TV Unbundling in Canada – Stakes and Opportunities
This spring, Canadians will begin to see the potential development of the next phase of the television industry in the anticipated report required by the government from the CRTC. In a consumer-first move during the October 2013 throne speech, the federal government required that the CRTC develop a roadmap for the future of television unbundling and the subsequent steps that the CRTC intends to take in that regard. With the first phase of this report due in April, Canadians have been encouraged to weigh in on the dialogue through the ‘Let’s talk TV’ campaign. The Commission must recommend a pick-and-pay format that will provide television viewers with the choice and flexibility to no longer be forced to buy bundles of channels that they do not want. Canadians’ experience of this process is heightened because of: 1) intense media consolidation; 2) exhibition conditions under the Broadcasting Act; and 3) the ability of consolidated broadcasting groups to license content across multiple specialty channels. The government’s request for further strategic input is not just to ensure that Canadian television viewers have greater choice as consumers but also to advocate for the inclusion of Canadian programming in choices made to consumers.
WILL UNBUNDLED TV COST CONSUMERS LESS… OR MORE?
While the government, CRTC and cable companies can agree that media consumers deserve more choice, the dialogue has plateaued in the past because the parties could not agree on pricing models. In the most recent round of discussions, the CRTC seems to side with Bell Media and support a sliding scale model for pick-and-play, so that the more channels that consumers order, the more they will save as a result. However, the sliding model has the opposite effect when fewer channels are ordered, i.e., each cost ends up costing more. For example, if a consumer only orders 5 channels, their bill will definitely be lower than someone who orders 50 channels, although the first consumer may actually be paying more per individual channel than the second consumer.
For Maritimes-based cable provider Eastlink, the Personal Picks package already provides options available for $2.95 per channel, with 12 channels costing $15 and 20 channels costing $20 a month. In Alberta and British Columbia, Telus-operated Optik TV also offers specialty channel groups for $4 per channel. In the US the average household uses only 16 channels per month but subscribes to 135, notes Andrew Wallenstein, Variety’s digital editor-in-chief. However, consumers unfortunately may find that within an unbundled regime, they could easily be paying $1.50 and upward per channel to receive the handful of channels that they do in fact watch.
Analysts suggest that the increased cost per channel will stem from supply and demand mechanisms as well as networks’ limited capacity to exploit the economies of scale that result from distributing across a channel package. Unbundling may be great for consumers who don’t watch a lot of traditional TV (in the sense of “TV programs watched on TV live while they are being broadcast”) and who are media savvy enough to conduct a household consumer analysis before spending impulsively. However, consumers who normally subscribe to a 250-channel package and decide that they only want to purchase 100 of those channels after unbundling may find that their costs have not decreased.
Unbundling may also make it harder for many of the smaller niche channels, which are an important part of the Canadian broadcasting landscape. Often, these channels depend on packages to attract viewers. In fact, investment and asset-management firm Needham Insights, in its July 2013 report “The Future of TV,” estimates that only 20 US channels would survive unbundling because smaller channels would not generate enough viewership to justify spending on advertising. However, like any niche subject area in the digital era, it is likely that these channels will thrive online rather than in conventional media.
There is nothing surprising about these developments. Consumers want a media mix that represents their personal choices. Unbundling is simply another indication of the hyper-customization of our personal media universe.