On April 30, 1998, the CRTC (1998b) announced a series of changes in the radio regulations, a number of which will increase Canadian content effective January 1,1999 (see figure 2). Most notably, the minimum percentage of popular musical selections on commercial A.M. and F.M. radio will be increased from 30 to 35 percent and this level will have to be maintained during the period 6:00 a.m. to 6:00 p..m, Monday to Friday. Moreover, Canadian selections will have to be played in their entirety. (The significance of this change is explained below.)

On French-language AM and FM stations, the minimum of 65 percent of popular musical selections in French was not changed. However, the "reasonable distribution" throughout the broadcast day provision was changed to a minimum of 55 percent French-language musical selections between 6:00 a.m. and 6:00 p.m., Monday to Friday.

To soften the economic blow, the CRTC will allow much higher concentration of ownership in each local radio market and it reduced the required public benefits test from 10 to 6 percent of the transaction value when ownership or control of a station is transferred. The CRTC changed the ownership rules which had limited a company to one A.M. and one F.M. station in any market. In smaller markets, a single owner can own a maximum of three stations; in markets with eight or more stations, a single owner can own up to two stations on each of A.M. and F.M. (see figure 3).

Figure 2: Changes in Canadian Content Requirements for Radio Stations

Attribute	1998	Effective January 1, 1999
% of popular musical selections (category #2) which must be "Canadian"	30%, measured each broadcast week,, Monday to Friday	35 percent measured each broadcast week, Monday to Friday
Daytime level of Canadian pop music (category #2)	25% of selections between 6:00 a.m. and 7:00 p.m. weekdays	35 percent of selections between 6 a.m. to 6 p.m. each weekday
Duration (English and French,, category #2)	Over 1 minute (need not be played in entirety)	Over 1 minute, but played in its entirety
Financial contribution on transfer of ownership	Percentage not specified,, but rule of thumb was about 10 percent of the value of the transaction transaction	6 percent of the value of the directed to the funds supporting Canadian talent, e.g., FACTOR, MusicAction (not applied to unprofitable stations)
French language AM & FM stations (re music category #2)	65% of popular musical selections broadcast each week must be French-language recordings	No change
Daytime level of music category #2)	Must be scheduled in a reasonable manner throughout each broadcast day	55 percent French language selections from 6:00 a.m. to 6:00 p.m. each weekday
Traditional and special interest music (category #3)	10% Canadian content (20% for CBC)	Stations are expected to propose an increase in Canadian compositions at time of licence renewal

Figure 2: (continued)

Attribute	1998	After January 1999
Foreign-produced programming	No maximum provided that Cancon requirements are met (could involve importation of US talk radio shows,, e.g., Howard Stern)	To be addressed at time of licence renewal if high level of non-Canadian programming
CAB's voluntary commitments	Modest contributions based on station revenues	Numerous initiatives to promote Canadian music including a Canadian Music Marketing and Promotion Fund
Canadian content outside the broadcasting day (6:00 a.m. to midnight, 7 days a week)	No requirements	No change
Quota for musical selections by new Canadian artists	No specific requirements	No change; review effects of CAB voluntary initiatives
Contributions to Canadian talent development	All stations contribute $1.8 million per annum.(see PN 1995-196)	CAB to apply new guidelines for allocation to eligible third parties
Definition of a "Canadian" musical selection	MAPL system; meet 2 of 5 criteria based on citizenship (Appendix B)	No change

Source: CRTC Public Notice 1998-41,"Commercial Radio Policy 1998," April 30, 1998.

Figure 3: Changes in Ownership Rules for Radio Stations in Canada

Attribute	Current (1998)	Effective January 1, 1999
Number of stations which can be owned in one market	Limit of one AM and one FM station in the same language in any market	(a) in markets of 8+ stations in a given language: two AM and two FM stations; b)in markets of 7 or fewer stations: maximum of 3 with maximum of 2 on one band (all in one language)
Diversity of news sources,, fair competition,, media cross-ownership	All addressed during CRTC hearing on the transfer of a licence	To be addressed in CRTC hearing on transfer of a licence Demonstrate that multiple ownership is in the public interest
Local management agreements	Generally permitted if parties respect CRTC criteria	CRTC to review its policy per PN 1998-42
Radio Market Policy of 1991	Used to assess the capacity of markets to support more commercial stations	Will no longer be applied

Source: CRTC Public Notice 1984-41,"Commercial Radio Policy 1998," April 30,, 1998.

