Before the Canadian Radio-television and Telecommunications Commission

The Future Environment Facing the Canadian Broadcasting System

Comments Filed by the Coalition of Canadian Audio-visual Unions in response to the Call for Comments in Broadcasting Public Notice CRTC 2006-72, June 12, 2006

September 1, 2006 The Future Environment Facing the Canadian Broadcasting System

Comments Filed by the Coalition of Canadian Audio-visual Unions

Table of Contents

1. Introduction ...... 1

2. Executive Summary ...... 3

3. Comments on Matters Raised in Order in Council

a) the current state of audio-visual technologies and their predicted evolution over the coming years...... 6

b) with respect to the usage of audio-visual technologies by Canadians, (i) changes in this usage since January 1, 2000...... 9 (ii) changes in demand for various kinds of programming and programming services since January 1, 2000 ...... 18 (iii) how Canadians of different generations use various technologies and the impact that these different uses will have on the broadcasting system ...... 21 (iv) a comparison of the adoption rate for technologies between Canada and other countries ...... 27 (v) the demand for various kinds of programming and programming services by the Canadian population, taking into account its full diversity...... 36 (vi) how future generations will consume or access content, programming, and programming services ...... 37 (vii) the impact this evolution of technologies has for content and programming choices available to Canadians, including local, regional, national and international content ...... 39

c) with respect to the impact on the broadcasting system, (i) the adoption of technologies by broadcasting undertakings since January 1, 2000...... 40

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions

The Future Environment Facing the Canadian Broadcasting System ii

(ii) the economic and regulatory impact on the broadcasting system caused by these technologies...... 58 (iii) the kind of content delivered through the regulated and the non-regulated aspects of the system, and how it is delivered ...... 63 (iv) the different methods for providing local, regional and national programming on a going forward basis ...... 65 (v) the predicted economic impact these technologies will have on broadcasting undertakings...... 66 (vi) the adoption of technologies by the independent production sector and their impact on this sector...... 67

Appendix 1 Nordicity Group Ltd., Validation of Projections for TV Advertising Revenues: Notes on Methodology...... 72

Appendix 2 Purchase details for PricewaterhouseCoopers LLP (PwC), Global Entertainment & Media Outlook: 2006-2010 (June 2006)...... 81

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System

Comments Filed by the Coalition of Canadian Audio-visual Unions

1. Introduction

These comments were prepared by the Coalition of Canadian Audio-visual Unions (CCAU) in response to the CRTC’s Call for Comments in Broadcasting Public Notice CRTC 2006-72, June 12, 2006.

The CCAU is a coalition of ten Canadian audio-visual unions, and is comprised of the following organizations: the Alliance of Canadian Cinema Television and Radio Artists (“ACTRA”), the Directors Guild of Canada (“DGC”), the National Association of Broadcast Employees and Technicians Local 700-CEP (“NABET”), the Writers Guild of Canada (“WGC”), the American Federation of Musicians – Canada (“AFM-Canada”), Union des artistes (“UdA”), the Commun- ications, Energy and Paperworkers Union of Canada (“CEP”), Association des réalisateurs et réalisatrices du Québec (“ARRQ”), Association Québécoise des techniciens de l’image et du son (“AQTIS”), and Société des auteurs de radio, télévision et cinéma (“SARTeC”).

These comments are being made on behalf of ACTRA, CEP, DGC, NABET/CEP and WGC.

On June 8, 2006, the Governor in Council issued Order in Council P.C. 2006- 519, pursuant to section 15 of the Broadcasting Act. In the Order in Council, the Governor in Council noted that

“…the evolution of audio-visual technologies is profoundly changing how Canadians communicate, express themselves and interact with various media, bringing with it important economic and social implications and leading to a new communications and media environment.”

In the midst of this rapidly changing environment in the audio-visual sector, the Governor in Council stated that it was “of the view that the Canadian broadcasting system, using various audio-visual technologies, must remain relevant in a global digital environment and that Canada should continue to play a leading role in the development and usage of world class communications technologies while fostering Canadian cultural choices and broadening public access to local, regional, national and international information and programming.”

Given the environment facing the Canadian broadcasting system, the Governor in Council requested that the Canadian Radio-television and ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions

The Future Environment Facing the Canadian Broadcasting System 2

Telecommunications Commission (CRTC) prepare a “factual report on the future environment” facing the Canadian broadcasting system. To this end, the CRTC issued a Call for Comments. This submission responds to that call.

In preparing its submission, the CCAU commissioned Nordicity Group Ltd. (“Nordicity”) to report to it on current and expected future trends in audio-visual technologies. In that connection, Nordicity used information from secondary sources to compile a comprehensive review of the recent trends in audio-visual technologies, including adoption rates of new technologies in Canada and elsewhere.

The CCAU also retained Nordicity to validate projections for the advertising revenue likely to be generated by CBC and the private broadcasting sector in the period up to 2010. In that regard, Nordicity relied on estimates and forecasts developed by PricewaterhouseCoopers LLP (PwC) in its publication, Global Entertainment & Media Outlook: 2006-2010. Information on how to order a copy of the PwC publication is provided in Appendix 2 of this submission. Nordicity also validated the revenues (subscriber + advertising) of Canadian pay- and specialty- television services for the same period. The methodology used by Nordicity in validating these revenue projections is set out in Appendix 1.

Except where Nordicity or PwC are specifically named and credited, however, the observations in this submission are those of the CCAU.

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2. Executive Summary

This submission provides updated data on the advent of new technologies and their effect on the Canadian broadcasting system. The comments by CCAU include commentary on the development of digital television, the impact of Internet distribution, the uptake of high definition television, and the use of mobile and other devices to deliver audio-visual content.

Given the rapid changes in technology and delivery platforms that have occurred, it is understandable that the Governor in Council would want to evaluate their impact on the broadcasting system and how it is or may be regulated. A report published by IBM early in 2006 with the title, “The End of Television,” suggested in fact that these new platforms and technologies, some of them unregulated, might cause significant harm to conventional television broadcasting.

Upon a review of the data, however, it turns out that the IBM report was exaggerated and overdrawn. Far from killing television, the new technologies will complement television and may end up supporting it.

A review of the impact of technology between 2000 and 2005 on the system is instructive. During this period, cable television systems in Canada followed the lead of direct-to-home (DTH) satellite and introduced digital packages with many more specialty channels and with video-on-demand. Broadband penetration of the Internet soared, facilitating access to video material on the web. Cell phones began to introduce video features.

Yet despite these changes, overall TV viewing in Canada per capita has stayed the same or actually increased.1 While viewing by certain demographic groups has declined slightly, viewing by other groups has increased. Overall, per capita viewing numbers have increased from 23.7 hours a week in 2001-02 to 25.1 hours a week in 2004-05. Accordingly, any suggestion that the use of other platforms is resulting in a significant decline in TV viewing by Canadians must be treated with caution. In fact, the numbers show that the increase in Internet broadband penetration and the rise of other platforms has had negligible impact on TV viewing to date.

What has changed is the relative share of tuning to Canadian vs. U.S. broadcast services. This is a good news story. During the last five years, tuning to Canadian over-the-air TV broadcasters has stabilized, and tuning to the Canadian pay and specialty programming services has increased along with the penetration of digital packages.

1 In this document, “TV viewing” refers to viewing on TV sets to all broadcast services, including off-the-air, pay and specialty television services ______

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The only loser in the equation has been the U.S. broadcast services – especially the U.S. border stations but also the U.S. specialty services. Their viewing in Canada has diminished to an all-time low. A key factor in this regard has been the simultaneous substitution policy, which requires cable and satellite distribution undertakings to substitute Canadian signals for U.S. signals when the program is the same.

A review of TV broadcast revenues2 shows a similar pattern. In English Canada, the over-the-air private TV broadcasters – arguably the category most at risk from unregulated platforms with U.S. content – consolidated their ownership and their aggregate revenues rose from $1.49 billion in 2000-01 to $1.68 billion in 2004- 05. The Canadian English-language pay and specialty services did even better, with revenues rising from $804 million in 2000-01 to $1,107 billion in 2004-05. So far, there has been little or no negative impact on Canadian broadcasters from the advent of new technologies.

Will that change in the future? While it is impossible to be categorical about the distant future, the signs point to a relatively robust scenario for Canadian conventional, specialty and pay television broadcasters over the next number of years.

In order to assess this more directly, the CCAU retained Nordicity to validate projections for the advertising revenue likely to be generated by CBC and the private broadcasting sector in the period up to 2010. In that regard, Nordicity relied on estimates and forecasts developed by PricewaterhouseCoopers LLP (PwC) in its publication, Global Entertainment & Media Outlook: 2006-2010.

On that basis, Nordicity concluded that the ad revenue for the conventional private TV stations in English Canada is likely to increase over the next four years from $1.68 billion in 2004-05 to between $1.85 and $1.91 billion in 2009-10. Revenues for Canadian pay and specialty services are projected to increase from $1.74 billion in 2004-05 to between $2.39 and $2.47 billion in 2008-10.

These projections, far from auguring the “end of television,” indicate that television will continue to be a robust, albeit mature, medium for a number of years to come. While the new platforms will provide alternative means of accessing content, they are expected to do so in a complementary rather than competitive way.

A key reason for this is that content providers will not knowingly allow their content to be distributed on the new platforms if this undermines the orderly marketplace upon which their programs were financed. Accordingly, content on the new platforms will either be created expressly for such platforms, or will be released

2 In this document, “revenues” generally refers to advertising revenues for off-the-air TV stations, subscription revenues for pay TV services, and the total of advertising and subscription revenues for specialty television services. ______

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only on the basis of timing, pricing and availability that supports rather than undermines the traditional distribution windows for such content. Those windows are based on geographical borders, and copyright owners of high-value audio-visual programming like theatrical movies and TV series are increasingly requiring the new platforms to confine their distribution to particular territories.

If we want to have a meaningful Canadian presence in the broadcasting system, it will be crucial for the government to support the existence of a distinctive Canadian rights marketplace, through effective copyright legislation and CRTC policies that maintain that distinctive market and require Canadian broadcasters to include Canadian drama programming of high quality that Canadians will want to watch.

The new platforms will provide a window for new content as well as repositioned content from older media. In that regard, we are already seeing the development of customized short-form video content for mobile and Internet use. Some of this is new content designed to be seen in short snippets for people on the fly. The new content also includes video material that is used to promote viewing of longer-form content on the traditional channels. There is also a rise in cross-platform licensing of programming, but generally in a way that complements rather than competes with existing media.

At this stage, it does not appear that the new platforms will cannibalize existing television; in fact, in many cases, they may promote it. In addition, to the extent that Canadian content created for traditional media reappears on the new platforms, there may a favourable multiplier effect in terms of the accessibility of Canadian programming. Thus, it is all the more important that the traditional television channels be subject to meaningful Canadian content requirements, given that the content may then appear on multiple platforms.

It is also important to note that the new platforms can be regulated if circumstances warrant. In the view of the CCAU, the CRTC and the government should closely monitor developments at home and abroad with regard to the impact of the unregulated platforms. Once the Commission’s upcoming policy review proceedings for over-the-air television and pay and specialty television are concluded, the CRTC should convene a policy proceeding to reassess the impact and regulatory status of these platforms. To the extent that the new platforms are shown to have any adverse impact on the creation or exhibition of Canadian content, the government and the CRTC should be prepared to act as appropriate, taking into account the lessons from Europe.

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3. Comments on Matters Raised in Order in Council

In the following pages, we provide our comments in respect to each of the matters or issues raised by the Order in Council. a) The current state of audio-visual technologies and their predicted evolution over the coming years

Digital Television

The conversion from analog to digital television in Canada is continuing as cable subscribers migrate to digital services. All subscribers to Canadian direct-to- home (DTH) satellite services are already digital because the services are only offered in digital. Some countries have a higher digital penetration rate than Canada,3 but this is largely because their multi-channel analog capacity was underdeveloped. Although Canadian multi-channel subscription levels remain among the highest in the world, there is currently little reason for Canadian cable subscribers to convert to digital, in view of the relatively abundant supply of programming services on the analog systems.4 Therefore, Canada is lagging behind in the conversion to digital. The U.S. follows a similar pattern, although according to some estimates is somewhat ahead of Canadian digital take-up.

However, there is little reason to believe that conversion to digital will not continue to proceed in Canada. As broadcasting distribution undertakings (BDUs), broadcasters and producers begin to invest more money into high definition television (HDTV) – largely as a defensive measure to retain subscribers and viewers – they will also heavily market the digitally-based HD services to recoup their investments. Internet Protocol Television (IPTV) offered on telephone Digital Subscriber Lines (DSLs) will become more of a factor, but the main competitive environment is between cable and DTH.

The justification for the telephone companies to invest in IPTV is that their cable competitors are increasingly single-point ‘triple play’ or ‘bundled services.’ For example, cable companies can offer a discount to sign up for television, Internet, and telephony all with one connection and this bundling will become increasingly attractive. Incumbent telephone companies are losing local exchange customers to cable operators, and are deploying IPTV to provide a similar integrated offer. Although not engineered for the same video throughput capacity of cable, IPTV has features (e.g. more windowing of programming) that phone companies are hoping prove attractive to consumers.

3 See the statistics at page 27 ff below. 4 PricewaterhouseCoopers, Global Entertainment and Media Outlook: 2005-2009. ______

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The Evolution of the PC Internet

The Internet will continue to evolve, moving from simply a provider of information and communications, to a combined information and entertainment platform. Most broadcasters in Canada are now offering programming online – either in the form of short ‘webisodes’ or featuring the full length episodes as seen on television.

While this broadcaster commissioned television content online will continue to prove popular with certain audiences, research indicates that user-generated content (UGC) is fast becoming the most popular type of content on the Internet among the younger generation. While initiatives such as Canadian BiteTV and Al Gore’s Current Television bring UGC into the domain of linear television, the Internet’s ability to upload, download and share information among social networks will continue to lead the way in the growth of the UGC phenomenon.

Mobile Developments

As video-enabled mobile phones become more prevalent in Canada, and as broadcasters and networks continue to innovate in their provision of mobile services, particularly more of the younger generation will increasingly ‘snack’ on video content offered via mobile. It is likely that this content will be short clips, rather than long- form content.

Cross-Platform Productions

While each of these platforms – digital TV, the PC Internet, and mobile networks – will become important delivery platforms in their own right, they will not tend to cannibalize each other. They will increasingly operate in concert in the form of cross-platform productions.

Increasingly, broadcasters are realizing that to reach the lucrative younger audiences raised on an appetite of video games, the Internet and mobile phones, offering simple linear TV programs will not suffice. Creating properties that have TV programs as the anchor, but which extend into the Internet and mobile phones is on the increase and is proving popular. Most major Canadian dramas are now being produced with content across platforms. Degrassi: The Next Generation, Whistler, and Falcon Beach are not only distributed for viewing online, but they also have their own websites featuring blogs and other non-video content complementing the TV experience.

In addition, broadcasters of children’s content are being highly innovative and successful in the provision of cross-platform content. Broadcasters now offer solid competition to U.S. sites in the provision of children’s sites which build on television properties – for example, ytv.com is the top rated Canadian children’s site for grades

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4 to 11 next to U.S. based sites such as ebaumsworld5. There are few children’s sites offered by players outside the broadcast community in Canada, as the broadcasters have the business model, audience, and brand recognition to generate enough revenues to sustain these sites.

As all of these technologies evolve, the implications on the industry will be significant:

¾ The Audience Becomes Producer: The rise of technologies to facilitate user- generated content such as Web 2.0 (see page 15), will facilitate the conversion of audiences to producers. However, there is little reason to believe that these new “producers” will cease to be viewers as well.

¾ The Producer Focuses on Multi-platforms: With the growth of new technologies and the increasing appetite for cross-platform productions, the producer will need to become the expert in not just TV production but production across new platforms, such as mobile and the Internet. New editing and post- production technologies such as Final Cut Studio will also mean that the producer becomes the editor and post-producer as well.

¾ Broadcasters Remain the Gatekeepers: In the multi-platform environment, a discerning gatekeeper of content becomes ever more critical. With the explosion of user-generated content, numerous channels online as well as on digital television, viewers will become overwhelmed by choice. The broadcasters will remain the trusted arbiters of what is entertaining or informative, and they will continue to navigate audiences through the digital world.

¾ The BDUs Remain the Backbone of the System: While the cost of distributing content through the Internet will decline, it will not be as efficient for the delivery of HD video programming as the BDUs who are configured for such broadband delivery. Thus, BDUs will continue to be essential components of the Canadian broadcasting system, and be joined by telcos offering IPTV. Overall, the industry will continue to evolve – but “lean-back” video content will still remain the anchor of the broadcasting industry.

5 Media Awareness Network (November 2005) Young Canadians in the Wired World, Phase II, Trends and Recommendations, Appendix 6, p 33 ______

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b) With respect to the usage of audio-visual technologies by Canadians, (i) changes in this usage since January 1, 2000

In this section, we present information on the usage of audio-visual technologies in Canada since 2000.

Over the last few years, digital TV households have been growing, giving access to pay and specialty services to more Canadian households. At the same time, computer ownership is growing, and high-speed Internet access is increasing. With the latter development, more people are listening to the radio and viewing TV online. However, as will be seen below, none of these developments has had a significant impact on TV viewing.

Television Viewing

Canadians are avid TV viewers. BBM viewing numbers for the past four years are provided in the CRTC Broadcasting Policy Monitoring Report, 2006 (see Tables 3.1 and 3.2 at page 41). They show that average weekly viewing hours have remained remarkably stable over the past four years, whether measured at the per viewer level or on a per capita basis. The average Canadian viewer spends about 28 hours a week watching television. On a per capita basis, which measures how the whole population watches television, the average weekly viewing is about 25 hours. Neilsen Media Research data show similar per capita viewing numbers for 2004-05.

There has been much discussion as to whether some of these numbers indicate a significant decline in viewing. In fact, an analysis of the CRTC numbers shows that while viewing by certain demographic groups has declined slightly, viewing by other groups has increased. Overall, per capita viewing numbers have increased from 23.7 hours a week in 2001-02 to 25.1 hours a week in 2004-05.

Accordingly, any suggestion that the use of other platforms is resulting in a significant decline in TV viewing by Canadians must be treated with caution. We address this further below.

Digital TV Uptake in Canada

The overall number of digital subscribers increased by an estimated 178,000, or 4%, in the second quarter of 2005 (February/March to May/June 2005), compared to 132,000, or 3%, during the same period a year earlier.6 There were almost 4.7 million digital TV subscribers in Canada at May/June 2005 – approximately 45% penetration of total TV households.7

6 Decima Research THE DIGITAL DOMAIN, cited in “Telcos entering TV market could further accelerate digital TV rollout;” Decima Research Reports, November 23, 2005 7 Ibid. ______

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As of August 31, 2005, the number and proportion of Digital TV households is indicated in the Table 1 below.

