Will Canada provide a test of a la carte?

The Honourable James Moore, Canadian Minister of Industry

The Honourable James Moore, Canadian Minister of Industry

Canadian Industry Minister James Moore made a bit of news over the weekend when he told The Canadian Press that the government plans to require cable and satellite TV companies to offer a la carte programming choices to their customers. “We don’t think people should be forced to buy bundled television channels when they’re not interested in watching those channels and those shows,” Moore said, according to a story in the Edmonton Journal.

The Canadian Radio-television and Telecommunications Commission, which regulates TV in Canada, had already nudged the industry in that direction in 2011. Rogers, one of the country’s largest cable operators, responded by offering London, Ontario viewers a “skinny basic” package with extra channels available as add-ons, and that plan proved very popular there. But many other companies resisted such plans, which were optional, so Moore said the government needs to step in.

“It’s not a command economy, we’re not going to put in place onerous regulations. We’re a government of deregulation,” Moore insisted. “But from time to time, we think that the best interest of consumers need to be enforced in the marketplace.”

Now there are plenty of people who will tell you that a la carte pricing is not in the best interest of consumers. At the CEDIA Expo last month, I was fortunate to share a table with Bruce Leichtman, brilliant president of the Leichtman Research Group. Our conversation about various topics was always friendly, but when I mentioned a then-recent a la carte news story, Leichtman launched into an impassioned lecture on the naivety of a la carte’s supporters and the widespread collapse of TV programming that would result if a la carte were ever implemented in the US.

I respectfully disagree. The vast majority of broadcast and pay-TV channels in the US are owned by just six corporations. These corporations routinely pad their packages with extra channels filled mostly with reruns from other channels they own. These extra channels serve to occupy space on cable and satellite operators’ finite channel bandwidth, blocking potential competitors and often eventually rebranded as ready-made launch platforms for completely different channels. If viewers actually had to pay 10 cents for H2 or MTV2, those programmers would probably throw them in for free with something else.

In an a la carte system, some current channels might die. Many others would experience profound changes. ESPN is getting around $5 per month per subscriber. If viewers could save $5 by opting out, ESPN would lose a lot of cash, but then what? Disney, ESPN’s owner, would be intelligent enough to set its price to achieve maximum overall profit. Considering that its advertising revenue is based on number of viewers, I think that ESPN’s price would stabilize at a point where any sports fan would want to buy it.

Even if some channels died, that would make room for new channels, and they’re out there. Just check out the continuing growth in digital sub-channel networks broadcasting over the air. These are networks that aren’t getting a dime of retransmission money, but they keep popping up. Maybe there’s something to this advertising-supported TV model.

For a long time, I’ve talked about Canada whenever the topic of a la carte came up. Canadian satellite TV companies Shaw Direct and Bell TV (and their predecessors) provided basic programming packages and a lot of small bundles of channels that were available to add on to those packages. Maybe it’s the smaller Canadian market, but this system hasn’t precipitated programming apocalypse. Even though channels such as Slice aren’t in every core package, they somehow survive.

Nobody really designed cable TV to be a bundled system; the technology at the time of cable’s origins demanded it. Nobody really knows exactly what would happen if each viewer were now allowed to choose individual channels. Some media companies would probably lose profits in an a la carte system, but maybe it’s something worth trying anyway. We’ll see what happens in Canada.