Online TV accounts for 1.6% of Canadian TV ad spend: study

Online may be the new battleground for TV broadcasters, but a report from Convergence Consulting Group says it’s imperative broadcasters remain focused on their core business model. In its report “The Battle for the North American Couch Potato: New Challenges and Opportunities in the Content Market,” the Toronto research firm concluded that accelerating towards an […]

Online may be the new battleground for TV broadcasters, but a report from Convergence Consulting Group says it’s imperative broadcasters remain focused on their core business model.

In its report “The Battle for the North American Couch Potato: New Challenges and Opportunities in the Content Market,” the Toronto research firm concluded that accelerating towards an online-only model would put an estimated $3.4 billion in traditional TV advertising revenue at risk.

Online currently provides only 25% of the hourly advertising minutes of traditional TV, the report said, without the benefit of a “lucrative” upfront market.

Convergence estimated that online TV-related ad revenue accounted for a mere 1.6%, or $55 million, of the total Canadian TV ad spend in 2008.

It predicted that figure to grow to 4.8% ($175 million) by 2011.

However, the report also noted an ongoing shift in Canadians’ TV viewing habits. According to Convergence, 12% of weekly TV viewers watched a full episode of a show via a broadcaster or specialty channel website in 2008, a figure that is expected to reach 25% by 2011. (That figure doesn’t include viewing of TV shows at sites like YouTube, or through file-sharing sites.)

“There’s a huge transition going on in the way people consume content,” said Convergence Consulting Group president Brahm Eiley. “But the core revenue is coming from television. All the major providers know that and they act accordingly.”

While Canadian broadcasters such as CTV and Global have made significant strides in obtaining Internet rights for marquee U.S. programs like 24 and Lost, they still offer half as much online content as U.S. broadcasters like NBC and ABC, said Convergence.

But the company said that on a per capita basis, online viewing and revenue is similar to the U.S., which it attributes to three key factors: PVR penetration is lower in Canada than in the U.S. (roughly 13% versus 31%); Canadian cable/telco companies offer significantly less video-on-demand content than U.S. counterparts, thereby making online an attractive way for viewers to catch up on shows they may have missed; and Canadian broadband Internet penetration, a pre-requisite for online viewing, is higher than in the U.S.

Meanwhile, iTunes remains an insignificant source for TV content in Canada, accounting for only $10 million in revenue last year. The average TV subscriber home paid $55 month for cable service and watched an estimated 240 hours of TV, equating to roughly 23 cents an hour. By comparison, iTunes charges $1.99 for a typical TV episode.

“Bypassing Canadian cable, satellite and telco TV access providers, and selling TV shows directly to the consumer has seen little traction due to the expense and limited value proposition,” said the report.

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