TORONTO — Canadians still love their TV, love their cable packages, but they’re hungry for change, for flexibility, for a lower price, delegates of CTAM Canada’s packed Broadcaster Forum held last week in Toronto were told.
The TV industry folks in attendance were no doubt relieved to hear TV subscription value packs will continue to be relevant in a pick-and-pay world, especially as everyone gears up for the mandated introduction of skinny basic and pick-and-pay in 2016.
In fact, according to a recent study conducted by Charlton Strategic Research for CTAM, the majority of Canadian TV subscribers (57%) still say they are satisfied with their current subscription package, with millennials expressing satisfaction at a slightly higher rate than the overall survey base.
“That doesn’t mean that they’re happy with everything. It just means that they’re satisfied enough to say, ‘Yes, I’m happy with what I’ve got today,’” said Gord Hendren, principal at Charlton Strategic Research. “There are things that are going to need to change, whether that’s getting easier access to content… saving some money, that might mean changing some channels within the package, but a majority are satisfied.”
When asked if they planned to keep their current TV package when skinny basic and pick and pay became available, 43% of survey respondents said they would keep their package as-is, with a further 14% saying they would actually add channels to their current package. Of the millennials (18-34 year-olds) surveyed, 48% said they would keep their current TV package, with an additional 22% saying they planned to add channels to the package they already have.
Looking at the role today’s large TV subscription value packs have in a world of choice was the focus of a panel session moderated by Cartt.ca publisher and editor Greg O’Brien. Featuring executives from both the BDU and broadcaster side of the industry, the panel discussed the various challenges that pick and pay will present next year (the photo above, from left, shows O'Brien, Cogeco's JP Caveen, Corus' Jim Johnson, Rogers' Jon Medline and Blue Ant's Andrew Irwin).
Given that there is a large segment of customers who are satisfied with their current value packs, the adjustments that customers might want to make to their channel packages doesn’t necessarily mean wholesale change will happen, said Jon Medline, director of programming and video product management for Rogers Communications.
Customers would like to pay less money or they might want to swap out five channels they never watch for channels that they really want, Medline said. “But that’s not against the value model. That’s just a different version of the value model,” he said.
Medline added that Rogers needs to do a better job of marketing and selling its value packs and be smarter with new flexible packaging. Aside from millennials, the multicultural TV market is another segment where Medline said he sees potential. “If someone is Filipino or Mandarin, first generation, (some of) these package constructs just don’t make a lot of sense,” Medline said.
Cogeco Cable has already launched flexible packaging in Ontario with the introduction in November 2014 of what it calls “flex packs” that allow consumers to subscribe to a $35 starter pack and then add various-sized channel packs to their subscription (The company has offered pick-and-pay in Quebec for five years). As Jean-Pierre Caveen, vice-president of affiliate and carrier relations for Cogeco Cable, pointed out, the $35 starter pack does not currently satisfy the CRTC’s mandated $25 entry point for skinny basic. Some channels are available to be sold a-la-carte in Ontario.
Over the course of the past year, Cogeco has seen about a third of its new Ontario customers subscribe to these flex packs and another third subscribe to its big value packs. Caveen added there is a growing trend of customers who are downsizing to basic only.
Value packs are good for the average family, Caveen said, “but there’s a fairly large segment of the customers who also want choice, they want flexibility, they want to downsize… we hope that by introducing more flexible packaging we’ll be able to upsell some of these basic customers and stop the downsizing,” Caveen said.
The pick-and-pay model or “pick packs” have already become the norm in Quebec, Caveen said, where Cogeco has been selling pick packs for five years. Vidéotron first introduced the pick-pack model 15 years ago in Quebec.
For the broadcasters represented on the panel, Blue Ant Media and Corus Entertainment, pick and pay is already a reality with channels offered à la carte. However, the challenge will be making the right investments in both content, branding and marketing to ensure channels continue to be relevant going forward.
“I think we have to pick our winners and we have to make the right investments to ensure that people are finding services that they want.” – Jim Johnson, Corus
“I think we have to pick our winners and we have to make the right investments to ensure that people are finding services that they want,” said Jim Johnson, vice-president of marketing for Corus Entertainment.
He added broadcasters will continue to rely on BDUs to help market their channels, because customers who opt for pick and pay will still be ordering channels primarily through the BDU’s call centre.
“I think we just want to see more alignment on our efforts to co-market channels,” Johnson said. “We want to start doing that a little more effectively and in tandem with the BDUs. We’d love to see more set-top box data, to figure out where the opportunities are. Then we want more access into call centres. Both Cogeco and Rogers are really good, allowing us into call centres and talking to our front-line sales reps, but I want to see that across the board. So at the end of the day, someone who is picking up the phone is going to be completely educated on the products and services (that broadcasters offer).”
The popularity of certain individual TV shows, however, may lead customers to want to pick content on a show-by-show basis rather than by channel or network. In which case, the need for BDU call centre staff to be educated about different channel offerings becomes important, Johnson said. “I think you guys are going to get the question, ‘Where does a show air?’ So I think we can continue to do the advertising and marketing that we do, but ultimately I think it’s probably going to come back to you,” he said.
Johnson said Corus could probably do a better job of creating an association in the consumer’s mind between a show and the network. He gave the example of Property Brothers, which airs in Canada on W Network (a Corus channel) and not on HGTV (where it airs in the U.S., and which is a Shaw channel in Canada).
Speaking for Rogers, Medline said his company will continue to work with broadcasters to promote and sell channel packages because “it’s in everyone’s best interest”, but BDUs aren’t geared to sell individual channels very well.
