Source : Globe & Mail

by Robert Brehl

As a die-hard radio listener, Regan Flint can't understand why broadcasters are so upset about being told to play more Canadian music.

"I own more than 200 CDs and 60 per cent of them are Canadian," says Mr. Flint, 37, of Toronto, insisting that he has no ties to the music industry. "I like it because it's good, not because it's Canadian. I look for radio stations that play a lot of Canadian music."

Mr. Flint may not be a typical radio listener, but he's the kind that the CRTC is thinking about through landmark changes to the private radio industry laid down six weeks ago – including playing more Canadian music and the gradual introduction of more competition.

And those changes have broadcasters smarting.

In fact, Francoise Bertrand, chairwoman of the Canadian Radio- television and Telecommunications Commission, says static from radio executives and behind-the-scenes lobbying aimed at altering the April 30 decision has been so "aggressive" she's told broadcasters to back off.

They have stopped swarming CRTC commissioners and politicians at social events in Ottawa, but they still insist the regulatory changes are "unfair" to an industry that recently emerged from its darkest days.

A principle behind the CRTC decision is that by airing more Canadian songs, it will strengthen Canadian culture.

But broadcasters believe they play more than enough and this increase will cause stations to overplay long-ago Canadian pop stars, such as 1960s teen idol Bobby Curtola, by ordering more Canadian songs on the air.

"Bobby Curtola is certainly having a second life," says Duff Roman, chairman of the Canadian Association of Broadcasters and vice-president of CHUM Ltd., Canada's biggest radio chain with 24 stations.

Many of CHUM's AM stations, including flagship 1050 CHUM in Toronto, have been converted to an oldies format. Mr. Roman says increasing Canadian content further will make it impossible to find a supply of quality Canadian tunes in the oldies format and extremely difficult in other formats, such as adult contemporary, country – even rock.

An artist gets royalties every time a song is played and many believe more radio exposure leads to more retail sales, but broadcasters fear people will tune out if they don't like what they hear.

But increasing the percentage of Canadian songs played to 35 per cent from 30 per cent is not the single biggest problem broadcasters have with the decision.

In exchange for giving broadcasters the right to consolidate and own three stations (or four in the eight biggest markets), rather than today's maximum of one AM and one FM, the CRTC said it's ready to hand out more radio licences to incumbents and new entrants. This irritates broadcasters because the price for consolidation has turned out to be more players chasing the same advertising dollars in many markets.

(For broadcasters, consolidation means they can cut costs while potentially increasing revenue by offering advertisers more choices at their three or four stations, each targeted at different demographic groups.)

Besides increasing Canadian content, the commission has ruled that Canadian songs must be played as much during the day as at night. At present, broadcasters can play fewer Canadian songs when listenership – and advertising – are highest and then load up on Cancon at night and on weekends.

All the changes must be in place by Jan. 1. Some tinkering of the rules will take place over the coming six months after the commission receives more public input on the course it has set. But Ms. Bertrand says the overall policy direction will not change. "We can understand the emotional reaction. What cannot be understood is the attack, aggressivity and lack of respect. I cannot tolerate that and the commission cannot tolerate that."

Cooler heads are emerging. All sides now say they are working together to make the most of the decision from everyone's perspective. "When you get a lemon, you've got to make lemonade," Mr. Roman says.

So, how did the radio industry get into this position where it has lost on so many key points, harangued the regulator and is now trying to salvage table scraps?

"This isn't quite what we'd hoped would come of the process," says Gary Slaight, president and chief executive officer of Standard Radio Inc. of Toronto, that owns 13 stations and has the most listeners – 4.5 million a week – in the country. "It was supposed to make radio a more financially viable industry (but) when you look at it we're not ahead of the game. We may even be worse off."

In order to benefit from the decision, a radio chain must own two or more stations in one market in order to cut costs and increase revenue, he says. It it doesn't consolidate, it faces more competitors because the CRTC says it will issue new licences wherever possible.

