As with all ownership transactions it is the responsibility of the seller or its representative to prove that a transaction is in the public interest. The Commission has been abundantly clear about this recently. This means that the burden of proof lies with Rogers and Channel Zero. This is not simply a matter of promising to invest a certain amount of money in the Canadian broadcasting system, many other factors must also be taken into consideration, including the impact on the Montreal market and the Commission's various policies.
This was the statement at the beginning of last month's hearing by Jean-Pierre Blais, the chair of the Canadian Radio-television and Telecommunications Commission. Combined with the grilling that the commission gave to the three parties involved in two applications related to the purchase of CJNT by Rogers, it's clear that the commission's hard line about acquisitions wasn't just a one-off for Bell's sake.
Rogers: using the "back door"
First up at the table was Rogers, whose acquisition of CJNT is setting this whole thing in motion (though the idea of offloading ethnic broadcasting obligations on a third party actually precedes the acquisition).
We have a few more details about Rogers's plan for an English Citytv station in Montreal. The morning show, which would carry the same Breakfast Television brand as those it has in other markets, would be three hours, from 6am to 9am weekdays, and would employ "27 or 28" of the 30 to 35 people at the station. The rest would work in sales or for the weekly sports show.
Of the morning show employees, it would break down like this, as explained by Rogers Broadcasting President Scott Moore:
- "A minimum" of three on-air people, including a host, weather presenter and roving reporter
- Six to eight segment producers "that book guests that worry about what the individual segments on the show are on a day-to-day basis."
- A director and other technical people, who Rogers stresses "would all be based in Montreal"
The commission seemed particularly concerned that this station would have no evening newscast. Rogers reiterated that with three existing players already, it makes no sense to go up against them, especially when starting from scratch.
"So for us to get into the news game late we'd be banging our head against the wall for a number of years," Moore said.
Rogers Media President Keith Pelley even added that if they decided to expand local programming, it would probably be to launch a daytime lifestyle show like Cityline before trying an evening newscast.
From Moore: "The one phrase that stuck with me in my head, and I've used it several times, is one of the cultural group leaders came up to me and said the only way Anglo Montrealers see themselves on television is if they're involved in a murder or involved in a traffic accident because the only local production in Montreal is hard news. And we feel that the market deficit in Montreal was in lifestyle."
That's an exaggeration, of course. CTV invites guests who have not been murdered or arrested to discuss non-hard-news topics every day on its noon newscast. Global's weekly Focus Montreal show similarly has interviews with people who are involved in the community, and even has musical guests on a regular basis.
But there isn't a regular outlet on local television that's not either part of a newscast or having a newscast feel to it.
As a matter of record, the commission asked Rogers if it would accept a condition of licence requiring an evening newscast. It said if such a condition were imposed, it would not accept the deal.
When commissioners suggested that an evening newscast might be an eventual goal of Citytv outside of Toronto, Rogers again poured water on the idea, saying if anything they would launch a different type of show that doesn't compete directly with competitors and takes into account changing habits about consuming news.
Rogers was also asked about a weekend morning show, but also said that this wasn't feasible in any of its markets, and likely wouldn't be in Montreal either.
Regarding the other proposed local show, a half-hour weekly sports show, Moore compared it to what used to air on CFCF on Saturday nights. SportsNight 360, which was right after the half-hour 6pm newscast and acted as an anglo Canadiens pregame show, was cancelled four years ago. He admitted that its discussions would almost certainly be heavy on Canadiens hockey talk, because that's what Montrealers care about. But he also said it would be an outlet for stories about amateur sports. Expect it to be similar to the kinds of stories that CTV Montreal's sports department puts out on a daily basis, profiling amateur athletes and regularly visiting university teams.
The commission asked about financial effects of giving Citytv an outlet in Montreal, whether it would drive up the cost of acquiring foreign programming, or hurt the existing stations. Rogers responded by pointing out that the U.S. border stations (WPTZ, WVNY WCAX and WFFF) still sell advertising in Montreal, and that most of Citytv's local advertising would simply be repatriating that money by taking advantage of more simultaneous substitution.
There was some discussion of Plan B: Rogers acquiring CJNT but being forced to maintain it as an ethnic station. This was actually the original plan, until Rogers learned of a deal between Channel Zero and ICI to propose a new ethnic TV station. Naturally Rogers jumped at this idea. Still, it says if the CRTC won't accept the plan it is willing to take ownership of CJNT and keep it ethnic, provided it is relieved of the obligation to ensure that 75% of programming from 8pm to 10pm is ethnic. That condition cuts out a lot of revenue for a station that would be heavily dependent on U.S. primetime programming to fund itself.
The commission didn't hint at where it might go with that, but did ask Rogers a simple question: If it can't run CJNT as a fully ethnic station, what makes it think that ICI could?
