Thursday, October 29, 2009

Reluctantly siding with the cable companies

Ask Canadians to pick between broadcast conglomerates and cable companies and they're likely to throw up a little in their mouths and pick none of the above. Both sides are fighting for our affections at the moment, using money they don't have, to convince us of the righteousness of their sides. Ironically, we're funding both sides of this battle for our love.

Here's the latest salvo from the broadcasters, via CTV:

A majority of Canadians believe local television stations should receive a portion of what consumers pay monthly to their cable companies, according to a new poll.

Seventy-two per cent of those who took part in a Nanos Research study agreed, when asked whether "the government should force the cable companies and broadcasters to negotiate payment for local TV signals."

Fifty-seven per cent agreed when asked whether they believe local TV stations will close, "if cable companies don't pay for the local TV signals."

Due respect to Nik Nanos, but I'm skeptical. But then again, the broadcasters certainly have the resources to shape public opinion, don't they?

Anyway, I guess I'm in the minority according to those numbers but I'm siding with the cable companies on this one.

The business model is fairly simple: broadcasters purchase and produce content, and sell advertising to pay for it. Cable companies build a delivery infrastructure, broadcast the content and deliver the content to subscribers.

The two groups need each other, and the cable companies aren't leeching off the broadcasters as the broadcasters contend. If it wasn't for the cable companies, no one would be getting the content the broadcasters produce. No audience means no advertisers, meaning no revenue and therefore no business. The cable companies provide the delivery infrastructure to provide an audience for the broadcaster's content, and that requires significant investment.

So the broadcasters provide cable companies with content, and the cable companies provide the broadcasters with an audience. They need each other.

Now, it's easy to argue that, on one level, its unfair for the cable companies to get the broadcasters' content for free, and they should pay a fee. Sure, why not. One could also argue then that cable companies should charge a fee for carrying the broadcaster's content over their delivery infrastructure. Or how about higher fees for better placement on the dial?

Where will it end? Because, at the end of the day, the money all comes from the same place: Canadian television viewers.

And this is nothing to do with local TV, that's a complete red-herring. For broadcasters like CTV, local content is a mandated minimum by the CRTC that they grudgingly supply as cheaply as possible. None of this money they want will go toward local TV. It's just a convinient rallying cry.

This is about the changing business models that are impacting broadcasters just the same as it's impacting print media. It's about fragmented audiences in a 1000 channel universe sharing a shrinking advertising pie, and its about legacy broadcasters that haven't adjusted their business models from the days when TVs actually had dials.

Squeezing more money out of Canadians is not the answer. Re-thinking your business model is. Ironically, more local content may indeed be the answer. But pay for it not by tax increases, but by not spending gazillions on imported American programming. Get lean, get mean, know your audience and focus. That's the future.

There may not be room for legacy broadcast networks in the new television universe. They'll adapt and survive or they'll die, and the world will keep on turning.

In the mean time, I'm reluctantly siding with the cable companies on this one. Hands off my wallet

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11 comments:

CanadianSense said...

Jeff

I can't agree as up until recently we were forced to deal with a monopoly if we want television service.

We don't have Rogers, Quebecor, Shaw, Cogeoco competing to deliver the same content.

We still don't freedom of selecting content if we want basic or local content.

Reminds me of the Air Canada, Canadian debate, either way the customer get the short end.

Will you be affected by NP closing?

Jeff Jedras said...

There was also until recently a broadcast monopoly. Specialty channels have changed that, but not by much. How many broadcast companies are there in Canada? Just a handful. There's still a great deal of regulation on both sides of the coin.

Will you be affected by NP closing?

Only in the sense that if I want to read comments from Conservatives about how unintelligent and out of touch I am I'll have to rely solely on my own comment section... :)

CanadianSense said...

Jeff I will continue to read and try to understand your perspective, I no longer vote liberal but think you add a great deal to the debate.

As an alleged paid troll, conbot, denier, moron, a favourite of the censor bedwetter brigade I appreciate the opportunity to challenge your views on your blog.

Thank you.


I am also fan of less regulation and think the customer has not benefitted from the recent changes.

If or when you can order only the channels you actually want to watch from anywhere on the delivery feed will the customer have progress.
(A la carte) vs basic +combo

Jennifer Smith said...

I'll have to disagree with you here, although of course the Networks haven't been any less self-serving than the Cablecos in this ridiculous fight.

