Source : Globe & Mail

As tech-savvy turn to Web for TV, networks may lose advertising dollars

Canadian broadcasters are among the most vulnerable to an onslaught of new technology that is changing how people watch TV, warns a report titled "The end of television as we know it."

In as little as five years, the global industry could be drastically altered by the rise of alternative ways to watch television, such as downloadable programs and TV streamed over the Internet, say a group of researchers with technology giant International Business Machines Corp.

Although not the first to suggest the migration of audiences to the Internet is threatening mainstream media, the report hits particularly hard at Canadian broadcasting.

Federal regulations that allow Canadian networks to earn the bulk of their advertising dollars by running domestic commercials on U.S. signals will be useless if audiences start drawing TV shows from the Internet, the report said.

The revenue from such advertising is the lifeblood of Canadian networks, often offsetting the cost of domestic productions and local news.

"That advantage will evaporate if alternate sources of content exist," the IBM research asserts.

"Canadian-based content distributors will need to find compelling ways to bring the customer to them -- and thereby, to their advertisers."

The study was done for the North American television and advertising industries. The emergence of TV-equipped cellphones, and shows that are pulled from websites could make it difficult, if not impossible, for advertisers to target Canadian viewers, IBM said.

"In the 1960s, there was one type of television consumer and that probably carried on through to the 1980s, with the advent of the VCR -- and that started to change the way things happened." said Alan Sawyer, a consultant with IBM Business Consulting Services in Toronto.

Today, there are two primary audiences -- viewers who watch scheduled television and those who are driven by gadgets, mobile TV and on-demand programming.

"Over time, one will disappear and the other will become the dominant segment," Mr. Sawyer said.

Canada's networks are wrestling with those very issues in Ottawa. The Canadian Association of Broadcasters has asked the Canadian Radio-television and Telecommunications Commission to regulate video programming on cellphones, ensuring there is still room for domestic content and local advertisers.

"It's about the fundamental business model that has supported Canadian television over the years," said Glenn O'Farrell, president of the association, which represents CTV, Global, CHUM and other networks.

"The advertising model is very much being put to the test by these new technologies . . . The question is how effective will it be if Canadian consumers can also access the same programming from non-regulated sources."

Canadian networks could lose advertising dollars to viewers who download shows from U.S. or British networks, for example, rather than watching those same programs on Canadian channels.

"The CRTC is going to have to pay a lot more attention, on a go-forward basis, to the fragility of the economic model supporting television," Mr. O'Farrell said.

While broadcasters want some form of regulations on mobile TV, an industry that is just getting off the ground, Mr. Sawyer said that approach is likely not the answer.

Canadian networks must instead build themselves as reliable brands on the Internet and offer the same shows on-line, provided they can secure the rights.

However, as U.S. networks start making hit series available for download, Canadian networks face the possibility of being left out of the distribution chain.

"Without ad revenue to cover the cost of production and distribution, local TV news may become thing of the past, or exist only in major urban areas," the IBM consultants said.

TVO's brave new world

The television industry's business model is on the verge of a seismic shift as a younger, more tech-savvy generation of consumers shuns traditional network-defined program scheduling for 'anytime, anywhere content' delivered via multiple media platforms.

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