Monday, 17 November 2014

Here's How We Can Pay For the CBC

The CBC has not brought much attention to the fact that its current financial problem is caused mostly by funding cuts from the Harper government. Instead, CBC recently told the government it is "grateful" for the money its gets.
CBC is reeling from a $115 million annual reduction in funding from the federal government, which fully kicks in this year. CBC seems reluctant to discuss that not only has the government cut the budget, it won't provide any money for staff severance payments or inflation on salaries for those who remain at CBC. This is the first government in history that has not only cut the budget but treated CBC employees so poorly.
CBC has also lost all future advertising revenue from NHL hockey, although the president of CBC, Hubert Lacroix, has admitted that CBC was at best breaking even on the NHL. Yet Mr. Lacroix points to the loss of hockey and a downturn in TV and radio advertising revenues generally as the culprit for CBC's financial problems rather than government cuts. He at least has adopted the idea of a cable tax, or what might better be called a "Canadian programming fee" to fund CBC.
A cable tax seems an easy target for the cable and satellite companies to attack and the media would pile on, since no one likes a new (or old) tax.
The cable companies and the media might hate the idea but what do average Canadians think about paying a little bit more for better quality Canadian TV programming?
In a previous article it was pointed out that the entire Canadian English TV industry generates revenues from advertising, subscription fees and government of about $5 billion annually. The BBC alone has more funding than our entire TV industry. The U.S. TV industry, with which Canada's broadcasters must compete, had annual revenues in 2011 of $165 billion or 33 times that of Canadian broadcasters. Lots of critics bemoan the lack of quality in Canadian TV compared to the U.S. but they offer no real solutions other than to suggest Canadian TV (CBC) needs to be "cool" and make do with less money! These critics have scant knowledge of how TV is financed or produced.
What Canadian TV has always lacked is adequate funding that would allow for experimentation, expensive failures, and the occasional hit program. That is how the industry works in the U.S. and elsewhere. In Canada we have starved both CBC TV and private conventional networks of funds and neither CBC nor the privates can produce high quality TV drama that compares with HBO and other U.S. networks. Canadian TV will never produce a Six Feet UnderThe SopranosThe Wire or Big Love with the budgets given to Canadian writers and producers.
CBC can afford to broadcast (in a good week) only two hours of original prime time drama while Canadian private networks mostly buy U.S. dramas and air them at the same time as the U.S. networks. This allows cable and satellite companies to unplug the U.S. channel and replace it with the Canadian channel. The effect is that Canadian commercials are carried on both the Canadian and U.S. channel.
CMRI tracks public opinion about Canadian TV and for over a decade we have asked Canadians if they would be willing to pay for better quality TV. Surprisingly, on average, about four in 10 have agreed to paying $5 more per month. That would be enough to dramatically improve the drama and other programming of CBC TV and private networks. Readers should visit CMRI's blog for methodological details on the annual survey.
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Cable and satellite subscribers are far more willing to pay an extra $5 a month for better quality TV than people who watch TV off-air via an antenna. This makes sense. They have always been used to receiving TV for "free." Interestingly, willingness to pay for better quality TV is highest among those who voted Conservative in the last election, something the folks at Sun Media should take note of.
One of the great ironies in Canadian TV is that a large majority of Canadians think that a high percentage of their monthly cable bill already goes to CBC and other local stations. In our most recent survey only about one in three people thought that none of the money from their monthly bill went to local stations, almost one in two thought it was 10 per cent of the bill and about one in four thought that 25 per cent or more went to local stations. In other words, Canadians already think there is a cable tax!
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On average Canadians think that about 20 per cent of their bill goes to CBC and other local stations, when it is actually zero. Specialty channels, the majority of which are owned by cable and satellite companies, such as TSN and Sportsnet, receive a percentage of what you pay to Rogers, Bell, etc. but CBC and private TV networks that have local stations receive nothing. They can only benefit indirectly from a small fund that underwrites some of the cost of independent programming. If CBC, CTV, etc. were to get even 10 per cent of our cable bill, it would amount to almost $1 billion per year and change Canadian TV overnight.
The trend has been remarkably consistent over the past decade and provides a clue as to how such a tax or programming fee could be introduced. Perhaps it should be a direct corporate tax on cable and satellite companies rather than on consumers. If cable companies chose to pass on the tax and bring it to the attention of their subscribers, many might be very surprised to learn that Rogers, Bell and others have not been giving some of the monthly fee to the CBC all along.

