Kevin Crull, Bell Media’s President delivered a much-anticipated keynote speech at the Prime Time in Ottawa conference on Friday. Titled “The New Reality: Broadcasting in Canada”, Crull’s claim was that the new reality for broadcasting in Canada is unsustainable and requires massive regulatory change. While Crull argued that Bell doesn’t want protection (in fact, incredibly claimed that a company that has benefited from foreign investment restrictions, genre protection, and simultaneous substitution has never had protection), he proceeded to outline a series of radical reforms that would raise television fees, block access to U.S. channels, violate net neutrality rules, and make Netflix less attractive to consumers. Couched in terms of “level playing fields” and “secure rights markets”, the speech was fundamentally an admission that given the competitive challenges, Bell’s hope is for a regulatory overhaul.
The key slide within the presentation can be found here. Crull certainly spoke about creating great content, though on the previous day Bell executives cautioned against programs that are “too Canadian.” The major focus of Crull’s talk wasn’t on content creation – the overwhelming majority of Bell Media’s leading programs are licensed from U.S. broadcasters – but rather on proposed changes to the regulatory framework.
Bell Calls for New TV Fees and Less Consumer Choice
Crull’s talk renewed a call for payments for over-the-air television channels. This is an old issue that the conventional broadcasters regularly raise, only to lose time and again. Many will recall the battle several years ago pitting the “TVTax” vs. “Local TV Matters” over whether there should be an additional fee paid by cable and satellite subscribers for conventional channels. The issue ended up at the Supreme Court of Canada, which ruled against the payments in 2012. If Crull and Bell Media get their way, the debate will start again with lobbying pressure to enact legislative changes to allow for a new TV tax.
Crull and Bell Media also want U.S. broadcasters blocked from Canadian cable and satellite packages. [While Shaw (Global) has not asked for U.S. signals to be blocked, an executive raised similar concerns at a conference a week earlier, suggesting that if we really cared about the Canadian system, we would have blocked U.S. signals years ago.] Crull framed the issue as critical to creating a secure rights market, since Bell Media licenses U.S. programs and feels that competition from U.S. channels showing the same program is unfair. Crull acknowledged that simultaneous substitution (substituting the U.S. feed for the Canadian feed) provides some protection but warned that it is an insufficient solution (plus the CRTC has ordered a ban on simsub for the Super Bowl starting in 2017). I’ve argued that simsub is becoming less important and Crull seems to confirm it, seeking to do away with it altogether by blocking access to U.S. content.
The Bell position is remarkable since blocking access to channels to which Canadians have had access for decades (and which was the foundation of building Canada’s cable systems) is an obvious political and policy non-starter. Bell is arguing for less choice for consumers, claiming that Canadians should be satisfied with access to the programs it (and other Canadian broadcasters) licence. If anything, the Internet is leading to greater choice and options for Canadians that want access to U.S. programs. Blocking content feels like the last refuge of a company that simply cannot compete with greater consumer choice, particularly with the imminent arrival of pick-and-pay channels. Consumers will soon be able to pick the channels they want to purchase alongside new ways (Internet streaming, over-the-top video services, iTunes downloads) of accessing U.S. programming. Bell somehow thinks the solution to these options is to create less choice by blocking access to popular U.S. channels on cable and satellite services.
Defending Net Neutrality Violations
Bell wants to overturn the CRTC decision on its Mobile TV service, arguing that it can’t offer it unless it has a competitive advantage by offering access that does not count against consumers’ monthly data caps. In other words, it can’t compete with the Internet, which offers a far richer and broader array of content than licensed mobile TV services. The CRTC’s concern was that disadvantaging competitive services would reduce innovation and consumer choice:
the Commission finds that the preference given in relation to the transport of Bell Mobility’s and Videotron’s mobile TV services to subscribers’ mobile devices, and the corresponding disadvantage in relation to the transport of other audiovisual content services available over the Internet, will grow and will have a material impact on consumers, and other audiovisual content services in particular. As an example, it may end up inhibiting the introduction and growth of other mobile TV services accessed over the Internet, which reduces innovation and consumer choice.
This is net neutrality 101 and countries such as the Netherlands have experienced the benefits of net neutrality rules with respect to online video. In fact, researchers have found that countries with restrictive data caps are particularly vulnerable to “zero-rating” plans such as that offered by Bell. Crull made it clear that Bell will withdraw the service if cannot discriminate against competing services with respect to data charges.
Fighting a Losing Battle with Netflix
Crull’s talk made it readily apparent that Bell is desperate to counter the popularity of Netflix. Crull also framed this concern as a rights market issue, stating earlier in the conference that Netflix had an artificial business model with one-third of its business based on piracy. The claims of piracy refer to Canadians that access U.S. Netflix using a virtual private network. Leaving aside the fact that this hardly constitutes piracy, the real concern for Bell surely isn’t that some Canadians access U.S. Netflix. It is that Bell is struggling to compete with Netflix. Indeed, Crull also stated that “$8 or $9 a month doesn’t pay for the content that people are enjoying today. It just doesn’t pay for it.” That may be true in Bell’s business model, but it is not true for Netflix, which operates globally and generates far larger revenues and spends far more on content than Bell possibly could.
