THE CRTC IS EXPECTED TO launch its formal TV hearing process imminently. Much of the focus going into it has been on what Canadians want from their broadcasting system.
Without diminishing the importance of this, in all likelihood, Canadians will continue to want from the Canadian broadcasting system what they’ve always wanted.
To paraphrase Fred Sherratt, former COO of CHUM, from 15 to 20 years ago: “Canadians have more television than anyone else in the world. We get everything Americans get, plus Canadian content, at a lower price.”
Canadian television has delivered on this in spades for more than half a century, so perhaps the question should be: How can it continue to do so going forward? And perhaps the answer will be simply to approach the future with our eyes open, avoid major mistakes, and accommodate the fundamental shifts underway.
To that end, here are three ideas to consider.
First, in accordance with the “Sherratt Principle”, let’s discard this notion that Canadians need a-la-carte channel selection. Anyone who knows anything about this business understands this would offer fewer choices at far higher prices per choice. The U.S. hasn’t gone this way. American programmers won’t let us treat their channels this way – so why on earth would we shoot ourselves in the foot by offering only Canadian channels on a pick and pay basis? Of course, we can provide more packaging flexibility, maybe even mandated pick packs. Maybe even a basic-basic. But pricing to incentivize bigger packages is actually good for everyone – distributors, programmers, and viewers alike.
“Beneath all this is a more fundamental shift from volume to quality.”
Second, the shift to on-demand (in all its forms) means a massive change in how we consume TV. It includes time-shifting, binge viewing and watching shows on smart phones or tablets on the way to work. But beneath all this is a more fundamental shift from volume to quality. In the former world, we never got to watch all the shows we wanted – we caught most of the ones we really cared about, and then happened to watch “whatever was on”. It wasn’t always the best TV, but it was good enough.
Today, we can watch the best TV – and only the best. In this “golden age of TV”, we can watch practically every major sporting event. If we miss the first season of a drama series that takes off, we can catch up on the missed episodes and join in progress. We can PVR or use on-demand to watch only the really good stuff. And to do that, we’re going to stick with BDU service, likely with premium packages.
But for those of us who are happy with “good enough” TV, there’s suddenly a much cheaper option at hand. For one tenth the cost, rabbit ears and a Netflix subscription gives hours of good TV a week. TV Everywhere is eroding the option of online on-demand access to TV station programming but, for many, this is still better TV than as little as five or 10 years ago.
What does this shift from volume to quality mean from a policy and business perspective? The Commission recognized the first implication in reducing Cancon exhibition quotas from 60% to 55% in the last TV policy decision. That trend will need to continue. It also ultimately means fewer “channels”. The 500 channel universe made little sense when we watched for 25 hours a week live. It makes no sense as we move from that to mostly on demand. There isn’t enough quality broad interest content. And micro niches needn’t be “channels” in any case.
“The 500 channel universe made little sense when we watched for 25 hours a week live. It makes no sense as we move from that to mostly on demand.”
Third point. After three decades of almost constant growth in the TV eco-system, it’s time to realize that the party’s over – for everyone. BDUs have to accept that cord cutting and cord shaving are real, even if their impact remains limited today. The days of passing on regular 3% to 4% annual price increases are past. That includes charging extra for TV everywhere. Broadcasters have to accept the potential hit from this as well as in their advertising. Producers have to do the same. The amount of money in the “regulated” system will level off and start to decline. In some areas, it already has.
One of those areas is advertising. Rogers noted a year-over-year 6% decline in advertising on conventional television in its group renewal hearing. This follows a five-year cumulative average annual decline (2008-2012) in revenues of 1.2% CAGR. This should come as a surprise to no one.
It is part of a general, and to a large extent, now predictable shift in advertising away from traditional media to the Internet. In a recent study for the Canadian Association of Broadcasters on radio, I noted that this trend can only be expected to grow through to 2020, and ultimately cause a loss in radio revenue of as much as 15%. Similar modeling suggests that conventional TV losses could reach 20% by 2020, and specialty TV, 5%.
None of this means that TV can’t continue to be a decent business, or a major contributor to Canadian cultural expression, but BDUs no longer have a monopoly on TV distribution and consumers can no longer be assumed to have no other option. This means that for their businesses to grow and thrive, companies in the value chain will have to accept Canadian TV as an important but diminishing piece of a broader digital or international play, not the only game. And it means that Canadian TV’s ability to support social and cultural objectives has likely reached its limit, and that a focus on core priorities will be needed.
Peter Miller is a communications lawyer and consultant. He can be reached info@petermiller.ca
