Peer-to-peer, Napster-like trading of TV shows is starting to get a toehold in the culture. It’s worth noting now while it’s still just a toe, because the whole foot, and maybe the leg, is going to get a hold within this decade.

The repercussions in the Canadian market will be significant.

According to a study released last month by London-based Internet monitoring firm Envisional, ‘illegal downloads’ of some TV shows increased by over 150% in 2004. Increased bandwidth, technological advances and a growing demand for early access to popular U.S. shows were cited as key contributors to the ‘worldwide explosion in online TV piracy.’

According to the study, the U.K. is the largest perpetrator of downloading TV shows, representing 18% of worldwide activity. Australia and the U.S. were two and three at 16% and 7%, respectively. Canada was seventh, at 4% of the total.

The study found that ‘high quality pirate versions’ of hit shows such as 24 and The O.C. are available on the Internet within hours of being aired in the U.S. and months before they are aired in the U.K. Over the course of 12 months, Envisional monitored illegal downloads of 24 and noted an increase to 95,000 downloads of each episode in season four from 35,000 the previous season. This marked an increase of over 150%. Downloads of Desperate Housewives shot up from 40,000 of episode one to over 60,000 for the most recent episode.

Most of the P2P trading is done over popular file-trading network BitTorrent.

This trend, combined with personal video recording technologies such as TiVo, which enables viewers to save shows on a hard drive and zap past the ads, could significantly impact broadcasters’ revenue streams. Not only can you skip ads, you can get pirated versions of shows before the season premieres through the Internet. Earlier this month, a pirated version of a new episode of BBC’s updated classic Doctor Who TV series was leaked online.

And this is all happening at a time when picture quality is still relatively compromised and viewers are forced to watch shows on computer screens or take an additional step of burning a DVD to enjoy the programs on a proper TV set. Once the picture quality of downloaded shows improves and more households gain the ability to play digital files from the Internet directly to their TVs, all bets are off.

Roma Khanna, VP CHUM Interactive, predicts that such technology will be ubiquitous within five years.

‘I don’t think it’s that far away,’ she says. ‘In terms of timelines, I always say to people, so much less is going to happen in a year than I had hoped; yet so much more will happen in five years than I imagined. I can’t imagine that in the next five years this won’t be taking off enormously.’

Similar technologies have certainly had significant impact on the music industry. Sales of recorded music shrank by 20% between 1999 and 2003 and record industry execs point directly at P2P file sharing as the key culprit. But this line of logic is currently under review. Some recent studies indicate that file sharing has, in fact, helped the sales of popular albums as it allows listeners to sample songs and has led consumers to record stores, just as radio did for decades.

But since the application to TV programming is still in relative infancy, the exact impact has yet to be studied. While no one has put an estimate on lost revenues to the TV business, a study earlier this year placed the cost to the U.S. motion picture business of online piracy at $850 million per year. The study, by Informa Media Group out of the States, said the biggest threat to the film business might be in the tendency to generate bad buzz and negative word of mouth ahead of theatrical releases. The same issues apply to TV shows.

So what does it mean for the Canadian industry? Well, for one thing, a threat to revenues throws some cold water on the efforts of Canada’s drama lobby, which likes to point out that record profits at Canada’s broadcasters are not being put back on screen through the telecasting of quality Canadian scripted programming.

The technology will also undermine the popular practice at conventional broadcasters, and some specialties, of airing non-simulcast shows well after they have premiered in the U.S., as CTV did with The Sopronos and Global did with Band of Brothers in recent years.

It could also threaten the value of those rare hits out of Canada such as Corner Gas and Trailer Park Boys when they do find that elusive audience.

Still, to Khanna’s thinking, that threat is a welcome challenge that smart broadcasters will embrace.

‘We need to reevaluate our business model. I don’t think the core advertising business model is going away anytime soon, yet we have to start thinking about challenging that model and adding other things into the mix, things like pay subscription services, pay-per-view, pay-per-use, some sort of all-you-can-eat buffet of on-demand content, imbedded advertising, more sponsorship, product placement, that sort of thing.’

That sort of thing has already emerged in the U.S. where Turner Broadcasting announced in early March that it will promote its clients’ brands beyond the 30-second spot by pushing all its platforms such as Web, video-on-demand, high-definition TV and broadband Internet connections.

It seems all that convergence talk earlier this decade has finally found a practical place in the media landscape as a means to offset the negative impact from the coming of ad-zapping and P2P file sharing.