TORONTO – The Canadian on-line advertising market will top $1.74 billion this year, according to new research from Convergence Consulting Group.
The report ‘The Battle for the North American (Canada & U.S.) Couch Potato: New Challenges and Opportunities in the Content Market’ estimates that on-line TV advertising revenues represented 2.3% ($1.52 billion) of 2009 Canadian broadcast and specialty network TV advertising revenue. That figure is forecasted to grow to 3.1% in 2010.
As in the U.S., Canadian broadcast and specialty networks aim to grow on-line advertising revenue without negatively impacting their traditional TV advertising revenue and programming fees from cable, satellite, and telco TV access providers. To do otherwise would put approximately $3.4 billion and $2.5 billion respectively, both 2009 revenue numbers, at risk, the report contends.
Thus, networks delay when a full-episode of the TV show appears on-line, and in some cases do not run all shows and/or episodes on-line. Further, broadcast and specialty networks make available 70% less advertising minutes per on-line TV episode than traditional TV.
Based on the full-episode TV shows (not including news and sports) that CBC, CTV, Global, TVA, as well as specialty networks from Astral, CanWest, Corus, CTVglobemedia, Quebecor, and Rogers made available on-line in 2009, the report estimates that 16% of the weekly viewing audience (traditional TV viewers and on-line viewers) watched on average between one to two full-episodes at a broadcaster, specialty or one of their TV distributor’s website. That figure is up from 12% in 2008, and Convergence forecasts that number will rise to 19% for 2010. For the average TV viewer, one to two episodes represents just 5% of weekly viewing time.
Although Canada has less full-episode TV on-line than our American neighbours, Canadian on-line full-episode viewership and revenue are almost the same from a per capita and market (as a percentage of traditional TV advertising revenue) basis as the U.S., the report continues.
There are three key reasons as to why:
– Approximately 20% of Canadian TV subscribers had a PVR at year end 2009, and this number is projected to be 35% by year end 2012. In the U.S., penetration reached 35% by year-end 2009 and is forecasted to reach 50% by year-end 2012.
– Given the option of watching TV and skipping ads, or watching TV on-line with ads, the majority of consumers will choose TV and the PVR. The PVR therefore limits full episode on-line viewing, as does, to a lesser extent, free cable/telco TV video-on-demand (VOD). On average, Canadian providers of VOD offer less than half of what the U.S. providers do in terms of programming choices and free programming. Nor do Canadian providers offer the various on-demand options that the U.S. players do.
– Canadian residential broadband penetration was 70%, while the U.S. was 59% as of year-end 2009.
The bottom line is that with low PVR penetration, less free/selection of VOD, and higher broadband penetration, there is more room for on-line full-episode TV viewership in Canada, the report concludes.
In 2008-2009, Canadian broadcasters, (which in general have higher on-line viewing penetration than specialty networks), and to a lesser extent specialty networks, made “major progress” in obtaining digital rights to U.S. programming. The report maintains that U.S. programs are critical to the Canadian market.
2009 saw the largest amount of TV subscribers added in Canada since 2005. Although we have modeled minor U.S. TV subscriber cord cutting statistics, Convergence’s analysis shows that it is challenging to claim anything statistically relevant for Canada. The report says that minor evidence of Canadian TV cord cutting will most likely occur in 2011-2012.
Nearly 800,000 U.S. households had cut their TV subscriptions as of year-end 2009 to rely solely on on-line, Netflix, OTA, etc. The report forecasts that cord cutters will grow to 1.6 million households by year-end 2011. Cord cutters represent less than 3% of full-episode on-line viewers.
The ‘Couch Potato’ report series is now in its eighth year of publication.
