Tuesday
Jun092009

Canada - online video overachiever

A presentation by Bryan Segal of ComScore at the NextMedia Conference on June 7, 2009 reaffirmed Canadians’ leadership in online video use, compared to internet users in the United States, United Kingdom, France and Germany, as reported by Cartt (June 8, 2009, subscription required).

At the same conference last year, Segal provided similar statistics on Canada's performance relative to these other countries.

The following highlights key indicators published by ComScore respecting online video usage among the five countries and how things have changed, or not, over the course of the past year.

Canadians were the most active users of online video for all but one of four indicators in early 2009. This was also the case at the end of 2007.

Two indicators have exhibited strong increases – the average length of time spent watching videos and the average number of videos watched per viewer. Users in Canada had the highest scores on both these indicators in 2009, as was the case at the end of 2007. Canadians also exhibited the largest absolute gains. However, the U.S. exhibited greater percentage increases. Charts 1 and 2 illustrate the growth for these two indicators for each of the five countries.

Chart 1

Chart 2

The average duration of each video watched, measured in terms of minutes per video, did not increase as significantly in most countries, as shown in Chart 3. However, the duration in Canada has increased to about four minutes, similar to the levels found in France and Germany. The duration in the U.S. increased as well but remains somewhat lower at 3.5 minutes per video. No data was available for the U.K. for 2009.

Chart 3

The percentage of internet users that engage in online video each month is an oft-cited indicator of the prevalence of online video in a country. However, as Chart 4 indicates, the trends are not as clear, with little or no change observed in most countries. Results reported for the U.K. suggest participation actually decreased. Some of the variation may be explained by seasonality factors. This effect may be minimized by taking observations from the same months of the year; however, data was not published for each country for the same months.

Chart 4

Another interesting indicator is the extent to which the videos being watched are drawn from Google properties, notably YouTube. The percentage has been relatively high in Canada, rising from 48% in January 2008 to 52% in February 2009. The trends are similar in Germany where the relative share increased from 42% in January 2008 to 51% a year later.

The relative share is lower in the U.S., and actually shows signs of decreasing. Google’s share stood at 43% in January 2009 and dropped slightly to 41% in April of this year. This has been accompanied by an increasing share garnered by Hulu.com

Google’s share is lowest in France, measured at 31% as of January 2009. This is slightly higher than the 29% share reported for January 2008. Google’s share in the U.K. stood at 45% in January 2008 but has not been reported for 2009.

Sources

All figures are taken from Comscore’s reported results for two periods: end of year 2007, which is December 2007; and first quarter 2009, which is from January or February 2009, with the exception of Germany which is December 2008. The only other exception is the average length of video per viewer for the end of year 2007, in which case the results for France are from January 2008, the U.K. are from March 2008, and Germany are from May 2008.

Charts 1 and 2: 2007 (EoY): Bryan Segal, ComScore, presentation “Online is the New Primetime,” June 7, 2008 (all five countries); Q1-2009: ComScore press releases for February 16, 2009 (Germany); March 4, 2009 (U.S.); March 12, 2009 (France), March 17, 2009 (U.K.), April 21, 2009 (Canada).

Chart 3: 2007 (EoY): Bryan Segal, ComScore, presentation “Online is the New Primetime,” June 7, 2008 (Canada); ComScore press releases for February 8, 2008 (U.S.), June 3, 2008 (France), June 25, 2008 (U.K.), July 16, 2008 (Germany); Q1-2009: ComScore press releases for February 16, 2009 (Germany); March 4, 2009 (U.S.); March 12, 2009 (France), March 17, 2009 (U.K.), April 21, 2009 (Canada).

Chart 4: 2007 (EoY): ComScore press release for April 10, 2008 (all five countries); Q1-2009: ComScore press release for April 21, 2009 (all five countries).

Google’s share: January 2008: ComScore press release for June 3, 2008 (all five countries); Q1-2009: ComScore press releases for February 16, 2009 (Germany); March 4, 2009 (U.S.); March 12, 2009 (France), April 21, 2009 (Canada) and June 4, 2009 (U.S.).

ComScore’s press releases are available at: http://www.comscore.com/Press_Events/Press_Releases/



Wednesday
Jun032009

Broadband Statistics - the good, the bad and the ugly

The Organization for Economic Cooperation and Development (OECD) recently released its latest batch of comparative statistics on broadband services for 30 countries.

