Pick-and-pay TV world has winner and losers

CRTC to implement changes despite possibility of losing jobs and American programming

The curtain is set to inexorably rise on “skinny basic” and à la carte TV viewing in Canada, despite forecasts that niche specialty channels bundled in large cable packages could be orphaned in a pick-and-pay world.

As of March 1, all domestic satellite and cable TV providers must offer a basic $25 cable package and either a pick-and-pay system or small bundles. By December, consumers will be able to pick individual channels or small theme packs on top of the skinny bundle.

The basic package will give preeminence to local and regional news programming and must include local stations and provincial educational channels. It may also include affiliates of U.S. networks, though their inclusion is not mandated.

Consumers can choose to supplement the service by buying individual channels or smaller bundles geared to content such as sports or comedy. Rates for individual channels or theme packs will be set by cable and satellite TV providers.

“We know Canadians want greater flexibility in how they subscribe to TV services,” said Jennifer Kett, media relations director for Toronto-based media and telecommunication giant Rogers Communications.

“That’s why we started down this path several years ago, offering dozens of services à la carte and in theme packs. We’ll start offering a new smaller basic service and additional package options for TV services to our customers by March 2016,” she added.

The changes were mandated by the Canadian Radio-television and Telecommunications Commission (CRTC) after it received more than 13,000 comments as part of a public consultation called Let’s Talk TV. The CRTC says most expressed frustration over the “big, unwieldy and expensive” bundles that have helped drive the increase in the cost of TV well ahead of the inflation rate.

But CRTC chair Jean-Pierre Blais also acknowledged that some lightly viewed specialty channels could be forced to rebrand, shift to alternate platforms or fail outright after the full pick-and-pay regime is in place.

“I won’t say that the result of this decision will mean that every provider will survive,” Blais said in announcing the regulatory changes last year. “In this environment, there may be services that don’t survive and that means jobs losses.”

He added that some companies already offer small and affordable cable bundles, in part as a response to over-the-top and Internet broadcasting alternatives and the accompanying rise in cable cord cutting.

Still, a la carte costs on top of the mandated skinny basic could be greater than those for the existing multi-channel bundles and some have questioned whether a pick-and-pay regime will result in lower overall prices for television services.

For big distributors, the changes could be neutral to operating earnings if individual channel prices can offset lower revenue from TV services, Barclays analyst Phillip Huang said in a note referring to Cogeco Cable.

Research commissioned by advocacy groups and media unions, meanwhile, forecasts as many as 7,000 direct job losses as a result of the new rules, but the CRTC says the analysis is based on an assumption that 40 per cent of specialty channels will fail, which it says overstates the case.

The research suggests that the TV packaging changes have been instigated by the former Conservative government as part of its consumer agenda and could be altered by the new Liberal administration.

But a spokesman for the new government stressed the arms-length, independent role of the CRTC, offering little hope that the federal Liberals will step in.

“The government recognizes that Canadian broadcasters are facing industry-wide challenges and opportunities,” said media relations adviser Tim Warmington, as they cope with changing technology, demographics, audience preferences and competition for advertising dollars.

“The Let’s Talk TV decisions were taken by the CRTC, an independent public authority responsible for the regulation and supervision of the Canadian broadcasting system,” he added in an email.

U.S. broadcasters, for their part, have threatened to withdraw from Canada’s airwaves and offer content over the top or via the unregulated Internet if their channels are excised from cable packages.

Allowing consumers to purchase individual TV channels instead of buying them in bundles would set off a “consumer-welfare-destroying death spiral” in TV, Viacom told the CRTC during its hearings.

Many independent broadcasters said bundles are crucial to the existence of specialty channels, warning that the channels could fold if revenue from bundles dries up.

Cable network A&E told the regulator it would either have to black out certain content in Canada if it becomes too expensive to acquire, or remove itself from Canadian TV altogether.

A lawyer representing AMC, the network that broadcasts The Walking Dead, told the CRTC that “nonCanadian programming may have no choice but to migrate to unregulated domains.”

Spokespersons for the U.S. broadcasters declined to comment or did not respond to messages.