The importance of Canada’s media economy

Editor's note: This Policy Watch piece is a rare look at Canada's media economy from the perspective of an academic researcher, rather than the usual commercial consultants. In this detailed entry, Winseck shows that media and the Internet—wired and wireless telecom services, tv, multi-channel pay tv, cable, satellite & IPTV distributors, newspapers, magazines, music, radio, Internet access, search engines, social network sites—are becoming increasingly prevalent in Canada's economy and in its citizens' lives. Canada has a large media economy. It has grown vastly larger and more complex over the past quarter-of-a-century. While often cast as a pygmy compared to the colossal size of the U.S., the Canadian media economy is in fact the eighth largest on the planet, as Figure 1 shows. It has also largely stagnated in sheer economic terms since the onset of the Great Recession, 2007ff.

Sources:  PWC (2009; 2003), Global Enterntainment and Media Outlook for all segments, except music, which is also based on the IDATE (2009) DigiWorld Yearbook, 2009.

The idea that Canada does not have a small but relatively large media economy, and other counter-intuitive insights, emerge when you have a good, consistent and systematic body of data.

Over this and the next three posts, I will present data that I have compiled and finished updating for twelve of the most important media sectors in Canada covering the years from 1984 to 1910: wired and wireless telecom services, tv, multi-channel pay tv, cable, satellite & IPTV distributors, newspapers, magazines, music, radio, Internet access, search engines, social network sites.

The aim is create a coherent and systematic body of data where currently there is none. It is to answer the question of whether the media economy and specific elements of it have grown, stagnated or declined over time, and how all of the bits and pieces of the media universe fit together (or not).

The objective is also to use standard tools – concentration ratios and the Herfindhahl – Hirschman Index (HHI) — to assess whether media have become more concentrated over time, or less. It is to help establish a baseline from which to grasp the network media industries and their evolution over time.

Good data is not found in a state of nature. Instead, it is painstakingly assembled and rendered in meaningful form. For the 2010 data, I am grateful for the research assistance provided by Adam Webb. Over the next four posts I will lay out a bunch of tables, charts, figures and graphs based on this evidence with the aim of presenting data and some tentative thoughts regarding:

• The growth of the network media economy (today)
• Media Concentration – More or less over time, 1984 – 2010?
• The ‘big 10 network media companies’: rank, profits, capitalization and debt
• Who cares and why?

Part I: The Growth of the Network Media Economy, 1984 – 2010

In Media Ownership and Concentration in America, Eli Noam (2009) laments the lack of a systematic body of empirical data that allow us to address these issues. He points to two culprits behind this reality: the issues at stake are highly politicized and gathering data on these industries is not easy. Much the same, and more, can be said for Canada.

It’s not that there’s no information around, but that it is scattered, inconsistent and incomplete. Certain periods have seen a flurry of studies and data pumped out right, left and centre, as when three inquiries were held in Canada in the 1970s and 1980s to examine the organization of the media industries : Special Senate Committee on Mass Media (Davey Committee), The Uncertain Mirror (2 vols) (Canada, 1970); Royal Commission on Corporate Concentration (Canada, 1978); and the Kent Committee’s inquiry into a spate of newspaper consolidation and closures in 1980 (Canada, 1981).

Thereafter, interest waned for nearly a quarter of century until a wave of consolidation in the late-1990s put the issue back on the front burner between 2003 and 2008: (1) Standing Committee on Canadian Heritage, Our Cultural Sovereignty (2003); (2) Standing Senate Committee on Transport and Communications, Final Report on the Canadian News Media (2006); and (3) the Canadian Radio-Television and Telecommunications Commission’s Diversity of Voices inquiry in 2008.

All of these examinations found that concentration was high, but did not do much to stem the tide. The CRTC adopted a formal set of ‘thresholds’ for the first time in 2008 to guide its decisions in the future, but they are weak, as its blessing of Shaw and Bell’s acquisitions of the Global and CTV stable of tv assets in 2010 and 2011, respectively, revealed. Instead of striving for as much diversity and freedom of expression as possible, the CRTC backstopped its rules with the mind-numbing administrative standard of as much diversity “as is practicable”.

