Marketing Magazine, January 20, 1997   

Few Canadians are holding their breath over the imminent arrival of a domestic direct-to-home satellite TV service. And marketers are paying even less attention than the general public is to the phenomenon.

 

Direct-to-home satellite television (known variously as DTH or direct broadcast satellites — DBS) beams encoded signals from a single geostationary satellite to subscribers on earth. In the United States, DTH is the fastest-selling consumer electronics product ever. In a little more than two years, the number of subscribers there has gone from zero to almost five million, though that’s still just under 5 percent of U.S. households.

 

In Canada, things are happening with DTH too. But what exactly is happening depends on who’s describing the situation. To hear the CRTC tell it, shifty-eyed satellite criminals are undermining what few shreds of endangered cultural sovereignty remain intact. Canadian broadcasters bemoan the fact that American satellite broadcasters are offering programs to so-called grey-market subscribers that Canadian outlets have already bought broadcasting rights for.

 

The CRTC has warned grey-market subscribers that they’re breaking the law if they receive U.S. DTH signals. They may be complicit in a case of copyright infringement by receiving programming from a broadcaster other than the approved Canadian one.

 

 But they’re not breaking any telecommunications law. It’s legal to own a DTH receiver. It’s legal to sell DTH receivers and decoders. And, because it’s legal to listen to radio programming from 50,000-watt clear channel U.S. radio stations, consumers — understandably — can’t see why there’s any difference when it comes to television signals.

 

Add to that the successive hollow claims that would-be Canadian DTH providers have made over the last two years and it’s not surprising a grey-market audience has grown. Every few months, ExpressVu Ltd. of Mississauga, Ont. has boldly announced its imminent launch of a Canadian DTH service. And when the appointed deadline arrives...there’s another announcement that Canadian DTH satellite TV is about to happen.

 

Milton, Ont.’s Tee-Comm Electronics has entered the fray in the U.S. under the name AlphaStar, and is competing against bigger players such as Hughes Corp.’s Los Angeles-based DirecTV (whose ultimate owner is General Motors) and other services such as USSB and PrimeStar. But while its U.S. version is operating and holding its own, Tee-Comm waits for a license from the CRTC, which has yet to make any ruling on the Tee-Comm application for a Canadian DTH service.

 

It’s beginning to look as though, in Canada, anyway, DTH is the TV of the future, and always will be.

 

Small wonder, under those circumstances, that marketers aren’t paying much attention to DTH. But they’re not ignoring it completely, either.

 

“We’re speculating about if it gets up — and that’s a big if, because there are lots of reasons to believe it won’t,” says Doug Newell, senior vice-president media buying operations at Harrison Young Pesonen and Newell in Toronto. “They haven’t lived up to any of their promises about timing. Will it happen in the next few months? There’s reason to think it might not.”

 

“No clients mention it,” says Ann Boden, president of McKim Media Group in Toronto. “There are just too many other — more pressing — considerations for them to worry about.”

 

Any Canadian DTH service might be hampered in its chances of success before it starts. The CRTC has decreed that domestic DTH providers can only carry services already approved for broadcast in Canada. This effectively limits Canadian DTH services to duplicating the cable menu.

 

Most of the grey-market subscribers are hooking up illicit DTH rigs as supplements to their cable connections, in order to watch U.S. networks such as Comedy Central, HBO, Showtime, Turner Classic Movies and a welter of regional sports carriers. Why would any TV viewer pay more than $1,000 for hardware plus another $30 monthly for the privilege of duplicating the cable menu?

 

Leaving that conundrum aside, Doug Newell says penetration, carriage and programming are all unknowns being monitored by marketers: “If it does happen, it will really depend on the penetration, and the biggest factor will be carriage. Will the stations that are offered emanate from Canada or from elsewhere? If they are Canadian and have Canadian content, then it will be business as usual. If they don’t, then they’re going to eat into television usage by advertisers, and have a serious effect on our ability to communicate with our customers.”

 

Newell points out that at current levels, DTH in the U.S. has yet to reach 10 percent penetration in a heavily cabled nation. For media buyers, VCRs weren’t a threat or an issue when they were only at 10% penetration, he says, adding that this perception could change if the penetration percentage rises.

 

But the grey market keeps growing. And that spells trouble for outfits like ExpressVu. With each broken promise about a launch date for a domestic DTH service, more Canadians get tired of waiting and order one of the U.S. services. Canadian hardware DTH retailers advertise on television. Despite its threats to the contrary, there’s nothing the CRTC can do to prevent them selling the dishes or the decoders.

 

Newell hopes that will change.

 

“The big issue, ultimately, is: will the government be able to regulate it or won’t the government be able to regulate it?” he says. “If the government is able to regulate it, then it won’t matter. It’ll be Canadian. If the government isn’t able to regulate it and the decisions are being made south of the border, then we’re all in deep shit. I think the government can regulate it.”

 

“The issue is when we’re going to decide in this country what we’re doing,” says McKim’s Ann Boden. “It’s been so up and down and on and off: ‘yes, you’ve got a license,’ ‘no, we’re not going on.’ There is so much confusion it’s hard to take a position when we just don’t know what’s going on. Wait and see.”

 

Boden has two dishes at her country home, she says. “And I love them, because that far out of town I can’t get cable.” But she’s less sure the industry will really take off in Canada outside of people whose business or obsession makes them insist on having complete access to all available forms of TV.

 

There is currently some cross-border buying on traditional broadcast outlets, but that buying can’t be extrapolated to the satellite business. As Doug Newell explains, it has to do with relative scale: “We buy time on Fox in Buffalo for our clients not to reach people in Buffalo, but to reach people in Toronto. We can do that because Toronto is a lot bigger than Buffalo. We can’t buy the United States to cover Canada. We cannot afford to compete with the Americans if we have to buy American signals that are bigger than our signals.

 

“If we can’t control it, we turn all of Canada into Windsor, Ontario. What happens in Windsor? Advertisers don’t buy it. They count on the spill from Detroit. That’s what’s going to happen to our market if we can’t control it.”

 

As frightening a prospect as that might seem for broadcasters, media buyers and advertisers, it’s still largely hypothetical.

 

“There are so many other things that that is just very low priority right now,” Boden says. “That doesn't mean that in 1997 it might not become high priority.”

 

But don’t hold your breath.