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How unbundled cable could save Canadian television

Jesse Brown on the Conservative government’s “pick and pay” pledge


 

Canadians may soon have the right to pay only for the cable channels they want, if promises from Industry Minister James Moore come true. Speaking to the Canadian Press and offering a sneak peek at the coming speech from the throne, Moore hinted at this particularly shiny offering the Conservative government will be dangling in front of Canadians in their new “consumer-first” agenda.

If the move is a calculated ploy to curry favour with the frustrated, Game of Thrones and sports-hungry masses, it’s a damn good one. Even if it fails to produce the desired outcome, as it well might (more on this below), it goes a long way towards illustrating to voters that the Harper government is on the side of the little guy. But if a true “pick and pay” model is forced upon our cable and satellite providers, viewers won’t be the only ones to benefit. Despite how much they’ll hate the idea (and how hard they’ll fight it) it just might be the only thing that can save our providers, and the Canadian television industry itself.

Forcing subscribers into expensive bundles is widely regarded as a retrograde, pre-Internet, vanishing business model, akin to forcing listeners to buy a $20 CD in order to get a hit single. Even HBO is experimenting with new strategies that have American cable providers trembling. In Sweden, Finland, Norway, and Denmark they offer HBO GO as a standalone, Netflix-like app, priced at 10 Euros a month. They’ve also released a bunch of their top-tier offerings on Google Play, where you can buy shows an episode at a time. Viewers who choose this a la carte pricing will end up paying HBO more money than viewers who get HBO via cable: a full season pass can cost as much as $34.99. But they’ll also typically end up spending less in total than they would if they had to bundle up just to get their HBO. It’s a win-win for premium cable channels and their fans, but a loss for cable providers, who will lose subscribers in droves if more sports and premium channels turn to Internet distribution.

Switching completely to pick-and-pay is the cable and satellite industry’s best bet for longevity. But to do so would be to instantly turn away hundreds of millions of dollars from complacent subscribers who begrudgingly pay hand-over-fist for the few channels they actually watch. Many of these viewers haven’t discovered Internet-delivered alternatives yet, both legitimate and otherwise.

Eventually, they will. All of the major tech players–Google, Apple, Amazon and more–are working feverishly to provide a simple, user-friendly Internet TV product that will likely support cable subscriptions, but won’t require them. When (and not if) one of these companies cracks the problem and releases the iPhone of online TV, cable and satellite providers will face a sudden, violent displacement, and not the gradual one they’ve been banking on.

In Canada, this will have severe ripple effects. When we subscribe to Videotron, Bell or Rogers (the owner of Maclean’s), a significant percentage of our monthly fees are put into the production of CanCon TV shows. When we cut cable and turn to Netflix, Bittorrent, iTunes and Google Play, the Canadian production system gets nothing.

Switching quickly to a true a la carte system will mean a large, immediate loss in revenue for our broadcasters. Expect them to fight it with everything they’ve got, just as they fought the possible entrance of Verizon into our wireless industry this past summer. Even if the government pushes the ball forward, what results might not be the simple menu of channels that one imagines. Unless the legislation also regulates pricing, what’s to stop providers from offering each individual channel at a hyper-inflated cost that preserves the current order? Canadian consumers have learned to expect such tricks, but if our television industry doesn’t learn to take the government’s prodding as a blessing in disguise, the final joke will be on them.

Follow Jesse on Twitter @JesseBrown


 
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How unbundled cable could save Canadian television

  1. Switching completely to pick-and-pay is the cable and satellite industry’s best bet for longevity.

    Actually, discarding channels entirely and just offering shows is because no one really cares about channels anymore as long as they get the show they want. But, the reality is that cable and satellite won’t exist in their current format in 20 years for the simple reason that they’re no longer required to do the job. There’s absolutely nothing stopping content providers from going direct to the consumer over the Internet anywhere in the world other than the usual stick in the mud Napster era pretending the old world still works attitude prevalent within the entertainment industry. CBS is already leveraging the CW to test delivering everything via Apps that are one step removed from “pay us $3 a month for all our content when you want, wherever you want”

    10 years ago, this would’ve been a market shift. Now? When the market under 35 increasingly doesn’t bother and the market above is dying off or being converted by their kids? Well, that’s the very definition of government finally getting around to changing the rules once the game is already over.

    Does this mean a death knell for Canadian production? Not necessarily; if all those companies you’ve run off wanna remain in the content distribution business…. well, in a world where Hollywood can ship to everyone’s door without a local “broadcaster” they’re going to need to actually produce their own content. Or Bail.

    Given how spineless we are when it comes to competing with the US at anything other than hockey, you’re probably right through: we’re boned.

