I READ YOUR COMMENTARY published March 26 regarding the Bell Media vs. CIDG arbitration with great interest. I can confirm that it was a critically important hearing as it has turned out to be a referendum on the very future of our industry and its financial foundation.
I also agree with your conclusion – and thought I’d offer a little insight as to how Bell Media thinks about these important issues.
But first, I want to thank you for your comprehensive daily coverage of important developments and issues in our industry. Cartt.ca has become essential reading for so many of us and I am frequently impressed by the timeliness and breadth of your coverage.
Our entire industry is built around the viewer, and that means just about every single Canadian. The Canadian television industry is one of the most successful in the world – when comparing to seven other developed nations, more Canadian households subscribe to a television service provider than anywhere else (over 91%), our prices are the lowest, and we watch 18% more than the average, about 4.5 hours a day for every single Canadian! That number is the highest it has ever been and it grows every year, despite all the other media options Canadians have today. That’s over 300 hours of television watched per household per month. The tremendous quality and variety of programming in Canada, or our “choice”, is the very reason for that success.
There’s no question that allowing viewers flexibility to choose channels that meet their personal taste is important, and our industry does that today! There are in excess of 300 channels available in English and French, and innumerable combinations can be customized to create a personalized package from any provider.
But we think “choice” is more about the power you wield when the remote is in your hand. Most viewers decide what to watch through exploration. They channel surf, scroll the program guide, follow recommendations on social media, or sit down with family & friends and watch what others want. You note that viewers often watch more channels than they think: you’re right the average household tunes in to about 50 different channels every month.
If CIDG were to get their way the choice that viewers currently enjoy would be greatly diminished. These distributors simply want to pay less for content, with the sole intent of expanding their profits. If they pay less, the quality and the breadth of television programming in Canada will suffer, and choice will be reduced. The effect of their plan will be to make it unaffordable for viewers to “explore” and it will reduce the channels and the programs they can discover.
Your potato chip analogy provides a useful reference for discussion. There are four ways the television business is very different than the potato chip business which are relevant to “how many chips you must buy”:
1. Television is a fixed cost business. The cost of producing and purchasing content is the same whether 10,000 homes or 10,000,000 homes subscribe to the channel. Like all fixed cost businesses, it only delivers value to customers with scale. Producing and selling potato chips on the other hand is the opposite: almost all the costs are variable allowing low scale manufacturers to prosper.
2. If you like the first chip out of the bag, you are going to like all of them. Television doesn’t work that way. TV shows vary greatly, and viewer tastes vary greatly. That’s why exploration occurs to find what you want to watch. If you don’t like hot chili chips today you likely won’t like them tomorrow. But if you don’t find a program on Discovery or Comedy or AMC you want to watch today, you very well might tomorrow. The World Junior Hockey Championship could never have become the Canadian phenomena it is if TSN weren’t in 87% of Canadian homes.
3. Potato chips aren’t socially and culturally vital. Television is. The reason we have a comprehensive Broadcasting Act is that television shapes our identity and glues our communities. We must take care to support its ongoing success.
4. Potato chips are an unregulated, free market business. So there is a natural balance between manufacturers, distributors, and retailers. Television is possibly the most regulated business in Canada. So policy makers must take great care ensuring balance is maintained, otherwise the system will crumble. Anytime there is artificial manipulation of pricing by a regulator the outcome will eventually harm consumers.
In your commentary you note that the current system has benefitted everyone in the industry, especially consumers, and you’re right! It’s also important to acknowledge that the Canadian Media industry is a critical driver of our economy and of Canadian employment. By the way, as consumers we pay around 20¢ per hour for television in Canada. Where else can you be entertained, informed, and inspired for so little? That’s value we should celebrate!
In the mid-2000s the United States Congress thought it was a good idea to do what CIDG is seeking. The FCC, consumer groups, lawmakers, and the industry studied the implications for almost two years. Despite initial momentum in favour of the concept, they found conclusively that consumers would be harmed by higher prices and would receive far less choice. They concluded, as did you, that “we must take care to recognize and defend the value already distributed to Canadians through our television industry” and they abandoned the concept.
Citing Netflix and other over-the-top content as reasons to “break what isn’t broken” is misguided. As the commission found in its OTT fact finding exercise “the evidence does not demonstrate that OTT is having a negative impact on the system”. And in fact Netflix subscribers just LOVE television. Netflix is a different product satisfying a different need – it’s “for TV lovers not cord cutters” as subscribers watch 28% more television overall than the average viewer. In any event, Bell Media’s Penetration Based Rate Card provides unprecedented flexibility in a balanced way that will support innovation without harming consumers.
At Bell Media we’ve never been more committed to serve viewers and to modernize our broadcast system to meet their evolving demands!
Kevin Crull
President
Bell Media
