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Canada’s TV Fix Is ‘Pick and Pay’

MORE A LA CARTE, FEWER BLACKOUTS ANSWER U.S.STYLE CALL FOR CHOICE 3/23/2015 8:00 AM Eastern
TakeAway

Canada’s TV regulator has made a move many U.S. pay TV customers have clamored for: Allowing the a la carte sale of cable networks to consumers.

For years, consumers have begged pay TV operators in the U.S. to sell channels individually, allowing consumers to buy only the channels they want.

 

Canada has heard their call.

 

In what was billed as a World of Choice “road map,” the Canadian Radio-television Commission (CRTC) — Canada’s version of the U.S. Federal Communications Commission — will start requiring multichannel video programming distributors to offer a la carte programming options and will not allow blackouts during carriage disputes between programmers and distributors.

 

By year-end 2016, viewers will be able to subscribe to the lowcost basic tier, which will have to include “all local and regional television stations, public-interest channels such as the Cable Public Affairs Channel and Aboriginal Peoples Television Network, education channels, and, if offered, community channels and the services operated by provincial legislatures.”

 

Rather than having to add bundled tiers, they can then “pick and pay” from among other channels, or add “small, reasonably priced” packages of service.

 

ALL ABOUT CHOICE

 

CRTC chairman Jean-Pierre Blaise said the decision was all about choice and affordability. “More and more Canadians are watching the content they want, when they want, and on multiple devices,” he said. “They are enjoying the freedom and benefits that come from living in a world of choice.

 

“They told us that the bundles offered by the cable and satellite companies were large, unwieldy and expensive,” Blaise added. “They expressed frustration that, in order to access a particular channel, they had to buy others that they didn’t want.”

 

In the U.S., consumer advocacy groups and even some cable operators have pushed for the ability to offer video a la carte, but most analysts believe economics will prevent true a la carte from ever happening. A full a la carte model would mean that the costs of individual channels would need to increase significantly just to make the same revenue as under the current business model, both analysts and networks have said.

 

Needham & Co. media analyst Laura Martin has estimated that a move to true a la carte would slash pay TV revenue in half from $140 billion annually to about $70 billion. A move toward total choice for all networks would force prices up to compensate for lost revenue from advertising and affiliate fees, she warned.

 

One common example has been that ESPN, which currently charges distributors $6.04 per subscriber per month, would rise to $30 per month in an a la carte world.

 

“All content companies benefit from TV bundling, as well as from new digital platforms that are driving record free cash flows from content creation globally,” Martin wrote in an earlier note to clients.

 

But as more and more networks look toward offering shows online directly to consumers — through products such as HBO Now and CBS All Access — and other players like Sling TV, Sony’s PlayStation Vue and Apple TV enter the market; distributors and programmers are under pressure to slim down their content bundles.

 

Already, the U.S. pay TV market has begun to see programming bundles shrink to some extent. At the beginning of the year, Dish Network’s S l i n g TV launched offering a basic package of 20 channels (including ESPN and ESPN2) for $20 per month. And recently Viacom said it would offer mobile access to children’s programming via its Noggin service for $5.99 per month, resurrecting the brand once used by its Nick Jr. channel.

 

Sony’s PlayStation Vue package, released in a trio of markets earlier this month, offers about 55 channels for $49.99 per month. And Apple, which reached a deal to offer HBO Now via its Apple TV in April, also is said to be considering a 25-channel offering for between $30 and $40 monthly.

 

MORE CERTAINTY

 

A la carte has been a major issue in Canada for several years — Rogers Communications, the largest pay TV operator in that country, trialed a “Pick and Pay” offering in London, Ontario, in 2012, offering about 86 channels (including government mandated channels) for $20.29 per month.

 

That offering was scrapped after programmers expressed concerns, but according to reports, Rogers said it still offers dozens of channels on an a la carte basis and sees the CRTC ruling as giving it more certainty in its consumer offerings.

 

No. 2 Canadian cable operator Shaw Communications said it supports the CRTC in its efforts.

 

“While this new regulatory environment will not be without challenges, the commission has provided real opportunities for Shaw to continue delivering the best content experiences possible for our customers and viewers within a healthy, dynamic and competitive environment,” Shaw CEO Brad Shaw said in a statement.

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