ENTITLED "BDU CONTENT Strategies: Can Cable and Phone Companies Do Their Own Thing?", the session on what TV distributors think of content and its changing place in their business plans was a popular session at the Canadian Film and TV Producers Association annual Prime Time conference in Ottawa two weeks ago.
The elephant not in the room, however? A cable company. But one former cable guy spoke for the industry anyway. Moderated by Peter Lyman, senior partner, Nordicity Group, the panelists included Chris Frank, vice-president, programming and pay-per-view, Bell ExpressVu, Michael Hennessy, vice-president, broadband and video policy, Telus; Tom Laird, general manager, digital interactive video, SaskTel; and Julia Keatley, of Keatley Entertainment, which currently produces Godiva for CHUM.
The group covered a range of topics, concentrating heavily on VOD fears, show exclusivity and what that may mean for carriers, broadcasters and producers. What follows is part one of an edited transcript of the discussion. Part two will follow next week.
Peter Lyman: In my discussions with broadcasters, there are two anxieties that they seem to have from a more on-demand type of world. One is broadband bypassing them, but the second is from VOD or their friends the distributors getting into content distribution and content acquisition themselves.
So those are varying ties which should be producers’ anxieties because that however they’re weakened, they may have less to spend on programming. On the other hand, there are some opportunities that come from this, too. So, I would like to give those who represent the BDUs here a chance to talk about… their content plays.
Chris Frank: Well, ExpressVu has been in the pay-per-view business since 1999. Those of you who are plugged into what happens in this town will know when the regulatory framework for DTH was announced by the federal government… it specifically included the ability for DTH to have its own pay-per-view operation and so we obviously seized that mission back in the ’90s and we’ve been, I think, very successful with it.
The people that we buy our programming from tell us that we are, on a per-subscriber basis, the largest revenue producer in the pay-per-view space in Canada. So it’s natural for us as we start to roll out our wireline business to jump into the VOD business, too. But I need to say right up front that at Bell Video Group content is not our core business. The acquisition of content, yes; the production content, no. So, we’re naturally aligned, I think, with the folks in this room who represent the production industry and international producers who are doing the same.
PL: Michael, first if you could talk about your own activities, wireless and IPTV and then if you come back and act as Jim Shaw.
Michael Hennessy: … Just to make clear, our IPTV system is not on the Internet. It’s not Internet television. It’s IP-based television… next generation BDU infrastructure and because we’re really starting from zero, we’re building around the planks of what we think our strength will be in the future.
So that’s going to be IP infrastructure, a national wireless network with already five million subscribers and next generation ADSL2 Internet service. And the concept we’re looking at with IPTV – we have virtually no limits on capacity because everything is streamed from the headend. It’s really on demand – even your linear channels.
So, we can ultimately carry as many HDTV channels as available, as many multi-cultural channels, as many specialty channels. We can actually merge traditional television that had capacity constraints with a long-tail network but in a managed environment so you don’t get the jitter you’re going to see on the Internet. I think that’s kind of what’s really going to be cool about this is that over time we’re going to be able to marry traditional television technology to the Internet and make it portable on 4G wireless broadband networks.
PL: Tom, can you talk about what you’re doing in IPTV. Michael just talked about it. You’ve done something about it.
Tom Laird: Yeah. We’re very excited about what IPTV’s doing within our province. We are trying to provide our customers with a different way of doing entertainment and information and, of course, their communications. And so with that we have all the traditional linear channels and HD. As Michael has indicated, we have this endless capacity in which drive out content. We are particularly excited about the interactivity component of our business.
People are telling us they like the ability to play games, getting involved with playing games against each other in different locations, the interactivity of your television experience over your PC and then driving it to your wireless device… So we are pushing very hard for the next component to have whatever you’re watching at home on your plasma TV, if you’re half-way through it and you have to go pick up the kids at a hockey game, then you flip it on to your cellular device and then move to your vehicle or bring it back.
From that, the other aspect that we’re really pushing hard is our local community events on our on-demand platform. We are working with local producers within very much the same context as was indicated from ExpressVu. We’re not in the content business. We acquire it. However, on the local demand piece, we are certainly working with producers to develop local, unique people, places, events, content. We’re very excited about the early days of what that’s doing to help us differentiate and provide to our customer base what’s happening locally. We’re very excited about what’s going on.
