If Canadian broadcasters are to survive and thrive in the new digital economy, they must beef up their e-commerce potential, according to a new report from the Canadian Association of Broadcasters.
Broadcasters are going to see advertising revenue dwindle and competition increase as the broadcasting landscape becomes more fragmented and advertisers reach out to consumers by broadcasting content over the Web, says Michael McCabe, CAB president.
‘The digital economy is going to create fundamental changes in the current broadcasting business model,’ he says. ‘There is a very good chance that in five or 10 years the broadcasting structure will bear little or no resemblance to our current business model.’
In an effort to help its members remain competitive, the CAB is linking with the Television Bureau of Canada and the Radio Marketing Bureau to undertake an ambitious study of the North American advertising market. The study should be completed by the fall and will be the largest study of its kind conducted by any of the sponsors.
While the methodology and parameters are still being worked out, the study will examine trends and patterns in North American ad spending and attempt to identify the current and anticipated needs of key advertisers.
‘We want to find out where companies like Ford and Procter & Gamble see the digital economy fitting into their needs and requirements and how we can help them get there,’ he says.
The old ways of doing business will no longer work as more consumers move to the Internet and competition from specialty channels and non-traditional broadcasters cannibalizes the traditional broadcasting audience, according to the CAB’s Digital Blueprint.
The number of specialty channels carried on digital TV will exceed that of private conventional television by 2005. By 2010, specialty channels will earn more revenue than conventional broadcasters, the report predicts.
About 36% of Canadians currently have access to the Internet with about 6% wired for high-speed connections that could support more interactive features and video. By 2010, Internet penetration is expected to grow to 75%, with 60% of those consumers using high-speed connections.
Advertisers are increasingly using the Web to strike up direct relations with their customers, thus bypassing the broadcasters they traditionally relied upon to deliver that audience. As well, large advertisers are increasingly becoming content providers, supplying programming over the Internet that will eventually compete with broadcasters, McCabe says.
‘There is nothing to stop Labatt from broadcasting sporting events or other entertainment over their Beer.com Web site,’ he says. ‘And in the future we may even see the Royal Bank, who owns 20% of AOL Canada, broadcasting content over their site in an effort to entice people to use their Internet banking.’
It is not only the Internet that will shake up broadcasting. Personal video recorders that download programs onto a computer hard drive and can eliminate commercials with the touch of a button are only now entering the marketplace. However, by 2010, as many as 60% of Canadians are expected to own the devices, which will turn traditional television advertising on its head, says McCabe.
‘We have to start working with advertisers to find a way for them to get their message to consumers in new and effective ways,’ he says.
Broadcasters are only now waking up to the fundamental changes that the Internet promises to wreak upon the broadcasting industry, says McCabe.
‘Five months ago, no one was really worried, but the AOL-Time Warner deal and, more recently, the proposed takeover of CTV by BCE has really given the industry a wake-up call,’ he says.
Other Canadian broadcasters are moving onto the Internet as well. Last month, CanWest Global Communications invested $20 million to purchase a stake in Medbroadcast.com, an Internet health information site.