Beyond formal inquiries, there are four basic stances discernible among those who weigh in on this subject:

First, some critics see media concentration as constantly going from bad to worse, extinguishing “democracy’s oxygen” (Winter, 1997), or creating “Canada’s most dangerous media company” (Edge, 2007).

A second approach mocks such concerns. Writing on the Final Report on the Canadian News Media (Canada, 2006), Chris Dornan set this tone in an article for the Literary Review of Canada: “’Big media bad thing’”: how a Senate committee wrote a media report with its head in the sand”.  Likewise, Leonard Asper, the former CEO-owner of bankrupt Canwest, once quipped that “the media are now more fragmented than ever. People who think otherwise probably believe that Elvis is still alive”.

A third stance involves academics who try to hug the middle ground, grinding massive amounts of content through a battery of quantitative analysis but only to conclude that changes in media ownership have no discernible impact on content (Soderlund, et. al, 2005) — as if this is the only concern.

A fourth position, and one that I largely subscribe to, believes that the mainstay focus on the impact of media ownership on content and ideology is too narrow. Tim Wu’s The Master Switch, in contrast, outlines recurring tendencies toward consolidation over more than a century and wonders whether we are once again seeing such trends with respect to search engines (Google), Internet access (ISPs), online music (Apple), social networking sites (Facebook), etc?

He also asks about the potential of players in each of these domains to use their dominance in one layer of the network media (networks, applications and content, devices) to dictate outcomes in others. Noam (2009) also adds to this that neither the Internet nor digital media are immune to consolidation. In fact, they may be quite prone to it because digitization appears to magnify economies of scale and network effects (also see Noam, 2009).

Andrew Odlyzko of the Digital Technology Centre, University of Minnesota, also argues that the issues behind net neutrality debates revolve around a centuries old conflict that has never been

. . . resolved completely, since it arises from a conflict between society’s drives for economic efficiency and for fairness. There is no reason to expect that this conflict will lessen, and . . . arguments that suggest it will intensify. Should something like net neutrality prevail, the conflict would likely move to a different level. That level might become search neutrality . . . (p. 3).

Clearly, there are important issues regarding how we frame the issues. Yet, analytically prior to that, we also need to recognize just how incomplete the available data is. Why is this such a problem to begin with?

First, while inquiries generate a lot of data and discussion, the results are compiled to serve the purposes at hand rather than to create a basis for studying long-term trends. The focus is also often on the news media, and thus is not comprehensive in scope as a result.

Second, the evidence is poor because of the highly-politicized nature of debate.

Third, the CRTC publishes ‘top-line’ data for the top 4 or 5 players in radio, television, cable and satellite distribution, and telecoms, but its data is incomplete and inconsistent from year-to-year. Sometimes, it seems to be deliberately designed to distract our attention from unpleasant truths regarding, for instance, the poor development and use of broadband Internet services by global standards, as Peter Nowak has recently noted, or trends in media concentration over time and relative to other countries, as David Ellis has also observed.

Fourth, the CRTC throws out data that is more than eight years old, and is tight-fisted when it comes to providing access to resources at its disposal. It also seems adverse to working with communication and media scholars as well, instead relying on commercial consultants. Tell me what you wanna pay, and I’ll tell you what you’d like to hear. Consequently, documents like it’s recent Navigating Convergence report look more like an exercise in ‘futurology’ than historically, empirically and theoretically-grounded analysis.

Lastly, the CRTC and Statistics Canada’s undue deference to claims of corporate confidentiality and the ‘competitively sensitive’ nature of information about business means that they mainly provide data only at the aggregate level. I have met with CRTC staff many times and filed a dozen requests under the Access to Information Act, all to no avail and whose only effect has been to harden the Commission’s obstructionist stance and alienate those with whom it is necessary to work.

Capturing a key insight into what all of this means for researchers and public alike, Susan Crawford, a Cardozo Law School Professor and expert on media anti-trust issues in the United States, calls the regulator’s website “truly primitive”.

