New Trends in Home Entertainment

BRENT LESSARD, a 19-year-old with an angelic face and dreadlocks dyed jet black, recently made a copy of the 50th anniversary edition of The Wizard of Oz - for himself. No, he's not regressing. The version he downloaded, billed as "a legend" on the Internet, replaces the movie's original soundtrack and dialogue with Pink Floyd's Dark Side of the Moon. Aficionados say the music eerily matches transitions between scenes. While young people across North America are lining up at independent movie theatres to watch the show, Lessard found it at the click of a computer mouse on Kazaa, an Internet file-sharing service that allows users to share movies, videos and TV shows, and then downloaded it off a clone called KazaaLite. Both are rip-off services and, like Napster a few years ago, are confounding the global entertainment business.

They and similar services are getting a fair amount of Canadian traffic. According to a poll conducted for the Canadian Cable Television Association and shared exclusively with Maclean's, Canadians are tapping into a panoply of gadgets to organize their home entertainment in new ways. The CCTA poll, which surveyed 1,500 Canadians aged 15 and up about which technological appliances they have at home and how they use them, reveals a marketplace in transition. As new technologies are introduced, people's habits are changing.

And, not surprisingly, younger Canadians are driving the emerging trends in entertainment. They are the quickest to take on the new stuff, and are the most nimble around it. There's more electronic equipment - from PCs to CDs to DVDs - in homes with 15- to 19-year-olds than in any others. A full 98 per cent of their residences have CD players, and 89 per cent have PCs. In a list that ranges from the PC to the digital still camera, households with teens score the highest on each item, with one exception: dial-up Internet service. At 23 per cent, teens' homes lag behind those of thirtysomethings, 29 per cent of whom have dial-up. But presumably, that's because kids' houses more than others have the superior, high-speed Internet connection.

While the couch potato lives on - and will survive long past the last potato chip - Canadians are using new technology to get what they want, when they want it. Remember the not-so-long-ago era when whole families would sit down to Disney on Sunday nights at 7? Gone. Or, settling down with a tea and your honey at 9 p.m. on Wednesday for The West Wing? Finished. Sure, it's still on TV, but Canadians don't want to do it that way any more. Rather than be tied to a pre-set schedule, Canadians are customizing their entertainment. "Consumers are really embracing new technology," says Janet Yale, president of the CCTA. "They are willing to spend the money to adopt it. And, they are adopting it in increasing numbers."

Paul Marsden, a 20-year-old Calgarian and the regional manager of a mobile DJ company, has created what he calls his "theatre room" in the basement of his parents' home. He's got a DVD player, a receiver, a 25-CD player, a digital audio tape player, a digital cable box and a 46-inch TV that he intends to replace soon with a projector and a seven-by-nine-foot screen. When asked how much it all cost, he replies that he's never added it all up. But then, after taking into account the couches, a desk and a computer - and noting "this might be a little depressing for me" - he guesses $10,000. Marsden watches mostly news on TV. But this room is primarily for movies. He rents or, mainly, buys them in the form of DVDs. Marsden, who uses the Internet for e-mail, news and work-related research, is in the minority of his age group for the attention he lavishes on his television set.

Among Canadians with Internet connections, a third say their personal use of the Internet is more important than TV. Among 15- to 19-year-olds, that number jumps to 56 per cent. Like Lessard, more and more Canadians of all ages are using the Internet to watch video - almost one-quarter of households with Internet connections. When the teens are asked, three out of five say they watch video on their computers.

To make his copy of The Wizard of Oz, Lessard went to KazaaLite which, ironically, rips off the original rip-off service and allows users to avoid the "annoying pop-up ads," as Lessard refers to them. There's another twist: Kazaa has a points system that works much like an air miles card: the more you offer your own files to be shared, the more points you gain. The more points, the better the service: a user with the most points jumps to the head of a queue to download an item. But Lessard, who says "like everything on the Internet, there's a way around it," has software called KazaaHack that automatically gives him the max of 1,000 points. What Lessard is doing is not simply cheating, he says - "It's really, really cheating the system."

It's also easy and quick. Lessard says he can find any episode of any TV show, download it, prepare the popcorn and be ready to watch it, usually commercial-free, in 20 minutes. For all of those reasons, and "because the computer screen is flawless," Lessard prefers the Internet to TV. There's more to "fool around with." He can fast forward a show, just with a click and a drag. "It's more convenient," he says.

