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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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Back to the Future: From the “Death” to the “Birth” of the Music Industries

Not only should we be circumspect of claims that the Internet, P2P networks and rampant piracy are leading to the demise of the music industry, we must remember that the music industry itself is the child of the ‘network infrastructure’ industries going back to the late-19th century.

As I noted in my last post, the “death of the music industries” only makes sense if we focus on just the ‘recorded music sales’ segment of the business rather than the “total music industry”: 1) recorded music sales; 2) online digital music sales (Internet, ringtones, etc.); 3) concerts and 4) publishing. I have provided the details for this argument in a previous post; my column for the Globe and Mail this week (May 17) will consider the specific case of Canada.

Here I want to make a different case: namely, that claims about the impending demise of the music industry is especially strange once we consider that network technologies gave rise to the music industry to begin with.  In fact, the music industry was the direct offspring of  ‘network infrastructure’ competition between the Western Union Telegraph Company and the Bell Telephone Company in the U.S. and Canada in the late-1870s and 1880s.

To be sure, there is more to this than just corporate rivalry over new technologies and markets. For instance, innovations in architecture — the use of iron girders, in particular — allowed music concerts halls to be built much bigger and on smaller tracts of land in crowded metropolitan cities such as London and New York in the latter part of the 19th century. More seats in bigger halls meant economies of scale. That meant cheaper tickets and bigger audiences. The expansion of the concert side of the business was, according to the historian Gerben Bakker, a key component in the ‘industrialization of entertainment”, and these processes were replicated throughout the world.

The ‘recorded music’ side of the business was ushered into being as an unintended outcome of “network infrastructure competition” between Western Union and the Bell Telephone Company in the United States. As Richard John notes in Network Nation, as part of this competitive rivalry, Western Union and the Bell Telephone Company threw vast sums of money at the leading technological geniuses of their time – Thomas Edison, Elisha Gray, Alexander Graham Bell and Emile Berliner.

The results produced several cutting-edge innovations that shaped the communication and entertainment industries into the 20th century: (1) quadraplex technology that doubled the speed of telegraphs, (2) the telephone, and (3) the phonograph.

Thus, in addition to their key role in the development of and competition between the telegraph and telephone, all of these figures, Bell, Edison and Berliner, except Gray, also became primary early movers behind the development of the phonograph and ‘recorded music’ industries as a direct result of unintended discoveries stemming from their role in the corporate rivalry between Western Union and the Bell Telephone Company between, roughly, 1876 and 1881.

Edison set up his Speaking Phonograph Company in 1877. Bell and the Bell Telephone Company patented their innovations for the graphophone and commercialized it through the creation of the Volta Graphaphone Co. in 1886, a company that, through mergers and acquisitions, would be transformed into Columbia Records over time.

Berlinger’s work at the Bell Telephone Company until 1883 led directly to his own patents for the gramaphone machine in 1887. He created the Gramaphone Company two years later, and set up international branches in London (the Gramaphone Company), Hanover, Germany (Deutsche Grammophon) and Montreal (Berliner Gram-o-Phone Company) over the next decade.

Not suprisingly, these three companies came to dominate the music industries that Edison, Bell, and Berliner had played such a primary role in creating. Remnants of Berliner’s Gramaphone companies are still with us today, having been progressively absorbed in one way or another into the operations of Universal, EMI and Sony over time.

In short, network infrastructure competition drove the development of the music industries.

There are several other important dimensions in these developments that need to be unpacked and discussed.

Cont’d on Page 2 . . . . . . . .

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The Political Economies of Media: New Book by Winseck and Jin

Well, here’s a little bit of shameless self-promotion.  It’s the front cover of a new co-edited collection that I’ve put together with Dal Yong Jin, an assistant professor at the School of Communication, Simon Fraser University in Vancouver, Canada as well as the College of Culture and Technology, Korea Advanced Institute of Science and Technology (KAIST).

