LESS THAN A DECADE AGO, the television landscape was a lucrative landscape of BDUs and broadcasters who understood the terrain. Laws were established. Rules followed. Peace (sort of) reigned.
Then over-the-top video (OTT) with all of its possibilities blew into town, creating a wild west that many believe leaves traditional players without a strong weapon while a new, lawless breed takes over, driving consumers to cut, or trim, their TV subscriptions.
“OTT is more important than we thought,” says Alain Gourd, chair of The Working Group on Online Broadcasting (formerly the Over-the-Top Working Group), a conglomerate of 13 BDUs, broadcasters and industry associations created to help urge the CRTC to study the over-the-top phenomenon. “We also concluded it was going to grow exponentially. It won’t disappear whether the cost of Internet goes up or down, whether we have aggregate Internet pricing or not, it will grow.”
The Canadian Media Production Association (CMPA) is preparing submissions for the CRTC’s fact-finding mission this month that include studies measuring the audience impact of OTT and the impact on broadcasters and the Canadian production community.
“The preliminary information we’re getting is there will be a financial impact on the system if OTT grows,” says CMPA president Norm Bolen. “Unless something is done, it will lead to less robust Canadian system and less for Canadian producers.”
A study of more than 2,000 Canadian adults and 400 teens, released by Montreal-based Lemay-Yates Associates (LYA) on June 11, found that 12.3% of adult respondents intend to "cord shave" or reduce their cable TV bill over the next six months and 6.6% of them intend to "cord cut" or disconnect from cable TV. This will also be fed by the rapid, ongoing growth in the tablet market.
“The number of paid subscribers for TV online is already over a million and that’s barely a year ago,” adds Gourd. “10% of Canadian homes subscribed to online services in one year. What’s going to happen in three years?”
He points to the U.S., where he says there is clear evidence of cord cutting and shaving, as an indicator of what’s to come in Canada. “We’re seeing a decrease of subscriptions and exponential growth of services. Consumers have a finite amount of money to spend on content. They are going to make choices. There isn’t a level playing field for Canadian versus foreign services. That’s our initial hypothesis in terms of acquisition of rights.”
A trite phrase, but “leveling the playing field” will likely turn out to be the most contentious one. To some, it means bulldozing the existing landscape and starting fresh. To others, it means taxing and regulating it.
At the Banff World Festival two weeks ago, the buzz about OTT focused on two main initiatives that may appear conflicting but are actually complementary and driven by the same customer need, says David Purdy, VP of video and entertainment products at Rogers Communications.
First, there are the incumbent television providers, cable, satellite, IPTV, who are all making their products available across multiple platforms, as well as OTT competitors buying libraries and making them available through subscription or ad-supported models, purely on the Internet. The consumer is driving the demand for any content, anywhere, anytime and on any device, he says. Mobile and tablets have become viable options to watching that content and consumers are using them to watch TV and video.
“We, on the cable side, are desperately trying to allow customers access on these devices and at the same time there are new people launching business models on these devices,” Purdy says. “It looks like the great battle of TV anywhere. The reality is two different types of companies are coming at it in two different ways. That’s the primary discussion.
“The second, sub-story to that is linear and VOD off the set-top box are regulated and the other, broadband and mobile is unregulated. If you’re one of the existing providers and want to meet your customers’ needs for any content anywhere, anytime, any device, you have one set of rules for the TV and set-top box and another set of rules for the PC, tablet and mobile devices. And any of the OTT competitors coming into the marketplace have no rules. They don’t have to do anything for the Canadian production community. They don’t have to respect any of the Canadian channels or genre exclusivity. People in the regulated environment were wondering how they were going to thrive and flourish if the unregulated environment co-exists.”
Rogers’ solution: Loosen the rules and regulations surrounding the regulated environment or address the issue of the unregulated environment, Purdy says. “On demand is the most obvious example where I could go out and buy a library of 20,000 movies and series and television shows and make it available online… but I couldn’t make it available on our set-top boxes in a way that would be most complementary and helpful to the Canadian broadcasting system because the rules and regulations around VOD licensing preclude me from providing a library service that would compete with MPix or even Showcase Action and Diva. But we find it hard to believe the CRTC would want the Canadian broadcasting system to be challenged when competing with the unregulated over-the-top U.S. guys who are doing little or nothing to support the Canadian broadcasting system.”
Bolen sees only one solution: Foreign OTT providers contributing to Canadian content. He doesn’t support free-market activity, citing the financial markets in the U.S. as an example of how wrong it can go.
“Whether Netflix is a threat is besides the point. We believe all online broadcasters should contribute to the system. It’s an ongoing shift from over-air to online. They’re getting subscriber revenue so they should make a contribution. They’re the modern equivalent of a broadcaster and they’re having a negative impact on existing players. From a Canadian content point of view, we need to continue to have a system that ensures Canadian content gets made. Netflix should make a contribution like VOD makes in Canada.”
Without regulations that mandate contributions, the industry will end up in a death spiral with more spending on American content, which is easiest to do and most profitable, he says.
“As soon as you lower Canadian content obligations, the cost of American content will go up because there’s more competition. Canadian broadcasters will find it will be harder and harder to get premium content. Why, then, do we need Canadian broadcasters when they are re-broadcasting American content?”
Despite a seemingly sparse field, there’s a lot of innovative, creative Canadian OTT activity such as ctv.ca, the National Film Board, Rogers On Demand Online, CBC.ca and Radio-Canada’s online-only station Tou.tv, says Gourd.
Launched in January 2010, Tou.tv is not just a platform to replicate on-air or re-broadcast for catch up, it does its own programming. It offers everything it has rights for on the basic TV channel, as well as original content and content from partnerships with TFO and the Francophone World Consortium, among others.
“We have ambitions to create themes and even link them to events like if it’s the anniversary of the Berlin Wall,” says Genevieve Rossier, the general manager of Internet and digital services for Tou.tv.
Far from cannibalizing content from on air, it has helped popularize it. One series, Les Invincibles, became popular in its fourth season, says Rossier. “Then we put season one up and then season two and season three. When the show starts small, you can re-exploit earlier seasons.”
Its original web series En audition avec Simon, where every capsule simulates an audition with an artist, was “hugely popular”, she says. “We did two seasons of that. People thought it was real.”
It launched a mobile app in January and will soon be selling ads on it as part of the package with traditional TV now that the volume of viewers has grown.
Canadians can be successful, says Gourd. It’s a matter of branding, capitalizing and reinforcing online content. Radio-Canada pushes Tou.tv, for example, and CTV pushes ctv.ca. Keep the technology user-friendly, make it simple, and create partnerships between producers, creators and distributors instead of being siloed.
“Look at the history of the Canadian broadcasting system,” he says. “In the early ’60s, TV arrived. It was supposed to be the death of radio. Radio didn’t die. It was doing very well, thank you. But it moved from a very formatted radio programming approach to the roving format.
“Then cable arrived. It was supposed to be the death of (off-air) TV. Television developed the specialty services and cable. Instead of fighting the trend, you capitalize on it to develop new services that don’t need or use an antenna anymore. Then we had Direct to Home, the so-called Death Star, the end of cable. It got over two million subscribers, close to 20% of Canadian households. But cable is still doing well, thank you,” Gourd continued.
“The way I see it, it’s the same with online broadcasting. It’s there, it’s growing, it won’t disappear. But is there anything in our history of the Canadian broadcasting system that suggests that it will not complement rather than destroy the previous broadcasting formats and activities?….We have to maintain perspective.”
