SO MANY WORDS, so few facts. So much fear. Is OTT the new “Death Star”?
I simply must stop learning to be so hopeful when it comes to these CRTC proceedings. Almost eight weeks ago, the Commission launched a look into over-the-top video, asking the TV industry, and anyone else who wanted to contribute, for cold, hard, facts on how consumers getting more video content online is affecting their business.
In their submissions to the CRTC on OTT, I was hoping some of the vertically integrated distributors would have some early numbers culled from their customers’ set-top box data showing how OTT is affecting viewership, right now. Are cable VOD buys down? What is aggregate tuning to pay-TV like these days, compared to the past? If many are viewing content via the numerous alternatives, how is that affecting real-time, plain ‘ol TV watching? What is viewership like on the various online or iPad apps they all offer? The vertically integrated companies each have access to that data from their set top box and web metrics in real time and analysis of that data would give us a very clear picture of the effect of OTT video in the summer of 2011.
While those facts and others like them would have been illuminating, they are absent from the submissions. That says to me then, that the early data the vertically integrated distribution and media companies own probably show no such thing and that, as John Cassaday said to Cartt.ca in April: OTT viewership is, in fact, additive to the regulated TV business. “I’m not one of those who believes – and there are some in our industry that believe – that Netflix will be very damaging to our business,” he told us then.
Instead, the submissions churn out mentions of the same publicly available general research that has been written about for months from the likes of Akamai, comScore, Cisco or Sandvine which shows consumers could, if they wanted, trim their subscription TV a little or cut the cord completely. Some of the quoted reports say consumers are poised to go ahead and do it. The companies mention the exclusive content agreements that Netflix has signed with Paramount and Sony and the original series deal it has with Kevin Spacey’s House of Cards.
The thing is, though, that in the 75-year history of television, people have always wanted more TV, more movies , more entertainment. Never less. And Canadians have shown repeatedly they are more than willing to pay for it, too.
As it turns out, the ‘fact-finding” portion of this process was almost unnecessary. Just about everything – and I’ve read a number of the submissions front to back – reveal absolutely nothing new. The submissions from the big media companies (we’ll take a look at what the production side has to say soon) ramble on and on about how broadband is available widely now, so people can watch shows on Netflix and iTunes and Amazon and Facebook and elsewhere; how Hulu.com wants to come to Canada, too, and how scaaary this all is for everyone because people COULD cut off or cut back their traditional TV watching.
This, we knew already.
The Bell Canada submission even has a new term for OTT: FOB, which means foreign online broadcasters (in case anyone had any doubt that these nefarious outsiders were broadcasters…).
But with so few facts combined with so much fear and speculation from so many, coupled with the realization our Canadian policies and regulations just don’t fit into a fluid global electronic media marketplace, there is simply no way for the CRTC to avoid holding a full-blown hearing into this in the fall.
“(Bell Canada and Bell Aliant) strongly urge the Commission to expeditiously initiate a follow-up proceeding relating to FOBs to implement necessary reforms that formalize this type of regulatory symmetry and solidify the presence of a strong Canadian broadcasting system going forward,” says the Bell report. They are not alone in calling for this.
Adds Astral Media: “What happened between June 2009 and May 2011 to make what seemed unlikely in 2009 become probable today? Quite simply, a strong acceleration of the development of new media companies whose time appears to have come.”
So fine, we’re pretty sure there will be a hearing, despite how the issues are rather similar to the new media exemption proceeding we just finished in 2009. However, I do not expect the result to be the application of any of the current Cancon requirements on the likes of Apple, Google or Netflix (or at least I hope we don’t try that).
So what will the hearing be about?
WHAT WE NEED TO DO IS restart. A hearing into the complete overhaul of the regs in the face of all the new realities is the better one to call, rather than one which asks what we’re going to do about these Netflix whipper-snappers and their gang of upstarts. As I wrote back in April (prior to the Commission’s OTT facts call), our regulatory system, so many of our policies, seem utterly untenable.
For example, Bell is right on one front for sure. It isn’t fair for the company’s customers to have to pay into the various Canadian content funding schemes when others do not – especially when those others are using its networks to deliver their goods.
So, I’m with Shaw Communications on this one. The big cable, satellite and broadcasting company has (almost) asked for the system to be blown up to start again. It’s an idea that CRTC chairman Konrad von Finckenstein has been pondering for some time, too.
Rogers, on the other hand, offers a less drastic idea as its focus: The liberation of the video on demand rules so that it can better compete with OTTs, which are all VOD offerings, whether they stream or download. It’s a more pragmatic approach, supported by others, that takes one step towards deregulation.
(Ed Note: Rogers has long been the best company at predicting the political winds swirling through Ottawa-Gatineau, so if it doesn’t expect huge, wholesale changes in policy backed by the federal government, maybe its simpler demand is indicative of the tea leaves being read on the Hill and across the river.)
“Since Rogers is only permitted to offer on our VOD service the SVOD extensions of Canadian linear services, we are prevented from offering a package of older films and television series that Canadians can otherwise legally obtain from SVOD-based OTT services online,” reads its submission.
BUT BACK TO THE FOUND FACTS of this exercise. While deregulation is at the centre for some submissions, others see value in applying the existing contribution and exhibition regimes to the OTT (or FOB) companies.
Bell believes “that the solution lies in establishing a system framed around regulating a company’s principal broadcast business in the Canadian market, while allowing experimentation in secondary businesses,” its report reads.
