Toronto, Ontario
May 21, 2015
Tom Pentefountas
Vice-Chairman, Broadcasting
Check against delivery
Thank you for your warm welcome. I am delighted to join such an enthusiastic group.
I thought you might all be depressed these days, following the finale of the Mad Men series.
As this Forum makes clear, we're entering a new ad man – and woman – era. One every bit as exciting as the earlier advertising age.
I don't pretend to be an expert on advertising, of course. But I know – from the CRTC's recent consultations ... public hearings ... and eventual decisions surrounding our Let's Talk TV policy review – that a world of opportunity is opening up for your sector.
I've come today to highlight how the Commission's roadmap for the future creates new avenues for advertising.
Before I do, I'll provide a broad overview of what we set out to do with Let's Talk TV ... the conclusions we came to ... and some of their implications for the future of TV advertising in this country.
Let's Talk TV
So, why did the CRTC think it necessary to have this national conversation about television?
It's no secret to anyone here that the TV world is undergoing a profound shift. A shift being led by viewers, who are now in the driver's seat. And one which demands that content creators and distributors, as well as television advertisers, follow their lead to remain relevant.
Canadians' viewing habits have evolved rapidly in recent years. They are migrating away from the traditional TV set and watching the content they want, where, when and how they want, using the latest technologies.
The volume of content and viewing options available has never been greater. Consider that 300 hours of video are uploaded to YouTube every minute, of every day, of every month.
That's on top of the 1,300 hours of traditional television Canadians can access every waking hour of the day.
This abundance of content, coupled with new tools to access it, has empowered the viewer. It has fundamentally changed the roles played by mainstream broadcast media – including advertisers.
As the CRTC's Chairman likes to say, while content remains king, the viewer is emperor. And no amount of regulation can stop that.
So, with Let's Talk TV, we set out to hear what Canadians have to say about the future of TV – what they need, what they want and what role new technologies will play in providing it.
The CRTC also wanted to ensure that the new framework fosters choice and innovation ... encourages the creation of compelling programming made by Canadians ... and empowers Canadians to make informed choices.
We needed public input to develop a forward-looking framework that ensures Canada's television system not only adapts to, but capitalizes on, the rapid rate of change.
We listened to more than 13,000 Canadians who participated in various phases of Let's Talk TV and received presentations from industry experts from across the broadcasting spectrum.
Based on what we heard, the Commission concluded that we need to update our toolbox and challenge conventional thinking to respond to changing times. Old solutions no longer suffice.
Protectionism is an anachronism in an age of abundance and a world of choice.
So, the CRTC is tearing down barriers to innovation that have hampered broadcasters and producers, and throwing open the door to new ideas.
We want to cultivate the necessary conditions for the creation and promotion of compelling, high-quality content that audiences at home and abroad will choose to watch. And as a result, you can pitch sponsors' products to these audiences.
We could have ignored the fundamental changes taking place and ridden the same old wave as it lost its momentum and crashed ashore. Or we could have chosen to help create an environment conducive to creativity and innovation, so that the industry is able to catch the next wave. This is exactly what we did.
I say this because the sand is moving beneath our feet and it would be irresponsible to ignore it. American broadcasters, too, have no choice but to change. Who would have guessed the Cabletelevision Advertising Bureau would become the Video Advertising Bureau and now include the networks?
This alliance became self-evident after a major softening in the advanced advertising commitments during last year's “upfronts” for both cable and network inventories in the upcoming cycle.
Key changes
I will highlight a few of our recent decisions, focusing primarily on content related issues since they are the most relevant to you.
We've decided that Canadian video-on-demand services will be able to offer exclusive content as long as they are available to all Canadians over the Internet without needing a cable or satellite television subscription.
Many stakeholders felt disadvantaged in the face of foreign online video services. Well, here you have it – a level playing field.
Recent success stories for original content created solely for online consumption have demonstrated its importance in the digital era. Producers need to create innovative and appealing programming in order to stand-out in a sea of content.
So we're reducing our reliance on quotas for the amount of Canadian programs that local television stations and specialty channels must broadcast. Quotas simply won't work in the future.
Instead, we are focusing on prime time. It's important that Canadian-made programs are available to viewers at these times, particularly since simultaneous substitution provides television stations with an incentive to air non-Canadian programs. We are maximizing the return on investment at a time of day when there are larger audiences.
We've also struck down rules under which specialty channels could only broadcast certain types of programs. And Canadians will be able to choose the television channels they want – either on a stand-alone basis or through small, reasonably-priced packages.
This paves the way for programming innovation, as broadcasters will need to be creative to distinguish their brands and appeal to viewers.
We are not dictating business models; we are just setting clear and predictable frameworks in which companies operate.
Our objective is to foster a more open and competitive television market, and an environment that nurtures innovation in the programs Canadians watch.
Another significant change, we now expect all broadcasters to financially invest in programs made by Canadians. We will require a greater number of local stations and specialty channels to reinvest a portion of their revenues into the creation of made-in Canada content.
This shift away from outdated protectionist policies to expenditure requirements underlines that we want creators and distributors to choose quality over quantity.
