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Arm's Length or Strong Arming the CRTC?: Minister Moore's "Mandate Letter" to CRTC Head Jean-Pierre Blais
Early in December a journalist from the Huffington Post, Althia Raj, contacted me about a letter that she had turned up through an access to information request. Sent by then Heritage Minister James Moore to the, at the time, new chair of the CRTC, Jean-Pierre Blais, on his first day on the job (June 18, 2012) the letter lays out what is expected of the incoming chair in a surprising amount of detail, despite the fact that the CRTC is suppose to be independent from the government-of-the-day.
In this so called "mandate letter", Moore lays out a number of "issues of mutual interest" that he hopes he and Blais "can work together on", while remaining mindful of the fact that whatever cooperation does occur must "maintain[] an appropriate level of distance between our two organizations".
After initially reading the letter, I was struck by how much I agreed with many of its goals:
- more room for consumer participation in CRTC proceedings is needed, Moore tells Blais;
- the Commission needs to "comprehensively address consumer affordability and service complaints";
- "consumers should have access to more programming choices and affordable choices across all distribution platforms" (radio, television, broadband networks and mobile devices);
- more "competition, investment, innovation and consumer choices" is needed in telecommunications services, and all with a light regulatory touch but with a keen eye on "consumer protection and participation".
While I like the broad contours of the letter, however, I also think it is unusual, and deeply problematic. Why?
First, because there is no precedent, to my knowledge, of a Minister sending a 'mandate letter' to a new head of the CRTC laying out what is expected of them.
Second, a 'mandate letter' has no basis in the Broadcasting Act (1991) (sections 7-8, 15, 26-28) or the Telecommunications Act (1993) (sections 8, 9 and 12) – the two main pieces of legislation that apply in such matters. Both laws give Cabinet broad powers to issue policy directions and to review, vary and overturn CRTC rulings (Orders-in-Council), but they do not give the Minister authority to do any of these things, or to send a letter telling an incoming chair of the CRTC what the Minister expects of him or her.
Third, while the Minister tries to straddle the awkward zone between respecting the CRTC's independence and framing a mandate around 'mutual interests', the very existence of the letter casts doubt on the regulator's autonomy. As a result, it is impossible to know for certain whether the CRTC's newfound standing as a champion of the Canadian consumer on Blais' watch is the fruit of consumer friendly decisions that have rankled incumbent interests, or the unintended prize of serving up just what the Minister ordered?
Three high-profile decisions in particular have defined Blais tenure to date but they could just as easily be seen as fulfilling the requirements of the mandate letter:
- the CRTC's flat out rejection of BCE's first bid to take-over Astral Media in October 2012;
- the adoption of a National Wireless Code that came into affect in December;
- the recently launched inquiry into wholesale mobile wireless roaming rates at the end of December 2013 after its fact-finding mission found the Big 3 – Rogers, Telus and Bell – to be "charging or proposing to charge significantly higher rates in their wholesale roaming arrangements with other Canadian carriers than in their arrangements with U.S.-based carriers."
Blais seemed to wince when Raj raised the notion that perhaps he was just following orders rather than marching to his own drum. However, he also worked hard to parry the appearance that the CRTC's might be being used for partisan ends. He had to because, ultimately, the legitimacy of the regulator depends on being seen and believed to be independent from the government.
I do not think that Blais is doing the Minister's bidding. However, it is naïve to not see the problem here. It is also naive not to see Blais and Moore as at least rowing in the same direction on the 'consumer friendly' approach to telecom and media regulation.
The consumer focus of the Conservative Government is real, and Blais appears to have little trouble with that. There is also no doubt that the Government chose Blais because it sees him as ideologically allied with them, and probably because of the close relationship that he and Moore cultivated when the former was a copyright lawyer at Heritage – Moore's former home turf.
All of this should have been enough without the Minister firing off a letter that only raises doubts about the CRTC's autonomy while at the same time being of doubtful legal standing or even effectiveness. Furthermore, the letter reinforces views that the Harper Government keeps bureaucrats on a short-leash, while the fact that the letter only turned up through an access to information request only furthers notions that the government prefers to rule in secret rather than in the light of day.
Curious to know what others thought about this, I canvassed scholars, lawyers and former high-ranking bureaucrats to find out what they thought. None of them has ever seen a 'mandate letter' before, but could imagine such a thing, as their replies reproduced below show. Their views about whether such a thing was a good or bad thing are mixed.
David Skinner, Professor, Communication Studies Program, York University.
This sounds intriguing (and problematic). I have never heard of such a thing before. Perhaps obvious suggestions, but have you asked Liora Salter or Konrad von Finckenstein? It would be interesting to know if there is something here and who/what party "invented" it.
Konrad von Finckenstein, former chair of the CRTC (2007-2012), head of the Competition Bureau (1997-2003), Justice of the Federal Court (2003-2007) and now an independent arbitrator of Canadian and international business disputes.
The letter to Blais was indeed unprecedented. Like you I have no problem with the general contours. Strictly speaking it should have taken the form of a direction to the CRTC like the government did on forbearance for instance. Instead they used the more informal letter carefully saying "should" instead of "shall" thereby leaving some leeway to the Commission to differ with the expectations expressed in the letter as it sees fit to do so.
Frankly, I think the letter is useful. It shows a delineation of the government' s overall policy and will avoid any unintentional conflict between the Minister and CRTC yet leaves the CRTC open to go a different way, if it feels circumstances warrant, and allows it to spell out in detail, in an preemptory defense, why it took the decision. Personally as chairman I would have preferred such a letter to the sudden criticism that resulted when the CRTC took a decision the government did not agree with.
By the way you might want to file an access to information request to see if a similar letter regarding broadcasting was sent by Minister Glover to the chair.
Jon Festinger, Q.C., media, regulatory and corporate lawyer and a faculty member of the Centre for Digital Media in Vancouver. He also teaches law at the UBC Law School and Thompson Rivers University.
Having practiced regulatory law for much of my career […], I can say that I have never heard of a "mandate letter". More interesting than my opinion is that of Sheridan Scott former counsel to the Commission and past Commissioner of Competition, heading the Competition Bureau of Canada. Sheridan very recently spoke to my class at UBC Law (Video Game Law) on the intersections of policy, politics & Law. She expressed her opinions and surprise on the subject of procedures being followed by cabinet vis-a-vis the Commission, if memory serves. You can find video of Sheridan's talk here. Her talk starts at 1:03:44.
Sheridan Scott, co-chair of the competition practice at Bennett Jones LLP and Canada's Commissioner of Competition from 2004 to 2009 and Chief Regulatory Officer of Bell Canada before that.
I also believe that this sort of letter is unprecedented but my reaction to it is generally positive. I have always been in favour of policy directions rather than Cabinet appeals, since they necessarily speak to general rather than case-specific issues. While a letter such is this is not the same as a policy direction, and is not subject to the same procedural safeguards, I would nonetheless see it as providing useful context to a regulator that operates at arm's length but not in a complete vacuum. I do not think that it in any way forces the CRTC down a specific road: it instead provides some useful considerations to be aware of in carrying out their statutory mandate.
In the telecom side this direction is nothing more or less than the Policy Direction issued several years ago, so nothing new. On the broadcasting side, there is more guidance but the wording is quite general. Obviously there are many ways for the Commission to provide access to more programming choices and affordable choices and this letter does not prejudge or dictate any of these. Nor are these unusual goals to identify: the CRTC itself often indicates that its decisions are aimed at increasing programming choices and affordability. As far as providing consumer access to broadcasting hearings, this is also something the CRTC has tried to do especially under Konrad's direction, when benefits monies were diverted for this purpose.
If there is one thing I find disappointing about the letter, it is the failure of the government to say anything about the importance of Canadian content. Fostering the development of Canadian content and encouraging its accessibility were clearly amongst the original intentions of the legislators and lie at the heart of the legislation, as the Supreme Court of Canada has recently suggested. This letter can't change that and indeed it suggests the Commission should be mindful of the original intent.
In sum, while this sort of letter is unusual it does not to my mind constrain the CRTC in any material way and provides additional context for the Commission to consider. In any event, I'm not sure there is much of a remedy if the CRTC fails to take any steps in these directions. The government can't issue a policy direction to apply to past policy decisions (though it could issue a direction to influence decisions on a forward looking basis) and on the broadcasting side Cabinet appeals are limited to decisions to issue, amend or renew broadcasting licences only. The scope of Cabinet appeals is broader on the telecom side, and I think this type of ministerial communication is definitely preferable to tweeting what the Cabinet is likely to do on appeal, before the CRTC has taken a decision, as we have seen in the past. And in any event, there is already a Policy Direction in place, and the letter does nothing but confirm this.
Anonymous former senior bureaucrat:
I have also heard from several communications law experts. The consensus view is that the letter walks a fine line — likely inappropriate but not illegal. In the so-called "arm's length" relationship, the length of the arm has never been fixed — but in this interaction it appears to be very short.
With respect to telecoms, the letter references the Policy Direction which is public and in force, so that's a wash.
For broadcasting, the letter, combined with the Section 15 Order, is certainly relevant to anyone participating in the CRTC's consultation on the future of television. Unlike the S.15 Order, the letter cannot in any way be considered binding on the Commission or the Chair. However, the letter gives the appearance of constraining the CRTC's discretion because, ultimately, the government could intervene by way of a formal policy direction if the CRTC's outcome were contrary to the views expressed by the Minister. So arguably this is setting policy by stealth — without the government having to take on the responsibility and suffer the onerous public and parliamentary process of issuing a formal policy direction as set out in the Broadcasting Act. In this context, the letter's release under access to information may be way of managing expectations of interested parties — especially those with a vested interest in the status quo.
When the current Broadcasting Act was being debated in Parliament, the main criticism of the proposed Governor-in-Council power to issue policy directions was precisely this outcome — that the mere existence of the power would so change the relationship between the CRTC and the government of the day that the government would be able to get away with telling the CRTC what it wants without having recourse to the process set out in the Act. This outcome, it was feared, would undermine the independence of the regulator much more significantly than any actual use of the power as set out in law. Since the Act was passed in 1991, this letter is the first documented instance of this criticism and concern having been borne out.
Clearly, Moore's letter to Blais raises fundamental issues about the independence of the CRTC. While views differ over the appropriateness of the letter, nobody thinks the 'mandate letter' is business as usual.
One thing that emerges from these responses is the sense that regulators have been blind-sided by already high-levels of intervention in the CRTC's affairs. This was notably the case when then Industry Minister Tony Clement announced, by all things, a tweet that the CRTC's Usage-Based Billing decision in 2010 would be overturned if the Commission did not go back to the drawing board on its own accord. Duly warned, von Finckenstein ordered the CRTC staff back to the drawing board; a more palatable wholesale bandwidth access rate followed the next year.
Rather than continuing to be blind-sided, it's not surprising that those closest to the fray – von Finckenstein and Scott, notably – think that giving the government even more powers to issue 'mandate letters' might offer greater clarity. Indeed, with a mandate letter in hand all might be clear and no one would be sent back to the drawing board by tweets issued in the middle of the night.
That is understandable, but I have my doubts. Anonymous, it appears, who I can assure is no stranger to these matters, is not so sure either.
I worry that grafting more powers on the extensive ones the government already has will only further eliminate whatever independence the Commission still retains.
Regardless of which of these views is correct, one thing is clear: 'mandate letters' are not 'business-as-usual'. Things need to change, but just how remains up for grabs. Until they do, however, the independence so essential to the CRTC's legitimacy and, the public's trust in it, will remain on shaky ground, and for good reason.
Carleton Study Challenges Claims of Big Wireless Players and Promotes Need for Maverick Brands
Cross posted from Carleton University homepage.
Well, this is a bit of a cheat, but Steven Reid at Carleton University did such a great job conveying the central message of a new report that we put out at the Canadian Media Concentration Research Project that I thought I'd just crib the whole thing and re-post it here. Thanks Steve.
Steven's wordsmithing follows:
Carleton University's Canadian Media Concentration Research project, directed by Dwayne Winseck of the School of Journalism and Communication, has released a report entitled Mobile Wireless in Canada: Recognizing the Problems and Approaching Solutions. The study outlines the state of wireless competition and concentration in Canada in relation to 57 countries worldwide, covering a period of three decades.
"The deep divide between the wireless industry and the government that has erupted over the latter's attempt to reduce domestic and international roaming charges and foster more competition is the focus of the study," said Winseck. "The study challenges the industry's claim that there is no competition problem in Canada and emphasizes the importance of maverick brands that extend the market to those at the lower end of the income scale – women and others who are otherwise neglected by the well-established wireless players."
The report supports the assertion that mobile wireless markets in Canada are not competitive. It offers a comprehensive, long-term body of evidence that places trends in Canada in an international context. The study shows that Canada shares a similar condition with almost all countries that were studied: high levels of concentration in mobile wireless markets.
The difference between the wireless situation in Canada and elsewhere is the lack of resolve to do anything about this state of affairs said Winseck. The study concludes that Canada's situation is not promising, although there are some bright spots on the horizon.
"For the time being, the tendency is to deny reality, even when incontrovertible evidence stares observers in the face," said Winseck. "This, however, is symptomatic of a bigger problem, namely that in Canada the circles involved in discussing wireless issues are exceedingly small and they like to hear the sound of one another's voices. Their members do not look kindly on those who might rock the tight oligopoly that has ruled the industry from the get-go."
The study highlights the importance of emerging maverick brands like T-Mobile in the U.S., Hutchison 3G in the U.K., Hot Mobile and Golan Telecom in Isreal, and Iliad and Free in France.
Maverick brands have many things in common:
- All have faced aggressive incumbents and they tend to disrupt the status quo, pushing down prices, driving massive growth in contract-free wireless plans and unlocking phones.
- They have relied on the state for a fundamental public resource that underpins the entire mobile wireless setup: spectrum.
Incumbents have fought against new wireless companies, challenging governments in an attempt to preserve their domination of the spectrum. In Canada, three companies currently hold 90 per cent of the spectrum: Rogers (41 per cent), Telus (25 per cent) and Bell (24 per cent).
The study shows that compared to the countries included in the study:
- Wireless markets in Canada, regardless of how they are measured, are remarkably concentrated;
- Canadians are first in terms of time the spent on the Internet, GBs of data uploaded and downloaded, smartphone data sent and received etc.;
- Canada is highly ranked when it comes to capital investment in its wireline infrastructure, but lags in wireless investment.
"Whether or not people get the media, wireless and Internet capabilities they need to live, love and thrive in the 21st century depends on making the right choices now," said Winseck. "Those choices are staring Canadians in the face. How we act, and how our government moves ahead, will set the baseline for how mobile wireless media in this country will evolve for the next two decades – the length of the licences being awarded in the upcoming 700 MHz spectrum auction – and probably for a lot longer than that."
An executive summary of this study can be found at: http://www.cmcrp.org/2013/11/18/executive-summary-the-cmcr-projects-wireless-report-mobile-wireless-in-canada-recognizing-the-problems-and-approaching-solutions/
The full report can be viewed at: http://www.cmcrp.org/wp-content/uploads/2013/11/Mobile-Wireless-in-Canada2.pdf
Growth and Concentration Trends in the English-language Network Media Economy in Canada, 2000-2012
This is the fourth post in a series on the state of the media, telecom and internet industries in Canada and has been cross-posted from the Canadian Media Concentration Research project website. It focuses on the growth of and concentration trends in ten sectors of these industries in the predominantly English-language speaking regions of Canada from 2000 until 2012: wireline telecoms, mobile wireless, internet access, broadcast TV, pay and specialty TV, total television, radio, newspapers, magazines and online (see here, here and here for the last three posts in this series) (for a downloadable PDF version of this post please click here).
The data and methodology underpinning the analysis can be found at the following links: Media Industry Data, Sources and Explanatory Notes, English-language Media Economy, CR and HHI English Media, and the CMCR Project's Methodology Primary.
The Growth of the English-Language Network Media Economy, 2000-2012.
As with the rest of Canada, the English-language media economy expanded greatly from $31.7 billion in 2000 to $55.8 billion in 2012. Figure 1 below shows the trends over time.
Figure 1: The Growth of the English-Language Network Media Economy, 2000-2012 (Millions $)
Sources: English-language Media Economy, Sources and Explanatory Notes.
The fastest growing sectors of the English-language media economy have been internet advertising (2,782%), internet access (284%), mobile wireless services (284%), cable, satellite and IPTV (103%) and television (74%). The rapid growth of mobile wireless, internet access and cable, satellite and IPTV are leading to an ever more internet- and mobile wireless-centric media ecology, hence the notion of the network media ecology. For the most part, these trends are similar to patterns in the French-speaking regions of Canada.
At the opposite end of the spectrum, revenue for wireline telecoms has fallen by nearly a quarter since 2000. Newspaper and magazine revenues also seem to have peaked in 2008, and have fallen since then from $4.9 billion to $4.3 billion last year – a drop of 13%.
One crucial thing distinguishes English-language dailies from their French counterparts: paywalls. Two out of ten French-language dailies – Quebecor's Le Journal de Montréal and Le Journal de Québec – have put up paywalls that limit readership to paid subscribers only (albeit with a soft cap that allows several free articles per month). For the English-language daily press, in contrast, twenty-four dailies accounting for two-thirds of average daily circulation are now behind paywalls.
All of the major English-language daily newspaper ownership groups have put paywalls into place over the last two years. Brunswick News (Irvings) led the charge in early 2011, followed by Postmedia (May 2011), Quebecor (September 2011), the Globe and Mail (October 2012) and the Toronto Star (August 2013). Many smaller papers are testing the waters as well (Glacier, Transcontinental and Halifax News). There are no hold-outs among the English-language daily newspapers equivalent to the role played by Power Corporation's La Presse group of papers in Quebec.
While it is difficult to say exactly what accounts for this contrast, the fact that the CBC plays a much smaller role in English-language regions of the country compared to its place within the Quebec media landscape, probably explains much of it. As the fifth largest player with over 5% market share in Quebec, Radio Canada/CBC has maintained a large place for the public service model of news within the French-media ecology, whereas the CBC's seventh place rank and two percent share of the English-language market means that it is correspondingly easier to carve out a near universal role for the commercial news model (see Picard and Toughill). Recent statements by the Globe and Mail about its target audience being households with more than $100,000 in income demonstrate exactly the kind of market failure that makes news a public good to begin with.
Radio still constitutes an important medium within the media ecology and actually grew significantly from 2000 to 2012, with revenues rising from $1070 million to $1,600 million. While revenues dropped for the two years following the financial crisis of 2008, the medium appears to be more resilient than many might have once thought, with revenues increasing ever since and reaching an all-time high last year – a pattern that mirrors trends worldwide.
As I have pointed out many times, the economic fate of the media hinges tightly on the state of the economy in general (see Picard, Garnham, Miege). This can be seen in Figure 1, which shows how the growth of several media flat-lined, declined and sometimes even dropped steeply after the onset of the "great financial crisis. Even fast growing segments like mobile wireless, internet access and total TV were not immune to this, while growth for cable, satellite and IPTV tapered off considerably.
Figure 2 below gives a snapshot of the patterns of growth, stagnation and decline that have taken place within different media sectors since 2000.
Figure 2: Growth, Stagnation and Decline in the English-language Media Economy, 2000-2012
Leading Telecoms, Media and Internet Companies in the English-Language Media Economy
The following paragraphs shift gears to look at the biggest media, telecoms and internet companies in the English-language media. Figure 1 sets the baseline by ranking the sixteen largest media, internet and telecom companies in these areas based on revenues and market share.
Figure 3: Leading Media, Internet and Telecoms Companies in English-Language Markets, 2012
Sources: Media Industry Data, English-language Media Economy, Sources and Explanatory Notes.
As Figure 3 shows, Bell is the biggest player by a significant stretch, accounting for just under a quarter of all revenue. In Quebec, it was also the largest player, with an even larger one-third share across the French-language mediascape. It's share of the national market is 28%.
The two biggest companies – Bell and Rogers — account for 43% of all revenues; the "big four" for 70%: Bell, Rogers, Shaw and Telus. Three of these four companies — Bell, Rogers and Shaw — are vertically-integrated giants, and their reach, as Figure 1 shows, stretches across the sweep of the English-language mediascape.
Quebecor – the fourth biggest media conglomerate in Canada, hardly registers at all, ranking 13th with one percent share of revenues. Its dominance is limited to Quebec. Telus is not vertically-integrated at all, eschewing the idea that telephone companies need to own content to be effective players within the network media industries.
Bell, Rogers, Shaw and Telus' control over communications infrastructure (content delivery) is the fulcrum of their business. Given the massively larger scale of these sectors relative to media content it is not surprising that these four firms rank at the top of the list. Their stakes in content media, while extensive, are modest; Telus is not in the content business at all beyond acquiring rights for its IPTV service, Optik TV and mobile TV.
As Figure 4 shows, between two-thirds and 100 percent of the big four's business comes from control over connectivity and content delivery rather than content creation.
Figure 4: Content Delivery versus Content Creation
Content media are but ornaments on the carrier's organizational structure, but they are being used to drive the take-up of mobile wireless services, broadband internet as well as cable, satellite and IPTV services, as telecom and internet gear makers like Sandvine and Cisco, and the International Federation of Phonographic Industries all observe. Illustrating this point, half the advertised roster of Bell's Mobile TV service is filled with tv networks and specialty tv channels it owns: CTV, CTV News Channel, CTV Two, Business News Network, Comedy Network, Comedy Time, MTV, NBA TV, NHL Centre Ice, RDI, RDS, RDS2 and TSN, TSN2. Whether it ties this control over content and the means of delivering it to our doorsteps and into the palms of our hands in ways that confer preferential benefits on its own services at the expense of other content media and platform media providers and, ultimately, users, is an open question that merits further investigation.
While Bell, Rogers, Shaw and Telus tower over their peers, a dozen or so smaller entities fill out the field: MTS, Google, CBC, Torstar, SaskTel, Cogeco, Postmedia, Eastlink, Quebecor, Astral (before it was acquired by Bell in 2013), the Globe and Mail as well as newspaper and magazine publisher Transcontinental. Several things stand out from the list.
First, these companies' revenues and market shares are less than a tenth of the corresponding figures for the big four. Second, second-tier firms, except Quebecor, are either in the content delivery business or the business of making content, but not both. In other words, they are not vertically-integrated, and depending upon which side they stand, this leaves them vulnerable to the three vertically-integrated goliaths when it comes to gaining access to either content, carriage or audiences, hence the interminable disputes over access to all three resources (see here, here, here, here, here and here for a sample of such disputes).
Third, with estimated revenue of $1,274 million from English-language markets in 2012, Google is a very big player and ranks sixth on the list. Facebook and Netflix, on the other hand, rank 17th and 18th on the list, based on estimated revenues of $182.3 and $114.2 million, respectively, and market shares of .2 and .3 percent. They are not big players on the Canadian mediascape.
The CBC still plays a significant role in English language markets, but it is steadily losing ground. At the outset of the 21st century, it accounted for about 30% of all TV revenue; today that number has been cut in half. Today, Bell and Shaw stand where the CBC stood a dozen years ago, with revenues and market shares nearly double those of the CBC.
In radio the CBC has slipped precipitously. Whereas it stood out within the field in 2004, by 2012 it was on an equal footing with Astral, Rogers and Shaw/Corus, each with between 11 and 14% market share. In English-language regions of the country, it is clear that public service core media have shrunk while the role of the market has expanded enormously.
Concentration in the English-language Network Media Economy, 2000-2012
Beyond the individual companies and their ranking, the most notable point with respect to the English-language media is that concentration levels are lower than in Quebec. While the HHI across all segments of the media combined in Quebec is at the moderate end of the scale at 1,800, in English-language markets it is 1,300 and at the low end of the scale, when we take the media as one large undifferentiated whole.
That, however, is the endpoint of analysis rather than the starting point, and it is essential to climb down from this view from the tree-tops to examine things sector-by-sector and then by broader categories (i.e platform media, content media, online media) before arriving at conclusions for the network media economy as a whole. And it should also be noted that while the HHI score is at the low end of the scale for the network media, the CR4 is not; the "big four" accounted for 70% of all revenues in 2012, as noted earlier – the same level as in French-language markets.
While Bell, Rogers, Shaw and Telus are top-ranked players in many of the sectors they operate in, none are dominant in all sectors. Table 1 below illustrates the point.
Table 1: Rankings of the Big Four by Media
The Platform Media Industries
Figures 5 and 6, below, depicts the trends with respect to concentration levels over time for the platform media industries within the English-language media economy based on Concentration Ratios (CR4) and the Herfindhahl – Hirschman Index (HHI) (see methodology review in the second post in this series and the CMCR project's methodology primer). Unlike the French-language media sectors assessed in the last post, the results are more mixed.