Table 1

Penetration of Digital Subscribers

Platform % of Digital TV Total Subscribers (000) households Digital Cable 50% 2,630.8 DTH 48% 2,514.9 Telco (DSL) 2% 90.3 MDS 1% 39.4 Total Digital Subs 100% 5,275.4 Source: Decima Research THE DIGITAL DOMAIN, cited in “Telcos entering TV market could further accelerate digital TV rollout”; Decima Research Reports, November 23, 2005

IPTV Uptake

As noted above, the recorded uptake of Internet Protocol TV (IPTV) in Canada was 77,107 subscribers in 2005. MTS Allstream and SaskTel were the first off-the-mark in Canada to launch IPTV services, although the other major incumbents all have active trials and plan to enter the market.

Usage of Video-On-Demand (VOD)

As the penetration of digital television is increasing, so is the usage of video- on-demand (VOD). In 2005, 36% of digital cable subscribers used VOD. This number is a significant increase from 2002 when only 10% had used it8.

HDTV Uptake

Michael McEwen, head of Canadian Digital Television, estimates that 20% to 25% of Canadians have an HD display, which is lower than the U.S.9 However, only a minority of these households in the U.S. and Canada subscribe to the BDUs’ HD channel offerings. Effectively, then, most TV households with HD receivers capable of displaying HDTV are just not using it for that purpose, since very few of them have over-the-air TV receivers.

8 Price Waterhouse Coopers, Entertainment and Media Outlook, 2005-2009 9 Binning, Cheryl, “Industry Finally Embracing HD”, Playback Magazine, August 7, 2006. ______

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Computer ownership by Canadian households

Overall, personal computer ownership rate increased from 55% in 2000 to 74% in 2005. In the last year, significant ownership increases were noted among individuals between 55 to 64 years of age (7%) and those 65 years of age or greater (12%).10 Socio-economic reasons continue to be a determining factor in computer ownership. In December 2005, 96% of households with an income over $80,000 owned computers while only 49% of households with an income under $20,000 owned computers. Note that much computer use is business related, and not necessarily for entertainment use.

Internet Access

Home and work remain the most popular places to access the Internet (65% and 45% respectively), and this proportion appears to have stabilized. Accessing the Internet via wireless zones is on the increase – growing from nothing in 2003 to 7% in 2005. Overall, access to the Internet is proportional to the level of education and income - only 37% of those with less than a high school education have access to the Internet.11

The percentage of Canadians choosing high-speed rather than dial-up Internet access at home continues to increase as 74% of Internet households had access to high-speed in 2005, compared to 30% in 2001. According to CyberTRENDS,12 gender, household income and marital status do not appear to be factors influencing the selection of broadband versus dial-up Internet access. Dial- up users are more likely to be infrequent or short-term users. The number of broadband Internet homes in Canada now exceeds the number of digital TV homes (i.e., homes with digital cable or satellite TV), while the reverse is true in the U.S.13

Canadian Broadband Penetration Compared to the U.S.

The percentage of households that is connected to the Internet via high- speed broadband is significantly higher in Canada than in the U.S. according to a Canadian research firm. Almost half of households (49%) in Canada now have broadband access compared to only 34% of U.S. households (Note: this source cites 2005 data). 63% of Canadian households are now on the Internet (49% are broadband and 14% are dial-up) versus 57% of American households (34% broadband, 23% dial-up).14

10 CyberTRENDS, ComQUEST Research: Research Dimensions, 2004 to 2005 editions, cited in CRTC Broadcasting Policy Monitoring Report, 2006 11 Ibid 12 Ibid 13 “Canada leads U.S. in broadband penetration”, Digital Home website Wednesday, 12 October 2005, URL: http://www.digitalhome.ca/index.php?option=com_content&task=view&id=711&Itemid=51http://di gitalhomecanada.com/index.php?option=com_content&task=view&id=711&Itemid=51 14 Ibid ______

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Frequency and Duration of Internet Use

According to CyberTRENDS, December 2005, the average Canadian with Internet access connected for an average of 16 hours of Internet use per week. On average, men spent 142 minutes more on the Internet per week than women. The number of Canadians who reported using the Internet at least once a week remained constant at 60% from December 2004 to December 2005.15

Non-Internet Users

Of those Canadians who do not use the Internet, the percentage who indicated cost as a reason for not using the Internet increased to 14% in December 2005. The number of Canadians indicating the absence of need or interest in having Internet access in the home continues to decline.16

Music Listening and Downloading Online

The percentage of Canadian adults who reported listening to music or the radio on the Internet is 16%, a decrease of four percentage points in 2005 compared to 2004. Data from the BBM Fall surveys indicates that the amount of tuning to Canadian radio stations via the Internet, although still insignificant, continues to increase annually – it now equals 0.3% share of total tuning.

Also, downloading of music via the Internet continues to be popular, particularly among avid music listeners who also consume music by other platforms. One report points out that people who are downloading music from the Internet are those who also make extensive use of CDs and conventional radio to listen to music, indicating that for certain users, downloading of music might not be cannibalizing other forms of music listening.17

TV and Video Viewing Online

Internet activities that require high bandwidth are popular in Canada, especially among younger age groups. One research study found that 25% of Canadian Internet users in the 12-29 age group have downloaded a full-length movie or a 30- or 60-minute TV show off the Internet in the past, compared to 16% of American Internet users in the same age group.18 The increase in viewing online is increasing, albeit at a slow pace – a different study indicated that the percentage

15 CRTC, Broadcasting Policy Monitoring Report, 2006. p.128-129 16 CRTC, Broadcasting Policy Monitoring Report, 2006, p.130 17 Statistics Canada, General Social Survey: “The Internet and the way we spend our time” August 2nd 2006. URL http://www.statcan.ca/english/research/56F0004MIE/56F0004MIE2006013.pdf 18 “Canada leads U.S. in broadband penetration”. Digital Home website, Wednesday, 12 October 2005 URL: http://www.digitalhome.ca/index.php?option=com_content&task=view&id=711&Itemid=51 ______

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of Canadian adults who said they watched or downloaded videos, movies or television programming from the Internet increased by only one percentage point in 2005 compared to 2004.19

Use of Mobile and Other Personal Devices

59% of Canadians reported using a mobile phone, compared to 3% with a Blackberry, and 7% with another form of PDA.20

In Canada the use of data services on cellular phones which carry the functionality for such services is quite low. Text messaging still has only a 30% penetration rate among cellular phone users in Canada, according to Bell, and that’s one of their better data services.21 In this regard, Canada lags behind European and Asian countries, where text messaging is much more popular. However, in the U.S., text messaging use is comparable, although slightly higher than in Canada, and is increasing year-on-year. Research indicates that in 2006, 35% of cell phone owners were using text messaging, which was an increase of 7% from 2005.22 Canada might see a similar trend in the future.

At this time, only 2% use their mobile device to watch television, compared to 7% who use them to obtain news or the weather via text. According to a recent estimate there are about 500,000 video-enabled cellular phones in use in Canada – or approximately 3.1% of the 16 million phones in Canada.23 One projection calls for that number to rise to about 16 million over the next two to three years, which may lead to an increase in the number of people viewing TV via their cellular phones.24 However, apparently now only 10% of those with video-enabled phones ever tune in to video content. Behaviour might change over time, as people become more comfortable using a wider range of functions on their phones, but such a change will take time.

Also, those who do view content don’t typically view “longform content.” According to a survey by Ericsson, people will spend less than five minutes watching television programs on their mobile phone.25 Viewers of mobile television want short form content and want to be able to access it on-demand, “anytime, anywhere, and on any device.”

19 CRTC, Broadcasting Policy Monitoring Report, 2006, p.131 20 CRTC Broadcasting Policy Monitoring Report, 2006, p. 133 21 ”Mobile Video offers opportunities for new formats”, Decima Report, Volume 8 Issue 24, December 22, 2005 22 Pew Internet and American Life Project(2005 and 2006), Press Release, “Americans and their cell phones”, http://www.pewInternet.org/press_release.asp?r=128 23 Research from Quickplay Media, cited in “Mobile biz gets moving” by Sean Davidson; Playback Magazine January 23, 2006. 24 Statistics Canada, The Daily, “Canadian Internet Use Survey”, August 15th 2006. URL http://www.statcan.ca/Daily/English/060815/d060815b.htm: 25 “Mobile TV is ‘snack TV,’ says Ericsson”, Inq7.net, 06/20/2006; URL : http://technology.inq7.net/infotech/infotech/view_article.php?article_id=5730, ______

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However, even with limited uptake of video via mobile, Quickplay (a mobile device content company) estimates that there are about 1.8 million potential viewers. If each person spends an average of $15 a month for mobile content, it would represent over $300 million annually. About $100 million of that amount would be in the form of payments to Canadian broadcasters and content producers, demonstrating a significant opportunity for future revenues.

User-Generated Content

New technologies – across TV, the Internet, and personal devices – now facilitate greater individual involvement in the production and distribution of content. Because of this, the phenomena of user-generated content and social networking26 are growing trends which are increasingly impacting the way audiences interact with their media.

In the last two years, many new websites have been created on a consumer generated basis (i.e. blogs, videos, and networking websites). In fact, they have become among the most visited websites of the last year. Some key initiatives, and usage figures of these initiatives, are outlined below and demonstrate the growing popularity of this type of content:

¾ Creative Commons Licence: A copyright licence with greater flexibility, essentially with fewer ‘rights reserved’, which allows people to adapt one person’s work (music, video, text, images) to create another work without needing to gain legal consent in advance. Usage of the work is typically limited to non-commercial use.27 The producers of Canadian animated comedy ‘Odd Job Jack’ recently launched ‘Free Jack’, a site in which the master Flash files and bitmaps of every piece of art used in this season are being released under the Creative Commons Attribution-Non Commercial- Share Alike license, so that audiences can share, reuse, and remix all the files28 used in the programme and create their own ‘Odd Job Jack’ program for non-commercial use. ¾ The Creative Archive Licence Group (CALG): A similar initiative to the Creative Commons licence begun by rights owners in the U.K. – the BBC, Channel 4 and others. CALG releases certain archive and newly created content under a specific licence allowing UK residents to re-purpose the content for non-commercial use.29

26 A Social Network, as defined by Wikipedia, is a “social structure made of nodes which are generally individuals or organizations”. Internet social networking is formed by Internet communities which use a circle of friends to expand a network. The first such sites were Classmates.com and Friendster. 27 Creative Commons Website, www.creativecommons.org 28 http://www.oddjobjack.com/freejack.php 29 Creative Archive Licence Group Website, http://creativearchive.bbc.co.uk/ ______

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¾ Web 2.0: A second generation of services available on the World Wide Web that lets people collaborate and share information online - often allowing for mass publishing (web-based social software) to create blogs and wikis (websites that allow users to easily add, remove, or otherwise edit and change some available content). ¾ MySpace: A social networking website offering an interactive, user- generated network of blogs, profiles, groups, photos, MP3s, videos and an internal email system. According to Alexa Internet, as of August 2006, it is the world's fourth most popular English-language website and the seventh most popular in any language. In Canada, it is the seventh most viewed website, after search engines and emailing services.30 ¾ YouTube: A social networking website that allows users to upload, view, share and receive feedback on their video clips. Founded in 2005, YouTube is now one of the most clicked websites worldwide. YouTube includes clips from films and television programs, music videos, and homemade videos. Video feeds of YouTube videos can also be easily embedded on blogs and other websites. YouTube prohibits the posting of copyrighted video by anyone but the copyright holder; however, restriction of copyrighted material has proven difficult.31 ¾ ZeDTV: Originally a CBC initiative (currently on hold) where the audience submitted shorts via a website, then the top programs were broadcast – it was possibly the first programmed broadcast of user generated video content. In 2005, ZeD had aired 3,000 works, and had a user group of 46,000 people regularly viewing and uploading works onto the site.32 ¾ Bite TV: A Canadian Category 2 digital channel that features video productions contributed by professional and amateur producers. ¾ Current TV: An independent U.S.-based television service which is the first 24-hour network based on viewer-created content. ¾ The Nimble Company: Started by the former ZeD producers, Nimble is a company that develops video-based creative content and delivers it across multiple platforms – Internet, television, portable devices and mobile phones.33 ¾ Vidiotbox.tv: Run by the Nimble Company, Vidiotbox.tv compiles – by its opinion – the best online videos on the net from various sources like YouTube.com, Google Video and other smaller obscure websites.

30 Alexa Web Information Service,2006, URL: Alexa.com 31 Wikipedia, URL: http://en.wikipedia.org/wiki/Youtube 32 “Putting Creativity on Air,” speech by Robert Rabinovitch, CBC, at the NABA Conference, May 16, 2005 33 http://www.thenimblecompany.com/what.html ______

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User-generated content sites feature among the top 10 sites in Canada, far ahead of sites such as the CBC.ca, as shown in Table 2 below. In Canada, myspace.com, youtube.com and live.com feature in the top ten. The other top sites are primarily search engines and web-mail.

Table 2

Top Ranked Sites in Canada by Hits, August 2006

1 Google.ca Search engine 2 Yahoo.com Search engine and emails 3 Msn.com Dialup access and content provider 4 Google.com Search engine 5 Live.com Windows Live Search engine. 6 msn.ca Dialup access and content provider 7 Myspace.com Social Networking Site 8 Ebay.com International person to person auction site 9 YouTube.com Platform to share user videos 10 eBay.ca International person to person auction site – – – 21 BBC Headline ticker automatically updated throughout the day Newsline with the latest news, sport, travel, finance and weather Ticker from the BBC.Bbc.co.uk 27 CBC Canadian Radio and Television Network Television 31 The Globe Toronto-based National Daily Newspaper and Mail 52 The Toronto Toronto Daily Newspaper Star 62 CTV News Canadian Television Source: Alexa Web Information Service, 2005 Alexa.com

Impact of the New Platforms on TV Viewing

A key question is whether these new platforms on the Internet or on mobile devices will cannibalize the viewing of television.

In its 2006 Broadcasting Policy Monitoring Report, the CRTC makes the following statement (at p.132):

“In some instances, the Internet has influenced Canadians to decrease or increase their use of broadcast media. Overall, there has been a net decrease in the use of television viewing. Radio appears to be minimally affected by Internet use.” ______

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The statement by the CRTC that there has been a net decrease in the use of television viewing by reason of the Internet does not appear to be fully supported by the data elsewhere in its report and is at odds with a statement made by the Commission in April 2006.34 As noted earlier, TV viewing by Canadians has remained remarkably constant over the past five years, despite significant growth in broadband access to the Internet. While it is true that average weekly viewing hours among 18-49 viewers fell from 26.5 hours in 2001-02 to 25.0 hours in 2004-05, the per capita viewing numbers for the same demographic rose from 21.4 hours to 22.0 hours. Moreover, TV viewing by children and teens, two demographics that might have been expected to drop because of increases in video games and cellphone use, rose in the same period.

A telephone survey by CyberTRENDS in December 2005 found 5% of respondents reporting increased TV viewing by reason of Internet use, 14% reporting decreased viewing, and 81% reporting no impact whatever. From this, the research concludes that there has been a net decrease in the total TV viewing35. However, one cannot conclude from this that there has a significant net decrease in TV viewing, since the question did not quantify any amounts. In addition, such a conclusion is contradicted by the actual viewing numbers as collected by BBM and Nielsen.

The CRTC conclusion is also rebutted by a Statistics Canada report published in August 2006.36 This report, based on a detailed review of respondent activities over a 24 hour time period, concluded that the Internet does not affect the way consumers watch television. Comparing heavy, moderate and non-Internet users, StatsCan concluded that all of them watch almost the same amount of traditional TV. Furthermore, the report points out that heavy Internet users are even more motivated than other consumers to use other types of media other than the Internet. b) With respect to the usage of audio-visual technologies by Canadians, (ii) changes in demand for various kinds of programming and programming services since January 1, 2000

34 In Broadcasting Public Notice CRTC 2006-47, April 12, 2006, at paragraph 40, the CRTC made the following statement: “[I]n the Commission’s view, there is nothing on the record of this proceeding to indicate that the use of the Internet to deliver and access programming has increased to the point that the ability of traditional broadcasters to fulfil their obligations under the Act has been impeded. Specifically, the Commission finds that parties provided no evidence in this proceeding to indicate that new media broadcasters have been responsible for any significant loss in television audiences for licensed Canadian broadcasters.” 35 CRTC, Broadcasting Policy Monitoring Report, 2006, p.132. 36 Statistics Canada, General Social Survey: “The Internet and the way we spend our time” August 2, 2006. URL http://www.statcan.ca/english/research/56F0004MIE/56F0004MIE2006013.pdf ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 18

In this section, we focus on changes in the viewing of the Canadian conventional, pay and specialty services over the past five years.

The key technological change has been the rise in the penetration of digital TV, which gives more Canadians access to the broad array of broadcast services available in digital tiers.

In that connection, it is interesting to note that as digital penetration has increased, the share of audience enjoyed by Canadian conventional, pay and specialty TV broadcasters has increased rather than decreased.

This becomes clear when the BBM fall sweep surveys are reviewed. The results from the last five years are shown in Table 3 below.

Table 3

SHARE OF HOURS TUNED BY STATION GROUP 2001-2005

FALL Station 2001 2002 2003 2004 2005 Canadian Conventional TV Stations CBC O&O 4.4 4.5 4.7 4.2 4.6 CBC Affiliates 0.9 0.7 0.7 0.7 0.7 CBC TOTAL 5.4 5.3 5.6 5.1 5.5 CTV 11.3 12.2 11.9 13.1 13.4 Independent English 7.6 8 9.4 8.8 8.3 Global 7.7 7.9 7.5 7.2 7.4 Radio Canada O&O 4.1 3.4 2.7 3.8 3.4 Radio Canada Affiliates 0.9 0.8 0.6 0.8 0.7 RADIO CANADA TOTAL 5.1 4.2 3.3 4.6 4.2 TVA 8.7 8.7 8.2 8.1 7.9 Télé Québec 0.6 0.7 0.7 0.7 0.7 Quatre Saisons 3.4 3.5 4.1 3.1 2.9 Total Canadian Conventional TV 49.8 50.4 50.7 50.7 50.6 Provincial 1.2 1.4 1.2 1.4 1.5 Cable 0.3 0.4 0.3 0.3 0.3 Canadian Specialty/Pay 21.4 22.8 23.8 23.7 25.8 TOTAL CANADIAN SERVICES 72.7 75.0 76.0 76.1 78.2

US Conventional TV US: ABC Affiliates 2.4 2.1 1.9 1.7 1.7 NBC Affiliates 2.3 2.0 2.1 2.0 2.0 CBS Affiliates 2.1 2.1 2.2 2.1 2.1

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FOX Affiliates 2.5 2.0 2.0 1.7 1.5 PBS 1.4 1.1 1.1 1.0 0.9 Independent/UPN/WB 1.5 1.6 1.4 1.2 2.4 Total U.S. Conventional TV 12.2 10.9 10.7 9.7 9.3 U.S. Specialty/Pay 9.2 8 7.2 7.1 4.7 International 0.1 0.1 0.1 0.1 0.2 Others 1.4 1.4 1.6 1.9 1.2 VCR 4.2 4.5 4.5 4.9 4.7 PVR - - - 0.1 0.3

Total Hours (Millions) 642.9 659.4 667.4 666.5 678.7 Source: TV Basics, 2005-2006, p.23; BBM Fall 2005 Sweep Surveys (Mon-Sun 6A-2A)

As is seen from Table 3, Canadian conventional TV stations have held their own, garnering about 50% of tuning for each of the past five years. Viewing to Canadian pay and specialty services has steadily increased from 21% of viewing hours to 26%. This increase in viewing has been at the expense of U.S. conventional TV stations (dropping from 12% to 9%) and U.S. specialty services (dropping from 9% to 5% of viewing).