    • Tsk….20 minutes into the future and we’ll have no factories, no retail stores, no cash and now you tell them no channels or networks either. LOL

    • I think that the Television industry of the future will closely resemble the video game industry of today. Digital distrubtion will trump everything, you will start to see “studio” based hits (yes you could argue this already exists), differential pricing of shows, multiple platforms. In fact it won’t be long until both industries merge all together. … though I have been surprised at just how long the death throes of a an industry last (ie. print media).

  2. Actually, that’s an argument for putting Cancon fees on the services mentioned (easy peasy with paid subscriber services, and with the dirt cheap price of Neflix a small fee going to the Canadian industry wouldn’t be breaking the bank).

    • The problem with this is that, short of a Great Content Firewall of Canada, how do you force companies with no physical presence here to pay a tithe to enter when they can “broadcast” from anywhere in the world and ignore your rules?

      • Again, it works easily for subscriber services, if you can subscribe from here a fee can be added. yes people might figure out ways to proxy around it, but if the only reason to do that is to save a small addition to a small charge, like on Netflix, it won’t be huge.

        • You’re missing the point: streamers are under no requirement to operate somewhere where they would fall under any requirement to adhere to Canadian Law. Therefore: other than good will, where’s the incentive for them to collect and return the fee you’re suggesting?

          Answer: there isn’t one. Or, are you suggesting that the government monitor how it’s citizens spend their money and charge the fee direct against their account?

          • If the companies want to operate in Canada, they can be made to conform to Canadian law. Frankly it’s you who keeps missing the point.

          • Maybe they could tax the licensing that Netflix needs to buy to provide services in Canada?

          • They’re going to tax companies based in California? That doesn’t work either. Remember, Canadian rights are purchased from US based companies.

            Why? Well, the existing licensing model is based on the assumption that “broadcasters” require a physical presence within the country of the recipient to deliver their goods. Thanks to the internet, that’s no longer required at all. While the CRTC can impose broadcast regulations stipulations on companies that operate within Canada, they’re not going to be able to tell a US based company that has the world wide rights to content what to do, nor a British one, or a Russian, or Chinese…, So, again, unless the government is going to start blocking streamers at the border gateways to replicate a technological state that we’ve surpassed, you can’t impose a fee on the companies themselves if they lack a physical presence here and there’s literally no reason of them to do so anymore.

            Not only that, but which streamers pay? Does Crunchyroll – who specializes in Asian drama and animation – still pay a Canadian content fee to produce content they’ll never play because that’s not what their audience is paying for? The suggestion that we can just throw a fee at things is not enforceable at best or is going to force companies to just refuse to serve Canadians at worst. It’s a 1950’s solution to a 2010 problem and it doesn’t remotely apply as cleanly now as it did then.

            Wait, I know: let’s just tax the internet! Don’t forget to throw the music guys from 1998 their cut either…

          • Well, the one thing I can guarantee is that the government will find one way or another to tax them, it’s their specialty after all. If they can’t find a way to tax the users or the licensing then they’ll probably just tax the ISP’s, similar to what they did with blank media.

          • It would be infeasible for Netflix or any video streamer to operate in Canada with no physical presence here. Netflix relies on local caching servers to serve content.

      • Very simple. Forbid Canadian ISP from carrying services that originate outside Canada. How are you then going to get the internet feed from the U.S., U.K., or anywhere else? Sure you can use VPNs or other bypassing products, but the average consumer is not going to be able to do that. There are lots of Canadians accessing Netflix U.S. and subscribing to U.S. satellite services, but these folks represent a small minority.

  3. I think channels work well-enough for new and live content. I’m not fond of having to wait until they finish producing and editing every last episode of House of Cards so they can release them all at once but I do like having them available on-demand immediately and indefinitely upon release.

    Specialty channels like Comedy Gold and DejaView prove just how stuck in the mud the current providers are. Those would make much more sense as internet on-demand services and over-the-air digital sub-channels (due to their low bandwidth, SDTV requirements) to bring down the per-channel cost of digital TV transmitters.

    http://en.wikipedia.org/wiki/Digital_subchannel#Technical_considerations

  4. Cable companies control the internet in Canada, and can strangle IPTV in its cradle using terrible internet service and data caps. Short of Google rolling out its Fiber service on a massive scale (with competitors being forced to offer affordable gigabit internet), IPTV is still probably a ways off yet.

  5. Mr. Brown, I enjoy and respect your work. This is another good post. I am curious how you would respond to the so-called industry experts who have been out there claiming that unbundling would result in the loss of many channels, and therefore programs, among other negative effects. Surely we don’t want less diversity? Being on television is still a very important way for views and groups of people to gain legitimacy and, of course, to reach a wide audience.

  6. I’m tempted to view this in the lens of the ongoing SunTV saga. They tried really hard to get mandatory carriage status, and that failed. I wonder if we’d see this cable unbundling had the Conservative spokes-channel succeeded. There’s some people involved at SunTV that are pretty close to people at the top of the Conservative party. Would they really have fought that hard had they known everything was about to be unbundled anyway?

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