Broadcasters still pondering: To license, or not to license, to Netflix

If viewers of Netflix Inc.’s Canadian streaming service are in the mood for a Canadian show, they might find their selections pretty limited. Not counting children’s content, viewers can choose from CBC/Radio Canada series like Dragons' Den, Mr. D, Cracked, Heartland, Being Erica and Camelot, though not too much more than that. Independent broadcast consultant Kelly Lynne Ashton said Netflix’s Canadian TV content primarily comes from CBC because that content is not owned by a broadcast distributor like Shaw Communications Inc., which owns Global TV, or BCE Inc., which owns Bell Media and CTV. “BDUs , which own Global and Bell, they’re not licensing their content to Netflix because they see them as a competitor. They don’t want to lose BDU subscribers,” she said. “It’s not that the content is not good enough, and it’s not that the audience isn’t interested. The audience wants to find those shows on Netflix. They want one place to go, to be able to see shows if they’re not on broadcast ,” she said. The question for major broadcast distributors and broadcast companies is whether licensing their content to Netflix will cannibalize their traditional revenue streams, or complement them with additional revenue. Netflix doesn’t disclose the total number of movies and TV shows it has available in Canada, though 2012 data complied by iStreamGuide.com for Canadian Business Online showed a total of 2,647 titles, a count that includes 362 TV series (as opposed to TV episodes). On Monday, the Netflix’s “Canadian TV shows” section showed a total of 29 titles available for viewing. That number included children’s programming, though not every Canadian show available on the service, as CBC’s Mr. D and Camelot were not shown as options. Ashton pointed out that, aside from CBC shows, some Canadian shows broadcast on Comcast Corp.’s SyFy channel are also available on Netflix. Neither BCE’s Bell Media division, which owns the CTV network and several specialty channels including The Comedy Network, Space, and Fashion Television, nor Corus Entertainment Inc., which owns a stable of specialty channels including YTV, the Oprah Winfrey Network Canada, and Food Network Canada, license content to Netflix. Scott Henderson, a spokesman for Bell Media, said in an emailed statement that the company does not currently license any of its original, Canadian content. Bell has said in the past that it planned to launch its own TV Everywhere services that could compete with online, foreign competitors like Netflix, and introduced its first TV Everywhere service, Bravo GO, over the summer. Corus licenses its Nelvana children’s content to Netflix where it operates outside of Canada. In the U.S., unlike in Canada, attitudes toward Netflix may be changing as major broadcast companies experiment with licensing content to the online streaming service. Ashton said U.S. broadcast distributors initially established streaming service Hulu to compete with Netflix, though she pointed out some of them are now in negotiations to make the Netflix streaming service available through their set-top boxes. “I think they tried to set up competition, and now they may be seeing it as more as a help than competition,” Ashton said. “It’s still early days in the States, even. They’re still experimenting.” She said “it certainly has not happened at all here, and I think they’ll be watching what happens in the States to see if that’s something they need to consider.” Making content available on Netflix appears to have had mixed results on ratings. Last month, season catch-up viewing on Netflix may have led to a significant ratings rise for the season finale of AMC Networks Inc.’s Breaking Bad, according to industry speculation, while an analysis by Sanford Bernstein this fall said the Cartoon Network’s viewership dropped after its content was made available on Netflix. Michael Serafini, senior director of content planning at CBC Television, said he doesn’t think “anyone has found that magic formula” on how licensing content online correlates to ratings. “I think there’s a lot of information out there that is speculative, like the Breaking Bad story or the Cartoon Network dropping,” he said in a phone interview. Serafini said part of the reason CBC licenses its shows to Netflix is that its role as a public broadcaster is to make its programming available “wherever Canadians are,” which includes CBC.ca, iTunes, and cable companies’ video-on-demand platforms. CBC decides what to license by looking at what is popular on a given platform, Serafini said. “On Netflix we know they like the darker serialized dramas, which is why Cracked was put up there and Camelot was put up there,” he said. He said making CBC content available on platforms other than its own allows the public broadcaster to expose its content to more viewers. “Does that translate to TV ratings? Not necessarily, but it does make sure our content is being watched and consumed the way we want it to be,” he said. Serafini said he doesn’t think the industry will figure out, anytime soon, how licensing to a platform like Netflix can help or harm broadcasters. “I do think you’ll see a lot of experimentation, and I think the viewers will help us decide as well. If they’re consuming content in different ways, we just have to make sure we’re getting in front of it so its available on those platforms,” he said. Ashton said Netflix can be a force for good, and a platform broadcasters can use to help build an audience and catch-up viewing on missed shows. “But because the broadcasters are owned by the cable companies, by the BDUs, I don’t think that’s going to happen,” she said. She said there are a number of TV series, such as Justified or Homeland, or British series like Luther and Sherlock, that were discovered by viewers on Netflix who then went to look for them on television. It’s difficult to find data to support the phenomenon of a Netflix ratings bump because the online video provider doesn’t publicly release its viewership numbers, Ashton said. Tony Wible, an analyst at Janney Capital Markets in the United States, is less optimistic. While the studios are increasingly “hooked” on the licensing cheques they receive from Netflix, the over-the-top TV provider is also “causing irreparable harm to the TV ecosystem,” he said in a phone interview. “While a lot of networks may look at the good side of Netflix—for instance, looking at a TV series like Breaking Bad and pointing out how it helps to build an audience—the reality is, somebody has to spend many, many hours on Netflix to even get to that point,” he said. Wible said he believes putting content on Netflix hurts ratings. “Many will deny it, but I think there’s clear evidence that we’ve seen that’s the case,” he said. He referred to his analysis of viewer data, comparing those who watch Netflix and those who don’t, which showed Netflix viewers tend to watch more traditional TV than non-viewers, though the amount of traditional TV they watch started falling after 2012. “Now they are watching disproportionately less TV than they were back then,” he said. “At some point, if this trend persists, one could argue that Netflix viewers will watch less TV than a non-Netflix viewer.” Ashton said she doesn’t think the lack of Canadian TV content on Netflix is an issue that is on the CRTC’s radar, though if consumers bring it up, it may become a subject for discussion in the regulator’s “conversation with Canadians” on television services, which starts Thursday. The CRTC has previously taken the position that online broadcasting services are complementary to traditional broadcasting. It held a consultation two years ago on over-the-top services like Netflix and Apple TV—which remain unregulated and do not face any Canadian content requirements—and opened a “watching brief” on the issue. Last year, the regulator cancelled a follow-up consultation on the impacts on online competitors, concluding that “over-the-top programming services have not had an impact sufficient to warrant another fact-finding exercise at this time.” Ashton said the CRTC has allowed for more vertical integration and consolidation between TV providers and broadcasters largely on the basis that the companies needed to be bigger to be more competitive. “Now the Canadian consumer doesn’t have choice for Canadian content on that platform, because of vertical integration,” Ashton said. “I think the CRTC, which caused that situation, has to take some responsibility to step in and do something to try to fix it.” Joris Evers, a spokesman for Netflix, said by email that the company chooses a mix of content, “picked and licensed for the local market, that offers a local, international and Hollywood titles.” With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Simon Doyle at sdoyle@thewirereport.ca

Broadcasters still pondering: To license, or not to license, to Netflix

Broadcast | October 23, 2013

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Broadcasters still pondering: To license, or not to license, to Netflix

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