(Originally published in Huffington Post)

Don't Believe Everything You Read About CBC Cuts

Much of what is written about the CBC contains erroneous information. The latest cuts to the CBC are a case in point.
The Globe and Mail, the Toronto Star, the Sun and several other news outlets are fixated on the CBC to varying degrees and with equally varying editorial stances.
But they often provide readers with misinformation about CBC. The Globe, for example, reported that the Conservative government had cut CBC's Parliamentary grant to "much less the $1 billion," a figure that has become a rallying cry for those who think CBC is a drain on taxpayers. The truth is that the CBC's corporate plan shows that for years to come the government operating and capital grant (used to buy and maintain equipment and facilities) will remain at more than $1 billion. The journalist, when challenged, tried to defend this claim on Twitter by saying he was referring to CBC English services but the English services have never received $1 billion from government.
Another Globe reporter said that CBC did not breakdown the necessary data so she said that "outsiders" put the cost of the main CBC French TV network at $400 million. A quick check of the CRTC web site would have revealed it was $476 million in 2013. The CRTC publishes the data annually, which are provided by CBC.
The Star ran an editorial saying the budget of CBC after the latest cuts would be reduced to $913 million, which is off by about $800 million. The total budget of the CBC is about $1.7 billion. The Star ignored not only government funding for equipment but also all advertising revenues and the many millions Canadians pay to receive CBC News Network, etc. through their cable bill. The editorial proclaimed that in the past five years CBC had cut 2,100 jobs. Again, a check of CRTC data would have revealed that the correct number was about one-third that.
An opinion piece in the National Post included those same staff numbers, adding that it represented a quarter of the workforce. The Post also ran a commentary saying CBC seemed incapable of reinventing itself, which may be true, and concluded that it didn't matter since TV viewing was in decline and the television industry, that is, networks, cable, etc. wouldn't exist in its present form in "maybe two years." This blissfully ignores the fact that TV viewing and cable/satellite subscriptions have shown no decline, according to CRTC.
The Sun, which has always taken an aggressive stance when it comes to CBC, echoed other outlets, saying government funding would decline to $913 million in 2014-15, also forgetting government funding for equipment, etc.
The Globe and the Post have reported on the losses CBC TV will incur when it no longer has ad revenue from NHL hockey. The Post put the number at $200 million, while the Globe put it at $225 million. Both estimates were based on hockey representing half of CBC ad revenues but used the total of CBC English and CBC French ad revenues to arrive at their estimates. One Globe reporter was closer with an estimate of $175 million but in the same article said Rogers wasn't a likely bidder for Saturday night hockey. The CBC recently revealed NHL ad revenue was $125-$150 million and, contrary to earlier claims, said it wasn't making a profit. The number was probably $100 million in 2013, a year when the NHL locked out players for the start of the season.
So where does this leave readers of these news outlets?
Thing is, the public who read all these stories about CBC and its crisis need to have the correct facts about its funding, staffing and audiences. After all, the public will eventually shape the future of the CBC. The CBC should be totally transparent about its operations so that journalists of all stripes can report on the CBC accurately. Make no mistake, the CBC is facing a crisis and its networks, especially the CBC English TV network, do not have the funding to offer Canadians what they ask for and deserve.
But it is not just a question of more money, it is also necessary to define the role of CBC TV.
CBC TV and private English TV in Canada compete in an environment that is dominated by U.S. television. The U.S. industry in 2011 had revenues of $165 billion dollars compared to total revenues of all English TV of about $5 billion. Canada's TV revenues are lowest among the G7 countries, while the U.S. is bigger than all other G7 countries combined and 33 times larger than the Canadian English TV industry. CBC TV, the main network and the news channel, have revenues of roughly $800 million, from all sources, or less than 0.5 per cent of U.S. TV revenues.
To be a real public broadcasting service CBC should be funded like public broadcasters in the U.K. or France. As a service to the public, it should be commercial free and like HBO, it should make programs for viewers, not advertisers. A small tax on all cable TV, satellite TV, Internet, mobile services, etc, that is, all the services that provide video to consumers should be used to properly fund CBC (and private TV services). Such a tax could generate as much as $3 billion dollars annually.
This would put CBC and private Canadian television on somewhat equal footing with the U.S. and allow for programs of sufficient quality to compete with U.S. television and the rest of the world. Cable executives would be aghast but I believe the public, evidenced by the insatiable appetite for cable TV, Internet, Netflix, smartphones, etc., would not resent paying for quality Canadian programming on CBC and private TV.
Now that is a story that Canadian journalists could be exploring and, after getting the facts straight, writing about for their readers.

(Originally published in Huffington Post)

Who's Really Paying for the Rogers $5.2 Billion NHL Deal?

