Did the CRTC “OK” Radio’s Next Wave of Consolidation?

Canadian Radio-television and Telecommunications Commission

It has been more than two years since the Canadian Radio-television and Telecommunications Commission began soliciting feedback for its review of the broadcast industry. After several delays, the CRTC finally released its results last week.

The goal of the Commission’s review is to provide the framework for the broadcast industry to be more competitive with each other as well as versus the big advertising tech giants like Facebook, Google and Spotify. Some of the major changes that the CRTC is implementing include:

  • Radio broadcasters can now own up to three FMs in any given market
  • The definition of what constitutes Canadian Content (CANCON) has loosened slightly, although the percent of programming requirement has remained the same
  • Broadcasters in bilingual markets like Ottawa and Montreal are no longer bound by “hit” rules

With these changes, the CRTC has retained a “hands-off” and “status-quo” approach to managing the broadcast sector that is experiencing dramatic reductions in both audiences and revenue as it struggles to compete in today’s media ecosystem.

Ownership Rules Changes

Under the previous regulations, broadcasters could own up to a maximum of four radio stations in the same language in any given market. The broadcaster was also limited to two stations per radio band – meaning that they could own two English FMs and two English AMs. In some bilingual markets like Ottawa and Montreal, broadcasters like Bell Media have been able to own six radio stations when including an additional two FMs that broadcast in French.

With this new framework, broadcasters can now own three stations in AM or FM, although cannot exceed the cap of four total stations broadcasting in the same language. By allowing one company to have a third FM in a market we will undoubtedly see a flurry of activity in AM stations switching to FM or (more likely) smaller broadcasters being eaten up by the major players.

We’ve seen this happen before when the CRTC first loosened the ownership rules in the late 1990s, paving the way for the heavy consolidation we see today in local radio. Small, independent operators sold out to larger companies who quickly cut employees and began to homogenize the sound coming from our speakers.

Broadcasters were transparent with their plans once the Commission relaxed the rules – more of the same. “Broadcasters in favour of more consolidation have consistently argued that consolidation allows for synergies to be found within one geographical market” says the CRTC in their release. “Economies of scale can be found around administration, sales, programming and news, which help to reduce costs and enhance profitability.”

Canadian Content Changes

Canadian radio must, by law, broadcast a certain percentage of music that was created by Canadians. But by quirks of the rules, some songs by Elvis Presley are considered Canadian content while others from Justin Bieber are not. To be considered CANCON, a song must check two of the four main criteria:

  • Music – The melody of the song must be written by a Canadian
  • Artist – The singer of the song must be Canadian
  • Performance – The song must be recorded in Canada
  • Lyrics – The words to the song must be written by a Canadian

The categorization, called MAPL, makes Elvis’ “Snowbird” Canadian because it meets the “music” and “lyrics” criteria thanks to song originator Anne Murray. However, much of Stratford Ontario’s Justin Bieber is not considered CANCON because he is not the exclusive writer of his music or lyrics, and many of his songs are recorded in the United States.

In its review, the CRTC has eliminated the need for writing to be exclusively done by a Canadian, reconciling with the reality that much of today’s music is often written in collaboration with international writers. It is also eliminating the “performance” criteria due to it’s problematic tracking and accountability. Music must now meet two of the three MAL criteria, as long as “music” and “lyrics” are written “principally” (more than 50%) by a Canadian.

Broadcasters advocated for lower CANCON requirements which, for most stations, sits at 35% of all music played during prime-time hours. The Canadian Association of Broadcasters (CAB) advocated for a 25% threshold to allow radio to play more music from American and International audiences that are available on-demand through online streaming services.

At the end of it’s review, the CRTC decided to retain the 35% threshold – a decision CAB President Kevin Desjardins calls “regulation through the rear-view mirror” in Broadcast Dialogue.

Hit Music Requirements Removed

Radio stations located in Ottawa-Gatineau and Montréal saw some relief in a little known “hit music” requirement designed to protect French-language radio. A hold-over from previous rules that were designed to help AM stations compete with the higher-quality FM frequency in the 1970s and 1980s, the Commission forces English-language FM stations in these two markets to play no more than 50% “hit” music as defined by several charts like Billboard’s Top 100.

This rule forced music and program directors to be creative in how they curate the sound of their station. Once a song becomes “too popular” it is removed from the playlist in order to stay on the right side of the rules. With this regulatory review, the Commission has decided to eliminate this rule from Ottawa and Montreal and should lead to a more consistent music mix for English FM in these markets.

Impact on the Industry

Radio has lost more than a third of it’s advertising revenues over the past five years, largely due to advertisers finding more accountable alternatives for their marketing budgets. Although the goal of the CRTC’s review is designed to help broadcasters recover from these losses, last week’s announcements will only lead to more of the same from the industry.

There are 1,500 fewer people working in English radio in Canada than there was in 2017 – a drop of nearly 25% over the past five years. This decision surrounding ownership, along with the rule changes impacting local management and local sales agreements, will only ensure fewer people will be working in the industry in the future while limiting audience and advertiser choice.

Radio cannot rely on the Government to bail it out of a situation that it largely created for itself. Years of cutbacks has led to decreasing amounts of innovation to the point where owning more stations and playing more Taylor Swift seems to be the only solutions the industry is presenting. As the newspaper and publishing industry had demonstrated, you can’t cut your way to profitability.

The new rules the Canadian Radio-television and Telecommunications Commission do nothing to encourage broadcasters to deepen their relationships with their audiences and to seek coexistence with the digital tech that has replaced the time we previously spent searching up and down the dial. It allows the big guys to get bigger, and ultimately leaves audiences and advertisers with fewer choices.

Interested in talking about radio’s opportunity to grow audience engagement and revenue? Contact us and let’s talk about the unique advantage that radio has in local media to generate highly valuable first-party data that’s freely given to you by your audiences – and in high demand from your advertisers.

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