TECHNOLOGY HAS CREATED THIS vast crevasse. On one side is what consumers want. On the other is what the traditional TV industry says they can give them. Nestled in the void, like a big broadcast boogeyman waiting to pounce (for some, anyway), is OTT.
At the Banff World Festival last week, over-the-top video was top of mind and a prominent feature in CRTC chairman Konrad von Finckenstein’s breakfast speech to delegates, although he refused to speculate on its impact, given the fact-finding proceeding that is under way.
But it’s clear that there’s no way to zipline across the divide without changes to the traditional TV landscape.
At the 2011 Cable Show, Time Warner CEO Jeff Bewkes said there’s a simple change that will solve all problems: TV Everywhere. He’s been promoting it for years. Buy your package and with authentication, you have access at any time and on any device, whether TV, computer, mobile or iPad.
Sounds easy and while we already have VOD, the limited availability of TV programs and episodes make it unattractive to consumers, says Michael Hennessy, senior vice-president, regulatory and government affairs for Telus. The ability to access all episodes in the season and a library of past seasons is a must.
“Exploiting VOD is not a simple proposition because it attacks the fundamental economics of the system,” he says. “It’s not as simple as saying ‘go do it’ because you look at the U.S. or global players that may be in a position to fund global rights. Will you be able to access rights to popular programming on all platforms?
“It’s primarily popular U.S. programs that generate profits. For Canadian producers, it’s both an opportunity and challenge. Their survival is tied to the system and challenge of need to license Canadian production. If you move to an a-la-carte system, some of the least popular channels won’t survive.”
At its CRTC licence renewal hearing in April, Shaw Media announced that Netflix is already impacting the Canadian broadcast system, pointing to its deal with Paramount. It outbid Corus Entertainment and Astral Media for exclusive Canadian rights to 350 titles from Paramount Pictures’ library and reruns of Mad Men. The reruns are currently not available in the U.S., says Netflix’s vice-president of corporate communications Steve Swasey.
Earlier this year, Netflix purchased rights to 26 episodes of House of Cards, an original drama starring Kevin Spacey, even outbidding American cable brands HBO and AMC.
It may be tempting to dismiss this, said Barb Williams, Shaw Media’s senior VP of content, at the hearing, “Unfortunately, that’s not what we see. The regulatory bargain for private conventional TV lies in the model of profits from U.S. programming that subsidizes Canadian content. Netflix’s moves strikes at the heart of that bargain, and losing control of program rights for U.S. series will jeopardize our ability to uphold that bargain.”
Netflix refuses to comment on its content negotiations but, Swasey admits, “if you write big cheques, you’ll get content.”
The issue is whether Canadian players are on a sufficient scale to compete on global rights with non-Canadian exhibitors. “It’s the rights that prop the system – or value of rights diminished by available platforms that don’t support the system,” says Hennessy.
According to a Scotia Capital report from January 2011, Going Over the Top: Implications for the Canadian Broadcast System, there’s still a discrepancy between the U.S. and Canadian content on Netflix that stems from content licensing issues and geographic segmentation. Even Netflix’s CEO has said its ability to secure rights for programs is its biggest challenge in entering the Canadian market, citing the series Dexter as an example. It’s available for streaming in the U.S. but not in Canada where the rights are held by Astral and Corus.
OTT represents a small threat to the Canadian broadcast industry, the report says. Key barriers include the vertically integrated industry, specific geographic content rights, BDUs’ own OTT services and, as discussed here last week, broadband pricing.
“The Canadian television industry has responded quickly to the threat of OTT services as cable/DTH providers have created online video portals that enable consumers subscribing to their service to access their content anywhere and anytime,” reads the report. “Canadian broadcasters have been active in working with the BDUs to secure the online video rights for the majority of their key programming.”
Astral and Corus, it says, have been actively working with their BDU partners to address the threat from OTT services. “We anticipate that both firms will continue to be proactive in ensuring that key content is protected through longer-term agreements and that the diversity of the businesses helps to offset some of the exposure to changes in the TV business.”
But we’re not doing as much as we could. “Broadcasters have always looked at VOD suspiciously, as potentially cannibalizing ad revenue from regular broadcasting,” says Hennessy. “The inclination has been to limit the number of rights they acquire in order to reduce their costs. The problem now is that streaming has become better and the quality of online got to the point it is increasingly a real competitive experience. All that suggests what may have worked in the past doesn’t make sense right now.”
For Corus CEO John Cassaday, it’s a matter of quickly ascertaining how to capture the audience, measure it and give that value back to advertisers. “I think what we’re going to end up doing is increasing our viewing,” he said in a recent Cartt.ca interview. “I think the way I differ from most is that a lot of people view this as a zero sum game, that if people choose to subscribe to Netflix, they are not going to choose to subscribe to something else on traditional television. I don’t see it that way at all."
So, if there’s value, consumers will come. But first we have to untangle the messy business of licensing, royalties and rights.
The salvation of the Canadian TV industry lies in the willingness to innovate, change and embrace a new business model.
“It’s not in the business of broadcasters to withhold content,” says Hennessy. “If we can’t maximize our audience perhaps we don’t deserve to win or prevail.”
Questions, comments, or kudos? Do you have a cord-cutting or shaving experience you’d like to share? Drop us a line at editorial@cartt.ca.
