Once again, yet another story in the Globe and Mail yesterday was out peddling a tale of doom and gloom about the state of conventional commercial television broadcasters in Canada. This time, the story came hot on the heels of a Supreme Court of Canada ruling Thursday that threw cold water on the idea that cable, satellite and IPTV services should pay broadcast tv companies — Bell (CTV), Shaw (Global), Rogers (CityTV), Quebecor (TVA), the CBC, and a smattering of smaller independents — to deliver their signals to the tv screens of Canadians across the country.
It was a small victory for the non-vertically integrated entities that have long been in the business of television distribution, such as Cogeco, Eastlink and other cable companies, as well as several telcos across the country that are trying to expand their IPTV services in order to break into this highly concentrated field: Telus, MTS Allstream, Sasktel. Even Rogers, given its relatively small place in the conventional tv universe, opposed the fee-for-carriage model being touted by Bell, Shaw and a few others.
However, rather than entertaining the idea that the Supreme Court’s decision might be a good thing because it means that there will be no new ‘fee-for-carriage’ charges on already expensive cable and satellite bills (i.e. a “TV Tax”), or that it could foster more competition in the anemic tv distribution biz, where the big four — Shaw, Bell, Rogers and Quebecor — control roughly 84 percent of industry revenues, the Globe and Mail article hands the narrative over to the loser in the case: Bell.
Instead of framing the victory as potentially a small victory for consumers, or examining the Supreme Court decision itself, the article rips and reads from Bell’s talking points. Of the 813 words in the article, 144 are direct quotes from Bell; the Supreme Court decision gets 37.
Indeed, Bell sets the narrative frame for the story from the get-go, not just in terms of the sheer volume of ink spilt transcribing and transmitting its view to readers, but by the fact that it is the first to be quoted, and extensively so, with paragraphs five and six completely handed over to the company’s talking points. Here’s Bell setting the stage in paragraph five, lamenting why the decision is bad, not for itself, but Canadians:
“TV viewers across the country would have benefited from long-term stability for their local television stations, which currently rely on an advertising market that has seen permanent structural change, and is no longer able to fund such a model on its own.”
A few paragraphs later, Bell locks down the frame that sticks for the rest of the story: “the ad market for local television is in permanent decline.”
But hold the phone! Are any of these claims true? Umm, there’s room for interpretation, although not in the Globe and Mail’s piece, but the answer is basically (i) mixed if we look just at broadcast television advertising revenue, (ii) no if we look at total revenues for broadcast tv and (iii) an even bigger NO if we look at advertising revenues for all tv services.
As the CRTC’s most recent Communication Monitoring Report shows, advertising revenues for conventional tv for the past four years have been basically flat, hovering between $2,320 – $2,350 million. Advertising revenues went to hell in a hand-basket in 2009, but have risen by nearly $220 million in the two years since (p. 73).
If we look at all revenues for conventional television, the picture is even clearer. While revenues plunged in 2009 at the height of the economic downturn, other than that they basically stayed flat between 2008 and 2010.
By 2011, revenues for conventional tv were up $86.3 million over the previous year and over $100 million more than they had been at the outset of the global economic downturn in 2008. They were roughly $315 million more than five years ago, i.e. $3,491 in 2011 versus $3,176.2 million in 2006 (all revenue figures can be seen here). Not bad, really, and hardly the picture of distress portrayed by Bell.
Every media economist knows that the fortunes of advertising supported media hinges on the state of the general economy. In light of that, the fact that conventional tv has weathered the economic downturn, and done so whilst so much else in its environment is in a heightened state of flux, is not a catastrophe, as Bell and the Globe and Mail would like us to believe, but quite remarkable.
Perhaps if we dig deeper to look at advertising revenues across all television services as a whole, we will see the deep structural shift that Bell claims is happening, and which the Globe and Mail simply transcribes and transmits, as dollars are forever siphoned away from television in favour of the internet? Um, no.
The big picture for advertising revenues across all television services (conventional and pay/specialty) is even more unequivocal: television advertising revenues have risen steadily and substantially over past twelve years, as the following figure shows:
Source: Interactive Advertising Bureau (2012). 2011 Actual + 2012 Estimated Canadian Online Advertising Revenue Survey; Interactive Advertising Bureau (2009), 2008 Actual + 2009 Estimated Canadian Online Advertising Revenue Survey.
While there is absolutely no doubt that all of the players are scrambling to come to terms with new realities and still moving grounds, it is precisely because conventional television is not in crisis that the CRTC decided earlier this year to phase out the much hated Local Programming Improvement Fund (LPIF) that it had put into place in 2008 when things really did look rocky.
Journalists do a disservice to their readers by packing stories and what purports to be analysis with talking points from Bell rather than doing the leg work needed to access readily available data that paints a fuller and, by and large, very different picture.
