No ‘trafficking’ involved in purchase of digital licences, Alliance Atlantis tells CRTC

Alliance Atlantis Communications Inc has rejected suggestions from Canada’s broadcast regulator that its purchase of Salter Street Films Ltd earlier this year constituted "trafficking" of a broadcast licence. The film producer and specialty channel broadcaster is in the CRTC hot seat as it seeks approval to acquire the must-carry Independent Film Channel and 20 Category 2 licences that were awarded to Salter Street. In a letter to Alliance Atlantis as part of its assessment of the transaction, the CRTC asks the company to explain why it should not consider the sale of a broadcasting licence within weeks of being granted "a question of trafficking of a licence". In response, Alliance Atlantis says the transaction doesn’t fall into "the ‘typical’ trafficking scenario" whereby a company applies for a licence with the expectation of flipping it at a huge profit. Salter Street applied for the licences with the belief that it would launch the channels, Alliance Atlantis chair and CEO Michael MacMillan, writes in a reply letter to the CRTC. As evidence, he notes that Salter Street had moved forward on the film channel, including holding meetings with distributors, and commencing negotiations to acquire programming. Alliance Atlantis also points out that the CRTC has in the past authorized transfers of ownership of a number of unlaunched services. These include the 1999 purchase by Astral Media Inc of Radiomutual Inc’s Canal Z – just 18 days after that service was licensed – and the 2001 transfer of the Category 2 Canal Habitat to Corus Entertainment Inc from Metromedia. Alliance Atlantis inked a deal to buy Salter Street in February, about two months after Salter Street received digital licences on Nov. 24, 2000 (CCR, Feb. 14/01). The CRTC is seeking comments on the merits of Alliance Atlantis’ application to gain control of Salter Street’s broadcasting assets. In Public Notice 2001-86, released July 26, the commission asks whether approval of the transaction might have consequences on the commission’s process in licensing specialty services. Industry observers wonder whether the regulator is contemplating establishing a minimum "no sale" time period following the issuance of licences to maintain the integrity of its licensing process. The deadline for filing comments is Aug. 30. Benefits package above 10% The CRTC is also seeking comments on the value of the transaction, the proposed benefits package, and the impact the transaction will have on the diversity of ownership of Canadian specialty channels. Alliance Atlantis is offering well over the standard 10 per cent in benefits for Salter Street’s broadcasting assets, proposing to spend $1.25 million in benefits, including $0.7 million on a filmmakers training program in Atlantic Canada, $500,000 on a Canadian programming film fund for the film channel, and $0.05 million on the Atlantic Film Festival. The company commissioned an independent study by Yorkton Securities, which valued the broadcast assets – mostly the film channel – at between $5.9 million and $6.8 million. Alliance Atlantis used the mid-point of $6.4 million to work out its benefits package. In contrast, Astral and Corus valued the unlaunched specialty services they acquired at zero. Based on Yorkton’s evaluation, the standard 10 per cent benefit test would require that $640,000 be invested. Alliance Atlantis stresses in its CRTC application that its $1 million-plus benefits package should not be viewed as a "precedent", but merely reflects its desire to "make a real difference for Atlantic Canada filmmakers". The company also trumps what it has valued at $1.5 million in synergy benefits for the film channel. It says the film channel will be strengthened by its ties to Alliance Atlantis by having access to its film libraries, technical assistance, advertising force, and by taking advantage of cross-promotion on Alliance Atlantis’ other specialty channels and possibly even its theatre chains.

No ‘trafficking’ involved in purchase of digital licences, Alliance Atlantis tells CRTC

Broadcast | August 2, 2001

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