Report: Separate channels will end pay TV

2012-06-26 10:53
Thinus Ferreira
Cape Town – If pay TV operators were forced to sell TV channels separately to their subscribers on a so-called a la carte basis or as part of a so-called "unbundling" of their TV channels, it would destroy the billion dollar pay TV industry, a new independent analysis on the pay TV industry has found.

A new report warns that so-called "unbundling" would lead to less choice and to only 10 TV channels in America surviving the move.

In America the department of Justice is investigating the pay TV industry as well as the programming and TV channel bundling agreements – the basic premise on which the pay TV industry's model is based.

1 million jobs

This comes as South Africa's National Consumer Commission issued a compliance notice to MultiChoice's DStv, On Digital Media's (ODM) TopTV and the SABC which the commission since had to retract after it acted too hastily.

The Commission wanted them to sell and make various TV channels available separately - in essence selling single crayons instead of crayons by the box.

Now a new independent American analysis by Needham & Co has issued a grave warning that forcing pay TV companies to offer TV channels on an a la carte basis - giving individual TV channels separate prices and allowing each subscriber to choose the TV channels they want to pay for - would present tremendous risk to every company in the TV business, including production companies, separate broadcasters and the entire TV ecosystem.

In the new report by analysts Laura Martin and Dan Medina from Needham & Co, the analysts warn that if pay TV operators are forced to "unbundle" TV channels, it would destroy $300bn of value within just the American TV industry.

It will also endanger 1 million jobs within the TV industry, it will negatively impact consumers' video choices, and that only five to 10 traditional TV channels in America would be able to survive such a move.

Cease to exist

"The government is a bull in the proverbial china shop with unintended consequences likely to destabilise the delicate work of the invisible hand which is working today in the TV ecosystem," Dan Medina and Laura Martin said.

Without the ability to sell TV channels in a bundle to consumers, just five to 10 "hit channels" would be profitable enough on a standalone basis to survive unbundling, says the analysis.

This means that hundreds of TV channels - even though a specific channel may be the favourite of a specific pay TV subscriber - would become uneconomic to produce and run and would simply cease to exist.

The report surveyed 500 TV viewers in America to gauge which TV channels they would like, would select and would pay for if they were able to choose just the TV channels they want.

Pay TV revenue will drastically decline

"Minority and special-interest channels would be unlikely to survive," the Needham & Co analysis found.

"Since the average TV households watches 12 to 14 TV channels each month, every household would lose TV channels which they believe are important to them. In an a la carte world, consumer satisfaction would be destroyed."

The report said an a la carte model would "bankrupt all niche TV channels within five years, destroying enormous value" for TV viewers and pay TV subscribers as well as the industry as a whole.

Pay TV revenue would also drastically decline by between 15% to 20%, and ad revenue will dramatically plunge by 75%, the analysis projects.

It would put 1 million jobs in America at risk which includes employees at pay TV operators, telecommunication forms and 500 000 employees at media companies who all depend on profits generated within the pay TV industry.

"We believe that every job in these companies is at risk if the TV ecosystem is disrupted by the government because TV is the most material contributor to revenue in every case," said the report.

Thinus Ferreira is an independent TV critic, writer and journalist covering South Africa’s TV industry. Read his blog here.

Comments

  • thebe.tau - 2012-06-26 11:06

    I don't understand why people should pay for tv chanels they don't want to watch, why can't Multichoice do a research on which of their channels are the most popular and then get rid of the useless ones.

      Castiel - 2012-06-26 11:11

      Or at least drastically reduce subscription prices.

      thebe.tau - 2012-06-26 11:16

      What they are going to do is to add more useless channels that they got at a very cheap price so they can push to get R650-R700 out of us, criminals if you ask me.

      mrbroom - 2012-06-26 12:02

      The difference in America is that TV is A LOT cheaper than here. It's daylight robbery for Multichoice to charge over R600pm for TV. Internet is becoming cheaper, electronics are becoming cheaper, computers/DVD's/CD's etc too. Yet every year, the DSTV charge becomes more and more ridiculous...

