Bundling up revenue and missing an opportunity?

Pay TV operators have access to a fairly exhaustive amount of content. There something to float everyone's boat - news, entertainment, leisure, drama. comedy, sport and plenty of different options in-between.

Yet despite this mass of content consumers are only offered a select number of channel bundles to choose from. Virgin has 3 products and Sky has 4.  In both cases the add-ons which differentiate each bundle are basically the same. If you want to watch sport, movies or drama then you have to pay extra, with all the other channels essentially thrown in for free.

Now I love watching movies and so I'm very happy to fork out a little bit more to include these in my package. But surely there is potential to extract some revenue from me for the 'other channels' as well?

Of course the marginal cost of providing the 'other channels' almost zero and they have traditionally been viewed as space-fillers. I'm just not so sure that the benefits need to be equally low for both broadcaster and consumer.

In the UK it's crystal clear what viewers want most. Pure and simple, sports broadcasting is king. And, it leads the field by large margin. In 2011 sport was worth a total of around £1800 million of revenue to UK broadcasters. But for every pound made from sports, broadcasters only got back....

• 3 p from leisure broadcasting, 
• 4 p from the news, 
• 6 p from music, and
• 11 p from factual programs.

Sure the revenue splits reflect consumer preferences to a degree, and consumers are budget constrained, but I get the feeling that sport is over-weight and some of these other genres are not being fully capitalised.

I think there is a case to be made for providing more bespoke channel products, moving away from "all you can eat" TV. It's had success in other sectors and the time could be right for broadcasters.

Let's take news media as an example. As for a basic price-point estimate we can apply what happens in online pay-per-view news as a proxy. Here a premium provider like the New York Times charges £10 per month to allow readers get around the pay-walls. And, it's probably fair to assume that such a figure would be a price-ceiling as there are plenty of other sites charging much less. So for £10 or less a broadcaster would have to feed through 10 or so news channels - that is, all the freeview (BBC, ITV, 4 etc) plus the full suite of 4 or 5 paid channels (ESPN, CNN, Sky, etc).

Now is this a value proposition for anyone?

If you're high-flying corporate viewer who really values being on top of all the news you probably already have the triple-platinum HD package, or are someone who it less price-sensitive and happy to pay for channels that you don't watch that often. There could be some slack in the middle market, but, moving to the bottom-end  we potentially have a segment here who would be willing to engage at a low price point for specific content, and perhaps a group who may be persuaded climb the value chain over time. But returning to the high-flyer for a second, is there any reason why they shouldn't pay for each channel they watch. Why leave consumer surplus on the table?

The broadcasters do have to deal with a mighty competitor in the BBC and its world-class selection of free content (after license fee), but is there be a new business model that supports more granular packages without cannibalising value from the current offering?

New entrants using IP systems would seem to have the right cost base to make it work (at least while there is network neutrality).