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Please note that the Official Languages Act requires that government publications be available in both official languages.
In order to meet some of the requirements under this Act, the Commission's transcripts will therefore be bilingual as to their covers, the listing of CRTC members and staff attending the hearings, and the table of contents.
However, the aforementioned publication is the recorded verbatim transcript and, as such, is transcribed in either of the official languages, depending on the language spoken by the participant at the hearing.
TRANSCRIPT OF PROCEEDINGS BEFORE
THE CANADIAN RADIO‑TELEVISION AND
TRANSCRIPTION DES AUDIENCES DEVANT
LE CONSEIL DE LA RADIODIFFUSION
ET DES TÉLÉCOMMUNICATIONS CANADIENNES
SUBJECT / SUJET:
Further to call for applications for a broadcasting licence to
carry on an over-the-air digital/high definition (HD) television
programming undertaking to serve locations across Canada /
Suite à l'appel de demandes de licence de radiodiffusion visant
l'exploitation d'entreprises de programmation de télévision
numérique/haute définition (HD) en direct pour desservir
l'ensemble du Canada
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)
February 12, 2008 Le 12 février 2008
In order to meet the requirements of the Official Languages
Act, transcripts of proceedings before the Commission will be
bilingual as to their covers, the listing of the CRTC members
and staff attending the public hearings, and the Table of
However, the aforementioned publication is the recorded
verbatim transcript and, as such, is taped and transcribed in
either of the official languages, depending on the language
spoken by the participant at the public hearing.
Afin de rencontrer les exigences de la Loi sur les langues
officielles, les procès‑verbaux pour le Conseil seront
bilingues en ce qui a trait à la page couverture, la liste des
membres et du personnel du CRTC participant à l'audience
publique ainsi que la table des matières.
Toutefois, la publication susmentionnée est un compte rendu
textuel des délibérations et, en tant que tel, est enregistrée
et transcrite dans l'une ou l'autre des deux langues
officielles, compte tenu de la langue utilisée par le
participant à l'audience publique.
Canadian Radio‑television and
Conseil de la radiodiffusion et des
Transcript / Transcription
Further to call for applications for a broadcasting licence to
carry on an over-the-air digital/high definition (HD) television
programming undertaking to serve locations across Canada /
Suite à l'appel de demandes de licence de radiodiffusion visant
l'exploitation d'entreprises de programmation de télévision
numérique/haute définition (HD) en direct pour desservir
l'ensemble du Canada
BEFORE / DEVANT:
Konrad von Finckenstein Chairperson / Président
Michel Arpin Commissioner / Conseiller
Len Katz Commissioner / Conseiller
ALSO PRESENT / AUSSI PRÉSENTS:
Cindy Ventura Secretary / Secretaire
Peter Foster Hearing Manager /
Gérant de l'audience
Jean-Sébastien Gagnon Legal Counsel /
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)
February 12, 2008 Le 12 février 2008
- iv -
TABLE DES MATIÈRES / TABLE OF CONTENTS
PAGE / PARA
PRESENTATION BY / PRÉSENTATION PAR:
HDTV Networks Inc. 4 / 27
INTERVENTION BY / INTERVENTION PAR:
Scénario Québec 205 / 1266
Canadian Association of Broadcasters 216 / 1324
Gatineau, Quebec / Gatineau (Québec)
‑‑‑ Upon commencing on Tuesday, February 12, 2008
at 0930 / L'audience débute le mardi 12 février
2008 à 0930
LISTNUM 1 \l 11 THE CHAIRPERSON: Good morning.
LISTNUM 1 \l 12 Madam Secretary, are we ready?
LISTNUM 1 \l 13 THE SECRETARY: Yes, we are.
LISTNUM 1 \l 14 THE CHAIRPERSON: Well, welcome to this public hearing. The Panel today consists of Vice‑President Michel Arpin and Vice‑Chairman Telecommunications Len Katz and myself, Konrad von Finkenstein.
LISTNUM 1 \l 15 We are assisted by Peter Foster the Hearing Manager and by Jean Sébastien Gagnon Legal Counsel and Cindy Ventura is our Hearing Secretary.
LISTNUM 1 \l 16 Today we will consider the application of HDTV Networks and YES TV Incorporated to operate digital hi‑definition over‑the‑air television service.
LISTNUM 1 \l 17 The Panel is particularly interested in discussing the following questions:
LISTNUM 1 \l 18 a) What contribution would the proposed service make to the Canadian programming and to the achievement of objectives of the Broadcasting Act; and,
LISTNUM 1 \l 19 b) What impact would the licensing of additional television services have on the broadcasting system and the market in question.
LISTNUM 1 \l 110 We have got a lot to do, so I am not going to bother with any further introductory remarks. So, let's go.
LISTNUM 1 \l 111 Madam Ventura, you have some announcement.
LISTNUM 1 \l 112 THE SECRETARY: Merci monsieur président et bonjour à tous.
LISTNUM 1 \l 113 Before beginning I would like to go over a few housekeeping matters to ensure the proper conduct of the hearing.
LISTNUM 1 \l 114 When you are in the hearing room, we would ask that you please turn off your cell phones, beepers, and blackberries as they're an unwelcome distraction and they cause interference on the internal communication systems used by your translators. We would appreciate your cooperation in this regard throughout the hearing.
LISTNUM 1 \l 115 Please note that the Commission Members may ask their questions in English or French. You can obtain interpretation receivers from the commissionaire sitting at the entrance of the conference centre.
LISTNUM 1 \l 116 Le service d'interprétation simultanée est disponible durant cette audience. L'interprétation anglaise se trouve au canal 7 et l'interpeétation française au canal 8.
LISTNUM 1 \l 117 We expect the hearing to take approximately two days. Tomorrow morning we will begin at 9:00 a.m. We will take an hour for lunch and a break in the morning and in the afternoon. We will let you know of any schedule changes as they may occur.
LISTNUM 1 \l 118 Pendant toute la durée de l'audience, vous pourrez consulter les documents qui font partie du dossier public pour cette audience publique dans la salle d'examen qui se trouve dan la Salle Papineau, située à l'extérieur de la salle d'audience à votre droite.
LISTNUM 1 \l 119 As indicated in the agenda, the telephone number of the examination room is 819‑953‑3168.
LISTNUM 1 \l 120 There is a verbatim transcript of the hearing being taken by the court reporter sitting at my right. If you have any questions on how to obtain all or part of the transcript, please approach the court reporter during a break.
LISTNUM 1 \l 121 Please note that the full transcript will be made available on the Commission's website shortly after the conclusion of the hearing.
LISTNUM 1 \l 122 For the record, we wish to inform you that at the request of the Commission the Applicant, YES TV Inc. has submitted a copy of its Certificate of Incorporation which will be added to the public examination file of its application. Copies are available in the examination room.
LISTNUM 1 \l 123 Also please note that Bell ExpressVu has been added to the list of appearing interveners for this hearing. They are scheduled as the last intervener on the agenda.
LISTNUM 1 \l 124 And now, Mr. Chairman, we will proceed with Item 1 on the agenda which is an application by HDTV Networks Incorporated for a licence to operate an English language hi‑definition over‑the‑air television service with transmitters in Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Ottawa, Montreal and Halifax.
LISTNUM 1 \l 125 Appearing for the Applicant is Mr. John Bitove. Please introduce your colleagues and you will have 20 minutes for your presentation.
LISTNUM 1 \l 126 Mr. Bitove
PRESENTATION / PRÉSENTATION
LISTNUM 1 \l 127 MR. BITOVE: Thank you, Madam Secretary, Mr. Chairman, Mr. Vice‑Chair. Bonjour Mesdames and Messieurs.
LISTNUM 1 \l 128 Before I get started as well, I would just like to go over the material. We've furnished the Commission this morning with a copy of our script, also a re‑allocation of our programming funds which you'll see there is a one‑pager, it's a document that looks like this. And, as well, you should have a seating chart to assist you with the individuals who are up here.
LISTNUM 1 \l 129 And before I get started as well, I wouldn't mind just introducing the individuals.
LISTNUM 1 \l 130 To my left is Doug Hoover our Executive Director of Network Programming and Promotions, formerly of CanWest; next to Doug is Tecca Crosby, Canadian Development and Production, formerly of CTV; next to Tecca is Ellen Baine, Acquired Programming for us and formerly of CHUM; and next to Ellen is Michael Taylor, Acquired Programming and Production, formerly from Craig Media.
LISTNUM 1 \l 131 And to the far right over here we have David Hamilton responsible for promotions and formerly from CanWest; Ken Johnson ‑‑ sorry, Claude Galipeau who was formerly with Alliance Atlantis; next to him Ken Johnson who was sales at CanWest and responsible for sales with us; Stewart Lyons our Executive Vice‑President who also works with me at XM Canada.
LISTNUM 1 \l 132 And behind us in our corner is Brandon Alexandroff who was also Finance and also works with me at XM Canada; next to Brandon is Kaan Yigit of Solutions Research Group who performed the market research and focus group studies.
LISTNUM 1 \l 133 Behind me ‑‑ immediately behind me is Robert Buchan one of our counsel and to his left is Mark Lewis, additional counsel for us as well. And then to Mark's left, the three gentlemen are Wolf Riesterer, Paul East and Kerry Pelser representatives from engineering firm DEM Allen & Associates based in Winnipeg.
LISTNUM 1 \l 134 Is there any clarification with respect to the seating chart.
LISTNUM 1 \l 135 THE CHAIRPERSON: It seems clear enough.
LISTNUM 1 \l 136 MR. BITOVE: Thank you. Now, I'd like to commence.
LISTNUM 1 \l 137 Good morning. My name is John Bitove and I'm the President and CEO of HDTV Networks.
LISTNUM 1 \l 138 Our team is here to present our plans for a new national network with eight hi‑definition conventional television stations in Halifax, Montreal, Ottawa, Toronto, Winnipeg, Edmonton, Calgary and our proposed home base of Vancouver.
LISTNUM 1 \l 139 All of these channels will be free over‑the‑air and, by the way, as of last week Industry Canada has signed off all the required paperwork to be able to transmit from these sites.
LISTNUM 1 \l 140 As you can see, this is a seasoned and knowledgeable group with decades of industry experience amassed from a wide variety of Canadian broadcasters, from small start‑up to large corporations.
LISTNUM 1 \l 141 I'd now like to turn it over to Doug Hoover to take you through some of the important pieces of our presentation.
LISTNUM 1 \l 142 Doug.
LISTNUM 1 \l 143 MR. HOOVER: Today we are examining the potential for generating new interest in conventional television via new technology, hi‑definition over‑the‑air free television for Canadians. Ultimately the main reason we are here today is to offer Canadians a new and better choice.
LISTNUM 1 \l 144 Why us? First, we bring experience to the table. Most of our team has been involved with the Canadian television industry for decades and; second, because we think we have put together a strong application that will bring incremental production dollars to the Canadian broadcasting system.
LISTNUM 1 \l 145 Overall, our goals for HDTV Networks are five‑fold.
LISTNUM 1 \l 146 One, create a new independent and unaffiliated conventional network that responds to the needs of Canadian television viewers with a fresh approach to programming and current affairs;
LISTNUM 1 \l 147 Two, to provide Canadians free access to the latest television technology, hi‑definition programming;
LISTNUM 1 \l 148 Three, to encourage and support Canadian productions wherever possible to be produced in hi‑definition;
LISTNUM 1 \l 149 Four, to provide additional access to the broadcasting system for Canadian television production community and its producers, directors, screen writers and actors; and,
LISTNUM 1 \l 150 Five, to ensure that the Canadian broadcasting system remains in the forefront of new and emerging technologies.
LISTNUM 1 \l 151 We wish to serve as a new independent and unaffiliated voice for Canadians, one that will provide additional points of view and new source of information in an era of increasing consolidation amongst the large Canadian media players.
LISTNUM 1 \l 152 Our programming approach, as Tecca and Ellen will elaborate on further, is innovative yet does not stray too far from proven methods and although are ambitious in this regard, are admittedly modest. We expect Canadians to quickly embrace the high quality programming we will air.
LISTNUM 1 \l 153 In each of eight markets in which we will broadcast, we intend to provide free access to hi‑definition programming. This is a central part of our application and will be a key component of our success.
LISTNUM 1 \l 154 The stark reality is that today's conventional television industry has been slow to develop HD TV programming to Canadians, yet it is the fastest growing global consumer technology.
LISTNUM 1 \l 155 Currently the only way to receive HD programming for most Canadians is to pay for it through cable and satellite. We do not think this is appropriate and leaves HD programming out of the reach for many Canadians. We will increase viewing of HD programming. Our commitments in Canadian programming will help ensure that the programs made here in Canada will be increasingly produced in HD.
LISTNUM 1 \l 156 The Canadian production industry has been overwhelmingly supportive of our application, filing over a hundred letters of support.
LISTNUM 1 \l 157 It is quite clear that they require a more competitive environment in which to work. Competition in this regard will benefit the producers, screen writers, actors and directors in this country, not just in terms of production financing but exposure as well.
LISTNUM 1 \l 158 We believe the Canadian broadcasting system should be at the forefront of new technologies. The Canadian Government and the CRTC have acknowledged Canada is falling behind in this regard. The proliferation of HD television sets has been rapid, however, the corresponding growth in programming has not yet occurred.
LISTNUM 1 \l 159 Our application goes well beyond merely HD programming in its scope. We also have significant goals with respect to both user‑generated and interactive content. We believe that digital convergence is upon us and it is something broadcasters must embrace as a focal point of what they do.
LISTNUM 1 \l 160 These goals are at the heart of our application and we believe that by meeting them the Canadian broadcasting system will benefit considerably.
LISTNUM 1 \l 161 Tecca.
LISTNUM 1 \l 162 MS CROSBY: When I joined HDTV Networks' team one of my first priorities was to re‑look at the Canadian programming section of the application that was originally created almost two years ago when HDTV first made its application to the CRTC and, specifically, at the resources available for Canadian independent development and production.
LISTNUM 1 \l 163 As a result, we have made some significant adjustments to our original application which I'd like to review with you now. It should be noted that we have met and discussed this approach with the key unions and guilds and taken their comments and concerns under advisement as we have re‑tooled our vision for Canadian programming allocations and resources at HDTV.
LISTNUM 1 \l 164 It became quite clear that our original plan fell short in two key areas; namely, the amount of priority programming being broadcast in prime time and the amount of resources being allocated for script and concept development. As a result, HDTV Networks has agreed to significantly increase its commitment to priority programming.
LISTNUM 1 \l 165 In the first three years of its licence term, HDTV will commit to airing six hours of priority programming in prime time, increasing to eight hours in the last four years of its original licence term, putting us on equal footing with other national private conventional broadcasters. This is a significant increase from our original application.
LISTNUM 1 \l 166 Additionally, HDTV Networks has also agreed to increase the amount of script and concept development from $1.4‑million over the licence term to $3.5‑million with recouped amounts being reinvested into additional development. This more than doubles our original proposal.
LISTNUM 1 \l 167 However, that is just the beginning of what HDTV Networks brings to Canadian independent production. Based on our business model, the highlights of our plans are as follows.
LISTNUM 1 \l 168 We intend to make a meaningful impact within the Canadian broadcasting system, specifically in the form of incremental new spending on Canadian production. The positive benefits to the production industry contained in our proposal include more than $350‑million on Canadian programming over the seven‑year licence term to be committed in the following manner:
LISTNUM 1 \l 169 More than $120‑million on pre‑licensing new priority Canadian content programming produced by independent Canadian producers;
LISTNUM 1 \l 170 More than $95‑million on acquiring existing priority programming from Canadian independent producers, distributors and other broadcasters;
LISTNUM 1 \l 171 More than $70‑million licensing non‑priority Canadian content programming which will be acquired from third parties; and,
LISTNUM 1 \l 172 More than $70‑million on Canadian news and current affairs.
LISTNUM 1 \l 173 I have considerable experience working with Canada's largest broadcaster on Canadian programming and I can say with certainty that for a new entrant broadcaster these are significant and laudable commitments. Many of these commitments also exceed the spending made by existing broadcasters on a proportionate basis.
LISTNUM 1 \l 174 For example, incumbent broadcasters traditionally spend about 40 per cent of their overall programming budgets on Canadian programming, while HDTV Networks proposes to spend more than 60 per cent.
LISTNUM 1 \l 175 It is for these reasons that our application has met with support from the production community. In our discussion with stakeholders, it is clear that they are finding today's Canadian television climate in this era of consolidation to be one of reduced opportunities and limited possibilities. They are looking for new and incremental dollars and opportunities to be brought into the system and they are looking for new entrants like HDTV Networks to do just that.
LISTNUM 1 \l 176 Ellen.
LISTNUM 1 \l 177 MS BAINE: The key to broadcasting is content and the conventional television universe is no different from the rest of the industry. However, HD television is in its infancy, so creative thinking needs to be done to fill the schedule, to present the schedule and to provide choices for Canadian viewers. This is what our application is about.
LISTNUM 1 \l 178 The CRTC has always encouraged a bottom‑up innovation rather than innovation by consolidation. Changing corporate priorities often provides opportunities for entrepreneurs quick enough to spot the openings and this is what we will try to do from a programming acquisition point of view.
LISTNUM 1 \l 179 As we mentioned earlier, an important component of our programming schedule will be taken up by our Canadian productions that we will develop exclusively with the independent production sector. Whether it is for series, miniseries, TV movies, feature films or documentaries we will be counting on Canada's creative talents.
LISTNUM 1 \l 180 But Canadians are more and more open to being entertained by the best of world drama, the best of world music and the best of world documentaries. Our very healthy Canadian cable networks have proven that. With HDTV Networks we would now be able to bring those same types of programs to the over‑the‑air viewer as well, programs that come from Britain, Australia and India to name just a few.
LISTNUM 1 \l 181 Of course, one other component of our programming will come from the United States, more precisely from the major studies and networks but we are not so bold, nor inexperienced to assume that we will be competing for those expensive primetime shows with other Canadian networks. Rather, our focus will be on affordable foreign programming including U.S. to be interspersed throughout our schedule.
LISTNUM 1 \l 182 There is an orderly marketplace when it comes to television program sales and often the conventional window is missing from the sale of some quite extraordinary shows. That could be made available to the general viewing public. We would be more than willing to work with all stakeholders including other conventionals, cable networks and pay television services in order to offer that window.
LISTNUM 1 \l 183 We have made a couple of strides in that area already. For example, we have partnered with the very successful Asian Television Network, ATN, to bring some of their successes to HDTV Networks as well.
LISTNUM 1 \l 184 We have also been approached from a representative of one of the country's leading colleges for financial assistance in completing a TV series that their media students are working on and want to shoot in high depth. We are excited by that idea and hope to do more in this area. We also see it as a perfect way to develop some of the interactive and user‑generated content we would like to bring to our audiences.
LISTNUM 1 \l 185 Ken.
LISTNUM 1 \l 186 MR. JOHNSON: HDTV has taken a very conservative and realistic approach to our audience and revenue projections. We consulted with ZenithOptimedia, one of the top media buying agencies not only in Canada but worldwide. As referenced by the Financial Post, ZenithOptimedia are the chief statistical gurus in media market data.
LISTNUM 1 \l 187 We asked them to assess our schedule and determine the audience that we could expect to achieve. With their extensive knowledge of the competitive schedules in each of the markets we would be covering they were able to evaluate each of those markets and estimate a realistic national audience that HDTV would achieve with its initial schedule. ZenithOptimedia then provided us with competitive costing guides and ranges that we could use to help develop our projected revenue model. Drawing on my 30 years of experience in broadcast sales and management, I then determined realistic seller rates to calculate our revenues throughout the seven‑year term of the licence.
LISTNUM 1 \l 188 After determining our expected revenues for the seven‑year term we confirmed our calculations by a comparison to the total national advertising revenue earned by broadcasters. We found that the revenues we were projecting through our licence term represented less than 3 percent of the projected national advertising budgets for those seven years. This amount of revenue is sufficient to sustain our operating costs and it only represents a very small portion of the industry's healthy advertising base.
LISTNUM 1 \l 189 ZenithOptimedia also found through their audience projections that the introduction of HDTV would have a minimal impact on local station audience share. This combined with our revenue evaluation confirmed for us that our entry into the marketplace would not have any significant negative effects on local broadcasters. With the technology of high definition and the enhanced viewing experience that it brings, the industry is in agreement that audiences will grow. Increased audiences and the experience that high definition provides will encourage advertisers to explore new ways to use the medium.
LISTNUM 1 \l 190 One of the fresh new approaches that we will be able to bring to the marketplace is that we can truly provide an integrated marketing plan that will involve both television and interactive technologies. This will not only give advertisers a new way to use television but provide the viewer with an enhanced way to watch television. Most importantly, it will help to repatriate some of the lost television advertising revenues that are slipping over to online.
LISTNUM 1 \l 191 Claude.
LISTNUM 1 \l 192 MR. GALIPEAU: Thanks, Ken.
LISTNUM 1 \l 193 HDTV will innovate and engage audiences on nonlinear platforms from the internet to cellular broadband. About 80 percent of Canadians regularly access the internet. The average weekly time online is approaching 15 hours per user, not far from the average for radio listening now under 19 hours.
LISTNUM 1 \l 194 HDTV wants to wrap content around communities and communities around content. Therefore, we want to increase a supply of video and interactive services available to Canadians, invite audiences to collaborate with us as producers and storytellers and start the conversation. In brief here is our five point plan.
LISTNUM 1 \l 195 One, 360‑degree commissioning: All our regional programs and program licensing will focus on multiplatform exhibition to build out our internet video presence from our website into iTunes from Juiced to mobile delivery. We believe HD quality video is the next big thing for online on‑demand delivery.
LISTNUM 1 \l 196 Two, pro‑am commissioning: We plan to be open access for content, especially comedy and news to tap into the community of amateur/professional producers.
LISTNUM 1 \l 197 For example, our news service will be open and collaborative. We want to develop a new format of conversational news coverage with the audience covering stories from their perspective and sharing these with us. We plan for a significant and growing portion of our on‑air news and current affairs coverage to be user‑ generated in HD video and submit it to us online. To achieve this goal we will invite Canadians to do what they are already doing, shooting video, telling local stories, sharing these stories. And we will partner with innovative citizen journalism news services, like NowPublic based in Vancouver, to help us tap into this new crowd powered movement.
LISTNUM 1 \l 198 Three, an interactive agora: We know Canadians like to connect and share online. On our web service we will provide tools for uploading video, stories and photos and for connecting people so they can share perspectives on social and political issues and pop culture. We also plan regular town halls in each of our coverage areas with calls for video story submissions. We will also innovate an interactive TV and get live web and cellular input from audiences using technologies like those of LiveHive systems based in Waterloo, Ontario.