The fact is, the cable companies already pay the specialty channels for their content. That's how the specialties can afford to produce a lot of that content in the first place. The 'over-the-air' nets didn't need to get paid because, well, they were broadcast over the air and didn't need to go through the cable companies at all.

Now that all television has gone digital and 'dial placement' has become as meaningless as the dial itself, the playing field has been leveled and there is no reason why the nets shouldn't get paid like everyone else. And it's not like the cablecos aren't swimming in cash - they just don't want to increase their operating costs, so they call it a 'TV tax' and threaten to pass it on to the consumer.

That said, the networks MUST BE REQUIRED to spend this money on local TV, as well as being required to spend a certain minimum amount on scripted Canadian content. Because if they are just going to be brokers for cherry-picked U.S. TV hits without creating anything themselves, there's no point to their continued existence.

Anyway, go read Ricky. He knows.

Ti-Guy said...

They can all go broke, as far I'm concerned. It's all garbage.

I'm looking forward to the day when all content is delivered through the Internet. At that point, a new business model for private media will emerge, likely one based on rental fees/micro-payments for on-demand delivery and true market competition.

Barcs said...

Agree with you 100% Jeff. That is to say 70% with cable and 30% with "local TV".

When cable was first set up the powers that be required them to carry Canadian content. The "local tv" as it were. The local stations were given a national voice. More advertising revenue due to more viewers.

Now they want more money.

(who doesn't).

Do I jump to the Canadian station to watch: Survivor/american idol/dancing with the stars/Daily show/colbert report/Leno/obrien/letterman/simpsons/wheel of fortune/jeopardy/grey's anatomy/king of the hill/family guy/the office/my name is earl/two and a half men..... etc etc etc.

Most of the shows I watch are on the specialty channels... And some of them (like stargate) are even Canadian.... Unlike the average evening lineup for our "local" TV.

And so I propose. If cable is required to pay to carry the "local" channels... then they also be allowed to choose if they want them or... to not pay and not carry them. (thus reducing our cable bill)


But further to the "tax that the local tv thinks cable will eat". I bet it goes straight through just like, oh say BC's carbon tax. BC taxes CN CP to move my grain though to port. And it shows up on my bill as a carbon tax for the exact same amount it costs the "polluter". Companies do not pay taxes. (like this tv tax). People (consumers) pay every penny.

Like Jennifer I would like to see things be earmarked. but if I give you $100 to spend on 1... whats to say you don't take the money you were already spending on 1 and spend it on 2 instead... the new money is still being spent like you wanted?? Earmarking generally doesn't work.


And lastly to borrow a quote from Canadian sense "As an alleged paid troll, conbot, denier, moron, a favourite of the censor bedwetter brigade I appreciate the opportunity to challenge your views on your blog."

Thank you Jeff, from another knuclkedragger. :)

PeterC said...

I guess my only comment is that cable companies are going to raise prices anyhow.

Right now, most of the cost of my TV is in having the cable companies plan out a schedule of channels which require me to pick up as many useless and unwatched channels as possible. I believe I'm paying 2 to 1 for channels I do not watch. Strange how that is "cheaper" for me.

Meh, TV bad, reading good. ;)

Barcs said...

I don't think that is strange at all Peter..... given that it is the CRTC that has to approve those packages for the amount of "Canadian programming" in them (and those packages are all nearly perfectly the same across all providers)

It would seem that your problem is more with the government regulation of the cable industry than with the private providers.

Wilson said...

Squeezing more money out of Canadians is not the answer.

For capitalists, squeezing money out of whoever has it is always the answer, whether it's the answer or not.

Barcs said...

"For capitalists, squeezing money out of whoever has it is always the answer, whether it's the answer or not."


I keep reading comments like that... and wondering if they really mean only capitalism.... or if they forgot to include the word socialism too.

The difference between the 2 seems to me just the difference of who is asking for more money. (and of course the amount and type of work someone is willing to do to get it)

Bob said...

I look forward to the day when I would have the freedom to subscribe to any satellite service that I want, including DIRECTV where I can get 130 HDTV channels ... far more than from either Shaw Direct or Bell TV. And movies in 1080P ... the only way to watch movies. And no more of this simsubbing done by Bell TV and cable companies! It is so irritating, especially when it results in inferior picture and sound quality. I wouldn't miss the local stations for a second, because I rarely ever watch them!