our news, with our non-news programming, it has 3 been higher, it has been much higher. Today it is 4 north of 40 hours, approximately 45 hours a week. It 5 is fundamental to the people who are in this room, to 6 the people you are going to talk to this week. 7 645 That doesn't take away from our 8 business responsibility, our financial responsibility, 9 to not declare an emergency, to not panic, but to say 10 these are important, serious, material matters of 11 revenues and costs and best we talk to you openly today 12 and tomorrow about how we have to deal with it, because 13 we do have a responsibility to come up with flexibility 14 to deal with these changes. 15 646 It is not our intent, and nor have we 16 in the past seven years on any of these stations, 17 arbitrarily cut or in any way responded in a knee-jerk 18 reaction, but this is a serious business situation and 19 although there will perhaps be some tension between us 20 on this matter, it is best, we believe, to talk about 21 fair and reasonable proposals that deal with all the 22 conflicts that we are facing in all of these factors, 23 and we are happy to talk to you about any of these 24 things. 25 647 COMMISSIONER CARDOZO: I appreciate
1 that. We will get to the details as we go through more 2 questions, but I am just struck by the request for less 3 or flexibility to do less when you say you want to do 4 more. 5 648 MR. MILLER: Flexibility -- 6 649 COMMISSIONER CARDOZO: Maybe I won't 7 take you there. I don't mind leaving it at this. The 8 answers will pan out as we go through other sections 9 too. Thanks. 10 650 Thanks, Mr. Chair. 11 651 THE CHAIRPERSON: If you would care 12 to comment, go ahead. 13 652 MR. MILLER: The point is, we want to 14 do more. The flexibility we seek is one of many tools 15 we will have, regulatory flexibility. 16 653 Again, more doesn't always 17 mean volume. 18 654 In terms of your comment about local 19 service to our viewers, I think that is probably the 20 most important one. We want to make sure that our 21 local viewers get the same sense of local reflection 22 and commitment that they have always had. We may do it 23 a different way, we may do it through a greater 24 combination of local and regional programming for 25 example, we may do it not necessarily with separate
1 newscasts ultimately in areas such as Windsor and 2 Wingham, it may be a common newscast, but that sense of 3 local reflection, that commitment to local will be 4 there. We want the flexibility to do it in different 5 ways. 6 655 Also, again we are talking about a 7 certain time period and we are talking about the fact 8 that we need to seek this flexibility now and over 9 time, again, things change. 10 656 But the point we were trying to make 11 here is that we want to do more, but we only can if the 12 conditions allow us to. 13 657 THE CHAIRPERSON: Thank you. 14 658 Commissioner Wylie. 15 659 COMMISSIONER WYLIE: Thank you, 16 Mr. Chairman. 17 660 Good afternoon. I will discuss 18 with you your programming strategy and plans for the 19 next license term, particularly in light of the 20 potential synergies that are available to the CHUM 21 Television Group. 22 661 I will have some specific questions 23 on priority programming plans, but none on your 24 specific local programming plans per station or 25 overall, only in light of the overarching programming
1 strategy. 2 662 Hopefully we can lift this funereal 3 pall on the hearing to date and find some more positive 4 happenings in CHUM's life, which were recognized, for 5 example, by Mr. Waters himself in your annual report 6 of 2001. 7 663 I know that the world hadn't 8 continued to change, it started a long time ago, as 9 Commissioner Langford alluded to, and so did 10 Mr. Sherratt, that there have been many changes, some 11 positive, some less, in CHUM's life in the broadcasting 12 system. 13 664 But Mr. Waters, if I quote from 14 page 8 of that annual report, said: 15 "First, our stations are 16 intensely local and highly 17 targeted sought after niche 18 markets. 19 Second..." (As read) 20 665 And this is what I want to emphasize 21 as a positive as opposed to the funereal quality of 22 your position today: 23 "The synergies between our 24 various television, radio and 25 new media platforms give us
1 unmatched opportunities in 2 sales, strategic promotions and 3 programming cross promotions." 4 (As read) 5 666 So I think that for your conventional 6 TV stations, without looking even at the specialty 7 array of services that you hold license for, you have 8 now access to the two major markets in the country, 9 Toronto and Vancouver, you have regional distribution 10 of CITY in Ontario, and you have dual station ownership 11 in Vancouver and Toronto. Those are the probably more 12 positive or larger components of the synergies. Then 13 the NewNet stations probably in some cases are 14 struggles, some of them are only beginning, you haven't 15 really yet mined all the potential. 16 667 So that is, to me, a more positive 17 beginning of the reality of CHUM Television as a group 18 to be perhaps opposed to the concerns you are 19 expressing about recent licensing decisions in the 20 system. 21 668 In your supplementary brief at 22 page 28 you have a Part 4 which is entitled "CHUM's 23 Emergence as a National Player". You say: 24 "With the addition of Victoria 25 and Vancouver, CHUM Television
1 is poised to become a true 2 national alternative station 3 group." (As read) 4 669 I am wondering if your new position 5 in the system, as an emerging national player, will 6 affect your ability to purchase foreign program rights? 7 You have alluded to it this morning about the (a) and 8 the (b). Is it possible that this will move you, in 9 fact as your wrote yourself, closer to being an 10 emerging national player with the consequences in the 11 purchasing clout you may have? 12 670 MR. SWITZER: Madam Vice-Chair, I 13 will begin. 14 671 The addition of the most recent 15 conventional stations in Victoria and Vancouver are a 16 very important new part of our group and they have 17 helped us quite a bit. We have already seen that 18 effect. Perhaps I can explain to you what life was 19 like before that. 20 672 To remain competitive -- perhaps I 21 will take half a step back. 22 673 We are not in the same traditional 23 dramatic network series, network sitcom business that 24 the CTVs and Globals are in, so we have chosen as a 25 matter of differentiation -- and frankly where our
1 hearts are and where we think there is a business, to 2 not enter that fray. But in the areas that we have 3 entered, in the areas of action/adventure series and 4 movies, motion pictures, new Canadian films, some 5 science fiction, we have grown. 6 674 To remain competitive, over the past 7 five or six years we had to start buying national 8 rights. We grew to be a small national rights player 9 in these alternative programs, again not in the 10 traditional dramas or sitcoms, in the movie business 11 and in some of the action/adventure series, and we are 12 operating with one hand tied behind our back. 13 675 Our margins were considerably lower 14 because we had fewer markets to share those programs 15 with. We make most of our programs available to the 16 Craigs in the prairies and that helps to some extent, 17 but in B.C. we had very little takers. We had, except 18 for an occasional program or an occasional movie, no 19 interest. So we had to commit to national rights. We 20 were out competitive full network pricing for those 21 kinds of movies and series and we could not share those 22 program costs. 23 676 Victoria and Vancouver have made a 24 very big difference and it has reduced the competitive 25 disadvantage that we live with. We are still at a
1 smaller disadvantage, it certainly has made a great 2 deal of difference. 3 677 So what it does is reduce the risk of 4 losing those specialized programs. We are large enough 5 a little bit to control our own destiny. It doesn't 6 fundamentally change our ability, nor do we have any 7 desire to change our ability and change what we are 8 doing. 9 678 I know in other parts of the country, 10 in Alberta and Manitoba, the Craig's have shifted away 11 from a movie format to more of the CanWest Global 12 programming, I'm sure for their own business reasons. 13 We have chosen to remain primarily movie-driven on CKVU 14 and CITY-TV and on the NewNet stations, including 15 Victoria, more action/adventure hours and alternative 16 kinds of programs. 17 679 Our ability to have these stations 18 now means that we can more fairly share the costs and 19 it takes pressure off of the group as a whole. 20 680 COMMISSIONER WYLIE: Yes. You 21 acknowledge on the next page in your supplementary 22 brief that: 23 "With the Vancouver and Victoria 24 station (you) will be able to 25 amortize program costs more
1 effectively, thereby increasing 2 the quality of the programming 3 as well as reducing the 4 programming costs." (As read) 5 681 My question was more not that it 6 would drive you necessarily to the CTV/Global capacity, 7 but whether it would in fact be, as you say here, an 8 emerging national player and that the quality -- 9 without going perhaps to the "A" level -- the quality 10 of the "B" level could be improved and make you more 11 competitive with those very stations that you say will 12 compete with you at the "B" level. 13 682 Surely it is not just "A" and "B", 14 there is the ability to buy higher or lower quality, 15 depending on one's ability to amortize the costs, which 16 is what you are suggesting in the line I was just 17 reading, that with the additional stations you will be 18 able to increase the quality of your "B" programming 19 perhaps by reducing the program costs in the 20 amortization. 21 683 Wouldn't that be something that will 22 drive you to a level that is not the same as you were 23 yesterday and, therefore, perhaps overly concerned 24 about the ability of a new player with less ability to 25 amortize, to buy exactly the same level of programming?
1 684 MR. SWITZER: You are absolutely 2 right, it is important. We do of course always want to 3 improve the quality of our programs, both the programs 4 we produce and the programs we purchase. We don't 5 believe it will be a big factor in the next seven 6 years, but we in fact have included some growth, some 7 small growth in qualify of those acquired programs. 8 685 You used the reference "A" and "B", 9 you are right, it is a palette. There is a wide 10 palette of things, and although we do not in any way 11 want to enter the traditional network business of CTV 12 and Global, of course we can always improve the quality 13 of our acquired programs and we have planned to do that 14 to the best of our ability. 15 686 MR. MILLER: I think what has 16 changed, Madam Wylie, since we filed this, is that 17 those savings -- which again, it is not savings to the 18 cost of programming, it is the fact on a per-station 19 basis the costs come down because you are now 20 amortizing over more stations. Those savings that we 21 have anticipated have basically been wiped out with the 22 licensing -- in fact more than wiped out with the 23 licensing in Ontario. 24 687 So we kind of back to where we were 25 before in terms of the health of the group as a whole.
1 In fact, we are worse off, I think, as Peter could 2 point out to you if you wanted to go through that. 3 688 COMMISSIONER WYLIE: A bit of a side 4 question. 5 689 You emphasize in your application the 6 export opportunities that you have had and the ability 7 of CHUM to find a presence for itself in Barcelona and 8 to sell programming outside the country. Is that going 9 to be increased with the new CHUM, I would call it? 10 690 You can't possible have two stations 11 in the second largest Anglophone market in Canada and 12 not call it the new CHUM, as far as television is 13 concerned. We will get to the specialties next. 14 691 Could this new CHUM have greater 15 opportunities to export? 16 692 MR. SWITZER: We certainly do intend 17 to export the best of the shows that we produce across 18 the country. And yes, it is our desire that in the 19 next 18 months both the Victoria station and the 20 Vancouver station each contribute at least one weekly 21 half hour that our international team will make 22 available around the world. It might be the program 23 that deals with the environment, it might be the First 24 Nations program, it might be a larger Pacific Rim half 25 hour that we are also looking at.
1 693 Of course we want to take these to 2 many countries and we are proud of the distribution and 3 the number of countries that they are seen in. It is 4 not, from a business point of view, if you add up the 5 number of hundreds of dollars per telecast that some of 6 the countries pay a material or significant 7 contribution. Certainly it is an export we are proud 8 of and of course we want to grow it. 9 694 We also want to, of course, make sure 10 that these shows are seen across Canada as we talked 11 about when we appeared before you in Vancouver. 12 695 COMMISSIONER WYLIE: The Chairman 13 discussed with you briefly how you treat the revenue 14 and the costs of programming when there are 15 opportunities. I believe the discussion was more 16 domestically how the allocation is made. 17 696 What do you do? How do you treat 18 financially, in your report to the Commission, revenues 19 that may flow from programming that has been produced 20 here and exported? 21 697 MR. SWITZER: I'm sure others may 22 correct me if I am wrong. I do not believe that is 23 reported as regulated revenue in any of our station 24 returns. 25 698 COMMISSIONER WYLIE: So it has no
1 effect, then, on the cost side either? All the costs 2 of a program that is exported with some return remains 3 assigned to the television station where it originated? 4 699 MR. SWITZER: The international 5 division pays any incremental expenses that are 6 specific to the sale internationally, so additional 7 clearances or music rights. 8 700 COMMISSIONER WYLIE: That would show 9 up, then, in your financials -- 10 701 MR. SWITZER: That shows up in -- 11 702 COMMISSIONER WYLIE: -- as revenue? 12 703 MR. SWITZER: No. Let me clear, I'm 13 speaking of the costs now. You asked on the cost side 14 what costs are attributed internationally, if I 15 understand you. 16 704 COMMISSIONER WYLIE: Yes. 17 705 MR. SWITZER: The only cost -- 18 706 COMMISSIONER WYLIE: Well, I asked 19 cost and -- 20 707 MR. SWITZER: Of course. 21 708 COMMISSIONER WYLIE: -- revenues. 22 709 MR. SWITZER: Revenues. 23 710 COMMISSIONER WYLIE: How do you 24 treat it? 25 711 MR. SWITZER: Revenues to related
1 parties to CHUM television stations domestically are 2 reduced from or clawed back from an eligible Canadian 3 program expense. 4 712 International revenues are not shown 5 as part of station revenue totals. Costs for those 6 shows remain where those shows are produced, with the 7 exception of incremental costs that are specifically a 8 result of sales internationally. Those are not at the 9 station level or included in the program production 10 budget. 11 713 COMMISSIONER WYLIE: So there is no 12 effect really? 13 714 MR. SWITZER: No. In a word, no. 14 715 COMMISSIONER WYLIE: So the cost of 15 producing that program which may get revenues from 16 export is all on the Canadian station that produced it? 17 716 MR. ZNAIMER: Madam Wylie, that is 18 the remarkable thing about these shows, is we didn't 19 make them for export. We made them for our stations. 20 We made them well enough -- 21 717 COMMISSIONER WYLIE: But they are 22 exportable. 23 718 MR. ZNAIMER: Yes, but they were made 24 for the stations that ran them originally and therefore 25 the costs lie in those stations.
1 719 COMMISSIONER WYLIE: Can you give me 2 an example of one, let's say in Barcelona, that is 3 exported? 4 720 MR. SWITZER: Yes. I believe they 5 play the as-produced Toronto version of Fashion 6 Television, and I believe they might play Media 7 Television as well. 8 721 I should add that the Barcelona's, 9 the Bogota's, many of the things that we have talked 10 about in terms of the sales, the program sales are 11 really a very small component of the business we do 12 with these stations. 13 722 These stations have come to us to 14 partner or create a joint venture to license our 15 intellectual material, our intellectual property. They 16 are buying a format, they are buying a system, they are 17 buying our assistance, they are buying training, 18 marketing help, news help, in some cases sales help, 19 and along with that some programs are included. But 20 they are generally working with us to help them create 21 a strong, local, feisty, independent station in their 22 particular market. 23 723 MR. ZNAIMER: Over time we encourage 24 them to actually replace the programs they receive from 25 us with equivalent programs produced by those stations
1 themselves. 2 724 MR. SWITZER: So our joint venture in 3 Finland for example, in Helsinki, began in the first 4 year carrying Fashion Television. In the second year 5 they made half of the episodes themselves. By the 6 third year they were producing completely their own 7 local show, and in fact although their fees to us 8 continued for our systems and brand and intellectual 9 copyright, they were in fact not telecasting the 10 program at all. 11 725 COMMISSIONER WYLIE: So what you are 12 saying basically is you are selling expertise -- 13 726 MR. ZNAIMER: That's right. 14 727 COMMISSIONER WYLIE: -- and that the 15 programs that are exported as such, and probably 16 subtitled or dubbed in the language of the -- 17 728 MR. SWITZER: As what is appropriate 18 to the market, yes. 19 729 COMMISSIONER WYLIE: -- are not a 20 major component of -- 21 730 MR. SWITZER: That is correct. 22 731 COMMISSIONER WYLIE: -- of the 23 revenue that accrues from international expansion? 24 732 MR. SWITZER: Correct. 25 733 COMMISSIONER WYLIE: Now, as you
1 know, in the TV Policy the Commission said at 2 paragraph 10 that it: 3 "...will take into account, when 4 looking at large groups, the 5 other holdings of the group such 6 as the specialty service, 7 although not necessarily 8 entertaining the license renewal 9 of that service at the same 10 time." (As read) 11 734 Now, if I return to the more positive 12 comments in the annual report, this time at page 18, 13 Mr. Waters addresses -- that is the 2001 report -- it 14 may not be Mr. Waters necessarily this time, but the 15 report says, and I quote: 16 "Each of the new digital 17 channels is a logical extension 18 of programming genres and 19 formats already established by 20 CHUM in the marketplace. This 21 strategy has resulted in marked 22 increases in viewership and 23 revenue across CHUM's 24 established specialty networks." 25 (As read)
1 735 I think this morning that one of 2 you -- I think it may have been Mr. Sherratt -- 3 actually put forward the benefit or the positive that 4 flows from the fact that your genre of television is, 5 not only with the specialty but also with the analog 6 networks, make it possible to have extensive program 7 synergies between them. 8 736 I think you would agree that you do 9 have a lucrative array of specialty services, analog 10 and emerging digital services, which provide numerous 11 rebroadcasting opportunities or repurposing of 12 programming by cleverly focusing on some genres that 13 you already have some expertise in. 14 737 In your application you, over and 15 above the speech to the shareholders, the speech to us 16 in your application as at page 33 is that: 17 "The synergies between CHUM's 18 conventional and specialty 19 services..." (As read) 20 738 I am reading from page 33: 21 "...have been essential to the 22 success of CHUM Television. 23 Specialties provide less than 24 one-half of CHUM TV revenues, 25 but the vast majority of its
1 profits." (As read) 2 739 At page 34 of your application you 3 talk about it being "very much a two-way street". 4 740 So there is no doubt that when we 5 talk synergies, number one the Commission has said it 6 would go, in looking at conventional, beyond the 7 conventional assets and that you see yourself as very 8 well positioned with specialty services while the world 9 fragments in the conventional side. 10 741 I would like you to elaborate on what 11 those synergies are and that two-way street is in what 12 I believe has to be positive if it provides you with 13 the majority of your profits, although half -- less 14 than half of your revenues. The synergies between the 15 two in a general way, and then I will have more 16 specifics. 17 742 MR. SWITZER: Thank you, 18 Vice-Chair Wylie. 19 743 Yes, the synergies are important and 20 we are indeed very fortunate to have built and created 21 a very innovative and successful group of specialty 22 channels. We have spent a lot of time and gone to some 23 detail to try to summarize what those synergies mean 24 for us and how it works. 25 744 Perhaps Peter Miller can be specific.
1 745 MR. MILLER: In these pages that you 2 outlined, Madam Vice-Chair, we essentially divided the 3 synergies into four categories: the advertising sales, 4 the program acquisition, schedule and promotion, and 5 then the back office, admin, and so forth. So we have 6 taken full advantage of those synergies. Indeed, as 7 Moses said, it was our ability to launch specialty 8 given our conventional niche presence that got us into 9 this business in the first place. 10 746 To give some specific examples, our 11 digitals, we were able to launch digital channels with 12 incremental additions in terms of staff and programming 13 costs that were far lower than our competitors. That 14 was very necessary given that, for example, our digital 15 Category 2s are not carried at all by one of the DTH 16 operators. So were we not able to have those 17 synergies, we wouldn't have been able to launch so 18 many digitals. 19 747 Another specific example, we have 20 some of the lowest subscription fees of any specialties 21 in Canada. Again, that is because this company 22 realized very early that specialty could be sold and 23 therefore has always placed a high emphasis on 24 advertising. 25 748 So I can take you through with our
1 team how we do it, if that is helpful to you, but we 2 did, as you have noted, have some description in the 3 application. 4 749 COMMISSIONER WYLIE: And some 5 examples of programs. 6 750 Did I correctly understand that you 7 responded to the Chairman this morning that the 8 programming repurposing exchange or second window or 9 third or first, whatever, as between your conventional 10 and specialty services is in the range of 15 per cent 11 to 20 per cent? 12 751 MR. SWITZER: That was a quick 13 approximation, 15 per cent to -- I said under 20 per 14 cent or under 15 per cent, which of course means under 15 15 per cent -- 16 --- Laughter / Rires 17 752 MR. SWITZER: -- of either the hours 18 or the dollars involved of the conventionals would also 19 show up -- be shared or in any other way be connected 20 to programmatically the specialties. 21 753 Of course, the cross promotion is one 22 of the areas that you touched on and that Peter just 23 mentioned, and that is an area that we have gone to 24 great lengths to develop and to build and it is an 25 important part of being a mid-sized player and to be
1 able to get, as the marketing team says, more bang for 2 the buck. 3 754 COMMISSIONER WYLIE: Yes. And we 4 have heard a lot about cross promotion of course in the 5 last few years of attempts at convergence and it is 6 fairly obvious on our screen right now what cross 7 promotion between various media can be. 8 755 You say it is below 20 per cent and 9 possibly below 15 per cent. Would you be in a position 10 to be able to file with the Commission, let's say of 11 the last broadcast year, a list of the programs -- the 12 number and the genre of programs that were actually 13 seen on both your specialties and conventional stations 14 to see whether it is below 20 per cent or below 15 15 per cent. 16 756 MR. SWITZER: Of course we would be 17 happy to go through a list and we will file -- 18 757 COMMISSIONER WYLIE: Yes, and 19 file it. 20 758 MR. SWITZER: -- from the base of 21 conventional those that -- 22 759 COMMISSIONER WYLIE: The number and 23 the nature of the programming -- 24 760 MR. SWITZER: Yes. 25 761 COMMISSIONER WYLIE: -- that was
1 repurposed as between any specialty, digital or analog, 2 compared to conventional. 3 762 We are just trying to get -- you had 4 a discussion this morning with the Chairman as to your 5 programming costs, et cetera, and of course, not 6 surprisingly when -- and the possibility that we are 7 not focusing sufficiently on the potential synergies 8 and the effect of them, of your new position of CHUM 9 Television and too much on whether it will be 10 completely not only wiped out but drag you down because 11 another decision has been made since that has brought a 12 change in the broadcasting landscape. 13 763 So I think we are not renewing your 14 specialties, but we are looking at what are your 15 strengths, not only yesterday but today, with your new 16 array of services. 17 764 MR. SWITZER: I am going to ask 18 Marcia to go in a second, but can I just address one 19 point before we start. 20 765 This very issue of conventional 21 versus specialty is an issue that is very important for 22 this proceeding and we recognize it. That is why we 23 asked PWC to do the report that you have seen that was 24 filed with our application. It is important to 25 recognize in that report that it projects what we are
1 already seeing, and that is while we have been very 2 successful with our specialty business, that business 3 is not going to keep growing the way it has in the 4 past. 5 766 The magnitude, the significance of 6 the 40-plus new digital licences that were issued in 7 September cannot be over stated. That is more 8 licences -- more stations launched, more specialty 9 stations launched on a single day than were launched in 10 the previous 15 years. 11 767 So what we are seeing is that that 12 specialty business and our specialty business will not 13 have the historically strong profits and, therefore, 14 while we have absolutely maximized the synergies 15 between specialty and conventional and will continue to 16 do so, what we see is declining specialty profits, 17 which is the reason why we absolutely have to get our 18 conventional business on a firmer profitable financial 19 footing, because otherwise we will be in serious 20 trouble as a company. 21 768 But to synergies, I think the thing 22 that we have forgotten to mention is synergies come to 23 people, and I would like Marcia to jump in here. 24 769 MS MILLER: Thank you. 25 770 I think the real strength, and as we
1 have already talked about, channels have come out of 2 the success of TV shows that have started specifically 3 on CITY-TV. 4 771 Movie Television and Fashion 5 Television are very good examples of the synergies from 6 a content and people perspective. When we started 7 these shows, Movie Television I think in terms of 8 helping launch Star!, it was 14 years of being in that 9 community of movies in the Canadian feature film and 10 stars that started us off without having to network 11 from the beginning, starting off with already having 12 our foot in the community and with a huge resource of 13 footage and archival material that the channels, both 14 Fashion and Star! were able to tap into. 15 772 So you had people already in the 16 business of those genres for 15 years and 17 years 17 being able to cross over with new people coming in, but 18 also utilizing their expertise and content. 19 773 COMMISSIONER WYLIE: I understand the 20 general principle, what I am trying to get at is: We 21 have numbers now, it is less than 20 per cent, less 22 than 15 per cent, it would be interesting to know just 23 what is the actual result or the possibility of having 24 either producing or purchasing programming that is 25 aired on both conventional and specialty.
