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Growth and Concentration in the French-language Network Media Economy in Canada, 2000-2012

Cross posted from the Canadian Media Concentration Research Project website. 

This post focuses on the development of and concentration trends in eight sectors of the network media economy in French-language regions of Canada from 2000 until 2012: i.e. wireline telecoms, mobile wireless services, internet access, broadcast tv, pay and specialty tv channels, total tv, radio and online advertising. It is a follow up to previous posts that looked at these matters across Canada as a whole (see here and here for the last two)(for a downloadable PDF version of this post please click here).

As with the previous posts, the data and methodology underpinning the analysis in this post can be found through the following links: Media Industry Data, Sources and Explanatory Notes, French Media Economy, CR and HHI French Media and the CMCR Project’s Methodology Primary. Excellent additional resources for further analysis of the media in French-language regions of Canada can be found through the GRICIS research project at Université du Québec in Montreal and the Centre d’études sur les médias at Laval. Journalist Steve Faguy is also very knowledgeable about the media industries in Quebec.

So what did we find?

The Growth of the French-Language Network Media Economy, 2000-2012. 

The media economy in French-language Canada has expanded greatly since 2000. Revenues rose from $9.8 billion to $14.5 billion in the last dozen years and, indeed, the French-language media grew faster than in the rest of Canada. The relatively fast pace of growth, however, has slowed considerably since the “great financial crisis” of 2008, just as has been the case with the rest of Canada and indeed for much of the Anglo European world,

The faster rate of growth relative to the rest of Canada likely reflects the fact that, historically the French-language media economy has been smaller than what its population alone would dictate. For instance, while Quebec’s population accounts for about 23% of the national total, in 2012 it’s media economy accounted for just over a fifth of the total Canadian media economy (20.6%) – although that was up from just 18% at the turn-of-the-century. 

Figure 1 below shows the trends.

Figure 1: The Growth of the French-Language Network Media Economy, 2000-2012

 

Growth of French NME 2012 (wo total$)

Sources: French Media Economy, Sources and Explanatory Notes.

The fastest growing sectors of the French-language media economy, again similar to patterns in the rest of Canada, have been in internet advertising (2,442%), internet access (524%), mobile wireless services (237%), cable, satellite and IPTV (118%) and, less so, television (34%). By and large, it is the platform media industries and, again to a lesser extent, television that are driving the growth of the network media ecology, adding both to its size and structural complexity. 

At the opposite end of the spectrum, wireline telecom has fallen by more than a quarter. Newspapers also saw their revenues decline after seeming to peak in 2008, from an estimated $1,036 million then to $907 billion last year – a drop of 12%.

While these trends areconsistent with the course of events in the rest of the country, and indeed throughout much of the Anglo European world, one important thing distinguishes French-language dailies form the rest of the country: paywalls. Unlike the English-language press where twenty-four dailies accounting for two-thirds of circulation have put up paywalls in a bid to stem the tide, only two dailies out of ten in Quebec representing just under half of average daily circulation – Quebecor’s Le Journal de Montréal and Le Journal de Québec – have done so.  

Power Corporation’s La Presse has resisted the temptation. This difference in the extent to which English- and French-language dailies have embraced paywalls likely reflects the fact that Radio Canada/CBC looms larger in Quebec than elsewhere in Canada, and perhaps cultural considerations as well.

Radio has grown only modestly since 2000. In fact, since 2008, the medium has seen revenue stagnate, largely because of a combination of budget cuts and restraint in government funding of the CBC and flat advertising spend, with the latter largely being a function, once again, of the economic uncertainty since the financial crisis. 

One more thing that stands out from Figure 1 is the extent to which the growth of several media flattens or goes into decline after the onset of the “great financial crisis” in 2008. Indeed, several sectors see a dogleg in growth at this time: cable, satellite and IPTV as well as internet access, notably. Even fast growing mobile wireless services slowed, while newspaper revenues dropped.

Figure 2 below gives a snapshot of these conditions based on trends since 2000. 

Figure 2: Growth, Stagnation and Decline in the French-language Media Economy, 2000-2012.

 

Growth Stagnation Decline French Media 2000-2012 

Leading Telecoms, Media and Internet Companies in Quebec

Every study of the Canadian media industries highlights the colossal role that Quebecor plays in French-language media, and rightly so. The company’s reach across the telecoms, television, newspaper, magazine, book and music retailing landscape is enormous. With over 80% of the sprawling media conglomerate’s $4 billion in revenues — $3.3 billion — coming from Quebec in 2012,[i] the company single-handedly accounts for over one-fifth of all French-language network media economy revenue. 

While Quebecor no doubt cuts an imposing figure within French-language media, it is not the largest media conglomerate in this respect; Bell is — by a large margin. Figure 3 illustrates the point and shows the top 14 companies and their revenues from the eight sectors canvassed in this post. Figure 4 immediately after that shows what conditions would have looked like if the CRTC had approved Bell Astral Version 1.0.

Figure 3: Leading Media, Internet and Telecoms Companies in Quebec, 2012 (millions$).

 

Leading-French-Telecom-Media-Internet-Enterprises-in-French-Canada

Figure 4: Leading Media, Internet and Telecoms Companies in Quebec, 2012 (millions$) — Post Bell Astral Version 1.0

Leading-French-Telecom-Media-Internet-Enterprises-in-French-Canada-Post-Bell-Astral

Sources: Media Industry Data, French Media Economy, Sources and Explanatory Notes.

Several interesting points stand out from Figure 3. First, taking all their holdings into account in Quebec, Bell’s 2012 revenues of just over $5 billion outstripped Quebecor’s $3.3 billion by a large margin. In fact, BCE accounted for more than a third of all revenue in Quebec, which was roughly equal to the next three biggest players combined: Quebecor, Rogers and Telus.

If the CRTC had approved the 2012 version of Bell’s bid to take-over Astral, as Figure 4 illustrates, the gap would be larger yet. Under the first version of that failed transaction, BCE’s total share of the French network media economy would have been 37.2% versus 22.6% for Quebecor (the consequences of the Competition Bureau and CRTC’s approval of Bell’s revised bid to acquire Astral in early 2013 will be discussed in next year’s post when the effects based on 2013 data will be discernible).

As Figures 3 and 4 show, Bell and Quebecor are in a league of their own. The two vertically-integrated giants tower over their peers, most of whom operate in only one or two sectors. Cogeco is a partial exception because it too is vertically integrated because of its stakes in high-speed internet access, basic phone service, cable tv and radio, but its revenue ($445 million) and market share (3.1%) across the ‘total network media economy’ are puny by the standards of Bell or Quebecor.  

Joining Cogeco are another half-dozen or so second tier players: Rogers, Telus, the CBC, Power Corp, Astral and Google with French-language media revenues in $200-$950 million range. Telus and Rogers’ stakes in Quebec are mostly limited to mobile wireless services, although the size of the mobile wireless segment, and the fact that after internet advertising and internet access, it is the fastest growing sector, means that the two comapnies loom large in the province. Google is ranked ninth based on estimated revenues of $268.4 million from online advertising in 2012 and just under two percent share of the entire network media economy (versus $242.2 million in 2011). 

The CBC still cuts a formidable presence in the province as well. Indeed, it is the largest player in TV and radio, with a 40% and one-third share of both media markets, respectively, compared to Quebecor with one-quarter of the French tv market and Astral’s 27% of the radio market in 2012. The CBC/Radio Canada’s major role is probably one reason, as mentioned earlier, why the French-language press has been more hesitant to introduce paywalls, as noted above; it is also why the CBC is so vilified by Quebecor and others in the English-language press.

Power Corps’ place as the seventh largest media enterprise in French-language markets gives a sense of the continued importance of the press within the overall mediascape and of the scale of its newspaper interests (i.e. La Presse, Le Nouvelliste, La Tribune, La Voix de l’Est, Le Soleil, Le Quotidien, Le Droit). Power Corp’s share of average daily circulation is equal to that of Quebecor’s two French-language dailies, Le Journal de Montréal and Le Journal de Québec: 47% — the basis which I use to estimate newspaper revenues for both companies in French-language markets. Independents pick up the remaining six percent of the circulation and revenues.

The French-language newspaper market, in short, is extremely concentrated, and more so than the national situation. Given the importance of newspapers amongst political and business elites, it is this dominance that no doubt draws a critical eye to both companies, and especially to Quebecor given it’s sprawling grasp across media, while Bell’s relative absence from ‘opinion influencing media’ seem to give it a freer hand in this regard.

Finally, a number of smaller players with less than one percent market share round out the ranks: Eastlink (.7% market share), V Interactions (.5%), Facebook (.2%) and Shaw (.2%).  Together these four companies account for less than two percent market share.

Concentration in the French-language Network Media Economy, 2000-2012

Beyond the individual companies and their ranking, the most notable point with respect to the French-language media is the extent to which just two entities — BCE and Quebecor – dominate the landscape. Together, they account for well over half of all revenues (57%) (BCE’s market share in 2012 was 34.7%; Quebecor’s 22.6%). And this was before the Competition Bureau and CRTC blessed BCE’s take-over of Astral, the 8th largest French-language media company, earlier this year.

The second observation to be made is that concentration trends across the board are considerably higher for French-language media markets than in their national counterparts, except wireless. This is important for several reasons.

For one, it shows that the national measure we rely most on can be insensitive to conditions on the ground at the local/regional level. To put this more bluntly, we under-estimate concentration levels, not exagerrate them. This in turn makes the case that there is a media concentration problem in Canada even stronger.

Table 1, below, depict the trends over time in French-language network media economy on the basis of two standards methods for analyzing concentration: Concentration Ratios (CR4) and the Herfindhahl – Hirschman Index (HHI) (see methodology discussion in the last post and the CMCR project’s methodology primer).

Tables 1: CR and HHI Scores for the French-language Media Economy, 2000-2012

CR & HHI French Network MediaEcon, 2012

Sources: CMCR Project CR and HHI French Media.

Table 1 shows that every single sector of the media, telecom and internet examined here is very highly concentrated in Quebec, except for radio which slipped under the threshold for the designation in 2012.

The Platform Media Industries

One notable trend moving gradually in the opposite direction is the steady decline in the extremely high levels of concentration in mobile wireless services. One thing that stands out in this regard is that Quebecor has emerged as a significant rival to Bell (33% market share), Rogers (29%) and Telus (28%) since entering the market after acquiring spectrum in the last round of spectrum auctions in Canada in 2008.

Quebecor’s share of the market has grown to 5.3% (based on revenues) in the four years since it entered the market, effectively demonstrating the viability of the 4th player strategy. Other newcomers, notably Wind, have picked up about 4.7% market share, as well. As a result, Quebecor, Wind and other newcomers now account for 10% of the market, while the big three’s share has dropped to 90% since 2008. While the mobile wireless market is still highly concentrated by the CR4 (95.3%) and HHI (2742) measures, Quebec stands out as (1) the province with the highest levels of competition and (2) indicating the viability of a “4th mobile wireless carrier” strategy.

