Appearing before the CRTC on Thursday, Canwest (my employer, you’ll recall) made the case for license amendments at its two Montreal television stations, CKMI-TV (Global Quebec, which is actually licensed out of Quebec City but operates out of Montreal) and CJNT-TV (a former ethnic programming station which has since become half ethnic programming and half E! entertainment shows).

Here are some highlights from the transcript.

Global Quebec

The main change Canwest wants to make to Global Quebec’s license that would affect programming is a reduction in local news. Canwest proposes to reduce local programming minimums across the country to 10 hours per week for stations in large markets (Toronto, Edmonton, Calgary, Vancouver) and 5 hours per week for small markets (which includes Montreal’s anglo market).

This would mean local programming for CKMI would drop from 18 hours a week to 5. As a result, News Final would be reduced from an hour to half an hour on weeknights, the morning repeat of News Final would be eliminated, all weekend local news would be eliminated and the half-hour weekly news show Focus Montreal would be cancelled.

Current conditions of license:

• Regional station based out of Quebec City (CKMI-TV Channel 20) with retransmitters in Montreal (CKMI-TV-1 Channel 46) and Sherbrooke (CKMI-TV-2 Channel 11)
• Minimum of 18 hours of local programming each week
• Minimum eight hours a week of priority (drama, documentary, etc.) Canadian programming, of which at least 75% must be produced by independent production companies

Canwest’s proposal:

• Station’s license based out of Montreal (with retransmitters in Quebec City and Sherbrooke), with a change of classification from regional to local to allow it access to local Montreal advertising
• Minimum 5 hours a week of local programming, consistent with a national policy of 5 hours for small markets and 10 hours a week for large ones.
• Elimination of priority programming requirements (leaving only general Canadian content requirements).

On moving the station from Quebec to Montreal:

The Quebec City CMA has an English-speaking population of 7,420 people using Stats Can’s 2006 numbers for language spoken at home.

For the Montreal CMA the number is closer to 600,000. We would note in this regard that in 2006 the Commission denied an application for an English-language radio station in Quebec, stating that the Commission notes that Quebec has a very small Anglophone population and that the advertising pool to support such a station is limited.

We think that it would be much more appropriate to amend the licence to reflect the size of the English-language population it serves and the majority of that audience actually resides in Montreal.

On reducing requirements for independent production:

THE CHAIRPERSON: Okay. And on independent programming, you’re asking us to reduce it from 75 percent to 50 percent. Can you explain to me how that translates into dollars for you? Translate into dollars for you.

MS WILLIAMS: Yeah, I think that things are — all of these issues are somewhat connected in that as we face a declining revenue challenge in the conventional world we’re looking as much as possible to be re-inventing ourselves and thinking about different ways to make our business more successful ultimately and recapture some of this revenue if we can, other than simply just cutting away at costs.

And one of the big challenges we’re all facing is the fragmentation of viewers across all of our channels and all of our other platforms and we’re all trying to get our heads around, how do we somehow take advantage of all of this other viewing as opposed to it just being a problem.

So, to the extent that there is opportunity to start to garner other revenue streams from secondary platforms, those can be ways for us to make sure that that big up front investment, which is valuable in so many ways, it’s valuable in terms of the big promotion you get from a show first being seen on a large platform so that everybody’s aware of it, which is the only reason someone might know that they want to go find it on iTunes or your website or something anyway. There’s a huge initial impact to that first broadcast.

But we don’t get the revenue out of that first broadcast, although we still have all the cost. But the other revenue potentially comes from those other platforms and those other streams.

So, what we’re saying is we need to be able to have, again, more flexibility on some projects some of the time to own the whole darn thing and to be able to experiment now with where we put that show and how we push that show into other places and how do we get an advertiser to buy the whole package all at once rather than an advertiser moving in and out of bits and pieces?

How do we use the leverage that we have to make these shows as successful as possible, not only with the largest audiences, but also with the largest revenue?

So, it’s the flexibility to stay in control of the product in an effort to stay in control of the revenue which is the source of the whole problem here we’re facing in conventional.

THE CHAIRPERSON: You’re not going to produce it yourself, you’re still going to buy it, so it’s just you’re going to own the rights rather than the producer?

