Tuesday, November 1, 2011
OPINION. South Africa's Consumer Commission clueless about why ordering pay TV operators to sell TV channels separately is a bad move.
Crayola is forced to no longer sell crayons of different colours in one box together as one product. If children want to draw or colour in a complete picture crayons must be bought separately.
Liquorice allsorts are prohibited from being sold as a variety of liquorice in one bag although being sold as a mixture is part of the total product.
Yes. Of course these examples are preposterous.
Yet that is exactly what the out-of-touch, uninformed, cluless and dead WRONG National Consumer Commission has in mind for MultiChoice's DStv and On Digital Media's TopTV.
The National Consumer Commission that has clearly no insight, limited knowledge of pay television, and seems unaware of the economic principles, models and operational intricacies of the pay TV industry globally as well as in South Africa, is intent on forcibly changing South Africa's pay TV business to be different than the rest of the world, and different than standard practice. If it has to happen, it will (ironically) push up prices for subscription television for ordinary South African consumers and not make it easier and cheaper for people to watch pay television in this country.
The uninformed National Consumer Commission has ordered both MultiChoice and ODM to regroup their channel offerings and to sell TV channels within bouquets separately.
The uninformed and ridiculous National Consumer Commission is claiming that the bouquets of DStv and TopTV are ''bundled services'' while it's in fact one product. The National Consumer Commission is wrong, and MultiChoice and ODM as South African pay TV services - although they're big business - are also big targets and in my opinion targeted unjustly and unfairly by a body that really should know better and do its homework better.
I spoke to several MultiChoice and ODM executives over the telephone and in person during last week. They were apprehensive; they felt that the National Consumer Commission doesn't understand how exactly pay television works.
They felt that what the Commission proposed and ordered them to do is impractical and not possible and some were actually frustrated to the level of exasperation. It's difficult to say - my subjective interpretation of their voices and tone and their measured sentences are after all just mine - but some of the people I spoke to sounded somewhat scared. Perhaps concerned is a better word. I can mimic it in person but not adequately write it. It was definitely not how they always talk and sound.
''We'll explain comprehensively to the commission how pay television works, what the model entails; what in fact they're asking us to do,'' said another executive not authorised to speak on the matter but who was willing to discuss the issue when I asked.
Pay TV subscribers in South Africa, as indeed anywhere else in the world, often harping and clamouring for separate, or a so-called a la carte channel selection from pay TV providers, should be careful what they wish for. Only paying for (popular, since that's all that will remain) channels will result in a smaller potential possible channel choice. Why? Less watched and desired channels that still offer original programming but serve a niche audience, will disappear as choices. The available remaining individual ''premium'' channels will also likely cost more. It's simple economics of scale.
While the subscription fee might overall be lower for an a la carte pay TV subscription, the most likely result is that a subscriber will in effect be paying more. If a bouquet cost R400 for 40 channels, a subscriber getting the choice to pick individual channels might pay on an la carte subscription only R200 - but it might be R100 for one sport channel, and R50 each for two general premium entertainment channels. Definitely overall cheaper, but in essence more expensive (because you're paying for less).
It's also highly doubtful if pay TV operators such as MultiChoice and TopTV will be able to secure licensing deals for the content to be sold in such a way. Yes. The Commission of course has no idea that longterm contracts and deals are already in place according to which content and channels can't be separated. It's the same across the world. There's also the problem of declining ARPU - or ''average revenue oper unit'' which would go down. And if premium channels become available on their own, it will lessen the value of upper-tier bundles like DStv Premium.
If the National Consumer Commission wants to look at pay TV operators, rather engage them about their utterly deplorable long call centre waiting times, their billing mishaps, their bad customer service, their mostly uncommunicative subscriber demeanour, sometimes deceptive advertising, or possibly lousy after-sales services. But don't mess with how they run their core business.
Neither MultiChoice nor ODM are ''bundling'' services. They're selling crayons. Can you really buy just one small sardine? There's a reason there's a few of them together in a tin can. If you buy and have balloons at a birthday party, are you bundling services? Is the petrol station bundling services because they check your oil and water and put in fuel and clean your windscreen?
MultiChoice and ODM are not doing anything wrong, and can in this aspect not really do it better. Ordering them to adjust their contracts which the Commission also did, is correct, not a problem, and should be done. But the National Consumer Commission ordering them to make their TV channels available separately is extremely misguided. It's not in the best interest of the consumer and South African pay TV subscriber and it's they who the Commission is ironically supposed to serve and represent.
ALSO READ: National Consumer Commission orders MultiChoice and On Digital Media to amend their DStv and TopTV contracts.