[acc-cca-l] The CMCR Project’s 2018 Media and Internet Concentration in Canada Report

[Daniel Paré]

Forwarded on behalf of Prof Dwayne Winseck


Now Out: The CMCR Project’s 2018 Media and Internet Concentration in Canada Report

December 17, 2019

Today, the Canadian Media Concentration Research Project<http://www.cmcrp.org/> is releasing the second of its two-part annual series on the state of telecoms-internet and media concentration in Canada. A downloadable PDF of the report can be found here<http://www.cmcrp.org/media-and-internet-concentration-in-canada-1984-2018/> (http://www.cmcrp.org/media-and-internet-concentration-in-canada-1984-2018/).

This is probably our most ambitious effort yet, covering 20 sectors of the telecoms, internet & media industries in Canada over a 34 year period. This year’s report expands greatly on coverage of online video services like Netflix, Amazon, Apple, Crave, SportsNet Now, illico, etc. It also adds significantly to our examination of advertising spending across all media in Canada, i.e. TV, radio, online, newspapers, magazines and out-of-doors. We have also significantly expanded our coverage to include online music and gaming services, downloads and apps, including the activities of the two most important app stores, Google Play and Apple Appstore.

The image below gives a snapshot of what we cover:

 [https://gallery.mailchimp.com/e0116e6bb3c4d8ec52eafce65/images/32e6b611-d762-4395-b10a-d0e8ce7e71a5.png]

For the second year now, this report delves deeper into the state of competition specifically in local and regional mobile wireless, retail internet access and “cable TV” services. We show that mobile competition has improved considerably in Quebec, for example, where Videotron has carved out a 13% market share for itself by revenue. In Ontario, Alberta and BC where Shaw operates Freedom Mobile, it has carved out an estimated market share of between 5% and 6%. The big three national mobile network operators market share slid from 92.5% in 2017 to 91.3% last year as a result, but that—and an HHI score of 2807—are still highly concentrated by either of the commonly used standards we rely on in this report.

The same trends apply to local retail internet access and cable TV markets: both are extremely concentrated markets but have become steadily less so over the last decade as independent ISPs and the IPTV services of the telecoms operators Bell, TELUS and Sasktel make inroads in both of these markets. In short, there are strong reasons for concern in all these markets. Now is not the time to let up on policy measures that have begun to bear at least some fruit, and perhaps good reason to double-down on them.

Whether the CRTC will do that is increasingly looking doubtful. Its failure to release its annual flagship publication, The Communications Monitoring Report, at the time of this report’s release stands as another sign of the extent to which it has made the task of understanding these realities, let alone responding to them appropriately, all the harder.

The report also identifies two other qualitative features of the network media economy that set Canada apart from other countries: the sky-high levels of diagonal integration and the extremely high levels of vertical integration that exist in this country.

Diagonal integration is where mobile wireless, wireline internet access and cable TV service are owned by one and the same player, and broadcast TV and pay TV services separately owned. In most countries, for example, there are often more than one stand-alone mobile network operators (MNOs) competing in the market, whereas in Canada the last stand-alone mobile operator was acquired in 2016 by Shaw, i.e. Wind Mobile, since re-branded as Freedom Mobile.

Vertical integration is where network operators own media content companies, or digital platform like Google owns and controls, for example, its search engine and Youtube, audience data and the digital advertising exchanges the underpin internet advertising. Current levels of vertical integration are exceptionally high in Canada, after having doubled between 2008 and 2013. By 2018, four vertically-integrated communications conglomerates in Canada had come to account for nearly 57% of the $87.2 billion network media economy: Bell, Rogers, Shaw (Corus) and Quebecor.

The high level over vertical integration means, crucially, that all of the main TV services in the country, except for the CBC and Netflix, of course, are owned by telecoms operators. In the US, by contrast, there are only three comparable vertically-integrated behemoths—AT&T, Comcast and Charter (Liberty)—and between them, they accounted for a third of the mammoth trillion dollar plus US media economy.

The principle of “common carriage” (popularly known as “net neutrality”) is built for conditions like these—albeit not contingent upon them. As this report suggests, this unique combination of conditions helps explain why internet access, mobile wireless and cable TV services prices are so expensive, data caps low, unlimited options rare and expensive, and the variety of stand-alone internet streaming TV services on offer limited in Canada, amongst other things.

After declining between 1984-2010, the level of concentration across the overall network media economy rose during most of the first half of the present decade, before being driven downwards in the last several years by the rapid advent of digital AVMS services and the main players that have ushered them in: Netflix, Amazon, Apple, and so on. There has also been a downward drift in several other sectors that stand out in ways that differ from the past, although, of course, the trends are never in one direction, and thus there have increases as well. The areas where concentration levels have fallen and risen are briefly discussed and laid out below.