In contrast, a less unusual trend can be seen when we turn our attention to internet access. In this case, the levels of concentration are much higher in Quebec than they are across the country. Indeed, concentration levels for internet access have risen steadily and sharply since 2008, reaching an HHI of 2726 in 2012, a score that is firmly in the very concentrated zone versus one that was more in the moderately concentrated region just four years earlier. The CR4 in 2012 was also high at 78%.

In contrast, Canada-wide, the CR4 was 59% and the HHI at the low end of the scale at 1051. It is the former measure that is the more accurate, though, while the gap between them a reflection of measuring things nationally despite the fact that access to the internet is arranged in light of the choices available locally. Both measures are useful, though, and this why we look at things from multiple angles.

In terms of the broadcast distribution markets (BDUs), IPTV services have steadily grown to become more significant rivals to incumbent cable and DTH companies since 2010. The CR4 and HHI scores both fell slightly between 2011 and 2012, but are still at the extremely concentrated levels they were two years earlier: CR4 = 91.5%; HHI = 3400.

Concentration has hardly budged over the past few years. In 2012, Quebecor and BCE accounted for 49.3% and 29.5% market share, respectively, or just shy of four-fifths of the BDU market. The big two have increasingly clashed over the past twelve years, however, as BCE’s share of the market nearly tripled, rising from 10% to 30%, while Quebecor’s slid from 65% in 2000 to just under 50% in 2012.

A key reason why concentration remains sky high in Quebec is that BCE began rolling out IPTV services in 2010, half-a-decade later than in the prairie provinces, and did so in a way designed to protect its investments in DTH satellite TV. Cogeco and Eastlink remain distant rivals behind the big two, with 9% and 3.5% market share respectively.

Figure 5: Cable, DTH & IPTV French-Language Market Share, 2012

French Lang BDU (2012) Sources: French Media Economy, Sources and Explanatory Notes.

The Content Media Industries

Casting the net a bit more broadly to bring television into view alongside the distribution side of this domain also illustrates the extent to which Quebecor and Bell, and their strategies of vertical integration, stand apart from the rest of the field by a very wide margin. As Figure 5 below illustrates, the “big two” account for about two-thirds of the total tv universe, including distribution platforms. The CR4 for this measure is just shy of 82%, while an HHI of 2377 puts it just under the threshold for highly concentrated markets.

Again, it is worthwhile to reiterate that such claims are based on 2012 data before consolidation increased yet further on account of Bell’s take-over of Astral Media.  Figure 6 illustrates the state of affairs with respect to BDU and the total television market in Quebec as of 2012.

Figure 6: Vertically-Integrated BDUs and Total Television by French-Language Market Share, 2012

French Lang BDU+TV (2012)

Sources: French Media Economy, Sources and Explanatory Notes.

French-language broadcast television consists of three main players: CBC/Radio Canada (60% market share), Quebecor/TVA (27.3%) and V Interactions (7.8%). Broadcast television is extremely concentrated with the top 3 players accounting for 95$% of revenues and a sky-high HHI of 4403. Bell has no interests in this segment, and did not acquire any either when taking over Astral.

Radio is not nearly as concentrated, but still sits at the high-end of the moderately concentrated spectrum with an HHI of 2407 and a CR3 of 84%. Once again, the biggest player on the radio landscape is the CBC/Radio Canada, with a third of all revenues. Astral was the top commercial radio broadcaster and 2nd after Radio Canada and ahead of Cogeco in 2012 with 27%.  Big 3 control 84.1% of radio, and the sector fell just under the threshold of highly concentrated in 2012 based on an HHI score 2407. The biggest change in recent years was Shaw (Corus) exit from French-language radio in 2011 after a radio station swap with Cogeco.  

The trend for French language pay and specialty TV services is followed a U-shaped pattern over the decade, with concentration declining between 2004 and 2010, but rising again after 2010. Despite the half-a-decade or so dip, this sector has always remained highly concentrated on both the CR4 and HHI measures, with the “big four” – Astral, BCE, Quebecor and the CBC – accounting for 95.3% of revenues in 2012, and an HHI score of 2670.

Bell was already the second largest player in specialty and pay tv services in 2012 with a 27.1% market share. It would have single-handedly held an extraordinary two-thirds (64.8%) of the market had its original bid for Astral Media — the biggest player in this sector — been given the green light by the CRTC in 2012. The CR4 would also have risen from 95.3% to 99.3%, and the HHI score soared to 4,715. While the outcomes from the 2013 Bell Astral transaction will be assessed in next year’s version of this post, the difference is a matter of slight degree, not in kind: the results are off-the–charts in terms of CR4 and HHI guidelines.

In 2012, the total French-language TV market was highly concentrated by either the CR4 (92%) or the HHI (2594). The biggest entity is still Radio Canada, with 40% market share, trailed by Quebecor (TVA)(24%), Astral (16%) and Bell (11%). Had Bell’s original proposal to acquire Astral been approved as planned without any divestitures, its market share would have risen sharply from 11.1% to 27.7% and the third largest player, Astral, would have disappeared.

Concluding Thoughts

Studying the media industries and their evolution over time is never easy, and it becomes more difficult the deeper one probes simply because so much data is not released to scholars or the public. However, based on what we do know and some reasonable estimates of revenues and market shares derived from that, we can arrive at a pretty detailed and reasonable portrait of the French-language network media economy.

And in this regard, several things stand out.

  • the French-language media economy is very concentrated and much more so than the Canadian media economy as a whole.
  • Bell is the largest player in French-language markets with over one-third of all revenues across a wide swathe of media, followed by Quebecor with just under a quarter of the market across an equally large span of media, telecom and internet markets. The two are in a league of their own.
  • The market shares of BCE and Quebecor are significantly larger within Quebec than they are on the national stage (e.g. for Bell, its total share of the French-language market is 35%, while nationally it is 28%; for Quebecor, the gap is more pronounced, with 23% of all revenues in Quebec versus a modest 6% at the national level).
  • Similar patterns are observable in terms of the structure of the network media economy as a whole, with an HHI of 1800 in the French-language media being 400 points higher than what it is at the national level.
  • Two important exceptions to this general portrait need to be made. First, radio nominally falls into the moderately concentrated zone. Second, the steady uptick in competition in wireless bodes well for those who suggest that a fourth wireless competitor strategy might be just what is needed to help the ailing mobile wireless sector in Canada, at least if international measures are our guide (see here, here, here and here)

 


[i] For the sectors covered by the CMCR project and not including music and books.

The Growth of the Network Media Economy in Canada, 1984-2012

Cross-posted from the Canadian Media Concentration Research Project blog.

Has the media economy in Canada become bigger or smaller over time? Does the answer to that question, one way or the other, apply across the board, or to only a few of the dozen or sectors that make up the network media economy: i.e. wireline and wireless telecoms; internet access; cable, satellite & IPTV; pay and specialty television; conventional television; radio; newspapers; magazines; music; search engines; social media; internet advertising and online news sources?

Which of these sectors are growing, which are stagnating and which are in decline? To illustrate these trends over the period from 1984 until 2012, this post hones in on rising new media services (IPTV), those that have seen their revenues stay relatively flat over the past few years (conventional television) and those that appear to be in long-term decline (newspapers). I also examine whether the media economy in Canada is big or small relative to global standards.

This post also aims to set down a baseline of data to underpin a series of posts to follow over the next few weeks. Similar to what I have done for the past two years, the next post examines trends within and across the TMI industries from 1984 until 2012 to see if they have become more concentrated over time, or less (for previous versions, see here and here). The post after that zooms in on the top sixteen or so companies with one percent or more market share across the network media in Canada. Such firms account for 86% of all telecom, media and internet revenues. Rank ordered on the basis of revenue, they are: BCE, Rogers, Telus, Shaw, Quebecor, the CBC, MTS, Cogeco, Google, Torstar, Sasktel, Postmedia, Astral, Eastlink, the Globe and Mail, Facebook and Netflix. You can see a past version this discussion here).

In addition to updating our analysis for a complete set of the 2012 data, our goal is to break new ground. This year we do so by adding a new post that examines the state of media, telecom and internet concentration in Canada relative to the preliminary results of a thirty country study by the International Media Concentration Research Project, in which I served as the lead Canadian researcher. There are some surprising results that that smash a few shibboleths while confirming other elements of what we know from past research.

Finally, another new dimension for this year is a break out of data and analysis for the English- and French-language telecom, media and internet (TMI) markets. For the most part, similar questions to those introduced above are addressed about media growth and concentration trends between 2000 and 2012, while the leading firms in both of these regions are profiled in terms of size, ownership, the media, telecom and internet sectors they operate in, and how they each fit into the Canadian mediascape overall. 1

While we cite our sources below, by and large, the following documents and data sets underpin the analysis in this post: Media Industry DataMedia Economy DataSources and Explanatory Notes and the CMCR Project’s Methodology Primary.

Canada’s Network Media Economy in a Global Context

Canada’s network media economy has grown immensely over time. Between 1984 and 2012, it nearly quadrupled from $19.4 billion in revenue to $73.3 billion (current $). Adjusted for inflation, the rise was from $39 billion to $73.3 billion last year (2012 $).

While often cast as a dwarf amongst giants, the network media economy in Canada is large by international standards: tenth largest in the world as of 2012, as the overview in Table 1 below illustrates.

Table 1: Canada’s Ranking Amongst 12 Biggest Network Media Economies by Country, 1998 – 2012 (billions USD)

CDN NME Ranking Globally (2012)

Sources and Notes: OECD Communication Outlook 2013; ITU Revenues 2012. PriceWaterhouseCooper’s Global Entertainment and Media Outlook, 2012 – 2016 (plus 2011, 2010 and 2009 editions) for media and internet. P = preliminary estimate for countries, except Canada. See CMCRP Media Industry Data and methodology primer for Canadian data and analysis.

Canada’s network media economy is obviously small relative to the U.S., at one-twelfth the size. However, relative to the rest of the world, it is amongst the biggest, right after Australia, Italy and Brazil and just ahead of Spain and South Korea.

The growth of the network media economy was especially swift from the early-1990s well into the first decade of the 21st century but like most other countries on the list, it has slowed since 2008, mostly on account of the economic instability that has followed quick on the heels of the Anglo European financial crisis (2007ff). Indeed, worldwide network media revenues fell 5% between 2008 and 2009 and half of the countries listed in Table 1 saw their media economies actually shrink over the following years: the US, Germany, France, the UK, Italy and Spain.

Collectively, these countries’ media economies shrank by around $67.2 billion between 2008 and 2012. Some of this lost ground was regained by 2011, but only on account of increases in the US and France while the media economies in the other four countries (Germany, the UK, Italy and Spain) continued to be smaller than they were before the financial crisis.

In sharp contrast to much of Europe, the US and, less so, Canada, the media economies of Australia, South Korea, Brazil and China have been largely unscathed by the financial crisis. Indeed, these countries and a few others such as Turkey, India, Indonesia, South Africa, and Russia have been going through something of a ‘golden media age’ over the past decade, with most media, from internet access, to the press, television, film and so on undergoing an unprecedented phase of fast-paced development (OECD, 2010).

