Harnessing Change: The Future of Programming Distribution in Canada

From: Innovation, Science and Economic Development Canada

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

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 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. Two thirds of Internet data usage on fixed networks is to consumption of video and audio. One third of mobile networks.

The growth of broadband Internet is impacting how we consume content. Traditional TV and radio usage 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.

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.

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.

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.

Given these market insight, we have taken a look at the future viability of program distribution models.

We have classified each model into three broad categories: growth, mature and decline.

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.

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.

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.
  • 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.

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.

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