Of course, there is tons of room to argue over the evidence but the flat portrait of conventional tv in decline painted at the Globe and Mail obscures the terrain of debate. If this was just an isolated instance, then perhaps we could just move along, nothing to see here. My sense, however, is that it is not.
To be more specific, we saw exactly this kind of coverage by the Globe and Mail when the CRTC quashed Bell’s bid to acquire Astral Media (see here and here, for example). Bell was essentially given free reign to vent, to tell us why the CRTC decision was wrong, how the CRTC under new chair J.P. Blais had gone activist, how Astral’s market cap had taken an undeserved beating as a result, what George Cope and Kevin Krull planned to do about things, and finally, when Bell teed up a second bid for Astral its move was pitched as somehow being routine, just another kick-at-the-can, when it is anything but.
There’s two final points to be said on these matters, at least for now: first, the task of journalists is not to act as conveyer belts for corporate PR and a monochromatic view of the world. Readers deserve better.
Second, and in this particular context, the fact that the owners of the Globe and Mail, the Thomson family, have a significant equity stake in Bell, and Bell holds a 15% stake in the Globe and Mail, raises questions about the ability of journalists to cover this beat without serving on bended knees. There is no proof that Globe and Mail journalists are taking orders from headquarters on this stuff, and if they were, the chance that we could know about it are about zero since we have no access to the internal workings of the newsroom and the day-to-day routines of journalists.
The fact that researchers can seldom gain access to the internal working of media organizations is why I do not generally like to try to connect my analysis of the structure of the media industries with the quality of the content they provide, whether good, bad or otherwise. One thing that this means, however, is that we have to trust journalists and for that to happen they have to give us good reason to do so.
People who own stuff like to tell others what to do and certainly have the potential to do so within the media, so it seems to me that journalists must walk the extra mile to demonstrate their autonomy rather than serving up Bell’s view of the world in one case after another in which the company finds itself on the losing end of the stick. Two months ago, the context was Bell Astral, two days ago the Supreme Court. Tales of doom and gloom advance a policy agenda and in this case, that of Bell and a few others, and that is why it is so important not to parrot what they have to say.
With Bell Astral Round Two likely to be teed up in the New Year, we deserve better journalistic coverage of the media industries in this country and I sure hope we get it. The last thing we need is yet another rooftop from which the most powerful and well-endowed media voices in the land get to shout about their view of the world and how things oughta be.
The Motion Picture Association (MPA), the lobbying arm of the major Hollywood studios, was out again last week playing whack-a-mole with anyone audacious enough to entertain heretical ideas.
This time it was a three-page abstract (yes, the abstract) of a paper, Piracy and Movie Revenues: Evidence from Megaupload, by German and Danish scholars Christian Peukert and Jorg Claussen that seemed to get on the MPA’s nerves. The abstract had sat in relative obscurity on the SSRN research website for the past month-and-a-half until Torrent Freak trotted it out last week with a trumped up title that the MPA certainly did not want to hear: “MegaUpload Shutdown Hurt Box Office”.
The title played fast and loose with the thrust of Peukert and Claussen’s paper – most films probably see a small but insignificant negative effect on theatre attendance when sites such as MegaUpload are taken down — but it was not the journos and bloggers that the MPA went after, but the paper’s original authors. The thought that sites like MegaUpload might actually be good for the movie business by helping to put more bums in theatre seats must have seemed to be just too heretical to let stand, especially when coming from academics.
As Peukert and Claussen explain, file sharing may be good for a lot of movies released in theatres every year, but by no means all, because people sharing files online can
. . . spread information about a good from consumers with zero or low willingness to pay to users with high willingness to pay. The information-spreading effect of illegal downloads seems to be especially important for movies with smaller audiences.
The upshot is that, for most movies, putting file-sharing sites (Megaupload, Isohunt, Pirate Bay) out of business could reduce the size of the theatre-going audience — the exact opposite outcome intended by those who believe that strong copyright laws and enforcement are essential to remedying whatever might ail the traditional media. Whereas Peukert and Claussen deliver this conclusion in careful and measured language, the headline pinned on the article describing their work by Torrent Freak, “MegaUpload Shutdown Hurt Box Office”, definitely did not.
The thrust of the Torrent Freak piece played well to the open internet, copyright minimalist crowd, confirming that the incumbent Hollywood movie moguls must have their heads stuck in the sand, given their steadfast and stupid resistance to the new way of doing things in the ‘new internet economy’. Technically, the headline was true. The problem, however, is that this particular truth hides an even bigger one, at least for the MPA and its members: the slight impact seen for most films does not hold when it comes to the MPA members’ blockbuster films, you know, the big budget spectacles that open on 500 screens across North America all at once (before moving in carefully staged sequences across the planet).