      harald.voney - 2012-06-26 14:40

      Its quite simple, Gov says we need a certain amount of local content... which is genrally crap TV, so that gets moved to some of the less popular channels, to keep the puplic who pay watching the stuff they want to watch... closing all the alternative channels will kill the local production industry before they mature and produce something worth watching.... And before you say " thats ok, put it on the popular channels and don't screen the popular stuff", I,like loads of other people, will not pay to watch the local crap, stop our subscription and that will be that.... the end of DSTV, Mnet, TopTv etc etc The only one to survive would be SABC, and that would be (as usual) because the TAX payer is paying for it to keep its doors open... And I will not watch SABC, because that is really crap TV

  • erich.goosen - 2012-06-26 11:13

    If this argument holds water, it is abundantly clear that Multi Choice has too many rubbish in its bouquet. Retain the popular channels and lower the subscription fee and you might be surprised how many new subscribers will join.

  • thebe.tau - 2012-06-26 11:22

    Why are we subsidising these no good channels, they should have told us this is a charity organisation, I don't to pay just to keep afloat somone who has a dream of owning a channel, if they struggling they must merge.

  • julie.vanniekerk.3 - 2012-06-26 11:31

    No matter how much we complain, Multichoice does not listen to us!

      Press - 2012-06-26 11:53

      Vote by cancelling your subscription.

      mark.scheepers.773 - 2012-06-26 12:41

      I cancelled my subscription because I was not prepared to pay the constant rise in cost for the sevice. It was difficult at first, not having access to shows I frequented. But my family & I have overcome this need and moved on to other things in our lives. Looking back we realized DSTV was nothing more than an addiction and the reason why most subscribers complain about the cost but continue paying for the service. Oh, and forget about DSTV, reducing the cost when there is still a demand for the service, and everyone's hooked on a couple of 'good' shows. They don't give a damn about the subscribers, that's why they constantly raise the cost and add rubbish content as justification.

      john.jacobs.90663894 - 2012-06-26 16:52

      Remember, there are greedy shareholders that expect return on their investments. Cancel subscription, or pick a cheaper bouquet.

  • jacqui.daanevanrensburg - 2012-06-26 11:34

    MultiChoice get a lot of these rubbish channels for free and sell them to us. Wwe don't ask for them, we don't want them yet we have to pay for them. In other words we are being forced to pay for all this tripe, just because we want to watch sports and one or two other channels. The sooner we are allowed to choose our channels the better. Mind you then MultiChoice will probably make it even more expensive.Greed being the motivator here.

  • gerhardus.stefanus.5 - 2012-06-26 11:45

    Well good news for Google TV and Apple TV, apparently you will be able to search for something too look for like Youtube, it's basically Youtube, and Google is getting new directors to make shows exclusively for them. In the end the whole industry is going to change.

  • Neil - 2012-06-26 11:55

    I understand the problem that the niche shows would lose out and niche viewers would lose their shows. However, why should the average viewer subsidise shows he doesn't want? Instead, to make it fair and still profitable why don't the pay channels sell bundles of 20, 30, 100 etc. shows... but shows you can choose. So the jocks can choose sports channels, the nerds can choose science channels, average Joe can mix and match, but he still has to pay for 20 or 30 or 100 channels. This should even things out and the jocks, nerds, music fans, movie buffs and average Joe will be happy, paying for something they actually want.

      davesub - 2012-06-26 12:16

      Good call, Neil. But do we REALLY expect Multichoice to pick up on this and run with it? NO way - they have a fu@ken monopoly with no competition - why would they want to stop raking in money? It is up to US - the public - to make them change by unsubscribing ....

  • johan.maree.5036 - 2012-06-26 12:08

    So basically they are saying that if they have to compete for viewers they will fail? Competition improves performance, we wan't to have better channels! We want to pay for what we want not what we don't! Maybe it would stop (or at least decrease) below standard entertainment...