Rogers massive $5.2 billion, 12-year NHL deal has shaken the TV industry. The deal is for national TV and digital/internet rights for all regular season and playoff games and was voted Canadian business story of the year.
Why would Rogers pay so much for NHL games? The deal averages about $435 million annually, roughly $300 million more than the combined sum TSN and CBC TV have been paying for national rights. CBC TV is left carrying some Saturday night hockey but all ad revenues flow to Rogers, starting in fall 2014. TSN is scrambling for crumbs, including local TV rights in Ottawa and Montreal (French), giving them a select number of games that can only be aired regionally. TSN's desperation showed when it reportedly paid $400 million for the regional rights to Ottawa Senators games for the next 12 years.
Rogers is counting on increased advertising revenues to pay for the deal. It hopes that by broadcasting over 500 games, including Saturday night games, not just on CBC but also on CITY TV, Sportsnet, Sportsnet One and Sportsnet 360, as well as Sunday night and mid-week games, substantially more ad revenue can be generated.
But Rogers may be disappointed -- Canadians already have access to a large number of televised NHL games. CBC airs just over 100 games per year and TSN/TSN2 and Sportsnet each air almost 200 games per season, although Sportsnet games are only available regionally. In addition, the NHL's own network airs a small number of games, as do NBC affiliates and the superstation WGN. There are also French-language broadcasts of roughly 200 games each season for die hard fans. Many viewers already have access to over 500 NHL games/season on regular TV and cable/satellite and this allows us to project future ad revenues.
The table below trends the total ad revenues of CBC TV, Rogers TV (CITY and Omni), CTV, as well as the specialty channels that carry or will carry NHL games.
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Rogers TV stations generated some $278 million in ad revenues in 2012, about the same as CBC TV's $246 million but only roughly one-third the revenue of CTV. Note CTV's $100+ million increase in 2010, corresponding to the Vancouver Olympics; no similar increase resulted from the 2012 London Olympics.
The four sports specialty channels combined accounted for another $240-odd million in 2012. Specialty channels have traditionally sold advertising at heavily discounted rates and even with a large number of NHL games in their schedules, TSN and Sportsnet have relatively small ad revenues. Ad agencies won't pay the premium rates Sportsnet and TSN would like to charge. The two specialty sports channels together actually generate almost the same hockey audience as CBC but that doesn't translate into the same advertising revenue.
CBC says that it was basically breaking even or losing money the last few years on the NHL and we assume in this projection that about one-half its total ad revenue was from NHL hockey. Taking this into consideration, the table below estimates the ad revenue generated by NHL games that past 4 years.
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In 2012, CBC, which carried the most highly rated playoff games, generated about $120 million in NHL-related revenue. The revenue may have been even less, perhaps only $100 million. Using audience metrics as a guide, we estimate that TSN and Sportsnet generated roughly $25 million each from their NHL coverage. Thus, using fairly optimistic assumptions, the total ad revenue from the NHL is currently about $170 million.
What will happen next season and beyond? If Rogers airs Saturday night games on CITY TV and its other specialty networks, this will eat into CBC's Hockey Night in Canada audiences and the associated revenue; we estimate a 30 per cent loss in audiences and revenue for games on CBC. Games on CITY will likely feature big market home teams (Toronto and Vancouver) and be very attractive for advertisers. But the net effect of losses on CBC and gains from additional games on Rogers stations, coupled with the fact that there are only so many companies who want to reach the hockey audience at any given time, will mean only a modest increase in ad revenue.
Rogers expects NHL audiences to increase by 20% overall, which is optimistic, given the audience performance of the more than 500 NHL games currently available to viewers. However, Rogers should be able to increase ad rates somewhat, given that they control all national rights. Assuming somewhat higher rates and a 10 per cent increase in audiences, we estimate that the revenues generated by the additional CITY TV, Sportsnet, Sportsnet One and Sportsnet 360 Saturday, Sunday and weeknight NHL games will generate about $25 million in additional ad revenue, bringing the total in 2014 to about $195 million.
Rogers paid a premium for national NHL rights and the additional TV ad revenues will still leave a financial 'hole' of approximately $240 million. The hole must be filled with revenues from three other sources: sub-licencing to French TV, digital/mobile services and subscriber/fee increases for Rogers specialty channels.
The French TV rights for more than 300 games per year are being sub-licenced to TVA/TVA Sports for $120 million annually. The parent company, Videotron, will presumably market the NHL in a similar fashion, especially on mobile devices. Conveniently, Videotron operates primarily in Quebec, with minimal service overlap with Rogers cable and internet. That still leaves a shortfall of about $120 million.
A digital/mobile app for Rogers NHL games on smartphones and tablets could fill some of the gap with ad revenues from viewers on mobile devices. Rogers NHL app would likely be bundled with Rogers cable/internet -- if you are a Rogers cable/internet subscriber, the mobile NHL app would be included in your monthly bill at no additional charge. Bell, Shaw and Telus subscribers will have access to the app but would likely have to pay an additional fee for access on mobile devices. This will bring in more revenue. Digital/mobile revenues are difficult to estimate but let's put the number at $20 million.
The big revenue will come from another, more traditional, source. Rogers will enjoy new subscriptions to its lesser known channels, such as Sportsnet One or Sportsnet 360, which have 2-3 million fewer subscribers than Sportsnet. To see all the games your cable or satellite TV company will have to offer all the Rogers channels. Rogers also plans to air some games on Fx, which you may have noticed from the ads is not yet carried by Bell, and has almost 7 million fewer subscribers than Sportsnet. Leaf fans would suddenly find Fx appealing if the channel carried exclusive Leafs' games. 10 million new subscriptions to Sportsnet One, Sportsnet 360 and Fx would generate $100 million, using current fee schedules.
Rogers could also bundle all its sports specialty channels for one fee, which would simplify matters for the consumer. It will presumably also increase fees for its sports channels, as ESPN did when it secured Monday Night Football. The revenue from new channel subscriptions and fee increases will come not just from Rogers subscribers but Bell, Telus and Shaw subscribers who want access to all the NHL games.
The massive deal has the earmarks of satisfying a lot of Rogers and non-Rogers hockey fans, despite what a faulty Ekos poll recently said. The poll planted the idea that it disadvantaged the CBC and then asked respondents if the deal would hurt the CBC. One survey question included a typo, asking about CBC "ad venue" rather than "ad revenue."
Thus, while advertising revenue will probably not increase much, there are additional revenues to be accrued from mobile customers and new subscriptions to existing specialty channels and fee increases for all Rogers sports channels. Cable and satellite TV subscribers and smartphone users will ultimately pay for the NHL deal, which should break even, if not be profitable.
There is one hidden value for Rogers, which is priceless. The NHL deal, bundled for Rogers mobile subscribers, will keep subscribers from switching to other companies and maybe even attract a few from Bell and Telus.