LISTNUM 1 \l 199 Four, music, popular culture, comedy: We know that music and comedy play big online, on YouTube and My Space. We will get our on‑air talent therefore to provide unique material for online distribution and we will leverage the cross‑promotion of XM Radio both on air and online to push this unique content.
LISTNUM 1 \l 1100 Five, go fish where the fish are: We know Canadians are massive users of YouTube, Facebook and My Space. So we will go to them and partner with these services. We will create branded sections inside these sites and serve our content there. This social media distribution strategy goes where the audiences are across all day parts and serves them content and invites them back into our network for more.
LISTNUM 1 \l 1101 John.
LISTNUM 1 \l 1102 MR. BITOVE: In conclusion I would like ‑‑ sorry ‑‑ in conclusion I would like to reiterate some of the points made earlier.
LISTNUM 1 \l 1103 First of all, we would like to become a new, independent and unaffiliated voice in Canadian television broadcasting. We believe this is important now that an unprecedented amount of consolidation has already taken place. And this consolidation goes beyond conventional television and cable network acquisitions but it is considerable when you include newspaper, new media and radio interests. Collectively, Canadians hear from very few independent voices today compared to just a few years ago.
LISTNUM 1 \l 1104 Secondly, free access to high definition programming is important. Most Canadians are unaware that there is an option outside paying a BDU or DTH provider for these highly sought‑after services, something that is now being labelled the HD gap.
LISTNUM 1 \l 1105 We are also offering to do something that other broadcasters are not. For example, we are proposing to be the only over‑the‑air source of high definition content in four of the eight markets we propose to operate in. Not even the CBC offers free HD content in Halifax, Winnipeg, Edmonton or Calgary. Why is this important? Because Canadians seem unwilling, maybe because some of them can't afford it, to pay a BDU or DTH provider for something they believe they should get for free. A recent Decima study revealed that cost is the single biggest factor among those unwilling to rent or buy a set‑top box.
LISTNUM 1 \l 1106 Thirdly, if we don't provide more Canadian content high‑definition programming today we will lose those viewers to the foreign production of tomorrow. According to the research we filed with our application, three years from now almost half of the country will have a high‑definition television set.
LISTNUM 1 \l 1107 These are large numbers and purchasers of this equipment will soon demand HD programming in large quantities. If Canadian production is not there to meet this anticipated tidal wave of demand, you can bet foreign production will be. Our team believes we can create content that comes from Canadian producers not only for Canadians but to also export for the world.
LISTNUM 1 \l 1108 Fourth, independent production requires more avenues of distribution than they currently have. We believe it is very telling that most of Canada's production community, the CFTPA, Writers Guild of Canada and Directors Guild of Canada generally support our application. We will provide them with a meaningful broadcast outlet and increased competition for the works which they recognize will benefit all of them in the long run.
LISTNUM 1 \l 1109 And finally, fifth, HD television is an important emerging technology. However, despite significant demand consumer confusion is rampant. A recent study suggested 40 percent of persons with an HD‑capable TV set are unaware that they require a separate set‑top box to receive their HD signals. However, even that statistic is misleading because of the very fact that you don't need a box to receive HD programming. You can still receive it free over the air.
LISTNUM 1 \l 1110 Additionally, high definition is only the tip of the iceberg. The world is rapidly becoming a large digital community and there are many new media technologies and new forms of usage and rated content that need to be embraced by Canadian conventional broadcasters. Today we believe we haven't pursued this diligently enough.
LISTNUM 1 \l 1111 Mr. Chair, Vice‑Commissioners, Commission, as we have said earlier, we are eager to get going and to do so we lack one thing, a broadcasting licence from you.
LISTNUM 1 \l 1112 When some of us appeared before you on the satellite radio application we were asked many questions. A couple that stuck out in my mind were around our viability and benefits to Canadian broadcasting. As I sit here today I am pleased to repeat some of them to you.
LISTNUM 1 \l 1113 First of all, for XM we were asked can we raise the money and achieve profitability. Well, we actually had to raise more than we projected but the answer is a resounding yes. We raised over $200 million in new money spent on the Canadian broadcasting system and we expect to breakeven at XM Canada this year in just our third year of operation.
LISTNUM 1 \l 1114 Secondly, we were asked if four channels was the maximum we could broadcast from Canada. Your decision required us to have eight channels. Well, as we sit here today we have surpassed that number by over 50 percent. Today we have 13 Canadian channels on the XM system broadcast across the North American continent and close to 10 million XM subscribers in Canada and the U.S. that now have access to Canadian content through these 13 channels.
LISTNUM 1 \l 1115 The third point I would like to raise was the undertone of, "But you are not a broadcaster and how can we trust you?" Well, the proof is in the pudding based on the success of satellite radio to date in this country. You took a bold decision to trust us then and licence us. Therefore, you can be confident about the decision we are asking you to make again. Just because it hasn't been done before doesn't mean it can't be done now.
LISTNUM 1 \l 1116 We will now be pleased to take any questions after we watch a short video.
‑‑‑ Video Presentation / Présentation video
LISTNUM 1 \l 1117 THE CHAIRPERSON: Well, thank you very much for your presentation. We have some questions for you as I am sure you are not surprised. Basically, I will concentrate on the rules. My colleague, Len, will concentrate on the financial aspects and my colleague, Michel, will concentrate on the programming.
LISTNUM 1 \l 1118 But before that I would like a couple of questions on your presentation generally. You are speaking about free TV, et cetera, and you mention and made a big point that most Canadians don't realize there is an alternative to a BDH and DTH provider. But assuming you get the licence, et cetera, Canadians still won't be able to receive it because they need a special HD licence do they not?
LISTNUM 1 \l 1119 I mean they need a set‑top box if they want to get it from a BDU, but if they want to receive yours just having bought an HDTV is not enough.
LISTNUM 1 \l 1120 MR. BITOVE: Correct. You need ‑‑ obviously, most TVs, HDTVs have a built‑in tuner and you need a separate antenna which you can get for less than $50 which gives you the capacity to get the signal for free.
LISTNUM 1 \l 1121 THE CHAIRPERSON: It's not your intention to supply those for free is it?
LISTNUM 1 \l 1122 MR. BITOVE: No, sir.
LISTNUM 1 \l 1123 THE CHAIRPERSON: Okay.
LISTNUM 1 \l 1124 Secondly, when your colleague spoke about the interactive agora in the last sentence he said:
"We will also innovate an interactive TV and get live web and cellular input from audiences using technologies like those of LiveHive Systems based in Waterloo, Ontario."
LISTNUM 1 \l 1125 THE CHAIRPERSON: Can you explain to me how this works? I have no idea what you are talking about. Sorry.
LISTNUM 1 \l 1126 MR. BITOVE: Thank you.
LISTNUM 1 \l 1127 MR. GALIPEAU: LiveHive Systems is a company based in Waterloo that provides simultaneous coordinated interaction online and on cellular related to the TV signal. It's not through the TV signal, it's done simultaneously.
LISTNUM 1 \l 1128 It is to do with the problem that ‑‑ if we want to have interactive television in Canada the difficulty is getting it through the system, so the BDU, DTH, and so on and so forth, is to go around that by actually empowering the online platform, the cellular platform to work simultaneously with a live signal.
LISTNUM 1 \l 1129 It has been used in a number of cases with NASCAR, ESPN, and even in fact with Global and Big Brother. So the system works and it has been used by broadcasters.
LISTNUM 1 \l 1130 THE CHAIRPERSON: How does it work? Give me a live example.
LISTNUM 1 \l 1131 You mentioned NASCAR. What happens actually?
LISTNUM 1 \l 1132 MR. GALIPEAU: Well, the broadcast through master control can prompt viewers online or on cell phones to answer quizzes or offer predictions if its sports, to vote if it's a talk show, and those kinds of things.
LISTNUM 1 \l 1133 THE CHAIRPERSON: But it's audio. The interaction is audio?
LISTNUM 1 \l 1134 MR. GALIPEAU: No, the interaction would be clicking.
LISTNUM 1 \l 1135 THE CHAIRPERSON: It's not just the guy has a cell phone. You actually see him because he comes on the cell phone?
LISTNUM 1 \l 1136 MR. GALIPEAU: It would be text‑based and clicking. So you would be prompted online with various prompts which would be graphic and text‑based. So let's say we are having a talk show and it's actually interviewing a politician who says "My view of the economy is this" and say "Do you agree or disagree?" It comes up on the computer screen "Agree/Disagree", it gets fed back into the television and then it can be talked.
LISTNUM 1 \l 1137 THE CHAIRPERSON: Let's go back to the example of NASCAR. You are talking to a fan who makes a prediction, blah, blah, blah.
LISTNUM 1 \l 1138 MR. GALIPEAU: Yes.
LISTNUM 1 \l 1139 THE CHAIRPERSON: Can the fan take his cell phone, take a picture of himself, send it to you and it goes up on the screen while he talks or can you see him live talking?
LISTNUM 1 \l 1140 MR. GALIPEAU: Well, I mean you could adapt it for live video. I mean, live video applications is not what LiveHive does, but it does actually exist. Yahoo! just rolled out one, so there are those kinds of applications.
LISTNUM 1 \l 1141 However, if you set up a profile at the broadcaster's web site, you would have your picture already there and you can actually interact via your profile.
LISTNUM 1 \l 1142 THE CHAIRPERSON: My questions are not so much on the technology, it is your intention. Is that what you are trying to do, is you see yourself in future doing that kind of live interactive television that in effect whoever is interacting with you not only he has the voice but you actually see the person, have a video feed from the site?
LISTNUM 1 \l 1143 MR. BITOVE: The answer is yes. Now, how we envision it today and the practical applications three years from now may be different, but we view this as much more of an interactive component terrestrial broadcasting than currently would exist.
LISTNUM 1 \l 1144 THE CHAIRPERSON: All right. Thank you.
LISTNUM 1 \l 1145 Now, to your application. You want us to give you a licence for an HDTV network.
LISTNUM 1 \l 1146 As far as I understand it, you are going to have the main station in Vancouver, that's where most of your programming will be, then essentially rebroadcast in the other cities with a little of a local feed.
LISTNUM 1 \l 1147 This is quite different from the normal rules that we have for networks. As you know, we basically have made over‑the‑air the cornerstone of our television system and because your local partners then get the carriage and you also get the local advertising.
LISTNUM 1 \l 1148 You agree that you will not go for local advertising, but I don't quite understand the rationale why you feel we should make an exception for you and free you from the local content, from the local news requirement.
LISTNUM 1 \l 1149 MR. BITOVE: Mr. Chair, we view that television is at various stages in Canada depending on what you broadcast and probably local broadcasting is the most precarious of the three, especially in some of the bigger markets. So when we built this application we recognized that ‑‑ one of your questions you even said was the impact on the broadcasting system.
LISTNUM 1 \l 1150 We wanted to make it clear that we did not want to impact local broadcasters and there is a quid pro quo that goes with that. To not impact local broadcasters you will have to forgo the local advertising revenue that is equivalent with it.
LISTNUM 1 \l 1151 So it's part of how we built the application in terms of the fundamental piece, was that the transmitters would be in the larger markets broadcasting over‑the‑air for free, and recognizing that we had to try and protect or segregate, build a wall around the local broadcasters so that we wouldn't impact them, so there isn't local programming per se.
LISTNUM 1 \l 1152 We have said in our news roundtable, obviously if there is a major story that happens in a local market that impacts all Canadians it would be covered and discussed, but we are really not there to compete with local television broadcasters and we want to make sure that is clear.
LISTNUM 1 \l 1153 THE CHAIRPERSON: Yes, but you just said exactly what bothers me about this "segregate". You are basically saying local broadcasting we want a separate category. We just want to be a pure national broadcasting system.
LISTNUM 1 \l 1154 We have no such category and you are asking me to create it. As I said, what we are really doing right now, as you well know, if you want to, cross‑subsidizing local broadcasting from the national one. By allowing you to create a purely national system without any local feed, in effect, you are competing with those who have an obligation to provide local programming and taking away the cream on the national market.
LISTNUM 1 \l 1155 MR. BITOVE: I don't think we share that view. I think that, if anything, we view ourselves as competing more with kind of specialty in terms of its reach and what its audience has, which is the healthiest of the three sectors if you took national over‑the‑air, local over‑the‑air, and specialty in terms of the revenue base. So we were trying to ‑‑ because, as you said, we had to be cognizant of the impact on the broadcasting system in Canada, we built our application to minimize the impact on those most precarious and to try and set our sights to compete with those that are healthiest.
LISTNUM 1 \l 1156 At the same time, we had to look at what it is we were trying to do, having free over‑the‑air high definition can't be done unless we put transmitters in these markets. So it is part of what is constructed.
LISTNUM 1 \l 1157 I guess, Mr. Chair, you know that's what happens in the technology world, is things change. I understand your job as regulators is to try to keep up with the change, although Parliament never responds as quickly as you need it to be. So we are trying to build something that is within the framework of the Broadcasting Act and apply for this licence.
LISTNUM 1 \l 1158 THE CHAIRPERSON: How do you explain the other side of the coin? I mean, you say you want to jump ahead; you want to fill the void on HD which you see coming; you want to make sure that the Canadian programming and the Americans go off‑the‑air, that you will fill the void.
LISTNUM 1 \l 1159 On the other hand, when it comes to carriage suddenly you are the most traditional of all, you want any kinds of carriage, you want analog, you want digital carriage, you want HD carriage. I mean, isn't there a little bit of inconsistency? If you are out front, if you are filling the gap, et cetera, why don't you stay out there? How come you are now suddenly wanting analog carriage rights?
LISTNUM 1 \l 1160 MR. BITOVE: It has to do with the revenue and then our benefits to the Canadian broadcasting system, in particular the Canadian production industry. The larger the reach we have, the more eyeballs we can get, the more viewers we can get, the more advertising we can sell, the more we can plough back into the broadcasting system. So that's why it's critical from that piece that we be put on equal footing with the national broadcasters.
LISTNUM 1 \l 1161 THE CHAIRPERSON: But you appreciate that the more eyeballs you reach, the more impact you will have on the traditional system obviously?
LISTNUM 1 \l 1162 MR. BITOVE: Well, I think any application, whether it is radio or TV, is an impact on the existing system. We are trying to be cognizant of those, as I said before, protecting the ones that are most precarious and going after the healthiest.
LISTNUM 1 \l 1163 THE CHAIRPERSON: All right, Mr. Bitove, put yourself in my shoes for one second. Assuming you get your wish, we approve this, I hold a press conference and I explain why I have done this, why have we given HDTV a national licence with no requirement for local news and local programming, but I get carriage rights, mandatory carriage rights in all three forms that you are asking for, what is my justification? Why have I done this? Why does this benefit the Canadian broadcasting system?
LISTNUM 1 \l 1164 MR. BITOVE: I'm making notes frantically here while we are speaking and I ask for the chance to maybe come back on this later when we caucus with the team, but I would say there are a few things off the top.
LISTNUM 1 \l 1165 First of all, you have had massive consolidation in this industry, you have incredible talent around this table and there are lots more who should be brought back into the Canadian broadcasting system somehow, people who spent, you know, 20, 30 years in an industry were there isn't necessarily the jobs that there were before.
LISTNUM 1 \l 1166 Second, you need to voices. Newsgathering alone has shrunk in Canada and I think any thriving democracy needs more independent voices of whatever political positions or philosophies that they have to make a country healthier.
LISTNUM 1 \l 1167 Third, we are ploughing dollars into the system. It's just like with XM Radio, we could have said "Well, don't license it, but that $200 million we have spent on the broadcasting system and jobs in Canada wouldn't be here otherwise.
LISTNUM 1 \l 1168 I think it's easy to explain the local issue by saying they are not going to be ‑‑ you know, they are not permitted to collect local advertising revenue so they are not required to produce local programming. That's not how this was constructed.
LISTNUM 1 \l 1169 Fourth ‑‑ and this is the biggest of all. I think you will hear these numbers a few times today ‑‑ there is about 10 to 12 per cent of Canadians who don't use a BTU or DTH provider to get their television signal. That is about 3‑million‑odd people. On top of that, even a few years down the road I referenced in all the research you get about half of Canadian households will be HD‑capable, but whether those people are HD‑capable by having a TV set or a set‑top box, they don't want to pay the premium for HD programming.
LISTNUM 1 \l 1170 So the numbers are as much as half or more of the country has this new technology out there that they feel we are almost creating two classes, those who can pay the premium to get high definition and those who can't.
LISTNUM 1 \l 1171 I don't think that's what the Broadcasting Act was founded on. In fact, when I look at your own reports from this past year where there was questions about over‑the‑air broadcasters, the Commission itself said over‑the‑air broadcasting is important to Canadians and free service is important to Canadians, and I would say that is the fourth piece of the puzzle that we are providing through this application.
LISTNUM 1 \l 1172 THE CHAIRPERSON: As you know, the Broadcasting Act has requirements for programming as well. So I don't want to put words in your mouth, but I guess the justification you are saying is well, by having free over‑the‑air HDTV in effect we meet the requirement for free broadcasting accessible, whatever word you want to use. On the other hand, through the traditional broadcasters, to the extent that they convert to HD ‑‑ and they obviously all will by 2011 or so ‑‑ we meet the local requirement. So we have different networks addressing different points of the Broadcasting Act. That would be the rationale for doing this?
LISTNUM 1 \l 1173 MR. BITOVE: I believe so.
LISTNUM 1 \l 1174 Doug, I don't know if there is anything further you want to add.
LISTNUM 1 \l 1175 THE CHAIRPERSON: As I say, I don't want to put words in your mouth, I'm just trying to construe when we get into the Act ‑‑
LISTNUM 1 \l 1176 MR. BITOVE: I think so. Please give us the time to maybe come back on this after breaks or whatever, but I believe that would be the position right now.
LISTNUM 1 \l 1177 THE CHAIRPERSON: As you know, you have an opportunity to come back at the end.
LISTNUM 1 \l 1178 As I have made clear on many occasions, I feel it very important for this Commission to be predictable and clear in its role in the place and if they make an exception or make a deviation from existing rules to give the rationale for it and also indicate whether this is a one‑time exception or whether this is a change in gear.
LISTNUM 1 \l 1179 I'm not suggesting we approve yours, but I say if we do those questions obviously will be posed to us and I have some trouble reconciling what I see in front of me with that approach. So any help you can give me would be appreciated.
LISTNUM 1 \l 1180 I'm sorry, did you have anything else?
LISTNUM 1 \l 1181 MR. HOOVER: Just a comment with respect to local programming and local production.
LISTNUM 1 \l 1182 It's my understanding that a number of the current conventional broadcasters have started to back away from local news in communities that they serve and so there are licensees that are moving out of that arena.
LISTNUM 1 \l 1183 The other is that in today's technology and the ability to gather information and reflect back into a community the views of the individuals in that community, I don't believe you require an actual facility or bricks and mortar or an actual station per se because you can feed back to a central point and then have that signal go back into the community.
LISTNUM 1 \l 1184 So there are ways of dealing with communicating and giving access to the medium in the community without having a substantive structure and facility built right in the community.
LISTNUM 1 \l 1185 I think through the use of technology we can offer a great deal of access that currently isn't being provided.
LISTNUM 1 \l 1186 THE CHAIRPERSON: Yes, but with respect that's a different point. I didn't ask you to have local establishments, I asked you to have local programming and your submission does not offer any at all. That's the point, whether you do it through a local operation or whether you do feed it via the internet from different parts of the country.
LISTNUM 1 \l 1187 I agree with you, modern technology frees us from the necessity of having sort of a local presence necessarily.
LISTNUM 1 \l 1188 But coming back to you, is there any transition here? Is there any suggestion that you will move towards local programming, local news or is your business plan basically saying, no, we are separate, we are going to be a purely national network, we have HD content, we have a lot of foreign content that is non‑U.S. that other people don't have, et cetera? But if you were looking for local content, local news, don't look to us?
LISTNUM 1 \l 1189 MR. BITOVE: You never say never. But I think when we built this application we had to look at, you know, questions even you put to us at the beginning about impact on the broadcasting system.
LISTNUM 1 \l 1190 If you look at the picture today and who is to say ‑‑ I mean, 10 years ago when I wanted to get into broadcasting there was 20 different players and nobody was selling and now we are down to two big guys and a bunch of small independent local guys. We don't want to impact the small local operators right now.
LISTNUM 1 \l 1191 Now, five years from now, three years from now, if they become healthy and they have much different cost structures or it is a different environment, we may be back to amend our application and say, we think there will be a minimal impact if we are able to do this because there is a different business model.
LISTNUM 1 \l 1192 But if you ask us today as we apply, and you look at the Canadian broadcasting system where the maximum impact is and the minimum impact, I think we have to respect the territory of the small local broadcasters and their limited local advertising revenue pie and allow them to exist in the model they have.
LISTNUM 1 \l 1193 THE CHAIRPERSON: So if we say, yes, approved, conditional of having local programming, local news equivalence to CTV or so, you pack your bags and don't launch your program, your network?
LISTNUM 1 \l 1194 MR. BITOVE: It might mean that. I think that if you are doing local news you have got to get much more aggressive into local advertising and local programming. I mean, it bifurcates itself. That is not to say there aren't some national advertisers that won't just buy for efficiency and spread it around on everything, but it is a different model from how we constructed this application.
LISTNUM 1 \l 1195 THE CHAIRPERSON: You know, I appreciate your pointing out the need for HD programming in Canada and also that there will be a void or else there will be a massive U.S. offering and a lack of Canadian offering and that you want to position yourself for that. And notwithstanding that we said transition to digital is in 2011 and may actually be driven earlier because of the earlier U.S. conversion. I see all of that.
LISTNUM 1 \l 1196 But then the next step of sort of freeing you from this, that is why my question. If we said, yes, we appreciate what you are doing, but we can't let you get off the hook on local programming and local news, it is something you want to reflect on because this is a very big give you are asking here.
LISTNUM 1 \l 1197 MR. BITOVE: Okay.
LISTNUM 1 \l 1198 THE CHAIRPERSON: Okay, Mr. Katz, your turn.
LISTNUM 1 \l 1199 COMMISSIONER KATZ: Thank you, Mr. Chairman.
LISTNUM 1 \l 1200 I just want to pick‑up on one thing on the previous discussion and then we will go into the financial piece of it.
LISTNUM 1 \l 1201 If I look at your reply dated February 7, 2008 and look at paragraph 28, there is a statement in there that I just need some clarification on. And it reads:
"Contrary to what some interveners have suggested, our proposal not to do significant amounts of local programming in each of the eight markets for which HDTV Networks seeks licences is not contrary to the spirit or the letter of the Broadcasting Act." (As Read)
LISTNUM 1 \l 1202 When I look at the Broadcasting Act, and in fact you quoted it in paragraph 63 of your evidence, there is a sub clause 3(1)(i)(ii) that says:
"It is hereby declared, as the broadcasting policy for Canada, that the programming provided by the Canadian broadcasting system should be drawn from local, regional, national and international sources." (As Read)
LISTNUM 1 \l 1203 It doesn't say "or" it says "and." That, to me, is the letter of the law. And yet you are saying it is not contrary to the spirit or the letter. Can you elaborate?
