Rogers says London ‘pick-and-pay’ trial drew new customers, revenues

A Rogers Communication Inc. trial that offered TV subscribers more control over the channels they pay for drew new cable customers and helped to offset losses caused by some channels' lower penetration rates, the company said in a brief filed with the CRTC Monday. The Rogers trial, which ran in London, Ont., from Nov. 8, 2011 until the end of March 2012, allowed customers to subscribe to a digital basic package for a reduced monthly fee of $20. Customers could supplement the basic channel package with individual specialty or foreign channels of their choice, paying $26 for 15 additional channels, $28 for 20, or $33 for 30, the company said. As a part of the CRTC’s new regulatory framework for vertically integrated broadcast companies, the commission ordered major TV distributors to file reports detailing their efforts to offer consumers more television packaging choice and flexibility. Vertically integrated broadcast companies own both content and TV distribution services. The deadline for the TV distributors to file the reports passed this week. In Rogers’ brief to the CRTC, the company outlined for the first time the results of the London trial and its lessons learned. Much of the data and insights in Rogers' report was redacted because it was filed confidentially with the CRTC. Rogers said “the message of choice and control was attractive enough to bring new subscribers to Rogers who had not previously chosen to subscribe to a BDU service.” The new customers “helped to offset some of the loss in penetration to specific specialty services,” Rogers wrote. Some broadcast distributors have indicated a desire to offer more programming choices to TV subscribers, but distributors pay specialty channel operators per-subscriber carriage fees for their channels, leading the broadcasters to fear that more flexibility and choice would lead to revenue declines resulting from lower penetration. David Purdy, Rogers’ vice-president of video products, told The Wire Report in an interview that most specialty channels did not experience major variation in penetration levels during the trial. “There were some broadcast ownership groups that were flat, some that were up slightly, and some that were down,” Purdy said. Rogers wrote in its CRTC filing that more flexibility will produce both “winners and losers since customers will determine the subscriber levels of each service.” Purdy said while some customers took part in the trial to save on their monthly cable bills, others took advantage of the offer to add services to their subscriptions. He said the trial did not cover the entire London area and that it involved less than 20,000 people. Purdy said the trial was an opportunity to measure a segment of the company’s subscribers and to compare attitudes and behaviours to the similar market of Kitchener, Ont. Rogers told the CRTC that the trial encountered resistance from broadcasters that do not want to risk declines in penetration levels. “Rogers would like to extend the Trial in order to generate a statistically significant sample size of customers against which definitive conclusions can be drawn,” the company said. “However, to do that we need to obtain the consent and cooperation of programmers. Some programmers have been reluctant to participate in this Trial.” Purdy said the resistance came “from across the board. We had calls from everything from U.S. program partners to independents to vertically integrated . So we experienced some concerns from all types of broadcasters and specialty channels.” Kevin Crull, president of BCE Inc. division Bell Media, said at a CRTC hearing last month that Rogers needs Bell’s permission to conduct the trial under an agreement with Rogers that prevents changes to specialty channel packaging without Bell's approval. Crull said the stipulations are designed to prevent penetration declines for high-revenue specialty services (such as TSN), which can help subsidize less profitable services. Richard Paradis, president of media and consulting firm Groupe CIC in Montreal, said some specialty service operators could “whither away” if the entire distribution regime moved towards offering more flexible “pick and pay” options. "We can assume that, in a pick and pay universe, a lot of Canadian services will maintain their interest with subscribers if they’ve done a good job of doing good programming. We’ve probably reached the point now where Canadian specialty services are in a position to defend themselves in the marketplace,” he said. Paradis said he expects the country’s distribution regime move to more flexible pick-and-pay or pick-a-pack options like those available in Quebec. "We slowly move over time into a universe where everything is a pay-as-you-want kind of service,” he said. The commission will use the TV distributors' reports to help determine whether it should hold a public proceeding on consumer choice and flexibility in the increasingly integrated TV distribution sector. Videotron, a Quebecor Media Inc. subsidiary, in its submission to the CRTC on Monday highlighted the success of its pick-a-pack option. “Over the years, the packaging option has become increasingly popular to Videotron subscribers,” the company wrote, noting that it has risen as a proportion of its cable customers by about 141 per cent between 2006 and 2011. “It is interesting that this tendency for 'pick and pay' is the most preferred by our new subscribers,” the company wrote. Purdy agreed that customers seem to appreciate more flexibility. "I think it's early days, and I think the more the industry can work together to create choice and flexibility ... the better off the Canadian broadcasting system will be,” he said. In a report filed with the commission Monday, BCE Inc. argued that Canadian consumers now “enjoy a great deal of broadcasting choice and flexibility” and that there is no need for the CRTC to regulate packaging structures. “s emerging technologies and services, such as mobile broadcasting, over-the-top (OTT) services and IPTV mature, consumer choice and flexibility will only increase,” Bell wrote. “Billions of dollars have already been invested and the current level of competitive intensity in broadcasting markets ensures that there will be a continuing need for service providers to innovate and invest. As the abundant evidence shows, no incremental regulatory action is required to facilitate this process,” the company said. Shaw Communications Inc. told the commission in its report that any additional regulation of vertically integrated distributors would harm consumers and be inconsistent with the Broadcasting Act. “Investment and innovation by strong companies like Shaw are vital to the ongoing success of the system in a highly-competitive and increasingly borderless digital environment,” Shaw wrote. “These efforts should be supported by decreased regulation—not undermined by increased regulation.” nkyonka@thewirereport.ca

Rogers says London ‘pick-and-pay’ trial drew new customers, revenues

News | April 3, 2012

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