Broadcaster, October 2006
CAB New Realities
In the Struggle Between "Me Media" and "Mass Media," What's to Become of Canadian Media?
The technology explosion that has revolutionized content development and distribution is, and will continue to transform the landscape for the expression of creative voices and talent.
It wasn't so long ago that we lived in a society dominated by broadcast mass media operating with analog technology. And while mass media is still a powerful force, the universe is becoming more and more populated by narrowly targeted digital media offerings. In fact, we are now seeing references to markets defined as "the audience of one" which I prefer to call "Me Media". Hence, the title: In the Struggle between "Me Media" and "Mass Media," What's to become of Canadian Media?
I want to share a few thoughts, raise a few questions and hopefully spark your interest in an issue that is central to ensuring we continue to have a strong Canadian media industry for many years to come.
As our point of departure let's recognize the strong foundation we have in this industry.
For example we have twice as many indigenous television programming services per capita in Canada than in the United States. We have 80 years of shared history, of state-of-the-art infrastructure, second to none.
Broadcasting is not just another industry. It's an industry whose chief currency is relevance to Canadians, millions of whom vote with their remote controls, and their wallets, every day. And, according to Neilsen Reports, Canadians continue to do so in high numbers on a weekly basis.
Canada's broadcasters are a Canadian success story.
Canadian broadcasters are successful, but we are not complacent. And today's success is no guarantee of tomorrow's performance.
To build tomorrow's success we need to appreciate, in the deepest sense, where we are, how we got here, and where we are headed. We were willing participants in the CRTC Radio Review last May and we welcome the government's decision to embark on a comprehensive review of the television landscape to inform policy development. I am confident that government understands how long and hard it needs to think about the choices we face.
Understanding how we got here is the easier part.
Great as our heritage is, Canada is and always has been a country where sovereignty could not be taken for granted. Our impressive wealth in natural and human resources contrasts with our unique but continually threatened Canadian identity.
It was precisely this concern that inspired the legislators and stakeholders who laid the foundations of the Canadian broadcasting system more than seven decades ago. Like the visionaries behind other great initiatives - from the railroads and the Trans-Canada, to the St. Lawrence Seaway, and later, our own domestic satellite network - these individuals had a vision of a system that would deliver Canadian content over an infrastructure that Canadians owned and controlled.
And the model has proven to be flexible enough to evolve with incremental changes in technology. As change occurred, the paradigm was adjusted. And the outcome is significant: the Canadian broadcasting system produces thousands of hours of original programming in English and in French and billions of dollars for the Canadian economy every year.
But the sheer magnitude of recent fundamental change, as opposed to incremental technological change has shifted the paradigm in ways that could not and were not foreseen. What we now face are unprecedented challenges to the "old order". These changes will test our ability to ensure that the goals of Canadian cultural policy remain achievable in a new, asymmetrical universe, in which a regulated broadcasting system co-habits with a parallel, unregulated world - the world of broadband and IPTV.
Everybody understands this is happening, and is unfolding as we speak.
So what does Canadian public policy do when the living room of the Wayne and Schuster era explodes into multiple platforms and distribution channels? Downstairs, Mom and Dad might still be watching a great mass media product but Jessica, their 15-year-old daughter, is upstairs on her mobile device communicating with somebody named "Lucy in LA" who she found on YouTube.
Who would have thought Lucy, age 24, and Jessica, 15, would be active players in the new paradigm of the Canadian broadcasting system?
Well, they are.
If in the 16th Century we learned that contrary to previous notions the earth revolved around the sun, and in the 20th Century we learned that the world revolved around the consumer, in the 21st Century we are in the process of discovering that the consumer revolves around his or her Self, otherwise known as "Me." Tomorrow's audience is an audience of one and tomorrow's store front is the Internet.
The numbers help tell the story.
MySpace, where users post their own content to share with friends, commands a dazzling five percent of daily Internet traffic. According to AdAge, MySpace now hosts more than 106 million profiles, including roughly 3 million musical acts that post tracks online.
And then there's YouTube, where users post their home-made or copied video clips, which underwent 300% growth in usage in the first half of 2006. It currently boasts 100-million downloads daily and 20-million unique visitors each month, people like Jessica looking for people like Lucy while Dad falls asleep on the sofa.
But what is this new reality that is "Me", what I call "Me Media", and others refer to as, the "Audience of One".
* In this world, "I" want what "I" want when "I" want it - on whatever device "I" happen to be using; and
* "I" want it wherever "I" am.
"Me Media" have colonized an unregulated parallel universe, where, beyond the reach of government policy and the CRTC, they are stealing growth and competitive advantage from conventional, regulated mass media by the hour.
Meanwhile, Canadian broadcasters are required to observe static regulatory obligations, conceived when all media were mass media, and "Me Media" was a postcard.
