Opportunities and Risks

The market insights and assessments of future viability found in this report paint a general picture of the digital media environment and how Canadians will use and access audio and video content and services in the future. But what does this mean for Canada’s domestic market specifically? Does this picture show a vibrant market in which there are improved creative, cultural and employment opportunities for Canadians? Or are there risks that could prevent the development of such a vibrant market?

Clearly, while there are stresses on the audio and video market and the current broadcasting system, as well as immediate threats to certain sectors, there is little likelihood of imminent collapse. But to have a vibrant domestic market in the future, it will be necessary to do more than prevent or postpone such a collapse. In assessing how to foster a vibrant domestic market, we begin by identifying the various opportunities and risks of the digital media environment. Importantly, some of these opportunities and risks affect English- and French-language markets and audio and video services differently.

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Content for Canadians

Opportunity 1: Access to more global content
English-language market French-language market Audio market Video market

Since the advent of radio and television, Canadians have enjoyed access to content from other countries in addition to our own. Most of this content comes from the U.S., but increasingly it comes from all over the world, thanks in large part to international or global online services. Access to this content provides great opportunities for Canadians to inform and entertain themselves.

Risk 1: Loss of Canadian content
English-language market French-language market Audio market Video market

The content Canadians value—whether, for example, music, news, drama, documentaries, children’s or lifestyle programs—depends on the supports built into our broadcasting system. It is a dynamic cultural industry and economic ecosystem based on the engagement and contributions of Canadian creators, governments, industry members and the public. This system, however, is largely focused around traditional radio and television services. If Canadians turn away from these services in large enough numbers, then the system will be less able to support the creation of content. Content that is already costly or unprofitable to produce will become even more difficult to support. This content could include:

“Canadians place strong importance on news programming relative to other genres of audio and/or video programming … three in four (75 per cent) respondents in the representative survey indicated that national and international news is of importance to them personally and just over two-thirds (69 per cent) indicated that local news is of importance. Documentary programming is considered to be important programming for three in five (61 per cent). Half or more in the representative survey value programming for entertainment, including: drama, action, fantasy/sci-fi, or horror programming (56 per cent), music (52 per cent), or comedy (50 per cent).” The study also notes that an even greater portion of women, Atlantic Canadians and older Canadians (55+) place an importance on local news, while Qubecers place more emphasis on documentaries and younger Canadians consider comedy and music more important.

According to EKOS research
  • News, particularly local news, on television and radio
  • Canadian dramas, documentaries, children’s programming and comedy
  • French-language content for Canadians outside of Quebec
  • Content that is accessible to persons with disabilities
  • French-language music
  • Content by and for Indigenous peoples
  • Canadian content in other languages

Loss of this content would limit the capacity of the broadcasting system to enrich, strengthen and reflect Canadian culture, identity and society. Some of the relationships between the production of certain types of content and the cultural ecosystem and industries that finance this content can be seen in this interactive tool:

How could market shifts impact Canadian TV and film production?

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A vibrant Canadian production market depends greatly on traditional TV subscription and advertising revenues, a portion of which broadcasters use to spend on content.

How to use the flowchart: Adjust the Subscriber and Advertiser Revenue sliders to increase or decrease the percentage of revenue that flows through the broadcasting system to Total Canadian Content Production. The amounts in certain boxes will increase or decrease. Click on the titles to read more information about each box.

Sources: Nordicity estimates based on data from CRTC, CAVCO, CMF, Telefilm Canada, CBC/Radio-Canada, Statistics Canada, 2018-19 Federal Budget and Numeris.

Note: Some totals may not sum due to rounding.

Content by Canadians

Risk 2: Supports for Canadian video content decline
English-language market French-language market Video market

Looking specifically at the economics of video content, declines in consumption of traditional television may impact the support systems used to create much of the content valued by Canadians. Most services are not currently in danger of disappearing, but as the interactive tool illustrates, lower subscription and advertising revenues in the traditional system mean that many of the existing legislative, policy and regulatory tools, such as expenditure and exhibition requirements, contributions to funds and tax incentives, become less effective in supporting policy objectives. These tools are not currently applied to international or global online services operating in Canada, which means that as Canadians turn to these online services, the burden of supporting video content production may fall more heavily on Canadian television services and producers that are less able to shoulder it.

“I think once you leave cable you never go back. There’s literally nothing cable could do to compete with the fact that once I have my show I can watch it with no ads, whenever I want, unlimited amount, no wait time. There’s nothing cable could do to bring me back.”

Focus group participant from Ottawa (EKOS)

The most direct concern is that, driven by the shift to online consumption, continued declines in traditional TV advertising and subscription revenues—the broadcaster revenues on which the bulk of current financing is based—will reduce the money available for production by Canadians. If creators and producers do not find alternative types of financing, less content will be made by Canadians and Canadians will see less of themselves, their culture and their values reflected. The impact of declines in support could be amplified by increasing production costs. If there are fewer opportunities in Canada, this could also accelerate the loss of Canadian creative talent to other nations, particularly the U.S.