LISTNUM 1 \l 1204 MR. BITOVE: Well, we didn't say there was absolutely no local programming. For instance, if there is a major issue, let us take the ‑‑ it didn't happen in Halifax ‑‑ but the Bathurst, New Brunswick basketball team accident that happened. I mean, we would have cameras there and fill reports and be providing it.
LISTNUM 1 \l 1205 And let us say there was an emergency type situation in Winnipeg. As Mr. Hoover reiterated, we could provide camera and local content to the citizenry in terms of what is required. What we are not building, though, is a schedule that has regular, local programming blocks in them. We just think that that is the domain of the small local broadcasters and we don't want to impact them.
LISTNUM 1 \l 1206 MR. BUCHAN: Mr. Katz, if I could just jump in to quote from the Broadcasting Act as well. The reference that you have read in 3(1)(i)(ii) is a reference to the system overall, not to each individual licensee. And you have read it correctly, but the word is "system" not each individual broadcaster.
LISTNUM 1 \l 1207 If I could take you to section 5(2), it says:
"The Canadian broadcasting system should be regulated and supervised in a flexible manner that.."
and then it goes down to:
"..(c) is readily adaptable to scientific and technological change; (d) facilitates the provision of broadcasting to Canadians; (e) facilitates the provision of Canadian programs to Canadians; and (f) does not inhibit the development of information technologies and their application or delivery of resultant services to Canadians." (As Read)
LISTNUM 1 \l 1208 So, you know, you can take these objectives in the Broadcasting Act and quote them one way or the other, but you started with a reference to the system, and I think what Mr. Bitove is suggesting, that as technology changes, the response to technology and the response to consumer demand changes and this application has been designed in a way to bring high‑definition television to Canadians and high‑definition Canadian programming to Canadians in an attempt to close that gap and that is the attempt.
LISTNUM 1 \l 1209 It is certainly designed and built within the Broadcasting Act and the Broadcasting Regulations. The whole issue of the trade off between local programming and local advertising, Mr. Bitove has already spoken to that and I know you will be hearing from Mr. Johnson about the question about impact on other broadcasters national and local. But we started with an objective in section 3 that relates to the system, not to each individual broadcaster.
LISTNUM 1 \l 1210 THE CHAIRPERSON: If I can just interject. You seem to use the terms local news and local content interchangeably. Presumably, local programming and local content doesn't necessarily have to be news?
LISTNUM 1 \l 1211 MR. BITOVE: Correct.
LISTNUM 1 \l 1212 THE CHAIRPERSON: And you have no plans in either, if I understand you.
LISTNUM 1 \l 1213 MR. BITOVE: No, correct.
LISTNUM 1 \l 1214 THE CHAIRPERSON: You will broadcast local news if they are relative, obviously, because ‑‑
LISTNUM 1 \l 1215 MR. BITOVE: Correct.
LISTNUM 1 \l 1216 THE CHAIRPERSON: ‑‑ if it is a national story, like you mentioned a disaster in Halifax or something, you would put it on. But neither local programming nor local news, you application as it stands right now, sees you playing a role in it?
LISTNUM 1 \l 1217 MR. BITOVE: Yes. And I think Mr. Hoover describes it best where he says, you know, it is a bottom‑up local to national news that there will be local content that all Canadians will share an understanding, you know, what is happening.
LISTNUM 1 \l 1218 I think also you have to remember, and this is where we have to do a balancing act, you know, some of the largest Canadian associations and production companies, it kind of falls where who is master, who are you trying to serve in this. And the more we spend on local the less we have for Canadian drama, whereas we built a programming schedule more built on Canadian drama and the types of things that the major associations are crying out for where they need help. So that was part of the balancing act as well.
LISTNUM 1 \l 1219 MR. HOOVER: The only other comment to coattail on John's comment with respect to dramatic production, we will be soliciting and working with producers across the country and many of those producers will wish to produce dramatic programming that reflects and tells local stories. It is just that those local stories will then shared on a national basis.
LISTNUM 1 \l 1220 So again, it is more of a bottom‑up type of localism, if you like where instead of taking a local story and only sharing it back into that local community, we hope to share that story on a national basis and some of those will be through dramatic productions.
LISTNUM 1 \l 1221 COMMISSIONER KATZ: But picking up on that same topic, the regulatory bargain, if I can call it that, that you are looking at balancing is local advertising and local content as opposed to the package, the broadcasting system, where there are obligations and there are commitments and benefits that ascribe to all broadcasters and goes beyond just local for local, there is a package there as well. You are just taking two pieces of it and saying I won't do this and I won't do this.
LISTNUM 1 \l 1222 MR. BITOVE: No, I don't totally share that thought, Mr. Vice‑Chair. I think what we are saying is our definition of local programming may be different from how people understood local programming 10 years ago. But the most important thing when it comes to a dedicated block on a schedule called local programming, traditionally that has been setup there with a local revenue source attached to it and we didn't build our schedule that way.
LISTNUM 1 \l 1223 So within the fundamentals of the Broadcasting Act there will be localism in terms of what we are doing. As to traditionally how you have seen a network licence and what you call local programming and the quid pro quo of local revenue that goes with that, we are not going there, we have constructed this differently.
LISTNUM 1 \l 1224 COMMISSIONER KATZ: If I can take you to paragraph 31 I guess of your reply as well. And I guess that starts to lead into the financial situation. You actually commented you find it surprising conventional broadcasters would put forth a study that would suggest their stakeholders' intent to incur losses of some $1.3 billion over the next seven years.
LISTNUM 1 \l 1225 When I look at your financial statements that you filed as part of your initial application, and it may have changed since then, if I read this correctly, and I think it is Appendix 4(a), there is accumulated loss of $169 million or roughly that. So it is not surprising that there are losses being incurred by the industry, not just the existing conventional, but even yourselves as you go into this opportunity.
LISTNUM 1 \l 1226 MR. BITOVE: I believe there is a difference between a start‑up and an ongoing structure in a business, and most of our losses could be attributed to start‑up as opposed to the viability of the business.
LISTNUM 1 \l 1227 COMMISSIONER KATZ: How sensitive is this profit and loss statement to revenue variances if, for example, there was a 10 per cent loss in revenue or a 20 per cent loss in revenue, how sensitive is this financial and would it still be viable?
LISTNUM 1 \l 1228 MR. BITOVE: Well, I think like any other business, you have to make the corresponding adjustments everywhere on the line ends at a business plan, you know, if you have a softer advertising season or stronger advertising season. So it is no different than anything else I am involved with.
LISTNUM 1 \l 1229 COMMISSIONER KATZ: When I look at the letter that accompanied your application from ZenithOptimedia, and I will give you a minute to find it, it was signed by Sunni Boot on November 28, 2006 as part of your evidence. There is references here to your forecast, specifically a comment in the fourth paragraph down regarding the $3 million of gross national advertising revenue in the first year, which is stated as an accurate reflection of how much HDTV can sell in the first year.
LISTNUM 1 \l 1230 When I drop down to the fifth paragraph, and I will read it just for clarity:
"With respect to projected revenues beyond the first year we believe that if HDTV is able to improve their programming line‑up.."
"..through the addition of best‑in‑class content.."
a challenge for a new start‑up, as you say.
"..and if the television advertising revenue remains constant or continues to grow.."
And I note that Ken Johnson in his opening remarks today talked about forecast of projected national advertising budget, and I will leave the thought, if you would tell us what your forecast assumptions were going up seven years I would appreciate it.
"..then the advertising revenue growth rates presented by the company may be achievable." (As Read)
LISTNUM 1 \l 1231 There are a couple of caveats in there and a couple of very very bold statements and subjective statements as well. And I don't see Sunni here either. Can you talk to that and give us some degree of assurance that you can develop a best‑in‑class content in the timelines that you have identified here and perhaps she implied by improving the programming, which may suggest that the programming that you initially contemplated is not going to generate that revenue base? A lot of questions there.
LISTNUM 1 \l 1232 MR. BITOVE: One of my cohorts will do programming, the other will do revenue.
LISTNUM 1 \l 1233 MR. JOHNSON: I think it is important, when you are evaluating the financial health of national advertising revenues, to consider both parts of the pie, the conventional side of the pie and the specialty revenue side of the pie.
LISTNUM 1 \l 1234 Agencies, when they work with our advertisers to form marketing plans, form a marketing plan, they do not predetermine revenues going to either conventional or specialty. The client gives the agency the amount of money and they go to the market and see how the market reacts to the money they have.
LISTNUM 1 \l 1235 When we took a look at the last five years of national advertising revenues as published by the CRTC, we saw that there was a growth rate on average of 6.4 per cent.
LISTNUM 1 \l 1236 When we wanted to see the impact that we would have over our seven‑year licence term ‑‑ and, again, this is fairly consistent throughout our initial years as well ‑‑ we took a very conservative approach and estimated a two per cent growth rate for the seven‑year term of our licence.
LISTNUM 1 \l 1237 Interesting to note, the two per cent that we were using was even less than Mr. Armstrong's 2.4 per cent that the CAB used in their intervention.
LISTNUM 1 \l 1238 So, we believe that we've taken a very conservative approach to where the total national advertising revenues will grow over the next seven years.
LISTNUM 1 \l 1239 Again, we went back to our revenues and totalled that for the licence term, we found that we would be taking less than three per cent of national advertising revenues out of the pie.
LISTNUM 1 \l 1240 And, again, major broadcasters have attempted to get assets and build specialty and conventional for that reason, the national advertising pie has to be both parts.
LISTNUM 1 \l 1241 We've also taken a very conservative approach in ‑‑ three variables are used when you build a revenue model: your audience level, which is your inventory; your pricing level and, of course, your sell‑out or inventory usage levels.
LISTNUM 1 \l 1242 Optimedia did take a very realistic and conservative approach to audiences in our first year and as Sunni has said in that, that she feels they're achievable.
LISTNUM 1 \l 1243 They also provided us with a pricing range. We use the lower end of the pricing range, again, to be conservative and knowing that we would be up against specialty to get the majority of our revenues.
LISTNUM 1 \l 1244 And the reason we believe that is because our audiences and ratings will be similar to that of the specialty stations. What advertisers will be looking to us in opening years is for a cost‑efficient way to get a national footprint and to have a low maintenance buy, not unlike the specialties either where there is one bill and one invoice.
LISTNUM 1 \l 1245 The advertisers do not book the large networks for their cheap efficiencies or their easy maintenance of the buy, they book those stations for their top 20 programming, their large ratings and their vast reach.
LISTNUM 1 \l 1246 Again, one of the reasons we took a very conservative approach for the early years of our licence is that that would give us time for the public to find a station and accept what we're doing; certainly for our schedule to mature because it does take a while for the schedule to mature; and, thirdly, because advertisers are usually reluctant to use a new applicant until they have a history in the marketplace.
LISTNUM 1 \l 1247 So, we've purposely used conservative numbers in our early years to give us time to grow, give us time to expand.
LISTNUM 1 \l 1248 And, again, with those three variables, as I've said, we've used the lower end of the pricing range, so we've allowed ourselves a fair bit of time to grow our rates over our term as well as our audience over our term.
LISTNUM 1 \l 1249 We also did a check and balance I guess you'd call it for the seventh year of our term to see, you know, how we would relate to the marketplace as it stands today.
LISTNUM 1 \l 1250 We found that the audiences we had projected in our seventh year of our term were similar to those of OMNI and City, probably a little closer to City's audiences that they're doing today. The thing to note is that City has only five stations, or the old City I guess had five stations and we cover eight major markets. So, we believe that our audience growth is very attainable over the seven years.
LISTNUM 1 \l 1251 We've allowed quite a bit of room in our pricing as the term of the licence proceeds and, again, as I said in my opening, I have a bit of experience in sell levels of new entries into the market and I believe I've allowed more than enough sufficient growth to grow the business over the seven years with that variable as well.
LISTNUM 1 \l 1252 COMMISSIONER KATZ: So, you have assumed a two per cent projected national advertising growth rate over the seven‑year term annually?
LISTNUM 1 \l 1253 MR. JOHNSON: That's correct, which is less than, as I said, less than...
LISTNUM 1 \l 1254 COMMISSIONER KATZ: Have you looked at the growth rate of national advertising as between conventional and specialty?
LISTNUM 1 \l 1255 MR. JOHNSON: Well, again ‑‑
LISTNUM 1 \l 1256 COMMISSIONER KATZ: Are they both growing at the same speed or are they...
LISTNUM 1 \l 1257 MR. JOHNSON: Again, what we did and, again, we're after the full pie. That's what you have to consider when you're looking at national advertising revenues that it's not one or the other, it's both. Agencies do not pre‑determine where they're spending their advertising dollars.
LISTNUM 1 \l 1258 So, we looked at the total pie and the average over the last five years from the Commission's number was 6.4 per cent. And, again, cognizant of the fact that the growth rate may not remain at 6.4 per cent, we took a very conservative approach at two which was even less than the interventions mentioned it would be.
LISTNUM 1 \l 1259 So, I believe that we've allowed certainly a smaller growth rate in the national revenues, but if in fact it grows at what the interventions have said, there's even going to be a bigger pie and our three per cent will probably be ‑‑ or our less than three per cent will even be a little lower than that.
LISTNUM 1 \l 1260 So, we don't believe we're going to have an impact ‑‑ a significant impact on any one broadcaster as we go forward for the term of our licence.
LISTNUM 1 \l 1261 I don't know if you want me to speak to this now, but we've taken a similar approach with our audience estimates.
LISTNUM 1 \l 1262 And the example I'll use is that in our first year we've estimated our prime time audiences to be 6,000 audience, which is similar to specialities in their initial year.
LISTNUM 1 \l 1263 We took a look at the three metered markets, Calgary, Vancouver and Toronto, they're metered, and took a look based on BBM population estimates that those three markets would represent about 74 per cent of our audience. If you take 74 ‑‑ and I'm a numbers guy, so I might be moving a little quick ‑‑ but if you take 74 per cent of the 6,000, that means all we need to garner from three of the major markets in Canada is 4,500 people.
LISTNUM 1 \l 1264 Presently in that time period there's 965.2‑thousand people watching television. So, as you can appreciate, our impact on any one station or any one program is going to be very, very limited.
LISTNUM 1 \l 1265 COMMISSIONER KATZ: Okay. You filed this morning some additional cost I guess for priority programming. How does that mesh with this P&L and what does it make it look like?
LISTNUM 1 \l 1266 MR. BITOVE: It's a re‑allocation predominantly how we had news and documentaries in through our ‑‑ and I'll let Tecca or Ellen comment further ‑‑ but through our meeting with the various stakeholders, the guilds, the associations we took money ‑‑ some money that we had allocated for other news programming and put it more into drama.
LISTNUM 1 \l 1267 COMMISSIONER KATZ: Does this P&L change at all?
LISTNUM 1 \l 1268 MR. BITOVE: No, the P&L doesn't change, I believe the total, it's just how we allocated the programming costs within the old P&L to a revised P&L.
LISTNUM 1 \l 1269 COMMISSIONER KATZ: Okay. And the comment, or the question I asked earlier about sensitivity. If you missed your revenues by 10 per cent what would that do to the financials?
LISTNUM 1 \l 1270 And I guess I'll ask that question in the context of, the Chairman raised the question about analog distinct from digital. If this application was hypothetically approved but only for digital applications not for analog, it would certainly have an impact on your reach, obviously.
LISTNUM 1 \l 1271 MR. BITOVE: Yes, it would.
LISTNUM 1 \l 1272 COMMISSIONER KATZ: And on P&Ls as well.
LISTNUM 1 \l 1273 MR. BITOVE: Yes, it would.
LISTNUM 1 \l 1274 COMMISSIONER KATZ: And I guess the question is, to what extent?
LISTNUM 1 \l 1275 MR. BITOVE: Well, we'd have to re‑look at that. Obviously there'd be ramifications on the programming front if our revenue is reduced.
LISTNUM 1 \l 1276 COMMISSIONER KATZ: Have you done that analysis yet?
LISTNUM 1 \l 1277 MR. BITOVE: No, we haven't and we were hoping ‑‑ we were wondering if you'd ask the question and Ken said, I hope they don't ask the question because that's going to take a while.
LISTNUM 1 \l 1278 COMMISSIONER KATZ: I think it's important to have that information on the record.
LISTNUM 1 \l 1279 MR. BITOVE: Okay. We will do as best we can.
LISTNUM 1 \l 1280 COMMISSIONER KATZ: I do know, based on the CRTC records, there's roughly 3.9‑million analog subscribers in the markets you talked about and there's about 3.1‑million digital customers.
LISTNUM 1 \l 1281 So, you're looking at about a little less than 50 per cent of the market just for digital and HD is a fraction of that as well.
LISTNUM 1 \l 1282 MR. BITOVE: Correct.
LISTNUM 1 \l 1283 COMMISSIONER KATZ: If you can run these things based on the three scenarios of what you've asked for in your application, which I guess we have before us, if it was just digital and if it was just HD.
LISTNUM 1 \l 1284 MR. BITOVE: I think it's safe to assume it would be ‑‑ at least half the programming costs are going to go, the Canadian programming costs, but we'll try and vet it out and formally submit it to the Commission.
LISTNUM 1 \l 1285 MR. LYONS: Sorry, Mr. Commissioner, are you saying just HD or why the distinction between digital and HD?
LISTNUM 1 \l 1286 COMMISSIONER KATZ: Well, you've filed an application for HD programming.
LISTNUM 1 \l 1287 MR. LYONS: Right.
LISTNUM 1 \l 1288 COMMISSIONER KATZ: And from a broadcaster's perspective ‑‑
LISTNUM 1 \l 1289 MR. LYONS: Right.
LISTNUM 1 \l 1290 COMMISSIONER KATZ: ‑‑ the carriage of HD distinct from SD I guess ‑‑
LISTNUM 1 \l 1291 MR. LYONS: Right.
LISTNUM 1 \l 1292 COMMISSIONER KATZ: ‑‑ is an additional cost as well. So, we're looking at it from a cost perspective, from a systems perspective from the broadcasters as well.
LISTNUM 1 \l 1293 So, to download or to upload both in analog and in standard digital, as well as in HD, requires additional cost.
LISTNUM 1 \l 1294 MR. LYONS: Right. But if we're broadcasting in digital, I think ‑‑ well, obviously there's the three formats, analog, digital and HD, but HD is just a, you know, increased resolution version of digital, it's still digital, but you would actually look at segmenting it all the way down to just HD?
LISTNUM 1 \l 1295 COMMISSIONER KATZ: Well, I mean, we'll ask the question of the broadcasters when they come up here.
LISTNUM 1 \l 1296 MR. LYONS: Right.
LISTNUM 1 \l 1297 COMMISSIONER KATZ: If it's just a matter of just segmenting it and there's no additional cost, also good to know; or is there initial cost associated with SD distinct from HD?
LISTNUM 1 \l 1298 MR. LYONS: Right.
LISTNUM 1 \l 1299 MR. BITOVE: I think, you know, Mr. Vice‑Chair, because you've raised a sensitive point, if you look at some of the existing BDUs, you know, their carriage of analog, SD and HD, you know, is all over the place.
LISTNUM 1 \l 1300 You have some markets where you have, you know, nine or 12 CBS stations showing up on the dial in various formats. So, you know, the uploading and downloading and how that's done is something that we can work with the BDUs to minimize the impact.
LISTNUM 1 \l 1301 The most important thing is the train that, you know, is allocated in market, out of market through those three spectrums that you spoke of and how it's divvied up.
LISTNUM 1 \l 1302 COMMISSIONER KATZ: Okay. Is there a time line how long it will take you to do that, just so we can get a sense ourselves? Are we looking at days, weeks?
LISTNUM 1 \l 1303 MR. BITOVE: What we will do, I think with your indulgence is, you know, by the time we wrap up today after ‑‑ you know, whenever it is, we'll kind of ‑‑ we'll undertake ‑‑ we're going to try and give you an initial answer by wrap‑up tomorrow.
LISTNUM 1 \l 1304 COMMISSIONER KATZ: Okay, thank you.
LISTNUM 1 \l 1305 Those are my questions, Mr. Chairman.
LISTNUM 1 \l 1306 THE CHAIRPERSON: And can you just clarify, so I understand it and the Secretary, what you asked Mr. Bitove to provide by tomorrow.
LISTNUM 1 \l 1307 COMMISSIONER KATZ: Certainly. I asked him to take a look at the profit and loss statement, Appendix 4A I guess it is, and to re‑run those numbers with an assumption that the reach of his basic customers will strictly be digital only and the second one being strictly HD only.
LISTNUM 1 \l 1308 THE CHAIRPERSON: Okay, perfect. Thank you.
LISTNUM 1 \l 1309 Michel.
LISTNUM 1 \l 1310 COMMISSIONER ARPIN: Thank you very much, Mr. Chairman.
LISTNUM 1 \l 1311 Mr. Bitove, I will start my first question based on previous discussions that you had with either the Chair or with Mr. Katz and sometimes it is only for a matter of clarification, but on a few occasions you spoke about small broadcasters.
LISTNUM 1 \l 1312 Now, since you are planning to broadcast in mainly major markets, who are you contemplating are small broadcasters in these markets?
LISTNUM 1 \l 1313 MR. BITOVE: Well, I mean, the issue that comes to my mind is like Sun TV which isn't a small broadcaster in the total scheme, but in the English market is a small broadcaster.
LISTNUM 1 \l 1314 Corus has some small stations, of course there are ‑‑
LISTNUM 1 \l 1315 COMMISSIONER ARPIN: But they are not in Toronto, they are in Peterborough and Kingston, say.
LISTNUM 1 \l 1316 MR. BITOVE: Yeah, but there will be spill from the signal, everything else. I mean, there's the big two and there's, you know, a few others, but as Mr. Hoover continually points out, there's less and less.
LISTNUM 1 \l 1317 COMMISSIONER ARPIN: Mr. Hoover, could you ‑‑ explained that you could do local programming from distance and he gave some examples, particularly regarding news and you added that it could be for other content.
LISTNUM 1 \l 1318 Those local components, will they be only available in the locality they have been shot, or will they be available throughout all the whole network?
LISTNUM 1 \l 1319 MR. HOOVER: No, that's the point, they'll be shared on a national basis. And if I can just go back for a moment to the tragic bus accident with the school kids in New Brunswick.
LISTNUM 1 \l 1320 The follow‑up to that story was that there's a move to examine whether school kids should ride in those type of vehicles for sporting events. That to me sounds like a solid idea for a documentary.
