CTVglobemedia Submission

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Submitted by CTVglobemedia Inc. 2010-07-13 20:30:32 EDT
Theme(s): Building Digital Skills, Canada's Digital Content, Digital Infrastructure

Improving Canada's Digital Advantage — Strategies for Sustainable Prosperity — Consultation Paper on a Digital Economic Strategy for Canada

  1. CTVglobemedia Inc. ("CTVgm") is pleased to submit the following comments in response to the above-referenced consultation paper entitled Improving Canada's Digital Advantage (the "Consultation Paper") and wishes to congratulate the Government for taking this initiative.
  2. CTVgm is Canada's premier multimedia company with ownership of CTV, Canada's #1 television network, and The Globe and Mail, Canada's #1 national newspaper. CTV Inc. owns and operates 27 conventional stations across the country, with interests in 30 specialty channels, including Canada's #1 specialty channel, TSN. CTVglobemedia also owns CHUM Radio, which operates 34 radio stations throughout Canada, including CHUM FM, Canada's # 1 FM station.
  3. Given our diverse multimedia interests and our use of digital technologies throughout our media properties, the results of this consultation are of great importance to us.

    Summary

  4. CTVglobemediagm is a leader in the digital media space. Our continued success depends on the creation and availability of high quality Canadian content, building the infrastructure and investing in digital skills. It is these themes that our submission focuses on.
  5. CTVgm will continue to invest in these three key areas and develop content that will resonate with all Canadians on a borderless platform. The way to foster the development of digital media in Canada is to help ensure a stable traditional broadcasting model to supply the content, and allow content providers to freely experiment and innovate without regulation on digital platforms.
  6. Digital media remains dependent on content from traditional television and currently acts as a complement to linear television. Under the right conditions, digital media in Canada will continue to grow from its relatively nascent state. One of those conditions is that content providers must have the ability to own exclusive broadcast rights on television. A balanced copyright regime that supports creators, consumers and businesses is also important.
  7. Finally, the Government has mandated broadcasters to transition from analog to digital in order to provide new spectrum for wireless communication providers and as part of the digitizing Canada's infrastructure. This transition is being done at great cost for broadcasters without any return or benefit. Consequently, given that the Government is supporting the expansion of broadband throughout Canada, it would also be appropriate for the Government to support broadcasters' conversion of their transmitters. This could be achieved by setting aside a reasonable portion of the funds raised from the Government's spectrum auction, made possible by our transition in the first place.