In the French-language markets, there are additional risks. Although demand for traditional television services and content remains strong in these markets, the total number of consumers is small. Scale is essential to producing the content on which these services rely. The loss of even relatively small numbers of viewers may have a disproportionately large impact on the ability to produce content in French by French-speaking Canadians. Further, the international or global online services to which Francophones, particularly younger generations, may be drawn are predominantly English-language services, meaning the implications are both economic, social and cultural.

To the extent that international or global services do offer French content, very little is produced by Canadians. Even content that is dubbed in French will most likely be dubbed elsewhere than in Quebec, which may have significant negative impacts on Francophone viewers and that province’s dubbing industry.

Opportunity 2: Democratizing content production
English-language market French-language market Audio market Video market

New online services have provided the tools and opportunities for more Canadians to become creators than ever before. This has resulted in the development of a large pool of Canadians who have developed the creative and technical talent and skills necessary to inform and entertain audiences large and small, within local communities, across the country and around the globe.

Unlike content created for traditional television and radio services, user-uploaded content, for example, is created by Canadians with relatively little support by industry or governments, although some of this content is acquired by online services and other services sometimes pay the most popular creators a portion of advertising revenues. To fully realize the potential of this opportunity, it will be necessary to ensure that these Canadian creators maintain the rights to their own creations and are able to benefit from those rights.

Opportunity 3: More content buyers
English-language market Audio market Video market

New technologies and online services create opportunities for content production by Canadian creators and producers. There is an increasing number of online service providers, and each must invest in content to draw in viewers. Traditional services, particularly television services, must also continually invest in content to compete with each other and their new competitors. There are great opportunities for new and existing Canadian creators and producers to benefit from this demand.

In the past, traditional television broadcasters have acquired much of their content from U.S. creators and studios. With the costs of content production increasing and U.S. producers and other rights holders developing services or other partnerships to sell directly to consumer, purchasing rights to broadcast foreign content in Canada may become more costly and traditional broadcasters may need to place a greater emphasis on new domestic content.

Developing the content of the future will mean new partnerships, many of which are likely to involve international sources for production financing. This shift will, in turn, open doors to a greater number of markets for Canadian content creators and producers.

These opportunities are more than just economic. Demand for content and new technologies, coupled with partnerships with new players, can also lead to novel modes of storytelling and innovative forms of content, as well as different ways of conveying Canadian stories around the world. Creators bring their experiences from these partnerships back to their other work, enriching the creative process throughout the domestic market.

Risk 3: Canadian music may lose an important promotional tool
English-language market French-language market Audio market

While the importance of radio to Canadian music production and its financing has declined, it remains a valuable tool for promoting and discovering artists and music, particularly new and emerging artists. Continued declines in radio listening may impact the future value of radio as a promotional tool.

“I remember when CRTC was not around, and there was no Canadian content rules. If you had a talent, you had to leave Canada, you had to. . There was no way if and but [sic]; if you wanted to succeed in entertainment you had to leave Canada. Then when they came in with Canadian content people started staying in Canada because they could get their music heard, get their feet on the ground here in Canada.”

Focus group participant from Sault Ste Marie (EKOS)

Artists have been forced to adapt their approach to promotion and discoverability by relying, for example, more heavily on touring and merchandizing. Future artists may face an even more complex challenge in trying to succeed and promote themselves through means such as social media or inclusion in algorithmic playlists offered by streaming services. Then again, online services offer the benefit of accessing valuable analytics, which help to create fan bases and identify new markets for live performance opportunities.

French-language artists may face even greater challenges. The unique and valuable contributions of these artists have been well supported by a robust French-language radio industry. Declines in listening in favour of international, predominantly English-language online platforms present significant risks for the future. On the other hand, Indigenous artists and artists who perform in languages other than English and French, some of whom may not have been as well supported by commercial radio, may find that the move to global platforms presents significant opportunities.

How could changes in radio broadcasting revenues affect financial contributions used for the development of Canadian music and spoken word content?

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A portion of AM/FM and satellite radio revenues are directed to Canadian content development (CCD) and royalties. These financial contributions support the growth and development of the Canadian music industry.

How to use the flowchart: Adjust the slider to increase or decrease the percentage of radio broadcasting revenues and see how it impacts support for the music industry. The amounts in certain boxes will increase or decrease. Click on the titles to read more information about each box.

Sources: CRTC data collection; Sirius XM Canada publicly available financial statements; Copyright Board of Canada; SOCAN; CMR 2017, and FACTOR and MUSICACTION Annual Reports, 2016-2017; Department of Canadian Heritage.

Note: Some totals may not sum due to rounding.

Canadian Program Distribution Models

Risk 4: New expectations
English-language market French-language market Audio market Video market

Improvements in Internet access and the development of a wide range of new Internet-based services have brought a seemingly limitless array of content to many Canadians, but it has also changed their expectations. Canadians have come to expect to be able to access content anytime and anywhere and to do so cheaply or even for free—though they may have to exert more time and energy to find the various services that provide that content.

