Cable companies derive the highest segment of revenue from the Canadian video sector but spend the least amount of money on Canadian programs, says a report on the changing economic structure of the audio and video industry in Canada.

The paper, prepared for Canadian Heritage and the cbc by Ken Goldstein of Communications Management, says cable companies took in 37.5% of sector revenue in 1993, but contributed only 6.4% of all industry spending on Canadian programs.

In contrast, private broadcasters and the cbc spent a higher percentage of total revenue on programming, despite deriving lesser percentages of sector revenue.

The private broadcasters earned 30% of industry revenue in 1993, and contributed 32.9% of total industry spending on Canadian programs.

While the cbc’s share of sector revenue has shrunk from 35.8% in 1978 to 19.7% in 1993, its share of all spending on Canadian television programs is 42.2%.

In 1993, private broadcasters and the cbc had a combined share of sector revenue of just under 50%, but still accounted for almost three-quarters of spending on programming, the report says.

The paper examines how Canadians choose to receive, and pay for, video and audio information and entertainment programming. It looks at the revenue base for private and public broadcasters, cable services, non-profit television services, pay-tv, specialty services, home video rental and sales, movie theater admissions, and video games, and sources of audio revenue.

The report concludes that current public policy goals for Canadian content will not be sustainable unless the industry finds a way of channeling more industry revenue into Canadian production.

Reduce spending

The other option is to reduce the level of spending on Canadian programs and risk a lower quality product.

‘Relatively lower spending on Canadian programs, or the development of programming whose content must be homogenized in order to serve wider markets, may not be the most effective way to create the kinds of programs that will reflect a Canadian identity within the expanding video landscape,’ the report says.

Canadians are undeniably changing the way they receive entertainment and information. According to the report, subscriptions in the form of fees for cable and specialty services, rentals, sales and admissions have passed advertising as the largest source of revenue for the video industry.

Direct payment

While total expenditure on the video industry increased from $1.4 billion in 1978 to $7.1 billion in 1993, the direct payment part of those totals increased eightfold from $500 million in 1978 to over $4 billion in 1993.

With the growth of new media and an emphasis on one-on-one consumer promotions, advertising revenue for the video sector is climbing at about half the rate of direct payments.

In 1978, advertising and direct payment revenues were nearly the same size. By 1993, advertising expenditures had quadrupled but direct payment had increased eightfold and was greater than all other revenue sources combined, the report says.

Titled ‘The Changing Economic Structure of the Canadian Audio/Video Industry: Implications for Public Policy,’ the paper seems to confirm that a user-pays broadcasting environment is evolving.

The future will likely be made up of a la carte services, but it is reasonable to assume that consumers will continue to buy packages of channels for a number of years, it says.

Fund viable

In terms of funding for Canadian programming, the report notes that a production fund supported by the cable industry is viable, but it questions whether it will be enough to support the amount of Canadian content programming public policy currently stipulates.

‘While such a fund will no doubt be useful, we are still concerned that the emphasis on `pump-priming’ through such funds may not be paying sufficient attention to the relative position of the underlying revenue streams for those that will carry the programs.’ AV