Regional ad losses offset by national gains: ACA

While time-shifting and on-demand programming are changing the way Canadians watch television, these personalized viewing options are also altering the economic structure for Canada's small-market broadcasters.As time-shifting gives Canadians greater choice as to when they watch their favourite TV shows, more eyeballs are watching out-of-market programming, which effectively renders many local advertisements useless and decreases the value and cost of local ad space.For example, if someone in Ontario chooses to watch an episode of Survivor on CanWest Global Communications Corp.'s Edmonton channel because it better suits their schedule, the advertisements they see for Alberta merchants are of no consequence to that viewer. It also means one more person out of reach of Ontario advertisers.CanWest director of regulatory affairs Jon Medline recently told Canadian Communications Reports that the impact of time- and station-shifting on the CanWest Global television network in 2006 alone was $36 million. It's a significant loss to be sure, but according to Bob Reaume, VP of policy and research at the Association of Canadian Advertisers, it shouldn't be viewed as an absolute loss for the broadcasters."I guess the complaint by the national broadcasters is ‘Look, we can't monetize this lost audience,'" says Reaume. "I don't agree with that....You can bet when the national broadcaster comes in and presents that show, that out-of-market audience is included in the full coverage. It's presented prior to negotiation, it's in the full-coverage audience, a price is negotiated and it's paid for." Essentially, that means that if a viewer in St. John's chooses to watch Survivor on Global Vancouver, Global's overall national viewership isn't affected.Reaume continues: "It's unfortunate because it's exerting difficulties on small-market broadcasters who feel that their local audience is being stolen away. But for the most part - not 100% - those small-market broadcasters are all owned by large national broadcasters, so their loss is the mother corp's gain."However, a recent Globe and Mail article focused on the potential confusion caused by regional ads airing out-of-market, another side effect of time-shifting. The article noted that viewers now see ads for promotions that don't apply or aren't available in their region.While this theory has some validity, it assumes both that Canadian TV viewers lack the intelligence to recognize they are watching programming from another region, and that confusion over the price of a cheeseburger in one province versus the next is causing serious headaches.The real issue is the broadcasters' loss of revenue, but the Globe seems to have misspoken when it noted that advertisers are united with broadcasters in finding a solution. Reaume says that while advertising agencies are having problems with time-shifting because it's more difficult to track the size of regional audiences, actual advertisers - companies that market and advertise their products and services - aren't feeling a substantial impact from time-shifting. So how are regional advertisers dealing with reduced audiences due to time-shifting? "Each client will have to determine what critical mass is for their particular situation," says Reaume. "If there comes a point where a regional advertiser is noticing that 35% of their audience is going elsewhere and that translates directly into a 35% increase in relative cost efficiencies, then yes, they'll have to do something about that." That being said, Reaume isn't against resolving the issue. Like many of the large networks, he says it's not a bad idea to look at having BDUs insert local ads into distant signals. In addition to balancing out broadcaster revenue, this would also eliminate regional ads on distant signals that amount to nothing more than wasted airtime. At the CRTC's conventional television policy review hearings in November, Ted Rogers, president and CEO of Rogers Communications Inc., argued that time-shifting was a good compromise in the on-demand TV world, noting that regional ads being viewed by out-of-market audiences are still better than viewers skipping commercials altogether with a personal video recorder. Rogers Communications, however, was unable to further comment on its position, or address the possibility of inserting local ads in distant signals, by press time.Broadcasters, meanwhile, have requested that the CRTC alter the rules regarding distant signals to either allow for local ads to be inserted or for the broadcasters to negotiate new rates from BDUs who offer time-shifting. Until a ruling is made, however, Reaume says broadcasters will have to continue to work with the current environment. "The commission in their wisdom allowed this to happen by granting the cablesystems permission to allow time-shifting and you can't put the genie back in the bottle," he says."I have a lot of sympathy for Lloydminster and Red Deer and some of the small markets where 60% of their local viewing is going elsewhere," Reaume continues. "But when it goes elsewhere it's kind of laddered up to the mother corporation and they're claiming it in their full-coverage audience, so maybe that's the cost of owning and running a small-market broadcaster these days."

Regional ad losses offset by national gains: ACA

Broadcast | April 5, 2007

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