Want pick-and-pay? You may end up paying $9 for TSN, consultant says

If TV subscribers are about to receive individual channels on a pick-and-pay basis, as the Conservative government says it will mandate, they may be surprised at the standalone pricing for some of their favourite channels. Broadcast consultant and former CRTC commissioner Michel Arpin said that for an idea of the cost of individual channels with high-value programming like sports or movies, observers may want to look at current standalone pricing for pay channels like The Movie Network (owned by BCE Inc. division Bell Media). “There are people who don't watch any sports,” Arpin said, and with mandated pick-and-pay, some specialty channels could be dropped from basic TV packages and channels like TSN could hike their subscription fees. “At the end of the day, everyone may be paying more than they are, because consumers, more than likely, would be taking more than one or two services.” Under a pick-and-pay model, TV subscribers would pay a monthly fee for basic television channels, plus per-channel fees only for the additional services they want. As a rule of thumb, broadcasters tend to charge retail prices that are about double the wholesale carriage fee. Right now, Canadian TV providers charge customers about $18 to $20 per month for the high-value TMN pay service, which includes movies and HBO Canada content, while they pay about a $9 to $10 monthly wholesale fee per customer. Prized sports channels like TSN (also owned by Bell), which is carried for an estimated wholesale fee of about $3 to $5 per subscriber per month, would sell a la carte to TV subscribers for $8 or $9 per month, Arpin said. Over the Thanksgiving weekend, Industry Minister James Moore appeared on Global TV's the West Block and CTV's Question Period to discuss the government's throne speech on Wednesday. Moore told CTV that the government will continue to focus on Canadian consumers, pointing to issues such as high credit card fees, protection for air travellers, TV channel bundling, and domestic wireless roaming charges. “We don't think it's right for Canadians to have to pay for bundled television channels they don't watch. We want to unbundle television channels and allow Canadians to pick and pay for the specific television channels that they want,” Moore said. “That's a cost that's imposed on consumers that's unfair. They have to pay for services they're not interested in, and we think it's time to modernize that.” Arpin said the Conservative government is wading into a messy file as the economics of the broadcast distribution business will have to be “completely revisited,” with some channels dropped from basic cable and less popular channels going out of business. Last year, under former CRTC Chairman Konrad von Finckenstein, the regulator ordered Canada's largest broadcast distributors to file reports on the efforts they've made to offer consumers more television packaging choice and flexibility. BCE and Shaw Communications Inc. said at the time they strongly opposed any kind of mandated pick-and-pay model. Quebecor Media Inc. pointed out that, due to different market dynamics related to Quebec's francophone population, the company already offers pick-a-pack options, where consumers can fill their own channel packages. Rogers Communication Inc., in response to the call for information, reported on a trial it ran in London, Ont., in which it offered TV subscribers more control over the channels they pay for, and said it drew new cable customers and helped to offset losses caused by some channels' lower penetration rates. Aprin agreed that some channels would face significant challenges as a result of the change, and some would close down. He said the government could lead the changes by issuing formal direction to the CRTC or by amending the Broadcasting Act. The issue is expected to be raised in the regulator's upcoming consultation with the public about television services, scheduled to start Oct. 24. CRTC Chairman Jean-Pierre Blais said in September that the availability of la carte TV channels is a “number one concern” among consumers, though offering them individually may mean higher costs per channel. "That's why we want to have a good, rich conversation with Canadians. I know there are frustrations with prices," Blais said. Ten or even five dollars per specialty channel may be more than many consumers are willing to pay, according to a report by RBC Capital Markets last year. The report published survey results that said consumers in the United States are willing to pay $1.50 US per channel under an a la carte television distribution model. It released results from a proprietary survey of more than 1,000 consumers that suggested “more than 90 per cent of consumers would prefer an à la carte programming solution for their pay TV viewership.” The Wire Report reported last year that moving to an a la carte system could drive many independent or low-penetration specialty channels out of business because their subscription numbers and resulting per-subscriber carriage rates depend on being carried in packages. In a note to clients Tuesday, Canaccord Genuity analyst Dvai Ghose said that “we may see a negative impact on less popular specialty channels that are currently bundled with more popular channels,” and that the firm estimates that eight per cent of Shaw's fiscal 2013 revenue came from specialty channels, compared to five per cent or less for Bell, Rogers and Quebecor. Other major Canadian broadcast distributors, including Telus and Cogeco Cable Inc., do not own TV stations. Globe and Mail television critic John Doyle joked in a column in April that selling TV channels in packages effectively subsidizes a system of “people making money for doing nothing.” He wrote that channels such as Book Television and Bravo (both owned by Bell Media), as well as the Oprah Winfrey Network (licensed as Canadian Learning Television and owned by Corus Entertainment Inc.), are channels not likely to survive under a pick-and-pay model. “Look, getting a specialty licence in Canada is getting a licence to make money—the subscriber fees roll in from people who have no interest in the channel,” he wrote. “I’ll tell you what’s wrong with this country: We are obliged to pay money for nothing, and do nothing about it.” John Lawford, executive director of the Public Interest Advocacy Centre, said in an email Tuesday that the group welcomes Moore's comments. “Consumers want more choice and flexibility in broadcasting services and ideally would manage their subscriptions to trim excess unwanted content and control their expenses,” Lawford said. He said it's necessary to give consumers more control in an environment where large, vertically integrated broadcast companies also control the distribution networks. Telus spokesman Chris Gerritsen said if the government aims to unbundle television packages, it must also deal with vertical integration in the broadcast sector. Moore said on CTV that the government also aims to regulate domestic roaming fees following the CRTC's new wireless code this year, which put a $100 cap on the amount wireless providers can apply to a customer's bill for international roaming. “When we put together a list of things that frustrate consumers, on which the government can take action, the list gets long very quickly. Some of these things are taken care of in the free market. I'm a free marketeer, a free enterprise guy, but in other circumstances they can't be, and responsible government action is needed,” Moore said. When host Robert Fife asked the minister whether the government is willing to “take the heat” for policies opposed by large corporations, Moore said: “Contrary to the perception that some may hoist on us, the Conservative party is not the party of big business. The Conservative party—we are the party—of the middle class.” Shaw and Bell declined to comment for this story. The throne speech will be delivered Wednesday starting about 5 p.m. in Ottawa. —With reporting by Simon Doyle at sdoyle@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Want pick-and-pay? You may end up paying $9 for TSN, consultant says

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