1 774 You may have some comments as well as 2 to whether that will be increased as between the analog 3 and the new specialized digital channels. 4 775 You have explained this morning you 5 have been clever in ensuring that to an extent the 6 genres and formats are compatible with your style of 7 television which will, of course, bring some questions 8 later on as to why you would take the risk of changing 9 that style. 10 776 But, in any event, you have an array 11 of specialty services which is quite remarkable in that 12 it hangs together and there are synergies there that 13 can flow and we would like some more details. 14 777 You have discussed with the Chairman 15 how -- well, first let me say that in your application, 16 in your financial assumptions you explain how you 17 allocate costs and revenues, et cetera, with regard to 18 programming that is shared as between your conventional 19 television stations. Do you have anything more to add 20 about how you do it between specialties and 21 conventional to what you responded this morning? 22 778 MR. WATERS: Jay, I just want to add 23 one thing before you go there. 24 779 I was just thinking about that 20 per 25 cent or 15 per cent under.
1 780 One of the things that may be 2 difficult, and I think I am kind of tagging onto what 3 Marcia said, the team here knows I always use this one 4 as an example, but CITY-TV and CP-24, which I would say 5 there are more synergies with CITY and CP-24 than there 6 is with any one of our specialty channels. To quantify 7 that in programs -- looking over at Mr. Hurlbut over 8 there -- would be very difficult to do. 9 781 COMMISSIONER WYLIE: I didn't raise 10 that one. 11 782 MR. WATERS: It is just it is a 12 specialty channel. 13 783 COMMISSIONER WYLIE: Yes, I realize, 14 but I meant other than CP-24. 15 784 MR. WATERS: Okay. 16 785 COMMISSIONER WYLIE: The genres and 17 formats and so on, because the news -- 18 786 MR. SHERRATT: If I could just hop 19 in, Madam Vice-Chair -- 20 787 COMMISSIONER WYLIE: I don't think it 21 is a big moneymaker yet, is it? 22 788 MR. WATERS: No, we wish it was, but 23 it is a long way away from that. 24 --- Laughter / Rires 25 789 COMMISSIONER WYLIE: We are only
1 looking at where you are successful right now. The 2 funeral is over. 3 --- Laughter / Rires 4 790 MR. SHERRATT: Madam Vice-Chair, if I 5 might just hitchhike on what Marcia and Ron have said. 6 791 It wasn't that many years ago when we 7 described the difference between radio and television 8 as radio being one big program and television being an 9 exhibitor of programs. That is blurring now. These 10 specialty channels that Marcia is talking about, the 11 channel is a program. It is one program 24-hours 12 a day. 13 792 So the input and the synergy and the 14 value of the people who made the program that was 15 30-minutes a week into what is now a seven-day a week, 16 24-hour a day program, those synergies, you can't 17 quantify them because it is the expertise and the feel 18 for it. 19 793 But that is kind of the analogy that 20 I see, that these specialty channels, as they become 21 more and more focused, become more and more like radio, 22 one single 24-hour a day program. 23 794 COMMISSIONER WYLIE: I am sure that a 24 group of people who can give us the details of how a 25 licensing decision will affect you for seven years can
1 tell us the advantages in, let's say the year ending 2 2001 or 2002, whichever you want, more details about 3 why it is that you have, in your own words, an 4 unmatched opportunity to gain synergies as between 5 the two. 6 795 So we simply want a better fix on the 7 number and the genre of programs and what is the extent 8 of the -- then we can add, Mr. Sherratt, on top of 9 that, the advantages you have just spoken to which have 10 a value, which is you are not doing sports or something 11 different from what you do normally so it is much more 12 easy. Of course, it was very clever to actually keep 13 in the genres and formats, but it is an advantage that 14 we would like plumb the realities of a little more. 15 796 So perhaps by reply time you will 16 have some more details. 17 797 MR. MILLER: Maybe I can just add two 18 observations. 19 798 First of all, I think the single 20 biggest synergy, as Jay alluded to, is cross promotion. 21 We don't own newspapers, as our larger competitors to, 22 but the ability to cross promote is a huge synergy and 23 that is probably the largest on. 24 799 In terms of programming synergies, 25 let's separate program purchasing power from multiple
1 windows. 2 800 Again, the programming purchasing 3 power is important. The fact that we can buy a movie 4 package and then run the movies on conventional and 5 specialty and split them up is a tremendous synergy, 6 but that doesn't mean the same movie is running over 7 and over again on every single channel. 8 801 Finally, in terms of the actual 9 overlap of programming, and what we will do is we will 10 go through our conventional stations and we will 11 estimate based on a program schedule basis and a 12 program cost basis how much of that is also going to 13 specialty. 14 802 I would submit that over time the 15 programming overlap will diminish. It will diminish 16 for two reasons. 17 803 One, as we on the conventional group 18 become more national people have more opportunities to 19 see our programming on conventional. So the extra 20 window, if it were, on specialty, doesn't necessarily 21 add much in the way of audience. 22 804 We have learned that what is very 23 interesting about using programming on different 24 channels is that each channel has its own audience 25 which may be attracted to the same program in an
1 entirely different context. So one program may reach 2 an entirely different audience when it is shown on a 3 different channel. That will continue to some point, 4 but over time, as we become more national in the 5 conventional group, the repeat factor, if you will, on 6 specialty will go down. 7 805 Secondly, technology will drive us 8 there. We are spending a lot of time on what has 9 happened in the last few months, but over our next 10 seven year license there will be huge technological 11 changes. Seven years ago no one knew of the Internet. 12 So think of what can happen over the next seven years. 13 I would submit that one of the big changes will be 14 PVRs, TiVo replay in the U.S., personal video 15 recorders, which will allow consumers to get the 16 programs they want. So repeating programs as a 17 strategy maybe ultimately will be less valuable. 18 806 So all of those things together 19 probably suggest that in some way we have reached our 20 peak in programming synergies, but the cross promotion 21 synergies, they will become and remain very strong. 22 807 COMMISSIONER WYLIE: Well, at least 23 2001 or 2002 you can show us what is actually happening 24 with more detail, numbers and so on. 25 808 You may want to be more specific as
1 well, either orally or on paper, as to then what 2 happens with the financial where the costs and revenues 3 from those programming as between specialty and 4 conventional are treated. You are quite clear in 5 pages 9 and 10 of your financial assumptions in your 6 application as to how you do it as between conventional 7 stations, but not the other way. 8 809 All this in the context of the 9 Commission's desire and your own comments about the 10 synergies of your television assets as between 11 conventional and specialty. 12 810 Mr. Chairman, that seems to be both a 13 call from the stomach and a good time for a break. 14 811 Thank you. 15 812 THE CHAIRPERSON: Permission granted. 16 813 We will resume at 2:15. 17 --- Upon recessing at 1245 / Suspension à 1245 18 --- Upon resuming at 1418 / Reprise à 1418 19 814 THE CHAIRPERSON: A l'ordre, s'il 20 vous plaît. Order, please. 21 815 Madam Wylie. 22 816 COMMISSIONER WYLIE: Thank you, 23 Mr. Chairman. 24 817 Welcome back. I would like to talk 25 to you now about your programming strategy for the
1 coming term in light of some of the concerns you have 2 about your ability to continue exactly what you were 3 doing and requiring more flexibility and what the 4 effect may be on that programming strategy. 5 818 So the way I understand it now, if I 6 look at pages 19 and 20 of your application, under 7 4.11, which is "Programming Strategies and Policies", I 8 think it would be fair to say you describe your 9 programming strategy for the NewNet stations as 10 generalist with emphasis on science fiction, fantasy 11 genre and largely series based, whereas CKVU and CITY 12 would be largely movie-based with original magazine 13 style shows. 14 819 Is the ownership, for example of 15 Space, Star!, Bravo!, an incentive for CHUM Television 16 to maintain and even intensify its current programming 17 strategy for its conventional stations? 18 820 By that I mean, we spoke this morning 19 about what you describe as the advantages that flow 20 from the clever connection between your specialty 21 services and your conventional services. That has been 22 continued, to a large extent, with your digital 23 channel. 24 821 Conversely, will that be an incentive 25 as you proceed in your new term to maintain the
1 strategy I just described for your two groups of 2 conventional stations so that the synergies continue? 3 822 MR. SWITZER: Madam Vice-Chair, 4 perhaps I can begin. 5 823 Yes, we have every plan to continue 6 along the same strategy that we have outlined. We 7 think it takes advantage of synergies. We think it 8 provides programming in the markets in a way that is 9 not now being served. 10 824 This is, of course, in the context of 11 each of these groups of stations being intensely local 12 and connected to their community in a truly local way. 13 So the elements of differentiation that we are talking 14 about have to do with some of the acquired programming. 15 825 We believe that the format for 16 CITY-TV and CKVU to remain movie-based is sound and 17 remains as valid as ever, in the same way that the 18 NewNet stations, along with the NewVI in Victoria, to 19 concentrate on more action/adventure programming, some 20 science fiction programming and to deal with their 21 generally smaller markets in a way that is appropriate 22 to those markets. The synergies that you mention 23 continue. 24 826 What we have to deal with is that set 25 against these decisions on format and specialization
1 and differentiation are the new revenue implications 2 and the new cost implications. But those pressures do 3 not suggest to us that we should change course from the 4 path that we have set these stations upon. 5 827 COMMISSIONER WYLIE: Of course if we 6 go to the TV Policy we can find a paragraph, which you 7 can find as quickly as I can, where the Commission 8 indeed -- I think it was paragraph 15 -- encouraged 9 that type of distinctiveness especially among the 10 stations that were not in the largest multi-group. 11 828 So the distinguishing factors is, as 12 I described, it is also -- if we go back to those 13 pages 19 and 20 -- news and local programming. 14 829 Of course, there is no need to go 15 through all the places in your group supplementary 16 brief where the words "local", "intensely local 17 orientation", et cetera, is raised -- and "local 18 reflection" and "fiercely local" and "commitment to 19 local reflection" and that is what makes you different 20 as well. 21 830 So then what would make you different 22 would be the strategies I just described for NewNet, 23 CKVU, CITY and this "intensely local". 24 831 But at page 28 this morning, of your 25 special brief, I pointed out that you had that section
1 called "CHUM's Emergence as a National Player". 2 832 With some of the proposals you are 3 making about reducing as a strategic measure, and the 4 only one you see to react to the new realities in 5 Toronto, I heard you say this morning, a reduction in 6 local, do you not risk becoming a national player like 7 the others with less clout to compete? 8 833 What are you going to put in those 9 hours if you were to reduce them to the level that you 10 have suggested you may need as flexibility? 11 834 How will you retain your 12 distinctiveness, since it is based on local reflection 13 and those two strategies? 14 835 MR. SWITZER: Vice-Chair Wylie, you 15 hit on the point exactly. Our differentiation is our 16 distinctiveness. Our localness is what makes us 17 special. 18 836 What we are talking about is a review 19 of all the factors in front of us. It has to do with 20 not only hours of production but the types of programs 21 we may choose to produce, whether, as Peter touched on 22 this morning, some of them may involve regional 23 productions, matters of how many episodes, how we do 24 them, how we crew them, how we staff them, budget 25 levels. It is a complicated mix. We have many factors
1 in front of us. 2 837 Yes, hours are important, but it is 3 certainly -- to be here today and talk about the 4 flexibility that we require in a very open and complete 5 discussion doesn't mean that it is our intent certainly 6 to do that in any quick knee-jerk reaction. 7 838 We are talking about flexibility to 8 run our businesses so that these stations can continue 9 to do the wonderful things they are doing and this is 10 very important. 11 839 COMMISSIONER WYLIE: But if you were 12 the regulator -- you don't look very interested -- 13 --- Laughter / Rires 14 840 COMMISSIONER WYLIE: -- of 15 conventional television stations, wouldn't "hours" ring 16 a bell and say: They now say this is their strategy or 17 what it is they provide in the broadcasting system and 18 it is intensely local and this is how many hours we do. 19 841 In some cases, from what I gather, 20 you are way above the commitment and now you are 21 committing to do half or even less -- Commissioner 22 Langford will go into that in more detail later. 23 842 Then you ask yourselves: Well, what 24 is going to be the strategy and what does this 25 medium-sized group of conventional stations look like
1 once half of this programming disappears? Is it still 2 going to be what you like to call yourselves, 3 alternative TV based on fiercely local anchoring? 4 843 MR. SWITZER: This is at the heart of 5 the matter, Vice-Chair Wylie. 6 844 COMMISSIONER WYLIE: It is. 7 845 Applicants for renewal or new 8 licences can tell us "This is what I am prepared to 9 promise you, but I will do way more." 10 846 For a seven year licence it is not 11 easy for us to really assess what it is we have before 12 us and what your new role will be if it comes to pass 13 that it is lowered to the level that you are prepared 14 to commit to as opposed to what you hope you will 15 continue to -- 16 847 MR. SWITZER: We understand. We are 17 here to make commitments and to be very specific. 18 848 Let's take an example of the 19 performance, the commitments and the results, at 20 CITY-TV to cite one example over the past seven years. 21 849 Our commitments in total are at a 22 little over 13 hours, 13 and change per week. Our 23 production has flexed over the past seven years, both 24 in news and in non-news programming. The news has 25 grown, has shrunk, continues to grow, as has the
1 non-news programming. 2 850 Today, not because we have to but 3 because we have chosen to, we have grown the local 4 production slate at CITY-TV to approximately 45 hours 5 per week. 6 851 The commitments that we are making as 7 part of our need for flexibility in fact are at a 8 35 per cent level higher than the 13 hours and change 9 that we currently live with. 10 852 We are not suggesting we are going to 11 produce at that level immediately, but in the same way 12 our production has flexed, with our ability, with our 13 competition, with the business climate, we believe that 14 a 35 per cent increase in the case of CITY-TV versus 15 our current conditions is an acceptable and fair level 16 to discuss with you today, alongside the matter of 17 priority programming. 18 853 We have been torn. We are competing 19 with priorities set in policy where both priority 20 programming is recognized as something important that 21 we should grow and want to grow and are growing, set 22 against the specific acknowledgement that mid-station 23 groups are expected or have the ability to do 24 distinctive and innovative local programming, which 25 is sometimes at some tension with the priority of
1 priority programming. 2 854 We have come to this table with 3 specific priority programming commitments on CITY-TV 4 where we now have none, and as a medium-sized player 5 under current policy would have no obligation to do so. 6 855 We are torn between finding the right 7 balance of reflecting our community, continuing to do 8 this wonderful innovative programming -- which we hope 9 we will get to and be able to talk about with some of 10 those producers -- against the business reality we are 11 facing in a way that is not negative, but in a way that 12 addresses the reality that we are facing in a way that 13 we think is fair and balanced in our solution. 14 856 COMMISSIONER WYLIE: We will get into 15 the details of priority programming somewhat later. 16 857 What I am looking at now is what is 17 it you are telling us? You may actually have a very 18 different programming strategy because of the realities 19 of the new licence in Toronto. 20 858 I am looking at a letter as recent as 21 January 18, 2002, a deficiency letter. At page 3 I 22 quote you where you say: 23 "With no reasonable prospects 24 for turnaround, CHUM would be 25 forced to radically revisit
1 NewNet's structure and approach 2 and in particular its local 3 programming strategy." 4 (As read) 5 859 At page 5 of the same letter, under 6 the response No. 2, the third paragraph on that page, 7 you add: 8 "Moreover, the very real 9 potential exists that should 10 more than one station be 11 licensed in the GTA significant 12 commitments in areas other than 13 local programming may also have 14 to be revisited. These could 15 include, but are not limited to, 16 for example, descriptive video 17 and/or script and concept 18 development." (As read) 19 860 Again put yourselves in the shoes of 20 the regulator and you read this and you say "What is 21 the message here? With a new station in Toronto we are 22 reducing our local programming. We may actually 23 restructure our whole NewNet stations and, in fact, we 24 may make other changes that we don't know quite what 25 they are or we are not about to tell you and we may
1 look very different shortly." Mr. Craig probably feels 2 quite powerful by now. 3 861 If we risk having something that is 4 going to be entirely different -- what do we have to 5 test what is the number of hours of local, number of 6 hours of priority programming? We can't tell you you 7 are going to remain science fiction. We have some 8 tests to know what it is we are dealing with and 9 whether it makes sense in the circumstances. 10 862 So in terms of programming strategy 11 overall, how much can you cut back on local, for 12 example, and still be alternative and distinct? 13 863 MR. SWITZER: Mr. Miller wants to 14 touch on some of our history I know, but let me restate 15 and absolutely clarify for the record some of the 16 things you touched upon. 17 864 In this renewal document we have not 18 in any way altered many of the things that you 19 suggested. Our commitments to descriptive video, to 20 closed captioning, to script and concept development, 21 to various transfer benefits that are in place, to 22 specific promises that were made as part of the 23 application in Victoria, the promises that were made as 24 part of a transfer of CKVU, those all remain absolutely 25 intact and are committed as minimums.
1 865 The area we do seek flexibility is 2 one of the few areas that we do have to work with, and 3 that is with our approach to local which has flexed 4 over time. 5 866 Peter, can you continue? 6 867 MR. MILLER: Thank you. 7 868 I want to address this in three 8 parts. I want to talk about the last seven-year 9 license term and give you some examples of what has 10 happened there. 11 869 I want to talk about the 12 circumstances in which we filed the January letter. 13 870 I want to talk about what we did over 14 the last four weeks to look long and hard as to what we 15 needed to come to you today with, taking into account 16 all of the factors, Madam Vice-Chair, that you have 17 raised. 18 871 First of all, a bit of history. 19 I hope we get into this with each of our stations 20 later on. 21 872 Jay's point on CITY-TV, our 22 commitment to local news in this last license term for 23 CITY-TV was 13 hours and 36 minutes. The first year of 24 this license term, 1995-1996, we did 14 hours and 25 30 minutes, okay, just slightly above the commitment.