Entertainment at home, once the almost exclusive domain of the TV set, is no longer a passive affair, points out Dean MacDonald, chief operating officer of Rogers Cable Inc., the country's largest cable provider (whose parent company, Rogers Communications Inc., also owns Maclean's). "Because the Internet is so pervasive, so ubiquitous in its reach, it is changing the way people access entertainment. It is a sea change in terms of what is happening."

The sea change is being experienced not only in dens and living rooms across the country. It will also have a profound impact on the way broadcasters and cable companies do business. The revolution will only escalate, MacDonald predicts, as younger people lead consumers to increasingly embrace the Internet. "To think that we'll be able to wrap our arms around that and control it is silly," he says. "The thing we can do is adapt. Our industry is going to change in terms of how people use it. In fact, we'd be well advised to make sure we change. It's good business to give your customers what they want. It's not rocket science."

The key for cable companies and broadcasters, according to analyst Mark Quigley, is to understand the new demands, and learn how to make money from them. The Canadian research director for Yankee Group Inc. says this country's cable companies are well-positioned because almost three-quarters of homes are already cable subscribers. On top of that, almost two million of them are high-speed Internet subscribers. The broadcasters are beginning to catch on, too, he says. Shows such as American Idol, which invites viewers to cast votes on a lineup of wannabe stars, encourage people to use the Internet. "The convergence idea has seen a lot of bad press in recent months," Quigley says, "but at the end of the day, it will prove itself as the next logical step."

Quigley notes that cable companies are expanding the array of products available to customers. Video on demand, which allows consumers to "check out" movies and special programming for a given period, is already available in Toronto, from Rogers, and in some Western cities, from Shaw Communications Inc., the country's second largest cable provider. Other special features on tap will include interactive TV - which would provide e-mail and limited Internet surfing - and enhanced TV, which will allow viewers to probe a little deeper into a broadcast and, for example, replay a hockey goal. "From a technology point of view, we are well poised," says MacDonald. "If I had to wear a jersey," he concludes, "I'd want the cable jersey on right now, no question."

For cable companies and broadcasters, the greatest stumbling block will be the ease with which consumers can get programming for free - and the widespread sense that it's OK to take it. Only 33 per cent of poll respondents say using U.S.-based satellite services, which is illegal, is stealing - and that's across all age groups. Among 15- to 19-year-olds, only about one in five say it's stealing. "People don't see music and video content as property, like jeans or candy," says Yale. "That is worrisome."

But for Lessard, there are no worries. "I know it's a selfish, consumer-ish view, but I've never struggled with the moral qualm," he says. "I don't really think much about the fat cats in Hollywood." Marsden disagrees. He's watched the music industry struggle with pirating. While he doesn't think the impact on broadcasting will be as harsh, he still contends it's wrong to use black market satellite services. "It's like asking if it's wrong to shoplift. We know it is."

Dale (not his real name) is a 33-year-old Toronto-area resident who watches about two hours of TV with his wife most evenings. Often, they catch a pay-per-view movie, except they get it for free using a dish that captures programs emitted by a U.S.-based DirecTV satellite. Harvey, who works as a network technician for an international service company, has a small unit attached to his home computer that he uses to program his satellite card. The scripts needed to make the card function can be bought - and at first Harvey paid US$35 a year for access to the codes. But now, he's figured out how to program his card on his own, so apart from the initial $300 cost of buying the hardware, Harvey receives his programming for free. But for him, cost is not the issue. "You have two choices in Canada: Star Choice or Bell ExpressVu," he says. "Their lineups are largely Canadian, which is great, but they are not the shows I want to see. I look at it this way: technically, I can't pay for it. So who am I ripping off?" His wife knows what they're doing is not legal. "I consider it stealing," she says. "But do I feel bad about it?"

Not only do a minority of Canadians say using a black market satellite is actually stealing, but close to half (46 per cent) say they are very comfortable going around the system to get programming and entertainment they want. When young people - the trend-setters, aged 15 to 19 - are asked, the number jumps to 62 per cent. And among all age groups, 56 per cent say using a U.S.-based satellite service makes sense if it provides the variety and types of programming they want. "We are seeing an attitudinal shift," says Chris Kelly, a partner of The Strategic Counsel, the research firm that conducted the poll. As more technology becomes available, and puts more programming within easy reach of Canadians, attitudes are changing, he says. That only one- third of Canadians consider using a U.S.-based satellite service to be stealing is surprising, but not shocking, he adds. However, "it demonstrates the scope of the challenge for industry."