LISTNUM 1 \l 1321 So, if we take that tragic incident and commission a documentive program on that subject, we can share that on a national basis. Now, effectively that's a local story, but we've elevated it and people residing in British Columbia will have access to that same information.
LISTNUM 1 \l 1322 And that's what I meant by taking a local issue or something that originates in a very local manner and then sharing it on a national basis.
LISTNUM 1 \l 1323 And so to me I think that's a very worthwhile programming concept and meets today's view of local as it were.
LISTNUM 1 \l 1324 COMMISSIONER ARPIN: What you are really saying is you are going to be interested in local events who have a national impact or brought to a national focus. So, you are making a distinction between really local local issues which have no connotations and no relation for the national audience versus local issues or local events that could have an impact or an interest for national viewers. Am I right?
LISTNUM 1 \l 1325 MR. HOOVER: Generally yes. You know, I don't think we would perhaps cover the local City Council election or something of that nature, that's being very well covered now by community cable channels and services of that nature.
LISTNUM 1 \l 1326 But there are very few significant events that take place in Canada, I believe, that aren't of interest to people beyond the borders of a given city and, so, it's that type of material that we're talking about.
LISTNUM 1 \l 1327 But true localism, because we're not able to segment our signal and reflect it back only to that community, we would leave to the domain of the community service channels and the local there.
LISTNUM 1 \l 1328 COMMISSIONER ARPIN: And the local broadcaster?
LISTNUM 1 \l 1329 MR. HOOVER: And the local broadcaster. Although it's my understanding that they're not doing much of that programming themselves.
LISTNUM 1 \l 1330 COMMISSIONER ARPIN: At least on the news level, they are still doing local news.
LISTNUM 1 \l 1331 MR. HOOVER: I believe some are, yes.
LISTNUM 1 \l 1332 COMMISSIONER ARPIN: All right. Mrs. Crosby, obviously not as Mr. Bitove, that you had ‑‑ you come up this morning with a lot of people who have recently through the synergies been made available and, so, you've been able to recruit. So, obviously that surely helped you beef up your presentation and we heard Mrs. Crosby earlier this morning describing the re‑allocation ‑‑ the programming re‑allocation that you have made.
LISTNUM 1 \l 1333 How does that compare with the original plan and why should the Commission take that into consideration because it is an application that was standing by itself and now that you have made some amendments, maybe through re‑allocation, but it is a new ball game that we have before us.
LISTNUM 1 \l 1334 No, you don't agree with that?
LISTNUM 1 \l 1335 MR. BITOVE: Well, before I turn it over, yes, we're lucky to have these people because they have certainly beefed up our team.
LISTNUM 1 \l 1336 Secondly, programming by its very nature changes flavour of the month or the year or the season.
LISTNUM 1 \l 1337 COMMISSIONER ARPIN: Yes.
LISTNUM 1 \l 1338 MR. BITOVE: So, you know, you learn more and the schedule that, you know, we've had a year ago obviously is subject to change.
LISTNUM 1 \l 1339 The most important thing though was in response to the interventions and the meetings with the stakeholder groups, listening to them and responding. So, you know, I think it's better for me to turn it over to Tecca to discuss your question.
LISTNUM 1 \l 1340 MS CROSBY: Yes, I think it's just a better ball game now, not a new ball game.
LISTNUM 1 \l 1341 When I was brought in to look at the application I did go to the places that I discussed today; namely, the hours of priority programming and the script resources and also trying to bring clarity to what monies were available for Canadian programming. That was important to me and, conversely, I think it's important to this application, and all we really have done is to flush out and put numbers to those efforts and, in particular, to increase the efforts around priority programming hours.
LISTNUM 1 \l 1342 The give, if that's what you can call it, of six hours as opposed to eight hours for the first three years of the licence is mainly driven from the fact that should the CTF rules stay the same, obviously a very important part of Canadian programming financing, HDTV Networks will not have historical access to the Fund.
LISTNUM 1 \l 1343 These rules could be very different by the time HDTV Networks starts, but the feeling was and we discussed with the stakeholders, that if we could have a little bit of flexibility around the eight hours that we could make good in the second part of our licence term.
LISTNUM 1 \l 1344 COMMISSIONER ARPIN: Just coming out from a week of public hearing on CTF and what you said, obviously, is that you will require some historical evidence before being able to access the significant money, but along the road over the years to what extent are you dependent on CTF financing?
LISTNUM 1 \l 1345 MS CROSBY: Well, I mean, we can't be dependent at the beginning and I think the real challenge will be the beginning.
LISTNUM 1 \l 1346 Again, if the rules are the same, and I don't know, there have been no new entrant national broadcasters per se to even discuss with the CTF the possibility of, you know, some form of access for a new entrant versus an incumbent broadcaster who just hasn't been doing the level of Canadian production to get historical access.
LISTNUM 1 \l 1347 I think it's fair, and I've said to John, that I think the first couple of years will be expensive to HDTV in terms of making Canadian programming and developing Canadian programming.
LISTNUM 1 \l 1348 There are other broadcasters that we can partner with, particularly the pay services that don't exhaust the audience in terms of their reach and that will bring very viable audiences to us as a conventional broadcaster.
LISTNUM 1 \l 1349 I also think it's fair to say that Canadian producers have really come of age. You've all read that various Canadian programming has now sold into Canadian networks, maybe aided and abetted by the writers' strike but, nevertheless, we have very sophisticated producers who can put together international financing packages that don't rely completely ‑‑ at all on the CTF.
LISTNUM 1 \l 1350 So, it's my hope that this organization has luck with financing and projects and ratings and audiences and they will be able to access CTF with other broadcasters when the time comes.
LISTNUM 1 \l 1351 COMMISSIONER ARPIN: If the Commission was to grant you a licence and, say, the decision comes up within the next ‑‑ well, before summer, when do you think you will be able to be implemented?
LISTNUM 1 \l 1352 MR. BITOVE: It's our hope to be on the air within a year of being granted the licence.
LISTNUM 1 \l 1353 COMMISSIONER ARPIN: So, that is going to be 2009.
LISTNUM 1 \l 1354 MR. BITOVE: Yes, sir.
LISTNUM 1 \l 1355 COMMISSIONER ARPIN: Say, fall 2009, will be about 18 months before ‑‑ no, two years before the date the Commission has picked out for everybody to move from analog to digital.
LISTNUM 1 \l 1356 MR. BITOVE: It will be for sure after the U.S. shut‑off date.
LISTNUM 1 \l 1357 COMMISSIONER ARPIN: Yes.
LISTNUM 1 \l 1358 MR. BITOVE: So, when that analog spectrum is supposedly out there. You know, we're trying to deal with the transition and I think it's very important for the Commission to understand those spots on the dials especially for conventional ‑‑ you know, for broadcast network are very important, which is another reason why the whole analog piece, Mr. Vice‑Chair, is important to us in terms of where we're placed.
LISTNUM 1 \l 1359 If we're down at 703, we've got a problem. If we're in, you know, like the Toronto market 26, which is where Industry Canada has allocated us on the digital spectrum dial, we can make a viable go of it.
LISTNUM 1 \l 1360 COMMISSIONER ARPIN: But within two years after you had launch, the scenario that has been put out by the Commission in its review of over‑the‑air television last May has set the date of August 31st, 2011 for the switch‑over from analog to digital.
LISTNUM 1 \l 1361 By that time, so you will have been in operation for two years, but by that time I guess all the other networks will also have made that transition, it's at least the plan, we are going to hear more from them through renewals, but at that time what will be the main characteristics of your service, say, vis‑a‑vis CTV and vis‑a‑vis Global?
LISTNUM 1 \l 1362 MR. BITOVE: Are you talking ‑‑
LISTNUM 1 \l 1363 COMMISSIONER ARPIN: Programming.
LISTNUM 1 \l 1364 MR. BITOVE: Well, I mean, I think I'll turn it over to the ladies and Mr. Hoover to bring you ‑‑ to keep you current ‑‑ you know, to talk about the programming.
LISTNUM 1 \l 1365 I just want to understand one aspect of your question and, that is, there's kind of three dates in this whole digital transition spectrum that are relevant. The U.S. shut‑off date because some of our BDUs and DTHs have allocated spectrum to them on their dial. The Canadian, the 2011 date, but we also have to remember there's that 2013 date where, from what I understand, analog carriage up until that point in time is still going to be allowed to be carried on BDUs.
LISTNUM 1 \l 1366 So, there's lots of battles over spots on the dial that we have to be cognizant of.
LISTNUM 1 \l 1367 COMMISSIONER ARPIN: Yes, but I'm not talking dial on the BDUs which obviously the 2013 date is the migration date for everybody, so whatever special pay services, community channel and over‑the‑air services will migrate out ‑‑ totally out of the BDU ‑‑ analog BDU distribution.
LISTNUM 1 \l 1368 But I'm talking here, I'm talking about your over‑the‑air plans, competing against over‑the‑air broadcasters in the digital world as of September 1st, 2011.
LISTNUM 1 \l 1369 MR. BITOVE: Okay. I think it's best if I turn it over to Ms Baine.
LISTNUM 1 \l 1370 MS BAINE: Thanks, John.
LISTNUM 1 \l 1371 I think what we've planned so far for our programming for HDTV Networks is, and we've concentrated on is the diversity of the programming that we can bring.
LISTNUM 1 \l 1372 We've concentrated on three main points. As we said in our opening remarks, programming from around the world that doesn't necessarily make it to conventional television right now and we have already started sourcing programs that are available in HD from countries around the world; our news program which will be different from CTV and CanWest as we probably talked about ad infinitum already; and our ability to encourage productions from our Canadian producers that are innovative and different than things that might go to the traditional broadcasters right now.
LISTNUM 1 \l 1373 The biggest point on that being that they come to us right away, we can say yes or no right away if it's something we want to do for HDTV Networks rather than having to check with multiple stakeholders from all the other sources that we might have to consider if we were one of the larger broadcasters.
LISTNUM 1 \l 1374 COMMISSIONER ARPIN: You did mention, Mr. Bitove, I think the first question the Chairman asked you, you said that you were seeing yourself somehow as a specialty services or a specialty over‑the‑air services.
LISTNUM 1 \l 1375 One of the questions that has been raised by some of the interveners, but we may address it at this stage also to better understand your programming strategies, why haven't you applied for a specialty services ‑‑ for a Category 2 specialty service?
LISTNUM 1 \l 1376 MR. BITOVE: Thank you, Mr. Vice‑Chair.
LISTNUM 1 \l 1377 When I was referring to specialty it was more or less the advertising, the advertising base and where the dollars are.
LISTNUM 1 \l 1378 I think there's predominantly five reasons why we didn't seek a Category 2. First of all, we want to be free. Even on, you know, whether it's basic cable, DTH, however, we want to be a free service.
LISTNUM 1 \l 1379 Secondly, we want to be over‑the‑air because there's a portion of Canadians who don't have basic service through a BDU.
LISTNUM 1 \l 1380 Thirdly, we want to be general programmers. We want to have, you know, to allow the creative, no creative limits in terms of what we put before the Canadian people, other than of course the standards and the other general provisions that go with any programming, but we want to be a general programmer.
LISTNUM 1 \l 1381 Fourth, we'd like the simulcast and substitution rights that are allowed and given by the Commission with respect to the over‑the‑air stations.
LISTNUM 1 \l 1382 And, fifth, as well, the elements of must carry, because we think that reach is very important to us. So, whether it's a BDU, a DTH or an over‑the‑air signal, we want to be able to maximize the viewership that this gets and, in turn, the benefit from that is the dollars that get plugged into the Canadian production community by having those five. We want to maximize our audience.
LISTNUM 1 \l 1383 THE CHAIRPERSON: I think, Mr. Bitove, it's time for a health break. Let's take a 10‑minute health break.
LISTNUM 1 \l 1384 MR. BITOVE: Thank you, Mr. Chair.
LISTNUM 1 \l 1385 THE CHAIRPERSON: And we'll continue.
‑‑‑ Upon recessing at 1059 / Suspension à 1059
‑‑‑ Upon resuming at 1115 / Reprise à 1115
LISTNUM 1 \l 1386 THE CHAIRPERSON: Before we broke, Mr. Bitove, you gave five reasons. Maybe you want to repeat those. In the rush to the washroom I only managed to take down four.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1387 MR. BITOVE: You might have got confused on the first one, because even when we were discussing ‑‑ first of all, we want to be free, which means included with the basic service of a BDU, whether by cable or satellite.
LISTNUM 1 \l 1388 Second, we want to be over‑the‑air because there is a percentage of Canadians that don't use a BDU.
LISTNUM 1 \l 1389 Third, we want to be a general programmer. You don't have a category to license, from what I understand, that allows for general programming.
LISTNUM 1 \l 1390 And we want to be able to maximize our creativity within the standards of the industry.
LISTNUM 1 \l 1391 Fourth, the simulcast and substitution rights that are permitted with over‑the‑air.
LISTNUM 1 \l 1392 Fifth, the must carry, which is also included.
LISTNUM 1 \l 1393 I think just in response as well, it's funny because the way the questioning started, the genesis of this application was responding ‑‑ and I know there was different leadership and people involved in the CRTC then, but there seemed to be a disappointment at the lack of pickup with the Canadian broadcasting system in the conversion, so what we tried to do was respond to the Commission's request for people to respond with the conversion to HD and we had to construct this appropriately.
LISTNUM 1 \l 1394 So I think part of what I wanted you to understand is this was based on a response that we had heard loud and clear coming from Hull.
LISTNUM 1 \l 1395 As well, from what we understand it is not the Broadcasting Act as much as the TV Policy that has the quid pro quo about local programming: If you don't do local programming you can't go for local revenue. So we were cognizant of that when we constructed the application.
LISTNUM 1 \l 1396 We also were cognizant of there is ‑‑ Mr. Arpin, that's why, excuse me, I wasn't sure where you were going.
LISTNUM 1 \l 1397 But everyone acknowledges there is going to be four or five years of confusion in this transition from analog to digital and it seems as though some services have analog, but then they are given SD, standard definition, and HD spots on the dial. Some are digital and from what I understand some of the BDUs have said "Well, even though there is only going to be digital signals coming from the U.S. we are still going to give them analog spots on the dial.
LISTNUM 1 \l 1398 We just think it is really important for you to understand that, as I said, you could take a BDU in a major market like Toronto and CBS has nine spots, three or four in analog, two or three in SD and two or three in HD.
LISTNUM 1 \l 1399 So it's almost if you are broadcasting either analog or digital for general, other than the specialty, you kind of get analog, digital and high def go together in terms of what it is you are trying to do.
LISTNUM 1 \l 1400 My only other point was, you know, with respect to local programming, and that is that we see ourselves as doing local programming again, it's just not a dedicated box on our schedule on a weekly basis in terms of what we do.
LISTNUM 1 \l 1401 Thank you.
LISTNUM 1 \l 1402 COMMISSIONER ARPIN: Thank you, Mr. Bitove, for the clarification.
LISTNUM 1 \l 1403 Obviously you are seeing it from the perspective of the broadcaster. If you were a cable operator or an MDS operator you will see exactly what you have said, you have three spots on the dial, one analog, one SD, and one HD, and eventually, and the sooner the better, they want you to vacate the analog spot and eventually I would suspect they will want to have everybody in HD.
LISTNUM 1 \l 1404 So that might be the source of the confusion. It shows that there are really two sides to the same coin here.
LISTNUM 1 \l 1405 Now, one of your objectives, the first one, is to be free. As you know ‑‑ I don't want to open up a can of worms here and a first salvo at the public hearing that we are going to have an April, but on the table there is fee‑for‑carriage.
LISTNUM 1 \l 1406 Are you telling the Commission that you will decline fee for carriage if the Commission was to agree with the over‑the‑air operator?
LISTNUM 1 \l 1407 MR. BITOVE: I think I own Mr. Buchan a dinner on this one.
LISTNUM 1 \l 1408 You know, we started constructing this application over ‑‑
LISTNUM 1 \l 1409 COMMISSIONER ARPIN: So you had an opportunity to rehearse the question?
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1410 MR. BITOVE: Exactly. When we built this a year and a half ago fee‑for‑carriage wasn't contemplated.
LISTNUM 1 \l 1411 I don't envy your position because you are continually trying to regulate and change a system.
LISTNUM 1 \l 1412 I think if you change the rules going forward we trust that you will be fair to everyone in terms of what they are doing. Obviously if fee‑per‑carriage has repercussions on more Canadian programming, or whatever else, you know, I'm sure there are going to be quid pro quos going forward.
LISTNUM 1 \l 1413 All I can tell you today is, we built this application not expecting or knowing at the time that the Commission may consider that pretty much the whole industry goes to some form of fee‑for‑carriage business. That's the best answer I can give right now.
LISTNUM 1 \l 1414 COMMISSIONER ARPIN: All right.
LISTNUM 1 \l 1415 You also said that you want to be over‑the‑air, but in some instances you have picked fairly low power frequencies to serve some of the markets, being available over‑the‑air but to a limited ‑‑ not to the whole market.
LISTNUM 1 \l 1416 MR. BITOVE: I think I will turn it over to our associates from DML who did all the work.
LISTNUM 1 \l 1417 COMMISSIONER ARPIN: All right.
LISTNUM 1 \l 1418 MR. PELSER: What we have done is, when we started the search for frequencies or channels, probably about two years ago, we were in an environment where Industry Canada is working on the post‑transition plan, we are presently in the transition plan. There are a number of ‑‑ a lot of allotments out there for existing broadcasters and what we did is, we went to the plan and basically found the best frequencies that were available at the time.
LISTNUM 1 \l 1419 The existing plan we are working under does put some limitations on power of stations, and the reason being is to incorporate both existing analog and digital stations for the transition plan. So we did end up with a number of lower‑powered stations, but that is to accommodate the present rules of Industry Canada.
LISTNUM 1 \l 1420 COMMISSIONER ARPIN: But what kind of an impact does the users of low‑power frequencies have on your business plan?
LISTNUM 1 \l 1421 MR. PELSER: If we look at some of the populations that we do cover in some of the major cities, we do, even with the low power, manage to cover some significant populations. I won't go through them, but for instance in Vancouver in the interference‑free area we still manage to cover two million people; in Winnipeg, where frequencies are much more available, we manage to cover about 900,000 people; some of the other markets, too, the populations are quite significant.
LISTNUM 1 \l 1422 That is one of the advantages of digital, is the fact that we can achieve a very similar coverage area with a much lower power.
LISTNUM 1 \l 1423 MR. LEWIS: If I could just add one point of clarification, the transitional policy is to take Industry Canada through August 31, 2011. Our startup date would be hopefully September 2009. In the course of going forward and building out this system there will be the final allocations of the permanent DTV frequencies in all of these markets. So it will be resolved for high power operation after 2011.
LISTNUM 1 \l 1424 MR. LYONS: Presumably that is another reason why the BDU carriage in analog is more important through the transition period and then once the transition period is over we can reallocate signal strength, perhaps up the power of all those transmitters we have after the transmission is over.
LISTNUM 1 \l 1425 So in this period of confusion it is important that we have maximum distribution.
LISTNUM 1 \l 1426 COMMISSIONER ARPIN: I'm told, and you even referred to it, Mr. Bitove, this morning in answering one of the questions, that your chosen frequency is 26 to serve Toronto.
LISTNUM 1 \l 1427 We are told by Industry Canada that channel 30 is a better frequency than channel 26.
LISTNUM 1 \l 1428 Do you have any comments to make on that?
LISTNUM 1 \l 1429 MR. LYONS: We started with 26. Basically the situation is, 26 works through transaction and then after transition you would have to switch to a different channel. So they recommended channel 30 which works both ways through, but there is some moving people out of that spectrum and some coordination that needs to take place. We are still working on that.
LISTNUM 1 \l 1430 So they have given us authority ‑‑ because actually 26 technically works but it's not as clean as 30, so we actually would hope to be on 30 at the end of today. We are just working on some coordination issues.
LISTNUM 1 \l 1431 COMMISSIONER ARPIN: All right. Now, back to programming issues, if I may.
LISTNUM 1 \l 1432 You were referred a few times to user‑generated content in some of your Canadian programming and I think Mr. Hoover explained how it could work.
LISTNUM 1 \l 1433 Bit will that user‑generated content be in HD format or could it be upgraded to an HD format? Obviously your whole presentation is predicated on being an HD network.
LISTNUM 1 \l 1434 MR. BITOVE: You know, it's our belief that there is going to be a transition in everything to high definition at some point, obviously through our transition period, as we even said, because we would have to upload or convert certain signals to HD. Our plan is for the user to ultimately, through the over‑the‑air, only get it in high definition or converted high definition, the various online forms. It is our preference to go that way, but until all the hardware catches up with it we are going to have to be able to adapt both ways.
LISTNUM 1 \l 1435 Sorry, Doug.
LISTNUM 1 \l 1436 MR. HOOVER: Just to add a footnote, I think it will be a prerequisite of programming that we commission and programming that we purchase from freelance producers to be in HD. Be it local programming or dramatic programming, it will all be required to be in HD in order to meet our service.
LISTNUM 1 \l 1437 COMMISSIONER ARPIN: Ms Crosby, in her earlier reply, you talk about foreign program supply, saying that not only in the U.S. you could find some programming but mainly you will be contemplating some other foreign sources.
LISTNUM 1 \l 1438 There are already some specialty services that are providing Canadians with, say, U.K. programming and what will be the impact of your plan on those specialty services?
LISTNUM 1 \l 1439 MS BAINE: I will take that, Mr. Commissioner.
LISTNUM 1 \l 1440 There are services that are already doing that, but the difference between them and us is that we are a free over‑the‑air broadcaster and there is a lot of those programs that could be made available to conventional television viewers that right now are only available to people who can afford or who choose to buy specialty channels.
LISTNUM 1 \l 1441 COMMISSIONER ARPIN: Will you be looking at foreign programming in other languages than English?
LISTNUM 1 \l 1442 MS BAINE: Yes, absolutely. We are looking at programming from around the world.
LISTNUM 1 \l 1443 For example, the South Asian programming that I referenced in our opening remarks would be partly in English, partly in Hindi, or whatever language they chose to do it in.
LISTNUM 1 \l 1444 COMMISSIONER ARPIN: What will be the portion of that foreign origin? Will it cater to the ethnic audience or will it cater to the general public?
LISTNUM 1 \l 1445 MS BAINE: In that particular portion right now we have about four hours of programming that would be tailored to that ethnic audience and whether they choose to do it in English or in a language that they choose would be sort of up to them.
LISTNUM 1 \l 1446 We have also sourced things like movies which are available in French, Italian, from around the world that could be made available in high definition and obviously we would caption them or closed caption them.
LISTNUM 1 \l 1447 COMMISSIONER ARPIN: Or even dub?
LISTNUM 1 \l 1448 MS BAINE: We could, yes.
LISTNUM 1 \l 1449 COMMISSIONER ARPIN: Yes.
