Case Documents

CT-90/1

:IX 'l'BB JIATTER o:f an application by the Director of Xnvestiqation and Research :for orders pursuant to section 92 of the 9JWpetit~on ,A.£t., R.s.c. 1985, c.C-34, as iUM!Dded; AND DJ '1'BE llAi9l'ER of tbe direct and indirect acquisitions by Soutbaa :Inc. of equity interests in the businesses of pabli.shiDCJ The Vancouver Courier, the Horth §ho~ 1!evs and the Real Estate Weekly: B E T 11 E E 1': THE DrRECTOR OP DIVEST:IGAT:IOH AND RESEARCH, Applicant,

- and -SOD'l'HAK INC. , IDWER llAINIAND POBLISHDG LTD. 1 RIM PUBLYSlllNG DIC. , YELIDW CEDAR PROPERTIES LTD. , HORTH SHORE FREE PRESS L'!'D., SPEC:IAL'l'Y POBLI:SHER DfC., EL'l'Y POBLICATIOHS LTD., Respondents.

AFFIDAVIT I', DAVID E. STANGER, of the City of Richmond, in the Province of British Columbia, KAKE OATH AND SAY:

A. Background 1. I have been the Media Director of Baker Lovie~ Advertising in Vancouver since 1982. I was appointed Vice-· President of the company in 1986 and Senior Vice-President in 1990. I am currently part of a three-man agency team that has been responsible for leading Baker Lovick to a prominent position in the international advertising field. Excerpts from 200. 391::::1d NOOAl::::l?!l9 513551::1:'.)

- 2 ­a recent f ira brochure describing Baker Lovick are attached as Exhibit A.

2. In addition to rt role at part-time instructor of Marketing Communications at the British Colwnbia Institute of Technology (•BCIT•) and I have co-written textbook • a media for BCIT. I teach Introduction to Media and Advanced Media Planning at Berl'. BCIT's Marketing and Tourism Advisory Council.

3. In 1989, I completed a two-year term as President of the Vancouver Media Director's Council, and am currently the Education Chairman of that body. I am also Education Chairman of tbe Advertising Agency Association of British Columbia.

4. For tbe 2-1/2 years prior to joining Baker Lovick, I was a partner in canadian Media Corporation, a Toronto-based media buying service. Before that, I had a number of years experience in advertising agencies in Toronto and Montreal. As well, I have had in-house media buying experience in a senior capacity with a :major advertiser.

5. I have been retained by Southam Inc. to advise them on the way that retail advertising is carried out in the Lower Mainland of British Columbia. In providing such advice I have relied on my business experience, my knowledge of the advertising activities of my clients and 111.Y competitors in the advertising industry and •Y study of advertising, both for my job and for my teaching activities.

B. overview of AdV'ertisinq Jledj,a 6. I bave reviewed the affidavit of Joya Dickson in this matter and agree that it accurately describes the advertising vehicles available in the LoWer Ka.inland.

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) ... l~er Lovick, I am a I am also the chairJDan of

- 3 -c. ~vising a "94ia Plan 7. My first step in developing an advertising plan for any client is to precisely identity the business ohjectives of that client. I do this by interviewing the client and analyzing his business.

8. Tbe promotional activities wbich a retailer desires to undertake may reveal one or more business objectives. Discounts, for exaaple, may be desiCJned to satisfy one of two objectives: to reward existing customers or to increase traffic in a particular location. If tbe business objective is to increase traffic, but more specifically to draw new customers into the store, the focus of advertising may extend outside of the normal trading area of the retailer. :If, on the other hand, the retailer wants simply to reward existing customers, I would sugqest rewarding them on a local store level by giving them something as they enter the store. some other common business objective are: launching- new products, promoting new store openings and announcing sales.

9. After identifying the business objectives, I typically consider a broad range of advertising vehicles in f ormulatin9 a media plan. The options range from handing out coupons in a store, all the way to doing a week'• worth of broad-based multi-media advertising in Vancouver (e.g., a daily newspaper ad campaign combined with radio remote fro• a particular location) to attempt to drive people from all over the city to 90 to that particular location. The radio ads might tell people to look in the newspaper for specific details about where the event would be held.

10. Yf the business objectives indicate a narrow geographic trading zone (e.g., a television and radio repair store wishes to keep its name in front of potential customers),

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for example, I have numerous vehicles at llJY disposal. :I ·may buy one outdoor board, 10 transit shelters, or one specific bus route. I never decide between sillply one form of media such as community newspapers and. another like dailies. Those are ~ver the sole options for ...

