Consumers would pay $1.50 per channel under pick-and-pay: Report

Consumers in the United States are willing to pay $1.50 US per channel under an a la carte television distribution model, a new report by RBC Capital Markets says. The report, released Monday, said results from a proprietary survey of more than 1,000 consumers suggest “more than 90 per cent of consumers would prefer an à la carte programming solution for their pay TV viewership.” RBC said consumers would pay for about 19 channels and are willing to pay $1.50 each, which would return approximately $28.50 US per user per month per customer to TV distributors. “There are a number of existing programming packages at approximately this level that offer even greater choice, but they don’t really seem to be getting consumer traction,” the report said. The RBC survey also found that at least 92 per cent of respondents were “somewhat likely” to switch to an a la carte channel selection model if one was available. RBC said if the a la carte model was available, 82 per cent of current TV subscribers would pay for “at least 11 channels.” The report said 41 per cent of respondents said they would subscribe to more than 20 channels. “Fifty one per cent of respondents would pay at least $1 per channel in an à la carte world with the estimated weighted average being $1.47 ,” RBC said. RBC said that 100 million households subscribing under the a la carte model would generate about $34 billion US in revenues. The report speculated that 50 per cent of those revenues would cover “affiliate fees” the distributors pay to programmers or cable channels and that “total affiliate revenues for the industry would be approximately $17 billion .” RBC said that number would be “far lower” than the total industry affiliate or carriage fees to specialty channel operators of $34 billion US estimated in 2011. Although consumers would prefer an a la carte channel model, it may be difficult for providers to give them what they want, RBC noted. “It would be very difficult for the industry (pay-TV operators and programmers) to offer what the consumers want (on average 19 channels per household at $1.50/channel/month ) while maintaining the current level of financial profitability,” the report said. Right now, TV distributors in Canada pay channel operators a fixed rate for each subscriber to the channel. Different channels command different rates, with sports specialty channels among the most valuable. According to SNL Kagan data for 2009, ESPN collected between $4.08 US per subscriber per month from distributors as the highest-priced specialty channel on television in the U.S. FOX Sports Net collected $2.37 US, the firm said. In Canada, sports channels like BCE Inc.’s TSN had regulated rates for carriage on basic service at $1.07 per subscriber for nearly 20 years until those rates were deregulated last year. Industry insiders have speculated that BCE would increase the rate to $4 or $5 per subscriber after deregulation. The CRTC ordered vertically integrated distributors BCE, Quebecor Media Inc., Rogers Communications Inc. and Shaw Communications Inc. to file reports this month on what those companies are doing to increase consumer choice and flexibility in their TV packaging options. Integrated players, experts, and independent broadcasters have said a move to a la carte options would be good for consumers and bad for the industry and independent specialty channels. news@thewirereport.ca -- CORRECTION: Due to a typo, an initial headline for this story incorrectly stated consumers would pay $150 per channel.

Consumers would pay $1.50 per channel under pick-and-pay: Report

Broadcast | April 18, 2012

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