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Ottawa, 3 September 1993
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Decision CRTC 93-581
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MusiquePlus Inc.
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Montréal, Québec - 930304100
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Authority to Increase the Wholesale Rate
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Following a Public Hearing held in the National Capital Region beginning on 6 July 1993, the Commission approves in part the application submitted by MusiquePlus Inc. (MusiquePlus) to amend the condition of its licence requiring the licensee to charge a wholesale rate per subscriber per month to each cable operator wishing to provide MusiquePlus as part of its basic service. Accordingly, effective 1 January 1994, by condition of licence, the licensee shall charge exhibitors distributing MusiquePlus on the basic service a maximum monthly wholesale rate of $0.17 per subscriber.
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The current wholesale rate for this service is $0.10. The authorized wholesale rate increase approved herein is $0.03 less than the $0.10 increase proposed by MusiquePlus.
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MusiquePlus, which was first licensed in Decision CRTC 87-897, offers a 24-hour-a-day French-language music video service originating in Montréal. Its programming consists of video clips, concerts, theme programs and magazine-type programs offering news about music and musicians.
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At the hearing, MusiquePlus stated that, over its five years of operation, it has reduced its reliance on videoclips and has put a greater emphasis on the use of more expensive thematic programming. The applicant claimed this course of action was necessary in order to reflect the preferences and tastes of its target audience (the 12 to 34 year age group). The Commission acknowledges that, by being responsive to this evolution, MusiquePlus has been very successful in attracting its audience in Quebec.
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According to MusiquePlus, however, this success has come at a cost in excess of its original projections. The licensee stated that it has experienced cumulative losses of $1.9 million (before interest and taxes) during its first four years of operation.
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The licensee indicated that, if it does not receive an increase in its wholesale rate, it will be forced to implement reductions in programming expenditures and reduce MusiquePlus to a service that relies strictly on video-clips. At the hearing, MusiquePlus stressed:
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[TRANSLATION] We must have the financial means to continue to conceive, produce or acquire original and attractive programming that will draw the participation of artists and young people. Not only to achieve the content objectives required of us by the Commission, but also to maintain the vitality of French-language music production, MusiquePlus must be allowed to continue to invest in programming rather than cut its level of production.
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In considering MusiquePlus' request, the Commission has taken the same approach followed in the case of the wholesale rate increases proposed by the licensees of the specialty services YTV (Decision CRTC 92-571), Newsworld (Decision CRTC 92-529) and Le Canal Famille (Decision CRTC 92-570). As a general approach to its evaluation of rate applications by the licensees of specialty programming services that have been in operation for three to five years, the Commission reviews a licensee's revenues and expenses and examines whether its programming conforms to the service's mandate at a satisfactory level of service. The level of any rate increase subsequently authorized is based upon the Commission's determination of the amount of financial resources required by the licensee. Having granted such a fee increase, the Commission would generally not foresee any subsequent increase as being warranted.
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The Commission has decided not to authorize annual increases based upon inflation. While such increases may be justifiable in the case of specialty services that do not have access to advertising revenues, and whose income from subscribers is thus their only source of revenue, services such as MusiquePlus normally have the ability to compensate for inflation, or otherwise to increase their revenues, by maximizing their advertising income. The Commission notes that licensees of such services also have the ability to improve their operating margins by increasing the overall efficiency of their undertakings.
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Consistent with the general approach described above, the Commission has decided to grant MusiquePlus a one-time increase of $0.07 in the wholesale rate it charges cable television affiliates. Accordingly, by condition of licence, MusiquePlus shall charge exhibitors of this service a maximum monthly wholesale rate of $0.17 per subscriber per month, effective 1 January 1994.
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As noted earlier, the one-time increase approved herein is less than the total amount sought by the licensee, and will generate total revenues over the remainder of the licence term that are lower than those projected in MusiquePlus' application. Nevertheless, the Commission is satisfied that the new wholesale rate is reasonable and sufficient to enable the licensee to increase its expenditures on Canadian programming and to continue to provide a viable and attractive service to subscribers. The Commission advises the licensee that it would not be favourably disposed to granting any further increase in this rate in the foreseeable future. In section 3 of the Broadcasting Act, emphasis is given to the fact that "English and French language broadcasting, while sharing common aspects, operate under different conditions and may have different requirements". In approving the rate increase granted herein, the Commission has given recognition to these different conditions and requirements. The Commission also acknowledges by this decision the unique and vital role played by MusiquePlus in reflecting and contributing to Quebec's cultural fabric, expecially in relation to the young people of that province and to Quebec's music production industry.
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The Commission acknowledges the views expressed in the interventions submitted by the Canadian Cable Television Association, the Association des câblodistributeurs du Québec Inc. and Vidéotron Ltée that the increase in the wholesale rate proposed by the licensee would more appropriately be considered as part of the service's licence renewal. The Commission, however, is satisfied that MusiquePlus has provided adequate justification to support the increase in its wholesale rate approved herein to $0.17 per subscriber per month, effective 1 January 1994.
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The Commission acknowledges the intervention submitted by the Association québécoise de l'industrie du disque, du spectacle et de la vidéo in support of this application.
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Allan J. Darling
Secretary General
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