Thus, it will be possible to reduce each market to a duopoly and in theory, two owners could own virtually all radio stations in Canada. Why is this being permitted? This change will help broadcasters combat the decline in radio's share of the total advertising market.²⁴ But the central motivation is to ensure that broadcasters are financially strong enough to pay the costs of higher CanCon burdens. The chair of the CRTC said, "You cannot have a very weak industry and pretend that you can support Canadian talent." (Ibid).²⁵

Despite CanCon rules for radio since 1972, only 10 percent of record sales (in dollar terms) go to Canadian artists; and Canadian releases amount to 12 percent of the total number of music recordings in Canada (Vancouver Sun, May 1, 1998, p. A2). The head of True North Records, Bernie Finkelstein, challenges the CAB's figures that Canadian content records only account for about 12 percent of retail sales. He says Canadian artists sell well above 20 percent and refers to Shania Twain and Celine Dion (Brehl and Scoffield, 1998, p. B1). The problem is that he is comparing apples and oranges. For example, Celine Dion has a mega hit with the theme from "Titanic." However, it does not meet the CanCon criteria, getting only one of the required two of five specified characteristics. So, despite winning the Order of Canada in early May 1998, Ms. Dion's big hit does not qualify as CanCon under the rules established by the CRTC.

Quotas and selection length

The CanCon quotas for radio are based on the percentage of musical selections in a specific category. (The key one is category 2, popular music, which is very broadly defined-see appendix B.) A selection counts only if it is of greater than one minute's duration. Therefore, a four-minute Canadian selection counts for one-half the number as two Canadian selections, each of two minute's duration. This fact was not lost on station programmers and owners. They apparently fell into the habit of fading-out popular Canadian selections before the music ran out. The CRTC, in its role of regulatory cat, imposed a new constraint on the radio station mice: beginning January 1, 1999, all Canadian selections in English or French must be played in their entirety (CRTC, 1998b). The mice, however, could continue the game by requesting the suppliers of Canadian recordings to shorten each selection (subject to the one minute minimum).

The effects of shortening the average duration of Canadian selections is interesting. Suppose we begin by assuming all Canadian and foreign selections are of three minutes duration. To meet the minimum 30 percent CanCon requirement, a station broadcasts six Canadian and 14 foreign selections per hour (I ignore the opportunity for averaging across the whole broadcast day). CanCon accounts for 30 percent of selections and 30 percent of minutes of music each hour. Now assume that the average duration of Canadian selections is reduced from three to two minutes. The station now broadcasts seven Canadian and 15.33 foreign selections per hour. The number of Canadian selections increases and accounts for 31 percent of all selections, but CanCon's share of minutes in each hour falls from 18 to 14. If the average duration of Canadian selections is reduced to one minute (the minimum), the number of Canadian selections rises to eight (out of total of 25.33 per hour), but the number of Canadian minutes per hour falls to eight (from 14 if the duration is twice as long).

Therefore, because advertising revenues are generally adversely affected by the number of minutes per hour of Canadian pop music, radio stations should press recording companies to produce one minute CanCon selections. More Canadian selections will be played, but the number of CanCon minutes will be minimized. It might even be possible to have a regular, three-minute selection be released as three one-minute items, each of which will be counted separately.

Reaction to the changes

The Canadian Association of Broadcasters (1998c) pointed out that (a) only 11.3 percent of new recordings released in 1993/94 (the latest year for which data is available) qualified as Canadian content, (b) Celine Dion's last album, which contained the theme for "Titanic," did not qualify as CanCon, (c) major Canadian artists like Shania Twain and Sarah McLaughlin release a CD only every 18 to 24 months, which is "not enough to meet radio's needs," and (d) to meet the 35 percent CanCon quota from 6:00 a.m. to 6:00 p.m., broadcasters will have to increase Canadian selections by 40 percent during that period and "that's not what listeners want," based on a survey conducted for CAB.

No opposition party spoke out against the increase in CanCon quotas for radio stations (see CRTC, 1998b), but three newspapers offered editorials. The Vancouver Sun (May 4, 1998, p. A10) was mildly critical, ²⁶but the Ottawa Citizen (May 2, 1998, p. B5) and the Globe and Mail (May 4, 1998, p. A18) were much harsher. The Globe described the decision as a new way by the CRTC to "mess with the viewing and listening habits of Canadians." The Chair was described as "misguidedly overachieving." The Globe argued that a generation ago there may have been a case for "the support and exposure of CanCon quotas," but they are no longer necessary. It referred to the international success of Celine Dion, Shania Twain, Alanis Morissette, and k.d. lang. CanCon rules apparently had little to do with their success. The improving situation should have resulted in a reduction, not increase in the CanCon quotas. "Yet instead of scaling back the 30-percent rule to, say, 25 percent now and 20 percent in a few years, the CRTC has turned it into a stepping-stone to bigger, more meddlesome things." Finally, the Globe explained how the radio decision provided some benefits for everyone but the listeners:

The radio industry gets to consolidate ownership. The music industry gets more guaranteed airtime for its products. The CanCon lobby gets a small victory. The CRTC invents another reason for its existence. And Canadian listeners? Uh, sorry, the reception is breaking up. Dear CRTC: Stop tuning our radio dials for us. (May 4, 1998, p. A18)