PL: Michael, if you want to take the next shot and say just generally what cable is up to. You’re quite familiar with that up to a year ago, so.
MH: Yeah. It was when I mentioned it to somebody in public about our plans for world domination that ultimately led to the breakup of the CCTA. Cable’s in a great position right now, adding more and more digital capacity. Take a company like Rogers, they’re now at 850 MHz, which means in the short run, they have no capacity limitations. They have enormous capacity for video-on-demand.
I think they’ve got 6,000 titles in stock at this point of time. They’re on the leading edge when it comes to wireless and adopting a lot of the content applications that are delivered over GSM networks in Europe. So, huge bandwidth, very fast Internet because of the big pipe of bandwidth and longer term plans to look at things like MPEG-4 which will increase capacity even more and to approach the IP world from a slightly different direction, but I think they’re going to end up there, too.
So whether you’re cable or a telephone company or satellite, everybody is moving in different ways to more integrated platforms to greater scale, more capital investments. So, really, if you look at any of us, the future is all going to be about super-fast internet, abundant capacity, on-demand, the ability to port things in your house or externally over wireless devices and still provide a CD quality sound, good TV viewing experience in a number of locations.
TL: … We’d better be doing that because the generation that’s coming up now watches TV, or watches what we know as TV in a totally different way. So if we don’t get with the program, we’re going to lose them.
PL: Julie, have you’ve heard enough from these gentlemen to want to seize some opportunities as a producer in what they’ve said so far?
Julia Keatley: … Out of challenge comes opportunity and as producers were obviously already producing in a variety of media. We are working across every platform and whether it’s something that’s going to be premiering on a main network and looking at all the other ways we do it, it always comes down to "how you pay for it and who’s going to pay for it…
PL: Just get this straight, what is it that you can do and not do from a regulatory point of view? What restrictions are there on what you can show on VOD or pay-per-view in terms of content or exclusivity? Are you able to get exclusivity vis-à-vis broadcasters on other media platforms?
CF: Now that’s a very interesting question. Exclusivity is supposed to a no-no… but in fact that happened, if you remember the NFL Sunday Ticket. For those who aren’t aware, there is a premium pay-per-view football package which brings all of the NFL football games on any given Sunday to the home by pay-per-view — and one of the cable companies (Rogers) locked up the exclusive rights (and also sold them to other cable companies in Canada). That was contested and the decision really hinged on whether or not, yes there was preference, but was it undue, and the Commission at that time said no, it wasn’t undue.
So, back to exclusivity, it’s an unclear concept at this point. If somebody makes a complaint, the Commission feels that this is bad for competition not for public policy, then I suppose the exclusive contract will be ripped up. If it’s not a material exclusive contract, it won’t be. And all of us in the business need to judge whether or not they can get away with an exclusive or not.
It seems to me that as the industry gets more concentrated, the players get larger, and scale determines what is do-able and what is not doable, that we will see more and more exclusive contracts in this business and there probably will be more complaints and more litigation in front of the CRTC.
I can’t predict where that’s going to go, but clearly all of us in the media business are seeking to differentiate our products. Tom, you mentioned local programming and… of course cable’s been doing that for a long time.
…I guess we could probably learn from Sky, which is the big DTH company in the UK. Their numbers grew. They launched like a rocket because they signed up an English premium soccer team named of Manchester United, which along with the New York Yankees, are the top two sporting brands in the world. (Sky) got an exclusive on those guys and eventually on the league itself and it was a compelling enough product that they couldn’t keep the boxes and dishes in the stores. They just flew off the shelves. So, as the companies get larger and as the competition gets fiercer, I can’t see anything but more of this kind thing happening.
PL: Tom… your company has relationships with eight studios (for VOD)… and those are relationships you’ve developed over time. Have you encountered the exclusivity issue at all, do you buy their product on an exclusive basis that only you could show or how does that work?
TL: In our small world that would be a beautiful thing… The reality for us in our particular market we don’t have the scope, the breadth, the depth to have the type of exclusivity. Oh, we can have it, but we don’t have the dollars and support that unique experience.
So, we’ll… move it to our platform so that people can view it in a different way and a different experience. We’ll use things like taking a particular feature film and look for them to give us the alternate endings, the director’s cut, the bloopers, everything you shouldn’t have seen in the first version.
And we make more margin in those smaller pieces than we do in the original film. We try to differentiate in very small ways, so our exclusivity is slightly different but we don’t have the breadth and depth to go to a major studio and have something that is completely and totally unique. So, we understand that and try and work within that framework.
