Connectivity beats content in telecom/media sector: report

The notion that "content is king" is challenged in a new report that points out that connectivity services take in significantly more revenue than content providers in Canada and have seen more growth in recent decades. The Canadian Media Concentration Research Project, led by Carleton University communications professor Dwayne Winseck, released on Tuesday what it said was the first in a series of reports that analyzes trends in the entire "network media economy" in Canada between 1984 and 2014. It looks at everything from content such as TV, radio, newspapers and magazines to network services including phone lines, mobile services, Internet and TV distribution. The report showed revenue for all network and media businesses in Canada in 2014 was $75.2 billion, which was 3.9 times the $19.4 billion it had in 1984. The figures were not adjusted for inflation. The biggest portion of that amount came from what the report categorized as "platform media," including phone services, Internet access, wireless service and television distribution. That totalled $54.8 billion in 2014, the report said, which was four times the $13.8 billion it was worth in 1984. Content providers saw revenue of $20.4 billion last year, representing a multiplication of 3.6 times over the $5.6 billion it had in 1984, the report added. "If Content is King, Connectivity is Emperor," the paper stated. Using figures from the CRTC's recently released communications monitoring report, the research directed by Winseck showed how mobile services are the biggest part of the connectivity industry. It had $22 billion in revenue last year, almost 70 times the $321 million it was worth in 1984, the report said. Internet-access revenue was $8.9 billion last year, up about 37 times from $239 million in 1996, the earliest year for which such data was given in this paper. The report recorded revenue from IPTV services as early as 2004 at $8.3 million and said it increased by almost 200 times to $1.6 billion by 2014. Looking at cable- and satellite-TV services separately from IPTV, the report said this sector saw $7.3 billion in revenue last year, down for a third-straight year from a peak of almost $8 billion in 2011 but still up more than 10 times from the $716.3 million it had in 1984. Landline phone services saw $15 billion in revenue last year, down almost 30 per cent from a high of $21.2 billion in 2000, the report said. Michel Arpin, former vice-chairman of broadcasting for the CRTC, said the idea that "content is king" has been around since the Fowler Commission on broadcasting in 1950s, though he added in a phone interview, "Over the last 50 years, it may have moved toward connectivity." Still, Arpin said when you look at the investments companies such as BCE Inc., Roger Communications Inc., Shaw Communications Inc. and Quebecor Inc. have made in content, it's clear there is much value in it. He said a main feature of content is how it can be used to sell connectivity services. " claim that to be successful with their hardware, they must have content," Arpin said. "The users, the consumers, the viewers, they're not buying a piece of hardware; they're buying the content that comes through a piece of hardware." The report cites growth in IPTV services — which is now subscribed to by 15 per cent of Canadian households — as evidence that cord-cutting is not as significant a trend as some think. "While many claim that widespread cord cutting is hurting the cable television industry, almost all of the losses to cable and direct-to-home satellite TV providers have redounded to Telus, Sasktel, MTS and Bell’s IPTV services," the report said. One subheading in the report is titled, "The Rumoured Death of Television in Much Exaggerated." It showed that revenue among Canada's conventional-TV broadcasters of $3.1 billion last year represented a drop of 12.6 per cent since 2011, largely as a result of declining advertising, government cuts to CBC/Radio-Canada, a phasing out of the Local Program Improvement Fund and a shifting of resources in the private sector to faster growing areas such as specialty, pay and other subscription-based programming services. It said revenue from specialty and pay-TV channels first surpassed conventional TV in 2010 at a level of almost $3.5 billion and then grew more than 20 per cent to $4.2 billion last year. The report said TV-distribution and broadcasting revenue combined was $16.2 billion last year, representing 22 per cent of the whole network media economy, up from 19 per cent in 2000 and 13 per cent in 1984. "In other words, television continues to be a central feature of the increasingly internet- and mobile-centric media universe," the report said. Arpin agreed that the TV industry, overall, is not in dire straits. "What all those analysts always forget is that most of the population is some kind of couch potato," he said. "Even if the is pushing for the pick-and-pay solution, that Videotron already introduced seven years ago, a great, great number of their consumers are still buying the tiers that they were buying a decade ago. ... They're paying for services that they never watch, and it is a significant amount of consumers that are behaving that way." And if a trend toward cord-cutting becomes more prevalent, Arpin said the companies in Canada that provide TV services will be OK since most of them also provide the Internet access that is becoming the replacement conduit for TV content. "They're making more money with their Internet services than with their distribution units," he said, adding that TV services require more resources to maintain than Internet connections. "So they prefer you to take it from the Internet." While the report said the rise of IPTV has led to heightened competition in the TV-distribution market, concentration remains high in most types of telecommunications services. It said the proportion of all telecommunications and broadcasting revenue going to the "big five" of Bell, Rogers, Shaw, Quebecor and Telus Corp. rose to 83 per cent last year from about 67 per cent in 2010. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Shruti Shekar at sshekar@thewirereport.ca

Connectivity beats content in telecom/media sector: report

Broadcast | November 3, 2015

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