Figure 5: CR4 Scores for the Platform Media Industries in the English-language Media Economy, 2000-2012
Sources: CMCR Project CR and HHI English-language Media.
Figure 6: HHI Scores for the Platform Media Industries in the English-language Media Economy, 2000-2012
Sources: CMCR Project CR and HHI English-language Media.
As Figure 5 shows, all of the English-language platform media industries, except internet access, are very concentrated on the basis of the CR4 measure. Indeed, using the CR4 measure, concentration in each of these areas is similar to levels in Quebec, except for internet access, which is less concentrated in English-language parts of the country than in Quebec. While there has been some fluctuation over time, and a recent dip for wireless and cable, satellite and IPTV providers, there is no long term, significant decline concentration levels across the platform media industries.
The HHI measure provides a more discriminating view, indicating that wireline and wireless are firmly within the 'highly concentrated' range, while cable, satellite and IPTV fell just under the threshold for that designation. In general, concentration in each of these sectors rose in the early 2000s, peaked between 2004 and 2008, and drift downward slowly thereafter. Every segment of the platform media industries, except wireless, is significantly less concentrated than in Quebec.
The first thing to note with respect to mobile wireless service is that is the most concentrated of all sectors reviewed. Second, the English-language market is more concentrated than in Quebec, with the recent downward drift slower in English-language markets than in French-language ones. The most important point in both cases is that concentration is and always has been "astonishingly high", as Eli Noam has recently noted in relation to trends around the world.
New entrant's – Wind, Mobilicity and Public – have gained ground since entering in 2008, but they do not pose a challenge similar to Quebecor/Videotron in Quebec. As a result, Rogers (37%), Telus (29%) and Bell (26%) still dominate English-language markets, with 95% of wireless revenues. An HHI score of 2922 underscores the key point: concentration remains firmly at the upper ends of the scale.
Internet access, in contrast, is the least concentrated of the platform media and un-concentrated by the standards of the HHI, with a score of 1024 and only modestly so by the criteria of the CR method. Concentration levels rose steadily during the first decade of the 21st century but remained low in comparison to other segments of the platform media industries. They have also modestly declined since 2010.
However, the reality on the ground is that when we look closely at the local level, 93% of residential internet users subscribe either to an incumbent cable or telecom company, according to the CRTC 's Communication Monitoring Report, pp. 143-144). In other words, seen from afar, internet access looks remarkably competitive, but up close, it is effectively a duopoly.
In terms of broadcast distribution markets (BDUs), IPTV services have steadily grown to become more significant rivals to the cable and satellite companies. CR4 and HHI scores have fallen as result since reaching their all time high in 2004, but still remain towards the high end of the scale with a CR4 of 88% and an HHI of 2400 — just beneath the threshold for highly concentrated markets.
Figure 7 below shows the market share and relative size of each of the main BDU players. With 79% of BDU revenues between them, Shaw, Rogers and Bell account for the lion's share of the industry, while Cogeco, Eastlink and Telus, each with 3-7% market share, fill out much of the rest.
Figure 7: Cable, DTH & IPTV English-Language Market Share, 2012
Sources: English-language Media Economy, Sources and Explanatory Notes.
The Content Media Industries
The big three – Shaw (Corus), Bell and Rogers – not only dominate the BDU side of the television industry, but the content side as well, although here it is becoming clearer over time that some clear blue water is opening up between Bell and Shaw (Corus), on the one side, and the more modest scale of Rogers, on the other, when it comes to TV holdings. I will return to explore this point further below but for now the main point to made is that, collectively, the big three control three-quarters of revenues across the entire TV landscape, i.e. distribution + broadcast TV and pay and specialty TV channels. Figure 8 illustrates the point.
Figure 8: Vertically-Integrated BDUs and Total Television by English-Language Market Share, 2012
Sources: English-language Media Economy, Sources and Explanatory Notes.
The total English-language television market – excluding the BDU side of things – needs to take account of a crucial fact that has crystallized more clearly in the past few years: the extent to which just two firms – Bell and Shaw – dominate the scene, with Rogers and the CBC falling ever further into their shadow with the passing of time and further consolidation.
Combined, Bell and Shaw controlled 57% of total TV revenues in 2012 before Bell acquired Astral Media, the fifth largest TV company in English language markets. That figure will climb closer to two-thirds once the effects of the Bell-Astral deal become reality in the revenues for 2013 – a point that will be dealt with more fully in next year's version of this post.
The extent to which Bell and Shaw now stand at the commanding heights of English-language TV markets can be gleaned from a quick reprisal of their holdings. Thus, Shaw's acquisition of Global TV and a slew of channels from bankrupt Canwest in 2010 gave Shaw/Corus a dozen conventional TV stations that comprise the Global TV network, additional broadcast stations in Oshawa, Peterborough and Kingston (Channel 12, CHEX TV, and CKWS TV, respectively) and fifty-one pay and specialty channels (Shaw and Corus Annual Reports). It's share of total TV revenues? 27.3%.
Bell's re-entry into the field after re-acquiring CTV in 2011 created an even larger entity with twenty-eight broadcast tv stations and thirty three specialty and pay tv stations (or forty after the acquisition of Astral). Bell's 30% share of all TV revenue in 2012 ranked it as the largest TV provider in the country. Its take-over, in a joint-venture with Rogers, of Maple Leaf Sports Entertainment (MLSE) and a roster of sports channels – NBA TV, LeafTV, GolTV, etc. – with the Competition Bureau and CRTC's blessing last year only compounds the trend.
By comparison, CBC and Rogers are the distant third and fourth tv operators, with 15.6% and 13% share of total tv revenues – roughly half the scale of Bell and Shaw. The CBC had 5 cable TV channels in 2012, while Rogers had a dozen – again, paling in comparison to Bell and Shaw, i.e. 17 in total versus 90+ for Shaw and Bell.
The comparison of these four entities within just the pay and specialty tv domain is especially interesting because, first, this is one of the fastest growing domains of the media economy and, second, because Bell and Shaw's respective stranglehold is greater here than in either broadcast TV or the TV market as a whole. In 2012, Shaw was the biggest player in the pay and specialty channel domain with 33% market share, while Bell followed close behind with 28%. Together, the two accounted for 61% of all revenues. This looks more like a duopoly then either competition or any kind of reference to the big four that lumps these two goliaths together with Rogers, the CBC or, for that matter, Quebecor.
Bell and Shaw's respective share of the pay and specialty TV market will reach new heights in 2013 on account of the Bell Astral deal. Shaw will account for 35% of the market, Bell 34%. With just under 70% share of the specialty and pay TV market between them, this is effectively a duopoly. This is why, for instance, Rogers was not signing from the same hymn sheet as Bell at the Bell Astral hearings or the vertical integration hearings in 2011. Bell and Shaw, however, sang koombaya together on both occasions as everybody else receded from view.
In short, the TV marketplace is bifurcating, with Bell and Shaw at the apex, followed far behind by two mid-size players, Rogers and the CBC, and a smattering of small entities scattered after that: APTN, Blue Ant, CHEK TV, Pelmorex, Fairchild, and so forth. In sum, the wave of consolidation blessed by the Competition Bureau and the CRTC stand as testaments to diversity denied. Canadians and the future evolution of the network media ecology in this country will labour under these conditions for years, probably decades, to come.
Before turning to a quick discussion of radio and then newspapers and magazine to complete this post, I want to depict the trends for the content media across time on the basis of both the CR4 and HHI scales. Figures 9 and 10 depict the trends.
Figure 9: CR Scores for Content Media in the English-language Media Economy, 2000-2012
Sources: English-language Media Economy, Sources and Explanatory Notes.
Figure 10: HHI Scores for Conent Media in the English-language Media Economy, 2000-2012
Sources: English-language Media Economy, Sources and Explanatory Notes.
As has been the case at each other level of analysis, radio stands out as a clear contrast to trends in TV and in the platform media industries. The CR4 is at the low end of the spectrum, with the "big four" having just under 52% of the market between them: Astral (14.2%), Rogers (14.1%), CBC (12%) and Shaw (Corus) (11.4%).
Again, this will change in light of the Bell Astral deal with Bell catapulting from its fifth place ranking and 9.8% of the market to first place with 22% market share. Still, however, relative to the rest of the media, radio will remain relatively diverse.
This conclusion is illustrated more markedly on the HHI scale, with radio falling well into the un-concentrated zone with an HHI of 822.5. Moreover, the trend over the past half-decade has been steadily downwards – although that too is set to reverse in light of Bell's take-over of Astral Media.
The last comments for this post are for the newspaper and magazine sectors which I treat together here, in contrast to separately in the Canada-wide analysis and hardly at all in the French-language media markets, mostly because of limits in the available data. Combining the two enlarges the size of the 'relevant market' and, consequently, diminishes the scale of specific players within either of these markets, nonetheless the analysis is still instructive.
The analysis shows several things. First, concentration levels are not high and have been falling for most of the past decade regardless of the measure used. Second, to the extent that we can speak of the "big four" press and magazine publishers, they are: Torstar (25%), Postmedia (19%), Quebecor (14%) and the Globe and Mail (8%). To be sure, while concentration levels are not sky high, that four entities account for more than two-thirds of all revenue does not seem worthy of celebration.
At the same time, however, this needs to be set against two other realities: first, both industries have fallen on hard times, newspapers more so than magazines, and as the big players stumble, they are losing market share and, in some cases, being broken up, with significant divestitures leading to the emergence of a stronger second tier of daily newspaper publishers: Transcontinental, Glacier, Black Press, notably. These entities now need to be put more firmly on the analytical radar screen.
Concluding Thoughts
We can summarize the general results by sorting different sectors of the network media economy that rank low, moderate or high on the concentration scale according to the HHI. Figure 11 below does that.
Figure 11: Media Concentration Rankings on the Basis of HHI Scores, 2012
Over and above just giving a snapshot of where things stood as of 2012, we also need to distill the key developments over time. Several things stand out.
- the English-language media economy, like its Canada-wide and French-language counterparts, has grown greatly since 2000, although the course of development has been interrupted by economic instability since 2008. For a some sectors, notably daily newspapers, this may, with the passage of time, be seen as the tipping point in which they went into long-term decline, while for others conditions of prolonged stagnation seem to still be in play, i.e. radio and magazines;
- the media economy is increasingly internet- and wireless-centric, and mobile, but TV is still a large and significant driver within the network media ecology – carriage, not content, is king.
- Bell is the largest player in English-language markets with roughly one quarter of all revenues across a wide swathe of media, followed by Rogers, Telus and Shaw.
- the media in English-speaking regions of Canada are less concentrated than in Quebec, except for mobile wireless services;
- high levels of concentration persist across most platform media industries: wireless, wireline and falling just beneath the cut-off point, cable, satellite and IPTV services. Internet access is a partial exception when measured regionally or nationally, but not locally;
- an emerging duopoly is taking shape within the TV landscape, with Bell and Shaw currently accounting for 61% of revenues in the specialty and pay TV universe. This figure is set to rise to just under 70% once Bell's acquisition of Astral and divestiture of several of that entity's TV channels to Shaw (Corus) sets in. The CBC and Rogers lag far behind, with a combined market share between them much less than half the share held by Bell and Shaw;
- as a result of these trends, regulatory battles over access to the three essential resources of the media economy – carriage, content, audience attention – will persist into the future; whether regulators will rise to the occasion any better than they have to date is an open question;
- Internet access, radio, newspapers and magazines stand out as exceptions to these general trends and as media in which greater diversity and some modest competition prevails.
Next post: How do concentration levels and trends in Canada stack-up by international standards?
Growth and Concentration in the French-language Network Media Economy in Canada, 2000-2012
Cross posted from the Canadian Media Concentration Research Project website.
This post focuses on the development of and concentration trends in eight sectors of the network media economy in French-language regions of Canada from 2000 until 2012: i.e. wireline telecoms, mobile wireless services, internet access, broadcast tv, pay and specialty tv channels, total tv, radio and online advertising. It is a follow up to previous posts that looked at these matters across Canada as a whole (see here and here for the last two)(for a downloadable PDF version of this post please click here).
As with the previous posts, the data and methodology underpinning the analysis in this post can be found through the following links: Media Industry Data, Sources and Explanatory Notes, French Media Economy, CR and HHI French Media and the CMCR Project's Methodology Primary. Excellent additional resources for further analysis of the media in French-language regions of Canada can be found through the GRICIS research project at Université du Québec in Montreal and the Centre d'études sur les médias at Laval. Journalist Steve Faguy is also very knowledgeable about the media industries in Quebec.
So what did we find?
The Growth of the French-Language Network Media Economy, 2000-2012.
The media economy in French-language Canada has expanded greatly since 2000. Revenues rose from $9.8 billion to $14.5 billion in the last dozen years and, indeed, the French-language media grew faster than in the rest of Canada. The relatively fast pace of growth, however, has slowed considerably since the "great financial crisis" of 2008, just as has been the case with the rest of Canada and indeed for much of the Anglo European world,
The faster rate of growth relative to the rest of Canada likely reflects the fact that, historically the French-language media economy has been smaller than what its population alone would dictate. For instance, while Quebec's population accounts for about 23% of the national total, in 2012 it's media economy accounted for just over a fifth of the total Canadian media economy (20.6%) – although that was up from just 18% at the turn-of-the-century.
Figure 1 below shows the trends.
Figure 1: The Growth of the French-Language Network Media Economy, 2000-2012
Sources: French Media Economy, Sources and Explanatory Notes.
The fastest growing sectors of the French-language media economy, again similar to patterns in the rest of Canada, have been in internet advertising (2,442%), internet access (524%), mobile wireless services (237%), cable, satellite and IPTV (118%) and, less so, television (34%). By and large, it is the platform media industries and, again to a lesser extent, television that are driving the growth of the network media ecology, adding both to its size and structural complexity.
At the opposite end of the spectrum, wireline telecom has fallen by more than a quarter. Newspapers also saw their revenues decline after seeming to peak in 2008, from an estimated $1,036 million then to $907 billion last year – a drop of 12%.
While these trends areconsistent with the course of events in the rest of the country, and indeed throughout much of the Anglo European world, one important thing distinguishes French-language dailies form the rest of the country: paywalls. Unlike the English-language press where twenty-four dailies accounting for two-thirds of circulation have put up paywalls in a bid to stem the tide, only two dailies out of ten in Quebec representing just under half of average daily circulation – Quebecor's Le Journal de Montréal and Le Journal de Québec – have done so.
Power Corporation's La Presse has resisted the temptation. This difference in the extent to which English- and French-language dailies have embraced paywalls likely reflects the fact that Radio Canada/CBC looms larger in Quebec than elsewhere in Canada, and perhaps cultural considerations as well.
Radio has grown only modestly since 2000. In fact, since 2008, the medium has seen revenue stagnate, largely because of a combination of budget cuts and restraint in government funding of the CBC and flat advertising spend, with the latter largely being a function, once again, of the economic uncertainty since the financial crisis.
One more thing that stands out from Figure 1 is the extent to which the growth of several media flattens or goes into decline after the onset of the "great financial crisis" in 2008. Indeed, several sectors see a dogleg in growth at this time: cable, satellite and IPTV as well as internet access, notably. Even fast growing mobile wireless services slowed, while newspaper revenues dropped.
Figure 2 below gives a snapshot of these conditions based on trends since 2000.
Figure 2: Growth, Stagnation and Decline in the French-language Media Economy, 2000-2012.
Leading Telecoms, Media and Internet Companies in Quebec
Every study of the Canadian media industries highlights the colossal role that Quebecor plays in French-language media, and rightly so. The company's reach across the telecoms, television, newspaper, magazine, book and music retailing landscape is enormous. With over 80% of the sprawling media conglomerate's $4 billion in revenues — $3.3 billion — coming from Quebec in 2012,[i] the company single-handedly accounts for over one-fifth of all French-language network media economy revenue.
While Quebecor no doubt cuts an imposing figure within French-language media, it is not the largest media conglomerate in this respect; Bell is — by a large margin. Figure 3 illustrates the point and shows the top 14 companies and their revenues from the eight sectors canvassed in this post. Figure 4 immediately after that shows what conditions would have looked like if the CRTC had approved Bell Astral Version 1.0.
Figure 3: Leading Media, Internet and Telecoms Companies in Quebec, 2012 (millions$).
Figure 4: Leading Media, Internet and Telecoms Companies in Quebec, 2012 (millions$) — Post Bell Astral Version 1.0
Sources: Media Industry Data, French Media Economy, Sources and Explanatory Notes.
Several interesting points stand out from Figure 3. First, taking all their holdings into account in Quebec, Bell's 2012 revenues of just over $5 billion outstripped Quebecor's $3.3 billion by a large margin. In fact, BCE accounted for more than a third of all revenue in Quebec, which was roughly equal to the next three biggest players combined: Quebecor, Rogers and Telus.
If the CRTC had approved the 2012 version of Bell's bid to take-over Astral, as Figure 4 illustrates, the gap would be larger yet. Under the first version of that failed transaction, BCE's total share of the French network media economy would have been 37.2% versus 22.6% for Quebecor (the consequences of the Competition Bureau and CRTC's approval of Bell's revised bid to acquire Astral in early 2013 will be discussed in next year's post when the effects based on 2013 data will be discernible).
As Figures 3 and 4 show, Bell and Quebecor are in a league of their own. The two vertically-integrated giants tower over their peers, most of whom operate in only one or two sectors. Cogeco is a partial exception because it too is vertically integrated because of its stakes in high-speed internet access, basic phone service, cable tv and radio, but its revenue ($445 million) and market share (3.1%) across the 'total network media economy' are puny by the standards of Bell or Quebecor.
Joining Cogeco are another half-dozen or so second tier players: Rogers, Telus, the CBC, Power Corp, Astral and Google with French-language media revenues in $200-$950 million range. Telus and Rogers' stakes in Quebec are mostly limited to mobile wireless services, although the size of the mobile wireless segment, and the fact that after internet advertising and internet access, it is the fastest growing sector, means that the two comapnies loom large in the province. Google is ranked ninth based on estimated revenues of $268.4 million from online advertising in 2012 and just under two percent share of the entire network media economy (versus $242.2 million in 2011).
The CBC still cuts a formidable presence in the province as well. Indeed, it is the largest player in TV and radio, with a 40% and one-third share of both media markets, respectively, compared to Quebecor with one-quarter of the French tv market and Astral's 27% of the radio market in 2012. The CBC/Radio Canada's major role is probably one reason, as mentioned earlier, why the French-language press has been more hesitant to introduce paywalls, as noted above; it is also why the CBC is so vilified by Quebecor and others in the English-language press.
Power Corps' place as the seventh largest media enterprise in French-language markets gives a sense of the continued importance of the press within the overall mediascape and of the scale of its newspaper interests (i.e. La Presse, Le Nouvelliste, La Tribune, La Voix de l'Est, Le Soleil, Le Quotidien, Le Droit). Power Corp's share of average daily circulation is equal to that of Quebecor's two French-language dailies, Le Journal de Montréal and Le Journal de Québec: 47% — the basis which I use to estimate newspaper revenues for both companies in French-language markets. Independents pick up the remaining six percent of the circulation and revenues.
The French-language newspaper market, in short, is extremely concentrated, and more so than the national situation. Given the importance of newspapers amongst political and business elites, it is this dominance that no doubt draws a critical eye to both companies, and especially to Quebecor given it's sprawling grasp across media, while Bell's relative absence from 'opinion influencing media' seem to give it a freer hand in this regard.
Finally, a number of smaller players with less than one percent market share round out the ranks: Eastlink (.7% market share), V Interactions (.5%), Facebook (.2%) and Shaw (.2%). Together these four companies account for less than two percent market share.
Concentration in the French-language Network Media Economy, 2000-2012
Beyond the individual companies and their ranking, the most notable point with respect to the French-language media is the extent to which just two entities — BCE and Quebecor – dominate the landscape. Together, they account for well over half of all revenues (57%) (BCE's market share in 2012 was 34.7%; Quebecor's 22.6%). And this was before the Competition Bureau and CRTC blessed BCE's take-over of Astral, the 8th largest French-language media company, earlier this year.
The second observation to be made is that concentration trends across the board are considerably higher for French-language media markets than in their national counterparts, except wireless. This is important for several reasons.
For one, it shows that the national measure we rely most on can be insensitive to conditions on the ground at the local/regional level. To put this more bluntly, we under-estimate concentration levels, not exagerrate them. This in turn makes the case that there is a media concentration problem in Canada even stronger.
Table 1, below, depict the trends over time in French-language network media economy on the basis of two standards methods for analyzing concentration: Concentration Ratios (CR4) and the Herfindhahl – Hirschman Index (HHI) (see methodology discussion in the last post and the CMCR project's methodology primer).
Tables 1: CR and HHI Scores for the French-language Media Economy, 2000-2012
Sources: CMCR Project CR and HHI French Media.
Table 1 shows that every single sector of the media, telecom and internet examined here is very highly concentrated in Quebec, except for radio which slipped under the threshold for the designation in 2012.
The Platform Media Industries
One notable trend moving gradually in the opposite direction is the steady decline in the extremely high levels of concentration in mobile wireless services. One thing that stands out in this regard is that Quebecor has emerged as a significant rival to Bell (33% market share), Rogers (29%) and Telus (28%) since entering the market after acquiring spectrum in the last round of spectrum auctions in Canada in 2008.
Quebecor's share of the market has grown to 5.3% (based on revenues) in the four years since it entered the market, effectively demonstrating the viability of the 4th player strategy. Other newcomers, notably Wind, have picked up about 4.7% market share, as well. As a result, Quebecor, Wind and other newcomers now account for 10% of the market, while the big three's share has dropped to 90% since 2008. While the mobile wireless market is still highly concentrated by the CR4 (95.3%) and HHI (2742) measures, Quebec stands out as (1) the province with the highest levels of competition and (2) indicating the viability of a "4th mobile wireless carrier" strategy.
In contrast, a less unusual trend can be seen when we turn our attention to internet access. In this case, the levels of concentration are much higher in Quebec than they are across the country. Indeed, concentration levels for internet access have risen steadily and sharply since 2008, reaching an HHI of 2726 in 2012, a score that is firmly in the very concentrated zone versus one that was more in the moderately concentrated region just four years earlier. The CR4 in 2012 was also high at 78%.
In contrast, Canada-wide, the CR4 was 59% and the HHI at the low end of the scale at 1051. It is the former measure that is the more accurate, though, while the gap between them a reflection of measuring things nationally despite the fact that access to the internet is arranged in light of the choices available locally. Both measures are useful, though, and this why we look at things from multiple angles.
In terms of the broadcast distribution markets (BDUs), IPTV services have steadily grown to become more significant rivals to incumbent cable and DTH companies since 2010. The CR4 and HHI scores both fell slightly between 2011 and 2012, but are still at the extremely concentrated levels they were two years earlier: CR4 = 91.5%; HHI = 3400.
Concentration has hardly budged over the past few years. In 2012, Quebecor and BCE accounted for 49.3% and 29.5% market share, respectively, or just shy of four-fifths of the BDU market. The big two have increasingly clashed over the past twelve years, however, as BCE's share of the market nearly tripled, rising from 10% to 30%, while Quebecor's slid from 65% in 2000 to just under 50% in 2012.
A key reason why concentration remains sky high in Quebec is that BCE began rolling out IPTV services in 2010, half-a-decade later than in the prairie provinces, and did so in a way designed to protect its investments in DTH satellite TV. Cogeco and Eastlink remain distant rivals behind the big two, with 9% and 3.5% market share respectively.
Figure 5: Cable, DTH & IPTV French-Language Market Share, 2012
Sources: French Media Economy, Sources and Explanatory Notes.
The Content Media Industries
Casting the net a bit more broadly to bring television into view alongside the distribution side of this domain also illustrates the extent to which Quebecor and Bell, and their strategies of vertical integration, stand apart from the rest of the field by a very wide margin. As Figure 5 below illustrates, the "big two" account for about two-thirds of the total tv universe, including distribution platforms. The CR4 for this measure is just shy of 82%, while an HHI of 2377 puts it just under the threshold for highly concentrated markets.
Again, it is worthwhile to reiterate that such claims are based on 2012 data before consolidation increased yet further on account of Bell's take-over of Astral Media. Figure 6 illustrates the state of affairs with respect to BDU and the total television market in Quebec as of 2012.
Figure 6: Vertically-Integrated BDUs and Total Television by French-Language Market Share, 2012
Sources: French Media Economy, Sources and Explanatory Notes.
French-language broadcast television consists of three main players: CBC/Radio Canada (60% market share), Quebecor/TVA (27.3%) and V Interactions (7.8%). Broadcast television is extremely concentrated with the top 3 players accounting for 95$% of revenues and a sky-high HHI of 4403. Bell has no interests in this segment, and did not acquire any either when taking over Astral.