(Originally published in Huffington P0st)

The CBC Wants to Cancel Your Favourite Shows

CBC plans on cutting programs and services that many Canadians use and enjoy. The "plan" is to transfer money from existing services, such as CBC Radio, and funnel dollars into some as yet to be determined programs by 2020.
The president of CBC, Hubert Lacroix, made the announcement in a recent speech: "If we can't generate new revenues or our funding model doesn't change, we'll need to take existing dollars away from services we're currently offering, to pay for those we need to be offering in the future." He also makes a very good case for why Canada needs a public broadcaster. I feel for Mr. Lacroix. He is faced with a financial conundrum that seems unsolvable. But he must tread carefully and not throw the baby out with the bathwater.
The problem with planning for 2020 is that no one knows what the future holds. Five years ago there was no such thing as an iPad, the smartphone had just been introduced and Netflix delivered movies by mail. Technology is changing so rapidly, the best laid plan is to not commit past the current year but be nimble, allow creative people to take control and respond to new inventions as they are introduced.
Besides, most of the cool new technologies don't impact the way traditional radio and TV content is made but rather affect how content is distributed. Netflix figured this out and produces original series such as Orange is the New Black and House of Cards, series that could run on any TV network. Similarly, the music and the podcasts we stream from the internet are basically the same content that we consume on the radio. CBC bureaucrats, who have been called much worse here, need to be wary of the 'Steve Jobs syndrome' which convinces them they have the insight of Mr. Jobs.
The truth is that traditional radio and TV have not been replaced by the internet or other new technologies but instead have maintained their central role in our lives. Traditional TV viewing levels have, if anything, increased slightly in recent years. This is partly the result of improvements in picture quality (HDTV) and the inherent quality of programming. We are in the golden age of TV. Internet TV services, such as Netflix, are adding to our viewing time but mostly with old TV programs and movies.
Radio listening levels have waned slightly but CBC Radio's audience share has grown in the past decade. CBC presented the chart below to a Senate Committee earlier this year. Of the four CBC/SRC Radio services all but CBC Radio 2 increased audience substantially in the past decade. Radio 2 tried and failed to attract a younger audience, as radio listening by young people is in decline.
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Overall, CBC Radio's audience share is three times that of CBC TV. Is the plan to cut CBC Radio? It has lost a fifth of its staff in the past 5 years and even more of its budget, while CBC TV has had only minor reductions.
Why cut CBC Radio, the most successful service and then announce possibly more cuts to fund an internet "digital" service that will likely deliver far less audience for the buck? The rationale of the president is that "70 per cent of listening in Canada takes place over the air." But then he adds, "When should we change our approach?" Answer: probably never, since the radio spectrum is the most efficient and effective way of delivering CBC Radio to listeners and will remain so for the foreseeable future. CBC radio (and TV) frequencies are its most valuable and irreplaceable asset.
Radio has always accounted for something like 70 per cent of listening, the remaining 30 per cent today is internet streaming and listening to music on iPods, iPhones, etc. A few years ago the 30 per cent consisted of listening to CDs, a few years before that it was cassette players and before that LPs and 45s. But over-the-air radio has always had a dominant role and that will continue, especially for CBC Radio listeners. CBC's research shows that a very tiny proportion of its listeners come from new digital platforms, so if Radio 2 were only on the internet, it would virtually disappear. Before shutting down Radio 2, set up a web site that allows Radio 2 listeners to contribute funds to support it, especially if it returned to all classical music.
As for TV, Mr. Lacroix said in his speech: "The advertising market is weak, down approximately 5 per cent overall in the last year. All signs point toward this not being a slump -- it's a new way of life, particularly as advertising dollars migrate to digital." But this is an incomplete analysis of the TV market. Yes, ad revenues of conventional TV have flat-lined but revenues (advertising and subscriptions) of specialty TV channels, such as TSN, Sportsnet and CBC News Network, have more than quintupled in the past 15 years and surpassed $4 billion in 2013. TV isn't going to go away and neither are advertisers. 