This is a pretty big exception and basically covers the 140 – 150 films produced by the Hollywood studios each year and which are the real bread and butter of the MPA’s corporate rank and file: Time Warner, News Corp, Disney, Sony, Paramount (Viacom) and Universal (Comcast NBC). For these films and the majors that finance and produce them, Megaupload and its ilk are bad news indeed, and little in Peukert and Claussen’s study challenges this idea.
To suggest that this is not a main part, if not the main part of the story, is misleading. As far as I can tell, however, this is not the fault of the paper’s authors but how their work was pumped up into something that it wasn’t by the blogerati and real journos who seem ever more prone to trolling the blogosphere and twitter for ideas and inspiration.
Not surprisingly, the MPA, had a radically different take on things, given that its main concern is not with most of the six hundred or so films released in theatres around the world every year, but the 140 – 150 films produced by its members which account for most of the revenues in the movie business worldwide. As the MPA interpreted Peukert and Claussen’s paper, correctly in my view, the evidence seems to suggest that blockbuster films have bigger theater audiences when they do not compete with Megaupload and other such sites. This is probably because the massive promotional budgets associated with the blockbuster does not need file-sharing to amplify and augment word-of-mouth to build buzz around a film in the way that smaller films, of a more obscure vintage produced and distributed outside the Hollywood system, do.
However, to stop here would be to give the MPA too much credit. The MPAA does little more than point to the obvious. More importantly, instead of focusing on how scholarly findings have been twisted and trumped up by bloggers and journos, the MPAA takes a run at Peukert and Claussen’s methodology, as if it is the scholars rather than others that are out causing mischief.
The assault on methodology is wide of the mark. Designed more to dirty the waters and distract attention, it is an exercise in intellectual dishonesty. While trying to cast doubt on the paper’s methodology as if such things undermine the study’s conclusions, the MPAA offers zero evidence to buttress its criticisms or its own view that piracy and file-sharing are bad and the copyright maximalist position obvious and good.
Six Decades of Cassandra Calls and Falling Skies
These tactics are not new but part of the DNA of the film industry in the United States. Hollywood has been trotting out tales of impending doom since the Paramount Decision in 1948 by the Supreme Court that forced the major studios to divest themselves of the theatres they owned in order to foster independent theatres that would hopefully be more responsive to audiences because less obligated to show the slate of films foisted upon them by their studio masters.
The story of impending doom continued in the 1950s and 1960s when tv became a fixture in North American homes. To be sure, film theatre attendance did fall for nearly two decades during this time, but was this because people abandoned theatres for tv at home, or the result of a combination of factors: the move to suburbia, widespread adoption of cars as well as the embrace of television? I think it is the latter that is the case, as do others (see here and here, for example).
The more important point, however, is that by the 1970s television became the film industry’s pot of gold at the end of the rainbow, moving unequivocally from threat to one of the most lucrative new media markets the movie business has ever known. The same lesson came to apply to the VCR, DVD and every other personal video recording device thereafter, yet again, not before the MPAA and its members demonized each new technology as an existential threat to the movie business and a particular American icon.
Most famously, the MPAA’s then chair, Jack Valenti likened the VCR to the Boston strangler, as much a threat to the film industry as darkness is dangerous to damsels in distress. And yet again, a mixture of new, ever more personalized media technologies, along with the increased individualization of pleasure and social life in general, led the VCR, DVD, PVR, and so forth to become not just important new lines of revenue for the film industry but the most significant sources of growth (see below).
Movies and Money, 2011
If there was ever a case that an old medium would be decimated by the new, you might think that a medium born in the 1890s would be a star candidate for extinction. However, as one of my mentors and teachers Janet Wasko once told me and my fellow classmates, each new audio-visual medium has typically opened up a new market for the major Hollywood studios and other film distributors.
This was a lesson she had drawn from her research in the 1970s and 1980s and which she told us about in the early 1990s. But perhaps everything has changed since then because of digitization and the rise of the Internet?
Not really. A couple of things illustrate the point.
First, let’s take a look at the MPA’s most recent report on the subject. According to the MPA, worldwide box office revenues were at an all time high in 2011 at $32.6 billion (USD) – up from $31.8 billion a year earlier. The North American box office saw a very modest decline, but has generally stayed quite steady for the last few years, which also means that it was the global box office that helped to lift the tide. The following figure shows the trend.
Figure 1: Domestic and Worldwide Theatre Box Office Revenues, 1998 – 2011 (millions USD)
Sources: Motion Picture Association (2011). Theatrical Market Statistics.