1 We were able to grow that to the point that in 2 1998-1999 we were doing 23 hours, 45 minutes. In the 3 last two years that came down by an hour. 4 873 In other words, you gave us the 5 flexibility to grow. We are saying you have to give 6 the flexibility to cut back. 7 874 CITY-TV was no less a local station 8 in 1995-1996 with 14 hours and 30 minutes of local news 9 as it is today with 22 hours and 43 minutes. We would 10 submit that if we went to 18 hours, as we proposed, it 11 would still be no less a local station. 12 875 COMMISSIONER WYLIE: Yes, but that is 13 a long time ago. There are a lot of things that have 14 happened since. I was talking more about the NewNet 15 stations. 16 876 MR. MILLER: Well, if you would allow 17 me to finish, Madam Vice-Chair. 18 877 The reason I think the history is 19 relevant is because we are coming before you today 20 again to ask for a seven-year license. What we are 21 proposing for, say, CITY-TV, is that we are going to 22 raise our commitment from 13 hours and 36 minutes to 23 18 hours of local programming a week. That is two and 24 a half hours more than CTV, two and a half hours more 25 than Global, three and a half more hours than Toronto
1 One. We are committing to that for the next seven 2 years. That, in our view, is a substantial commitment. 3 878 But to why we did this, both in terms 4 of CITY and NewNet, why we came to these numbers, I can 5 tell you that when I and our team wrote that 6 January 18th letter, we told you about what we thought 7 was the worst-case scenario. We never thought we would 8 be facing it. 9 879 But we think we did our homework then 10 and we have done our homework since, but we also, as 11 Jay will say, looked again to make the final decisions 12 as to where we were going to seek flexibility and we 13 felt, given your priorities as a Commission, we 14 couldn't, for example, come to you and say "We are 15 going to change our priority programming plans. We are 16 not going to do descriptive video." So we came to the 17 conclusion that the only thing that we could look at 18 is local. 19 880 Now let me get to the business 20 aspect. 21 881 When it comes down to it, we could 22 cut an hour here and there and that might save a little 23 bit of money, but the reason we have asked for these 24 levels is at the end of the day if we had to 25 rationalize to the extent of significant savings we
1 might have to cut crews. 2 882 All of our stations are fully 3 staffed. We have at least two crews doing both morning 4 and afternoon/evening. It may be that over some period 5 of time, if worst came to worst, we would have to cut 6 crews. That is what all those commitments relate to. 7 As we get into them at the station level, that is why 8 we have asked for those numbers. 9 883 How can we remain local while cutting 10 crews? Well, the answer will be regional, just as the 11 PL London, WI Windsor, NX Wingham trio of stations take 12 advantages of some common regional programming, 13 ultimately we might have to do more of that with 14 NewNet. 15 884 So we looked at the numbers in terms 16 of how we would have to get there if we had to get 17 there. We looked at them from a business point of 18 view, we looked at them from the perspective what our 19 competitors do, and we said "Okay, over the next seven 20 years what is the worst-case scenario?" 21 885 That is what we had to give you, the 22 absolute worst-case because, as you pointed out Madam 23 Vice-Chair, that is our minimum commitment. 24 886 But what we have also shown to you 25 over the last license term is where we can we have
1 exceeded those minimum commitments and we will do it 2 again over the next license term if we can. 3 887 COMMISSIONER WYLIE: I said this 4 morning -- and other panel members will go into it in 5 more details about local. I am trying to just look at 6 the overall strategy. 7 888 If I look at page 6 of your 8 supplementary brief, you are talking here about CFPL, 9 CKNX and CHWI in the middle of the page, but I suspect 10 that is true for all the NewNet stations, where you 11 say, for example: 12 "Similar to the NewRO this 13 station carries certain programs 14 common to the NewVR, yet hold a 15 strong local identity. Each 16 maintains a separate character 17 through their own news 18 information programming and 19 station branding." (As read) 20 889 In your application at page 32 you 21 specify that: 22 "Each station operates 23 autonomously with separate 24 management." (As read) 25 890 I am wondering if this approach would
1 be maintained or would still be necessary in your 2 worst-case scenario. 3 891 You are talking about cutting crews. 4 Would we have now a group of NewNet stations where 5 there would not be autonomous separate management and 6 the stations would not have a local identity or a 7 separate character because of the extremely lowered 8 level of -- I retract "extremely" -- a lower level of 9 local programming which allows you to make these 10 statements that despite the fact that they share 11 programming they are separate and distinct. 12 892 How much is needed for them to remain 13 that way and not be all blended? 14 893 MR. SWITZER: Madam Vice-Chair, I 15 cannot conceive of a situation where we would not 16 maintain independent managements. It is what these 17 stations -- we have invested 10s of millions of 18 dollars. 19 894 While some of our competitors have, 20 frankly, gotten rid of general managers, gotten rid of 21 local program managers and centralized everything, we 22 have hired dozens and dozens of people across southwest 23 Ontario, in Ottawa, in Victoria, we are in the process 24 in Vancouver. Our whole raison d'être is to have those 25 local teams activity reflect the communities at a time,
1 frankly, when our competitors are pulling back locally 2 and doing things more centralized. 3 895 I believe that will be an advantage 4 for us for a long time to come. It does not change the 5 plan to create a series of strong, local, independent 6 stations with independent management that are, of 7 course, connected with some acquired programming, with 8 some sales and marketing leverage, with some back 9 office savings functions. 10 896 Certainly we can always do a better 11 job and, yes, we are looking at back office shared 12 matters of human resources and finance and so on, but 13 they must remain separate and independent and you will 14 see that when you speak to each of these teams later 15 today and tomorrow. 16 897 COMMISSIONER WYLIE: And if you were 17 the regulator again, Mr. Switzer, what would you use as 18 mechanism or a measure of some sort to ensure that it 19 will remain as you describe, autonomous, separate, 20 local? 21 898 What is possible for us as a 22 mechanism to ensure that that is what is going to occur 23 and you will remain an alternative station? What is 24 the mechanism, other than hours of local programming -- 25 899 MR. SWITZER: I would certainly --
1 900 COMMISSIONER WYLIE: -- a minimum 2 number of hours of local programming? 3 901 Is there any other mechanism other 4 than what you are telling us today. Suppose you want 5 something to measure it three years down the line: Are 6 they what they said they would be? What is another 7 measurement, or is that the only one? 8 902 MR. SWITZER: I can understand that 9 those kinds of tests are some of the tools you have to 10 work with to give you comfort. I would certainly do my 11 best to argue that in this case it is not required and 12 not appropriate in at least one situation in Canada. 13 903 We live with -- I'm not sure if it is 14 a commitment or an expectation or a condition, but we 15 certainly treat it as a condition of license, and that 16 has to do with separate management, program management 17 and separate news management in our Vancouver and 18 Victoria stations. That is part of the license, that 19 is frankly -- 20 904 COMMISSIONER WYLIE: It is not a very 21 high price to pay to have two stations in the same 22 market, is it? 23 905 MR. SWITZER: No. We are fortunate 24 to have the privilege of operating two stations in that 25 market.
1 906 I am trying to point to an example 2 where in the past the Commission has come up with some 3 language that was perfectly acceptable and appropriate 4 for that situation. 5 907 COMMISSIONER WYLIE: Are you 6 suggesting that that would be a good idea as between 7 your stations? 8 908 MR. MILLER: No, Madam Vice-Chair, 9 and for a very simple reason. We think track record is 10 important. We think actually it is probably more 11 important than conditions of license. 12 909 We pride ourselves in exceeding our 13 conditions of license. I'm not saying we make don't 14 make mistakes, we occasionally do, but we think track 15 record is important. 16 910 COMMISSIONER WYLIE: Yes, and that is 17 why Mr. Miller's backtrack is a problem for us as 18 regulators in the sense that if you said you would do 19 "X" hours and you are now saying I want the flexibility 20 to do half as much -- or whatever Commissioner Langford 21 will discuss with you -- also creates a concern. 22 911 MR. MILLER: But that is not what we 23 are saying. 24 912 COMMISSIONER WYLIE: Because normally 25 you do what you said you will.
1 913 MR. MILLER: Normally we exceed what 2 we say we would do. 3 914 Again, we are not saying we are going 4 backwards in commitments of CITY-TV, we are saying we 5 need the flexibility, particularly on the NewNet 6 stations, consistent with your policy, consistent with 7 what you have given our competitors. 8 915 You put me in an interesting position 9 when you asked me what we would have done if we were 10 the regulators. I guess we wouldn't have put ourselves 11 in this situation if we were the regulators, is the 12 honest answer. But we are in this position now and we 13 are trying to deal with it as responsibly as we can. 14 If you have better ideas for us we are certainly open. 15 916 But we have read your policy many, 16 many, many times, we have a track record of exceeding 17 our commitments to our local communities. What we are 18 saying is, the way we do that in the future will need 19 to be different. 20 917 As you get into the specific 21 discussions with our GMs you will see how we can do 22 that very creatively, how we can still serve our local 23 communities with less "hours", by your definition, but 24 as much local commitment as we continue to provide 25 today. That will be an important discussion.
1 918 I guess in my view the best example 2 of that is our new PL/WI/NX, three stations who really 3 do a fabulous job serving that locality, both on a 4 strictly local and a regional basis. Again, perhaps in 5 the future that will be more of a model for the entire 6 NewNet across Ontario. But that combination of serving 7 local and regional to make ourselves distinct. 8 919 Also it is our other programming that 9 makes us distinct as well. We will remain distinct. 10 920 COMMISSIONER WYLIE: Yes. So what I 11 gather, then, is your strategy for the NewNet and for 12 CKVU/CITY will remain the same including the intensely 13 local approach? 14 921 MR. SWITZER: Absolutely, of course. 15 922 COMMISSIONER WYLIE: I am intrigued 16 by a comment you made at page 34 of your supplementary 17 brief where you say that, quote: 18 "It is critical that a stable 19 regulatory environment exists in 20 order for CHUM to continue to 21 maintain its unique position in 22 the system." (As read) 23 923 What is intended by that? Because a 24 stable regulatory environment wouldn't see you coming 25 back here with, I don't know how many more specialty
1 services and two more stations in the second largest 2 market. That is not very stable, but it seems to have 3 worked well. 4 924 MR. MILLER: I think in particular 5 that was meant to refer to your TV Policy implemented 6 in 1999. We think it is a good policy, we think you 7 should stick to that policy and we have tried to make 8 sure that we have stuck to that policy in what we filed 9 with you. 10 925 COMMISSIONER WYLIE: But you are 11 prepared, I heard you say, to revisit how you do things 12 without being outside of your broadcasting mission, 13 even if there are changes. Some of them are to your 14 advantage, some of them are not. 15 926 MR. MILLER: As we, I think, 16 indicated in our opening statement, that are various 17 parameters in our world, the market reality, the 18 economic reality and the regulatory climate, which is 19 an important but not the only important factor in our 20 lives. 21 927 So what we are simply signalling is 22 within the regulatory framework, yes, we want that 23 flexibility. 24 928 COMMISSIONER WYLIE: Some of the 25 broadcasters, including CHUM Television, would not be
1 where they are if the TV Policy had been followed 2 verbatim. You would have only one station in 3 Vancouver. That would be stability, but it would not 4 be so positive for CHUM, would it? 5 929 MR. MILLER: Again, sometimes there 6 are exceptions and if those exceptions are consistently 7 applied then they become a defacto new policy. 8 930 So you are right, Madam Vice-Chair, 9 we are not suggesting that everything is stagnant. Our 10 business evolves, and your policies evolve and we 11 totally respect that. 12 931 COMMISSIONER WYLIE: So with regard, 13 then, to local programming you will have more 14 discussion with Commissioner Langford when each station 15 is looked at. 16 932 One more thing I want to discuss with 17 you. As far as I understand it we discussed to date 18 the advantages that may flow to you from international 19 activities. I think I understood you to say you were 20 selling mostly your expertise not your programming so 21 it doesn't really come into the picture very much. 22 933 We discussed how you allocate costs 23 and revenues related to programming as between your 24 conventional stations and that is in your financial 25 assumptions.
1 934 The Chairman also discussed with you 2 how you allocate as between -- how you handle as 3 between specialties and conventional, related ones, and 4 you cited back the 1993 PN to me. 5 935 Why has this situation with 6 sublicensing, when you sublicense programs, how do you 7 handle that in your financial projections? 8 936 For example, the right to "Lexx". Do 9 you buy programming domestic and foreign that you can 10 then sublicense? 11 937 What is the state of your 12 relationship with Craig which you alluded to with 13 regard to sublicensing? 14 938 So two questions: What is it, 15 especially with Craig? 16 939 How is it handled or reflected 17 financially, the money you get back from sublicensing? 18 940 MR. SWITZER: Madam Vice-Chair, I 19 will take you through it to the best of my ability. 20 Let's take it category-by-category. 21 941 For non-Canadian programs that 22 are sublicensed, essentially or effectively we have 23 two sublicense ongoing clients in Canada, the Craigs at 24 the moment and our friends at CTV in the Maritimes. 25 They pay license fees and those license fees are
1 deducted from the total price of the acquisition and 2 the remainder is shared between the CHUM stations 3 that use it. 4 942 As to Canadian-produced programs that 5 we produce ourselves, as I said earlier, sublicensing 6 to third parties does not come out of the cost of those 7 programs. Sublicensing or sharing inside the CHUM 8 family does come out, and we believe that is in 9 compliance with 1993-93. 10 943 As to acquired Canadian programs 11 such as "Lexx" that we do not produce but that we 12 commission, again we treat it as if it were a 13 non-Canadian program in that the full license fees 14 that we receive from the Craigs, or from others, come 15 off our national license fee and we are left with 16 expensing the balance between the CHUM stations that 17 are left with it. 18 944 You asked about our relationship with 19 the Craigs. Despite some small tensions in Ontario 20 certainly the relationship in Alberta and Manitoba is 21 constructive and ongoing and we see no reason for a 22 change in that relationship in the next year or two, 23 certainly in Alberta and Manitoba. 24 945 COMMISSIONER WYLIE: I was trying to 25 figure out the meaning of the footnote at page 29 of
1 your supplementary brief. 2 946 MR. MILLER: The reference there, 3 Madam Vice-Chair, if I recall correctly, simply was to 4 the point that some of the shows that we make available 5 in Alberta are not currently being exhibited. I think 6 we address that, if I recall correctly, in our response 7 back to you on our reply to interventions where we gave 8 some examples of shows, Canadian shows that we have 9 made available to Craig Broadcasting in Alberta and 10 they are not carried and it is understandable now that 11 the Craigs are getting programming also from CanWest 12 from CHEK stream. Obviously they don't have as much 13 time available so they are taking fewer of our shows. 14 947 COMMISSIONER WYLIE: Less. Fewer. 15 But you still have a relationship with them -- 16 948 MR. SWITZER: Absolutely. 17 949 COMMISSIONER WYLIE: -- a 18 sublicensing relationship? 19 950 MR. SWITZER: Absolutely. 20 951 COMMISSIONER WYLIE: How do you 21 expect that to be affected by the recent decision that 22 is the cause of your angst? 23 952 MR. SWITZER: Small amounts of 24 tension. 25 953 We must plan for an eventual end to
1 that relationship in Alberta and Manitoba, not 2 necessarily at our doing, but we would expect and have 3 reason to believe that once Craig gets up and running 4 and does his own larger national buying there will just 5 be less interests and less shelf space and less demand. 6 954 Because the more -- perhaps I'm 7 speculating here, but one might suggest or an industry 8 analyst might suggest that the more Craig takes from 9 CanWest and from CHUM in Alberta, the less shelf space 10 and buying power there is to support presumably their 11 important Toronto station. 12 955 It is not for me certainly to be 13 specific. I don't know what is in their mind, but we 14 must plan for one more year of traditional syndication 15 and sublicensing to them. 16 956 We will continue to make programs 17 available to them. We are getting signals that they 18 will have interest in those programs for next year and 19 probably not for the year after. We are making our 20 plans accordingly. 21 957 COMMISSIONER WYLIE: It is not clear 22 to me whether that loss, so to speak, has been 23 expressly factored into your projections when you were 24 discussing with the Chairman the effect of the 25 licensing of Toronto One.
1 958 MR. SWITZER: It mirrors the 2 assumptions we have made. 3 959 COMMISSIONER WYLIE: Now, priority 4 programming, in CIVI, in the licensing of CIVI you have 5 accepted as a condition of license eight hours of 6 priority programming. In the transfer of CKVU you also 7 will carry eight hours of priority programming. 8 960 Are you accepting this as a condition 9 of license? 10 961 MR. MILLER: Yes. 11 962 COMMISSIONER WYLIE: My understanding 12 as well is that they will be eight different hours? 13 963 MR. MILLER: That was the safeguard 14 we committed to for CKVU and CIVI. 15 964 COMMISSIONER WYLIE: That is also 16 acceptable to you as a condition of license going 17 forward? 18 965 MR. MILLER: Yes. 19 966 COMMISSIONER WYLIE: Because at 20 transfer, as you know, we weren't in a position to do 21 other than to tell you we would review this at renewal. 22 967 Then when CIVI was licensed you also 23 committed to eight hours of priority programming on 24 NewNet, on the NewNet stations. 25 968 MR. MILLER: Yes.
1 969 COMMISSIONER WYLIE: You actually 2 applied and that was done through Decision 2001-519. 3 970 Now, will that programming on the 4 NewNet stations be exactly the same as CIVI, consistent 5 with the NewNet programming strategy? 6 971 MR. SWITZER: It is expected that it 7 will be, but it may not be. In general there are great 8 similarities, both on the Canadian acquired and some of 9 the foreign acquired. We have not drilled down to that 10 level of specificity in terms of exactly a perfect 11 match on that priority programming. 12 972 COMMISSIONER WYLIE: But would you be 13 prepared to commit that it won't be the same as on CITY 14 for the NewNet stations? 15 973 MR. SWITZER: Based on our filings 16 for CITY-TV in this renewal document, yes, we would. 17 974 COMMISSIONER WYLIE: Would you accept 18 that as a condition of license? 19 975 MR. SWITZER: Yes, we would. 20 976 COMMISSIONER WYLIE: That the NewNet 21 stations not have the same priority programming as 22 CITY? 23 977 MR. MILLER: With the same language 24 as you had in the safeguards for CIVI and CKVU. 25 978 COMMISSIONER WYLIE: What is your
1 view of CHUM station potential reach in the manner in 2 which the Commission calculates that for the purpose of 3 the TV Policy? 4 979 At page 9 of your presentation you 5 say that you serve roughly 40 per cent to over 50 per 6 cent of English-language households. 7 980 At page 16 you certainly emphasize 8 that you are not a large multi-station group. 9 981 But what is the level below 70 per 10 cent that you consider your are at in that regard? 11 982 MR. MILLER: We actually spent a 12 little time on this late last week and it wasn't 13 something that we had looked at before because I think 14 where we and the staff analysis is in agreement is that 15 we are not at the 70 per cent threshold. 16 983 But while I understand the staff 17 analysis puts us at 67 per cent reach of English 18 households, our analysis puts us at 51.2 per cent 19 reach. 20 984 I think we have done it the same way. 21 I was hoping perhaps at some stage the staff and we can 22 have some discussion to figure out if we have just been 23 looking at it differently and try to reconcile it. 24 985 But certainly our numbers -- and I 25 can break that down for you. In Ontario we find
1 ourselves with 81 per cent reach, in B.C. we find 2 ourselves with just shy of 70 per cent reach. When we 3 bring that together we find ourselves overall in Canada 4 with 51.2 per cent reach. 5 986 So we are lower than the staff 6 numbers and we haven't had the chance to figure our 7 exactly what the reason for that discrepancy is. 8 987 COMMISSIONER WYLIE: I perhaps can 9 read to you what I am told is the way it is calculated" 10 "Potential reach is based on the 11 assumption that if one survey 12 respondent in a cell -- that is 13 the smallest geographically 14 defined are in a BBM audience 15 survey -- reports tuning to a 16 particular station then the 17 entire population of that cell 18 is counted as potential 19 audience." (As read) 20 988 So that is how we do it. But I would 21 certainly be foolish to start arguing with you about 22 how that is done, but I can tell you that our numbers 23 or our assumptions are 67 per cent. 24 989 MR. MILLER: Daphne might want to 25 add, but I am aware of that assumption and we tried to
1 do it the same way, but we still came up with very 2 different numbers and it is something that obviously we 3 should try to resolve because I think we are dealing 4 with the same BBM numbers, if I recall correctly. 5 990 Daphne. 6 991 MS HUBBLE: Yes. In fact, that 7 methodology is, just to be exact, based on a 1 per cent 8 share I believe. So in any county where CITY-TV would 9 have 1 per cent or more share of viewing, that county 10 would be included. 11 992 We have done that analysis as well 12 and come to a total share of 60 per cent across the 13 country. 14 993 I think where we may differ is in 15 counties outside of Ontario, for example, for CITY-TV. 16 So this is something that we do have to reconcile. 17 994 COMMISSIONER WYLIE: But what I was 18 telling you was that the assumption was if one survey 19 respondent in a cell -- I heard you say 1 per cent, 20 which -- 21 995 MS HUBBLE: That could be the 22 difference. 23 996 COMMISSIONER WYLIE: -- is entirely 24 different, is it not? 25 997 MS HUBBLE: Yes. That could be the
1 difference. 2 998 COMMISSIONER WYLIE: But anyway, 3 those are our numbers. 4 999 Which leads me to ask whether you 5 have further plans for expansion. 6 1000 THE CHAIRPERSON: You might have to 7 get up to 120 per cent by our reckoning. 8 --- Laughter / Rires 9 1001 MR. SWITZER: Madam Vice-Chair, we 10 are here today to -- 11 1002 COMMISSIONER WYLIE: We are talking 12 about priority programming and of course the 13 requirement for a multi-station group and how that is 14 calculated and the emphasis that you are being very 15 generous in doing what you don't have to do, but we 16 think you are only 3 per cent from having to do it. 17 --- Laughter / Rires 18 1003 MR. MILLER: It is an important 3 per 19 cent, if indeed it is 3 per cent. 20 1004 MR. SHERRATT: We will be back for a 21 reduction in power. 22 --- Laughter / Rires 23 1005 COMMISSIONER WYLIE: Reduce the 24 antenna height or perhaps bite the bullet and expand 25 beyond 70 per cent.
1 1006 MS HUBBLE: Could I just add a 2 comment on the methodology being used, whether it is a 3 1 per cent share or one respondent in a county. That 4 methodology is something that we have felt 5 overestimates what our coverage is. 6 1007 Let me give you an example. There 7 are certain areas, for example Kingston, where we do 8 get some viewership, however you take the entire county 9 of Kingston, not everybody can get CITY-TV via cable 10 there. So my understanding is that we are on a fairly 11 high channel position there and that we do not have 12 cable coverage throughout the county. So to count 13 everybody within that county as being part of our 14 coverage area would be an overestimation. 15 1008 In fact, we have tried a second 16 methodology using Media Stats data where we get an 17 actual count of subscribers in Ontario and an actual 18 count of subscribers to direct-to-home, again from 19 Media Stats. There we have to make some estimates 20 because we can only get eastern Canada and western 21 Canada. But we use BBM data in terms of being able to 22 estimate how many households there are in Ontario with 23 direct-to-home. 24 1009 So we feel very confident we have 25 some good numbers on exactly how many homes can receive
1 CITY-TV via cable or via a DTH. 2 1010 Then probably the more difficult part 3 is the off-air. Again we have come up with a 4 methodology to get a little bit better estimate of how 5 many people are reaching us off-air. So again, we are 6 coming out with a lower number using that methodology 7 and we are confident that those numbers probably better 8 reflect our true coverage. 9 1011 COMMISSIONER WYLIE: Of course we 10 will never get very far unless we agree as to what the 11 assumptions are for coming to the calculation of 70 per 12 cent. But of course, if you had come in with eight 13 hours of priority programming on CITY we wouldn't have 14 had to have this difficult conversation about how you 15 calculate it, which leads me to ask you: Why not? 16 1012 First let me ask you: You have in 17 your 2001 schedules, if we look at the programming that 18 is priority, we calculate seven hours on CITY. That is 19 in 2001. CKVU 9.5 hours and NewNet stations eight to 20 nine hours. 21 1013 What is the situation in 2002? 22 1014 MR. MILLER: Those counts are from 23 our program schedules are they, Madam Vice-Chair? 24 1015 COMMISSIONER WYLIE: The current 25 program schedule.