LISTNUM 1 \l 1450 What you mean by "up to them"? Aren't you the programmer? You just said when you have South Asian content whether it will be an English or Hindi will be up to them. I don't quite understand.
LISTNUM 1 \l 1451 MS BAINE: When they do programming that is specific to that market ‑‑ when you talk about ethnic programming sometimes they like to do it in English because it is a language that they have come to speak when they come to ‑‑ or French when they come to Canada, but sometimes they also like to do it in ‑‑ they access programming from India or Pakistan or wherever, they are accessing programming that comes in those languages.
LISTNUM 1 \l 1452 COMMISSIONER ARPIN: You are referring here to your association.
LISTNUM 1 \l 1453 MS BAINE: Yes.
LISTNUM 1 \l 1454 COMMISSIONER ARPIN: To ATM.
LISTNUM 1 \l 1455 MS BAINE: Yes. I mean they are the experts and far be it from me to tell them what to do.
LISTNUM 1 \l 1456 COMMISSIONER ARPIN: ATM will be the one that will provide you with the programming?
LISTNUM 1 \l 1457 MS BAINE: Yes.
LISTNUM 1 \l 1458 COMMISSIONER ARPIN: That's what you have in mind?
LISTNUM 1 \l 1459 MS BAINE: Yes.
LISTNUM 1 \l 1460 COMMISSIONER ARPIN: Will it be programming that it is already carrying on one of its services or it has other sources? I know Mr. Sur Sagar, he probably has ‑‑
LISTNUM 1 \l 1461 MS BAINE: I think he has his own ideas of what ‑‑
LISTNUM 1 \l 1462 MR. BITOVE: You answered it.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1463 COMMISSIONER ARPIN: In asking the question I answered it. I see.
LISTNUM 1 \l 1464 MS BAINE: Yes. Obviously some of it would be newer because they would have to produce it in high definition.
LISTNUM 1 \l 1465 COMMISSIONER ARPIN: Any other relationship with ethnic broadcasters other than ATN?
LISTNUM 1 \l 1466 MS BAINE: Not that we could speak of right now, but if we were lucky enough to get the licences we would obviously be approaching other people as well.
LISTNUM 1 \l 1467 MR. BITOVE: You saw that there is a letter of support from Corus and they have some ethnic programming as well that we have been having discussions with them.
LISTNUM 1 \l 1468 COMMISSIONER ARPIN: Yes. There is a letter from Telelatino and I think there is also a letter from Fairchild which are also capable of accessing some foreign programming.
LISTNUM 1 \l 1469 In you original application ‑‑ and I don't know if it is still the case today ‑‑ you have planned for 14 hours of barter programming.
LISTNUM 1 \l 1470 Is it still part of the program schedule?
LISTNUM 1 \l 1471 MS BLAINE: I'm sorry, 14 hours of...
LISTNUM 1 \l 1472 COMMISSIONER ARPIN: Barter programming.
LISTNUM 1 \l 1473 MS BLAINE: Oh, barter programming.
LISTNUM 1 \l 1474 Yes, it is part of the plan right now.
LISTNUM 1 \l 1475 COMMISSIONER ARPIN: It is. You gave examples of the type of barter programming that you were contemplating. I remember baby and things like that.
LISTNUM 1 \l 1476 Any religious programming that is contemplated?
LISTNUM 1 \l 1477 MS BLAINE: Doug...?
LISTNUM 1 \l 1478 MR. HOOVER: Not that I recall. And I believe most of the barter programming, if not all of it, is outside the normal broadcast day. It is beyond midnight or after midnight.
LISTNUM 1 \l 1479 COMMISSIONER ARPIN: And it does exist in HD, or by the time it will exist in HD?
LISTNUM 1 \l 1480 MR. HOOVER: Yes, I believe so.
LISTNUM 1 \l 1481 MR. BITOVE: I think, Mr. Commissioner and Commission, Doug made an important point, we are not putting it on unless in one way or the other it is HD in terms of our over‑the‑air stuff.
LISTNUM 1 \l 1482 I saw some of the interventions and what they were wondering and we just want to be clear that whether we ‑‑ our preference is to get original programming in HD, but if we have to convert it we will convert it so that it's in HD. It's not as good, but we are in a transition period.
LISTNUM 1 \l 1483 COMMISSIONER ARPIN: You spoke about priority programming and the table that you gave us this morning about the budget relocation between priority and non‑priority programming.
LISTNUM 1 \l 1484 Are you planning any children's programming per se?
LISTNUM 1 \l 1485 MR. BITOVE: I will let Ellen comment.
LISTNUM 1 \l 1486 MS BAINE: At the moment no, we are not, but that doesn't mean that we are not open to doing it. There doesn't seem to be a lot in high def at this particular moment, but it's not that we are not open to doing it if we could.
LISTNUM 1 \l 1487 MR. BITOVE: We originally had more children's programming in the grid. We have also found out from the advertising community that there isn't the same vibrancy for children's programming advertising as there was a few years ago and it's part of what we said earlier, programming will continue to change.
LISTNUM 1 \l 1488 I don't know, Dave, if there is anything else.
LISTNUM 1 \l 1489 MR. HAMILTON: Plus we discovered through talks ‑‑
LISTNUM 1 \l 1490 THE CHAIRPERSON: Could you open up your microphone?
LISTNUM 1 \l 1491 MR. HAMILTON: Sorry. Plus we discovered through talks that children's programming was well served by other specialty services as well.
LISTNUM 1 \l 1492 COMMISSIONER ARPIN: Now, the other priority programming is documentaries and you are planning to have documentaries? Is it an important part or a limited part of your grid?
LISTNUM 1 \l 1493 MS CROSBY: Yes, we have an allocation for documentaries and it will be part of our prime time schedule.
LISTNUM 1 \l 1494 COMMISSIONER ARPIN: What type of documentary, serials or unique?
LISTNUM 1 \l 1495 MS CROSBY: I would say unique for the most part and also feature length in some cases.
LISTNUM 1 \l 1496 COMMISSIONER ARPIN: Regarding drama, any plan for script drama?
LISTNUM 1 \l 1497 MS CROSBY: Absolutely.
LISTNUM 1 \l 1498 COMMISSIONER ARPIN: Have you a specific target and at which time of the day will they be broadcast? Obviously in prime time in order to be at the beginning CTF‑able and eventually CTF‑financed, but it will be in the schedule at the end of the day on weekends or in prime time during the weekdays?
LISTNUM 1 \l 1499 MS BAINE: Drama obviously, as you have said, would be in prime time.
LISTNUM 1 \l 1500 Documentaries, we would plan to also schedule during the day as well, depending on the subject matter. With the dramas as well, depending on the subject matter whether it is appropriate for during the day. But obviously would target for prime time between 7:00 and 11:00 particularly.
LISTNUM 1 \l 1501 COMMISSIONER ARPIN: Are you planning to have a program grid that will be based in making use of repeats over the same week, within the same as a week period or a seven‑day period?
LISTNUM 1 \l 1502 MS BAINE: There probably would be a couple during the week, yes. It's not our intention to repeat as much as you might think or as much as, let's say, a specialty channels does. It's more like a general broadcaster. There might be the odd program that would be repeated, but that would be to take advantage of audiences at different parts of the day, different parts of the week who might not get a chance to see the program when it is originally scheduled.
LISTNUM 1 \l 1503 COMMISSIONER ARPIN: Any variety shows that you are planning?
LISTNUM 1 \l 1504 MR. BAINE: In our original schedule we did have a variety show. We have rethought that.
LISTNUM 1 \l 1505 We know there are things like comedy which are important to people who want to watch a general interest station, but we think we can service that particular thing through our interactive portion of our schedule or through licensing comedies in the way of scripted comedies as in drama or sitcoms or movies in particular.
LISTNUM 1 \l 1506 COMMISSIONER ARPIN: Mr. Bitove, you had said that you had been in discussions with various guilds and producer organizations and you have entered into discussions in some form of negotiation with them.
LISTNUM 1 \l 1507 I note we can see him in the room. Mr. Mason is there listening to the questions and I'm sure to your answers.
LISTNUM 1 \l 1508 Where are you regarding negotiations with unions and producer associations?
LISTNUM 1 \l 1509 MR. BITOVE: I think I will really turn it over to a programming team, who was done a great job to date.
LISTNUM 1 \l 1510 MS CROSBY: Do you mean in terms of trade?
LISTNUM 1 \l 1511 COMMISSIONER ARPIN: Yes.
LISTNUM 1 \l 1512 MS CROSBY: Well, obviously we haven't entered into any negotiations with them because we don't have a licence yet, but I think it would be ‑‑
LISTNUM 1 \l 1513 COMMISSIONER ARPIN: No, but that's why I'm not asking you if you have a signed agreement.
LISTNUM 1 \l 1514 MS CROSBY: But I think it's safe to say that my understanding is that the CRTC is going to require this in terms of the major broadcasters at their licence renewal time, at which point even if we were granted a licence today we would not be operational. But I would say that we would abide by the terms of trade struck between the major broadcasters and the unions.
LISTNUM 1 \l 1515 COMMISSIONER ARPIN: The one thing that we don't know if they are negotiating collectively or if they are negotiating one‑by‑one, so if they are negotiating one‑by‑one I suspect you will have at some point in time to enter yourself into negotiations.
LISTNUM 1 \l 1516 I just say, if they are negotiating collectively and there is an agreement, well, then it has to be imposed on everybody else.
LISTNUM 1 \l 1517 Anyway, what you are saying here is you are open to discussion but you have not yet, obviously for the main reason that you don't have yet a licence, you haven't ‑‑ but you haven't yet struck some concept or saying that on this ‑‑ because I note that in your presentation, Mr. Bitove, you are saying that you are looking to do multi‑platform broadcasting and obviously this is a subject of contention. I'm sure that you are aware of that, or if you weren't they made you aware of that.
LISTNUM 1 \l 1518 MR. BITOVE: You can't pick up a newspaper lately and not be aware somehow, Monsieur Arpin, so we are aware.
LISTNUM 1 \l 1519 I think we at least started the dialogue in certain instances, with like the CFTPA, which is different, we were able to hone in more specifics in terms of the application. With others that will be post‑application, their time will come.
LISTNUM 1 \l 1520 COMMISSIONER ARPIN: I think we have covered a lot of ground, Mr. Chairman.
LISTNUM 1 \l 1521 THE CHAIRPERSON: Len, I believe you have some follow‑up questions and so do I.
LISTNUM 1 \l 1522 Go ahead.
LISTNUM 1 \l 1523 COMMISSIONER KATZ: I feel like Columbo here, just a couple of more questions if you don't mind.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1524 MR. BITOVE: Where is your trench coat?
LISTNUM 1 \l 1525 COMMISSIONER KATZ: You filed some comfort letters I guess back on April 13th from Genuity and I just want to go back to it again and see whether you have had a chance to talk to them since the filing of this letter, only because it's sort of a comfort letter that talks to "all things being equal and as they were at the time" and "subject to no material adverse change in financial markets or business conditions".
LISTNUM 1 \l 1526 Obviously there is been an awful lot that has taking place.
LISTNUM 1 \l 1527 Has anything changed at all in that area?
LISTNUM 1 \l 1528 MR. BITOVE: There has been change, but I would say two things with reference to that.
LISTNUM 1 \l 1529 If you can tell me for sure when you think we are going to be launching, we can crystal‑ball together. I mean, markets change and they go up and down and I think ...
LISTNUM 1 \l 1530 I just have to look at the XM Canada scenario where, you know, when we constructed the application and filed we actually had different debt plans from what we did to finance. We went with a high yield facility because you had a robust bond market then.
LISTNUM 1 \l 1531 We do have a good team. Part of our strength in being good operators is we understand financial markets and we keep our ear to the tracks to be able to capitalize on what's there.
LISTNUM 1 \l 1532 We are and will be aware of our obligations to undertake this licence and we will make sure that we have a Plan "A" and contingency plans to make sure we can live by what we say we are going to do.
LISTNUM 1 \l 1533 COMMISSIONER KATZ: This is a comfort letter with no guarantees at all.
LISTNUM 1 \l 1534 When you came before the Commission back for your XM licence, did you have something more definitive than this or was it just as broad I guess.
LISTNUM 1 \l 1535 MR. BITOVE: I believe, Mr. Katz, it was a comfort letter, as well as there was some personal information provided by myself in confidence to the Commission, which we have provided again this time.
LISTNUM 1 \l 1536 COMMISSIONER KATZ: All right.
LISTNUM 1 \l 1537 The note here indicates that "there will be some debt financing", but there will also "be some initial equity infusion", which seems to be somewhat vague.
LISTNUM 1 \l 1538 Is that equity infusion all coming from one source?
LISTNUM 1 \l 1539 MR. BITOVE: That's the plan right now and I furnished the Commission in confidence that information.
LISTNUM 1 \l 1540 COMMISSIONER KATZ: All right.
LISTNUM 1 \l 1541 I didn't want, Kaan Yigit to come all the way out here and not have any questions to answer ‑‑
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1542 COMMISSIONER KATZ: ‑‑ so I'm going to, in retrospect, come back to the ZenithOptimedia letter that came in as well. Since they are not here maybe he can answer it, or anybody else on the panel that you would like to.
LISTNUM 1 \l 1543 Was there any surveys done, audience surveys done at all, to substantiate your business case? I know there is a forecast here, but to what extent was there work done in looking at demand for this service by Canadians and how was that survey undertaken?
LISTNUM 1 \l 1544 MR. YIGIT: If I could go through briefly what we have done.
LISTNUM 1 \l 1545 So the research was conducted during third quarter 2006 and it was a bottom up approach as opposed to top down. What I mean by that is, when we were approached by team HDTV there was a general idea for a television network, but really no strong focus for programming beyond HD components.
LISTNUM 1 \l 1546 So we conducted two phases of research, one was environmental in nature, looking at viewing trends. The second component was focus groups basically.
LISTNUM 1 \l 1547 So the objective was to provide, on an exploratory basis, what are some of the kinds of things that would resonate with consumers from a service like this.
LISTNUM 1 \l 1548 So among the findings we found interest in HD movies, features and documentaries among those who had HD sets. We found a strong interest in the younger demographics about integration of television and the web. And also, for a new generation of consumers I guess, a more edgier approach to programming and news.
LISTNUM 1 \l 1549 So we served up those findings to the group and I believe they based their programming grid on those fundamental findings.
LISTNUM 1 \l 1550 Mr. Vice Chairman, basically we didn't have a predetermined grid to take to people or an existing business where we could say "Hey, what do you think of this grid? Are you in favour or not in favour?" So what we did, as Kaan said, is we did focus groups in five of the eight markets in which we plan to operate in and you can extrapolate over the last three as well. So we did in‑depth focus groups over several hours with individuals, some of them who had had HD television, some who had not. So we asked them "Do you like HD? What do you like about it? What kind of programming do you like?" All those findings basically one way or another made their way into the schedule that we tried to build, so it was bottoms up and it was a fairly in‑depth, very detailed analysis of the findings from those studies in five of those eight markets.
LISTNUM 1 \l 1551 COMMISSIONER KATZ: Is there some working documents that you can file with us that would allow us to sort of back into the data that you came up with?
LISTNUM 1 \l 1552 MR. LYONS: I'll kind of speak to that, but I mean there is some analysis in the one that is Exploring the TV Consumer in Canada, a qualitative study. That actually is the one where we talk about the focus groups and everything else and how we ‑‑ and how we developed all that information. But if you were looking for the background there is some video we took. I mean there is all kinds of stuff.
LISTNUM 1 \l 1553 COMMISSIONER KATZ: But it's a matter of trying to recreate the data that you have there and some of the underlying assumptions that are in your P&L basically.
LISTNUM 1 \l 1554 MR. BITOVE: I think, Mr. Vice‑Chair, we will provide you whatever we have so you can understand the information that went into building our programming foundation.
LISTNUM 1 \l 1555 MR. YIGIT: Just to make sure that there is two decks as part of the appendix, one is the "Exploring the TV Consumer in Canada: Environmental Context". The other one is a qualitative study report. They are combined about 100 pages.
LISTNUM 1 \l 1556 COMMISSIONER KATZ: Yes. No, I have seen them.
LISTNUM 1 \l 1557 MR. YIGIT: All right.
LISTNUM 1 \l 1558 COMMISSIONER KATZ: I just can't back into the numbers with that data.
LISTNUM 1 \l 1559 MR. YIGIT: Right.
LISTNUM 1 \l 1560 COMMISSIONER KATZ: It's at a very high level.
LISTNUM 1 \l 1561 MR. YIGIT: Correct.
LISTNUM 1 \l 1562 COMMISSIONER KATZ: I need something a bit more substantive, right.
LISTNUM 1 \l 1563 MR. YIGIT: We haven't done a specific test of a schedule and say, "Would you watch this and how much would you watch this?" There are many reasons why that wasn't done.
LISTNUM 1 \l 1564 MR. BITOVE: I don't think he is asking that.
LISTNUM 1 \l 1565 You are asking for the assumptions behind the conclusions to the research?
LISTNUM 1 \l 1566 COMMISSIONER KATZ: Well, something behind the conclusions and also ‑‑
LISTNUM 1 \l 1567 MR. BITOVE: He is looking for more data behind the 100 pages that we summarized, I believe.
LISTNUM 1 \l 1568 MR. YIGIT: There is lots.
LISTNUM 1 \l 1569 MR. BITOVE: We will provide you.
LISTNUM 1 \l 1570 COMMISSIONER KATZ: Okay.
LISTNUM 1 \l 1571 You mentioned one of the five reasons for the HD request that you have asked for BDUs is for simultaneous substitution rights. You want to be able to ‑‑ simultaneous substitution. From my understanding of the benefits of that is to ‑‑ is in order to showcase U.S. programming and yet you are saying in your application that you are not looking for U.S. programming as a basis for this programming.
LISTNUM 1 \l 1572 Why is simultaneous substitution so important? And I guess the second question is if you don't get the analog component what does that do to your simultaneous substitution?
LISTNUM 1 \l 1573 MR. BITOVE: You know there is ‑‑ what we said is we are not going after the big bets of U.S. programming but we will utilize some U.S. programming. And there is lots of U.S. networks out there, a lot more than there are in Canada and if we end up with the simulcast we want to be able to have the right of substitution which in itself enhances the revenue pie and in itself allows us to have more money to spend on domestic Canadian programming.
LISTNUM 1 \l 1574 COMMISSIONER KATZ: Can you let us know what your estimate is on the revenue generated from the benefits of simultaneous substitution?
LISTNUM 1 \l 1575 MR. JOHNSON: Not specifically. That comes with audience growth and certainly, as I said earlier, we have an audience growth that will grow to about the levels that City is producing right now.
LISTNUM 1 \l 1576 Along the way do we hope that our programming department can find a hit that comes out of nowhere? Absolutely from a sales perspective. In my former life I am sure people are familiar with the Love Boat show that turned one of the networks around big time. Are we hoping for something like that? Absolutely.
LISTNUM 1 \l 1577 What that does to a schedule is it not only brings a revenue as it grows into a hit, the revenue directly with a program, but it also brings other revenues to the station in terms of people wanting to be on the station.
LISTNUM 1 \l 1578 As a way of quantifying it it's really difficult to do because it's one program within a schedule and at this point we don't have a hit in our schedule. And again, as program people said, we don't have the budget to go after existing hits. It will be a show that comes out of nowhere and that was a show probably that most of the other big networks have decided they don't want to be part of and it would be something that we would pickup at a last minute basis.
LISTNUM 1 \l 1579 So again it's difficult to quantify one program's effect or a simulcast on an overall audience. It certainly is part of the growth, you know, in terms of growing our audiences over the term of the licence.
LISTNUM 1 \l 1580 COMMISSIONER KATZ: I am looking at my building block perspective.
LISTNUM 1 \l 1581 MR. HOOVER: Commissioner Katz, just one comment I would like to make is that I think simulcast is a known method today to protect the copyright of the programming that we have acquired. If at some point in the future there are other mechanisms available to us to protect those rights we would want to take advantage of them.
LISTNUM 1 \l 1582 So it's not an issue of simulcast per se. It is an issue of saying we have acquired the telecast rights to a program and we wish to have whatever mechanism is available to Canadian broadcasters to protect those rights and if that's blackout, if it's simulcast, whatever is available to us we wish to implement it. It's not that we envision in the initial years to have a lot of U.S. programming, but if it is one hour and we have paid dearly for it we want to protect our right to that programming.
LISTNUM 1 \l 1583 COMMISSIONER KATZ: My last question, I think for now, has to do with local news programming as well.
LISTNUM 1 \l 1584 If there was an obligation put on you, assuming that the licence will be favourable ‑‑ I just want to get a sense for what that does to your economics as well. Is there any way for you folks and your modeling, given you are going to come back with some models anyways, to pick ‑‑ I don't know, pick 15 hours of local programming and let us know how your business case would look if you were obligated to do this?
LISTNUM 1 \l 1585 MR. BITOVE: It's my understanding that it's not an issue of simply saying, okay, this program, period, is going to be local and carving out a niche. It's the manner in which the technology and the structure of the network has been designed. And I think we would have to look at the implications not purely from a programming point of view but also from a technical point of view and ‑‑
LISTNUM 1 \l 1586 COMMISSIONER KATZ: But I thought by technical point of view you are downloading individually to each of your eight local cities on individual stream bases. So it shouldn't be hard to inject local ‑‑
LISTNUM 1 \l 1587 MR. BITOVE: Okay.
LISTNUM 1 \l 1588 COMMISSIONER KATZ: ‑‑ into it, as far as I understand technology.
LISTNUM 1 \l 1589 MR. BITOVE: Okay. To be honest, I haven't looked at that because it wasn't envisioned in our proposal. So I am not exactly sure ‑‑
LISTNUM 1 \l 1590 COMMISSIONER KATZ: Because technically it can be done from the way you engineer your network, as I understand it.
LISTNUM 1 \l 1591 MR. BITOVE: You know, there will be cost implications and then the trade off of where do we get those costs from that we would have to look at, trying to do it that we can take under advisement.
LISTNUM 1 \l 1592 I think that, you know, it ‑‑ Mr. Katz, you are asking some great questions but you can kind of see us ‑‑ it's like a series of n‑diagrams and as you pull one loop out or whatever there is direct implications to each other. And I know Mr. Lyons here is chomping once more on the BDU piece that, you know ‑‑
LISTNUM 1 \l 1593 MR. LYONS: Well, just only because you mentioned it. But this whole issue of the BDU and analog, digital and HD carriage. It's sort of ‑‑ it's sort of funny in that we are not really ‑‑ in our opinion not really asking to do anything that the Commission doesn't already do.
LISTNUM 1 \l 1594 I mean look at Omni, for example in Toronto, broadcast and analog. It is carried in analog and it's carried in digital and it's carried in HD. And we are just conforming simply to government policy to transition to digital.
