CRTC’s 2017 Communications Monitoring Report: the Steady Rise of Internet TV

For the first time this year, the CRTC’s Communications Monitoring Report presents data on revenues generated from Internet services. One thing is clear: the popularity of video-on-demand services is undeniably on the rise.

Year after year, the CRTC’s Communications Monitoring Report, which provides a bill of health of Canada’s communication system, measures the evolution of our system toward a future that’s gradually becoming clearer.

In this universe characterized by the convergence of two sectors that used to be very distinct, telecommunications continue to dominate—with 70% of the total revenues—thanks to the provision of mobile wireless services and Internet services while the broadcasting sector continues to decline slowly especially due to the decrease in advertising revenue generated from conventional television. This decrease is partly offset by the increase in optional add-on service subscription revenues.

Source: Table 2.0.1 – Annual communications service industry revenues ($ billions). CRTC data collection

Each year, among the indicators provided in over 172 tables and 150 charts, media outlets focus mainly on the fact that the conventional television indicators are entering new territory. Indeed, the rate of adoption of online television in Canada peaked in 2016, with 58% of Canadians aged 18 years and up having stated that they watched Internet TV. That is what the Media Technology Monitor (MTM) defines as watching or streaming television programs or clips available over the Internet. As for the 18–34 age group, they are now 23% to watch online television exclusively.

Online television, the popularity of which paled in comparison to broadcast television not that long ago, is now a well integrated phenomenon.

It has come to a point that the report’s section on the television sector no longer refers to the expression “over-the-top” (OTT) and, for the first time, includes the revenues generated by Canadian or foreign video-on-demand Internet services available in Canada (estimated by OVUM, an independent firm).

Online television surpasses conventional television

In 2016, according to OVUM’s estimates, online television revenues surpassed those generated by private conventional television services for the first time. Private conventional television is one of the founding components of Canada’s broadcasting system.

Sources: Tables 4.2.1 Revenues of television services, by type of service (CRTC data collection) and 4.2.5 Estimated revenues of Internet-based video services in Canada by type of service (OVUM 2016)

It is however important to note that the revenues generated by all television services (conventional television services and optional add-on services) remain significantly higher than those generated by Internet video services.

In 2016, the revenues generated by television programming services available in Canada, whether distributed conventionally or on the Internet, totalled 9,234 million dollars (a sum obtained by adding the data collected by the CRTC to OVUM’s estimated data). For its part, online television generated 21% of these revenues, compared to only 8% as recently as four years ago.

Sources: Tables 4.2.1 Revenues of television services, by type of service ($ millions) and 4.2.5 Estimated revenues of Internet-based video services in Canada by type of service. Optional services include: speciality, pay, pay-per-view and video-on-demand services licensed by the CRTC. Internet-based VOD includes: subscription video-on-demand (SVOD), transactional video-on-demand (TVOD), and advertising video-on-demand (AVOD).

The global screen

With respect to Internet-based video services, subscription-based services (SVOD) generated the lion’s share of revenues (55%), whereas transactional services (TVOD) and those financed by advertising (AVOD) generated equal shares of the remaining revenues. Not surprisingly, with revenues estimated at 766 million dollars, Netflix dominated with 70% of all revenues in its category and 39% of total revenues.

Source: Table 4.2.5 – Estimated revenues of Internet-based video services in Canada by type of service ($ millions). OVUM, 2016

That being said, according to OVUM’s estimates published in the CRTC’s report, advertising-funded services recorded the strongest growth in 2015 and 2016. Consequently, the estimated share of revenue generated by Facebook in this category, although it remains modest compared to the revenue generated by YouTube, increased from 6% in 2015 to 14% in 2016, which represents a year-over-year increase of 176%.

Actually, Facebook recently announced that its advertising sales had surpassed 10 billion dollars during the year’s third quarter, i.e., +50% compared to the same period the previous year. This success however comes with a setback: the platform is suffering from a shortage of advertising inventory that now jeopardizes its revenue growth.

Facebook launched its Watch service in August of this year. This platform is designed for live or pre-recorded video content (available only in the US until further notice) and should eventually lead to inventory increases. Mark Zuckerberg announced that his company would be investing massively in content for this new platform and that the objective was to fund programming through advertising revenue (shared with the content creators).

Facebook is expected to spend close to one billion US dollars on original content for Watch in 2018. For example, it was made public in October that Facebook had ordered an American remake of the celebrated Norwegian series Skam catering to young adults, the same young adults who, as reported in the introduction, are now 23% to exclusively watch online television in Canada.

During a presentation at the Mipcom in October, Facebook’s director of video products, Daniel Danker, began dreaming of a world series that the entire plant could watch simultaneously. After all, he pointed out, “with 2 billion people on Facebook each and every day, it would be fantastic and possible to manage to broadcast a world series.”

Among the hundred or so indicators provided in next year’s communications monitoring report, the one dealing with Facebook’s revenues will undoubtedly prove to be the most interesting. It may make it possible to confirm that the television system is mutating into a planetary system dominated by “the tech dragons [the four platforms beyond one billion users]. They are now part of the value chain and arriving to television,” to quote the GM of Havas and president of Vivendi Content, Dominique Delport, during the Mipcom.

Danielle Desjardins
Danielle Desjardins offers analysis, research and writing services for media and cultural enterprises through her company, La Fabrique de sens. Before that, she was director of planning for Radio-Canada, where she was responsible for strategic, corporate and regulatory matters for more than 20 years.
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