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Mr. Lacroix told the Montreal audience that ad revenue accounts for $250 to $300 million of CBC revenues. That's about $100 million less than he told the Senate in February. Assume the difference is the revenue that CBC will no longer derive from NHL hockey and it raises the question: why is CBC English TV in ad sales? CBC French TV for the first time will generate more ad revenue than its English sister and the head of French TV sales has been put in charge of sales for both services. French TV delivers an audience that can be sold to advertisers at attractive rates, whereas English TV does not. There is a cost to promoting and selling to advertisers and CBC should jettison advertising on any service, like CBC TV, that generates negligible returns with 10-15 minutes of highly repetitive, content-killing ads per hour.
The speech also referred to cable and satellite TV subscription having "plateaued," again implying that maybe its time to shut off TV transmitters. Car ownership and home ownership have also plateaued. That doesn't mean car dealers and real estate agents are going to shut their businesses. Also mentioned was cord-cutting, i.e., people cancelling their cable subscriptions and relying on internet-delivered TV. To date, the most reliable data sources, including Statistics Canada, show little evidence of cord-cutting. Cable companies still provide the most compelling programs and the easiest (and often the least expensive way) to access them.
The speech signals CBC has already concluded it should abandon TV transmitters and deliver programs via the internet. This would be ill-advised and before doing so Mr. Lacroix should ask the private TV networks if that's what they plan on doing. They know that far more than "5 per cent" of their audience comes from people watching TV off-air and today they receive favourable channel placement and multiplexing on cable systems, which they could lose if they abandoned their transmitters. Recently, CBC was impressed that 10 million hours of CBC's Sochi Olympics' coverage were streamed on the internet -- but about 1 billion hours, 100 times more, were watched on CBC TV networks, according to CBC data. How much revenue was generated by that streaming versus TV viewing?
CBC TV likes to compare itself to BBC. The Montreal speech refers to the BBC six times. The problem with this comparison is that BBC TV is a far more important service with a 30 per cent share of the TV audience in the U.K., while, according to CBC, its share of English TV viewing is about 5 per cent in a typical week. CBC TV has yet to embrace the reality of its ranking in the TV environment and until it does, it will fail to define a new role.
Nordicity ranked the audience delivered by public broadcasters in the U.K. (BBC) and Canada (CBC) and whether by share points or absolute viewers per public monies spent, the U.K. ranks far ahead of CBC, which is last among all the public broadcasters they studied.
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Mr. Lacroix was out of date about how the BBC licence fee works but he was right to point out that BBC has far more resources because of the TV licence fee system. Every household in the U.K. must have a licence to watch TV on a TV set, computer, tablet, etc. CBC needs more funding, if it is to offer quality programming, and either a licence fee or a TV/video distribution fee or tax would be the mechanism to generate that funding.
If that fails to materialize, it doesn't mean abandoning conventional radio or TV or funneling money from successful programs and services into untried internet-digital concepts that will compete for audience with thousands of competitors. It does mean CBC bureaucrats should worry less about 5-year plans, gather and analyze all the facts, then design services based on traditional TV and radio delivery, and start proposing how a licence fee, distributor tax or other innovative new ways of funding CBC could work in Canada.
(Originally published in Huffington Post)

Will Netflix and YouTube Kill TV?