The fact that box office revenues have climbed significantly from $26.3 billion to $32.6 billion between 2007 and 2011 amidst the global financial crisis and ensuing economic downturn is also impressive, basically showing the resilience of the movie business in the face of economic hard times.
And this is less than half the picture, actually, as we can see as soon as we cast our net a little wider to consider all revenues sources across the ‘total film industry’, including pay-per view tv services, cable and satellite channels, rapidly declining video/DVD rentals and fast rising over-the-top (OTT) subscription services (Lovefilm, Netflix, etc.) and digital downloads (Apple, Amazon, etc.). As soon as we bring these areas into view, any sense of doom and gloom in tinsel town should dissipate.
Indeed, the movie business is doing even better than the box office numbers suggest, with total revenues rising sharply on a worldwide basis from $46.5 billion just before the turn-of-the-21st century to $83.5 billion in 2011. Figure 2 below shows the trend.
Figure 2: Total Worldwide Film Industry Revenues, 1998 – 2011 (US$ Millions)
Sources: Motion Picture Association (2011). Theatrical Market Statistics; PWC, 2012, Global Entertainment and Media Outlook, 2012 – 2016 (plus previous years; e.g. 2009; 2003).
Again, several things of note stand out from Figure 2. First, like the box office, revenues for the total film industry continued to rise from $80.3 billion in 2007 to $83.4 billion in 2011 despite the economic malaise affecting much of Europe and North America since the global financial crisis of 2007-8. Many areas of the media industry are very heavily dependent on the state of the macro economy but this seems less true of the movie business.
Second, while total revenues for the movie industry continue to grow, the number of films produced by the Hollywood majors per year continues its decade-long decline to the point where in 2010 and 2011, MPA members produced 141 films versus around 200 per year in the late-1990s and early-2000s. This is an important development and reflects the fact that the majors are trying to cut through the clutter of a crowded media economy by relying on a smaller number of spectacular blockbusters with massive budgets backed by equally massive promotional campaigns.
The average budget of the top 10 blockbuster Hollywood film nearly doubled between 2000 and 2010, rising from $109.2 million in the former year to $197.2 million last year. The primary objective, of course, being to keep the three scarce resources of the media economy — time, money and attention — fixed on the MPA members’ own wares.
Table 1 below shows the following trends: a declining number of blockbusters produced by MPA members, rising number of independent produced films over the past decade, and lastly a greater number of films overall, but with a relatively stable output of about 550 to 600 films per year for the past half-decade.
Table 1: Number of Films Released in Theatres, MPA vs. Non-MPA Sources, 1998 – 2011
|Total # Films Released||509||478||475||489||594||634||555||569||610|
Source: MPA (2012). Theatrical Market Statistics.
There is, however, one other thing that stands out from Figure 2 above that puts a bit of a fly-in-the-ointment in the story that I am telling of consistently rising total revenues: namely, that while increased revenues from television and various video services have added immensely to the movie biz’s total revenues over the past thirteen or so years, such revenues appear to have peaked in 2004 ($54.9 billion) and have fallen significantly since to about $50.9 billion.
Why is this? I’m not exactly sure. The days of torrential growth in television seen during the 1990s and early-2000s as countries the world over picked up the tv habit, notably in the fast growing economies of China, Brazil, Indonesia, India, Brazil and Russia, might be slowing down, perhaps. However, over and against this view, the size of the total tv market worldwide has continued, according to PriceWaterhouseCooper’s Global Entertainment and Media Entertainment Outlook, 2012 – 2016, to grow very significantly, rising from roughly $280 billion in 2004 to over $400 billion last year. I would love to hear why revenues in this area have fallen for the last several years.
The next time you hear about the movie industry (or any other media sector for that matter) falling on hard time because of digitization, the Internet, piracy, and so forth, think about these trends. And please repeat after me: the movie industry is not in crisis; for the most part it is flourishing.
These are important observations because it is the same vested interests that want us to think that the sky is falling which use these mistaken impressions to:
- push for changes to copyright laws and a clamp down on Internet Service Providers in ways that wouldn’t otherwise have a hope in hell of succeeding;
- exert leverage over politicians and policy-makers, who have often accepted the bulk of such arguments while crafting the raft of new and reformed copyright legislation that has been installed around the world in the past few years. As a recent example shows, even the Republican Congressional staff’s think tank in the U.S., the Republican Study Committee, felt compelled to yank a policy discussion paper on copyright reform authored by one of its staff from its website just hours after releasing it and after the MPAA and RIAA are said to have “went ballistic“;
- play cities, states, provinces and countries around the world off of one another for subsidies and favourable labour conditions;
- and in labour bargaining with unions representing film and television workers, with the latter easily made to appear outlandish in their demands for good wages and working conditions in light of the steady drumbeat of public relations saying that the movie industry stands on the edge of the abyss.