Why is Pay TV Channels packaging done ? Is a-la-carte channels better ?
So, you may have been wondering for so many years about channel packaging on your Digital TV. Whether in India or abroad, creating bouquets of channels or packages is a common practice. and a general feel among everyone is that it is expensive. May be Yes, May be No. For some people, it will be expensive and for many, it might not be.
A normal human being (TV viewer) tends to track/watch about 20 channels on an average. An average TV viewing time for an individual is around 2 hours. Depending on the human nature and behaviour, any human being watches a particular categories of channels most of the time and then, rest of the time goes in watching other categories. For example: If a person loves sports, he will be spending almost an hour on watching sports, then about 15 minutes of news, 15 minutes of information channels (discovery/Nat Geo) and rest of the time is divided on movies, general entertainment and music channels. And for this kind of person, an ideal channel line up will be all sports channels, a few news channels, a couple of informatory channels and then, a couple each of other categories. So, essentially, this person is gruntled as he believes that he ends up paying for more number of channels than he actually watches ever.
But if that’s the case with everyone, why do service providers package channels ?
Benefits Of Consumers:
Consumer Viewing Habits : Believe it or not, Channel surfing is a most common habit. Out of 2 hours of average viewing time, people end up spending at least 40 minutes on channel surfing before narrowing down on a particular channel to watch. Channel surfing is classified as when you spend an approximate time of 1 minute or less on a particular channel before moving to next channel. Now, if people subscribe only channels of their choice, they will hit “cannot view this channel as you do not subscribe” a lot more which becomes irritating and content discovery becomes impossible leaving consumers high and dry.
Ease Of Use: Imagine keeping track of new channel launches, TV Series moving from one broadcasting channel to another one. A particular movie being shown on multiple channels on different days or you want to compare opinions of experts on different news channels. There are so many other such user experience issues. If you have to subscribe to each individual channel , it will become a nightmare for a user.
Technical Know how: Most of the users think TV viewing is easy but it is not. There are approximately 30 buttons on an average remote control unit of a Set Top Box. How many buttons 90% of TV viewers use (even if he has recording enabled) ? Ten at the maximum . Channel Up, Channel Down, Volume Up, Volume Down, Select, Play/Pause, Rewind, Forward, Planner, Settings. Yes, even directly entering channel numbers through number pad is not a very common habit. Why ? because most of the time, users are either channel surfing or are switching between a particular category of channels like news or sports or movies. TV viewing is a passive immersive activity and hence, even advanced users tend to ignore commonly available technology at hand to make it a better experience. In TV viewing world, consumer habits change slowly. Channel Up/Down was used 20 years ago and still, it is the most commonly used button on Set Top Box Remote.
Pricing: This is the most important aspect. People tend to think that they pay for too many channels and hence, the packages are expensive. This might be true in very small cases like in case of sports channels packaged along with normal channels. but in general, it works out cheaper. Broadcaster gives cheaper pricing to service providers if the subscriptions are in bulk. So, service providers create packages in such a way to get maximum volume discounts from broadcasters while passing on benefits to consumers and in turn, maximise revenue. Think if every individual subscribed only a la carte channels then, each channel price will be high on an individual basis and the money you pay for only sports channels on a la carte basis will be more than the monthly package of all channels including HD channels which are way more expensive.
Benefits of Business:
Low Operational cost: With Channel Packages, the billing issues are much less. and the billing softwares are less complex. Thus, keep errors on a lower side.
Channel Uplinking: Service Provider uplink the commonly packaged channels together on the same satellite transponders. This saves a lot of bandwidth. Please consider that satellite systems are one way communication unlike internet and are way more expensive. Each satellite transponder bandwidth is on rent from Governments (in many countries like US, service providers can have their own satellites too). This is an expensive technology. Each satellite can have only limited number of transponders. For example: Tata Sky in India uses INSAT 4A for broadcast and for every transponder pays a heavy cost of transmission. Bundling channels together helps keep the cost low for consumers. But this is an indirect impact on pricing and not a direct one. Because this can still be done with a la carte channels . The only problem is disruption in user experience.
Volume Pricing: As explained above, as consumer subscribe to lot of extra channels leading to increase in subscription numbers, broadcasters like Sony & Zee give a volume discount. The another type of volume discount happens when broadcasters provide heavy discount if all/multiple channels are provided as a bundle to consumers.
Channel Surfing Habits: Channel surfing habits of the consumer leads in discovery of new content and hence, an increase in TRPs (or impressions in latest terminology of TRAI) boosting the advertising revenue for that channels. Note that as numbers of channels increase, TV viewing time is increasing and the total number of channels viewership per user is also on increase. 30 years ago, we watched only two channels (national broadcaster in India) and then, in 90’s , it became to 5–7 channels and now, it is up to 20 channels on average.
Having said that, A la carte channels are still provided by almost all service providers (in India, it is with caveats of base package fee etc). Base Package Fee is enforced in India to cover up a lot of operational cost. In India, due to regulations, Service providers cannot charge very high and they have to subsidize up to 50% of the cost of channel charged by the broadcaster. For example: a few years back, Zee Network charged Rs 27/- for ZEE TV entertainment channel only, and Tata Sky could not afford to provide that channel by passing on the cost to consumers. hence, they decided not to provide Zee TV. but later on, the negotiations worked out to make Zee TV ( a popular TV channel) to be made available for competitive purposes.
If you look at the cost you pay every month (an average ticket size is Rs 380/-) versus the number of channels you watch including HD channels and the kind of programming you see including international programming, the cost is heavily subsidized. For example: watching Wimbledon on Indian TV network is much cheaper than watching it on Sky TV in UK. Again for the reason of heavy subsidy regulated by TRAI.
In a nutshell, If you are a person who watches only a particular set of channels then a la carte works best for you in terms of price. but then, you are less than a minority (less than 0.01%) of 50 million people who subscribe to satellite pay TV like Tata Sky , Bharti Airtel, Videocon D2H, Dish TV or anything else.
There are a lot more complexity and differences in satellite Pay TV versus Cable TV and both have their pros and cons. But if you switch to cable TV just because of high price of satellite, you might not have enough good reason. Satellite TV will always be expensive due to the nature of technology involved but then , it also is highly available and highly reliable too. With Internet TV and services like netflix coming in, things will become different anyway with ever changing user behaviour. May be, I’ll talk about it some other time.