“For example, if an FOB’s principal line of business in Canada is an online subscription video service, which competes directly with a licensed Canadian broadcaster’s properties and is increasingly indistinguishable from a VOD service, it would be required to make a contribution to the system. However, both the FOB and licensed broadcaster could develop new, related businesses that would be unregulated. The Companies submit that this would ensure regulatory symmetry, while still encouraging innovation and guaranteeing that consumers have access to a range of content (both Canadian and foreign).”
In other words, if Hulu came to Canada as HuluBell.com, that might be unregulated, it would seem from that passage.
Citing comScore and other data, the Bell report also points to how Canadians are watching tons of video online and how that might impact regular TV viewing. (Ed Note: I guess it would be impish of us to point out now that the Television Bureau of Canada and BBM – of which Bell is a member – say that the web and TV are allies, not enemies.)
In its submission, the big telco, TV and distribution company also points to a slowing growth rate in the net additions of subscribers to pay-TV channels The Movie Network, Super Ecran and The Movie Channel – saying this is clear evidence of "cord shaving". However, if you look at the chart Bell presents (pictured), there was an even more precipitous drop in pay TV growth way back in 2007-08, which right about the time the monstrously popular The Sopranos, finished its run.
So is flatter pay TV growth this time because of cord-cutting, or content that isn’t at the popularity level of The Sopranos? The reports don’t offer any facts on that.
Both Rogers’ and Bell’s submissions, (and I really don’t mean to be picking on Bell here), also draw a parallel between wireline phone cord-cutting (in favour of wireless) and the potential for the same impact in the TV business. While it’s true that both are examples of cord-cutting of traditional, regulated businesses, I find this parallel a bit on the specious side. Voice is commoditized and much more easily replicated and replaced than video. I can call anyone from any phone anytime. But I can only get HBO content in Ontario from The Movie Network when they say.
The other sea-change, though, that we’re all talking around and not about, is that the wireless phone or tablet or PC is a personal device, not a household one like cable/satellite/telco TV subscription that is delivered to the biggest screen for all to see.
THIS GETS TO ANOTHER of the axis points upon which OTT spins: OTT video is most often a personal video choice. Netflix sells to individuals, not households. Same goes for iTunes, Amazon and others. They charge a person’s credit card. They don’t send a bill to an address. There is great personal choice in what they offer, but if you have more than one person living in your home – as most do – it will be really difficult to cut off the rest of the channels or content enjoyed by the others who live under your roof.
My seven-year-old daughter can find SpongeBob on demand via the cable box. My 13-year-old son uses our Boxee to find Survivorman episodes. My wife likes watching Sex and The City on Cosmo TV on linear. I can watch Modern Family on the iPad and recently watched 1996 movie Big Night over AppleTV. Speaking of Death Stars, I have the full DVD set of Star Wars and yet have found myself watching pieces of the movies on Spike or Space over the past few weeks. When I was a Netflix subscriber for a bit I used the Wii to watch Groundhog Day again. This weekend I watched the British Open via my cable DVR in the evenings (really wish I had whole-home DVR).
Yes, one family does not a “fact” make, but to satisfy all of these personal video choices, for various reasons, I need these all of these connections. One such reason? When I’m making dinner, I can hand the remote to my daughter, tell her to watch SpongeBob if she wants and poof, it happens and I have 20 peaceful minutes to finish dinner.
Will all that change in the future? Most definitely. It could change tomorrow. But only the ways in which content can be accessed will shift. The desire for choice in the diversity of content my family wants will keep many connections and accounts active for as long as I can foresee.
So, our media companies need to be freer to adapt than they are now.
“As noted by Kaan Yigit, President of SRG, in a recent article: ‘…cord-cutting is not happening at any scale in Canada. Yet anyone who takes comfort in this is a fool’,” reads Rogers’ submission. “According to Mr. Yigit, cord-cutting is in its embryonic stage and its numbers are similar to when wireless/wireline substitution first emerged in Canada. SRG found that since the TV subscription is a household service, this is the main reason that Canadians have been reluctant to cut the cord. Everybody in the household must be in agreement with the decision to cancel the BDU service.”
ALL OF WHICH MAKES APPLYING our existing regulations and policies to a fluid media world seem all the more futile.
“The current regulatory system is a form of ‘walled garden’ that seeks to control the impact of non-Canadian services on the domestic market through the regulation of access. The traditional regulatory bargain within this framework is to provide ‘protection’ from foreign competition in exchange for ‘contributions’ to the regulated system, all with a view towards achieving the objectives of the Broadcasting Act,” reads Shaw’s submission.
“This framework is no longer sustainable in a borderless digital environment. What is needed now is a coherent scheme for the support of Canadian content and the development of a flexible, competitive and innovative system that provides access to programming on the customer’s chosen delivery system.”
So, support for Canadian content is certainly still required, somehow, but the big distribution, broadcast and content company still generally wants all funding regimes done away with.
“At a minimum, the Commission should not introduce any new rules or requirements for regulated players given the growing impact of OTT services,” says Shaw. “The current regulatory system of subsidies and obligations is not sustainable. Attempts to maintain it until the last marginal benefit to the realization of current legislative objectives is derived will undermine the competitiveness and long-term health of the entire communications industry.”
And as for attaching new regs to the new interlopers? “Rogers does not think the answer is to regulate OTT services. We do not believe such an approach would be feasible given consumers’ expectations.”
So then, we must start anew.
Please let us know what you think in our comments box below or at editorial@cartt.ca.
