Cogeco to launch pick-and-pay TV outside Quebec next year: Audet

MONTREAL—When Cogeco Inc. introduced its pick-and-pay cable-TV offering in Quebec a decade ago, it had to find a balance between profitability and satisfying customers, and the challenge will be the same in English Canada as the company introduces pick-and-pay there, said Louis Audet, Cogeco president and chief executive. “It works very well … both at our company and at Videotron. Our margins didn’t suffer overly, and our client satisfaction is higher,” Audet said Thursday in a round-table discussion with reporters in Montreal. “We succeeded in reconciling the two. It takes some reflection … but it’s doable.” Audet told reporters that the company plans to introduce a pick-and-pay offering in markets outside of Quebec within a year. “It’s something we want to do. We are now ready to do, and about to do it,” Audet said. Currently, both Cogeco and Quebecor Inc. subsidiary Videotron Ltd. offer a version of pick-and-pay in Quebec, where customers sign up for basic cable and then can choose which individual channels to include in their packages. Videotron customers can build their own bundles of as few as five channels to as many as 30, in addition to basic service, while Cogeco customers can build their own bundles of 15, 20 or 30 channels, according to the companies’ websites. Audet’s comments follow the federal government’s throne speech in October, when it promised to “unbundle” television channels and move towards a pick-and-pay model. The federal cabinet issued an order this month to the CRTC to produce, by April 30, a report outlining the potential impact of a move to a pick-and-pay regime. Audet said Thursday that it is too early to specify how the pick-and-pay system it will offer outside of Quebec will differ from the system it offers inside the province. “It’s going to be different in the sense that in Quebec … because of our geographic position, we end up selling mostly French language programming, whereas in Ontario, it’s the total opposite. We sell very little French and there’s a lot of English programming available,” he said. “So it’s the same idea, but it’s going to be different in that sense.” Independent broadcast consultant Kelly Lynne Ashton said in a telephone interview that the kind of system offered outside of Quebec could be a compromise between the status quo and a pure pick-and-pay system, the latter of which would undermine the economic structure of the television industry to such an extent that most channels would not be affordable. “It’s going to be some middle ground, and I think that’s where people are going ‘Well, we’re going to have to do something; we’re not sure how far, but it’s not going to be a full pick-and-pay system because consumers aren’t going to be able to afford it, the system can’t afford it, it’ll have too much of an impact on programming, which consumers won’t want.’ ” When asked whether it could resemble the system currently in place in Quebec, Ashton said “it’s going to have to go somewhere in that direction." Ashton said there is a sense in the industry that some level of required pick-and-pay is inevitable. “There’s a sense of fatalism that something has to be done,” she said. “There’s such a groundswell of public opinion that they want more control over their channels and their programs, so I think that there is a feeling that something is going to have to be done.” Barry Kiefl, president of Canadian Media Research Inc., agreed there is a consensus among customers, industry and government that the industry is headed in the direction of greater choice. He said the fact that there hasn’t been a backlash from the industry toward the move to pick-and-pay—especially compared to the organized opposition last summer to a potential entry of Verizon Communications Inc. into the wireless market—indicates that most of the industry is comfortable with the idea. Audet told reporters Thursday it’s necessary to accept change. “There are those who don’t want things to change, but that’s futile… It’s been a long time that our customers have been telling us they want this,” he said. “If we don’t stay relevant to our customers, they will find another way to get what they want.” Kiefl said that although consumer demand is spurring these changes, that doesn’t mean all cable customers will immediately adopt pick-and-pay. “They may be slightly unhappy with their cable bill, but they’re not about to phone up the cable company and say ‘I want to switch from all the channels I get now,’ and make decisions about the 30 channels they’d like to pick,” Kiefl said. “I think that consumer lethargy will mean that there will a large number of people that will just stick with what they’ve got … and that’s probably what the are counting on.” In a report this summer, American research firm Needham & Company predicted that the U.S. TV industry would see its annual revenues of $150 billion US cut almost in half under a pure pick-and-pay model. Ashton and Kiefl said both broadcasters and broadcast distributors could benefit from higher prices under pick-and-pay. “I would imagine that from the BDU perspective, that if they open up those bundles of channels into individual choices, that the BDU can then begin to exercise price control. They can price individual channels at a much higher rate,” Kiefl said. Broadcasters will also benefit from price increases of popular channels, he added. “They’re not going to let the make all of that additional money. They’ll want a share in it,” he said. While under a pick-and-pay system, big broadcasters will be able to charge more for content and broadcast distributors will be able to charge more for channels, they can only increase the prices so much, said Ashton. Ashton said the “whole system is supposed to reduce consumers' bills. They will rebel if it increases them.” Kiefl said customers are willing to pay a sizeable amount for their TV and other communications services—to the tune of more than $3,000 a year. “Clearly, if a customer wants to have the ability to choose individual channels and therefore reject a whole bunch of channels they don’t want to watch, they’re almost certainly going to be willing to pay a greater amount of money,” he said. — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca.

Cogeco to launch pick-and-pay TV outside Quebec next year: Audet

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Cogeco to launch pick-and-pay TV outside Quebec next year: Audet

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