Two Steps Forward, One Step Back: An Update on CRTC Proceedings of Relevance to the Music Industry

The Canadian Radio-television and Telecommunications Commission (CRTC) recently announced two consultations of great importance to the Canadian music industry, as well as made decision that many will find disappointing. With so much happening at the CRTC, we thought it would be prudent to inform you of what’s going on, how it might affect you and how CIMA will engage in the process.

Specifically, the CRTC has proposed two reviews that will allow CIMA to directly advocate for a strengthened Canadian Content Development (CCD) system; one that will better support emerging talent. CIMA is drafting two submissions to both of these review processes that will speak to these needs.

However, the CRTC has also announced a decision to exempt broadcasters with annual revenues less than $1.25 million dollars from making CCD contributions, which will undermine the strength of that system.

Step Forward: Tangible Benefit Review

The Commission is reviewing “Tangible Benefits,” which is a system that forces radio broadcasters to remit some funding to the music industry when they change ownership. Currently, the CRTC uses a specific formula that assesses the “value” of a particular acquisition, and then requires that the broadcaster propose a package of Tangible Benefits that is allocated to the music industry. The transaction must be no less than six percent of the assessed value. This six percent must be distributed as follows:

  • 3% must go to Radio Starmaker or Fonds Radiostar;

  • 1.5% must go to FACTOR or MUSICACTION;

  • 0.5% must go to the Community Radio Fund of Canada; and

  • 1% may go to any CCD-eligible initiative selected by the radio station.

The CRTC’s proposed review encompasses a broad range of issues, but the following are the ones of importance to the Canadian music industry:

  • How relevant is the current system of radio benefit allocation? The CRTC believes that overall radio tangible benefit contributions should remain regulated at 6 percent of the assessed value of an ownership transaction. However, the commission is asking how this 6 percent should be distributed. For instance, should companies still be obligated to devote 3 percent of their tangible benefit contribution to Radio Starmaker, or 1.5 percent to FACTOR? Are changes required to this breakdown?  In other words, is the status quo sufficient?

  • In what situations should broadcasters be exempt from tangible benefit Contributions? Currently, the CRTC does not require a tangible benefit contribution when an “unprofitable” radio station is acquired. The commission is currently considering other situations in which tangible benefits should not be proposed. The CRTC is asking which circumstances warrant an exception from tangible benefit requirements, if any.

  • Should outstanding tangible benefit payments be made before a station is acquired? Currently, the CRTC does not require all outstanding tangible benefit payments to be made before a station is acquired by another. The CRTC asks whether it should require all future tangible benefits payments to be paid out before an ownership transfer is approved.

  • How should the value of an ownership transfer be calculated? The CRTC currently assesses the value of a transaction through a specific set of criteria. This tangible benefit review proposes revising the current methodology to one of the following two options: one based on the past and present value of each asset held by radio broadcaster; another based on the past and expected future earnings of each asset. The CRTC asks whether it should modify its approach to calculating the value an ownership transaction, and how it should approach this modification. Further, the CRTC asks whether “non-licenced” assets (i.e revenue from online broadcasting endeavors) should be considered in the value of an ownership transfer.

Step Forward: Targeted Radio Review

As a separate process, the CRTC has initiated a “targeted” review of its Radio Policy, which sets out many broadcasting standards relevant to the Canadian music industry. The radio policy regulates how much Canadian Content Development (CCD) funds radio broadcasters must contribute on an annual basis, where and when Canadian content must be broadcasted, and more.

The notice-of-consultation poses a number of focused questions on areas of the Radio Policy, including:

  • How can CCD Compliance be improved? The CRTC has identified that a large number of radio stations have failed to pay sufficient CCD contributions, have failed to provide proof of payment, failed to provide proof of eligibility or failed to file an annual return. As such, the CRTC is considering adding compliance mechanisms to combat this, including: resources to broadcasters to help them better understand their obligations; public reporting of non-compliant radio broadcasters; a requirement for licensees in non-compliance to file regular reports; an increase the frequency of CCD monitoring; an imposition of advertising limits to non-compliant broadcasters; and a general increase to CCD contribution requirements for those who haven’t sufficiently contributed in the past. Specifically, the CRTC is asking for comments on the effectiveness of these tools.

  • How can radio regulations better reflect technological changes? The CRTC proposes amending the wording of radio regulations to better reflect technological changes that have occurred over time (i.e, radio regulations still predominantly refer to ”tapes”). While many of these changes would be non-substantive, the CRTC’s amendments open a window on how regulations could more effectively encompass the growing revenue that radio broadcasters receive from online distribution.

  • What other issues should be considered? Though the review is advertised as “targeted,” the CRTC is also asking whether other issues should be considered as part of the review.

Step Back: CRTC amends CCD requirements for broadcasters earning less than $1.25 million per-year

CIMA engaged the CRTC in July on a proposal to exempt broadcasters earning less than $1.25 million from making basic annual contributions to Canadian Content Development, which came on the heels of a decision to exempt broadcasters earning less than $625,000.

Unfortunately, the CRTC granted this exemption, which is now in effect. CIMA will continue to dialogue with the CRTC on this issue, arguing that exempting approximately half of Canadian radio broadcasters from basic CCD contribution requirements undermines the spirit of the Broadcasting Act. However, for the time being, the decision has been made.

CIMA will be drafting official responses to the CRTC on these issues in the next month. Please forward any concerns, questions or ideas on these topics to Chris Martin, CIMA’s Research & Communications Coordinator at chris@cimamusic.ca.