Consumer behaviour is pointing away from current policy direction. Broadband has penetrated 60% of English-speaking households and 40% of French-speaking households. And it's this parallel, unregulated, broadband universe that is drawing more and more Canadian eyeballs.
Let's look at data gathered by Armstrong Consulting for the CAB:
* In Canada, 11% of the anglophone population and 7% of francophones downloaded a video in the past month, and with broadband penetration climbing every day, that number can only go in one direction: up;
* In fact when you drill down into the younger demographic, you will find that 25% of Canadian Internet users aged 12-29 have downloaded a full-length movie or TV show, compared to 16% of US Internet users of same age group;
* Three percent of mobile phones were video-capable in 2005 - but 90% will be video-enabled by 2008.
Other data from a Youthography survey recently filed by a numbed of telcos, indicates that among 9-23 year olds:
* 18% edit their own digital video;
* 20% write for a blog; and
* 21% manage their own website.
Meanwhile, as eyeballs migrate to the unregulated, parallel universe, advertisers are racing to meet them there. This is splitting the value chain, and in consequence, posing a serious challenge to Canadian cultural policy.
* Price Waterhouse is projecting slower growth, 1.9%, in Canadian TV advertising to the end of the decade. At the same time, they expect Internet advertising to grow at 18.8% over that period, albeit from a smaller base.
* Online advertising within the US increased from $9.6 billion in 2004 to $12 billion in 2005, for 23% growth in one year.
* In March 2006, US advertisers bought 185 billion display ads on the Internet, double the amount in the same month the previous year.
* And while the Internet accounts for 14% of all media use, it still accounts for only 4.3% of all ad spending. A correction - upwards - is inevitable.
Broadcasters aren't sitting on their hands - they are actively engaged in this transition. They are aggressively seeking new sources of revenue from existing content, and developing new content for new services. Everywhere you look, broadcasters are cutting deals, launching innovative ventures, and making advances in the delivery of content across the multiple platforms that new technologies have made possible and there is much success to report.
Just as a sampling:
* CanWest MediaWorks and Rogers Wireless have launched the first media player to deliver content for the ubiquitous BlackBerry. Called "bbTV" the service offers Rogers Wireless customers clips from Global News, Global National and the Financial Post as well as daily sports information from Rogers Sportsnet;
* CTV has launched the CTV Broadband Network, with a premium broadband player offering access to full length CTV programs on four different channels. The company is also offering made-for-mobile CTV and RobTV news channels;
* CHUM has announced that it is making full episodes of "VJ Search" available for podcasts;
* Corus is offering advertisers a Do-it-Yourself ad creation service to create advertising content for Shaw Cable television listing channels;
* Family Channel has announced that the new series "Life with Derek" will premier on-line for two days before it is distributed on the broadcast channel;
* Astral will begin to offer HD on its eight French-language services in Fall 2006;
* SUNTV simultaneously launched "Canoe Live" on-line and on its television station in Toronto;
* Alliance Atlantis has launched new programming for teens on BBC Kids, backed up by a multimedia campaign combining viral, street, print and on-line initiatives.
These initiatives are the cross-walks that are bridging the divide between mass media and 'Me Media', but they aren't the solution to all of the challenges we, as an industry, face in this new landscape.
The most obvious challenge is cost. $8-10 million to upgrade a TV station to HD, $2-3 million per specialty. While these online and mobile content offerings extend our relevance into the personalized media market they will not offset the investments in broadcasters' physical plants required to go HD.
Another obvious challenge is adapting a mass-media programming model to a 'Me-Media' marketplace. "The Canadian audience" is becoming many "audiences of Canadians." They can watch different shows, on different devices, at the same time. There is little, if any, homogeneity left in the Canadian broadcasting marketplace. Different segments of the population are using new and existing media in different ways. People don't always use technology the way we expect them to, and programming no longer needs to resonate within the mass-media market for it to be viable.
Which brings me to programming rights. Canadian broadcasters are experienced and very successful content marketers, which means we are better positioned than anyone else to extend Canadian content into new media platforms, fostering a Canadian cultural presence in the new unregulated space.
Of course, for these mobile and online offerings to work, we need access to the necessary rights. There are a number of views about who should hold which rights in the unregulated media space. As broadcasters, we maintain that if content is to be leveraged across new platforms, these rights should not be unduly parceled off, or sold to multiple parties in the same territory. It simply makes no sense to compete with our program suppliers for audiences in the same market, with the same program.
Some might suggest we have the elements of a nearly perfect storm: as costs rise, as earnings slow, and regulation remains inflexible and removed from the ways in which people are consuming content, broadcasters are playing with one hand tied behind their backs. Although change may eventually render the broadcasting landscape unrecognizable, existing policy requires that regulators continue to make their decisions based on yesterday's framework.