MS WILLIAMS: Yeah, it is about controlling rights, it is about controlling a project from the very beginning, it is about staying in control of that project from its very beginning to its very end, and that often comes with, you know, a very significant up front cost which is one is selective about this. It’s not something that suddenly we want to one hundred per cent finance, own and control every single project that we’re involved in.

But we do believe that there is some value in some projects some of the time in taking a larger stance and we want to be able to do that more than the rules allow us right now.

THE CHAIRPERSON: Yes. My point was, you’re not going to move into in-house production?

MS WILLIAMS: No. The contemplation at the moment is not to own a studio.

On the broadcast centres that result in centralized production of local news:

MS McGINLEY: This project, the digital news project that you were referring to, was developed and implemented to address several converging issues facing the conventional broadcasters; technologies moving to a digital platform and we had to move with it.

Content has to be available on a multiplatform basis to meet the needs of the interactive and mobile demands.

We have been facing continued declining profits in our conventional broadcast operations and sustaining significant financial losses in our small market stations.

So to address these issues, we conducted a very thorough review of the financial results of every one of our stations across the country and we have 14 conventional broadcast stations that produce local news, and we divided them into the two groups as defined in the CRTC; four that are greater than a million and 10 that are less than a million people. And our review included comparing the sales generated from the local programming per station against the costs incurred to produce and broadcast this local programming, which would come up with an operating margin or loss.

It was clear that we incur significant losses on local programming in all our small markets and in our large markets we operate at a loss in two of the four, as it relates to the generation of local programming.

Our ability to continue providing local news in all of the small markets was being questioned with this analysis.

So thanks to our very innovative engineering team, we devised a plan which we refer to as the digital news project to produce and broadcast our local newscast on a digital platform across multiple platforms in a more cost-efficient manner and avoid a costly capital upgrade.

So this was accomplished by turning our large markets; Edmonton, Calgary, Toronto and Vancouver into production centres where the technical and production responsibilities for the small markets now reside. The small market stations now have the ability to focus on their primary goal of gathering, producing and reporting compelling local content in the markets they serve.

So to be clear, the local news teams at the local stations continue to: assign stories locally, write these stories locally, edit these stories locally, vet these stories locally, tell these stories locally and maintain editorial control of the newscasts locally.

What has changed is that the local newsrooms no longer have a new studio and a control room. Instead, the local on-air anchor who is at the local station, reads the newscasts from a small green room with a desk and the rest of the virtual set is digitally inserted by the productions — from the productions centre. The cameras at the local station are robotic and they are controlled remotely from the production — controlled remotely by technical staff out of the production centre. The control room now resides at one of the production centres.

So the stories are gathered, written and edited at the local station, sent by a net pipe which is critical in order to do this; a dedicated fibre line linking all the stations to the production centres where the stories are inserted into a digital news system for story lineup which again is determined by the local news director.

Regional, national and international stories are added to the lineup at the production centre at the direction of the local news director.

The ability to provide local breaking news in any of our local markets still exists and we have also invested heavily in the digital archive system which will allow us to store, catalogue and retrieve the locally-televised stories and historical events gathered in all of these Canadian markets.

In a traditional model this digital archived technology would have been beyond the financial reach of a small market station.

So in summary, the digital news project provided us the following advantages:

We have now moved all of the over-the-air stations to a digital platform, thereby replacing absolute and unsupportable analog equipment at 30 percent of the cost.

We more efficiently move original, locally-produced news content throughout Canwest group of stations to support regional and national news at all of our conventional outlets. So we have less reliance on booking fibre or satellite feeds.

And we deliver a big market high-end virtual set and high-end graphics to all our stations. Even ones for the adoption of the standalone state-of-the-art digital facility would be cost prohibitive. And this has significantly improved the overall look of our small market newscasts.

And, finally, we reduced operating costs at a significant level in order to protect and insulate where possible the newsgathering capabilities at a local regional station level.

And I would like to add that last week we were very pleased to be honoured at the annual NAB conference with a Broadcast Engineering Excellence award in the category of New Studio Technology for Networks for this specific project. And it was particularly gratifying as it was voted by our peers in our industry across North America.

We would be happy to provide you with a tour and show you our facilities.