The Network Media Economy in Canada: Growth, Stagnation or Decline?

As noted above, the network media economy in Canada has grown enormously from $19.4 billion in 1984 to nearly $73.3 billion in 2012 (current $), or from $39 billion in 1984 to just over $73.3 billion last year (2012$). Figure 1 below charts the trends using current dollars.

Figure 1- Growth of the Network Media Economy 1984-2012

Source: see Media Economy DataSources and Explanatory Notes and the CMCR Project’s Methodology Primary.

Entirely new sectors – wireless, internet access, pay and specialty tv services, internet advertising – have added immensely to the increase. The most significant source of growth is from the platform media elements (wireless, ISPs, IPTV, cable and satellite), especially after the mid-1990s, but television has also grown enormously regardless of where we start the time line.

Music has also grown slightly, at least once a full measure of all of its subsectors are included – recorded, live, digital/online and publishing – as shown below, while radio has stayed mostly flat. In contrast, wireline telecoms, newspapers and magazines have declined, the first very sharply since 2000 and the latter two gently since sometime between 2004 and 2008, depending on whether trends are looked at from the point of view of real dollars or current dollars.

Table 2 below summarizes the state of affairs across the network media economy as things stood at the end of 2012 in terms of whether each sector covered in this post appears to be growing, stagnating or in decline.

Table 2: The Network Media in Canada: Sectors Experiencing Growth, Stagnation or Decline

Table 2: The Network Media in Canada: Sectors Experiencing Growth, Stagnation or Decline

The Platform Media Industries

The platform media industries – the pipes, bandwidth and spectrum used to connect people to one another and to devices, content, the internet, and so on — of the network media economy grew from $13.8 billion to $51.5 billion between 1984 and 2012. In real dollar terms, revenue grew from $26.8 billion to $52.5 billion. Table 3 shows the trends.

Table 3: Revenues for the Platform Media Industries, 1984 – 2012

Platform Media Industries, 1984-2012

Sources: see Media Economy DataSources and Explanatory Notes and the CMCR Project’s Methodology Primary.

Accounting for 72% of revenues, the platform media sectors are the fulcrum of the media economy, as is the case in most of the world. This is why Bell, Rogers, Shaw, Quebecor, Telus, SaskTel, MTS Allstream, Eastlink, Cogeco, etc. are so fundamental to the media economy.

While some might think that the over-sized weight of the platform media in the media economy is of recent vintage, their share of the network media economy in 2012 was basically the same as it was in 1984, i.e. 71-72%, albeit within the context of a vastly larger media economy. This is mostly because of the steep decline in wireline telecom revenues, from $21.2 billion at their peak in 2000 to $15.9 billion in 2012.

As plain old telephone service (POTS) has gone into decline, however, some pretty awesome new stuff (PANS) has come along to more than pick up the slack.  Wireless is the best example of this, with revenues skyrocketing after 1996, as Figure 1 and Table 2, above, demonstrate.

Indeed, wireless revenues have nearly quadrupled from $5.4 billion in 2000 to $20.3 billion last year. A corresponding rapid growth in mobile voice and data traffic reinforce the impression. Voice and data traffic were up in Canada 69% and 85% in 2012 over 2011, respectively, with the latter rising considerably faster than the worldwide average (70%)(sources cited here are silent on the other).

The growth in wireless is fast on account of the expanding array of devices that people use to connect to wireless networks: phones, smartphones, tablets, wifi connected PCs, and so on. In short, personal wireless mobile communications are quickly moving to the centre of the media universe. These are the social, economic and technological foundations underpinning the wireless wars that are now in full-swing in Canada.

Some have recently argued that the rate of wireless growth has slowed since 2008, arguing that this is mainly because it is becoming a mature market (Church and Wilkins, 2013, p. 40). Relative to the torrid pace of growth from the late-1990s through the most of the 2000s, this is true. However, it is well known that the pace set during the early commercialization of new technologies cannot be sustained forever. More than this, however, the flattening of growth coincides perfectly with the financial crisis.

This reality simply cannot be ignored. As indicated earlier, revenues for the network media economy worldwide declined between 2008 and 2009 and many of the world’s largest network media economies are still smaller today than they were five years ago (Germany, UK, Italy and Spain), have stalled (Japan and France) or are only modestly larger now than they were five years ago (US, Canada and Korea). Therefore, a modest let-up in the pace of wireless growth amidst such conditions is not surprising.

That said, wireless revenues have not been hit as hard as other media sectors by either the collapse of the dot.com bubble in 2000 or by the Anglo-European financial crisis (2007ff). Only the pace of development has slowed relative to past trends.

Internet access displays similar patterns of massive growth, albeit for not as long or to the same extent. Internet access revenues last year were $7.6 billion, up substantially from $6.2 billion in 2008 and quadruple what they were at the turn-of-the-21st century ($1.8 billion).

The most notable development in the past two years is the rapid growth of the telephone companies’ Internet Protocol TV (IPTV) services, albeit from a low base.  IPTV is the incumbent telcos’ managed internet-based tv services: e.g. Telus, Bell, MTS Allstream, SaskTel, and Bell Aliant. Revenues have nearly tripled, from $231 million to $638 million, over the past two years. The number of IPTV subscribers has followed suit, rising sharply from 200,000 in 2008, to nearly a half-million at the end of 2010, to just under 1.2 million at the end of 2012.

These figures are slightly higher than those in the CRTC’s Communication Monitoring Report (pp. 110-111) because the CRTC’s figures for subscribers are taken from the end of August in each year as opposed to the end of the year. More importantly, the CRTC’s estimated revenues (ARPU) are lower than those the telcos cite in their annual reports (see CMR, pp. 110-111).

Tables 4 and 5 below show the trends for IPTV growth in terms of both subscribers and revenues, respectively.

Table 4: The Growth of IPTV Subscribers in Canada, 2004–2012

2004

2006

2008

2010

2011

2012

Bell Fibe TV

13,000

50,644

248,298

Bell Aliant

46,575

68,199

107,391

Telus

 63,000

266,000

453,000

637000

MTS Allstream

25,422

59,442

82,278

89,604

93,244

95,374

SaskTel

22,850

48,980

68,408

83,610

91,854

93507

Total IPTV Connections

48,272.0

108,422

 213,686

498,789

756,941

1,181,570

Sources: see Media Industry DataSources and Explanatory Notes and the CMCR Project’s Methodology Primary.

Table 5: The Growth of IPTV Revenues in Canada, 2004–2012

 

2004

2006

2008

2010

2011

2012

Bell Fibe TV

8.9

22.7

120.2

Bell Aliant

14.9

27.6

55.7

Telus

14.3

101.6

202.2

314.7

MTS Allstream

8.4

29

50

59.0

70.6

78.5

SaskTel

7.6

23.9

37.1

51

63.7

74.3

Total IPTV $

16

52.9

97.2

231.3

380.0

638.1

Sources: see Media Industry DataSources and Explanatory Notes and the CMCR Project’s Methodology Primary.

The growth of IPTV services is significant for many reasons. First, the telcos are finally making the investments needed to bring next generation, fiber-based internet networks closer to subscribers, mostly to neighbourhood nodes and sometimes right to people’s doorsteps. If the distribution of television is essential to the take-up of next generation networks, as I believe it is (for better or worse), IPTV will be a key part of the demand drivers for these networks (see below).

Second, the addition of IPTV as a new television distribution platform brings the telcos deeper into the cable companies’ dominion. IPTV services accounted for 7.5% of the TV distribution market in 2012 (the CRTC’s Communication Monitoring Report publishes a slightly lower number at 6.7%, p. 110 for reasons explained above). The competitive threat posed by IPTV services, however, is more prominent in the western provinces where Telus, SaskTel and MTS are deploying IPTV in direct rivalry with Shaw versus the provinces from Ontario to the Atlantic where Bell’s decision to manage the introduction of IPTV in ways that are as least disruptive to its existing satellite operations as possible has moderated the impact on Rogers, Quebecor and Cogeco.

While the telcos’ IPTV services appear to have cut into the revenues of some cable companies, they have also contributed to a substantial expansion of BDU revenues from $8.1 billion in 2010 to $8.7 billion last year. Growth in 2012, however, was slow. Against the hew and cry about cord-cutting in industry pleadings for regulatory favours, and in so much of the journalistic coverage that uncritically repeats such claims, the losses of a few incumbent cable providers should not be mistaken with an industry in peril. Even if it was, growing competition is to be encouraged rather than something to shed tears over.

While IPTV services finally appear to be taking off, we must remember several things. First, the small prairie telcos, followed by Telus, have taken the lead in deploying IPTV. For Sasktel, MTS and Telus, IPTV now make up a significant 13.9 percent, 6.6 percent and 5.9 percent, respectively, of their revenues from wireline network access services (Wiredline + ISP + Cable). Bell lags far behind, with 1.5 percent of its revenues coming from IPTV services, including Bell Aliant, in 2012 (see Table 5).

Indeed, Bell launched IPTV late via its affiliate Bell Aliant in 2009. It slowly rolled out service for the next two years in the high-end districts of Montreal and Toronto, half-a-decade after MTS and SaskTel began doing so in the prairies. More cities were added in 2012 and subscriber numbers for the Bell Fibe service grew as a result from just under 120,000 the year before to about 356,000.

Innovation and investment in Canada came first from small telcos on the margins and Telus, not Bell. This replays a long-standing practice for new services to start out as luxuries for the rich before a mixture of public, political and competitive pressures turn them into affordable and available necessities for the public generally (see Richard John with respect to the US, Robert Babe for Canada). From the telegraph to next generation fibre Internet infrastructure, the tendencies, conflicts and lessons have remained much the same. The wireless wars that are now in full-swing are just the latest iteration of an old, old story (Winseck ReconvergenceWinseck and PikeJohn or Babe).

IPTV remains under-developed as a critical part of the network infrastructure in Canada, accounting for only 2 percent of the $32.2 billion in wire line network access revenues (i.e. wireline+BDUs+ISPs) (see Table 3 above). Less than two percent of broadband connections in Canada use fiber-to-the-home (see CMR, p. 142). The OECD average is 15 percent. In countries at the high end of the scale (Sweden, Slovak Rep., Korea, Japan), thirty to sixty percent of all broadband connections are fiber-based. The OECD ranks Canada 24 out of 34 countries in terms of fiber-connections out of the total number of subscribers as of December 2012. The following figure illustrates the point.

Figure 2: Percentage of Fibre Connections Out of Total Broadband Subscriptions (December 2012)

Figure 2: Percentage of Fibre Connections Out of Total Broadband Subscriptions (December 2012)

Source: OECD (2013). Broadband Portal.

