TORONTO — Adding some broadcast content into the mix at the Canadian Telecom Summit last week, experts from the video content creation and distribution industries discussed the challenges and opportunities arising from the advent of over-the-top services during a special panel discussion.
OTT is about a “content revolution”, said George Burger, advisor at Internet TV provider VMedia, an upstart BDU. “[OTT is] a massively disruptive event…and it’s going to make the disruption that happened to the music industry, with Napster, pale in comparison completely,” Burger said.
“It’s flourishing from the consumer point of view. Consumers have never, ever had it better,” he said. He added BDUs have good business prospects going forward as organizers of the massive amount of content that will be available to consumers.
David Asch, senior vice-president and general manager of shomi, Rogers and Shaw’s subscription video-on-demand service, said OTT is “a horse out of the barn” that won’t be going back in. He said he thinks OTT and traditional broadcasting will complement one another, allowing people to consume TV content when and where they choose, whether it’s at the appointed time on traditional broadcast TV or at any time through shomi.
Speaking from the perspective of TV content producers, Michael Hennessy, president and CEO of the Canadian Media Production Association, had a less rosy view about the effect OTT will have on traditional broadcasters.
“I think things are really fucked up,” he said. “The reasons for this are the conventional television business which anchors broadcasting is in terrible shape and nobody’s predicting anything but a further downward trajectory in terms of advertising revenues. The specialty business in this country I think potentially has been gutted.”
“You can’t make $3- or $4-million-an-episode television shows within the Canadian system if the supports from the business itself are on the decline, because we didn’t have much scale to begin with.” – Michael Hennessy, CMPA
With an anticipated decline in both advertising and subscription revenues, it makes it difficult for traditional broadcasters to maintain the scale necessary to fund “those kinds of shows that the CRTC says are very critical to make,” Hennessy said. “You can’t make $3- or $4-million-an-episode television shows within the Canadian system if the supports from the business itself are on the decline, because we didn’t have much scale to begin with,” Hennessy said. He added that it takes typically $50 million or more to finance one season of a television show.
Burger pointed out that with greater access to more TV content for consumers, the content itself becomes commoditized. “I would not be crazy about being a TV producer wondering where I’m going to make my living in five to 10 years,” Burger said.
“I represent a lot of very nervous people,” Hennessy responded.
The outgoing CMPA president (he has announced his retirement and the association is looking for a new chief) agreed that the “massive oversupply of content” will create commoditization, driving down the price that buyers are willing to pay, not only for TV programming, but also advertising. “There’s this massive supply right now, but there isn’t the capacity to consume it all, even though it costs millions of dollars to make. That’s just simple economics,” Hennessy said.
One fundamental question he has about OTT is why the CRTC has not applied the same type of foreign ownership restrictions on broadcasting as it has maintained in the telecom, wireless and cable industries, Hennessy wondered.
“I know there’s a lot of people in the room that feel there would be a lot more competition in telecom, if there weren’t the foreign ownership restrictions,” Hennessy explained. “Well today, without any public debate, we’re really saying that as long as you broadcast in Canada using a broadband or wireless pipe, we’re not going to regulate you, regardless of whether you’re the biggest player in the world.” (Hennessy mentioned specifically Apple’s rumoured launch of an OTT video streaming service.)
“Maybe if we said, look, Canada’s open for business, but by the way when you come to Canada we expect you to operate by the laws and rules of the country — whatever we decide those are for telecom and wireless and broadcasting — that might be a better place to end up in, than pretending to still live in a protectionist environment but we’re not really interested in protecting,” he added.
“One of the worst things a regulator can do during a period of massive upheaval and transition is to assert jurisdiction and start to distort the marketplace.” – Raj Shoan, CRTC
As it happened, the CRTC was represented on the panel by Ontario commissioner Raj Shoan, who said the Regulator’s current data indicates that OTT service consumption in Canada continues to be complementary to traditional viewing.
“We’re in a period of tremendous transition and upheaval right now. One of the worst things a regulator can do during a period of massive upheaval and transition is to assert jurisdiction and start to distort the marketplace. So I think the Commission has taken an approach that is cautious, while recognizing the fact that programming consumption behaviour, audience behaviour, is changing,” Shoan said. He added it would be inappropriate for him to comment directly about current public consultations, such as the one regarding hybrid VOD services.
Shoan added that the reality is a massive amount of bandwidth on Canada’s high-speed networks is being used for video distribution. “That has implications for numerous industries. Before deciding on what we’re going to do, the more responsible thing might be to take a step back and say, ‘Let’s have a discussion about what’s happening. What does that tell us about how people want to get their programming?’ before jumping in with both feet, to determine if something needs to be done at all,” Shoan said.
Photo by Michal Tomaszewski / Pinpoint National
