TRANSCRIPT OF PROCEEDINGS BEFORE

             THE CANADIAN RADIO‑TELEVISION AND

               TELECOMMUNICATIONS COMMISSION

             TRANSCRIPTION DES AUDIENCES DEVANT

              LE CONSEIL DE LA RADIODIFFUSION

           ET DES TÉLÉCOMMUNICATIONS CANADIENNES

                          SUBJECT:

Review of the Commercial Radio Policy /

Examen de la Politique sur la radio commerciale

HELD AT:                              TENUE À:

Conference Centre                     Centre de conférences

Outaouais Room                        Salle Outaouais

140 Promenade du Portage              140, Promenade du Portage

Gatineau, Quebec                      Gatineau (Québec)

May 18, 2006                          Le 18 mai 2006

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

Review of the Commercial Radio Policy /

Examen de la Politique sur la radio commerciale

BEFORE / DEVANT:

Charles Dalfen                    Chairperson / Président

Michel Arpin                      Commissioner / Conseiller

Rita Cugini                       Commissioner / Conseillère

Andrée Noël                       Commissioner / Conseillère

Joan Pennefather                  Commissioner / Conseillère

ALSO PRESENT / AUSSI PRÉSENTS:

Chantal Boulet                    Secretary / Secrétaire

Peter Foster                      Hearing Manager /

Gérant de l'audience

Bernard Montigny                  General Counsel,

Broadcasting / Avocat

général, Radiodiffusion

Anne-Marie Murphy                 Legal Counsel /

Conseillère juridique

Robert Ramsey                     Senior Director, Radio

Policy and Applications /

Directeur principal,

Politiques et demandes

relatives à la radio

HELD AT:                          TENUE À:

Conference Centre                 Centre de conférences

Outaouais Room                    Salle Outaouais

140 Promenade du Portage          140, Promenade du Portage

Gatineau, Quebec                  Gatineau (Québec)

May 18, 2006                      Le 18 mai 2006

           TABLE DES MATIÈRES / TABLE OF CONTENTS

                                                PAGE /  PARA

PRESENTATION BY / PRÉSENTATION PAR:

FACTOR                                          1433 /  8193

Radio Starmaker Fund                            1466 /  8439

ANR Lounge                                      1504 /  8666

Canadian Satellite Radio                        1515 /  8747

Impératif français                              1532 /  8825

Canadian Conference of the Arts                 1557 /  8937

Evanov Radio Group Inc.                         1584 /  9110

Coalition of Nine Provincial/Territorial Music  1602 /  9229

  Industry in Process Association

Michael Fockler                                 1623 /  9345

Canadian Music Centre                           1640 /  9474

Fondation Radio Enfants                         1656 /  9591

Wayne V. Plunkett                               1681 /  9741

CPSC                                            1698 /  9837

Magda de la Torre                               1728 / 10021

                  Gatineau Quebec / Gatineau (Québec)

‑‑‑ Upon commencing on Thursday, May 18, 2006

    at 0904 / L'audience débute le jeudi

    18 mai 2006 à 0904

LISTNUM 1 \l 1 \s 81868186             THE CHAIRPERSON:  Order, please.  À l'ordre, s'il vous plaît.

LISTNUM 1 \l 18187             Good morning, everyone.  Bonjour, tout le monde.

LISTNUM 1 \l 18188             Madam la Secrétaire.

LISTNUM 1 \l 18189             LA SECRÉTAIRE:  Merci, monsieur le Président.

LISTNUM 1 \l 18190             We will now call the first participant for this morning, which is FACTOR.

LISTNUM 1 \l 18191             Mr. Jim West and Ms Heather Ostertag will be appearing for FACTOR.

LISTNUM 1 \l 18192             You will have ten minutes for your presentation.  Please go ahead.

PRESENTATION / PRÉSENTATION

LISTNUM 1 \l 18193             MR. WEST:  Thank you, Mr. Dalfen and Commissioners, for granting FACTOR this opportunity to appear today.

LISTNUM 1 \l 18194             My name is Jim West and I am the Chair of FACTOR.

LISTNUM 1 \l 18195             Joining me today, beside me, is FACTOR's President, Heather Ostertag.

LISTNUM 1 \l 18196             FACTOR is a non‑political, non‑aligned organization and it was not our initial intention to appear at these hearings.  However, given the nature of the issues and the responses and positions put forward, it is apparent that there is confusion surrounding the important work done by FACTOR.

LISTNUM 1 \l 18197             It is our goal to support this process by ensuring that the facts on FACTOR are placed on the record.

LISTNUM 1 \l 18198             Throughout these hearings there have been many acknowledgements on the importance of FACTOR continuing its good work.  In hearing of the concerns expressed around a need for a greater transparency of how the foundation operates and where its funding is disbursed, I would like to suggest that all interested parties meet to discuss our common objective of supporting the development of Canadian artists.

LISTNUM 1 \l 18199             We advocate that we explore the possibility of a common administration for the various funding programs.  We would also like to see that these discussions include the possibility of redefining and reconstituting FACTOR to enable it to be the conduit for supporting the visions of the various boards of directors of these organizations.

LISTNUM 1 \l 18200             I will now turn the presentation over to Heather.

LISTNUM 1 \l 18201             MS OSTERTAG:  Thank you, Jim.

LISTNUM 1 \l 18202             FACTOR is a successful private/public partnership that has produced some very significant results.

LISTNUM 1 \l 18203             Currently, FACTOR provides funding to assist with all stages of the development of the career of an artist, from demos on through to the support of commercially released recordings.  Support is also provided to assist with the marketing and promotion of these recordings, both nationally and internationally.

LISTNUM 1 \l 18204             A significant benefit for Canadian artists from this partnership is FACTOR's ability to blend the public and private funds.  Treasury Board rules do not allow for a carryover of commitments.  The carryover that occurs at FACTOR can only happen because of the blended private/public funding, which provides the artist the ability to complete projects, allowing complete freedom within the creative process.

LISTNUM 1 \l 18205             Some FACTOR results include:

LISTNUM 1 \l 18206             Since April 1999, 43 FACTOR‑supported artists have received 89 certifications and over 221 various domestic awards ranging from Juno Awards to the Urban Awards to the Country Music Awards.

LISTNUM 1 \l 18207             From April 1, 1999 to March 31, 2006, FACTOR has disbursed final payments on completed projects totalling $55 million.  This funding has been matched by the industry's own investment of just over $114 million.

LISTNUM 1 \l 18208             While FACTOR requires applications to put up minimally 50 percent of the budget, the industry has actually absorbed 68 percent of the costs.

LISTNUM 1 \l 18209             A national network of music industry associations that is supporting the growth and development of Canadian grassroots artists coast to coast to coast.  Through FACTOR's National Advisory Board there are two face‑to‑face meetings per year to discuss industry challenges and issues.

LISTNUM 1 \l 18210             It has also afforded provincial music industry associations the opportunity to network with each other as well as with other key industry people.  The exchange/access to information has supported the growth of the industry at the grassroots level.

LISTNUM 1 \l 18211             Canada has become the number three exporter of music in the world.  FACTOR‑supported artists such as Nickelback, Alanis Morrisette, k.d. lang and Sarah McLachlan, are among those that have put Canada into such a significant place in the global market.

LISTNUM 1 \l 18212             All of those artists have been supported by FACTOR.

LISTNUM 1 \l 18213             The Nickelback story, for example:  They made a CD, took it to radio and before radio could play it, they asked them to re‑mix.  The band was out of money and unknown.  FACTOR loaned them $5,000, and in the words of Chad Kroeger, lead singer of Nickelback, "the rest is history".

LISTNUM 1 \l 18214             Since inception FACTOR‑supported sound recordings have sold over 30.2 million copies worldwide with a retail value in excess of $680 million.

LISTNUM 1 \l 18215             FACTOR's future plans:  Following FACTOR securing a five‑year commitment from Canadian Heritage in 2005, the board of directors had a full review of the foundation undertaken.

LISTNUM 1 \l 18216             Surveys were sent to over 4,600 potential respondents and approximately 1,000 stakeholders took the time to provide feedback through interviews and on‑line surveys.

LISTNUM 1 \l 18217             The following groups were included in the surveys:  the Department of Canadian Heritage; broadcasting sponsors; music industry associations; applicants (both successful and unsuccessful); jurors; the board of directors and staff of FACTOR.

LISTNUM 1 \l 18218             This review is enabling FACTOR to re‑invent itself and revamp its programs in very significant ways.  However, with the business changing radically and FACTOR's desire to be sensitive to the need for change, we will continue to consult with the industry to ensure the programs remain responsive.

LISTNUM 1 \l 18219             We are also aware of the importance of recognizing the need for change and that it needs to be effectively implemented.

LISTNUM 1 \l 18220             We are currently developing a new website that will be even more interactive and will be available for use by the visually impaired.

LISTNUM 1 \l 18221             Programs are being overhauled and new ways of interacting with the artists and applicants are being developed.  We are targeted to roll out the newly renovated FACTOR on July 1, 2006.

LISTNUM 1 \l 18222             We will, of course, continue to consult with the industry to ensure the programs and funding we provide continue to be responsive to the rapidly changing environment.