While Canadians don't want access to international fare restricted, they do want programming from a Canadian perspective. Sixty-five per cent of those polled said increased competition from non-Canadian sources will foster better-quality Canadian programs, while 45 per cent say unrestricted service is important even if it means some Canadian channels will no longer be available. "There's some understanding," Kelly says, "that if you open it all, there's a risk you'll impinge on Canadian services. It's a really fine line for a regulator. How do you maintain the Canadian content, which everyone agrees is valuable and important, and at the same time make everything available? This is something that needs to be thought about in public policy terms."

But regulatory issues will be academic if the real challenge - the illegal programming flowing, increasingly, into Canadians' homes - is ignored. Industry players have banded together to lobby enforcement agencies to crack down. They will soon relaunch an ad campaign against pirating. But, as Yale says, "How can you compete with free? You can't. And it's causing a significant hemorrhaging of Canadian consumers." For MacDonald, it's an awareness issue. "At some point, this has to become personal for everybody. Look at smoking. It was socially acceptable. It isn't anymore. We have to put this in the same category."

Tony (not his real name), a 19-year-old York University history student, says he's been downloading video on his PC "for years." Usually he copies TV shows like The Simpsons or Family Guy. Often, he says, they are commercial free. He even got a controversial episode of Family Guy, about Jewish stereotypes, that never aired on TV. He says he knows many people with illegal satellite dishes - and often watches international soccer games with them. "Bootlegging has been around forever," Tony says. "It will be a lot harder to change attitudes about this than about smoking."

What does all of this mean for the television set itself? Is it a dinosaur? Not really, says Kelly. He predicts the TV will continue to be the hub of a family's home entertainment. But Canadians will use it differently - instead of plunking down to see what's on, they'll pick their shows from a broader spectrum of choice - and watch them when they want. So, how about a family Disney breakfast on Monday morning, and The West Wing any old time of the week?

HOW THEY COMPILED THE RESEARCH

The poll was conducted by The Strategic Counsel for the Canadian Cable Television Association. From March 24 to April 3, 2003, interviewers canvassed a random sample of 1,500 Canadians, aged 15 and up, and proportionate to provincial populations. The margin of error is 2.6 percentage points, 19 times out of 20.

FOR THE YOUNG, THE INTERNET IS THE FIRST CHOICE

TEENS HAVE THE HARDWARE ...

Personal computers at home:

Age %

Total 73

15-19 89

20-29 75

30-39 81

40-49 83

50+ 59

... THE FAST CONNECTION ...

High-speed Internet service:

Age %

Total 38

15-19 59

20-29 40

30-39 43

40-49 45

50+ 24

... AND, MORE THAN ANYONE, THEY SAY THE INTERNET IS MORE IMPORTANT THAN TV*

Age %

Total 33

15-19 56

20-29 45

30-39 31

40-49 27

50+ 25

*Among Those with Internet Service

NOTE TO MOVIE INDUSTRY: THE NEXT CRAZE IS ABOUT TO CATCH FIRE

TEENS ARE BUYING THE NEWEST TOY ...

DVD burners at home:

Age %

Total 11

15-19 23

20-29 7

30-39 9

40-49 18

50+ 7

... LOVE TO WATCH VIDEO*...

Use personal computers to watch video:

Age %

Total 23

15-19 61

20-29 29

30-39 21

40-49 18

50+ 10

*Among Those with a Pc and Internet Service

... AND BURN IT ONTO DVDs**

Use personal computers to copy video from the Internet onto DVDs:

Age %

Total 11

15-19 25

20-29 13

30-39 11

40-49 9

50+ 5

GIMME ME WHAT I WANT, WHEN I WANT IT, OR I'LL TAKE IT

WATCHING TV IS BECOMING LESS IMPORTANT ...

Age %

Total 33

15-19 40

20-29 40

30-39 38

40-49 30

50+ 26

... BUT WE STILL WANT TO WATCH WHATEVER WE LIKE ...

Want quality programming available regardless of where it comes from:

Age %

Total 83

15-19 89

20-29 86

30-39 84

40-49 82

50+ 81

... AND DON'T THINK IT'S WRONG

People who believe using U.S.-based satellite services is really stealing:

Age %

Total 33

15-19 22

20-29 28

30-39 31

40-49 34

50+ 37

Maclean's May 5, 2003