Radio is not nearly as concentrated, but still sits at the high-end of the moderately concentrated spectrum with an HHI of 2407 and a CR3 of 84%. Once again, the biggest player on the radio landscape is the CBC/Radio Canada, with a third of all revenues. Astral was the top commercial radio broadcaster and 2nd after Radio Canada and ahead of Cogeco in 2012 with 27%. Big 3 control 84.1% of radio, and the sector fell just under the threshold of highly concentrated in 2012 based on an HHI score 2407. The biggest change in recent years was Shaw (Corus) exit from French-language radio in 2011 after a radio station swap with Cogeco.
The trend for French language pay and specialty TV services is followed a U-shaped pattern over the decade, with concentration declining between 2004 and 2010, but rising again after 2010. Despite the half-a-decade or so dip, this sector has always remained highly concentrated on both the CR4 and HHI measures, with the "big four" – Astral, BCE, Quebecor and the CBC – accounting for 95.3% of revenues in 2012, and an HHI score of 2670.
Bell was already the second largest player in specialty and pay tv services in 2012 with a 27.1% market share. It would have single-handedly held an extraordinary two-thirds (64.8%) of the market had its original bid for Astral Media — the biggest player in this sector — been given the green light by the CRTC in 2012. The CR4 would also have risen from 95.3% to 99.3%, and the HHI score soared to 4,715. While the outcomes from the 2013 Bell Astral transaction will be assessed in next year's version of this post, the difference is a matter of slight degree, not in kind: the results are off-the–charts in terms of CR4 and HHI guidelines.
In 2012, the total French-language TV market was highly concentrated by either the CR4 (92%) or the HHI (2594). The biggest entity is still Radio Canada, with 40% market share, trailed by Quebecor (TVA)(24%), Astral (16%) and Bell (11%). Had Bell's original proposal to acquire Astral been approved as planned without any divestitures, its market share would have risen sharply from 11.1% to 27.7% and the third largest player, Astral, would have disappeared.
Concluding Thoughts
Studying the media industries and their evolution over time is never easy, and it becomes more difficult the deeper one probes simply because so much data is not released to scholars or the public. However, based on what we do know and some reasonable estimates of revenues and market shares derived from that, we can arrive at a pretty detailed and reasonable portrait of the French-language network media economy.
And in this regard, several things stand out.
- the French-language media economy is very concentrated and much more so than the Canadian media economy as a whole.
- Bell is the largest player in French-language markets with over one-third of all revenues across a wide swathe of media, followed by Quebecor with just under a quarter of the market across an equally large span of media, telecom and internet markets. The two are in a league of their own.
- The market shares of BCE and Quebecor are significantly larger within Quebec than they are on the national stage (e.g. for Bell, its total share of the French-language market is 35%, while nationally it is 28%; for Quebecor, the gap is more pronounced, with 23% of all revenues in Quebec versus a modest 6% at the national level).
- Similar patterns are observable in terms of the structure of the network media economy as a whole, with an HHI of 1800 in the French-language media being 400 points higher than what it is at the national level.
- Two important exceptions to this general portrait need to be made. First, radio nominally falls into the moderately concentrated zone. Second, the steady uptick in competition in wireless bodes well for those who suggest that a fourth wireless competitor strategy might be just what is needed to help the ailing mobile wireless sector in Canada, at least if international measures are our guide (see here, here, here and here)
[i] For the sectors covered by the CMCR project and not including music and books.
Media and Internet Concentration in Canada, 1984-2012
Reposted from the Canadian Media Concentration Research Project website (for a downloadable pdf version of this report please click here).
This is the second post in a series. Building on last week's post that analyzed the growth of the media economy between 1984 and 2012, this post addresses a deceptively simple yet profound question: have telecom, media and internet (TMI) markets become more or less concentrated over the same period of time?
In Media Ownership and Concentration in America, Eli Noam (2009; also see 2013) notes that creating a coherent portrait of media concentration is difficult. Strong views are plentiful, but good evidence is not. Canadian scholar Philip Savage makes much the same observation, noting that debates over media concentration in Canada "largely occur in a vacuum, lacking evidence to ground arguments or potential policy creation either way".
This post addresses that gap by providing a long-term, systematic, data-driven analysis of concentration trends across a dozen or sectors in Canada for the years between 1984 and 2012: wireline and wireless telecoms, internet access, BDUs (cable, satellite & IPTV), specialty and pay TV, broadcast TV, radio, newspapers, magazines, search engines, social media sites, online news sources, browsers and smart phone operating systems. These are the essential elements of the network media economy.
Concentration trends are assessed sector-by-sector and then across the network media as a whole using two common analytical tools — concentration ratios (CR) and the Herfindahl – Hirschman Index (HHI). While we cite our sources below, by and large, the following documents and data sets underpin the analysis in this post: Media Industry Data, Sources and Explanatory Notes and the CMCR Project's Methodology Primary.
Media Concentration: Contentious Debates, Main Issues
Some consider discussions of media concentration in the age of the internet to be ridiculous. Leonard Asper, the former CEO of bankrupt Canwest, quipped, "the media have become more fragmented than ever. People who think otherwise probably believe that Elvis is still alive". Chris Dornan points to how a Senate report that came out in 2006 was written by a bunch of Senators with their heads buried in the sand.
In Bell Astral 2.0, BCE said that while many critics allege that concentration in Canada is high, the evidence, "regardless of the metric employed – proves otherwise" (Bell Reply, para 46). When there are thousands of websites, social networking sites galore, pro-am journalists, a cacophony of blogs, 744 TV channels licensed for distribution in Canada, ninety-five daily newspapers and smartphones in every pocket, how could media concentration possibly be a problem?
If there was ever a golden media age, this is it, argue Thierer & Eskelen, 2008. Media economics professor, Ben Compaine (2005) offers a terse one-word retort to anyone who thinks otherwise: Internet.
Shackling media companies with ownership restrictions when they face global digital media giants like Google, Amazon, Netflix, Facebook, and so on is to condemn them to a slow death by strangulation (Skorup & Thierer, 2012; Dornan, 2012). Journalist's too often share this view mostly, it seems, because they rely on industry insiders while considering balance and objectivity to be achieved when two industry insiders are shown to disagree with one another.
Critics, in contrast, tend to see media concentration as steadily going from bad to worse. Ben Bagdikian, for instance, claims that the number of media firms in the US that account for the majority of revenues plunged from 50 in 1984 to just five by the mid-2000s. Canadian critics decry the debasement of news and the political climate of the country (here and here). Others see internet as another frontier of capitalist colonization and monopolization (Foster & McChesney, 2012).
A third school of scholars aims to detect the influence of changes of media ownership and consolidation by quantitatively analyzing reams of media content. They generally find that the evidence is "mixed and inconclusive" (here). The newest of such studies, Cross-Media Ownership and Democratic Practice in Canada: Content-Sharing and the Impact of New Media, comes to similar conclusions (Soderlund, Brin, Miljan & Hildebrandt, 2011).
Such findings, however, proceeds as if 'impact on content' is the only concern, or as Todd Gitlin put in many years ago, as if 'no effect' might not be better interpreted as preserving the status quo and thus a significant problem in its own right.
A fourth school of thought, and one that I largely subscribe to, sees the shift from the industrial media of the 19th and 20th centuries to the online digital media of the 21st century as entailing enormous changes. However, it also argues that these changes also entail an equally enormous "battle over the institutional ecology of the digital environment" (Benkler, 2006, ch. 11). The history of human communication is one of recurring 'monopolies of knowledge" (Innis, 1951) and oscillations between consolidation and competition (John, 2010; Babe, 1990), so why should we expect this to be any less true today(Noam, 2009; Benkler, 2006; Wu, 2010; Crawford, 2012)?
As Noam (2013) states after reflecting on the results of a thirty-country study, concentration around the world is "astonishingly high". Whether Canada ranks high by international standards, low or in between will be dealt with in a subsequent post.
The core elements of the networked digital media – e.g. wireless (Rogers, BCE, Telus), search engines (Google), Internet access (ISPs), music and book retailing (Apple and Amazon), social media (Facebook) and access devices (Apple, Google, Nokia, Samsung) – may actually be more prone to concentration because digitization magnifies economies of scale and network effects in some areas, while reducing barriers in others, thereby allowing many small players to flourish. A two-tiered digital media system may be emerging, with numerous small niche players revolving around a few enormous "integrator firms" at the centre (Noam, 2009; Wu, 2010).
All this matters because the more core elements of the networked media are concentrated, the easier it is for dominant players to exercise market power, coordinate behaviour, preserve their entrenched stakes in 'legacy' media sectors (e.g. television and film), stifle innovation, influence prices and work against market forces and the needs of consumers and citizens (see here, here, here, here and here). Large consolidated telecom, media and internet giants also make juicy targets for those who would turn them into proxies working on behalf of the copyright industries, efforts to block pornography, and as part of the machinery of law enforcement and national security (see here, here and here).
In sum, the more concentrated the digital media giants are, the greater their power to:
- set the terms for the distribution of income to musicians, journalists and media workers, and authors (Google, Apple, Amazon);
- turn market power into moral authority by regulating what content can be distributed via their 'walled gardens' (Apple);
- set the terms for owning, controlling, syndicating and selling advertising around user created content (Google, Facebook, Twitter) (van Couvering, 2011; Fuchs, 2011);
- use media outlets they own in one area to promote their interests in another (see Telus intervention in Bell Astral, 2.0 pages 4-6 and here);
- and set defacto corporate policy norms governing the collection, retention and disclosure of personal information to commercial and government third parties.
Whilst we must adjust our analysis to new realities, long-standing concerns remain as well. Consider, for example, the fact that every newspaper in Canada, except the Toronto Star, that editorially endorsed a candidate for Prime Minister in the 2011 federal election touted Harper –three times his standing in opinion polls at the time and the results of the prior election.
Ultimately, talk about media concentration is really a proxy for conversations about consumer choice, freedom of the press and democracy. Of course, such discussions must adapt to changes in the techno-economic environment of the media but the advent of digital media does not render them irrelevant (Baker, 2007; Noam, 2009; Peters, 1999).
Measuring media concentration begins by defining the media studied, as noted at the outset. I then collected revenue data for each of these sectors and for each of the firms within them with over a one percent market share. This handy dandy list of sources and others listed here were used.
Each media is analyzed on its own and then grouped into three categories, before scaffolding upward to get a birds-eye view of the entire network media ecology: (1) platform media; (2) content media: (3) online media. The results are analyzed over time from 1984 to 2012. Lastly, two common tools — Concentration Ratios (CR) and the Herfindhahl – Hirschman Index (HHI) – are used to depict levels of concentration and trends over time within each sector and across the network media ecology as a whole.
The CR method adds the shares of each firm in a market and makes judgments based on widely accepted standards, with four firms (CR4) having more than 50 percent market share and 8 firms (CR8) more than 75 percent considered to be indicators of media concentration (see Albarran, p. 48). The Competition Bureau uses a more relaxed standard, with a CR4 of 65% or more possibly leading to a deal being reviewed to see if it "would likely . . . lessen competition substantially" (p. 19, fn 31).
The HHI method squares and sums the market share of each firm in a market to arrive at a total. If there are 100 firms, each with a 1% market share, then markets are highly competitive, while a monopoly prevails when a single firm has 100% market share. The US Department of Justice set out new guidelines in 2010 for determining when concentration is likely to exist, with the new thresholds set as follow:
HHI < 1500 Unconcentrated
HHI > 1500 but < 2,500 Moderately Concentrated
HHI > 2,500 Highly Concentrated
At first blush, these higher thresholds seem to water down the earlier standards that had been set at lower levels and used since 1992. The new guidelines, however, are probably even more sensitive to reality and tougher than the ones they supersede.
This is because they go beyond setting thresholds to give more emphasis to the degree of change in market power. For instance, "mergers resulting in highly concentrated markets that involve an increase in the HHI of more than 200 points will be presumed to be likely to enhance market power", observes the DOJ (emphasis added, p. 19).
Second, markets are defined precisely based on geography and the relevant details of the good at hand versus loose amalgamations of things that are based only on superficially similarities. This is critical, and it distinguishes those who would define the media universe so broadly as to put photocopiers and chip makers alongside ISPs, newspapers, film and TV and call the whole thing "the media" versus the 'scaffolding approach' we use that starts by analyzing each sector before moving up to higher levels of generality from there until reaching a birds-eye perspective on the network media as a whole.
Third, the new guidelines also turn a circumspect eye on claims that enhanced market power will be good for consumers and citizens because they will benefit from the increased efficiencies that result. What is good for companies is not necessarily good for the country (see Stucke & Grunes, 2012).
Lastly, the new guidelines are emphatic that decisions turn on "what will likely happen . . . and that certainty about anticompetitive effect is seldom possible and not required for a merger to be illegal" (p. 1). In practice this means that the goal is to nip potential problems in the bud before they occur; to "interdict competitive problems in their incipiency", as the guidelines say (p. 1). Crucially, this means that experience, the best available evidence, contemporary and historical analogies as well as reasonable economic theories are the basis of judgment, not deference to impossible (and implacable) demands for infallible proof (p. 1).
These assumptions overturn a quarter-century of economic orthodoxy and its grip on thinking about market concentration (see Stucke & Grunes, 2012 and Posner). Freed from the straight-jacket of Chicago School economic orthodoxy, and the subordination of policies and politics to economists and judges, the new guidelines set a tough hurdle for those with the urge to merge. It was precisely this kind of thinking that killed the bid by AT&T – the second largest mobile wireless company in the US – to acquire the fourth largest, T-Mobile, in 2011, for instance (also Stucke & Grunes, 2012).
In Canada, in contrast, the CRTC Diversity of Voices sets up thresholds for a broadly defined TV market in which a proposed deal that results in a single owner having less than 35% of the total TV market will be given the green light; those that fall in the 35-45% range might be reviewed; anything over 45% will be rejected (para 87). Unlike the Competition Bureau that uses the CR4 method whereby a deal that result in a CR4 over 65% may be reviewed to determine whether it will substantially lessen competition, the CRTC has no such guidelines, although a recent accord between the two regulators might change this.
The CRTC's threshold for TV, instead, is based on a single snapshot of a single company's share of one broadly defined market – the total TV market –"before" and "after" a single transaction. It is a static measure that has no sense of trends over time, the relational structure of markets or any capacity to analyze the drift of events across media and the network media ecology as a whole.
The Competition Bureau draws selectively from the US HHI guidelines. It does not use the HHI thresholds. Instead, it focuses on "the relative change in concentration before and after a merger" (emphasis added, p. 19, fn 31). How faithful it is to either its CR4 guidelines or the HHI criteria for judging relative changes in market power is open to question, however, in light of its decision earlier this year to bless Bell-Astral 2.0 (here). In Canada regulators appear to mostly make it up as they go along rather than consistently follow a coherent set of guidelines.
The Historical Record and Renewed Interest in Media Concentration in the 21st Century
There has always been keen interest in media ownership and concentration in Canada and the world since the late-19th and early-20th centuries.
In 1910, for example, the Board of Railway Commissioners (BRC) broke up the three-way alliance between the two biggest telegraph companies — Canadian Pacific Telegraph Co. and the Great Northwestern Telegraph Co. (the latter an arm of the New York-based goliath, Western Union) – and the American-based Associated Press news wire service. Why?
The BRC did this because, it argued, in the face of much corporate bluster, that allowing the telegraph companies to give away the AP news service for free to the leading newspaper in one city after another might be good for the companies but it would "put out of business every news-gathering agency that dared to enter the field of competition with them" (1910, p. 275). In a conscious bid to use telecoms regulation to foster the development of rival news agencies and newspapers, the BRC forced Western Union and CP Telegraphs to unbundle the AP news wire service from the underlying telegraph service. It was a huge victory for the Winnipeg-based Western Associated Press – which initiated the case – and other 'new entrants' into the daily newspaper business (Babe, 1990).
Media concentration issues came to a head again in the 1970s and beginning of the 1980s, when three inquiries were held: (1) the Special Senate Committee on Mass Media, The Uncertain Mirror (2 vols.)(Canada, 1970); (2) the Royal Commission on Corporate Concentration (1978); and (3) the Royal Commission on Newspapers (Canada, 1981).
Things lay dormant for more than two decades thereafter before springing to life again after a huge wave of consolidation in the late-1990s and turn-of-the-21st century thrust concerns with media concentration back into the spotlight. Three inquiries between 2003 and 2008 were held as a result: (1) the Standing Committee on Canadian Heritage, Our Cultural Sovereignty (2003); (2) the Standing Senate Committee on Transport and Communications, Final Report on the Canadian News Media (2006); (3) the CRTC's Diversity of Voices report in 2008.
Competitive Openings and Two (three?) Waves of TMI Consolidation
As I noted in my last post, the media economy in Canada grew immensely from $39 billion in 1984 to $73.3 billion last year (in inflation-adjusted "2012 real dollars"). Between 1984 and 1996, new players meant more diversity in all sectors, except for newspapers as well as cable and satellite video distribution. Concentration climbed significantly in both of those sectors.
Conventional as well as pay and subscription television channels expanded during this time as well. In terms of ownership, incumbents and a few newcomers – e.g. Allarcom and Netstar –cultivated the field, with their share of the market growing steadily.
Concentration levels remained very high in wired line telecoms in the 1980s and early 1990s, too. Mobile wireless telecoms services were developed by two incumbents, Bell and Rogers. As had been the case in many countries, telecoms competition moved slowly from the ends of the network into services and then network infrastructure, with real competition emerging in the late-1990s before the trend was reversed and concentration levels began to climb again, notably after the dot.com crash in late-2000.
In the 1980s and early-1990s, consolidation took place mostly among players in single sectors. Conrad Black's take-over of Southam newspapers in 1996 symbolized the times. In broadcast television, amalgamation amongst local ownership groups created the large national companies that came to single-handedly own the national commercial television networks by the end of the 1990s: CTV, Global, TVA, CHUM, TQS.
While weighty in their own right, these amalgamations did not have a big impact across the media. The CBC remained prominent, but public television was being eclipsed by commercial television as the CBC's share of all resources in the television 'system' slid from 46 percent in 1984 to less than half that amount today (20.4%).
Gradual change defined the 1980s and early-1990s, but things shifted abruptly by the mid-1990s and into the 21st century as two (and maybe three) waves of consolidation swept across the TMI industries. A few highlights help to illustrate the trend:
Wave 1 – 1994 to 2000: Rogers' acquisition of Maclean-Hunter (1994), but peaking from 1998 to 2001: (1) BCE acquires CTV and the Globe & Mail ($2.3b); (2) Quebecor takes over Videotron, TVA and the Sun newspaper chain ($ 7.4b) (1997-2000); (3) Canwest buys Global TV ($800m) and Hollinger newspapers papers, including National Post ($3.2b).
Wave 2 – 2006-2007. Bell Globe Media re-branded CTVglobemedia, as BCE exits media business. CTVglobemedia acquires CHUM assets (Much Music, City TV channels and A-Channel). CRTC requires CTVglobemedia to sell City TV stations – acquired by Rogers (2007). Astral Media's buys Standard Broadcasting. Quebecor acquires Osprey Media (mid-size newspaper chain)(2006). Canwest, with Goldman Sachs, buys Alliance Atlantis (2007) (Showcase, National Geographic, HGTV, BBC Canada, etc) – and the biggest film distributor in Canada.
Wave 3 – 2010 – ? Canwest bankrupt. Newspapers acquired by Postmedia, TV assets by Shaw. BCE makes a comeback, buys CTV (2011) and bids for Astral Media in 2012, but fails to gain CRTC approval.
The massive influx of capital investment that drove these waves of consolidation across the telecom, media and Internet industries is illustrated in Figure 1 below.
Figure 1: Mergers and Acquisitions in Media and Telecoms, 1984–2012 (Mill$)
Sources: Thomson Reuters. Dataset on file with author.
Mergers and acquisitions rose sharply between 1994-1996, and spiked to unprecedented levels by 2000. The collapse of the TMT bubble ended such trends, until they restarted again between 2003 and 2007 before being ground to a halt by the Global Financial Crisis (2007ff), and with only a tentative step up since. These patterns reveal that trends in the network media economy parallel the state of the economy in near lockstep fashion; they also closely track those in the US and globally.
Consolidation has yielded a specific type of media company at the centre of the network media ecology in Canada: i.e. the integrated media conglomerate. While popular in the late-1990s in many countries, many media conglomerates have since collapsed or been broken up (AOL Time Warner, AT&T, Vivendi, CBS-Viacom, and parts of NewsCorp, etc)(see, for example, Jin, 2011; Jin, 2013; Skorup & Thierer, 2012; Thierer & Eskelen, 2008; Waterman & Choi, 2010).
Despite deconvergence trends elsewhere, in Canada media-telecom and internet conglomerates are still all the rage. Figures 2 and 3, in fact, illustrate the acceleration of the trend toward vertical integration from 2008 to 2012, largely due to Shaw's acquisition of the Global TV and a suite of specialty and pay TV channels from Canwest (2010) and Bells re-purchase of CTV (2011).
Figure 2:
Figure 3:
Sources: Media Industry Data, Sources and Explanatory Notes
By 2012, four giant vertically integrated TMI conglomerates accounted for 56% of all revenue across the network media economy: Bell (CTV), Rogers (CityTV), Shaw (Global) and QMI (TVA). Add Telus to the fold and the number swells to 71 percent. The 'Big 5' are joined by a second tier of a dozen or so more focused entities: the CBC, MTS, Google, Cogeco, Torstar, Sasktel, Postmedia, Astral, Eastlink, Power Corporation, the Globe and Mail, Facebook and Netflix, ranked on the basis of Canadian revenues.
Strip out the wireline and wireless telecoms sectors and we get a more sensitive view of what is going on across the rest of the media universe because those two sectors are so big that they cast a shadow over everything else. From this vantage point, the big ten's share of revenue reached it's low point in 1996 (51.7%), before reversing course to reach 58% in 2000. By 2004, the big four's share of all revenues (without telecoms) soared to 70%, where things have stayed basically flat since. The big 10's market share in 2012 was 69%: Bell, Shaw, Rogers, QMI CBC, Google, Cogeco, Torstar, Postmedia and Telus, in that order.
The big four's share of the network media economy rose significantly to 48% in 2010 (after Shaw's acquisition of Global) and rose again to 51% in 2011 (when Bell re-acquired CTV), where it has basically stayed since — an all-time high and well above the low point CR4 score of 24% in 1996. Media concentration in Canada is currently more than twice as high as in the US based on Noam's analysis in Media Ownership and Concentration in America.
Figure 4 below depicts the relative share of the major players in the network media economy as things stood in 2012, without the telecommunications sectors.
Figure 4:
Sources: Media Industry Data, Sources and Explanatory Notes
The next section doubles back to look at things sector-by-sector, and within the three main categories in which we group these sectors:
- platform media (wireline & wireless, ISPs, cable, satellite, IPTV);
- 'content' (newspapers, tv, magazines, radio);
- 'online media' (search, social, operating systems).
At the end, I combine these again one last time to complete the analysis of the network media industries as whole.
Platform Media
All sectors of the platform media industries are highly concentrated or at the high-end of the moderately concentrated scale, and pretty much always have been, although Internet Access is a partial exception.
Table 1: CR and HHI Scores for the Platform Media Industries, 1984 – 2012
Sources: Media Industry Data and Sources and Explanatory Notes.
CR4 and HHI measures for wireline telecoms scores fell in the late-1990s as some competition took hold. They reached their lowest level ever at the time between 2000 and 2004 before the the dot.com bubble collapse took out many of the new rivals with it (CRTC, 2002, p. 21). Competition waned thereafter until 2008, but has risen since. Levels of concentration for this sector are very high nonetheless by both the CR4 and HHI measures.
Mobile Wireless
Much the same can be said with respect to wireless services. They have consistently been highly concentrated, and still are, despite the advent of four new entrants since 2008: Mobilicity, Wind Mobile, Public and Quebecor.
Some recent studies argue "that there is not a competition problem in mobile wireless services in Canada" (see here and here). That conclusion rests on questionable assertions about efficiencies are often asserted but seldom hold up under scrutiny and contestible markets theory in contrast to realities on the ground (see here, here and here).
Claims that there is no wireless competition problem in Canada clash with the reality that CR4 scores have been stuck in the ninety-percent range for the entire history of wireless in Canada, a level well-above the Competition Bureau's standards. Concentration is a durable fixture in the wireless sector rather than something that will wilt over time. CR and HHI scores have drifted downwards since new rules to encourage new entrants were adopted for the spectrum auction in 2008, but in 2012 the HHI score was still 2873 – far above the 2,500 market that defines a highly concentrated market.
