TORONTO – What is the best way to offer choice to your customers when the very act of choosing is personal and subjective?
That was the basis of a panel entitled ‘Packaging Flexibility: Customer Choice vs. Brand Investment’ at the CTAM Canada Broadcaster Forum held Wednesday in downtown Toronto. And that panel, a mix of broadcasters and distributors moderated by Rogers’ senior vice-president of content David Purdy, all agreed that Canadians’ ability to choose their own television channels was inevitable, whether mandated by the government, the Regulator, or driven by consumer demand.
“This is coming”, said Bell Media president Kevin Crull. “It’s not about if, it’s about how, and we’re all in this together as an industry to figure this out. So whether it’s consumer demand, technical capabilities, or its political or regulatory pressure, change is coming.”
But while pick-and-pay is a hot button issue, driven in part by the CRTC’s recently launched Let’s Talk TV initiative, don’t Canadian television providers already offer lots of options to their customers?
“I think that the review that the CRTC is going to undertake… is going to show that there already is a lot of choice”, said Maria Hale, Corus Entertainment’s vice-president, television, head of content distribution and pay TV. “I think there’s going to need to be more communication about the choices that are available, both in the regulated and unregulated space, because let’s not forget that you can get Apple TV today, you can get Netflix today, you can go to the (broadcasters’) websites, like Shaw and Bell, and see full length episodes of content there for free." Although Crull noted that he believes viewing much of that online content will soon (within 18 months) require the authentication of online viewers by their subscription TV provider (which is what Global Go requires of viewers in order to binge view episodes more than a week old).
Barb Williams, senior vice-president of content at Shaw Media, described pick-and-pay as “an interesting starting point”, but stressed the need for various options that speak to consumers’ own ideas of choice and value. “It’s not just about choosing this channel or that channel, it’s which channel comes with an on-demand offering, or comes with a TV Everywhere-supported opportunity for consumers”, she said. “There will be so many different ways to understand what content is for consumers, what they really want, and how they will measure the value for them. And I think our opportunity here is to provide a variety of ways for people to make those choices, not simply see it as a single idea.”
Acknowledging that Canadian TV viewers seem enamoured with the idea of simply paying for the handful of channels that they wish to watch, Ken Engelhart, senior vice-president of regulatory & chief privacy officer at Rogers Communications, cautioned that sentiment may change once they grasp the economics of television – and that their cable bills may rise as their channel selections drop.
“They don’t realize in our business that in both distribution and broadcasting, as well as a lot of other businesses characterized by large fixed and common costs, there are volume discounts….I think that as we work through this process and people realize that the volume discounts are real, that will affect their behaviour in the marketplace." For example, noted Engelhart, while customers will find themselves mistaken to think that because they are paying $80 for 80 channels, 14 will cost $14.
Bell Media’s Crull added that his early experience with the company’s satellite television business taught him that small theme packs result in “dissatisfied and confused customers” who make frequent changes to their programming (which also raised costs for the satellite provider). He also warned that a true pick-and-pay world could have a detrimental impact on the health and quality of Canadian channels and programming. “TV is an industry where there’s a ton of cross-subsidization across platforms, across shows from conventional to specialty and things of that sort, so do we want to just pull apart those strings – whether we’re a consumer or a distributor like Rogers? What we have to realize is that a lot of those strings that we pull are going to make other parts fall apart.
“The thing that I learned coming in to Bell Media is that all along the value chain, very few hits subsidize a whole lot of dogs… And in that process, when people say ‘I only want to subscribe to the few channels that I watch’, what they’re really saying is ‘I only want the few programs that I watch. And I only want the popular stuff’."
Agreeing heartily with Crull, Rogers’ Engelhart said that model will be even tougher to implement in Canada due to stringent Canadian content regulations, and affiliate agreements that include penetration-based rate cards which see wholesale rates rise dramatically when channels are sold a-la-carte and not in large, well-penetrated tiers.
“I think to a large extent distributors are a little more interested in pick-and-pay than the programming services are”, he said. “Distributors see these competing platforms coming along and they say ‘well we’ve got to do something to prevent cord-cutting’. Programming services, not just in Canada but also in the U.S., don’t like it, and it’s partly because the successful ones really want all of their services bought by distributors and they want to keep their revenue up for very good and legitimate reasons.
“If broadcasters are saying to distributors ‘you are going to have to bear the risk of this brave new world and not me’, then I don’t think customers are going to get pick-and-pay. I think there’s going to have to be a sharing of the risk.”