1 1016 MR. MILLER: No, I was asking you 2 where your counts were from. 3 1017 COMMISSIONER WYLIE: I believe it is 4 from the schedules that were 2001 and filed with the 5 application. 6 1018 MR. SWITZER: Let's perhaps start 7 with CITY-TV and look at the current -- or I should say 8 the 2001-2002 schedule. 9 1019 The current priority programming in 10 that schedule is approximately five hours and it is 11 made up of two one-hour Canadian dramas. In the fall 12 schedule they are the Canadian drama "Relic Hunter" and 13 the Canadian drama "Lexx", as well as at least one 14 Canadian movie in prime per week. That is four hours. 15 1020 There are bonuses some weeks and 16 there are bonuses in some cases, depending on the age 17 of the movie and the age of the shows. In addition, 18 the only other priority program that we believe is 19 priority according to current regs is the Star! TV 20 program which is a special program, magazine 21 exclusively supporting and glamorizing Canadian stars, 22 Canadian television and Canadian film. 23 1021 Our other very innovative and very 24 distinctive local magazine programs -- and this is 25 really the crux of this question -- do not qualify we
1 believe, and we believe that is unfortunate -- do not 2 qualify under your current definitions of priority 3 programming, even though we believe these programs are 4 making a huge contribution in the case of Movie 5 Television or Media Television in terms of advancing 6 media literacy and all of the good things that these 7 shows are -- they do not qualify. 8 1022 So our base number before bonuses in 9 a typical week on CITY-TV this year is 4.5 hours. With 10 various bonuses it averages our to a total of five 11 hours. The promises we have put on the table are six 12 and then, beginning three years later, seven. 13 1023 COMMISSIONER WYLIE: They do not 14 qualify because they are not -- they are magazine-style 15 but they don't fall within the definition of what is a 16 priority program in that category? 17 1024 MR. SWITZER: It is a very hot topic 18 around our shop and we would like to talk to you about 19 that for hours, but we are living with the regulations 20 and policy without in any way stretching, and according 21 to our read of those rules, even though these shows 22 provide community access and discuss in great depth and 23 detail important matters of Canadian culture, Canadian 24 music, Canadian art, Canadian architecture, Canadian 25 films, Canadian television, they do not qualify under
1 priority programming. That is the fundamental reason 2 for the gap between six hours and eight hours, it is 3 these many hours of magazine programs which for us 4 contribute to the contribution of the CITY-TV station. 5 1025 COMMISSIONER WYLIE: And don't fall 6 within the definition -- 7 1026 MR. SWITZER: Correct. 8 1027 COMMISSIONER WYLIE: -- in the 9 definition of the categories as Canadian 10 entertainment magazine programs as defined with the 11 percentages and whatever the definition is, and can't 12 be tweaked to fit? 13 1028 MR. SWITZER: Well, that is an 14 interesting question. 15 1029 MR. MILLER: That is an interesting 16 question. 17 1030 COMMISSIONER WYLIE: What are the 18 hours on CKVU currently of priority? I have a sneaking 19 suspicion that -- 20 1031 MR. MILLER: We are up to eight hours 21 now. We can add up how we get there, but we are at the 22 eight hours on CKVU right now. 23 1032 COMMISSIONER WYLIE: The calculation 24 that was made for seven hours included these 25 non-qualifying programs.
1 1033 MR. SWITZER: I will just -- 2 1034 COMMISSIONER WYLIE: So we obviously 3 have our own question marks. 4 1035 MR. MILLER: Maybe they qualify and 5 we have been too conservative all along. 6 1036 MR. SWITZER: The Canadian hours that 7 would qualify -- and I apologize that the CKVU team 8 will be much better briefed on the detail than I am, 9 but the hours in the current 2001-2002 schedule include 10 "Beastmaster" -- we are speaking of CKVU now -- "Relic 11 Hunter", "Earth: Final Conflict", a show shot in 12 Vancouver called "The Crow", at least one Canadian 13 movie, and a show called "Highlander: The Raven". 14 1037 Some of those are eligible for 15 bonuses, some are not. In total, in addition, they 16 would add up to at least eight hours, and of course the 17 Star! TV half hour, which is eligible and does qualify 18 because it is predominantly about the Canadian 19 entertainment business. 20 1038 So it varies depending on the 21 bonuses. We are clearly making the eight hours and in 22 some weeks it is nine and ten hours. 23 1039 COMMISSIONER WYLIE: On the NewNet 24 stations? 25 --- Pause
1 1040 MR. SWITZER: I will take you through 2 a sample schedule. 3 1041 Again, the NewNet programmers and 4 general managers will be better briefed, but I will do 5 my best. 6 1042 There is at least one Canadian movie 7 per week which would count for two hours. In addition, 8 the "Beastmaster" show, the "Tracker" program", "Earth: 9 Final Conflict", "First Wave", a drama shot in 10 Vancouver, "The Immortal", a drama shot in Vancouver, 11 and bonuses on top of that in addition to Sir Arthur 12 Conan Doyle's "The Lost World" as an hour. Those are 13 all one-hour programs, some eligible for bonuses, some 14 not. Again, we are in excess of the required eight 15 hours. 16 1043 That program schedule, with some 17 variations, would be similar across the Ontario NewNet 18 stations. 19 1044 COMMISSIONER WYLIE: So on CITY, 20 then, the ones that you think are close to 21 magazine-type programmings that could fit as 22 entertainment would be Media TV and Movie TV? 23 1045 MR. SWITZER: There are many programs 24 we produce, Movie Television that could be -- certainly 25 "The New Music", Movie Television, Movie Media, "The
1 New Music". 2 1046 Of course of "Speaker's Corner" 3 program which we haven't talked about which in some 4 markets is as much variety and performance as it is 5 politics and democracy might qualify. It is to suggest 6 that at the local level we are doing lots and lots of 7 magazine programs that unfortunately don't qualify, 8 although they are absolutely acknowledged as industry 9 leaders and making a contribution. 10 1047 MR. MILLER: We have been very 11 conservative, Madam Wylie, in our interpretation. It 12 could well be that some of these shows would qualify as 13 long-form documentaries because they are over half an 14 hour, half an hour or more. 15 1048 The other interesting thing 16 obviously, if some of them were produced elsewhere, for 17 example if they were produced in Ottawa or Victoria, 18 then they clearly would be priority programs because 19 they would fall under the regional priority programming 20 definition. 21 1049 So it is somewhat ironic that if we 22 tweaked them, as you say, they would qualify, but at 23 the moment being conservative we have assumed they 24 haven't, but we believe, as Mr. Switzer has pointed 25 out, that they are a key part of our contribution.
1 1050 They are very strong shows, both 2 domestically -- they export Canadian culture and 3 Canadian values abroad. They don't make us a lot of 4 money abroad, but we think it is a wonderful thing that 5 they are abroad and we think it would be a shame if 6 inadvertently we were forced to cancel these shows 7 through a premature application of the higher priority 8 programming obligations on CITY-TV. 9 1051 COMMISSIONER WYLIE: You could have a 10 documentary on a CRTC hearing. 11 --- Laughter / Rires 12 1052 COMMISSIONER WYLIE: You could call 13 it "This Minute Has 22 Hours". 14 --- Laughter / Rires 15 1053 MR. SWITZER: A 22-part mini-series 16 event, that's right. 17 1054 COMMISSIONER WYLIE: I think I will 18 charge you for that idea. 19 --- Laughter / Rires 20 1055 COMMISSIONER WYLIE: So is this your 21 rationale for the peculiar distribution of priority 22 programming where CIVI and CKVU would have different 23 eight hours of priority programming, your NewNet 24 stations would have eight hours as well, and then CITY 25 would have less? Is it because of these programs?
1 1056 You gave another reason this morning, 2 you talked about flexibility, et cetera, but is it 3 because of this particular style of programming that 4 you want to be able to have in peak time, or what is 5 the rationale for this asymmetry? 6 1057 MR. SWITZER: Obviously -- I 7 shouldn't say "obviously". 8 1058 The number one reason is, of course, 9 revenue pressures, but you have hit it in that we are 10 disadvantaged in that we have been so conservative in 11 our treating of these programs not as priority. These 12 magazine shows are the fundamental reason for the 13 difference, yes. 14 1059 COMMISSIONER WYLIE: And they are 15 always aired in peak time, between 7:00 and 11:00? 16 1060 MR. SWITZER: They are first 17 telecast -- for the most part, yes, I can't think of 18 one that isn't. In many cases they will repeat, 19 perhaps the following week, later in the evening or in 20 the afternoon, but they each have at least one 21 prime-time exposure as a first play, yes. 22 1061 COMMISSIONER WYLIE: What would it do 23 to your overall programming strategy if the Commission 24 decided that indeed in the circumstances you should do 25 eight hours of priority programming on CITY?
1 1062 MR. SWITZER: We would have to -- I 2 will be discreet -- tweak perhaps. We would have to 3 reassess the shows we make or where we make them. We 4 may have to cancel -- frankly, cancel some local 5 programs that we want to do but that don't qualify and 6 perhaps don't contribute as much revenue or margin and 7 therefore is we were to both do extra priority and some 8 of these extra shows it would be perhaps not the best 9 use of some of the prime-time, and yet if we move them 10 out of prime-time they are worthy of prime time. 11 1063 It is not something that is easy to 12 talk about and it is part of why I say we are facing 13 the conflicting pressures of recognizing the importance 14 of priority programming and still wanting to ensure 15 that all of these magazine shows can continue to be 16 vibrant. 17 1064 MR. MILLER: And also the -- 18 1065 MR. ZNAIMER: But, Madam Wylie, that 19 is precisely the tough logic that leads us to look at 20 the thing that you think is the least likely thing that 21 we should be looking at, which is local programming. 22 1066 MR. MILLER: If I could be clear, it 23 would mean, for example, that we would have to lower 24 our local commitments. We have been prepared to make 25 an 18-hour a week local commitment on CITY, recognizing
1 in part -- recognizing in part the fact that we are not 2 prepared at this time to make the eight hour priority 3 programming commitment. 4 1067 If we had to make the eight hour 5 programming commitment on CITY, in light of what Jay 6 has said about cutting shows, we would probably have to 7 cut that 18 hour commitment to a level more consistent 8 with our competitors. 9 1068 COMMISSIONER WYLIE: These shows come 10 right now within your definition of local. 11 1069 MR. SWITZER: Yes, of course. They 12 count as local original productions. They do not 13 qualify as priority. 14 1070 This goes back to Chairman Dalfen's 15 opening comments this morning which made us smile when 16 he reminded us of perhaps our role as mid-sized players 17 to come up with distinctive, unique, innovative 18 programming to serve our local markets in ways that may 19 be different than the larger players. You have seen 20 this natural expression through these magazine shows. 21 We are doing a very good job. We want, of course, to 22 continue along the path we are. 23 1071 COMMISSIONER WYLIE: If they were 24 produced in your new facility in Ottawa they would be 25 priority programs, wouldn't they?
1 1072 MR. SWITZER: Yes, they would. 2 1073 COMMISSIONER WYLIE: That is another 3 great idea that I have. 4 --- Laughter / Rires 5 1074 COMMISSIONER WYLIE: It would be fair 6 to say, would it, that the type of priority programming 7 you do in drama is more the six-to-nine points type of 8 programming? 9 1075 MR. SWITZER: Our main thrust remains 10 movies, long-form programming, made-for-television 11 movies and theatrical films. I would like Diane Boehme 12 to speak briefly to that, because in that area, which 13 remains our first most important priority, we have 14 talked about action/adventure and some science fiction, 15 six-to-nine point Canadian dramas, and yes they are 16 important and yes they are in our schedule, but where 17 we make a difference, where we can contribute where 18 others either do not or have chosen not to, is in the 19 intensely Canadian feature films and 20 made-for-television movies. 21 1076 Sometimes we don't take enough time 22 to brag about that, frankly. Since we are sometimes 23 known as braggers, I would like Diane to just spend a 24 few seconds on why this important area is an area where 25 we have filled in where others have chosen not to.
1 1077 MS BOEHME: Thanks, Jay. 2 1078 Actually, most of the Canadian 3 long-form fiction that we do, whether it is a 4 made-for-television movie or whether it is a theatrical 5 feature film is either a nine out of ten or a ten out 6 of ten. 7 1079 There is occasionally, as more and 8 more Canadian independent producers are trying to raise 9 their budgets and draw more audiences to the cinemas, 10 and ultimately to our screens as well, in order to 11 raise the budget they have tried to go to international 12 co-productions which changes and skews things a little 13 bit. So in those cases where there is international 14 co-productions and there is either actors or directors 15 or screenwriters that are representative of the treaty 16 co-production partner, we don't necessarily come in at 17 nine or ten points. But most of the time our material 18 that we develop and that we prelicense is all nine out 19 of ten on the long-form side. 20 1080 COMMISSIONER WYLIE: Can you give us 21 some type of ratio as between the 10 point drama and 22 the six-to-nine point drama? 23 1081 MS BOEHME: On long-form fiction 24 or on -- 25 1082 MR. SWITZER: In the movie area.
1 1083 MS BOEHME: In the movie area? 2 1084 COMMISSIONER WYLIE: On all drama. 3 1085 MS BOEHME: On all drama. 4 1086 In the movie area, the nine or tens 5 would be, I would think, 80 per cent of our activity. 6 On the television drama series side it is certainly 7 less than that because of the nature of what we are 8 trying to do. 9 1087 We have recently been trying to go 10 through the more typical Canadian funding system where 11 we would have 10 out of 10 projects. Unfortunately we 12 have not been successful in this recent round. We did 13 not, for reasons that still remain mysterious, receive 14 the support from the funding agencies for those 10 out 15 of 10 drama series that we chose to initiate this year. 16 1088 But on the television drama series, 17 they are more typically six or seven out of ten 18 probably 75 per cent of the time. 19 1089 MR. SWITZER: Vice-Chair Wylie, Diane 20 hits on the point of the disadvantage that medium-size 21 players are facing at the funding agencies. This year 22 with the growth of our western stations we were able to 23 come to the table to Telefilm and to the CTF with full 24 national network trigger prices on -- I will give you 25 one example.
1 1090 A completely conceived, written, 2 produced, set in Vancouver brand new, fully expensive, 3 regular $1.5 million an episode new Canadian drama. 4 That project set in Vancouver did not pass the test of 5 CTF and Telefilm, in part we believe because we don't 6 provide national coverage. We were disadvantaged to 7 the CTVs and Globals, even though we were offering the 8 same license fee, $232,500 per episode, which for a 9 medium-size player like us is a monstrous number, that 10 project was not successful and we were penalized 11 because of our limited coverage and because we could 12 not guarantee to them that as many Canadians would see 13 it as if it played on the CTV. 14 1091 So we have put most of our resources 15 in the area -- and there is a long list in our filing 16 of extraordinary Canadian films from coast-to-coast 17 where we have been able to effect some change, we have 18 been able to help producers get money. It is not a 19 case of one is right and one is wrong, we have chosen 20 to put our budgets and our hearts into the movies 21 because we are at a funding disadvantage with the 22 agencies at series. 23 1092 COMMISSIONER WYLIE: This inability 24 to get funds, would that be from the CTF? 25 1093 MS BOEHME: Yes, it is.
1 1094 COMMISSIONER WYLIE: And not because 2 something was judged to be better, simply you didn't 3 make the threshold requirements? 4 1095 MS BOEHME: On the LFP side that is a 5 complicated question. 6 1096 It is very simple just to cite an 7 example. Last week I had a conference call with 8 Telefilm when the EIP Decisions came out, because the 9 EIP is where the majority of the support does end up 10 coming from. At that point in time we had, out of 11 eight projects, there was only one small digital movie 12 out of Victoria that has received support. 13 1097 I asked them to review very briefly 14 if there was a problem with our ranking and it was very 15 clear and we all agreed that there is a systemic bias 16 against non-national players. 17 1098 One portion, especially in an 18 oversubscribed year like this one, one portion of the a 19 analysis that the Telefilm people apply to the 20 decisions that they make for projects to support, is 21 very much geared towards the maximum number of eyeballs 22 that those programs will receive. They admitted and 23 agreed that there is a systemic bias against people who 24 are not national players and we do not score points in 25 that area that is equivalent to our competitors in the
1 market. 2 1099 COMMISSIONER WYLIE: Is there an 3 avenue, formal or informal right now, to enter into any 4 type of discourse with the funding agencies about these 5 problems? 6 1100 MS BOEHME: That was the sum of the 7 call actually, is that they admit and recognize that 8 there is a problem. We have to have a dialogue to 9 rewrite the rules in order to address this. 10 1101 COMMISSIONER WYLIE: But you don't 11 have representation on the board or any -- 12 1102 MS BOEHME: No. 13 1103 COMMISSIONER WYLIE: -- avenue to 14 engage with them? 15 1104 MR. SWITZER: Not right now. We are 16 trying to take a more active role as a medium-sized 17 player and, frankly, effect some change to reduce this 18 bias. We are hopeful, but it has been a struggle and 19 it has to do with competing pressures from 20 semi-independent producers. It is a mess, frankly, and 21 we are not happy and we must solve that problem. 22 1105 It complicates things when we are 23 trying to talk about financing new series. Paul 24 Gratton has been very involved. 25 1106 Diane, if I can ask Paul to join
1 our -- 2 1107 MR. GRATTON: Yes. I was going to 3 say, I have sat on the CTF Board in prior years. I sit 4 on the Independent Production Fund, which is the old 5 McLean Hunter fund. I also sit on the Feature Film 6 Advisory Committee to Telefilm. 7 1108 This year there was a major crisis. 8 I mean, demand far exceeded available funds. 9 1109 It is explicit in the Telefilm 10 evaluation grid that priority, all other things being 11 equal, will be given to those shows that can be exposed 12 to the highest number of eyeballs. So I think what we 13 found this year was almost all the second tier players 14 had their proposals rejected. 15 1110 Of course, with so many more licensed 16 people all with conditions of licence, the number of 17 proposals that came forward this year was almost double 18 last year. Last year there were enough funds for most 19 of the drama requests. This year a huge number of 20 drama series were turned down. 21 1111 I think it is fair to say that the 22 last thing Telefilm really wants to see from the CHUM 23 Group is us coming forth with 10 point drama series 24 such as they see from the CTVs and the CBCs of this 25 world. I think they prefer us to exercise our support
1 for high content, Canadian content in the area of 2 feature films where other broadcasters are far less 3 involved. 4 1112 There is just enough money to 5 continue to support 10 out of 10 point Canadian dramas. 6 This is consistent on all the funds that I am exposed 7 to. They are simply tapped out in terms of the 8 requests and the available dollars. 9 1113 COMMISSIONER WYLIE: With regard to 10 scheduling you have heard us, I'm sure, discuss with 11 CTV, Global and Craig at their renewals, the focus on 12 scheduling. 13 1114 I think "grosso modo" if we look at 14 your block schedules right now there seems to be a 15 spread. In your view, is that important that it be 16 maintained, that the scheduling of the priority 17 programming not be only in peak hours but be spread 18 throughout the week? 19 1115 MR. SWITZER: We obviously 20 acknowledge the importance of priority programming 21 and treat it and promote it in prime-time in a very 22 serious way. 23 1116 To continue to be totally candid with 24 you, we don't think of it in terms of day of the week. 25 We are fortunate in that it is spread because to meet
1 the needs of our views in each community it has made 2 sense, both in the distribution of Canadian movies, 3 which is effectively across every night of the week, 4 and the various Canadian dramatic series. 5 1117 On all of our stations there is a 6 very even distribution across the week and ironically 7 the traditional lowest tuning night, Saturday night, 8 generally, I think on all of our stations, represents 9 the smallest amount of Canadian priority programming in 10 any of our schedules and it has been that way certainly 11 through the year or two years where we have had stepped 12 up commitments. 13 1118 So we don't program it that way, we 14 don't think of it that way, it is not one of the 15 mechanisms that each of the programmers is trying to 16 balance, but because they are each doing a good job in 17 their community and we don't have the CTV/Global 18 problem of first setting our schedule with American 19 simulcasts, our station grids are not driven by 20 American simulcasts so the programmers have the 21 flexibility to better put shows where they think it 22 will make the most good and that has resulted in an 23 even distribution. 24 1119 COMMISSIONER WYLIE: But do you see 25 an overall virtue in even distribution?
1 1120 MR. SWITZER: Yes, we do. Obviously 2 there is a virtue in shows being made available across 3 the week. I am trying to add a layer that suggests it 4 has not -- our success in this area was not driven by a 5 particular mandate. 6 1121 MR. MILLER: I think, Madam 7 Vice-Chair, just to add a couple of observations. The 8 fact that the Friends of Canadian Broadcasting are not 9 here before you with their chart of the reds and the 10 blues is at least some indication that at least they 11 don't see us as a problem in that regard. 12 1122 Secondly -- 13 1123 COMMISSIONER WYLIE: Maybe 14 Mr. Morrison is on holidays. 15 --- Laughter / Rires 16 1124 MR. MILLER: That is the other 17 possibility, yes. 18 1125 But the other thing that we were 19 looking a little bit at our success in attracting 20 audiences to Canadian programming and just I will give 21 you a couple of numbers. 22 1126 Looking at CITY-TV for example, we 23 estimate our prime-time viewing to our Canadian 24 schedule results in roughly an 18 per cent viewing to 25 Canadian in prime-time on CITY, it is about 15 per cent
1 on VR. That compares to 7 per cent on CFTO, the CTV 2 affiliate, and 4.7 per cent on Global. 3 1127 So by that measure on average I think 4 we are doing a relatively good job in attracting 5 Canadians to Canadian programming in prime-time. 6 1128 COMMISSIONER WYLIE: In the case of 7 CITY let me go back. When you say that you should be 8 allowed to do six hours as of September 2002 for the 9 first three years and then seven hours, you would 10 accept that as a condition of license? 11 1129 MR. MILLER: Yes. 12 1130 COMMISSIONER WYLIE: If in our 13 judgment it should be eight, that would be a condition 14 of license as well. 15 1131 MR. MILLER: We can't accept eight. 16 1132 COMMISSIONER WYLIE: For the reasons 17 you have given. 18 1133 MR. MILLER: Yes. 19 1134 COMMISSIONER WYLIE: Last question 20 on -- no, second last question on priority programming. 21 1135 Are you in a position to be able to 22 tell us what is the ratio of original to repeat 23 programming in the various categories for CKVU, the 24 NewNet stations and CITY? 25 1136 MR. SWITZER: We would of course be
1 happy to provide you with whatever specific information 2 you need. Perhaps I can -- 3 1137 COMMISSIONER WYLIE: You may want to 4 wait until later on, the reply stage. 5 1138 We would be interested in knowing 6 what is original material as opposed to repeats and 7 what is programming that has already been broadcast by 8 other services in the three situations and by genre of 9 programming? 10 1139 Is that possible to produce? 11 1140 MR. SWITZER: We will do our best. 12 1141 COMMISSIONER WYLIE: Using, I 13 suppose, the current block schedule -- 14 1142 MR. SWITZER: Yes. 15 1143 COMMISSIONER WYLIE: -- or what you 16 expect will be on the air in your first year. 17 1144 The credit for drama, as you know -- 18 I don't have to go through the mechanics -- it is 19 different if you are a multi-station group and if you 20 are not, but in the case of the NewNet station in 21 Decision 2001-519 the credit system applicable to 22 multi-station group was what was going to be applied. 23 I assume that you would accept that as to be the case 24 for CKVU? 25 1145 MR. MILLER: Yes.