According to the statistics, Canada ranked 10th in terms of broadband subscribers per 100 inhabitants at the end of 2008. There has been little change in Canada’s placement relative to other countries since 2005. However, that does not mean actual penetration has not increased. At the end of 2005, there were 20.7 subscribers per 100 inhabitants. Three years later, this had increased to 29.

In addition, the gap between broadband penetration in the top-ranked country and Canada’s penetration has remained quite stable, as indicated in the following chart.

 

Canada continues to hold the lead among the G7 countries in terms of broadband penetration. However, the United Kingdom has been catching up and is just 0.5 points below Canada.

Canada did not place as well in terms of the price of broadband service. The OECD measured the average price in each of the 30 countries and converted these to U.S. purchasing power parity for comparison purposes. According to the OECD, the average price for broadband in Canada was $45.65. At this price, Canada was 56% more expensive than in Sweden which had the lowest price, and ranked 15 places behind Sweden.

Canada appeared to fare even worse in comparison to other OECD countries in terms of the speed of broadband service offered. According to the data published by the OECD, Canada had an average download speed of 6.2 Mbps, which was 25th out of the 30 countries. However, as reported elsewhere, there is reason to be skeptical about this ranking.

The OECD’s reported top speed for cable broadband service was 25 Mbps (as of September 2008) even though at least one cable company has been providing service with 50 Mbps download capability since early 2008.  In addition, the Observation for November 24, 2008 posted on this site reported that almost all of the large cable and telephone companies had broadband service with speeds well above the 6 Mbps average reported by the OECD.

However, as also noted in that earlier Observation, the rate of adoption of higher speed service was relatively low in Canada compared to other industrialized countries. Akamai’s most recent report on the State of the Internet for the fourth quarter of 2008 indicates that Canada ranked 13th among 45 countries studied in terms of the percentage of broadband connections that were at speeds of at least 5 Mbps.

This is still not as strong a performance as might be expected for a country that had a relatively early start in the deployment of broadband services, but ranks Canada's performance somewhat higher than the OECD's latest statistics.

Monday
Apr272009

Cable’s financial success – more than just television

Cable and satellite companies in Canada (known in regulatory speak as broadcasting distribution undertakings or BDUs) reported revenues that totaled in excess of $10 billion dollars in 2008, according to data released by the CRTC on April 23, 2009.

The industry sector’s revenues in 2008 represented almost three-times that reported in 2000 when total revenues were less than $3.7 billion. Profits (defined as income before interest and taxes) have increased ten-fold during the same period, reaching almost $2.2 billion in 2008 from only $0.25 billion in 2000.

The rapid growth in revenues and profits is attributable to a number of factors.

The main line of business for cable and satellite companies has traditionally been the distribution of television programming. Since 2000, the range of television programming and related services has increased significantly; initially with the roll out of digital services, and more recently, with high definition programming and personal video recorders. These services have contributed to overall growth in revenues.

At the same time, there have been increases in the cost of providing these services, both in programming and capital investment. For cable companies in particular, the capital investment has contributed to declining operating income and profits. Operating margins decreased from 39% in 2000 to 28% in 2008. Profit margins decreased from 20% to 6.5% over the same period.

(The CRTC did not report depreciation or profits separately for programming services for the period 2006 to 2008. Profits were derived for the last three years based on estimates of the depreciation expense attributable to programming services using trends in the ratio of depreciation for programming versus all services reported for prior years.)

The real source of growth, particularly in profits, has been the launch by cable companies of broadband internet and, more recently, telephony services.

At the start of the decade, services other than television programming accounted for less than 6% of the revenues and 2% of the profits generated by cable companies. By 2008, internet and telephony services generated more than 42% of the revenues and 85% of the profits. The financial results reported for satellite companies consist almost entirely of programming services so a similar comparison is not meaningful.

 


There have been suggestions that cable and satellite companies should be required to pay a fee for carriage to Canadian conventional broadcasting stations. At a public hearing on April 27, 2009, the CRTC provided estimates that a fee of $0.50 per station per subscriber each month would amount to more than $352 million in annual payments from cable companies, according to a report by the Globe and Mail.

Annual payments of this magnitude would have exceeded the profits generated by cable companies from the distribution of television programming services in any of the years 2005 through 2008.


Thursday
Mar262009

Growth in digital video outpaces high-speed internet

The subscriber figures by the major providers of digital video and high-speed internet services point to diverging growth patterns towards the end of 2008.

