MONTREAL – Cogeco Cable CEO Louis Audet said yesterday that the existing subscription TV model of providing large multi-channel programming packages to customers will soon be a thing of the past as companies evolve towards a model of more choice and flexibility.
Speaking to financial analysts after the company’s release of its strong fourth quarter results, Audet said irrespective of the CRTC’s demand for a report on providing more choice to the consumer (as the Commission has demanded as part of its Vertical Integration Policy), the overall video market will push cable in that direction.
“It’s not about the CRTC, it’s about consumer preferences and consumers are increasingly asking for the ability to make choices of what they want to see and not what they don’t want to see and that’s a legitimate aspiration,” he explained. “The cable industry has not been able to fulfill that desire up to this point in time except in very moderate terms because the economics didn’t work.”
For years, cable was limited by analog technology and clunky, expensive (often home-made) back-office systems that made providing real choice to consumers all but impossible, from a cost standpoint. This led to the creation of large tiers of channels where if a viewer wanted to subscribe to W, for example, also had to take 10 or more other channels. Not optimum for the viewer, but good for the distributors – and especially for the other nine channels in the package which normally wouldn’t have been selected by that customer.
However, as over three-quarters of cable subscribers take digital over analog, as the technology costs drop, and as consumers demand the same level of choice from their cable provider as they can get online, “we may now entertain offering smaller packages,” said Audet. “I don’t mean next month, but we may, in the foreseeable future, start thinking about those smaller packages.”
While those who wish to remain in their existing packages will be grandfathered (volume-pricing is an advantage for consumers, of course, and more choice via smaller packages or a-la-carte could well mean higher costs), it just isn’t fair to make, for example, the non-sports fan pay for ever-increasing sports rights.
“Some categories, such as sports, are likely to increase (in cost) more dramatically and the day when you can have all customers pay for huge increases in sports when they’re not watching it… that’s unsustainable,” Audet explained. “Eventually, you want to be able to put the sports in one or a few packages and you’ll want to put something else in other thematic packs so that people are able to not be hit with huge rate increases that are related to content they’re not watching.”
Audet acknowledged such changes may stagger some broadcasters, who are used to being packaged in large, well-penetrated tiers (Ed note: And often have such caveats written into their contracts), but they must ready themselves for the new realities.
The truth about the future of our industry is that this is no longer possible,” he said. “I know people have difficulty understanding that but… there has to be more flexibility, there has to be smaller packages so that consumers can make a choice, not only that there are competitors out there, there are over the top competitors so you want to me able to manoeuvre to repel these competitors as best you can.”
– Greg O’Brien