LISTNUM 1 \l 18223             FACTOR's challenges are:

LISTNUM 1 \l 18224             (1) the high level of applications not successful in securing funding;

LISTNUM 1 \l 18225             (2) the limited financial resources currently available to FACTOR making it impossible to meet full artists' needs;

LISTNUM 1 \l 18226             (3) how to effect change that results in a positive, constructive difference, not a change for the sake of change or, even worse, change that results in a negative outcome.

LISTNUM 1 \l 18227             Why a common administration?

LISTNUM 1 \l 18228             With a common administration, there are the economies of scale to be enjoyed; as well, the benefit of ensuring that the programs provided operate at a high level of complementing other initiatives while preventing double funding of the same projects.

LISTNUM 1 \l 18229             It would ensure the funds are spread out in the most equitable fashion.

LISTNUM 1 \l 18230             Why FACTOR?

LISTNUM 1 \l 18231             FACTOR has a proven track record of 24 years of supporting Canadian independent artists.

LISTNUM 1 \l 18232             We have a solid working relationship that has had the broadcasting and music industries working together for what is best for the artists.

LISTNUM 1 \l 18233             We have a successful track record of managing significant amounts of both public and private funds.

LISTNUM 1 \l 18234             We have a trained, experienced staff.

LISTNUM 1 \l 18235             FACTOR has participated in a minimum of five federal audits, the most recent having been concluded in October 2003.

LISTNUM 1 \l 18236             A copy of this report can be found on the website for Canadian Heritage.

LISTNUM 1 \l 18237             Some highlights of the audit include:

"The objective of this audit was to provide senior management with assurance on the soundness of processes and to determine where the organization is most exposed to risk and to identify which remedial actions are available and appropriate."

LISTNUM 1 \l 18238             In general, the audit team found that:

"(1) the management control framework is appropriate to ensure compliance, effectiveness and financial integrity;

(2) information used for decision‑making and reporting is timely, relevant and reliable;

(3) risk management strategies and practices are suitable to deliver the intended results and the program design and implementation reflects the objectives of PCH"

LISTNUM 1 \l 18239             FACTOR's response to submissions.

LISTNUM 1 \l 18240             There have been a number of comments made in submissions to this hearing that beg our response, including those of the CAB/PriceWaterhouseCooper Report, Canadian Music Centre, Canadian Association of Ethnic Broadcasters and Canadian Independent Recording Artists Association.

LISTNUM 1 \l 18241             However, due to the time constraints of this hearing process, we will only be briefly speaking to the CAB submission and specifically to their PriceWaterhouseCooper Report.

LISTNUM 1 \l 18242             We would like to thank Glenn O'Farrell and the Canadian Association of Broadcasters for including the comment in their submission acknowledging that, quote:

"FACTOR may have certain reservations regarding the manner in which the data is compiled and/or presented."

LISTNUM 1 \l 18243             This is correct.

LISTNUM 1 \l 18244             However, due to the limited time available, we are unable to cite all the errors in this report.  In the meantime, it is our view that the PWC Report does not represent an acceptably accurate assessment of FACTOR's performance in the execution of its mandate.

LISTNUM 1 \l 18245             Should the Commission so direct, we are prepared to undertake the preparation of a full report identifying all the discrepancies in the PWC document.  We would however appreciate being given several days to prepare this report.

LISTNUM 1 \l 18246             We direct you to the additional comments on the other submissions contained in the annex.

LISTNUM 1 \l 18247             Thank you and we welcome any questions you may have for us.

LISTNUM 1 \l 18248             THE CHAIRPERSON:  Thank you very much.

LISTNUM 1 \l 18249             Commissioner Arpin.

LISTNUM 1 \l 18250             COMMISSIONER ARPIN:  Thank you, Mr. Chair.

LISTNUM 1 \l 18251             Regarding the comments that you were contemplating for the CAB PriceWaterhouse Report, as you probably know, we stated at the beginning of this hearing that we were allowing up to June 12th for interested parties to file comments in response to the various submissions.

LISTNUM 1 \l 18252             MS OSTERTAG:  I wasn't, but I will; thank you.

LISTNUM 1 \l 18253             COMMISSIONER ARPIN:  So you have up to June 12th.

LISTNUM 1 \l 18254             If you want to make further comments also on other submissions ‑‑ I just notice that you have comments on other submissions as an appendix, but if you have attended the hearing or read the transcript and think that other comments have to be brought to the attention of the Commission, you have up to that very date.

LISTNUM 1 \l 18255             If we were to ask you for some more detail, you will only have until May 29th to do so.  But replies will be allowed until June 12th.

LISTNUM 1 \l 18256             MS OSTERTAG:  We will take the June 12th date and file; thank you.

LISTNUM 1 \l 18257             COMMISSIONER ARPIN:  Based on your oral presentation this morning, you mention you have twice a year meetings with various parties of the industry, which include provincial music industry associations.

LISTNUM 1 \l 18258             Are the broadcasters attending these meetings?

LISTNUM 1 \l 18259             MS OSTERTAG:  No.  They are ‑‑

LISTNUM 1 \l 18260             COMMISSIONER ARPIN:  So they are music related only.

LISTNUM 1 \l 18261             MS OSTERTAG:  It is music related.

LISTNUM 1 \l 18262             It is the challenges facing the development of FACTOR's programs and what have you.

LISTNUM 1 \l 18263             COMMISSIONER ARPIN:  So the meeting of the minds between the broadcasters and the music industry is either at a CRTC hearing or at the Canadian Music Week annual gathering, I suspect.

LISTNUM 1 \l 18264             MS OSTERTAG:  No.  We actually have a representative, the Chair of our National Advisory Board.  Whatever recommendations come out from the meetings are actually minuted, documented and provided to the board of directors where all the directors meet for two days.  And we have found that our board of directors, which is a volunteer board, doesn't have the time to be able to sit for those two days and work through a lot of this stuff.

LISTNUM 1 \l 18265             Some of it is just them sharing information on how they were successful in approaching this sponsor or that sponsor for funding.

LISTNUM 1 \l 18266             It is at a very basic working level, not high end stuff.

LISTNUM 1 \l 18267             COMMISSIONER ARPIN:  I see.

LISTNUM 1 \l 18268             So it is almost an introductory course to the music industry, what you are describing here.

LISTNUM 1 \l 18269             MS OSTERTAG:  It's a little more than an introductory level kind of conversations that are going on because what they do, one of the main purposes of the board of directors ‑‑ and for the record, we have five broadcasters sitting on our board and six music industry representatives.

LISTNUM 1 \l 18270             They are there for the main purpose of having disseminated information and gathered it up from their communities and the artists that are members of their organizations on the things they would like to see FACTOR address in terms of program development, all of which gets distilled, once they have discussed it as a group.

LISTNUM 1 \l 18271             Sometimes one province or territory can have an idea about something, but there could be an adverse effect if that change were to be implemented.

LISTNUM 1 \l 18272             So it is allowing that program development type of discussion to take place.

LISTNUM 1 \l 18273             Aside from that, they take a bit of time to discuss their other challenges, not FACTOR‑related.

LISTNUM 1 \l 18274             COMMISSIONER ARPIN:  If I heard you well, you have 11 members on your board.

LISTNUM 1 \l 18275             MS OSTERTAG:  That's correct.

LISTNUM 1 \l 18276             COMMISSIONER ARPIN:  Five broadcasters and six coming from the music industry.

LISTNUM 1 \l 18277             MS OSTERTAG:  Yes.  We also have two observers.  We have a representative from the Canadian Association of Broadcasters, Pierre‑Louis Smith and Jean‑François Bernier on behalf of Canadian Heritage are at the table also.

LISTNUM 1 \l 18278             COMMISSIONER ARPIN:  But they are not directors.

LISTNUM 1 \l 18279             MS OSTERTAG:  They don't vote, but they are there.

LISTNUM 1 \l 18280             COMMISSIONER ARPIN:  They don't vote.  So they are not part of the decision‑making process.

LISTNUM 1 \l 18281             MS OSTERTAG:  No.

LISTNUM 1 \l 18282             COMMISSIONER ARPIN:  Is the board of directors only making policy decisions or are they making financial decisions, allowing money to ‑‑

LISTNUM 1 \l 18283             MS OSTERTAG:  They make both.

LISTNUM 1 \l 18284             COMMISSIONER ARPIN:  They make both.

LISTNUM 1 \l 18285             MS OSTERTAG:  The board of directors ‑‑ we have a process by which there is a creative decision made, and the board of directors of FACTOR never gets involved in making creative decisions.  That is such a subjective process.

LISTNUM 1 \l 18286             COMMISSIONER ARPIN:  That is left to the juries.

LISTNUM 1 \l 18287             MS OSTERTAG:  That's correct.

LISTNUM 1 \l 18288             And if you are successful in getting through a jury on the sound recording programs that are juried, the board would give you funding.  They are just going to look at the financial commitment.

LISTNUM 1 \l 18289             But it is the board of directors that makes all the funding decisions on all of the programs.

LISTNUM 1 \l 18290             COMMISSIONER ARPIN:  How are the members of the board chosen?

LISTNUM 1 \l 18291             MS OSTERTAG:  The broadcasters have founder seats, and with all five seats that the broadcasters have on our board ‑‑ for example, with Rogers, Rogers will choose who they want to serve on the board.