1 1146 COMMISSIONER WYLIE: What about 2 for CITY? 3 1147 MR. MILLER: The same. 4 1148 COMMISSIONER WYLIE: The same. 5 1149 MR. MILLER: Yes. 6 1150 COMMISSIONER WYLIE: The same credit 7 system would apply and it would not go to reducing the 8 Canadian content in the evening period only in that 9 priority programming time? 10 1151 MR. MILLER: Precisely. 11 1152 COMMISSIONER WYLIE: I only have one 12 or two questions remaining about children's 13 programming. 14 1153 I don't think I found any mention of 15 children's programming in the application. CKVU of 16 course did a fair amount of children's programming. 17 What is your intention in that regard in any station 18 including CKVU? 19 1154 MR. MILLER: I believe this issue 20 comes up with respect to CKVU, CKVR and CHRO, and in 21 each case in section 6 of those applications we have 22 indicated our desire to be relieved of any expectations 23 with regards to children's programming. It is not a 24 genre that we specialize in and consistent with your 25 TV Policy we feel there are enough other choices for
1 children's programming in the broadcasting system that 2 it is not necessary any more for us to do that. 3 1155 COMMISSIONER WYLIE: Yes, I 4 apologize. In those separate applications it was 5 addressed, but it wasn't addressed as part of your 6 overall programming strategy. 7 1156 MR. MILLER: No, you are right. We 8 didn't mention it in the overall document, we referred 9 to the specific stations. 10 1157 COMMISSIONER WYLIE: You referred to 11 the TV Policy, which discusses of course the fact that 12 there is a lot of children's programming available now 13 on specialty services and some programming could, of 14 course, be priority programming. 15 1158 Do you see -- you don't see any need 16 to have any at all on any of your stations? 17 1159 MR. MILLER: I am a parent and I can 18 tell you my kids watch a lot of children's programming 19 and I can tell you that there is a lot of great 20 children's programming out there and I personally don't 21 see a need, and I don't think any of the parents that I 22 meet today, see a need for CITY or other stations to 23 carry children's programming. That is not what we are 24 known for. In fact, quite frankly I think it would be 25 inappropriate because that is not the demographic we
1 appeal to. 2 1160 We have in some stations had a mixed 3 children/youth expectation, that is the case in the 4 NewRO and we certainly believe we meet that because so 5 much of our programming is youth-oriented, but again in 6 terms of specific requirements for children's 7 programming we just simply don't think that is 8 appropriate or necessary given the choices available in 9 the system. 10 1161 COMMISSIONER WYLIE: When you speak 11 of youth-directed programming, which is an aspect of 12 your stations, what age are you talking about? 13 1162 MR. MILLER: I think for simplicity 14 we tend to use the definition of children as under 12 15 and youth between 12 and 18. Certainly, as is 16 evidenced from the type of programming we do and our 17 interest in our programming, we tend to attract youth 18 audiences. But we don't see any need for any specific 19 conditions of license or requirements there. 20 1163 COMMISSIONER WYLIE: By the time your 21 children reach that age you will find that you may be 22 actually programming to children, if the threshold is 23 12, because it seems to me that children are getting to 24 be youth younger and younger, so you may actually be 25 doing children's programming by your seventh year.
1 1164 MR. MILLER: There you go. 2 1165 COMMISSIONER WYLIE: Thank you very 3 much for your cooperation. Those are my questions. 4 1166 Thank you, Mr. Chairman. 5 1167 THE CHAIRPERSON: Thank you. 6 1168 Commissioner Langford. 7 --- Pause 8 1169 COMMISSIONER LANGFORD: Thank you. I 9 am just wondering what the schedule was and looked 10 ahead. 11 1170 Commissioner Wylie touched on a good 12 many of the points that I was interested in and had 13 been assigned in the way we break up our work a little 14 bit, about the way you break up yours, and then we step 15 on each other's toes. It makes for some interesting 16 dancing and some good things come out of it. But I'm 17 sure there are some other rocks out there that we can 18 turn over and look under to try to figure out exactly 19 what beast lurks there. 20 1171 I think what I would like to do is to 21 start with a little statement about local programming 22 which will either demonstrate my wisdom or my complete 23 lack of understanding, but I am willing to risk it. We 24 have counsel here, Mr. Howard, who will bring me up 25 very shortly if I am wrong.
1 1172 But as I understand the law and the 2 policy, the proposals you have made with regard to 3 local programming are probably fine in the sense of 4 black letter law and black letter policy. There might 5 be some question as to what exactly regional reflection 6 means, and that sort of thing, and we can talk about 7 that and we will. 8 1173 So I think we can put behind us, 9 unless Mr. Howard leaps up and disagrees with me, the 10 whole question of whether what you are suggesting is in 11 some way improper, illegal, out of keeping with policy. 12 I don't think it is. I think it is fine. 13 1174 On the other hand, it is somewhat 14 perplexing, if I can put it this way. I don't say that 15 to try to draw some kind of cute line, it actually is 16 to me a little bit perplexing, and probably that is 17 because it is so different, by your own admission in a 18 way, or by your own characterization perhaps would be 19 better, than what you are so well known for. If people 20 had to pick one work to describe CHUM and "outrageous" 21 was not the word that was allowed, probably "local" 22 would be the one people would think of. 23 1175 So herein lies my kind of sense of 24 mystery. You have a commitment to local going back to 25 sometime just after the flood. You do it well, so you
1 tell us and I am prepared to believe that. You do it 2 beyond any expectation of law or policy, in the sense 3 of hours and variation and depth across the board of 4 your NewNet stations and your other stations. 5 1176 And I understand that you have been 6 dealt the thunderbolt from hell in the sense of a 7 recent decision, but I would like to put that behind us 8 now if we could, we have all heard you on that and I 9 think it is time to look forward a little bit. 10 1177 So understanding that there are ups 11 in life when one visits Vancouver, and downs in life 12 when one makes one's points in Toronto. You have come 13 out pretty even I would say, some would argue slightly 14 ahead, but anyway, you have told us that about the only 15 place left for you, the only place where you can kind 16 of make inroads and try to get your financial house in 17 better order is in the local area, the very area where 18 you are known and respected for your historic 19 programming. 20 1178 Why would you not look elsewhere? I 21 know that there are few places in a sense, you have 22 told us how you are trapped, but why would you look for 23 local in the sense that -- too local in the sense that, 24 as I understand it, there really isn't a lot of money 25 there anyway?
1 1179 Can we start there? 2 1180 MR. SWITZER: Let me start, 3 Commissioner and Moses can add. 4 1181 It is our desire to look forward and 5 to be very positive and to be thankful for our 6 privileges. That is set against what we know is 7 happening this month, next month, next year. I will 8 keep this as constructive as possible. 9 1182 It is a real shudder to our system 10 that we must effect. We can review many areas of our 11 business, technologies, sales and marketing, back 12 office, administration expenses, foreign acquired, 13 Canadian priority, Canadian news, in-house, other. 14 When we go through that list, many of us in the 15 meetings that we have held in the past four weeks, your 16 words have been echoed around out tables as we also 17 deal with this problem. I know Moses will get to that. 18 1183 At the very end of the day, when we 19 go through -- in fact on some of our sheets we have 20 shown some savings to the best of our ability in 21 administration and in technology and in other areas, 22 and in fact even small amounts in Canada acquired, some 23 of it that might be Canadian priority. The two largest 24 areas are foreign acquired and local in-house staff. 25 1184 Unlike some of our other competitors,
1 we have chosen a path voluntarily that has added 2 tremendous staff. Literally hundreds of people across 3 our system were not -- we have done this voluntarily. 4 We have grown. Your regulations allow it. It 5 encourages us. These are decisions we have made. 6 1185 We are now suggesting that that 7 flexes in both directions. It is important enough for 8 us to talk about because what we talk about today will 9 be the rules that we live with for the next seven 10 years. 11 1186 COMMISSIONER LANGFORD: So is it 12 staff cuts where the money is? 13 1187 MR. SWITZER: No. It comes down to 14 something that was touched on earlier, and that has to 15 do with the way television plants work. It has to do 16 with not exclusively but to some great extent when push 17 comes to shove perhaps -- and we hope it doesn't 18 happen -- years down the line, crews, operation crews. 19 1188 Most of our television stations work 20 today with two crews, in many cases dozens of people. 21 Once you invest in a crew and infrastructure and camera 22 people and lighting people and audio people and all the 23 support that goes along with that, you wish to add 24 hours of production to take advantage of those fixed 25 costs that you have invested in.
1 1189 We have two crews in most of our 2 stations I think, in fact all of our stations. So yes, 3 we could flex a little bit of money or a half an hour, 4 but the big -- I won't say fixed costs, but the big 5 chunks that are not linear, they don't move in a kind 6 of organic way, you can just go up or down by 10 per 7 cent, are these crews and the production associated 8 with that. 9 1190 So it may come to pass that we will 10 have to look at, in some situations and some stations, 11 one crew rather than two. That may involve 12 reorganizing our shows, the time periods that we 13 produce. Right now, to be clear, we have in most 14 stations a morning crew that deals with morning shows, 15 daytime shows, perhaps noon newscasts, and an 16 afternoon/evening crew that deals with dinnertime 17 newscasts, late newscasts and other kinds of things as 18 well as other magazine shows. 19 1191 COMMISSIONER LANGFORD: You are 20 talking studio crews rather than field crews that are 21 out chasing ambulances? 22 1192 MR. SWITZER: Correct. Correct. 23 1193 COMMISSIONER LANGFORD: Thank you. 24 I'm sorry to interrupt, but I wanted to be sure. 25 1194 MR. SWITZER: We don't have
1 traditional studios, but yes, in that vernacular, yes. 2 1195 So part of it isn't just hours that 3 are up or down but these large thresholds, steps that 4 you must take in either direction to effect any real 5 change. 6 1196 So we have shown that we are looking 7 at improved technologies, admin and other 8 non-programming areas, but the single biggest area for 9 us to flex in, given that we cannot flex in U.S. 10 acquired because of pressures there, is local. 11 1197 We have an obligation to bring these 12 stations to some kind of bottom line. It may not be a 13 30 per cent or 40 per cent bottom line -- Mr. Sherratt 14 is probably smiling -- that some of our competitors 15 have enjoyed, but certainly these stations cannot 16 continue to lose money. 17 1198 COMMISSIONER LANGFORD: I can 18 absolutely assure you that nobody at your table is 19 smiling. 20 --- Laughter / Rires 21 1199 COMMISSIONER LANGFORD: This is like 22 the last scene from "On The Beach" or something what is 23 going on here. 24 1200 MR. SWITZER: Occasionally when I 25 mention potential margins of 30 per cent or 40 per cent
1 Mr. Sherratt will smile a little bit. 2 1201 COMMISSIONER LANGFORD: He hasn't 3 smiled yet. 4 1202 MR. SWITZER: So this is the problem 5 we are in and we share the perplexity of this 6 situation. 7 1203 COMMISSIONER LANGFORD: Oh, I'm glad. 8 1204 I saw that Mr. Znaimer was nodding 9 yes while you were saying no and he is now keen to get 10 at the microphone, so let's hear why. 11 1205 MR. ZNAIMER: I am in the process of 12 echoing some of what Jay said and wanting to express 13 some appreciation for your recognition of our 14 discomfort in the circumstance. You are quite right, 15 there is a kind of logical inconsistency of it, but you 16 have just witnesses the discussion with Madam Wylie. 17 She asked: Six hours of priority programming, seven 18 hours of priority programming, will you accept eight? 19 Mr. Miller at some point said no, we can't go any 20 further. 21 1206 So what I wanted to add to the 22 discussion was that we had some disagreement internally 23 in preparing for this hearing and I was the voice of 24 dissent saying: Let's cut back on priority Canadian at 25 CITY -- at CITY.
1 1207 I was persuaded that no, in the 2 hierarchy of values as expressed by this Commission 3 priority of Canadian programming in general and 4 specifically in the case of CITY-TV took precedence 5 over local programming. 6 1208 I said, half in jest: Well, since we 7 can see that CTV has generally withdrawn or in the 8 process of withdrawing from the arena, CBC is obviously 9 in the process of withdrawing from the arena, Mr. Craig 10 apparently in his renewal said also that he was looking 11 for flexibility in local, I said half in jest: The 12 Commission will wake up one morning and decide that 13 local programming is a priority and then we will be at 14 one with these regulations. 15 1209 But in the meantime, if the cost of 16 our import programming that pays so much of the freight 17 is going up, and if you have decided, as between local 18 and Canadian priority, Canadian priority has priority, 19 we have nowhere left to go. So we find ourselves here 20 with a hangdog expression because it is logically 21 inconsistent. 22 1210 At the same time, I am partially 23 bemused because we are not talking about necessary 24 reality here, we are talking about theoretical 25 minimums. What we are trying to establish here is what
1 is the theoretical minimum to which we could go if all 2 hell broke loose. 3 1211 So we talk about our current 4 undertaking of 13.5 hours and as compared to that our 5 willingness to undertake 18 hours of COL does appear to 6 be an increase rather than a decrease. It is a rather 7 subtle discussion and it leaves us apparently on the 8 defensive and nothing could be less true. 9 1212 We wanted to come here to tell you 10 all the great things we have done, but we didn't want 11 to find ourselves in a position, which sometimes the 12 regulatory process leaves you in, of being punished for 13 your over fulfilments by being frozen into them. 14 Because we have flexed up, we didn't want then for you 15 to say "Well, that's swell. That is where you have to 16 be forever", knowing that we have a business that is 17 also a master, we have many masters to serve here, and 18 while all of this has been going on various analysts 19 have knocked about $100 million off the market cap of 20 this company because of recent events. 21 1213 So in trying to balance all these 22 masters we have come to what is an uncomfortable but 23 seems to be an unavoidable conclusion. 24 1214 COMMISSIONER LANGFORD: I know the 25 Chair wants to call a break and I'm sure that everybody
1 will be more than happy to get that news. 2 1215 When we come back I would like to 3 focus hard, kindly, in a gentle blue-skying way, but 4 well-focused on the worst-case scenario, what would 5 be on the box on your stations, what you would replace 6 it with, what those costs would be, that sort of thing, 7 so we can get an idea of -- I mean, you like to talk 8 about worst-case scenarios and best-case scenarios and 9 so do we. 10 1216 THE CHAIRPERSON: Thank you. 11 1217 We will resume in 15 minutes at 4:05. 12 --- Upon recessing at 1530 / Suspension à 1530 13 --- Upon resuming at 1605 / Reprise à 1605 14 1218 THE CHAIRPERSON: Order, please. A 15 l'ordre, s'il vous plaît. 16 1219 Just to assist everyone in their 17 planning, we will go today until 5:30, which means that 18 we will not be hearing from any intervenors today. We 19 will break at that point no matter where we are in the 20 schedule. 21 1220 But our intention would be to finish 22 intervenors and the CHUM reply tomorrow, so that may 23 mean that we would be sitting a little later tomorrow, 24 depending on the requirements. 25 1221 I would now turn the microphone back
1 to Commissioner Langford. 2 1222 COMMISSIONER LANGFORD: Thank you, 3 Mr. Chair. 4 1223 Having given you advance notice 5 perhaps we can just move sort of in an orderly way 6 through some of your thinking. 7 1224 So the worst-case scenario from, I 8 would assume, both of our positions regarding local 9 programming is that you have to cut back or fall back 10 to the minimum numbers you have provided us with. 11 1225 So then what happens? 12 1226 MR. ZNAIMER: There are a number of 13 ways forward. 14 1227 In the most extreme -- I will start 15 with that because I think that is what you are most 16 interested in. 17 1228 COMMISSIONER LANGFORD: Not really, 18 but I am interested in knowing really the full gamut. 19 1229 MR. ZNAIMER: Yes. 20 1230 COMMISSIONER LANGFORD: So we can 21 really comprehend what we are dealing with here. 22 1231 MR. ZNAIMER: Right. At its most 23 extreme we would have to cut crew, and with crew goes 24 programming. 25 1232 If you were to examine the output of
1 CITY-TV just before our last license renewal you would 2 see that we had crystallized the identity of CITY-TV. 3 It was known for its local programming, for its up 4 tempo, for its youthful vitality, for its interest in 5 cultural diversity, even before we doubled the number 6 of hours that we actually produced. The increase is 7 heavily featured in the morning hours all through to 8 about noon hour. 9 1233 So in the extreme, whether it is 10 CITY-TV or any of the other NewNet stations, that is 11 how that would tumble. 12 1234 In the alternative, that is the 13 last thing that any of us want to do and all of us 14 have said so. 15 1235 In my particular case, Madam Wylie, 16 again it may not be a form of regulatory assurance but 17 I think it is a potent form of assurance, I have spent 18 my entire career here building up these programs and it 19 would break my heart to cut them down. 20 1236 In fact, I was trying to think over 21 the break over my entire career at CITY-TV how many 22 shows we have actually cancelled. Fewer than the 23 fingers on one hand. We are not cavalier about 24 launching programming, but when we do we mean those 25 programs to stick.
1 1237 So other avenues of retreat available 2 to us would be to increase the number of repeats, to 3 take in programming from other stations and run them in 4 different stations in our group. You know, it is not 5 only a matter of hours, it is a matter of quality. 6 1238 In the break one of our people from 7 RO reminded us that before CHUM bought and improved 8 that station, repositioned that station, they were 9 doing their news with six people. Today we are doing 10 the same news, but we are doing it with 60 people. So 11 the difference is quality. It is that quality that we 12 would be desperately trying to sustain. 13 1239 But at the end of the day there is 14 that one fatal line in the financial projections which 15 demonstrates the money gap that we have to make up, one 16 way or another we have to make up. 17 1240 What we have been trying to tell you 18 and perhaps it has compounded the sense of uncertainty, 19 is that we don't have at this point a precise blueprint 20 of how to get there. That wouldn't be reasonable. We 21 have only just absorbed the news. But if we had to get 22 there, these are some of the steps that we would be 23 taking. 24 1241 COMMISSIONER LANGFORD: Would it be 25 news that would go first or would it be non-news
1 programming? Because I noticed that in some of your 2 projected cuts it appears as though non-news 3 programming is not guaranteed in any way, whereas there 4 is always some level of news that is guaranteed. So I 5 assume it is non-news programming that would go first. 6 Am I reading -- I am only assumed that. 7 1242 MR. SWITZER: In our financial tables 8 I think we used the phrase "local programming" and that 9 is to assume both news and non-news. 10 1243 COMMISSIONER LANGFORD: But, as I 11 say, when I look at your minimums, some actually 12 include no non-news. So am I to assume that in some 13 way non-news is a slightly lower priority than news? 14 1244 MR. MILLER: Commissioner -- 15 1245 COMMISSIONER LANGFORD: This is the 16 sort of thing I -- I'm sorry to interrupt, but -- 17 1246 MR. SWITZER: No, no, it is very 18 important. 19 1247 COMMISSIONER LANGFORD: This is what 20 leads to my state of perplexity, I just don't quite 21 know how to read the signals that seem to underlie the 22 kind of position you have put to us here. 23 1248 MR. SWITZER: I would like to begin 24 just very briefly and Peter can fill in. 25 1249 Part of our request for flexibility
1 on some of these stations and in some of these 2 categories is a move away from the historic news and 3 non-news count towards total local programming counts. 4 That gives us, in addition to the question of hours, 5 flexibility to change over time that ratio without 6 having to deal with micro-counts of some shows that may 7 be one, may be the other, may have elements of both. 8 1250 In general the promises in these 9 renewals deal with total commitments to local original 10 programming without specificity as to news or non-news. 11 1251 MR. MILLER: Commissioner Langford, I 12 remember at the Hamilton/Toronto hearing you made a 13 comment to one of the applicants, I think it was the 14 Alliance applicant, when we were talking about the 15 905 belt and you said "Surely news is where news 16 happens". We think you are right. And local is where 17 local happens as well. Certainly news is the most 18 highly local of our local programming. 19 1252 So both the fact that a suppertime 20 and an evening newscast are almost assured to always 21 remain in the schedule because they are something that 22 viewers want and they are something that for the most 23 part we can recoup our costs on, then that would be 24 there whereas the local -- and they share a crew, 25 because it is one crew to do the suppertime and the
1 late evening. 2 1253 The local non-news, you are right to 3 some extent. To some extent it is the most vulnerable, 4 but it is also the one that can lend itself most to 5 regionalization. Again, for example, you recognized 6 that with CFPL, CHWI and CKNX, where earlier, in the 7 previous license term we had specific commitments to 8 news, but that the three stations could share the same 9 non-news. 10 1254 So if we go to our breakfast show 11 scenario, right now we have a separate breakfast show 12 at CITY-TV, separate breakfast show in the NewRO, 13 separate breakfast show that serves with different 14 inserts CFPL, CHWI and CKNX. Again, perhaps one 15 scenario, not that we have planned for it, not that we 16 have thought about it, but this flexibility would allow 17 us to do, would be to have some kind of a regional 18 Ontario show. Maybe that would work with some 19 combination of common regional programming and separate 20 news inserts. 21 1255 These are all the variations, but 22 your comment about news versus non-news is something I 23 think the Commission has recognized in this policy, 24 news, a certain level of news is certainly going to be 25 there than non-news, but we do say that with one
1 important caveat, and that is the caveat that Moses has 2 made, is that the non-news shows that are central to 3 our CITY-TV schedule, we would be loathe to drop. One 4 of the reasons we have asked for the flexibility on 5 priority programming is to make sure that we could keep 6 those shows in our schedule. 7 1256 COMMISSIONER LANGFORD: So if I may 8 borrow a little from CTV, instead of having three 9 separate morning shows, you would have an "Ontario AM" 10 and then pop into that some very locally responsive 11 news, perhaps even a rerun of some of the items from 12 the late news the night before if they still held up, 13 that kind of thing I suppose. Because you don't have 14 your crew in the morning so I guess you could work it 15 that way. You would have some sort of update from the 16 night before and run that down the wire from wherever 17 you are. 18 1257 Okay. Now, we then move to what you 19 have just touched upon and that is this notion of local 20 and/or regional. You use the word "regional", but you 21 don't define it. You use the word "local" and you 22 don't define it either, and I don't blame you. I don't 23 think we quite define it all that well ourselves so we 24 can hardly ask you to. 25 1258 Although there is an interesting kind
1 of definition of local, or you might call it that in 2 one of your supplementaries. The supplementary brief 3 to CFPL-TV and the others, Windsor and Wingham, and I 4 think, if I can remember -- yes, on page 3 of that, at 5 the top, you say: 6 "Today, despite such 7 setbacks..." 8 1259 And we know what they are: 9 "...and the continued 10 difficulties facing conventional 11 broadcasters, CFPL-TV, CHWI-TV 12 and CKNX-TV have returned to 13 their roots and provide their 14 local communities with distinct 15 and reflective programming." 16 (As read) 17 1260 To my mind, though I can't force this 18 down your throat in a proceeding like this, that is not 19 a bad definition of local. It is certainly something 20 you could almost put in the window, it is short enough, 21 but is it a definition of "regional" or, to put it 22 another way, if that is local does the notion you are 23 giving us of regional, which you don't describe, or at 24 least I didn't see it, does that really substitute for 25 local?
