MONTREAL – The uniqueness of the Montreal market, the fact that there is only one AM station still operating in the region, and Astral’s significant radio holdings in the province should be all the evidence the CRTC needs to grant Cogeco an exemption to its radio station ownership policy, the company told the Commission this week.
The Regulator heard arguments this week on Cogeco’s proposed $80 million purchase of Corus Entertainment’s Quebec radio assets – and one of the major issues up for discussion was Cogeco’s ownership exemption request. If granted, it would allow the company to own three FM and one AM radio stations in Montreal. According to Commission policy, a company is allowed to own two FM and two AM radio stations in a single market.
In response to a question from acting broadcast vice-chair Rita Cugini, Richard Lachance, VP of radio, Cogeco Diffusion, made it clear what the company was requesting.
“What we have presented you with is the request for an exception to the general policy that applies throughout Canada, but in the specific circumstances of one very specific market, which is the Montreal francophone market – what the Commission refers to as a bilingual market,” he said.
As part of the purchase proposal, Cogeco is planning to divest of two Quebec City radio stations so that it will comply with the common ownership policy in the provincial capital.
Cogeco says it needs the exemption in Montreal so that it can effectively compete against Quebec radio giant Astral for both listeners and advertising revenue. And since one of the stations (CHMP-FM 98.5) is talk radio, this should be enough for the CRTC to grant the exemption.
“In this context and given that one of the acquired stations, CHMP-FM, is a predominantly spoken-word station, Cogeco submits that an exception to the common ownership policy by market is fully justified, as our proposal complies in all points with the spirit of the policy", said Caroline Dignard, Cogeco’s director of legal affairs, during opening remarks.
The importance of holding on to Montreal FM station CKOI 96.9 was also raised during the hearing. Lachance said this station is critical to fight for French-speaking listeners who are tuning into English radio owned by Astral.
“Technically it’s by far the best platform amongst all the Corus stations. It is clearly an extremely important radio service and it’s crucial to ensure Cogeco has the capacity to compete with its main adversary in the 25 to 54 year old male market,” he said of CKOI.
This radio station is also important because of the revenue it generates. Lachance noted that of the 11 stations in the deal, only four are generating profits and three of them are located in Montreal.
“We’re not going to tell shareholders, ‘we’ll only keep the non-profitable stations and the main assets, we’ll let them go’. So that’s why I have to say that if the CKOI-FM station in Montreal cannot be a part of this overarching transaction, the transaction will not be feasible between Corus and Cogeco", Lachance told commissioner Suzanne Lamarre.
Cogeco’s proposed purchase received support, but some of it came with conditions.
Quebec-based musician rights organization ADISQ, (l’Association québécoise de l’industrie du disque, du spectacle et de la video), for example, applauded the amount of the benefits package proposed in the transaction. Cogeco has proposed a benefits package of $7.2 million or about 9% of the value of the purchase. But the organization said that Cogeco should have gone further.
Solange Drouin, VP of public affairs and director general of ADISQ, said that Cogeco should take on greater responsibility in promoting music diversity on Quebec radio, noting the company had proposed in 2002 and 2003 to broadcast Canadian music 10 times higher than the regulatory requirements. Yet with this deal, nothing of the sort was included.
“ADISQ is concerned that only two groups – Astral and Cogeco – would hold or own all of the commercial radio stations of non-specialized format in Quebec. We fear that this more restricted access to decision making levels regarding musical programming could have a negative effect on musical diversity in this market as well as the Quebec market as a whole,” she said. “[This] is why we propose to the CRTC that it impose on Cogeco different obligations… aimed at ensuring more musical diversity in the market.”
Not surprisingly, Astral Media was opposed to any exception to the common ownership policy for Cogeco. It noted that it supports consolidation in the radio market because it can stimulate competition and make the radio market more dynamic. But Astral said consolidation has to be done in compliance with regulations and policy.
Jacques Parisien, president of the radio and outdoor media group at Astral Media, said that Cogeco will be a formidable competitor with 12 radios stations in the province – including a 51% market share in Montreal and 32% in Quebec City – if the deal is approved.
“There is therefore no need to grant an exemption for the common ownership policy in the French language Montreal market in the context of this transaction. Such an exemption would run against fundamental objectives that led to the adoption of this policy,” he said. “Accepting this demand would imperil the competitive environment between the players present in the radio market concerned.”
Pierre Rodrigue, president of the national sales committee and VP of sales and marketing at Astral Radio, underscored the significance of the Montreal market and why allowing Cogeco to control three FM stations in that market would be detrimental to competition.
Montreal accounts for 43% of total French language advertising revenue in Canada and 53% of advertising revenue for the six major French language markets. In comparison, Toronto only represents 20% of total advertising revenue for English language radio in Canada and 37% of advertising of the six major English language markets. If the transaction is approved as proposed, Cogeco will have more than 64% of commercial radio share in the 18 to 54 age category in the Montreal French language market.
“This will mean that Cogeco will not only be the major player in this market, but a sufficient player,” he said, noting that advertisers could deal with a single player (Cogeco) to reach the vast majority of their target audiences. “This would run against the fundamental objectives, which is to say guaranteeing the balance of competition between radio broadcasters in the market concerned by this request for an exception,” continued Rodrigue.
A decision will be rendered within 35 days of the hearing’s start, or by November 3.
