Leclerc abandons purchase of Radio X and 91,9 Sports after CRTC sets condition on transaction

The CRTC has said no to Leclerc Communication’s request to own three French-language FM radio stations in Quebec City, but approved the $19-million deal for it to acquire CHOI-FM (Radio X) in the provincial capital as well as CKLX-FM (91,9 Sports) in Montreal, for which it also acquired a licence amendment to convert from a sports format into a music one based off its WKND brand.

Though the overall deal has been approved, under the CRTC’s conditions, Leclerc would need to sell one of its other stations — WKND 91,9 or Blvd 102,1 — in order to buy CHOI and still comply with the ownership rules in Quebec City. The ownership rules limit an owner to two stations in one market in one language on one band.

And Leclerc has said it won’t sell its stations. So its own media are reporting that the entire deal is off, and its owner confirmed to La Presse that it won’t proceed with the transaction.

At a hearing in Quebec City in February, Leclerc vice-president Jean-François Leclerc made it pretty explicit that without this exception, the deal would not go through (emphasis mine):

233 LA PRÉSIDENTE: Merci. Ce qui nous amène à un autre type de questions. Dans l’hypothèse où le Conseil refusait votre demande d’exception à la Politique sur la propriété commune, avez-vous considéré d’autres options qui vous permettraient de procéder tout de même à l’acquisition de CHOI et CKLX-FM tout en respectant la Politique sur la propriété commune? Et si oui, dans l’affirmative, quelles sont ces autres options?

234 M. JEAN-FRANÇOIS LECLERC: Il n’y a pas d’autres options considérées que celles que nous présentons devant vous. C’est peut-être pas la réponse que vous souhaitiez entendre mais malheureusement c’est la seule qu’on peut vous donner aujourd’hui.

235 Il est important pour nous de bénéficier des synergies de quatre stations de radio. Ce que nous proposons à Montréal c’est une aventure coûteuse. C’est une station qui n’est pas rentable présentement, qui ne l’a jamais été, qu’on veut acquérir et qu’on veut transformer en station musicale différente au bénéfice des artistes et des auditeurs de Montréal.

236 Sans l’apport de trois stations à Québec, jamais on ne pourrait offrir une programmation de qualité tel qu’on le propose à Montréal, ni investir autant en publicité pour permettre la découverte de notre station, de sa musique et ultimement des artistes émergents des talents locaux qu’on y tourne.

237 Oui, la station CFEL est pas rentable à l’heure actuelle mais nous croyons fermement que BLVD et son format rock sont la meilleure proposition pour cette station. Les derniers résultats d’écoute sont encourageants. On est certain que cette station pourra è terme contribuer à la rentabilité de notre groupe.

238 Nous départir de CFEL ce serait de mettre un frein à notre élan et à nos efforts pour le développement d’un format musical unique à Québec. Ça ne rendrait service ni à notre entreprise, ni au système de radiodiffusion que de céder cette station.

239 Il faut pas non plus négliger notre attachement personnel envers nos stations, envers les employés qui y travaillent. On forme une belle et grande famille chez Leclerc Communication, puis on peut pas penser laisser aller quiconque de cette belle famille.

240 Et c’est dans l’intérêt public qu’on s’engage à maintenir la vocation musicale rock de BLVD et surtout à offrir aux Montréalais une nouvelle station radiophonique qui va s’appeler WKND 91,9 et qui va jouer un rôle extrêmement important en matière de diversité dans le marché, tant musicale qu’éditoriale.

241 Alors je pense que la réponse doit être très claire ici là. Si on doit céder une de nos stations à Québec pour concrétiser la transaction, malheureusement on ne pourra pas mener à bien l’acquisition des stations CKLX et CHOI.

242 LA PRÉSIDENTE: Parfait. Une autre question hypothétique, si le Conseil approuvait la transaction mais avait comme condition d’approbation que vous vous conformiez à la Politique sur la propriété commune, est-ce que vous procéderiez tout de même à la transaction? Puis pouvez-vous nous décrire votre raisonnement?

