Nobody's watching

by Felix Vikhman
The National Post
Dec 27, 2003

For centuries, philosophers struggled with the question of whether a tree falling in the woods must be heard for it to make a sound. Today, a similar question is causing pained hours of self-reflexive chin-scratching for operators of the new Canadian digital TV channels: If a TV channel has less than 1,000 people watching it, does it really have an audience? While some isolated viewers might protest, for advertisers the answer appears to be no, and that undoubtedly has more than a few TV executives contemplating a Socratic hemlock cocktail.

Needless to say, the ratings compiled by Nielsen Media Research, Ltd. aren’t pretty. Of the 57 so-called “diginets” – the first 46 of which were launched a year ago September with great hope and hoopla – a full third, including such grabbers as The Green Channel and The Racing Network, have fewer than 1,000 viewers in any given minute. Cumulatively, 57 diginets have captured less than 2% of Canada’s total television audience. Of the average 10.5 million Canadians watching TV in prime time, only 182,000 are tuned to digital channels.

Worse still for the diginets, the top 10 digital channels account for at least two-thirds of that modest audience. The few eyeballs left over for the rest aren’t even enough to entice the makers of cheap late-night ads for products like the Flowbee to buy advertising time. Few ads mean little revenue. Little revenue means no worthwhile programming. No programming means no viewers. And the cycle repeats.

How small are the morsels? Almost all of the diginets are selling 30 second advertising slots for $10, says Danuta Boehler, broadcast manager at Montreal media-buying firm Allard Johnson Communications Inc. “But even that is expensive,” she says. If only a few hundred people are watching a channel, it would probably be more effective to place an ad on TSN at four in the morning.

A key problem facing the channels is that only about 30% of Canadian households have digital cable boxes or direct-to-home satellite TV systems, such as Bell ExpressVu and Star Choice, through which the diginets are broadcast. But therein lies diginets’ existential paradox: exclusively was their original reason for being. By offering premium, digitally exclusive content, they were supposed to entice basic cable subscribers to upgrade their systems.

By and large, however, analogue cable subscribers don’t even know that these channels exist. So says Kaan Yigit, a partner at Toronto-based Solutions Research Group Consultants Inc., which monitors consumer awareness of the diginets. “Your average analogue subscriber thinks the whole thing is a mystery,” says Yigit. He points to a recent SRGC study that found about half of analogue subscribers thought diginet programming was simply better picture quality for the same channels they already receive.

Even with their low budgets, the diginets as a whole are churning through capital like FOX does unmarried millionaires. In the past few months, a number of diginet operators have announced layoffs and cost-cutting measures, including Alliance Atlantis Communications Inc., which owns 16 diginets, among them BBC Canada and Showcase Diva; CHUM Ltd., Which owns BookTelevision and SexTV; and Stornaway Communications LP, which runs ichannel and BPM. “We haven’t seen any failures yet, but some [diginets] are hanging on for dear life,” says Mario Mota, president of Ottawa’s Decima Publishing Inc., Which puts out a quarterly report on the state of Canadian digital broadcasting. “There is going to be a shake-out. The questions are, Will it be a giant upheaval or just a little tremor?”

Not everyone is so pessimistic. Alliance Atlantis Broadcasting Inc. CEO Phyllis Yaffe maintains that the problems afflicting the diginets are nothing but growing pains. “We are on schedule,” she says. “So far, we have been meeting all of our goals in terms of audience numbers and audience penetration. “Yaffe says she is encouraged by the fact that her company operates six of the top 20 channels, and believes the channels will begin breaking even in their fourth year.

Yaffe dismisses criticisms that the diginets represent an oversupply of content on the TV dial. But it’s hard not to think that diginets are failing because they segment the TV audience to the point of absurdity. One can only imagine what will happen if the Canadian-Radio and Telecommunications Commission (CRTC) goes ahead with plans to license more diginets in the next few years. “With analogue TV licenses, where you had [CRTC-] protected spaces in which there was not going to be competition from a similar service, you could say these were licenses to print money,” says Mota. But those days are history. In the ever-expanding TV universe, the commission’s guarantee of “if you build it, they will come,” has expired.

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