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

Mon Jan 20 18:14:13 MST 2020

Just before the holidays, the Canadian Media Concentration Research Project<http://www.cmcrp.org/> released 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/wp-content/uploads/2019/12/Media-and-Internet-Concentration-in-Canada-1984-2018-17122019-FINAL-2.pdf>.

The report covers 20 sectors of the telecoms, internet & media industries in Canada over a 34-year period. It also expands greatly on its coverage of online video services like Netflix, Amazon, Apple, Crave, SportsNet Now, illico, etc and 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.

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, where Videotron has carved out a 13% market share for itself by revenue, and modestly in Ontario, Alberta and BC where Shaw-owned Freedom Mobile has carved out an estimated market share of between 5% and 6%. That said, the big three national mobile network operators'--Rogers, Bell and TELUS--market share still stood at a very high 91.3%.

The same trends apply to local retail internet access and cable TV markets: both are extremely concentrated but have become steadily less so over the last decade. In short, there are strong reasons for concern in all these industries.

The report also identifies two other qualitative features of the network media economy that set Canada apart from other countries:

  1.  the sky-high levels of diagonal integration where mobile wireless, wireline internet access and cable TV service are owned by one and the same player whereas there are often more than one stand-alone mobile network operators competing in the market in other countries, such as Vodafone throughout much of Europe, Asia and Africa, as well as T-Mobile and Sprint in the United States;
  2.  levels of vertical integration are also exceptionally high in Canada, with all of the main TV services, except for the CBC and Netflix, owned by telecoms operators. By 2018, four vertically-integrated communications conglomerates had come to account for 57% of the $87.2 billion network media economy: Bell, Rogers, Shaw (Corus) and Quebecor.

Whether the CRTC will do anything to respond to such realities is increasingly looking doubtful. Its failure to release its annual flagship publication, The Communications Monitoring Report, in  a timely fashion, missing data, a series of rulings that downplay the extent of concentration as well as vertical- and diagonal-integration, and grossly inflated estimates for the revenues of online video providers like Netflix and Amazon Video in Canada that serve to heighten the sense that Canadian culture is under siege all suggest that the Commission is returning to the protection of ‘national champions’, a nationalistic view of Canadian content and a bureaucratic conception of the public interest that its previous chairs over the past decade had steadily moved away from.

Like the first report in this series, this report focuses foursquare on Google and Facebook’s growing dominance of the internet advertising market in Canada. Together, these two companies controlled for 78.2% of the $7.6 billion in 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.

Vertical integration is also increasingly coming to define the internet giants as well, with Google, for example, now owning and controlling not only its iconic search engine but also Youtube, the Chrome browser, Android operating system and its own digital advertising exchange (as well as the audience data upon which it operates) that underpins a great deal of the online advertising market.

Conversely, however, 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. 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 they account for just under an estimated three-quarters of the online gaming industry, and thus do not dominate online gaming.

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

In sum, 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 netted $7.9 billion last year, 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 the report highlights the fact that while the big six US-based internet giants account for just under a tenth of all revenues across the network media economy in Canada, the top five Canadian companies accounted for nearly three-quarters of the $86.2 billion network media economy last year—a figure that was up significantly from the year before. They “big five” Canadian companies 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.

Over and above mapping the cross-cutting trends across the 20 sectors of the telecoms, internet and media industries that it covers, the report offers a series of policy recommendations that aim to address the high levels of concentration as well as vertical and diagonal-integration wherever they prevail without fear or favour for either the well-established telecoms and media companies that have long held sway in Canada or in the online, digital media sectors that are increasingly being dominated by a handful of global internet giants such as Google, Amazon, Facebook, Apple, Microsoft and Netflix.

In terms of dealing with these realities, the report offers a half-dozen recommendations. The same principle of “vertical separation” that underpins common carriage (aka net neutrality), 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, 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 policy and regulatory principles are reviewed:

  1.  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;
  2.  network interconnection and inter-operability and data portability rules to counter the “platformization” of the internet;
  3.  strong data and privacy protection rules based on the European Union’s General Data Protection Rules as a floor;
  4.  the selective application of the EU’s Audiovisual Media Services Directive (2016) to online video-on-demand services;
  5.  “functionally equivalent rules” should be applied to functionally similar activities, i.e. election advertising rules should be applied in a “platform neutral” manner.

best wishes,
Dwayne

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/

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