Two competitors – Clearnet and Microcell – emerged in the late-1990s and managed to garner 13.4 percent of the market between them, but were taken over by Telus and Rogers in 2000 and 2004, respectively. It is still too early to tell whether the new entrants will fare, but with only 7% market share in 2012 they were just half way to restoring the high-water mark of competition set a decade ago with mounting signs of trouble swirling about all of them, except Quebecor and, to a lesser extent, perhaps Wind – but these are points for next year's post.
Internet Access
As the telecoms and Internet boom gathered steam in the latter half of the 1990s new players emerged to become significant competitors, with four companies taking over a third of the ISP market by 1996: AOL (12.1%), Istar, (7.2%), Hook-Up (7.2%) and Internet Direct (6.2 percent).
The early 'competitive ISP era', however, has yielded to more concentration since. Although the leading four ISPs accounted for a third of all revenues in 1996, by 2000 the big four's (Bell, Shaw, Rogers & Quebecor) share had grown to 54 percent, where it stayed relatively steady for much of the rest of the decade. Since 2008, however, the CR4 has crawled upwards to reach 59% last year.
HHI scores for internet access doubled between 1996 and 2000, but are still low relative to most other sectors and to this measure's standards for concentration. However, this reflects the limits of the HHI method in this case, since 93% of residential internet subscribers use one or another of the incumbent cable or telecom companies' for internet access. The top 5 ISPs account for 76% of all residential high-speed internet access revenues (CRTC Communication Monitoring Report, pp. 143-144).
Climbing down from national measures to the local level, internet access is effectively a duopoly, with the left over 7% of the market not dominated by the incumbents scattered among 500 or so independent ISPs. TekSavvy is the biggest ISP with an estimated 180,000 subscribers in 2012 and just over 1% market share. Other small ISPs are on the wane (Primus). Indy ISPs' market share has increased slightly from 2010, but it has stayed flat for the past two years and is nowhere near returning to the high-water mark of competitive internet access in the late-1990s.
Canada has relied on a framework of limited competition between incumbent telecom and cable companies for wireline, wireless, internet access and video distribution markets. Incumbents still dominate all of these sectors, while smaller rivals continue to eek out an existence on the margins in each.
Cable, Satellite and IPTV
Concentration in cable, satellite and IPTV distribution rose steadily from low levels in the 1980s (850) to the upper end of the moderately concentrated zone (by the new HHI guidelines) in 1996 (i.e. HHI=2300), before drifting downwards to the low 2000s by the turn-of-the-century. This is where things have stood until recently as the incumbent telcos' IPTV services exert pressure on the incumbent cable companies.
The cable, satellite and IPTV industry is still largely a duopoly at the local level. The CR score has dropped 5% since 2004 but the big four still dominate with 81% market share: Shaw (25.1%), Rogers (22.3%), Bell (21.1%) and Quebecor (12.5%). Add the next five biggest players – Cogeco (7.5%), Eastlink (3.8%), Telus (3.6%), MTS (.9%) and SaskTel (.9) – and all but two percent of industry revenues are accounted for.
The telcos' IPTV services are making incursions into the incumbent cable and satellite service providers' turf, accounting for 7.5% of the TV distribution market by revenue in 2012 (based on my numbers, or about 6.7% percent using CRTC data)(see p. 110). In terms of subscribers, IPTV services account for 10% of the market (CRTC numbers are slightly lower, p. 111) (see here for partial explanation of the differences).
Since IPTV services began to be rolled out by MTS and SaskTel in 2004, followed later by Telus and Bell in 2008 and 2009, respectively, the HHI score has fallen 320 points (see Table 1 above) and now sits at the lower end of the "moderately concentrated" scale. The threat to incumbent cable companies is greatest in western Canada, where MTS, SaskTel and Telus have rolled out IPTV services faster than Bell from Ontario to the Atlantic.
Within the platform media industries as a whole, new players have emerged, but it is primarily the expansion of incumbent telcos and cable companies outside their traditional turf and into one anothers' industries that is generating the greatest effect. There has been a modest increase in competition in all platform media sectors in recent years since except internet access. While new technologies have increased the structural complexity of platform media, they have not disrupted the long-standing trajectory of development when it comes to tv distribution: more channels, and a few new players, but with more of the whole in the hands of the old.
The Media Content Industries
In the late 1980s until 1996, concentration in broadcast TV fell sharply while the specialty and pay TV channels emerging at this time displayed similarly high levels of competition. TV became much more diverse as a result.
Such trends abruptly reversed in the late-1990s, however, with something of a lag before the specialty and pay TV market began to follow suit. After the turn-of-the-century concentration levels for TV climbed steadily and substantially. The upswing since 2008 has been especially sharp. Figure 5, below, shows the trend in terms of CR scores; Figure 6, in terms of the HHI.
Figure 5 CR Scores for the Content Industries, 1984-2012
Figure 6 HHI Scores for the Content Industries, 1984-2012
Sources: Media Industry Data and Sources and Explanatory Notes.
In 2012, the largest four television providers controlled about 78% of all television revenues, up substantially from 71% four years earlier. In terms of the 700 TV channels actually operating in Canada, the big four own 171 of them in total and which account for just under four-fifths of all revenue: Shaw (66 tv channels), Bell (61), Rogers (24) and Quebecor (20). In contrast, in 2004, the big four accounted for 62% of the TV biz, a time before major players such as Alliance Atlantis and CHUM had carved out a significant place for themselves in the TV marketplace (circa 2000-2006), respectively.
Concentration across the total TV market has been pushed to new extremes in recent years, first, by Shaw's take-over of Canwest's television assets in 2010 and, second, by Bell's buy-back of CTV the year after that. They would have been higher yet had the CRTC approved Bell's acquisition of Astral Media – the fifth largest television provider – rising to about 86%. The about face on that matter in 2013 will be dealt within in next year's version of this post.
In 2012 the largest four tv providers after Bell and Shaw are: the CBC, Rogers, Astral, and QMI, respectively, and in that order. Together, they accounted for 91% of the entire television industry last year. Similar patterns are replicated in each of the sub-components of the 'total television' measure (conventional television, pay and specialty channels), as the chart above illustrates.
In contrast, in 2004, the six largest players accounted for a little over three-quarters of all revenues. The run of HHI scores reinforces the view that the television industry is has become markedly more concentrated in the past two years.
CR and HHI measures for tv were the lowest in the 1990s when newcomers emerged (Netstar, Allarcom), yet before the time when the multiple ownership groups that had stood behind CTV and Global for decades combined into single groups. The period was significantly more diverse because the CBC no longer stood as the central pillar in tv and radio, while specialty and pay television channels were finally making their mark. Today, the latter are the jewel in the TV crown, but they are highly concentrated by the CR4 measure, with a CR4 of 81%, yet only moderately so by HHI standards with a score of 1906.
Concentration in the newspaper industry rose steadily from 1984 until 2008, when it peaked. In 1984, the top four groups accounted for 61% of all revenues, a number which had risen to about two-thirds of the market in 1996 – a level that stayed fairly steady for most of the next decade before rising again to an all-time high within the time frame studied here in 2008. At that point, the four largest newspaper groups accounted for three-quarters of the market: Canwest (23.7%), Quebecor (21.5%), Torstar (19.3%) and Power Corp (10.5%).
Levels have since declined considerably by either the CR4 or HHI measure, with the former falling to 69% in 2012 and the latter dropping from 1628 in 2008 to 1,398 – well within the 'competitive' range by the lights of the new HHI standards or only moderately concentrated by the old standards. The new conditions likely reflect Postmedia's decision to sell some of its newspapers (Victoria Times Colonist) and to cut publishing schedules at others. Indeed, its market share has fallen steeply from 24% in 2008 when the papers were still in the hands of Canwest to just 17% last year, and within a significantly smaller market. A few new publishers have also emerged amidst the tough times now facing the newspaper industry, notably Black Publishing and Glacier Publishing in western Canada.
Of all media sectors, magazines are least concentrated, with concentration levels falling by nearly one half on the basis of CR scores and two-thirds for the HHI over time.
Radio is also amongst the most diverse media sectors according to HHI scores, and only slightly concentrated by the C4 measure. The shuffling of several radio stations between Shaw/Corus and Cogeco in 2011 had continued the long-term decline in concentration, but in 2012 there was an uptick as the CR4 rose from 56% to 60% and the HHI from 954 to 1027. Bell's take-over bid for Astral – Canada's largest radio broadcaster – would have further pushed radio along this path had it have been approved by the CRTC in 2012. Levels of concentration would have been high by the CR measure, with the CR4 rising from 60% to 68%, but with an HHI of 1371 it would still have been well within the unconcentrated zone by the revised HHI guidelines or moderately concentrated by the old ones. .
Online Media
As the earlier discussion of internet access showed, there is little reason to believe that core elements of the Internet are immune to high levels of concentration. But what about other core elements of the Internet and digital media ecology: search engines, social media sites, browsers, operating systems and internet news sites?
Concentration in the search engine market grew markedly from 2004 to 2011. CR4 scores have been persistently sky-high during these years, rising from 93% in 2004 to almost 98% in 2011, while HHI scores have been off-the-charts in the 4000-7000 range. Google's dominance seemed to be locked in the low 80%-range, with others lagging far behind, during this period.
Google's share of search, however, tumbled in 2012 to just under 68%, although this still leaves Microsoft (17.8%), Yahoo! (5.4%), and Ask.com (6.2%) trailing far behind. The CR4 and HHI scores are still sky-high at 97% and 4995, respectively, and as Table 2 shows.
Table 2: CR4 and HHI Scores for the Search Engine Market, 2004-2012
Source: Experien Hitwise Canada. "Main Data Centre: Top 20 Sites & Engines." last Accessed May 2013.
Social media sites display a similar but not quite as pronounced trend. Facebook accounted for 46% of unique visitors to such sites in December 2012, followed by Twitter (15%), LinkedIn (12%), Tumbler (12%), Instagram (9%) and Pinterest (6%) (Comscore). Again, the CR4 score of 85% and HHI score of 2762 reveal that social networking sites are highly concentrated.
Similar patterns hold for the top four web browsers in Canada. Microsoft's Explorer (55%), Firefox (20%), Google's Chrome (18%), Apple's Safari (5%) have a market share of 98 percent (Netmarketshare). In terms of smart phone operating systems, the top four players accounted for 96 percent of revenues: Apple's iOS (55%), Google's Android OS (29%), Java (7%), Nokia's Symbian (5%). RIM (3%) and Microsoft (1%) accounted for the rest (Netmarketshare).
Internet news sites are an exception to the extremely high levels of concentration in the online digital media environment. Internet users time on top 10 online news sites nearly doubled from 20 to 38 percent between 2003 and 2008. Most of that increased time is spent on sites that are extensions of well-known traditional media companies: cbc.ca, Quebecor, CTV, Globe & Mail, Radio Canada, Toronto Star, Post Media, Power Corp. Other major sources included CNN, BBC, Reuters, MSN, Google and Yahoo! (Zamaria & Fletcher, 2008, p. 176).
Despite this rapid "pooling of attention" on the top 15 or so news sites, concentration levels stayed flat between 2004 and 2007. They declined thereafter until 2011 – the latest year for which good data is available. Online news sources are not concentrated by either the CR or HHI measure and are diverse relative to any of the other sectors, except magazines.
Table 3: Internet News Sources, 2004-2011
Source: Table calculated by Fred Fletcher, York University, from the Canadian Internet Project Data sets (Charles Zamaria, Director). Reports on the 2004 and 2007 surveys are available at http://www.ciponline.ca.
The Network Media Industries as a Whole
Combining all the elements together yields a birds-eye view of long-term trends for the network media as a whole. Figure 7 below gives a snapshot of the state of the network media economy in 2012, listing those sectors that were unconcentrated, those that were moderately concentrated and finally those that were highly concentrated by HHI standards.
Figure 7: Concentration Rankings on the basis of HHI Scores, 2012
Clearly, things are not all to one side, with several sectors showing low levels of concentration. However, there is no shortage of segments where concentration is either moderately high or very high. Perhaps one of the most striking things to stand out from Figure 7 is the extent to which core elements of the internet and digital media ecology seem to be prone to very high levels of concentration.
Figures 8 and 9 show the trends over time on the basis of, first, CR1, CR4 and CR10 scores, followed by a depiction of the trends based on the HHI.
Figure 8: CR 4 Score for the Network Media Economy, 1984-2012
Sources: Media Industry Data and Sources and Explanatory Notes.
Looking the entirety of the network media economy, several distinct points emerge: The biggest company's share of revenues across the whole of the media twenty-eight years ago was 48%; in 2012, it was 26.4% albeit in a vastly larger media universe. That company in 1984 was BCE; it is still the same company today, and substantially larger than the second and third ranked firms, Rogers and Shaw.
The CR4 levels today are about the same as they were twenty-eight years ago: 66.7% versus 65.1%. Today, the top 10 firms have a larger market share than they did in 1984: 81% versus 76%. These figures would have been higher had the CRTC given the green light to BCE's first bid to acquire Astral in 2012, as Figure 8 shows.
Figure 9: HHI Scores for the Network Media Economy, 1984-2012
Sources: Media Industry Data and Sources and Explanatory Notes.
As Figure 9 shows, the HHI fell by half from 1984 to 2000. Trends then moved erratically for the next few years before stabilizing in the 1200 to 1300 range, before a significant step up in 2010 and with another potential step in the same direction last year before the CRTC nipped Bell's bid to acquire Astral in the bud.
The results depict a competitive scenario by the revised 2010 HHI standards (or moderately concentrated by the old standards) – if we take the 'total media universe' as the beginning and endpoint of analysis (e.g. Ben Compaine, Ken Goldstein, Adam Theirer). But this is problematic for several reasons.
First, it obscures trends at lower levels of analysis, i.e. sector-by-sector and then by category – platform media, content media and online media – before moving to the total network media. We use the "scaffolding method" precisely so that we can pick up on such things.
Second, such conclusions skate over the fact that while concentration levels according to the most sensitive measure – the HHI — fell greatly between 1984 and 2000, they have basically stayed flat ever since, with a significant uptick since 2010.
Third, from the point of view of the CR4 and CR10, there is a distinct u-shape trend over the past three decades. Concentration fell steeply in the 1980s until 1996-2000, when there was a sharp reversal leading to the CR4 being pretty much the same now as it was thirty years ago. On the basis of the CR10, concentration levels were higher in 2012 than in 1984, i.e. the CR10 in 2012 was 81% vs. 76% in 1984.
From this perspective, concentration has grown significantly over time. At best, one might argue that the CR and HHI scores cut in somewhat different directions, or at least the latter are not so pronounced as the former, and thus the results must be seen as mixed. There is little reason, however, to view the current state of affairs and contemporary trends through rose-tinted glasses.
Concluding Thoughts
Several things stand out from this exercise. First, we are far from a time when studies of media and internet concentration are passé. Indeed, theoretically-informed and empirically-driven research is badly needed because there is a dearth of quality data available. Moroever, general developments and the press of specific events – Bell Astral 1.0 in 2012, the resurrected version of the Bell Astral deal that was approved earlier this year, and now the wireless wars in which some claim there is no competition problem in mobile wireless services at all versus those who argue the opposite – demand that we have a good body of long-term, comprehensive and systematic evidence ready-to-hand.
This kind of data is still very hard to come by and data collection for 2012 reconfirmed that at every step of the way. The CRTC still needs a dramatic overhaul of how it releases information and of its website. The underlying data sets included in the Communications Monitoring Report, Aggregate Annual Returns, and Financial Summaries should be made available in a downloadable, open format (also see David Ellis' series of posts on this point).
The regulated companies themselves must also be made to be more forthcoming with data relevant to the issues, not less as they so strongly desire (see here for a recent example). The CRTC also publishes too much data that does not square with what the companies themselves state in their Annual Reports. Good decisions cannot be made poor data.
The trajectory of events in Canada is similar to patterns in the United States. Concentration levels declined in the 1980s, rose sharply in the late-1990s until peaking circa 2000 and staying mostly flat thereafter. While processes of deconsolidation and vertical dis-integration have taken hold in the US — with the exception of Comcast's 2011 blockbuster take-over of NBC-Universal — trends in Canada are running in the opposite direction and with the forces of concentration having gained momentum since 2010.
Of course, trends are not all to one side. The assets from the bankrupt Canwest have been shuffled in recent years, and the process is ongoing with Postmedia selling off further papers in the past year, thereby allowing small newspaper publishers to grow (Black Publishing, Glacier). Some significant new entities have emerged (e.g. Blue Ant, Post Media, Remstar, Teksavvy, Netflix, Tyee, Rabble.ca, Huffington Post, a worker-owned TV station in Victoria, CHEK, and a and CHCH in Victoria and another independently owned TV station in Hamilton, CHCH).
The overall consequence is that we have a set of bigger and structurally more complicated and diverse media industries, but these industries have generally become more concentrated, not less. There is a great deal more that can and will be said about what all this means, but in my eyes it means that concentration in no less relevant in the "digital media age" of the 21st century than it was during the industrial media era of centuries' past.
The next two posts will look at the state of media concentration in the English- and French-language regions of the network media economy, followed by another that will look at the state of media concentration in Canada relative to the US and the thirty countries studied by the International Media Concentration Research (IMCR) project, including the U.S. Germany, Japan, Australia, the UK, France, and so on. The final two posts in the series will profile the top 20 TMI companies in Canada as well as trends with respect to ownership, boards of directors, revenue, profits and debt.
The Growth of the Network Media Economy in Canada, 1984-2012
Cross-posted from the Canadian Media Concentration Research Project blog.
Has the media economy in Canada become bigger or smaller over time? Does the answer to that question, one way or the other, apply across the board, or to only a few of the dozen or sectors that make up the network media economy: i.e. wireline and wireless telecoms; internet access; cable, satellite & IPTV; pay and specialty television; conventional television; radio; newspapers; magazines; music; search engines; social media; internet advertising and online news sources?
Which of these sectors are growing, which are stagnating and which are in decline? To illustrate these trends over the period from 1984 until 2012, this post hones in on rising new media services (IPTV), those that have seen their revenues stay relatively flat over the past few years (conventional television) and those that appear to be in long-term decline (newspapers). I also examine whether the media economy in Canada is big or small relative to global standards.
This post also aims to set down a baseline of data to underpin a series of posts to follow over the next few weeks. Similar to what I have done for the past two years, the next post examines trends within and across the TMI industries from 1984 until 2012 to see if they have become more concentrated over time, or less (for previous versions, see here and here). The post after that zooms in on the top sixteen or so companies with one percent or more market share across the network media in Canada. Such firms account for 86% of all telecom, media and internet revenues. Rank ordered on the basis of revenue, they are: BCE, Rogers, Telus, Shaw, Quebecor, the CBC, MTS, Cogeco, Google, Torstar, Sasktel, Postmedia, Astral, Eastlink, the Globe and Mail, Facebook and Netflix. You can see a past version this discussion here).
In addition to updating our analysis for a complete set of the 2012 data, our goal is to break new ground. This year we do so by adding a new post that examines the state of media, telecom and internet concentration in Canada relative to the preliminary results of a thirty country study by the International Media Concentration Research Project, in which I served as the lead Canadian researcher. There are some surprising results that that smash a few shibboleths while confirming other elements of what we know from past research.
Finally, another new dimension for this year is a break out of data and analysis for the English- and French-language telecom, media and internet (TMI) markets. For the most part, similar questions to those introduced above are addressed about media growth and concentration trends between 2000 and 2012, while the leading firms in both of these regions are profiled in terms of size, ownership, the media, telecom and internet sectors they operate in, and how they each fit into the Canadian mediascape overall. 1
While we cite our sources below, by and large, the following documents and data sets underpin the analysis in this post: Media Industry Data, Media Economy Data, Sources and Explanatory Notes and the CMCR Project's Methodology Primary.
Canada's Network Media Economy in a Global Context
Canada's network media economy has grown immensely over time. Between 1984 and 2012, it nearly quadrupled from $19.4 billion in revenue to $73.3 billion (current $). Adjusted for inflation, the rise was from $39 billion to $73.3 billion last year (2012 $).
While often cast as a dwarf amongst giants, the network media economy in Canada is large by international standards: tenth largest in the world as of 2012, as the overview in Table 1 below illustrates.
Table 1: Canada's Ranking Amongst 12 Biggest Network Media Economies by Country, 1998 – 2012 (billions USD)
Sources and Notes: OECD Communication Outlook 2013; ITU Revenues 2012. PriceWaterhouseCooper's Global Entertainment and Media Outlook, 2012 – 2016 (plus 2011, 2010 and 2009 editions) for media and internet. P = preliminary estimate for countries, except Canada. See CMCRP Media Industry Data and methodology primer for Canadian data and analysis.
Canada's network media economy is obviously small relative to the U.S., at one-twelfth the size. However, relative to the rest of the world, it is amongst the biggest, right after Australia, Italy and Brazil and just ahead of Spain and South Korea.
The growth of the network media economy was especially swift from the early-1990s well into the first decade of the 21st century but like most other countries on the list, it has slowed since 2008, mostly on account of the economic instability that has followed quick on the heels of the Anglo European financial crisis (2007ff). Indeed, worldwide network media revenues fell 5% between 2008 and 2009 and half of the countries listed in Table 1 saw their media economies actually shrink over the following years: the US, Germany, France, the UK, Italy and Spain.
Collectively, these countries' media economies shrank by around $67.2 billion between 2008 and 2012. Some of this lost ground was regained by 2011, but only on account of increases in the US and France while the media economies in the other four countries (Germany, the UK, Italy and Spain) continued to be smaller than they were before the financial crisis.
In sharp contrast to much of Europe, the US and, less so, Canada, the media economies of Australia, South Korea, Brazil and China have been largely unscathed by the financial crisis. Indeed, these countries and a few others such as Turkey, India, Indonesia, South Africa, and Russia have been going through something of a 'golden media age' over the past decade, with most media, from internet access, to the press, television, film and so on undergoing an unprecedented phase of fast-paced development (OECD, 2010).
The Network Media Economy in Canada: Growth, Stagnation or Decline?
As noted above, the network media economy in Canada has grown enormously from $19.4 billion in 1984 to nearly $73.3 billion in 2012 (current $), or from $39 billion in 1984 to just over $73.3 billion last year (2012$). Figure 1 below charts the trends using current dollars.
Source: see Media Economy Data, Sources and Explanatory Notes and the CMCR Project's Methodology Primary.
Entirely new sectors – wireless, internet access, pay and specialty tv services, internet advertising – have added immensely to the increase. The most significant source of growth is from the platform media elements (wireless, ISPs, IPTV, cable and satellite), especially after the mid-1990s, but television has also grown enormously regardless of where we start the time line.
Music has also grown slightly, at least once a full measure of all of its subsectors are included – recorded, live, digital/online and publishing – as shown below, while radio has stayed mostly flat. In contrast, wireline telecoms, newspapers and magazines have declined, the first very sharply since 2000 and the latter two gently since sometime between 2004 and 2008, depending on whether trends are looked at from the point of view of real dollars or current dollars.
Table 2 below summarizes the state of affairs across the network media economy as things stood at the end of 2012 in terms of whether each sector covered in this post appears to be growing, stagnating or in decline.
Table 2: The Network Media in Canada: Sectors Experiencing Growth, Stagnation or Decline
The Platform Media Industries
The platform media industries – the pipes, bandwidth and spectrum used to connect people to one another and to devices, content, the internet, and so on — of the network media economy grew from $13.8 billion to $51.5 billion between 1984 and 2012. In real dollar terms, revenue grew from $26.8 billion to $52.5 billion. Table 3 shows the trends.
Table 3: Revenues for the Platform Media Industries, 1984 – 2012
Sources: see Media Economy Data, Sources and Explanatory Notes and the CMCR Project's Methodology Primary.
Accounting for 72% of revenues, the platform media sectors are the fulcrum of the media economy, as is the case in most of the world. This is why Bell, Rogers, Shaw, Quebecor, Telus, SaskTel, MTS Allstream, Eastlink, Cogeco, etc. are so fundamental to the media economy.
While some might think that the over-sized weight of the platform media in the media economy is of recent vintage, their share of the network media economy in 2012 was basically the same as it was in 1984, i.e. 71-72%, albeit within the context of a vastly larger media economy. This is mostly because of the steep decline in wireline telecom revenues, from $21.2 billion at their peak in 2000 to $15.9 billion in 2012.
As plain old telephone service (POTS) has gone into decline, however, some pretty awesome new stuff (PANS) has come along to more than pick up the slack. Wireless is the best example of this, with revenues skyrocketing after 1996, as Figure 1 and Table 2, above, demonstrate.
Indeed, wireless revenues have nearly quadrupled from $5.4 billion in 2000 to $20.3 billion last year. A corresponding rapid growth in mobile voice and data traffic reinforce the impression. Voice and data traffic were up in Canada 69% and 85% in 2012 over 2011, respectively, with the latter rising considerably faster than the worldwide average (70%)(sources cited here are silent on the other).
