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 three weeks ago.
As we noted in part one last week, the great big elephant not in the room was a cable company. 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 (and former head of the Canadian Cable Television Association); Tom Laird, general manager, digital interactive video, SaskTel; and Julia Keatley, of Keatley Entertainment, which currently produces the show Godiva for CHUM.
The group covered a different range of topics in the second half of their discussion, concentrating heavily on Canadian content, the North American rights market, VOD, the effect of disruptive technology, opportunities broadcasters are missing and what it all may mean for carriers, broadcasters and producers in the future.
What follows is part two of an edited transcript of the discussion. Part one appeared last week.
Peter Lyman: This is about the time that people get a bit glazed over, so let’s get some floor intervention, which is always welcome
Audience Member: We haven’t heard very much about Canadian content… do you see a place for true content creation and what is the consumer demand for that?
Chris Frank: Without sounding condescending, let me tell you that our company’s philosophy is that Canadian content is… don’t laugh, Michael…
Michael Hennessy: I’m representing the cable guys.
CF: One of our key principles, our key motivators, is Canadian content is our point of product differentiation. Take that to a logical conclusion: If we didn’t have Canadian content, if we didn’t appeal to Canadians, what would be the difference between ExpressVu and Direct TV or EchoStar? That discussion inevitably goes to an open skies discussion and the removal of the bifurcated market between Canada and the U.S. and we become an integrated market and everyone watches what they want… which is going to happen soon enough anyway.
Canadian content is very important and we certainly have as much as we can acquire, as much as we can reasonably sell on pay-per-view and our plans for our VOD. As far as the NHL’s concerned, we have all of the Canadian teams now providing pay-per-view hockey product to us. Outside of the Toronto and Montreal market place, that’s very good for hockey fans because those games wouldn’t get to market otherwise.
I agree with Michael that exclusives are going to cost a lot of money, they’re going to be strategically surgically used, it’s not going to become all-pervasive. OTA, specialty and pay services, as far as I can see in the future, are going to continue to be an integral part of BDUs’ offerings. They may change somewhat as we get significant pressure from broadband and over the top broadband on regulated distributors, but it’s metamorphosis, not a revolution.
MH: I think there’s a huge opportunity for Canadian content. In spending two years on the CTF board, I gained a lot of respect for the quality of content that’s being produced through organizations like the CTF and I think the skills that we’re developing in Hollywood North, combined with the creative talents in terms of writing have done some tremendous stuff but … it’s very hard to market it – just in terms of the financial structure in this country.
VOD provides a huge opportunity for people to get people to get to know a Canadian series before it disappears because it not only allows you to pick the time you want to watch it, and allow word of mouth to create a more viral affect around the shows, but also creates a counterpoint to PVR in that once again you’re putting it in a box where there’s an opportunity to monetize the product.
Now, part of the problem may be in a lot of the licensing deals and the way they go down – you know the producers don’t necessarily end up with the VOD rights by the time they manage to get a license fee out of the broadcasters to go on air. But it’s in the interest of the broadcasters, too, if they’re selling advertising, to create more windows for the Canadian product because they, just like Chris said, the broadcasters need to – and I think they’re starting to understand that a lot more – they need to have Canadian product to differentiate themselves or they’re dead.
The one thing that that’s going to happen with this new technology is that the broadcasters that are sort of floating along on the edge, that never really built, spread loyalty or have strong support, but sort of float along in packages are going to be crushed by the increasing interactivity in on-demand aspects of the network.
Tom Laird: Or to put it another way, have built their brand and built their ratings and their profitability on the back of inexpensive U.S. programming. If there isn’t more differentiation, more allegiance, more brand awareness of Canadian shows, I think Michael’s absolutely right, people will find another way to get what they want and that means that we’re going to lose some eyeballs.
MH: What was the audience for Intelligence, maybe 300,000? Awesome show. If that was on VOD as well and people start saying we really should have seen this from the beginning, because a lot of these shows need to be seen from the beginning, then there’s less chance at some point somebody at CBC is going to pull the trigger like they did on “This is Wonderland” and kill something that’s a great Canadian show.
PL: These are good points. Astral said yesterday that ReGenesis and Slings and Arrows scored very well compared to other VOD offerings, so there was some demonstrated proof of that… What about the potential partnerships with broadcasters? Is it going to be that the BDUs will have a direct relationship in acquisition or developing content… or is there a role for broadcasters to come in with their brand, their programming, their advertising through a on-demand system like VOD?
MH: We’d love to have a lot of CTVs programming on demand. Anybody’s programming that is, you know, popular in the mainstream is an enormous opportunity to put online and it’s a lot easier for us if the broadcaster, who has all the relationships, uses those to get the rights to do that. That’s a win-win situation.
But if you want to do exclusives, using movies as an example, there’s no reason to go to a Canadian pay TV licensee and say "can you get us movies?" when you can go directly to the studios to do that.