The overall result, not surprisingly, and as Professor Philip Savage (2008) of McMaster University and the Canadian Media Research Consortium states, “the media ownership debate occurs in a vacuum, lacking evidence to ground arguments or potential policy creation either way” (p. 295). Mike Gasher, an Associate Professor of Communication, Concordia University, similarly asks rhetorically, “Who is really trying to measure media concentration and its impact in an empirical way? I honestly . . . cannot think of anyone who does that” (p. 295).

That said, it as been possible to draw together a wide range of material from Statistics Canada and the CRTC to establish general revenues for each sector, and for recent years to gather data from the latter on market share for the top four or five players in sectors that it regulates. Other than that, it is necessary to assemble the data on the basis of annual reports in the case of publicly-traded companies, industry association reports, previously published studies, and so on. It has also been occasionally necessary to extrapolate backwards and forwards for select years based on prevailing trends.

Ultimately, it has been possible to create a fairly comprehensive, systematic and long-term portrait for most media sectors, except the music industry, where changes in revenues since 1998 can be charted, but not the market share of players in it. The same is true for book publishing as well as film distribution and exhibition for the same reasons.

Key Trends and Dynamics

The following section sketches the evolution of the network media economy in Canada between 1984 and 2010, pointing to those sectors that have flourished, others that have stayed relatively stable, and the few cases where they have declined.

As Figure 1 and Table 1 immediately afterwards show, the media economy grew immensely from $19.7 billion in 1984 to $56.1 billion in 2000 and to $68.7 billion in 2010 (‘real dollars’).

Figure 1:  The Growth of the Network Media Economy, 1984-2010

The emergence of new media – pay television and wireless cellphone services since the 1980s followed by Internet access and Internet advertising in the latter period – has more than tripled the size of the network media economy over the past quarter-of-a-century. Wireless cellphone service alone is now an $18 billion sector, whereas it was not on the charts in 1984.

Wired line telecom revenues (excluding Internet access) have fallen sharply by a third from 2000 to just under $17 billion last year, although this has been more than offset by gains from wireless and Internet access. Even with those sharp declines, ‘connectivity revenues’ (wiredline, wireless, Internet access) have risen sharply from $25.9 billion in 1984, to $35.3 billion in 2000 to just under $42 billion last year.

Even when we bracket aside for a moment wired and wireless telecoms services because they tend to overshadow everything else on account of their size in order to focus on the Internet centric and traditional media elements in the mix, much the same pattern emerges. Indeed, these ten sectors grew impressively from $12.1 billion in revenues in 1984, to $23 billion in 2000, to $33.8 billion last year (in real dollars). The media generally are in not in crisis.

Table 1: The Growth of the Network Media Economy, 1984-2008

It is often said that core traditional media —  television, music, newspaper, books —  are teetering on the brink of calamity. The slightest whiff of troubles on the horizon, i.e. ‘cord cutting’, increased subscriptions to Netflix, or drop in advertising revenue, and the story is trotted out time and time again. For two recent examples, see here and here.

Yet, looking at the chart above suggests a rather different picture. Conventional television revenues – the poster child of a sector of the media in distress – did drift down from a high of $3.6 billion four years ago to $3.4 billion last year (including the annual subsidy for the CBC). Pay and specialty cable channel revenues, in contrast, doubled over the past decade to $3.5 billion, surpassing conventional television in 2010 (including the CBC’s annual subsidy).

Combine this with the much more significant growth in the means of television distribution — cable, satellite and other ‘online video distributors’ (OVDs) — and the total television universe doubled in size from $5 billion to $10 billion between 1984 and 2000, and then grew again to just under $15 billion last year. Once all of these elements are accounted for, television clearly still stands at the heart of the networked digital media universe, rather than serving as exhibit A for an ‘old medium’ imperiled by the new.

