Fewer TV subscribers generating more revenue: CRTC

Television-service providers in Canada took in more revenue last year despite having a smaller subscriber base to draw from, according to new data from the CRTC, and one analyst says that’s due to pricing trends that could soon come to an end soon. The commission said in a press release Thursday that cable, IPTV and satellite-TV providers had revenue of $8.9 billion in the year ended Aug. 31 last year, up 1.5 per cent from the previous year. TV subscribers were down "modestly," the regulator said, to 11.4 million from 11.5 million a year earlier. In every category, the year-to-year revenue comparison was more favourable than the subscriber trend. Cable subscriptions were down 5.2 per cent while revenue was down 3.2 per cent, the CRTC said. It added that satellite-TV customers fell by 4.9 pent while revenue dropped 2.4 per cent. IPTV, on the other hand, saw growth of 29 per cent for subscribers and 39 per cent for revenue, according to the CRTC's release. Greg MacDonald, a telecommunications analyst with Macquarie Capital Markets, said in phone interview that, for the last 10 years, TV-service providers have typically raised their prices at rates beyond inflation, though their leverage for doing so might be shrinking. "Historically, they've been able to do that because of the perceived value of the product and, more importantly, the lack of competition," MacDonald said. He said the ability of TV service providers to raise their prices might take a turn after the CRTC’s new regulatory measures take effect next year, which require providers to offer skinny basic packages at no more than $25 a month and allow customers to pick discretionary channels on an à la carte basis. Online-TV options will also affect this dynamic, MacDonald added. "Will the five, six, seven per cent annual price increases on cable service over the last decade come back to bite these companies?" he said. "Yeah, I think it will because the perceived value of the product has changed as a function of the technology." The CRTC's report also showed a divergence in IPTV subscriber trends, with nearly 30 per cent growth in customers over the last year, versus cable and satellite services, which each saw declines of about five per cent. MacDonald said the difference is not so much about the product, since the IPTV experience isn’t markedly different from cable or satellite TV. He said it's mostly the result of aggressive marketing by companies that provide IPTV, such as BCE Inc., which are motivated by the way it can be packaged with broadband Internet. "Broadband, with the growth in online services, is becoming more important," he said. "I would venture to say it is the most important product that these companies offer right now. And you'll notice also that IPTV services are not sold unless they're sold in a two-product bundle that includes broadband. So there's some strategic rationale behind BCE or Bell pushing , from a marketing perspective." Mario Mota, a TV-industry analyst with Boon Dog Professional Services Inc., said in an email that while the IPTV experience is closer to a traditional TV service than an over-the-top (OTT) product, it does have extra features, such as the ability to access apps, that might attract customers because of a "coolness or newness factor." He added that newer services tend to have a "honeymoon period." One of the earliest providers of IPTV in Canada was Manitoba Telecom Services Inc. in 2003, and Bell's Fibe TV has only been around since 2010. "Satellite TV grew like crazy in the years after it was introduced, with growth even in urban areas served by cablecos," Mota said. "Now in steep decline." He added: "There are always customers who are looking to switch providers because of satisfaction issues, and IPTV is the beneficiary right now." Mota, however, said that IPTV growth is starting to slow. BCE, for example, reported 42 per cent growth in IPTV subscribers in 2014, whereas in 2013 it was up 93.1 per cent. "I wouldn’t be surprised if within two to three years we see IPTV declining rather than growing because of cord-cutting and OTT options available to consumers," Mota said. — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Fewer TV subscribers generating more revenue: CRTC

News | May 21, 2015

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Fewer TV subscribers generating more revenue: CRTC

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