LISTNUM 1 \l 1595 So why would we be penalized for doing that by not being carried in the transition phase until everyone is digital? It's sort of counterintuitive. You know, Omni doesn't broadcast in digital yet it's carried digitally, or there is plenty of examples of that across the country where a station broadcast in analog over‑the‑air and is carried analog, digital and in HD. So why would the opposite ‑‑ and we are going in reverse ‑‑ is just sort of a funny thing.
LISTNUM 1 \l 1596 And then you mentioned simultaneous substitution things. So what if we had rights to a program and it was carried in analog on another tier? Would they down convert our signal to analog temporarily for the one hour and then convert it back? It doesn't really ‑‑ it creates a lot of messiness if we weren't treated the same as every other conventional incumbent.
LISTNUM 1 \l 1597 MR. BITOVE: But you have asked us to comment on respective ‑‑ if there were limitations on the licence on distribution and you have asked us to come back with implications of local programming and we will do both.
LISTNUM 1 \l 1598 COMMISSIONER KATZ: Thank you.
LISTNUM 1 \l 1599 THE CHAIRPERSON: Okay. Two, if I could, follow‑up questions; number one, the undertaking that you put on the table this morning in terms of priority programming and upping it to six and eight hours respectively. Presumably you have no problem making that a condition of licence?
LISTNUM 1 \l 1600 MR. BITOVE: Yes, that's ‑‑ we accept that.
LISTNUM 1 \l 1601 THE CHAIRPERSON: And the same regarding not soliciting local advertising?
LISTNUM 1 \l 1602 MR. BITOVE: We accept that provided ‑‑ other than this last piece.
‑‑‑ Laughter / Rires
LISTNUM 1 \l 1603 MR. BITOVE: Yes, sir.
LISTNUM 1 \l 1604 THE CHAIRPERSON: The main question which I want to ask because other people will ask you ‑‑ ask it here, et cetra. They will say you are cherry picking. You are taking the best of everything and you are not taking up on your obligations.
LISTNUM 1 \l 1605 What would be your answer to that? Of course you know, no local use, no local undertakings but you are doing everything as HD. You doing it and you get maximum carriage rights. That's how it will be portrayed. And sure, you know, and you go after national advertising, the richest part of the pie, so rather than having it from somebody else here or somebody else will say later on and say it. So I would like to know what your explanation is.
LISTNUM 1 \l 1606 MR. BITOVE: As Mr. Hoover pointed out to me, you know, he has been involved in this industry longer than I have and there hasn't been an application for a network in years. In fact, part of the genesis of this, Mr. Chair, I said though, that we were responding to a need from the CRTC. But I was at a conference, a media conference where they said, you know, newspapers are dying, radio is dying, TV is dying, you know, sell everything and run for the hills. I don't share that point of view.
LISTNUM 1 \l 1607 I actually think all three of those industries ‑‑ some of them may have to change in terms of their current business models but the consumer, the Canadian consumer wants all three of those. You did a proposal call. Anyone else was welcome to come in and try and do the same thing. In fact, I had a lot of people say to me, "What are you doing? Like don't you know TV is doing, conventional TV is dying? Are you nuts?"
LISTNUM 1 \l 1608 We just think that there have to be different implications. And I would say at the end of the day, you know, one of the big, big pieces that either Tecca or Ellen spoke to is at the end of our term 60 percent of our programming costs are for Canadian programming, which is much higher than the other conventional broadcasters.
LISTNUM 1 \l 1609 So if you go in reverse order are there benefits to the broadcasting system? Yes. Are there benefits to the Canadian public? Yes. Did other people have an opportunity to do it? Yes.
LISTNUM 1 \l 1610 We are not afraid to try and do things that people haven't done before. It's ‑‑ others have had this opportunity and, as Doug said, others have had years to apply. We are responding to a need that's also a consumer need and that's why we have applied.
LISTNUM 1 \l 1611 THE CHAIRPERSON: I understand that but that wasn't exactly my question. I said if people accuse you of cherry picking you would say you are not?
LISTNUM 1 \l 1612 MR. BITOVE: No, not at all. We are trying to build a network in today's reality and technology to make it viable and make sure that there is the inherent benefits to the Canadian broadcasting system that is required to get a licence. That would be my response.
LISTNUM 1 \l 1613 THE CHAIRPERSON: Okay.
LISTNUM 1 \l 1614 MR. BITOVE: I don't know, Doug, if ‑‑
LISTNUM 1 \l 1615 THE CHAIRPERSON: Mr. Bitove, I just posed the question.
LISTNUM 1 \l 1616 MR. BITOVE: Yes, sir.
LISTNUM 1 \l 1617 THE CHAIRPERSON: But this isn't my view necessarily. I just know that it has been raised by others. That's why I wanted you to put on the record how you would respond to it.
LISTNUM 1 \l 1618 Okay. It's 12 o'clock. I think we will take an early lunch and we will hear from YES TV after lunch. So let's break until about 1:15, okay?
LISTNUM 1 \l 1619 MR. BITOVE: Thank you.
‑‑‑ Upon recessing at 1157 / Suspension à 1157
‑‑‑ Upon resuming at 1315 / Reprise à 1315
LISTNUM 1 \l 1620 THE CHAIRPERSON: Good afternoon.
LISTNUM 1 \l 1621 Let us resume.
LISTNUM 1 \l 1622 Madame Secretary, you have some announcements.
LISTNUM 1 \l 1623 THE SECRETARY: Thank you, Mr. Chairman.
LISTNUM 1 \l 1624 For the record, we wish to inform you that, at the request of the Commission, the applicant YES TV Inc. has submitted a copy of the shareholders' resolution of YES TV Inc., which will be added to the public examination file of its application file. Copies are available in the public examination room.
LISTNUM 1 \l 1625 We will now proceed with Item 2, which is Application by YES TV Incorporated for a license to operate a high‑definition, over‑the‑air television station serving the Greater Toronto Area on channel 21 with an effective radiated power of 9,000 watts.
LISTNUM 1 \l 1626 Appearing for the applicant is Mr. Michael Girard.
LISTNUM 1 \l 1627 Please introduce your colleagues, and you will have 20 minutes to make your presentation.
LISTNUM 1 \l 1628 MR. GIRARD: There aren't as many chairs filled up here, but we are equally proud of the team that we are bringing behind this application.
LISTNUM 1 \l 1629 Ladies and gentlemen, on behalf of the team that created YES TV, thank you for this opportunity to detail the benefits of our proposal.
LISTNUM 1 \l 1630 My name is Mike Girard, and I am legal counsel for the applicant.
LISTNUM 1 \l 1631 To my left is Ryan Sutherland, President and CEO of YES TV.
LISTNUM 1 \l 1632 He is a new media pioneer and he has developed Internet and mew media applications in several countries, most recently in Asia.
LISTNUM 1 \l 1633 More than ten years ago he was already involved in HD productions and building HD movie theatres throughout the world.
LISTNUM 1 \l 1634 Sitting beside Mr. Sutherland is Sanderson Layng, the VP of Education and Business Development for YES TV.
LISTNUM 1 \l 1635 He majored in educational media, and attended the Masters program at the Ontario Institute for studies in education.
LISTNUM 1 \l 1636 He is probably best known to the Commission as the developer of closed‑caption television in Canada.
LISTNUM 1 \l 1637 To his left is Aaron Goldman, a Toronto‑based, independent producer who has been involved in Canadian television for over 25 years.
LISTNUM 1 \l 1638 He created the YES TV concept more than six years ago.
LISTNUM 1 \l 1639 And next to Mister Goldman is Peter Gold, the CFO of YES TV, with more than 20 years of international and entrepreneurial business experience.
LISTNUM 1 \l 1640 He has been a board member, CFO and strategic adviser with a wide range of businesses, including CHUBB Security, British Gas and Mark4 Industries.
LISTNUM 1 \l 1641 Peter currently serves as the Vice President of Finance and Director of Fun Technologies Inc, a high‑growth software and services company which is a subsidiary of Liberty Media Corporation.
LISTNUM 1 \l 1642 Moving on to the second row, immediately behind me is is Bob Linney, our Vice President of Operations and Regulatory Affairs.
LISTNUM 1 \l 1643 He has been involved in the development of a number of innovative broadcasting proposals, including a number that the CRTC has licensed through the years, among them The Weather Network and The Score.
LISTNUM 1 \l 1644 Next to Bob is Wendy‑Lee Starr, our marketing and research consultant.
LISTNUM 1 \l 1645 She is also a veteran of the development of a number of innovative services.
LISTNUM 1 \l 1646 She works with Kelly Services, a fortune 500 staffing company.
LISTNUM 1 \l 1647 She often deals with the challenge of reaching out to Gen X and Gen Y youth, to help them understand the skills necessary for today's employment market.
LISTNUM 1 \l 1648 Next to Wendy is Shawn Henry, an aboriginal producer who works exclusively in HD. His productions have been aired on networks worldwide, including the BBC and here in Canada on Bravo, SUN‑TV and APTN.
LISTNUM 1 \l 1649 He is also the first graduate of the Young Producers Development Initiative ‑‑ pardon me ‑‑ a program that YES TV helped developed to assist new and innovative independent producers in Canada.
LISTNUM 1 \l 1650 To Shaun's left is Tara Lee Gerhards, who is responsible for marketing and sponsorship opportunities with YES TV.
LISTNUM 1 \l 1651 She has been heavily involved in the independent production community.
LISTNUM 1 \l 1652 She is a former Project Manager at Sears Canada with a focus on branding.
LISTNUM 1 \l 1653 It is her job to attract new advertisers to the over‑the‑air TV medium in the Toronto area.
LISTNUM 1 \l 1654 One member of the YES TV management team is unable to be here today due to the flu.
LISTNUM 1 \l 1655 I do wish that you be aware that our General Manager and Vice President of Programming is Deborah Grafman, President of Dogs TV, General Manager of Jackpot TV and a Consultant to the Life Networks and HGTV.
LISTNUM 1 \l 1656 I would like to re‑emphasize that, to us, YES TV and HDTV are non‑competing applications for an over‑the‑air license to serve the Toronto market.
LISTNUM 1 \l 1657 There are major differences between YES TV and the other applicant that may warrant the licensing of both.
LISTNUM 1 \l 1658 A CRTC decision of this nature would not, in any way, impact on the business plan or programming proposals of YES TV.
LISTNUM 1 \l 1659 I would now like to call on Ryan Sutherland, the CEO of YES TV, to begin our presentation.
LISTNUM 1 \l 1660 MR. SUTHERLAND: Thank you, Michael.
LISTNUM 1 \l 1661 Ladies and gentlemen, Commissioners, Chairman, Commission Staff, simply put, YES TV is high definition for the web generation.
LISTNUM 1 \l 1662 If licensed, YES TV will offer free‑to‑see HDTV showing primarily original Canadian content geared towards youth.
LISTNUM 1 \l 1663 The station will be powered, in part, by a collaborative online social network.
LISTNUM 1 \l 1664 We are applying for an over‑the‑Air license because we firmly believe it is the best and most widely accessible way to reach our primary target audience, which includes marginalized young adults who otherwise do not have sufficient access to quality local programming that accurately reflects and encourages the cultural diversity of Canadian youth.
LISTNUM 1 \l 1665 Y‑E‑S is an acronym for Youth Empowerment Station.
LISTNUM 1 \l 1666 Each of these words has been carefully chosen to describe in just three letters what this application is all about.
LISTNUM 1 \l 1667 We have all heard it said, from before the 1960s to today, that our young people are the future of this country.
LISTNUM 1 \l 1668 The tough questions are...
LISTNUM 1 \l 1669 Who are the youth of today? What do they value? What inspires them to succeed and make a difference in this country and in the world?
LISTNUM 1 \l 1670 I am sure most of you would agree that what motivates the youth of today are not the same things that motivated us a few years ago.
LISTNUM 1 \l 1671 Culture changes, society evolves, and that impacts how we empower, or neglect to empower, our youth.
LISTNUM 1 \l 1672 Unfortunately, empowerment isn't simply handed down from one generation to the next.
LISTNUM 1 \l 1673 To facilitate empowerment requires a deep understanding of what young people want, and how to motivate them to turn inspiration into action.
LISTNUM 1 \l 1674 One challenge that YES TV addresses is providing these tools and resources to young people that will facilitate them having an impact in the social fabric of the GTA.
LISTNUM 1 \l 1675 That is exactly what the Youth Networking Forum told Toronto Mayor, David Miller, in its final report in 2006.
LISTNUM 1 \l 1676 Their report said Toronto media had to do more to cover ethnic issues in the GTA.
LISTNUM 1 \l 1677 It called for more youth‑to‑youth initiatives at the local level.
LISTNUM 1 \l 1678 The report said there should also be more ways for youth in Toronto to get involved in self‑expression, and that there should be training programs to help get Toronto youth involved in various professions, including broadcasting.
LISTNUM 1 \l 1679 YES TV provides many of those key requirements identified by the Youth Networking Forum.
LISTNUM 1 \l 1680 Some have suggested that YES TV be simply a cable‑based community television license, or perhaps a digital specialty channel.
LISTNUM 1 \l 1681 Might I remind you of the goal: youth empowerment.
LISTNUM 1 \l 1682 Giving anything less than the newest and best technologies and resources we can offer does not bring the greatest benefit to the greatest number.
LISTNUM 1 \l 1683 Research shows how differently youth use media today.
LISTNUM 1 \l 1684 They are in fact not turning away from television per se ‑‑ rather they are using different applications to meet their need for empowerment and looking for a voice of their own.
LISTNUM 1 \l 1685 The success of user‑generated websites, such as YouTube, MySpace and Facebook, clearly shows that the passive experience of conventional television viewing is quickly becoming a thing of the past.
LISTNUM 1 \l 1686 Youth want to be involved.
LISTNUM 1 \l 1687 They want the latest and best technology to do that.
LISTNUM 1 \l 1688 They want attention, and they want to share their experiences.
LISTNUM 1 \l 1689 Currently, television in Toronto is not providing a strong platform for these voices, and the youth of today will no longer settle for merely a "Speakers Corner" experience.
LISTNUM 1 \l 1690 Web‑based, video‑on‑demand replays of shows is also not what the youth are looking for in an interactive experience.
LISTNUM 1 \l 1691 They want to be heard and seen, not simply counted as a unique visitor to help boost ad sales for broadcasters.
LISTNUM 1 \l 1692 So far, the television industry has responded by adding a wider variety of channels for the broadcast universe, but they have not provided the latest technology ‑‑ which is high definition ‑‑ nor have they built diverse delivery platforms that encourage interactivity and empowerment for youth.
LISTNUM 1 \l 1693 Based on the report from David Miller's office, it is clear that YES TV can deliver many the objectives Toronto youth said they needed and wanted, by building our unique platform using the latest technologies for Canada's largest television market.
LISTNUM 1 \l 1694 The Mayor of Mississauga, Hazel McCallion, has further substantiated the City's support for YES TV in her letter to the Commission just last week.
LISTNUM 1 \l 1695 Some interveners have suggested that YES TV has not demonstrated the technical, operational, or financial ability to succeed.
LISTNUM 1 \l 1696 They have also suggested YES TV will not contribute in any meaningful way to meeting the objectives of the Broadcasting Act.
LISTNUM 1 \l 1697 Our application clearly details the technical, operational and financial capabilities of YES TV.
LISTNUM 1 \l 1698 And the experience at this table and on the rest of our team represents the development and successful launch of over a dozen radio stations and specialty networks, many of them criticized by similar interveners for the innovative approach they proposed to take.
LISTNUM 1 \l 1699 According to the Broadcasting Act, programming should "be varied and comprehensive."
LISTNUM 1 \l 1700 The YES TV programming schedule meets that criteria.
LISTNUM 1 \l 1701 The Act also says that programming provided by the broadcasting system "should be drawn from local, regional, national and international sources, and include educational and community programs".
LISTNUM 1 \l 1702 Again, the programming strategy for YES TV absolutely meets this objective.
LISTNUM 1 \l 1703 Furthermore, the Act clearly states that programming provided by the Canadian broadcasting system should "provide a reasonable opportunity for the public to be exposed to the expression of differing views on matters of public concern", and "include a significant contribution from the Canadian independent production sector."
LISTNUM 1 \l 1704 This is where YES TV truly shines.
LISTNUM 1 \l 1705 Empowerment and user‑provided elements means much greater diversity in views expressed, and our extensive youth training and mentorship programs will contribute ongoingly to the independent production sector.
LISTNUM 1 \l 1706 YES TV represents a considerably different approach than an existing conventional broadcaster would take.
LISTNUM 1 \l 1707 This unique approach is to the advantage of our audience, and it certainly contributes to achieving the objectives of the Broadcasting Act.
LISTNUM 1 \l 1708 Now I would like to call on Wendy‑Lee Starr to discuss market demand and market impact for YES TV.
LISTNUM 1 \l 1709 MS STARR: Contrary to what many people think, research shows that when children reach for the 'on' button today, their first choice is not an MP3 Player or a computer. It's television.
LISTNUM 1 \l 1710 That finding comes from a new national survey on kids' media habits conducted by Solutions Research Group for YTV and published in the YTV Tween Report.
LISTNUM 1 \l 1711 It covers the seven‑to‑12‑year‑old demographic ‑‑ those who we identify as the next generation of YES TV supporters.
LISTNUM 1 \l 1712 The survey shows that kids spend more than twice as much time with television as they do with the Internet.
LISTNUM 1 \l 1713 The results show that kids spend 45 per cent of their media time watching TV compared to 14 per cent on the Internet.
LISTNUM 1 \l 1714 Television takes the number one spot as kids' top media choice, and the Internet is a strong second choice.
LISTNUM 1 \l 1715 The survey reflects a trend towards kids spending more time with more media than ever before.
LISTNUM 1 \l 1716 Yet even with the introduction of a range of new media choices from text messaging to gaming, the amount of time kids spend watching TV has remained constant over the last 15 years, at about 17 hours per week.
LISTNUM 1 \l 1717 In other words, those who are about to be our target audience are not shying away from television ‑‑ they are simply using other media alternatives more.
LISTNUM 1 \l 1718 TV is still their first choice as they enter our target demographic, but television viewership drops rapidly as we move into the 12‑to‑24‑year‑old demographic.
LISTNUM 1 \l 1719 We believe that this reflects the absence of material that engages the primary target audience of YES TV.
LISTNUM 1 \l 1720 Our programming concepts were developed, not only to meet the social and youth empowerment goals that have already been described, they were developed to attract, and be of interest, to the 12‑to‑24‑year‑old demographic in the Toronto area.
LISTNUM 1 \l 1721 Different research sources and methodologies produce different research results about media use.
LISTNUM 1 \l 1722 As the Television Bureau points out in its recent newsletter, the bottom line is that Canadians consume all media to varying degrees, depending on who they are, how old they are, their interests, needs, and where they are.
LISTNUM 1 \l 1723 One way to attract younger viewers back is to make sure any new service is free‑to‑see HDTV.
LISTNUM 1 \l 1724 That means combining the most modern television broadcasting technology with the concept of delivery that is free, over‑the‑air, not part of a costly HDTV bundle or extra cost tier.
LISTNUM 1 \l 1725 To reach a young audience with a local television service in Toronto, it must be available to the largest possible audience at the lowest cost ‑‑ in our case, free.
LISTNUM 1 \l 1726 In a study published in February 2007 for the CFTPA, the Nordicity Group also noted that on the domestic front, conventional commercial broadcasters have shifted increasingly away from children's and youth programming because of limitations on the advertising potential for this demographic.
LISTNUM 1 \l 1727 The share of the Canadian Television Fund (CTF) funding contributed to children's and youth programming has dropped by almost 20 per cent over the last three years.
LISTNUM 1 \l 1728 The CTF's Stakeholders Report suggests that the share will drop even further in the 06/07 CTF fiscal year.
LISTNUM 1 \l 1729 Limited advertising revenues are one of the reasons identified by the Nordicity for reduced production of youth programming.
LISTNUM 1 \l 1730 YES TV is not concerned with this statistic.
LISTNUM 1 \l 1731 We firmly believe that YES TV's unique and highly engaging programming will attract new advertising revenues and sponsorships for the development of more new and powerful youth programming.
LISTNUM 1 \l 1732 And we will do it without creating a major impact on existing over‑the‑air broadcasters.
LISTNUM 1 \l 1733 As CTV pointed out in their intervention, YES TV's business plan would have less than a one per cent impact on the existing marketplace.
LISTNUM 1 \l 1734 Sanderson Layng will now share with you how user‑generated content will be used on YES TV.
LISTNUM 1 \l 1735 MR. LAYNG: Thank you, Wendy.
LISTNUM 1 \l 1736 Good afternoon.
LISTNUM 1 \l 1737 My career has focused on encouraging youth to be the best they can be.
LISTNUM 1 \l 1738 Beginning with the Children's Broadcast Institute, through to Concerned Children's Advertisers and on to my Show Kids You Care campaign, the empowerment of youth, through the influence of television, has been a pervasive theme.
LISTNUM 1 \l 1739 Then along came the YES TV concept some six years ago, and I was hooked.
LISTNUM 1 \l 1740 User‑Generated Content takes young people from being passive recipients of other people's content to becoming authors of their own content, which is a key step towards becoming authors of own destiny.
LISTNUM 1 \l 1741 This is the essence of empowerment, and this is the real product of YES TV.
LISTNUM 1 \l 1742 The approach YES TV takes to User‑Generated Content is unique, responsible, and enriching, and will conform to existing broadcasting regulations.
LISTNUM 1 \l 1743 We will work with schools; we will provide programming that inspires and empowers aspiring filmmakers, music makers and animators; we will produce websites with strict content submission guidelines; we will assemble teams of students to review and nominate the best UGC programming; we will create "User Integrity" systems that identify and authenticate students to help us streamline the production and submission of high‑quality UGC content.
LISTNUM 1 \l 1744 The tools and resources to make this happen have never been so accessible and affordable.
LISTNUM 1 \l 1745 The time has come to use them in a new and innovative way.
LISTNUM 1 \l 1746 An example of our daily newscasts outlined in our programming schedule illustrates this point.
LISTNUM 1 \l 1747 We anticipate that 30 to 40 per cent of the total content of our newscasts will be user‑generated.
LISTNUM 1 \l 1748 Our newscasts will be more relevant, engaging and empowering for youth than any other news service because it will contain peer‑reviewed, user‑generated content.
LISTNUM 1 \l 1749 Our young people want a live, interactive forum for communications, and they want to be generators of content.
LISTNUM 1 \l 1750 They want to be contributors, and that's a good thing, because they are the ones who are going to teach us what the future of our broadcasting system must be like and can achieve.
LISTNUM 1 \l 1751 YES TV will champion this process.