LISTNUM 1 \l 18292             We have a six‑year rotation policy and it is really up to them who they appoint on their behalf.

LISTNUM 1 \l 18293             COMMISSIONER ARPIN:  So Rogers always has a seat on the board?

LISTNUM 1 \l 18294             MS OSTERTAG:  Yes.  You have Rogers, Standard, CHUM ‑‑ I'm sorry, Corus and Global.

LISTNUM 1 \l 18295             COMMISSIONER ARPIN:  And Global.  So those five broadcasters are the only ones who can appoint directors to the FACTOR Board?

LISTNUM 1 \l 18296             MS OSTERTAG:  They actually have it amongst themselves, because at the time FACTOR was formulated we had a set of by‑laws which are also going to be revamped in June to expand it further.

LISTNUM 1 \l 18297             But the broadcasters discuss amongst themselves who they thing should be ‑‑ talk to each other and talk to each other corporately and they come up with their own game plan and we just accept who they recommend.

LISTNUM 1 \l 18298             COMMISSIONER ARPIN:  Are the appointees of the broadcasters attending the meetings?

LISTNUM 1 \l 18299             MS OSTERTAG:  Yes.  They are attending as many as others.

LISTNUM 1 \l 18300             COMMISSIONER ARPIN:  So to some extent you are more successful than Musicaction, because Musicaction's problem is that the broadcasters don't go to the meeting.

LISTNUM 1 \l 18301             MS OSTERTAG:  No,  We are fortunate that they show up.  You get the odd one where it is challenging for our board, because it is a minimum of 12 meetings a year and then you have your approvals meetings and stuff.  So it can get a bit challenging.

LISTNUM 1 \l 18302             Actually, recently with the change of a couple of the directors on the board, it is really exciting with the new blood that has come in, and I know that their commitment and passion to supporting music I consider and say that I know because of them and their specific knowledge and expertise they brought to the table it has affected positively some artists and the funding they have gotten.

LISTNUM 1 \l 18303             COMMISSIONER ARPIN:  How are the music members picked up?

LISTNUM 1 \l 18304             MS OSTERTAG:  The music industry, we have six seats there.  Four of them have criteria attached to them.  Two are appointed by CIRPA, the Canadian Independent Record Production Association; one is appointed by the CMPA.  In the same way that the broadcasters decide CIRPA decides from its board how that works, CMPA from theirs.

LISTNUM 1 \l 18305             We also, with the merger of FACTOR and the Canadian Talent Library back in 1985 for FACTOR to acquire the assets of the Canadian Talent Library, whose assets were owned by the American Federation of Musicians, they actually allowed the assets to be transferred on the condition that there was a member of the AFofM that was a fully paid dues member in good standing.  So one of them has to be that.

LISTNUM 1 \l 18306             The other two are voted on by the board at large.  We try to take into consideration ‑‑ in fact, we want an artist on the board, we want regional representation and we try to spread it as far as we can to encompass as many sectors of the industry as possible with the seats we have available.

LISTNUM 1 \l 18307             COMMISSIONER ARPIN:  I may have misunderstood you, but I'm now up to eight members of the music industry.  You said there were four coming from CIRPA, one from CMPA ‑‑

LISTNUM 1 \l 18308             MS OSTERTAG:  No, two from CIRPA.

LISTNUM 1 \l 18309             COMMISSIONER ARPIN:  Two from CIRPA, okay.  We are back to six.

LISTNUM 1 \l 18310             MS OSTERTAG:  Sorry.  Yes.

LISTNUM 1 \l 18311             COMMISSIONER ARPIN:  I apologize.

LISTNUM 1 \l 18312             Heritage Canada just implemented the MEC program.

LISTNUM 1 \l 18313             MS OSTERTAG:  That's correct.

LISTNUM 1 \l 18314             COMMISSIONER ARPIN:  What kind of impact will that have on FACTOR?

LISTNUM 1 \l 18315             MS OSTERTAG:  We had actually hoped in some respect, because we are so challenged financially ‑‑ I know one of the criticisms that FACTOR gets is our low approval rate, but it is directly attributed to the fact that we have been successful in getting the word out there about the program.

LISTNUM 1 \l 18316             The MEC program, when it was talked about in theory, thought it was going to free up funds at FACTOR, but in actual fact there are only six companies in English Canada that were dealing with FACTOR, so it is still not enough of a relief.  There is still more money needed for us to be able to respond to the other artists.

LISTNUM 1 \l 18317             I think there is a lot of confusion surrounding the program right now, and once people understand it I think things will settle down.

LISTNUM 1 \l 18318             COMMISSIONER ARPIN:  I'm giving you an opportunity to explain what that program is, because we don't have, at least for the record, enough information about it.

LISTNUM 1 \l 18319             MS OSTERTAG:  All right.

LISTNUM 1 \l 18320             The MEC program ‑‑ and I'm not working for the department.

LISTNUM 1 \l 18321             COMMISSIONER ARPIN:  No, no.

LISTNUM 1 \l 18322             MS OSTERTAG:  But from my understanding, is the ‑‑

LISTNUM 1 \l 18323             COMMISSIONER ARPIN:  But they are not appearing here.

LISTNUM 1 \l 18324             MS OSTERTAG:  Yes.

LISTNUM 1 \l 18325             My understanding is that it is there to help build the infrastructure of the larger Canadian‑owned independent record labels and they are being given envelopes of money with which they can do what they need to do to operate their businesses successfully.

LISTNUM 1 \l 18326             My understanding is there is also going to be an assessment process and a criteria to ensure that they can stay in the program.  No company can get more than $650,000.

LISTNUM 1 \l 18327             I know there was talk that it would be a minimum of $200,000, but in rolling the program out I know there is several that are getting significantly less than that money.

LISTNUM 1 \l 18328             So as a program, it is yet another one that is being launched under financed and, like everything in the music industry, we just aren't getting access to enough funds to effectively meet the needs.

LISTNUM 1 \l 18329             Because the concept of a MEC program ‑‑ from my understanding, and this goes back a number of years ‑‑ was pitched by the Canadian Music Industry to Heritage, but it was requesting $100 million.  When the program finally was announced they said $10 million, and then all of a sudden it became $8.5 million because $1 million was being set aside for publishers and another half a million for administrative costs in the department.

LISTNUM 1 \l 18330             So all of a sudden it is weaning down and it can, in actual fact, be quite scary for those companies that are in there, because as more companies rise up and are able to go into that program the pie is going to get even smaller?

LISTNUM 1 \l 18331             So when it started out with a tenth of what was needed, I think that there is a lot of expectation it is going to free up a lot of money, but realistically it is not enough of a change.

LISTNUM 1 \l 18332             COMMISSIONER ARPIN:  The Heritage Department commitment towards the MEC goes up to the year 2010.

LISTNUM 1 \l 18333             MS OSTERTAG:  Yes.

LISTNUM 1 \l 18334             COMMISSIONER ARPIN:  I think it is the fiscal year ending on March 31, 2010.

LISTNUM 1 \l 18335             That is correct?

LISTNUM 1 \l 18336             MS OSTERTAG:  That's correct.

LISTNUM 1 \l 18337             COMMISSIONER ARPIN:  The funding to FACTOR, has it been already set up to the same date?

LISTNUM 1 \l 18338             MS OSTERTAG:  Yes.

LISTNUM 1 \l 18339             COMMISSIONER ARPIN:  Or is it a yearly commitment?

LISTNUM 1 \l 18340             MS OSTERTAG:  No.  We were suffering through that and it has caused a lot of challenges for us, but at the present time we have an agreement, a fully executed document.

LISTNUM 1 \l 18341             However, it has the proviso, as I think it is with all government documents, that it can be cancelled at any time for any reason with no repercussions on our part.

LISTNUM 1 \l 18342             So how good is the ‑‑

LISTNUM 1 \l 18343             COMMISSIONER ARPIN:  Your contract with the Department of Heritage, does it stipulate that you will need to have broadcasters' commitment to it, or direct funding from the broadcasters?

LISTNUM 1 \l 18344             MS OSTERTAG:  We are committing that we have that.  Not that we will get it or maintain, but that we have to have it, yes.

LISTNUM 1 \l 18345             COMMISSIONER ARPIN:  So at the time of signing the agreement obviously the broadcasters were ‑‑

LISTNUM 1 \l 18346             MS OSTERTAG:  We were completely unaware that there was the possibility of other things in the works.

LISTNUM 1 \l 18347             COMMISSIONER ARPIN:  So the submission that the CAB makes of a Super Starmaker Fund ‑‑ obviously there have been a variety of views expressed throughout this hearing and when you read the filing of the CAB you come to the conclusion that there will be no more money going to FACTOR.  We have commitments from the CAB and the major players know that the Starmaker will provide the funding to FACTOR rather than the money coming directly from the broadcaster.

LISTNUM 1 \l 18348             If that was the scenario, the money was channelled through Starmaker to FACTOR, will that impair your ability to getting the money from Heritage?

LISTNUM 1 \l 18349             MS OSTERTAG:  I can't speak to that.  I just know that Canadian Heritage has gone on record as saying that in the event that the broadcaster money is no longer being provided to FACTOR they are rethinking what they are doing with FACTOR.

