Entertainment

Cable TV Companies Forced to Unbundle in Canada


Minister of Canadian Heritage and Official Languages James Moore speaks onstage during the 2012 Toronto International Film Festival on Sept. 6, 2012 in Toronto

Photograph by Alberto E. Rodriguez/Getty Images

Minister of Canadian Heritage and Official Languages James Moore speaks onstage during the 2012 Toronto International Film Festival on Sept. 6, 2012 in Toronto

Is the future of television going to be Canadian? Probably not. And even if it is, it might not be the future you want. But boy, does it sound nice on first glance.

Over the weekend, a Canadian government official said the country was going to begin requiring cable providers to unbundle the television service they offer, allowing customers to pick and choose which stations they’re willing to pay to watch. This is sort of the Holy Grail for those who like to grouse about cable TV companies, and Canadian Interior Minister James Moore was happy to oblige.

“We don’t think it’s right for Canadians to have to pay for bundled television channels that they don’t watch. We want to unbundle television channels and allow Canadians to pick and pay the specific television channels that they want, Moore said on CTV’s Question Period.

Despite the efforts of one cantankerous Republican senator from Arizona, the chances of U.S. lawmakers soon following suit are relatively small—even if they, you know, start doing anything at all. John McCain’s Television Consumer Freedom Act of 2013 hasn’t moved since it was introduced in May, and GovTrack.us now gives it a 1percent chance of becoming law.

The television industry is likely to fight such legislation because the stakes are really high. According to a study published this summer by Needham Insights, half the industry’s revenue (PDF)—about $70 billion—would disappear if people didn’t have to pay for bundled television. The firm thinks only 20 stations would survive the fallout.

That doesn’t mean the market won’t push them in this direction, and some Canadian cable providers are actually already playing with the idea. Telus (T:CN), one of the country’s largest, offers a pared-down package to existing customers for $29 Canadian ($28.02) and then allows people to add  channels for $4 apiece. It has nearly doubled its consumer base since doing so, according to the Globe and Mail. But the bundles are structured so that people are still paying for the good stuff, which often means they don’t save much.

“Consumers in most à la carte models end up paying more or less the same as what they were paying before, and all they have to show for it is that now they have fewer channels,” MoffettNathanson research analyst Craig Moffett told the newspaper.

Allowing people to buy television channels individually would almost certainly drive up the price of the channels that people actually want. ESPN (DIS), for example, costs cable providers about $5.15 per customer each month. But if only the people who watched ESPN every week were willing to pay, the company would have to charge $13 per month to make the same amount of money, according to Nielsen (NLSN) numbers provided to Bloomberg Businessweek  by Brad Adgate of Horizon Media. The network might have to sacrifice some of that revenue, but viewers would have to meet it halfway.

Meanwhile, channels that weren’t ESPN might stop existing. In television a very few popular shows, or channels, pay the way for everything else. Because no one quite knows what’s going to be a hit, it makes a certain amount of sense to fund television content this way. It does seems unfair that the average household pays for a 200-channel television bundle but watches only 12 to 14 of those channels each month. Then again, according to Needham, almost every single household watches at least one obscure channel that wouldn’t exist if it had to pay its own way.

Some version of à la carte television may eventually emerge. But it might not seem so utopian if it meant paying two and a half times as much for sports, being forced to admit you’re willing to pay for 24-hour news, and not even having the option of indulging yourself with Jewelry Television.

Brustein is a writer for Businessweek.com in New York.

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Companies Mentioned

  • T:CN
    (TELUS Corp)
    • $38.95 CAD
    • -0.55
    • -1.41%
  • DIS
    (Walt Disney Co/The)
    • $90.33 USD
    • 0.06
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