Pick and pay cable pricing could mean end of some channels: industry insiders

OTTAWA – The federal government will have to give TV service providers the ability to rework contracts with television program suppliers if it wants true “pick-and-pay” pricing for consumers, says one cable firm.

The Harper government’s throne speech Wednesday outlined plans to mandate an unbundling of TV offerings.

But as much as he might like to further unbundle his company’s channel lineup, Telus chief marketing officer Dave Fuller said the company’s hands are tied.

“We’re supportive of anything the government can do under the current regulatory regime,” says Fuller.

“The reality is that almost all of my content licenses prohibit me from unbundling any further.”

And if the Harper government doesn’t tread carefully, it may end up hurting the consumers that it’s pledging to help by forcing service providers to adopt a pick-and-pay model, said Zoomer Media’s Moses Znaimer.

“The government may be well-meaning, but they are badly misinformed about how things work in television,” Znaimer, well known as a Canadian television trailblazer, said in a statement.

“If packaging is disallowed or handled insensitively, I’m afraid the Canadian public will wake up to find they are paying a whole lot more for a whole lot less. ”

Industry insiders warn that forcing an a la carte pricing model on cable and satellite TV providers could result in some television channels disappearing, and likely won’t mean lower prices for consumers.

The Conservatives are expected to instruct Canada’s broadcast regulator to require that cable and satellite TV service providers offer pick-and-pay pricing, where consumers can choose to pay for individual channels.

The move will be “evolutionary” for Canada’s broadcast sector, say industry watchers who see pick-and-pay as a necessity with broadcasters trying to compete with increasingly popular online services, including Netflix.

But content producers and independent specialty channel operators are running scared.

“We’re very worried,” said one television executive who did not want to be identified. “Potentially every broadcaster, at least initially, would be worse off” under pick-and-pay, he said.

It’s also likely to spark a war among broadcasters and service providers and will certainly mean a ramping up of marketing by the cable and satellite companies to convince customers to stay with bundled packages.

There are already hints of the battles that lay ahead.

Cable companies will demand more “flexible” pricing from the television networks that supply the programming, said Rogers vice-president Kenneth Engelhart. But if there is more flexibility, consumers, producers and the distribution companies will all benefit, he said.

“I’m optimistic that we can have pick-and-pay, we can have a valuable service and we can have Canadian content,” said Engelhart.

“I believe we can have it all.”

Shaw Communications, which has strongly opposed pick-and-pay, declined to comment Tuesday when asked about the pitfalls of such a pricing model.

Some channels rarely watched by viewers will certainly disappear as a pick-and-pay system comes into place, said Michael Hennessy, president and CEO of the Canadian Media Production Association.

“It’s almost inevitable because, to the extent that pick-and-pay reduces the penetration of all channels — and therefore reduces subscriber and advertising revenues — some will just simply not be (economically viable),” he said.

“But the big question is: Will (pick-and-pay) be the primary model, or will the response from the industry be even more attractive packaging?”

Observers also note that service providers could raise prices for on-demand programming if they see revenues decline, or begin to charge more for individual channels in markets where there is little competition, resulting in even higher overall monthly cable and satellite bills.

The Canadian Radio-television Telecommunications Commission is already scheduled to hold consultations on the future of television, beginning Oct. 24. The regulator wants to gather the views of Canadians on how they think the broadcasting system should function. Pick-and-pay prices is certain to be raised as an issue.

But those consultations could take months, and developing regulations even longer. And that means it could be 2015 or beyond _ well after the next federal election _ before cable and satellite TV distributors are mandated to adopt a new pricing model.

In the meantime, there is nothing preventing service providers from adopting new pricing models on their own.

Companies such as Videotron (TSX:QBR.B) are already offering a form of pick-and-pay. Eastlink also allows customers to choose from a list of channels under what it calls its Personal Picks plan. Prices vary depending on how many channels are selected.

Rogers has also experimented with pick-and-pay, saying the pricing scheme was popular while it was offered to customers in London, Ont. The experiment lasted only a few months, ending in March 2012.

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