The book is called The Political Economies of Media and will be published by Bloomsbury Academic — the academic publishing arm of the same company behind the Harry Potter series — in June.  I think the cover looks great. The authors that have contributed to this volume are exceptional as well: Bernard Miege, Susan Christopherson, Terry Flew, Amelia Arsenault, Guillermo Mastrini, Martín Becerra, Dwayne Winseck, Elizabeth van Couvering, Dal Yong Jin, Christian Fuchs, Aeron Davis, Peter Thompson, Marc-Andre Pigeon.

You can read sample chapters here by myself, Aeron Davis and Christian Fuchs here.

Rogues, Pirates and Bandwidth Bandits

Yesterday was yet another day in which the struggle over copyright seemed to be going on at a feverish pitch.

In the U.S., hearings before the House of Representatives Committee on the Judiciary Subcommittee on Intellectual Property, Competition, and the Internet provocatively pitted Internet investment and commerce against pirates and parasites. Daniel Castro from the supposedly ‘non-partisan’ Information Technology and Innovation Foundation (ITIF) tried to set the tone by describing “the impact of parasitic websites” as “an economic leech on the Internet economy”.

Castro set out the costs to various industries, and they were, if he’s correct, staggering:

  • the U.S. motion picture, sound recording, business software, and entertainment software/video game industries lost an estimated $20 billion dollars in 2005 due to piracy;
  • the U.S. recording industry and related alone lost industries lost over $5 billion altogether and 12,000 jobs in the sound recording industry alone, according to estimates by the music industry trade group, the International Federation of the Phonographic Industry (IFPI);
  • the U.S. motion picture industry, by one estimate, lost $6.1 billion to piracy, which resulted in either the elimination or prevention of 46,597 jobs in the film industry.

This is indeed dire stuff (if true).  Dire stuff also requires drastic measures. Here’s some of the drastic measures Castro put on his wish-list:

  • cooperation between the federal government and business to identify “rogue” sites around the world;
  • require ISPs to combat piracy by blocking websites that offer pirated content;
  • encourage bandwidth and usage caps that discourage online piracy;
  • require search engines to remove links to websites that facilitate piracy;
  • require advertisers and financial intermediariers (e.g. Paypal, Visa, Mastercard, etc.) to stop doing business with ‘illegal websites’;
  • further private/government cooperation around development, promotion and adoption of anti-piracy technology, including ‘deep packet inspection’ (DPI) by ISPs.

This is essentially a recipe to impose a lockdown on digitally networked media.  It makes a mockery of the separation between state and media demanded by ‘free press’ traditions. But rather than government nefariously interfering with the media, in this scenario, the state is called on to act as the tool of the media industries. Proposals to seize the domain names of rogue sites, cut them off from ISPs and payments, and so on threatens to balkanize the Internet further as nation-States assert their ‘sovereign authority’ over whatever slice of cyberspace they deem necessary to pursue ‘rogue pirates’ (in the US and elsewhere) or to suppress dissident voices and the free access to information elsewhere (Egypt, China, Iran, etc.).

For Canadians, the emphasis of putting ISPs in the role of gate-keepers and promoting the use of UBB and bandwidth caps to thwart would be bandwidth bandits adds another layer to the ongoing debate over these issues in Canada.

But what about these claims about dire losses?  They are mostly a product of cherry-picking data to support foregone conclusions. As my post earlier today showed, worldwide box office revenues for the movie industry are up, not down, from roughly $25 billion to $32 billion over the past five years. And that’s just the half of it, with total worldwide film revenues from all sources up from about $46.5 billion in 1998 to $87.4 billion last year.

Rather than being under assault, as Castro and others would like us to believe, the vast expansion of the film industry is not surprising. This is not surprising given the massive growth in global media markets generally, particularly in China, Brazil, Russia, and India.

