Archive for October, 2009
If you’re Canadian, and you watch TV, you’ve likely noticed the advertising war going on between the signal carriers (Cable, Satellite, and some Phone Companies now offering Video on Demand) and the broadcasters (Individual tv channels like CTV, CBC, CityTV, etc.). How can you miss them. And as we get closer to the Novemeber 2nd deadline for the CRTC review, that battle is heating up with both sides spinning their own vague propaganda. It has for months left me confused as nobody is really saying anything other than the other guy is a big evil corporation and blah, blah, blah. At least that’s all it boils down too from what I see and hear.
Where are the objective news reports about the issues? I’ve not seen a one, just those highly spun attack ads. Maybe I missed it but as a voracious consumer of media it strikes me as odd I’ve not seen it.
Could it be the obvious conflict of interest and inherent bias of one party trying to report it via their network that’s keeping their mouths shut? Or both parties fear that spilling the beans on the truth of the real details may sway public opinion in the opposite direction, so instead they hide behind the knee jerk fear tactics? I don’t know.
Well, I decided I would try to investigate by Googling around to see if I could find some real info. Being directly tied to the internet marketing industry, and following it closely I do have some initial thoughts as to what it might be about. And being that my specialty is local search marketing the local aspect of all this intrigues me.
This all sounds like some of the same issues that are plaguing other forms of traditional media (newspapers, radio, print magazines, even yellow pages, etc..). The internet has created a marked shift in consumer media consumption and, with that, changes in allocations of advertising dollars. It’s been going on for years now but it’s now reaching a level significant enough to force real change in the market place. This has also been quickly exasperated by last years global economic collapse (internet advertising see’s this too, though at a lower rate of decline).
But there’s more.
The Canadian Television Business Model
First some background on how things have been working up till now and what appears to be at the heart of the issue, “Who pays who?”. Or as it’s officially called, the “fee-for-carriage”.
As average TV consumers we subscribe to access to distribution networks via our Cable companies, Satellite TV companies, etc… Through this we have access to a wide range of individual TV networks and we can choose to watch whichever ones we want. We pay the signal carriers, the cable and satellite TV companies, and that’s where they make their revenues. The TV channels broadcast various shows and receive revenues from the advertising displayed.
Some of the specialty TV networks like the Discovery Channel, Food TV, History Television, etc… do get paid by the signal carriers, the cable/satellite companies, for the privilege of having that network within their monthly subscription packages. From the cable companies perspective it makes their monthly service more attractive. “Look, you can watch these too”. They also have up-sell packages where you get access to even more networks for a higher monthly fee. Those specialty networks are also pulling in their own advertising dollars.
Not so for the normal, local, Canadian TV networks. They provide their signal to the cable companies for free and have done so for years. Why? On the surface it’s a good business model for the Canadian networks as it allows them to have their signal carried across the nation, unencumbered, thus allows them to ensure they have eyeballs to feed advertising too. But now that advertising revenues alone are not producing profits, as they once were, they feel they should get paid a fee like the other networks do to be part of the cable companies package.
Maybe it’s fair for the Canadian TV networks to be getting a small piece of the cable companies revenues like the other networks do. But wait there’s an inherent problem with that, government mandated Canadian content rules.
Canadian Protectionism - This Market is not a Free for All
In Canada we have this government body known as the CRTC, Canadian Radio-television and Telecommunications Commission, who’s mandate is “to ensure that both the broadcasting and telecommunications systems serve the Canadian public”. What it boils down to is that we are a small market and we have to the south of us a capitalistic behemoth. We love American culture, from music to movies, as well as television. However, if that market were left to it’s own devices the fact of the matter is that our Canadian networks, production facilities, talent, etc… would be swallowed whole and some essentially Canadian aspects of our culture, as well as raw dollars, would leave the confines of our own borders. The purest of capitalists hate these rules, but the majority of us wee citizens appreciate it. So there are some rules in place to help ensure a piece of us remains intact.
Here lies part of the current dilemma. If the CRTC demands that cable networks carry a certain percentage of Canadian content, including local TV networks and programing, which on it’s own most of us deem fair enough, it becomes something else if the mandated portion of the market must also get paid by the carrier forced to include them. So perhaps that inherent conflict was why, up till now, the Canadian TV networks, who were running profitable anyways, up till now, saw fit to forgo that potential revenue. But now sitting deeply in the red they are trying to claw at it.
Why Local TV is the Fall Guy in the Fee for Carriage Debate
The major Canadian TV networks are both a national and local television station at the same time. Certain time slots are for the big entertainment programs we all want to watch and those get broadcast across Canada at the same time, with some shifting here and there to account for time zone differences. Other portions of the day are sectioned off for local programming. That’s the local news, often just before or after the national news, as well as some locally produced shows in some markets. Portions of the advertising space are also allocated for national and local advertisers.
With the decline in television advertising, due to shifts in the market place such as the flow of advertising dollars to the internet, dilution due to more choices for obtaining TV signals (Satellite, Video on Demand, Direct to TV, etc…), and the current economic environment making many advertisers spend less, the local portion of Television feels that impact the most. The local portion of Canadian television networks has long been the smallest contributor to their revenues. If accounted for separately their profit margins have probably been smaller locally. So when times get tough this portion of the market goes into the red first, and deepest. When it comes time to cut costs, as with any organization in need of cost cutting, you cut the least profitable parts first. So local TV is finding it’s head under the guillotine.
But local TV matters to many of us. Sure it does. Hence the name of the co-operative campaign conjured up by the major networks, localtvmatters.ca. They even have their own twitter account. They argue, and rightly so, that local stations in small and medium markets will need to be closed if revenues do not pick back up.
