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Media and Internet Concentration in Canada, 1984-2018

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Media and Internet Concentration in Canada, 1984-2018 MEDIA AND INTERNET CONCENTRATION IN CANADA, 1984-2018 REPORT DECEMBER 2019 Canadian Media Concentration Research Project Research Canadian Media Concentration www.cmcrp.org Candian Media Concentration Research Project x The Canadian Media Concentration Research project is directed by Professor Dwayne Winseck, School of Journalism and Communication, Carleton University. The project was funded by the Social Sciences and Humanities Research Council between 2012 and 2018, after which the Faculty of Public Affairs at Carleton University generously stepped in to provide bridge funding for the next two years of the project. The overall objective of the CMCR Project is to develop a comprehensive, systematic and long-term analysis of the telecoms, internet and media industries in Canada to better inform public and policy-related discussions about these issues. Professor Winseck can be reached at either [email protected] or 613 769- 7587 (mobile). Open Access to CMCR Project Data CMCR Project data can be freely downloaded and used under Creative Commons licensing arrangements for non-commercial purposes with proper attribution and in accordance with the ShareAlike principles set out in the International License 4.0. Explicit, written permission is required for any other use that does not follow these principles. Our data sets are available for download here. They are also available through the Dataverse, a publicly-accessible repository of scholarly works created and maintained by a consortium of Canadian universities. All works and datasets deposited in Dataverse are given a permanent DOI, so as to not be lost when a website becomes no longer available—a form of “dead media”. Acknowledgements Special thanks to Ben Klass and Han Xiaofei, both doctoral students in the Ph.D. program at the School of Journalism and Communication, Carleton University, and Lianrui Jia, a Ph.D student in the York Ryerson Joint Graduate Program in Communication and Culture. They helped enormously with the data collection and preparation of this report. Ben wrote key aspects of the wireless section and helped immensely with the online games, gaming downloads and apps and in-game purchases section of the report. Sabrina Wilkinson, a graduate of the MA Program at the School of Journalism and Communication at Carleton University and currently a Ph.D. candidate at Goldsmiths University in the United Kingdom, also offered valuable contributions to the sections on the news media. Agnes Malkinson, another Ph.D. candidate in the Media and Communication program at Carleton University, is responsible for the look and feel of the reports, does all the visuals, and keeps the project’s database in good working order. www.cmcrp.org i Media and Internet Concentration in Canada, 1984-2018 Executive Summary Every year the Canadian Media Concentration Research Project puts out two reports on the state of the telecoms, internet, and media industries in Canada. This is the second installment in this year’s series. Whereas the first report in this series examines the growth, development and upheaval that are transforming the media industries in Canada, this report takes a step further by asking a deceptively simple but profoundly important question: have these industries—individually and collectively—become more or less concentrated over time? The report does so by examining the state of competition and concentration in the mobile wireless and wireline telecoms market, broadband internet access, cable, satellite & IPTV services, broadcast television and radio, specialty and pay television services, online video subscription and download services, newspapers, magazines, internet advertising, search engines, social media as well as mobile and desktop operating systems and browsers. This year’s report also adds significantly to our efforts last year to examine the dynamics of advertising spending across all media in Canada, i.e. TV, radio, online, newspapers, magazines and out-of-doors. As we noted in our first report, we have also significantly expanded our coverage by taking some preliminary steps to capture a broader range of audiovisual media services that are delivered over the internet, including: 1. Music downloads and streaming music subscriptions; 2. Online gaming, gaming applications, game downloads or in-game purchases 3. App stores, in particular Google Play and Apple Appstore. Collectively, we call these latter sectors the digital audiovisual media services, or digital AVMS for short, a category that also includes internet advertising as well as online video subscription and download services such as Netflix, Crave, SportsNet Now, Apple iTunes and Amazon Video. We treat the digital AVMS sectors as being distinct from more established content media that do not depend on internet aggregation and distribution as a core part of their business models and activities, e.g. broadcast TV, specialty and pay TV, radio; music, newspapers and magazines. We call the sum-total of