Pick and pay versus bundled packages- Cable industry faces stiff opposition in bid to offer new TV channels à la carte

A large rift has opened up in the Canadian television industry over how new digital specialty channels will be sold to consumers. The Specialty and Premium Television Association (SPTV) and the Canadian Association of Broadcasters (CAB) are facing off against the major cable companies, represented by the Canadian Cable Television Association, (CCTA) over the issue of whether digital channels should be offered on a pick and pay basis or sold in packages. Both sides gave the issue high priority in their interventions to the CRTC, which begins licence hearings for new digital channels on August 14. In its intervention, SPTV argues that highly penetrated broad digital packages will ensure long-term choices for Canadians and the viability of quality Canadian digital programming. The digital specialty rollout in Canada will be "stillborn" if the CCTA-supported pick and pay system is enshrined by the CRTC, the SPTV warns. Pick and payis the favourite way:CCTA surveyCanadians want to create their own packages of TV services as new digital channels come onto the market over the next year, according to new consumer research published by the Canadian Cable Television Association. The survey, conducted last month by The Strategic Counsel, was filed with the CRTC as part of the digital TV hearing. The Strategic Counsel asked 1,000 cable customers to rate four generally recognized approaches to marketing pay and specialty television services. The research found that most customers want digital services offered on a stand alone ‘Pick and Pay’ basis or in a ‘Pick Pack’ where they build packages of services to suit their interests (see box). The less attractive options were, Themed Packages of three or four related digital services, and a Large Package with as many as 15 channels. The Strategic Counsel surveyed 1,000 cable customers across Canada and found that most want a choice over each digital channel they pay for. Pick and pay80% found very appealing50% found appealing Pick Packs68% found appealing Themed Package37% found appealing Large Package29% found appealing"The commission should encourage BDUs (broadcast distribution undertakings) to market new digital services in a ‘top-down’ fashion, where consumers receive highest value. Selling services using a top-down approach requires aggressive marketing of all-inclusive and broad programming packages above other marketing approaches such as thematic packages, pick a pack and pick and pay," the association states in its July 7 intervention. SPTV wants the CRTC to order BDUs to sell packages with at least five services, regardless if the service is licensed as a Category 1 or 2. "We note that Canada’s direct-to-home ("DTH") satellite TV operators have been successful in selling theme programming packages within an overall top-down marketing approach, as evidenced by the relatively high number of subscribers they have attracted since launching their DTH services in 1997. The majority of DTH customers have welcomed the flexibility and increased choice provided by theme packages and, in response, have purchased a large number of programming services where they receive the best value," the association writes. But CCTA president Janet Yale says her members oppose any rules that would create new tierage systems. "Our focus is recognizing that digital technology isn’t analog technology," she told CCR, "We have to recognize and empower consumers to be able to pick and choose the services they want and the packages that most appeal to them. There has to be a sense that it’s the market that will pick the winners, not the regulator. There shouldn’t be restrictions on packaging flexibility that limit the ability of customers to exercise the choices possible with digital technology. "There will not be a ‘one size fits all’ solution," she adds. "That’s what you’re limited to in analog. You can have a bunch of different options available to customers, and they get to pick, depending on their interests and tastes. The fundamental premise is, that in an environment where people can take services one at a time, it’s not that they will, but if you tell them that they can’t, they get really angry." Unlike analog distribution, Yale notes that digital technology also lends itself more to pick and pay offerings. "With analog technology, we have to offer services in packages, because that’s the only way you can track them in or out," she explains. "Digital technology, just by definition, lets you scramble and unscramble services one at a time." She maintains that the CRTC "got it right" when it set its rules on digital packages, and that her association will fight to prevent SPTV and the CAB "from re-creating the analog world." While unpopular with production companies and channel owners, Yale says pick and pay is the only system that has a chance of catching on with consumers. "It’s clearly not as financially attractive to customers, to cable companies, or to programmers, if they take them one at a time. When you buy in bulk, the price is cheaper for the services in the package. We’re certainly going to aggressively market people taking more rather than less, because we make more money, the services make more money, and everybody’s better off." The SPTV isn’t alone in this battle, and has found an ally in the form of Canada’s most powerful broadcasting association. In its intervention, the CAB says the survival of digital specialty programming – and of digital television itself – depends on the way the services are sold. "The perceived attractiveness of packages, in terms of construction and pricing, and the focus by distributors on the promotion of these packages as the preferred option for consumers are key determinants both in providing choice and value to consumers and in driving the deployment of digital television," the CAB writes in its intervention. The broadcasters’ association points to the failure of Canada’s first attempt to provide à la carte services in the early 1980s. The pay per view services were launched in an analog environment, and with little competition, yet they failed to provide value or affordable choice, the CAB notes. "Experience has shown us that a marketing campaign focussed on à la carte offering does not promote the penetration of services. Rather, it discourages the take up of services. Without looking for guarantees for success within the system, services are simply looking for the best circumstances in which to contribute and ensure affordable choice to their viewers," the CAB writes. "One of the great advantages of digital is not just the technical ability to offer à la carte," the CAB adds, "but to simultaneously assemble a variety of packages and pricing options and to market these creatively and cooperatively."

Pick and pay versus bundled packages- Cable industry faces stiff opposition in bid to offer new TV channels à la carte

Broadcast | July 19, 2000

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