The Broadcasters (Cable Companies) Role in This
The major broadcasting networks, formally know as Broadcasting Distributing Undertakings (BDU), that’s the cable satellite and phone companies, are required to commit 5% of revenues to the Canada Media Fund, which is to be a combination of the Canadian television Fund and the Canada New Media Fund. As well they must contribute 1% to the Local Programming Improvement Fund.
The Local Programming Improvement Fund in particular is relatively recent, created in 2008, and against the direction set by the CRTC the cable companies have decided to pass that extra cost on to the consumers.
In light of the performance levels of the BDU sector and the benefits accruing to BDUs as a result of other changes being made to the regulatory framework, the Commission is of the view that there is no justification for BDUs to pass along any increased costs relating to the LPIF - estimated to be on average approximately $0.50 per month - to their subscribers.
See, the broadcasters are not feeling the economic pinch that the networks are. Ad revenues are way down, but most of us continue to spend $50-$60 per month for our cable TV. Many of us are even upgrading to the bigger packages. So the cable companies are flush with cash, but they would rather keep it all, versus giving up 1% of it.
What’s this $10 TV Tax?
I don’t know, I’m scratching my head over this one. The cable companies are spinning this as though it was a tax, as high as $10 per month, each cable TV subscriber will need to pay. They too have their own website to push their point of view at stopthetvtax.ca along with their own Twitter account. Yes, I’m following both of them.
From what I can see that’s a pretty huge markup of the 50 cents the CRTC claims it would cost the cable companies. Maybe they are including the 5% to the Media Fund as well, but if 1% equals $0.50 then 5% is $2.50, for a total of $3. But they have already been paying into the Media Funds all along, I believe, which brings us back to $0.50. So where does the $10 come into play? I can’t tell.
What To Do? What To Do?
Frankly I can’t decide. I would like to see local TV survive. The Local Programming Improvement Fund I’m sure will help contribute to that, but maybe it’s not enough. I’m not a fan of the cable companies wanting to jack monthly subscriptions by $10, nor do I really see a justification for that. In fact, in a competitive market environment you cannot simply tack on each and every expense that comes up on to the consumers bill. You need to charge the market price for a service or commodity and any new expenses simply cut into your profit margins. Unless however all the market players colluded together to fix prices, which is illegal. But, by the sounds of their propaganda in all this, that may be exactly what they are trying to prime the market for, except this kind of media transparency method of doing so saves them from the legal ramifications had they done so in a back room deal. I don’t know, that’s pure conjecture on my part, I admit that.
Writing this, and researching it, has been rather time consuming. I’m much more informed than I was, but even more confused in my opinions. I’m pissed at the networks for some of their bonehead moves that got them into this situation (consolidation moves to buy up other networks and some specialty networks at the peak of the market, thus overpaying). I’m pissed at the cable companies for what sounds to me like they are merely trying to protect their profits as well as position themselves to profit even more in the future through higher fees. I’m pissed again, I think, at the networks for forcing the CRTC to erode some of their protections by decreasing Canadian content restrictions. I’m pissed at the media in general for not really bringing this to light in a wider manner. I’m pissed at local TV networks for the piss poor advertising products they sell locally which if they were better they could sell more of and make better local revenues, but that’s a whole other blog post.
What will you do? What do you Think? Leave your comments below.
Or, if you do have a more solid opinion than I do, you can submit them to the CRTC by Fax at 819-994-0218 or online with this form here
Seems everyone got the notice that top 5, top 7, top 10, top 11 or top 38.2 lists make for good blog posts. Here is a sample of what I can see in my RSS feed readers today, in order by numbers of things in their list.
- 5 Top Reasons to Evaluate Your Social Strategy
- Top 5 Small Business iPhone Apps
- 7 Tips for Surviving PubCon
- 7 Bad Writing Habits You learned in School
- 10 Blogging Mistakes Most Bloggers Make
- 10 Pre-Press Tips For Perfect Print Publishing
- 15 stressful jobs that pay badly
- 16 Things I’ve Learned About Business while Being an SEO Consultant
Don’t get me wrong, there’s some good stuff in a few of those, but man, the internet sure likes to take a good idea, run with it, bastardize it, then beat it to an agonizing bloody death. With a side dish of spam. Big heaping dish. Like those 700 pound people who need a crane to get them out of the house would eat.
The thing is… about good things…once everyone is doing it, it’s not so good anymore. Boring. Been there, done that, saw it re-tweeted a dozen times.
Top X lists are still effective, people like them, their are easy to write, easy for readers to scan and digest, etc., etc… But it’s time for something different. A new bandwagon for everyone to jump upon. I suggest we cut right to the chase. Top 1 lists!
Here’s a few examples;
- The single best reason to hire a Local SEO (shameless plug)
- The #1 Reason to Use Wordpress as you content management system
- The Best Way to Make More Money
- One PHP Class Every Programmer Should Know
- The Only Reason to Trade the Markets with 3x Leveraged ETF’s. 3 times leverage…Duh!
- One Search Engine Headed to the Dead Pool, Yahoo
Ok, interweb land, get going before this next bandwagon takes off without you. What’s your single best tidbit you can blog about?
- I’m Such a Nerd - Now a Wine Nerd
- An Ode to a Very Special Little Rescue Dog
- Centering a Div in IE9 Using margin:auto
- Playing with HTML5 for First Time
- My Wife is a Food Blogger
- Designing and Coding a Mobile Version of your Website
- A CSS Sticky Footer that Works in 2009 (Chrome too) (343)
- New iGoogle with Left Nav Bar is the SUCK! (194)
- My Cool Ass CB750 Cafe Racer (115)
- Centering a Div in IE8 Using margin:auto (19)
- The State of Local Search in Canada (14)