LISTNUM 1 \l 18350             I have actually asked them ‑‑ it's kind of a scary place to be when you hear something like that ‑‑ here are a lot of artists out there with a huge expectation what we do ‑‑ and I said, "Is this a poker game?" and they said, "We don't play games."  So I think it is a very real threat.

LISTNUM 1 \l 18351             The idea that FACTOR would, after 24 years of service, be in the position ‑‑ and it's unknown because it is not clear at this point in time, how the CAB would actually funnel this money.  How do you develop programs and plan things if you are at the mercy yet again ‑‑ you need some stability.

LISTNUM 1 \l 18352             We have just come through a very unstable time with the department in having one‑year contracts and the impact to the industry is very clear, it has us behind in program development.  Because if you are not sure you are going to be around in 12 months you go, "Well, what is the point in doing it all?"  It's difficult to do it when you don't know what your money is going to be.

LISTNUM 1 \l 18353             If FACTOR is going to continue to be effective it needs to be in control of its own destiny.

LISTNUM 1 \l 18354             COMMISSIONER ARPIN:  I know that Musicaction is not appearing at this hearing, it hasn't filed anything, but to your knowledge is Musicaction in the same situation?

LISTNUM 1 \l 18355             MS OSTERTAG:  I don't believe so, because at Musicaction they have been recognized as the agency and are currently operating with two respective Boards of Directors with two different mandates.  They are managing the funds for both, so they know what is going on.

LISTNUM 1 \l 18356             COMMISSIONER ARPIN:  Yes.

LISTNUM 1 \l 18357             MS OSTERTAG:  It is the complete opposite for us.

LISTNUM 1 \l 18358             COMMISSIONER ARPIN:  But my question relies more on the commitment made by Heritage to Musicaction.

LISTNUM 1 \l 18359             Or is there a commitment by Heritage, to your knowledge?  If you don't know, you don't know.

LISTNUM 1 \l 18360             MS OSTERTAG:  It would be the same as ours.

LISTNUM 1 \l 18361             COMMISSIONER ARPIN:  I guess it will be the same as yours.

LISTNUM 1 \l 18362             MS OSTERTAG:  Yes.

LISTNUM 1 \l 18363             COMMISSIONER ARPIN:  All right.

LISTNUM 1 \l 18364             When we look at your annual report one of the complaints that we are hearing is that you are only reporting top‑of‑the‑line information.  You don't give that many breakdowns or information on who get's what and how much or whatever.

LISTNUM 1 \l 18365             Is there a reason?

LISTNUM 1 \l 18366             MS OSTERTAG:  There was a reason, but also it is the first time ‑‑ we have actually very recently heard about the complaint so we are actually disclosing all of those numbers.

LISTNUM 1 \l 18367             One of the reasons we didn't is because there is an assumption when people attach a number to a project that that is what the project costs, when in actual fact our contribution to it may only be 10 or 12 percent of the cost and it can result in there being a negative thing, "Oh, well they made that record for so little it can't be very good", and it could have hurt people.

LISTNUM 1 \l 18368             In our desire to try to not let any of the information be prejudicial to a project, to allow it to stand in the marketplace on its own, we perhaps come up against some criticism, but it is our intention that our annual report that will be released at the end of June for the fiscal ending March 31st will include those numbers.

LISTNUM 1 \l 18369             They have been available.  We were never asked for them before and understand the desire, so we are prepared to give it.

LISTNUM 1 \l 18370             COMMISSIONER ARPIN:  Mr. Chairman, I think those were my questions.

LISTNUM 1 \l 18371             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 18372             Commissioner Cugini...?

LISTNUM 1 \l 18373             COMMISSIONER CUGINI:  Good morning.

LISTNUM 1 \l 18374             MS OSTERTAG:  Good morning.

LISTNUM 1 \l 18375             COMMISSIONER CUGINI:  Just relating back to your Nickelback example that you mentioned in your oral presentation this morning, I'm assuming at that time that Nickelback received the $5,000 from FACTOR you considered them to be an emerging artist, at that point?

LISTNUM 1 \l 18376             MS OSTERTAG:  An unknown.

LISTNUM 1 \l 18377             COMMISSIONER CUGINI:  Right.

LISTNUM 1 \l 18378             MS OSTERTAG:  They are not even emerging.

LISTNUM 1 \l 18379             COMMISSIONER CUGINI:  All right.

LISTNUM 1 \l 18380             Do you, as FACTOR, have a definition of "emerging artist"?

LISTNUM 1 \l 18381             MS OSTERTAG:  You know, it's an excellent question and I have heard the question has been asked in this forum a number of times.

LISTNUM 1 \l 18382             It would take probably greater minds than mine to actually come up with a definitive because you can say it is the number of releases they have had, it could be airplay potential that is achieved, it could be based on number of years in the business, it could be that they are profitable.  There are many, many things.

LISTNUM 1 \l 18383             But what I can do is, I can give you a real example of an artist that I think is an emerging artist to try to illustrate a bit the complexity of trying to come up with that definitive definition.

LISTNUM 1 \l 18384             I was having lunch this week with a young country artist by the name of Erin Pritchard.  He is out of British Columbia.  He has been in the business quite a number of years, 10, 12 years.  A number of years ago he competed in a FACTOR and Corus jointly funded initiative called Project Discovery.  He was actually the winner of the competition.

LISTNUM 1 \l 18385             He has gone on, he released his first album, he got some success at radio airplay.  He has released his second album and his first single from that album went No. 3 on the Canadian charts.  He is just releasing his second one.

LISTNUM 1 \l 18386             He went into a Tim Hortons to buy a coffee and there was a fan there working behind the counter, "Oh my God, it's Erin Pritchard", you know, and all excited and everything.  And he is kind of cute, so it didn't hurt.

LISTNUM 1 \l 18387             Anyway, he was standing there and he was absolutely embarrassed, because he was paying for the coffee with his debit card and he didn't know if he had enough money and the card wouldn't let him pay the $1.40 for his coffee.

LISTNUM 1 \l 18388             So it's like ‑‑ it's all over the map in trying to really nail it down because to me he is emerging still because he is not able to financially sustain himself and every penny he has is being reinvested back into his career.  There isn't anything left over to be able to accumulate anything.

LISTNUM 1 \l 18389             All of it and then some, because he is still having to knock on our door to get the support.  So in my mind he is still emerging, yet at radio I'm sure they would say, "No, he is established now because he has had three hits on radio."

LISTNUM 1 \l 18390             COMMISSIONER CUGINI:  So in applying for FACTOR funding there isn't a box where someone would check "emerging" and that would put them into one category or another to receive funding?

LISTNUM 1 \l 18391             MS OSTERTAG:  You do that through the programs we have where you have those artists who are applying to, say for example, our Independent Recording Loan Program.  That is a program for artists who have absolutely no distribution and they are at the very, very beginning, in many cases making their first CD.

LISTNUM 1 \l 18392             So we will give them up to $20,000 to get started and we give them matching production funds.  They are emerging.

LISTNUM 1 \l 18393             But also you have them where some of them have distribution and they are still emerging.

LISTNUM 1 \l 18394             COMMISSIONER CUGINI:  So Nickelback doesn't qualify any more for FACTOR funding?

LISTNUM 1 \l 18395             MS OSTERTAG:  No, they are not emerging any more.  No.

LISTNUM 1 \l 18396             COMMISSIONER CUGINI:  Or for any FACTOR funding?

LISTNUM 1 \l 18397             MS OSTERTAG:  I honestly ‑‑

LISTNUM 1 \l 18398             COMMISSIONER CUGINI:  Do they still qualify or would they be eligible?

LISTNUM 1 \l 18399             MS OSTERTAG:  I doubt that they would, because the only program probably left that they would be eligible for would be touring, and on a tour you only actually receive funding from FACTOR if you are losing money.  If they are losing money on a tour, then they so need a new team working for them.

LISTNUM 1 \l 18400             COMMISSIONER CUGINI:  Thank you.

LISTNUM 1 \l 18401             Thank you, Mr. Chair.

LISTNUM 1 \l 18402             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 18403             Commissioner Pennefather.

LISTNUM 1 \l 18404             COMMISSIONER PENNEFATHER:  Thank you, Mr. Chairman.

LISTNUM 1 \l 18405             Good morning.

LISTNUM 1 \l 18406             MS OSTERTAG:  Good morning.

LISTNUM 1 \l 18407             COMMISSIONER PENNEFATHER:  Mr. West, in your remarks you said:

"We advocate ‑‑ we explore the possibility of a common administration for the various funding programs."  (As read)

LISTNUM 1 \l 18408             Could you expand for us, please?

LISTNUM 1 \l 18409             MR WEST:  You know, FACTOR has worked extremely well for 24 years and there has been a lot of talk lately about transparency of the programs and we feel we are extremely transparent in that any information requested from us is certainly available to anybody at any time.

LISTNUM 1 \l 18410             You know, when you look at people applying for money right now, the way it is applied for, it could be an organization or a label or it could be the artist directly, if you are applying to FACTOR and you receive your funding then you go on to the next level of funding, which is Starmaker.

LISTNUM 1 \l 18411             They are housed in two complete different places, two complete different administrations.  The dialogue has to be very close between the organizations in order to make sure there are no what people perceive to be as double dipping, you know, marketing funds that are expended.  You have to be very careful.

