The owners of Canada's English-language broadcasters are on their way to Gatineau, Que., this week to ask the federal regulator to renew their TV licences, but the conversation is likely to turn to a new kind of broadcaster that requires no licence at all: Netflix.
TV stations such as CTV and Global are only allowed to broadcast in Canada with licences from the Canadian Radio-television and Telecommunications Commission that mandate spending on Canadian broadcast content and set rules meant to protect Canadian culture. Some of these companies are likely to complain to the CRTC this week that Netflix is allowed to operate in Canada without such costly rules; since it airs its TV shows and movies over an Internet connection to computers, Web-connected TV sets and gaming consoles.
So far, so-called "over the top" content such as that of Netflix represents a small portion of TV viewing, especially since those services tend to show older content and the selection can be limited. But a new report suggests that the threat of alternative viewing may be growing.
In its annual report on the TV industry in the U.S. and Canada, Toronto-based Convergence Consulting Group Ltd. predicts a small number of Canadians will soon begin to cut the cord on their cable or satellite subscriptions.
The risk is still small: The report expects that just 1 per cent of TV subscribers will cancel their cable or satellite service by the end of 2012.
"There's just not enough content … to see a massive amount of cord-cutting yet," said Brahm Eiley, a principal at the research firm. "But it is growing."
The appeal of alternative programming comes down to price: the average TV subscription in Canada costs $61 per month, according to the report. Viewers using over-the-top viewing could watch a lot of content online - and be handed plenty of overage charges on their Internet accounts for exceeding capped limits - and still save money on a traditional TV package.
The broadcasters have also put a lot of their content online for free in an attempt to feed viewers' anywhere/anytime appetites. But Canada lags behind the U.S. in this push: U.S. broadcasters such as ABC and NBC put, on average, 85 per cent of the TV shows they own on the Web for free, on their own websites or on the free viewing website Hulu, according to the report. By comparison, Canadian English-language broadcasters put an average of just over 60 per cent of their shows online. And those Canadian videos have 80 per cent fewer ad minutes than are shown on traditional TV.
"That equation does not equal big revenue," Mr. Eiley said. "Canadian broadcasters need to monetize."
Running more ads with online videos is one way to bring in money. Online ad revenue for the broadcast and specialty TV industry in Canada totalled $92-million in 2010, and should grow to $115-million this year, the report states.
But that's still just a fraction of what media companies earn for TV spots. The industry has a stake in keeping traditional TV viewers - especially since the private broadcasters in Canada are all owned by cable and satellite providers. That means the amount of free TV online is likely to fall even further. Netflix offers older seasons of TV shows, but on-demand viewing of recent shows could require that viewers visit their cable or satellite provider's website and log-in to prove they pay for TV service. That's already the model for much of the specialty channels' shows, which are available on the Internet for subscribers through Rogers On Demand Online, for example. More content will be enclosed in these "walled gardens" in the future, the report predicts.
"You will be able to access everything online, but you may have to be a subscriber," Mr. Eiley said. "It's already happening here with Rogers and Videotron … and in the States, Hulu's days as a free platform are numbered."
Editor's note: This story contains a correction from a previous online and print version regarding how many advertising minutes are shown on online videos in Canada.