Furthermore, the CRTC bases its decisions on broadcasters' productivity curves over the previous seven years, but past performance is no longer an accurate indicator of future success.
The Commission is known to regulate based on facts, and we are reminded "there are no facts in the future." Well there may not be any facts in the future, but there is one incontrovertible reality:
* The old economics of broadcasting in which a restricted number of players served large audiences in an appointment-based model is being turned on its head, with an ever-increasing number of players serving an ever more fragmentary audience, increasingly, in an unregulated space.
Yesterday's regulatory expectations were built on assumptions that the broadcasting system would yield large audiences for a limited number of players. Tomorrow's, must be based on the reverse. Yet even the most recent CRTC pronouncements continue to operate, at least in part, on yesterday's assumptions. If the going-forward objective is putting Canadian content in front of Canadians, then our policy apparatus must be sharply re-oriented.
So, what is to be done?
Well, first, let's recognize that this is not the apocalypse. But when you put your ear to the ground, there's an unmistakable sound of horses' hooves. There are messages here, and we had better read them and make our choices. Doing nothing is not an option.
Let's also recognize that we no longer live in a world of telecommunications and broadcasting silos. Those walls came down awhile ago. When you can watch MTV, World Cup soccer or even pick up satellite radio on your Treo, Blackberry and cell phone, there are no more silos. If you haven't already checked it out, when you get back to the office, take a look at the unregulated audio streaming possibilities offered by Pandora.com. And after you do that, ask yourself if it makes any sense for the CRTC to continue to regulate commercial radio based on traditional concepts of adding quotas and increasing spending requirements?
The current policy regime assumes new distribution technologies will conform to existing rules and operate through gates and within walls. History shows us they don't.
A technology whose time has come will not be stopped by unenforceable rules.
Sirius and XM were licensed to provide satellite subscription radio services. Fast forward one year, and there are half a dozen applications in front of the Commission to extend the distribution of their services to cable and other distribution platforms.
IPTV providers are licensed on the assumption that they are simply cable companies with newer pipes. Yet already we hear calls for regulators to get out of the way and let IPTV "maximize its potential" - in other words, to reflect a borderless IP environment. How long before regulated IPTV providers morph into unregulated content providers?
And perhaps most obviously, who would have thought that cell phones would become the multi-functional - multi-purpose devices we have today?
All of these examples serve as reminders that we cannot be complacent.
So, the first priority must be to develop a holistic view of the system. And we can - by setting clear goals and giving thoughtful consideration to consumer demand, market forces, and ultimately focusing on what's best for Canada. You can't make changes to one part of the system without affecting all the others.
Next, we have to recognize that once audiences are blown up into fragments, it's going to be a challenge to re-aggregate them. The changes we are witnessing are fundamental and irreversible. But while they may be disruptive, there is no need to throw our hands up in resignation and forfeit the achievements of the last many decades.
I firmly believe that, fundamentally, the principles that have guided the development of the broadcasting system have enduring value. A sense of community drove the architects of the Canadian broadcasting system, and a sense of community is its enduring strength. In an age of globalization we share a common hunger to reconcile the disparate fragments of a world of infinite possibilities and choices with the very finite world of the neighbourhoods we call home, the schools that educate our children and the pavement under the soles of our feet.
Broadcasters - and more than anything else, local broadcasters - bring these threads together and achieve this reconciliation. Local broadcasters provide a focal point for communities, and the homes and offices and yes, mobile devices into which they reach are brought together by that very commonality of experience like beads on a necklace.
If you ask Canadian audiences, they will tell you as much. But the distractions of the parallel broadband world have made local broadcasters among the most vulnerable links in the chain of Canadian communities. We face the very real risk that the broadcasting system we take for granted may falter due to lack of proper policy attention today.
I have mentioned the need for a holistic view as one priority. But overriding even that is the need to make conscious and deliberate choices to prioritize and preserve what's important to us as Canadians. In the struggle between "Me Media" and mass media can we ensure there's still a place for Canadian media?
I believe, emphatically, we can. What's more, Canadians want us to. To succeed in this new environment, two essential measures are required:
* First, Canadian entrepreneurs and Canadian companies must be encouraged to grow and multiply media streams featuring Canadian content; Government policy must continue to recognize that given the size of our domestic market, a "pure" market forces driven policy will not enable the growth of Canadian media; and
* Second, existing government agencies and their programs must be adapted to the new digital environment.
Canadians expect, and ultimately need their media universe to continue resonating with Canadian stories, told in Canadian voices, music and images that reflect the Canadian experience.
We owe it to ourselves and future generations of Canadians to energetically meet these challenges with fresh new ideas and meaningful solutions.
From Remarks Prepared by: Glenn O'Farrell, President Canadian Association of Broadcasters
For Presentation to the: Broadcast Executives Society Toronto, ON September 21, 2006Table of Contents
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