11. If the busin.Ss objective indicates a need for price and it.ell advertisin9, print .edia is one option, but far from the only option availa))le to ae. Radio is just as effective, just as fast and far •ore economical than newspapers in terms of price and itea advertising. For example, B.C. Cellular and Cantel are constantly battling over the price of their cellular phones. cantel say come out with a newspaper advertisement on Monday advertising that their phones may be leased-to-own for $3 9. oo a month for three years. In addition, the purchaser would get 200 free minutes a month. B.C. Cellular would hear about that at noon on Monday, ask us to write a radio spot that afternoon, and beat the price in a radio advertisement ready for the drive home that evening. This is price and item advertising, and its use is not limited to print media.

12. If a small, single outlet retailer selling electronics came to me and asked me to help him write a media plan, I would 'begin by asking him about his customers. I would ask him to give me his receipts for the past year so that I could look at the addresses of those who have 111.ade purchases at his store. This would tell "ae how far away from the store his customers qenerally come frcqa. I would plot on a •ap how far away his customers come frOJll so that l: would know his retail trading area. That would tell me whether ~ was wasting my money or not going into a broad-based advertisin9 vehicle, such as a daily ROP advertisement that will qo to the entire Lower Mainland. If the trading area turned out to be very localized, I would look at advertisinq vehicles which are local in nature, perhaps

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- 5 ­located entirely within the comrunity within which the store was located, e.9., Richmond. 'l'hese vehicles would be more suitable to clriViftCJ traffic from the tar'9et geoqraphic tradinq area to bis store. My options would include transit shelters along key high traffic routes within the target area: door-to-door flyer delivery - for example, I could go to the local Boy Scout troup ·and ask them to deliver flyers or door hangers in a particular area (door hangers are simply a small sheet with a hole punched in it to hang on the door); coupon packs called Val Packs; Ad Mail using postal walks; the community newspapers: and the Yellow Pages; (including talking Yellow Pages, which can be used to give a number to call for a weekly special). No particular medium bas a clear advantage over the others at this stage.

13. If the outlet was in West Vancouver, upscale area, potential customers effectively without using newspaper print advertising. the people who live in West Consequently, they can be reached purchasing one or two key outdoor locations at the Vancouver end of the bridge, where people are going to see it commuting back and forth across the bridge to work everyday~ A couple of outdoor signs along these routes could be very effective.

14. Another alternative would be to run exterior transit signs on the buses that are on the routes that simply go to the North Shore and back. These buses make their way all the way through North Vancouver and West Vancouver.

15. For a single retailer, I probably would not think about radio. 'l'he coverage area of a radio station is simply too broad when compared to a single retailer's tradin9 area. consequently, the effective cost of radio for reachin9 the

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which is an may be reached quite Many of Vancouver work downtown. quite effectively by

- 6 ­target audience is •uch too high. For the same reasons, X also would not consider daily newspaper, or television. Therefore, in the case o~ a small sinqle location retailer, the choice of advertisi119 vehicles is not between dailies and weeklies, but rather between weeklies and a nwnber of other creative ways of meeting the retailer's business objectives. '!'be only examples that I can see where • a single location retailer located in North or West Vancouver would use a broad-based medium such as daily nell&papers or radio or teleYision would be when the retailer's product is unique or when the retailer's trading area is unusually large. These cases would be extremely rare, hollever.

16. In the case of multiple retail outlets, economies of scale begin to come in to play and it becomes possible to look at all media, including radio, the dailies, the community papers and television, depending on the kind of store. The magic number in my mind for Vancouver is five. When a retailer grows to five locations, and those locations are located in different Lower Mainland communities, the cost of the line rates of five Lower· Mainland c01Dmunity newspapers, by the time you add them up, is the same as running an advertisement in the dailies and reaching far more people. The kind of budget that a retailer would generate out of five stores on an advertising to sales ratio is enough that the retailer could be considering radio, dailies, and/or outdoor billboards, i.e., the whole range of broader-based media.

hft-eles of lledia Plans 17. Some of my clients advertise in both the dailies and the weeklies. In some cases this usage is designed to support local sales force activl.ties. That is to say, sometimes an advertiser's business objective is not only to talk to

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- 7 ­consumers ~ut also to aotivate the retailer's sales force. For example, the publisher or Yellow Pages •ay run television

CODDDercials to remind people to look in the Yellow Paqes: however, vhen its sales people are out knocking on doors in I Richlllond to try to generate advertisements for the next year's directory, I: advise tile head Office to run advertisements in the local community newspaper to help those salesmen in their particular activities at a particular point in ti.Jae.