The claim that access to U.S. Netflix is a major problem for Bell just doesn’t add up. First, everyone agrees that Netflix has millions of Canadian subscribers who do not access U.S. Netflix. This is a big business that will steadily lead to more cord-cutting regardless of access to some additional titles through the U.S. Further, there are many programs that Netflix licenses that are accessible on both the U.S. and Canadian services with VPN use irrelevant for the purposes of rights.
Second, the content on Netflix – whether Canadian or U.S. – rarely competes directly with CTV or other Bell channels. Netflix offers original content, movies, and television shows that have already aired on conventional television. That is not the Bell model for its broadcast services. The two may compete for viewers, but they are watching different things. Even if there were Canadians who watched only U.S. Netflix and only programs not available in Canada, they still would have little to no overlap with CTV or Bell’s specialty services.
Third, Bell now offers CraveTV and it is true that it may obtain exclusive licenses for content in Canada. Yet Crull admitted during the conference that CraveTV will never make money. It is not designed as a standalone service to compete with Netflix. Rather, it is designed to encourage viewers to maintain their satellite packages by adding an online video component for a few dollars per month. In fact, CraveTV has positioned itself by promoting content such as Seinfeld or HBO programs, shows that cannot be found on U.S. Netflix.
Since Bell struggles to compete with Netflix, it is left to find ways to make the service less attractive to Canadian consumers. Crull was careful not to call for blocking VPN use (as a Rogers executive did), instead calling on Netflix to use different mechanisms such as credit card address to identify non-U.S. subscribers. This suggestion is reminiscent of the failed attempts to stop Canadians from accessing U.S. satellite services many years ago. Netflix will have no interest in making the change nor should they. It will stop those that access U.S. Netflix once rights holders stop licensing content on that condition, something that has presumably yet to happen.
Bell announced that it completed its $3.2 billion acquisition of CTV on April 1, 2011. Less than four years later, company executives say that their business is unsustainable and effectively admit that they cannot compete. In most sectors, that would be grounds for unhappy shareholders and corporate change. In the Bell world, it means intense lobbying for radical regulatory reform to raise television fees, block content, violate net neutrality, and fight Netflix.
Bell’s arguments are akin to Air Canada and WestJet demanding that VIA stop running its afternoon express train between Montreal and Toronto – where the downtown-to-downtown travel time is about the same as flying – because the railroad is syphoning off passengers who don’t want the hassle of marginal service, fees beyond the ticket price for everything and the nightmare of shuffling through security.
As a one-time Bell customer, I suggest that before demanding even more protection from its customer base Bell ought to look at its own awful schedule of programs, its poor customer service record and its exorbitant pricing structures.
Why should traditional cable and program providers be exempt from the disruption that comes with new technology if they are so slow to adapt to it?
Don’t worry, VIA has added their own fees beyond the ticket price!
When was the last time you used Viarail? I used it back in December and paid barely above 80$ round trip between Montreal and Toronto.
I just checked my last VIA ticket, and the only addition to the base fare was HST. Where did @Jason get his information?
Actually, WestJet and AirCanada regularly *do* complain about VIA rail.
So does Greyhound. It’s very very very sad really… wish we have a government that could apply carbon taxes properly.
Bell’s “Internet” is behind on pretty much every metric I have.
How does someone rise to head a huge corporation like Bell or Rogers when they can’t figure out for themselves that an unsustainable business model means that THEY have to find a new way to make money.
Both Rogers and Bell executives have essentially come out and said:
“We can’t make money like we used to, so we need to make things worse for our customers.”
The problem is that they are used to the old fashioned billion$ corporation mentality, and that’s to use other people’s money to make money. Historically, they have done what they are proposing to do all along, and that is to lobby for rules and regulations which allow them to dip feed us what they want (not what we want or even pay for) for whatever money they want to gouge us for. The don’t have to be sustainable, they don’t have to make a sensible business, they don’t have to do anything except rake in the cash when we have no choice. Oh, but choices have arisen? Time for more lobbying. Only time will tell as to how much clout these businesses have with the powers that be. What I’m not looking forward to is more of the world getting their media from the internet (am actually getting zero amount of news from tv now and getting more and more media from the internet too) which will result in these media barons simply raising the price of internet service at dribbling speeds and ridiculous caps. So far not a big issue but as you want more from the internet, and more people do, their “business model” will simply shift to gouge us there.
You are 100% right.
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Half the people I know are getting streaming boxes with xbmc installed and cutting the cable. I am going to be doing that as well as Eastlink doesn’t offer anything I want for their prices. It’s true what a lot of consumers are saying about Bell and Rogers, which is stop gouging us for medicore content. Netflix Canada is guilty too with their crappy Canadian content. The new releases Netflix Canada gets are out over a month earlier in HD on yts.re.
I’m trying to understand who told Bell & Rogers that you had to go buy US TV shows? Did consumers ask you to go buy shows from CBS, ABC, FOX & NBC when we already get those stations on basic cable or via OTA?