For those who might be dismissive of such figures, it is useful to remember that the data presented in Tables 4 and 5 about IPTV are based on the Canadian telcos’ own audited numbers from their annual reports. While it has become something of a sport in Canada to cast aspersions on the OECD data (see herehere and here), the UK regulator Ofcom comes to similar conclusions: 5% of Canadian households subscribed to IPTV in 2011 versus France (28%), the Netherlands and Sweden (11%), Germany and the US (6%) and Spain (4%) as of 2011 (p. 136). The prairie telcos and Telus are part way to the OECD average, but in many ways, especially given its size and presence from Ontario to the Atlantic, it is Bell’s poor performance over the past half-decade that has dragged Canada down in the global league tables.

The Content Media Industries

The remainder of this post looks at the content media industries (broadcast tv, specialty and pay tv, radio, newspapers, magazines, music and internet advertising). For the most part, they too have grown substantially, although the picture has become murkier for a few sectors in the past few years.

In 1984, total revenue for the content industries was $5.6 billion; in 2012, it was $20.8 billion in 2012. In inflation-adjusted dollars, the revenues basically doubled from $11.3 billion to $20.8 billion over this span of time. Growth was steady throughout this period, with no discernible major uptick or downturn at any given point in time except for the years between 2008 and 2010, for reasons discussed above. Figure 3 depicts the trends.

Figure 3: Revenues for the Content Industries, 1984 – 2012 (Millions $)
Content Media Industries, 1984-2012

Sources: Media Economy DataSources and Explanatory Notes and the CMCR Project’s Methodology Primary.

The rise of the internet and the confluence of its impact with the advertising downturn after the Anglo European financial crisis led many to claim that conventional TV is in a death spiral. Over-the-top services such as Netflix and supposedly rampant cord-cutting further compound the woes, or at least so the story goes.

Such doomsday scenarios, however, have been wide of their mark. Advertising revenue has gyrated in lockstep with state of the economy: plummeting by 8.5% from 2008 to 2009 followed by substantial increases of 9.2% and 7.7% in 2011. Things, however, stalled in 2012 amid ongoing economic uncertainty (-2%), fitting the patterns described earlier perfectly (on economic recessions, advertising revenue and the media economy see PicardGarnham or Miege).

Beyond advertising, the picture is clearer. The amount of time people watch television has stayed remarkably steady across all age groups and outstrips time with other media — the internet, radio, newspapers or other media – by a considerable margin, according to the most recent Canadian Media Usage Study. Ofcom’s latest international monitoring report shows that TV viewing was up in 13 of the 16 countries it surveyed, including Canada (p. 162).

In “Why the Internet Won’t Kill TV”, Sanford C. Bernstein & Co. senior analyst Todd Juenger writes, “so far teens are following historical patterns, and in fact, their usage of traditional TV is increasing”. Their use of computers, smart phones and tablets to do so is adding to, rather than taking away from, how much they watch television, he states.

Internet equipment manufacturers Cisco and Sandvine suggest that television and online video are driving the evolution and architecture of the internet. The proliferation of devices is expanding the time and space for television in people’s lives, not taking away from it. Elsewhere, I have called this the rise of the prime time internet. The fact that Netflix is engineered to be viewed on 800 devices helps illustrate the point.(2)

Conventional broadcast TV revenues have been basically flat since 2008. In real dollar terms, they have slid from $3,562 million to $3,407 in 2012 – a 4% decline. The real growth has been in subscriber fees and the pay-per model of TV (Mosco), as has been the case around the world – a point returned to immediately below.

For now, however, four points can be highlighted to explain the stalled growth of conventional TV when measured in current dollars or slight decline when ‘real dollars’ are used:

  1. dip in TV advertising in 2012;
  2. budget cuts to the CBC (p. 8);
  3. the phasing out of the LPIF between 2012 and 2014;
  4. the big four commercial TV providers – Shaw, Bell, Rogers and Quebecor –backing of the rapidly growing pay, specialty and other subscriber-based forms of TV (i.e. mobile, IPTV), while edging away from broadcast TV (see the CRTC’s CMR, pp. 100-102 and Individual Financial Summaries for a list of the 116 pay and specialty channels the big four, in total, own 2012).

That the TV in crises choir is wide of the mark is clearer yet once we widen the lens to look at the fastest growing areas of television: i.e. specialty and pay tv services (HBO, TSN, Comedy Central, Food Network, etc), mobile TV, and television distribution. Pay and specialty television services have been fast growing segments since the mid-1990s and especially so during the past decade. Their revenues eclipsed those of conventional broadcasting in 2010, when revenues reached $3,474.6 million. Last year, that figure was half-a-billion dollars higher at $3,967.5 million.

Adding conventional as well as specialty and pay tv services together to get a sense of ‘total television’ revenue as a whole yields an unmistakable picture: total TV revenues quadrupled from $1,842 million in 1984 to $7,375 million in 2012; using ‘real dollars’, total TV revenues doubled from $3.7 billion to $7.4 billion last year — hardly the image of a media sector in crisis. The fact that such trends persisted steadfast in the face of the economic downturn also points to a crucial point: the importance of the direct pay-per model (Mosco) and its relative imperviousness to economic shocks in comparison to the hyper-twitchy character of advertising revenue.

Add cable, satellite and IPTV distribution and the trend is more undeniable. In these domains, as indicated earlier, the addition of new services, first DTH in the 1990s, followed by IPTV in the past few years, plus steady growth in cable TV, means that TV distribution has grown immensely. Indeed, revenues for these sectors expanded twelve-fold from $716.3 million in 1984 to $8,695.7 million in 2012 (in current dollars).

“Total TV” and TV distribution revenues accounted for just over $16.1 billion in 2012. To put this another way, in 1984, all segments of the TV industry accounted for just 7% of revenues in the network media economy. That figure rose to 14% in 2000; by 2012, it was 22%. Table 6 illustrates the trends.

Table 6: Television Moves to the Centre of the Network Media Universe, 1984 – 2012 (millions current $)

Television Moves to the Centre1Sources: see Media Economy DataSources and Explanatory Notes and the CMCR Project’s Methodology Primary.

Television is not dead or dying. It is thriving, and remains at the core of the internet- and wireless-centric media universe. Moreover, television and online video are driving the development and use of wireless and internet services. This is why Rogers, Telus and Bell are all using television to drive the take-up of 4G wireless services, and IPTV for the latter two. To paraphrase Mark Twain, rumors of television’s demise are greatly exaggerated.

Of course, this does not mean that that life is easy for those in the television business. Indeed, all of these sectors continue to have to come to terms with an environment that is becoming structurally more differentiated because of new media, notably IPTV and over-the-top (OTT) services such as Netflix, as well as significant changes in how people use the multiplying media at their disposal.

While incumbent television providers have leaned heavily on the CRTC and Parliament to change the rules to bring OTT services into the regulatory fold, or to weaken the rules governing their own services (see Bell’s submission in its bid to take over Astral Media, for a recent example, notably p. 22), OTT services have not cannibalized the revenues of the industry. They have added to the size of the pie. Based on an estimated 1.6 million subscribers at the end of 2012, Netflix’s Canadian revenues were an estimated $134 million – about 1.8 percent of “Total TV” revenues. Reports by Media Technology Monitor and CBC as well as the CRTC’s (2011) Results of the Fact Finding Exercise on Over-the-Top Programming Services lead to a similar conclusion.

Part of the more structurally differentiated network media economy is also illustrated by the rapid growth of internet advertising. In 2012, internet advertising revenue grew to $3.1 billion, up from just over $2.7 billion a year earlier and $1.6 billion in 2008. At the beginning of the decade, internet advertising accounted for a comparably paltry $110 million, but has shot upwards since to reach current levels. Similar to wireless services, however, internet advertising revenues continue to grow fast, although even here the pace has slowed appreciably since the onset of the Euro American financial crisis.

To be sure, these trends have given rise to important new actors on the media scene in Canada, notably Google and Facebook, among others, who account for the lion’s share of internet advertising revenues. Indeed, based on common estimates that Google takes about half of all internet advertising revenues, the search engine giant’s revenues in Canada in 2012 were in the neighbourhood of $1,542.5 million.(3) This is significant. It is enough to rank Google as the eighth largest media company operating in Canada, just after the CBC and MTS, but ahead of, in rank order: Cogeco, Torstar, Sasktel Postmedia, Astral, Eastlink, Power Corporation (Gesca) and the Globe and Mail.

For its part, Facebook had an estimated 18.1 million users in Canada at the end of 2012. With each Canadian user worth about $12.70 to the company a year, it’s revenue can be estimated as having been $229.7 million in 2012, or 7.5% of online advertising revenue – an amount that gives it a modest place in the media economy in Canada and near the bottom of the list of the top twenty TMI companies in this country.

While it is commonplace to throw digital media giants into the mix of woes that are, erroneously, trotted out as bedeviling many of the traditional media in Canada, the fact of the matter is that Netflix’s impact on television revenues is negligible, while those of Google and Facebook are mostly irrelevant except for three areas where they are likely quite significant: music, magazines and newspapers.  For the latter two, this is because of the direct impact on advertising revenues, while for music it is not advertising that is at issue, but how online distribution and the culture of linking is affecting the music industry. The following and concluding sections of this post sketch out trends in each of these domains.

Music

While many have held up the music industry as a poster child of the woes besetting ‘traditional media’ at the hands of digital media, the music industry in Canada is not in crisis. The picture over time, however, is mixed but getting better from a commercial standpoint.

Using current dollars, the sum of all of the main components of the music industry – i.e. recorded music, digital sales, concerts and publishing royalties – the music industry has grown modestly from $1,214 million in 1998 to $1,523.2 million in 2012. The current trend is slightly up, but the trend over the past decade-and-a-half has been unsteady, with considerable oscillation between record highs and contemporary lows.

Revenue dropped after the collapse of the dot.com bubble between 2000 and 2002, for instance, but then rose again until hitting a peak in 2004 of $1,379.3 million where they stayed flat for the next four years, when they began once again to climb. By 2010, music industry revenues had grown to $1,458.2 million; they have edged upwards from there ever since: to $1,480.4 million in 2011 and to $1,523.2 million last year – an all time high. Figure 4 illustrates the trends over time based on current dollars.

Figure 4: Total Music Revenues, 2000, 2006 & 2012 (millions$)

Music Industry Revenues in Canada (2000)

Music Industry Revenues in Canada (2006)

Music Industry Revenues in Canada (2012)

Sources: Recorded Music from Statistics Canada, Sound Recording and Music Publishing, Summary Statistics CANSIM TABLE 361-0005; Stats Can., Sound Recording: data tables, October 2005, catalogue no. 87F0008XIE; Stats Can, Sound Recording and Music Publishing, Cat. 87F0008X, 2009; except for 2012, from PriceWaterhouseCooper,  Global Media and Entertainment Outlook, 13th ed., 2012; Concerts from Stats Can, Spectator sports, event promoters, agents, managers, and artists for 2007, 2008, and 2009; Publishing from Socan,  Financial Report (various years); Internet from PriceWaterhouseCooper, Global Media and Entertainment Outlook, 13th ed (various yrs).

The picture is less rosy when we switch the metric to ‘real dollars’, which results in revenues reaching a high of $1.6 billion in 2004 before dropping to their lowest point in over a decade: $1, 455 million in 2008. Yet, since then, revenues have once again been on the rise and in 2012 reached $1523.2 million – less that 4% off their peak in 2004.

