BDUs, producers and programmers square off in battle for Cancon and advertising on VOD

Two of Canada’s big cablecos are cautioning the CRTC against changing the existing video-on-demand regulatory framework and adopting rules that restrict the growth of VOD and its expansion onto digital platforms. Cable giants Rogers Communications Inc. and Shaw Communications Inc. say the current VOD model works just fine and a light handed regulatory approach that allows market forces and consumer demand to spur growth is what the industry needs. Rogers argues that the key objectives of the existing VOD regulatory framework, which came into effect in 2000, were designed to promote the transition to digital by building the subscriber base for category 1 and category 2 digital services. “The past eight years have proven the wisdom of that strategy,” Rogers writes in its April 2 comments to the CRTC. The company has signed on 1.5 million digital subscribers to its on-demand services, which offer 5,000 titles, compared to 100 when it first launched the service in 2002. Rogers and Shaw are among 52 stakeholders that have submitted comments in response to a CRTC review of the current VOD framework. In issuing the call, the commission said while linear services like over-the-air, pay and specialty television services provide the bulk of VOD programming, it is important to assess the impact of non-linear services on the VOD market. Specifically, the CRTC says several issues on the VOD framework need to be reviewed. These touch on packaging of VOD services, access to platforms, program rights, advertising on VOD services, Cancon obligations, access in French and English, VOD buying requirements, a common licensing framework for pay-per-view and VOD undertakings, an approach for VOD undertakings owned by small BDUs, and introduction and evolution of network personal video recorders. But Rogers and Shaw argue any changes to the current VOD framework would hinder the development of VOD services and their expansion to new platforms. “Many of these proposals are inconsistent with the interactive nature of VOD and would almost certainly degrade the quality of the service we provide,” writes Rogers. Jean Brazeau, Shaw’s senior VP, regulatory affairs, said market forces and consumer demand should be allowed to drive the VOD market within the current framework. “This will allow VOD to provide important competitive benefits in terms of enhancing the attractiveness of the regulated system, in generating revenues for programmers, producers, BDUs, and VOD licensees, in driving digital penetration, and in increasing viewing to Canadian programming services.” Advertising on VOD is expected to be one of the more contentious issues in this proceeding. Some parties, like the Canadian Film and Television Production Association (CFTPA), argue that if programming is obtained from a Canadian rights holder, advertising limits on VOD should be removed. Additionally, pay and specialty services claim that advertising windfalls derived from VOD belong to them. Some broadcasters also fear that advertising on VOD platforms will be at the expense of advertising spent on over-the-air (OTA), pay and specialty television services. While Rogers and Shaw disagree with these proposals, they say there is a window of opportunity for the BDUs, broadcasters, and other VOD suppliers to sit down and negotiate appropriate terms for sharing advertising revenues. Echoing a long held apprehension about the level of content on television, the production community has called on the CRTC to consider increasing the VOD contributions to Canadian programming, including demands for extra Canadian content. Telefilm Canada has proposed that that VOD contribution to Canadian production be upped from 5% to 6%, while the CFTPA has proposed that Cancon levels be doubled from the current 20% to 40%. But Rogers argues that VOD should not be compared to OTA, and pay and specialty services. Higher Cancon requirements are needed for these services because they offer programming at specific times, Rogers contends. “In the VOD environment, the Canadian content is available to viewers at any time of their choosing.” Shaw cautions against increasing monetary contributions for VOD services, saying the service is still in its infancy in Canada and as it grows so will the advertising revenues, and everyone will eventually benefit from a larger slice of the advertising pie. Rogers and Shaw also don’t see eye to eye with other stakeholders on other points raised by the CRTC, such as packaging of VOD content. The CFTPA, Astral Media and Corus Entertainment Inc. argue that OTA, specialty pay TV services licensees should be allowed to offer subscription video-on-demand (SVOD) as part of their licence conditions. Rogers and Shaw argue against this request, stressing that it will introduce unnecessary regulatory burdens. “We believe it is complex and excessively regulatory, quite apart from being unnecessary,” says Rogers, adding that the move will result in three types of VOD services that are: an extension of linear services; SVOD packages created by VOD undertakings; and services that are transactional in nature. All three will be governed by different rules, Rogers argues. Also contentious is a proposal by CTVglobemedia Inc. and Allarco Entertainment that popular linear services should not be carried at the expense of Canadian programming. But Rogers and Shaw argue the CRTC should not consider any special Cancon requirements for SVOD. On its part, Rogers contends that its SVOD packages such as here! On Demand and Howard Stern TV on Demand, do not compete with Canadian programming.

BDUs, producers and programmers square off in battle for Cancon and advertising on VOD

Broadcast | April 13, 2009

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