Trends Report – 2014 Mid-Year Update

This mid-year report presents six recent market developments that are notable in their potential to accelerate trends documented in the January Report.

While our Trends report have a strategic focus, here we aim to provide supplementary insight on the topics that should remain on the CMF’s radar. Once again, we consider challenges and opportunities related to the market developments that may affect the Canadian TV and digital media industries.

Technology continues to shift towards robust content delivery systems, higher quality screens and an ever increasing number of internet-enabled devices available in households. All of these facilitate the spread of content that’s available worldwide and accessible primarily through streaming distribution complemented by pay-per-view and downloading strategies.

In this essentially on-demand world, user behaviours remain mainly characterized by a will for more control, choice and mobility. Audience viewing habits will be increasingly guided by tools for recommendation (such as social media or algorithms), curated content and self-aggregation services. In such a context, one should not be surprised to read the most recent documents (April, 2014) released by the CRTC in regards to their policy of the television framework (“Let’s Talk TV”) and their review of the industry practices and regulatory measures that govern packaging of programming services (Order in Council P.C 2013-1167) which raise the possibility of requiring that BDUs and programming services provide Canadians with more flexible, build-your-own package offerings while, at the same time, acknowledging that “pick and pay” approaches could lead to a decrease in revenue predictability for BDUs, an increase in subscription fees on a per service basis, and the likely demise of some discretionary services.

In the next few months: unbundling will be the most important challenge for the North American cable, satellite and broadcasting industries.

In Europe, things are not any easier for policy makers and governements. After several months of negotiations over “Cultural exception” regulations – a set of rules designed to protect the French TV and film industry from foreign competition, including the obligation to hand over part of the revenues to contribute towards the system – Netflix executives and the French government were unable to reach an agreement. Yet, this will not impede Netflix to launch their streaming services into the French market by the end of this year by operating out from Luxembourg.

These ongoing changes reinforce the scenario of an audiovisual market that will be entirely online. One in which “legacy players” from the broadcasting industry (everywhere in the world) are losing a) curatorial control over the TV-viewing experience and b) distribution exclusivity for local audiences. What remains to be seen is whether the Canadian broadcasting industry will be able to position itself in such an open competitive environment or will remain a relatively small player in an open, global, online-only audiovisual world.

Six key trends

Six recent market developments are presented in this document:

1. Virtual is flirting with reality;
2. Consumers want unrestricted access to content;
3. Originals are coming from everywhere;
4. Audiences are becoming makers, investors and marketers
5. Subscription models have multiplied – taking the music sector in example;
6. The World is the new «niche» market.