Similar trends are observable from the CRTC data in the 2006 Broadcasting Policy Monitoring Report (see Table 3.3 at p.43). Viewing to non-Canadian broadcast services has steadily dropped from 21.2% in 2002-03 to only 17.6% in 2004-05.

If one looks only at viewing to English-language services, the story is similar. In 1993, over ten years ago, the share of the Canadian English-language audience by U.S. broadcasters (both conventional and specialty) was 33%. But by 2005, this share had shrunk to only 23%. Conversely, the English-language audience share of Canadian broadcasters, as reported by Neilsen, rose from 67% to 77%.

The CRTC has developed similar numbers in its 2006 Broadcasting Policy Monitoring Report, based on BBM metered data. The CRTC numbers break out viewing in Quebec so it is possible to measure the viewing share of all broadcast services in Canada outside Quebec. The numbers are shown in Table 4 below.

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Table 4

Viewing share of Canadian and non-Canadian broadcast services in Canada excluding Quebec

Viewing Share % 2002-03 2003-04 2004-05

Canadian Conventional Broadcasters 39.4 39.1 39.0

Canadian Pay & Specialty 33.6 36.8 38.3

Non-Canadian Conventional 12.9 12.0 10.7 Broadcasters Non-Canadian Pay & Specialty 13.3 11.4 11.3

Source: CRTC Broadcasting Policy Monitoring Report, 2006, Table 3.3, at p.43.

What can be shown from these numbers?

Within these numbers, over-the-air broadcasters have suffered from the increased fragmentation of audience caused by the introduction of pay and specialty services. But even there, the aggregate audience share of the Canadian over-the-air broadcasters in English Canada has stabilized at about 38-40% over the last four years. And as we will see further below, the ad revenue of those broadcasters has not declined but has continued to rise, albeit less dramatically than the revenue of the pay and specialty services.

It is important to realize that these numbers do not reflect the relative viewing to Canadian and non-Canadian programming on these services. As before, the majority of television viewing in English Canada continues to be U.S. programming. However, more of that viewing is to Canadian stations and services, which are the only players in the system that support the creation and exhibition of Canadian programming. To the extent that control over the broadcasting system is repatriated to Canadian stations and services in this way, and advertising revenue to those stations is maximized, so too is their concomitant ability to contribute more to finance quality Canadian programming.

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 21

b) With respect to the usage of audio-visual technologies by Canadians, (iii) how Canadians of different generations use various technologies and the impact that these different uses will have on the broadcasting system

Children, Teenagers and Television

Television viewing by children and teenagers has for many years been lower than for adult viewers. However, as reported by the CRTC, that viewing is on the rise.37 Children 2-11 watched 20.5 hours of television per week in 2004-05, an increase from 18.3 hours in 2001-02. Television viewing by teens 12-17 rose from 20.9 hours a week to 21.3 hours a week over the same period. Thus, despite the rise in Internet and mobile usage by the teen demographic, this does not appear to have negatively impacted their TV viewing.

TV Viewing Online

Generally, younger audiences are viewing content online more than the older generations. Research from the U.S. indicates that 31% of teenagers with access to the Internet download video files to their computer, compared to 14% of online adults.38 The Canadian situation is similar. A 2005 survey found that 40 percent of Canadian students in grade 11 downloaded movies and TV shows on computers connected to the Internet.39

Usage of Mobile Devices

Penetration of cellular phones is high among the younger generation. Two- thirds of Canadian students (grades 4 to 11) used a cellular phone; and nearly one- quarter of Canadian students actually owned their own cellular phone.40

Also, people aged 18 to 29 year are much heavier users of data services on their cellular phones compared to older generations. In the U.S., research demonstrates that 65% of 18-29 year olds text message compared to 35% of the general population.41 28% of the younger cohort use cellular phones to access the Internet, compared to 14% of older population. 47% of youth play mobile games compared to 22% overall, and 14% have used their phone to vote in a TV contest compared to 1% of the overall population. Only 5% of 18-29 year olds view video or

37 CRTC, Broadcasting Policy Monitoring Report, 2006, at p.41. 38 “Teen Content Creators and Consumers”, Pew Internet and American Life Project, November 2, 2005. 39 Media Awareness Network (2005). Young Canadians in a Wired World, Phase II Student Survey., prepared by Erin Research Inc., Ottawa, p. 20 40 Media Awareness Network (2005)Young Canadians in the Wired World, Phase II, Trends and Recommendations, November 2005, page 16 41 Note the 35% is slightly higher than the Canadian figure of 30% cited earlier; therefore, these findings are indicative of the Canadian situation rather than directly comparable. ______

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TV on their phones compared to the overall population (2%); however, 23% of young would like this feature on their phone compared to 14% overall42. While there are no comparable Canadian figures publicly available, Canada and the U.S. consumers share similar characteristics in the usage of cellular phones (see page 31); therefore, we can assume trends are similar in Canada.

Gaming

Gaming is a significant activity among young people, but is also gaining popularity among the general population – in the U.S., the average age of a gamer is 33 years old43 and 25% of gamers are over 55 years old. Games are played on a PC, mobile phone, PDA as well as a games console, such as a Sony Playstation or an Xbox. PC and console games are often played online, and some are categorized as “multiplayer” – that is, gamers compete against each other virtually online. To enable multiplayer online playing, consoles now come with broadband connections.

PC games are more popular with older people compared to console games – 44% of most frequent players for PC games are over 35 compared to 25% of the most frequent players for console gamers. Overall, across all ages, game players tend to be male – 62% of all game players are male.44 In the U.S., 88% of boys ages 12 to 17 own a game console, compared with 63% of girls the same age.

Console gaming is very popular – today, over 3.5 million Canadian households have one or more game consoles.45 While consoles often sit in a bedroom – particularly when owned by a teen or a child – companies such as Microsoft are increasingly upgrading devices with add-ons such as connections to MP3 players and to home computers in the hopes that it may bring the console into the living room and thus attract a wider audience.46 Therefore, the game console will increasingly sit alongside the television in the centre of the home.

Also, as game companies are increasingly targeting a wider audience, games are becoming ever more sophisticated and are beginning to become Hollywood- quality, including the use of top-quality animation as well as the involvement of film stars. For example, actor Samuel L. Jackson and rapper/actor Ice T were featured in the U.S. popular game Grand Theft Auto: San Andreas. Hollywood writers are also becoming involved in gaming – Bruce Feirstein is the writer of three James

42 Pew Internet and American Life Project, Press Release,” AOL cell phone survey”, March 8-28, 2006.; http://www.pewInternet.org/pdfs/PIP_Cell_phone_study.pdf 43 Entertainment Software Association,”Top Ten Facts”, URL: http://www.theesa.com/facts/top_10_facts.php 44 Entertainment Software Association (2006); Essential Facts about the Computer and Video Game Industry. 45 Canada Newswire, cited in “Rogers PWR Playgaming Championships”, Saturday March 19, 2005 URL: http://www.all-Internet- news.com/articles/online_games/rogers_pwr_play_gaming_championships_pit_man_against_ma chine_825.html 46 BBC News, “Microsoft’s big games gamble”, November 3, 2005 ______

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Bond feature films but has also written two James Bond videogames. Such a trend is also occurring in Canada – Canadian Michael Ironside is the voice of Sam Fisher in Tom Clancy’s Splinter Cell Series, and Quebecois film director Michel Poulette recently directed animated sequences within Ubisoft’s video game Myst IV.

In the U.S. and the U.K., many analysts suggest that television viewing is declining among younger audiences because of the increased time spent on gaming – for example, 55% of boys under 17 say they would rather play games than watch TV (U.S.).47 Online gamers spend an average of 6.1 hours per week playing.48 However, as in Canada, there is no downward trend in television viewing among younger audiences. Thus, this activity is likely additive to TV viewing.

Online Use – Generational Differences

There are significant generational differences in Internet usage. U.S. research demonstrates that people up to the age of 27 spend 12.2 hours online every week — 28 percent longer than 27- to 40-year-olds and almost twice as long as 51- to 61-year-old olds.49

In addition, people under 27 are also much more likely to engage in social computing activities while online. For example, they are 50% more likely than 27 to 40 year olds to send instant messages, twice as likely to read blogs, and three times as likely to use social networking sites like MySpace.50 In Canada for pre-teens, user-generated content is also popular. Among boys and girls aged 8-11, user- generated site “ebaumsWorld” is the second most popular site. Other top-rated sites include gaming sites such as Addicting Games, and Neopets (a virtual pet website).51

The purpose of using the Internet also varies by generation. In Canada, the highest percentage of Internet users cite ‘general browsing’ as an activity undertaken online, whereas those aged 46 and upwards cite email usage as the most popular activity online.52 Also older audiences don’t tend to use the Internet for entertainment purposes as much as the younger generation. The chart below highlights the disparity in involvement in downloading music, playing games and participating in chat rooms between the generations.

47 Forrester Research ; “Young Consumers Are The First "Technology Everywhere" Generation”; Press Release, Cambridge, Mass., December 6, 2005 48 Ibid 49Forrester Research; “Forrester Research Assesses The State Of Consumer Technology Adoption”; Press Release , Cambridge, Mass., July 31, 2006 50 Ibid 51 MediaAwareness Network, Young Canadians and a Wired World – Phase II, ERIN Research, 2003 (updated in 2005) 52 Statistics Canada (2003), Adult Literacy and Life Skills Survey ______

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Also, older audiences tend to view content online during the day compared to younger audiences – under 18 year olds are three times more likely to access the Internet evenings and weekends than the adult population.53

Table 5

Purposes of Internet use, by age group, Canada, 2003

Activity Age Age Age Age Age Ratio of 16 26 36 46 56 youngest to 25 to 35 to 45 to 55 to 65 age % of Internet users performing activity in a group: oldest typical month General browsing 92.3 88.9 84.9 79.7 71.2 1.3 Email 89.1 88.6 84.8 86.6 85.0 1.0 Obtain or save music 73.5 38.8 28.9 19.3 13.0 5.7 Read about news and 66.8 75.8 69.6 67.3 64.8 1.0 current events Participate in chat groups 50.7 24.2 15.5 12.2 9.9 5.1 or online discussions Search employment 44.1 41.9 28.5 20.1 8.9 4.9 opportunities Search for weather 41.6 51.5 45.3 41.9 41.9 1.0 related information Shopping 41.2 49.4 44.7 40.9 34.2 1.2 Search for health-related 34.9 56.2 52.8 53.4 54.8 0.6 information Playing games with others 34.4 16.5 9.4 7.0 6.5 5.3 Search for government 29.4 49.1 50.3 47.2 44.8 0.7 information Banking 28.5 51.2 41.9 36.3 33.5 0.9 Formal education or 25.7 18.1 15.2 14.6 6.6* 3.9 training Source: Statistics Canada, Adult Literacy and Life Skills Survey, 2003; *use with caution: coefficient of variation between 16.6%- 33.3%

While the activities online differ, older Canadians are increasing going online. New research shows that seniors now make up the fastest-growing group of Canadians who own computers. The number of people age 65 and over who own a computer increased by 12 percentage points last year, while the number of people

53 Online Publishers’ Association, Press Release, February 6, 2003; URL: http://www.online- publishers.org/?pg=press&dt=020603 ______

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in the 55- to-64 age group who own a computer was up seven percentage points.54 The same research also indicates that there was a significant increase in the number of older Canadians who are using the Internet. More than 65% of Canadians age 55-64 reported having Internet access at the end of last year, a 15% increase from March 2004.55

Overall, it appears that the older generations may catch up over time to the level of Internet usage seen among younger generations, although the activities conducted online will likely continue to differ, as social networking, user-generated content and general entertainment are of more importance for younger audiences, and general reference and email communication is likely of more importance for the older generation.

Impacts on the Broadcasting System

While the older generation is catching up to the young in their uptake of technologies such as the usage of PCs and the Internet, there appears to be divergence in the use of the technologies by generation. The younger generation appears to be using the Internet for communication and entertainment purposes – such as gaming, social networking, distributing and creating user-generated content. However, the older generation appears to be primarily using the Internet for research and other functional uses, as well as communication via email. This divergence is also evident in the time of day when the generations access the Internet – the young, at night and weekends for their leisure time, the older generation, during the day at work.

In addition, the young demonstrate increasingly sophisticated usage of other technologies, such as mobile devices, compared to the older generation. Also, gaming, while reasonably prevalent among the older generation, still remains a more popular and time consuming activity among younger consumers.

Yet, as we have seen, these technology uses aren’t necessarily impacting the amount of television being viewed. However, in order to retain brand loyalty and the full attention of these audiences who have grown up on a diet of instant communication via the Internet as well as their mobiles and highly interactive entertainment experiences such as gaming, broadcasters and producers will need to provide sophisticated content experiences across the various platforms where these audiences spend their time. We outline evidence further below56 which demonstrates that broadcasters and producers in fact are already adapting to these new behaviours – by extending broadcast properties onto new platforms, such as mobile devices and the PC Internet.

54 Weeks, Carly “CANADA Embraces Technology”, OWL Institute, July 4th 2006, URL: http://owli.org/node/1414?PHPSESSID=0b011dfcf8053b62c00c91053f75f847 55 Ibid. 56 Below at p.42 ff. ______

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The greatest impact on the system, then, is that broadcasters and producers will soon no longer be television companies, but multi-platform content companies. In turn, business models and organizational structures will need to adapt to this cross-platform world.

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 27

b) With respect to the usage of audio-visual technologies by Canadians, (iv) a comparison of the adoption rate for technologies between Canada and other countries

In this section, we examine adoption rates for four technologies around the world as compared with Canada, namely, digital TV, high definition, IPTV and mobile.

Digital TV Uptake Around the World

Digital TV penetration in the U.S. is approximately 55%,57 compared to digital penetration in Canada which stands at 45%. Some European countries are already far ahead of the U.S. and Canada, and analysts predict that all of Europe will overtake the U.S. with regard to digital TV penetration by the end of 2010.58

This trend is confirmed by the statistics outlined by Ofcom, the U.K. Office of Communications, which indicate that in March 2006 the U.K. has the highest digital penetration of any country in the world. As of March 2006, digital television was viewed by approximately 70% of all U.K. television households, up from 65.9% in the previous quarter. Take-up has not passed the 50% mark in any other European country.59 This high penetration in the U.K. has been partly driven by the satellite provider, Sky, subsidizing set-top boxes but also by the high success of the free Digital Terrestrial Service, Freeview. Digital penetration in Wales, where the U.K. is aiming to switch analog off first, had reached 80% by the end of 2005.60 Analysts predict that by 2010, almost 95% of households will receive digital TV in the U.K. Increased digital uptake could also be driven by the imminent launch of Freesat – a free-to-air satellite service that will target the population who cannot receive terrestrial digital signals.

In Western Europe, 50% of digital TV households receive service by satellite, with 24% using terrestrial broadcast, followed by 22% on cable and 4% via IPTV. As in the U.K., then, the major digital force is in DTH satellite services, unlike North America where cable is the main distributor and was already offering substantial programming choice in analog form but is now undergoing a transition to digital. Analysts predict that almost 69% of European households will have made the transition to digital services by 2010.61 The growth will be driven by the availability of digital terrestrial services as well as IPTV services. Although the majority of European digital TV viewers are still paying for digital TV, free services are growing

57 Analogue to Digital Switchover, Parliamentary Office of Science and Technology, U.K., postnote June 2006, Number 2064 58 Moore Carla, “Europe to surpass US in digital TV penetration by 2010”, July 28th 2006, http://www.digitalmediaasia.com/default.asp?ArticleID=17088 59 Ofcom Press Release, 2006 URL : http://www.ofcom.org.uk/media/news/2006/03/nr_20060317 60 Ibid 61 Research and Markets, Digital TV Markets: Europe and the US (Market Focus), 2006. ______

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quickly and already account for more than one-fifth of the market. One analyst – Canalsys - expects over 40% of European digital TV households to be using only the free services by 2008.62

Table 6 below ranks the top 10 European countries on the basis of household penetration of digital television. By contrast, digital household penetration in Canada in 2005 was 45%.

Table 6

Top 10 European countries by digital TV household penetration (year end)

Country 2004 – digital tv penetration 2005 – digital tv penetration UK 58.1% 66.1% Sweden 33.4% 43.8% Ireland 33.0% 39.6% Norway 33.9% 37.6% Finland 27.5% 32.3% France 24.4% 26.8% Italy 15.5% 17.7% Portugal 13.1% 17.5% Spain 15.1% 17.5% Denmark 12.0% 15.2% Source: Global Information Inc., “UK leads the way in Euro digital TV conversion”, URL: http://www.gii.co.jp/press/fi23873_en.shtml

Sweden, which is expected to have ended 2005 with a digital TV penetration rate of almost 44%, is committed to make the switchover to digital in 2008. Ireland, Norway and Finland are the only other countries with a digital TV penetration above 30% at the end of 2005. All these countries are looking to make the digital switchover before the end of 2010. In the U.K., where penetration is the highest, the government intends to switch off the analogue signal between 2008 and 2012.

However, plans for an early analog switch-off for some European territories remain ambitious. France, which has a provisional date of 2010, will end 2005 with digital TV penetration at slightly more than one quarter of its households. Italy, which has one of the region’s most ambitious switchover timetables, was expected to finish 2005 with a penetration rate below 20%.