LISTNUM 1 \l 1752 To help with that empowerment, we plan to use High Definition Television, multi‑media and multi‑window experiences.
LISTNUM 1 \l 1753 Youth empowerment is not a niche; it is a community issue.
LISTNUM 1 \l 1754 When young people grow, our society grows, and so do our communities.
LISTNUM 1 \l 1755 Our unique training program, the Young Producers Development Initiative, will train a new generation of independent producers in all aspects of television production.
LISTNUM 1 \l 1756 This will be headed by one of our graduates, Shawn Henry, who is with us for today's presentation.
LISTNUM 1 \l 1757 Shawn?
LISTNUM 1 \l 1758 MR. HENRY: Good afternoon.
LISTNUM 1 \l 1759 I am Seneca from the Six Nations of the Grand River.
LISTNUM 1 \l 1760 I am also an Independent Producer and Editor.
LISTNUM 1 \l 1761 I'm here today to describe my role in molding the vision for YES TV's Young Producers' Training Initiative.
LISTNUM 1 \l 1762 Coming from a grassroots, community‑based background I found it very challenging to get training in the television industry.
LISTNUM 1 \l 1763 Eventually, I was lucky enough to have doors opened to me, doors that are closed to many others, especially from marginalized communities such as my own.
LISTNUM 1 \l 1764 The Native Indian Inuit Photographers' Association has started a video training program in the early nineties.
LISTNUM 1 \l 1765 I was lucky enough to get into this program, to learn and gather information that would help take me to the next step.
LISTNUM 1 \l 1766 After a few years I was able to attend the Banff Centre for Continuing Education.
LISTNUM 1 \l 1767 Through the years I have also been privileged enough to participate in additional television workshops at the Banff Centre.
LISTNUM 1 \l 1768 These workshops were very instrumental in helping me define the kind of training that I wanted to be involved in.
LISTNUM 1 \l 1769 Since then I have become successful in my career as an Editor and Producer, having worked across Canada on many different types of shows, including variety, educational, lifestyle, and magazine news shows.
LISTNUM 1 \l 1770 If it was not for these types of training and professional opportunities, I would not be where I am today.
LISTNUM 1 \l 1771 The reality of training for Aboriginal and marginalized youth in Canada is that it is often slim at best.
LISTNUM 1 \l 1772 Certainly, training in the Toronto marketplace is not accessible to many people in these groups.
LISTNUM 1 \l 1773 Our plan is to give them access to sufficient resources and training, so they can begin to create high‑quality, user‑generated content that tells their stories in a meaningful way.
LISTNUM 1 \l 1774 To the best of my knowledge, no other over‑the‑air channel is giving Toronto's youth this kind of well‑thought‑out, well supported opportunity to create their own voice ‑‑ stories in their own voice.
LISTNUM 1 \l 1775 These programs will then be presented through a platform that gives a wide audience insight into these stories.
LISTNUM 1 \l 1776 We are confident that powerful, positive changes will result for both the creator and the audience.
LISTNUM 1 \l 1777 Now, Tara Lee will detail where sponsorships fit in YES TV's initiatives and program development.
LISTNUM 1 \l 1778 MS GERHARDS: Thanks, Shawn.
LISTNUM 1 \l 1779 To make all this all work, YES TV has a unique approach to supporting program producers through the creation of partnerships with organizations that share our mandate for the empowerment of youth.
LISTNUM 1 \l 1780 Essentially, our revenue sources have been identified in three key areas: advertising, sponsorships and partnership with the public sector
LISTNUM 1 \l 1781 The first category, advertising, follows traditional broadcast models.
LISTNUM 1 \l 1782 Advertising dollars are generated through purchase of airtime.
LISTNUM 1 \l 1783 Being a youth empowerment station, it is essential that advertisers are screened to ensure that corporate social policies are in synch with the YES TV mantra.
LISTNUM 1 \l 1784 That is to say that YES TV will not simply take advertising dollars because they are on the table.
LISTNUM 1 \l 1785 Advertisers appearing on YES TV have been approved because of their clear and solid principles that support the development and the empowerment of youth.
LISTNUM 1 \l 1786 The demographic of YES TV appeals to a new tier of advertisers because of the station's unique programming and innovative interactive applications.
LISTNUM 1 \l 1787 The second category is sponsorship, which is a growing TV revenue trend, especially for lifestyle programming such as Holmes on Homes, a Canadian renovation show with sponsor funding from Home Depot.
LISTNUM 1 \l 1788 Yes TV's programming has a strong focus on lifestyle, which we refer to as Life Skills programming, which makes YES TV a strong candidate for successful sponsorships.
LISTNUM 1 \l 1789 For example, snowboarding and the snowboarding culture are of primary interest to the youth demographic that is also the primary audience for YES TV.
LISTNUM 1 \l 1790 Our program Bikini Wax showcasing snowboarding would be an ideal match to sponsors who manufacture boards and other snowboarding gear.
LISTNUM 1 \l 1791 We anticipate a significant number of sponsorships, given that our package will also engage them in an interactive process with their target audience.
LISTNUM 1 \l 1792 We also expect that our interactive model will be an important source of information about our primary 12‑to‑24 demographic, as well as those on the fringe demos who are drawn to the empowering and entertaining programming of YES TV.
LISTNUM 1 \l 1793 We have accounted for some sponsorship revenue derived from on‑air sales within the ad revenue line in the pro forma.
LISTNUM 1 \l 1794 Beyond that small amount of sponsorship, we intend to pursue larger sponsorship packages to increase production budgets, and expand our training and empowerment program, as well as community outreach initiatives.
LISTNUM 1 \l 1795 This leads to the third area of program funding: government agencies.
LISTNUM 1 \l 1796 For example, our Better Bods program, a health and wellness program may be appealing to Health Canada.
LISTNUM 1 \l 1797 Sponsorship of this program may help Health Canada in its outreach strategy to educate youth on health, social issues, and policy.
LISTNUM 1 \l 1798 Our responsible and ethical approach to selecting and approving advertisers and sponsors with matching principles and mandates ensures the development of mutually beneficial relationships, promoting long‑term relationships between sponsors and YES TV and certainly our youth.
LISTNUM 1 \l 1799 Over to you, Peter.
LISTNUM 1 \l 1800 MR. GOLD: Thank you, Tara.
LISTNUM 1 \l 1801 Having YES TV on air today makes sense.
LISTNUM 1 \l 1802 And I think there is an obvious demand for the kind of general interest programming envisaged by YES TV.
LISTNUM 1 \l 1803 I am fairly new to the YES TV team, and I'm excited about the prospects.
LISTNUM 1 \l 1804 We have a well thought‑out plan, and have assembled a highly competent and professional team, capable of making this a success and tackling the real and expressed concerns for the Toronto youth demographic.
LISTNUM 1 \l 1805 We have taken a conservative and prudent approach with our budgets, revenue projections and associated costing.
LISTNUM 1 \l 1806 At the time of our application, we had secured one million dollars in equity financing and a further five million dollars committed in debt financing.
LISTNUM 1 \l 1807 Our business plan is such that, even if we were to generate no additional revenue, the station would be able to survive for nearly four years.
LISTNUM 1 \l 1808 Since filing our application, we have secured an additional 10 million dollars of financing, which, if called upon, would ensure the financial viability of the station for at least the full duration of the license term of seven years.
LISTNUM 1 \l 1809 We see this station as a win for everybody.
LISTNUM 1 \l 1810 Current broadcasters are invited to partner with us, and we will be able to provide them hours of new content.
LISTNUM 1 \l 1811 Advertisers will be able to efficiently access our well‑defined demographic in a new and exciting way.
LISTNUM 1 \l 1812 And most importantly, YES TV will be able to accomplish its Youth Empowerment mandate.
LISTNUM 1 \l 1813 MR. SUTHERLAND: Therefore, ladies and gentlemen, we urge you to take a bold step into the future of broadcasting by granting this over‑the‑Air HD license to YES TV.
LISTNUM 1 \l 1814 Thank you, and we would now welcome your questions about our proposal.
LISTNUM 1 \l 1815 THE CHAIRPERSON: Thank you very much for your presentation.
LISTNUM 1 \l 1816 You mentioned in the presentation yourself that traditional broadcasters shy away from the audience that you are targeting, the 12‑to‑25 year olds.
LISTNUM 1 \l 1817 Yet you say you are optimistic you can make a success while others shy away.
LISTNUM 1 \l 1818 I am not sure if I see what you offer that a traditional broadcaster could not offer, why you feel you will succeed where others have obviously failed or shied away. Maybe you could elaborate on that.
LISTNUM 1 \l 1819 MR. SUTHERLAND: What we offer primarily is involvement. Involvement in our network, in our training programs, community outreach, in our online social network, our involvement with the schools.
LISTNUM 1 \l 1820 We intend to do our very best to get our youth involved in every aspect of the community.
LISTNUM 1 \l 1821 I don't think that many other broadcasters are willing to take that to the extent that we are, in that, that is our 100‑per‑cent top priority and mandate.
LISTNUM 1 \l 1822 THE CHAIRPERSON: And you are not worried that the group that you are targeting doesn't have the financial strength to support you?
LISTNUM 1 \l 1823 I mean, these young people truly don't have the disposable income that obviously older, more‑established folks have.
LISTNUM 1 \l 1824 So aren't you taking a bit of a gamble here?
LISTNUM 1 \l 1825 MR. SUTHERLAND: We are not looking to make money out of the pockets of our young demographic.
LISTNUM 1 \l 1826 We are looking to empower them to become more successful members of the community.
LISTNUM 1 \l 1827 And we think that the community will be more than happy to support us in our initiatives to get involved with youth.
LISTNUM 1 \l 1828 THE CHAIRPERSON: Now I am assuming that user‑generated content is going to be a very large portion of your programming.
LISTNUM 1 \l 1829 Are the youth, the target groups, capable of generating HD products so that you can put it on your TV?
LISTNUM 1 \l 1830 MR. SUTHERLAND: In my fairly extensive experience, particularly with the Internet, the most active demographic of the community in producing the latest and greatest technology is the youth.
LISTNUM 1 \l 1831 And I think they are much more media savvy than we give them credit for.
LISTNUM 1 \l 1832 We certainly do have experience of this.
LISTNUM 1 \l 1833 And we also believe that the take up of HD is very quickly growing amongst the youth, and the availability of the hardware and software to do with that is changing on a monthly basis.
LISTNUM 1 \l 1834 THE CHAIRPERSON: Yeah. I wasn't worried too much about the savvy.
LISTNUM 1 \l 1835 I was just thinking the cost of producing in HD.
LISTNUM 1 \l 1836 MR. GOLDMAN: Well, in addition to the equipment and facilities that youth themselves have access to, we also would like to get much more involved with the schools and their equipment offering, their media programs, and encourage youth to become involved with our network by more actively participating in the schools and leveraging resources that we also hope to help the schools to provide.
LISTNUM 1 \l 1837 THE CHAIRPERSON: You mentioned the word internet, and that actually is my segue to my next question, listening to you and your presentation the obvious question that comes to mind is why do you need a licence from us? Why can't you do everything you want to do by way of a web‑based, you know, TV or broadcasting service? I mean, especially since you are so high on interactive and you want the youth and the youth are so media savvy and feel so comfortable on the internet. Couldn't you achieve all of this without bothering with us?
LISTNUM 1 \l 1838 MR. SUTHERLAND: Certainly, we fully intend to do our best to create an engaging and powerful internet platform. Having the television aspect we believe is a key part of the empowerment process because it is a showcase for youth. It is a platform for them to get the attention and recognition which is the very reason that they attempt to go online in the first place.
LISTNUM 1 \l 1839 THE CHAIRPERSON: Yes, but I mean the youth obviously feels very comfortable on the internet and the internet is a great tool to reach them and promote things. And if you, let's say, partner with somebody like Facebook or so you could probably reach half the youths in Canada within a very short period of time. So I am not quite ‑‑ I don't quite see why you feel it is so necessary to have a television licence, why ‑‑ if the internet is not a far better medium for you and not having to worry about regulatory restraints?
LISTNUM 1 \l 1840 MR. SUTHERLAND: If we restricted ourselves only to the internet what would we have to offer that would be different or more empowering than what is out there? Having the power and reach of this over‑the‑air HD licence in the Toronto area gives us that step up to attract attention to have something to offer back to the youth in order to get them involved into the television industry.
LISTNUM 1 \l 1841 THE CHAIRPERSON: Okay. Len?
LISTNUM 1 \l 1842 COMMISSIONER KATZ: Thank you, Mr. Chairman.
LISTNUM 1 \l 1843 Just one quick follow up. Why HD? I think you have answered the question as to why television. I guess I am asking the next question, why is it has to be on HD given the audience you are trying to reach?
LISTNUM 1 \l 1844 MR. SUTHERLAND: Again, because I think youth are hard to impress and I think that they want ‑‑ they like to have access to the latest and greatest, the hottest gadgets. The youth that I know use HD a lot more than their adult counterparts.
LISTNUM 1 \l 1845 COMMISSIONER KATZ: But wouldn't that beg the opportunity for them to get involved in group networking through wireless devices; again, the same technology they want to impress. They carry around their gadgets, their Blackberrys with interactivity, with cameras, with everything else as well. It's all there for them. It's all real time. It's all live. Why do you need to be tethered to a wire in a home or in a bedroom or whatever to make this business case work?
LISTNUM 1 \l 1846 MR. SUTHERLAND: We don't see it as being tethered to a wire per se. We have described our approach as being a three screen approach by which we are referring to internet, television and mobile.
LISTNUM 1 \l 1847 Now, what we are here to discuss primarily today is the television offering of that, but we fully intend to offer as extensive services as we can muster in our goal to empower youth.
LISTNUM 1 \l 1848 COMMISSIONER KATZ: Have you already started this initiative with unlicensed technology?
LISTNUM 1 \l 1849 MR. SUTHERLAND: In terms of?
LISTNUM 1 \l 1850 COMMISSIONER KATZ: The internet, like wireless software. Have you started to build this thing out already or is this your first foray coming before the Commission for a broadcasting licence?
LISTNUM 1 \l 1851 MR. SUTHERLAND: I personally have been involved in building internet applications in projects for various social networking projects, some broadcast related, some not, in Canada and several other countries. And I believe that I bring my wealth of experience and also a great deal of software and applications which I have built for precisely this purpose to this approach for YES TV.
LISTNUM 1 \l 1852 COMMISSIONER KATZ: Okay.
LISTNUM 1 \l 1853 THE CHAIRPERSON: But just to follow that question up, you are not ‑‑ you don't have right now a platform for YES TV? You said you wanted to do all three; wireless, web and TV. Nothing is stopping you from doing ‑‑ for pursuing the web format at this point in time. You haven't done that so far if I understand you correctly.
LISTNUM 1 \l 1854 MR. SUTHERLAND: We have certainly built some of the platform for that, but have we offered that as a service to youth? No, because they are getting a fair bit of that elsewhere already and we are trying to take a more ambitious approach with a television offering which is, I think, a cornerstone to building up that approach with the internet and having something to engage those youth back into television.
LISTNUM 1 \l 1855 COMMISSIONER KATZ: You are trying to do, I guess, the reverse of what the industry seems to be experiencing, and that is moving from a wire technology to a new media environment whether it's wired or wireless. You are trying to bring them back to television effectively by virtue of this request to us.
LISTNUM 1 \l 1856 MR. GOLDMAN: I think if we look at the tendencies that were revealed in the study that Wendy referred to as seven to 12‑year olds move into this demographic there is a dramatic drop in their TV viewing. It seems to happen from the 12 to 14 age range. It's not that they stop watching a TV screen. It's that they are stopping watching broadcasting. They will watch DVDs. They will watch things like that, but they are still watching a high quality picture. Then they are going to go and spend some time on the internet and certainly they are going to spend time on mobiles and text messaging, but they are watching a high amount of pre‑produced, pre‑recorded programming rather than live broadcast content.
LISTNUM 1 \l 1857 What we are doing is saying, okay, that portion, that large portion which is still the preponderant amount of media consumption they are doing, is high quality media consumption. It is television. It's on a television screen. But there is nothing that is serving them that's speaking to them or that's giving them a platform for their voice. And that's why they are not watching. If it's there they will watch it but there is nothing that engages them.
LISTNUM 1 \l 1858 There is nothing that is inspiring them. There is nothing that is speaking to them or respecting them. And that's what we are here to create.
LISTNUM 1 \l 1859 COMMISSIONER KATZ: Do you not think that the educational system is a by‑product of what we are facing right now? When you go to schools they are teaching people how to use computers ‑‑ children ‑‑ how to interact with computers. There may be some TVs there for downloading for video or whatever but for the most part what people are exposed to in the school level is interactivity over the internet, and so that's how as they grow up and get to that age of 12, 14, 15 they are very conversant with two‑way interactivity over the internet.
LISTNUM 1 \l 1860 What you, I think, seem to be doing is running up the hill with water behind you dragging it up instead of trying to bring it down. Now, maybe the composition of all three of your solutions come together and make it a win‑win scenario, and that's why I asked the question whether you started any of these already.
LISTNUM 1 \l 1861 MR. SUTHERLAND: I think, further to one of the points in there that actually it is well before the age of 12 that the youth are becoming educated and familiar with the ways of the internet; younger everyday it seems.
LISTNUM 1 \l 1862 But, again to reiterate, the television is still the dominant showcase medium and we are trying to give a voice to youth to bring them forward to engage them. That is the attractive fact. We are absolutely not going to try to compete or take them away from the internet. The internet is very much a part of the platform that we are building.
LISTNUM 1 \l 1863 MR. GOLDMAN: The other thing is that if we look at this seven to 12‑year old demographic and then we look at the 24 and up, 29 and up demographic, there is a high amount of television viewing, broadcast television viewing. And in this area it seems that it is a very low amount of television viewing.
LISTNUM 1 \l 1864 We think it's because their interests have been somewhat ghettoized, that they haven't had programming that has been built for them that engages them, that inspires and involves them and speaks to them. And that's one of the thrusts behind this channel. We want to give them that opportunity to have programming that speaks to them, engages them, inspires them and makes them feel that they have a voice.
LISTNUM 1 \l 1865 COMMISSIONER KATZ: Do you have research to substantiate what you are saying? Have you actually gone out and done live research documented with survey results and demographics that build up this view and vision that you have?
LISTNUM 1 \l 1866 MR. GOLDMAN: We have done a lot of analysis of other people's research. We haven't sponsored our own study to go and do this.
LISTNUM 1 \l 1867 The popular wisdom from all the broadcasters that I have spoken to in the GTA especially with TVO is that, "Oh, these people just don't watch TV". I was speaking with Pat Ellingson at TVO and she said, "Oh, just they don't watch." And we have had an ongoing discussion about why that is.
LISTNUM 1 \l 1868 My sense is that what ‑‑ you know, the case that we are putting forward is that they don't watch because there is nothing there for them to watch. There is nothing there that engages them and gives them the kind of forum that we are looking to build with this channel. Certainly, when you look ‑‑ you know, you have spoken about the other two screens, you know, wireless and internet, like isn't there enough for them there? Well, they seem to keep watching television, just not broadcast television because it's ‑‑ you know there isn't anything there for them. We want to fill in that hole and give them something that allows them to watch all ‑‑ to deal with all three of these screens on the ratios that everyone else is able to because they have got a broadcast market that speaks to them.
LISTNUM 1 \l 1869 MR. GIRARD: In answer to that as well perhaps I could ask Wendy‑Lee Starr, our marketing research consultant, to go through the statistics that have formed this view.
LISTNUM 1 \l 1870 COMMISSIONER KATZ: Please.
LISTNUM 1 \l 1871 MS STARR: Thanks.
LISTNUM 1 \l 1872 I have a report that I am prepared to submit as well. I just had a little bit of a technology problem.
LISTNUM 1 \l 1873 But what we found ‑‑ our analysis shows the program that's available today for youth there is no other over‑the‑air broadcaster that provides the cultural diversity that we plan to showcase to attract. There is no other over‑the‑air broadcaster that is engaging youth in their current programming that is offered right now. And that's in looking at all of the major over‑the‑air broadcasters in the Toronto area.
LISTNUM 1 \l 1874 And in doing our research as well we found a lot of the feedback that has come back is those kids that grow up watching television, Canadian television, and they move into their teen years watching television, they are more likely to stay watching Canadian television as they become adults.
LISTNUM 1 \l 1875 So I can submit the report that I have that will show that there basically is no other broadcaster in our demographic area providing the kind of empowering youth programming that we plan to do.
LISTNUM 1 \l 1876 COMMISSIONER KATZ: So you have taken this analysis, if we can call it that, research or analysis, and then have you gone to the advertising agencies to see whether this opportunity is marketable?
LISTNUM 1 \l 1877 MR. GOLDMAN: Absolutely. There is a very, very large media buying agency that we have dealt with. I will get some paperwork to you on that possibly by the end of the day. But they are very excited about this concept. They think there is absolutely a way to bring new advertisers in to enhance the advertising marketplace. Their sense that this demographic is not served in the market is similar to ours.
LISTNUM 1 \l 1878 COMMISSIONER KATZ: So you intend to file both those documents?
LISTNUM 1 \l 1879 MR. GOLDMAN: I believe we will be able to ‑‑ the first one is ready, I understand, and the second I believe we can get it today. It would be a letter from the media buying agency I am talking about. It may take a few days. They need to go through head office in New York to get approvals for things like that.
LISTNUM 1 \l 1880 COMMISSIONER KATZ: Please.
LISTNUM 1 \l 1881 Can I take you back to your submission this afternoon? I just want to pickup on a couple things and then go into the financials as well for clarification.
LISTNUM 1 \l 1882 I note that you indicate that Mr. Goldman ‑‑ no, sorry, Peter Gold ‑‑ is CFO of YES TV and when I read this it says he also currently serves as Vice‑President of Finance and Director of Fun Technologies.
LISTNUM 1 \l 1883 So you have got a dual role?
LISTNUM 1 \l 1884 MR. GOLD: Yes, my role at YES TV is a recent appointment. It's more on an interim basis and I have been working in a consultative capacity with the team. So there is a dual role, yes.
LISTNUM 1 \l 1885 COMMISSIONER KATZ: Your fulltime capacity then is as Finance, Vice‑President and Director of Fun Technologies ‑‑
LISTNUM 1 \l 1886 MR. GOLD: That's correct.
LISTNUM 1 \l 1887 COMMISSIONER KATZ: ‑‑ which is a subsidiary of Liberty Media Corporation?
LISTNUM 1 \l 1888 MR. GOLD: Yes.
LISTNUM 1 \l 1889 COMMISSIONER KATZ: Is that the U.S. media corporation?
LISTNUM 1 \l 1890 MR. GOLD: Yes, it is.
LISTNUM 1 \l 1891 COMMISSIONER KATZ: Is there any relationship between Liberty Media and YES TV?
