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October 16, 2013

Almost three-quarters of pay-TV subscribers would like to purchase slimmer, customized TV bundles - mostly because they believe it would lead to lower bills, according to a new consumer survey. At the same time, subscribers accept the pay-TV model and are consuming soaring amounts of entertainment through smartphones, tablets, and new video services such as Netflix. "We are seeing outlandish consumption, and that is good for the industry and good for the consumer," said Joe Atkinson, the market advisory leader in Philadelphia for PricewaterhouseCoopers L.L.P., which conducted the survey.

The results seem to confirm the thinking that TV providers could have to reduce the sizes of their bundles of channels as the TV-distribution industry faces political pressure and shifting consumer tastes. Among those respondents in the survey who said they would like a more customized TV bundle, 62 percent said they were willing to pay up to $2.99 per channel a month while 26 percent said they would be willing to pay from $4 to $8 a month for a channel.

The TV-distribution industry, which includes Comcast Corp., says subscribers would pay more and get less entertainment if the channels were sold individually or in smaller bundles. However, there is a growing recognition of, and discontent with, bundles that carry costly programming that many don't view - sports being a prime example. Most customers' bills have a high percentage of costs resulting from sports programming, even if those channels are rarely or never accessed. A study earlier in the year by Laura Martin of Needham & Co. L.L.C. in Boston said ESPN could cost $30 a month if it were sold separately. ESPN is expensive because of the tens of billions of dollars it pays for TV sports rights.

Martin noted Tuesday that the Canadian government has said it will attempt to unbundle TV channels as policy. But she doesn't see that happening in the United States, partly because of political gridlock in Washington. "You don't maximize consumer choice by unbundling," Martin added. TV executives talk about the "cord-never" generation of young adults who are skipping traditional TV services altogether. The PricewaterhouseCoopers survey, though, showed that younger adults who paid for cable- or satellite-TV services also were likely to augment their entertainment options with Netflix or other Internet-based services.

Fifty-six percent of those between the ages of 18 and 24 with a pay-TV subscription also watched a video service. Only 19 percent of customers 50 to 59 subscribed to more than one video service. Comcast, the nation's largest cable company, is talking with Netflix and other video providers about apps that could be loaded onto its new X1 set-top box. Netflix is the biggest of the Internet services. Other commonly accessed entertainment sites were TV networks, Hulu, Amazon Prime, and iTunes. Comcast has said the talks with Netflix are preliminary and it could eventually come to terms with another service.

Because of its capabilities, the functionality of Comcast's X1 could be compared with an iPhone or Android phone, though the available apps will be limited as compared with those available for smartphones. In addition to multiple video services, TV subscribers are consuming more entertainment and news through phone and tablet "second screens." Consumers remain willing to watch more advertising instead of being charged higher fees for channels, said Atkinson, of PricewaterhouseCoopers. But as screens get smaller on smartphones and tablets, consumer tolerance for advertising diminishes, he warned.

About 1,000 customers responded to the survey in June. PricewaterhouseCoopers, a global professional services firm with 180,000 employees, also conducted focus groups in July in Los Angeles. "We see the strength of the pay-TV market persisting despite all the technology changes and the changing consumer expectations," Atkinson said. Philadelphia Inquirer

The National Football League is considering selling another slate of Thursday games to a media outlet to increase the audience for football on one of television's most competitive nights, according to a person familiar with the league's strategy. The NFL is disappointed its own cable channel, NFL Network, hasn't attracted more viewers for the 13 Thursday night games it airs each season, the person said. The league believes that adding a second game to create double-headers on some Thursdays could create more national interest.

The process is still in the preliminary phase, the person familiar with the league's strategy said. Executives have discussed the issue with media outlets but the league isn't shopping a specific package and no formal offers have been received, the person said. Adding another several hours of football on Thursday nights would have significant implications in the TV industry. Thursdays have historically been a big night for advertisers like auto makers and movie studios looking to promote weekend openings. As a result broadcast networks put some of their best shows on that night.

The Thursday night NFL Network games have been closely followed in the markets of the participating teams but have not become must-see television in the same way that NBC's Sunday Night and ESPN's Monday Night Football games are. They are usually the least-watched nationally televised games of the week, in part because the NFL Network still isn't fully distributed. Asked about the performance of the Thursday night games at last week's owners meetings, NFL Commissioner Roger Goodell said he was pleased with the growth of the NFL Network's ratings. He added, "People want to watch it and are excited about Thursday Night Football. It is our job to build Thursday Night Football and make it, 'This is where you want to be on Thursday.'"

The additional games would be taken from the Sunday afternoon schedule, now shown on CBS and Fox, and wouldn't affect deals the NFL has with NBC and ESPN. The league negotiated in its most recent TV agreements the rights to pull games from the Sunday afternoon schedule and use them to create another package of games. The league also could move Thursday night games shown on NFL Network to another channel. The network may be able to drop some games without suffering a decrease in the affiliate fees it charges distributors to carry the network, the person familiar with the league's strategy said. If the NFL Network were to sell off all of its games, it would be forced to renegotiate its affiliate agreements.

Potential buyers of the games would likely be national cable sports networks. But league officials have also considered selling the Thursday night package to a nontraditional media partner, including online players like Netflix Inc. or Google Inc., the person said. The league believes it can work with a new entrant just as it did in the 1990s when it joined with with satellite television provider DirecTV to create NFL Sunday Ticket, which gave subscribers the ability to view every NFL game throughout the season rather than limiting them to games in their market and those that are nationally televised. Wall Street Journal

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