Just for the sake of argument, even if Netflix gets $8 per month for each of its million subscribers in Canada, that’s $96 million dollars a year in revenue, or .6 percent of the total for all segments of the television industry. Of course, that’s nice if you can get it, but it is a mere drop in the Canadian television bucket, and hardly worth revamping the rules for, as many entrenched interests would like the CRTC to do.

The ascent of the Internet has contributed greatly to the growth in the size and complexity of the network media universe. Internet access has risen from $239 million in revenue in 1996 to $6.8 billion last year. Internet advertising also started from next-to-nothing in 2000 to become worth $2.2 billion last year.

Growth for the entire network media economy, nonetheless, has stagnated since the economic downturn caused by the global financial crisis (2007ff). This is typical, however, of a long-term historical tendency for the fortunes of the media economy to hinge tightly on the state of the economy in general, as Figure 1 and Table 1 in fact show with respect to the comparatively milder recession years of the early 1990s when revenues for wiredline telecoms and newspapers plummeted. Indeed, total revenues for all media combined in 1992 were down more than 20 percent from four years earlier.

The impact of the current economic downturn has varied. Overall, revenues largely stagnated between 2008 and 2010, but some media have seen revenues rise substantially (wireless, cable, satellite & other video distribution platforms, Internet access, Internet advertising) or decline slightly (radio, magazines, music), while newspapers and wired telecom services revenues have dropped sharply.

Despite declining circulation and readership since the late-1950s (Goldstein, 2009), the newspaper sector’s revenues grew until reaching — and then roughly staying at — an all-time hight between 2000 and 2006. They have fallen significantly (about 20 percent) since.

This is not nearly as severe as trends in Britain, the US and a few other countries. In the U.S., for example, circulation and advertising revenue in 2010 were down 10 and 40 percent respectively from their all time high in 2003 (see, for instance, here and here). The trend in Canada has, however, been harsh enough to tip the overly-indebted Canwest into bankruptcy. It also casts a shadow over the prospects for the successor company, Post Media, that took over the chain of newspapers last year in a bid to, phoenix-like, raise them from the ashes and make a go of them. However, a standing invitation to its journalist and editorial staff to take early retirement, wonky ownership structure, and shaky ride in the stock market after its initial IPO surge, are raising questions about its long-term viability.

Newspaper Canada says there are ninety-four dailies across the country. By my count, however, only about a third of that many dailies amongst the Postmedia, Quebecor, Transcontinental and Gesca chains publishes on a daily basis. Several dailies have cut their weekly schedules to five or six days in the past two years. In addition, many small- to mid-size town dailies have cut back even further to just one or two days a week, while being refreshed daily (continuously) with ‘content’ from regional content factories within these chains (see here).

This is significant because the press is the core of the ‘content factory’ when it comes to news across the media as a whole. Pound-for-pound, newspapers pack more journalistic wallop than any other medium, and so there is good reason for concern.

The news is not all bleak, though, with a rise in advertising revenue (3.7%) and readership in 2010. The trend has been especially notable among younger readers seemingly eager to get news online via social network sites such as Facebook, for example (see here), while pure ‘newspaper publishers’ – Torstar, Transcontinental, etc. — seem to be recovering on the business side of things.

There have also been modest declines since 2008 in magazines (7.8%), music (5.7%) and radio (4.7%). However, changing the base of measurement from ‘real dollars’ to ‘current dollars’ – i.e. removing adjustments for inflation – turns things around. A plausible argument exists that the dramatical fall in prices for media and ICT goods has actually pushed costs downwards, not upwards. Therefore, there’s no need to discount for inflation and it is appropriate to look at trends from the perspective of both current and real dollars.

So, ultimately, the media economy has grown substantially over time. This has been true even during the last few years other than for newspapers and wireline telecom services. For music, radio and magazine sectors, relative stability has been the dominant trend.

Overall, there is little sense that the Internet, falling advertising, changing audiences, and even the Great Recession have laid waste to core elements of the media universe, traditional or new. However, keep up the latter, and well . . . .

Please watch for the next post when we’ll look at concentration trends over the past quarter-of-a-century for each of the sectors covered here and the network media economy as a whole.