LISTNUM 1 \l 1892 MR. GOLD: No, no relationship.
LISTNUM 1 \l 1893 COMMISSIONER KATZ: There is none?
LISTNUM 1 \l 1894 MR. GOLD: No, sir.
LISTNUM 1 \l 1895 COMMISSIONER KATZ: Okay.
LISTNUM 1 \l 1896 You indicate in your application and again on page 26 of your submission this afternoon that you have secured $1 million in equity financing and a further $5 million commitment in debt financing and you have also secured additional $10 million of financing.
LISTNUM 1 \l 1897 I guess the question I have got is when I read over your actual application it wasn't as definitive as it appears to be here. Is there documentation that actually clarifies you have access to that, you have cleared all the hurdles, the terms, conditions associated with that equity and debt has been defined and is something that you can present to us?
LISTNUM 1 \l 1898 MR. GOLD: What we have at this point is a firm commitment, a letter of intent in other words. And the primary condition is subject to getting CRTC licensing. The letter which, again, we would be willing to provide, because I have a copy in front of me, has a ringing endorsement from the proprietor of this business to the team and to the concept.
LISTNUM 1 \l 1899 COMMISSIONER KATZ: And the equity financing is Canadian equity financing?
LISTNUM 1 \l 1900 MR. GOLD: Yes, it is.
LISTNUM 1 \l 1901 COMMISSIONER KATZ: Okay. Can you place something on the record for us so that we can take a look at the terms and conditions of that commitment?
LISTNUM 1 \l 1902 MR. GOLDMAN: The terms and conditions have not been clarified. Since the business plan doesn't actually require that the debt be accessed, those terms would need to be negotiated. I could speak with the lender in question and see if they would offer terms and conditions for the sake of clarity with the Commission.
LISTNUM 1 \l 1903 COMMISSIONER KATZ: Is it the same lender that was filed in the application?
LISTNUM 1 \l 1904 MR. GOLDMAN: It is the second lender to buttress the first.
LISTNUM 1 \l 1905 COMMISSIONER KATZ: Okay. If you could, that would be helpful as well.
LISTNUM 1 \l 1906 MR. GOLDMAN: I will make the approach, yes.
LISTNUM 1 \l 1907 COMMISSIONER KATZ: Can we move onto the actual financials themselves? I must admit after 30 odd years in the industry it is the first time I have seen a business plan that is self‑financing from the pre‑operation stage, which is very very unique and, if it is doable, it is very creative on your side as well.
LISTNUM 1 \l 1908 Can you explain how you make money before you even go into business? I mean, you are here apparently selling something that isn't operational yet and someone is paying you for it as well. And I am just trying to understand the dynamics of that transaction.
LISTNUM 1 \l 1909 MR. GOLDMAN: I think I am the best person to answer that, since that happens to be my creativity that you are referring to.
LISTNUM 1 \l 1910 Certainly, we are aware that any new licensee, especially a new entrant without a track record, is looked at very critically in terms of their ability to handle themselves financially. I have invested six years, a great deal of my own money in this concept and I am willing to continue to do that, such that this channel hits the ground running.
LISTNUM 1 \l 1911 So that investment is something that is guaranteed by me. It is business that is being guaranteed by me and enterprises that are associated with me. So that this channel which we think is a crucial development in Canada's social fabric, especially in the GTA, so that that can happen.
LISTNUM 1 \l 1912 Does that address your..?
LISTNUM 1 \l 1913 COMMISSIONER KATZ: Well, when I look at your statement ‑‑ I am looking at I guess your financial statement here, I note that there is program rights that are generating revenue, half a million dollars in year zero and then it continues on throughout the seven‑year term for a total of $4 million.
LISTNUM 1 \l 1914 So you are providing someone with rights, obviously it is Freedom I gather ‑‑
LISTNUM 1 \l 1915 MR. GOLDMAN: Yes.
LISTNUM 1 \l 1916 COMMISSIONER KATZ: ‑‑ Freedom Films. But they are paying for something in year zero and there is no tangible value that they are getting in return for that in year zero.
LISTNUM 1 \l 1917 MR. GOLDMAN: Actually, there is. There has been a great deal of production already going on for the channel for the last 12 months. So there is material on the order of 60 hours of high‑quality HD programming, much of it multi‑camera, Dolby Surround material that was produced in preparation for a launch that we had planned in August. So there absolutely is material that rights exist for that YES TV has to vend.
LISTNUM 1 \l 1918 COMMISSIONER KATZ: You said in August you had planned for it or you are planning for a launch in August?
LISTNUM 1 \l 1919 MR. GOLDMAN: No. Originally, as we have mentioned, we have been at this for about six years. I was the primary investor sought out by a specialty channel called the High School Television Network and Ryan and myself and Mr. Layng have been involved since that time. Mr. Girard joined us about four years ago to continue developing this concept. It turned out that the initial operators were under capitalized, had represented otherwise. But my capital essentially went down the drain on that venture. But the concept we thought was of significant value.
LISTNUM 1 \l 1920 We moved it towards ‑‑ launched as best we could. But it became obvious to us that this is not a concept that should exist in the specialty channel universe. The BDUs want a rather steep take on subscribership. It doesn't maximize the empowerment of the audience and that was why we went to the over‑the‑air concept. We had hoped perhaps we could negotiate a new tier, like a basic digital over the last six years, but it has certainly been challenging, you know, gathering all the monies to do this and not having a track record. So we have gathered together a group of people that have really strong track records in broadcasting and broadcast management and we are looking at doing an over‑the‑air licence which will definitely penetrate this market and that is what we are interested in doing.
LISTNUM 1 \l 1921 COMMISSIONER KATZ: But YES TV has generated 60 hours of programming ‑‑
LISTNUM 1 \l 1922 MR. GOLDMAN: Correct.
LISTNUM 1 \l 1923 COMMISSIONER KATZ: ‑‑ for Freedom Films, for whoever is giving you half a million dollars of programming rights?
LISTNUM 1 \l 1924 MR. GOLDMAN: Correct.
LISTNUM 1 \l 1925 COMMISSIONER KATZ: And programming rights goes with broadcasting or distribution of some sort, which isn't going to happen until year one presumably? I am just trying to understand the half a million dollars is being paid out, what is Freedom getting in return for that in year zero?
LISTNUM 1 \l 1926 I can understand in year one, two if this licence gets approved they will be on air and broadcasting. But what is he getting in year zero and why is he paying half a million dollars?
LISTNUM 1 \l 1927 MR. GOLDMAN: Right outside of Toronto, rights outside of Canada, those rights to sell around the world of this programming, which exceptionally high quality.
LISTNUM 1 \l 1928 COMMISSIONER KATZ: There is also slightly less than a quarter of a million dollars for production mobile rental. And when I went through the file it appears as though there is a loan of $1 million for the equipment. Is that how it is tied together? There is $1 million of purchasing of equipment being purchased?
LISTNUM 1 \l 1929 MR. GOLDMAN: Sorry, which page are you looking at?
LISTNUM 1 \l 1930 COMMISSIONER KATZ: There is somewhere in here where there was $1 million of leased equipment that was charged out at $50,000 a year I believe.
LISTNUM 1 \l 1931 MR. GOLDMAN: I believe you are talking about transmission equipment in that case.
LISTNUM 1 \l 1932 COMMISSIONER KATZ: Is that what that was for?
LISTNUM 1 \l 1933 MR. GOLDMAN: I believe so. I think those are the numbers that Jim Multner gave us for the transmission equipment that we would be leasing. I am not sure that it refers to the mobile at all, I suspect it doesn't.
LISTNUM 1 \l 1934 COMMISSIONER KATZ: Okay, well then I am wrong and I apologize.
LISTNUM 1 \l 1935 But the production mobile rental is renting of a mobile studio?
LISTNUM 1 \l 1936 MR. GOLDMAN: Correct, three.
LISTNUM 1 \l 1937 COMMISSIONER KATZ: Three of them?
LISTNUM 1 \l 1938 MR. GOLDMAN: Yes.
LISTNUM 1 \l 1939 COMMISSIONER KATZ: And who owns that equipment?
LISTNUM 1 \l 1940 MR. GOLDMAN: In the event the licence is awarded, those assets will be co‑owned by Freedom Films and YES TV. YES TV is going to have a significant benefit from having those resources be well‑used by YES TV and YES TV is going to split the revenue as a result of giving that benefit to Freedom Films, so it is essentially a partnership that is created between the entity that controls the mobiles and YES TV.
LISTNUM 1 \l 1941 COMMISSIONER KATZ: So YES TV will invest the $1 million of equity into purchasing this?
LISTNUM 1 \l 1942 MR. GOLDMAN: No.
LISTNUM 1 \l 1943 COMMISSIONER KATZ: Where is YES TV getting the equity to purchase or invest in these mobiles?
LISTNUM 1 \l 1944 MR. GOLDMAN: There is no equity going into the mobiles from YES TV.
LISTNUM 1 \l 1945 MR. GOLD: I think that the plan is that the additional revenue, by having these mobile units being serviced more frequently, is of value to Freedom and that is the basis of the sharing arrangement.
LISTNUM 1 \l 1946 COMMISSIONER KATZ: So YES TV is generating $220,000 of income on zero investment of their own? They have no investment and they are being paid a quarter of a million dollars thereabouts for renting something that they don't own?
LISTNUM 1 \l 1947 MR. GOLDMAN: The fact is that, out of programming monies, it is anticipated that the mobiles will be rented by YES TV. The rationale for this arrangement is essentially to give YES TV a 50 per cent discount on its mobile use, but it is realized through giving it half of the ownership so it gets half the income. It nets out as being the same, but it has got a long‑term benefit from these mobiles doing well.
LISTNUM 1 \l 1948 COMMISSIONER KATZ: But if it is getting half of the revenue, where are the operating costs or expenses associated with them?
LISTNUM 1 \l 1949 MR. GOLDMAN: Absorbed by Freedom Films.
LISTNUM 1 \l 1950 COMMISSIONER KATZ: Absorbed by Freedom Films.
LISTNUM 1 \l 1951 MR. GIRARD: If I just may. In terms of what is being paid, there are a number of relationships between Freedom Films and YES, and I appreciate that your question is going to well, what is Freedom getting out of this? And I think if you look to the financials, and Mr. Gold may be able to expand on this, but there is a sale of infomercial time to Freedom Films which it is then going to be able to market, that is a benefit going to Freedom Films.
LISTNUM 1 \l 1952 In return, Freedom is going to supply $1 million in financing, it is going to sell or split the ownership of these four mobile units, it is going to supply the studio facilities. And all of these are set out in the financial statements that were provided. But I believe those are the three main things Freedom is offering in exchange for getting the infomercial rights of six hours during the evening timeslot, that is the benefit going to Freedom.
LISTNUM 1 \l 1953 COMMISSIONER KATZ: Is there a balance sheet associated with your income statement here? Did you file balance sheets or a cash flow page?
LISTNUM 1 \l 1954 MR. GOLD: I don't believe so.
LISTNUM 1 \l 1955 COMMISSIONER KATZ: Could I ask you folks to file an accompanying balance sheet and statement of cash disposition and flow as well as the transaction history that you just denunciated between YES and Freedom as to who is lending whom what and what they are getting in return for it and what the commitments are both ways?
LISTNUM 1 \l 1956 MR. GIRARD: Yes, I will be pleased to detail what those transactions are and provide that. But, as I said, I believe each one of those is disclosed in the pro forma financial statement that has been provided, but I will pull it together for the Commission.
LISTNUM 1 \l 1957 COMMISSIONER KATZ: Part of it fits into the balance sheet. They are off income statement transactions I have got a feeling and I just want to see them come through a balance sheet as well and see what it looks like.
LISTNUM 1 \l 1958 MR. GIRARD: We will be happy to provide that.
LISTNUM 1 \l 1959 MR. GOLDMAN: Commissioner Katz, I am just going to excuse myself for about two minutes.
LISTNUM 1 \l 1960 COMMISSIONER KATZ: Sorry?
LISTNUM 1 \l 1961 MR. GOLDMAN: I need to excuse myself for about two minutes.
LISTNUM 1 \l 1962 THE CHAIRPERSON: Do you want to take a break?
LISTNUM 1 \l 1963 MR. GOLDMAN: I would really appreciate that.
LISTNUM 1 \l 1964 THE CHAIRPERSON: Why don't we take a five‑minute break.
‑‑‑ Recessed at 1415 / Suspension à 1415
‑‑‑ Resumed at 1423 / Reprise à 1423
LISTNUM 1 \l 1965 MR. GIRARD: Thank you for that adjournment.
LISTNUM 1 \l 1966 THE CHAIRPERSON: Okay, Commissioner Katz, do you have some more questions?
LISTNUM 1 \l 1967 COMMISSIONER KATZ: I just want to pursue the discussion of all these transactions that are taking place between YES and Freedom Films and that there is an undertaking here that you will provide us with all the moving parts back and forth, the flow of funds?
LISTNUM 1 \l 1968 MR. GOLDMAN: Yes, we will provide you with the detail on the flow of funds and the agreements that are in place between or at least memorandums of understanding that are in place between the entities.
LISTNUM 1 \l 1969 COMMISSIONER KATZ: Now, is YES TV a going concern today? Is it a business today? Because you said that there is 60 hours of HD programming that has already been done. There is a business there, there is a company, it is incorporated, there is a financial statement for last year?
LISTNUM 1 \l 1970 MR. GOLDMAN: Up until the last part I was going to say yes. There is not a financial statement yet. I am going to hand that off to Peter as soon as he gets back from wherever he has disappeared to.
LISTNUM 1 \l 1971 The company was incorporated at the end of April last year, I think it was ‑‑
LISTNUM 1 \l 1972 MR. GIRARD: I will deal with the corporate structure. YES TV Inc. was incorporated April 30, 2007 and it exists as a corporation right now, but it hasn't had a yearend yet, so it doesn't have financial statements at this point. Its yearend is April 30, 2008.
LISTNUM 1 \l 1973 COMMISSIONER KATZ: Is it an incorporated entity?
LISTNUM 1 \l 1974 MR. GIRARD: It is an incorporated entity. The Articles of Incorporation and the Certificate of Incorporation were filed with the Commission counsel.
LISTNUM 1 \l 1975 COMMISSIONER KATZ: So there are assets, there are liabilities, there is something there we can look at? You can file interim audited statements for six months or nine months or something?
LISTNUM 1 \l 1976 MR. GOLDMAN: Yes, we wouldn't want to do that by Tuesday though and audited statements I think would take probably a couple weeks, I don't know. How long would it take to produce audited statements for YES TV? There is nominal activity.
LISTNUM 1 \l 1977 COMMISSIONER KATZ: I guess what I am looking for is what assets does YES have today, because you mentioned 60 hours of programming. So obviously you must have equipment, you must have some assets and you must have some liabilities and you probably have some debt as well along the way and I am just trying to get a sense for what it all looks like.
LISTNUM 1 \l 1978 MR. GOLDMAN: We will be happy to put that together. I think that the important part is ‑‑ you highlighted the programming rights and I think that, in fact, that may be a low number. The value of the materials that have been produced is actually quite high. With your permission, we are going to file a list of what has been produced and what we believe its market value to be as well.
LISTNUM 1 \l 1979 COMMISSIONER KATZ: Okay. And that market value will be assessed by yourselves or by a third party?
LISTNUM 1 \l 1980 MR. GOLDMAN: There is a company that we have done some estimates with, Cinemavault in Toronto, I can approach them and see if they would do an estimate value.
LISTNUM 1 \l 1981 COMMISSIONER KATZ: Yes, and in fact your cost would be worthwhile as well, what did it cost you to manufacture, create and that as well.
LISTNUM 1 \l 1982 MR. GOLDMAN: Certainly, certainly. I think that we would need three weeks to produce that given the volume of material.
LISTNUM 1 \l 1983 COMMISSIONER KATZ: Okay. There is a lot of transactions between YES obviously and Freedom Films. Can someone provide me with some insight as to who Freedom is, what their ownership structure is, are they Canadian, are they incorporated, what do they do?
LISTNUM 1 \l 1984 MR. GIRARD: I am content to provide that information by way of undertaking to the Commission. I mean, I can tell you it is a Canadian company, it is involved in television production, I will give you details of its ownership and the other questions that you raise, I will respond to that if that is satisfactory.
LISTNUM 1 \l 1985 THE CHAIRPERSON: When you say Canadian, is it owned and controlled by Canadians within the meaning of the Act?
LISTNUM 1 \l 1986 MR. GIRARD: Yes.
LISTNUM 1 \l 1987 COMMISSIONER KATZ: I think those are all my question, Mr. Chairman.
LISTNUM 1 \l 1988 THE CHAIRPERSON: Vice‑Chairman Arpin.
LISTNUM 1 \l 1989 COMMISSIONER ARPIN: Thank you, Mr. Chairman.
LISTNUM 1 \l 1990 Could you help me to understand what will be the use of the three mobiles that YES TV will inherit and what kind of programming are you planning to do in making use of these mobiles?
LISTNUM 1 \l 1991 MR. GOLDMAN: Debra would normally field that question, but she is not feeling well today.
LISTNUM 1 \l 1992 The mobiles are intended to be used to produce very high‑quality high‑definition content in the music and variety categories. Certainly, there is a wealth of musical talent in the Toronto area in this demographic that does not have much of a forum to be seen. I think that, you know, certainly this is in line with the goals of heritage to promote such artists and we will give strong strong support to that.
LISTNUM 1 \l 1993 So we envision having at least one live show a week that involves these kinds of artists that is used on the mobile. Sporting activities that are, you know, of an amateur nature, high school, university where possible where other broadcasters are not involved and already have rights tied up.
LISTNUM 1 \l 1994 But we are really interested in things like beach volleyball which our audience is very attracted to that goes on down on Cherry Beach. You know, there are days of really intense competition that we think would make really good television.
LISTNUM 1 \l 1995 There is an incredible number of schools that do really high‑end musical productions and that has never been put on television before. So, you know, all this stuff is either priority programming or amateur sport and we want to see really high‑end coverage of it, which is why ‑‑ the mobiles make it possible to do it very quickly with very low post‑costs.
LISTNUM 1 \l 1996 And because YES TV has got an opportunity to own the mobiles, it gives it the ability to do it relatively inexpensively and to then potentially turnaround and sell some of that programming if it is done at a high enough level.
LISTNUM 1 \l 1997 COMMISSIONER ARPIN: The way you describe the programming that will come out of those mobiles lead me to believe that we are not here talking about pick‑ups with one or two cameras in the back and with people going to cover it. You are talking of big gear with master control and so you are talking fairly expensive mobile units.
LISTNUM 1 \l 1998 MR. GOLDMAN: Again, I would agree with you up until the last point. The cost of putting mobiles together that are purpose‑built for specific kinds of programming ‑‑ if you are building, you know, a CBC kind of mobile to do high‑end sports, you are going to spend a lot of money. But if you are going out to do something that is specifically a music and variety show and you know exactly what you need, the number of inputs you need, you can be very very cost effective in a build.
LISTNUM 1 \l 1999 And we have got strong engineering support on our team from Bob and also we have got the engineer that helped build The Score who is on our team, so we can do this very very cost effectively.
LISTNUM 1 \l 11000 COMMISSIONER ARPIN: How many hours a week are you planning to produce in making use of these mobile units? On average, it could vary one way to the other.
LISTNUM 1 \l 11001 MR. GOLDMAN: Can I give you that number at the end of day? I would have to look at the schedule and sort of make an educated assumption.
LISTNUM 1 \l 11002 MR. SUTHERLAND: So if I can clarify, Mr. Commissioner, you are referring to the amount of programming specifically produced by the mobile ‑‑
LISTNUM 1 \l 11003 COMMISSIONER ARPIN: Yes, making use of the mobile.
LISTNUM 1 \l 11004 MR. SUTHERLAND: Okay.
LISTNUM 1 \l 11005 COMMISSIONER ARPIN: Because, obviously that programming is not user‑generated ‑‑
LISTNUM 1 \l 11006 MR. SUTHERLAND: Correct.
LISTNUM 1 \l 11007 COMMISSIONER ARPIN: ‑‑ it is something that is made at the request of the program director or the programming team.
LISTNUM 1 \l 11008 MR. SUTHERLAND: Yes.
LISTNUM 1 \l 11009 COMMISSIONER ARPIN: And it serves a purpose.
LISTNUM 1 \l 11010 MR. SUTHERLAND: Yes, it does. We weren't anticipating to need to breakdown how much programming would be done by the mobiles, but we can certainly do that.
LISTNUM 1 \l 11011 COMMISSIONER ARPIN: And are you planning to have repeats within the same week of the programming produced, making use of these mobiles?
LISTNUM 1 \l 11012 MR. GOLDMAN: We have a repeat factor in mind of approximately 75 per cent, which would mean about 2,200 hours a year of original programming within the same week as not in any broadcaster's interest typically unless they are doing ‑‑ you know, I know with APTN some shows that I have produced for them, they will do three repeats of the same program within a 24‑hour period in order to exploit the terms of a contract. I don't know that we are going to look to do that. That would be a programming decision, it would be Debra's decision.
LISTNUM 1 \l 11013 In general, we are looking to have a high volume of original engaging content on the channel because we want to serve the audience.
LISTNUM 1 \l 11014 COMMISSIONER ARPIN: Now, other than user‑generated programming and not produced by making use of the mobile, are you planning to have other programming say produced out of a studio facility of your own?
LISTNUM 1 \l 11015 MR. GOLDMAN: I am sorry, out of a facility of our own?
LISTNUM 1 \l 11016 COMMISSIONER ARPIN: Yes.
LISTNUM 1 \l 11017 MR. GOLDMAN: And are we speaking about me‑owned or YES TV‑owned?
‑‑‑ Laughter / Rires
LISTNUM 1 \l 11018 COMMISSIONER ARPIN: Well, we will start with YES TV on the one hand and then Freedom and, after that, each of you are independent producers.
LISTNUM 1 \l 11019 MR. GOLDMAN: I think it is important to go back to where, not too far back, but about a year ago we sat down, we had a brunch with about 20 independent producers. And we laid out our model for stimulating high‑quality programming for the channel. And so forgive me if I go about a bit, but I am answering the question. I think what you are wondering is is this going to look like YouTube, is there really strong content on this channel and are independent producers, other than the people who are corporately related, going to benefit from this channel being licensed?
LISTNUM 1 \l 11020 It is not going to look like YouTube, there is definitely going to be a lot of very high‑end content and we have a wide open door to independent producers who will do the same things that we are doing in order to get funding for programming which is, in most cases, it is going to involve securing strong sponsorships for high‑quality programming.
LISTNUM 1 \l 11021 MR. SUTHERLAND: Allow me to step in with one other point.
LISTNUM 1 \l 11022 We certainly do look forward to being able to build our own productions studios and, you know, i