LISTNUM 1 \l 18412             FACTOR offers marketing money as well and some of that marketing money to get to the next level is offered by Starmaker.  we want to make sure that money is not received twice, by mistake or whatever process, but it would really, really help the process if it was under one common administration.

LISTNUM 1 \l 18413             COMMISSIONER PENNEFATHER:  So similar to the Musicaction, La Fond Radiostar?

LISTNUM 1 \l 18414             MR WEST:  That is a perfect scenario, and that is what we would have liked to have happened.

LISTNUM 1 \l 18415             COMMISSIONER PENNEFATHER:  That's what you have in mind discussing over the next while?

LISTNUM 1 \l 18416             MR WEST:  Absolutely, with all the stakeholders.  Sit down at a table and say, "Let's formulate something here and make it work."

LISTNUM 1 \l 18417             COMMISSIONER PENNEFATHER:  Thank you.

LISTNUM 1 \l 18418             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 18419             Commissioner Arpin...?

LISTNUM 1 \l 18420             COMMISSIONER ARPIN:  Mr. West, you just referred to one of the goals of having a common administration for the two funds is to make sure that there is no overlap or no double dipping.

LISTNUM 1 \l 18421             Has there been any double dipping in the recent past?  Because Starmaker has only existed for three or four years now.

LISTNUM 1 \l 18422             MR WEST:  I will have to defer to Heather for that answer.

LISTNUM 1 \l 18423             MS OSTERTAG:  I wouldn't say that it has happened intentionally, but yes, it does happen.  Currently there is a representative from Starmaker who shares information with one of my staff to compare things, but it is doubling up on the paperwork and everything.

LISTNUM 1 \l 18424             Something I would like to add to Jim's comment, there is an ease for the industry if they know where to go and it is all laid out in one place, the one‑stop shopping.  It is a very complicated thing in understanding where it is that you should be going and for what and to be able to actually have it that you could say, "Okay, with the FACTOR funding it goes to here" and then "With the Starmaker money it goes to here" and then this would go to here.

LISTNUM 1 \l 18425             There is a huge logic to it and I think that the success that is happening at Musicaction really speaks to why we should be doing that and we should be taking a page from their book.

LISTNUM 1 \l 18426             COMMISSIONER ARPIN:  Thank you.

LISTNUM 1 \l 18427             THE CHAIRPERSON:  Thank you very much.  Those are our questions.

LISTNUM 1 \l 18428             MS OSTERTAG:  I had a report.  I understand yesterday you were asking for the amounts of money radio has given to FACTOR.  You were asking one of the broadcasters.

LISTNUM 1 \l 18429             I have had the report emailed to me and I printed out a copy if you want it.  It records the funding since our inception ‑‑

LISTNUM 1 \l 18430             THE CHAIRPERSON:  Okay.

LISTNUM 1 \l 18431             MS OSTERTAG:  ‑‑ on what each broadcaster ‑‑ just to assist you.

LISTNUM 1 \l 18432             THE CHAIRPERSON:  If you hand it to Madam Secretary ‑‑

LISTNUM 1 \l 18433             MS OSTERTAG:  Okay.

LISTNUM 1 \l 18434             THE CHAIRPERSON:  ‑‑ we will have it on the record.  Thank you.

LISTNUM 1 \l 18435             Madam Secretary, would you call the next item, please.

LISTNUM 1 \l 18436             THE SECRETARY:  Thank you, Mr. Chairman.

LISTNUM 1 \l 18437             I would now invite Radio Starmaker Fund, Mr. Chuck McCoy, to come forward for his presentation.

‑‑‑ Pause / Pause

LISTNUM 1 \l 18438             THE CHAIRPERSON:  Whenever you are ready, Mr. McCoy.

PRESENTATION / PRÉSENTATION

LISTNUM 1 \l 18439             MR. McCOY:  Good morning, Mr. Chairman, members of the Commission.  I had the pleasure of being up before you yesterday in my role as a programming executive for Rogers but today I am here as the Chairman of the Radio Starmaker Fund.

LISTNUM 1 \l 18440             I would like to start by thanking the Commission for the opportunity to appear and take part in this proceeding.

LISTNUM 1 \l 18441             Before I begin, I would like to introduce the members of our panel and we are fortunate to have both of our independent Board members with us today.

LISTNUM 1 \l 18442             To my far right is Andy McLean and he is the founder and the Managing Director of the North by Northeast Festival in Toronto which opens next week ‑‑ a little plug‑in there for Andy ‑‑ one of Canada's most important events for discovering new music.  Andy is also an artist manager and an accomplished musician.

LISTNUM 1 \l 18443             Beside him, to my immediate right, is musician/writer/producer Jian Ghomeshi.  Many of you may know Jian from his musical career as a lead singer and songwriter in the platinum‑selling Canadian band Moxy Fruvous and more recently you probably know him from his work as a national host on CBC Television Newsworld and CBC Radio One.

LISTNUM 1 \l 18444             To my far left is Rachel Oldfield who has been the Finance and Administration Manager of the Starmaker Fund from its inception.  She is the keeper of all the statistics and financial information.

LISTNUM 1 \l 18445             And next to me is our current Executive Director Mr. Chip Sutherland who, in addition to fulfilling the role of Executive Director is also the original architect of the Starmaker Fund.  In May of 2001, Chip was hired by the first Board of Directors to design the fund and he has been involved in its evolution and operations ever since that time.  He is a well‑known entertainment lawyer who has been involved in the music business in many different capacities for the past 15 years.

LISTNUM 1 \l 18446             Now, you have our submission, our written submission, and I thought we would simply highlight a few points.  I will do some and then I will ask Jian and Chip to say a few words.

LISTNUM 1 \l 18447             As Chair of the fund for almost four years now, I think I am first and foremost the most impressed with the mandate of the fund and how well it has worked in practice.  In some ways, I think the Radio Starmaker Fund established the concept of truly artist‑centred funding.

LISTNUM 1 \l 18448             The fund's primary objective is to support artists with established track records regardless of their industry structure or affiliation.

LISTNUM 1 \l 18449             The secondary objective is to recognize the role of the independent record industry and how we can help preserve all forms of independent recording in Canada.

LISTNUM 1 \l 18450             When we look at the proposed funding, the first question is always how will this benefit the artist and the second question is are there any adjustments or accommodations that need to be made to ensure that this policy is fair to the independent sector.  This is how we define the artist‑centred approach.

LISTNUM 1 \l 18451             Now, the interesting part of this for me is that these are all just ideas until they are actually put into practice and in practice these broad guidelines have proven to hold true to achieving our goals.

LISTNUM 1 \l 18452             Here, I would like to point out some of the statistics in relation to the fund.

LISTNUM 1 \l 18453             Major labels receive 20 per cent of our funding; CIRPA‑independent companies receive 35 per cent; non‑CIRPA‑independent companies receive 35 per cent; and quasi‑indies ‑‑ those would be artists who own their own records but license them to majors ‑‑ they receive approximately 5 per cent.

LISTNUM 1 \l 18454             Part of this is explained by the fact that we have built in accommodation for the indies that allow them to access 2:1 funding for dollars invested, whereas major labels are only able to access 1:1 funding.

LISTNUM 1 \l 18455             As for the artists, as an example, I noticed this week that Black Crows were here in Ottawa and they were supported by Matt Mays as an opening act.  We are happy and proud to say that we provided the funding for Matt Mays to make that possible.

LISTNUM 1 \l 18456             As a broadcaster, it was also particularly important to me to see that the fund is able to foster the careers of artists that we can play on the radio.  This represents the true nature of the partnership between music and radio.

LISTNUM 1 \l 18457             To do that, we knew we needed to spread the funding across a broad spectrum of artists and that had to include many genres.  The result is 83 per cent of Starmaker‑funded artists received significant airplay in this country.

LISTNUM 1 \l 18458             Finally, I would like to say a word about our administration.  I don't think I truly appreciated the full value of our website.  It is truly an amazing administrative tool and it has been invaluable to us in managing the fund and allowing us to easily adapt program and criteria for the website.

LISTNUM 1 \l 18459             Now at this point, I would like to ask Jian Ghomeshi to give you some of his thoughts from an independent perspective.

LISTNUM 1 \l 18460             MR. GHOMESHI:  Thanks, Chuck.  And thank you, if you will forgive me, I will make my comments somewhat informally or anecdotally.

LISTNUM 1 \l 18461             I have been on the Board for two years and I have been directly involved in the music business for about 15 years.  I am quite proud to be part of the Radio Starmaker Fund experience.

LISTNUM 1 \l 18462             I think these are great days for Canadian music, for Canadian artists.  I have said that a few times as a broadcaster.  I really think, and the results are there, we are doing disproportionately great work, not just domestically but internationally ‑‑ Canadian artists are ‑‑ and I am so proud of that and I think Radio Starmaker has been a big part of that in the last two, three, four years especially, obviously.

LISTNUM 1 \l 18463             The bottom line for me is that Radio Starmaker Fund works.  It is lean, it is supportive, it is effective, it is not bogged down in administration.  It is artist‑centric, and really the artists that we look at and support and fund are quite a diverse lot, you know, both in terms of the genres and whether they are signed to major labels or independent labels or major indies, et cetera.