But there’s a whole bunch of relationships that the broadcaster controls… The studios have big relationships with CTV and companies like that that provide them with enormous revenue streams so it’s not in their interest to turn around and give away rights which in the short run aren’t going to draw a lot of money and will screw with your best customer.
So there’s great opportunity. Broadcasters in this country are not threatened by opportunity. They may be threatened by not seizing the opportunity because it’s sometimes hard to see the business case – and the current regulatory system tended to allow returns on anything within six months to a year, and that’s not the way a lot of the future is going to play out.
But the opportunity is huge and anybody that’s worried about the future of broadcasting doesn’t understand the future of digital media.
CF: It’s kind of like high definition: Don’t necessarily think offense, think defense. If you want to maintain your business you’ve got to exploit these new technologies and these new opportunities. It has ultimately turned to offense, but if you can’t see an immediate business case for it and you don’t invest, you do so at your peril.
I would point out one particular issue that we find annoying and the other distributors on the panel may find a difficult proposition, too, and that is the increasing frequency of broadcasters to put prime product live on the Internet and not charge for it. From our prospective, that devalues the product and to paraphrase from a few minutes ago: "there’s no business case for that."
PL: With that being said, it opens up another issue, but, gentlemen.
Audience Member: How will things like Apple TV and other (such units) affect your business and does that mean there’s going to be a time when in Toronto I will be able to buy my television from Shaw or Telus or SaskTel and there are regulations rolled into that. But how does that affect broadcasters? Is that something you guys would do… starting to offer your services across the country?
TL: I think that’s available now with a Slingbox. As far as I know, there’s no Canadian television for a game between Ireland and England tomorrow from Dublin, but you can certainly watch it off a Slingbox through which you can definitely watch it from Europe.
Audience Member: But are you guys going to do that type of distribution in Canada? Why would I have to go out and buy a Slingbox?
MH: Well, I think the answer is no… To take Telus TV which is a licensed, managed entity and lift it up and drop it down in Toronto on a broadband platform. We have all kinds of rights issues that would blow up in our face.
Audience Member: What happens when Apple TV comes in? Is that a threat to you? Or what happens when someone like Viacom because of its expertise, comes up and says well, here’s my own box?
MH: To be honest, Viacom won’t do it that way. Everybody at the end of the day, whether you’re a broadcaster or broadcast distributor, are in the business of aggregating content and putting secure boxes around the content to derive value for your business. So if you go into the game and you start to pirate it into another territory whether you’re a big brand or a new IP player, you’re going to bring down, you know, thunderstorms from Hollywood. You can’t do that. There are limits to what you can do in terms of blowing up the model.
You don’t want to blow up the model because it’s your business.
Audience Member: You don’t want blow up the model. I’m sure there’re lots of companies that would want to blow up the model.
MH: Well, of course. And there are threats there. But even take Google. It is already running into all kinds of rights issues with YouTube because people that own the properties want to have those properties monetized. When Google gets its act together and says okay, I’m going to use my video search engine that they’ve been building to build the greatest VOD library in the world, and I have a system here so that all the rights holders are compensated, that’s a huge threat.
That’s an enormous kind of thing, but they still have the next problem which is they’re going to be streaming a lot of this stuff on the Internet and streaming of mass entertainment is still a very economically inefficient way to deliver
Audience Member: I’ll disagree with that.
MH: You may disagree, but you’d be wrong. [laughter]
Audience Member: My point is that when Apple TV turns around and sells me a TV shows on their iTunes system and I watch it over the Apple TV box, you can’t stop it. It’s happening already, so when you say you’re not going to do it, I’m very confused.
MH: You’re talking about two different things. What Apple’s doing then is they have bought the rights whether it’s, you know, wireless rights or whatever for that television program say from Viacom or whoever and they’re delivering that program to you. So they have the rights to do that. We don’t have the rights to take a broadcast distribution system, stick it up on the Internet – I mean you’re dead right there in terms of what you’re doing – and then deliver it somewhere else.
TL: Another cut at that question is that those are come of the competitive pressures we face. Michael’s absolutely right when he says there’s unlikely to be rights anarchy because that’s going to affect way too many businesses. It’s a very complex rights market out there.
We’ve just seen a court case where one Canadian BDU who doesn’t have the NHL’s out-of-market rights effectively disseminated hockey games out of market and a court injunction was sought and gotten and they’re not doing it anymore. So, there’s where the rights holder, in this particular case a Canadian specialty sports channel – who was in danger of losing that programming from the NHL – stepped in and said we can’t do that and got a court order saying no.
There is an orderly rights market. It will evolve… Maybe in the fullness of time there will only be one rights market in North America, who knows? But as Michael said, without an orderly rights market, people can’t monetize their product. If they can’t monetize it, why create it? They don’t create it for their own personal enjoyment unless it’s a local community television. This is all being produced to make money.