    CTVgm is a Leader in the Digital Media Space

  8. CTVgm is pleased to see that the Government in its Consultation Paper recognizes that the private sector is investing considerably in Canada's digital economy through digital media and digital infrastructure. CTVgm is no exception to this. For our part, we are well on our way to meeting many of the challenges indentified in the Consultation Paper, including ensuring the competitiveness of our digital properties; investing in our digital infrastructure; creating Canadian content for a global marketplace; and helping to ensure that Canadians and businesses have the skills and knowledge to participate in Canada's digital economy.
  9. In the digital media space, CTVgm is recognized as a leader and, from an audience perspective, we are highly competitive with other Canadian and foreign media companies. We were the first Canadian broadcaster to make full television episodes available to stream online and we are very proud that CTV Website consistently ranks as the number one Canadian-owned online video destination.1
  10. Nowhere was our leadership more demonstrable than the Vancouver Olympics where, among many other firsts for CTVgm, we set an all-time record for online viewership for a Canadian broadcaster by providing Canadians with a cutting-edge digital Olympics experience beyond anything that Canada (or the world) has ever seen before. In particular:
    • Canadians viewed 28.5 million videos, totaling 7.2 million hours of video consumption.2 This amounted to a staggering 6.2 petabytes (or 620,000,000,000 megabytes) of video being delivered through our Olympic-branded websites (CTV Olympics and RDS Olympiques (in French only)) during the 17 days of the Games. For comparison, a high traffic Canadian Internet site would serve approximately 2 petabytes per month. In addition, nearly half of all Internet users in Canada visited our two websites during the Games, totaling 12.3 million unique visitors.3
    • As well, our Olympic-branded websites' built-in video player streamed video in HD and allowed viewers to pause, rewind and review key moments while at the same time view results, statistics and participate in a live chat. In addition, an all-encompassing viewers' guide was created to help Canadians navigate the television options as well as the 14 channels available online.
  11. CTVgm was able to provide this unprecedented choice and access to the Games in part because of the experience gained through our other media properties where we also provide a significant amount of online content. More specifically:
    • CTVgm properties combined to serve over 580 million video views over the last 12 months.4 This is equivalent to nearly 1.6 million videos per day or about 62,000 videos per hour. As noted above, this ranks us as the number one Canadian-owned online video destination.
    • TSN Sports News and Headlines is recognized as a top sports destination online in Canada and RDS.ca Website (in French only) is the undisputed #1 sports web site in French Canada, with close to 28 million videos streamed in the last six months.5
  12. With respect to the presence of Canadian content in the digital environment, CTVgm notes the Government's statement that creating Canadian content for a global marketplace is a key challenge. Recognizing this, as well as the cultural importance of providing Canadians with Canadian content online, CTVgm has, for several years, moved aggressively to support and promote Canadian content online in three key ways:
    • By making virtually all of our Canadian television programs available to stream online, either through our own website, or through iTunes.6 In fact, we were one of the first Canadian broadcasters to make shows available on iTunes and Apple praised our technical integration as being one of the best.
    • Second, by providing live streams of Canadian events, including Canada for Haiti, We Day and The Giller Awards, as well as on-demand performances from The Junos and MMVAs. In just two weeks following the 2010 MMVAs, Muchmusic served more than 1 million MMVA-related videos.7
    • Third, by allowing for user participation through our interactive websites. In fact, it was in 2003 that we first ventured into this area, in conjunction with the Canadian production company Epitome Pictures, to launch one of Canada's first social networks in an extension of Degrassi: The Next Generation. More recently, we have ventured into the area of user-generated content with Upload Yours, a portion of the Comedy Network website designed to help discover new Canadian comic talent, and for which we are now producing a program that will be aired on the Comedy Network and streamed online.
  13. To date, CTVgm has enjoyed great success with our viewers and readers with our digital media content initiatives. We have invested resources, both human and financial, to achieve this and we are constantly looking to the future to see how we can improve our media offerings for Canadians.
  14. CTVgm's audience success described above has been achieved in part by being responsive to evolving consumer behaviour and demands, and in part by providing our digital team with the flexibility to experiment and innovate. For example, when CTVgm bid for the broadcast rights in 2005 to the 2010 Olympics, what we dreamt of in the digital space did not exist five years ago. But by staying at the forefront of the digital revolution in broadcasting, studying consumer behaviour and ultimately responding to their needs, our digital team gave Canadians an experience beyond anything they had before. In a sense, we gave our digital team at the Olympics their science lab in which to experiment and train staff and we are now applying the lessons learned throughout CTVgm.
  15. This type of experimentation and flexibility is crucial for broadcasters, and indeed all Canadian cultural institutions, in order to benefit from developments in digital media and to prepare for the future.

    A Successful Online Business Model Remains Elusive

  16. However, even with our online audience successes, the financial return has been extremely modest. To date, a small percentage of our revenues are derived from online. Moreover, while Internet advertising overall has grown rapidly over the last decade, only a small portion of this — approximately 1% — is targeted to video on the Internet. And importantly, we now live in a world where a virtually infinite number of foreign and domestic websites compete with us directly for viewers, listeners and advertising dollars.
  17. The nascent state of our online business model is why we use the online platform as a complement to our traditional television platform at this time; it is a promotional tool for our television services and it provides an additional window for viewers to watch those programs on another platform. In fact, the content that CTVgm and other Canadian broadcasters put online is for the most part, content from our traditional media business. CTV will continue to use the online platform as a valuable promotional tool regardless of how our online business model evolves.
  18. Notwithstanding the elusiveness of a successful online business model, CTVgm has embraced the digital environment and will continue to do so. While this is currently only a small part of our business, we are confident that we can grow it given the right business conditions. These include maintaining our ability to purchase exclusive online broadcast rights which are fully respected; something that is in sharp contrast to our traditional media business. It is ironic that the exclusivity of broadcast rights are better respected in the 'wild west' of the digital marketplace than in our traditional media business in Canada where our rights are infringed through over-the-air broadcasts coming in from the United States and other markets domestically.