Many media pundits have declared that TV is dying. Their argument: Netflix, YouTube, HBO Go and other Internet-TV services mean that traditional channels, cable and satellite TV, will soon fade to black. Why pay for a lot of channels you don't watch? The CRTC, fearing the worst, agreed and held a two-week long public hearing on the future of TV this fall.
The demise of TV has been predicted since the invention of the VCR. There has even been some good research that points in this direction, including recent survey data from comScore showing that young adults in the U.S. spend about one-third of their TV time on tablets, smartphones or computers.
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CRTC released data (which comes from CBC, although the Commission has not acknowledged the source) showing that about one in three English Canadians now subscribe to Netflix. Despite this, CRTC has chosen to ignore Netflix, ever since the company refused to confirm the CBC research numbers. In a fit of pique, the Commission redacted the testimony of Netflix from the public hearing, the hearing on how Netflix will affect the future of TV. CMRI informed the Commission the CBC research probably exaggerated Netflix subscription but the CRTC ignored that too.
CRTC also released CBC data claiming two out of three Canadians watch YouTube. (Neither CRTC nor CBC will reveal what questions were asked in the survey, normally a prerequisite in survey research.) YouTube's testimony was also excised from the public record of that hearing but before the CRTC zapped it, we noted that YouTube boasted that one-billion people spend six-billion hours monthly watching YouTube videos. Like the CRTC data, that sounds impressive and even the media critic of the New York Times touted the YouTube numbers. Putting aside the fact that these numbers are generated by YouTube's server software, which tends to exaggerate usage and measures computers not people, are they really that extraordinary?
No. Fact is that Canadians alone spend about four-billion hours watching traditional TV per month, while Americans spend almost 40-billion hours and worldwide, according to Eurodata and ITU, time spent watching traditional TV easily surpasses 500-billion hours per month! YouTube, which has been around for almost a decade, is a drop in the TV ratings bucket, rounding error in the ratings. YouTube is the everyman's cable community channel, a good training ground for future talent.
The pundits and the columnists ignore this because writing about the death of TV, rather than its health is more eye-catching. Also, some TV columnists seem to dislike TV, especially Canadian TV, and are writing for a medium that is truly on the ledge, newspapers. Incidentally, comScore, an independent measurement service, puts YouTube's worldwide usage at less than three-billion hours per month (September, 2014). Third-party research estimates that Netflix's worldwide audience is even smaller, about one-billion hours per month.
Truth is that we are spending almost as much time as we ever did with TV programs delivered over-the-air or via cable/satellite. The TV Bureau of Canada confirms this with its weekly viewing tracking service. And why wouldn't we? TV today is markedly better quality in technical and programming terms.
Take TV programming today. HBO, The Movie Network, Superchannel, TSN, Sportsnet, Discovery, Space, A&E, Showcase and many other specialty channels have schedules filled with compelling programs that are superior to those of pre-Internet times. CNN, CBC News Network and other news channels transport the viewer to any event or disaster in the world within minutes of it happening. The older, established channels, including CTV, CBC, Global, and the U.S. networks have addictive reality series, dramas that resemble Hollywood movies and comedy that makes pre-Internet TV seem quaint.
Also, the TV set has undergone a revolution. Today's HDTV flat screen sets provide almost a cinema-like picture and prices for HD sets have plummeted. 4K HD sets are already under $1,000, having fallen in price by 80 per cent in the last two years. Even smartphones and tablets have dramatically improved screen quality, making mobile watching viable. All the channels mentioned above and many others now offer their entire schedule in HD, which can be accompanied by surround sound, equal to the best stereo system. We are in the golden age of TV and Facebook, YouTube, Yahoo and Google don't stand a chance of replacing TV (unless they get into the real TV business).
In the past year or two viewing of traditional channels has fallen off minimally, about one hour per week. Services such as Apple TV and Netflix, the latter consisting primarily of older TV programs and movies, with video-on-demand offerings are eating ever so slightly into traditional viewing. But VOD has always played a relatively minor role in our TV viewing. Most viewing, over 90 per cent, is live.