LISTNUM 1 \l 18464             I don't think it is comprehensive.  I think that there are artists out there that don't meet the criteria to apply for this fund.  But in terms of the mandate of this fund and the artists who are at a level to be taken to the next level and become stars, whether it is on radio, sales, et cetera, I think this fund has done its job and done its job very, very effectively.

LISTNUM 1 \l 18465             I will just say, as an artist, after spending many years in a band and selling half a million records and touring and doing that, to me, it comes down to ‑‑ and being a producer and manager ‑‑ it comes down to a couple of nutshell elements of what it takes to get somewhere as an artist in this country and to carry music abroad.

LISTNUM 1 \l 18466             On the one hand, you have to create the content to make a record, et cetera.  On the other hand, you have to get it out there.

LISTNUM 1 \l 18467             In terms of creating the content, the world has changed and we know that.  You can now make a world‑class quality record out of your basement because of new technology that you wouldn't have been able to in the past.

LISTNUM 1 \l 18468             In terms of getting it out there, we still ‑‑ it still takes resources, it still takes support, it still takes funding, marketing, promotion and touring, and that is where Starmaker has come in.

LISTNUM 1 \l 18469             Chuck mentioned matinees.

LISTNUM 1 \l 18470             We could look at an artist like Joel Plaskett on the east coast who is touring with Ottawa's Kathleen Edwards right now in the States with Starmaker support.

LISTNUM 1 \l 18471             We could look at a band like Metric who is an underground critically acclaimed band from Toronto that, with the support of Starmaker, has gone on to open for the Rolling Stones at Madison Square Garden and do effective things.

LISTNUM 1 \l 18472             So in a nutshell, I think from an artist perspective, I am proud to see what this fund is doing in carrying artists at a certain level to the next level.

LISTNUM 1 \l 18473             MR. McCOY:  Thank you, Jian.

LISTNUM 1 \l 18474             Andy would be, I know, happy to answer any questions you might have.

LISTNUM 1 \l 18475             Before we get to those questions though, I am going to ask Chip Sutherland to say a few words and just clarify a few points for us.

LISTNUM 1 \l 18476             MR. SUTHERLAND:  Thank you, Chuck.

LISTNUM 1 \l 18477             I have been listening this week and I thought it would be helpful, since I am sort of the mechanic of the fund, to just address a couple of issues to clarify.  I have got five of them.

LISTNUM 1 \l 18478             The first one is the commercial fund.  Everyone has been throwing the phrase around "commercial fund" but what does that mean?

LISTNUM 1 \l 18479             There is sort of a presumption that it means big established pop rock artists like Avril Lavigne and Nickelback.

LISTNUM 1 \l 18480             But "commercial" for our purposes means "where the artist intersects with people paying for their music."  So we have people like Jane Bunnett, Alpha Yaya Diallo, Montreal Jubilation Gospel Choir, Daniel Taylor and Taima, to just name a few.

LISTNUM 1 \l 18481             Our written submission includes in Appendix 1 a breakdown of all of our funding to date by genre.  You will see that pop rock artists make up only 50 per cent of our funding.  The other 50 per cent are niche genres in some of these lower levels.

LISTNUM 1 \l 18482             Also, our sales levels for being approved for the fund.  If you are a jazz artist, you only have to sell 2,500 records to get onto our fund.  If you are an independent artist in pop rock, it is 10,000.  If you are a major label artist, it is 15,000.

LISTNUM 1 \l 18483             So we don't have one threshold.  We adjust the thresholds for the genres.

LISTNUM 1 \l 18484             The amount of funding.  There definitely was confusing, I think, about this and for good reason.  It is very complicated.  I see Lynn Buffoni sitting here today and if it wasn't for her, I would still be trying to figure out these numbers.

LISTNUM 1 \l 18485             I have provided a chart of the CAB contributions to date.  We have turned that into a three‑year rolling capital funding model and that is how we rationalize our funding because we only have one source of funding.

LISTNUM 1 \l 18486             You can see on this chart if you turn to it ‑‑ it is a lovely hot pink graph ‑‑ it goes from 1999 to 2010 and you can see that there is a very precipitous drop‑off at the end and this is because of how the transactions are paid.  So we will ‑‑ obviously, in the next two or three years our funding drops right off.  I can talk about that more in question and answer if you would like.

LISTNUM 1 \l 18487             Artist‑centring.  Chuck gave you some examples of artist‑centring.  I just want to clarify this doesn't mean artist payment.  It doesn't always mean the payment goes into their bank account.  Sometimes the labels who are driving marketing, they are the best people to administer that money.

LISTNUM 1 \l 18488             But it does give us the flexibility.  For example, Jimmy Rankin has his own record label song, Dog Music.  We pay him directly.  It is irrelevant to us.  We are based on sales criteria for the artist.  So it doesn't matter how their industry is structured.

LISTNUM 1 \l 18489             It also allows us to pay artists direct touring subsidies.  In many international countries, the artists don't have a record label and therefore by paying artists directly we are able to infuse that, as Jian was addressing.

LISTNUM 1 \l 18490             Emerging artists.  I know this is a big issue.  There are lots of questions and, of course, we don't have any position regarding the CanCon issues there.  But I would like to point out that 52 per cent of the artists that we fund, we are funding on their first or second record.

LISTNUM 1 \l 18491             The concept of Starmaker was to grab artists as they are starting to take off and provide incremental investment right at that point where they need it to shoot off into the next level and that is what we are trying to do.

LISTNUM 1 \l 18492             The control of the fund.  Just a couple of references.  Honestly, I think because the name is Radio Starmaker Fund, I think people think it is radio's fund.  But there are only four out of 10 radio Board members on our Board.

LISTNUM 1 \l 18493             We have by‑laws that we spent quite a bit of time revising the first year of the fund, that were unanimously adopted by the Board, that have very detailed criteria about how decisions are made.

LISTNUM 1 \l 18494             So just to be clear, we are very serious about governance and how the Board operates with a strict set of by‑laws and radio has four out of 10 seats on the Board.

LISTNUM 1 \l 18495             So those are my comments.

LISTNUM 1 \l 18496             MR. McCOY:  That really completes our oral presentation and we are here to answer any questions that you might have.

LISTNUM 1 \l 18497             THE CHAIRPERSON:  Thank you.

LISTNUM 1 \l 18498             Commissioner Pennefather.

LISTNUM 1 \l 18499             COMMISSIONER PENNEFATHER:  Thank you, Mr. Chairman.

LISTNUM 1 \l 18500             Good morning, everyone, and thank you for the presentation.  It is very helpful, indeed, filling in some of the blanks but I have got a few more.

LISTNUM 1 \l 18501             Let us start with the governance question first, and kicking off from Mr. Sutherland's comments about the composition of the Board, how is the Board chosen?

LISTNUM 1 \l 18502             MR. McCOY:  Well, there are ‑‑ each body ‑‑ for instance, the four broadcasters ‑‑ the CAB appoints the representatives they want to have on that Board and it is done via the four major broadcasters: Rogers, CHUM, Corus and Standard.  They make the decision as to who is going to represent them.

LISTNUM 1 \l 18503             The same is the case for CIRPA.  Their board appoints members to be part of our Board, as does CRIA.  And the two independent members are selected by the Board itself.

LISTNUM 1 \l 18504             I am not sure ‑‑ Chip, have you anything to add to that?

LISTNUM 1 \l 18505             MR. SUTHERLAND:  No, thank you.

LISTNUM 1 \l 18506             MR. McCOY:  Okay.

LISTNUM 1 \l 18507             COMMISSIONER PENNEFATHER:  Should the CAB proposal, which, simply put, would redirect all funding through the Starmaker Fund, would the composition of the Board or its selection process change?

LISTNUM 1 \l 18508             MR. McCOY:  Thank you, Madam Commissioner.  I don't like to duck a question but I think that Radio Starmaker Fund was formed five years ago on the basis of some governing principles and guidelines from the Commission and some money from the broadcasters and we are prepared to respond in the same way should those change, either the governing principles or the amount of money.

LISTNUM 1 \l 18509             I don't think that I am in a position or my Board members here are in a position to discuss what we might or might not be able to do, certainly not without discussing it with our own Board.

LISTNUM 1 \l 18510             But I guess to say we have been given some principles and some money before and we made it work and we would do the same with whatever decision you make.

LISTNUM 1 \l 18511             COMMISSIONER PENNEFATHER:  One of the principles is the breakdown with major labels, indie funds.  That was part of the, going in, principles and premises and I just wanted to clarify.

LISTNUM 1 \l 18512             On page 3 of the presentation this morning, the percentages add up to 95 per cent, first point; and second point, the annual report that I have in front of me here of 2004‑2005 has a significant difference in the percentages to each of the groups.  So perhaps you could just explain that to us.

LISTNUM 1 \l 18513             MR. McCOY:  Yes, and if you are getting into the mechanics and numbers, I am going to ask our Executive Director Chip Sullivan to follow up on that one.

LISTNUM 1 \l 18514             MR. SULLIVAN:  Thank you.

LISTNUM 1 \l 18515             The other 5 per cent is music associations.  We do sponsor the East Coast Music Association and the WCMAs.  We give them travel grants for artists to get to their conferences.  We do the same thing with the Junos.  It is one of our ways to trying to provide some regional outreach.