The top 10 countries in the Asia-Pacific region in terms of digital TV penetration are as follows:

62Canalys Press Release, “Digital Broadcast TV in Europe is a shifting market,” 21 October 2005; URL: http://www.canalys.com/pr/2005/r2005101.htm ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 29

Table 7

Top 10 Digital TV Asia Pacific Countries

Digital Penetration Rate Ranking Country (Dec-05 in %) 1 Hong Kong 57.0% 2 Malaysia 48.6% 3 New Zealand 41.4% 4 Australia 34.7% 5 Japan 21.9% 6 South Korea 17.7% 7 China 8.5% 8 Singapore 7.7% 9 Taiwan 4.8% 10 Thailand 2.2% Source: E-media institute, “Top 10 Digital TV Asia Pacific Countries”; extracted from country research programs, 2005 http://www.e- mediainstitute.com/top10digitaltvasiapacificcountries_en.content

Internet Protocol TV (IPTV) Uptake

In the first six months of 2005 the number of subscribers to European IPTV services increased by 66%.63 France is on the cutting edge of high-speed broadband and is the European leader so far.64 There are 700,000 subscribers to IPTV in Europe – 281,000 in France, 190,000 in Italy, and 5,800 in Spain. Penetration of IPTV in France is 1.5% of total households.65 By comparison, in Canada, just over 77,000 households subscribe to IPTV.

High Definition TV (HDTV) Uptake Around the World

As of early 2006, HD broadcasts were available in 12 countries around the world: U.S., Canada, Japan, Australia, South Korea, China, Germany, Austria, Sweden, Finland, Denmark and Norway.

Mid-way through 2006, 15 million homes were tuning into HD worldwide and penetration is projected to reach 20.3 million by year-end. The U.S. and Japan have the greatest HDTV penetration worldwide – combined, they account for 91% of the global market.66 (For a detailed discussion of the Canadian situation, see pages 42- 50 of this submission.)

63 Research and Markets, European IPTV: Market Assessment and Forecasts To 2009 Research and Markets, citing Screen Digest, November 2005, http://www.researchandmarkets.com/reports/c28598 64 Canalys, “Digital Broadcast TV in Europe is a shifting market” , 21 October 2005; URL: http://www.canalys.com/pr/2005/r2005101.htm 65 Ibid 66 Webdale, Jonathan. “HD on track for 20 million homes”, C21media.net, August 15, 2006, URL: http://www.c21media.net/news/detail.asp?area=1&article=31715 ______

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In the U.S., by the end of 2005 there were 19 million households with HDTV sets in the U.S. (17% of total TV households), and 11 million of these were actually watching HD broadcasts (either through HD decoders or off-air via built-in HD tuners). In the US, receiver penetration was 12% in 2005, up 7% from the year before.67 In a recent interview, Michael McEwen, head of Canadian Digital Television Inc., estimated that about 40% of American households have an HD-ready set.68

In Europe, during the lead-up to the World Cup 2006, the number of HD televisions sold to European consumers increased. This was a result of the efforts of broadcasters such as Premiere in Germany, TPS in France, Sky Italia in Italy, Canal Digital in the Nordic countries and the BBC who all broadcasted soccer (football) matches in HD format. However, without HD set-top boxes (the 'HD ready' households), viewers could not watch these matches in HD quality.

Before the World Cup in Germany, Vincent Létang, Screen Digest Senior Analyst, and author of the report “High Definition Television: Global uptake and assessment to 2010,” discounted the importance of the events as a trigger for HD. "The June World Cup in Germany was supposed to be the perfect kick-start for HD in Europe and its full thrust will be partly missed, but this does not jeopardize the introduction of HDTV. The strongest driver for HDTV is the success of flat panel television sets in Europe at the moment and the fact that a growing proportion of those are featuring HD resolution screens, which are standardized by the 'HD ready' Europe-wide label introduced in 2005."

At the end of 2005 there were already 2 million HD-ready TV households in Europe, and by 2010 it is predicted that there will be more than 50 million HD-ready TV sets. This growing pool of HD households should create new opportunities for European pay TV operators, assuming they can extract premium pricing through offering an HD service. Screen Digest predicts that by 2010 there will be approximately 100 HD channels available in Europe and more than 11 million households will be actually watching television in HD quality (receiving HD broadcasts on HD ready sets and set-top boxes). Thus, while the HD product will be exhibited by broadcasters, only a minority of TVHHs equipped to watch HD will actually do so.

Mobile Adoption

Canada currently lags behind many countries in the adoption of mobile telephones. With a penetration rate of 61% of households, Canada is behind Japan at 95%, France at 85%, the U.K. at 79%, the U.S. at 75%, and Russia at 63%.69 Canada‘s wireless penetration is second last in the OECD and also lags behind

67 PWC (2006), Entertainment and Media Outlook 68 “Industry Finally Embracing HD”Playback Magazine, August 7, 2006, 69 Note the Canadian figure is households, compared to percentage of population cited on page 13. Source: Ipsos insight, quoted in the summary of research report, “Mobile Payments in Japan’, e-marketer, July 2006. http://www.emarketer.com/Reports/All/Mobile_pay_japan_jul06.aspx ______

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penetration in the U.S.70 In addition, mobile owners in Asia tend to spend more time with their device compared to those in Canada and the U.S. 71

The reasons for Canada to be behind the rest of the developed world in mobile uptake and usage lie in the structure of the industry. In Europe, the pricing of fixed wireline compared to wireless services has been less appealing to consumers. The flat pricing for local calls, the low cost for long distance because of the earlier introduction of competition, and superior service in Canada for wireline connections have dampened the demand for mobile compared to Europe. However, Europe has led in the development and deployment of second- and third-generation wireless technologies, and these products will migrate to Canada.72

Also, a report from KPMG indicates that usage of cellular phones may differ by country due to different commuting habits, as North Americans spend less time commuting on public transport. For example, 32% of Asian consumers view short clips on their mobile while commuting compared to 16% of North Americans, and 23% of Europeans.73 Also, according to the report, North American consumers – as well as Europeans – are simply less willing than Asian consumers to spend extra money on converged services on their mobile.

High-Speed Broadband and Internet Uptake

The number of broadband subscriptions throughout the OECD74 continued to increase in the first half of 2005 from 119 million to 137 million. Broadband penetration in the OECD grew by 15% in the first half of the year to an average of 11.8 subscribers per 100 inhabitants (see Table 8 below). (Note the figures refer to percentage of the population, rather than per household). As penetration grows, broadband providers in the OECD are increasingly offering voice and video services over this platform. The speeds offered by providers are also increasing. It may be noted that penetration of broadband in Canada is quite advanced compared to many other countries within the OECD. The figures below, per inhabitant, indicate that 19.2% of inhabitants in Canada are broadband subscribers. Earlier figures cited on page 11 indicate that this figure is 49% of households.

70 Telecommunications Policy Review Panel, Final Report, (2006), commissioned by the Canadian Ministry of Industry, page 39 71 KPMG (2006),Consumers and Convergence, page 4 72 Telecommunications Policy Review, page 41 73 KPMG (2006) Consumers and Convergence, page 4 74 The OECD groups 30 member countries sharing a commitment to democratic government and the market economy. With active relationships with some 70 other countries , NGOs and civil society, it has a global reach. Best known for its publications and its statistics, its work covers economic and social issues from macroeconomics, to trade, education, development and science and innovation. Its members are: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States. ______

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Table 8

Broadband subscribers per 100 inhabitants, by technology, June 2005

DSL Cable Other Total* Rank Total Subscribers Korea 13.9 8.9 2.7 25.5 1 12 260 969 Netherlands 13.6 8.9 0 22.5 2 3 642 315 Denmark 13.2 6.1 2.4 21.8 3 1 176 637 Iceland 21.0 0.30.4 21.7 4 63 553 Switzerland 12.7 7.2 0.4 20.3 5 1 515 446 Canada 9.4 9.7 0.1 19.2 6 6 142 662 Finland 16.3 2.20.2 18.7 7 978 600 Belgium 11.0 7.3 0 18.2 8 1 899 652 Norway 14.8 2.50.9 18.2 9 836 060 Sweden 11.3 2.7 2.5 16.5 10 1 482 843 Japan 11.0 2.4 3.0 16.4 11 20 953 090 United States 5.5 8.0 1.1 14.5 12 42 645 815 United Kingdom 9.7 3.8 0 13.5 13 8 095 000 France 11.9 0.8 0 12.8 14 7 935 900 Austria 7.0 5.4 0.1 12.5 15 1 025 036 Luxembourg 10.4 1.30 11.816 52 920 Australia 8.5 2.4 0.1 10.9 17 2 183 300 Germany 9.9 0.3 0.1 10.2 18 8 439 732 Italy 9.4 0 0.6 10.0 19 5 783 319 Portugal 5.1 4.7 0 9.9 20 1 031 491 Spain 7.0 2.2 0.1 9.3 21 3 949 234 New Zealand 6.4 0.3 0.3 6.9 22 283 798 Hungary 2.9 1.60.1 4.6 23 469 186 Ireland 3.5 0.40.5 4.3 24 175 500 Poland 2.5 0.7 0.1 3.3 25 1 250 000 Czech Republic 1.8 1.0 0 2.8 26 284 200 Slovak Republic 1.2 0.3 0.1 1.6 27 86 958 Turkey 1.1 00 1.2 28 862 843 Mexico 0.8 0.2 0 1.0 29 1 051 854 Greece 0.8 0 0 0.8 30 93 287 OECD 7.2 3.8 0.8 11.8 136 651 000 Source: OECD 2005 Broadband Statistics. (http://www.oecd.org/document/16/0,2340,en_2649_34225_35526608_1_1_1_1,00.html#data20 04); DSL, Cable and Other may not add up to total penetration due to rounding.

Other main highlights from the first half of 2005 are:75

¾ Korea maintains its lead in OECD broadband penetration with 25.5 subscribers per 100 inhabitants.

¾ The Netherlands has the second-highest penetration at 22.5 subscribers per 100 inhabitants. Denmark, Iceland and Switzerland complete the top five countries for broadband penetration.

75 OECD 2005 Broadband Statistics. URL: http://www.oecd.org/document/16/0,2340,en_2649_34225_35526608_1_1_1_1,00.html ______

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¾ DSL is now the leading broadband platform in 28 OECD countries. Canada and the United States are the two countries with more cable modem than DSL subscribers.

¾ The "Other broadband" category had the highest percentage growth in the past six months, growing 13%.

¾ The overall breakdown of broadband technologies in June 2005 is DSL: 61.2%, Cable modem, 32.0%; Other technologies: 6.8% (e.g. fibre optics, LAN, satellite and fixed wireless).

TV Viewing Around the World

Overall, North American consumers watch much more television than their counterparts in Asia or Europe.76 Table 9 below outlines the number of hours spent viewing television per week, indicating that television viewing in the U.S is higher than in France, the U.K and other countries. Figures for Canada (see page 9) demonstrate that viewing in Canada is much higher than the U.S. – at 28 hours per week compared to the 19 given below for the U.S. However, the sources are different and hence may not be directly comparable.

Overall, the U.S. is expected to see an increase in television viewing, while other countries –such as the U.K. – are experiencing a decline in viewing. Canada’s experience is aligned more closely with the U.S., as time spent viewing appears to be slightly increasing.

Table 9

International Media Habits

Number of hours per week Watching TV Reading Listening On a spent: to Radio computer / the Internet United Kingdom 18.0 - 10.5 8.8 France 17.3 6.9 - 8.8 United States 19.0 - 10.2 8.8 Brazil 18.4 - 17.2 10.5 Taiwan 18.9 - - 12.6 Source: The Economist (2006,)Pocket World in Figures, 2006 Edition, p.94

In the U.S., total TV consumption hours have continued to grow; the average U.S. household was estimated to spend 1,826 hours with its TV in 2005 (the

76 KPMG (2005), Consumers and Convergence, p. 5 ______

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equivalent of more than five hours per day). “TV consumption is expected to rise, in part due to the appeal of new technologies which allow increased control over when, how and where content is viewed.” 77

TV Viewing Online Around the World

In the U.K., the BBC launched a pilot of its Internet media player (now re- named BBC iPlayer) offerings triallists on-demand access to a range of downloadable television programmes and radio content 78 The full service must gain approval from the regulator before it can launch. Channel 4 has yet to launch their on-demand service.

In this regard, Canada is ahead of the U.K. as broadcasters such as CTV have launched on-demand services. However, in the U.S. many broadcasters offer online on-demand services, and iTunes in the U.S. carries popular television programs such as 24.

User-Generated Content Around the World

User-generated content is as popular in other countries as it is in Canada currently.

In the U.K., YouTube surpassed the reach of BBC's websites in May, 2006.79 The average visitor spends 28 minutes on YouTube. Its success has been such that it is rumoured to be valued at as much as $1bn (£536bn) - far more than the £332m that Rupert Murdoch paid for the social networking site MySpace.

The implication for broadcasters is that they will likely need to learn to incorporate user-generated content and interactivity into their offering – the BBC’s loss of online share to YouTube is a warning for media companies with even the deepest pockets.

In the U.S., according to Nielsen/Net Ratings, YouTube's American unique users grew by 297% in the first half of the year (see Table 10 below). Time spent viewing per person also increased by an average of 10 minutes.

YouTube’s popularity has led the conventional broadcasters in the U.S. to sit up and take notice of the site. NBC recently decided to work with YouTube by advertising on the site as well as promoting the site on air. This new strategy is an about-turn from earlier in the year, when NBC Universal ordered YouTube to remove a highly popular clip taken from NBC’s program Saturday Night Live. YouTube removed the clip, but the legal action prompted such controversy and

77 IBM Institute for Business value (27 March 2006), The end of TV as we know It 78 The Communications Market 2006 Overview , Ofcom, http://www.ofcom.org.uk/research/cm/overview06/ 79 Sweney Mark, “The rise and rise of YouTube”, The Guardian, Monday July 31, 2006 URL: MediaGuardian.co.uk ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 35 national attention that YouTube’s usage significantly increased, leading NBC to change its strategy.80

Table 10

U.S. YouTube Audience 2006

Web Metric Jan-06 June-06 Percent Growth Unique Audience 4,942 19,618 297 (000) Time spent per 0:17:22 0:27:58 64 person (hh:mm:ss) Source: “YouTube U.S. Web Traffic Grows 75% Week Over Week”, Press Release, Neilsen, NetRatings, July 21 2006

The popularity of the site and the impact of User Generated Content in general are being felt worldwide.

80Sandoval, Greg. “NBC Strikes Deal with YouTube,” CNET News June 27, 2006, http://news.com.com/NBC+strikes+deal+with+YouTube/2100-1025_3-6088617.html ______

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b) With respect to the usage of audio-visual technologies by Canadians, (v) the demand for various kinds of programming and programming services by the Canadian population, taking into account its full diversity

The great majority of TV viewing in Canada is to broadcast services that program in English or French. However, given the diversity of ethnic groups in Canada, it is understandable that demand has increased for access to broadcast services in foreign languages.

The CRTC has licensed a number of over the air ethnic TV broadcasters, as well as ethnic pay and specialty services, initially for analog distribution and more recently as digital services. It has also authorized the carriage of numerous non- Canadian satellite services in foreign languages. A listing and description of all these services is provided in the CRTC’s 2006 Broadcasting Policy Monitoring Report.81

The licensing of these services has resulted in a slight increase in viewing to ethnic services. However, viewing of all these third-language services was still only 1.3 percent of total viewing in 2004-05.82

81 CRTC, Broadcasting Policy Monitoring Report, 2006, at pp.89-93, 96-99. 82 Ibid, Table 3.3. at p.43 ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 37 b) With respect to the usage of audio-visual technologies by Canadians, (vi) how future generations will consume or access content, programming, and programming services

As technologies evolve and broadcast undertakings innovate and provide new offerings to consumers, the viewing patterns of television audiences will change. But the evidence seen so far – from the supply side as well as the demand – indicates that the use of the platforms will be in addition to television viewing. Fears of what has been dubbed ‘cannibalization’ – new platforms eating into TV viewing – appear unfounded for a number of key reasons:

Cross-Platform Projects are Anchored Around Major TV Properties

Broadcasters are increasingly commissioning cross-platform projects – essentially productions which feature related content across platforms. These projects are typically based on an anchor TV program, around which the complementary initiatives are based. For example, children’s television series– such as Raven Tales commissioned by APTN – feature the same animation or filmed characters on websites and interactive games. With Raven Tales, a child can watch the series on APTN, and then go to the website to interact with the same characters on the game.

Reflecting this development, the Canadian Gemini awards have introduced a new award for cross-platform programs.

Critical to the success of these cross-platform projects, however, is an anchor television program. The central TV program engages audiences with the storyline, and creates connections with the characters. Additional platforms can then work to extend and enhance the connection already formed through the main television program. With Raven Tales, for example, a child would get to know the animal characters through the television program, then engage further via an interactive game. With drama programs such as Whistler and Degrassi, the “lean-back” television experience enhances an engagement with the characters that may have begun online, or alternatively can also create such an interest in a storyline or characters that the viewer is driven to other platforms to engage further.

Mobile TV Provides Snacks, Not the entrée

Mobile TV offerings currently provide clips of content typically lasting no longer than several minutes. Much of this content is repurposed from original tv content, and that which is created specifically for mobile typically consists of shorts and clips. Such short-form content typically leads to ‘snack viewing’ – content viewed briefly on the go, rather than long-form content viewed on the couch. Therefore, it is not likely that mobile will replace the entrée of the couch and the television.

______

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Internet TV Promotes the Real Thing

Evidence in Canada and the U.S. indicate that viewing of content online not only fails to cannibalize television viewing, but it can serve to increase ratings. Viewers can sample content online, and if they like it, may in turn go to watch the real-thing on television. Also, viewing online offers a “catch-up” service for those without a Personal Video Recorder on their television. If viewers have the chance to get up to speed on plot lines in between missed episodes, the risk of losing viewers because they have fallen behind on the plot is diminished. In addition, viewing links online are easy to circulate to friends, which offers the opportunity for broadcasters to use viral marketing to promote content on their site.

______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 39

b) With respect to the usage of audio-visual technologies by Canadians,

(vii) the impact this evolution of technologies has for content and programming choices available to Canadians, including local, regional, national and international content

With every new change in technology comes a set of new opportunities as well as challenges for the audio-visual industry. With the advent of the multi- channel universe, the industry had to adapt to intensified competition from numerous foreign channels. Canadian successes – such as Corner Gas – have achieved high ratings in Canada despite the competition from such non-Canadian channels, compounded by the use of simultaneous substitution by commercial TV broadcasters.

The growth of new platforms only intensifies the changes already witnessed with the multi-channel universe. Not only do broadcasters have to compete with one another for eyeballs, they will need to compete for attention against mobile and Internet content and applications. Yet, in this competitive environment, the need for local and national content remains.