Medline said in a world of more content choice and smaller packaging, TV broadcasters “are going to have to spend a significant amount of money, more than they ever have, to establish their brand, or re-establish their brand or rebrand their channels.”
The content mix of new TV packages will also need to be done carefully, Medline said, and he suggested that some channel rebranding “is really going to make a mess of things”. He cited the example of the rebranding of Blue Ant Media’s male-oriented, short-form comedy channel Bite into the female-focused crafting Makeful network.
“Nobody will have a bigger rebranding than what these guys did to Bite. But imagine if we put that into a pick pack, which is targeted to male, short-form comedy, and now we’ve got Makeful,” Medline said.
To provide some context, Andrew Irwin, Blue Ant Media’s vice-president of content distribution and partnerships, said Blue Ant research that was done about a year and a half ago identified a new demographic or genre that was underserved in the linear TV world, while comedy was already well served. “That’s why we rebranded it, and so far it’s doing great. It’s not just the linear channel, but it’s creating the ecosystem for makers,” Irwin said.
Irwin added that Blue Ant Media’s marketing focus will continue to be on its brands and not just on its shows. For example, its Cottage Life brand is an “ecosystem” that includes a linear channel, a magazine, a digital presence and a live event consumer show, Irwin said. The strategy is to get consumers involved in each little subset of the Cottage Life ecosystem, Irwin said.
Irwin countered Johnson’s point about working with the BDUs to co-market channels by saying he doesn’t think broadcasters should expect BDUs to help sell their channels.
“For a programmer…how much can we expect the BDU to help market and sell our channels these days? It’s a question I’m asking and I don’t have an answer.” – Andrew Irwin, Blue Ant Media
“For a programmer…how much can we expect the BDU to help market and sell our channels these days? It’s a question I’m asking and I don’t have an answer. I just think that we have to start doing our own thing, strategically,” Irwin said. “We should be looking at ourselves to do as much as we can to get people to embrace our brands or our shows or our ecosystems, to get them over to the BDUs to subscribe.”
To get around some of the technical issues of making it easier for customers to order specific channels, Irwin said he would love to have a button on Blue Ant’s website that allows customers to simply click to order a channel. “Just to make the selling easier,” he said,” because if you call a call centre, you have technical issues, you have billing issues, you have home phone issues. It goes on and on and on.” Talking about specific brands is not likely to happen in a call centre, Irwin added.
For BDUs which plan to continue to market value packs aggressively, finding the right price points that keep customers satisfied will be another challenge in a pick-and-pay world. Cogeco’s Caveen said competitive dynamics in the market really set prices, but if preassembled channel packages get to be too big, because so many broadcasters want the security of being included in them, it drives the prices up. “And if it drives the prices up, is it going to drive the people out?” Caveen questioned.
Going back to Charlton Strategic Research’s study data, the good news for value pack marketers is that TV subscribers are starting to realize that they won’t necessarily save money with the pick-and-pay model.
“Consumer perceptions about TV subscriptions being expensive are still very high, and we know that the Let’s Talk 
TV hearings drove them even higher, with 7 in 10 Canadians saying they think they’re too high,” Hendren (right) said. “I think it’s fair to say if you go to a cocktail party and raise the question, ‘Do you think you’re paying too much for your cable television?’, I think you’ll get most people in the room agreeing that you are. So that is a challenge, that is a headwind that we’re going to have to look at and see how we can create value in terms of the packages that they ultimately end up with.”
“When we introduced the idea that these channels are going to be rescaled in terms of price and the popular channels are going to cost more, then the popularity of pick and pay falls dramatically. In fact, it falls four-fold.” – Gord Hendren, Charlton Strategic Research
At a high level, Canadians love the concept of pick and pay, he added, because they’re going to be able to cut some channels they’re not using and therefore they think they’re going to save money. “However, when we introduced the idea that these channels are going to be rescaled in terms of price and the popular channels are going to cost more, then the popularity of pick and pay falls dramatically. In fact, it falls four-fold,” Hendren said.
Looking at the specific survey numbers, 41% of respondents initially said they thought pick and pay was “a very good idea” for their household. When the concept of price rescaling was introduced, only 12% of respondents said pick and pay would be a very good idea for their household. In comparison, 23% of respondents said they considered skinny basic to be a very good idea for their household.
Hendren said one interesting finding of the study is that many non-TV subscribers indicated they are interested in the skinny basic and pick-and-pay options that will be available next year. In fact, 32% of non-TV subscribers surveyed said they were considering creating their own TV package or subscribing to skinny basic and adding other channels.
“So I think there is an opportunity. How it’s packaged is still very much up for debate. Can you force them to take skinny basic or are they just going to buy channels à la carte? What I am seeing here is that there is opportunity. And for those who are currently outside the sphere of paid television, I see opportunities in terms of repatriating them (cord cutters and cord nevers),” Hendren said.
He acknowledged having all of the TV channels and bundles up for discussion in a pick-and-pay world is a scary conversation for the industry to be having.
“It means that the consumer is now re-evaluating everything they’re doing, everything they’re spending. Now there are two sides to that conversation. On the front side, yes, it’s scary. But on the other side, does everyone want to spend an hour on the phone talking about their package and every individual channel and what’s going to be in it?
“And like when you go to buy a car, do you want to know every part? Do you want to look at every part that’s in it? So some aspects of this won’t happen just the way we think they might. But also it still is scary, and I think the industry needs to be very well prepared to manage the conversation.”
Photos courtesy CTAM Canada.