CF: I think it’s worth saying that exclusivity, of course, has been a fact of life in the OTA, specialty, and pay television environment for ages. So it’s not an unnatural concept. It has its pluses if you’re looking to differentiate product. It has its minuses if you’re looking for, you know, an ultra-competitive market place with new entrants.
PL: Well Michael, putting on the cable hat again, Chris’ company has the numbers with almost two million (subscribers) at Bell ExpressVu now.
CF: Closing in on 1.9 million.
PL: Cable still has very large numbers, but just thinking in terms of exclusivity – what is a concern to broadcasters is VOD exclusivity of first-run American TV shows. Is that a direction that could be taken by cable companies, or what would be wrong with that scenario?
MH: You know, if you get into an exclusive you have to start from the premise that it’s going to cost you a lot of money because you’ve taken the producer’s work and you say we’re going to offer it to a smaller audience than you’d get on an open platform. So, then you have to determine what’s the advantage you’re going to get from that. Let me just give you an example. We have a deal with Canadian Idol on our cell phones – where you text to vote.
We have that because it’s a great way to sell phones. So there’s a business case for that, right? If the cable companies want to try to get all the first-run U.S. TV shows, the problems you run into are it’s very costly – you’re starting to step into becoming much more of a content provider than you may want to given everybody’s becoming integrated, so you’ve got telephone strategies, wireless strategies, internet strategies, as well as the content end.
The other thing is you’re competing with established players: Broadcasters who have very deep relationships with the studio, and they’re not going to pay the studios the same amount of money for the main window if you’re devaluing that product by putting it into another window first. So there’s a lot of puts and takes there.
So I think for the most part, exclusivity is something that you use as a strategic tool, whether you’re trying to promote a bundle or sell cell phones, whatever. You’ve got to have a business case for it. With one exception. If you have a cable company that’s very integrated into broadcasting as well as distribution. Let’s take something like the Quebec market where there’s a lot stronger affinity towards Canadian production.
Then you do have a potential advantage by denying rights to your competitors to some of the product that you put on video and demand… Then you’re doing it for a different reason… (But) you get into interesting things where you get into self-dealing and that will become a particular issue when we start discussing funding – CTF funding going into vertically integrated companies: Will they have the opportunity to self-deal or exploit what’s partially public and other companies’ money to begin with.
CF: To Michael’s point I can confirm that we have lost a couple of niche, but popular niche pay-per-view products in the last 12 months in the Quebec market. So for our French speaking customers who aren’t just in Quebec of course, they’re right across the country, and I expect that will be an issue. And Michael’s absolutely right. I think a large part of the issue will wrap around the CTF.
PL: Incidentally, Chris, as a DTH operator, what’s your response to video-on-demand? Is it just a whole pile of pay-per-view and porn or do you have something else in mind on that?
CF: The present response to video-on-demand is push storage capacity – buffered storage capacity in our PVRs. We were the first company in Canada to launch PVRs and… our PVRs are considered by consumers to be the slickest currently in the market place, amongst the big players anyway. So there’s the buffered PVR approach and there’s also broadband Ethernet approach. So, I would expect the DTH companies in the States are exploiting the former currently and I expect the industry will in very short order get into the latter as well.
PL: In general terms, would you say that the broadcasters can take a deep breath and say BDUs will go after exclusive content on rare occasions where they want market differentiation but by-and-large they’re not going to get into the head-to-head competition on mainstream broadcast programming? Is that a correct analysis?
MH: I think the real opportunity is more of a partnership opportunity in using the VOD platform for creating additional windows for the linear programming – and even then taking the VOD technology and inserting ads for specific demographics creates opportunities: One, to increase the viewing of the particular program in a fragmented world; two, to compete with the PVR, where obviously VOD is going to produce a better revenue stream; and three, to generate more advertising revenues by using next-generation technology to segment audiences.
TL: The conversation so far, if I’m understanding it correctly, sounds like this is being driven by both technology and by the companies themselves. We can’t lose sight of the customer in all of this and I think that distributors will respond to what customers want. It’s crystal clear to everybody in the BDU business – and I’m sure in this room – that customers want more than appointment television. They want to take control of what they watch and when they watch it and that will be a huge influence on where the television viewing and distributors go over the next five to seven years.
Part II will continue next week.
