I recently moved house and, in doing so, briefly entertained the notion of signing up to cable. It was a very short consideration, given there’s only one channel I really want – the Comedy Network. Fishing around on the local cable provider’s website, I discovered that acquiring that channel, plus a whole lot of other junk I don’t want, would cost me about $73 a month, plus device rental or purchase. If I wanted to add an HD PVR, that would be another $25 or so. I checked on the other guys’ website and, wouldn’t you know it, the prices were pretty much the same. So the one channel I want would ultimately cost me $100. Lunacy, right?
Wednesday’s speech from the throne, which included a promise from the federal government to institute a pick-and-pay system where consumers would be free to choose only the channels they want, has drawn a lot of flak from media commentators for being short on details, silent on major issues and overly populist. My favourite take on it actually comes from Sun Media bureau chief David Akin, who covers the coverage and wonders whether the various columnists and experts are being too precious and self-righteous. The “Media Elites,” he writes, may themselves be out of touch with the things ordinary Canadians care about.
He’s probably right, since the instituting of pick-and-pay TV is something millions of Canadians are likely to be very interested in. Moreover, rather than being the insignificant populist pandering that some are suggesting, such a plan has the potential to shake up and transform the way people inform and entertain themselves.
As a number of observers have predicted, instituting a-la-carte channels is likely to have two obvious results: first, the popular channels will probably end up costing a lot; and second, the unpopular channels are likely to die off. Such predictions use pretty simple math – TV providers package less successful content with the good stuff so that they can sell advertising bundles and then spread that money around. In effect, the better channels subsidize the others.
Pick-and-pay is fundamentally good for consumers because they’ll finally be able to get what they want – say, the Comedy Network – without a bunch of stuff they don’t. The analogies are numerous; for some people, being forced to subscribe to, say, sports channels when they have no interest in them is akin to a vegetarian having to buy steak at the grocery store.
Such a system is naturally bad news for TV providers because they will inevitably make less. As one analyst put it, “I can’t for the life of me see how à la carte programming isn’t going to reduce the amount you and I spend… I don’t see how it can’t have a negative impact” on their revenue.
The question then, is how high can the prices on those individual popular channels go? That’s where the other good news comes in. Exposing channels to actual market forces will actually make them competitive and likely force a change in how they’re sold. If a TV provider prices a particular channel too high, fewer people will subscribe to it. If the actual content provider – say, HBO, for example – isn’t happy with the number of subscribers (and revenue) it’s getting from a particular television provider, it may find it more worthwhile to go direct to consumers over the internet through a Netflix-style streaming service.
HBO fans, for one, have been waiting and praying for this to happen for a while now. A forced split from TV bundles may be the final push the channel needs to do a direct offering, free from any sort of cable subscription. The same could happen for a lot of channels. Ultimately, TV providers could be disintermediated from the entire process.
The current TV situation bears many similarities to the block-booking system that Hollywood ran on until the late 1940s. Under block booking, content providers (movie studios) required theatres to buy and show less-desirable B fare if they also wanted the A-list stuff. The system spread the cash around for the studios, but it cost the theatres more and at the same time disseminated a lot of low-quality content.
U.S. authorities found the system to be inefficient and anti-competitive and in 1948 they smashed it open. Actors were laid off and fewer films were produced initially, but the various players adapted, innovated and improved. No one can argue the movie industry hasn’t been better for it since in every measure.
The TV realm is likely to see the same gains after the same initial pains. As Chase Carey, chief operating officer of the Fox television network, recently said: “The priority should shift from quantity to quality. We’d rather have a bouquet of great channels than acres of mediocre channels.” In other words: more Breaking Bad, less World’s Craziest Fools. That’s a world I’d like to live in.
The broader TV system isn’t likely to change unless a shakeup happens where it really matters, down south in the United States. Canada, however, is still an important market for U.S. television and a big change here may really be the one card that finally causes the whole house to topple.
The details of the government’s pick-and-play system are important, but make no mistake: if done correctly, it has the potential to dramatically change how a great many North Americans inform and entertain themselves. Despite what the “media elites” may say, this could be a potentially huge development.