Further, I will just tell you out of the four production centres; for example in Vancouver we do the news for Winnipeg; for Montreal, for Kelowna and Victoria out of the Vancouver production centre. The production is done. In Edmonton it is Red Deer and in the Maritimes, in Calgary it is Lethbridge … Regina and Saskatoon are slated to be done this summer.

…

THE CHAIRPERSON: Now, the CEP as you know is not pleased with this development and as we will hear from them later on. And they feel that this somehow violates your commitment for local news and a local story. I gather you feel you are compliant?

MS MCGINLEY: We are compliant.

No mention of centralized weather and sports casters.

CJNT

As you can see from this chart, CJNT has been hemmorhaging money ever since Canwest rescued it from bankruptcy. They were overly optimistic about being able to pull a profit from the station and have watched millions of dollars go down the drain each year.

As a result, Canwest is asking for changes to CJNT’s license, primarily to reduce the amount of original programming it has to create each week. Its license requires 126 hours of ethnic programming each week, of which 13 hours is original and the rest repeats or acquired programming. Under the proposal, there would be only five hours of new programming every week, with more repeats so the total is the same.

Looking at the charts they provide, it seems clear something needs to be done. CJNT is spending more than 100% of its entire budget on Canadian programming.

Current conditions of license:

• Ethnic programming must comprise:
  • no less than 60% of the total broadcast schedule (6am to midnight)
  • no less than 50% of the schedule between 6pm and midnight
  • no less than 75% between 8pm and 10pm
• Non-ethnic programming must be 35-60% English and 35-60% French
• Third-language programming must comprise at least 50% of the total broadcast schedule
• Ethnic programming must be directed toward no less than 18 different groups and in no less than 15 different languages, calculated on a monthly basis
• Minimum 13.5 hours of local programming each week

Canwest’s proposal:

• Ethnic languages broadcast per week: 5
• Ethnic groups targeted per week: 5
• No requirement for French-language non-ethnic programming
• Minimum 5 hours of local programming each week
• Ethnic programming would comprise a minimum of:
  • 50% of the total broadcast schedule (6am to midnight)
  • 40% of prime time (6pm to midnight)
  • No restriction on programming between 8pm and 10pm specifically

From its license renewal application:

Over an entire licence term (plus one additional year), the station has underperformed even the most pessimistic financial projections.  Operating losses since 2002 have exceeded $30 million.  We never expected to make much money on this investment (see below), but losing an average of over $5.3 million per year (over the past three years) was never anticipated.  And given the pressures on our company, and more generally on the conventional television sector, we cannot continue to operate this station on a status quo basis.

Charlotte Bell, head of Regulatory Affairs, on the problems facing the station:

As you know, we have tried everything possible to make the station viable. We face a much different challenge than the OMNI stations with no synergies for ethnic programming and much smaller ethnic communities. We have not been able to attract advertising revenues to support the ethnic programming.

We are hobbled in our non-ethnic programming with restrictions that require a mix of English and French language programming, effectively making us the fourth entrant in French-language television in the market after TVA, Radio Canada, TQS and Télé-Québec.

You are quite aware of the struggles of TQS and we follow them and the opportunity to acquire attractive programming and consequently in our capacity to draw programming. This requirement as well as the requirement for ethnic programming between eight and ten also limits our ability to share programming with other Canwest stations.

As the Commission has often pointed out with regard to ethnic programs, the only viable private conventional model is having foreign English language programming support ethnic programming and this option is not fully available to us.

…It remains doubtful that these changes will make the station viable, but at least it will give it a better chance to succeed.

On wanting license amendments at the same time it is considering selling the station:

COMMISSIONER MENZIES: I have a couple questions; one which I have asked other people so I have to ask you too, and the other one is just on the topic we are on, (CJNT).

If I get it correctly, the aim is to get this licence spruced up and then you can sell it, is that what I understood basically, make it more attractive to a potential buyer?

MR. PETER VINER: That is an option, yes.

MS BELL: Can I just jump in for a second though? This is part of the goal, but we applied for a lot of these changes several years ago. And because of the losses that were continually incurred by the station, we were turned down. So it is not a new idea, because we may be selling the station.

The CRTC also has issues with CJNT’s license compliance concerning the total amount of ethnic programming produced over the past few years. Canwest said there is a lag time for reporting and that shortfalls would be made up.