Concentration levels have fallen, for example, in mobile wireless services, cable TV (when measured locally, but not nationally), internet access (at both the local and national level), broadcast TV, online video and the “total TV marketplace” (the latter, largely because of the growth of internet streaming TV services, especially Netflix), search engines, desktop operating systems and internet news sources. That said, however, the declines in cable TV, internet access, online video services, search and desktop operating systems have been from extremely high levels of concentration and they continue to be so despite the changes that have taken place.

New sections in this report also show that the online games, game downloads and in-game purchases sector have grown swiftly to become a $1.33 billion industry by last year and that they continue to be characterized by a fairly diverse range of companies and business models (i.e. subscriptions to gaming platforms; subscriptions to particular games; revenues from direct-purchase game downloads and in-game purchases). While a core group of global companies looms large in each of these sub-areas of the digital games industries, such as Microsoft, Sony, Nintendo, Activision, Blizzard, Electronic Arts, Valve and the Chinese internet giant, Tencent, together these companies account for just under an estimated three-quarters of the online gaming industry, and thus do not dominate online gaming.

While Apple’s iOS app store and Google Play had a combined estimated revenue from their app stores of  $360.6 million in 2018, or roughly 27% of online gaming, gaming applications, game downloads, and in-game purchases revenue, and this is up considerably over the past five years, they do not dominate this sector either.

Concentration levels have risen in specialty and pay TV services and, most notably in internet advertising, the total advertising market across all media, mobile operating systems and desktop browsers. This, and the very high levels of concentration referred to above for other elements of the internet ecology, suggests that, far from being immune to consolidation, “core elements of the internet” are highly susceptible to such pressures.

The following figure provides a high-level snapshot of where things stood in 2017 for each media covered in this report on the basis of their respective HHI scores (a measure defined in the report).

Concentration Rankings on the basis of HHI Scores, 2018
 [https://gallery.mailchimp.com/e0116e6bb3c4d8ec52eafce65/images/0adbb9c6-ee3b-4d7f-bfca-dc2ccabbb54f.png]

This year’s report adds a whole new section on the role of advertising as a source of revenue spending across a variety of media in Canada, i.e. TV, radio, online, newspapers, and magazines.
Like the first report in this series, this report focuses foursquare on Google and Facebook’s growing dominance of the $7.6 billion internet advertising market in Canada. Together, these two companies controlled for 78.2% of online advertising spending in Canada in 2018, up very significantly over the past few years, largely because the “digital duopoly” has taken nearly all the gains in online advertising revenue to themselves.


Google and Facebook have also carved out a very large place for themselves in terms of the $14.1 billion spent on advertising across all commercial media, with the two’s share of that sum swelling to 42.2% last year, up from 38.3% a year earlier. They are now the fifth and seventh largest companies operating in the Canadian media.

In fact, a half-dozen global internet giants have carved out a very sizeable spot for themselves within Canada over the last five years on account of the extremely rapid growth of online video, gaming and music subscription and download services and app stores and online advertising: i.e. Google ($4.1 billion in revenue and 4.9% market share), Facebook ($2.1 billion in revenue and 2.4% market share), Netflix ($1000.8 million in revenue and 1.2% market share), Apple ($422.3 million in revenue and .5% market share), Amazon ($181 million in revenue and .2% market share) and Twitter ($117.5 million in revenue and .1% market share).

Combined, these firms’ total revenue from their operations in Canada last year netted $7.9 billion, for a 9.3% share of the all revenue across the network media economy.

While these entities obviously now cut a very sizeable figure on the landscape, to help keep things in perspective it is important to keep front-and-centre in mind that whereas the big six US-based internet giants account for just under a tenth of all revenues across the network media economy based on their revenues in Canada, the top five Canadian companies accounted for 73.4% of the $86.2 billion network media economy last year, up from 71.4% the year before. They are: Bell, Telus, Rogers, Shaw and Quebecor. Indeed, Bell is the biggest player in Canada by far, with total revenues in Canada nearly three times the combined revenue of the “big six” US-based internet giants.

In terms of dealing with these realities, the report offers a half-dozen recommendations. The same principle of “vertical separation” that underpins common carriage, and which should be strengthened in the telecoms domain, could also be extended to Google, for instance, so as to effectuate a structural divestiture between its search engine and Youtube and control of audience data, on one side, for example, and its proprietary digital advertising exchange on which the buying and selling of online advertising takes place, on the other. This is what breaking-up “big tech” might look in terms of details.