  • Anakin - 2012-06-26 12:19

    I feel NOTHING for Multichoice/Dstv, overseas pay channels is a different matter though. We don't have enough competition to Multichoice here, and when there is they practice anti-competitive behaviour. A standalone example of this is how they stopped the importing of DVD recorders into South-Africa, purely because it affects THEIR OWN PVR sales countrywide: DVD Recorders and Multichoice/DSTV ================================== 1. DVD - HDD Recorders and DSTV http://www.businessmasters.co.za/showthread.php/6549-DVD-HDD-Recorders-and-DSTV 2. DVD RECORDERS BANNED IN SOUTH AFRICA ? http://www.avforums.co.za/index.php?topic=12507.0 3. LG digital TV DVD recorder .... UK [ not allowed in SA ] http://www.lg.com/uk/blu-ray-dvd-players/lg-DRT389H-dvd-player

  • cronje.fourie - 2012-06-26 12:51

    Ok so in America with a population of around 311 million people, these trustworthy independent researchers...questioned 500 people, that's about 0.00016% of the population. And based on this they believe there results are conclusive. BAH! Their independent study was most likely funded by the "invisible hand" that keeps screwing the people in the US same as here with us. And for the rest of you...stop crying and moaning about the cost of your MultiChoice. It's there in the name...it was your "CHOICE" to buy their rubbish. No one is forcing you to buy it, and why should MultiChoice listen to morons who complain about their product but buy it anyway. If you don't like the price of DSTV, cancel your subscription or shut-up.

  • Siegeknives - 2012-06-26 12:56

    I personally don't watch tv. To get decent veiwing I'd have to get the full package, which unfortunately for multichoice to rich for my blood. I'm very happy with my monitor and gaming. Besides it's still cheaper to buy a contract at the local video store and rent a movie or two every day, then it is to get satelite tv. If your local video store polishes their dvds and people take care when handling them, they should work 99% of the time. Plus you get what you want without those lowd add breaks :)

  • raymond.d.pickering - 2012-06-26 12:57

    It is not only the rubbish channels that are included in our monthly subscription but the repeats! "Who wants to be a Millionaire" programs are being shown repeatedly that go as far back as 2002-2005. We don't need a HDPVR to record programs - we get them repeated till they come out of our ears each week!

      john.jacobs.90663894 - 2012-06-26 16:57

      Its about the greedy shareholders, remember?

  • steve.barrow.104 - 2012-06-26 12:59

    The entertainment industry always comes out with something like this. The cassette recorder will kill the music industry. The VCR will kill the TV industry. The DVD will kill the movie industry. These divices have been around for a while now and I haven't seen Brad and Angelina looking for handouts at the stop street yet. Freedom of choice for the consumer is always resisted by these corporations.

  • Siegeknives - 2012-06-26 13:00

    I personally don't watch tv. To get decent veiwing I'd have to get the full package, which unfortunately for multichoice to rich for my blood. I'm very happy with my monitor and gaming. Besides it's still cheaper to buy a contract at the local video store and rent a movie or two every day, then it is to get satelite tv. If your local video store polishes their dvds and people take care when handling them, they should work 99% of the time. Plus you get what you want without those lowd add breaks :)

  • Siegeknives - 2012-06-26 13:00

    I personally don't watch tv. To get decent veiwing I'd have to get the full package, which unfortunately for multichoice to rich for my blood. I'm very happy with my monitor and gaming. Besides it's still cheaper to buy a contract at the local video store and rent a movie or two every day, then it is to get satelite tv. If your local video store polishes their dvds and people take care when handling them, they should work 99% of the time. Plus you get what you want without those lowd add breaks :)

  • yusuf.mahomed.319 - 2012-06-26 13:23

    Multichoice will never change the way they currently conduct business, why should they? I don't agree with the monopoly they have and the way they treat their viewers like fools but the only solution to this problem is if the viewers implement a complete BOYCOTT of the company, this will force them to take immediate action and re-look at their business model. I personally would support any sort of boycott action taken against DSTV.

      john.jacobs.90663894 - 2012-06-26 16:57

      Its about the greedy shareholders, remember?

  • Ken - 2012-06-26 13:57

    So what most of you are saying is lets all watch the same channels with Little choice. What one person finds boring is another persons favorite. You think Naspers will lose money. If there are 5 channels left expect to pay R120 per channel. Or they will take the most popular channel and charge R300 and the other 4 at R75 each. I have the internet and so don't watch much T.V When they drop the financial programs e.g. Summit they would lose me as a viewer and the rest of you can pick up the tab. Yes Naspers (DSTV) is charging too much but this is because of lack of competition and signing up all the sport and overseas distributors. There is nothing you can do, either pay or switch off.

