Canadian over-the-top market getting competitive, could impact pricing, rights

Google Inc.’s introduction of YouTube Movies into the Canadian market last week signals an increasingly competitive market for over-the-top entertainment services which could lead to downward pressure on pricing and spending for content rights acquisitions, industry experts say. “It’s conventional wisdom that when there are two or more big firms competing for program rights ... it tends to drive up programming costs because there’s competition for valuable assets,” technology consultant and York University communications professor David Ellis said in an interview. “On the other hand, I think that Google’s entry into this market may have very much the opposite effect.” Ellis said the introduction of a powerhouse like Google into the over-the-top entertainment industry could encourage big studios and film and programming distributors to take over-the-top services more seriously than they have in the past. Over-the-top services willing to take on more products and larger contracts could find themselves with better deals for content rights, he said. “One effect that this might have on the studios and networks that own these goodies is that they may begin to think of the online marketplace less as a threat and more as a place where they’re going to have to do business,” Ellis said. “Once you get a couple of 800-pound gorillas entering a market, it makes it very difficult for even the Hollywood six to treat this as a marginal kind of business,” he noted. The YouTube Movies streaming rental service, released last week in Canada, joins a Canadian market in which other over-the-top providers, Apple Inc. and Netflix Inc., are currently operating. Launched with a small but growing library of more than 1,000 titles, the new service will offer on-demand movie streaming of Hollywood and independent films at $4 for older movies or $5 for newer titles—pricing similar to that of iTunes and Apple TV. Increased competition online could also apply pricing pressure to other over-the-top services and traditional broadcasters, John Lawford, counsel with the Public Interest Advocacy Centre (PIAC), said in an interview. Service providers are likely to look for cost savings if their revenues decline. “It’s competition, right? So it should put some pricing pressure on . Those guys will go back to the producers and say, ‘We can’t pay you as much’,” Lawford said. “I think it puts fear into the hearts of all of the content distributors and the content creators, and where this all falls off I’m not sure.” Ellis and Lawford said they did not feel that Google’s latest Canadian release is designed to target Netflix as a competitor. YouTube Movies is a pay-per-view service and Netflix is a subscription service, they noted. So far, Lawford said, YouTube Movies seems to be featuring new releases that primarily appeal to younger viewers. As of Wednesday, the top rentals on the new site included youth and teen-friendly films Your Highness, Paul, Soul Surfer and Hall Pass. Google launched the new over-the-top rental service in Canada after it secured the rights to content through partnerships with major Canadian producers Entertainment One, Mongrel Media and Alliance Films. In an interview with The Wire Report Tuesday, Google spokesman Aaron Brindle said the Canadian version of the service now features “significantly more than 1,000” titles. That falls well below the 3,000-plus titles available to U.S. users, whose version of the service launched in May. But the new service is also in the process of adding popular American films produced by Warner Bros., Universal Pictures and Sony Pictures, among others, Brindle said. “We’re trying to bring all those catalogues to bear,” he said. “That doesn’t mean that all of those catalogues are available yet, but we’re in the process of ingesting a high number of those films.” Questions have also emerged about how over-the-top services operate parallel to the regulated Canadian broadcasting system and are not required to meet Canadian content obligations. Online services like iTunes, Netflix and now YouTube Movies do not face Canadian content regulations that require traditional broadcasters to offer Canadian-made programming and make monetary contributions to support Canadian productions. Brindle said the company will roll out more Canadian content on YouTube Movies as it expands its library. He said Canadian YouTube-users have a preference for made-in-Canada content and that the company will continue to push home-grown movies without a requirement to do so. “Our Canadian YouTube audience is significant, and they’ve clearly expressed—by what they watch and the videos that they generate—an interest in Canadian content,” Brindle said. “We want to serve that interest.” He said he does not have specific numbers on how many of the currently available titles were Canadian-made. The Canadian library does not yet include any Quebec-made, French-language titles, although those are likely to be added in the weeks and months to come, Brindle said in a follow-up email. The role of over-the-top services in the Canadian broadcasting system was in focus this summer during a CRTC fact-finding consultation on the issue. Groups such as the Alliance of Canadian Cinema, Television and Radio Artists (ACTRA) and the Canadian Media Production Association (CMPA) argued that online, over-the-top service providers should be required to contribute to the creation of Canadian programming. During the consultation, Google wrote in a submission to the CRTC that user-generated videos posted on YouTube by amateur Canadians are an expression of Canadian culture. “Some of YouTube’s Canadian content is not highbrow, but it is certainly a meaningful contribution to Canadian culture,” the company wrote. Analysts and legal experts have noted the difficulties in attempting to regulate foreign-owned, over-the-top websites. It's unclear what, if any, changes to the regulatory system the CRTC may recommend when it releases a report on the fact-finding consultation later this year. Google has followed the CRTC consultation “very closely,” Brindle said. YouTube Movies should have a place in Canada well into the future, he added. “Canadians have this insatiable appetite for online video,” he said, referring to a comScore report from April that said Canadians of all demographics are more likely to watch online video than their American counterparts. “I think we have a dedicated audience and YouTube is the destination for Canadians in terms of their online video content.” He said Google launched the new service in Canada less than 24 hours after it confirmed it was technologically capable of doing so. “We wanted to get the offering out as quickly as possible to our Canadian consumers,” he said. “We kind of recognized that this is just the beginning. We’re going to push for Canadians to go to YouTube as a source for their Friday date nights ... I think you’ll be hearing more from us in the future.” nkyonka@thewirereport.ca

Canadian over-the-top market getting competitive, could impact pricing, rights

Broadcast | September 7, 2011

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