The response from both Rogers and Channel Zero was that ICI's cooperative model is the difference here. Rather than try to duplicate the OMNI model, which failed for both Canwest and Channel Zero and which even Rogers admits is looking less viable these days, the new channel would offload some risk onto members by having them sell ads.
Channel Zero's Cal Millar put it this way: "What struck us probably most powerfully about their proposal is the co-op model, because those, let's say 25 producers that are working with them on shows, are also 25 sales reps who are embedded in the community who already have access to advertisers and know these people with relationships going back many years."
We'll see if that argument convinced the commission. As we'll see below, they're skeptical of ICI's viability.
Finally, Rogers was asked to account for the process used, paying $10.3 million for a station that never made money and then asking that its very nature be changed. Was there any value in the station itself, or was Rogers just shelling out this cash in an order to get around regulatory problems?
The application itself puts more than 90% of the value itself in the licence, with the rest going to tangible things like the transmitter. So that would seem to support the idea that this acquisition only has value if the CRTC accepts Rogers's demands.
Rogers countered that the value of the application should be judged by the commitments Rogers is prepared to make, not the $10.3 million being spent to acquire CJNT.
Blais, the CRTC chair, pointed out the main concern: "It might be suggested by a third-party observer that this might look, however, like a back-door entry into the Montreal market for you. I understand your views of wanting to create a third private national presence, but there may have been a more front-door approach to that by actually applying for such a licence and maybe it would have resulted in a call, one doesn't know but, in any event, how would you respond to somebody who would raise this as this really looks like a back door entry?"
Rogers reiterated what it told me, that the intention was to move as fast as possible, not undermine CRTC process. It also hinted that an open call for applications probably wouldn't result in any, given that there's little interest in starting new over-the-air television stations in Canada, and nothing new has launched in Montreal since 1997.
If the CRTC decides to approve this plan, it will have to come to the same conclusion.
Channel Zero: unacceptable logs
"Okay, let's get to the ugly -- logs, if we can still call them that."
That was how vice-chair Tom Pentefountas began questioning of Channel Zero's Millar on his company's three years in control of CJNT.
Millar said it was only in July, when alerted to it by the commission's staff, that his company was made aware that the logs submitted for CJNT were not in the proper format. Looking at the before-and-after logs for CJNT, it's hard to notice much different. It's all lists of all the programs and commercials the station aired for a given month, with the start time, length, title and type. Programming is also tagged with some categorical information, like what language it's in.
It seems as though it's the tagged information that was most faulty, because based on those logs the commission came up with some pretty crazy numbers:
- Only 8.56% of its evening (6pm-midnight) programming was ethnic, while the licence requires at least 50%
- Only 20.58% of its primetime (8-10pm) programming was ethnic, while the licence requires at least 75%
- Only 45.34% of its daily (6am-midnight) programming was Canadian, while the licence requires at least 50%
- 89.6% of its daily (6am-midnight) programming was non-ethnic, while the licence sets a cap of 40%
- Only 14.06% of its programming was closed-captioned, while the licence requires 100%
Another condition of licence, that 40% of evening (6pm-midnight) programming be Canadian, was met, according to the logs.
Channel Zero said the logs must clearly be faulty, because they have been meeting their licence requirements as far as ethnic programming. They pointed to their schedule, which meets those requirements. And they're right here. I can't speak to closed-captioning or to Canadian programming, but clearly there were some ethnic programs that were not properly categorized as such and threw off the CRTC's calculations.
Channel Zero promised to correct the logs, but said doing three years' worth of logs would take months. They proposed to redo a month of logs - the commission would pick which month - to demonstrate that they're fulfilling their licence obligations.
The commission, while reiterating that logs are not a trivial matter and are taken very seriously, nevertheless accepted the proposal, and told Channel Zero to redo the logs for September 2012.
A document it later filed with the commission confirmed that, based on the schedule of programs it broadcast in September 2012, it was in compliance with all its conditions of licence.
There was another licence obligation that I didn't mention above. It's not strictly a "condition of licence", but rather a "commitment" - the distinction legally isn't clear. It goes like this:
The licensee will broadcast 14 hours of original local ethnic programming each week.
There are three key words in there: local, ethnic, and original. That means that the station must produce 14 hours of local programming every week, that it has to be ethnic in nature, and that it has to be original (supposedly meaning no repeats).
This obligation is actually slightly higher than it was under Canwest, at the request of Channel Zero, according to the CRTC's 2009 decision granting the transfer of ownership of CJNT.
But when Pentefountas brought that up, he said the CRTC had concluded that the amount of such programming the station was producing every week was zero.
Nothing, nada. No original local ethnic programming at all.
Pentefountas asked Channel Zero specifically about that, where that can be found on the schedule:
600 COMMISSIONER PENTEFOUNTAS: Okay. And where is the original ethnic programming in your week's line-up? Do you see any of that?