The growth in wireless is fast on account of the expanding array of devices that people use to connect to wireless networks: phones, smartphones, tablets, wifi connected PCs, and so on. In short, personal wireless mobile communications are quickly moving to the centre of the media universe. These are the social, economic and technological foundations underpinning the wireless wars that are now in full-swing in Canada.
Some have recently argued that the rate of wireless growth has slowed since 2008, arguing that this is mainly because it is becoming a mature market (Church and Wilkins, 2013, p. 40). Relative to the torrid pace of growth from the late-1990s through the most of the 2000s, this is true. However, it is well known that the pace set during the early commercialization of new technologies cannot be sustained forever. More than this, however, the flattening of growth coincides perfectly with the financial crisis.
This reality simply cannot be ignored. As indicated earlier, revenues for the network media economy worldwide declined between 2008 and 2009 and many of the world's largest network media economies are still smaller today than they were five years ago (Germany, UK, Italy and Spain), have stalled (Japan and France) or are only modestly larger now than they were five years ago (US, Canada and Korea). Therefore, a modest let-up in the pace of wireless growth amidst such conditions is not surprising.
That said, wireless revenues have not been hit as hard as other media sectors by either the collapse of the dot.com bubble in 2000 or by the Anglo-European financial crisis (2007ff). Only the pace of development has slowed relative to past trends.
Internet access displays similar patterns of massive growth, albeit for not as long or to the same extent. Internet access revenues last year were $7.6 billion, up substantially from $6.2 billion in 2008 and quadruple what they were at the turn-of-the-21st century ($1.8 billion).
The most notable development in the past two years is the rapid growth of the telephone companies' Internet Protocol TV (IPTV) services, albeit from a low base. IPTV is the incumbent telcos' managed internet-based tv services: e.g. Telus, Bell, MTS Allstream, SaskTel, and Bell Aliant. Revenues have nearly tripled, from $231 million to $638 million, over the past two years. The number of IPTV subscribers has followed suit, rising sharply from 200,000 in 2008, to nearly a half-million at the end of 2010, to just under 1.2 million at the end of 2012.
These figures are slightly higher than those in the CRTC's Communication Monitoring Report (pp. 110-111) because the CRTC's figures for subscribers are taken from the end of August in each year as opposed to the end of the year. More importantly, the CRTC's estimated revenues (ARPU) are lower than those the telcos cite in their annual reports (see CMR, pp. 110-111).
Tables 4 and 5 below show the trends for IPTV growth in terms of both subscribers and revenues, respectively.
Table 4: The Growth of IPTV Subscribers in Canada, 2004–2012
|Bell Fibe TV
|Bell Aliant
|MTS Allstream
|Total IPTV Connections
Sources: see Media Industry Data, Sources and Explanatory Notes and the CMCR Project's Methodology Primary.
Table 5: The Growth of IPTV Revenues in Canada, 2004–2012
|Bell Fibe TV
|Bell Aliant
|MTS Allstream
|Total IPTV $
Sources: see Media Industry Data, Sources and Explanatory Notes and the CMCR Project's Methodology Primary.
The growth of IPTV services is significant for many reasons. First, the telcos are finally making the investments needed to bring next generation, fiber-based internet networks closer to subscribers, mostly to neighbourhood nodes and sometimes right to people's doorsteps. If the distribution of television is essential to the take-up of next generation networks, as I believe it is (for better or worse), IPTV will be a key part of the demand drivers for these networks (see below).
Second, the addition of IPTV as a new television distribution platform brings the telcos deeper into the cable companies' dominion. IPTV services accounted for 7.5% of the TV distribution market in 2012 (the CRTC's Communication Monitoring Report publishes a slightly lower number at 6.7%, p. 110 for reasons explained above). The competitive threat posed by IPTV services, however, is more prominent in the western provinces where Telus, SaskTel and MTS are deploying IPTV in direct rivalry with Shaw versus the provinces from Ontario to the Atlantic where Bell's decision to manage the introduction of IPTV in ways that are as least disruptive to its existing satellite operations as possible has moderated the impact on Rogers, Quebecor and Cogeco.
While the telcos' IPTV services appear to have cut into the revenues of some cable companies, they have also contributed to a substantial expansion of BDU revenues from $8.1 billion in 2010 to $8.7 billion last year. Growth in 2012, however, was slow. Against the hew and cry about cord-cutting in industry pleadings for regulatory favours, and in so much of the journalistic coverage that uncritically repeats such claims, the losses of a few incumbent cable providers should not be mistaken with an industry in peril. Even if it was, growing competition is to be encouraged rather than something to shed tears over.
While IPTV services finally appear to be taking off, we must remember several things. First, the small prairie telcos, followed by Telus, have taken the lead in deploying IPTV. For Sasktel, MTS and Telus, IPTV now make up a significant 13.9 percent, 6.6 percent and 5.9 percent, respectively, of their revenues from wireline network access services (Wiredline + ISP + Cable). Bell lags far behind, with 1.5 percent of its revenues coming from IPTV services, including Bell Aliant, in 2012 (see Table 5).
Indeed, Bell launched IPTV late via its affiliate Bell Aliant in 2009. It slowly rolled out service for the next two years in the high-end districts of Montreal and Toronto, half-a-decade after MTS and SaskTel began doing so in the prairies. More cities were added in 2012 and subscriber numbers for the Bell Fibe service grew as a result from just under 120,000 the year before to about 356,000.
Innovation and investment in Canada came first from small telcos on the margins and Telus, not Bell. This replays a long-standing practice for new services to start out as luxuries for the rich before a mixture of public, political and competitive pressures turn them into affordable and available necessities for the public generally (see Richard John with respect to the US, Robert Babe for Canada). From the telegraph to next generation fibre Internet infrastructure, the tendencies, conflicts and lessons have remained much the same. The wireless wars that are now in full-swing are just the latest iteration of an old, old story (Winseck Reconvergence, Winseck and Pike, John or Babe).
IPTV remains under-developed as a critical part of the network infrastructure in Canada, accounting for only 2 percent of the $32.2 billion in wire line network access revenues (i.e. wireline+BDUs+ISPs) (see Table 3 above). Less than two percent of broadband connections in Canada use fiber-to-the-home (see CMR, p. 142). The OECD average is 15 percent. In countries at the high end of the scale (Sweden, Slovak Rep., Korea, Japan), thirty to sixty percent of all broadband connections are fiber-based. The OECD ranks Canada 24 out of 34 countries in terms of fiber-connections out of the total number of subscribers as of December 2012. The following figure illustrates the point.
Figure 2: Percentage of Fibre Connections Out of Total Broadband Subscriptions (December 2012)
Source: OECD (2013). Broadband Portal.
For those who might be dismissive of such figures, it is useful to remember that the data presented in Tables 4 and 5 about IPTV are based on the Canadian telcos' own audited numbers from their annual reports. While it has become something of a sport in Canada to cast aspersions on the OECD data (see here, here and here), the UK regulator Ofcom comes to similar conclusions: 5% of Canadian households subscribed to IPTV in 2011 versus France (28%), the Netherlands and Sweden (11%), Germany and the US (6%) and Spain (4%) as of 2011 (p. 136). The prairie telcos and Telus are part way to the OECD average, but in many ways, especially given its size and presence from Ontario to the Atlantic, it is Bell's poor performance over the past half-decade that has dragged Canada down in the global league tables.
The Content Media Industries
The remainder of this post looks at the content media industries (broadcast tv, specialty and pay tv, radio, newspapers, magazines, music and internet advertising). For the most part, they too have grown substantially, although the picture has become murkier for a few sectors in the past few years.
In 1984, total revenue for the content industries was $5.6 billion; in 2012, it was $20.8 billion in 2012. In inflation-adjusted dollars, the revenues basically doubled from $11.3 billion to $20.8 billion over this span of time. Growth was steady throughout this period, with no discernible major uptick or downturn at any given point in time except for the years between 2008 and 2010, for reasons discussed above. Figure 3 depicts the trends.
Figure 3: Revenues for the Content Industries, 1984 – 2012 (Millions $)
Sources: Media Economy Data, Sources and Explanatory Notes and the CMCR Project's Methodology Primary.
The rise of the internet and the confluence of its impact with the advertising downturn after the Anglo European financial crisis led many to claim that conventional TV is in a death spiral. Over-the-top services such as Netflix and supposedly rampant cord-cutting further compound the woes, or at least so the story goes.
Such doomsday scenarios, however, have been wide of their mark. Advertising revenue has gyrated in lockstep with state of the economy: plummeting by 8.5% from 2008 to 2009 followed by substantial increases of 9.2% and 7.7% in 2011. Things, however, stalled in 2012 amid ongoing economic uncertainty (-2%), fitting the patterns described earlier perfectly (on economic recessions, advertising revenue and the media economy see Picard, Garnham or Miege).
Beyond advertising, the picture is clearer. The amount of time people watch television has stayed remarkably steady across all age groups and outstrips time with other media — the internet, radio, newspapers or other media – by a considerable margin, according to the most recent Canadian Media Usage Study. Ofcom's latest international monitoring report shows that TV viewing was up in 13 of the 16 countries it surveyed, including Canada (p. 162).
In "Why the Internet Won't Kill TV", Sanford C. Bernstein & Co. senior analyst Todd Juenger writes, "so far teens are following historical patterns, and in fact, their usage of traditional TV is increasing". Their use of computers, smart phones and tablets to do so is adding to, rather than taking away from, how much they watch television, he states.
Internet equipment manufacturers Cisco and Sandvine suggest that television and online video are driving the evolution and architecture of the internet. The proliferation of devices is expanding the time and space for television in people's lives, not taking away from it. Elsewhere, I have called this the rise of the prime time internet. The fact that Netflix is engineered to be viewed on 800 devices helps illustrate the point.(2)
Conventional broadcast TV revenues have been basically flat since 2008. In real dollar terms, they have slid from $3,562 million to $3,407 in 2012 – a 4% decline. The real growth has been in subscriber fees and the pay-per model of TV (Mosco), as has been the case around the world – a point returned to immediately below.
For now, however, four points can be highlighted to explain the stalled growth of conventional TV when measured in current dollars or slight decline when 'real dollars' are used:
- dip in TV advertising in 2012;
- budget cuts to the CBC (p. 8);
- the phasing out of the LPIF between 2012 and 2014;
- the big four commercial TV providers – Shaw, Bell, Rogers and Quebecor –backing of the rapidly growing pay, specialty and other subscriber-based forms of TV (i.e. mobile, IPTV), while edging away from broadcast TV (see the CRTC's CMR, pp. 100-102 and Individual Financial Summaries for a list of the 116 pay and specialty channels the big four, in total, own 2012).
That the TV in crises choir is wide of the mark is clearer yet once we widen the lens to look at the fastest growing areas of television: i.e. specialty and pay tv services (HBO, TSN, Comedy Central, Food Network, etc), mobile TV, and television distribution. Pay and specialty television services have been fast growing segments since the mid-1990s and especially so during the past decade. Their revenues eclipsed those of conventional broadcasting in 2010, when revenues reached $3,474.6 million. Last year, that figure was half-a-billion dollars higher at $3,967.5 million.
Adding conventional as well as specialty and pay tv services together to get a sense of 'total television' revenue as a whole yields an unmistakable picture: total TV revenues quadrupled from $1,842 million in 1984 to $7,375 million in 2012; using 'real dollars', total TV revenues doubled from $3.7 billion to $7.4 billion last year — hardly the image of a media sector in crisis. The fact that such trends persisted steadfast in the face of the economic downturn also points to a crucial point: the importance of the direct pay-per model (Mosco) and its relative imperviousness to economic shocks in comparison to the hyper-twitchy character of advertising revenue.
Add cable, satellite and IPTV distribution and the trend is more undeniable. In these domains, as indicated earlier, the addition of new services, first DTH in the 1990s, followed by IPTV in the past few years, plus steady growth in cable TV, means that TV distribution has grown immensely. Indeed, revenues for these sectors expanded twelve-fold from $716.3 million in 1984 to $8,695.7 million in 2012 (in current dollars).
"Total TV" and TV distribution revenues accounted for just over $16.1 billion in 2012. To put this another way, in 1984, all segments of the TV industry accounted for just 7% of revenues in the network media economy. That figure rose to 14% in 2000; by 2012, it was 22%. Table 6 illustrates the trends.
Table 6: Television Moves to the Centre of the Network Media Universe, 1984 – 2012 (millions current $)
Sources: see Media Economy Data, Sources and Explanatory Notes and the CMCR Project's Methodology Primary.
Television is not dead or dying. It is thriving, and remains at the core of the internet- and wireless-centric media universe. Moreover, television and online video are driving the development and use of wireless and internet services. This is why Rogers, Telus and Bell are all using television to drive the take-up of 4G wireless services, and IPTV for the latter two. To paraphrase Mark Twain, rumors of television's demise are greatly exaggerated.
Of course, this does not mean that that life is easy for those in the television business. Indeed, all of these sectors continue to have to come to terms with an environment that is becoming structurally more differentiated because of new media, notably IPTV and over-the-top (OTT) services such as Netflix, as well as significant changes in how people use the multiplying media at their disposal.
While incumbent television providers have leaned heavily on the CRTC and Parliament to change the rules to bring OTT services into the regulatory fold, or to weaken the rules governing their own services (see Bell's submission in its bid to take over Astral Media, for a recent example, notably p. 22), OTT services have not cannibalized the revenues of the industry. They have added to the size of the pie. Based on an estimated 1.6 million subscribers at the end of 2012, Netflix's Canadian revenues were an estimated $134 million – about 1.8 percent of "Total TV" revenues. Reports by Media Technology Monitor and CBC as well as the CRTC's (2011) Results of the Fact Finding Exercise on Over-the-Top Programming Services lead to a similar conclusion.
Part of the more structurally differentiated network media economy is also illustrated by the rapid growth of internet advertising. In 2012, internet advertising revenue grew to $3.1 billion, up from just over $2.7 billion a year earlier and $1.6 billion in 2008. At the beginning of the decade, internet advertising accounted for a comparably paltry $110 million, but has shot upwards since to reach current levels. Similar to wireless services, however, internet advertising revenues continue to grow fast, although even here the pace has slowed appreciably since the onset of the Euro American financial crisis.
To be sure, these trends have given rise to important new actors on the media scene in Canada, notably Google and Facebook, among others, who account for the lion's share of internet advertising revenues. Indeed, based on common estimates that Google takes about half of all internet advertising revenues, the search engine giant's revenues in Canada in 2012 were in the neighbourhood of $1,542.5 million.(3) This is significant. It is enough to rank Google as the eighth largest media company operating in Canada, just after the CBC and MTS, but ahead of, in rank order: Cogeco, Torstar, Sasktel Postmedia, Astral, Eastlink, Power Corporation (Gesca) and the Globe and Mail.
For its part, Facebook had an estimated 18.1 million users in Canada at the end of 2012. With each Canadian user worth about $12.70 to the company a year, it's revenue can be estimated as having been $229.7 million in 2012, or 7.5% of online advertising revenue – an amount that gives it a modest place in the media economy in Canada and near the bottom of the list of the top twenty TMI companies in this country.
While it is commonplace to throw digital media giants into the mix of woes that are, erroneously, trotted out as bedeviling many of the traditional media in Canada, the fact of the matter is that Netflix's impact on television revenues is negligible, while those of Google and Facebook are mostly irrelevant except for three areas where they are likely quite significant: music, magazines and newspapers. For the latter two, this is because of the direct impact on advertising revenues, while for music it is not advertising that is at issue, but how online distribution and the culture of linking is affecting the music industry. The following and concluding sections of this post sketch out trends in each of these domains.
While many have held up the music industry as a poster child of the woes besetting 'traditional media' at the hands of digital media, the music industry in Canada is not in crisis. The picture over time, however, is mixed but getting better from a commercial standpoint.
Using current dollars, the sum of all of the main components of the music industry – i.e. recorded music, digital sales, concerts and publishing royalties – the music industry has grown modestly from $1,214 million in 1998 to $1,523.2 million in 2012. The current trend is slightly up, but the trend over the past decade-and-a-half has been unsteady, with considerable oscillation between record highs and contemporary lows.
Revenue dropped after the collapse of the dot.com bubble between 2000 and 2002, for instance, but then rose again until hitting a peak in 2004 of $1,379.3 million where they stayed flat for the next four years, when they began once again to climb. By 2010, music industry revenues had grown to $1,458.2 million; they have edged upwards from there ever since: to $1,480.4 million in 2011 and to $1,523.2 million last year – an all time high. Figure 4 illustrates the trends over time based on current dollars.
Figure 4: Total Music Revenues, 2000, 2006 & 2012 (millions$)
Sources: Recorded Music from Statistics Canada, Sound Recording and Music Publishing, Summary Statistics CANSIM TABLE 361-0005; Stats Can., Sound Recording: data tables, October 2005, catalogue no. 87F0008XIE; Stats Can, Sound Recording and Music Publishing, Cat. 87F0008X, 2009; except for 2012, from PriceWaterhouseCooper, Global Media and Entertainment Outlook, 13th ed., 2012; Concerts from Stats Can, Spectator sports, event promoters, agents, managers, and artists for 2007, 2008, and 2009; Publishing from Socan, Financial Report (various years); Internet from PriceWaterhouseCooper, Global Media and Entertainment Outlook, 13th ed (various yrs).
The picture is less rosy when we switch the metric to 'real dollars', which results in revenues reaching a high of $1.6 billion in 2004 before dropping to their lowest point in over a decade: $1, 455 million in 2008. Yet, since then, revenues have once again been on the rise and in 2012 reached $1523.2 million – less that 4% off their peak in 2004.
This is a slight decline since the all-time high in 2004, of course, but certainly not a calamity. Moreover, the trend from 2008, whether measured in current or real dollars is all in one direction: up! One reason for this might be because of all the media covered by the network media concept, the music industries embraced digital/internet sources of revenue earlier and more extensively than any other. Worldwide, by 2012, the industry obtained about 15% of its revenues from online, mobile and digital sources.
There is and has been no crisis in the music industry. In fact, conditions in Canada now mirror those in the music industry worldwide. To be sure, certain elements within the music industry – recorded music, for instance – have suffered badly, but publishing has plugged steadily along with modest increases and digital/online/mobile have exploded. Even recorded music now appears to be holding steady. Moreover, whereas recorded music has long been the centre of the industry that place has now been usurped by live concerts, as shown above. Even the music industry's main lobby group, the International Federation of Phonographic Industries states in its most recent Digital Music Report that in 2012 "the music industry achieved its best year-on-year performance since 1998" (p. 5).
Radio stands in a similar position to the music industries a few years ago. Revenues grew until reaching a peak in 2008: $1,990 million (includes CBC annual appropriation), a level at which they have basically remained ever since. Revenues in 2012 were $1,946 (current dollars). Change the measurement from current dollars to inflation-adjusted, real dollars, however, and the picture changes, with revenue declining from $2,088.3 million in 2008 to $1,946 million in 2012 – a fall of 6.8%.
Magazines appear to stand in the same position as the music and radio sectors as well, although I have not been able to update my revenue data for the sector for either 2011 or 2012. Yet, extrapolating from trends between 2008 and 2010 to obtain an estimate for 2012, revenues have declined slightly on the basis of current dollars (from 2,394 million in 2008 to $2,100 in 2012). PriceWaterhouseCooper, in contrast, shows a slight uptick in revenues between 2011 and 2012. Back to estimates using Statistics Canada and the drop of nearly 17 percent from $2,522.4 million in 2008 to $2,071.1 last year seems pronounced. The Internet Advertising Bureau shows a net drop in advertising between 2011 and 2012 of 3%. In other words, the evidence is mixed but leans toward the 'media in decline' side of the ledger.
Perhaps the most dramatic tale of doom and gloom within the network media economy, at least in terms of revenues, is from the experience of newspapers. Readers of this blog will know that in earlier versions of this post, and other posts, I have been skeptical of claims that journalism is in crisis. I still am. Generally, I agree with Yochai Benkler who argues that that we are in a period of heightened flux, but with the emergence of a new crop of commercial internet-based members of the press (the Tyee and Huffington Post, for example), the revival of the partisan press (e.g. Blogging Tories, Rabble.ca) as well as non-profits and cooperatives (e.g. the Dominion) and the rise of an important role for citizen journalists signs that journalism is not moribund or in a death spiral. In fact, these changes may herald a huge opportunity to improve the conditions of a free and responsible press.
At the same time, however, I also believe that traditional newspapers, whether the Globe and Mail, the Toronto Star or Ottawa Citizen are important engines in the network media economy, serving as the content factories that produce news, opinion, gossip and cultural style markers that have the ability to set the agenda and whose stories cascade across the media in a way that is all out of proportion to the weight of the press in the media economy. In other words, the press originates far more stories and attention that the rest of the media pick up, whether television, radio or via the linking culture of the blogosphere, than its weight suggests. Thus, problems in the traditional press could pose significant problems for the media, citizens and audiences as a whole.
While I have been reluctant to see newspapers as being in crisis, mostly because in previous years I have felt that the trends had not been long enough in the making to draw that conclusion. I also believe that many of the wounds suffered by the newspaper business have been self-inflicted out of a mixture of hubris and badly conceived bouts of consolidation. Nonetheless, I began to change my tune last year and the results this year offer no reason to change course now.
The revenue figures for the newspaper industry, as one industry insider who tallies up the data told me, are "a mess". The problems are mostly terminological in nature, such as how to define a daily, community or weekly newspaper while allocating revenue to each category accordingly. They also reflect concerns with how to present the industry in the least damaging light but without sugar-coating harsh realities. That said, using a mixture of data from Newspaper Canada and Statistics Canada allows us to arrive at good portrait of the newspaper industry over time and its main players, although it's also important to point out that the Statistics Canada data for 2011 and 2012 are preliminary estimates that must wait until next year when it releases newspaper industry revenues for these years.
The data I use is drawn mostly from Statistics Canada, but Table 7 below shows both Newspaper Canada and Statistics Canada data so that readers can see the difference and also to reveal online revenues. Further discussion of why these differences exist can be seen in the relevant sections of the documents here and here.
Regardless of differences, both sources show that newspaper revenues have plummeted. In current dollar terms, Statistics Canada shows that newspaper revenues peaked at $5,482.3 million in 2008, and have fallen substantially since to an estimated $4,978 million last year. They fell another $180.7 million in 2012 – 3.6% — a decline of 12.5% since 2008. Table 7 illustrates the trends over time since 2004, while the full data set based on Statistics Canada data from 1984 can be seen under the relevant heading here.
Table 7: Newspaper Revenue — Newspapers Canada vs Statistics Canada, 2004-2012
|($ million CND)
|Daily Newspaper (Adv$)
|Daily Newspaper (Circ$)
|Community Newspaper ((Adv$)
|Community Newspaper (Circ$)
|Online Newspaper*
|Newspaper Canada
|Statistics Canada Total $
Sources: see Media Economy Data, Sources and Explanatory Notes and the CMCR Project's Methodology Primary. Online Newspaper revenues includes daily and community papers. 2012 data for Community Newspaper circulation revenue based on estimate of flat year-over-year growth.
In real dollar terms, the fall is more pronounced, with the decline setting in earlier and the drop being steeper. According to this measure, newspaper revenues basically flatlined between 2000 and 2008, with a small drop, but have shrunk greatly since by just under $1 billion – or 17%. This is the most clear cut case of a medium in decline out of the sectors of the network media economy reviewed in this post.
The results of these trends in 2012 were clear:
- Postmedia cut the Sunday edition at three of its papers (the Calgary Herald, Edmonton Journal and Ottawa Citizen) adding to those where such measures had already been taken in the past few years (e.g. the National Post);
- Postmedia also made deep cuts to journalistic staff across its chain;
- the Globe and Mail adopted a voluntary program with the hope that sixty of its journalists would take the hint and leave (and here);
- Quebecor's Sun newspapers cut 500 jobs and centralized its printing operations in a smaller number of locations;
- Glacier and Black swapped a number of smaller papers to consolidate their own operations.
Perhaps the most significant change to take place in 2012 is the extent to which dailies were put behind paywalls in Canada. Prior to 2011 there were no dailies with paywalls; in 2011 there were 5 covering under 1/5th of daily circulation; by 2012 the number had grown to 11 dailies and more than half of daily circulation. By August 2013, the number had grown 26 dailies accounting for more than two-thirds of daily circulation – a rate that is considerably higher than either the US or the UK (see Picard and Toughill). Table 8 illustrates the point.