Mr. Flint, the Canadian music lover, says broadcasters have reaped what they have sown by treating Canadian artists as inferior to Americans. "If broadcasters really cared about promoting their own, there would be no need for the CRTC telling them to play more."

Broadcasters deny this. Listeners don't want to hear more Canadian, Mr. Roman and Mr. Slaight both say, adding that if they did, then Canadian music sales would be higher than the 14.5 per cent of total sales in Canadian record stores. (Others insist sales are higher, depending how one defines what is Canadian music. Everyone agrees sales are less than 25 per cent.)

The regulatory changes come at a time when broadcasters hoped they were emerging from an extended period of losses. Last year, the industry, made up of 476 AM and FM stations, earning a total profit of $51.8-million on revenue of $862-million.

And the radio industry often points out it is not nearly as consolidated as other information sectors. Together, the top five radio chains own almost 100, or 20 per cent, of the stations. In cable TV, the three biggest companies have two-thirds of the subscribers; in the telephone business, BCE Inc. of Montreal controls, directly or indirectly, more than 60 per cent of the local lines into Canadian homes; in newspapers, Hollinger Inc. controls 66 of the 105 Canadian dailies.

But the big radio chains dominate the major markets, where the lion's share of advertising revenue exists.

Radio's 1997 average operating margin, at 14 per cent, generally lagged other media, although FM stations have been above 20 per cent for the past three years. Newspapers and television were around 20 per cent and cable was at 38 per cent. Financial numbers like that, broadcasters say, exemplify why the CRTC should not allow new competition.

"If it's so bad, how come no one ever hands in their radio licence?" asks Ian Morrison, spokesman for the Friends of Canadian Broadcasting, a grassroots lobby group allied with Canadian artists.

"It's a balancing act. Radio licences are valuable. In return for receiving a licence, there is an obligation to promote Canadian culture," says Brian Chater, president of the Canadian Independent Record Production Association.

He points out that in the battle for control of WIC Western International Communications Ltd., its 12 radio stations were valued at between $160-million and $240-million.

In the past, before handing out a new radio licence, the CRTC would look at individual markets and see whether advertising would support another station. That's all changed. If there is room on the dial, anyone can apply and the CRTC may issue new licences. Markets such as Calgary, Edmonton and Vancouver could each see two or three new FM stations.  (Toronto is the only full market.)

This is frustrating broadcasters because the new rules will allow them to own two FM stations in every market and many want to either flip a money-losing AM station into FM or fire up an all-new FM station. But there's a catch: If a broadcaster applies to flip an AM station to FM, that triggers a call for others to apply for the same licence.

"Then there's a hearing. Then the CRTC decides," says Mr. Slaight at Standard. "Are they going to look at it like they want new blood in the industry or will the decision be based on whoever commits the most dollars to benefits or will it be based on somebody offering programming not currently in the marketplace?"

Ms. Bertrand says the CRTC wants new blood in local radio markets and will not be as sensitive to incumbent players; however, newcomers must have the backing to survive.

"What we're saying is competition will be occurring in broadcasting the same way we're seeing it evolve in telecom. We feel it's important we do that gradually and the element for that to happen was to take away that criteria" that limited the number of licences in a market based on how profitable the stations were, she says.

No matter how the CRTC decides on individual cases, it means existing players will have to promise more money toward "public benefits" – the buzz phrase for supporting Canadian culture – in order to land a new FM licence; or, they will face new competitors who will, in essence, outbid them.

The record industry's Mr. Chater says the Canadian Association of Broadcasters have only themselves to blame because they had an all-or-nothing strategy at the radio hearing last fall. "We couldn't have been any more blunt with them that the best thing to do would have been to negotiate. Hey, you win some, you lose some."

No matter what, the industry today is sounding a lot like AM radio:  Lots of heated talk and not a lot of harmony.

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