This is a slight decline since the all-time high in 2004, of course, but certainly not a calamity. Moreover, the trend from 2008, whether measured in current or real dollars is all in one direction: up! One reason for this might be because of all the media covered by the network media concept, the music industries embraced digital/internet sources of revenue earlier and more extensively than any other. Worldwide, by 2012, the industry obtained about 15% of its revenues from online, mobile and digital sources.

There is and has been no crisis in the music industry. In fact, conditions in Canada now mirror those in the music industry worldwide. To be sure, certain elements within the music industry – recorded music, for instance – have suffered badly, but publishing has plugged steadily along with modest increases and digital/online/mobile have exploded. Even recorded music now appears to be holding steady. Moreover, whereas recorded music has long been the centre of the industry that place has now been usurped by live concerts, as shown above. Even the music industry’s main lobby group, the International Federation of Phonographic Industries states in its most recent Digital Music Report that in 2012 “the music industry achieved its best year-on-year performance since 1998” (p. 5).

Radio

Radio stands in a similar position to the music industries a few years ago. Revenues grew until reaching a peak in 2008: $1,990 million (includes CBC annual appropriation), a level at which they have basically remained ever since. Revenues in 2012 were $1,946 (current dollars). Change the measurement from current dollars to inflation-adjusted, real dollars, however, and the picture changes, with revenue declining from $2,088.3 million in 2008 to $1,946 million in 2012 – a fall of 6.8%.

Magazines

Magazines appear to stand in the same position as the music and radio sectors as well, although I have not been able to update my revenue data for the sector for either 2011 or 2012. Yet, extrapolating from trends between 2008 and 2010 to obtain an estimate for 2012, revenues have declined slightly on the basis of current dollars (from 2,394 million in 2008 to $2,100 in 2012). PriceWaterhouseCooper, in contrast, shows a slight uptick in revenues between 2011 and 2012. Back to estimates using Statistics Canada and the drop of nearly 17 percent from $2,522.4 million in 2008 to $2,071.1 last year seems pronounced.  The Internet Advertising Bureau shows a net drop in advertising between 2011 and 2012 of 3%. In other words, the evidence is mixed but leans toward the ‘media in decline’ side of the ledger.

Newspapers

Perhaps the most dramatic tale of doom and gloom within the network media economy, at least in terms of revenues, is from the experience of newspapers. Readers of this blog will know that in earlier versions of this post, and other posts, I have been skeptical of claims that journalism is in crisis. I still am. Generally, I agree with Yochai Benkler who argues that that we are in a period of heightened flux, but with the emergence of a new crop of commercial internet-based members of the press (the Tyee and Huffington Post, for example), the revival of the partisan press (e.g. Blogging Tories, Rabble.ca) as well as non-profits and cooperatives (e.g. the Dominion) and the rise of an important role for citizen journalists signs that journalism is not moribund or in a death spiral. In fact, these changes may herald a huge opportunity to improve the conditions of a free and responsible press.

At the same time, however, I also believe that traditional newspapers, whether the Globe and Mail, the Toronto Star or Ottawa Citizen are important engines in the network media economy, serving as the content factories that produce news, opinion, gossip and cultural style markers that have the ability to set the agenda and whose stories cascade across the media in a way that is all out of proportion to the weight of the press in the media economy. In other words, the press originates far more stories and attention that the rest of the media pick up, whether television, radio or via the linking culture of the blogosphere, than its weight suggests. Thus, problems in the traditional press could pose significant problems for the media, citizens and audiences as a whole.

While I have been reluctant to see newspapers as being in crisis, mostly because in previous years I have felt that the trends had not been long enough in the making to draw that conclusion. I also believe that many of the wounds suffered by the newspaper business have been self-inflicted out of a mixture of hubris and badly conceived bouts of consolidation. Nonetheless, I began to change my tune last year and the results this year offer no reason to change course now.

The revenue figures for the newspaper industry, as one industry insider who tallies up the data told me, are  “a mess”. The problems are mostly terminological in nature, such as how to define a daily, community or weekly newspaper while allocating revenue to each category accordingly. They also reflect concerns with how to present the industry in the least damaging light but without sugar-coating harsh realities. That said, using a mixture of data from Newspaper Canada and Statistics Canada allows us to arrive at good portrait of the newspaper industry over time and its main players, although it’s also important to point out that the Statistics Canada data for 2011 and 2012 are preliminary estimates that must wait until next year when it releases newspaper industry revenues for these years.

The data I use is drawn mostly from Statistics Canada, but Table 7 below shows both Newspaper Canada and Statistics Canada data so that readers can see the difference and also to reveal online revenues. Further discussion of why these differences exist can be seen in the relevant sections of the documents here and here.

Regardless of differences, both sources show that newspaper revenues have plummeted. In current dollar terms, Statistics Canada shows that newspaper revenues peaked at $5,482.3 million in 2008, and have fallen substantially since to an estimated $4,978 million last year. They fell another $180.7 million in 2012 – 3.6% — a decline of 12.5% since 2008. Table 7 illustrates the trends over time since 2004, while the full data set based on Statistics Canada data from 1984 can be seen under the relevant heading here.

Table 7: Newspaper Revenue — Newspapers Canada vs Statistics Canada, 2004-2012

($ million CND) 2004 2008 2009 2010 2011

2012

Daily Newspaper (Adv$)

2,611

2,489

2,030 2,102 1,971

2,019

Daily Newspaper (Circ$)

745.1

808.3

867.2 836.9 829.5

829.5

Community Newspaper ((Adv$)

961

1,211

1,186 1,143 1,167

1,253

Community Newspaper (Circ$)

Total

42.6 42.9

42.9p

Online Newspaper*

180.7

212.7 246.0 289.3

277.3

Newspaper Canada

4,317

4,689

4,509 4,616 4,589

4,422

Statistics Canada Total $

5033.9

5482.3

4,938.5 5009.8 4978.5

4797.8

Sources: see Media Economy DataSources and Explanatory Notes and the CMCR Project’s Methodology Primary. Online Newspaper revenues includes daily and community papers. 2012 data for Community Newspaper circulation revenue based on estimate of flat year-over-year growth.

In real dollar terms, the fall is more pronounced, with the decline setting in earlier and the drop being steeper. According to this measure, newspaper revenues basically flatlined between 2000 and 2008, with a small drop, but have shrunk greatly since by just under $1 billion – or 17%. This is the most clear cut case of a medium in decline out of the sectors of the network media economy reviewed in this post.

The results of these trends in 2012 were clear:

  • Postmedia cut the Sunday edition at three of its papers (the Calgary HeraldEdmonton Journal and Ottawa Citizen) adding to those where such measures had already been taken in the past few years (e.g. the National Post);
  • Postmedia also made deep cuts to journalistic staff across its chain;
  • the Globe and Mail adopted a voluntary program with the hope that sixty of its journalists would take the hint and leave (and here);
  • Quebecor’s Sun newspapers cut 500 jobs and centralized its printing operations in a smaller number of locations;
  • Glacier and Black swapped a number of smaller papers to consolidate their own operations.

Perhaps the most significant change to take place in 2012 is the extent to which dailies were put behind paywalls in Canada. Prior to 2011 there were no dailies with paywalls; in 2011 there were 5 covering under 1/5th of daily circulation; by 2012 the number had grown to 11 dailies and more than half of daily circulation. By August 2013, the number had grown 26 dailies accounting for more than two-thirds of daily circulation – a rate that is considerably higher than either the US or the UK (see Picard and Toughill). Table 8 illustrates the point.

Table 8: The Rise of the Great Paywalls of Canadian Newspapers, 2011-2013

Newspaper Lang Paywall Owner

Weekly Total

Daily Avg.

Times Colonist, Victoria English May 2011 Glacier Media

168,003

28,000

Daily Gleaner, Fredericton English Nov 2011 Brunswick News Inc.

33,042

5,507

Times-Transcript, Moncton English Nov 2011 Brunswick News Inc.

1,813,141

302,190

New Brunswick Telegraph Journal English Nov 2011 Brunswick News Inc.

1,017,394

169,566

Gazette Montreal English May 2011 Postmedia

288,639

48,107

% Circ behind Paywall (2011)

17.9

19.2

Vancouver Sun English Aug 2012 Postmedia

103,106

17,184

Province, Vancouver English Aug 2012 Postmedia

184,485

30,747

Ottawa Citizen* English Aug 2012 Postmedia

313,017

52,169

Journal de Montréal French Sept 2012 Quebecor/Sun Media

987,040

164,507

Journal de Québec French Sept 2012 Quebecor/Sun Media

853,800

142,300

Globe and Mail English Oct 2012 Globemedia Inc.

1,184,530

169,219

Ottawa Sun English Dec 2012 Quebecor/Sun Media

106,343

17,724

Toronto Sun English Dec 2012 Quebecor/Sun Media

683,327

113,888

Winnipeg Sun English Dec 2012 Quebecor/Sun Media

764,473

109,210

Calgary Sun English Dec 2012 Quebecor/Sun Media

853,800

142,300

Edmonton Sun English Dec 2012 Quebecor/Sun Media

358,018

51,145

% of Circ behind Paywall (2012)

52.3

54.4

National Post English May 2013 Postmedia

2,503,284

357,612

Calgary Herald English May 2013 Postmedia

987,040

164,507

Edmonton Journal English May 2013 Postmedia

337,021

56,170

Windsor Star English May 2013 Postmedia

1,015,625

145,089

Guardian, Charlottetown English May 2013 TC Media

249,589

41,598

Leader-Post, Regina English May 2013 Postmedia

337,021

56,170

StarPhoenix, Saskatoon English May 2013 Postmedia

358,018

51,145

The Daily News, Truro English July 2013 TC Media

290,101

41,443

Toronto Star English Aug 2013 Torstar Corporation

2,014,592

287,799

Chronicle-Herald, Halifax English Aug 2013 Halifax Herald Ltd.

770,132

110,019

Total Circulation

18,574,648

2,875,390

% of Circ behind Paywall (8/2013)

68.8

68.3

Source: Newspaper Canada 2012 Daily Circulation Report.

Some Concluding Comments and Observations

Several observations and conclusions stand out from this analysis.

First, the network media economy has grown immensely over time, whether we look at things in the short-, medium- or long-term. In the short- to medium-term (1-5 years), however, things have been less rosy. The effects of the economic downturn in the wake of the Euro-American centred financial crisis have hit every sector, except, it would appear, and ironically, music, which began to recover shortly afterwards. Otherwise, the effect has been to slow the rate of growth in the fastest growing sectors (wireless, ISPs, internet advertising, television) and to compound the problem in those media already under stress (newspapers, magazines and radio).

Second, while the network media economy in Canada may be small relative to the U.S., it is large relative to global standards. In fact, it is the tenth biggest media economy in the world.

