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.
It 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 available various TV channels separately - in essence selling single crayons instead of crayons by the box.
ALSO READ: South Africa's National Consumer Commission clearly clueless as to why ordering pay TV operators to sell TV channels separately, is a very bad move.
ALSO READ: The real cost to the consumer should South African pay TV operators be forced to sell TV channels separately.
ALSO READ: South Africa's pay TV sector in peril - how the National Consumer Commission will break the pay TV business if it forces the "unbundling" of TV channels.
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 all separate prices and allowing each subscriber to to subscribe to only the specific 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, that it would destroy $300 billion of value within just the American TV industry, will endanger 1 million jobs with the TV industry, will negatively impact consumers' video choices, and that only 5 to 10 traditional TV channels in America would be able to survive such a move.
"The government is a bull in the proverbial china shop with unintended consequences likely to destabilize the delicate work of the invisible hand which is working today in the TV ecosystem," Dan Media and Maura Martin writes.
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. That 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 will 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. "Minority and special-interest channels would be unlikely to survive," the Needham & Co. analysis has found.
"Since the average TV households watches 12 to 14 TV channels each month, every households would lose TV channels which they believe are important to them. In an a la carte world, consumer satisfaction would be destroyed." The report says an a la carte model would "bankrupt all niche TV channels within five years, destroying enormous value" for TV viewers and pay TV subscribers and the TV industry.
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," says the report.