A growing number of households upgraded to digital video services in 2008 compared to 2007. The year-over-year net additions for digital video subscribers outpaced total additions and exhibited higher levels than in the previous three years.

The total number of digital video subscribers reached 6.8 million and accounted for 68% of the total video subscribers by the end of 2008. This is up from only 50% in the middle of 2005. At 68% penetration, there is still some room to grow.

Recently released results for Shaw Communication Inc. for the period ending February 28, 2009 showed continued growth. Compared to the same period in 2008, the total number of digital cable and satellite subscribers had increased by more than 236,000.

By comparison, growth in high-speed internet subscribers has continued to decelerate. This is to be expected as the vast majority of households who want the service and can subscribe have already done so. By the end of 2008, there were more than 9 million high-speed internet subscribers.

Net additions of high-speed internet subscribers have been declining fairly steadily over the past five years, with the greatest change occurring for additions of DSL subscribers.

The same pattern has been observed in the United States. According to a report by Leichtman Research Group, annual net subscriber additions for high-speed internet service reached a seven year low in 2008. The report also noted that cable modem subscribers accounted for 59% of the net additions in 2008.


 

Thursday
Feb052009

Old and new media – audiences and advertising

Traditional media – television, radio and print – rely heavily on advertising to support their business models.  Advertising dollars flow to where audiences can be reached. A recent report provides an update on how these older, more established media platforms are sharing audiences with the new media kid on the block - the internet.

The Interactive Advertising Bureau of Canada (IAB Canada) released its Canadian Media Usage Trends Study on February 3, 2009. The study consolidates audience data from a number of sources: PMB, NADbank, BBM RTS and comScore, with most of the data from Nadbank.

The IAB Canada study reported audiences for five media platforms – television, radio, newspapers, magazines and internet – for 2001 and 2007, measured in terms of weekly share of minutes per capita for all adults in Canada ages 18 and over. The data is shown in Chart 1.

CHART 1

As Chart 1 indicates, time spent using the internet increased dramatically, while more traditional media either stayed the same or lost some ground.

The total minutes spent across all five media platforms increased by almost 5% between 2001 and 2007. However, the internet accounted for all of the growth in minutes, causing its relative share to rise from 14% to 23%. The amount of time spent watching television did not drop; however, growth in total minutes spent with all media caused television’s relative share to slip slightly from 36% to 35%. Magazines and newspapers also exhibited decreases of 1% and 2% points, respectively. Radio had the largest decrease in relative share, falling from 33% to 29% of weekly minutes spent.

The trends in audience share were not necessarily reflected in the trends in advertising revenue over the same period of time. Chart 2 provides advertising revenue for the five media, published by the Television Bureau of Canada (which reports the amounts as net advertising volume).

CHART 2


Chart 2 indicates that the internet garnered the most significant gains in overall ad revenue.

The total value of advertising revenues increased by 38% between 2001 and 2007. In absolute dollar terms, all five platforms experienced some increase. However, radio was the only one of the traditional media to experience higher growth in revenues than the average, with a 40% increase between 2001 and 2007. This stands in contrast to the noticeable decrease in weekly minutes spent listening to radio (Chart 1).

Of the remaining three media, newspapers experienced the smallest gain in ad revenue, with less than 3% growth between 2001 and 2007. Television and magazines had revenue growth of 29% and 33%, respectively.

The internet is expected to continue to make gains in time spent and advertising revenue. However, as the data in Chart 2 indicate, this does not necessarily mean that traditional media face declining revenues. Between 2001 and 2007, the advertising revenues for the five media in total increased by more than $2.5 billion. Internet accounted for less than 45% of that increase.

In the past, almost all of internet advertising revenue has been generated from ads that did not involve video. According to IAB Canada, video accounted for less than 1 percent of the 2007 advertising revenue. 

Industry participants in Canada and the United States have been working on standards for video-based advertising that should increase growth opportunities. IAB Canada announced in July 2008 the release of specific standards for video advertising, based largely on those developed by IAB US. 

The main focus by IAB Canada is on the pre-roll video ad; for example, a 15 to 30 second ad that is shown before the start of the video that was selected by the website visitor. The pre-roll video ad is the most frequently used format in the U.S. market as well.  At the same time, there is considerable interest in applying the interactive capabilities of the web in the delivery of online video ads, as discussed in a recent article in Business Week.

Advances in standards and features of online video advertising will put more pressure on traditional media.

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