Consumer Confidential With David Lazarus
Column

High channel prices overshadow arrival of a la carte TV in Canada

Since the beginning of the month, Canadian pay-TV companies have been required to offer channels on an a la carte basis — that is, allowing customers to pay only for the channels they want, rather than having a costly bundle of more than a hundred channels shoved down their throats.

That probably sounds like a dream come true for American consumers, for whom the average monthly cable bill now runs $103, according to Leichtman Research Group. From 2011 to 2015, U.S. cable bills rose 39%, nearly eight times the rate of inflation.

Unfortunately, the Canadian experiment is already demonstrating that pay-TV companies and programmers won’t give up their old ways without a fight. Their response to government unbundling rules has been to price many a la carte channels at such high levels that it seldom makes sense to abandon fatter packages.

“We looked at the new plans,” Calgary resident Steve Finley told me. “It ended up being cheaper just to stay with our old bundle.”

A spokeswoman for the Canadian Radio-television and Telecommunications Commission, the chief industry regulator, declined to address such consumer sentiments. Instead, she passed along recent remarks by the commission’s chairman, Jean-Pierre Blais.

“We’ll be closely monitoring how television service providers are implementing the new TV choices and if they’re following the best practices we have identified,” he said.

Blais added some teeth to the equation. He said that most pay-TV companies will have their licenses come up for renewal next year.

“We will not hesitate to take action if any provider doesn’t conform to the established policy or respect Canadian consumers and their right to choice,” Blais said.

What’s happening in Canada isn’t necessarily unique to that country. Canadians get their pay-TV the same we do — cable, satellite and broadband lines. American pay-TV companies are thus watching closely to see how the industry and consumers in the Great White North respond to the new rules.

Since March, all Canadian pay-TV companies have been required to offer basic programming packages of major networks and educational channels for no more than $19 a month (that’s in U.S., not Canadian, dollars; I’m converting all figures here to American cash).

Service providers also have had to offer additional individual channels on an a la carte basis or so-called skinny bundles of no more than to 10 channels. But that changed Dec. 1.

Now, Canadian pay-TV companies are required to give customers a choice: They have to offer a la carte channels and skinny bundles. Customers can go with whichever option suits them best.

Finley, 48, said he pays about $68 monthly for a bundle that includes most popular U.S. and Canadian networks and cable channels. He said he considered getting the $19 basic plan and then adding all his favorite channels a la carte, but this ended up being more expensive than the bundled rate.

George Burger, co-founder of pay-TV provider Vmedia, told me that if someone has very specific viewing habits, a la carte channels or skinny bundles can lower monthly bills. But if you desire greater viewing choices, costs can add up fast.

Vmedia’s basic programming package of channels, including the top U.S. and Canadian networks, goes for about $13.50 a month. Some additional channels can be added for roughly $2.25 each. But desirable channels such as AMC and CNN can run more than $5 apiece.

“If you want three or less channels, you’re fine,” Burger said. “But once you get above that, it usually makes more sense to get a bundle.”

He said only about 9% of Vmedia customers have opted for the company’s $13.50 skinny package. “The vast majority are more comfortable with a bigger bundle.”

That’s not a coincidence. Canadian pay-TV companies seem to have adopted price points that make it easy to up-sell customers to more expensive packages once they express interest in the most popular channels. The pitch: Why not pay an extra $10 or so and get all the channels you want plus a bunch more?

For instance, Vmedia customers could pay a total of about $26 a month for AMC, CNN, TCM, A&E and TLC. Or they could pay $34 for a bundle that includes those five plus 65 other channels.

And suddenly we’re back where we started, with consumers paying for dozens of bundled channels they don’t want — even though the new law, dubbed “pick and pay,” was billed by government officials as a way to allow Canadian TV viewers to get rid of unwanted channels and presumably save money.

Every Canadian pay-TV and programming exec I contacted said no one should be surprised that a la carte channels cost more than the bundled variety.

“We have found the vast majority of customers prefer prepackaged programming options,” said Scott Henderson, a spokesman for Bell Media. “They’re more convenient than sorting through and choosing from the hundreds of channels available and tend to offer better overall value than a selection of individual channels.”

Aaron Lazarus (no relation), a spokesman for Rogers Communications, likened Canada’s pay-TV scene to a burger joint.

“Some folks want it plain, many want the full combo meal, and lots of people want to pick the toppings or their favorite side,” he said. “At the end of the day, people will put together the TV package that is right for them and their family and delivers the best value.”

That assumes people will keep buying Happy Meals because they’re cheaper and filling, if not exactly what they wanted.

I think Canadian pay-TV companies are seeing what they can get away with — and their U.S. counterparts are paying attention as skinny bundles such as Sling TV and DirecTV Now become more commonplace here.

Service providers in both countries are eager to keep profits as high as possible despite changing regulations and viewer expectations.

See the most-read stories in Business this hour »

What will wipe the smugness from the pay-TV industry’s face is the same trend that’s humbled the newspaper business: online distribution.

People are growing increasingly comfortable accessing information and entertainment via Internet connections, and they won’t pay high prices for content that’s similar to what other sites give away free. My teenage son doesn’t watch TV. He watches YouTube.

Since I cut our household’s cable cord and switched to cheaper streaming media, I thought the channels I’d miss most would be AMC and CNN.

I’ve done just fine without them. And I won’t pay $5 a pop to get them back.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.

ALSO

U.S. senators quiz AT&T, Time Warner executives over how planned merger would affect consumers

Shareholders OK Lionsgate's purchase of Starz for $4.4 billion

Donald Trump keeps financial ties to NBC reality show 'Celebrity Apprentice'

Copyright © 2017, Los Angeles Times
EDITION: California | U.S. & World
65°