A handful of other principles are reviewed: diagonal structural separation along the lines being pursued by the German Federal Cartel Office that would prevent Facebook from sharing people’s data across Instagram, WhatsApp and Facebook; network interconnection and inter-operability and data portability to counter the “platformization” of the internet; strong data and privacy protection rules based on the European Union’s General Data Protection Rules as a floor; the selective application of the EU’s Audiovisual Media Services Directive (2016) to online video-on-demand services; and the principle that “functionally equivalent rules” for functionally similar activities, i.e. election advertising, should be applied in a “platform neutral” manner.


Additional headlines of this report include:

  *   the top five Canadian companies—Bell, Telus, Rogers, Shaw and Quebecor—accounted for 73.4% of the $86.2 billion network media economy last year, up from 71.4% the year before;
  *   A half-dozen global internet giants have carved out a very sizeable spot for themselves within Canada over the last five years on account of the extremely rapid growth of online video, gaming and music subscription and download services and app stores as well as online advertising: i.e. Google ($4.1 billion in revenue and 4.9% market share), Facebook ($2.1 billion in revenue and 2.4% market share), Netflix ($1000.8 million in revenue and 1.2% market share), Apple ($422.3 million in revenue and .5% market share), Amazon ($181 million in revenue and .2% market share) and Twitter ($117.5 million in revenue and .1% market share). Combined, these firms’ total revenue from their operations in Canada last year netted $7.9 billion, for a 9.3% share of the all revenue across the network media economy.
  *   Google and Facebook are now the fifth and seventh largest entities operating in media economy in Canada.
  *   That said, Bell is the biggest player in Canada by far, with total revenues in Canada nearly three times the combined revenue of the “big six” US-based internet giants. Bell single-handedly accounted for nearly 28% of all revenue last year—up slightly from a year earlier;
  *   mobile wireless is very highly concentrated with Rogers, Telus and Bell accounting for 91.3% of the sector’s revenue in 2018—down a percentage point from the year before;
  *   new entrants Shaw (Freedom), Videotron and Eastlink’s share of the market rose to 6.4% in 2018—up significantly from 4.7% the year before;
  *   the least concentrated mobile wireless market in Canada is in Quebec, where Videotron had 13% market share by revenue and 15.5% based on subscribers at the end of 2018—a small increase over the year;
  *   incumbent telephone and cable companies accounted for 87.5% of the residential retail internet access market in 2018 (i.e. Bell, Rogers, Shaw, Telus, Videotron, Cogeco, Eastlink and SaskTel).
  *   the quick pace of IPTV growth over the past half-decade means that the “cable monopoly” is long gone. A tight duopoly persists, however, and local markets are extremely concentrated by the standards of the HHI;
  *   the number of Canadian households with a cable TV subscription fell to 75.7% last year, down from 85.6% at its high point seven years ago; those losses, however, have been largely recouped by price increases for cable TV and broadband internet access that have outpaced the consumer price index by large margins;
  *   combined, Bell and Shaw (Corus) accounted for nearly half (46%) of the entire television universe (e.g. television distribution and services) by revenue and possessed a total of 130 television stations and services between themselves in 2018;
  *   there was a steep rise in TV concentration between 2010 and 2014 but the spin-off of some pay TV services by Bell and Shaw (Corus) and the rise of Netflix, Amazon Video, Apple and a few other online video services has helped turn the tide. The “big 5” TV operators’ took 78.8% of all TV revenue (including internet streaming) last year—down from 82% in 2012 and with a big change insofar that Netflix has replaced Quebecor as the 5th largest TV operator in the country for the last three years and now has similar revenue to the fourth largest television service operator in Canada, Rogers
  *   Netflix’s had estimated revenue of $1000.8 million in Canada and a 11.4% stake of all television services revenues in Canada last year—up sharply from $820.6 million in revenue and a 9.7% market share the year before. On a stand-alone basis, the online video market is highly concentrated, but the trend is downward over time;
  *   smaller TV operators such as DHX, Stingray, Blue Ant, Channel Zero, APN, V Interactions and CHEK have benefitted from some new openings as well as the divestiture of TV services by bigger players like Bell and Shaw (Corus). However, their combined market share in 2018 of 3.5% was less than half of Astral Media’s share alone on the eve of its take-over by Bell in 2013 (7.4%);
  *   Canadians get their news from a wide plurality of internet news sources, both old (CBC, Postmedia, CTV, Toronto Star,) and new (Huffington Post), as well as domestic and foreign (CNN, CBS, BBC, NBC, Guardian, New York Times);
  *   The scale of vertical integration amongst the “big 4” vertically-integrated giants in Canada more than doubled from 2010 to 2013. In 2018, Bell, Rogers, Shaw (Corus) and Quebecor accounted for 56.5% of the $86.2 billion industry—in the US, in contrast, after the AT&T take-over of Time Warner last year, four vertically-integrated companies’ accounted for a third of that country’s $1,087.6 billion (CDN) network media economy;
  *   diagonal integration is where mobile wireless, wireline, ISPs and BDUs are owned by one and the same player, and is extensive in Canada, whereas in many countries there are stand-alone mobile network operators (MNOs), such as T-Mobile or Sprint in the US, or 3 in the UK, and Vodafone in many other countries around the world where it operates. The last stand-alone mobile wireless company in Canada–Wind Mobile–was acquired by Shaw in 2016;
  *   vertical and diagonal integration tend to dampen competition between different ‘modes of communication’, raise prices, limit the size of monthly data caps and promote the use of zero-rating schemes that challenge the precepts of net neutrality (i.e. common carriage). The use of data caps and zero-rating not only dampens internet use but turns carriers into editors, or gatekeepers, thereby the ‘model’ of the evermore internet- and mobile wireless-centric media universe towards a logic of integration, control and “walled gardens” vs “the open internet”;
  *   for a half-decade between 2012 and 2017, the CRTC had rediscovered media concentration and taken steps to do something about it in a series of landmark rulings: e.g. its Mobile TV, Talk TV, regulated wholesale mobile wireless and wireline decisions, and the “zero-rating” decision in 2016 that girded the already strong “Net Neutrality” framework in Canada. Common carriage (or “net neutrality”) is crucial in a context where high levels of vertical integration obtain, although it does not turn on the point. This recent period of commitment to such principles, however, appears to have weakened. The current chair of the CRTC has acknowledged that vertical integration is high in Canada but appears to think that this state of affairs is common (see here<https://www.canada.ca/en/radio-television-telecommunications/news/2019/11/ian-scott-to-the-cable-tv-summit-of-the-national-communications-commission.html>). It is not.


