Kevin Shea, Part 2: New Technologies, Regulation and Media Industries

Interviewed by Fil Fraser at Banff World Media Festival on June, 2011

Fraser. In light of what you have said about young people being able to create product and, in some cases, to monetize that, especially in the game industry, how does that work with OMDC [Ontario Media Development Corporation].

S.  Right now, we are limited almost exclusively to various aspects of project funding, whether that be a film, TV show, a game, or a music video.  Government funding has been a necessary and key stimulus to creating companies and content. Today, we need government and the private sector to understand that project funding must be considered along with a long-term plan to develop companies with the asset base to create marketing plans for international distribution and to invest in more R & D. That's where we have to go.  Look at RIM.  Thank God we had a player working in digital distribution of content; we need 20 more of those. What I find more fascinating is that we have invested heavily in education in universities and colleges across the country and are producing “Digital kids,” as I will call them. Do we give them the economic opportunity to work in well-funded companies and enhance that education? I don't think so.

F.  These new technologies represent a democratization of production. Fifteen or twenty years ago, if you wanted to make a movie, you needed hundreds of thousands of dollars in equipment, huge crews, a lot of infrastructure. Today you can almost put a camera in your pocket and you can produce screen-able product quite easily for $2000.

S.  There's lots of that going on around the world. And there always will be. In the traditional film business, there have always been breakthroughs; there have been producers who have produced films for $600,000, while studios were spending $30 million. That kind of innovative entrepreneurship has always been there. And we're going to see more production for $1.98. But it won’t be noticed unless there's a marketing budget behind it, unless there's an understanding of how the Internet works… and it's got to be good…  and it's got to be truly creative and smart….

We're hearing more producers saying that maybe it's better for them to launch their television product online. And why not? You will not recognize the television broadcasting industry five years from now. What happened to music, what happened to magazines, and newspapers, is going to happen to television. Stand by, get ready, it's going to change!

F.  Can you draw a picture of what that will look like?

S.  I think there will be many more Netflix. There will be more Studio Direct. The fundamental economics of television will not change: it will be a combination of subscription and/or advertising, maybe some public support too, maybe publicly-funded networks, I'm not sure. But given that you can go direct to consumer, if you're a major national studio, the broadcaster is now a middleman. There are innumerable examples of other sectors where distribution is direct; in those cases, the middleman doesn't exist. I'll give you two Canadian examples: Eatons and Simpsons, middlemen retailers that were completely caught off guard by the changing dynamic of retail.  Tomorrow it could well be CTV, NBC, or Global, who are basically middlemen in a world that is going consumer interactive. Unless they begin to invest more in original content, and become their own producer-distributor, and consumer-connector, they will be left behind. Simply being a re-broadcaster of other people's stuff, isn't it going to work.

F. Since you and I can remember, governments have been creating and re-creating policies in an attempt to forge an environment in which all of that can thrive, sometimes successfully, sometimes not. You've been a careful observer of this over the years. Do you see government policymaking as a positive or negative force? Could we do without it?

S.  It's the Canadian conundrum of a small nation up against an elephant. The intent, the wisdom, the fight never ends. The CRTC, for example, has confronted changes in broadcasting, the introduction of satellite communications etc., all with the intent of building and protecting Canadian voices and choices. You have to tick that box as a valiant job well done, to build and grow an industry, over a 40-year period. At that time, you could regulate because distribution was controllable. Along comes the net; now it isn't. When you protect an industry for 40-50 years and it hasn't generated a real business core, then what have we done? We've created a bunch of millionaires; regulation allows them to get licenses that you and I can't get because they're not truly competitive.

I’ve struggled with this over the last few years and have now concluded that it’s time to open up foreign ownership across all aspects of telecommunications, communications, and broadcasting. And it's time to alter our rules a bit because foreign ownership, with content rules, exists in numerous countries. We need to alter our mix of content rules to reflect more what’s going on in the market. Specifically what they should be, I don't have a prescription at the moment. We have a lot of wise people who can articulate what it could and should be; but I do think it's time to open up foreign ownership. The net is owned worldwide

F.  What will that mean?

S.  I think it will mean good things. I don't think anyone should be paranoid about it. The most important thing as a nation is our content regs, not our ownership regs.

Kevin Shea, Part 3: Foreign Investment and Internal Partnerships