1 1261 MR. MILLER: I think we have to 2 separate a regulatory definition from a working 3 definition. Maybe I will use CKVR as a good example. 4 1262 By your definition, any show produced 5 at CKVR is a local show. So we could run a news 6 operation out of CKVR entirely covering the Toronto 7 news market and it would still be a local show. That 8 would accord with your definition of local, but it 9 wouldn't be what we think is the right local for that 10 market. 11 1263 COMMISSIONER LANGFORD: And it 12 wouldn't accord with your definition that I have just 13 read here -- 14 1264 MR. MILLER: Exactly. 15 1265 COMMISSIONER LANGFORD: -- if you 16 accept it as a definition. 17 1266 MR. MILLER: Exactly. So from an 18 operational and a philosophical point of view we 19 believe in this -- and when you hear from our CKVR team 20 they will tell you how they make sure that their local 21 news is for Barrie and central Ontario. It is not for 22 Toronto. Maybe some people commuting up to cottage 23 country like checking in on it, but it is not for 24 Toronto audiences. That is an important distinction. 25 1267 But if we are coming to regulatory
1 instruments and tools, which at the end of the day we 2 have to, we think the only reasonable definitions are 3 for local it is what is produced in that locality by 4 the station and for regional, just to finish, for the 5 purposes of what we have talked about in terms of 6 replacing some of our local Ontario programming with 7 regional programming, we would use "regional" meaning 8 Ontario. So any program produced in Ontario would 9 qualify under that regional flexibility we have sought. 10 1268 MR. SHERRATT: Mr. Langford, 11 sometimes to know where you are going it pays to look 12 at the past a little bit. At the risk of getting a 13 little historical, I think a pretty good example of 14 what we are talking about happened in the Maritimes in 15 the 1970s. 16 1269 When we acquired those three 17 television stations in Nova Scotia, Prince Edward 18 Island and New Brunswick, they were each running local 19 television newscasts that were just dreadful in the 20 ratings. Everybody in the Maritimes watched the CBC. 21 The quality wasn't there, the input wasn't there, they 22 weren't working. 23 1270 We evolved into one single newscast 24 that to this day still serves the three Maritime 25 provinces with bureaus and crews and people all over
1 the region feeding back into a central place. And yes, 2 the newscast is assembled in Halifax, but it is the 3 local newscast for the people of the Maritime 4 provinces. 5 1271 Within a year it was the number one 6 rated newscast in the Maritimes and it and BCTV were 7 the two strongest local news programs in the country, 8 and I think probably continue to be that to this day in 9 terms of representative share of the size of the 10 audience, because they did it much the same way in 11 British Columbia. 12 1272 But we did three provinces with it, 13 but to those people that is their local newscast. It 14 is because of the content, it is they are being 15 reflected in it, they are there when it is important 16 news. So it is their newscast in Sydney as much as it 17 is the people in Moncton. 18 1273 COMMISSIONER LANGFORD: But it 19 certainly isn't -- and I don't say this in a critical 20 way. I am looking for information here and information 21 only. I want to repeat that my understanding of what 22 you have proposed is that it comes within the policy. 23 My understanding of "local" as defined is precisely 24 what Mr. Miller has given us, but then there is CHUM's 25 preferred "local".
1 1274 I am trying to get a sense for your 2 strategy, assuming that for all of Mr. Znaimer's career 3 distinct and reflective programming has been something 4 of a mantra. We are now moving to, I would say, 5 something somewhat different from that if you look at a 6 strict CRTC definition: Produce locally, good enough 7 for me. 8 1275 So how far are you prepared to move, 9 or how far have you considered moving from the Znaimer 10 definition, the historic CHUM position, to the black 11 letter law of CRTC policy? 12 1276 MR. SWITZER: Perhaps I can begin. 13 You are asking about difficult worst-case scenarios. 14 Certainly there will be some flex with budgets 15 before -- we talked about the NewRO. I think the total 16 news budget for the same traditional prime-time evening 17 news hours was in the range of $400,000 or $500,000 a 18 year. Today it is in the many millions, perhaps 19 $4 million or $5 million a year and is now generating 20 growing ratings and is the number two newscast in 21 Ottawa and, finally, the number one newscast in the 22 Valley. Those millions of dollars made a difference. 23 1277 They were still doing effectively the 24 same news hours on one-tenth the budget. That is not 25 where we want to go.
1 1278 One, there is some flex with budgets. 2 1279 Two, there is some possibility of 3 some regional reorganization. It is not part of a 4 larger solution. 5 1280 But, frankly, in a worst-case 6 scenario, candidly would be to drop those hours, to not 7 do that day shift, to not do that morning shift, and 8 that is of course the last thing on our mind and 9 something that we would obviously consider last. 10 1281 MR. MILLER: Mr. Langford, if I can 11 add a three and a four to what Jay just said, I would 12 say number three, you see that operational savings are 13 not something we are asking for right away. We are 14 giving ourselves some time. We have deliberately 15 ramped them up to give ourselves the time to do the 16 right thing and to perhaps become more efficient. 17 1282 Number four, we are always learning. 18 We are not static. I hope we have a chance to tell you 19 about our new Victoria breakfast show where with 20 essentially one person and one camera person and a lot 21 of other support, we run this vibrant, energetic, 22 fabulous show out of our bureau in Nanaimo. 23 1283 So we are learning how we can do more 24 with less and we are going to bring some of that skill 25 to how we meet this challenge.
1 1284 COMMISSIONER LANGFORD: I hope we 2 have time for that as well, but if you will permit I 3 will just stay on track here with where I am going and 4 kind of the education of Commissioner Langford here. 5 1285 I am looking at your 6 London/Wingham/Wheatley/Windsor/Hereford/Hartford and 7 Hampshire, hurricanes hardly ever happen. 8 --- Laughter / Rires 9 1286 COMMISSIONER LANGFORD: You have 10 today commitments to 17 hours of local news and eight 11 hours of local non-news and 5.4 hours a week of 12 separate local news originating in Wingham and 10 hours 13 per week of local Windsor news, which is quite a pile. 14 It is somewhere just over 40 hours, if I can still add. 15 I may have got it wrong, but it is still quite a pile 16 of hours. 17 1287 You are proposing, again quite within 18 the parameters of the Television Policy, 15.5 hours a 19 week of local programming overall, and then there was 20 some call to arms from Windsor, but that is perhaps 21 going to up that time for a couple of years or so, as I 22 understand it. 23 1288 But let's just for the sake of 24 argument say that you conceivably in a worst-case 25 scenario here could find yourself more than cut in half
1 on local programming news and non-news and other places 2 like Wingham and -- well, let's leave that for a 3 moment. Overall more than cut in half. 4 1289 What do you fill that with and how is 5 that a cost saving? 6 1290 MR. MILLER: Again, I will start. 7 1291 First of all, it does get confusing 8 because some of the definitions change in a sense as to 9 how we look at it and how the Commission now looks at 10 it. That local non-news commitment ended up being 11 served by what we consider to be a local common 12 program, now our breakfast show, that is seen across 13 all three of those stations. The separate local news 14 was the signal that it actually to be separate. 15 1292 When you have a chance to talk to the 16 team from the NewPL, they will tell you how, first of 17 all, we are going to effect the changes we have 18 proposed for Windsor and Wingham. 19 1293 In terms of for CFPL, what would 20 ultimately happen, for example, is the news in the 21 evening, both the suppertime and the late night would 22 remain the same. In the morning, instead of having 23 perhaps a London breakfast show it might be, as you 24 have suggested, a regional Ontario breakfast show, 25 perhaps with inserts, perhaps with not from news. That
1 is the kind of thing that would change. 2 1294 In other words, the programming would 3 come most likely -- and this again is just an initial 4 estimate, a crack at it -- from taking some of the 5 shows that have been strictly local and make them more 6 regional across Ontario. That is certainly one option 7 that we would look at. 8 1295 COMMISSIONER LANGFORD: So basically 9 you are not in the market for any new shows under this 10 scenario. What you are doing is culling the inventory 11 you have and choosing one out of three, shall we say 12 for sake of argument, and running that across the 13 Ontario network. Is that one of the solutions you have 14 looked at? 15 1296 I just want to make sure I understood 16 what you have said. 17 1297 MR. MILLER: What I have said is, 18 again we are talking still about the worst-case 19 scenario, should we have to go to what we filed as the 20 minimum commitment, certainly one of the options is to 21 do what you have said. 22 1298 But beyond thinking about it in 23 theory and beyond, again, understanding and making sure 24 that we could achieve the operational savings through, 25 for example, changing the number of crews and making
1 sure we could still meet the minimum commitments of 2 hours in so doing, we haven't spent a lot of time sort 3 of figuring out exactly how we would balance it. 4 1299 Again, as you will hear from our 5 people, we can be very creative and still be very 6 local, but in accordance with your "local" definition 7 have a lot fewer hours. So for example, that 1.5 hours 8 on Wingham, it is the same people, still four people in 9 Wingham, the smallest market in Canada with a 10 television station, it is 3,000 people at Wingham, we 11 still have those same four people there, but instead of 12 having to produce the same amount of hours, they are 13 producing more targeted hours. 14 1300 So from that local community's 15 perspective, they will see as much local reflection as 16 they ever had, but we will be able to produce it more 17 efficiently. 18 1301 COMMISSIONER LANGFORD: So it won't 19 be 1.5 hours of Wingham, it will be 1.5 hours of 20 Wingham wrapped into some other regional perhaps 21 morning show? 22 1302 MR. MILLER: Precisely. 23 1303 COMMISSIONER LANGFORD: So I want to 24 be sure I'm clear on this now. 25 1304 It is not a matter, then, of having
1 to refill or differently -- how do I put this? Let me 2 back up. 3 1305 You have to do 60 per cent during the 4 day Canadian. There is certainly nothing clearer than 5 that. So it is not a matter of dropping, for example, 6 the news at noon in Ottawa/Pembroke and filling it with 7 a fishing show, it is just a matter perhaps of dropping 8 the news at noon as it comes out of Ottawa/Pembroke, 9 filling it with one news at noon that would go across 10 all three, and then having inserts from different 11 communities to give people watching it a sense that, 12 yes, we are somewhere on the board in this -- we are 13 somewhere on the assignment board in this show. 14 1306 Is that a fair characterization? 15 1307 MR. SWITZER: It is certainly 16 possible, but that is not the specific plan to deal 17 with worst-case scenarios. There are probably 18 20 plans. 19 1308 There are lots of other programs we 20 are producing in these stations. We may end up 21 producing a daily show in Victoria of one kind or 22 another that we think has value and merit and if 23 economics prevail and there are pressures and an 24 excellent show is being produced in one area, it may 25 knock out other local production that doesn't
1 contribute in Ontario or in either direction. 2 1309 So we don't have the specific plan. 3 We can talk about what we must do in a worst-case 4 scenario and we know that it will involve crews and it 5 will involve large blocks of programming and that there 6 will have to be a way to change the way we share, 7 repurpose and reuse other programs to fill those 8 day parts. 9 1310 We are not trying to in any way be 10 evasive, but to suggest we have a year and our 11 financial suggests we have a year to deal with planning 12 for what we hope won't be a worst-case scenario. That 13 gives us time to look at all of our options. 14 1311 COMMISSIONER LANGFORD: You have 15 spoken persuasively and at times eloquently today about 16 how you are different from the big guys, the guys who 17 can outbid you, and one of the big differences of 18 course has been this kind of local, perhaps now it 19 will be regional sort of connectedness, if I can put it 20 that way. 21 1312 Is there a chance under any of the 22 scenarios that you will look more like the big guys? 23 You still won't have as deep pockets, but in fact 24 things like local news at noon, perhaps your morning 25 show, whatever regional shows, anything from Bingo
1 to -- I don't have the -- but anyway you have named 2 some of them today, some of your local shows, 3 "Speaker's Corner" for example, that some of these will 4 just simply give way to, shall we call it, Canadian 5 acquired for lack of a better term? 6 1313 MR. ZNAIMER: The answer is no. 7 1314 COMMISSIONER LANGFORD: Why is that? 8 1315 MR. ZNAIMER: There is no way that 9 whatever adjustments we have to make will strike at the 10 heart of the stations. 11 1316 We have various mechanics available 12 to us to recapture a difficult financial position, but 13 these stations are made up of more than just this 14 program or that program. The identity of a CITY-TV is 15 derived from a multiplicity of components. You have 16 mentioned "Speaker's Corner". It could be our voice, 17 you know, it could be the visual style. Many people 18 identify the components that pleases them the most. 19 1317 The sum total is a station that is 20 crisp, clear, easily identified, it existed before we 21 ramped up to 45 hours, it will exist after we take 22 those numbers of hours down, if we must. 23 1318 If I may add a small coda, when we 24 speak of flexibility, if we have a tough moment to deal 25 with and we must contract, there is nothing to prevent
1 us from bouncing back when that difficult period has 2 passed. 3 1319 COMMISSIONER LANGFORD: Well, that is 4 heartening. I don't mean that facetiously, it is 5 heartening, but it may not have the legs to survive 6 this day. 7 1320 I am not asking you to make policy on 8 the fly here, but your documents, your application 9 documents clearly have minimum numbers which have been 10 proposed to us in writing and today as absolutely 11 floors, worst-case scenarios. You have minimum numbers 12 now from licenses you have purchased or had renewed 13 under your own stewardship and you have exceeded them, 14 regular as clockwork. Hats off to you. 15 1321 Why wouldn't you come in with a less 16 depressing proposal to us, knowing full well that you 17 can come to us at any time if you are in an urgent 18 situation and say to us, "Look, we told you the worst 19 thing in the world had happened in Toronto. We warned 20 you in Hamilton not to do it. You did it. We have 21 told you what has happened. We have reiterated what 22 has happened. We have made our best efforts. We can't 23 do it any longer and we propose the following 24 solution." 25 1322 Why would you give us the worst news
1 today when, first of all, you are a year away from one 2 of the stations launching. You have no real hard 3 empirical evidence yet that the economy won't recover 4 and that everybody will be happy as heathens along the 5 way economically. Why would you ask us to take this 6 step and to put it in some kind of regulatory concrete 7 when there really isn't any need to do it now? 8 1323 MR. SWITZER: Let me begin and I know 9 Peter wants to join in. 10 1324 We certainly have -- and I will chose 11 my words carefully -- an urgent situation particularly 12 with the NewNet stations. We have reviewed with you 13 that since 1997 their cumulative losses approximate 14 $46 million. 15 1325 Two, we have evidence in the first 16 four weeks that the pressures on program prices are 17 real and significant and if the early news is bad we 18 know it will get worse. 19 1326 Number three, we have real evidence 20 from informal discussions with advertising agencies 21 that there is pricing pressure in the market. In 22 Toronto unit prices cost per thousand, cost per points, 23 are going down, even for this year, because Rogers is a 24 very smart and successful broadcaster, very 25 experienced, it is putting pressure on all of us
1 immediately for fall. 2 1327 So these are not hypotheticals. The 3 first taste of what we are facing is real and we have 4 made it as specific as possible in the documents filed 5 last week. 6 1328 As to the problem of our desire to 7 not come before you and declare some kind of emergency 8 in the weeks ahead, I would like Peter to add to that. 9 1329 MR. MILLER: We said in our opening 10 statement we needed a stable regulatory climate and 11 that stability has two aspects. 12 1330 One, consistency with the policy 13 that you have set. As you have said, Commissioner 14 Langford, what we have requested is entirely consistent 15 with that policy. 16 1331 The other is the certainty to know 17 that we can do what we need to do over the next seven 18 year period, just as our competitors have that 19 certainty. We absolutely must know that whatever 20 happens we can deal with it. 21 1332 We have spent a lot of time, too much 22 time talking about the Toronto licensing decisions, 23 because there are many other challenges, the ongoing 24 threats to conventional from specialty, the problems 25 with DTH. It is having a major impact on all our
1 stations in terms of advertising, and that is only 2 going to increase as DTH in Canada goes from about 3 $2.2 million to over $3 million, perhaps $4 million. 4 1333 Issues of interactivity. I said 5 earlier that last license renewal no one had heard of 6 the Internet, now we are dealing with all of those 7 challenges, we are dealing with issues of PVRs, we are 8 dealing with huge changes to the viewing patterns of 9 our audiences. 10 1334 And, finally, we are talking about 11 all these new digitals, huge threats to our traditional 12 movie audiences, huge threats to our niches in music 13 and other categories. We absolutely must have the 14 certainty from you that says we can deal with it and we 15 can deal with it like that. 16 1335 In terms of over performance, 17 Mr. Langford, we have over performed. If we were a 18 different company we would have come today and 19 announced the cuts, but we are not prepared to do that 20 because we built these stations. We built them, we 21 invested in them, we want to continue to do so and we 22 are going to give ourselves the time to rationally and 23 carefully look at how to recoup the losses that we are 24 going to suffer. It is not theoretical, it is very, 25 very clear.
1 1336 That is why we need seven year 2 licenses and that is why we need the flexibility that 3 we have asked for and we think, quite frankly, in the 4 context, we think we are being very, very reasonable. 5 1337 COMMISSIONER LANGFORD: I don't want 6 to argue the toss with you because no one would argue 7 against regulatory certainty, certainly not after some 8 of the public pronouncements we have heard lately. 9 1338 But your own plans are not completely 10 certain. In some ways you have created your own world 11 of uncertainty, if I may say so. You talk about moving 12 from local and having the flexibility to be regional, 13 but that is not very clear. We have put some meat on 14 the bones today, but the application itself is not a 15 study in clarity in that sense. 16 1339 You have talked in the 17 Windsor/Wingham area, Windsor particularly, of dropping 18 the whole local commitment entirely, then I would only 19 assume, I don't know, I don't sit in your boardrooms in 20 response to the Mayor of Windsor, rethought that and 21 came back with another approach that you would keep it 22 alive but for two years, minimum two years and you 23 would revisit it at that time. 24 1340 So you are not adverse, I would 25 suggest, to a little uncertainty in your own life.
1 1341 I guess turned on its head, I think I 2 could make a fairly cogent argument that what we -- 3 what I am suggesting, I shouldn't say "we", my 4 colleagues may not be on board with this at all -- but 5 what I am suggesting at this point in fact is a far 6 more certain approach, because you are sticking with 7 the tried and true CHUM model that Mr. Znaimer has 8 built his life on, and others around him. One has only 9 to listen to your opening statement today to hear the 10 words "commitment to local". That message is there 11 repeatedly. 12 1342 So what could be more certain that 13 you folks coming in here and saying, "There are 14 problems, but we have invested a huge amount of money 15 in the NewRO and in different facilities here and there 16 and the other thing. We are going to try to stick with 17 this model. It is a certain model. It is a winner. 18 It is improving. Revenues are going up. We see a 19 brighter future. We have some big capital investments 20 to pay off, but we can do it. We are putting you on 21 notice now that we may come back if there is a problem, 22 if we have misjudged, but right now it is full steam 23 ahead. We are staying with the local model that we 24 have stuck with all these years and we are going to do 25 it better than anyone else."
