OTTAWA – The future of one of three subscription radio services licensed Thursday by the CRTC is up in the air as the applicant considers whether it’s worth competing against the others when it feels the conditions of licence are unfair.
CHUM, with minority partner Astral, proposed to launch a terrestrial pay radio service in major Canadian cities with 50 homegrown channels. But the commission is requiring the two satellite services, SIRIUS Canada and Canadian Satellite Radio Inc. (CSR), to launch with a minimum of eight Canadian channels, with a ratio of at least one Canadian channel to every nine (mainly U.S.) channels brought in by their American partners.
“I am shocked, stunned, and quite surprised by the decision,” Paul Ski, executive VP of radio for CHUM, told www.cartt.ca, which was in Ottawa for the decision today. “We’re going to have to review the decision in a little bit more detail over the next few days to determine whether or not it would be appropriate for us to launch. We think that there might be a more equitable playing field. We don’t believe there is.”
CHUM’s channels would be 100% Canadian, whereas the satellite services can launch with 10% of their channels being Canadian, which isn’t fair, Ski says.
CSR and SIRIUS are both pleased by the decision, and assuming a successful review of the conditions imposed on them, they hope to launch by the end of this year. “I do think the commission has given us a framework to work toward. It’s now up to us as businesspeople to see how we can make it work,” says Kevin Shea, SIRIUS Canada’s CEO. “We are going to do everything in our power to try to ensure that we can bring a competitive service to Canada and we just need a couple of days to revise our business plans.”
John Bitove, the Toronto entrepreneur behind the CSR bid who has partnered with XM in the United States, says he’s “excited” by the decision but will have to renegotiate some deals with XM given the increased number of Canadian channels it’s being required to air. “It’s not what we expected but we’ll find a way to deal with it, I hope.”
The Commission is making some provisions for CHUM’s unprecedented programming commitments by requiring it to spend only 2% of gross annual revenues on funds that development Canadian musicians, such as FACTOR or MusicAction, while the satellite services must pay 5%.
That savings is not necessarily enough to make the CHUM service viable, Ski says.
As a terrestrial service, the commission approved the CHUM application as filed, determining that the service would be governed by the same regulations as conventional radio stations when it comes to Canadian content, so it would have to play a minimum of 35% Cancon for pop music, for example.
But the regs are much more onerous for the satellite services. The Commission is requiring CSR and SIRIUS to produce at least eight channels in Canada (they had proposed five in their applications), with at least 25% of them in French. For each Canadian channel, they can have no more than nine foreign ones. Canadian channels must air at least 85% Cancon of music and spoken-word programming. Of the Cancon music, 25% must be new music (released within the last six months), and another 25% must be by emerging Canadian artists (those who have never had a radio chart hit before). Ten percent of all channels must be original, Canadian-produced channels, meaning that at least half the content was produced for and first aired on that channel, not rebroadcast from a conventional radio station. At least 60% of the Canadian channels must be music-based.
That’s another discrepancy Ski points out: the 85% Cancon for competitors means they can play Canadian songs on their Canadian channels, amounting to just 10% of the services, where CHUM has to play 35% on all its channels, Ski told www.cartt.ca.
Shea says the satellite regulations will be “ultimately workable.” Bitove says since the commitment to talent has risen by 25% from its proposal and the number of Canadian channels has doubled, it will have to look at its business plan and “try to figure out how we can make this all work.”
There is still an issue of satellite capacity: since no Canadian satellite will be available until 2010, the services must broker deals with U.S. partners, who may not be able to make space available for the eight Canadian channels the commission is requiring. CSR had originally proposed airing 101 channels, and SIRIUS pledged to launch 75. Those numbers could change based on capacity and the new regulations.
All three services are barred from airing local advertising or programming and are restricted to six minutes of spots per hour of national advertising. The foreign channels aired on the Canadian services would have to follow Canadian standards in terms of offensive material, meaning that some channels may have to be blacked out here.
CRTC Chair Charles Dalfen says the licensing framework tried to “strike a balance” among the interests of the industry, consumers, and musicians. By approving all three applications, the commission is trying to stem the grey market of U.S.-based services coming into Canada, he says. He acknowledged that it’s hard to get a handle on the severity of the problem since it’s more difficult to count how many Canadians have tiny portable U.S. satellite radio receivers compared with black market TV dishes on the side of their houses.
Other benefits to Canadians are giving consumers more choice with more homegrown channels, reaching small and remote communities across the country, giving more exposure to Canadian talent, and giving listeners greater mobility with radio services, the CRTC says.
Others affected by the decision say they’re pleased. Gregg Terrence, president of Toronto-based Indie Pool Inc., which represents unsigned bands, says he’s “thrilled” and “ecstatic” that there could be three new outlets for up and coming Canadian bands and that the commission is requiring airplay quotas for emerging artists for the first time. He sees subscription radio as a “minor league” where artists can cut their teeth and then graduate to traditional radio stations.
Shea says he thinks the services will do “incredibly well in Canada,” reaching four million subscribers in total in five to six years, owing to our scattered population and the popularity of MP3 players, which he feels subscription radio can compete against.
A recent survey conducted by Solutions Research Group shows that 26% of Canadians said they’d be interested in subscribing to a satellite radio service, and it predicts there will be one million satellite radio units in Canada by the end of 2007.
The commission was not concerned about the new services taking away business from other radio. “No quantitative evidence was presented to indicate that this new form of radio service would have a significant impact” on either over-the-air stations or pay audio services, it said in its decision.
CSR and SIRIUS have to inform the commission in writing within 150 days as to whether they would accept these new conditions of licence. Both said they will likely respond much sooner than that.
Anyone is allowed to appeal the decision to the federal cabinet. Bitove says he hopes that doesn’t happen or it would delay the entry of Canadian services to curb the spread of grey market U.S. satellite radio.
