Netflix, et al, changing the market
GATINEAU – The tipping point is coming.
That was part of the message delivered to the CRTC by Bell Media during its appearance before the CRTC for the company’s group license renewal. Thanks to new content buyers with global reach and enormous purchasing power, securing the rights to foreign content for Canada is getting ever-more expensive.
“Last May, we were in Los Angeles buying our foreign television content,” said Bell Media president Mary Ann Turcke to the commission panel. “There were three shows that we were bidding on and Netflix was the competitor – a competitor who put a global, first run and SVOD rights deal on the table even though these are shows that are coming into Canada on the U.S. networks.
“We were lucky to take two of the three shows. However, we paid a significant premium. The conclusion, therefore, is that Netflix was willing to pay more for the content even in a non-ad supported world. The global scale of these players fundamentally alters the monetization model in this country. It also begs the question whether the product we currently buy that is known as Canadian rights is going to become obsolete.”
Essentially, Netflix was seemingly willing to pay for the rights to all windows on content for Canada even though it can’t monetize live linear TV, for example, but Bell managed to outbid the big streamer – for at least one more year anyway. Now with Amazon directly in the mix, as we have reported, one wonders what will happen to the specific Canadian rights market and whether it will be overwhelmed by the newer global players. CRTC chairman Jean-Pierre Blais asked Turcke about that directly, towards the end of Bell Media’s appearance.
“In some context, it might mean no American content comes to Canadian broadcasters.” – Mary Ann Turcke, Bell Media
“We all see the same sort of pressure,” she said, referring to her fellow Canadian broadcasters, “and I believe we all agree on the reasons for that pressure… but I think I want to be more overt around what I see as not-a-distant future in terms of this notion of Canadian rights, and if there are six or seven global players at the table, what does that mean?
“In some context, it might mean no American content comes to Canadian broadcasters – and there are a lot of people who think that’s a good thing – but the fact of the matter is that content still comes in anyway (but)… Canadian advertisers won’t get access to that popular content that still supports a lot of the system.”
The tipping point on that is coming, but Turcke said it’s not possible to know when or how steep it will be. “We could be walking into that this May (at the LA screenings) – and it’s not going to be a binary switch that gets flipped, it’s just going to be picking around the edges a little bit and it’s slowly going to impact CTV Global and City as we go forward.”
So, one of Bell’s primary ways to fight back is original content – and not necessarily original Canadian content as is counted by regulations. That means original, critically acclaimed shows like Orphan Black, super-popular reality fare such as Amazing Race, both of which hit all the right traditional Cancon markers on TV, Letterkenny, an original on CraveTV and in-house productions like The Social; but also a show such as Frontier (pictured, about the early fur trade), made in Newfoundland in partnership with Netflix. Turcke said the partnership with Netflix is what brought former Game of Thrones actor Jason Momoa to the project, now airing on Discovery.
However, cautioned Bell broadcasting and content president Randy Lennox, the deal with Netflix for Frontier “is not the norm, nor is it likely to be. The fact is that these deals are difficult to achieve and I can tell you first-hand that the terms will favour global OTT players due to their scale and leverage.”
“Following the creative” to find hits and success was a theme the Bell executives touched upon throughout their morning-long appearance, be it scripted drama, reality, comedy or news. Of course, that means it is asking for the CRTC to remove or lower what it sees as existing hurdles – and to especially not place any new ones in the way.
So, for conventional television, Bell wants Canadian program expenditures set at 22% of the prior year's gross revenues – a level Lennox said “recognizes the precarious financial position of local stations.”
For discretionary services with more than one million subscribers, Bell said CPE should be set at 32% and spending on programs of national interest (PNI) should be standardized at 5%, which is the current level that Bell, Rogers and the former Shaw services are required to meet. Bell noted it has spent $650 million on PNI programming over the past five years.
“All of these proposals, unfortunately, harken back to a time where we’re talking about an industry that had a guaranteed rate of return, guaranteed carriage, restrictions for competition, limitations on foreign entities on entering the system.” – Kevin Goldstein, Bell Media
Other groups, such as the Canadian Media Producers Association, want group CPE kept at 30% and no changes in any licensees’ historical PNI. Bell’s TMN, for example, has a historical PNI requirement of 18%. Various other intervenors have made their own requests for new, raised or maintained conditions which should be placed upon the broadcasters, many of which ring similar to last week’s demands made during the French language TV broadcasters’ hearing. Vice-chair Judith LaRocque asked Bell about those sorts of requests.
“We have no guarantees in our business anymore,” responded Bell’s vice-president of regulatory affairs, content and distribution, Kevin Goldstein in response. “We have a radically changed environment in which we’re operating… Our competitors, both regulated and unregulated can compete with us on all fronts… and all of these proposals, unfortunately, harken back to a time where we’re talking about an industry that had a guaranteed rate of return, guaranteed carriage, restrictions for competition, limitations on foreign entities on entering the system.
“I think the reality of our proposals is we need broad flexibility. We need parity.”
Cartt.ca will have more on the intervenors, some of whom appeared Tuesday and continue to appear all day Wednesday, in our stories tomorrow.
