Video-on-demand, pay-per-view revenues fall: CRTC

Television providers earned less from their video-on-demand services last year, according to CRTC data released Wednesday, despite investing in increasing the availability of content. The CRTC said in the statistical and financial summaries for Canadian specialty, pay, pay-per-view and video-on-demand (VOD) services that revenues for VOD services fell nearly 3.6 per cent in 2013, to $254.5 million. That decline is a change from the revenue increases reported for the previous four years; in 2012, revenues were up 2.5 per cent while they increased 25.3 per cent in 2011. Independent broadcast consultant Kelly Lynne Ashton said in a phone interview on Wednesday that a likely explanation for the drop in revenues is “consumer behaviour turning more toward Netflix. It is cheaper and easier to get content from Netflix than it is from demand.” Expenses for VOD services were up 4.1 per cent in 2013, to $240.9 million, following an 8.1 increase in 2012. In 2013, TV providers reported a nearly $8.9 million pre-tax loss during the year, following a $16.8 million loss in 2012. The Wire Report reported earlier this year that between 2012 and 2013 providers invested in increasing their VOD libraries, with availability of video-on-demand (VOD) titles doubling across Canada’s eight largest TV providers. Ashton said at the time the increase was likely part of a wider trend of broadcasters on the defensive against the streaming service offered by Netflix Inc. Many of the mainstream broadcasters, Ashton said in March, “have said repeatedly that what they want to do is build up alternatives to Netflix, to maintain subscribers within their system — within the regulated system if you’re looking big picture, but also within their particular system.” On Wednesday, Ashton agreed that viewers’ usage of VOD could be increasing, but if they are watching mostly free content, that wouldn’t be reflected in the revenues. “The first thing are doing is reducing their pay subscriptions,” she said. “So I think some of what we’re seeing with those VOD numbers is a reduction in pay subscribers.” CRTC numbers released Wednesday did not include usage or subscriber numbers for VOD or pay-per-view. Aside from $115,250 earned in local advertising, almost all of the $254.5 million in reported VOD revenues was from subscribers. CRTC spokeswoman Patricia Valladao said in an email that's mostly “revenue derived from the sale of VOD … programming ordered by subscribers (i.e. movies, television programs, events). That said, our forms do not provide further breakdown of revenue items.” Mario Mota, analyst and co-founder of Boon Dog Professional Services, said in a phone interview Wednesday that he would be “very surprised if usage wasn’t up.” He said that the increase in the availability of titles is likely up due to free on-demand content like catch-up content for television series, which distributors aren’t charging for. Mota added that he’s noticed that at least one provider has lowered the prices of its pay VOD titles. “It used to be that some HD titles used to be up to $7.99 for new releases in HD. Rogers in the last little while, in the last year or so, has reduced the price per title for new releases more in the line with what Apple TV charges, so $4.99, $5.99” he said. “So that could be part of what’s going on there — just a re-pricing in the marketplace to reflect the fact that there’s other services out there where people can get content on demand.” He noted that the price of one movie at $8 is comparable to a month's subscription to Netflix’s streaming service. Ashton said that she wasn’t surprised by the decrease in the revenues reported. “People want to actually pay for easy content and it is cheaper to pay for Netflix, and it’s a very easy way to pay for content. It may not be the most current content … but people are OK with that because they’re getting value for their money.” Last year, revenues for pay-per-view services fell more than those VOD; they declined 13.9 per cent in 2013, following declines of around 10 per cent in the previous two years, though pre-tax profits increased from almost $8.4 million in 2012 to $10.6 million in 2013. BCE Inc., which increased its library of VOD titles sixfold between 2012 and 2013, reported an overall loss of $5.4 million in 2013 for its Bell TV On Demand service. Though its revenue was up nearly 92.4 per cent to $9 million, so were its expenses, which increased 118 per cent to $14.5 million in 2013. Rogers, which tripled its available titles between 2012 and 2013, reported VOD losses of $11.4 million in 2013, with revenues down 14.2 per cent to $59 million. Cogeco Cable Inc., which doubled its VOD library between 2012 and 2013, reported its VOD revenues were down eight per cent in 2013 to $19.7 million, though it did report a profit of nearly $7.9 million. Its expenses were also down 8.7 per cent to $11.8 million. The CRTC also reported numbers Wednesday for the specialty channels offered by Canadian pay TV providers. It said revenues for all specialty services were up almost 5.2 per cent to $3.3 billion. Subscriber revenue was up 4.8 per cent to $536.1 million for satellite services and up 8.1 per cent to $1.4 billion for cable and IPTV providers. National advertising revenue for specialty channels was up 2.9 per cent to $1.3 billion, while local advertising fell 3.1 per cent to $29.2 million. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Peter Henderson at phenderson@thewirereport.ca

Video-on-demand, pay-per-view revenues fall: CRTC

News | April 30, 2014

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