243 M. JEAN-FRANÇOIS LECLERC: Est-ce que vous pourriez reformuler la question, s’il vous plaît?

244 LA PRÉSIDENTE: Oui. Alors on parle encore une fois d’hypothèse. Dans une hypothèse où le Conseil approuverait la transaction mais avec une condition… comme condition d’approbation que vous vous conformiez à la Politique sur la propriété commune, est-ce que vous procéderiez tout de même à la transaction?

245 M. JEAN-FRANÇOIS LECLERC: Non. Comme je vous ai déjà… comme j’ai déjà fait la présentation y a quelques instants, la réponse est la même. On ne pourrait pas procéder à l’acquisition des stations.

246 LA PRÉSIDENTE: Parfait, merci.

247 Donc par souci de clarité… de clarté, pardon, est-ce que vous êtes prêts à vendre l’une ou l’autre de vos stations ou à retourner une licence… l’une de vos licences afin de respecter la Politique sur la propriété commune?

248 M. JEAN-FRANÇOIS LECLERC: La réponse est non.

I asked Leclerc about its intentions. Its response is that it has no intention of selling either of its existing stations in Quebec City:

Nous venons de prendre connaissance de la décision du CRTC. Nous sommes évidemment déçus, mais nous respectons cette décision.

Comme nous l’avons indiqué tout au long de l’audience, nous n’avons jamais envisagé l’option de nous départir de l’une de nos stations actuelles. Ceci a toujours été clair et le demeure encore aujourd’hui. Nous sommes fiers du travail accompli par notre équipe au cours des derniers mois dans la transformation de BLVD. Et nous sommes convaincus que cette station a tous les atouts et les capacités pour grimper encore plus dans les sondages et se tailler une belle place dans le paysage radiophonique de Québec.

Cette acquisition représentait pour nous une opportunité et non une finalité. Leclerc Communication a le vent dans les voiles et nous orienterons maintenant nos efforts vers d’autres opportunités de croissance pour continuer de faire évoluer notre belle entreprise.

I asked for further clarification. I also asked RNC Media what it intends to do. Neither responded, but RNC vice-president Robert Ranger did interviews on CHOI and 91,9 Sports saying there’s no for-sale sign outside their stations. He also said that 91,9 Sports will maintain its format.

In its decision, the CRTC denied the exception because of its effect on market power. CHOI is the highest-rated station in the market, and the three stations together would give Leclerc a much stronger position in the market than its competitors — which is what the policy is designed to prevent.

the Commission considers that such an approval would create a competitive imbalance in this market and could have an undue impact on the existing licensees. The Commission also considers that granting such an exception would result in an increase of more than 90% in Leclerc’s market share in audience and revenue in that market. This would allow Leclerc to dominate significantly in terms of revenue and tuning, breaking the market’s existing competitive balance.

Unlike previous exceptions given to Bell Media in Montreal (to allow it to keep TSN 690 after acquiring CJAD, CHOM and Virgin 95.9 from Astral) and Cogeco in Montreal (to allow it to keep 98.5 after acquiring it and CKOI from Corus while also owning Rythme FM), Leclerc didn’t promise anything special to grease the wheels of the deal. No additional tangible benefits or programming commitments. The benefits it did propose were mainly toward the Montreal market and CKLX-FM.

The Commission considers that, despite the benefits proposed by Leclerc, the applicant has not demonstrated in a material manner that granting the exception in this case would serve the public interest and contribute to meeting the various objectives of the Canadian broadcasting policy. The Commission considers that the requested exception is not warranted by an economic or technical need, or by exceptional circumstances. It considers rather that the requested exception is based on a business plan that would allow Leclerc to increase its profitability by acquiring the highest-rated station in the Québec market to invest in its station operating at a loss in Québec (CFEL-FM) and to allow for its expansion with the acquisition of CKLX-FM Montréal.

Even if the deal falls through completely, that doesn’t mean 91,9 Sports is saved.

Though the sports format is doing better than the news-talk, populist talk and jazz formats it previously had, the station is still not making money and RNC Media will have to find something to do with it.

The application overall received 41 interventions, of which 22 were from fans of 91,9 Sports asking the regulator to prevent Leclerc’s plan to convert Quebec’s only French-language sports talk station into a music one. It also included a petition signed by 1,025 people.

