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No Regulatory Cherry-Picking Allowed: the CRTC vs. Netflix Clash @ the TalkTV Hearing
The final day of the CRTC's hearing into the future of television saw a heated clash between CRTC chair Jean-Pierre Blais and online video distributor Netflix. It was a moment with few precedents, and one ripe with a myriad of fascinating questions (Netflix presentation here; CPAC coverage here).
The clash ignited when Blais's request to Netflix's Director of Global Public Policy, Corie Wright, to file information with the commission about the number of subscribers it has in Canada, its revenues in Canada and other information the company does not routinely disclose was met by much hesitance on Netflix's part. As Wright repeatedly returned to concerns about confidentiality, Blais testily questioned whether Netflix did not trust the CRTC's ability to deal fairly with companies' request for confidentiality.
The problem, however, is that while Netflix demanded guarantees of confidentiality, it is the CRTC's prerogative to determine whether such requests outweigh the public interest in disclosure. And in this regard, Blais refused to concede that prerogative while Netflix was equally intent on assuring confidentiality for information that it never gives out to anyone, no matter who asks.
While that may cut it when it comes to researchers and journalists, it won't do in the context of a CRTC hearing that is, after all, a quasi-judicial proceeding with stringent legal standards about evidence. The point was made on the opening day of the "Talk TV" hearing as well when a similarly frustrated Blais encountered PR puffery from Google that hardly constituted robust evidence that could be used to shed light on anything other the company's own interests and story that it'd like to tell the world.
This is not novel and is, indeed, well-established practice. Indeed, for all those who play in the regulatory arena, there is little more frustrating than the extensive use of the infamous hashtag (#) in instances that the CRTC has granted companies confidentiality over those who have sought disclosure. Indeed, for many, the problem is that the CRTC has been too generous in granting confidentiality over disclosure. So, to have Netflix say that it was seeking to pre-empt the question by having guarantees of confidentiality from the get go was beyond the pale, and Blais treated it as such.
So, where do these trade-offs between confidentiality and disclosure come from? Three places.
First, from the general tradition of regulated industries where the interest of the public in the matters at hand are always weighed against business demands – typically expansive – to keep their affairs private.
Second, the CRTC took up the issue in 2007 in a proceeding about just this issue where the Commission observes the following:
. . . [The CRTC] conducts its public processes in an open and transparent manner. In some instances, parties submit information in the course of proceedings for which they request confidentiality. . . . [O]ther parties to the proceeding may request public disclosure of the information. If such a request is granted, the information is put on the public record. If it is determined that the harm outweighs the public interest in disclosure, the request is denied and the information remains confidential.
Basically, Netflix was trying to force the CRTC into a corner today over this issue, and Blais was not having any of it.
Lastly, the CRTC's Digital Media Exemption Order under which Netflix and other OTT providers operate in Canada albeit exempt from the normal requirements of the Broadcasting Act, makes it clear that such companies are required to submit information regarding their "activities in broadcasting in digital media, and such other information that is required by the Commission in order to monitor the development of broadcasting in digital media".
Some may not like these requirements, but for the time being they are the rules of the game and having decided to play by the rules of the game since its entry into Canada in 2010, today's hearing was not the right place for Netflix to challenge them.
We must remember that, since its first New Media Order in 1999, the CRTC has always claimed regulatory authority over television and other broadcasts delivered over the internet but has exempted them from the requirements of the Broadcast Act. It did so on grounds of technological neutrality, fostering creativity and innovation and that doing so would not prove disastrous to the Canadian "broadcast system". In short, it is not whether the CRTC can regulate the internet broadcasting, as Michael Geist noted the other day, but will it? The answer has unambiguously been yes, the CRTC can regulate internet broadcasting, but will not for the time being. That was the answer in 1999, in 2009 and in its last statement on the matter, the Digital Media Exemption Order (2012).
Three final points. First, Netflix cannot cherry pick the elements of Canadian media and telecoms policy that serve it while cocking a snook at those elements it would rather not deal with. Netflix has been the beneficiary of the CRTC's robust network neutrality rules, rules that apply both to wiredline telecoms and mobile wireless telecoms providers. This has been a huge benefit to Netflix, and partly on account of such measures its ability to locate its content caching equipment at Canadian telecoms and ISP providers such as Bell, Rogers, Telus and Shaw are a far cry easier in Canada than in the US. The forthcoming CRTC Mobile TV proceeding will help to determine the utility of these rules.
As Netflix does battle in the US at the FCC hearings now taking place over the future of network neutrality in that country, it would do well to recall the comparably better conditions it has in Canada. As Netflix itself noted today, Canada is its best international market and I would suggest that the combination of the CRTC's network neutrality and light touch Digital Media Exemption Order help explain this state of affairs. As such, when the Commission asks for information and to trust that it will make the proper decision in weighing the company's claims for confidentiality with the benefits of public disclosure, Netflix would do well to play ball.
Third, Netflix also needs to recognize that, faced with a wall of claims from incumbents for two week's running that unregulated OTT services threaten the Canadian "television system" altogether, robust evidence could help put such self-serving claims in perspective and is just what the CRTC needs. Indeed, Netflix should meet the CRTC's deadline for its orders for information of this Monday to help in just this regard, otherwise the CRTC will be left with much self-serving bluster about falling skies and doom and gloom.
Finally, it's time to recognize that while I don't personally think that Netflix should be subject to all of the requirements of the Broadcasting Act, this is no longer the days when technophiles could see the Internet as an unregulable space. Those days were always an illusion and, regardless, are over. There is a discussion to be had, and that discussion is already underway in many other countries around the world, as Netflix knows full well.
Outside Canada, the European Union's Audiovisual Media Services Directive brought online video providers under its sway in 2010. The Dutch and France have also reportedly required it to torque its algorithms to give priority to local content and to contribute to the creation and circulation of television content from both countries and Europe as a whole.
Whether we agree with that or not, it's now the discussion to be had, rather than ducked with gestures towards the internet as some kind of nirvana that exists outside the normal laws of the land. Neither Netflix, Google nor any other 'digital media giant' can escape this reality by invoking the internet as an world beyond regulation when they please while calling for network neutrality when that suits. What we all need to realize, is that an open media requires smart regulation not no regulation.
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.