The Canadian Media Concentration Research<http://www.cmcrp.org/> project is directed by Professor Dwayne Winseck, School of Journalism and Communication, Carleton University.  It is funded by the Social Sciences and Humanities Research Council and has the mission of developing a comprehensive, systematic and long-term analysis of the media, internet and telecom industries in Canada. He can be reached at either dwayne.winseck at carleton.ca<mailto:dwayne_winseck at carleton.ca> or 613 769-7587 (mobile).

Open Access to CMCR Project Data

CMCR Project data can be freely downloaded and used under Creative Commons licensing arrangements for non-commercial purposes with proper attribution and in accordance with the ShareAlike principles set out in the International License 4.0. Explicit, written permission is required for any other use that does not follow these principles. Our data sets are available for download here<http://www.cmcrp.org/about/archived-data/>. They are also available through the Dataverse, a publicly-accessible repository of scholarly works created and maintained by a consortia of Canadian universities. All works and datasets deposited in Dataverse are given a permanent DOI, so as to not be lost when a website becomes no longer available.

Acknowledgements

Special thanks to Ben Klass, a Ph.D. student at the School of Journalism and Communication, Carleton University, Lianrui Jia, a Ph.D student in the York Ryerson Joint Graduate Program in Communication and Culture and Han Xiaofei, also in the Ph.D. program at the School of Journalism and Communication, Carleton University. They helped enormously with the data collection and preparation of this report. Ben wrote key aspects of the wireless section. Sabrina Wilkinson, a graduate of the School of Journalism and Communication at Carleton University and now at Goldsmiths University in the UK, also offered valuable contributions to the sections on the news media. Agnes Malkinson, yet another Ph.D. student in the Media and Communication program at Carleton University, is responsible for the look and feel of the reports, and keeps the project’s database in good working order.

 http://www.cmcrp.org/media-and-internet-concentration-in-canada-1984-2018/
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DOWNLOAD REPORT PDF<http://www.cmcrp.org/wp-content/uploads/2019/12/Media-and-Internet-Concentration-in-Canada-1984-2018-17122019-FINAL-2.pdf>
Professor, School of Journalism and Communication and
Director of the Canadian Media Concentration Research Project,
Carleton University, Ottawa, Canada
Phone: 613 520-2600 x.7525
Mobile: 613 769-7587
Follow me on Twitter: @mediamorphis
Visit my blogs: www.cmcrp.org<http://www.cmcmp.org/>; https://dwmw.wordpress.com/

Daniel J. Paré, Ph.D.,
Associate Professor / Professeur agrégé
Department of Communication<http://arts.uottawa.ca/communication/en>,
School of Information Studies (ÉSIS)<http://www.sis.uottawa.ca/>, and
Institute for Science, Society and Policy (ISSP)<https://issp.uottawa.ca/>

Graduate Program Co-ordinator, ISSP<https://issp.uottawa.ca/en/education/master>
University of Ottawa / Université d’Ottawa
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