    Government Should Not Regulate the Digital Environment

  19. The right business conditions for digital success also include the Government taking a hands-off approach to regulation. This allows us the flexibility described above, and the ability to compete on a level playing field with the rest of the world. Both of which will help ensure a strong, competitive broadcasting sector in the digital environment. Consequently, CTVgm urges the Government not to impose regulations that hamper the ability of media companies to innovate.
  20. CTVgm applauds the recent confirmation of the Canadian Radio-television and Telecommunications Commission (the "CRTC" or "Commission") not to regulate online activities. In Broadcasting Regulatory Policy CRTC 2009-329,8 the Commission determined that imposing the traditional broadcasting regulatory framework on broadcasters who operate in the digital environment would not be in the best interests of the sector. This decision confirmed earlier policy decisions by the CRTC in 1999 and 2007.9
  21. CTVgm firmly believes that the Commission made the right decision and like the CRTC, the Government should avoid regulating the digital environment. Any regulation would result in a competitive disadvantage for domestic companies as it would inevitably exclude the foreign players that we openly compete with for both domestic and international audiences online, and it also risks hampering our ability to be flexible to consumer demands. The Government must guard against creating a two-tier system where Canadian players are regulated and others effectively operating in Canada are not.
  22. Moreover, the achievements we have made to date were done so in an unregulated digital environment and for the most part, on a level playing field with our competitors. To begin to regulate any part of the digital media environment — be they broadcasters, producers or distributors participating in digital space — would be harmful particularly when no one can predict what the digital environment will look like in the future.
  23. Another aspect of regulation is copyright. To be clear, CTVgm does not take issue with the recognition of copyrights and recognizes that fair compensation for creators is essential regardless of whether their works are used in the traditional media space or online. In this regard, we were pleased to see that the proposed Copyright Modernization Act ("Bill C-32") strikes a balance between creators and users of copyright.
  24. However, given that the Government has expressed a desire to ensure that our copyright legislation fosters competitiveness and investment in Canada, CTVgm believes that current process of collective administration for copyright is a competitive disadvantage to achieving this goal. Copyright laws should not only give creators and consumers the tools they need to confidently participate in the digital marketplace, but they should also give businesses the same tools.
  25. In this regard, CTVgm would like to see streamlining of the Copyright Act to reduce the layering and complexity of payments. In our view, this should be added to improve Bill C-32 as it is an essential part of copyright reform. A streamlined and transparent collective administration process will encourage new investment in Canada's cultural sector.
  26. CTVgm looks forward to expanding on these comments as well as providing additional comments on Bill C-32 during the parliamentary committee review of the bill.

    Building Upon Our Digital Skills

  27. The importance of Canadians acquiring and maintaining digital skills in order for Canada to improve its digital advantage cannot be underestimated. For CTVgm's part, the recent skills and knowledge that our digital team developed through the online offerings we provided to Canadians during the Vancouver Olympics were invaluable. We are now analyzing how we can take this new understanding and apply it to other aspects of our business.
  28. While CTVgm is ensuring that our employees are maintaining and updating their digital skills in order to keep us at the forefront of the digital media environment, we do recognize that overall there is a need in Canada for more digital skills, both in terms of employees and businesses. To that extent, we encourage the Government to foster and support education, retention, and ongoing training initiatives specific to this sector.
  29. We also note that digital skills cannot be taught using outdated methods or technologies, and consequently the Government needs to ensure that educational institutions have the resources to invest in technology and keep up with the rapid rate of change in this area — both from an infrastructure and course curriculum perspective. This is likely one of the largest and most necessary challenges for skills development in Canada.
  30. Moreover, although the rate of technological change will require ongoing investment in infrastructure, it is crucial that the Government support these investments through both incentives and direct funding. Investing in the digital economy will have positive returns as it will allow Canadian digital businesses to thrive, remain in Canada, and focus on what they can contribute to our economy.
  31. Finally, ensuring that every Canadian household has access to broadband and the devices necessary to both access and feed back into the digital environment is critical. This will help ensure that all Canadians have equal access not only to digital media, but also e-commerce, e-learning, e-health and other crucial areas going forward. It also has the potential to give Canadian online businesses access to each and every Canadian.

