PARIS – French restaurant diners often put the menu aside and order the better-value “formule du jour.” But when it comes to television, the same thrifty customers are increasingly doing the opposite: going a la carte.
The broadband revolution, which has shaken traditional media industries from newspapers to music and confronted consumers with an explosion of choice, is making its long-awaited TV debut.
As U.S. cable companies, politicians and regulators debate whether pick-and-pay TV would benefit the public, consumers in parts of Europe and Asia are finding out the easy way – by trying it.
Those subscribers choose their premium channels individually, instead of paying for large, pricey cable packages in order to get the smaller amount of television they actually want.
The new offerings come from phone companies and Internet service providers, not the cable industry. Instead of bundling channels, the new entrants make their profits by bundling voice calls and Internet with cheap TV.
For euro30 ($35.50) a month, some 1.5 million French subscribers to Iliad SA’s Freebox get broadband Internet, unlimited phone calls and more than 80 TV channels – with additional ones billed individually. ESPN’s European sports highlights channel is offered for 50 euro cents (60 U.S. cents), CNN for half that price.
By the end of 2005, two years after the service launched, some 200,000 Freebox users were paying for extra channels.
Beat cable at own game
As cable companies diversified into voice calls and broadband, phone and Internet operators have moved defensively into TV. Many are now well placed to beat cable at its own game, analysts say.
“Telcos might have disadvantages in acquiring content and have to pay more for it,” said Lars Godell of Forrester Research. “But overall, they have advantages on the network side.”
Hong Kong phone operator PCCW Ltd. claims more than half a million customers for Now TV, a pick-and-pay TV service launched around the same time as Iliad’s. Offering 15 free channels and about 75 a la carte, Now TV has won a 39 percent share of the Hong Kong pay-TV market and reaches one in four households, according to Macquarie Research Equities.
Both PCCW and Iliad deliver their TV over the Internet and have gained some ground against rival cable and satellite services – typically starting with what the industry calls a “big basic” package, which includes some premium channels.
But the newcomers have so far been unable to extend their full pricing flexibility to the most sought-after channels, as movie studios and other content owners resist the change.
Subscribers who have stayed with Cable TV, Hong Kong’s incumbent cable operator, say Now TV doesn’t have enough attractive premium channels to persuade them to switch.
Digital broadcasting
Compounding the challenge from Internet TV, digital broadcast services are also springing up in many countries. By using radio spectrum more efficiently than traditional analog broadcasts, they make room for more free-to-air and pay-TV channels.
Video on demand, unlike a la carte TV or cable packages, lets customers pay for each movie or show they watch, rather than by subscription, and view it whenever they like. It is increasingly offered by cable and Internet-based TV providers alike.
Lessons from music, film
Gartner analyst Adam Daum sees parallels with recording labels, which for years appeared reluctant to let a la carte online business dilute their album sales – until piracy got out of hand.
“TV and movie companies have had a few years to see what a disaster has befallen the music industry,” he said.
If they don’t want to be left on the sidelines, Daum added, “traditional cable and satellite operators will need to move in an a la carte direction in order not to lose subscribers.”
Associated Press Writer Helen Luk in Hong Kong contributed to this report.
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