This is also not surprising given the vast number of new media channels and distribution platforms.  Note the huge difference between total revenues versus just box office revenues, i.e. $87.4 billion versus $32 billion.  That $55 billion gap between the two is the space occupied by new media technologies. These are basically new media markets.

DVDs and the corner video shop may be going the way of the Dodo bird, but cable and satellite channels have doubled, according to the OECD, from 600 to 1200 channels worldwide over the past decade.  Add to this pay-per view, video-on-demand, streaming internet video (Hulu, Daily Motion, YouTube, etc.) as well as digital download and subscription services (Apple iTunes, Netflix, BBC’s iPlayer, mobile smartphones, etc.), and the vast expansion of the global media economy comes clearly into view.

Let’s look at the music industry. Sure, if we take a tiny slice, say just the ‘recorded music industry revenues’, and let it stand for the whole, than things look bad indeed.  Just how bad is shown in the Figure below:

Figure 1: Worldwide ‘Recorded Music Industry’ Revenues, 1998 – 2010 (US$ Mill.)

Source: PWC (2010; 2009; 2003), Global Entertainment and Media Outlook

Seen from just this angle, things are bad. the sale of “recorded music” (i.e. cds, vinyl, cassettes, etc.) has plunged by nearly half since 2004.  These are the figures that Castro and his preferred source, the International Federation of the Phonographic Industry (IFPI), point to in order to paint their ‘sky is falling’ scenario. It is also the backbone of their efforts to push through an egregious revamping of digital media in the service of the ‘traditional media’, a set of efforts that would likely never see the light of day were it not for the superficial persuasiveness of the case made.

The problem with the case, however, is that it takes the worst part of the entire music business and lets it stand for the whole. A decidedly different view emerges once we take the blinkers off that Castro, the IFPI, MPAA, etc. would like us to where and look at the whole picture. The whole picture doesn’t just look at ‘recorded music’, but concerts, publishing and copyright revenues, Internet and mobile phones.

When we do that, here’s what things look like:

Figure 2: Worldwide ‘Total Music Industry’ Revenues, 1998 – 2010 (US$ Mill.)

Sources: PWC (2010; 2009; 2003), Global Entertainment and Media Outlook and IDATE (2009).  DigiWorld Yearbook.

The fact of the matter is, these trends are similar across almost all of the media industries from television, film, music, radio, magazines, book publishing, Internet access and Internet advertising, except with a partial and heavily qualified exception for newspapers.

The media, as I have said repeatedly before, are not in crisis.  Thinking otherwise only gives the likes of Castro and the lobbying groups of the traditional media a blank cheque to push an agenda that ought to be stopped dead in its tracks.

Thankfully, there are other sources who see things from a broader point of view. Thus, over and against Castro, take a look at the much more interesting presentation of David Sohn from the Centre for Technology and Democracy yesterday before the same committee in Washington. Or take a look at the paper published by the Research Institute of Economy, Trade and Industry in Japan that was released last month. Looking at the impact of files-haring and YouTube on the sale and rental of Japanese animated television programs, the author concluded that:

  • Youtube “does not negatively affect DVD rentals” and appears to “help raise DVD sales,’
  • “file sharing negatively affects DVD rentals, [but] it does not affect DVD sales.”
  • Youtube’s effect of boosting DVD sales can be seen after the TV’s broadcasting of the series has concluded (the ‘electronic water-cooler’ effect);
  • YouTube can be interpreted as a promotion tool for DVD sales.

Repeat after me: the sky is not falling; new media are not bad media; we must be careful because the doomsday sayers, more often than not, would like nothing more than to throttle the hell out of digital media. That would not just be dangerous for the media economy and technology, but for democracy, how we socialize and communicate with one another, and for an open and creative culture overall.

The Search for ‘New Media Models’

Here’s an interesting link to a talk given by Alan Rusbridger, the editor of the Guardian in the UK.  It offers a glimpse of how he, and the Guardian, see the emerging media environment. The tone that he strikes is interesting insofar as it is not one saturated with the ‘journalism in crisis’ trope, but rather the opportunities that exist as established models are forced to adapt to fast paced and relentless changes.