Table 8: The Rise of the Great Paywalls of Canadian Newspapers, 2011-2013
Weekly Total
Daily Avg.
|Times Colonist, Victoria
|May 2011
|Glacier Media
|Daily Gleaner, Fredericton
|Nov 2011
|Brunswick News Inc.
|Times-Transcript, Moncton
|Nov 2011
|Brunswick News Inc.
|New Brunswick Telegraph Journal
|Nov 2011
|Brunswick News Inc.
|Gazette Montreal
|May 2011
|% Circ behind Paywall (2011)
|Vancouver Sun
|Aug 2012
|Province, Vancouver
|Aug 2012
|Ottawa Citizen*
|Aug 2012
|Journal de Montréal
|Sept 2012
|Quebecor/Sun Media
|Journal de Québec
|Sept 2012
|Quebecor/Sun Media
|Globe and Mail
|Oct 2012
|Globemedia Inc.
|Ottawa Sun
|Dec 2012
|Quebecor/Sun Media
|Toronto Sun
|Dec 2012
|Quebecor/Sun Media
|Winnipeg Sun
|Dec 2012
|Quebecor/Sun Media
|Calgary Sun
|Dec 2012
|Quebecor/Sun Media
|Edmonton Sun
|Dec 2012
|Quebecor/Sun Media
|% of Circ behind Paywall (2012)
|National Post
|May 2013
|Calgary Herald
|May 2013
|Edmonton Journal
|May 2013
|Windsor Star
|May 2013
|Guardian, Charlottetown
|May 2013
|TC Media
|Leader-Post, Regina
|May 2013
|StarPhoenix, Saskatoon
|May 2013
|The Daily News, Truro
|July 2013
|TC Media
|Toronto Star
|Aug 2013
|Torstar Corporation
|Chronicle-Herald, Halifax
|Aug 2013
|Halifax Herald Ltd.
|Total Circulation
|% of Circ behind Paywall (8/2013)
Source: Newspaper Canada 2012 Daily Circulation Report.
Some Concluding Comments and Observations
Several observations and conclusions stand out from this analysis.
First, the network media economy has grown immensely over time, whether we look at things in the short-, medium- or long-term. In the short- to medium-term (1-5 years), however, things have been less rosy. The effects of the economic downturn in the wake of the Euro-American centred financial crisis have hit every sector, except, it would appear, and ironically, music, which began to recover shortly afterwards. Otherwise, the effect has been to slow the rate of growth in the fastest growing sectors (wireless, ISPs, internet advertising, television) and to compound the problem in those media already under stress (newspapers, magazines and radio).
Second, while the network media economy in Canada may be small relative to the U.S., it is large relative to global standards. In fact, it is the tenth biggest media economy in the world.
Third, while most sectors of the media have grown substantially, and the network media economy has become structurally more complex on account of the rise of new segments of the media, a few segments have stagnated in the past few years (broadcast TV, radio and music, with apparent light at the end of the tunnel in the last few years with respect to the latter). It is now safe to say that two sectors appear to be in long-term decline: the traditional newspaper industry and wiredline telecoms. Magazines probably fit the latter designation but it may still be too early to tell, with some good sources suggesting that it too, like the music sector, might be poised for a turn-around.
These ambiguities give good reason for why the CMCR project will continue to update our research on these matters annually. As we have said before, we can know of few better ways to gain an intimate understanding of our objects of analysis – the network media and all of its constituent elements – than to peer deeply and systematically into the data, while providing a theoretically and historically informed analysis of the data and trends that emerge over as long a period of time as we reasonably can.
1 Brazil telecom estimated at 12.5 percent growth from 2004 to 2008, and 5 percent per annum for 2010 through 201; China's revenue estimated for 2010-2012 based http://www.cmcrp.org/wp-content/uploads/2013/10/Sources-and-Explanatory-Notes.docxon 10 percent per annum growth rates. Internet access revenues before 2004 are estimated for each country, except Australia and Canada, based on the prevailing CAGR for this sector within each country at the time.
2 Corey Wright, Director of Global Public Policy, Netflix, guest lecture given at School of Journalism and Communication, Carleton University, September 2013.
3 The Globe and Mail's publisher, Phillip Crawley told the World Publishing Expo in Berlin that Google takes 60% of internet advertising in Canada. Evidence for this claim do not seem to have been presented, but I am all ears if a good case can be made for revising the estimates upwards to this figure.
Canada's Wireless Wars: Bell Media Exec's Memo to News Directors
Since reports in mid-June that Verizon might be poised to enter the Canadian wireless and mobile phone market, Bell, Rogers and Telus have fought tooth-and-nail against that happening. That opposition, as this post shows, not only includes the full-on public relations assault, but a series of emails from Bell Media President Kevin Crull calling on the telecom and media giant's news directors to cover a report favourable to the incumbents' main arguments as well.
Key elements of this summer's wireless wars are well-known: Telus has launched a lawsuit against elements of the Government's wireless policy that prevent the incumbents from acquiring Wind, Mobilicity and Public. Rogers, Bell and Telus have held private meetings with Industry Minister James Moore to plead their case that the Conservative Government's wireless policy is chock-a-block full of loopholes that give unfair advantages to foreign telecom giants such as Verizon at the expense of Bell, Rogers and Telus — and Canadians. Full page adverts taken out by the incumbents are appearing daily in newspapers across the country in a bid to convince Canadians of the same points.
BCE CEO George Cope penned an open "Letter to Canadians"; BCE Director Anthony Fell excoriated the Harper Government for its supposedly unfair wireless policy; the Globe and Mail and Toronto Star have editorialized in support of the big three telcos' position as well; the Canadian Council of Chief Executives took the unusual step to write the Prime Minister in order to do the same. The Communications Energy and Paperworkers Union, the largest union representing telecommunications workers in the country, is also singing from the same page as the big three on this issue. The Canadian Wireless Telecommunications Association (CWTA) — the industry association that represents the collective interests of Bell, Rogers and Telus — has been selectively plucking evidence about cheaper wireless rates in Canada relative to the U.S. while distracting attention from the fact that, relative to the rest of the world, prices for nearly all cell phone service plans in Canada and the U.S. are high.
So far, however, these tactics appear to have backfired. Prime Minister Stephen Harper and Industry Minister James Moore have lambasted the companies' campaign as dishonest, while pledging to stay the course. The Conservative Party has launched a website to counter the incumbents' public relations campaign and trumpet the Government's position. Views opposing the incumbents' position have also been getting some play as well (see here and here). Canadians also appear open to the idea of a new player such as Verizon entering the market (here).
While there is certainly room for debate, by and large, Harper, Moore and the incumbents' critics are correct, and Canadians' sentiment in the right place. The rules the incumbents are grousing about are neither new, novel, nor filled with loopholes. For well-over a decade the consensus in international circles has been that the more competition in wireless, the merrier. The policy at home has taken some time to catch up with this reality, but the rules now being cast as unfair have been the cornerstones of the Conservative government's wireless policy since 2007.
The only real differences are that Canada embraced these ideas late in the game relative to others, no doubt due to the incumbent's intransigence, while foreign ownership rules continue to be far more restrictive in Canada despite last year's decision by the Government to relax them "for companies that have less than a 10 percent share of the telecommunications market". The basic ingredients of the international consensus are straight-forward, although everywhere their introduction has been fiercely contested by incumbents bent on maintaining their dominant market positions: spectrum set-asides for new entrants, reduced foreign ownership restrictions, network tower sharing agreements and open interconnection rules.
To get a glimpse of the vintage of these basic principles and rules, take a look, for example, at the OECD's Communication Outlook from 1999 (p. 28), and every volume since then, or the authoritative collection of chapters in William Melody's edited Telecoms Reform from 1997. I will write more about the finer points of wireless policy in the near future. The point that I want to stress for now, however, is that the big three's scorched earth approach on this issue is leading to other interests and important principles being thrown under the bus.
Some employees at Rogers and Bell, for instance, report being brow-beaten by managers to email a form letter in support of the companies to the government. More troubling, and a point that has not yet seen the light of day, is a chain of emails originating from Kevin Crull, the President of Bell Media — the largest media enterprise and one of the largest news organizations in the country — calling on news execs and journalists across CTV, CTV2 and local TV channels and radio stations across the country to cover a study that suggests that the state of wireless in Canada is not as bad as its critics claim. A copy of the emails, with the names of non-executives removed, can be found here.
The emails begin by setting out a couple of definitional issues and then distill the two key talking points to be covered: (1) that cellphone rates in Canada have fallen in recent years and (2) that they are generally cheaper than in the US. By the end, the message is clear: "Kevin Crull our President wants us to give this report some coverage…." and "Kevin is asking if this report can get some coverage today on Talk Radio. National news is covering for TV".
By the time the chain of emails is done, a veritable whose who of BCE's executive suite have been brought into the loop: Wendy Freeman, President CTV NEWS; Richard Gray (Head of News, CTV2); Ian Lurie (COO Astral Radio); Kevin Bell (General Manager/Sales Manager CTV Vancouver Island/C-Fax and KOOL FM); Eric Proksch, (VP and GM for Bell Media Radio); Charles Benoit (Astral); Chris Gordon, (President of Radio and Local TV news); Mirko Bibic (Executive VP and Chief Legal and Regulatory Officer).
Perhaps this is not all that surprising. The stakes are high, given estimated wireless revenues of over $20 billion in 2012. Moreover, with the combined market capitalization of Bell, Rogers and Telus tumbling by roughly $8.4 billion (from $85 billion to $76.6 billion) between June 17 when Steven Chase and Rita Trichur at the Globe and Mail first broached the possibility of Verizon entering the Canadian wireless industry and yesterday, August 26th, the companies are doing whatever it takes to preserve their entrenched dominance of the Canadian wireless market and the bloated market capitalization levels that go along with a cozy oligopoly.
While it is understandable, perhaps, that BCE would deploy its journalistic resources to protect its place within the wireless oligopoly, this is not good for journalism or Canadians. It casts a cloud over the independence of CTV national news as well as news programs across the CTV2 network and Bell Media's local tv and radio stations across the country. While we know of this particular instance, how many other directives from on high have been sent over not just this issue, but other ones in which Bell sees its interests at stake?
Ultimately, the problem is this: with revenues from wireless, wiredline, Internet, IPTV, cable/satellite services at BCE in 2012 of $17.4 billion, nearly eight times its $2.4 billion in revenues from TV and radio, news is a minor cog in BCE's corporate machinery. Journalism, in other words, is subservient to the company's attempts to prop up the value of the 'transmission' and technology side of its business.
Perhaps the fact that journalists and the news divisions of such TMI conglomerates will be deployed to protect dominant market positions and capitalization might not be all that surprising, but it should still be concerning to journalists and the rest of us who need them to offer views of the world unvarnished by their corporate overlords. That the execs at BCE and Bell Media news divisions went so cheerily along with Crull's memo serves neither journalism nor the public well.
Jeff Bezos Buys the Washington Post: The New Philanthropy, or Power and the Press in the New Gilded Age?
Jeff Bezos, the CEO and controlling share-holder of internet giant Amazon bought the newspaper last weekend that broke the Watergate story, published the Pentagon Papers (along with the New York Times) and, in June of this year, helped to break the story on the NSA's mass surveillance practices: the Washington Post. He paid $250 million for it, 1/100th of his net worth ($25.2 billion) in 2012.
Most commentators appear hopeful that Bezos will use his enormous personal wealth — he is the 12th richest person in America and 19th in the world — and business acumen to turn the floundering Washington Post around and chart a renaissance for the beleagured press in the United States more generally. Most seem to think that he will operate the paper in a way that is consistent with the traditions and requirements of a free press.
Indeed, in the press release announcing the deal on Monday he said that is exactly what he will do:
"I understand the critical role the Post plays in Washington, DC and our nation, and the Post's values will not change . . . . Our duty to readers will continue to be the heart of the Post, and I am very optimistic about the future.
Donald Graham, the CEO and Chair of the Board at the Washington Post Company, summed up the mood in the press release announcing the deal:
"Jeff Bezos' proven technology and business genius, his long-term approach and his personal decency make him a uniquely good new owner for the Post".
Bezos also undoubtedly won favour in the executive suite by agreeing to bring several senior executives at the Post with him to the new company he will set up independently of Amazon: Katharine Weymouth, the current CEO and Publisher of The Washington Post (and heir to the Graham family that currently holds the dominant stake in the paper's parent company, and niece to family patrician Donald Graham); Stephen Hills, President and General Manager; Martin Baron, Executive Editor; and Fred Hiatt, Editor of the Editorial Page, will all retain their jobs. For how long, however, he did not say. His pledge to the newspaper's 650 journalists that there would be no lay-offs for a year also no doubt helped to allay whatever concerns might have arisen among journalists.
The journalistic rank-and-file in general seem to be on board with Bezos' acquisition of the Post. Carl Bernstein praises him as "exactly the kind of inventive and innovative choice needed to bring about a recommitment to great journalism on the scale many of us have been hoping for."
Fred Hiatt, the editorial-page editor who will stay with the Post under its new ownership arrangements, put matters thus: "We've all been looking for a way to marry quality journalism with commercial success in the digital era, and it's hard to think of anyone better positioned to figure that out than Jeff Bezos". Columnist and editor of Wonkblog, Ezra Klein: "For now, I'm hopeful."
Bob Woodward distinguishes good moguls like Bezos from bad ones: "This isn't Rupert Murdoch buying the Wall Street Journal, this is somebody who believes in the values that the Post has been prominent in practicing, and so I don't see any downside." James Fallows goes a step further, hoping that Bezos acquisition of the Washington Post "signifies the beginning of a phase in which this Gilded Age's major beneficiaries re-invest in the infrastructure of our public intelligence."
This is Bezos as the 21st century version of the Carnegies, Rockefellers and Fords. Whereas they built libraries, foundations and schools, he is revitalizing a landmark press institution in the U.S., the Washington Post, and, if all goes well, lighting at least part of the path to recovery for the rest of the newspaper business.
Economic Woes at the Post, Malaise Across the U.S. Press
The Washington Post is in financial trouble. Revenues for the newspaper segment at it's parent company, the Washington Post Company, peaked at $961.9 million in 2006. By last year, they had plunged to $581.7 million. The division has not turned a profit since 2008, either (Washington Post Company's Annual Reports).
Declining advertising revenue has led the way; paid weekday circulation has declined sharply from 768,000 copies in 2002 to around 450,000 today (Steve Ladurantaye; Annual Report 2012, p. 21). Online revenues have grown greatly, but from a low base and are nowhere near covering the losses.
The paper's role within the overall Washington Post Company has shrivelled as well. Whereas it accounted for a quarter of total revenues in 2006, by last year it accounted for just 14%. The education division (55%), cable television (20%) and other activities (10%) accounted for the rest.
The company as a whole continues to be profitable, however, and even during the financial crisis years of 2008 and 2009, it turned profits between 5-6%. Profit levels have been in the 10-15% range for most of the years before and after that, but last year they fell to under 4% — half the rate of the year before (Annual Report 2012, p. 1). They are down further yet this year, with newspapers and broadcast television the biggest drags on the company's balance sheet (Ladurantaye).
Of course, the woes of the Washington Post reflect the woes of the US newspaper industry in general. The U.S. and UK press have suffered the most amidst the 'crisis of journalism' afflicting much of the Euro-American world. A 2010 study by the OECD indicated that the woes of the press set in earlier in the US and UK than in most countries, 2005-2006, and have been unrelenting since. The growth of internet advertising relative to other media also started earlier and tends to account for a bigger share of all advertising spending in both countries as well (see Ofcom, International Communication Market Report, p. 187).
U.S. newspaper industry revenues peaked in 2005 at $61.2 billion. Last year they were $32.8 billion — a fall of almost half (46%), according to the Pew Research Centre's Project for Excellence in Journalism.
Figure One below shows the trend.
The toll on the number of working journalists has also been grim. Figure 2 shows the trends.
While there is no doubt, then, that both the Washington Post and the U.S. press in general are in dire straights, the idea that Amazon CEO is the white knight he is being made out to be is questionable for at least three reasons.
1. The Return of the Mogul and the Quest for Political Influence and Power
Bezos purchase of the Washington Post puts him amidst the swelling ranks of uber-rich individuals who have stepped in to scoop up newspapers that have fallen on hard times. Just days earlier, hedge fund operator and owner of the Boston Red Sox, John H. Henry, acquired the Boston Globe from the New York Times.
This revival of the new breed of billionaire newspaper owners also includes real estate tycoon Sam Zell, who scooped up the LA Times and Chicago Tribune in 2007, only to drive them further into the ground (see here). It also includes partisan zealots like the Koch brothers, David and Charles (tied for sixth on the Forbes' list of billionaires worldwide with a network of $34 billion each), who are circling newspapers in distress in the hope of taking them over and harnessing them to their right wing conservative causes.
The hopeful, however, appear to divide the new breed of press mogul into "bad" and "good" capitalists, with Bezos apparently firmly in the latter camp. Like Warren Buffet, the folksy investment guru of Omaha, who acquired Media General's 63 dailies and weeklies (except for The Tampa Tribune and its weeklies) and several other papers last year, Bezos occupies such a place because he says he values the role of daily newspapers in the communities they serve and because he has supported some progressive causes, notably gay marriage, and operated Amazon as an open bazaar when it comes to books and literature, while refusing to buckle to censorious moralists.
According to Eli Noam, in Media Ownership and Concentration in America, the number of owner-controlled media firms fell from 35 percent to just 20 percent between 1984 and 2005 (p. 6). The revival of the press baron in the past few years reverses this trend of the last half of the 20th century when media moguls were steadily being replaced by share-holder owned, managerially-controlled corporate media.
The problem with moguls, however, is that the drive for profits are often tempered by the personal quest of newspaper owners for political influence and power. This clouds the independence of the press and turns journalism into the plaything of the rich and powerful. Like other internet giants, Amazon's annual lobbying budget has risen steeply in the past few years. In 2008, for instance, its lobbying budget was $1.8 million; in 2012, it was $2.5 million. It also doubled the number of lobbyists from 12 to 25 over the same period.
While still modest compared to Google ($16.5 million in 2012) or Microsoft ($8.1 million), the fact that Amazon's lobbying budget is high relative to other companies, and that it has risen steeply in recent years, suggests that its appetite for influence over politics, policy and public opinion is growing. Bezos acquisition of the Washington Post could add to that mission.
2. The Content Industries are Being Subsumed by the Tech and Internet Industries
There is a fundamental difference between the press barons of the 21st century and those of the past, however. Unlike the Pulitzers, Hearst, Browns, McCormicks and so forth who made their fortunes in the newspaper business, Bezos, Buffett, Zell and Henry have made their's from the internet, finance and real estate, as Dean Starkman and Ryan Chittum have observed.
The press is being sucked into the orbit of far larger enterprises as a result. The Washington Post case exemplifies the point given that not only is Bezos' net worth a hundred times greater than the price he paid for the paper, Amazon's revenues in 2012 — $61.1 billion — were nearly double those of the entire U.S. newspaper industry ($32.8 billion).
Newspapers, in other words, are no longer stand-alone operations. They are minor appendages in much larger business empires. The possibility that the component parts of these entities may not always be aligned raises the question as to how journalists will be treated when conflicts of interest arise.
The Washington Post could benefit mightily from such arrangements if it is able to use Amazon's hyper-efficient distribution infrastructure as a way to cut the enormous cost of delivering the paper to readers down to size. However, this could also be another case where "content" is sublimated to technology and distribution, a mere tool used to promote the acquisition and use of technology, similar to how 'free radio programs' served such a purpose for the manufacturers of radio transmission and receiving equipment in the early days of radio history. As John Cassidy asks, is the Washington Post's new role primarily to prime the pump for the sale of more Amazon Kindle e-readers?
Amazon's clout in online book retailing illustrate the point even better. In this domain, Amazon's ability to effectively set prices and rule the book publishing industry with an iron fist has put it at war with publishers.
This is not hyperbole, but the conclusion recently reached by Judge Denise Cote in a decision that found Apple guilty of colluding with the 'big five' book publishing giants in the U.S. — Harper Collins (NewsCorp), Simon & Schuster (Viacom), Hachette, MacMillan and Penguin — to form a scheme intended to break Amazon's stranglehold in online book retailing. Indeed, the book publishers' "abhorence of Amazon's pricing" drove them to join forces (collude) with Apple to devise a plan that would "eliminate retail price competition", raise prices, hold back books for online distribution, and establish a whole new business model. All of this was to be accomplished in an astonishingly short period of time — 4 months — to coincide with when Apple "launched the iPad on January 27, 2010″ (p. 10).
Apple wanted a secure line of content from top publishers to help drive uptake of its new devise, the publishers wanted to regain control over their industry from Amazon (pp. 10-13). A win-win for them, but a loss for Amazon and consumers / readers because of higher book prices and the triumph of collusive behaviour over competitive market forces. Underneath it all, however, lays the idea that technology and capital are in charge, not content or even Bezos for that matter.
Those who hold out Bezos as a saviour ignore all of this.
3. Amazon's Treatment of Wikileaks in 2010 does not bode well for the Network Free Press in the Days Ahead
Lastly, while many commentators point to Bezos' liberal stance when it comes to gay marriage and his track-record of standing down pressure to censor books as a good sign for the values of the free press, it is essential to remember the entirely different stance Amazon took towards the whistle-blowing site Wikileaks. In this case, Amazon's web hosting service, AWS, far from standing up for the free press, banished Wikileaks' content that had been stored on its servers. It did so the same day (December 1, 2010) it received a letter from Senator and Senate Committee on Homeland Security and Governmental Affairs Chair, Joe Lieberman (2010) calling on any "company or organization that is hosting Wikileaks to immediately terminate its relationship with them". That Amazon so dutifully and quickly did so raises questions about Bezos' self-professed commitment to free press values (Benkler, 2011).
Given that dubious track record, we can also wonder about how supportive Bezos would have been in relation to the Washington Post's ground-breaking coverage of NSA contractor Edward Snowden's leaking of documents detailing the agency's secret program of mass surveillance and metadata collection, worldwide and in the United States, over the past few months? (see here, here and here, for example). In the face of intense pressure from the U.S. government, would Bezos have stood firmly behind Washington Post journalists or buckled as in the past to protect the vastly larger interests of the company he created, leads and still controls?
KeyWords: Bell and Astral Discover the Public Interest
In March, media, telecom and internet policy wonks across Canada busily poured over Bell and Astral's revised application asking the CRTC to approve Bell's renewed bid to acquire Astral Media.
Along with a few graduate students at the School of Journalism and Communication, Carleton University, I pored through the voluminous application by Bell and Astral — about 75 documents in all that you can find here. And in painstaking detail, we assembled evidence on the state of competition and concentration in broadcast tv, pay and specialty tv, radio and across the network media in English- and French-speaking areas of the country as a whole. Working right to the wire, our evidence was filed with the CRTC moments before the deadline on April 5 (see here).
I won't repeat our findings and evidence here, but instead will point to something else that I found very interesting as we read through the cornerstone of Bell and Astral's application: a 74 page Supplementary Brief that crystallizes their main arguments for why their proposed combination ought to be approved by the CRTC.
As those among you who have been paying attention, the proposed transaction is different than the one put forward last year. Gone, for instance, is some of the high-flying rhetoric.
Now in the foreground is Bell and Astral's claim that the sale of several of Astral's marquee Pay and Specialty TV channels to Shaw (Corus) (e.g. the bilingual Teletoon/Télétoon, Teletoon Retro and Cartoon Network (Canada), Télétoon Rétro, Historia and Séries+), and the divestiture of several others (e.g. Family Channel, Disney XD, Disney Jr. (English)) as well as ten radio stations in a handful of cities across Canada (Vancouver, Calgary, Winnipeg, Toronto, Ottawa), ought to alleviate any worries that the CRTC might have about this deal. Indeed, the dispersal of these assets, they argue, should mitigate worries about excess media concentration or the possibility that acquiring Astral will confer undue advantages to Bell for its own integrated sweep of services that stretch from broadcasting to telecoms and the internet.
The public record is chok-a-blok full of what parties across the country thought about that issue, and Bell's claims, but for here I want to highlight something else that struck me as particularly interesting about the revived bid: the extent to which it is peppered with references to the keywords of the public interest, citizens, consumers, culture and even democracy.
Strategically, this makes sense because last October when the CRTC denied Bell Astral 1.0 (news release, full decision), it did so not just on the grounds of excess media concentration and concerns about vertical integration that had not been satisfactorily addressed, but because it failed to meet the Commission's standards of the public interest. Moreover, the CRTC's announcement of its hearings into the revived proposal in May made it clear that similar concerns would once again be front and centre in the Commission's deliberations.
Obviously, if the public interest was a big concern then, it would have to be given emphasis in the Bell Astral 2.0 application, and it is.
To look into this question further, using key word/phrase searches, I looked for evidence of how these ideas fare in Bell and Astral's new application compared with last year's application as well as their most recent annual reports (see here and here).