“Canadians who are watching at least some content online most often said the Internet provides them with the content they want (45 per cent combining those indicating this as a primary or secondary reason), or the convenience of where you can access it (43 per cent citing this as a key reason). The timing of accessing the content when you want it and the flexibility to explore and discover new content online are also key reasons for just over a third (38 and 34 per cent respectively combining primary and secondary reasons). The third order of motivation for watching content online is the cost for services, noted by 18 per cent including those seeing this as a primary or secondary reason.”

Amongst online audio listeners’ EKOS found that “[f]or focus group participants who listen online, the primary reason was described as the convenience of being able to listen to whatever they want in content, whenever and where ever they want it, emphasizing the importance of being able to select one’s own content, on flexible terms, to suit one’s own timing.”

EKOS research

These expectations place enormous pressures on existing (and new) program distribution models and may contribute to theft or piracy of content.

“I know for streaming, I don’t use radio stations on my phone because you can access anything [online]. You can download whatever you want from Google Play or the Apple store or whatever. YouTube has everything on it. So you can just pick and choose, you can make your own playlists, you don’t have to leave it up to someone else to pick and choose what you listen to.”

Focus group participant from Halifax (EKOS)

In order to get the content they want, Canadians also expect to have access to affordable high-quality Internet. Most Canadians have so far been willing to pay for access, as illustrated by the growth in spending on Internet access. However, they are frustrated by increasing costs and the slow rate of high-speed Internet roll-out.

“Where my parents live they don’t even have Internet there because they can’t get it. So is it important? Absolutely, because it shuts down half of what you can look at, you can’t go online, you can’t do anything.”

Focus group participant from Vancounver (EKOS)

Where there is a lack of access to broadband Internet services, Canadians who create or wish to create content are also hindered.

Risk 5: Distinct Canadian rights market could disappear
English-language market Video market

Profits from non-Canadian (primarily U.S.) programs are currently used to cross-subsidize domestic programming. This dependence on cross-subsidization is a double-edged sword: while it supports Canadian production, the profitability of using non-Canadian programs incents broadcasters to supplant Canadian programs.

In the future, non-Canadian players may go directly to Canadian consumers, bypassing the Canadian system altogether. As a result, separate Canadian rights may not be sold to Canadian broadcasters, eliminating an important economic support for Canadian production. Canadian broadcasters wishing to acquire rights to these programs would compete directly with domestic and international players to acquire global or North American rights, which will be more expensive and more difficult to exploit effectively. There is some evidence that this is already beginning to happen; however, longstanding business relationships and long-term content supply agreements between U.S. rights holders and their global partners may slow this practice.

Data

Opportunity 4: Understanding audiences through data
English-language market French-language market Audio market Video market

New online services have provided the means to collect detailed information on the content Canadians consume and how they consume it. This data offers an enormous opportunity to improve the quality and value of content for Canadians, promote and discover content more effectively, develop new types of content and distribute content in ways that make the most sense for Canadians. The analytics offered by online audio services can be valuable, for example, in developing fan bases or identifying locations for live performances. Online video service data is similarly valuable for identifying where there is demand for content or interest in products, as well as how content can best be distributed and promoted.

Most of this consumption data, however, remains proprietary to each service. Fully harnessing this opportunity to provide audience insights across all services and increase the value and reliability of data for all stakeholders will require some level of industry-wide collaboration.

Risk 6: Misuse of data
English-language market French-language market Audio market Video market

The development of these online services has also given rise to new ways of misusing data—for example, to infringe on the privacy of Canadians—particularly when services collect data without users’ knowledge or informed consent. Data can also be used to misinform and manipulate through fake or misleading news and information, affecting democratic processes, relationships with others and the way Canadians view the world.

New Developments

Opportunity 5 / Risk 7: New developments
English-language market French-language market Audio market Video market

Simply put, there will be changes that cannot be anticipated. The Internet has enabled an array of new content distribution models: new ways to create, promote, distribute and consume content, even new types of content. There are undoubtedly other opportunities and risks ahead that cannot be predicted, and the right conditions will need to be in place to ensure that innovation can thrive.

There are some changes that can be anticipated, though. Advances in audiovisual compression technology will make even more content of increasingly higher quality available to Canadians using even less bandwidth. Similarly, higher speed and higher quality Internet access and data services will slowly become available to more Canadians.

Algorithmic and artificial intelligence systems are likely to guide the selection of content by Canadians and to be key tools for its promotion and discoverability. Such systems will influence not just how content is found, but what content is created, how and by whom.

The battle between technologies that protect content and those used to steal content is likely to continue.

Finally, as is discussed in this report’s conclusions, an important risk is that the legislative and regulatory frameworks currently employed in Canada are not easily adaptable to the changing reality. Whatever the future holds, more innovative and adaptable tools will be necessary to address the risks and opportunities of technological change impacting the video and audio markets.