Some may argue that with the rise of user-generated content, local, regional and national content will be produced by amateurs without any additional support. However, the videos which appear on YouTube after a search on ‘Canada’ cannot possibly serve the same role as the high-quality content made by professional Canadian producers and creators – that is, to tell engaging stories about Canada to Canadians.

______

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c) With respect to the impact on the broadcasting system, (i) the adoption of technologies by broadcasting undertakings since January 1, 2000

In this section, we trace what broadcasters, cable companies, and DTH providers have been doing over the last several years in a number of areas – including digital TV, interactive TV, and HDTV.

As the CAB stated in their submission to the CRTC regarding HD, there have been three key steps in the 1990s digital transition 1) expansion of choice 2) analog to digital 3) transition to HD.83 In this section we trace how the broadcasting system has evolved in these three key areas.

Overall, choice has exploded, and as addressed in the previous sections, viewing of specialties has been at the expense of conventional channels, although the viewing share of Canadian conventional channels has generally stabilized in the last five years. But, the situation is not as severe as some pundits predicted in the late 90s. Conventional broadcasters (commercial, English-language ones) still pour their money into the American series hits, which continue to dominate viewing. Technologies that were touted as revolutionizing our lives – such as interactive television – have nearly died a quiet death. Few people are ordering pizza over interactive television as the technology forecasters had declared. On the flipside, few experts would have predicted that simply better quality TV would have been the key selling point of digital.

High definition (HD) may be one reason for the growth of digital, but it is not a so-called “killer app” of digital television. Other features, such as the choice of additional channels, the electronic programming guide, and the VOD and PVR options have been the principal drivers for increased digital penetration of the multi- channel option.

If broadcasters want to aggressively pursue delivering HD programs and services, BDUs will have to undergo an exercise of prioritization within their digital delivery. This option could mean pursuing an HD strategy at the expense of struggling digital specialty channels still broadcast in standard definition. The result could be more weeding out of the lower performing digital channels

Canadian Digital Specialty Services

Investment in the digital-only specialty services licensed by the CRTC in 2000 has taken some time to realize benefits, as audiences for these services still remain small. The analog specialty services licensed in previous rounds have been very successful in garnering audience and revenue. Over time, the digital-only channels

83 CAB Response to PNs 2004-58 and 2005-1; Digital Migration and HD framework proceedings, April 21, 2005, p 10 ______

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with strong audience appeal will also be successful, although a number of the rest may have a difficult time surviving.

There is some early evidence of this phenomenon: ¾ The number of channels has proliferated since 2000, largely as a result of the digital round of specialty TV licences granted in 2001. However, among the digital channels, few are profitable. ¾ Alliance Atlantis expansion into digital cable through channels such as Showcase Action, BBC Canada, and National Geographic launched in 2001 is turning a profit for the first time this year.84 ¾ Alliance has 17% of the digital specialty channels in Canada, but its networks account for 48% of advertising dollars in the sector - smaller specialties with less audience appeal may have difficulty in turning a profit. ¾ Ads on digital networks still sell for between 60 and 70% of the value of conventional television on a “CPM” basis; thus, increased reliance on ad revenue would be difficult. ¾ Some digital specialties have already ceased operation – including WTSN, Edge TV, the green channel and MSNBC Canada. ¾ The new CRTC digital migration rules85 put into jeopardy the subscription revenues of the analog specialty TV channels over the longer term. As BDUs start renegotiating carriage and rates, it is expected that analog services could lose some of their subscription revenues. ¾ Over the last two decades the CRTC has made sure that children’s and youth programming has had a place in Canadian households’ cable and satellite channel line-up. Since 1987, the CRTC has licensed six specialty television services (YTV, VRAK-TV, Teletoon/Télétoon, TreeHouse, BBC Kids, Discovery Kids) and one pay television service (Family Channel) with programming devoted to children and youth. ¾ These specialty and pay services have emerged as important television destinations for children and youth, and key outlets for Canadian children’s and youth programming. With the exception of the Category 2 digital licensees, virtually all of the specialty and pay television licensees have expenditure requirements that mandate them to spend between 20% and 47% of revenues on Canadian programming. ¾ Broadcasters in these categories of specialty TV channels can be expected to be more aggressive with respect to the use of new interactive technologies as they try to retain their children/youth audiences.

84 Robertson, Grant. “Digital TV turns profit at Alliance for the first time,” Globe and Mail, March 4, 2006 85 Broadcasting Public Notice CRTC 2006-23, Digital Migration ______

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Interactive Television

Interactive television services in Canada are limited – and so is usage, despite the hype these services received in the late 1990s. While Forrester predicted a bright future for interactive television back in 2001,86 in fact there are now only a few examples of innovative offerings by broadcasters and BDUs. There are three broad categories, identified as follows:87

1. Enhanced programming services; 2. Stand-alone services; and 3. Internet-over-TV services88

Based on information available, there are few interactive TV services available in Canada. In category 2, interactive services are primarily in news, sports and weather – for example, a weather service on BellExpressVu is linked to linear weather content on the Weather Channel. Those that remain are primarily in categories 1 and 2, and the Internet continues to be delivered via computer and mobile devices. In category 2, there are a limited number of game channels available (including gambling channels) for a monthly fee.

One enhanced programming service carried by all BDUs is Bite TV, which is an interactive TV channel, not very different from the CBC’s ZED-TV channel – with the key difference being that the channel is interactive on TV, rather than online.

Video-on-Demand

Video-on-demand has been a long time coming, all over the world, and has seen a number of services which could be seen as predecessors. Time shifting began to be offered by the Canadian DTH providers five years ago, and the practice was adopted as well by cable operators as a competitive response. Time shifting is known as the ‘poor man’s PVR’. Pay-per-view then became a key offering in the array of services offered by BDUs. And now increasingly video-on-demand offerings are on the rise.

As of May 2003, there were 13 licensed video-on-demand programming undertakings in Canada.89 Now, every major broadcast distribution undertaking has some form of VOD offering: Bell ExpressVu (PPV), VU! On Demand (VOD) owned by BCE; Cogeco Cable offers a regional VOD service; Quebecor – Archambault Group provides Illico sur demande; Rogers and Shaw have regional VOD services.

86 Forrester Research cited in “Microsoft Adds Interactive TV Partners”, E-Commerce Times, January 12, 2000 87 CRTC Report on Interactive Television Services, 22 October 2002 88 Ibid 89 CRTC, Broadcasting Policy Monitoring Report, 2006, p. 78. ______

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As BDUs offer these services, they are also seeking new revenue streams. In July of this year, the CRTC approved applications from Cogeco Cable and Bell ExpressVu that allows the companies to air commercials in selected VOD offerings.90 In Broadcasting Decision CRTC 2006-302 and Broadcasting Decision CRTC 2006-303, ExpressVu and Cogeco were permitted to air commercials, provided certain conditions are met. One of the conditions is that advertising can only be included if the content is offered to subscribers on-demand at no extra charge.

Essentially, this ruling limits companies from pursuing a mixed revenue strategy, as currently occurs on specialty channels. Under the new rules, however, companies can replay programs on their on-demand systems that have already aired on commercial television – complete with commercials – provided no extra charge is added. VOD then may become a catch-up service for what has already aired. Whether the benefits of such a catch-up-service outweigh the costs of delivery will have to be determined.

The decision does not address whether the ability to fast forward through the commercials would be enabled or disabled by the service providers.

Digital Subscriber Lines (DSL) in Canada

DSL (Digital Subscriber Line) is a technology for bringing high-bandwidth information to homes and small businesses over ordinary copper telephone lines. A number of DSL undertakings provided by telephone companies are offering video- on-demand – Aliant, Bell Canada, MTS Allstream, SaskTel and Telus.91

Bell Canada is currently undergoing trials for video-over-DSL to residential homes in Toronto, with a view to complementing its existing wired video service. This wired video service uses fibre to connect Multiple Dwelling Units (MDU) to the network. Bell Canada also operates the Canadian direct-to-home satellite service, Bell ExpressVu. The company is also interested in using ADSL as a back channel for its satellite network.92

High Definition (HD) in Canada

Around the world, broadcasters and cable/DTH operators are moving towards high definition. For example, in the U.K., key players such as the BBC to Sky is investing significant amounts in delivery of HD, and the core proposition of the new free-to-air satellite service being launched by the BBC is offering the free-to-air channels on HD. In the U.S., broadcasters and distribution undertakings are quickly ramping up their offering of the new technology as well.

90 “CRTC OKs Commercials in Selected VOD“, Broadcaster Magazine, July 2006 91 CRTC Broadcast Monitoring Policy Report, 2006, page 102 92 “Service Providers Fight for Digital Home”,Decima Reports, March 7, 2006 ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 44

An HD infrastructure is important for Canada as consumers are increasingly demanding it as they purchase HD sets. If Canadian broadcasters do not offer HD programming, there is the potential to lose Canadian viewers to the black market as Canadians with new HD receivers try to access U.S. originated HD signals.

Responding to HD Regulation in Canada

There is currently a hybrid approach to HD regulation in Canada. Existing pay and specialty services who wish to launch an HD service can choose between a light-handed approach with few privileges or a more traditional regulatory status and submit their applications for HD authorities accordingly – licence amendment for the first, a new licence for the second. In fact, as of May 1, 2006 the Commission has approved, by way of licence amendment, four analog specialty, two pay and ten category 2 specialty services93 for distribution in the HD format.

Indicators of Consumer Demand for HD

By the spring of 2006, it is estimated there were at least 320,000 BDU subscribers to discretionary HD services in Canada. Canadian DTH or cable subscribers have to pay a supplementary access fee to acquire the HD channel package. However, it is still difficult to predict what the HDTV “tier” take-up will be.

High quality wide-screen standard definition (SD) signals are proposed by some as an attractive alternative for some services, given costs, capacity limitations, and availability of programming.94 However, it is questionable whether the quality is significantly high enough to make a sufficient difference to consumers for them to make the incremental purchase decision.

The great majority of consumers who are buying wide-screen HD receivers are not then subscribing to HDTV services. According to a survey conducted by Decima Research Inc. in May and June of 2004, only 29% of respondents who have an HD display reported that their HD display was connected to an HD set top box provided by a cable or DTH provider. Even in the U.S., just over 1/3 of HD capable households actually subscribe to HD programming.95

An Overview of HD Status in Canada

The promise of HD must be balanced by the barriers to provide it and the lack of proven consumer demand for it. Although consumers are equipping themselves to receive and display HD at an escalating clip at this time, the migration to HD has been a slow process.

93 CAB Response to PNs 2004-58 and 2005-1; Digital Migration and HD framework proceedings, April 21, 2005, HD CRTC Review, CAB submission, p. 7 94 Ibid, p. ii 95 Ibid, p. 4 ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 45

¾ HD productions supported by the Canadian Television Fund were 150 hrs in 2003-4, up from 92 hours in 2002-3. Overall, however, as referenced above HD or HD convertible programming represented only 7% of all hours supported by the Canadian Television Fund96 ¾ There were only about 110 hours of new HD programming broadcast in a typical week over 33 services examined in a CAB study - the majority was exhibited on the seven major broadcast networks.97

Transition to HD by Canadian Broadcasters

Major broadcasters in Canada are pursuing HD strategies, although some have been more aggressive than others.

¾ Astral Television Networks, for example, set out with an HD strategy over six years ago. In May 2004, they launched The Movie Network HD, a 24-hour HD channel, followed this January by MHD, a movie channel that offers selected HD simulcasts of movies, and Astral plans to launch an HD VOD service over the next several months. In fact, Astral plans to migrate its whole service to HD.98 ¾ In 2005, CTV announced that it aimed to become “the first national conventional broadcaster transmitting over-the-air in High Definition.”99 CTV has confirmed that its Canadian dramatic scripted slate will be presented in High Definition this season. The slate consists of original scripted series -- including hits Corner Gas and Degrassi: The Next Generation -- and numerous Canadian MOW titles. ¾ CBC officially began broadcasting in HDTV in March 2005, and continues to produce selected programs in HD, including the Nature of Things and new commission 11 Cameras. ¾ French language television has also been active in HD as the following broadcasters - TQS, Canal Vie, Tele-Quebec – have produced programs like: 450 Chemin du Golf, Erreurs medicales, Singe Perrault, Ullumi, and La Savane americaine.

Figures published by the CRTC in 2006 demonstrate that the total number of hours of HD programming shown by the major Canadian broadcasters is fairly limited and that specialty channels are actually leading in terms of weekly hours, as shown in Table 11 below. Note that this table is not comprehensive and does not include all specialty channels which are carrying HD programming.

96 CAB Response, p.14 97 CAB submission, p. 9. 98 Binning, Cheryl. “Industry finally embracing HD”, Playback, August 7 2006, page 15 99 CTV press release, “Over-the-Air Transmitters Now Broadcasting CTV High-Definition Signals in Toronto and Vancouver”, August 17, 2005; http://www.cdtv.ca/en/whatsnew/aug17-05.htm ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 46

Table 11

High definition offerings of Canadian broadcasters

Weekly average of HD Original (% of HD hours hours exhibited which is original programming)

Conventional Television Services

CBC 8.25 100%

CHUM 11.5 17%

CTV 2.3 57%

Global 10 55%

SRC 6 100%

Pay and specialty services

Discovery HD 75 0%

Movie Central 42 7%

Movie Pix 11 9%

Raptors 25 100%

TMN 10 4%

TSN 10 60%

Source: CRTC Broadcasting Policy Monitoring Report, 2006, page 77; the date of the figures was not given.

Both Canadian and U.S. movie-based pay services, sports services and the Discovery Channel have moved quickly to establish an HD version of their

______

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services.100 In Canada, TSN and the Discovery Channel were the first two Canadian specialty services owned by BellGlobemedia that began broadcasting signals in HD. Other specialty channels, such as YTV and Treehouse are also migrating programming to HD. For example, the popular children’s program This is Emily Yeung is being delivered on HD, though last season’s This is Daniel Cook was not.

Some would take the view that there is a lack of perceived value for HD, as evidenced in the U.S. by the decision by certain specialty channels not to launch HD versions of their services at this time. These U.S. channels include A&E, CNN, MTV and Nickelodeon. However, propelled by the FCC timetable for conversion to digital, the over-the-air conventional channels - CBS, ABC, NBC, Fox, UPN and WB (now known as The CW) – are all making the transition, and all carry significant amounts of programming that originated in HD

There is some controversy over Hollywood films being delivered via HD, however, and there may not be as much of an appetite as for the sport and nature channels. For example, blogs are rife with commentary about how HDTV ruins the glamour of Hollywood stars, and reveals flaws many viewers would prefer to ignore.101 However, it is unlikely that this preoccupation is more than a small blip on the inexorable path toward full implementation of HD.

HD Programming on Canadian TV Compared to Other Countries

Compared to other countries, Canada is actually not that much behind. Yes, the U.S. is leading the way, but even there, not every service is being served up in HD. Those U.S. services that are actively trying to make a full transition to HD (the major commercial networks) are currently at only about 13% HD relative to their entire broadcast schedules, and about 37% of their prime time schedules.102

The CTV submission to the CRTC argues that (some) Canadian viewers actually have greater access to HD signals in Canada.103 On conventional television in Canada, virtually all prime-time programming is available in HD from U.S. sources or through Canadian broadcasters.

In the U.K.,104 Sky (the satellite provider) recently launched an HD service on satellite with a range of sport, films, arts and entertainment channels. Telewest has an HD service on cable. The BBC is trialing a limited number of HD services, and is planning to launch a free new satellite service (FreeSat) to rival Sky, the only cost of

100 CTV Response to PNs 2004-58 and 2005-1; Digital Migration and HD framework proceedings, 2005,HD CRTC Review, CAB submission , p. 10 101 “Cameron looks more like a Charlie than an angel”, URL: http://blogs.siliconvalley.com/gmsv/2005/03/cameron_diaz_lo.html, 102 CAB, HD document 103 CTV Response to PNs 2004-58 and 2005-1; Digital Migration and HD framework proceedings, 2005, HD CRTC Review, CAB submission, p. 6 104 http://www.bbc.co.uk/digital/tv/tv_hd.shtml ______

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which will involve a one-off purchase of an HD capable set-top box. While no direct comparison with Canada was made, it does not appear that the U.K. is experiencing a higher level of HD service than Canada.

Carriage of HD Services by Canadian BDUs

From the perspective of the total available services in HD, Canadian consumers are fairly well served compared to other countries. Table 12 below indicates the number of HD services available from Canadian broadcasting distribution undertakings.

Table 12

Carriage of HD services by Canadian BDUs

Canadian services Foreign services Total

Cogeco 10 9 19

Rogers 16 10 26

Shaw 5 5 10

Videotron 8 5 13

Bell Expressvu 16 11 27

Star Choice 6 8 14

Source: CRTC Broadcasting Policy Monitoring Report, 2006, page 77

Rogers’ digital subscribers in Toronto have access to the conventional television HD programming on seven local conventional television stations – and the local affiliates of five of the seven conventional television networks from the Eastern U.S. as well as the local affiliates of those same five networks from Western U.S.105 Comparatively, Adelphia digital cable subscribers in Buffalo only have access to the conventional television HD programming available on the local affiliates of the seven U.S. conventional networks.

105 Ibid. ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 49

Costs of HD in Canada

As discussed, cost is a key reason for the slow adoption of HD by BDUs, broadcasters, and producers. CTV estimates that it will incur over $500 million in capital costs and signal distribution costs to convert to HD. The master control facilities have to be converted and production and post-production HD facilities for all of its conventional and specialty services are required.

Overall, the concern from broadcasters is that they will be faced with the incremental costs of acquiring and/or producing HD programs – for which there is no obvious financial return. While advertisers maintain that they will not pay more for HD programming, they do pay for tuning. If Canadian broadcasters do not convert, or are slow to do so, they could lose audience to the growing number of HD services that will be carried by BDUs. Thus, the economic rationale lies mainly in audience (i.e. revenues) loss avoidance.

Depending on the technology deployed, technical costs could increase the cost of the delivery system by $1.25 million to $2.25 million on average for each HD service in the system.106 However, it is not known how much of the capital costs in the conversion to HD can be incorporated in the capital budgets and stand for some items that would have been replaced in any event. As for operating costs, it is unlikely that after several years of operation there would be much difference between the costs of standard definition television and HD.