      Ken - 2012-06-26 14:00

      Oh and sorry those of you who support Government intervention can look forward to staring @ a test pattern each evening.

      john.jacobs.90663894 - 2012-06-26 16:56

      We've downgraded to Select 2, purely because we enjoy watching Kyknet. It's a rip off paying R600pm for all the repeats, and we're not addicted to sport either. Internet can provide the movies & music on demand, as and when we want to.

  • nicola.barbour - 2012-06-26 14:45

    What rubbish! Mnet made fortune, as a separate stand-alone channel (crayon!) waaaaaay before DSTV and its bundles (crayon boxes) came into existence. And that was in a time when SABC was still producing entertaining content. Besides which - this is a yank study. What relevance does it have in this country. Must be a DSTV press release to news24!

  • jmackiedann - 2012-06-26 15:35

    judging from the aboveAmerican research the logical and athical thing for dstv and toptv to do is to drastically reduced their subscribtions to satisfy their customers who must pay for things they dont need and mostly dont want

  • aiazmir - 2012-06-26 18:26

    There must have been 30 odd comments here - all negative. Do yourself a favour and lobby 4 - 5 people every month to cancel their subscriptions, and within 6 months DSTV will have got the message.

      KevvyW - 2012-06-27 12:56

      Totally agree....Lets post on DSTV'S facebook what we intent to do...and see what happens...Everyone that plans on cancelling...let them know...give them 1 month to think about their options and let's see - Power to the people....

  • Lorraine - 2012-06-27 08:06

    This is complete and utter BS. Tata Sky TV has been doing exactly that, very successfully and affordable. http://www.tatasky.com/channel-packages.html

  • KevvyW - 2012-06-27 12:51

    I have been advocating this for many a years now. We as South African are addicted, or let me say the privileged are addicted to DSTV and , let me go on, cars, useless gadgets etc etc. We know we are paying way way too much for a product, but we will still get it. We are in a sick cycle of consumerism, which is about to kill us. I hv been travelling the world, and SA is one of the most expensive[ on the backdrop of income] in the world. I take for instance the Hummer that was fully built in SA. It costed us R300k+ and the same vehicle being exported to the middle east costed them halve the price. Tell me HOW. So we will be talking about this issue for many more years till Mzanzi wakes up and smell the roses. DSTV should even cost us R300. Unlimited ADSL internet should not even cost us R150 p/m for the fastest speed availible. What do we pay ? R2000 - R3000 p/m. Daylight robbery ? ? Fo sure...And all the ombudsman are also in bed with these people. I have written quit a few letters already concerning this economy, that is build around the rich....Will we get anywhere ? ? Hope so, but it's not gonna happen soon. Look at car pricing, REDICULOUS....Eskom just hiked our energy, and what do they show ? How many billions of Profit ???Oh Yes fo the CEO and his croneys to get a FAT BONUS YA....Telkom is not far behind, and also a monopoly [ Oh sorry I forgot it's Government driven]....Peace Family....

  • Kwajo.m - 2012-06-27 16:01

    This report has nothing to do with South African pay TV suscribers. In South Africa there is nothing much that is being produce here. Nearlly all pay TV material view on South Africa pay per view channels are imported from Americans so this report has nothing to do with what will happen if done. Mathematically those that are say it will be expensive to unbundle the channels, and most would cease to survive. If it does not worth watching why should it survive. views's needs need to be cartered first. If i need only sport channel on DSTV why should i pay to keep Big brother Africa, and the Idols running. I need to choose what I want to see. If there are viewers who want to pay to see other small channels let them pay what ever would be charge. We can not continue with this as if its an amensalism.

  • leon.vanderlinde.14 - 2012-06-27 19:11

    Then let them die off. I am only prepared to pay for what I want to watch. If there are channels nobody want, get rid of it. That is why I cancelled my MNET subscription. I am not going to get something yhat is useless to me. Only the top parcel has MNET. So stuff them. The lowest packet has only junk channels. Multichoice, may you rest in pieces.

  • theuns.botha.5 - 2012-07-31 16:16

    So am I right if I say then that we pay people to produce unviewable crap that was not viable to stand on its own in any case. If a channel is too crappy to solicit viewers, why must we put money in the pockets of the producers. It sounds like a racket to me, where the general public are forced to pay people for basically nothing.

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