Streamed Broadcasting Will Make New Winners

The month of March may be associated with spring, the return of baseball, or a week long school holiday in some households. For me it is all about "March Madness", the annual U.S. college basketball tournament that wrapped up this week following nearly a month of shocking finishes and Cinderella stories.

The tournament provides hours of overlapping games with television networks zipping between the closest ones. This year's tournament has been as exciting as ever, yet the coverage has changed. In Canada, TSN purchased the rights to broadcast the tournament and owing to an already packed schedule, proceeded to shift the games between channels.

Initially out of frustration and later out of convenience, I shifted my tournament viewing to the Internet. The National Collegiate Athletic Association, which runs the tournament, offered a live streaming Internet feed of all the games as well as an iPhone app that provided good quality video. All the games -- including the U.S. commercials -- were readily available to Canadians without the need for a cable television subscription or a Canadian broadcaster.

While the use of the Internet to by-pass Canadian broadcasters is still relatively rare -- most U.S. programs bundle the broadcast and Internet rights together -- the decision to stream the games directly into the Canadian market could soon become the norm.

Follow the money

The key determinant will obviously be money. Once U.S. rights holders conclude that it is more profitable to retain the Internet rights so that they can stream their programs online to a global audience and capture the advertising or subscription revenues that come with it, Canadian broadcasters may find that they can only license broadcast rights with the U.S. rights holders competing directly with them via the Internet.

The emergence of streaming television over the Internet has generally been viewed through the prism of Internet providers (do data caps unfairly limit the viability of Internet-based streaming?) or broadcast distributors (will streaming services allow consumers to drop their cable subscriptions?). The forgotten story involves the impact on Canadian broadcasters and the future of Canadian content regulation.

The Canadian broadcasting bargain has long recognized that it is more profitable to license the rights to popular U.S. programs -- aided by simultaneous substitution of commercials for Canadian viewers -- than to create and promote original Canadian programming. Indeed, even the best Canadian programs face an uphill battle since commercial success requires licensing the program for broadcast in dozens of other countries around the world.

Bright new day for Canadian content?

Canadian broadcasting has therefore involved a trade-off that allows private broadcasters to benefit from cheap, profitable U.S. programming in return for meeting their Canadian content obligations. The Internet is on the verge of disrupting this model by rendering the U.S. programs far less profitable for Canadian broadcasters, since acquiring broadcast-only rights means missing out on the fastest growing piece of advertising pie.

While this sounds like bad news for the creation of Canadian content, it might actually be its savior. Creator groups will likely focus on pressuring the foreign based video streamers to contribute to the creation of Canadian content, but Canadian broadcasters may become the bigger champions as they gradually recognize that owning the full suite of broadcast and Internet rights are essential to commercial success.

If those rights cannot be obtained through conventional licensing models from U.S. rights holders, the broadcasters may begin to create their own Canadian content in earnest. The approach may not be a slam dunk, but producing Canadian content for commercial reasons -- rather than due to licensing requirements -- may lead to a new made-in-Canada Cinderella story.