But some people want to watch recent movies on Apple TV or last season's TV series on Netflix because it is cheap and convenient. So, yes, there is some additional audience fragmentation linked to Internet-TV services but it continues to be small potatoes and only significant when it consists of the same types of programming found on legacy services.
The legacy cable and satellite TV companies provide one very valuable service: they collate hundreds of channels, which in turn consist of thousands of programs. The very best (and, true, some of the worst) Hollywood content, news, sports and international programming is brought together in one stream and is available at the touch of a remote control. Cable TV is a killer app.
So long as cable and satellite companies continue to perform this key role, they will maintain a large market share. They might not grow their share but that is difficult when you already have 90 per cent. However, here and elsewhere they are under pressure to adapt or justify their '2 for 1' pricing, even though this is a strategy used by most retailers.
The pundits complain that people only watch a dozen or so channels of the many they pay for. That may be true in a typical week but over the course of a month or year, even the CRTC might be surprised how many channels are used by the average subscriber.
No question, a small minority of people will search for replacements for cable; but given the cost of program rights, only a company like Netflix, with an international footprint, can compete with cable. Most people will keep the cable killer app and simply add Netflix or other premium Internet streaming services to their viewing menu. Proof: The Movie Network/Movie Central, Netflix's main competition, have lost only a few thousand of their two-million-plus subscribers since Canadian launch of Netflix in 2010. Likewise, a few thousand homes of the more than 11-million who subscribe to cable/satellite have cut the cord entirely, according to industry data.
Since the dawn of the Internet there has been an endless stream of articles claiming that it would result in the imminent demise of TV, not to mention the death of radio, newspapers, magazines and the post office. The decline of newspapers and magazines and a reduction in snail mail are real and undoubtedly caused by the Internet. The Internet has affected almost everything that deals with the printed word.
But TV has been little affected.
There is one noteworthy feature about the new TV services like Netflix, Apple TV and HBO's proposed Internet service that all TV networks and advertisers should heed: they are mostly commercial-free. Viewers have always disliked TV ads, especially in Canada, where the media economy is too small to create sufficient fresh ad copy.
Canadians are subjected to the most cluttered, repetitive TV advertising environment in the world. It is the single biggest complaint we have about TV but the CRTC, CBC and other broadcasters ignore it and instead of reducing advertising, they approve more minutes per hour. CBC's news channel now airs over 100,000 ads per year to generate less than $100 per ad, about what you pay for a classified ad in a local paper. CBC's main channel, having lost rights to NHL hockey, is on course to see its ad revenue cut by two-thirds and ad revenue will then cover less than 20 per cent of expenses, less if you count the expense of the sales department.
Elsewhere France has banned ads on its most important channel and most countries never allowed them on the main channels in the first place. If the BBC were to air one ad, it would be terminated. It doesn't even run ads in the Olympics. Not surprisingly, our research shows over 90% of Canadians agree there are too many commercials on TV; over half strongly agree.
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Too much of a good thing destroys the appetite. Despite maintaining audiences, TV ad revenue is not increasing. This TV season Rogers is learning the hard way by flooding the airwaves with NHL hockey and are failing to attract both the audiences and advertisers they hoped for, as predicted. The new Rogers sales manager has already departed, just weeks into the season.
TV networks worldwide are facing stalled ad revenues and the growth in TV is coming from premium, subscription channels that have less or no advertising.
Canadians have reached their ad limit and are "not going to take it anymore." The real question people are starting to ask: why pay for a lot of channels with so many commercials? CBC, which is now mostly funded by taxpayers, and any other network with a business model that can eliminate or at least reduce ads, can flourish in this new environment. That is, by giving viewers what they really want, programs, not commercials.
(Originally published in Huffington Post)