    Digital Transition and Access to Spectrum Requires Government Support

  32. An important element of this consultation relates to building a world-class digital infrastructure and access to spectrum. This issue is of great concern to CTVgm as it has a direct impact on our conventional television business — our CTV and /A\ stations — in the short term. Based on the CRTC's digital transition requirements, CTVgm is required to transition 22 analog over-the-air transmitters in mandatory markets to digital by August 31, 2011.
  33. This transition to digital is not necessary from a technological perspective, as the analog over-the-air transmitters operated by Canada's conventional television sector are able to continue to be used for years to come. However, we recognize that this process encourages digitization and will allow the Government to reclaim spectrum for use by wireless communications providers, which will garner significant financial benefit at auction, expected to be in the billions of dollars.
  34. Our ability to complete the transition will require a concerted effort from all stakeholders including the Government, who will need to inform consumers about the pending changes, including the resulting loss of signal for some, as well as potentially fund converter boxes, as other countries have done. The transition also requires a stable revenue base for conventional television to be in place and the timely processing of technical and regulatory requirements.
  35. From a cost perspective, to transition the 22 CTV and /A\ transmitters in the mandatory markets as defined by the CRTC alone would amount to nearly $30 million. And, to convert all CTVgm transmitters, its main transmitters and rebroadcasters for both the CTV and /A\ stations beyond the mandatory markets, would cost an additional $106 million. This does not include the additional equipment costs, such as upgrading our master controls.
  36. As the Government has noted, the costs of upgrading equipment and building new infrastructure can be immense, especially in our geographically challenging country. Despite continuing to experience significant financial challenges, conventional broadcasters are being asked to vacate this spectrum and to incur the associated costs with no possibility of recouping the capital expenditures required to accomplish the transition. It is, therefore, our view that the Government should provide financial support in order for broadcasters to achieve this ambitious undertaking.
  37. Government support to broadcasters for the digital transition would be appropriate and comparable to Government's current funding measures to support broadband access across the country that has the similar objective of reaching and providing digital access to all Canadians. This is also particularly appropriate when one considers that the Government stands to recoup substantial funds from the spectrum that is being vacated. CTVgm believes that Government should support the digital transition by setting aside a reasonable portion of the funds raised from the spectrum auction (currently estimated at $4 billion) to help broadcasters with the conversion of their transmitters.

    Conclusion

  38. CTVgm applauds the Government's initiative to support the growth of Canada's digital economy and to build a national strategy that will encourage Canada's prosperity in the digital arena. CTVgm is committed to continuing to play an active role in this area and invest in our digital properties.
  39. The success of digital media will depend on the creation and availability of high quality Canadian content, building network infrastructure and investing in digital skills. CTVgm will continue to invest in these areas and develop content that will resonate with all Canadians on a borderless platform. The way to foster this development is to help ensure a stable traditional broadcasting model to supply the content, and allow content providers to freely experiment and innovate without regulation on digital platforms.
  40. Canadian content through digital media remains directly connected to content on television and is a complement to linear television. And, Canadian content providers' ability to own exclusive broadcast rights on television and digital media will be a key component to their ability to capture and retain audience attention. A balanced copyright regime that supports creators, consumers and businesses will help achieve this goal.
  41. CTVgm thanks the Government for the opportunity to participate in this consultation process and we would be pleased to provide any further information on request.

Yours truly,

Paul Sparkes
Executive Vice-President, Corporate Affairs
CTVglobemedia Inc.


1 comScore Canada Video Metrix, Videos: May 09-May 10.

2 Conviva, February 12-28, 2010.

3 Based on ComScore Media Metrix Total Internet Audienceof 25 million online Canadians.

4 Source: Omniture.

5 Source: Akamai.

6 Our current online programming offers a comprehensive line-up of Canadian programs, including Degrassi: The Next Generation, Dan for Mayor, Hiccups, The Bridge, Flashpoint and highlights of performances from So You Think You Can Dance Canada.

7 Source: Omniture.

8 Broadcasting Regulatory Policy CRTC 2009-329, Review of broadcasting in new media (June 4, 2009).

9 Public Notice CRTC 1999-197, Exemption order for new media broadcasting undertakings (December 17, 1999), Public Notice CRTC 2006-47, Regulatory framework for mobile television broadcasting services (April 12, 2006) and Broadcasting Public Notice CRTC 2007-13, Exemption order for mobile television broadcasting undertakings (February 7, 2007).

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