John Tory, the éminence grise of the Canadian cable<slash>media juggernaut Rogers, whose name, we note, chillingly consists of two four-letter words, whines unbecomingly about the “timidity” of Canadian advertisers and content providers. Why won’t they sign up for interactive TV? When will they get with the program(ming)?
“We have not been overwhelmed by lineups of people pounding at the door,” said the president and chief executive officer of Rogers Cable in a speech to an E-business conference. Mr. Tory said the foot-dragging, while present in other countries, is especially apparent here. “Perhaps it’s a bit more Canadian.”
He said the lack of interactive ads, services and other content could hurt the spread of high-speed Internet access, since consumers will be less likely to pay higher fees for a broadband connection if they are simply using it to access E-mail more quickly. [...]
Mr. Tory acknowledged the existence of that stumbling block, but countered with the assertion that companies need to begin developing interactive content now in preparation for the emergence of a mass market in broadband access through this decade.
Now, we know why there’s no interest in “interactive ads”: The “interactive” television networks on which they would be featured are fictions of regulation. Did you know that Canada, a nation of a mere 30 million souls that already gives you 70 channels one notch above basic cable, licensed 21 more channels last year for mandatory carriage, and over 200 other channels for optional delivery?
And each of these, we are told, will come with a superswanky “interactive” component, which boils down to some unspecified form of E-commerce delivered by digital set-top boxes, which themselves are not standardized, compatible, or in wide use.
Broadcasting cartels were able to cough up the money (a) for the application process (estimated at $400,000 per channel or set of channels from the same applicant) and (b) the channels themselves ($1 million to $5 million just for openers), but not of course for accessibility, which is always too expensive. Still, the channels are money pits:
It’s estimated each new digital channel will spend between $3 million and $6 million annually on programming for now.
Strange as it may seem, the phones are silent across the production community. For example, the Writers Guild of Canada – a Toronto-based group that represents about 1,500 film and TV screenwriters – has yet to receive a single piece of business from digital television. “Writers are involved when a project begins and is in development,” says Jim McKee, the guild’s director of policy and communications. “We’re not seeing anything yet.”
Digital’s tough economics provide some answers. At present, some two million Canadian homes each pay about $70 a month to have digital TV service via cable set-top boxes and satellite dishes. Industry sources suggest the new channels will each receive from less than $1 million to a maximum of $5 million in annual subscriber fees.
That leaves at least $2 million a year to raise through advertising and a few ancillary sources. That’s $2 million times 21 channels with guaranteed carriage, plus an untold number of optional stations, adding up to over $40 million in elasticity in the advertising market that broadcasting cartels believe exists, according to their consensual hallucination.
While programming may be diverse, expect all the new channels to share one thing in common: dismal earnings statements. It’s widely agreed that audience numbers will be small and advertising revenue hard to come by.
“It’s going to be slim pickings for all,” said one Bay Street analyst. “I think there’s going to be all sorts of brackets on the financial statements next year from this thing.” [...]
Nevertheless, [short-fingered vulgarian Israel] Asper concedes “no one is budgeting a heck of lot of advertising revenue. There’s no doubt it will put pressure on the whole market” and pull an estimated $20-million in advertising each year from existing broadcasters, he said.
Our Unabashed Calculator defines this estimate as “south of the real figure by a good twenty mil.”
With viewership in the single-digit thousands for each of these stations (would you want to watch the French horror network?), dolling up some kind of interactive advertisement for diapers seems like an efficient way to piss away cash. Why not just knock off for the day and go bet on the horses?
Of course, the dirty secret of the discourse about “interactive” advertising – apart from its house-of-cards foundation of “convergence,” which doesn’t work and nobody wants – is its foundation in a regulatory confidence scheme. Snag a license and suddenly you become a viable takeover prospect.
Salter Street Films somehow secured a license of some kind and was immediately swallowed up by the chillingly- and inelegantly-named Alliance Atlantis for... how much? “In February, the Toronto broadcaster and producer paid a princely $71.1-million in cash and stock to acquire Salter Street Films Ltd., holder of a digital licence for an independent film channel.” A digital license for a channel.
There’s no money in “interactive” advertising. There’s no money in digital broadcasting, either. The real money is in winning television licenses.
Posted on 2001-07-31