Why Disney and Others Are Wary of Canada’s Plan to Unbundle Cable TV Subscriptions

Content creators, cable companies face the prospect of less revenue

U.S. content providers are warily eyeing efforts by Canadian regulators to unbundle Canada’s cable TV industry, a move that could eat into the profits of companies like Disney and Comcast that service the Canadian market.

In Ottawa next week, Disney will be alongside Canada’s largest cable operators to lobby against a proposal by the Canadian Radio-Television and Telecommunications Commission (CRTC) that would essentially give consumers the ultimate power to decide what they want to view and pay for on cable.

Bundling is the heart and soul of the cable TV industry, which is why the CRTC plan is being watched very closely by some big players in Canada and the U.S. If the regulations take hold, Canada would be among the first countries to institute a pick-and-pay cable TV market, which threatens the current cable TV pricing structure.

Under the proposed CRTC regulations, subscribers would pay around $20 to $30 for a basic cable service that would include local channels, government feeds and some educational services. Any other additions to the cable TV menu would be customized based on the demands of consumers, not operators.

U.S. and Canadian cable TV operators currently package their subscriptions with a suite of channels and a choice of add-ons—for a price. Some Canadian companies like Telus, offer their subscribers an additional 100 channels once they pay for their basic package.  It’s a profitable business model that accounted for $88.9 billion in North American revenues last year.

Bloomberg reported that two of Canada’s top cable TV companies racked up about $3.5 billion in revenues last year. In 2012, the entire Canadian industry generated an estimated $10.2 billion in revenue based on 8 million subscribers.

There are some big bills to pay, however, particularly when it comes to offering subscribers live coverage of Canada’s number one sport. Rogers Communications paid a reported $4.7 billion to lock in broadcast rights to air Canadian hockey games for the next twelve years.

And subscribers pay for new shows. In a submission to the Commission, Disney said unbundling will cut into the revenues they need to create new programming, an assessment echoed by Canadian cable operator, BCE, which contends some small channels will fall off the cable TV menu.

The entertainment giant’s Disney Junior channel airs in Canada. Comcast provides the Canadian market with CNBC and E!.