18. B.C. Tel, with its PhOneMarts, will use the daiiy newspapers to convey a general •essaqe (!L:..SL., •oo not forget to

drop into , your local PhoneHart to pick up a gift certificate•). Week1ies, or alternatively, mall flyers, will be used to remind people where the particular locations of the PhoneMarts are, as well as the products and services available at those locations. This latter advertisinq activity supports individual local retailers. Thus, while ads from an advertiser may well appear in both dailies and weeklies, the adds serve completely different retail business objectives.

19. A&W uses the same advertisements in both the Province and the community newspapers. The Province is selected because A&W's target audience is primarily adults aged 18 to 34, and that is the prillary readership group that the Province appeals to. The same advertisements are then run in the community newspapers where the individual stores are located to increase the reach in the areas and to remind the public at large that

A&W exists. Both ad"ertisements awareness, but on entirely different newspaper ad is a~ at general awareness of all stores, while the C0111JDunity newspaper is aimed at awareness of the particular local outlet. J:f the price of advertise•ents in the Province and in the weeklies were increased a non-negli9ible amount, I would step back and review al.l of the alternative vehicles

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are aimed at general levels: the daily

AUG 16 •s1 13:27 FROM BLAKE CASSELS GRAYDON PAGE.e09 -·-ava1lele to A,W. Thue alternatives would inclucl• radio, television, outdoor ~illboards, and others. Depending' on the particular needs ot each inc!ividual atore, I would quite 1ikely ~ift aoae or all of each at.ore'• advertising dollars out of th• new a paper -.dia.

RUG 15 "91 13:27 FROM BLAKE CASSELS GRAYDON PAGE. E10 23. In my experience a flyer insert i• identical to a free standing flyer. OUr clients play flyer delivery systems, including the newspapera, Ad Kail and independents, off one against another. -rhey switch back and forth e.mong these delivery systems in order to discipline ea.ch. Xf the daily and community newspapers chose to increase their prices for inserts saterially, I believe that the scales vould l>e tipped in favour of retailers •oving away from the newspapers to other alternatives, such •• unaddressed Ad Kail er independent flyer delivery.

24. Many of •Y clients now believe that the ~act that a flyer is inserted in a newspaper (of any sort) 1• a detrillent rather than a l>enefit. Bevspape.rs have become ~11 of inserts. Moreover, the 1.nserta all tend to be delivered on the sa.e fev days. Ky cliants J:>elieve that too sany readera t~eat all inserts &liker if they don't read one, they von't read any. My clients tell me, therefore, that they believe that a flyer now has a better chance of being read if it is delivered

ALlG 16 '91 13: 28 FROM BLAKE CASSELS GRAYDON PAGE. 011 - 10 ­by itself. This leads ma to believe that free-standinq flyers not only compete with inserts, they represent the delivery syst2111 of choice.

25. Flyers stay around for a 1ong ti.Jae. In this age of compUterized cash registers, where prices may be literally • cbanqed instantenously, the competition also can and do react almost instantaneously to a print advertisement. This reaction largely defe ats the purpose of tbe advertisement in the first place. This has caused the food chains to beqin to rethink the va1ue of price and item. advertising in newspapers and other print •edia. In other word.S, teehnological innovation has made broadcast :media even closer sUbstitutes to newspaper advertisements than they were a few years ago.

26. in :my opinion, therefore, even if all of the daily and community newspapers got together and attempted to raise the price of their display ads and/or their flyer inserts, they would end up losing more :money than their increased prices would 9enerate.

27. In my opinion, anyone who buys a qroup of community newspapers as a package simply because it is presented as a package, is buying the newspapers for the vronq reason. A 9roup buy of collllDunity newspapers is a convenient way to place an insertion, since I can book 11 advertisements at once dealing with one person: apart from that, it is merely creative packaqin9. However, I am. not prepared to take inferior papers in certain communities for the convenience of sboppinq at one place. If community papers is w.y overa11 choice, :I prefer to buy the stronqest paper in each community regardless of affiliation, rather than making a single buy from a particular qroup. z am not prepared to •underserve" five or six of the ll communities in the Lower Ka.inland that I am tar9ettin9 simply

AUG 16 '91 13: 28 FROM BLAKE CASSELS GRAYDON PAGE.012 - 11. ­for sake of convenience. Nobody forces •• to buy the AM and FM station in an AM/FM partnership if both stations are not in my tarqet group. 'l'bey .ay try to ..k e it attractive, and may lower their rate on the station that I would not normally buy to take aoney away from the competition, but that does not mean that I will turn to th .e m. I:n fact, when J: have selected tbe co11111.unity newspaper option, I have chosen the strongest newspapers in each community. This invariably translates into a s-paper buy from one group and a 6-paper buy from the other.