601 MR. MILLAR: I do. You see it from Monday to Friday in Metro Debut.
602 COMMISSIONER PENTEFOUNTAS: Okay.
603 MR. MILLAR: It's 15 hours a week.
Metro Debut is a show that airs weekdays from 7am to 10am and consists mainly of music videos and short film clips. It's hosted by this guy:
In between clips that Channel Zero can scrounge from its library, Arppe gives traffic information, weather and local headlines. He'd be fine as a radio DJ (except for the poor-quality audio), but it makes for pretty boring TV.
It's local (even though it's shot in Toronto), and it's definitely original (it doesn't air on any other channel), but is it ethnic? That is, at best, debatable.
When I asked Millar about this licence obligation on two occasions, he twice told me he didn't think that was what the licence said and that it was enough that it was local programming. Now Channel Zero seems to be recategorizing it, pretending that the whitest guy on television is hosting an ethnic show.
Up until it became a Citytv affiliate, CJNT thought it was meeting its local ethnic programming obligations by airing years-old reruns of local ethnic programs that were produced in the Canwest era. That led to some pretty embarrassing situations where outdated information made it to air repeatedly, and cultural events that happened in 2009 were being promoted in 2012.
We'll see how the commission decides on this. They'll no doubt review the programming to determine if it really meets the obligations.
But what if the commission finds that the station is ignoring its licence? Channel Zero doesn't want to own CJNT anymore. Would they deny the sale, forcing Channel Zero to keep the station? Would they revoke its licence, killing the city's only ethnic station and forcing Rogers to start from scratch? Or would they issue some sort of mandatory order that Rogers would inherit when it buys the station? It all seems a bit moot to me.
The chair alluded to a requirement that a change in ownership application requires coming forward with "clean hands" in terms of complying with a licence. That might suggest that a significant enough violation of that licence would mean denial of a sale. But that would just delay the inevitable.
ICI: Show us the money
For ICI, the ethnic television station project being proposed by the Norouzi family, the CRTC had no question as to its motives or its benefit to the broadcasting system. ICI is proposing to fill its schedule with ethnic programming, including a very large amount of original local programming.
The commissioners' concerns were more on matters of dollars and cents. The financial projections, they suggested, seemed optimistic, perhaps to the point of being unrealistic, particularly in terms of advertising revenue.
"You are all very confident that your producers will be able to secure their advertising. I wish you could give me something to make me confident," said commissioner Candice Molnar.
Her colleague Tom Pentefountas added concerns about startup financing and the Norouzis' personal stake in the project. The application came with no specific financial commitment from the owners, and no financing commitments from third parties, beyond the $1 million from Channel Zero and the proposed $1 million from Rogers, either of which could be in jeopardy depending on how the CRTC decides on CJNT's acquisition.
Sam Norouzi explained that the owners' stake in ICI would be intangible, through their production company Mi-Cam. If the station was unprofitable, the group would forgo Mi-Cam's revenue as a producer, and the production company would work for free for ICI for as long as it took. In addition, they fully expect to secure commitments from others to help with financing, but such commitments are hard to come by when a licence has not yet been awarded.
Norouzi also explained that he felt very confident the model would work, because it's not based on the OMNI/CJNT model of paying for U.S. shows to broadcast in primetime. Rather, as a producers' cooperative, the revenue would come from fees they pay to air their shows on the station, and the producers would be responsible for selling advertising. Having the producers sell the ads would mean more people doing ad sales, and those people being closer to the communities they serve.
Norouzi backed up his claims that the ICI model is sound with a later filing with the commission, showing letters of intent to purchase programming blocks from sixteen producers. With the rates set for each time slot (as low as $25 per half hour for overnight, to as high as $200 per half hour for weekend prime time), they were able to calculate a weekly revenue from these commitments alone of $17,650, which works out to an annual revenue of $917,800, slightly higher than the projected revenue in their financial projections:
ICI also managed to get additional commitments from Rogers and Channel Zero: Rogers would provide up to 200 hours of programming from OMNI a year for five years (or 1,000 hours total) at no cost, and Channel Zero would provide master control facilities worth $20,000 a month for five years at no cost. Plus Mi-Cam would provide its production services at no cost, if necessary, to ICI.
If the CRTC rejects ICI's application, the only reason will be a lack of confidence in its financial viability. But with almost $200,000 a year in committed revenue, and programming and facilities provided for free for five years, it's harder to make the argument that this can't succeed financially.
Plus, I suspect the potential benefit to the Montreal broadcasting scene will be too tempting to reject this station for this reason. Expect the CRTC to approve the applications as presented, with Rogers getting its Citytv station, ICI getting its ethnic station, and Channel Zero getting its money. The commission could set conditions on the sale, but it's too much of a win-win to give it an outright no.
See also: Will Citytv find a place in Montreal? - Broadcaster Magazine
UPDATE (Dec. 14): The CRTC has announced that the decisions related to these applications should come next week (Dec. 17 to 21). That's not absolute, so it could change, but the decisions are definitely coming soon.