Piracy, Netflix giving ‘false expectations’ about content cost: Crull

OTTAWA — Kevin Crull, president of BCE Inc.'s media division, said Thursday that monetization is currently his organization's biggest challenge, given the usage of over-the-top (OTT) services and illegal alternatives. “False expectations are being set in the minds of politicians and regulators, by a couple of things,” the Bell Media boss said during a panel at the Prime Time in Ottawa conference. “I do think piracy is a really big problem in setting expectations of the cost of content, that it’s free. And then the second expectation is Netflix … $8 or $9 a month doesn’t pay for the content that people are enjoying today. It just doesn’t pay for it.” Crull said that Netflix Inc.'s business is based on an “artificial economic model because maybe a third of its business is based on piracy.” About one-third of Canadian Netflix users have used a U.S. IP address to access the company's American service because it offers more content, according to a report from CBC/Radio-Canada's Media Technology Monitor. During the panel, Doug Murphy, chief operating officer of Corus Entertainment Inc., said that “there’s a whole bunch of Canadians that access the U.S. Netflix though VPN blockers, and that’s fundamentally wrong, slash, illegal, and somehow that’s got to be addressed because it’s not a level playing field.” Murphy added that “it’s a conversation that’s pretty ripe right now.” Last week, Rogers Communications Inc. denied reports that one of its executives called on government to ban VPNs. In an interview following the panel, Crull said that the use of VPNs to “cheat and to hide the geography in which you are consuming the content" is “wrong.” He added that this “goes less, maybe, to government. This is more of a commercial challenge that the industry needs to resolve so that both the technical and the business model protections are in place to ensure that geographic rights are respected.” The Wire Report reported last year that VPN use is likely growing among Canadians, though there had not been much action to date by rights holders against viewers using the technology to access content licensed for other geographic regions. Crull also said Netflix and similar services could not exist without the existing TV ecosystem. “Ninety-five per cent of the content that’s on Netflix, Crave and Shomi is from the traditional ecosystem. It was funded there. If they put that out of business, they don’t exist. So you can’t have one without the other,” he said. While Crull said $9 was an artificially low price for a service like Netflix, Bell Media’s streaming service, CraveTV, is priced at $4 a month. When it was launched, Crull said he was happy with the business case for the service at that price. On Thursday, Bell Media also announced that it has commissioned its first original series for CraveTV, a six-episode comedy called Letterkenny based on a web series. Crull said Thursday that “$4 is not a stand-alone, make-money value proposition for sure, but it had to do with our decision to marry it to the ecosystem, that we wanted it to be a value enhancement to that.” “But you can’t say Crave is the solution to Netflix and is going to save it. Crave won’t make money on a stand-alone basis. We have to have a healthy overall traditional, conventional and specialty broadcasting system.” Crull added that because CraveTV was developed “in conjunction with the existing TV ecosystem,” the company isn’t targeting it to or making it available to cord cutters. The company made that decision because, Crull said, “we all have a vested interest in the survival and the success of the traditional linear ecosystem. We want to do things to enhance the value proposition of being a cable subscriber, and when I say cable, it’s cable, satellite, IPTV.” The principle behind CraveTV, though, is currently undergoing a challenge. The Public Interest Advocacy Committee filed a complaint with the CRTC against both CraveTV, and Rogers Communication Inc. and Shaw Communications Inc.'s Shomi, on Feb. 6, taking issue with fact that their availability was linked with subscriptions to particular TV services in the case of CraveTV, and to TV or Internet subscriptions from Shaw or Rogers in the case of Shomi. Following that complaint, Bell asked the CRTC to dismiss the case on the grounds the commission lacks jurisdiction over what is essentially a business decision and called PIAC's complaint "frivolous." PIAC argued back that its complaint deserves a full hearing, as opposed to being shot down "in its infancy," and the CRTC suspended the proceeding in late February “until further notice.” In response to an interview question about the how big of a threat the challenge of CraveTV is to Bell, Crull said: “We don’t even know there was a challenge. I think it was dismissed and moved to some future conversation.” During the panel, Crull also touched on the question of net neutrality, saying that the recent decision in the U.S. to ban paid prioritization of some data was "a heavy-handed government intervention in a market that is investing tens of billions of dollars finding a solution to a problem that doesn’t exist.” He noted that in Canada, net-neutrality rules that are in place miss the “issue” that “someone has to pay for the pipes,” noting that Bell invests almost $4 billion a year to upgrade infrastructure “to keep up with video content travelling over it.” “Somebody has to pay for that, and I think it’s a fair question to ask. Should the consumer pay for it, or should the provider of the content pay for it?” he said, noting that in peak periods, Netflix makes up to half of the content on the network. “Should they get that for free?” The U.S. Federal Communications Commission (FCC) on Feb. 26 approved a set of rules that, among other things, prevents Internet service providers from blocking or throttling traffic, or giving priority to content from an affiliate or any company that's willing to pay to secure "fast lanes" for its content. In January, the CRTC ruled that Bell and Quebecor Inc.-owned Videotron can no longer exempt their mobile-TV services from data charges, which Bell is now challenging in the Federal Court of Appeal. When that decision was announced, CRTC Chairman Jean-Pierre Blais said that “at its core, this decision isn’t so much about Bell or Videotron. It’s about all of us and our ability to access content equally and fairly, in an open market that favours innovation and choice.” During the panel Thursday, Crull said that a “legitimate and secure rights market” was necessary. He added after the panel that the CRTC’s recent decision to ban the use of simultaneous substitution for the Super Bowl as of 2017 was an example of “heading in the wrong direction” on the issue. Bell is also challenging that decision in the Federal Court of Appeal. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Piracy, Netflix giving ‘false expectations’ about content cost: Crull

News | March 5, 2015

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Piracy, Netflix giving ‘false expectations’ about content cost: Crull

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