28. In my opinion there is a trend away from conventional media execution. over the past 10 years, f1yers, value coupons, and other non-traditional advertising vehicles have stripped a considerable a.ount of advertising revenue from the conventional vehicles. The conventional vehicles have begun to respond by becoming much more flexible. For exaJDple, over the last two years, the lead time to book :magazine space has moved from as much as two months to as little as two weeks. Second, advertisers typically would erect a billboard with a static message and leave 'it in place for the entire advertising campaign. Today, messages can be changed overnight: further, some billboards have incorporated electronic messages. Attached as Exhibit c to this Affidavit are pictures of

billboards which illustrate this flexibility at competitive prices has allowed billboards to move into price and item advertisinq, thereby placing them back into the range of :media a1t erna.tives available to advertisers to accomplish this type of business objective. this qreater flexibility, the beginning to eat back into the advertising dollars that were &tripped out of the them by the non-conventional vehicles.

29. Every time that tbe advertiser change, X 111Ust 90 ))ack to the full ranqe of media

point. This increased By introducing conventional vehicles are

business objectives of an

AUG 16 '91 13:29 FROM BLAKE CASSELS GRAYDON PAGE.013 - 12 -alternatives. The choices of media alternatives that l bave as a planner are as long as a pad of paper that you want to write them on. If any particular vehicle or combination of vehicles attempted. to aanipulate their prices. X would simply shift all or part of that advertising to an alternate vehicle or combination of maedia. • E. gyponse to Jledia Frice aaanqes

30. If the daily newspapers attempted to raise their prices relative to other media, for example, I l:>elieve that a number of things would happen. Most advertisers would continue advertising in the dailies, but would reduce the frequency of their ads. For them, then, the price increase would generate no additional revenue for the newspaper. A smaller, but significant number of advertisers would pull all or a part of their advertising dollars out of the dailies and move to their second choice or choices, whatever they JDiqht be. Some of these advertisers might switch to a number of coJDJDunity newspapers, but the proportion would not be overwhelming. Finally, a much smaller num!>er of advertisers would maintain their existing newspaper advertising and expenditures in the dailies, either by increasing their advertising budqet, or more likely by diverting money from another medium. In my view, however, the amount of advertising dollars 1ost from migration to other media would far outweigh the marginal dollars generated by the price increase.

31. The results would be 11Uch the same if the relative prices of the community newspapers increased, even by as little as st. However, there is one important dif~erence. I do not believe that anyone currentl.y advertising in the North Shore News or the Courier would •ove to the dailies in the event of a relative price increase .in the community newspapers. Jtather,

AUG 16 '91 13: 29 FROM BLAKE CASSELS GRAYDON PAGE.014 13 ­the second choices for those advertisers who would cease (or cut back) advertising would be to •ove to aore geoqraphically targettecl aedia like Ad Mail, billboards, clirect .ail, and so on.

32. If both dailies and weeklies attempted to raise their prices i:-elative to all ·the other media, even by St, t:.he result would simply be a combination of the two scenarios sketched out above. Enough · advertisers would either cut back their advertising frequency or aigrate to alternative media (or delivery systems, in the case of flyers) to render the price increase unprofitable.

E. Real Estate Adyertisinq 33. Royal LePage is the largest single purchaser of advertising in the Real Estate Wee)tly. Real estate agents use the Real Estate Weekly as a hook to gain listings. The buying and selling public has been conditioned, at least in the realtors' perception, to believe that the bal Estate Weekly listings are important. Surveys have shown that advertising is not really important to the people who a.re actually using the services. rn spite of these studies, however, none of the real estate agencies want to be the first to stop listing in the Real Estate Weekly.

34. I would not be surprised if the realt ors began their own publication si11ilar to tbe Real Estate Weekly within the .next two years. Right now this is happening over and over in the United States, and :r believe that it is just a matter of

time before Canadian realtors follow suit. Specialized equipment now exists that allows an individual to 90 out with a Beta Cam and. take footage of homes that are being listed in the publication, bring that footage back, take black and white stills out of the footage, scan them into a Macintosh computer,

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- 14 ­and produce material that is ready tor lay out in the pu.blication's pages. Not only is tbis process user-friendly, it is also very inexpensive. The first of these types of scanners just arrived in Vancouver approxillately tvo weeks a90. 'they are all across the tJnited states, and real estate a9ents are buyinc; them to lay out their own pages for their own publications which reseimle the Real Estate Weekly.