Has Canada Lost Faith in the CBC?

The president of CBC published an article in Huffington Post recently asking Canadians for help in deciding CBC's future. Good idea but the plea received modest reader feedback; a few hundred people at most cared enough to comment or like the article. CBC also launched an unscientific survey on its web site to solicit public input but it has been met with criticism. Is it a sign that CBC has lost the public, that Canadians have stopped believing in and what CBC and its managers say?
For years CBC has claimed, critics would say whined, that it has suffered from under-funding. CBC does need more money just to keep providing existing programming but the arguments the CBC uses to defend current or increased funding have clearly not worked. Why? Is it deliberate or a faulty communications strategy?
CBC claims to be open, transparent and accountable for the $1 billion dollars in taxpayers' money it receives. The $1 billion is spent on English and French radio and TV and miscellaneous other services. If more funding is needed to serve Canadian audiences, especially in TV, CBC needs to be far more transparent about how it spends its money and explain more convincingly why more dollars are required. The problem: CBC is too secretive and misleading.
CBC releases financial and other data to the media which often leads to inaccurate reports. For example, in April the Globe and Mail's TV critic proclaimed incorrectly that CBC's government funding was now "much less than" $1 billion. This was corrected in a later column but that column made the error of quoting CBC as saying its total budget, including non-government revenue, was about $1 billion, when it is about $500 million more than that. Other journalists more familiar with the use of empirical data have also fallen victim to CBC. The CBC president corrected this misinformation in a recent speech but once information is out there, there is a risk that it will be repeated indefinitely.
CBC has also released incorrect information to the media about the number of staff it has and the number cut in the past few years. CBC told reporters before recent cuts were announced that it had about 8,150 staff. In fact, the staff count was over 9,000, if one includes CBC employees who work for specialty channels such as CBC News Network (but not counting staff employed at cbc.ca, etc).
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CBC says budget cuts mean 2,100 "full time equivalent" positions have been "affected" since 2009. Translation: over the past five years full time positions may have been "affected," i.e., were vacant or eliminated, but then new positions seem to be created in their stead.
For example, in February CBC told the Senate inquiry looking into CBC that 750-800 jobs were lost as a result of the government's 2012 budget but the net number of staff cut after the 2012 budget was around 300, as shown in the table. Most of the job losses the past five years have been in radio, something CBC seems reluctant to discuss, despite the fact that radio is its most successful service. The CBC is required by regulation to provide the CRTC staff numbers shown here. Tellingly, nowhere does CBC publish the number of staff it has, let alone the salaries it pays to staff either in aggregate or by individual, as does the BBC.
Misinformation and cuts to radio have alienated many CBC supporters and caused a major rift between CBC staff and management and CBC radio and TV staff. CBC has also angered independent producers who are the unwittingly the target of CBC's attacks on private broadcaster subsidies and tax credits and now the producers, in the words of one senior person, "hate" CBC.
Some other examples of CBC misinformation:
-For years CBC claimed that NHL hockey made a profit, telling the CRTC in 2012 that hockey subsidized other programs. Only after losing NHL rights to Rogers, was there an admission hockey was at best breaking even the past six years.
-CBC constantly uses data from consulting firm Nordicity to claim that per capita cost of CBC is much lower than public broadcasters in other countries, failing to point out that Nordicity also found that internationally CBC TV is the poorest performing public broadcaster in audience terms.
-CBC regularly points to an analysis by Nordicity that shows private broadcasters benefit from public subsidies and tax credits (which actually go to independent producers, not broadcasters). Presumably the logic is to point out that even private broadcasters need access to public money. Valid point but this analysis fails to acknowledge that CBC also benefits from these sources, in addition to its Parliamentary grant, and that these policies were originally established to support independent producers because the CBC was considered too dominant. It would be better to simply bring attention to the very high cost of producing TV, using international examples.
-Analysis by (once again) Nordicity is used to support the flawed conclusion that advertising on CBC is good public policy. Advertising inevitably leads programmers to make programs for advertisers rather than viewers and listeners, something Heather Conway, new head of CBC English, acknowledged according to the Globe and Mail who said she will "work more with marketers to create so-called branded entertainment (a.k.a. product placement) shows." As long as CBC seeks advertising revenue, which is theoretically limitless, and puts itself on the same plane as private broadcasters, it will be difficult to argue for increased public funding.
-For decades CBC has produced pretty-looking program schedule charts that show how much more Canadian programming it has compared to CTV or Global but omit that Canadian audience performance of the private networks throughout the day often trumps CBC.
-CBC cherry-picks data telling the Senate inquiry that its prime time English TV audience is equal to that of a decade ago, when data on the CBC web site demonstrate otherwise. Besides, if true, does that help the argument for more funding; wouldn't it mean government cuts were justified? CRTC reports that CBC TV has only about a 5 per cent audience share on a 24-hour basis. If CBC were to acknowledge this reality, more Canadians might support increased funding, especially if there was a compelling service proposal.
-CBC unceasingly touts its audience performance but when challenged with negative facts, says ratings are not important to a public broadcaster?
-There are many more examples, some of which have raised the ire of MPs and Senators, causing both houses of Parliament to threaten to subpoena data on CBC finances, salaries, etc.
Our independent public opinion research shows that CBC is still one of Canada's most valued public institutions, indispensable for many Canadians.
So CBC programs and services are valued but CBC management has not done a good job communicating this. A good case can be made for restoring CBC radio budgets and increasing funding for CBC TV. But CBC management needs to open the books and address not just CBC strengths but also its shortcomings and propose a new approach which puts the audience first. More transparency about its finances, staff and audiences and less defensive analysis from consultants might be a start to restoring Canadians' faith in the public broadcaster.

(Originally published in Huffington Post)