Increasing Satellite Capacity for HD Services

Broadcasters are not the only ones with technical issues relating to the delivery of an all-HD system – distribution bottlenecks in satellite capacity mean that new satellites to deliver HD will be required.107 Industry Canada announced on July 11, 2006, that it has launched a licensing initiative to authorize the launch of more Canadian satellites. The goal is to increase satellite capacity, so that high definition television in Canada can be implemented, as well as the carriage of other telecoms services.108 In the U.S. DIRECTV is launching four new satellites that will give the ability to carry up to 150 national HDTV channels and 1500 local HD spot beamed services in most cities by 2007.109

106 CAB Response to PNs 2004-58 and 2005-1, Digital Migration and HD framework proceedings, page 12 107 Ibid. 108 Industry Canada Announces Assignment Process for Canadian Satellite Orbital Positions , press release, Ottawa, July 11, 2006 109 CCTA Response to PNs 2004-58 and 2005-1; Digital Migration and HD framework proceedings, 2005, HD CRTC Review, p. 10 ______

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Impact of HD Conversion and Digital Migration

A report prepared by the CAB stated that the combined impact of digital migration and transition to HD results in a decline in revenues for analog services. This decline is offset by some gains made by Category 1 and Category 2 digital services, but it increases the cost structure for all pay and specialty services.110

The CAB commissioned report estimated that industry-wide net revenue reductions resulting from migration would be $80 million. Among other assumptions it assumes cable packaging and penetration of specialty services will be comparable to that experienced for DTH. The cost of migration from analog to digital for specialty-TV services will undoubtedly be addressed more clearly in the forthcoming specialty policy hearing in 2007. The digital migration regulations established by the CRTC allow for a significant transition period.

Internet Protocol TV (IPTV)

Internet Protocol Television (IPTV) is similar to digital cable or satellite television except that in the last mile to the subscriber, the signal is distributed to viewers using packet switched Internet protocol on digital subscriber lines (DSL). IPTV enables features such as multiple pictures-in-picture, remote programming of digital video recorders, and access to caller ID, digital photos or personalized stock, weather and sports information right on the TV screen. IP technology also can allow various devices in the home to work together more seamlessly.111

Telephone companies have entered the market using IPTV platforms, and cable will increasingly adopt IP to deliver more switched video. Telcos have a strong incentive to enter the IPTV market as a defensive measure, to keep customers from bolting to the cable providers who can already offer attractive one- bill, triple-play services.

IPTV appears to have been most successful to date in countries which are poorly served by other offerings and in densely populated centers (e.g. Hong Kong).

Canadian IPTV is advancing, slowly but surely, and existing BDUs are assessing how this advance will affect them.

In 2005, Aliant launched IPTV in Halifax. The service features over 150 television and over 70 music channels. The 150 television channels offered by Aliant TV include all four local Halifax channels while the 70 digital music channels include 30 Atlantic Canadian radio stations. The new service will start at $29 per month for the first twelve months ($39 per month thereafter)

110 Wall Communications report, CAB HD submission 111 WIRED, Telcos Prep for IPTV Play, Michael Grebb, 2005-08-03 ______

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MTS has spent $300 million rolling out a broadband network, and as a result the company is well ahead of many others in terms of IPTV potential.112 It launched in 2003, and signed up more than 50,000 subscribers (as at July 2005). MTS attributes a great deal of their success to the fact that it has signed deals with most major Hollywood studios to provide their latest releases over its video-on-demand (VOD) service.

SaskTel also launched ahead of most Canadian telcos and today has an estimated 45,000 IPTV subscribers.

Implications of IPTV

Once IPTV has become established and it is fully operational, IPTV will lead to a total customization of the TV experience--programming from a range of content from all over the world can be accessed, and specific episodes of a certain program can be searched for and accessed.

In terms of price, it is not clear whether IPTV will reduce prices for BDUs. Some analysts say that in Ontario, for example, neither Bell nor Rogers will want to enter serious price competition for triple play services – therefore, there may not be a major impact on prices.

Regardless of prices, IPTV could revolutionize the viewing experience. However, Industry Canada is promoting the expansion of satellite capability. The issue is whether IPTV’s personalization will be enough to rival satellite’s HD offering.

Mobile Video: Evolution of Mobile services

While the growth of mobile services has been slow compared to Europe, there has been significant progression in offerings in the last few years, evidenced by Table 13 below.

112 Heinrich, Erik. “IP nightly,” Canadian Business, June 19-July 16, 2006. ______

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Table 13 The Evolution of Mobile Services in Canada

Application Time of Launch in Canada

Short Message Service or SMS 1996/97 (launch of PCS service)

Launch of Mobile Internet access 2000/2001 by all services

SMS Interactive TV (voting) Third quarter 2001

Launch of ringtones services: - Monophonic ringtones Second quarter 2002 - Polyphonic ringtones November 2002 - True Tones (MP3 quality) May 2005

Camera phones and picture messaging Fourth quarter 2003

Launch of video clips and video Fourth quarter 2004 messaging

Launch of mobile TV services August 2005

Source: Lemay-Yates Associates Inc, 2005

Now, networks are developing technologies and standards that will handle content-heavy applications, such as mobile television or IPTV.

Mobile Video Offering

Nearly all broadcasters have become involved in offering mobile content in various forms over recent years. Quickplay, a Canadian company, has worked with broadcasters to deliver a range of new video services.113 MobiTV, an American competitor, is a mobile television and digital radio service provider for cellular, WiFi and broadband enabled devices worldwide which streams mobile content in Canada on Rogers, Telus, and Bell. Its offering is virtually the same across all three carriers, and includes U.S. content as well as Canadian.

Pricing plans are incremental to existing subscription fees – an extra $15 a month gains access to unlimited viewing on some networks, whereas other

113 www.quickplay.com ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 53

networks charge up to an extra $24. Video clips can also be downloaded and paid for on a per-clip basis starting at approximately $1 per clip.

Overall, content offered from cellular networks in Canada tends to be a mix of sports, news, user-generated material and music. Table 14 below gives an overview of some of the content offered by the major wireless networks in Canada. Note that the content provided is sourced not just from Canadian and American broadcasters, but also from other companies such as music labels (DefJam).

There remains debate about which subject areas and genres will be the most successful in mobile TV. According to experts in the field, sports, sex and user- generated material are currently proving to be the most popular content on the mobile – although specific research to verify this is not available in the public domain.114

Specific Broadcasters’ Initiatives

In addition to the content provided on Table 14, a number of broadcasters have embarked on special mobile initiatives:

¾ In addition to streaming content via MobiTV, CHUM has also recently entered into a joint venture with Rogers Wireless Communications Inc. to create MuchPhone - a prepaid mobile targeted towards youth which features exclusive content including celebrity voicemail, ring-tones, and video downloads.115

¾ CTV now specifically creates ‘made-for-mobile’ video news services, as well as offers Canadian Idol music videos and music in a deal with Telus.

¾ CBC provides news from its network news services as well as Newsworld.

¾ Corus’ channels YTV and Treehouse have signed a deal with MobiTV, and content from these specialty channels is streamed on all three carriers in Canada. Treehouse will launch the new preschool series This is Emily Yeung on mobile (as well as online and on video-on-demand) prior to its broadcaster premiere in the fall.

¾ Canadian specialty channel Bite TV streams user-generated short films on all three cellular networks.

¾ CanWest has recently teamed with Rogers wireless to launch a media player for the BlackBerry (bbTV), which will include news from Global and the Financial Post, as well as sports information from Rogers Sportsnet. Advertising is carried at the beginning and end of content, typically in five second segments.116

114 Galipeau, Claude. “Thinking Mobile”, Playback Magazine, May 29, 2006 115 Chum Limited website, http://www.chumlimited.com/television/interactive.asp 116 Okalow, Samson. “Canwest, Rogers launch bbTV”, Playback Magazine, August 21, 2006 ______

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¾ TVO and TFO have made a deal with Toronto’s QuickPlay Media to make programming from the TVOKids programming block available on video- capable cell phones. Table 14

Various Mobile TV Offerings in Canada

Genre Broadcaster/ Description Content Provider Music MTV Video highlights from 10 Spot shows and downloadable ring tones & screensavers MuchMusic Current music and industry news DefJam Featuring hip-hop artists Sport NHL Exclusive NHL daily highlights of every game Sports Illustrated Sports Illustrated’s finest swimsuit models Swimsuit ESPN Daily sports wrap, plus highlights from selected sport shows and events Fox Made for mobile comedic and dramatic serials and reality programming Def Jam Hip –hop artists such as Funkmaster Flex News/Weather AccuWeather Forecasts for 10 Canadian cities CBC & Radio Daily news wrap and top stories in English and Canada French CBC Newsworld Daily news wrap and top stories in English and French Bloomberg Daily news Global National Daily news wrap and top stories CP Daily news wraps and top stories CTV. CTV News clips Entertainment/Lifestyle Fashion TV Fashion news, reviews and interviews STC Trailers from current and coming feature films Comedy Time Stand-up comedians from the stages of LA’s comedy clubs Tribute TV The inside scoop on Hollywood. Movie trailers and hot celebrity interviews Kids YTV Clips and full-length programs Treehouse Clips and full-length programs User-Generated Content Bite TV Interesting short films in a variety of genres Source: Websites of MobiTV and Bell Wireless

______

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Television Program Viewing Online

Most major broadcasters have launched streaming and downloading services on the PC Internet. Some have adopted advertising based models – such as CTV’s broadband offerings which embeds advertising in each streamed segment. Others are based on a pay-per-view or pay per download model – such as Corus Entertainment’s Treehouse initiative (see below). Broadcasters typically are offering only Canadian content, as rights for American programming have not yet been secured by most Canadian broadcasters. A range of online initiatives from major broadcasters are outlined below.

¾ CHUM launched Much AXS this year, following closely by the debut of the American’s MTV Overdrive, a similar service. The broadband service features full-screen video clips, and in some cases, entire shows, of in-house titles including Much News and The New Music, plus music videos, interviews and concert footage. CHUM also offers complete episodes of its reality series VJ Search on Muchmusic.com. Also, in partnership with Yahoo!Canada, CHUM has launched a website for the reality show Canada's Next Top Model, which includes streamed video clips.

¾ CTV launched its broadband service– the CTV Broadband Network –a portal in 2006. The Network is essentially a portal which aggregates all its on- demand online content onto four ‘channels’ – news, shows, eTalk (entertainment news) and the Discovery Channel. The shows that are streamed are Canadian only, and include full-length episodes seen on television, but also ‘webisodes’ or shorter episodes. Full length episodes and webisodes of Canadian dramas Whistler and Degrassi are featured on the service. Canadian Idol is presented as a series of clips. The service is supported by advertising which can’t be skipped.

¾ Corus Entertainment launched what they are calling a "direct-to-family" download service, TreehouseDirect.com. This online service allows the purchase of single episodes, bundles or full seasons of programs seen on its preschooler cable channel.117

Overall, the streaming and downloading of content online is seen as an additional service for viewers rather than an alternative to television viewing. In the U.S., early evidence points to the fact that online viewing – streaming and downloading of content – can lead to increased ratings, particularly amongst the lucrative younger audiences. For example, ratings for ABC’s Desperate Housewives have risen since it became legally downloadable,118 and pundits speculate that its availability on iTunes helped to increase these ratings.

117 Okalow, Samson. “Porn Goes Mobile,” Playback Magazine, May 15, 2006 118 Speaking Notes for Charles Dalfen, Chairman, CRTC, at “Prime Time 2006”, February 16,2006 ______

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Early evidence from Canadian programming indicates similar trends. Linda Schuyler of Epitome Pictures noted at a recent conference that U.S. viewers were illegally downloading earlier Degrassi broadcast episodes from Canada shown on- line and then also watching them again when broadcast in the U.S. Also, online ‘catch-ups’ for plot-driven programs like Whistler can increase loyalty to a program – if an episode is missed, the viewer can catch up online, decreasing the risk that a viewer will fall behind and lose interest in a program.

Therefore, it seems that the new video platforms are ‘additive’ to the TV experience as they simply offer more entry points into a show.

Cross-Platform Initiatives

Broadcasters are not only providing linear content online and via mobile, but are also building a range of complementary online initiatives designed around a broadcast property. Some broadcasters see this is an essential component of a strategy to reach and build loyalty among young audiences, who are lucrative to advertisers.

For example, CTV has adopted a mobile and Internet strategy as part of their strategy to reach young audiences. In the last two years, CTV has grown its audience 12%, 11% and 14% in the A18-34, A18-49 and A25-54 demos, while Global has dropped 18%, 15% and 10% respectively.119 Part of this strategy is to offer audio-visual content online, but it is also to use the Internet and mobile in alternative ways to extend engagement of a program brand. For example, Whistler, the new Canadian drama on CTV, is not only broadcast online, but CTV has created web-only webisodes, as well as an online blog which is created by a fictional character from the series. Also, CTV launched a Degrassi website before it began airing the series Degrassi: The Next Generation in order to generate interest before the series started. These sites offer interaction with the characters from the programs, as well as with other fans.

Other broadcasters are following similar strategies. CHUM has embarked on similar initiatives – for example, the site by CHUM and Yahoo! for Canada’s Next Top Model site features free video clips, podcasts of auditions and interviews, blogs and a photo gallery for downloading to computers and cell phones.

Also, many children’s broadcasters are offering cross-platform initiatives, featuring online, mobile, and even console game content based around a television property. Atomic Betty, an animated series on Teletoon and Cartoon Network, has not only a website, but also a console game, a Gameboy game, and a mobile game. Treehouse facilitated the transition from popular This is Daniel Cook to This is Emily

119 CTV Press Release, “Network With A Vision: CTV's Got It. #1 Broadcaster Reveals Powerful Story at Fall 2006 Upfront’; URL: http://www.ctv.ca/servlet/ArticleNews/show/CTVShows/20060605/ctv_release_20060605g/20060605, JUNE 5, 2006. ______

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Yeung by running a “teaser” campaign online before the series began, inviting viewers to vote for the episode which should air first.

Cross-platform initiatives are also targeted at adults. For example, CHUM’s Space channel recently launched Ice Planet, a television program which has an associated mobile game where users can explore space on their cellular phone, as well as on other mobile devices.120

The trend towards cross-platform projects also demonstrates the importance of having key landmark programs to form the centre point of the project. In light of this, broadcasters will likely pursue a “fewer, bigger, better” strategy and choose several major properties per year to support with cross-platform projects, likely spending significant amounts licensing and marketing these properties. High production quality and large production budgets will continue to be important for these key landmarks.

120 “Silverbirch Acquires Rights to Develop ‘Ice Planet’ Mobile game,” News Blaze, 2006http://newsblaze.com/story/2006040613263200003.mwir/topstory.html ______

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c) With respect to the impact on the broadcasting system, (ii) the economic and regulatory impact on the broadcasting system caused by these technologies

The previous sections of this submission have outlined the technological developments that have occurred to date and what developments are likely to take place in the future.

What will be the economic and regulatory impact of these developments on the Canadian broadcasting system?

The starting point for this analysis is to assess the current broadcasting regulatory environment and whether it is likely to change in light of the new technology. In that regard, an important issue is whether the new media platforms will cannibalize the existing TV platforms or whether they will tend to supplement them.

Taking these factors into account, it is then possible to develop economic projections for the broadcasting industry. In that connection, the CCAU asked Nordicity Group Ltd. (“Nordicity”) to review and validate existing projections out to 2010 for conventional, pay and specialty TV in Canada. As will be seen, despite all of the technological changes factors noted, the revenues of Canadian television service providers are expected to be relatively robust.

Working from estimates from PricewaterhouseCoopers LLP, Nordicity concluded that the ad revenue for the conventional private TV stations in English Canada is likely to increase over the next four years from $1.68 billion in 2004-05 to between $1.85 and $1.91 billion in 2009-10. Revenues for Canadian pay and specialty services are projected to increase from $1.74 billion in 2004-05 to between $2.39 and $2.47 billion in 2008-10.

Maintaining a Distinct Canadian Marketplace

In assessing the future of the broadcast sector in Canada, it is important to realize that its health depends on maintaining a distinct Canadian marketplace for audio-visual rights. To protect that distinct marketplace, Canadian broadcasters benefit from a number of protective measures. These include the following:

(a) limits to the licensing of new competing over-the-air TV broadcasters in Canada, including foreign ownership requirements;

(b) must-carry and priority provisions for local Canadian signals on BDUs;

(c) the simultaneous substitution policy benefiting over-the-air TV broadcasters;

______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 59

(d) Section 19.1 of the Income Tax Act (Bill C-58), which disallows advertising expenses placed by Canadian advertisers on U.S. border stations as a business expense;

(e) far higher degrees of consolidation and concentration in the free-to-air markets than are permitted in the United States;

(f) prohibition of competing U.S. pay and specialty services;

(g) prohibition of local advertising by cable systems, either directly on local community channels or through the use of local avails on specialty services, and prohibition of local advertising by almost all specialty services;

(h) common ownership of niche-protected Canadian specialty services and BDU must-carry provisions for those services; and

(i) financial support for priority programming from the Canadian Television Fund, tax incentives and other sources.

Based on reports such as the IBM publication entitled “The End of Television,”121 some have suggested that support measures of this kind cannot be sustained if unregulated platforms are permitted to exist that ignore borders. The Internet is presented as the most cogent example of this.

However, any such suggestions fall apart upon close scrutiny. It must be remembered that the foregoing measures are largely derived from the 1991 Broadcasting Act and are strongly supported by both broadcasters and creators. There is therefore little pressure to change these policies, which have worked to the benefit of the Canadian broadcasting system.

Nor is the United States pressing Canada to abandon these measures. Many of those measures (e.g. prohibition of foreign ownership of free to air services, must- carry, simultaneous substitution, protection of localism) are similar to policies applied by the FCC to protect U.S. broadcasters.

There is also strong support for border integrity by U.S. program rightsholders, who prefer to have a distinct Canadian marketplace in copyright terms. In fact, as demonstrated in the iCraveTV case in early 2000, the Internet does have borders that can be enforced by rightsholders.

It is important to realize that new platforms will only be able to utilize high- value audio-visual material if they can persuade copyright owners to grant them the necessary rights. Such rights will only be granted if copyright owners are convinced

121 “The end of television as we know it: A future industry perspective,” IBM Business Consulting Services, 2006. ______

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that distribution of such content on the Internet or on mobile platforms does not disturb the orderly marketplace. In other words, both the Internet and mobile platforms will need to observe geographical borders and time windows if they want to utilize programming pre-bought by conventional, pay or specialty TV services.

Nordicity Revenue Projections Validations

Taking the foregoing into account, the CCAU retained Nordicity to validate projections for the advertising revenue likely to be generated by CBC and the private broadcasting sector in the period up to 2010. In summary, Nordicity concluded that ad revenue for conventional TV in Canada will increase over the next five years.

Nordicity also validated the revenues (subscriber + advertising) of pay- and specialty-television services. Nordicity confirmed revenue estimates showing continued strong growth in this segment of the Canadian television sector.