1 1343 Wouldn't that be a far more certain 2 atmosphere to create here in this room than the one you 3 have created with best-case scenarios, worst-case 4 scenarios, changed scenarios, "Maybe we will have to do 5 this, we hope we won't have to do it. We may go down 6 to one crew, we might not go down to one crew. We have 7 an exciting thing going on in Victoria which is 8 different than our exciting thing going on in Ottawa." 9 1344 To me that may be life, and it may be 10 messy like life, but it is not particularly the type of 11 message that I would bring -- I am speaking very 12 subjectively now -- to a regulatory proceeding if I 13 were trying for certainty. 14 1345 MR. MILLER: I hope others might join 15 in. I guess we have a very different perspective. 16 1346 I think again -- and I don't know how 17 many more times we can repeat it -- we looked at the 18 situation we face, we looked at the possible things we 19 might have to do in light of that situation. It is not 20 theory, it is real. We know the numbers, we know 21 pretty accurately what is going to happen next year. 22 We know pretty accurately what is going to happen the 23 year later. We made it clear going into this renewal, 24 even absent those decisions, that we needed to get our 25 conventional group on a firmer financial footing. We
1 had no choice. 2 1347 That imperative is still there so we 3 have to move in that direction. And we don't operate 4 in a vacuum any more than you do. We operate in an 5 environment where we face very strong competition from 6 larger players, from specialty services and now in the 7 heart of the revenue base of this company, and the 8 heart of the GTA, two new stations. So we have to 9 respond to that. 10 1348 We have come with commitments that 11 are entirely reasonable in light of that, and all we 12 ask -- all we ask is for the same certainty that you 13 have given our competitors. You have just licensed a 14 player in Toronto that is going to do less local 15 programming than we are currently committing to as an 16 absolute bare minimum on CITY-TV. We are doing more 17 ethnic programming as a percentage of acquired 18 programming than that applicant promised. So by any 19 and every measure what we proposed is entirely 20 reasonable. 21 1349 Looking at our bottom line as it 22 existed before the decision that came out four weeks 23 ago we had to make changes, now that imperative is even 24 stronger and we are simply saying: Give us the tools 25 to do what we need to do so that we don't face the
1 uncertainty of having to come back and having to face 2 the possible no. 3 1350 MR. WATERS: Maybe I could just add 4 to what Mr. Miller has said. 5 1351 We came to the hearing you were at in 6 Toronto and Hamilton with those numbers on the revenue 7 impact of each station. We were serious there. We 8 knew what the impact was. 9 1352 You licensed two. In your decision 10 you read back what that impact would be on us with both 11 Craig and Rogers, and I recall it was $9.7 million when 12 you added them up. Well, that $9.7 million was our 13 profit on our conventional stations in our first year 14 of this renewal. 15 1353 When our sales team did their numbers 16 and came back with the supply and demand, that it was 17 going to go from $9.7 million to $11.5 million, or 18 $12 million by year two in this scenario here, that is 19 a serious impact on our business. I think if we came 20 here today and said to you "Oh, we are okay. We will 21 be just fine. We will find the $12 million programming 22 increase and whatever it is", I don't think you would 23 take us very serious in the future. 24 1354 We are serious about that. We were 25 serious about it in Hamilton, we are serious about it
1 today. It is a big impact on our bottom line and we 2 need that flexibility. We wouldn't be here asking for 3 it and we don't want to go there, but if we have to go 4 there, we will have to go. 5 1355 COMMISSIONER LANGFORD: It wasn't 6 your seriousness I was questioning, it was your 7 certainty. I think I have heard now, particularly in 8 Mr. Miller's last comment, that this is far more 9 certain than perhaps a reading of your application 10 would have led one to believe. It looked to me like 11 something that might happen, didn't want it to happen, 12 possibly might happen, worst-case scenarios were kind 13 of words bantered around even today. But from what 14 Mr. Miller has said, that puts a different complexion 15 on things. 16 1356 I will have some more local -- I am 17 trying to split it. It is a little difficult to know, 18 but I will have some more questions on local, of 19 course, when we see some of your actual representatives 20 of the local stations a little later in the process. 21 But those are all my questions for now. 22 1357 Thank you, Mr. Chair. 23 1358 THE CHAIRPERSON: Thank you. 24 1359 Commissioner Grauer. 25 1360 COMMISSIONER GRAUER: Thank you.
1 1361 Well, I must say I will hand it to 2 you gentlemen for staying on message. 3 1362 I have a couple of questions about 4 your corporate opening statement and then I have 5 questions on regional and independent production. 6 1363 On page 10 of your opening statement 7 you talk about that you have: 8 "...invested close to 9 $160 million dollars in 10 infrastructure ... jobs, and ... 11 programming...." 12 1364 I just wondered if you could 13 elaborate for me what that $160 million is? 14 1365 MR. SWITZER: I would like Prem Gill 15 to perhaps address that. We are having a bit of 16 discussion here in terms of in that she had said it. I 17 can certainly give you top line, Commissioner. 18 1366 COMMISSIONER GRAUER: That is all I 19 am interested in. 20 1367 MR. SWITZER: Oh, then no problem. I 21 thought you had wanted some specifics and detail. 22 1368 That is the summation of the 23 investment in capital and infrastructure in Victoria 24 for the build and the acquisition price of CKVU, 25 together with the 104 full-time staff, local staff that
1 we employ in Victoria, as well as the approximately 2 145 full-time people we inherit at CKVU and of course 3 we are growing that. 4 1369 COMMISSIONER GRAUER: So the 5 acquisition cost of CKVU, though, would be money going 6 to CanWest Global, not to British Columbia. Correct? 7 1370 MR. SWITZER: Of course. The point 8 in the mention this morning was the seriousness of our 9 investment in the market. 10 1371 COMMISSIONER GRAUER: But 11 $160 million, if it is the acquisition cost, is not 12 money in the market. I do understand you have two 13 stations. 14 1372 MR. MILLER: It is money going to 15 infrastructure in the market. Where the money goes 16 after that is not in out control, but it did go to that 17 infrastructure in that market. 18 1373 COMMISSIONER GRAUER: Thank you. 19 --- Pause 20 1374 COMMISSIONER GRAUER: I think I will 21 leave the others until tomorrow. 22 1375 What I would like to do is talk about 23 regional production sort of conceptually, both with 24 respect to independent production and station produced 25 production.
1 1376 I don't know if any of you were here 2 last year when we did the CTV and Global renewals, and 3 of course pursuant to both the Broadcasting Act and the 4 Television Policy we take the view that it is important 5 that television, and particularly conventional 6 television, reflect the country in terms of a cultural 7 perspective in terms of programming, but also an 8 industrial perspective in terms of where the 9 investments are being made. 10 1377 So I wonder if you could perhaps 11 elaborate for me somewhat your plans for the new 12 license term with respect to that kind of regional 13 reflection? Both, I think British Columbia and 14 Ontario, anything you might be doing from other parts 15 of the country and any specifics you might have on the 16 Ontario issues, for instance Ottawa, London, whatever, 17 with respect to Toronto and the west? 18 1378 MR. SWITZER: Commissioner Grauer, I 19 will begin and, with your blessing and permission, will 20 leave some of the in-house local station production 21 reflection across the country to those program creators 22 and programmers at the local market, which will be 23 later. 24 1379 I would like to pass to Diane Boehme 25 to talk about some of the acquired Canadian programming
1 which is done across the country and uses funds and 2 resources from various parts of Canada, including 3 specific promises or commitments made in the west. 4 1380 Diane. 5 1381 MS BOEHME: Thank you, Jay. 6 1382 I think just as a point of reference, 7 as far as our breakdown of support for independent 8 production companies across the country, I did sort of 9 a little tally about who we have supported and how many 10 projects we have done in the license term which we are 11 currently in. 12 1383 We have supported 137 separate 13 independent production companies over the course of the 14 current term. Ninety-four point eight per cent of 15 those happens to be activity with small to medium-size 16 enterprises, but out of that 137, 70 are based in 17 Toronto, 41 are based in Vancouver and the rest are 18 scattered around the country, everywhere from Halifax 19 and St. John's through to Victoria, Regina, Saskatoon, 20 one in Petrolia which we have supported, and this is 21 all feature film activity that we have done. 22 1384 So we are, in those cases, supporting 23 people who are telling stories from wherever they 24 happen to be from and giving them a platform that 25 reflects wherever they might appear in the rest of the
1 CHUM system. 2 1385 MR. SWITZER: And we make a conscious 3 effort to make sure that those films are broadcast 4 across the country in various windows in various orders 5 as is appropriate so that they can be exposed to all 6 parts of our system. 7 1386 COMMISSIONER GRAUER: So then are we 8 talking about feature films in what you have talked 9 about here? 10 1387 MS BOEHME: Yes. 11 1388 COMMISSIONER GRAUER: Okay. 12 1389 MS BOEHME: There is a little bit in 13 there too. I mean, in many cases these are the 14 production entities that we have worked with. In some 15 cases that entity might -- we have done more than one 16 project with. In one case it might be a documentary 17 series as well as a feature film. 18 1390 COMMISSIONER GRAUER: In looking in 19 your block schedules, and as we have talked a bit this 20 morning, you are doing both the drama series -- 21 1391 MS BOEHME: Yes. 22 1392 COMMISSIONER GRAUER: -- as well as 23 the feature films, so -- 24 1393 MS BOEHME: Just to be specific, out 25 of that 137, 130 of those projects were with small to
1 medium-sized enterprises. The seven, there were seven 2 productions that were with larger vertically integrated 3 or publicly traded independent production entities and 4 those are primarily the people that we have this drama 5 series activity with. 6 1394 MR. SWITZER: And of course it is 7 these feature films, as we discussed earlier today, 8 that are mostly the full 10 point projects that in many 9 ways we are most proud of. 10 1395 COMMISSIONER GRAUER: One of the 11 things that is, of course, of great interest to me, and 12 I think to all of us at the Commission, is the extent 13 to which these acquired independent productions, the 14 extent to which they make use of Canadian creative 15 talent. I wonder if you could tell me to what extent 16 do you look at that criteria when you are licensing, 17 prelicensing, script and concept and to what extent is 18 that important as you move forward in your -- 19 1396 MS BOEHME: Yes. It is absolutely 20 fundamental to our development process. In fact, I 21 think in the eight years that I have been doing this 22 job I can think of only two projects where there was 23 not the entire team were Canadian. In one case there 24 was an American writer, and in the second case there 25 was an American writer. But they were Canadian
1 producers, Canadian directors. As far as Canadian 2 on-screen talent goes, as I said a little bit earlier, 3 in the majority of the cases that also holds true. 4 1397 MR. SWITZER: Our particular strength 5 is with new and emerging directors, first-time 6 directors and in stories that others may not finance. 7 We would rather make a difference with a smaller 8 independent project than to join on a much larger 9 project with American stars that may be Canadian that 10 may get made with or without our support. Almost 11 exclusively our support has been on these smaller, more 12 intense personal projects where our funds and our 13 development and our support makes a difference. 14 1398 MS BOEHME: In the development 15 commitments that we make with the producers, 16 contractually they have to agree that the participants 17 are Canadian creatively above the line. 18 1399 COMMISSIONER GRAUER: That is in your 19 feature film and long-form. 20 1400 MS BOEHME: Yes. 21 1401 COMMISSIONER GRAUER: What about the 22 drama series? 23 1402 MS BOEHME: In the drama series it is 24 different. As I think I alluded to this morning, we 25 are not necessarily the initiating partner. In the
1 cases where we are the initiating partner, that is 2 different, but where we have co-production entities 3 where we have to respect that there are Treaty 4 participants that are directors or producers from those 5 countries, that certainly we have a more reduced 6 participation there. 7 1403 But "Lexx" for instance, two of the 8 three principal characters were Canadian. One was a 9 representative of the international co-production 10 company. All of the writing was Canadian. I think 11 85 per cent of the directing talent was with Canadians 12 and the others were the treaty co-production partners. 13 1404 MR. SWITZER: It is getting to be a 14 little more difficult in the series area to make a 15 difference given the impediments that we discussed 16 earlier today in terms of financing at CTF and 17 Telefilm. We are trying to grow in the series area. 18 It will not overcome or take over from the priority of 19 these Canadian films. They remain our most important 20 priority. There are hundreds of them and it is the one 21 thing that is in common. It is where we believe we can 22 make the most difference. 23 1405 But in that we are growing in series 24 and other areas, our next problem to solve will be to 25 get past this funding crisis where, because of coverage
1 differences, our national network license fees are not 2 able to trigger financing to the same level as the 3 larger players. 4 1406 MS BOEHME: And there is momentum 5 there. I think you will also know that there has been 6 some fairly common and public discussion with some of 7 the independent production community on the feature 8 film side about allowing third party or American cast 9 as well in order to increase box office and get budgets 10 up in order for them to be able to finance their films. 11 1407 We have been included in the process 12 of that discussion and in any given year out of the 15 13 to 20 features that I might precommit to, I would 14 think -- I mean last year, for instance, I precommitted 15 to 17 films, nine of which were with first-time 16 filmmakers. Every one of those first-time filmmakers 17 were, top to bottom, all Canadian. 18 1408 In the others, there were only two 19 that were larger multi-million dollar productions, they 20 were International Co-Productions or there was an 21 American cast brought in, and one single American cast. 22 1409 COMMISSIONER GRAUER: I am just 23 trying, for helping myself because I want to do 24 independent production generally as well as this 25 regional production and maybe the way to handle this,
1 as I say, we can talk about your station-produced when 2 your stations come in. 3 1410 But you are new to British Columbia 4 and aside and apart from any of the public benefits 5 expenditures, do you have a -- I think you said this 6 morning, Mr. Switzer, that you were here to be specific 7 and make commitments, and going forward do you have any 8 internal mechanisms in place to ensure that there is a 9 balance of your, let's say the feature film productions 10 originating from British Columbia or other parts of the 11 country? 12 1411 MS BOEHME: Well, I think certainly 13 in connection with the NewVI which is out of Victoria, 14 we have that commitment there that is $12 million that 15 we will spend with independent producers over the 16 license term. A minimum of 50 per cent will be spent 17 with Island-based producers and we have already 18 announced initiatives to try to raise the level of 19 production there. The others we have committed to 20 spend with British Columbia-based producers and that is 21 over and above our commitment with CKVU. 22 1412 COMMISSIONER GRAUER: Okay. Because 23 of the licensing commitments with CIVI. Maybe if we 24 talk about CKVU then, apart from -- 25 1413 MR. SWITZER: Commissioner Grauer, to
1 your question, we have not had to formalize it in the 2 past. If you were to take a snapshot the month before 3 we were fortunate enough on either of these B.C.-based 4 stations and were to look at the past five years or six 5 years or seven years, through the natural course of the 6 quality and the material that was coming through 7 Diane's office, sometimes to the detriment of Toronto 8 producers -- not to the detriment, but as a result of 9 the supply that came in the door, some years it was 10 very Halifax heavy, in some years Calgary heavy, in 11 many years Vancouver heavy. It hasn't been enveloped 12 in any way and it has been a reflection of the quality 13 that has come through the door. 14 1414 The diversity is terrific, the 15 exposure on many of our stations in terrific and 16 genuinely the stations are better off because of 17 everything going east to west and west to east. 18 1415 COMMISSIONER GRAUER: As you probably 19 know, we agreed with CTV and Global that we would set 20 up a reporting mechanism where they would report 21 annually on a variety of aspects of their independent 22 production, including where it originates, and I wonder 23 if you could give me your comments on the possibility 24 of you doing a similar reporting? 25 1416 MR. MILLER: Perhaps I can get back
1 to you on the specifics of that in reply. We will have 2 an annual reporting mechanism on the benefits for CKVU, 3 which is the formal part of our contribution to the 4 independent production sector there. So that is a 5 given. 6 1417 Let me look at what else we might do 7 for you there. 8 1418 COMMISSIONER GRAUER: I really do 9 want to keep the benefits separate because I want to 10 talk to you about the benefits separately because I 11 think the public benefits are one aspect, but ongoing 12 regular activity is also important. 13 1419 MR. MILLER: Maybe I can actually 14 speak to that ongoing regular activity. 15 1420 I think, as Jay is signalling, in the 16 normal course we produce where we can get the best 17 product. We, by the way, have not demanded the $2,000 18 cup of coffee. Diane spends more time on the road than 19 anybody I know and she is meeting with independent 20 producers across the country on a regular basis. 21 Now with our local development officers, our 22 independent producers have the choice of going to Diane 23 or going to our local person. So we have that 24 infrastructure set up. 25 1421 We also have script and concept
1 development at all our stations, some of it within the 2 benefits for example at VU, and with the benefits that 3 are ending on RO and PL, but then even when those 4 benefits have ended for RO and PL we are continuing 5 with script and concept development as we have and will 6 continue at CITY. So that is the other triggering 7 mechanism to develop talent. 8 1422 So it is that twin approach of making 9 sure that we can sort of have some development funds 10 there to trigger emerging talent and then, if you will, 11 throw the weight of CHUM Television behind any projects 12 that we want so that we can take it across our 13 appropriate stations across the country. 14 1423 COMMISSIONER GRAUER: As you know, 15 this really came about because there were a number of 16 organizations in western Canada, in particular B.C. 17 Film, AMPIA from Alberta, SaskFilm and Manitoba Film & 18 Sound who have had grievances for many years about 19 having not reaped the benefits of the Canadian 20 broadcasting system. 21 1424 Really what this is designed to do 22 is, the more light that we can shine on the licensing 23 and funding activities of all of the private 24 broadcasters, and the better understanding all of us 25 can get as to exactly what is transpiring, hopefully we
1 can reduce those grievances and have people feel a 2 sense of inclusion in terms of enjoying the benefits. 3 1425 I am not meaning by any stretch of 4 the imagination to suggest that CHUM has not been 5 pulling its weight, but I think it is really important 6 for all of us that the more we see, the more we 7 understanding, the clearer it is, then the less 8 aggravation we encounter. 9 1426 MS BOEHME: I certainly have to 10 agree. We have been very involved with all of the 11 organizations that you have cited, routinely in touch 12 with them about what our needs are and what their needs 13 are and how we can cooperate by helping each other. 14 1427 I think the other thing that we are 15 really active working with is the CFTPA in defining 16 terms of trade which I think is going to help all of us 17 to know exactly who is doing what and why we are doing 18 things and that everything is transparent. They have 19 been very good about it and it is one of those things 20 that is high on my list of priorities of things to do. 21 1428 But we have been active in British 22 Columbia. If you want to look at "Last Wedding" as an 23 example, it was four years in the making, long before 24 CKVU or CIVI was on our horizon here. 25 1429 It just happened to be a great
1 talented team of people and a terrific property that, 2 if you want to use an old-fashioned term of 3 psychographically, demographically it is the kind of 4 film that we were looking for and it comes out of a 5 really vibrant, vital independent community. That 6 community is not going anywhere. As long as those good 7 ideas are there, there is no shortage of that, we will 8 certainly be there front and centre. 9 1430 COMMISSIONER GRAUER: I wonder if you 10 can help me. As you know, one of the great 11 frustrations in British Columbia has been the inability 12 to develop a strong indigenous production industry. I 13 think it is a frustration that is deeply held there. 14 There are of course the talented people. We don't have 15 the strong indigenous production companies as exist 16 even, frankly, Alberta is a bit stronger than British 17 Columbia has been. Certainly in the feature film area, 18 as you point out, there are some real success stories 19 out there. 20 1431 I would be curious to know what kind 21 of license fees generally? I know you talked about 22 "The Red Violin" and it was quite a significant license 23 fee that you paid and that was across all, both Bravo!, 24 CITY and some others. But what in general are the 25 kinds of license fees that you would be paying for a
1 two-hour feature on CITY and, let's say, CKVU and your 2 ability to -- what I am really trying to do is get a 3 fix on the 10 out of 10 per hour license fee that a 4 producer might receive. 5 1432 MS BOEHME: Sure. Just by 6 coincidence and maybe to put it in context, as a matter 7 of fact during the lunch break I have been doing some 8 negotiating on a B.C.-based film which I think is maybe 9 the next "The Red Violin" or even bigger in the market. 10 It has been something that we have in development for 11 the last 14 to 18 months. 12 1433 It was one of those things that we 13 were negotiating, as was CBC for the same rights. In 14 fact CBC was dismayed at the fact that we came to the 15 table with a significant enough license fee as we did 16 and they basically backed away because they couldn't 17 afford to compete at that level. 18 1434 It is a $10 million picture. It is 19 the kind of thing that deserves serious six figure 20 license fee on a post-pay basis and we were more than 21 happy and fortunate enough to be able to come to the 22 table in that way where we can turn heads where we 23 need to. 24 1435 We have been functioning very well 25 with the distribution community at the same time
1 because this is also a very complex question, as I am 2 sure I don't need to remind you, when it starts to talk 3 about the new state of Telefilm and the size of market 4 guarantees and how that is changing with the actual 5 distribution. 6 1436 So it depends on the rights that we 7 acquire and the size and scope of the film. A film 8 like that I am obviously paying a more sizeable license 9 fee than a small digital first-time feature that has a 10 total budget of $300,000, which is less than the entire 11 license fee of a larger picture. 12 1437 So it is very much on a case-by-case 13 basis depending on the project. 14 1438 COMMISSIONER GRAUER: Would this film 15 for instance, the license fees be part of your benefits 16 money? Would that be the funds that you are using? 17 Because I am really trying to not go there but get a 18 sense, not just this one, but what is an average 19 license fee that you would be paying? How does it work 20 out on an average? 21 1439 If we look at what are the license 22 fees that conventional broadcasters are paying for 23 10 out of 10, we are looking at anywhere between, what, 24 $150,000 and $200,000 an hour. So I'm just trying to 25 equate it.
1 1440 MR. SWITZER: There are theatrical 2 films, there are made-for-television movies. There are 3 many categories which Diane has touched upon and she 4 can't -- there may be a small, little personal 5 "Au Tour" digital video project where $50,000 makes her 6 day and let's the film get off and running and that is 7 fair value for the quality of the film, the attention 8 we are going to get, the ratings we are going to get. 9 1441 At the other end, we have licenses of 10 $300,000, $400,000 and even more, and it -- in other 11 words, averages are deceiving. I could probably 12 suggest that there are more than a dozen pictures, a 13 dozen movies in the past two years where our license 14 fee has been in excess of $300,000 or $350,000, but 15 there are many where it is $150,000 and some perhaps 16 much less. 17 1442 MS BOEHME: In those cases, for 18 instance, of made-for-television movies which are 19 putting through the funding system of the CTF, we are 20 paying identical license fees to CTV or Global or CBC 21 in that case. "Stork Derby" which we aired in January 22 was a perfect example of something that went through 23 that funding system on a per-hour basis, we are paying 24 identical license fees. 25 1443 COMMISSIONER GRAUER: Yes. That is
1 the discipline of going through CTF is that your 2 license fee is an important element of whether they 3 match the funds. 4 1444 MR. SWITZER: Commissioner Grauer, I 5 know you are aware of this, but just to be very clear, 6 part of the frustration in planning business and doing 7 this wonderful storytelling is that many of these films 8 take three and four years from development to financing 9 to execution until they are finally made. So the 10 projects that we are working on now may not make it to 11 air for three years. 12 1445 MS BOEHME: And "Stork Derby" for 13 instance, we supported that film for six or seven 14 years. 15 1446 MR. SWITZER: Four ways of 16 development, six years of preparation and financing, 17 and it is a full 10 point Canadian terrific true story 18 set in Toronto. From her first meeting until the day 19 Ellen Baine, the Director of Programming, telecast it, 20 was seven years. 21 1447 MS BOEHME: Six and a half years. 22 1448 COMMISSIONER GRAUER: Okay. This is 23 a good time for my next question. Before I didn't know 24 if it was going to be next, but it is a perfect segue. 25 1449 That is the whole area of script and
1 concept development has been characterized as the R&D 2 of television, that it is a really important element 3 and it is part of, again, the return to the Canadian 4 people from the broadcasters for the privilege of 5 holding a license. It is part of that investing in the 6 development of the creative and intellectual resources 7 of our people, our country. 8 1450 So I think it is wonderful that you 9 work that long, but maybe you could tell me, for 10 instance, you would do script and concept development 11 money and then your prelicensing. Maybe you could just 12 take me through what kinds of percentage of investment 13 in the final budget you would do. 14 1451 Do you see that as something 15 that necessarily is going to bring you a return, or is 16 it something that you do to hopefully develop a 17 project, but -- 18 1452 MR. SWITZER: I will let Diane go 19 through the details, because this is her life every day 20 and if you go into her office you will see hundreds of 21 scripts piled up around her you kind of have to fight 22 your way through. 23 1453 Of course we want to see return and 24 we want to help develop and work with producers and 25 directors and writers that will generate stories that
1 our viewers will want to see. Our track record is 2 improving. In fact, our Canadian films, both 3 made-for-television and theatrical are better than they 4 have ever been. The average tuning and average 5 audiences are getting much better. 6 1454 If we were to do an analysis, I'm 7 sure I would find they do not contribute and in fact we 8 are spending more than we are receiving in advertising. 9 We are here going forward, we are here growing, we 10 believe in the future there will be a payback as it 11 gets better. 12 1455 I'm sure you recognize from our 13 schedules and our promotions and the way we deal with 14 Canadian movies we do not "ghettoize" them. We don't 15 put them into corners, put titles on them and run them 16 on Saturday night. They are dealt with in a very 17 serious way. 18 1456 As to the waves of development, how 19 it might work, we have two pools to work with, one 20 traditional script and concept development and the 21 rules on the kinds of costs that qualify for that in 22 terms of our own rules are very specific and very clear 23 and some of those will lead to a situation where then 24 Diane or the local development officers can commit 25 prelicensing monies to the actual production.