Because such an approach creates a virtuous cycle. Investments to create better content bring more value into the television system. This generates more revenue to re-invest in content made by Canadians.
In turn, this creates an environment where Canadians want to watch content made by our creators – not because it is forced upon them, but because it's world's class. And it just happens to be Canadian.
Audiences around the world have access to the best content. If we're going to be playing on the world stage, our content has to be of the same calibre. Otherwise, we risk being left behind in the digital world and becoming known as creators of second and third-tier content that no one wants to pay for or watch.
If you have a top-notch product that can take on the world and attract big audiences – the world is now your oyster. So, think big.
Let's be world conquerors, not the conquered. The victors, not the vanquished.
Simsub
That's the essence of our message regarding another of our recent policy decisions that's relevant to your industry – simultaneous substitution or ‘simsub.'
I'm aware that the Association of Canadian Advertisers disagrees with the CRTC's policy decision to prohibit simsub during the Super Bowl at the end of the 2016 NFL season.
However, I would point to the results of a study submitted by Armstrong Consulting during our Let's Talk TV proceedings.
Called The Economic Value of Simultaneous Signal Substitution for English-Language Private Television Broadcasters, it concluded that simsub accounted for 9.7 million average weekly viewing hours in 2012-13.
Clearly, the three hours spent broadcasting the Super Bowl represents a miniscule amount of the total opportunities for TV advertising in Canada.
Given the huge number of substituted viewing hours, there will still be ample opportunities for advertising on programming and great Canadian events such as the CFL Grey Cup, NHL playoffs, the Tournament of Hearts and various awards shows.
I'm confident advertisers will rise to the challenge and create clever and entertaining ads, such as this year's Super Bowl Canadian Ad Challenge. Viewers will want to tune in to the Canadian feed of the game to watch them.
Besides, the evolution of program rights and viewing habits suggests it would be unwise to rely on simsub forever. The day will come when it will no longer be a useful or necessary tool to protect Canadian broadcast rights.
Rather than clinging to the status quo, it makes more sense to start preparing now. Not just to keep pace with the competition, but to get out ahead of it in a fast-changing marketplace.
You can be every bit as creative and innovative as those creating content elsewhere – whether in New York and L.A. or half a world away in emerging markets. Creativity is your stock in trade.
Golden Age of Targeted Advertising
We may agree to disagree about a few of these things, but I'm sure there's no disagreement that the potential for advertisers in this new age of television – whenever, wherever and however it is watched – is extraordinary.
As you've undoubtedly heard this week, there may never be a better time to be in the ad business. There are all kinds of new approaches to advertising that are dramatically reshaping your sector – for the better.
Take the example of programmatic buying and selling, which already accounts for 50% of digital advertising revenue. It automates real-time-bidding for online ad space by using algorithms. Media agencies are partnering with tech companies to access ad exchanges or to set up their own trading desks.
Programmatic buying is a promising tool for your sector that will help you achieve an appropriate return on your investments, while freeing you up to spend more time on being creative.
Cross-platform advertising is another technology-driven innovation. Technology is so deeply integrated into our lives today that it's not unusual to see people using multiple devices simultaneously.
And it's not just millennials, as you well know. According to Nielsen, about 85% of tablet and smartphone owners use these devices while watching television. Maybe even more surprising, people in the 55-64 age group are most likely to use their tablets multiple times per day when watching TV.
Regardless of the demographic, the point is that making brands visible and accessible through multiple platforms is essential to capturing viewers' attention.
Cross-platform advertising makes brands much more recognizable. It's also an efficient and cost-effective way to reach your audiences.
In fact, it makes it much easier to develop a direct relationship with your customer, proving the likes of Joseph Jaffe wrong.
Back in 2005, Jaffe wrote a book called Life after the 30-second spot. In it, he argued that the Internet has fragmented niche audiences so narrowly that they're now too tough to target – ergo, the end of the 30-second spot era is nigh.
The polar opposite has happened. The ability to tailor ads to those narrow niche markets is actually creating an advertising bonanza in some markets. Even among the home TV watching set.
Rather than fighting the impacts of broadband and mobile viewership, innovative advertisers are cashing in on addressable TV ad campaigns that some claim are driving TV ad revenues to “insane” levels.
David Downey, CEO and President of Invidi Technologies, claims that his company has achieved 439% revenue growth in certain U.S. markets. Markets where ad insertion technology allows advertisers to target specific household audiences, based on age, income and other demographic factors.
Addressable ads
The ability to deliver addressable TV advertising is revolutionizing the advertising industry.
Addressable ads have far greater precision than traditional approaches. Because of their focus on particular consumer profiles, they can be directly targeted. And they provide immediate feedback from these audiences.
This means marketers can both target and interact more effectively – tailoring and coordinating messages across TV, online, smartphones and tablets.
Cogeco Cable and CHCH Hamilton are experimenting with addressable ad systems but have yet to make their results public.
However, a study by Experian Marketing Services found that homes receiving addressable advertising tuned away 38% less of the time than homes receiving non-addressable advertising. There was 56% greater efficiency from sending ads only to relevant groups.
More impressive, another white paper produced by Visible World revealed a 70% sales lift caused by addressable commercials based on a sample of over a billion ad impressions.