Table 1, below, shows what I found.
|Key Word Search
|Bell Astral 2.0 Supp. Brief
|Bell 1.0 Supp. Brief
|BCE AnnRpt 2012
|Astral Ann Rpt 2012
|Public Interest
|21 (on 15pp)
|3 (2pp)
|80 (35 pp)
|2 (2pp)
|19 (17 pp.)
|17 (12 pp)
|3 (3pp)
Sources: See below.
As the table shows, Bell's first application referred to the public interest just once and to consumers four times and to citizens, culture and democracy not at all. In the new and improved version of Bell Astral 2.0, we find references to:
- the public interest 21 times on 15 pages,
- to consumers 80 times on 35 pages,
- citizens 19 times on 17 pages,
- culture 17 times on 12 pages,
- and to democracy 3 times on 3 pages.
Bell and Astral's embrace of the public interest and similar terms in their new application is clear, but whether or not this embodies a genuine corporate cultural conversion or just an opportunistic gambit designed to win CRTC approval and the more general battle for hearts and minds surrounding Bell Astral 2.0 remains to be seen. We can be sure of one thing, however, and that is that the CRTC's forthcoming decision will turn a great deal on this difficult concept. Whether or not the Commission will have found BCE and Astral's invocations of the public interest convincing or not, we'll have to wait and see.
BCE & Astral (2013). Supplementary Brief. Filed for Notice of hearing, Broadcasting Notice of Consultation CRTC 2013-106 <https://docs.google.com/file/d/0B3WCF51KmyImME5hVEpfak9EekU/edit>; BCE Inc. (1 May 2012). Bell Application 2012-0516-2, Appendix 1, Supplemental brief. Filed for Notice of hearing, Broadcasting Notice of Consultation CRTC 2012-370. <https://docs.google.com/document/d/1TVgld3nyT4IWoI5LElzE_yP1ILzokJMQKXgLFXo8eu0/edit?usp=sharing>; BCE (2013), Annual Report 2012. <http://www.bce.ca/assets/investors/AR-2012/BCE_2012_AnnualReport_accessible.pdf>; Astral (2012). Annual Information Form. http://www.astral.com/assets/094b7718a2994611a5667677b91f3321_AIF-YE-2012—2012-11-29—FINAL.pdf
Methodenstreit: A Reply to a Question from Greg O'Brien @ Cartt.ca about Media Concentration Research Methods
I have changed this post since putting it up last Wednesday (May 23, 2013). I have not done so substantively. Indeed, I have left all the data and main claims as they were.
What I have done, however, is remove some of the snark at the top and the bottom that I directed at Greg O'Brien at the outset. It's unnecessary, and as a few colleagues, friends and others with my interests close to heart have kindly suggested, we need more civility in the internets, not less (see Blayne Haggard's thoughts here).
Btw, the picture in Blayne's post of a guy pounding away at a keyboard struck a chord; Kristina, my wife, will nod disapprovingly for sure; and its effect would be even greater still if you put five more words at the end of the word bubble: "about telecom, media, internet concentration". I'll think about that.
The revised version follows. A link to the original is here.
Last Friday afternoon, just as I was settling in for the first long holiday weekend, Greg O'Brien, sent me an email asking about media concentration research methods. Greg is the founding publisher and lead writer over at Cartt.ca — an industry trade paper that serves the telecom, media and internet industries here in Canada. The question is an important one and so I began to sketch out a reply.
I was advised, however, that it would be best to wait. The final replies to the Bell Astral hearings had yet to be submitted and, thus, addressing questions of methodology directly bearing on the hearings in public was out of bounds until the proceedings closed. No need to tip your hat to others about what you're thinking. It was another in a long string of moments when my 'academic' persona tugged hard to break free of the short leash imposed on experts appearing before the CRTC.
The advice I got was superb. My advisors were dead right and I was wrong. While my inclination is always to just reply immediately and as fulsomely as I can, that is not always the smartest thing to do. Ask any journalists who knows me, or anybody for that matter, and they will tell you that I always freely share my ideas and don't play coy.[1]
The advice I received was right. Bell was poking around in the same spot that O'Brien was and raised the same question that O'Brien does about the HHI thresholds used by "consumer groups" (they don't refer to me or the consumer groups by name, nor do they speak of public interest groups) (See Bell Final Reply, page 2).
The core of his original email is below. My reply follows.
Date: Fri, 17 May 2013 12:11:23 -0400
From: "Greg O'Brien" <firstname.lastname@example.com> Block Address
To: "Dwayne Winseck'" <firstname.lastname@example.com>
Subject: Research question
Hi Dwayne,
I just wanted to point out an issue I came across about the research on media concentration that is part of PIAC's presentation to the Commission on Bell/Astral and a big part of the CMCRP, too. I did a little digging into Herfindahl-Hirschman Index (HHI), to figure out what it was and came across some info below that it looks like, from the links, the HHI index itself was changed or updated back in 2010 by the Federal Trade Commission and US Department of Justice.
Your research paper says the HHI and the thresholds of media concentration fall into three levels:
HHI < 1000 = Un-concentrated
HHI > 1000 but < 1,800 = Moderately Concentrated
HHI > 1,800 = Highly Concentrated
However, these links here, here and here seem to show that back in 2010, those HHI thresholds were altered so that:
HHI < 1500 = Unconcentrated
HHI > 1500 but < 2,500 = Moderately Concentrated
HHI > 2,500 = Highly Concentrated
That puts the HHI scores for many of the media mentioned in your report in the moderate or low range, I think.
To be honest with you, this is a bit too deep in the regulatory research weeds for a story in Cartt.ca. But I was wondering if you could explain the difference to me? Am I missing something? If not, does the research need to be altered/updated? Please let me know if I am wrong, or if we use different numbers for Canada.
My Response
Hi Greg,
Thanks for your inquiry.
Before I begin, please let me ask you to address specific questions about methodology or data to me since it was me that was hired to prepare evidence and write a brief in support of the public interest and consumer advocacy groups' intervention opposing Bell's revised bid to take-over Astral. My response is done solely in my capacity as a scholar and director of the Canadian Media Concentration Research (CMCR) project.
I wanted to send you my response earlier but was advised that it best to wait until the Bell Astral proceedings closed. Turns out, Bell was poking around in the same spot you were (see Bell Final Reply, page 2).
Let me also say, though, too, I was a bit hesitant about replying to you on account of the fact that the only other time you've spoken about my data, method or research at all was when you tweeted one of Bell's allegations about my CBC revenue data at the very end of the reply phase for Bell Astral 1.0. That you tweeted about it then without asking me first about my views, and that your question now falls again at the very end of the reply phase, feels funny to me and I don't quite like it.
However, let me put that aside and try to answer your question because it is a good question.
I am aware of the new U.S. Department of Justice and Federal Trade Commission's guidelines. David Ellis, who you also know, sent them to me earlier in the year. Please ask him about that.
Guidelines do change from time to time. While the U.S. replaced the revised 1997 version guidelines in 2010, there are a couple of reasons why they have not seeped into the scholarly literature and my research methodology specifically.
For one, when guidelines change academics will always take time to decide if the changes adopted are suitable to the field we've been working in. There has been a long-standing argument amongst scholars that the DOJ's existing guidelines were already inappropriate for communication and that a 'weightier' test was required because of the freight communications media carry with respect to free speech, the free press, privacy, democracy, their role as public spaces vital to citizenship, many non-market attributes and other such concerns. I share such concerns (also see Eli Noam and C. Edwin Baker on this point; or Compaine and Goldstein for opposing points of view).
Second, the International Media Concentration Research (IMCR), of which I am a part, and which is, as you know, led by one of the world's foremost experts in this area, Professor of Finance and Economics, Eli Noam at Columbia University (New York), set sail in 2008. Changing course midstream and with the larger debates just referred to still hanging in the air would have been unwise. The fact that the project has forty or so scholars studying long-term media concentration trends in as many countries around the world also suggests that you don't change things just because things in the U.S. change.
Of course, we must take heed of what the U.S. does, but it does not determine things everywhere else. Historical and international comparative references, amongst other things, are crucial too. You might also ask Professor Noam as well why the project stuck with the existing standards rather than change to the new ones midstream?
In short, one doesn't jump from a set of standards over which there is already a lot of debate to looser ones without a great deal of thought. That said, one should not cling to outmoded ways of thinking either, and so I have been looking carefully at the new guidelines with an open mind.
Indeed, I brought the new DOJ/FTC guidelines with me to Montreal two weeks ago and was reading them in the run-up to and during Bell Astral 2.0. As you will see on page 19, the guidelines not only set the thresholds at the higher levels you recite, but tell us what constitutes significant consolidation by pointing to the degree of change, i.e. transactions that move the dial 100 or more points in markets that are already modestly to highly concentrated.
Here's what the new guidelines say with respect to transactions in:
Moderately Concentrated Markets: Mergers resulting in moderately concentrated markets that involve an increase in the HHI of more than 100 points potentially raise significant competitive concerns and often warrant scrutiny.
Highly Concentrated Markets: Mergers resulting in highly concentrated markets that involve an increase in the HHI of between 100 points and 200 points potentially raise significant competitive concerns and often warrant scrutiny. Mergers resulting in highly concentrated markets that involve an increase in the HHI of more than 200 points will be presumed to be likely to enhance market power (emphasis added, p. 19).
The chart below created on the basis of 2012 revenue data shows that, contrary to what you say in your email, none of the sectors implicated by the Bell Astral deal are at the low end of the new guidelines, except radio – as I never fail to mention.
More importantly, the Bell Astral transaction will move several sectors from moderately to highly concentrated status even by the looser standards of the new guidelines, i.e. an HHI score above 2,500, as the chart below illustrates. These sectors are:
- English-language Specialty and Pay TV (2525.2);
- French-language Specialty and Pay TV (4085.1);
- total Specialty and Pay TV (2512);
- the total French TV sector is already above 2,500 but would be pushed further to 2801.7.
It is also important to point out that the Competition Bureau in Canada does not use the HHI to set fixed benchmarks but rather to help it "to observe the relative change in concentration before and after a merger" (emphasis added, p. 19, fn 31). The Bureau does, however, state that when the four-firm concentration ratio (CR4) passes 65% it may step in to examine whether a merger "would likely . . . enhance market power, and thereby . . . lessen competition substantially" (p. 19, fn 31). You can look at the data in the chart below and reach your own conclusions on this point.
In addition, in terms of relative change, as the DOJ guidelines quoted above state, a transaction that moves the dial in moderately or highly concentrated markets by more than 100 – 200 points will "potentially raise significant competitive concerns and . . . be presumed to be likely to enhance market power" (emphasis added, p. 19). Based on the 2012 data shown in the chart that follows immediately below, here is a list of sectors implicated by Bell's proposed take-over of Astral that would move the dial between 200 and 1200 points (change in HHI noted in parentheses):
- English-language Specialty and Pay TV (+416 points);
- French-language Specialty and Pay TV (+1215.1 points);
- total Specialty and Pay TV (+608.5 points);
- English-language Total TV (+236 points);
- French-language TV (+207.5 points);
- Total TV (+298 points);
- French language vertical integration between BDUs and broadcasters (+361 points).
Changes in Concentration Levels: Before and After Bell Astral, 2012 Revenues
|2012 Revenues
Bell Mrkt Share Before
CR4 Before
CR4 After
HHI Before
HHI After
|Conv TV
|Spec & Pay TV
|Total TV
|VI & Network Media (2011)
Also take note of the big changes not just by the standards of regulatory authorities but those of the recent historical past as well, i.e. since 2008, and notably for pay and specialty tv, total tv and radio.
As you can see, Greg, if this was purely an issue of methods and numbers, the CRTC should be very busy. And it is. This is why the Bell Astral 2.0 deal has received the critical attention it deserves, by the Commission and by people such as myself.
Finally, as I am sure you will have noted, I have updated and made the CMCR's analysis of the 2012 data available on our website. I have the French- and English-language market 2012 data that corresponds to each of the sectors that we released the other day (radio, broadcast TV, specialty and pay TV, total TV), and for vertical integration between BDUs and broadcasting in both English- and French-language markets as well as for Canada
I really would be delighted to share all of our data sets with you under appropriate circumstances once the CRTC completes its deliberations on the current transaction. Doing this kind of research is not easy. There is much judgment involved and reams of data to be managed. I would like to trust that your question comes from a good place but I'm also acutely sensitive to the fact that there are many who toss barbs at researchers and, especially, critical ones, all the time. It really needs to stop, and if a full prof with tenure and a good salary can't stand up to such attacks, who will?
Ultimately, I always aim to improve my work and what I put out under the auspices of the CMCR. If you ever see anything in need of improvement, correction, qualification, etc., please let me know and I will, as is our standard practice, fix things while publicly acknowledging any errors we have made and your role in setting things aright.
Best wishes,
[1] To put a more scholarly spin on it, questions about research methods are difficult and often boring, but they can be really helpful when they clarify how we know what we know. They tend to be open ended (and wordy, too) which leads in many unforseen directions. German philosophers originally called such activities "methodenstreit", or "methods dispute", hence the title to this post. The notion of methods disputes is now common across philosophy and the social sciences and yes, that includes economics (see here and here).
CMCR Project 2012 Data Release: Concentration Trends in the Telecom-Media-Internet Industries in Canada, Part 1
Highlights (original posted to Canadian Media Concentration Research Project website)
The CMCR analyzed the financial results for Canada's biggest TV providers, radio broadcasters, specialty, pay and video-on-demand services as well as cable, satellite TV and IPTV providers released by the CRTC in early April. Our analysis shows that concentration levels in 2012 remained high in all areas, except radio.
Using two standard research tools to assess media concentration – concentration ratios and the Herfindahl-Hirschman Index (HHI) — our analysis shows that:
- Concentration levels for all of the industry segments for which the CRTC released data, except radio, remained high in 2012;
- However, such levels eased slightly in all segments addressed relative to 2011, except for specialty and pay TV services.
You can access all of our raw data not just for 2012, but from 1984 onwards here.
Coupled with the annual reports of publicly-traded companies, the CRTC's 2012 data allows us to construct a fairly comprehensive portrait of the current state of telecom, media and internet concentration in Canada.[1]
While concentration levels remain at the high end of the spectrum according to both the CR and HHI measures, and by international standards, there was a slight uptick in competition in four out of the five areas covered by the CRTC's data for 2012:
- In the $3.5 billion conventional TV sector, the CR4 declined from 87% to 83%, while the HHI score dipped slightly from 1966 to 1943. The decline is likely due to the fact that Bell and Shaw saw small declines in their revenues and market share, while two mid-size TV stations that were formerly a part of Canwest have continued to carve out a spot for themselves: the employee-owned CHEK TV in Victoria and Channel Zero's CHCH in Hamilton.
- A small dip could also be seen in the $7.5 billion total TV segment (an amalgam of conventional TV with specialty and pay TV), where the market share held by the big four — Bell, Shaw (Corus), Rogers and Quebecor — declined from 79% to 77%, with a corresponding decline in the HHI score as well.
- Trends for the $8.7 billion cable, DTH and IPTV pointed in a similar direction, with the big four's share declining modestly from 83 percent to 81 percent, largely due to the growth of Telus, MTS and Sasktel's IPTV services in western Canada and Bell's IPTV offering in Ontario and Atlantic provinces.
- Finally, the $2 billion radio industry continued its long-term downward drift, with the CR4 sliding from 55.5% to 53.4%.
Concentration levels in the $4 billion Pay and Specialty TV services – the fastest growing and most lucrative segment of the TV industry – stayed steady at the high end of the CR4 (81.6%) and HHI (1905) scales. This is likely due to the fact that the growth of newcomers such as Blue Ant and Channel Zero was offset by a rise in Bell's share of pay and specialty TV services, largely because of the substantial increase in revenue at its English and French-language sports channels, TSN and RDS, respectively.
The preliminary analysis offered thus far is important because the CRTC released the 2012 data in early April, just days after its deadline for submissions regarding BCE's renewed bid to acquire Astral Media. As a result, none of the interveners was able to include it in their formal, written submissions to the public hearings that took place last week, except for Bell.
Bell filed an updated analysis based on the 2012 data with the CRTC in its Reply to interveners on April 16. In doing so, it used the new data to repeat and buttress its rejection of critics' claims that the deal gives Bell too much market power:
. . . close review and analysis of the post-divestiture Bell-Astral in each of the English and French television markets – regardless of the metric employed – proves otherwise (Bell Reply, para 46).
Consequently, Bell asserted, there are no barriers from the standpoint of media concentration that should stand in the way of the CRTC approving the deal (Bell Reply, 2013, pp. 4, 11 – 20; also see the report Bell submitted from its consultant, CMI here, Appendix 3, or here). With today's release of the CMCR data, readers can examine the evidence for themselves and draw their own conclusions.
Regardless of whether you agree with Bell's view of the world or not, the fact that Bell and nobody else could update the public record for the Bell-Astral hearings using 2012 evidence is deeply troubling. I will have more to say about these issues in a series of upcoming posts. However, as the Commission settles in to make its decision on the Bell-Astral transaction, the public should have as much access as possible to the evidence upon which key elements of the decision will turn.
The CMCR project does not just present the relevant data company by company, or on the basis of 'before' and 'after' snapshots to gauge, for instance, the one-off impact of the Bell-Astral transaction on Bell's stand-alone share of the TV market. Instead, our analysis of the 2012 data relies on two fundamental tenets of good scholarship on media concentration:
(1) a long-term focus on concentration trends over a 28-year span from 1984 to 2012;
(2) using two standard research tools to examine the structure of media markets rather than changes in the stand-alone market shares of individual media firms: Concentration Ratios and the Herfindahl-Hirschman Index (HHI).
These research methods are essential because snapshots of just one or two media sectors or firms are often selectively used to make unwarranted generalizations about the larger media ecology. Moreover, 'before' and 'after' snapshots fail to capture dynamic trends over time. These are precisely the kinds of commonly used techniques that serve to muddy the waters, and that sound methodology in media concentration research is explicitly designed to counteract (Noam, 2009, chs. 1-3; IMCR, nd; CMCR, 2012).
Analysis of the 2012 data also reconfirms the existence of a fundamental problem in the CRTC's data for pay and specialty TV: key aspects of it cannot be reconciled with the results found in the audited annual reports of several companies covered by the Commission's data sets. Tallying up the CRTC's data for Astral, for example, yields a figure of $540.9 million, while the company's Annual Information Form indicates a figure of $562 million, after the revenues from its two conventional TV stations, in-house advertising and online segments are excluded (see p. 8 and PWC, 2012, pp. 45, 52 and PWC, 2013, p. 60).
Nor is the Astral example an anomaly, as I will show in a subsequent post. This is not a view that we reached lightly but only after lengthy discussions with a Commission analyst well acquainted with the Individual Pay, Pay-per view, Video-on-Demand and Specialty Services Financial Summaries being referred to.
We hope readers will find our analysis of the 2012 data helpful in relation to other matters, as well. In the next week we will also release our analysis of the 2012 data for vertical integration between cable, satellite and IPTV distributors (BDUs) and TV and radio broadcasters in English- and French-language markets, and for Canada as a whole.
Our analysis will also be updated as new data becomes available for the remaining telecom, media and internet industries covered by the CMCR project: wireless and wired telecoms, Internet access, search engines, music, newspapers and magazines.
[1] The CRTC released total revenue figures for pay and specialty TV and broadcast distribution services; it did not do so for conventional TV or radio. To estimate revenues for these two sectors, we used last year's cumulative annual growth rates cited in the Communications Monitoring Report, while checking that figure against other quality sources such as PriceWaterhouseCoopers' (2012) Global Entertainment and Media Outlook, 2012 – 2016 to help ensure the reliability of our estimate.
Netflix and Canadian TV: Menace or Messiah?
We hear a lot about Netflix, and we hear it often, by both those who love and loathe it. It has become a fixture on the Canadian media scene in a very short time.
Indeed, there has been much gnashing of teeth since Netflix's inception in this country in 2010, including the tightening up of bandwidth caps, inquiries by the CRTC, as well as the constant invocation of the streaming video on demand service (SVOD) in regulatory proceedings, from the CRTC's 91h hearings just last week and no doubt in the one that it is set to start next week for Bell and Astral's proposed amalgamation.
With roughly 1.6 million subscribers at the end of last year (IHS Screen Digest), it's revenues can be estimated to have been about $134.3 million in 2012. This is a sizeable amount for sure, but where does it fit within the existing $7.5 billion industry (not counting the carriage and distribution side of the biz)?
So, the question for our post today: Netflix, menace or Messiah?
Netflix's estimated 1.6 million subcribers, no doubt lean toward the latter view, even if they have to endure deliberately downgraded quality (i.e. no HD) to ensure they don't blow their monthly bandwith caps and a slimmer catalogue to choose from. Even those in the TV biz regularly tell investors that they don't expect any short- to mid-term harm, while the long-run is still anybody's guess.
However, look further and read the pages of leading newspapers in this country (take this piece by Andrew Coyne from the National Post just two days ago for starters), and Netflix is often cast as ushering in the death of "old TV" and as the spearhead of a much bigger 'video revolution' that is poised to bring Canada's big four vertically integrated media goliaths to their knees: Quebecor, Rogers, Bell and Shaw.
The long list of new content acquisition deals, and charts showing internet traffic attributable to Netflix going through the roof (here and here), all seem to have a point, and who knows, maybe all of the kerfuffle is on the mark. I don't want to offer anything definitive on the point other than to say that, me, I'm skeptical.
However, what I do want to know is something a bit more systematic about where things stand. And so as I'm won't to do, I've encouraged my students to have a look at things and recently, one of them, Patrick Foley, did a real bang up job putting together the following chart showing Netflix's content acquisition and development.
I've added to the table here and there and then developed some commentary of my own afterwards, but I think it's good to, first, take a deep breadth and take stock of what kinds of content deals that Netflix has and hasn't done. Otherwise, I'm afraid that a compendium of disparate press releases will add up to the impression that there are barbarians at the gate and unless we do something fast, they're gonna tear the place apart – that "place" being the "Canadian television system" as we know it.
So here we go, a selection of Netflix's content acquisition and development deals over the past few years.
Netflix's Content Acquisition and Development Deals
|Library Content
|2008 5 yr. deal. $30 million per year.
|Access to 2,500 titles, including "classic films" such as "Scarface" and "Beetlejuice"
|NBC Universal
|Renewed contract for 5 additional years, worth $1 billion.
|Rights to titles from Paramount, MGM, and Lionsgate studios. Also acquires rights to old and new episodes of "SNL," "30 Rock", "The Office," and other popular shows. Can offer SVOD (streaming video on demand) 90 days after airing on Pay TV.
|CBS Corp.
|4 yr. "Pay- as-you-go" deal with The CW Network (jointly owned by CBS and Time Warner)
|700 hours of old CW programming and rights to new episodes. Older shows like "Cheers" can now be streamed. So too for newer ones, e.g. "Gossip Girl" and "Vampire Diaries"
|Time Warner
|"Pay-as-you-go" deal between Netflix Turner Broadcasting & Warner Bros (TW subsidiaries) ($100s millions).
|New and old Warner Bros content produced for TV (i.e. shows already aired on ABC, NBC, FOX, HBO, Cartoon Network, TNT, etc.), including "666 Park Avenue" "Revolution"
|$200-$300 Annually
|Classic Disney titles and access to newly released Disney movies for 3 years (7 months after theatre release). Latter came its way after Disney's contract with Starz ended. Classics like "Pocahontas", "Alice in Wonderland" and LucasFilms productions available for internet streaming.Beginning in 2016 Netflix can exclusively stream films from Pixar, Marvel, DisneyNature, and Disney Animation Studios.
|Netflix did not renew contract
|Netflix loses rights to 2,500 "classic films" such as "Scarface" and "Beetlejuice"
|Arrested Development
|Former Fox TV series revived. May be prequel to movie.
|Media Rights Capital
|2011/12 – 2013
|House of Cards
|Adaptation of previous BBC miniseries of same name. First TV series to premier on Netflix, beginning Feb. 1, 2013.
|Viacom / Dreamworks
|Turbo F.A.S.T. (Kids animation series)
|Original animated series based on forthcoming Dreamworks' movie, Turbo.
Sources: Edwards (2012). Bloomberg; PR Newswire 2012; Kang (201). Washington Post. Villarrea. (2013). LATimes. Gruenwedel (2013). Home Media Magazine.
There's much to be said about the above list of activities. Instead of writing another of my trademark long, long posts, however, let me distill a few points that I think are the most important.
Characteristics of Netflix deals:
- Acquire old, classic, established libraries of content.
- Acquire rights to air new episodes from ongoing TV series, and newly produced movies, after time delay.
- Youth/kid/teen oriented content is really important.