LISTNUM 1 \l 18516             When the Junos started travelling, one of the problems they have is there are many artists that are independent being nominated for Junos and they live in Edmonton and they are a classical violinist and they don't have a label paying for them to go to the Junos in Halifax.  So we provide grants for Juno nominees.  So that is the other 5 per cent.

LISTNUM 1 \l 18517             As for the difference in the financial ‑‑ Rachel.

LISTNUM 1 \l 18518             MS OLDFIELD:  The difference between the annual report and the written submission in March to the CRTC is the annual reports track the funding by artist.  If you are a major label artist, the money was 100 per cent major label.

LISTNUM 1 \l 18519             In our submission in March, the money was tracked by company, which is a more detailed breakdown where if that major label artist was to receive touring money, the touring money was paid directly to the artist company and the label initiatives would have been paid to the major label.

LISTNUM 1 \l 18520             COMMISSIONER PENNEFATHER:  So today when you say CIRPA‑independent companies receive 35 per cent, and I am looking at the annual report, it says indie labels 69.9, it is not the same?

LISTNUM 1 \l 18521             MS OLDFIELD:  Yes, it is not broken down by ‑‑ it is just simply indie artists as opposed to indie companies and the breakdown of the companies.

LISTNUM 1 \l 18522             COMMISSIONER PENNEFATHER:  Okay.

LISTNUM 1 \l 18523             MR. SUTHERLAND:  And if I can just say, Madam Commissioner, why would we break it down that way, and the point is that there are all kinds of levels of the independent music industry and we are just trying to reflect that there are different aspects to that infrastructure and we are aware of it, that's all.

LISTNUM 1 \l 18524             COMMISSIONER PENNEFATHER:  Okay, that is helpful.  I guess perhaps if there is follow‑up, you might want to give us a little bit more of that because I think that ‑‑ as I said, it is one of the principles going in and as we look at the future it is important to understand, not necessarily drill down to the point where we are right in there ‑‑ we shouldn't be ‑‑ but just to get a better sense of it.

LISTNUM 1 \l 18525             You heard Vice‑Chair Arpin ask FACTOR about the MEC.  Could you also give us your perspective on, for example, the difference between the Starmaker Fund and the Heritage MEC program and how you understand that program to be functioning?

LISTNUM 1 \l 18526             MR. SUTHERLAND:  Well again, we don't.  They are just rolling it out.  We have only had preliminary discussions in the fall when Heritage was kind enough to inform us what they were planning so that we could start predicting it as we rolled out our programs.

LISTNUM 1 \l 18527             What we understand to date is that it is business plan funding for the bigger independent companies that provides them with significant funding on a business plan model as a per‑project‑based model.

LISTNUM 1 \l 18528             Since the program is brand new, we haven't determined yet ‑‑ our board hasn't yet decided how will we manage funding MEC companies.  That is something the Board has yet to look at because we haven't had them apply yet as MEC companies.

LISTNUM 1 \l 18529             But the basic premise, as we understand it, is Heritage is putting additional money into the music industry.  They are putting money targeted specifically at independent infrastructure, the bigger independents, based on their performance I believe is how they are doing it.  So it is basically additional funding in the ‑‑ I believe you have heard the word "ecosystem" a few times this week, so there is more fish food in the fish tank I would say.

LISTNUM 1 \l 18530             COMMISSIONER PENNEFATHER:  It usually brings more fish, too.

LISTNUM 1 \l 18531             MR. SUTHERLAND:  Well, hopefully some more varied colourful fish.

LISTNUM 1 \l 18532             COMMISSIONER PENNEFATHER:  The demand is always there.

LISTNUM 1 \l 18533             But so I understand, then, a company accessing money through the MEC program could also access money through Starmaker for marketing and promotion?

LISTNUM 1 \l 18534             MR. SUTHERLAND:  We haven't discussed that at the board level because we didn't know ‑‑

LISTNUM 1 \l 18535             COMMISSIONER PENNEFATHER:  Potentially?

LISTNUM 1 \l 18536             MR. SUTHERLAND:  Potentially, absolutely.  We have made no decisions on that.

LISTNUM 1 \l 18537             COMMISSIONER PENNEFATHER:  Then again concerning the chart that you have given us I did have a questions on the financials.  You have also laid that out in your written intervention.

LISTNUM 1 \l 18538             In the written intervention you also make the point that you will have stable funding in the next three years.

LISTNUM 1 \l 18539             I was reading from that, that next three years is the CAB proposal three‑year transition period.

LISTNUM 1 \l 18540             Did I read that correctly?

LISTNUM 1 \l 18541             MR. SUTHERLAND:  You are very close.  Three years starts for us 2006.  So it is actually the first two years of the CAB.  So we have stable funding right now because of our capital funding model.

LISTNUM 1 \l 18542             If you look at this little ski hill, what the board did in 2005 is we rationalized the funding and spread it out on a balance basis so that we wouldn't end up with programs that we couldn't fund over the next three years.  So '06‑'07.

LISTNUM 1 \l 18543             Our fiscal is September to September like the broadcast year, so '06‑'07, '07‑'08, '08‑'09 are the three stable years.

LISTNUM 1 \l 18544             COMMISSIONER PENNEFATHER:   The $3 million approximately is the demand number that we saw in the CAB proposal based on historic demand on the Starmaker Fund, and that would be secured and guaranteed?

LISTNUM 1 \l 18545             MR. SUTHERLAND:  Yes.  What we have in our budget, the capital fund model is $3.2 million a year.  It is $800,000 per quarter for our grant program; it's $300,000 a year in the association funding that I referred to earlier.  We are running at roughly $450,000 in administration.  So about $4 million is the real ‑‑ that is what our capital fund model allows for right now.

LISTNUM 1 \l 18546             The only thing I would add to the CAB model is that our international touring program is very popular and it is broad.  It has only been in place for 18 months and in terms of an arc of funding I suspect the demand will go up for that.

LISTNUM 1 \l 18547             So there is likely ‑‑ if I was truly giving a picture of the true demand today, it is probably more in the $4.5 million range.

LISTNUM 1 \l 18548             COMMISSIONER PENNEFATHER:  So am I looking at demand here on this, or contribution?

LISTNUM 1 \l 18549             MR. SUTHERLAND:  No, this is the painful chart of taking the transactions from the MLO approvals that you have.  We went to the CAB.  The very first thing I did was say to them, "How much money are we going to have and how do we get it and how do I know?"  We agreed with the broadcaster ‑‑ they were very cooperative ‑‑ to say we will stagger our payments in equal instalments over seven years and guarantee you those instalments, and they have lived up to that promise.

LISTNUM 1 \l 18550             So this is if you took all the multiple licence transactions, divided them up by the time of when they occurred and how the money is collected over a 7‑year period, as you would all know from being involved in it ‑‑ there was a big spike in these transactions, that's why you see the spike in the funding, and then it trails off now that the transactions have trailed off.

LISTNUM 1 \l 18551             So this is literally ‑‑ this is drawn right out of our capital fund model.  This is how we budget ourselves.  These are the numbers we expect to receive.

LISTNUM 1 \l 18552             COMMISSIONER PENNEFATHER:  Receive, all right.

LISTNUM 1 \l 18553             MR. SUTHERLAND:  That's right.

LISTNUM 1 \l 18554             COMMISSIONER PENNEFATHER:  All right.  That's helpful.

LISTNUM 1 \l 18555             Which connects a little more to the annual report in terms of the contributions line and then the expenses line.

LISTNUM 1 \l 18556             MR. SUTHERLAND:  If I could just one issue on the annual report, we are very strict about GAAP accounting rules on fund accounting and it is a little bit different.

LISTNUM 1 \l 18557             The CAB collects for us because it is an efficient thing to do, they are already in touch with all the transactions and tracking it.  When we receive the money we have to report it.

LISTNUM 1 \l 18558             So I think somebody suggested in one of our years there was $5 million, but that is just a cashflow issue.  It is really irrelevant.  We don't model on cash or we would run out of money and would not be able to fund programs.  We model on this contributions chart and then we just manage our cashflow appropriately from there.

LISTNUM 1 \l 18559             COMMISSIONER PENNEFATHER:  The drop off, again to be clear, this is based on tangible benefits contribution only?

LISTNUM 1 \l 18560             MR. SUTHERLAND:  The lexicon, I call it MLO money because I just made that up, but it's the multiple licence ownership transaction.

LISTNUM 1 \l 18561             COMMISSIONER PENNEFATHER:  We mean the same thing.

LISTNUM 1 \l 18562             MR. SUTHERLAND:  If that's tangible benefits, then that's what it is.

LISTNUM 1 \l 18563             COMMISSIONER PENNEFATHER:  All right.

LISTNUM 1 \l 18564             Technically CTD contributions can also come via other contributions, as in the 3 percent in the CAB plan.

LISTNUM 1 \l 18565             Is that a quantifiable number and is that include in this amount or is this just the tangible benefits?

LISTNUM 1 \l 18566             MR. SUTHERLAND:  This is just tangible benefits.

LISTNUM 1 \l 18567             We do receive from time to time, not very often, a few small CTD amounts.  There are some new license commitments we have received recently.

LISTNUM 1 \l 18568             COMMISSIONER PENNEFATHER:  Yes.