Rusbridger demonstrates an openness and understanding of media trends that appears well ahead of his counterparts in NA media.  He also fleshes out some of the potentials of a ‘collaborative model’ of journalism between the traditional media and new developments in social media, from WikiLeaks to Twitter. In this regard, he points to how the Guardian now casts itself not just as a newspaper publisher, but also a platform for OPC (other people’s content).

Finally, Rusbridger offer his thoughts on the way ahead not by throwing history and serious thinkers from the past overboard, but by embracing them. He discusses the continued threats of media concentration, highlights the undeniable dependence of most media on some form of subsidy, whether advertising, allocations for public broadcasters, wealthy patrons, etc. by drawing on Walter Lippmann’s 1922 classic, Public Opinion and waxes about the relationship between Raymond William’s observations from 1958 on communication and culture and conditions today.

In other words, media ownership and concentration, how stuff is paid for, and the relation of each to bigger questions about the kind of societies and cultures we currently live in, and those that we might imagine, are all given a serious nod.

Media Crisis, What Media Crisis

I’ve just returned back from a wonderful two weeks in Portugal.   We spent the first week at the International Association of Media and Communication Researchers, one of the best organizations, in my view, in the field dedicated to the study of all forms of communication and media.  The IAMCR also has a great reach globally, with scholars from all over the world congregating once a year to consider the state of the art of research, whether or not your interests lay in media political economy and history, like mine, public opinion, diasporic communcation, global media and many other areas.

As usual, it was a great time and I enjoyed meeting up with many of my old friends.  I’ll write some more on the conference and some of the substantive themes that I came across while there.  One of the most important things that I took away, though, is that the political economy of communication is alive and well, with almost all of its panels drawing large audiences.

The political economy approach to communication and media studies has sometimes drawn justified criticism for being simply code for a narrow-minded and obtuse marxist view of the world, but that is far too simple to capture the varieties of what is going on in the field now.  Moreover, I would also argue, as did many at the IAMCR conference, that our times are particularly well-suited to those who address the current crisis that continues to wreak havoc on the world’s economy, and people’s lives.  In that vein, studying the dynamics of the media industries and the broader economic, political, technological and cultural forces shaping and remaking the media is also a hallmark of media political economies.

Indeed, we can can learn a lot from this vantage point about the current state of the media and the oft-repeated claim that the ‘traditional media’ are ‘in crisis’, destined to go the way of the dodo bird, as people switch loyalty, time and connections to Youtube, Facebook, Twitter, and so forth, in this age of ‘mass self-expression’.  There is a great deal of  compelling evidence and examples that, at least superficially, illustrate the case that the ‘traditional media industries’ are in decline.

The case has been made all the more appealing in recent years by rise of the Internet and the substantial decline in advertising revenue for network tv and newspapers, the fragmentation of audiences, and the continuing long-term declines in newspaper readership across North America and most of the ‘west’ — although, against this, we must also point out that the massive explosion of newspaper titles and readership in places like India and China offer countervailing lessons, to say nothing of the growth of television worldwide.  I wrote a short piece that was published today in The Mark, a recent addition to the expanding range of quality online news, analysis and commentary publications, that challenges the ‘media in crisis’ theme in relation to the media in Canada.  You can see my piece here:What Media Crisis article in The Mark

A full-scale, scholarly version of that piece can be found in the paper that I delivered at the IAMCR Conference in Portugal in July, 2010.

Financialization and Media in Crisis (IAMCR 2010)

A PowerPt snapshot of the main charts, figures, data, and key arguments I rely on can be found here: Financialization and the ‘Crisis of the Media’ (IAMCR Pres).

I have begun to amass a fairly large data set on the media industries and am willing to share with those similarly inclined.

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