Third, while most sectors of the media have grown substantially, and the network media economy has become structurally more complex on account of the rise of new segments of the media, a few segments have stagnated in the past few years (broadcast TV, radio and music, with apparent light at the end of the tunnel in the last few years with respect to the latter). It is now safe to say that two sectors appear to be in long-term decline: the traditional newspaper industry and wiredline telecoms.  Magazines probably fit the latter designation but it may still be too early to tell, with some good sources suggesting that it too, like the music sector, might be poised for a turn-around.

These ambiguities give good reason for why the CMCR project will continue to update our research on these matters annually. As we have said before, we can know of few better ways to gain an intimate understanding of our objects of analysis – the network media and all of its constituent elements – than to peer deeply and systematically into the data, while providing a theoretically and historically informed analysis of the data and trends that emerge over as long a period of time as we reasonably can.


1 Brazil telecom estimated at 12.5 percent growth from 2004 to 2008, and 5 percent per annum for 2010 through 201; China’s revenue estimated for 2010-2012 based http://www.cmcrp.org/wp-content/uploads/2013/10/Sources-and-Explanatory-Notes.docxon 10 percent per annum growth rates. Internet access revenues before 2004 are estimated for each country, except Australia and Canada, based on the prevailing CAGR for this sector within each country at the time.

2 Corey Wright, Director of Global Public Policy, Netflix, guest lecture given at School of Journalism and Communication, Carleton University, September 2013.

3 The Globe and Mail’s publisher, Phillip Crawley told the World Publishing Expo in Berlin that Google takes 60% of internet advertising in Canada. Evidence for this claim do not seem to have been presented, but I am all ears if a good case can be made for revising the estimates upwards to this figure.

CMCR Project 2012 Data Release: Concentration Trends in the Telecom-Media-Internet Industries in Canada, Part 1

Highlights (original posted to Canadian Media Concentration Research Project website)

The CMCR analyzed the financial results for Canada’s biggest TV providersradio broadcastersspecialty, pay and video-on-demand services as well as cable, satellite TV and IPTV providers released by the CRTC in early April. Our analysis shows that concentration levels in 2012 remained high in all areas, except radio.

Using two standard research tools to assess media concentration – concentration ratios and the Herfindahl-Hirschman Index (HHI) — our analysis shows that:

  1. Concentration levels for all of the industry segments for which the CRTC released data, except radio, remained high in 2012;
  2. However, such levels eased slightly in all segments addressed relative to 2011, except for specialty and pay TV services.

You can access all of our raw data not just for 2012, but from 1984 onwards here.

Discussion

Coupled with the annual reports of publicly-traded companies, the CRTC’s 2012 data allows us to construct a fairly comprehensive portrait of the current state of telecom, media and internet concentration in Canada.[1]

While concentration levels remain at the high end of the spectrum according to both the CR and HHI measures, and by international standards, there was a slight uptick in competition in four out of the five areas covered by the CRTC’s data for 2012:

  • In the $3.5 billion conventional TV sector, the CR4 declined from 87% to 83%, while the HHI score dipped slightly from 1966 to 1943. The decline is likely due to the fact that Bell and Shaw saw small declines in their revenues and market share, while two mid-size TV stations that were formerly a part of Canwest have continued to carve out a spot for themselves: the employee-owned CHEK TV in Victoria and Channel Zero’s CHCH in Hamilton.
  • A small dip could also be seen in the $7.5 billion total TV segment (an amalgam of conventional TV with specialty and pay TV), where the market share held by the big four — Bell, Shaw (Corus), Rogers and Quebecor — declined from 79% to 77%, with a corresponding decline in the HHI score as well.
  • Trends for the $8.7 billion cable, DTH and IPTV pointed in a similar direction, with the big four’s share declining modestly from 83 percent to 81 percent, largely due to the growth of Telus, MTS and Sasktel’s IPTV services in western Canada and Bell’s IPTV offering in Ontario and Atlantic provinces.
  • Finally, the $2 billion radio industry continued its long-term downward drift, with the CR4 sliding from 55.5% to 53.4%.

Concentration levels in the $4 billion Pay and Specialty TV services – the fastest growing and most lucrative segment of the TV industry – stayed steady at the high end of the CR4 (81.6%) and HHI (1905) scales. This is likely due to the fact that the growth of newcomers such as Blue Ant and Channel Zero was offset by a rise in Bell’s share of pay and specialty TV services, largely because of the substantial increase in revenue at its English and French-language sports channels, TSN and RDS, respectively.

The preliminary analysis offered thus far is important because the CRTC released the 2012 data in early April, just days after its deadline for submissions regarding BCE’s renewed bid to acquire Astral Media. As a result, none of the interveners was able to include it in their formal, written submissions to the public hearings that took place last week, except for Bell.

Bell filed an updated analysis based on the 2012 data with the CRTC in its Reply to interveners on April 16. In doing so, it used the new data to repeat and buttress its rejection of critics’ claims that the deal gives Bell too much market power:

. . . close review and analysis of the post-divestiture Bell-Astral in each of the English and French television markets – regardless of the metric employed – proves otherwise (Bell Reply, para 46).

Consequently, Bell asserted, there are no barriers from the standpoint of media concentration that should stand in the way of the CRTC approving the deal (Bell Reply, 2013, pp. 4, 11 – 20; also see the report Bell submitted from its consultant, CMI here, Appendix 3, or here). With today’s release of the CMCR data, readers can examine the evidence for themselves and draw their own conclusions.

Regardless of whether you agree with Bell’s view of the world or not, the fact that Bell and nobody else could update the public record for the Bell-Astral hearings using 2012 evidence is deeply troubling. I will have more to say about these issues in a series of upcoming posts. However, as the Commission settles in to make its decision on the Bell-Astral transaction, the public should have as much access as possible to the evidence upon which key elements of the decision will turn.

The CMCR project does not just present the relevant data company by company, or on the basis of ‘before’ and ‘after’ snapshots to gauge, for instance, the one-off impact of the Bell-Astral transaction on Bell’s stand-alone share of the TV market. Instead, our analysis of the 2012 data relies on two fundamental tenets of good scholarship on media concentration:

(1)  a long-term focus on concentration trends over a 28-year span from 1984 to 2012;

(2)  using two standard research tools to examine the structure of media markets rather than changes in the stand-alone market shares of individual media firms: Concentration Ratios and the Herfindahl-Hirschman Index (HHI).

These research methods are essential because snapshots of just one or two media sectors or firms are often selectively used to make unwarranted generalizations about the larger media ecology. Moreover, ‘before’ and ‘after’ snapshots fail to capture dynamic trends over time. These are precisely the kinds of commonly used techniques that serve to muddy the waters, and that sound methodology in media concentration research is explicitly designed to counteract (Noam, 2009, chs. 1-3IMCR, ndCMCR, 2012).

Analysis of the 2012 data also reconfirms the existence of a fundamental problem in the CRTC’s data for pay and specialty TV: key aspects of it cannot be reconciled with the results found in the audited annual reports of several companies covered by the Commission’s data sets. Tallying up the CRTC’s data for Astral, for example, yields a figure of $540.9 million, while the company’s Annual Information Form indicates a figure of $562 million, after the revenues from its two conventional TV stations, in-house advertising and online segments are excluded (see p. 8 and PWC, 2012, pp. 45, 52 and PWC, 2013, p. 60).

Nor is the Astral example an anomaly, as I will show in a subsequent post. This is not a view that we reached lightly but only after lengthy discussions with a Commission analyst well acquainted with the Individual Pay, Pay-per view, Video-on-Demand and Specialty Services Financial Summaries being referred to.

We hope readers will find our analysis of the 2012 data helpful in relation to other matters, as well. In the next week we will also release our analysis of the 2012 data for vertical integration between cable, satellite and IPTV distributors (BDUs) and TV and radio broadcasters in English- and French-language markets, and for Canada as a whole.

Our analysis will also be updated as new data becomes available for the remaining telecom, media and internet industries covered by the CMCR project: wireless and wired telecoms, Internet access, search engines, music, newspapers and magazines.


[1] The CRTC released total revenue figures for pay and specialty TV and broadcast distribution services; it did not do so for conventional TV or radio. To estimate revenues for these two sectors, we used last year’s cumulative annual growth rates cited in the Communications Monitoring Report, while checking that figure against other quality sources such as PriceWaterhouseCoopers’ (2012) Global Entertainment and Media Outlook, 2012 – 2016 to help ensure the reliability of our estimate.

The Growth of the Network Media Economy in Canada, 1984 – 2011

Has the media economy in Canada become bigger or smaller over time? Which sectors are growing, which are stagnating and which are in decline? These are the questions addressed by this post.

To answer these questions, I will examine the following key sectors of the network media economy: wired line & wireless telecoms; broadcast TV; subscription and pay TV; cable, satellite & IPTV distribution; newspapers; magazines; radio; music; Internet access and internet advertising? I will also hone in on rising new segments (IPTV) and others that appear to be in long-term decline (newspapers). I will also examine whether the media economy in Canada is big or small relative to global standards.

The post kicks-off a three part series that I’ll unfold over the next few weeks. Similar to what I did last year, the next post will examine telecom, media and internet (TMI) concentration, while the third will look at who owns the leading telecom-media-internet TMI companies in Canada. The goal is to offer an empirically and theoretically-grounded, and historically informed, portrait of the development and current trends in the network media economy over the period from 1984 until 2011.

Canada’s Network Media Economy in a Global Context

While often cast as a dwarf amongst giants, the network media economy in Canada is in fact the ninth largest in the world, with revenues of just over $35 billion in 2011 (excluding wired and wireless telecoms). The media economy in Canada has also grown fast relative to other media economies. The twelve largest national media economies worldwide and their development over time are depicted in Table 1 below.

Table 1: Canada’s Ranking Amongst 12 Biggest Network Media, Entertainment and Internet Markets by Country, 2000 – 2011 (millions USD) [i]

 

The media economy in Canada is obviously small relative to the U.S., at one-tenth the size, but amongst the twelve biggest media economies in the world, as the above table shows, falling right after Brazil and just before Australia, South Korea and Spain. The media economy in Canada, like those in Germany, the UK, and Australia, largely stagnated for two years following on the heels of the Anglo European financial crisis (2007ff), but for the most part things have turned around since 2010. In contrast, media economies in the U.S., Japan, Italy and Spain actually shrunk during this time before once again picking up in 2010, except in Japan and Spain. Overall, the network media economy in Canada has fared well during the economic downturn years.

In sharp contrast to much of Europe and North America, the media economies of China, Brazil and South Korea continued to grow at a fast pace. Indeed, the media economies in these countries and a few others such as Turkey and Russia have been going through something of a ‘golden media age’, with most media, from internet access, to the press, television, film and so on undergoing an unprecedented and extended period of fast-paced development (OECD, 2010).

The Network Media Economy in Canada: Growth, Stagnation or Decline?

Turning our attention solely to Canada, the figure below shows that the network media economy has grown enormously over the past few decades, from $19.4 billion in 1984 to nearly $71 billion in 2011 (current $). In inflation-adjusted dollars, the network media economy grew from $37.5 billion in 1984 to just under $70 billion last year (2010$). The figure below charts the trends (you can access the underlying data sets by clicking on the Media Industry Data tab at the Canadian Media Concentration Research Project).

