TORONTO – Can connectivity and content achieve a happy marriage or should they just stay friends?
Dvai Ghose, the outspoken managing director and head of Canadian research for Canaccord Genuity, came down firmly on the side of ‘friends’.
“There is no evidence to suggest that owning content assets helps connectivity providers,” he said at the Canadian Telecom Summit during a panel discussion Monday afternoon called ‘Business Models 3.0: Financial Implications for Content and Carriage’.
While acknowledging that content ownership could make sense for “defensive reasons” or as a “regulatory hedge,” he was also quick to point to the “convergence nightmares” of the AOL/Time Warner in early 2000 and the BCE Globemedia venture in 2001, which he called a “value destruction story closer to home.”
(Ed note: There are many who think that AOL/TV and Bell/CTVgm were just too early and that with broadband so ubiquitous now, maybe it’s not such a bad idea. See: Shaw-Canwest)
“And if connectivity providers only offer their proprietary content to their customers, it does not maximize viewership which then makes it difficult to monetize,” he added, noting that the market also prefers “pure plays over conglomerate assets.”
Rogers’ vice president and general manager of television products, David Purdy, approached the question in a different way. Referring to his company’s broadband portal Rogers On Demand Online, Purdy said that his company prefers a partnership model where Canadian broadcasters purchase the digital ancillary rights with the linear rights for their content, particularly the popular American prime time shows.
“How do we deliver a comprehensive and competitive video entertainment experience long term if the rights we really need are not being secured by Canadian programmers?” he asked. Without these rights, Purdy said that both Rogers and Canadian broadcasters are more susceptible to over-the-top disruption and a “cannibalization of the value chain.”
But he did admit that Rogers’ television assets – which include Sportsnet, Citytv and Omni, among others – came in handy when the company was testing out its RODO platform.
“One of the things that owning content does is allow you to do is experiment, innovate, and prove out some of your hypothesis,” he said.
Jim Poole, the general manager of global networks, mobility and content for Equinix touched on the issue of how the exploding growth in online video strains the infrastructure of cable and telecom companies.
“You will be hard pressed to find a high quality, ad supported video business that actually makes money,” he said, noting the falling but still hefty costs of streaming. Quoting an analyst’s estimate, Poole claimed that “one of the more popular services” (You Tube, though he didn’t say it) generates between $100 million and $500 million in yearly revenue, but costs $700 million to operate, a venture that requires its parent (Google) to subsidize via other lines of business.
So content is still king, but is all content equal? Absolutely not, agreed Ghose and Purdy.
Ownership of mass content is questionable, Ghose said, but there is value in individual and specialized content. Purdy agreed, noting that Rogers is particularly interested in securing niche, ‘long tail’ content.
“You can’t just say content is content,” Ghose continued. “Content you can get anywhere is not necessarily worth owning if you’re a connectivity provider. There’s very little content that is that compelling that you can’t get from somewhere else.”
