Trends Report – 2015 Mid-Year Update

Canada Media Fund’s (CMF) previous KeyTrends report (The Big Blur Challenge) indicated that digital distribution is slowly converting television – as in the case with music, publishing and gaming – into an on-demand medium. We described an increased shift to all-digital TV viewing and a “tipping point” as US data showed internet subscribers now outnumber those with cable. In Canada, data shows that a similar shift could happen relatively soon.

According to iDate’s Content Economics 2014 report, various forms of online video distribution accounted for 31% of global audiovisual industry revenue in 2013. In the US, PricewaterhouseCoopers predicts that by 2018 all electronic home video (that is video streaming, video on-demand and transactional services) will generate $13.8 billion in revenues, surpassing overall revenues generated by the film industry. Could 2015-2016 also be the “Year of SVOD” in Canada thanks to the arrival of Shomi and CraveTV, and with one third (33%) of the country already signed up for Netflix?

The shift to all-digital TV viewing has also increased the importance of accurately measuring online consumption. The world-first decision made by Germany’s AGF (the German association providing official TV ratings) to include YouTube in its reach figures reflects the extent of convergence between TV and online video viewing. Yet if no one any longer questions the importance of digital distribution, what it means to the survival of television’s economic model remains unclear.

To this day, the transition to digital has gained traction by optimizing services, rationalizing processes, introducing greater organizational efficiencies and cutting back on middlemen. But, as we noted in The Big Blur Challenge, this has also led to the advent of certain paradoxes. There is unprecedented choice, but users’ attention span has shortened. Digital distribution provides more access to international markets but has a major impact on traditional rights management, which in turn strikes at the heart of local audiovisual industry business models. We also continue to witness a narrowing of cultural preferences as major US franchises (mostly from television) influence global audience standards. Finally, digital technology has lowered barriers to new forms of competition, particularly user-generated content (UGC), which has contributed to democratize media. But on the other hand, larger industry players are continuing to consolidate and seeking to secure global monopoly positions.

Six key trends

This update seeks to refine the observations and conclusions noted above by decrypting the following trends:

1. “Filter bubbles” and the growing dependence on algorithm-based recommendations from larger dominant platforms;
2. Content globalization and the growing integration of digital markets;
3. New content formats spurred by changes in consumer habits and behaviour;
4. Media divergence: whether next-generation audiences will someday revert to “traditional” consumption patterns remains uncertain;
5. The advent of “digital marketplaces” for film and TV rights;
6. The rise of creative alliances and new competitors to counterbalance the web giants’ market power.