The iPad is here, and so is the hype. But despite all of the debate about young viewers moving to the Internet, television is still where the money is.
Online revenue for broadcasters and specialty and pay TV companies accounted for a paltry 2.3 per cent of overall advertising revenue in 2009, according to a report by Convergence Consulting Group Ltd. Its research says the money won't soon begin flowing online – the report predicts that by the end of this year, only 3.1 per cent of TV ad revenue will come from the Web.
“When you contrast the amount of TV revenue … to the online numbers, they are drops in the bucket,” said Brahm Eiley, principal at the research firm. “Even if [online revenues] go up steadily for the next few years, it's not going to do anything for the business.”
Despite this, Canadian companies are lagging behind their U.S. counterparts in developing video-on-demand, or VOD, which could help recover some of the ad revenues that shrank during the recession.
Since VOD allows companies to sell dynamic ads – which can expire, so the time can be resold – it is “a far more robust channel” than the Web, he said. “There's more revenue to be gained by everybody.”
But Canadian companies have been late to the game. For example, according to the research, the largest U.S. cable company, Comcast Corp., offers roughly 20,000 TV and movie titles on VOD each month, mostly free. Canadian cable giant Rogers, by contrast, offers about 6,000 per month and roughly half are free.
A recent decision by the federal regulator that allows cablecos to negotiate with content providers like CTV to sell ads on VOD could change that.
Though very few Canadians cut the cord on their cable subscriptions, viewership of TV on the Internet is just as high in Canada as the U.S., the study found. That's because residential broadband penetration is high here. Also, usage of personal video recorders is much lower in Canada, mostly because they are more expensive here. The report estimates that by the end of 2012, half of American TV subscribers will have a PVR, compared to only 35 per cent of Canadian subscribers. (Currently PVR penetration in Canada sits at 20 per cent, and 35 per cent in the States.) All of that helps drive eyeballs to online content, where companies make very little money.
Some American Internet TV services, such as the popular Hulu.com, are preparing to move to a subscriber-only model, and Mr. Eiley predicts Canadian companies will follow suit. With the largest increase in TV subscribers added last year since 2005, companies will continue to deal with new technologies, but mostly in the service of the old business.
“It's crystal clear that the money is in television.”