all these media “the network media economy”. We analyse each sector on a stand-alone basis, and then scaffold up from by grouping related, comparable industry sectors into three more general categories: the “telecoms and internet infrastructure media”, the digital and non-digital AVMS and finally, “core internet applications and sectors”. Finally, we draw all of the sectors together into a birds-eye view of the network media economy as a whole. We call this the “scaffolding method”. At each step of the way, we use two common metrics—Concentration Ratios and the Herfindahl-Hirschman Index (HHI)—to determine whether these markets—individually and collectively—are competitive or concentrated, while paying keen attention to trends over time and in international comparison where possible. In addition to adding new and emerging sectors to our analysis, and further developing the new line of analysis with respect to advertising that we have pursued over the last two years, this report delves deeper into the state of competition in local and regional mobile wireless, retail internet access and “cable TV” services, as opposed to a purely national level of analysis. To do so, we examine the www.cmcrp.org Candian Media Concentration Research Project ii state of mobile wireless competition where the big three national carriers—Rogers, Bell and Telus— now face strong regional rivals in most provinces across the country from, for example, Videotron (Quebec and Ottawa), Freedom Mobile (Ontario, Alberta, BC), Eastlink (Atlantic provinces) and SaskTel (Saskatchewan). We show that competition has improved considerably in Quebec, for example, where Videotron has carved out a 13% market share for itself in the mobile wireless market (and about 15.5% based on subscribers). Since being acquired by Shaw, Freedom Mobile has also expanded its subscriber base from 940,000 in 2016 to 1.5 million last year earlier, while its revenue nearly doubled to $951 million over the same period. Its share of the national wireless market also jumped from 2.3% in 2017 to 3.4% last year (based on revenue), while in Ontario, Alberta and BC where it operates, it has carved out an estimated market share of 6.4%--up from 5% the year before. That said, the big three national mobile network operators—Rogers, Bell and TELUS—have a market share that continues to hover around 91.3% based on revenue—a slight decrease from 92.3% the previous year—or 91% based on subscribers (CWTA, 2019). Concentration levels are even higher in local retail internet access and cable TV markets, where the legacy cable companies and telecoms operators generally account for 87% and nearly 100% of the market, respectively. In short, there are strong reasons for concern in all these markets. Now is not the time to let up on policy measures that have begun to bear at least some fruit, and perhaps good reason to double-down on them—whether the CRTC will do that, however, has been rather doubtful in recent years and mixed messages are coming from other quarters such as the Competition Bureau and Innovation, Science and Economic Development. This report also identifies features of the network media economy that set Canada apart from other countries. In this regard, two things stand out: the sky-high levels of diagonal integration and the extremely high levels of vertical integration that exist in this country. Diagonal integration is where mobile wireless, wireline internet access and cable TV service are owned by one and the same player. In most countries, there are stand-alone mobile network operators (MNOs) such as T-Mobile or Sprint in the US, 3 in the UK and Vodafone throughout Europe and many other areas of the world where it operates whereas in Canada the last stand-alone mobile operator (Wind Mobile) was acquired in 2016 by Shaw. Vertical integration is where communications companies own media content companies. Current levels of vertical integration are exceptionally high in Canada by both historical standards and international standards. Indeed, the scale of vertical integration doubled between 2008 and 2013 and by 2018, four vertically-integrated communications conglomerates in Canada had come to account for 56.5% of the $86.2 billion network media economy: Bell, Rogers, Shaw (Corus) and Quebecor. As a result, Canada stands alone in the developed world on account of the fact that all of the main TV services in the country, except for the CBC and foreign-owned online video-on-demand services (OVODs) such as Netflix, Amazon Video and Apple, are owned by telecoms operators. In the US, by contrast, while there are also four vertically-integrated behemoths—i.e. AT&T (Time Warner), Comcast (NBC-Universal), Charter (Liberty) and Cox—they accounted for just a third of that country’s mammoth $1,087.6 billion (CDN) network media economy in 2018. In the US, like most other countries as well, most broadcast and pay TV services are not owned by telecoms operators—a fact that has important implications in terms of why they have proven to be more resilient and commercially successful than their Canadian counterparts, as this report and our previous report show.
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