RBC: A-la-carte model ‘directionally negative’ for TV industry
October 23, 2013 | Chris Powell | Comments
Who is most vulnerable to the pick-and-pay model?
RBC Capital Markets is warning of “elevated and lingering regulatory risk” for the Canadian TV industry in the wake of the Harper Government’s recent throne speech outlining plans to mandate the unbundling of TV services.
In a note to clients issued in the wake of the speech, analysts Haran Posner and Drew McReynolds said that the ultimate impact of channel unbundling on the industry would depend on the regulatory framework adopted (pure a-la-carte, pick-a-pack etc.)
Reasoning that it would threaten the continued viability of less popular channels and those that have enjoyed artificially high penetration for historical reasons, RBC called a-la-carte “directionally negative” for broadcasters.
The note said that consumer appetite for a-la-carte services remains unclear, and that the ability to potentially increase pricing for popular standalone channels could mitigate the impact for broadcasters while simultaneously lowering the appeal of channel unbundling for consumers.
While this model could protect subscriber revenue, RBC said that advertising revenues would continue to be vulnerable. The report predicted that the CRTC would strike a balance between increased packaging flexibility and protecting levels of Cancon spend and programming diversity.
The report said that Corus Entertainment is most vulnerable if a pure a-la-carte system is implemented, since specialty TV (excluding pay) accounted for between 45-50% of its total revenues in 2012 (with subscription and advertising accounting for 44% and 53% respectively). Corus properties include YTV, W Network, OWN and CMT.
The report also notes that TVA’s specialty portfolio is growing, although it still accounts for less than 20% of total revenues. French specialties are slightly less vulnerable, noted RBC, since pick-and-pay options are not entirely new to the Quebec market.