CRTC commissioning report about market impact of online BDUs

The CRTC wants to know more about the potential for the Canadian broadcasting market to absorb virtual broadcasting distribution undertakings (vBDUs). Those services sit in-between a traditional BDU and an over-the-top (OTT) service like Netflix Inc.: it’s effectively live television broadcast online. BDUs are defined as TV services delivered through satellite, cable or fibre. The regulator is looking for a report that would forecast what the Canadian consumer take-up of that service would be, how it would impact BDU prices, what the advertising and the Canadian content spending potential is, and whether it should create a new class of license for it. The subject is part of a larger research contract, posted on the government’s procurement website this week, that will examine the shifting broadcasting landscape toward online distribution. Broadly, the CRTC wants to “understand how TV distribution services, like cable and satellite TV, are evolving to internet based distribution platforms in a select group of countries and an assessment of their market potential in Canada,” it said in a statement of work contract. Those countries are the United States, Britain, France, Australia, Brazil, Netherlands, Sweden, Taiwan and Canada (including both English- and French-language markets). The report will be a follow-up to the regulator’s Harnessing Change report, which recommended that those who benefit from the broadcasting system must make an “equitable” contribution to it. The report concluded that BDUs “remain profitable and viewing levels high,” but declines persist -- albeit at a slower pace, it said. One way the BDUs would be able to resist this negative pressure is through internet distribution, it added. In advance of legislative change, the CRTC said in the report that it can take a “short-to-medium-term option” to reexamine the “role and effectiveness” of online BDUs. It also said it could relook at the BDU exemption order, which allows certain services to operate without a license -- often stipulating Canadian content contributions. One such exemption order is for online services, which largely don’t have to be licensed. That has been a sticking point for critics who say that foreign OTT services should be brought under the ambit of the regulatory system. The market in the United Kingdom includes satellite TV service Sky Ltd. offering an online companion product called Now TV. The U.S. online TV market is currently expanding beyond on-demand services -- like Netflix and Amazon.com Inc. Channels, which launched in Canada in June -- to include linear TV channels, the CRTC report noted. Those linear online services include Apple Inc. TV, Hulu and its live TV option, Alphabet Inc.’s YouTube TV, AT&T’s DirecTV Now, and Dish Network’s Sling TV. “The broadcast and cable network channels, which are overwhelmingly owned by U.S. studios, are supportive of the online distribution of their channels since it helps them retain subscribers,” the Harnessing Change report said. But “this shift isn’t happening in Canada,” it said. Part of what explains this difference is that the market in Canada is not only dominated by a few players, but the industry is also largely made up of vertically-integrated distributors -- companies that own both content and its means for delivery, like BCE Inc. and Rogers Communications Inc. They “may not have the same motivations to offer these channels to competing online distributors,” the report said. To keep its customer base inside its ecosystem, the Canadian telecoms have been adopting IPTV platforms for their TV products, including Rogers, TekSavvy Solutions Inc., Cogeco Inc., Quebecor Inc.'s Videotron, Saskatchewan Telecommunications Holding Corp., and Shaw Communications Inc. already had its BlueSky IPTV service in the market for a while. While the common denominator is the internet, IPTV services could require a bundled -- internet and TV -- subscription to the BDU, which would deliver the content over a private and managed network. Internet TV would just require a subscription to the service and any internet connection, which could hamper the delivery of content if the internet is too slow, for instance. Doug Murphy, Corus Entertainment Inc.'s president and CEO, said at a conference last year that live TV streaming, such as those from YouTube and Amazon, are an opportunity for the broadcaster, and they are "looking hard at Canada right now." Still, there has been some movement on the online delivery of cable television. For instance, the media division of Bell, a vertically-integrated company, only began broadcasting live episodes of HBO’s Game of Thrones on its Crave TV service late last year. The report is due in January 2020, the same month a government-appointed panel will also release its recommendations to amend the nation’s communications laws. The Heritage department has already commissioned seven working groups to help it prepare responses to the panel’s report. Heritage Minister Pablo Rodriguez has already said that the government plans to force large online services to make and promote Canadian content on their platforms. The $90,000 contract hopes to derive lessons from these countries about what’s going on now and what is likely to happen in the future with these distribution models. It requires an analysis of these phenomena in the aforementioned countries, like how they are adjusting to online distribution, how that model is impacting the market, the factors that may impact the evolution of online TV and video distribution in Canada, and the impact of vertically-integrated players on the market. It also seeks to understand how public policy and regulations have helped shape the overall TV market, what platforms viewers use to receive TV, the state of the free over-the-air TV business model, how TV distribution models, content production industries and TV business models have transformed, and how technology is evolving. The regulator is asking for regular progress updates on the report throughout the contract period, every two to four weeks, over the course of three months. It has pre-identified Informa UK Ltd.’s Ovum research to conduct the project, but has given others an opportunity to pitch their services with the publishing of this week’s call for proposals. The deadline for those proposals is August 28. — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Michael Lee-Murphy at mleemurphy@thewirereport.ca

CRTC commissioning report about market impact of online BDUs

Broadcast | August 9, 2019

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CRTC commissioning report about market impact of online BDUs

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