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    Online TV blurs line between channel surfers, Web surfers  
    Toronto Star  

Chris Sorensen

    March 14, 2009  

For Toronto's Paul Pethick, the days of gathering around the TV set for an evening of entertainment are but a fuzzy memory.

While the 35-year-old English-language teacher still watches a considerable amount of television, nearly all of it – from hit programs such as Heroes to sci-fi classics like Star Trek – is piped into his house via the Internet and watched on the computer.

In fact, with the exception of news and live sports, Pethick can't recall the last time he watched a TV program on plain old cable.

"My wife and I watch the computer together while we eat dinner," he said. "Actually, I don't even call it my computer anymore. I call it my TV."

Pethick didn't set out to replace his television set, but a four-year stint teaching English in Japan left him craving familiar North American television programs such as the hit series 24.

He eventually found it on the Web and soon discovered that most other shows were there, too, with the possible exception of a single episode of The Simpsons that continues to elude him.

Now, he can't imagine ever going back. "I get to watch what I want, when I want it."

It's the type of techno-epiphany that should be sending shivers down the spines of television industry executives, who have relied on a business model that encourages people to arrange their lives around their favourite shows.

They need only look at what happened to the music recording industry's near-obliteration by the file-sharing phenomenon to gain an appreciation for the Web's ability to upend decades-old business models in just a few years.

While it's not clear whether television will ultimately suffer the same fate, broadcasters are nevertheless moving quickly to make sure they aren't caught flat-footed by a sudden technological shift.

In the United States, they have already begun putting a significant amount of content online in a bid to make file sharing or any other third-party services less attractive.

The most ambitious effort has been, a joint venture between NBC Universal and News Corp., the parent of Fox. The service allows U.S. surfers to choose from a growing library of top-rated TV shows from different sources and available to view through an elegantly designed media player.

The shows are generally added to the service after they air. Commercials are limited to either a single spot that plays before the video, or several shorter ones that play while the content is streamed. Users can choose which commercial to watch from a given advertiser.

Hulu, which launched a year ago, attracted roughly 25 million monthly viewers in January, according to ComScore Media Metrix. By contrast, Google's YouTube attracted just over 100 million viewers, while social networking site MySpace fetched 63 million viewers for video content.

Some analysts believe Hulu is actually making money as a distribution outlet – estimated to be as much as $12 million (U.S.) in 2008 – no small feat, given the challenges faced by other media companies when it comes to attracting advertising dollars online.

In Canada, where people under the age of 18 now spend about as much time on the computer as watching TV, it's a different story.

Networks such as CTV and Global have made some programs available online, but the process has so far been a series of halting steps.

Adding to the frustration for Canadians is the fact that the Internet's global reach doesn't yet extend to the world of TV shows, where traditional geographic borders have been imposed on the World Wide Web.

A Canadian viewer who tries to log on to or CBS Interactive's will soon discover the content has been blocked to viewers trying to access the site from outside the U.S.

The culprit is complex international licensing deals that allow broadcasters such as Global Television and CTV to air American programming. Since the U.S. networks earn revenue from such deals, there's little incentive to open up online content to foreigners.

There's also not much motivation for Canadian TV networks, which pay top dollar for U.S. shows, to also secure online rights, given that the vast majority of their revenues come from traditional TV ads.

While some savvy surfers have figured out ways to circumvent the controls, the reality is it's often easier to download the shows from a file-sharing service such as BitTorrent, where most of the content has been stripped of advertising.

Either way, observers say the situation threatens the Canadian broadcast industry because it encourages viewers seeking online content to bypass the networks.

"Those who hold rights to Canadian programming need to be more dynamic and to make programming available more broadly and quickly if legal channels are to thrive," argued a recent paper by Canadian consulting firm The SeaBoard Group. "To drag out availability in some sort of homage to the economic and distribution models of yesteryear is to court more creative illegal (and therefore 'zero revenue') solutions."

But while there is little doubt the Internet is poised to change the way television content is delivered, it's too early to tell whether the shift will actually sound a death knell for broadcasters or merely transform the way they do business.

At present, the vast majority of television programming still takes place the way it has for decades, with families sitting down on their couches and staring at their increasingly large, higher resolution television sets.

Brahm Eiley, president of Convergence Consulting Group Ltd., said there's currently no evidence to suggest the traditional television model is in danger of being replaced by the Internet.

"The economics aren't there," he said, noting revenue earned by sites such as Hulu is a drop in the bucket compared with the billions spent by advertisers to reach conventional TV audiences.

Eiley also argues that there is currently little incentive for people to make the jump online because much of what they want to watch is already available via traditional broadcasts or cable, often in a much higher-quality format. "The problem is that the experience of watching online isn't better – it's worse."

Furthermore, the one area where Web-based TV would seem to offer a clear advantage – giving people the ability to watch shows on their own schedule – can be replicated fairly easily through the use of personal video recorders and video on demand services, Eiley said.

Although there's no question traditional broadcasting revenue is on the decline, the main culprit has been the rise of specialty TV channels on cable or satellite that allow advertisers to target their messages with more precision.

Indeed, it's no coincidence that Canada's biggest media conglomerate, Canwest Global Communications Corp., which owns the Global Television network, risked further weighing down its debt-heavy balance sheet in 2007 by partnering with Goldman Sachs to purchase the specialty TV channels owned by Alliance Atlantis for $2.3 billion.

That's not to say that the Internet isn't becoming an increasingly important part of the television universe, or that new technologies won't come along and upset the current balance.

For example, software company Boxee has made it possible for users to watch "free" Internet content, including streamed programs from network websites and Hulu, on their big-screen televisions. (Hulu recently demanded its content be pulled from the service, although a scaled-down version of Boxee's Hulu application has since reappeared following an outcry from users.)

Still, broadcasters, including those in Canada, say they believe the Web is emerging as a way for viewers to augment, not replace, traditional TV-watching habits.

"I don't think Web-enabled TVs are there yet and I don't think consumers are ready for another dedicated device on top of the stereo or DVD stack," Stephan Argent, CTV's vice-president of digital media, said in a recent interview.

"From our perspective, our strategy is to allow viewers to play catch up on episodes that they've missed. Part two is to catch new viewers online who will then watch on television.

"That, to me, is a circle. It's not down one road or the other. You're kind of bouncing back and forth."



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