LISTNUM 1 \l 18569             MR. SUTHERLAND:  Newcap has been very supportive of us.  So there will be a few of those, but they are so new that they haven't hit this model yet.

LISTNUM 1 \l 18570             COMMISSIONER PENNEFATHER:  The reason I'm asking I guess is obvious:  Would that waylay, would that change the drop?  If this is related just to tangible benefits, if there were other contributions through other doors would that change the drop off?

LISTNUM 1 \l 18571             In other words, do you have another plan, another backup plan to take care of this drop off?

LISTNUM 1 \l 18572             MR. SUTHERLAND:  We have no backup plan.  The Starmaker funds, as Chuck mentioned, the mandate was:  There are going to be these multiple license transactions.  We think this would be a good use of this money to put it into a star system so please build it.  We have known from the beginning that it had this arc and we have built it that way, stabilized in the last three years.

LISTNUM 1 \l 18573             One of the things about our capital fund model ‑‑ and it is one of the advantages of not being in a government model where you have to answer every March 31st for the money I suppose ‑‑ is we can model it like a business over three years and provide ‑‑

LISTNUM 1 \l 18574             To answer your question, if somebody showed up tomorrow and said, "Here is $2 million", we don't just spend it that month, we build it into our three‑year ‑‑ it's a three‑year rolling capital fund model.

LISTNUM 1 \l 18575             Because one of the problems with building your programs is, you can either build 15 programs and then not be able to fund any of them because you have too much demand for too many programs.

LISTNUM 1 \l 18576             One of the real challenges when we first started with this was to say, "Well, what can we afford to do, because we have a finite amount of money and it is for a specific purpose."

LISTNUM 1 \l 18577             For instance, we didn't do international touring at first because we didn't feel we had enough money for it, and then once the transactions increased we said, "Well, now we do have enough budget" so we added international touring.

LISTNUM 1 \l 18578             I hope, to answer you question, there is no plan.  As money comes in we will adjust the capital funding model, and it comes in generally in these spaced out increments so we just adjust as we go along.

LISTNUM 1 \l 18579             COMMISSIONER PENNEFATHER:  One of the comments that I read in one submission ‑‑ and you have mentioned it yourself ‑‑ is that Starmaker Fund is funding ‑‑ I think you used ‑‑ no that's the airplay, 88 percent, or a similar amount, of response to the demand.

LISTNUM 1 \l 18580             MR. SUTHERLAND:  Yes.

LISTNUM 1 \l 18581             COMMISSIONER PENNEFATHER:  Am I more or less correct on that, that you are responding to the demand at that level?

LISTNUM 1 \l 18582             MR. McCOY:  Yes.  Ninety‑one percent of all the qualifying applications are approved, and they are approved to, I believe, just over 80 percent of the total funding.

LISTNUM 1 \l 18583             MR. SUTHERLAND:  Yes.  We measured two things.  One is the number.  You get 30 applications, of those 30 generally 27 of them will be approved.  Of the 27 that are approved, they generally get about 83 percent of them ‑‑ which I think is the number you are talking about ‑‑

LISTNUM 1 \l 18584             COMMISSIONER PENNEFATHER:  Yes.

LISTNUM 1 \l 18585             MR. SUTHERLAND:  ‑‑ of the money they ask for.  Now, that is because we are able to set very specific criteria around what it is you are qualified ‑‑ our website is very detailed in terms of what you can get from us so it helps to steer that funding and make it more certain for everyone.

LISTNUM 1 \l 18586             MR. GHOMESHI:  Which is, I might add, one of the things I like, which is that it is not whimsical or subjection on behalf of the board in terms of where the money is going, it is if you meet the criteria and you have sold some records, you will probably get the funding.

LISTNUM 1 \l 18587             COMMISSIONER PENNEFATHER:  speaking of that, one of the main components of the programs is the direct board approval segment.  That would appear to cover a large part of the grants.

LISTNUM 1 \l 18588             Is that correct?

LISTNUM 1 \l 18589             MR. SUTHERLAND:  Direct board approval is FACTOR's process.

LISTNUM 1 \l 18590             COMMISSIONER PENNEFATHER:  All right.

LISTNUM 1 \l 18591             MR. SUTHERLAND:  We don't have a direct board approval because everything is sales‑based criteria.  An artist could show up tomorrow that has no track record, that is not on a label of any kind that anyone has ever heard of but, as Jian can talk to, can be the next big thing and if they hit that 10,000 unit level, they stick an application in, they get money.

LISTNUM 1 \l 18592             COMMISSIONER PENNEFATHER:  The question I asked earlier I wondered if you would comment on, Mr. McCoy, the possibility of a common administration of the funds in the context as described by FACTOR.

LISTNUM 1 \l 18593             Do you have any comment on that?

LISTNUM 1 \l 18594             MR. McCOY:  Well, I'm going to duck the question again a bit, because I really don't think that I can comment on what changes we might make to Radio Starmaker fund, what might work better for all the funds that are out there, including Radio Starmaker and FACTOR.

LISTNUM 1 \l 18595             I think I would only say that ‑‑ as I say, first of all, we haven't discussed that with the board an in terms of governance we wouldn't make a public statement on that.

LISTNUM 1 \l 18596             But I guess I would say and reiterate that what we have been doing for four years has been working and we are comfortable in continuing with the way it has been going.

LISTNUM 1 \l 18597             COMMISSIONER PENNEFATHER:  But the concept of a common administration is a little different, like let's say the way that Musicaction, Fond Radiostar are currently administered together.  This is what I believe has been put on the table as potential going forward.

LISTNUM 1 \l 18598             It's a little different than all the funds going through Radiostar.

LISTNUM 1 \l 18599             Is that something that could be contemplated or is it again something that you would want to discuss?

LISTNUM 1 \l 18600             MR. McCOY:  You know, Madam Commissioner, going back to what we were saying in our oral presentation, in reality we are a very independent fund.  We have a board that is comprised of people from all segments of the industry, both music and radio.  As Chip said, five years ago this Commission provided us with some governing principles and the broadcasters supplied some money and we built a fund.  That included administration.  We are really willing and able to take direction again and whatever funding is provided, including administration or however you see fit to construct it.

LISTNUM 1 \l 18601             MR. SUTHERLAND:  If I could just add, just on the administration because it sounds like just a vague word, we have two and a half employees and we have a website.  That is the extent of our administration.  It is not exactly a cumbersome ‑‑ I think Jian described it as lean.

LISTNUM 1 \l 18602             But the one advantage of having put such an investment in our website is that we are a 100 percent paperless web‑based application.  It is a fairly slim operation.

LISTNUM 1 \l 18603             COMMISSIONER PENNEFATHER:  Thank you.  Very helpful.  Thank you very much.

LISTNUM 1 \l 18604             THE CHAIRPERSON:  Vice‑Chair Arpin.

LISTNUM 1 \l 18605             COMMISSIONER ARPIN:  Obviously in this graph you are making the assumption that there will be no more transactions.

LISTNUM 1 \l 18606             Why are you making that assumption?

LISTNUM 1 \l 18607             MR. McCOY:  I will answer that ‑‑

LISTNUM 1 \l 18608             COMMISSIONER ARPIN:  Because you are living in the real world or you are living on the ‑‑

LISTNUM 1 \l 18609             MR. McCOY:  Well, Commissioner Arpin, I will answer that and then I will ask Chip to follow up.

LISTNUM 1 \l 18610             Preparing the capital funding model we never want to or we are not able to anticipate funding that might or might not be coming.  So we are really preparing our funding model based on the certainties that we have.  Again, that may change and there may be funding from other places and that would change the capital funding model.

LISTNUM 1 \l 18611             Chip, if there is ‑‑

LISTNUM 1 \l 18612             MR. SUTHERLAND:  I think the other thing, what you don't see here, I was being very specific about the existing contributions, but we have a three‑year rolling model.  So if next month in your wisdom ‑‑ or somebody else's wisdom I suppose if they want to buy somebody ‑‑ we find out there is another million dollars, we know it is being paid the seven years, we can easily adapt for new changes.

LISTNUM 1 \l 18613             But really we do not have another source of money and so we really can't say to the public, "Oh yes, we probably will have money", so we have to budget accordingly.

LISTNUM 1 \l 18614             COMMISSIONER ARPIN:  When in 1988 the CRTC allowed the creation of the Starmaker fund it was based on an assumption ‑‑ and the CAB created the Starmaker on the assumption that it will have a life of about seven to nine years.  I can see from your graph that what you are showing here is that you will have had a real life of about 10 years.  Well, you are showing 12, but in year 1 and year 12 you don't have any significant impact, particularly in the year 12.

LISTNUM 1 \l 18615             Wasn't the goal attained?

LISTNUM 1 \l 18616             MR. SUTHERLAND:  I think the goal was attained.  That's an excellent point.

LISTNUM 1 \l 18617             I think I said this earlier, this fund was brought about because of a specific circumstance in the marketplace that radio thought this would be effective.  They gave us a few principles and some money and we turned it into the fund and it worked for what it was supposed to do.

LISTNUM 1 \l 18618             COMMISSIONER ARPIN:  So why expand the lifespan of the fund?

LISTNUM 1 \l 18619             MR. SUTHERLAND:  We are not.  We are not expanding the lifespan of the fund. <