- 'Old TV' is the main ingredient of 'new TV', with established TV series revived and remade into new ones (Arrested Development; House of Cards) and forthcoming movies become TV series before they even hit the box office (Turbo F.A.S.T). In other words, original content is derivative of existing content.
Make Peace Not War: or how the Traditional US (but not Canadian) TV and Film companies learned to live with Netflix
- Netflix breathes new life into classic/old content.
- It opens a new distribution window: 'streaming video on demand': SVOD, slotted into the pre-existing, window-based Hollywood model that staggers the release of movies between regions and across time. Hollywood always learns to, at least eventually, embrace these new windows, even if late in the game, as my professor Janet Wasko taught us many years ago. Why? Because they are new markets, sources of revenue, that's why (see here for latest evidence of growth of new windows relative to box office.).
- Netflix is complementary because Netflix subscribers tend to watch more TV rather than less, as the MediaTechnologyMonitor studies have repeatedly shown. As the most recent MTM study says, for instance, "Netflix customers are not so-called cord cutters. . . . In fact, Netflix users were found to be more likely than other consumers to shell out for a premium TV package, even while paying $8 a month for the streaming service". UK communication and media regulator, Ofcom (see p. 3), has come to similar conclusions (also see here with respect to UK).
- Netflix may increase "packaged-media sales" (DVDs, DVD box sets, etc.) and cable VOD by sizeable amounts (15-30%), some Time Warner execs have claimed, although some of the scholarly literature I have read seems less convinced.
- Adds foreign films that lack North American theatrical release (thanks Patrick).
- Enables time-shifting and space-shifting via Microsoft's Xbox 360, the Nintendo Wii, Sony's PS3, Blu-ray disc players, and internet-based video players like Apple devices (again, thanks Patrick).
- And some stalwarts of the 'traditional mediacos' have a position on Netflix's Board of Directors alongside internet and tech companies and that affords them at least a small lever of influence and control: e.g. Ann Mather (Walt Disney, Pixar, Google, MGM, Village Roadshow Pictures), Leslie Kilgore (Amazon, LinkedIn), Jay Hoak (Technology Crossover Ventures) A. G. Battle (Ask Jeeves, Expedia), Reed Hastings (Netflix, Facebook, Microsoft) (Netflix, 2012).
Why Canada's Vertically-Integrated Players Continue to Hate Netflix:
- Must compete with Netflix over rights to new distribution window vs. treating them as an inexpensive bolt on to the existing suite of rights they acquire.
- They don't have much original content of their own so must compete even more with Netflix.
- Netflix seems to give media workers more creative autonomy in their work and a bigger slice of the pie and more say afterwards.
- The creation of a new window – SVOD – increases pressure to compress 'old windows', especially VOD – a lucrative cash cow for existing BDUs' specialty and pay TV services that continue to rake in operating profits in the mid- to high-20% range (see p. 1).
- Netflix enables time-shifting and space-shifting on other company's devices — Microsoft's Xbox 360, the Nintendo Wii, Sony's PS3, Blu-ray disc players, Apple, etc. – rather than their own.
- Finally, Canadian media execs seem to loathe Netflix because they have no position of influence or control at Netflix, or anything like it.
Does this mean that nothing's changing? Absolutely not! Television and how it is made, circulated, controlled and consumed is changing dramatically.
Fast disappearing is the old scheduled model of tv programming punched out by vertically-integrated tv cos modelled on the Fordist approach to car production (ownership of everything from inputs to manufacturing and dealerships), with highly unionized workforces and subsidized consumption brought to you courtesy of advertisers and government funding.
And what's coming online? Hold your breath, folks, but it just may be the the centuries' old 'publishing model'. In this model, TV execs function as commissioning editors signing contracts and royalty cheques with creative talent. Most media work becomes more and more precarious, less unionized and less well paid. Disappearing are the "old days" when union bosses negotiated long-term contracts for media workers with durable media jobs and clear roles and back are the really old old days when everybody had to fend for themselves.
In addition, in the publishing model, as with books, people pay for what they get while the ratio of advertising and government subsidies to public service media steadily declines. Audiences' preferences become more closely aligned with what they pay for as a result, but the gap between the media rich and media poor expands.
Think catalogues of movie and TV program titles, not a linear scheduled flow of appointment viewing. Long live TV, while everything changes.
So, Netflix, Menace or Messiah? You be the judge.
Competition Bureau Blesses Bell – Shaw Take-Over of Astral Media
Bell Astral Round 2 officially got under way today with an announcement by the Competition Bureau that it will conditionally approve the deal. In the Competition Bureau's words, "Today's agreement is essential to preserving choice for consumers and ensuring continued and effective competition in this area."
The Competition Bureau and Bell place a great deal of emphasis on the pay and specialty tv channels and radio stations the latter agreed to sell off to get approval for the deal, as well as the modest restrictions that the Bureau imposed to prevent Bell from blocking rivals' access to two marquee channels in the Astral line-up: The Movie Network and Super Écran.
The bottom line, however, is that no amount of divestitures can obscure the fact that already extremely high levels of media, telecom and internet concentration in Canada — by historical, international and anti-trust standards — will become a lot higher yet (see here). At least that will be the case, if the CRTC does not steel its spine for a second time to take a much more expansive view of the issues than the Competition Bureau's myopic views of the deal's impact on economic efficiency and "relevant advertising markets".
More important than the conditions placed on the deal is what Bell did get. Bell already owns thirty pay and specialty tv channels (e.g. CTV News, ESPN, Comedy Network, TSN, Réseau des Sports, Discovery Channel, etc.) and it will add eight more if its deal with the Competition Bureau sticks: the French-language SuperÉcran, CinéPop, Canal Vie, Canal D, VRAK TV, and Z Télé, and English-language services The Movie Network, HBO Canada, and TMN Encore. This, too, must be seen on top of the 28 conventional tv stations that Bell owns that make up its CTV1 and CTV2 networks across Canada.
Thus, even after the divestitures required, Bell will still hold 66 tv channels and its share of the pay and specialty tv market will rise sharply from 27.4% to 38.7%. But as I've always said, media and internet concentration is not about the market share of a single player but the structure of the relevant sectors and the telecom, media and internet (TMI) industries as a whole.
Thus, more important than just Bell's dominant market share is that in the pay and specialty segment of the tv industry, the big 4 companies' — Bell, Shaw, Rogers and the CBC, in that order if the deal succeeds — share of revenues will rise from 87.6% to 90.5%. This is far in excess of the CR4's typical threshold for establishing a prima facie case of concentration of 50% and well above the Competition Bureau's own standards set for banking (para 47).
An already sky-high Herfindahl – Hirschman Index (HHI) score of 2270 will move into uncharted territory at over 3000 (recall, that the U.S. Department of Justice typically uses an HHI of 1800 as a threshold for defining high levels of concentration) (on questions of the CR and HHI methodology, see here). Table 1, below, shows the results.
|Pay and Specialty Television Ownership Groups, Revenue, Market Shares and Concentration Levels, 1984-2011 (1)
|Post Comp Bureau Divestitures
|Shaw/Corus (4)
|CTV Globemedia
Bell – Shaw
|CBC/Radio Canada
|Quebecor (5)
|Fairchild (Chinavision)
|MusicPlus/MusiqueMax (7)
|Cogeco (as TQS from 2001-08)
|0.1 (Remstar)
|Spec and Pay TV $ (14)
|Conventional TV $
|Total TV $
Sources: CRTC's Communication Monitoring Report and its Pay and Specialty Statistical and Financial Summaries; Corporate Annual Reports.
While Bell's take over of Astral will have minimal effect on conventional over-the-air television, its impact on the total tv market, an amalgamation that adds conventional tv stations to the pay and specialty tv segment, will be significant. Bell's share of total tv revenues will rise from just under 26% to just under 32%. Sure, these figures fall beneath the CRTC's threshold of 35% set out in the Diversity of Voices ruling in 2008, but that is more a measure of the weakness of the rules rather than a satisfactory state of affairs. The CR4 for the total tv market will rise sharply from 81% to just under 90%; the HHI will similarly shoot upwards from its current excessive level of roughly 1900 to 2284, as the following table shows.
|Total Television Market
|Post Comp Bureau Divestitures
|Shaw/Corus (7)
|CBC/Radio Canada (4)
Bell – Shaw
|Quebecor (8)
|Total TV $
One of the more perverse outcomes of the state-of-affairs overseen by the Competition Bureau is how it plays to one of Canada's other major TMI conglomerates: Shaw. Indeed, while there is much talk of divestiture, the arrangements brokered by the Competition Bureau effectively dismantles Astral Media — the ninth largest media company and most significant non vertically-integrated media enterprise in the country — in a way that allows Bell to keep the company's crown jewels while handing over much of everything else to Shaw.
Indeed, Shaw is a major beneficiary of this transaction, moreso than citizens, consumers and the public will ever be. This is because Corus, which it controls through common ownership by the Shaw family, will pick up the two English-language radio stations as well as the half-a-dozen pay and specialty channels that Bell must sell: the bilingual Teletoon/Télétoon service, English-language Teletoon Retro and Cartoon Network (Canada), and French-language Télétoon Rétro, Historia and Séries+. Bell will also sell off ten other radio stations and another half-dozen specialty and pay channels: The Family Channel, Disney XD,Disney Jr. (English and French), MusiquePlus and Musimax.
This horse-trading amongst dominant players in the industry overseen and blessed by the Competition Bureau smacks of the worst in Canadian regulatory traditions, i.e. the state giving its seal of approval to incumbent interests in already concentrated markets. The matter is made all the more unsavoury by the fact that Shaw was Bell's only industry ally in Round One of the Bell-Astral deal, supporting Bell's application to the CRTC and largely sitting silent on the sidelines. The rest of the industry and many others — Quebecor, Cogeco, Telus, MTS, Sasktel, Eastlink, the Independent Broadcasters Association, public interest and consumer groups, etc — fought strategically and on principled grounds against the original deal. The upshot of these arrangements is the creation of two roughly equal behemoths, Bell and Shaw, with each accounting roughly for 38.7% and 35.1% of revenues in the pay and specialty tv sector, respectively, and about 31.6% and 25.4%, respectively, of revenues in the total television market.
Call it a duopoly, but it certainly is not competition in any normal sense of the term. On what should be the more exacting terms of creating the most diverse media possible in line with the ideals of the free press and democracy, such arrangements are a travesty.
Indeed, it is exactly this kind of insider coopetition that has defined Canada's TMI industries for too long and which the original CRTC decision looked like it might undo. The Competition Bureau's Consent Agreement certainly blunts that hope, if not kills it outright.
To be sure, this transaction has always been animated by the idea that Bell's acquisition of Astral might just put it in a better position to undo Quebecor's dominance of French-language media markets. Is we keep our eyes focused only on the 'clash of titans' scenario in which the end game is to pit an even bigger Bell against Quebecor, there is some truth to this, but focusing on only one or two players is not the proper way to assess the structure of any market, let alone media markets.
Looking at Table 3 below, we can see that on the basis of revenues, the CBC is currently the largest player in French language television markets, followed by Quebecor with roughly 24 percent market share and Astral with just over 17%. Bell, V Interactions and Shaw/Corus trail far behind with 8.2, 4.4 and 2.2 percent market share, respectively.
Table 3: French Language Total Television Revenues (Millions), 2007 – 2011
2011 Market Share
PCBD Mrkt Share)
|V Interactions
|Total French-language Conventional TV
|French pay and specialty TV
|Total French-language TV
Sources: CRTC (2012). Communications Monitoring Report and Aggregate Annual Returns and company Annual Reports.
If the scenario contemplated by the Competition Bureau's Consent Agreement goes ahead, Bell will replace Astral as Quebecor's biggest commercial rival. Shaw/Corus' place in the French-language market will also be strengthened on account of the increased share in French-language TV services that it will have. While such a scenario might put two of Canada's largest TMI conglomerates on a more equal footing in Quebec, the elimination of Astral will reduce the number of independent media groups and further drive up already extremely high levels of concentration within Quebec and across the Canada as a whole.
That concentration is already extremely high in Canada there can be no doubt, with the big four firms (CBC, Quebecor, Astral and Bell), as Table 3 above shows, controlling 91% of all revenues. The CR4 will rise if Bell acquires Astral to just under 92%, while the already sky-high HHI will rise from an exceptional 2699 to 2818. To be sure, these increases might appear modest, but it cannot be emphasized enough that this is only because concentration levels are already off-the-charts by any reasonable measure.
The claims that a bulked up Bell will make for a more formidable competitor to Quebecor is even less convincing when we look beyond the domain of television. In radio for example, while Bell will bulk up on French-language radio stations to complement its English-language stations, Quebecor isn't involved in radio at all. Net outcome? More concentration in radio, but zero benefit in terms of competition and diversity.
The table below shows the results with respect to French-language radio.
|French-language Radio Revenues
Post CompBur Divestitures $ Mills)
166.2 (4)
Bell – Shaw
84.1 (1)
|Total Fench Private Radio Rev
238.4 (2)
258.4 (3)
273.2 (5)
|Total Fench Radio Rev
Sources and Notes: CRTC (2012). Communications Monitoring Report and Aggregate Annual Returns and company Annual Reports; CBC figure for 2007 is based on estimate of 41% of CBC radio revenues allocated to French language services, as per 2008. For 2009, the Aggregate Annual Returns identifies French radio rev for CBC as 170.5, however it is 166.2 in the Canadian Media Monitoring Report; Cogeco data for 2011 from Annual Report differs (p. 29) from CRTC figure of $113.6 (Aggregate Annual Return).
Moreover, while Bell will divest ten English-language radio stations as part of its agreement with the Competition Bureau, more importantly it will retain 77 out of Astral's 84 radio stations. Add that to the 30 that Bell will retain in its existing stable and it will have 107 radio stations across the country — a development that will, as I stated last year when this transaction was first announced, see Bell "catapult from being the fifth ranked player in radio to top dog". It's exact share of revenues can't be precisely counted, but would be about 26% before the divestitures and likely somewhere around 21-23% afterwards by my estimation.
This is not terribly high, but it does reverse the trend of declining concentration in radio, which is pause enough for concern. Indeed, the best the Competition Bureau can muster in this regard is that it "is satisfied that the proposed divestitures are sufficient to ensure the transaction will not result in a substantial lessening or prevention of competition in any radio market." That's a far cry from saying that it will contribute anything positive.
Finally, Quebecor's dominance of French-language newspapers and magazines will remain completely unscathed by Bell's acquisition of Astral, since neither of them is involved in either of these areas, except for Bell's minority stake in the Globe and Mail. Given the protracted strife and lock-outs at Quebecor's Journal de Quebec and later the Journal de Montreal in recent years, and Pierre Karl Péladeau's commitment to using his media outlets to push a clear political and ideological agenda, there is no doubt a great deal of antipathy toward Quebecor in Quebec, across the country and amongst journalists in particular.
This has no doubt fomented a desire to undercut Quebecor's ability to seemingly lord over the French press with impunity. While that no doubt plays well into Bell's claims about increasing competition with its erstwhile rival, the fact that it has no stake in the French press further weakens its claim.
Ultimately, the CRTC might yet turn back Bell's bid to take-over and carve up Astral Media by taking a more expansive view of these matters under the Broadcasting Act and, more importantly, from within the traditions of a free press and democracy. At the same time, however, the fact that the Competition Bureau moved on its own today does not bode well.
Two years ago in the United States, by contrast, the Department of Justice and FCC worked hand-in-glove in relation to the closest parallel to the Bell-Astral agreement: Comcast's acquisition of NBC – Universal in 2011. To be sure, both regulators gave the green light in that instance, but the terms were a far cry from the weak measures that appear to have been adopted by the Competition Bureau on its own.
We still await details of the Competition Bureau's Consent Agreement, but so far, its actions seem woefully myopic and unhinged from even its own standards of assessing market concentration. This, however, is probably the price we play when fundamental matters of communication and democracy are left to those who see the world only through a constrained economic lens.
The net outcome of this transaction will be demonstrably higher levels of concentration in both French and national pay and specialty tv markets as well as the total tv market overall. The same will be true with respect to radio.
It will also further the extremely high levels of vertical integration across the entire sweep of the TMI industries. That, in turn, will, at the very least, solidify our dubious honour of having the second highest levels of cross media ownership concentration among the 14 comparable countries surveyed by the International Media Concentration Research Project. In fact, it will likely make us Number 1 on this measure.
At the same time, the idea of carving up the market between Bell and Shaw smacks of too much that is unsavoury of how media policy in this country has worked for far far too long. This has to change. There was hope that such change might be in the air last year when CRTC spiked the first incarnation of the Bell Astral deal. That hope just got dimmer.
Women, Power and the Media: Women (not) on the Board of Directors and in Executive Management at the Big 10 Canadian Media Companies, 2012
Two weeks ago I had the pleasure of presenting my research on telecom, media and internet concentration to several women from Canadian Women in Communication, an organization that strives to "raise the profile" and honour the achievements of women in the telecom, media and technology industries in Canada.
The organization does so through professional development and mentoring programs as well as by creating partnerships with industry, government and other organizations. It also does so, as its website indicates, through "high profile initiatives like Women on Boards".
These initiatives, and the "Women on Boards" one in particular, hint at what a lot of women who work in these areas already know, as I have learned over the years from casual conversations: the telecom, media and internet industries are notoriously tough ones for women to succeed in, and rise through the ranks to upper-level positions of decision-making authority on Boards of Directors or Executive Management teams. In order to take this beyond casual observations, however, I decided to examine the issue in more detail in preparation for my talk.
With the help of one of my star research assistants on the Canadian Media Concentration Research Project, Lianrui Jia, we examined the number of women in Board of Director and Executive Management positions at the "big 10 media companies" in Canada: Bell, Shaw, Rogers, Quebecor, CBC, Postmedia, Cogeco, Telus, Astral and Torstar. What did we find?
In a nutshell, we found that the raison d'etre for CWC is well-founded. Of the 286 Board of Director and Executive Management positions at the big 10 media companies, just less than a quarter (22%) are filled by women. From first to worst, the results are summarized in Table 1, below.
|# of Women on Board of Directors (Total # of Directors)
|Number of Women on Executive Team
|Total # of Women on BoD & Exec Team (%)
|3 (11)
|4 (8)
|7 / 19 (37%)
|4 (13)
|4 (11)
|8 / 24 (33%)
|3 (8)
|4 (14)
|7 / 22 (32%)
|4 (18)
|3 (12)
|7 / 30 (23%)
|BCE Grand Total*
|7 (38)
|9 (36)
|16 / 74 (21.6%)
|2 (14)
|2 (12)
|4 / 26 (15%)
|Bell Aliant
|3 (10)
|2 (7)
|5 / 17 (29%)
|Bell Media
|2 (14)
|5 (17)
|7 / 31 (23%)
|2 (8)
|1 (9)
|3 / 17 (18%)
|3 (15)
|1 (14)
|4 / 29 (14%)
|1 (9)
|1 (7)
|2 / 16 (13%)
|2 (16)
|2 (18)
|4 / 34 (12%)
|1 (13)
|1 (8)
|2 / 21 (11%)
|30 (149) (20%)
|32 (137) (23%)
|62 / 286 (22%)
|* Note: Total only includes figures from each of BCE's subsidiaries, not "grand total" for BCE.
|Sources: see below.
A fuller table with a finer breakdown by company and the names of women in Board of Director and Executive Management positions at the big 10 media companies can be found here.
Glass Half-Full or Half Empty?
A panglossian view of the evidence might suggest that things are, if not good, better than the rest of the state of Canadian industries as a whole and slowly improving over time.
Thus, according to research by the women in business advocacy group, Catalyst, the average number of women on Board of Directors at Canadian companies in general is 14.5%. By that measure, things look pretty good at the big 10 telecom, media and internet companies. These entities look good as well relative to the 41% of companies listed on the S&P/TSX that have no women directors at all.
Finally, there are three entities on the list of media enterprises above that stand out as doing quite well, by both Canadian and, as we shall see shortly, global standards: CBC (37% of Directors and Executive Management team are women), Torstar (33%) and Quebecor (32%).
Yet, to continue with such a rose-tinted view would vastly under-state the significance of the problem at hand. For one, the rate of increase of women in director and executive positions, as Catalyst and others show, has been painfully slow.
Second, the number of women in positions of decision-making power and authority pales in comparison to the number of women graduating from universities in Canada, and from journalism and communication programs in particular. For instance, at Carleton University, where I teach, 58% of all currently enrolled undergraduate students are women; 68% of those enrolled in the journalism program are women (see here). In short, the number of high-level opportunities available is far less than the number of educated and skilled women who desire them.
More importantly, conditions within the upper-ranks of the Canadian media stack up poorly globally. As a recent study by the International Women's Media Foundation (2011), Global Report on the Status of Women in the News Media found, there is no shortage of women in the media industries in Canada; just at the top and in key positions where their decisions could determine policies, the allocation of resources, strategy and so forth.
As the Global Report on the Status of Women in the News Media observes, women are well represented at "important administrative level of executive editors, bureau chiefs and news directors", accounting for about 55.1% of such positions. They also make up about half of mid-management level positions, 54% of producers, directors and writers are women, and occupy roughly six-out-of-ten sales, finance and administration positions (pp. 159-160). When it comes to production and design (e.g. photographers, scene designers) and studio production (e.g., sound and lighting), however, women account for only 23.6% and 13.1% of positions, respectively.
Pointedly, however, the Global Report on the Status of Women in the News Media states: "Glass ceilings were especially noticeable in Canada, Dominican Republic, Jamaica, Puerto Rico and the United States." (emphasis mine, p. 11). In short, it is not that women are frozen out of the media industries in Canada, just vastly under-represented in positions of real power and authority.
Comparatively speaking, the fact that women in Canada make up just 20% and 23% of Board of Director and Executive Management positions, respectively, fares well with a global average that is dragged down greatly by conditions in Asia and Africa. Compared to the United States, however, the situation in Canada is slightly less well-off. Roughly the same number of women are in upper-level management positions in both countries (23%). However, there is a significant difference when it comes to women in the boardroom, with roughly a third of directors at US media companies being women, while in Canada the number is 20%.
The situation is worse when we compare the status of women in Canadian media to their counterparts in northern Europe, where women occupy 36% and 37%, respectively, of Director and Executive Management positions. In Eastern Europe, women account for an even higher 33% and 43% of governance and top management positions, respectively (IWMF, 2011, p. 9).
Who Cares?
There is a ton of reasons why we should care about this state of affairs. For one, there's the principled question of fairness.
Second, there's a huge gap in income even for those women who do make it to the top compared to men (IWMF, 2011, p. 161).
Third, there's a substantial body of literature that suggests that companies with greater representation of women on their board generally do better (see here and here).
Fourth, and from a more specifically political economy of media perspective, while there is a great deal of focus in the literature on questions of representation in media texts, there is very little research on who is and is not making decisions that structure media companies, markets, work and texts to begin with. This is a huge oversight and needs to be filled.
Looking at the media, it is not just the day-to-day operations of media enterprises and the content they produce (operational control), but rather who allocates resources, makes decisions and sets corporate policies that frame everything else to begin with. The latter is known as allocational control and it is a form of structural power.
As this small exercise prompted by my talk with the Canadian Women in Communication two weeks ago suggests, when it comes to this latter kind of power, Canadian women in communication have a long way to go.
International Women's Media Foundation (2011) Global Report on the Status of Women in News Media. http://iwmf.org/pdfs/IWMF-Global-Report.pdf
Corporate Annual Reports
BCE: http://bce.ca/assets/Uploads/Documents/archivesAnnualReport/BCE/2011/BCEAR2011EN.pdf
Quebecor: http://www.myvirtualpaper.com/doc/Edition-sur-mesure/annualreporten2011/2012051001/#55
Rogers: http://www.rogers.com/web/Rogers.portal?_nfpb=true&_windowLabel=investor_1_1&investor_1_1_actionOverride=%2Fportlets%2Fconsumer%2Finvestor%2FshowGenericFlexibleZoneAction&investor_1_1subAction=showRciSeniorLeadershipAction&_pageLabel=IR_LANDING
Shaw: http://www.shaw.ca/corporate/investors/corporate-governance/
Cogeco: http://www.cogeco.ca/cable/corporate/cgo/governance/comity.html
Postmedia: http://www.postmedia.com/company/governance/
Telus: http://about.telus.com/community/english/investor_relations/corporate_team/executive_team
Astral: http://www.astral.com/assets/094b7718a2994611a5667677b91f3321_AIF-YE-2012—2012-11-29—FINAL.pdf
Torstar: http://www.torstar.com/html/our-company/Officers_and_Senior_Executives/index.cfm
CBC: http://www.appointments.gc.ca/prflOrg.asp?OrgID=CBC&lang=eng