Prodded by regulators, Bell unbundles its TV networks
Jamie Sturgeon Jul 20, 2012 – 1:31 PM ET
The option to pick and pay for only the channels that a viewer wants to watch moved closer to becoming a reality for millions of TV subscribers on Friday.
Bell Media, the country’s largest channel owner, said it will allow television distributors like Cogeco Cable Inc. and Telus Corp. to unbundle its channels and offer them individually following a regulatory ruling.
It is a risky gambit that could dent revenues at Bell’s entertainment unit, but a necessary strategy given today’s market place which is enabling consumers to seek out content from an array of competing sources, predominantly online.
The aim in providing greater choice to subscribers—a goal spurred on by broadcast regulators—is to keep them from straying.
We’re trying to accomplish twin objectives: To give more choice to viewers while ensuring the broadcast system remains healthy,” Kevin Crull, head of Bell Media, said in an interview.
The Canadian Radio-television and Telecommunications Commission decided Friday to adopt a proposal from Bell to allow its channels to be unbundled while rates for individual networks will fluctuate based on the number of subscribers who sign up.
Friday’s ruling rejected a plan from a group of smaller distributors that included Cogeco Cable Inc. and MTS Inc. to keep a fixed rate on channels regardless of penetration.
Aaron Lynett / National Post
Lady Gaga performs at the Much Music Video Award in Toronto.
A key reason in accepting Bell’s model was the telecom giant’s relenting on its demand that cable partners distribute all 29 of its networks, which include channels like TSN, Discovery and MuchMusic. Instead, Bell will allow operators to sell services individually.
Those networks each generate hundreds millions of dollars annually in subscribers fees. To offset potential financial losses for Bell’s broadcast arm—which like other broadcasters must fund an assortment of
subsidies that go toward Canadian content production— Bell will charge higher rates per channel.
“Fewer channels will mean unit costs for those channels will be higher than if you buy a bigger package,” the Bell executive said. “There’s a volume discount” for viewers who take bigger TV tiers with more channels.
If TSN for example costs a cable subscriber $2.50 month in a bundled package, individually, that fee could soar north of $10. Still, by opening up channels, consumers who want fewer channels at a lower cost will get their wish, Mr. Crull said.
Asked whether the new model lower bills, which are averaging about $60/month nowadays, he said: “It will for some people for sure, you will now have the ability and choice to buy a package that very well could lower your overall bill.”
The Bell executive said it is up to each cable company to decide on how it will package — or unpackage — Bell’s channels.
With Bell shifting away from “tied selling” other major channel owners like Shaw Media and Rogers Media are likely to follow suit. “It wont just be us, if you’re a cable provider, you really need all of your suppliers to participate,” Mr. Crull said.
Alongside the Global TV network, Shaw owns about 18 specialty channels, including HGTV and The Food Network. Rogers owns Sportsnet as well as OLN and The Biography Channel among other networks.
“I think it’s an evolutionary step,” Ted Woodhead, vice-president of regulatory affairs at Telus said. “It’s an affirmation that skinny basic cable is the way to go, an affirmation that consumers should have more control and choice.”
Telus has been aggressively pushing for a more flexible channel model, taking more expensive networks like Bell’s TSN out of its basic service to give customers the choice to pay for the sports network or opt out.
Friday’s CRTC ruling stems from a carriage dispute between Bell and many of the country’s TV distributors, including Cogeco. Until recently, Bell had insisted expensive networks like TSN meet minimum penetration rates, meaning providers had to put the channel in their basic packages, which drove higher subscriber and advertising rates for BCE’s media unit.
Smaller providers like Bragg Communications, the Canadian Cable Systems Alliance Inc. and MTS have also been worried Bell would attempt to drastically lift wholesale carriage rates on its channels, which were acquired by the telecom giant last April when BCE bought broadcaster CTV Inc.
Bell sells a competing satellite service in areas where each of those companies operates.
Most of the contracts between then-CTV and the country’s TV distributors had lapsed at the beginning of 2011. New “vertical integration” rules established by the CRTC last spring kept signals flowing between Bell Media and the cable operators during negotiations.
Talks reached an impasse this spring, however, forcing parties into final-offer arbitration overseen by broadcast regulators.
Even as viewers shift their viewing habits to new platforms, like online and on wireless devices, Mr. Crull suggested the model adopted by Bell will mean television programming development won’t be disrupted.
“We invest a lot in programming for TSN, for Discovery, for MuchMusic. We want to continue to, to keep the quality of programming where it is, even if fewer customers choose it.”