In reviewing available projections, Nordicity relied on estimates and forecasts developed by PricewaterhouseCoopers LLP (PwC) in its publication, Global Entertainment & Media Outlook: 2006-2010.122

It should be noted that these projections do not reflect the fact that broadcasters are expanding their horizons to generate other advertising avenues, including online and mobile. A recent report from the Interactive Advertising Bureau of Canada showed that Internet-based advertising revenues have gone up 54% and are projected to go up 43% next year. While the absolute numbers are still relatively small compared to the revenues of traditional media, they are growing. Canadian TV broadcasters all have at least one major website with advertising, so they are positioning themselves to benefit from any new streams of revenue that may develop.

Conventional Television

Chart 1, below, presents a forecast range of ad revenue for English-language conventional television. This forecast range was derived by Nordicity from PwC’s projections for Canadian conventional broadcaster ad revenue and additional information published by the Department of Finance and Statistics Canada.

Based on its review, Nordicity concluded that the ad revenue for conventional private TV stations in English Canada is forecast to increase over the next five years from $1.68 billion in 2004-05 to approximately $1.85 to $1.91 billion in 2009-10. The methodology used by Nordicity is set out in Appendix 1.

122 For information on how to order this publication, see Appendix 2 below. ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 61

Chart 1

Actual and Project Ad Revenues of Private English TV Stations in Canada ($ Millions) 2,000 1,909 1,851 1,803 1,759 1,800 1,850 1,727 1,813 1,776 1,739 1,709 1,683 1,600 1,611 1,614

1,468 1,493 1,460 1,400

1,200

1,000 00 01 02 03 04 05 06 07 08 09 10

Actual Ad Revenues Low Forecast High Forecast

Source: CRTC, Nordicity Group Ltd., PricewaterhouseCoopers, Department of Finance, Statistics Canada

Table 15

All amounts in Forecast based on Historical statistics for English-language millions of PricewaterhouseCoopers*, conventional television advertising revenue Canadian dollars English-language conventional advertising revenue unless specified Private Private broadcasters Private + CBC otherwise CBC Private + CBC broadcasters Low High Low High 2000/01 1,493 214 1,707 ------2001/02 1,458 216 1,674 ------2002/03 1,606 190 1,796 ------2003/04 1,614 209 1,820 ------2004/05 1,683 133 1,816 ------2005/06 f ------1,709 1,727 1,864 1,884 2006/07 f ------1,739 1,759 1,897 1,918 2007/08 f ------1,776 1,803 1,938 1,967 2008/09 f ------1,813 1,851 1,978 2,020 2009/10 f ------1,850 1,909 2,018 2,083 f - forecast Source: CRTC, Nordicity Group Ltd., PricewaterhouseCoopers, Department of Finance, Statistics Canada * The forecast series is based on a forecast prepared PricewaterhouseCoopers of the overall advertising revenues of conventional television broadcasters. Please see Appendix 1 for an explanation of how the PricewaterhouseCoopers forecasts were applied to advertising revenues in the English-language conventional television market.

Pay and Specialty Television

Chart 2, below, presents a forecast range of revenue for English-language pay and specialty television services. This forecast range was also derived by Nordicity from PwC’s projections for Canadian pay and specialty television revenue, ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 62 as well as additional information published by the Department of Finance and Statistics Canada.

Based on its review, Nordicity concluded that the total revenue for the pay and specialty television services in English Canada is forecast to increase over the next five years from $1.74 billion in 2004-05 to approximately $2.39 to $2.47 billion in 2009-10. The methodology used by Nordicity is set out in Appendix 1.

Chart 2

Actual and Project Revenues (Subscriber + Advertising) of English Pay- and Specialty-Television Services in Canada ($ Millions) 2,600 2,467

2,400 2,309 2,391 2,163 2,200 2,261 2,026 2,130 2,000 1,891 2,003 1,800 1,871 1,740 1,600 1,622

1,400 1,480 1,342

1,200 1,163 1,000 985 800 00 01 02 03 04 05 06 07 08 09 10

Actual Revenues Low Forecast High Forecast

Source: CRTC, Nordicity Group Ltd., PricewaterhouseCoopers, Department of Finance, Statistics Canada

Table 16

All amounts in millions Historical statistics Forecast based on of Canadian dollars for English- PricewaterhouseCoopers*, unless specified language English-language pay- and specialty-television revenue otherwise pay- and specialty- Low High television revenue 2000/01 1,163 -- -- 2001/02 1,342 -- -- 2002/03 1,480 -- -- 2003/04 1,622 -- -- 2004/05 1,740 -- -- 2005/06 f -- 1,871 1,891 2006/07 f -- 2,003 2,026 2007/08 f -- 2,130 2,163 2008/09 f -- 2,261 2,309 2009/10 f -- 2,391 2,467 f - forecast Source: CRTC, Nordicity Group Ltd., PricewaterhouseCoopers, Department of Finance, Statistics Canada * The forecast series is based on a forecast prepared PricewaterhouseCoopers of the overall revenues of pay- and specialty-television services. Please see Appendix 1 for an explanation of how the PricewaterhouseCoopers forecasts were applied to revenues in the English-language pay and specialty television market. ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 63 c) With respect to the impact on the broadcasting system, (iii) the kind of content delivered through the regulated and the non- regulated aspects of the system, and how it is delivered

In addressing the kind of content that will be delivered through mobile and Internet platforms, it is important to emphasize that content providers will not knowingly allow their content to be distributed on these new platforms if this undermines the orderly marketplace upon which their programs were financed.

Accordingly, content on the new platforms will either be created expressly for such platforms, or will be released only on the basis of timing, pricing and availability that supports rather than undermines the traditional distribution windows for such content. Those windows are based on geographical borders, and copyright owners of high-value audio-visual programming like theatrical movies and TV series are increasingly requiring the new platforms to confine their distribution to particular territories.

The new platforms will provide a window for new content as well as repositioned content from older media. In that regard, we are already seeing the development of customized short-form video content for mobile and Internet use. Some of this is new content designed to be seen in short snippets for people on the fly. The new content also includes video material that is used to promote viewing of longer-form content on the traditional channels. There is also a rise in cross-platform licensing of programming, but generally in a way that complements rather than competes with existing media.

If we want to have a meaningful Canadian presence in the broadcasting system, it will be crucial for the government to support the existence of a distinctive Canadian rights marketplace, through effective copyright legislation and CRTC policies that maintain that distinctive market and require Canadian broadcasters to include Canadian programming of high quality including Canadian dramas that Canadians will want to watch.

At this stage, it does not appear that the new platforms will cannibalize existing television. As noted above, cross platform projects are increasingly anchored around major television properties, and are used to promote traditional viewing. In addition, to the extent that Canadian content created for traditional media reappears on the new platforms, there may a favourable multiplier effect in terms of the accessibility of Canadian programming. Thus, it is all the more important that the traditional television channels be subject to meaningful Canadian content requirements, given that the content may then appear on multiple platforms.

It is also important to note that the new platforms can be regulated if circumstances warrant. In December 2005, for example, the European Commission adopted a legislative proposal for amendments to the 1989 Television Without Frontiers Directive which would extend regulation of broadcasting into the Internet ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 64

and other platforms. The new Directive, which would be called the Audiovisual Media Services Directive, distinguishes between linear and non-linear services, and maintains the requirement that on linear services a majority of broadcast programming, other than news, sports, games or teletext, should be European works. Linear services include both traditional broadcast services and streamed audio-visual services on the Internet or other platforms. Non-linear audio-visual services, such as video on demand, would be subject to a lighter regulatory regime which also would not differentiate between platforms. A public hearing on the proposal took place in Brussels in June 2006.

Here in Canada, the CRTC has regulated non-linear services (video on demand) when offered by the BDUs, but has exempted broadcast services offered through the Internet or on mobile platforms. In regard to video on demand, the Commission’s rules require VOD services to make a financial contribution to Canadian content and to ensure that an appropriate level of Canadian content is available on the system.

In the view of the CCAU, the CRTC and the government should closely monitor developments at home and abroad with regard to the impact of the unregulated platforms. Once the Commission’s upcoming policy review proceedings for over-the-air television and pay and specialty television are concluded, the CRTC should convene a policy proceeding to reassess the impact and regulatory status of these platforms. To the extent that the new platforms are shown to have any adverse impact on the creation or exhibition of Canadian content, the government and the CRTC should be prepared to act as appropriate, taking into account the lessons from Europe.

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 65

c) With respect to the impact on the broadcasting system, (iv) the different methods for providing local, regional and national programming on a going forward basis

In the view of the CCAU, the foundation of the Canadian broadcasting system will continue to be local TV stations. As indicated above, the projections indicate that private TV stations in Canada will continue to have a robust future, despite the advent of new platforms.

Local and regional programming – particularly in the news and sports genres -- can be developed, financed and broadcast at a local or regional level. However, private TV stations cannot finance high-value entertainment programming like TV drama series except by acquiring national rights and amortizing those rights over all the stations in the group.

The emergence of national station groups in the last 10 years was driven by the economics of broadcasting in this regard. Having approved the consolidation of station ownership over the last five years, the CRTC now has an obligation to ensure that the station groups deliver on their implicit promise that they will be able to finance more high-value Canadian programming that Canadians will want to watch.

______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 66 c) With respect to the impact on the broadcasting system, (v) the predicted economic impact these technologies will have on broadcasting undertakings

In this submission, the CCAU has examined the impact of new technologies on broadcasting undertakings. In that regard, it also commissioned Nordicity to develop broadcasting revenue projections for the next few years.

These projections, far from auguring the “end of television,” indicate that Canadian television will continue to be a robust, albeit mature, medium for a number of years to come. While the new platforms will provide alternative means of accessing content, they are expected to do so in a complementary rather than competitive way.

For further material on the Nordicity projections, see above at pp.58-62 and Appendix 1, below at p.72.

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 67 c) With respect to the impact on the broadcasting system, (vi) the adoption of technologies by the independent production sector and their impact on this sector

New Technologies for Producers

As new technologies become more widespread and, over time, less expensive and thus more available, the production industry will change. Changes include:

¾ New shooting techniques, such as the use of digital handheld cameras; ¾ New all-in-one editing and post-production technologies, such as Apple’s Final Cut Studio which allows producers to do their own editing and post- production at their desktop rather than within dedicated editing suites and/or post-production houses; ¾ Use of CGI (computer generated imagery) in productions; ¾ The creation of new content for other platforms – for example, websites or interactive games associated with television productions; ¾ The distribution of TV content across new platforms, such as mobile and the PC Internet.

However, this new world also brings challenges to the producer community, including:

¾ The growing demand from broadcasters for production in HD at an added cost; ¾ The need for TV producers to have new multi-disciplinary skills – no more are they just TV producers, but increasingly editors, post-producers, new media producers; ¾ The negotiation of licensing deals in uncharted territory, such as multiplatform distribution.

Around the world, technologies are advancing the efficiency of producers, but also possibly enhancing creative techniques. To meet the demands of the future – such as purposing content so it can be distributed across a range of platforms – as well as to reduce costs, the BBC has been implementing a Digital Production Strategy enabling “tapeless” production based on commodity technology. Even delivered on laptops, producers can edit on the move; thus, the booking of expensive editing suites is no longer needed.123

The new technologies, overall, present a number of opportunities as well as challenges. For example, Kelly Sears’ 2006 study of digital production in Canada, commissioned by the Department of Canadian Heritage, showed that for some Canadian digital productions, funding ran out at the 95% point. The increasingly

123 http://www.apple.com/uk/pro/profiles/fullonfood/ ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 68

widespread availability of affordable digital technology may increase project completion rates.124

High Definition (HD) Production

Producers are slowly taking up HD, but the cost of using HD equipment is currently very expensive. Between 2002/2003 and 2004/5, 42.2% of programming funded by the Canadian Television Fund was shot in analog, 51.5% SD digital and 6.2% in HD digital. French language programming was more likely to be filmed in SD digital, and less likely to be filmed in HD or analog.125

As certain genres are more popular than others in HD format, only certain producers specializing in these genres are investing in HD capacity. However, other producers are moving more towards HD production across all genres – for example, Omni Film Productions is shooting its entire 2006 slate in HD.126 The slate covers drama as well as documentaries and lifestyle series.

Shooting in HD has become a strategic decision – demand is high internationally for HD as it is in high demand in foreign markets, and the shelf life of HD productions is longer as HD is expected to be ubiquitous in the future. Some producers may not have a choice as certain broadcasters move towards HD-only strategies. For example, the VP of Programming at TSN recently told Playback Magazine in an interview that indie producers should pitch only HD projects to TSN.127

In the Kelly Sears report for Canadian Heritage, the following represents the status of the deployment of HD in production today:

128 ¾ 80% of Canadian feature films are still being shot in analog formats; ¾ approximately 5-10% of Canadian television production is done in HD; ¾ approximately 50% of Canadian television production is captured in Standard Definition (SD) digital, which is the preferred choice for lower budget productions;

Based on these estimates, in 2004/5 approximately 23 Canadian Feature Films were shot digitally, and about 418 – 837 hours of television were shot in HD.

A critical point is that, overall, foreign service productions are more likely to be shot in digital compared to CAVCO certified productions, demonstrating that in fact demand from broadcasters (in this case U.S.) drives production ultimately.

124 Kelly Sears (2006), Status of Digital Production in Canada, Commisioned by Department of Canadian Heritage, page 13 125 Kelly Sears report, page 31 126 “Industry finally embracing HD”, Playback Magazine, August 7 2006, page 15 127 “Industry Finally Embracing HD”, Playback Magazine, August 7, 2006 page 17 128 Kelly Sears report, page 3, ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 69

According to CAVCO, Canadian certified television productions are much more likely to be shot on tape (79%) than are certified service TV productions (14%); therefore, Canadian TV programs are more likely to be shot in SD digital than are foreign service productions.

Genres

Nature programs are moving more quickly to HD than any other type of programming, as identified in the previous section. The NFB is beginning to add HD stock footage to its library, including 300 hours from its Arctic Mission series shoot.129

According to the Kelly Sears report, a number of factors influence decisions to use digital formats:

¾ how familiar producers are with digital formats; ¾ aesthetic considerations; ¾ whether ‘future-proofing’ is desired – making a production more saleable and appealing to future consumers; ¾ market demands; ¾ shooting conditions (such as low light considerations); ¾ Need to ‘repurpose’ content for other media platforms.

The Characteristics of an HD producer

Based on the Kelly Sears report on HD uptake amongst producers, Nordicity believes that there is a certain tier of producers that will be shooting in HD:

¾ High budget producers – typically more experienced; ¾ Those who specialize in genres supplying one of the few Canadian services broadcasting in HD, such as Discovery or TSN; ; ¾ Producers who are seeking international salability of their product; ¾ Producers who are considering the long-term value of the content they are producing – typically this is limited to producers who retain their rights;

Considering the current Canadian industry, these characteristics are found in relatively few Canadian producers, but the number is growing. As Canadian broadcasters expand their HD requirements, a widening range of creators and producers will gain experience with HD. Since the economics of producing in HD have not been accommodated in the production financing arrangements for CTF projects, there will continue to a squeeze on the production budgets.

If producers increasingly seek international salability of their product, and gain success in this area, they will need to produce in HD in order to meet the

129Vlessing, Etan. “Stock Market Rises Thanks to New Technology”, Playback Magazine, August 1, 2005 ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 70

demand of foreign broadcasters. This driver in turn could increase the availability of HD product in Canada. Despite the long term and international view, it is likely that changes in the domestic demand and resolution of project economics are required to ramp up more Canadian HD production.

Grappling with the HD Production Cost Challenges

The additional cost of producing in HD is the biggest hindrance to producers using HD:

¾ The cost of producing in HD is 5-10% more expensive than producing in SD.130 ¾ HD was more expensive than SD, accounting for 11.32% of shooting hours, but 61.6% of shooting budgets.131

Producers who believe that shooting in HD increases costs maintain that the cost increases come from three primary sources – equipment rental, post- production, and physical or “on-screen” elements of production. Equipment is still somewhat scarce, and still somewhat new, so rental companies can and do charge a premium.132

While producers are struggling with the increased cost of HD, broadcasters aren’t necessarily paying more for HD product. For example, Astral says they are not topping up licence fees for HD product.133

Cross-Platform Productions

A number of independent producers or partnerships between different production companies have begun to develop cross-platform productions for broadcasters. For example,:

¾ This is Daniel Cook: a Treehouse TV YTV action series produced by marblemedia and Sinking Ship Productions, with a fully interactive website.

¾ Iceplanet: A CHUM commission, the TV program is produced by SpaceWorks Entertainment Ltd and the game by its subsidiary SpaceWorks Game Co.

As more projects bring together television content and interactive content, some production companies are structuring themselves so that skills from both worlds can come together under one roof. Marblemedia, Decode and Breakthrough

130 Kelly Sears Report, page 4 131 Kelly Sears Report, page 31 (Note that the Report reverses the figures; however, we assume this is an error) 132 Kelly Sears Report, page 43, Cost of HD 133 “Industry finally embracing HD” ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 71

Films all have television production arms as well as interactive production arms. However, other companies are simply entering into partnerships to complete isolated projects – such as Epitome and Snap working together on Degrassi and Shaftsbury and Xenophile working together on Regenesis.

Therefore, while there is no evidence of one particular trend, all producers will need to become more knowledgeable about the cross-platform world in order to either deliver cross-platform projects themselves, or to work effectively in partnership with interactive producers.

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 72

Appendix 1

Nordicity Projections for TV Advertising Revenues Notes on Methodology

A. Historical Statistics for English-Language Television

Conventional Television

• The historical statistics for English-language conventional television advertising revenue for 2000/01 to 2004/05 were obtained from statistics published by the CRTC in the Broadcasting Policy Monitoring Report 2006. In this report, total television advertising revenue includes revenues from local advertising, national advertising, network payments and revenue from infomercials.

Table A1

All amounts in Historical statistics for English-language conventional television advertising millions of dollars revenue unless specified Private broadcasters CBC Private + CBC otherwise 2000/01 1,493 214 1,707 2001/02 1,460 216 1,676 2002/03 1,611 190 1,801 2003/04 1,614 223 1,819 2004/05 1,683 133* 1,816 Source: CRTC, Broadcasting Policy Monitoring Report 2006. * CBC advertising revenues dropped by 35% in 2004/05 largely due to the cancellation of the National Hockey League season in 2004/05.

Pay and Specialty Television

• The historical statistics for subscriber and advertising revenues of English- language pay and specialty television services for 2000/01 to 2004/05 were obtained from statistics published by the CRTC in Pay and Specialty Statistical Financial Summaries (with amortization), 2001-2005 . In this report, subscriber revenue includes wholesale fees remitted by broadcasting distribution undertakings (BDUs) for the carriage of pay and specialty television services. Television advertising revenue includes revenues from local and national advertising.