Figure 1: The Growth of the Network Media Economy in Canada, 1984 – 2011 (Mill$ unadjusted for inflation)

Sources: see the CMCR Project’s methodology primary.

The vast expansion of the media economy has been driven by the addition of new media – wireless, internet access, pay and specialty tv services, internet advertising. The most significant source of growth is from the network connectivity elements (e.g. wireless, ISPs, IPTV, cable and satellite), especially after the mid-1990s.

The Network Connectivity Segments

The connectivity segments – the pipes, bandwidth and spectrum used to connect people to one another and to devices, content, the internet, and so forth — grew from $13.9 billion to $51.5 billion between 1984 and 2011. In real dollar terms, revenue grew from $26.8 billion to $50.5 billion. The following table shows the trends.

Table 2: Revenues for the Network Connectivity Industries, 1984 – 2011 (mill$)

Accounting for just under three-quarters of revenues across the media economy as a whole, the network connectivity sectors are the real fulcrum of the media economy in Canada, as is the case generally in most of the world. This is why Bell, Rogers, Shaw, Quebecor, Telus, SaskTel, MTS Allstream, Eastlink, Cogeco, etc. are so central to the media economy, to say nothing of the holdings that the biggest among them have in the media content sectors of the network media ecology.

While some might think that the over-sized weight of these sectors is of recent vintage, this is not true. In fact, the connectivity sectors’ share of the network media economy in 2011 was not even two percentage points more than twenty-seven years ago: 72.8 percent versus 71.2 percent, albeit within the context of a vastly larger media economy.

Why? One reason is TV, which is still very much at the centre of the network media universe (see below).

Not all network connectivity segments have grown and this is especially true of plain old wiredline telephone services. Wiredline telecom revenues peaked in 2000 at $21.2 billion and have fallen steadily ever since to reach $16.4 billion in 2011. The decline, as both figure 1 and the data in Table 2 above show, has been steep and unrelenting.

As plain old telephone services (POTS) has gone into decline, however, some pretty awesome new stuff (PANS) has come along to more than pick up the slack.  The best example is wireless cell phone services. Wireless revenues were $19.3 billion in 2011 – three-and-a-half times revenues at the beginning of the decade ($5.4 billion), and up significantly from $18 billion in 2010 and $16.2 billion in 2008. Unlike a few other areas (see below), wireless revenues did not suffer from the economic downtown either after the collapse of the dot.com bubble in 2000 or in the face of the Anglo-European financial crisis (2007ff).

Internet access displays similar patterns but for not as long or to the same extent. Internet access revenues last year were $7.2 billion, up substantially from $6.2 billion in 2008 and quadruple what they were at the turn-of-the-21st century ($1.8 billion).

The most notable development over the past year is the growth of Internet Protocol TV (IPTV) services, which are essentially the incumbent telcos’ managed internet-based tv services: e.g. Telus, Bell, MTS Allstream, SaskTel, and Bell Aliant.

IPTV services are often seen as important because the entry of the telcos into tv distribution promises more competition for incumbent cable companies and because IPTV is often associated with efforts to bring next generation, fiber-based internet networks closer to subscribers, either to their doorstep or nearby neighbourhood nodes. If the distribution of television is essential to the take-up of next generation networks, as I believe it is, then IPTV will be part of the demand drivers for these networks.

According to the CRTC, IPTV revenues were $322.3 million in 2011, up greatly from $207.8 million a year earlier and triple the amount of 2008.  The CRTC also states that there were 657,300 IPTV subscribers in 2011 versus 416,900 in 2010 and 225,000 in 2008. By any standard, this would appear to be impressive growth.

These numbers, however, still seem low.  For example, published data from Telus, MTS Allstream, SaskTel, and Bell Aliant show that they have substantially more subscribers than the CRTC identifies (775,000 vs 657,300), and this is without including Bell. Add another estimated 128,000 subscribers for Bell’s Montreal and Toronto-centric IPTV service and the number of subscribers rises to approximately 903,000. Table 3 below shows the trends in terms of subscribers.

Table 3: The Growth of IPTV Subscribers in Canada, 2004 – 2011[ii]

2004 2006 2008 2010 2011
Bell Fibe TV (1) 83,000 127,644
Bell Aliant (2)   49,000 77,000
Telus (3)  78,000 314,000 509,000
MTS Allstream (4) 32,578 66,093 84,544 89,967 95,476
SaskTel (5) 25800 51277 70463 85537 93,960
Total IPTV Connections 58,378.0 117,370  233,007 621,504 903,080

I explain some reasons for this large discrepancy in the endnote to Table 3 and will write another post to examine the issues more thoroughly. For now, however, I want to note that, not surprisingly, given that my estimate for subscribers is much higher than the CRTC’s, that my estimate for IPTV revenues is also much higher than the figure the Commission states. I estimate that IPTV revenues in 2011 were $650.6 million — more than four times the amount in 2008 ($142.7 million) — and up greatly from $423 million the previous year. Table 3 below illustrates the trends.

Table 4: The Growth of IPTV Revenues in Canada, 2004 – 2011 (mill$)[iii]

2004 2006 2008 2010 2011
Bell Fibe TV (1) 60.2 91.0
Bell Aliant (2) 33.6 54.9
Telus (3) 50.1 215.3 364.8
MTS Allstream (4) 10.8 32.2 50.6 59.0 71.5
SaskTel (5) 8.6 25 42 55.1 70.3
19.4 57.2 142.7 423.2 650.6

The growth of the IPTV services is significant for many reasons. First, it suggests that the telcos are finally making the investments needed to bring fiber networks closer to their subscribers, at least on a large enough scale that their efforts can be measured, despite being hemmed in by opaque reporting measures in some cases (Bell Aliant, Telus) and a complete lack of disclosure in others (Bell).

Second, the addition of IPTV as a new television distribution platform expands the size of the “BDU sector” (cable, satellite and IPTV), while bringing the telcos deeper into the cable companies’ dominion. By 2011, IPTV services accounted for 7.6 percent of the TV distribution market, based on my numbers, or 3.8 percent using CRTC data. I’ll address whether or not this has significantly increased competition and lessened concentration in the next post.

While IPTV services finally appear to be taking off, we must remember several things. First, it has been the small prairie telcos, followed by Telus, which have taken the lead in deploying IPTV. For Sasktel, Telus and MTSAllstream, IPTV revenues now make up a significant 11.9 percent, 8.5 percent and 6.6 percent, respectively, of their revenues from fixed network access services (Wiredline + ISP + Cable).

Bell lags far behind, with only 1.4 percent of its revenues coming from IPTV services, including Bell Aliant, in 2011. Indeed, Bell only launched IPTV via its affiliate Bell Aliant in 2009, before targeting high-end districts of Montreal and Toronto the next year, half-a-decade after MTS Allstream and SaskTel began doing so in the prairies.

In other words, innovation and investment is coming from small telcos on the margins and Telus, not Bell. This replays a long-standing practice in telecoms for new services to start out as luxuries for the rich and well-to-do before a mixture of public, political and competitive pressures turn them into affordable and available necessities for the masses. From the telegraph to fiber-based next generation Internet, the tendencies, conflicts and lessons have remained much the same.

Generally speaking, IPTV remains under-developed as a critical part of the network infrastructure in Canada, accounting for only 2 percent of the $32.2 billion in fixed network access revenues (see Table 2).  OECD data confirm the point, with Canada ranked 20 out of 29 countries in terms of fiber-based connections to the premises as a proportion of all broadband connections available.

In Canada, just over one percent of broadband connections use fiber, while the OECD average is 10 percent (similar to levels at Sasktel and Telus). In many ways, the poor performance of Bell over the past half-decade has dragged Canada down in the global league tables as a whole. In countries at the high end of the scale (Sweden, Slovak Rep., Korea, Japan), thirty to sixty-plus percent of all broadband connections are fiber-based. The following figure illustrates the point.

Source: OECD (2011a). Broadband Portal. www.oecd.org/…/0,3746,en_2649_34225_38690102_1_1_1_1,00.html.

The Network Content Industries

In the remainder of this post I will turn my attention to the content industries (broadcast tv, pay and specialty tv, radio, newspapers, magazines, music and internet advertising). For the most part, they too have grown substantially, although the picture has become more mixed than in the network connectivity sectors in the past few years.

In 1984, total revenue for the content industries was $5.6 billion; it was $19 billion in 2011. The growth overall appears to have been steady throughout this period, with no discernible major uptick or downturn at any given point in time. Table 4, below, depicts the trends.

Table 4: Revenues for the Content Industries, 1984 – 2011 (mill$)

Despite much hand-wringing to the contrary, television remains at the very centre of the increasingly internet-centric media environment. Indeed, this is true of all three of the main components of the television industries: conventional broadcast tv, specialty and pay tv services as well as the cable, satellite and IPTV services that underpin TV distribution for the vast majority of Canadians.

Many have argued that television is dying as audiences shrink and advertising revenues is diverted to the internet. Indeed, the dreaded “TV tax” (local programming improvement fund, or LPIF) was put into place by the CRTC in 2008 precisely on the basis of such arguments, before being rescinded by the regulator in 2012 and to be phased out completely by 2014. The rise of over-the-top services such as Netflix only further compounded the woes, so the story goes.

Yet, the evidence suggests that television is, for the most part, not struggling to survive but actually thriving. Broadcast television revenues did decline between 2008 and 2009, but only modestly, and were quickly restored and on the rise again by 2010. In 2008, broadcast TV revenues were roughly $3,381.4 million (including the CBC annual appropriation). They fell in 2009, but by 2010 had risen to $3,405.6 million. Revenues were just under $3,500 million last year.

Focusing solely on inflation-adjusted dollars changes the picture somewhat, but only slightly. Seen from this angle, broadcast television revenues were roughly $3,454.7 million in 2000, peaked at $3,518 million in 2005 and have drifted down slightly since, where they have stayed fairly steady around $3,400 million since 2008.

Small decline? Yes. But a calamity? Hardly.

That the TV in crises choir is wide of the mark becomes even clearer once we widen the lens to look at the fastest growing areas of television: i.e. specialty and pay tv services (HBO, TSN, Comedy Central, etc.) and television distribution. In terms of specialty and pay television services, these have been fast growing segments since the mid-1990s and especially so over the past decade. Specialty and pay-tv services eclipsed conventional broadcasting as the largest piece of the TV pie in 2010, when revenues reached $3,459.4 million. Last year, that figure grew to $3,732.1 million.

Adding both conventional as well as specialty and pay tv services together to get a sense of ‘total television’ revenues as a whole yields an unmistakable picture: with revenues of $7,224 million in 2011, television is not dead or dying. It is thriving.

TV remains at the centre of the internet-centric media universe and is growing fast. In fact, Total TV revenues quadrupled from $1.8 billion in 1984 to $7.2 billion in 2007; using ‘real dollars’, total TV revenues doubled from $3.5 billion in 1984 to just over $7 billion last year — hardly the image of a media sector in crisis.

