Harnessing Change: The Future of Programming Distribution in Canada - This report, prepared by the CRTC, offers context, in preparation for a review of the Broadcasting Act and the Telecommunications Act.
Transcription — Harnessing Change: The Future of Programming Distribution in Canada
Hi I'm Sheehan Carter and I'm Mark Allen we would like to tell you about our report Harnessing Change: The Future of Programming Distribution in Canada The CRTC was asked to examine the future of programming distribution in Canada and the extent to which it will support a vibrant domestic market for audio and video content that will remain competitive in the new global environment.
The report offers important context, in preparation for a review the Broadcasting Act and the Telecommunications Act, by painting an empirical research-based picture of the current market and where it appears to be going.
The framework for analysis was divided into four parts. Where the market is going. What impact it has on business models. How both opportunities and risks are emerging. And lastly, what types of legislative and regulatory changes Canada could need to face the future.
The market is changing as a result of the growth of the Internet, which clearly has become essential to Canadians for all number of daily activities. However, it is important to point out that the growth of broadband Internet – faster speeds, more data – is overwhelmingly driven by video and audio consumption. 2/3rds of Internet data usage on fixed networks is to consumption of video and audio. 1/3rd of mobile networks.
Slide 5 - The growth of broadband Internet is impacting how we consume content. Traditional TV and radio usage is still high but, is declining as Canadians watch and listen to online services. This trend not as advanced in the French market as the English, but it is equally evident. Slide 5 - Is the trend in total viewing to traditional and online TV in Canada the top lines are traditional TV both English and French and you can see that they are starting to decline. The bottom are viewing to online TV, one for English and one for French and you can see that they are growing.
Slide 6 - Broadband Internet is having a positive impact on the economics of the telecommunications sector, but it is also disrupting the economics of the media sector which makes important investments in production and promotion of content. Consumer spending on subscription for Internet service now far outstrips content, for example.
In both size and growth advertising which is another major source of revenue is also shifting for media services that support the creation of content to digital services that help consumers find and share. Slide 6 is a linear trend of subscription revenues for internet access and for content subscriptions. The top line is internet access both fixed and wireless and you can see it's grown from 12 Billion to over 18 Billion in just 5 years. The bottom line is content services including traditional services like cable and satellite radio cable TV and satellite radio and online services like Netflix and Spotify that grew from about 8.5 Billion to just over 10 Billion in five years so the trajectories for internet access and content subscriptions are very different.
Slide 7 - The Competitive Landscape in Canada is adjusting to presence of global online providers that leverage investments in content, data analytics and user experiences on a global scale with new business models. Slide 7 is a map indicating where Netflix and Spotify operate around the world.
Slide 8 - We are living in an era of an abundance of content but the economics of creating content still favour large markets, even in the digital era. A vibrant Canadian market will continue to need public support to ensure the creation and promotion of Canadian and local content. Slide 8 - is an illustration of this size of various countries population and the size of their television market. In the upper right hand corner is a very large bubble of America which is ten times the size of Canada but it's TV market is twenty times the size Canada and other countries are in the bottom left hand corner and are much smaller.
Slide 9 - Given these market insight, We have classified each model into three broad categories: growth, mature and decline. Slide 9 is a curve indicating the various stages of adoption, including growth at the beginning mature in the middle and decline at the end.
Slide 10 - Online audio and video models are clearly growing revenues, audience and making significant investments for the future in content, data analytics and user experiences. Mature models are seeing some erosion in revenues and audience, but remain profitable and we envision they will be able to adjust their businesses to remain viable. Radio (AM/FM, satellite) and traditional subscription TV (e.g. cable TV) are in this category.
Some models are in decline and we envision they will not be viable in the future. Conventional TV broadcasters have been unprofitable for some time and are unlikely to remain viable without fundamental change. These services are notably the cornerstone of the Canadian TV system given their high level of support to local news and Canadian entertainment. Slide 10 maps the future viability of program distribution models against the stage of their development growth mature and decline. Online audio, online video and user uploaded video are in the growth category; satellite radio, AM FM radio, cable satellite and fiber TV services are in the mature category. Conventional TV and transactional online audio are in the decline category.
Slide 11 - Taking into consideration all the evidence before it, the CRTC concluded that any future legislation, policy or regulation of content should be founded on three principles.
First, its primary objective should be the production and promotion of content by and for Canadians. Whether content is produced for television, radio or online, it needs to be supported. Even the best content cannot be successful if it is not promoted to and made discoverable by Canadians and the rest of the world.
Second, the current approach is focussed on traditional services such as cable systems and TV and radio stations. New approaches need to recognize that many Canadians already make use of online services to get content. These new online services draw significant revenues from Canada and in some cases make important contributions but neither their roles nor responsibilities are recognized. All services, new and traditional should make contributions to Canada and while these contributions do not need to be identical they should be equitable.
Third, future legislation and regulation must be flexible enough to adapt on the fly to changing circumstances. If it is overly rigid or directed solely at the today's environment it will be unable to fully meet the needs and challenges of tomorrow.
Slide 12 - Although there are a number of possible ways forward, the CRTC suggested two specific options:
The first of these is a restructured funding strategy. This would mean either consolidating or aligning the contributions made by government to various funds so that they work together in the most efficient and effective way. It would also mean redistributing some of the contributions made by the private sector. Right now, contributions to funding come only from traditional distributors like cable and satellite systems. If others sectors that benefit directly from the content produced, such as Internet and Wireless service providers, contributed a very small part of their revenues, the contributions of traditional distributors could be reduced and there would be substantial and sustainable funding for content going forward into the future. Slide 12 shows an interactive tool that's included in our report. It shows the total Canadian content production of 4.6 Billion and allows users to see what happens if more Canadian subscribers decide for example to cut the cord.
Slide 13 - The second of these potential options is the replacement of the existing licensing system with a more flexible type of regulation we called Service Agreements. The service agreement approach outlined in the report would be a way to ensure that all players are subject to binding obligations arrived at in a public process but would also grant access to certain benefits that would incent each service or group of services to participate and contribute to the system in appropriate ways. This approach is also intended to be more adaptable to future changes than the current licensing approach and to reduce administrative burden for all players.
In addition to those options, the CRTC also proposed certain national strategies that the government should consider as well as certain short and medium term interim steps that the CRTC could take to begin the transition to new approaches to policy and regulation. Slide 13 includes a visual depiction of various new and emerging business models in our online world today. These include YouTube, Netflix, Amazon, music streaming services and search and social platforms.
Slide 14 - That concludes our summary of the Harnessing Change report. Thank you for your time in watching this video. We encourage you to take a look at our report yourself on our website at www.crtc.gc.ca. The report includes a number of interactive tools and graphs intended to let you explore the data yourself and come to your own conclusions.