If your model doesn’t work, then change it. Why don’t you try actually competing and offering unique quality CanCon instead fulfilling current CanCon rules with
“low-cost news, current affairs and talk programs in off-peak hours. It is usually not difficult to fill the daytime schedule with a sufficient amount of Cancon, often through reruns, while two-thirds of the latter requirement can be filled simply by airing an hour of news every night at 6 pm and again at 11 pm. ”
There is no need for Canadian TV networks in this day and age based on the current setup. All we need is a few Canadian news stations and the CBC.
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This relentless pursuit of the “metered internet” model may very well be its own undoing. These statements by Crull just helps to illustrate the real reason the large providers want everyone to accept this absurd view of bandwidth being a “depletable resource”…
“Bell.. arguing that it can’t offer it unless it has a competitive advantage by offering access that does not count against consumers’ monthly data caps.”
“Bell will withdraw the service if cannot discriminate against competing services with respect to data charges.”
First, they create the “scarcity” model, immediately drawing the inappropriate parallel of bandwidth being somehow similar to electricity.
Then, they demonize the idea of the legacy account, even going as far as to paint a legacy customer into the image of a pirate and freeloader, simply for using the access he/she paid for. (“Bandwidth Hogs”, “Stealing others’ fair share”, “Torrent and other piracy applications”, etc.)
Over time, people have either become numb or just sick of the argument for a “metered” internet, and have seemingly fallen into a mind of half-acceptance about the practice.
Now, the incumbent providers want to dictate policies, using this red herring as the base of entitlement in most of their demands.
Lately, I find myself thinking back to the days when there was only over-the-air tv channels, which were completely paid for by the ads in their broadcasts. Later, cable companies emerged, collecting monthly charges to rebroadcast these stations, yet the ads were never removed. (Network revenue had to continue while letting the cable companies collect theirs.)
Fast forward to now, and we see the original stations as being subject to all sorts of control, fee, and access issues, even though we can still receive them all over the air.
I realize part of this conundrum would be because the same people who are providing ACCESS via alternative venues to some of these channels are also now the OWNERS of these channels/networks themselves (such as Bell with CTV). The rest, I really don’t quite get, but it certainly shows again how service providers should never have been allowed to also be content providers.
I realize that the govt/CRTC want to take advantage of economies of scale on behalf of all consumers, but isn’t it time to separate the content providers from the information hookers? How else will we ensure that internet providers give us good quality connections that motivate the content to be competitive?
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Those in areas in proximity to TV transmitters should consider getting an
antenna. In the GTA, for example, it’s not difficult to set up a system to get 20+
channels, and OTA HD is better then what Bell or Rogers provides. I’ve been
cable free since 2011 and get 25+ channels. I refuse to pay those rip off prices.
Anything else I want to watch, I’ll stream off the web. Oh, and if Bell and
company try to kill OTA here, Then I’ll be watching 10+ channels from the US.
I’m sure the CRTC/government will love that !
I concede that Crull isn’t crazy to be upset on the content rights issue. It’s pretty easy to use a DNS service, gain access to Netflix worldwide and stream a range of movies and shows that are supposedly exclusive to CraveTV. But really, this is not going to be a problem over the long term. Licensors aren’t exactly thrilled to see their rights undermined. They are taking steps to respond, whether it’s through selling rights on a global (rather than territory) basis and/or demanding better geo-restriction enforcement from Netflix. Despite my limited faith in the free market, this is the sort of thing that the market is good at sorting out.
So why is it that Bell can’t compete? The best explanation might be because they don’t want to.
Sounds like somebody needs a new business model, but they were so focused on the old one, that they don’t even understand what they’re competing with today.
Won’t get much sympathy from Canadians!
Sigh.
Bell is to Netflix (and other innovators) as Edison was to Tesla.
Unable to adapt, unable to change and yet in the position of power that allows them to bully their competitors.
If you want to hurt Bell, cut the cord.
The sad, cold reality is that the Canadian broadcasting model Bell needs to survive has only been sustainable because of out-dated licensing, ogopolistic business models supported wholly by government legislation.
Bell is NOT competing with NetFlix, VPNs or regulatory issues. They like ALL other traditional broadcasters long protected with exclusive licensing and trade agreements are now having to compete with the long promised innovation of the Internet.
Attracting MILLIONS of paying customers using the Internet is insanely easy and cheap. Especially if you have a great product or service. Traditional borders are becoming the biggest barriers to trade and that is why most of the countries that still use legislative barriers to maintain a domestic broadcasting model are pushing hard for trade agreements like Trans-Pacific Trade Partnership.
Trade agreements are large corporate content sellers (among and very long list of other corporate interests) last hope in controlling the content they control in their local markets. Without specific protections built into these secret trade agreements their business models will evaporate virtually overnight. Essentially what these agreements are doing is replacing physical borders with virtual ones while maintaining the barriers that support failing business models.
When in peril, seek government assistance. Especially if your business model is wholly dependent on the state for its continued existence. House of cards, anyone?
Where is CTV’s CANADIAN CONTENT on PRIME TIME….PRACTICE WHAT YOU PREACH…….
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