GATINEAU – It took some time, but the CRTC got into the meat of Sirius XM Canada’s licence renewal application on Thursday afternoon, quizzing the company about its proposal for a decreased Canadian talent contribution (CTD) charge and insistence that its licence be renewed for seven years.
While the company wants a 90% reduction in its CTD charge, a renewed licence with a shorter term could have potentially damaging impacts on satellite radio in Canada, Sirius XM insisted during its appearance.
“Why would [a car manufacturer] choose to support the satellite radio dashboard proposition when the proponent is regulated and subject to a short term renewable and its Internet radio competitor isn’t?” asked Mark Redmond, Sirius XM Canada president and CEO, in his opening remarks. “Thus, in our business which is so dependent on dashboard configurations, a short term licence would be very damaging.”
John Bitove, chair of the company’s board of directors, noted under questioning from commissioner Candice Molnar that the agreement with the U.S. supplier states that if “renewed on the same material terms” the deal is automatically renewed. “We do not want to put that at risk,” he said.
Molnar noted that in cases where a licensees has been found to be in non-compliance of its conditions of licence as Sirius XM was last year, the normal remedy is a shorter licence term. In addition, she said that television licences are five years and wondered why this length of licence would constitute such a risk to the company.
“You go with a shorter licence term, you put at risk a contract that could have great consequences for us, the artistic community and yourselves in terms of what the future is. Now why risk it?” argued Bitove.
Added Redmond: “If we had a seven-year term, you still have the ability to call us in the fifth year or prior.”
The request for a much smaller CTD contribution was also the subject of considerable debate on Thursday afternoon.
In his opening remarks, Bitove noted that by August 31, 2012 Sirius XM Canada will have paid more than $52 million in CTD levies which is $10 million more than was originally projected in 2004 prior to the licensing of Sirius XM’s two predecessor companies. “Today, more than seven years later, we are not asking you to change that framework,” he said, “we are asking you to change a new Canadian talent development (CTD) contribution figure for our renewal term.”
Sirius XM says that it’s only seeking a level playing field with its commercial radio competitors, something it believes currently doesn’t exist. The satellite operator wants its CTD rate to be lowered to 0.5% from its current contribution rate of 5%.
Redmond noted that the company pays more in CTD to Canadian artists than the annual contribution of all Canada’s commercial radio licensees combined.
“To be clear, we currently spend more than $12 million a year on CTD. This contrasts sharply with the $7 million per year for all of Canada’s commercial radio licensees in their renewal terms, according to the latest Communications Monitoring Report,” he said. “At the same time, we are not profitable, and we are operating in a competitive environment which still requires significant investments.”
Sirius XM Canada’s request for a significantly reduced CTD rate was called into question by the panel of commissioners. Molnar asked the company to explain the rationale behind its request for a much lower CTD contribution.
“The request is to put us on a level playing field with conventional radio broadcasters in Canada so that we can effectively spend similar to the levels that they do, continue to support Canadian artists [and] continue to give them a North America wide platform for their content to be heard on,” said Redmond. Additionally, the reduced CTD levy will “give us the financial wherewithal to be able to compete with the multiple of competitors that we’re now up against including the unregulated that pay nothing.”
But commercial radio has a Canadian content requirement of 35% or more, while satellite radio is at less than 10%, Molnar noted.
Bitove acknowledged this, but said Sirius XM’s Canadian stations actually carry much more Canadian content than conventional commercial radio by a three to one ratio.