That increases the likelihood of your messages getting through – and it increases profitability for you.
The Television Bureau of Canada says that major media generated net advertising revenue of $12.3 billion in 2013. So, there's clearly a lot of money – and opportunity – at stake.
Set-top boxes
Just as the era of Mad Men is passé, so, too, are audience measurement tools from the golden age of television.
We no longer live in a four-channel world where you get up to change the channel.
As you know only too well, today's 500-channel universe has led to audience fragmentation. And that poses major problems for advertisers like you and the sponsors whose products you promote. Traditional measurement systems are unable to capture these fragmented viewers.
Knowing who's watching what is critically important because measurement equals monetization. And we're leaving money on the table when we don't know precise market shares.
Two-thirds of U.S. broadcasters can't get a .5% share on Nielsen. Canadian independent broadcasters face a similar challenge.
The only ones getting a 1% share are Vision TV and the Weather Network. And, even then, it's only off and on.
South of the border, monetization is strictly commercial. But, in Canada, you can never lose sight of the fact that 30% of every dollar we measure goes to Canadian content production. Money that ensures the fundamental goals of the Broadcasting Act are achieved.
Measurement equals monetization, which in turn equals revenues. Revenues we can funnel back into Canadian programming expenditures and programs of national interest
Ironically, technological disruptors have also provided us with technological solutions – in this case, the modern set-top box's return-path data.
At the CRTC, we understand that the future success of the broadcasting sector depends on industry's ability to use technology to tailor content to the diverse needs and tastes of Canadians.
We recognize, too, that viewer information will be essential in this targeted consumer-centric environment. We know that accessing set-top box data is key to the sector's ability to compete with data-rich digital platforms.
So, we've ordered the industry to set up a working group to explore a set-top box measurement system in Canada.
The working group is tasked with proposing technical standards, privacy protections and a governance structure, as well as determining how costs will be shared.
Since such a system would give all distributors and programmers access to this data, it could improve the industry's ability to provide Canadian viewers with the information they need to make informed choices.
It could also increase revenues flowing to program creators by providing broadcasters with new opportunities to monetize heretofore unmeasured viewership. And that's likely to benefit you.
Because proper measurement not only increases content creators' pool, but also contributes to the advertising community's bottom line. The fragmentation of audiences and multiplication of platforms and windows need not be feared.
A study released last October by the Television Bureau of Canada certainly suggests that's the case. It demonstrated that, far from competing with each other, traditional TV and video-on-demand are actually growing market size. These results came courtesy of set-top box data.
The study focused on video-on-demand TV content available through digital cable and IPTV, which allows subscribers to access recently-aired traditional linear programming. It concluded that the video on demand platform generated a 9% increase to the average linear audience.
Especially interesting, 65 to 70% of these audiences had not viewed the original linear broadcast.
According to the report, audience levels remained steady throughout program episodes, with no material audience drop-off during commercial breaks. Again, great news for the people in this room.
There are a few caveats to this promising vision of the future.
The Commission has been clear that the privacy of individuals, along with the gathering and storage of personal information and viewer consent, are paramount. These considerations need to be top-of-mind.
The set-top box working group will submit its report to the Commission by June 10th, which will include its conclusions regarding privacy protocols. The report's findings will be of interest, and relevant, to ad agencies across the country.
Discoverability Summit
Something else coming along later this year is a Discoverability Summit, to be hosted by the CRTC.
The Commission appreciates that making great programs and measuring their viewership is only half the battle. Great content means little if viewers cannot find it.
For Canadian-made content to succeed, it must be widely available…visible on multiple platforms…and easily found.
The Discoverability Summit, to be held in the fall, will generate new thinking about tools and methods to connect viewers with content.
Algorithms – such as those used by online retailers to recommend goods to consumers – are among the tools used to connect viewers with the content they're seeking.
In the same way that big data is now being mined to target sales of laundry detergent, the likes of Netflix, Crave and Shomi are also finding innovative ways to capitalize on viewers' shifting tastes.
The Discoverability Summit will convene innovators and thought leaders from across the public and private sectors, from Canada and abroad.
People who employ cutting-edge techniques to underwrite the costs of production in a media-disrupted world of abundance.
People who understand that the roadmap to the future will not be found looking in the regulator's rear-view mirror.
People who recognize that you can resist change, or you can embrace it. But you cannot stop it. If you're not going forward, you are falling behind.
Conclusion
All of the measures I've outlined today set the stage for an exciting new era in Canadian broadcasting that enables Canada's creators – and, by extension, advertisers – to excel in a fast-evolving environment.
Let's Talk TV confirmed that Canada's television system is healthy. We have the necessary financial resources in the system to create and promote great programs. We have the talent to bring these programs to life. We have viewers who are hungry for new and interesting content.
I think we need to have an outward vision. We need to leverage the infrastructure we have in Canada to seduce the world with our vision, our stories, our creative genius.
Given the advertising industry's proven track record of being bold and innovative, I have no doubt you will identify and seize new opportunities in this brave new world of television.
I am equally confident that you will continue be successful as TV advertising of the future unfolds. Thank you.
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