Add to this, cable, satellite and IPTV distribution and the trend is more undeniable. In these domains, as indicated earlier, the addition of new services, first DTH in the 1990s, followed recently by IPTV, and steady growth in cable TV, means that TV distribution has grown immensely, in essence expanding ten-fold from revenues of $716.3 million in 1984 to $8,588.3 million in 2011 (in current dollars).

Altogether, adding “Total TV” and TV distribution revenues together, these segments of the network media industries accounted for just over $15.8 billion in 2011. As a matter of fact, the weight of all television segments in the network media economy has risen considerably over time, from accounting for 13.2 percent of all revenues in 1984, to 18.4 percent in 2000 and to 22.3 percent in 2011.

Of course, this does not mean that that life is easy for those in the television industries. Indeed, all of these sectors continue to have to come to terms with an environment that is becoming structurally more differentiated because of new media, notably IPTV and over-the-top (OTT) services such as Netflix, as well as significant changes in how people use the multiplying media at their disposal.

While incumbent television providers have leaned heavily on the CRTC and Parliament to change the rules to bring OTT services into the regulatory fold, or to weaken the rules governing their own services (see Bell’s submission in its bid to take over Astral Media, for a recent example), OTT services are still minor fixtures in the media economy. For example, based on roughly 1.2 million subscribers , Netflix’s annual revenues were an estimated $115 million in 2011 – about 1.6 percent of “Total TV” revenues.  Recent reports by Media Technology Monitor and the CBC as well as the CRTC’s (2011) Results of the Fact Finding Exercise on Over-the-Top Programming Services lead to a similar conclusion.

Part of the more structurally differentiated network media economy is also illustrated by the rapid growth of internet advertising. In 2011, internet advertising revenue grew to $2.6 billion, up from just over $2.2 billion a year earlier and $1.6 billion in 2008. At the beginning of the decade, internet advertising accounted for a comparably paltry $110 million, but has shot upwards since to reach current levels, demonstrating both fast growth as well as the fact that, like wireless services, internet advertising has not been significantly affected by downturns in the general economy.

To be sure, these trends have given rise to important new actors on the media scene in Canada, notably Google and Facebook, among others, who account for the lion’s share of internet advertising revenues. Indeed, based on common estimates of Google’s share of internet advertising revenues, the internet giant’s revenues in Canada in 2011 were in the neighbourhood of $1,300 million. This is indeed significant, enough to rank Google as the eighth largest media company operating in Canada by revenues, just after the CBC and SaskTel but ahead of Postmedia and MTS Allstream.

For its part, Facebook had an estimated 17.1 million users in Canada at the end of 2011. Based on estimated revenues of $9.51 per user, Facebook’s advertising revenue can be estimated at $162.6 million in 2011, or 6.3% of online advertising revenue – an amount that give it a modest place in the media economy in Canada but which would not put it even close to being on the list of the top twenty or so TMI companies in this country.

While it is commonplace to throw digital media giants into the mix of woes that are, erroneously, trotted out as bedeviling many of the traditional media such as television in Canada, the fact of the matter is that Netflix’s impact on television revenues is negligible, while those of Google and Facebook are mostly irrelevant.

Where they may be more important, however, is in three other areas where the portrait is not so rosy: music, magazines and newspapers.  With respect to music, it is not advertising that is at issue, but rather the manner in which online digital distribution, legal and illicit, as well the culture of linking is affecting the music industry. At some point I will write a full-length post on each of these sectors, but for now a simple sketch will have to do.

Music

While many have held up the music industry as a poster child of the woes besetting ‘traditional media’ at the hands of digital media, the music industry in Canada is not in crisis, although the picture is mixed. Using current dollars, the sum of all of the main components of the music industry – recorded music, digital sales, concerts and publishing royalties – the music industry grew from $1,181.9 million in 2000 to a high of $1,373.7 in 2008.

Music industry revenues across these four segments have generally stayed remarkably steady around the 2008 level, up to and including 2011, when revenues were $1357.7 million. There is no crisis.

The picture is a little more troubling, however, when we switch the metric to ‘real dollars’, which results in revenues reaching a high of $1.5 billion in 2004 and a decline from there to $1.316 billion last year — a significant decline, yes, but not a calamity, and with the trend clearly towards a floor being in place below which further declines in the future will be unlikely or very modest.

Radio

Radio stands in much the same position as the music industries. Revenues continued to grow until reaching a peak in 2008 of $1,990 (including CBC annual appropriation), a level at which they have stayed relatively flat since, with revenues of $1,949.5 in 2011 (current dollars). Change the measurement from current dollars to inflation-adjusted, real dollars, however, and the picture changes slightly, with a gradual decline from just over $2 billion in 2008 to roughly $1.9 billion in 2011.

Magazines

Magazines appear to stand in the same position as the music and radio sectors as well, although I have not been able to update my revenue data for the sector for 2011. Yet, extrapolating from trends between 2008 and 2010 to obtain an estimate for 2011, revenues have declined slightly on the basis of current dollars (from 2,394 million in 2008 to $2,135 in 2011). The drop is more pronounced when using real dollars, with a significant drop of about sixteen percent from $2,457.8 million in 2008 to $2,071.1 last year.

Newspapers

Perhaps the most dramatic tale of doom and gloom within the network media economy, at least in terms of revenues, is from the experience of newspapers. Readers of this blog will know that in earlier versions of the “Network Media Economy in Canada” post, and other posts, I have been skeptical of claims that journalism is in crisis. I still am, and believe, much along the lines of scholars such as Yochai Benkler, that we are in a period of heightened flux, but with the emergence of new commercial internet-based members of the press (the Tyee and Huffington Post, for example), the revival of the partisan press (e.g. Blogging Tories, Rabble.ca) as well as non-profits and cooperatives (e.g. the Dominion) and the rise of an important role for citizen journalists indicating that journalism is not moribund or necessarily in a death spiral. In fact, these changes may herald a huge opportunity to improve the conditions of a free and responsible press.

At the same time, however, I also believe that traditional newspapers, whether the Globe and Mail, the Toronto Star or Ottawa Citizen are important engines in the overall network media economy, serving as the content factories that produce news, opinion, gossip and cultural style markers that have the ability to set the agenda and whose stories cascade across the media as a whole in a way that is all out of proportion to the weight of the press in the media economy. In other words, the press still originates far more stories and attention that the rest of the media pick up, whether television or via the linking culture of the blogosphere, than their weight suggests. Thus, problems in the press could pose significant problems for the media, citizens and audiences as a whole.

While I have been reluctant to see newspapers as being in crisis, mostly because in previous years I have felt that the trends had not been long enough in the making to draw that conclusion, and also because I think many of the wounds being suffered by the newspaper business, have been self-inflicted out of a mixture of hubris and badly conceived bouts of consolidation, I’m now ready to change my tune when it comes to the state of newspaper revenues.

Newspaper revenues have plummeted. In current dollar terms, newspaper revenues peaked in the years between 2000 and 2006 at between $5.5 and $5.7 billion. They have fallen substantially since to just under $4 billion last year – a decline of 30 percent or so. Indeed, revenues fell by 9 percent just between 2010 and 2011.

In real dollar terms, the fall is more pronounced yet. Newspaper revenues, on the basis of this measure, shrunk by about $1.7 billion – or almost a third (30.7 percent) – in the five-year period between 2006 and 2011. This is the most clear cut case of a medium in decline out of the ten sectors of the network media economy reviewed in this post.

Some Concluding Comments and Observations

Several observations and conclusions stand out from the preceding analysis. First, the network media economy has grown significantly over time, whether we look at things in the short-, medium- or long-term.

Second, while the network media economy in Canada may be small relative to the U.S., it is large relative to global standards. In fact, it is the ninth biggest media economy in the world.

Third, while most sectors of the media have grown substantially, and the network media economy has become structurally more differentiated and complex on account of the rise of new segments of the media, a few segments have stagnated in the past few years (music, radio, magazines). It is also now safe to say that two sectors appear to be in long-term decline: the traditional newspaper industry and wiredline telecoms.

The next and last table of this post gives a snapshot of the state of affairs across the network media economy as things stood at the end 2011 by placing each of the sectors covered in this post in one of three categories: growth, stagnation and decline.

Table 5: The Network Media in Canada: Sectors Experiencing Growth, Stagnation or Decline

Growth Stagnation Decline
Wireless Telecoms Broadcast TV Wiredline Telecoms
Internet Access Music Newspapers
Cable & Satellite Radio
IPTV Magazines.
Pay & Specialty TV
Internet Advertising

[i] Sources:  PWC (2012), Global Entertainment and Media Outlook for all countries and for all segments, except the subcomponents of publishing rights and live concerts for the music sector, which is based on IDATE DigiWorld Yearbook 2009. I have excluded video games, book publishing, and business-to-business sectors from the PWC figures to make the country profiles correspond to the definition of the network media economy in Canada used here and by the Canadian Media Concentration Research Project. Canadian sources as listed in the CMCR project’s methodology primary, but generally based on the CRTC’s Communications Monitoring Report as well as Statistics Canada’s Cansim tables and publications for the sectors that make up the network media economy.

[ii] I use BDU ARPU because the CRTC’s estimate for IPTV ARPU of $40.86 appears too low alongside its estimates for BDUs ($59.41). with which IPTV services compete, as well as figures published by MTS Allstream in its Annual Reports that set their IPTV ARPU at $62.38. Sources: (1) Bell’s revenues are based on the CRTC’s Aggregate Annual Return. Dividing this number by the CRTC’s annual ARPU estimates for BDUs of $59.41/month in the 2011 Communications Monitoring Report (p. 96) yields 127.6 thousand subscribers for 2011. (2) Bell Aliant’s subscriber numbers are from its Annual Report (p. 2). Revenue figures arrived at by multiplying subscriber numbers by ARPU estimates for BDUs ($59.41/month in 2011) stated in the CRTC’s 2011 Communications Monitoring Report (p. 96); (3) Telus‘ subscriber numbers are from its 2011 Annual Report (p. 10) and 2010 Annual Report (p. 5). Revenue figures arrived at through same method as above. This number probably inflates the Telus figures slightly because it includes the company’s DTH satellite TV service that it resells for Bell, but Telus officials I have spoken to assure me that true IPTV subscribers are the vast majority; (4) MTS Allstream’s subscriber and ARPU figures from its 2011 Annual Report (pp. 3, 16) and multiplied by an ARPU of $62.38, as per its Annual Report. Its 2008 Annual Report lists subscriber numbers from 2004 (p. 62); (5) Sasktel’s data from its 2011 Annual Report (pp. 14, 29). Previous years from 2010 Annual Report (p. 45) and 2006 Annual Report(p. 49). SaskTel ubscriber numbers, except for 2008, are multiplied by MTS ARPU to arrive at total revenues because SaskTel does not present revenue figures for its IPTV service on a stand-alone basis and because MTS is most comparable to SaskTel vs CRTC’s average ARPU. Note: SaskTel revenue figures for this table revised on November 19th. 

[iii] Ibid.

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