1 1457 MS BOEHME: If think I have to 2 totally agree with you that it is a vital component and 3 it has certainly been one of those things that we have 4 been really, proud of over the years. 5 1458 A producer can come to us at any 6 point in time in that process. They can have, in some 7 cases, a novel that they have optioned that they want 8 to see whether or not we want to proceed into 9 development with them and we think there is something 10 in there. They can come to us with a treatment, they 11 can come to us with a final draft script where they 12 maybe need a story editor to help them. 13 1459 Our budget and our involvement and 14 our level of involvement financially depends on where 15 they are in that mix. If they come to us with a script 16 that is in a fairly good shape but they need to hire a 17 story editor to do a polish, then we don't necessarily 18 stay as involved financially as we might for somebody 19 who has acquired the rights to a stage play or a very 20 preliminary synopsis or outline of an idea that we like 21 that can sometimes take years and 10s of thousands of 22 dollars over the course of those years to be able to 23 support them through that. 24 1460 Because it is an intangible. When 25 you are working with creative people it takes as long
1 as it takes and it is going to get where it is going to 2 get. Through no fault of their own sometimes, the 3 rights lapse, they have a falling out with whatever 4 production team. I mean, there are as many reasons as 5 you can possibly imagine. 6 1461 Our ratio used to be about one in ten 7 of projects that we had supported with development at 8 one phase or another that actually proceeded to 9 prelicensing. That is enormously high risk money, but 10 when I look at it it is a high risk on a per-project 11 basis, it is not high risk when it comes to the talent 12 that is behind it. 13 1462 Because there has been a number of 14 instances where we have had people who we have 15 supported, the project for one reason or another didn't 16 go ahead, but we have established a wonderful working 17 relationship and they learned something and we learned 18 something and it was the next one or the next one that 19 we supported them on that actually became -- you know, 20 we see it on our screens. 21 1463 So that is the investment, it is 22 really long term. You are right, it is filled with 23 intangibles and if we don't put something back to the 24 creative community we don't have anything, and if we 25 don't put something to keep them here the seduction of
1 going south or elsewhere is enormous. 2 1464 On the local level I think I want 3 Prem to talk a little bit about what we are doing there 4 especially with Vancouver's other stories which we are 5 really excited about which we think is really 6 fundamental to who we are in the future and where we 7 are going. 8 1465 COMMISSIONER GRAUER: You know what, 9 I would love to talk about Vancouver's other stories, 10 but what I want to do is that is part of the benefits 11 for CKVU and I want to leave that all to end of day 12 tomorrow, if we could. 13 1466 So I really want to focus on your 14 approach going forward with all of this, being in two 15 provinces and the kind of specific commitments you are 16 prepared to make and how you see it both with the 17 feature film and again with the other. 18 1467 MR. SWITZER: I can start with the 19 promises made in here and there are script and concept 20 development funds at each of our stations. Those are 21 primarily executed by the local development officers, 22 sometimes in consultation with Diane. Those are 23 promises that we made in this application and it is, as 24 you say, fundamental to growing our feature film and 25 made-for-television pool.
1 1468 COMMISSIONER GRAUER: Then your 2 100 hours of movies, long-form features, and those are 3 for CKVU and CITY, and then there is the rest of your 4 independent production acquired, if I can put it that 5 way, and the extent to which you use small, 6 medium-sized enterprises and small local producers. 7 1469 In that area, which is really the 8 bulk of your activity, do you expend any script and 9 concept development or prelicensing funds in those what 10 are what, lower Canadian content programs. 11 1470 MS BOEHME: When you say "lower 12 Canadian content" you mean six out of 10? 13 1471 I can only think out of 137 companies 14 we have dealt with that -- there are more projects than 15 that, those are just the companies that we have dealt 16 with -- it would probably be only one, maybe two. 17 There are nine out of tens and out contract indicates 18 that the writer, producer and director must all be 19 Canadian in order for them to receive development 20 support from us. 21 1472 So it is -- 22 1473 COMMISSIONER GRAUER: (Off 23 microphone). 24 1474 MS BOEHME: Yes. That is correct. 25 1475 COMMISSIONER GRAUER: (Off
1 microphone). 2 1476 MS BOEHME: Yes, it is. 3 1477 MR. SWITZER: Generally, to be very 4 specific and clear on some of the lower six point out 5 of ten or seven point out of 10 dramatic series, we are 6 not involved creatively at their conception and they 7 are acquired for much smaller license fees. 8 --- Pause 9 1478 COMMISSIONER GRAUER: I wonder if I 10 can -- you talked briefly about a Terms of Trade 11 Agreement with the CFTPA and I wonder if you could tell 12 me if you have been working with them and, if so, what 13 is the status of that? 14 1479 MS BOEHME: We have initiated 15 conversations with them. We have opened a dialogue. 16 We know we want to do it, they are not quite ready to 17 have us yet and they have said "Absolutely, we haven't 18 heard any problems or complaints about you guys, we 19 don't anticipate a problem." 20 1480 It is one of those things that is on 21 both of our horizons, but there is no sense of urgency 22 on either side to put one together but we have opened 23 up a dialogue and are prepared to talk whenever they 24 are ready. 25 1481 COMMISSIONER GRAUER: I wonder if you
1 could just -- you explained earlier how you actually 2 had an application into the CTF and to Telefilm to do a 3 10 out of 10 series and it wasn't accepted for funding. 4 Your understanding is that is largely because you are 5 not a national group and couldn't give national 6 distribution. Do you know that or have you had an 7 explanation? 8 1482 MR. SWITZER: No. For the record, we 9 do not know that. We believe that. We know it is a 10 factor. It has been discussed. 11 1483 MS BOEHME: It was told to me as the 12 reason for some lack of support on the 13 made-for-television movie side. 14 1484 On the case of that particular drama 15 series in Vancouver, it was a little more complicated 16 than that. It is a very long story and I think 17 ultimately at the end of the day the producer at this 18 point in time is feeling quite ill-done by and 19 ill-treated by the CTF on the LFP side, which initiated 20 a sort of ripple effect. Because he feels that they 21 didn't appropriately evaluate his application on the 22 LFP side, he was then given seven days to replace, I 23 think, $300,000 per episode in order to remain in the 24 queue for the EIP, and despite the fact that we all 25 love the creative and our support was there, it became
1 problematic. 2 1485 But I think the producer is in a 3 position where he is taking that up on a separate issue 4 with the LFP and I wouldn't feel it appropriate to 5 bring that up here. 6 1486 COMMISSIONER GRAUER: Because if we 7 look at your NewNet stations, I mean some people 8 suggested that the location at which the production 9 originates can be a proxy for regional reflection, 10 which might be a bit of a challenge with the drama 11 series that appear on the NewNet stations given their 12 genre, science fiction and fantasy, and whatnot. 13 1487 I just wonder if you have given some 14 thought to how you might -- or have you thought about 15 doing more reflective drama, more indigenous drama, 16 utilizing more Canadian creative talent with the drama 17 that is on the NewNet stations. Do you have an 18 approach in that respect? 19 1488 MR. SWITZER: Yes, we do and we would 20 absolutely agree with you in that we would not 21 categorize a Canadian treaty co-production shot in 22 Australia as any kind of a refection. 23 1489 I guess my answer would be two-part. 24 1490 One, we are trying now that we have 25 more stations together and have stepped up to the table
1 with these very significant license fees and must get 2 past this financing hurdle where, as again we have just 3 discussed, we have had a 10 point conceived, written 4 and dreamed about set in Vancouver series turned down, 5 in part because -- at least in part because of our 6 national coverage. 7 1491 So there is a genuine desire to do 8 more and we have already stepped up to that table. 9 1492 We still believe, secondly, that the 10 film component, the independent film component, 11 although it may not make up as many hours, certainly 12 makes up a significant amount of dollars and we have 13 gone to great lengths in the past three years to take 14 advantage of completely local productions. I know the 15 teams tomorrow will want to talk to you about that, 16 including films such as "Juiced" shot here in Ottawa, 17 conceived, cast, written, directed, a terrific small 18 film that was seen across our station group. 19 1493 Similarly, films in the NewNet area, 20 including a film called "Shadow Lake" set in VR-land, 21 conceived, written, shot in the area. There are plans 22 for similar local films to be conceived -- or we will 23 develop them and expect that they will completely be 24 reflective of those communities and will be seen across 25 the system, not as one-time only events, but as the
1 start of an ongoing process to increase the frequency 2 of these so that we can do a better job. 3 1494 Diane, do you want to add to that? 4 1495 MS BOEHME: I just wanted to say we 5 have looked at that proactively down the road and in 6 the event that that is a way that we wanted to go we 7 are developing a couple of things that fit exactly that 8 mould, particularly they are coming through the Island, 9 they are Island-based stories, they are set 10 identifiably on the Island, and it is one of those 11 things that it is going to -- again, it takes as long 12 as it takes. 13 1496 They are at a very early script 14 stage. We had hoped they were going to be ready to go 15 through in this funding round, but creatively it just 16 wasn't there yet. But it is one of those things that 17 we are trying to address long-term. 18 1497 MR. SWITZER: And if we can get to 19 the point where each of the NewNet stations can 20 contribute one feature film per year to the system that 21 is seen elsewhere, that would be a wonderful success, 22 certainly a good start. 23 1498 COMMISSIONER GRAUER: The other area 24 perhaps you could give me some help with is the whole 25 area of rights ownership and the extent to which rights
1 ownership factors in when you are program planning. 2 Again, I am really thinking here of acquired 3 programming, owning Canadian rights, U.S. rights, 4 international rights. 5 1499 Do you consider rights ownership at 6 all, especially with the independent producer? 7 1500 MR. SWITZER: Yes. I want Diane to 8 answer that, but other broadcasters deal in different 9 ways and they make their own choices for their own 10 reasons. 11 1501 We have chosen to deal specifically 12 with license fees where we are strictly a short-term 13 licensee, ownership completely remains in the hands of 14 the independent producer, and for probably 99 per cent 15 of the productions we have been involved with to date 16 Canadian rights. 17 1502 We have had other opportunities to 18 complicate that or step that up or perhaps become more 19 aggressive and we are avoiding the potential for abuse. 20 Our license fees are done in a very transparent way. 21 If we then choose to bring to that producer an 22 opportunity for exhibition elsewhere in the world, we 23 will, after the fact in a very transparent way, come 24 back and say "We may have a station in Territory A, B 25 or C and they are prepared to license this, would you
1 like to sell it to them". 2 1503 Diane, can you add anything? 3 1504 MS BOEHME: No, that is perfect, Jay. 4 1505 We only take Canadian rights, we only 5 take English Canadian rights by and large, and the only 6 thing we do when I have producers -- and very often 7 they are the small emerging producers who don't have a 8 lot of experience and they ask me about things like 9 that, then one of the intangible things we do is we 10 broker relationships with people who we know in the 11 business who are looking for that kind of product, but 12 we don't take them ourselves. 13 1506 COMMISSIONER GRAUER: My question 14 wasn't whether you took rights, but again I think one 15 of the really critical aspects of growing an indigenous 16 industry here and really developing our own talent is 17 retaining the ownership of rights. My concern is with 18 a lot of these industrial programs, with a lot of 19 these -- they may be Canadian producers, but I don't 20 know how many of the rights remain here. 21 1507 I think that these are really good 22 opportunities, we don't have them that often, to really 23 talk with the industry, because broadcast licenses are 24 critical to the development of these, as you know, and 25 the broadcasters play an essential role in the
1 development of these small, medium-sized and peripheral 2 industries, if I can say, with respect to our talent in 3 this country. 4 1508 So to take this opportunity to really 5 push and get a better understanding of where the rights 6 ownership lie and the funding issues and pushing you a 7 little bit because I appreciate you may have 8 shareholder issues and I guess we are here for our 9 shareholder, being the Canadian public. 10 1509 MR. SWITZER: We fundamentally 11 agree with you and with these concerns and particularly 12 in the area of feature films with small producers and 13 the emerging small Canadian distribution companies. 14 We have been their best friends in that we provide 15 license fees that, as you suggest, are critical and 16 all we ask for are limited Canadian English-language 17 television rights. 18 1510 COMMISSIONER GRAUER: I think we will 19 leave it there and I will finish up tomorrow morning. 20 I don't have too much. 21 --- Pause 22 1511 THE CHAIRPERSON: Thank you. 23 1512 Commissioner Cardozo. 24 1513 COMMISSIONER CARDOZO: Thank you, 25 Mr. Chair.
1 1514 I will just start on a couple of 2 areas that I am going to be questioning and I will tell 3 you about the areas they belong to as well, which you 4 have probably figured out. 5 1515 What I am going to be covering is 6 described video, closed captioning, ethnic programming 7 and reflection of cultural diversity. Maybe I will 8 leave that last one until tomorrow, partly because of 9 course I only got your input a few hours ago so it will 10 give me what, another 10 hours to read it overnight and 11 have some good questions for you tomorrow. 12 1516 At any rate, let me start with 13 described video. 14 1517 I note your clarification I think, 15 Mr. Switzer, earlier today that your commitments on 16 described video and closed captioning are firm and 17 not up for reduction through any scenarios we have 18 talked about. 19 1518 MR. SWITZER: Correct 20 1519 COMMISSIONER CARDOZO: Okay. 21 1520 The commitments that you have made 22 for a certain number of hours per station taking in at 23 different times depending on the size of the station, 24 and so forth, those are original hours, are they? They 25 are not repeat hours?
1 1521 MR. MILLER: We have followed the 2 precedent set with CTV and Global which, if memory 3 serves, was half original, half -- it was 50/50. One 4 repeat was allowed. 5 1522 COMMISSIONER CARDOZO: We can clarify 6 that, that might have been for the first couple of 7 years there was a repeat, if I'm not mistaken. 8 1523 MR. MILLER: I thought it was 9 throughout the term, but I can check that for reply. 10 1524 COMMISSIONER CARDOZO: Okay, could 11 you? Yes, please do. 12 1525 What you are willing to do is the 13 same commitments as CTV and Global? 14 1526 MR. MILLER: Again, we have modelled 15 our commitments on CTV so, as you have alluded to, the 16 description commitments kick in immediately for CITY-TV 17 and CKVU, but for the NewNet stations they don't kick 18 in for three years and that is parallel to what you did 19 with the major market CTV stations -- 20 1527 COMMISSIONER CARDOZO: For the small 21 stations. 22 1528 MR. MILLER: -- versus their smaller 23 market stations. So we took our lead from what you 24 did there. 25 1529 COMMISSIONER CARDOZO: Okay. The one
1 part, then, I just want to clarify with you in terms of 2 their model, with regards to Wingham and Wheatley, you 3 haven't agreed to those as conditions of license and I 4 understand that Wingham and Wheatley have common 5 programming with London, largely are rebroads, so would 6 you be amenable to the Wingham and Wheatley conditions 7 of licensing mirroring those of London? 8 1530 MR. MILLER: Perhaps I can come back 9 in reply on that? 10 1531 COMMISSIONER CARDOZO: Okay. Sure. 11 1532 And in terms of described video for 12 American programming, what is your experience or what 13 is your projection with regards to acquired U.S. 14 programming with described video? Is it your sense 15 that it is increasingly available in American 16 programming and that you will be able to carry that? 17 1533 MR. MILLER: It is staring and Sarah 18 might want to speak, but I do know of one example that 19 Ellen Baine can allude to where we got a program from 20 the U.S. that was described but then it wasn't 21 captioned. So there are always difficulties, but -- 22 1534 MR. SWITZER: Which, for the record, 23 we live captioned for its first telecast so that it was 24 indeed both described and captioned when it went to 25 air. But it speaks to the difficulties that we are
1 seeing in terms of reliability from some of the 2 non-Canadian material. It is certainly getting better. 3 1535 MS CRAWFORD: But we also did have 4 one case of a U.S. supplier that did not want to pass 5 along the described video rights to the film in 6 question. Again, perhaps Ellen Baine tomorrow at the 7 CITY-TV panel can more fully talk about that. 8 1536 COMMISSIONER CARDOZO: Okay. Are you 9 finding that, as Commission Grauer was talking about, 10 these are interesting opportunities to talk to the 11 industry about how these issues are developing, but 12 apart from just what we are dealing with in terms of 13 the license, but is it your sense that there is more 14 American programming that has described video and is 15 the rights issue a common -- do you think it is going 16 to be a common problem? 17 1537 MR. MILLER: I think the trouble is 18 that when one buys a program there are all kinds of 19 ancillary things that you want that are often there but 20 they don't necessarily want to give to you. So, for 21 example, we don't necessarily get it closed captioned, 22 even though we know it is captioned. That is a 23 problem. We don't necessarily get it described, even 24 though it may be described. We don't necessarily get 25 an HD version, even though we know there is an HD
1 version. 2 1538 It has been a problem, it always is a 3 problem. We try to deal with it through our conditions 4 of contract, but very often, despite all best efforts, 5 while we know it is out there we don't get it. 6 1539 In terms of the supply of foreign 7 described programming, it is just starting, obviously 8 in response to the new requirements on U.S. 9 broadcasters. I think it will clearly get better 10 over time, but we are not expecting a sudden influx 11 of described U.S. programming for example in the 12 next year. 13 1540 COMMISSIONER CARDOZO: I have heard 14 examples of these different streams being so basic as 15 being on different diskettes and people just literally 16 lose diskettes after they run a show with described 17 video. Have you come across that kind of stuff, or 18 just don't want to give it to you I guess is what? 19 1541 MR. MILLER: It is as simple as 20 that, yes. 21 1542 MR. SWITZER: That we have come 22 across, yes. 23 1543 Not particular stories of loss 24 of data, but it is a negotiation point of contract 25 and license.
1 1544 COMMISSIONER CARDOZO: Okay. So for 2 your contracts that you are signing with American 3 acquired programming you are increasingly asking for 4 the described video and the closed captioning. Is that 5 an automatic thing? 6 1545 MR. MILLER: We are starting to it 7 for the next -- for the next broadcast season. 8 1546 Again, we are not seeing a huge 9 amount of product out there, but just as we did it with 10 captioned we are doing it with described video. But 11 what we find is they won't accept an absolute 12 requirement, we have to make it a sort of on a 13 best-efforts basis, which is why even today we 14 sometimes find a product that we should get captioned 15 doesn't, unfortunately, arrive captioned. 16 1547 COMMISSIONER CARDOZO: On audio 17 description, which is the description of alphanumeric 18 stuff usually on the screen, like telephone numbers and 19 stuff, what is your approach to that? 20 1548 MR. MILLER: That is a very important 21 question actually, because as some Commission staff are 22 aware we actually received a complaint via the Human 23 Rights Commission on some of our shows in terms of that 24 kind of description. 25 1549 I guess what we are looking for going
1 forward is the ability to ensure first of all that any 2 visuals in our news programming are also orally 3 described. In some of our magazine shows it is more of 4 a creative thing that we have to deal with on a 5 case-by-case basis. 6 1550 But I think the point that has become 7 evident to us is that while we understand your focus on 8 drama, we also see the importance of description on for 9 example our magazine shows so to fulfil some of our 10 requirements we would be looking for a mix of both 11 drama and other prime-time programming such as our 12 magazine show. 13 1551 COMMISSIONER CARDOZO: But on news I 14 don't see that you are necessarily doing it and it is 15 also quite difficult to do where you have -- in your 16 weather reports you have this incredible graphic that 17 pops up with little sort of pickets popping up with all 18 the temperatures and I have to tell you they are very 19 easily to follow and watch, but for somebody who 20 doesn't see them they are -- 21 1552 MS CRAWFORD: It is definitely 22 something that we endeavour to do whenever there is the 23 opportunity for on-screen text to be augmented with an 24 oral description of it. 25 1553 Again, our News Vice-President who is
1 going to be on the CITY-TV panel tomorrow can speak to 2 the specificities of doing that and the challenges on 3 news and speaking of CHUM corporately when we get into 4 multi-screen news formats it is an additional challenge 5 as well. But we certainly do endeavour to do it 6 throughout, particularly when we are presenting 7 information of import to the community. 8 1554 COMMISSIONER CARDOZO: Okay. Well, 9 thanks very much. I think we will stop there. We will 10 start tomorrow with closed captioning. 11 1555 Thank you for what you have shared 12 so far. 13 1556 Thank you, Mr. Chair. 14 1557 THE CHAIRPERSON: Thank you. 15 1558 We will adjourn now and resume at 16 9:30 tomorrow morning. 17 --- Whereupon the hearing adjourned at 1739, to resume 18 on Tuesday, May 7, 2002 at 0900 / L'audience 19 est ajournée à 1739, pour reprendre le mardi 20 7 mai 2002 à 0900 21 22 23 24 25
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