The commission approved the licence change for CKLX-FM because of a demonstrated economic need. The station has never been profitable, despite many efforts by RNC Media to find something that works. Since its market power is small, and other broadcasters didn’t oppose the request, the commission has granted it, allowing CKLX to go to a music format and be a commercial radio station like any other.

This will be the first time in its history that CKLX-FM will be a standard commercial radio station with no specialty format. When it was first launched in 2003, it had conditions of licence requiring it to have a jazz format. It tried several times to reduce or eliminate that requirement after learning that jazz radio wouldn’t work in Montreal. It finally succeeded after proposing a talk format and convincing the commission it could offer something different that way. It tried a Radio X format in Montreal, then tried a sort of news-talk format with the short-lived “Radio 9” before it finally found some success with a sports talk format. But though ratings went up significantly, it wasn’t enough to make it profitable.

The future of CHOI Radio X, 91,9 Sports and RNC Media’s other stations is up in the air, and it will be up to Leclerc and RNC to decide on the next steps. They could try again with a different transaction (maybe just 91,9 Sports). Leclerc has until May 30 to present its plan to conform with the ownership rules, but given its statement, it looks like leaving CHOI Radio X with RNC Media is the most likely outcome.

The CRTC tells me that if Leclerc wanted a different type of transaction, say to buy just 91,9 Sports, that would require a new application. Also, the authorization to change 91,9 from a talk to music format was given to Leclerc, so if RNC Media wants to make 91,9 a sports station, it too requires CRTC approval, which would mean a new application.

RNC has made it pretty clear it wants to get out of the radio business, despite its professions that it’s not desperate to sell the stations.

91,9 Sports also lost a key personality in November when Jean-Charles Lajoie bolted for TVA Sports. Lajoie said that decision wasn’t related to the pending acquisition, and said he thought the deal would fall through anyway.

Lajoie was also bullish on 91,9’s future as a sports station:

You can listen to CHOI’s personalities discuss the CRTC decision here.

3 thoughts on “Leclerc abandons purchase of Radio X and 91,9 Sports after CRTC sets condition on transaction

  1. Dilbert

    Apparently neither RNC or Leclerc are “big enough” for the CRTC to turn a blind eye.

    No “grease for the wheels” should make the CRTC ignore the rules. That’s lead to so many problems. If the CRTC could say no to Bell and friends as loudly as they do to smaller players, the entire broadcast system in Canada would be different.

    Reply
  2. Anonymous

    This is all very stupid. What if the Leclerc group placed a similar type of programming (CHOI-FM) channel on a HD2 on one of its present stations in Quebec City? A lot less expensive that buying up a station.

    I understand the CRTC want’s to say that they have rules. But, how about correcting the rules you allowed to be broken first before you suddenly start to stand up for ownership rules.

    Force Bell Media and Cogeco Media to divest out of their present over ownership in the Montreal market. There’s a problem. Then fix it.

    I’m sure RNC’s CKLX 91,9 fm, wouldn’t be in the jam it’s in if they could own a 50kw station, than a 5kw station, and allowed to operate without special conditions. Maybe it wouldn’t be on sale now. And maybe other francophones would have another good option as either listeners, or even employment options.

    We got rules. Ya! For some people we have rules.

    Reply
    1. Fagstein Post author

      What if the Leclerc group placed a similar type of programming (CHOI-FM) channel on a HD2 on one of its present stations in Quebec City? A lot less expensive that buying up a station.

      Yes, but then they’d be spending a buttload on programming and getting nothing back in advertising. That doesn’t sound like a great business plan.

      Force Bell Media and Cogeco Media to divest out of their present over ownership in the Montreal market. There’s a problem. Then fix it.

      The CRTC approved both those exceptions to the rules, so according to the commission there is no problem there. Though the Cogeco exception makes much less sense since 98.5 became Canada’s most popular radio station, the exception granted to Bell makes a bit more sense. It’s not like there’s a lot of demand for commercial AM stations these days.

      I’m sure RNC’s CKLX 91,9 fm, wouldn’t be in the jam it’s in if they could own a 50kw station, than a 5kw station, and allowed to operate without special conditions. Maybe it wouldn’t be on sale now.

      CHOI is Quebec City’s most popular radio station. That didn’t stop it from being up for sale in the same deal.

      Reply

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