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 73

Table A2

All amounts in Historical statistics for subscriber and advertising revenues of millions of dollars English-language pay and specialty television services* unless specified Subscriber revenue otherwise Subscriber revenue Advertising revenue + advertising revenue 2000/01 804 359 1,163 2001/02 924 418 1,342 2002/03 987 493 1,480 2003/04 1,048 574 1,622 2004/05 1,107 633 1,740 Source: CRTC, Pay and Specialty Statistical Financial Summaries (with amortization), 2001-2005. * Includes Météomédia, Teletoon/Télétoon and Bell ExpressVu DTH pay per view.

B. Overview and Validation of Forecasts

• Nordicity prepared a total of six forecast series. ‘Low’ and ‘High’ scenarios were prepared for each of the following three segments of the Canadian broadcasting sector: o English-language private conventional television o Total English-language conventional television (private broadcasters + CBC) o Total subscriber and advertising revenue of English-language pay and specialty television services

• Advertising revenue forecasts specific to each of the English-language television market segments in Canada were not available. Instead, Nordicity obtained PricewaterhouseCoopers’ forecast for overall television revenue and used the annual rates of change from this forecast as the basis for deriving a forecast of advertising revenue in the English-language market segments.

• The ‘Low’ scenario for the forecast essentially involved applying the annual growth rates in the PricewaterhouseCoopers (PwC) forecast to the historical time series developed for each of the English-language market segments.

• Nordicity also assessed the key elements of the PwC forecast and found the assumptions for nominal gross domestic product (GDP) growth to be somewhat lower than the most current outlooks for the Canadian economy published by the Department of Finance over the last 11 months.

• The PwC forecast was prepared in mid 2005, and so reflects the outlook for the Canadian economy at that time. The forecasts for the Canadian economy contained in the Department of Finance’s November 2005 Economic and Fiscal Update, and May 2006 Federal Budget reflects a more ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 74

up-to-date outlooks on the Canadian economy obtained through Department of Finance consultations with private sector forecasters.

• Given this shift over time in the outlook for the Canadian economy, Nordicity also prepared a ‘High’ scenario to reflect how the growth in television revenue, particularly advertising revenue, may respond to higher economic growth. The ‘High’ scenario essentially follows the PwC forecast but incorporates an adjustment to account for the somewhat higher growth in the Canadian economy reflected in the economic outlooks published by the Department of Finance in the November 2005 and May 2006.

• In the remainder of this section we present our review of the PwC forecast and describe how the forecasts for the ‘Low’ and ‘High’ scenarios were constructed.

• Nordicity assessed the PwC forecast by reviewing its key elements. The table below lists the key elements of the PwC forecast and offers comments about each.

Table A3

Key Elements of PwC Forecast Nordicity Comment

The Economy

Entertainment and media spending tends to be cyclical: Projections of overall economic activity in Canada are a During an economic expansion, it grows slightly faster key factor in the projected growth of Canada’s than nominal gross domestic product (GDP); as income entertainment and media industry and the television rises, more resources are devoted to leisure and advertising segment. entertainment. During economic contractions, PwC’s assumptions for Canadian GDP growth are entertainment and media spending tends to drop faster somewhat lower than the federal Department of Finance’s than overall economic activity. latest outlook for the Canadian economy. For the May PwC forecasts nominal GDP growth in Canada to be 2006 Federal Budget, the Department of Finance consulted private-sector forecasters. These forecasters - 4.9% in 2006, expected nominal GDP growth to be 6.0% in 2006 and - 4.5% in 2007, 4.6% in 2007. - 4.5% in 2008, - 4.1% in 2009 and In the Department of Finance’s Economic and Fiscal - 3.6% in 2010. Update published in November 2005, it included private- sector forecasts of economic growth in 2008 to 2010. In In 2005, Canada had nominal GDP growth of 6.2%. November 2005, private-sector forecasters expected Canada’s rates of GDP growth are somewhat lower than nominal GDP growth to average 4.7% between 2008 and the rates forecast for the U.S. during the 2006-to-2010 2010. period. Both PwC’s nominal-GDP forecast and private-sector

forecasters’ forecasts see continued growth in the Canadian economy over the next several years. PwC’s forecast, however – which was likely prepared nine to twelve months prior to the Department of Finance’s

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 75

Key Elements of PwC Forecast Nordicity Comment

reports – embodies somewhat lower growth rates in each year of the forecast period than those held by private- sector forecasters. Television Advertising

PwC forecasts that Canada’s overall advertising market PwC’s forecast for Canada’s overall advertising market will experience an average annual growth rate of 4.5% and television advertising are in line with its economic between 2006 and 2010. forecast.

PwC forecasts that television advertising (conventional, Within the television segment, PwC sees the growth tilted and specialty-television services) will experience an to specialty-channel advertising, which is forecast to grow average annual growth rate of 3.8% between 2006 and by 8.4%. Conventional broadcast advertising will grow 2010. more slowly, by 1.9%. This reflects recent trends in the Canadian broadcasting industry as advertising in the - Conventional television advertising, 1.9% specialty-television segment has been growing more - Specialty television advertising, 8.4% quickly than in the conventional segment. Between 2000 and 2005, the advertising revenues of specialty services grew by an annual average rate of 15.0%; private conventional services’ advertising revenues grew by an annual average rate of 3.0%. Conventional Television Advertising

The continued shift in viewership away from The PwC forecast takes into account changes in the CTF conventional broadcasters to specialty channels and the and the introduction of the drama incentives that private associated growth in specialty channel advertising will conventional broadcasters may make use of to generate continue to cut into the funds available to conventional additional advertising revenue. However, in the case of broadcasters. Conventional broadcaster still command the latter, PwC only acknowledges the availability of the the lion’s share, 74%, of total television advertising, but incentives; since it was too early to take into account the this share is declining. take-up of the incentives by conventional broadcasters.

Conventional broadcasters will be able to access In June 2006, the CRTC reported that English-language increased funding for Canadian programming and thus conventional broadcasters did indeed take advantage of limit audience erosion as the multi-channel universe the drama incentives. The English-language conventional expands. Still the increased funding for Canadian broadcasters’ use of the drama incentives is more than a programs will not completely offset the impact of the possibility; it is already occurring. The exhibition continued shift of audiences to specialty channels. incentives generated a total of 3 hours and 16 minutes of additional advertising airtime for English-language If conventional broadcasters take advantage of the drama conventional broadcasters; they used approximately 2 incentives they should be able to boost broadcast hours of this airtime in 2004/05. CHUM earned a 25% advertising. bonus on its additional advertising hours because it exceeded its drama-audience target. Global also earned a 25% bonus because it exceeded its drama-expenditure target.

Pay and Specialty Television Revenue

More new digital specialty channels are expected to enter Growth in multi-channel households and digital television the market over the next few years. households will grow the overall audience for specialty- television services, as more and more Canadians gain Growth in the number of digital subscribers over the next access to specialty television services. This should ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 76

Key Elements of PwC Forecast Nordicity Comment several years will lead to growth in the audience for translate into gains in advertising revenue. specialty channels and, in turn, attract more advertisers to Assuming that specialty channel wholesale rates stay specialty channels. fixed or increase, specialty channels will experience The number of Canadian households subscribing to multi- subscriber revenue growth as the number of multi-channel channel services (cable, DTH, TelcoTV, MDS) will grow and digital households grows. by approximately 1 million over the next five years to reach a total of 11.5 million. This subscriber growth will fuel increases in subscriber fees for specialty-television services.

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 77

C. Low-Scenario Forecast

• As discussed above, a forecast of Canadian conventional television advertising revenue was obtained from PricewaterhouseCoopers’ Global Entertainment & Media Outlook. The annual rates of change from this forecast were applied to the historical statistics for the English-language television markets to derive a forecast for 2005/06 to 2009/10.

• The PricewaterhouseCoopers data were originally reported in U.S. dollars and converted to Canadian dollars at the 2005 average exchange rate of 1.21173 Canadian dollars per U.S. dollar.

Conventional Television

Table A4

All amounts Conventional Conventional Forecasts of English-language in millions of television television Annual rate of conventional television advertising dollars unless advertising advertising change revenue specified revenue - revenue - PwC otherwise PwC Private Private + CBC* (USD) (CAD) 2000/01 1,751 2,122 ------2001/02 1,735 2,102 (0.9%) -- -- 2002/03 1,842 2,232 6.2% -- -- 2003/04 1,857 2,250 0.8% -- -- 2004/05 p 1,877 2,274 1.1% -- -- 2005/06 f 1,906 2,310 1.5% 1,709 1,864 2006/07 f 1,939 2,350 1.7% 1,739 1,897 2007/08 f 1,981 2,400 2.2% 1,776 1,938 2008/09 f 2,022 2,450 2.1% 1,813 1,978 2009/10 f 2,063 2,500 2.0% 1,850 2,018 Source: PricewaterhouseCoopers, Global Entertainment & Media Outlook, 2006-2010 and Nordicity Group calculations based on data from PricewaterhouseCoopers and CRTC. p -preliminary estimate by PricewaterhouseCoopers f- forecast * In 2004/05, the CBC experienced an extraordinary drop in its advertising revenues due to the National Hockey League lockout. Because of this extraordinary drop, Nordicity used an adjusted base amount for the forecast of CBC’s advertising revenues. Instead of $133 million (the actual amount of CBC English Television’s advertising revenue in 2004/05) as the base amount for the forecast, Nordicity used $153 million. Nordicity applied an adjustment of $20 million to account for the shortfall in advertising revenue caused by the National Hockey League lockout. In 2004, Robert Rabinovitch (President/CEO, CBC Radio-Canada) reported to the Standing Committee on Canadian Heritage that the CBC stood to lose at least $20 million due to the National Hockey League lockout.

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 78

Pay and Specialty Television

• A similar process was used to forecast the growth in subscriber and advertising revenues of English-language pay and specialty television services. The PricewaterhouseCoopers’ forecast for pay and specialty television revenue (subscriber revenue + advertising revenue) was converted to Canadian dollars, and the implied annual growth rates were applied to the actual amount in 2004/05 to derive a forecast for 2005/06 to 2009/10.

Table A5

All amounts Subscriber and Subscriber and Forecast of in millions of advertising revenue advertising revenue subscriber and dollars unless of pay and specialty of pay and specialty Annual rate of advertising revenue specified television services television services change of English-language otherwise PwC PwC pay and specialty television services* (USD) (CAD) 2000/01 1,205 1,460 -- -- 2001/02 1,381 1,673 14.6% -- 2002/03 1,530 1,854 10.8% -- 2003/04 1,673 2,027 9.3% -- 2004/05 p 1,807 2,190 8.0% -- 2005/06 f 1,943 2,354 7.5% 1,871 2006/07 f 2,080 2,520 7.1% 2,003 2007/08 f 2,212 2,680 6.3% 2,130 2008/09 f 2,348 2,845 6.1% 2,261 2009/10 f 2,483 3,009 5.7% 2,391 Source: PricewaterhouseCoopers, Global Entertainment & Media Outlook, 2006-2010 and Nordicity Group calculations based on data from PricewaterhouseCoopers and CRTC. p -preliminary estimate by PricewaterhouseCoopers f- forecast * Includes Météomédia, Teletoon/Télétoon and Bell ExpressVu DTH pay per view.

E. High-Scenario Forecasts

• The nominal GDP growth rate assumptions embodied in the PwC forecast were combined with the nominal GDP (current dollars) reported by Statistics Canada for 2004 to generate a forecast of nominal GDP for the 2004/05 to 2007/08 period.

• The forecasts (derived from the PwC forecast) for English-language conventional television advertising revenue were then calculated as a share of the nominal GDP.

Conventional Television

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Table A6

All amounts Nominal GDP Nominal GDP English-language English-language in millions based on PwC annual growth conventional television conventional television of dollars annual growth rate advertising revenue advertising revenue unless rate (PwC specified assumptions assumptions) Private only Private + CBC otherwise Amount Share of Amount Share of GDP GDP 2004/05 1,371,425 ------2005/06 f 1,438,625 4.9% 1,709 0.1188% 1,864 0.1296% 2006/07 f 1,503,363 4.5% 1,739 0.1156% 1,897 0.1262% 2007/08 f 1,571,014 4.5% 1,776 0.1131% 1,938 0.1233% 2008/09 f 1,635,426 4.1% 1,813 0.1109% 1,978 0.1209% 2009/10 f 1,694,301 3.6% 1,850 0.1092% 2,018 0.1191% Source: PricewaterhouseCoopers, Global Entertainment & Media Outlook, 2006-2010 and Nordicity Group calculations based on data from PricewaterhouseCoopers, CRTC, and Statistics Canada. f- forecast

• To generate the ‘High’ scenario forecast, the GDP shares for English-language conventional television forecasts were held constant and applied to a more aggressive projection of nominal GDP. This more aggressive projection was derived by using the forecast annual growth rates found in the May 2006 Federal Budget (2006, 2007 and 2008) and the November 2005 Federal Fiscal Update (2009 and 2010). Both of these Department-of-Finance forecasts were based on consultations with private sector forecasters.

Table A7

All amounts Nominal GDP Nominal GDP English-language English-language in millions based on forecast annual growth conventional television conventional television of dollars annual growth rate advertising revenue advertising revenue unless rates from from Department specified Department of of Finance Private only Private + CBC otherwise Finance consultations with Amount Share of Amount Share of consultations with private sector GDP GDP private sector forecasters forecasters 2004/05 1,371,425 ------2005/06 f 1,453,711 6.0% 1,727 0.1188% 1,884 0.1296% 2006/07 f 1,520,581 4.6% 1,759 0.1156% 1,918 0.1262% 2007/08 f 1,595,090 4.9% 1,803 0.1131% 1,967 0.1233% 2008/09 f 1,670,059 4.7% 1,851 0.1109% 2,020 0.1209% 2009/10 f 1,748,552 4.7% 1,909 0.1092% 2,083 0.1191% Source: PricewaterhouseCoopers, Global Entertainment & Media Outlook, 2006-2010 and Nordicity Group calculations based on data from PricewaterhouseCoopers, CRTC, Department of Finance, and Statistics Canada. f- forecast

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 80

Pay and Specialty Television

• A similar process was used to derive a ‘High’ scenario forecast for the pay and specialty television segment.

Table A8

All amounts Nominal GDP based on Nominal GDP annual Subscriber and advertising in millions PwC annual growth rate growth rate revenue of English-language of dollars assumptions (PwC assumptions) pay and specialty television unless services* specified otherwise Amount Share of GDP 2004/05 1,371,425 ------2005/06 f 1,438,625 4.9% 1,871 0.1301% 2006/07 f 1,503,363 4.5% 2,003 0.1332% 2007/08 f 1,571,014 4.5% 2,130 0.1356% 2008/09 f 1,635,426 4.1% 2,261 0.1382% 2009/10 f 1,694,301 3.6% 2,391 0.1411% Source: PricewaterhouseCoopers, Global Entertainment & Media Outlook, 2006-2010 and Nordicity Group calculations based on data from PricewaterhouseCoopers, CRTC, and Statistics Canada. f- forecast * Includes Météomédia, Teletoon/Télétoon and Bell ExpressVu DTH pay per view.

Table A9

All amounts Nominal GDP based on Nominal GDP annual Subscriber and advertising in millions forecast annual growth growth rate revenue of English-language of dollars rates from Department of from Department of pay and specialty television unless Finance consultations with Finance consultations with services* specified private sector forecasters private sector forecasters otherwise Amount Share of GDP 2004/05 1,371,425 ------2005/06 f 1,453,711 6.0% 1,891 0.1301% 2006/07 f 1,520,581 4.6% 2,026 0.1332% 2007/08 f 1,595,090 4.9% 2,163 0.1356% 2008/09 f 1,670,059 4.7% 2,309 0.1382% 2009/10 f 1,748,552 4.7% 2,467 0.1411% Source: PricewaterhouseCoopers, Global Entertainment & Media Outlook, 2006-2010 and Nordicity Group calculations based on data from PricewaterhouseCoopers, CRTC, Department of Finance, and Statistics Canada. f- forecast * Includes Météomédia, Teletoon/Télétoon and Bell ExpressVu DTH pay per view.

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 81

Appendix 2

PricewaterhouseCoopers LLP (PwC) Global Entertainment & Media Outlook: 2006-2010 (June 2006)

This report, which is 630 pages long, can be ordered on the Internet from PricewaterhouseCoopers LLP. The Outlook is prepared annually by PricewaterhouseCoopers in association with economic forecasters Wilkofsky Gruen Associates. The seventh annual edition contains in-depth analyses and five-year growth projections of 14 major entertainment and media industry segments across five regions of the world—the US, EMEA, Asia Pacific, Latin America and Canada.

Industry segments covered are: ¾ Filmed entertainment ¾ Television networks: broadcast and cable ¾ Television distribution ¾ Recorded music ¾ Radio and out-of-home advertising ¾ Internet advertising and access spending ¾ Video games ¾ Business information ¾ Magazine publishing ¾ Newspaper publishing ¾ Book publishing ¾ Theme parks and amusement parks ¾ Casino and other regulated gaming (including online gaming) ¾ Sports

Persons interested in ordering a copy of the Global Entertainment and Media Outlook: 2006-2010 —or in viewing a sampling of global forecasts for each industry segment and an index of the more than 500 data charts and tables that are included in this publication -- should access the following website: http://www. pwc.com/extweb/pwcpublications.nsf/docid/5AC172F2C9DED8F5852570210044 EEA7?opendocument&vendor=modmedia. The Outlook is available in hard copy or in PDF format. A Global Overview is available separately in hard copy or electronically, and individual chapters for each industry segment are available in electronic format.

Pricing and ordering details: Global Entertainment and Media Outlook: 2006-2010, Including the Global Overview, 632 pages and 500+ data tables, is available for US $995* (hard copy or PDF). Global Overview, a 50-page summary of the Outlook, can be purchased separately for US $95* (hard copy or PDF). Individual chapters can be purchased separately for US $95,* available in PDF format only. Corporate electronic site licenses are available for $3,000* per organization. A site license offers access by an unlimited number of users to the Outlook on a company's intranet. * plus a small download fee or postage and packaging and applicable taxes. ______

Comments to the CRTC by the Coalition of Canadian Audio-visual Unions The Future Environment Facing the Canadian Broadcasting System 82

For further information, the following can be contacted:

Carolyn Carson Modern Media Partners on behalf of PricewaterhouseCoopers [email protected] (631) 668-4098

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Comments to the CRTC by the Coalition of Canadian Audio-visual Unions