Who will cash in on Canada's love for online video?

Many TV shows and movies available online in the U.S. are blocked to users in Canada, but Canadians are still among the most voracious consumers of online video in the world.

Canadian companies could take advantage and cash in or lose big, technology analysts say.

Canadians watch more hours of videos on average than internet users in the U.S., U.K., Germany and France, said Bryan Segal, vice-president of sales for the market research company comScore Canada.

In February, comScore found that 21 million Canadians, or about 88 per cent of internet users, watched an average of 10 hours of videos online for the month 53 per cent more time than they spent watching videos online a year ago. The numbers even include pornography or sites that require a person to pay.

Only 76 per cent of internet users in the U.S. watched videos online, and they spent an average of just five hours, even though they have access to an enormous range of TV episodes and movies through websites such as Hulu.com and youtube.com. Much of that content is blocked to viewers in Canada due to distribution rights or copyright issues.

Segal said the numbers don't surprise him, as he sees Canadians as news- and entertainment-hungry people.

"I think at the end of the day, the growth of video is a great thing for advertisers, media companies and consumers," he said. "Online video's a great opportunity."

So far, in Canada the big winner is Google and its YouTube brand. The site allows Canadians to access the short, low-resolution videos, many of them generated and uploaded by the public. It does not let them watch the full episodes of TV shows such as Beverly Hillbillies and movies such as Casino Royale, something it recently started offering to viewers in the U.S.

Google dominates in Canada

Google had 52 per cent of the Canadian market share for online video in February, followed by Microsoft with just 1.8 per cent.

Segal's numbers show that Google had just 41 per cent market share in the U.S., while Fox Interactive media, an internet veteran that owns MySpace.com and has been streaming some TV episodes online since 2005, came second with 3.5 per cent market share. Hulu, which offers TV episodes and movies from many networks at a high enough quality to be viewed on a full-size computer screen, including some in high-definition, had 2.5 per cent market share just a year after it launched in March 2008. Hulu is backed by News Corp., which owns Fox, and NBC Universal.

Mark Tauschek, a lead research analyst for Info-Tech Research Group who studies the network and wireless industry, said he's not surprised that Canadians watch a lot of online videos as the country has historicallyhad a solid broadband infrastructure.

Companies are still only just beginning to think about how they can take advantage of the medium to boost revenue, he said.

Canadian TV networks not pushing online: analyst

Canadian media companies have so far chosen a different model than the U.S., he said.

While Hulu buys television programs from content providers, and then sells its own ads to make money, Canadian television networks such as CTVglobemedia and Global TV have chosen to stream their own episodes of shows such as The Daily Show with Jon Stewart and Heroes with their own revenue-generating ads.

'But the truth is they're [TV networks]probably not the right guys to deliver that content.' Mark Tauschek, technology analyst

"But the truth is they're probably not the right guys to deliver that content," Tauschek said, noting that a lot of infrastructure is needed to stream high-definition content to thousands of people. "Should they have embraced something like Hulu by now? They probably should have, but at least they recognized that they have to somehow get on the bandwagon."

The latest numbers show CTVglobemedia achieved 0.8 per cent of the market share for online videos and Global TV had just 0.1 per cent for their efforts.

"I think the fact is that they're not really pushing it too hard," Tauschek said, suggesting that they are really just testing the waters. He added that they may be concerned about eroding viewership on TV, irking their cable and satellite partners and whether or not they have the streaming capacity to support higher online viewership.

But Tauschek said Hulu is "working feverishly" to make its service available in Canada and other Western countries. He thinks they'll be successful and Canadian television networks should take heed.

"They really ought to embrace it because if they don't they run the risk of the same thing happening to them that happened to the record labels," he said, adding that when the music industry fought the internet, it led to an increase in piracy and a loss of revenues for their industry.

If the content providers do take the right approach, they could end up being the big winners, he predicts.

"I have a feeling that Hulu's really going to start to explode."

The cable and satellite television stand to lose revenues once consumers can get a wide range of TV with high image quality over the internet for free.

Cable, satellite companies could lose

"I think we're just sort at the leading edge of that," he said. "In Canada, I think Rogers and [Bell] Expressvu are going to start feeling that."

Rogers seems to have recognized the looming storm. AtCRTC hearings in March on the regulation of new media, Rogers proposed an online video platform similar to Hulu as a means of ensuring Canadian broadcasting content has a home on the internet. The proposed service would require a Rogers' cable subscription for access, although Rogers' head of regulatory affairs, Ken Engelhart, said the company was open to partnering with other cable providers on the service.

'Being a leader is great, but being behind the leader can be very profitable as well.' Bryan Segal, comScore

Tyler Chamberlin, who researches corporate strategies for technology-based firms, said barriers remain to the wider adoption of online TV in Canada, such as the CRTC's concern about cultural protection.

"I don't think that we've really figured out yet exactly what to do with the online world where it comes to culture which, personally, I think is to the detriment of the country economically. I think it holds us back culturally as well."

Chamberlin,a lecturerat the University of Ottawa's Telfer School of Management,added that Canadian companies may be reluctant to sell their content to a company like Hulu, as it may seem more advantageous for them to get access to the online market themselves than to give up the online rights.

"If people stop watching it on TV and stream American content directly from Hulu, what's left for them?"

Chamberlin also believes that people have only just scratched the surface of what's possible in the online world and many opportunities remain in online video, not just when it comes to TV, but also when it comes to streaming to the next generation of mobile devices and networks.

Tauschek also believes that there are money-making opportunities for non-media companies in online video, as it can be used to deliver all kinds of content to clients, although he is concerned that Canadian broadband infrastructure may not yet ready to deal with that.

While everyone agrees there's money to be made in online video, it's still not entirely clear who's going to be making it. Both Chamberlin and comScore's Segal said no one should be discouraged by Google's dominance in online video in Canada.

Chamberlin said that's the kind of thing that can change very quickly in the online world.

"You can go from a market leader to out-of-business rapidly."

Segal said it's not necessary to even dethrone the leader to make money given the popularity of online videos, even a small market share can represent a lot of dollars.

"Being a leader is great, but being behind the leader can be very profitable as well."