What to Think about When Negotiating Bulk Video Services for Student Living Communities (Part 2)
It’s time to get down the final process involved in delivering bulk services to your student residents—negotiating these services for your properties. I’ve already shared five key points in the negotiation process. In the second of two parts, I’ll offer another five things to consider when negotiating your bulk video services agreements.
When negotiating bulk services for a development, owners should consider installing as much of the passive infrastructure as possible, and even reimbursing providers for related equipment costs. Otherwise, the student living communities will end up paying providers for wiring for years after construction through higher rates. Asking a provider to wire a community for bulk services is the multifamily equivalent of borrowing from a loan shark. With some rare exceptions, the best return on investment is minus 300 percent.
Not surprisingly, many vendors stress the relative strengths of their video packages while downplaying their shortcomings. One common shortcoming is that popular channels are left out of the bulk lineup. Every negotiation and contract should list the channels to be provided. Though very competitive video packages can be created with direct broadcast satellite, some providers mislead communities by offering video packages that are missing popular channels that residents reasonably expect. Be wary.
Ratio of Beds to Units
Another common challenge for many student communities is failing to adjust for differences in the ratio of beds to units. Video should almost always be charged per unit. The, the cost per bed for video is far lower in communities with four beds per unit than in communities with an two beds per unit, on average. This seems obvious, but it is often missed during negotiations. As many communities with low bed-to-unit ratios are also relatively small, they have far fewer units to cover the
fixed costs of providing video service. Thus, the unit mix alone can often dictate the most cost-effective bulk video solution for a community.
Convergence: TV Everywhere and Multi-screen Video Services
TV Everywhere, or multi-screen access, is roughly the online version of a traditional linear or on-demand video offering from a cable, telco or satellite company. An example would be using a Comcast video account to watch HBO’s “Game of Thrones” on an iPad via the Internet. We believe students will increasingly shift much of their personal viewing of bulk and premium television to TV Everywhere. The need for larger televisions in living areas will probably always remain.
However, students will shift much of their cable TV viewing in their bedrooms to their computers, tablets and even smart phones. As many owners discovered last spring, residents are not happy when the bulk video service runs a commercial every half hour for a TV Everywhere service the community does not have. Admittedly, deploying TV Everywhere services to a bulk multifamily community creates unique challenges. However, student living communities will need to offer this service eventually as vendors work out these issues. TV Everywhere is only one example of how cable TV and high-speed Internet access are increasingly interrelated or converging. Owners must strive to anticipate change and address it, both in the deal terms and the documents.
Most modern clubhouses have a number of televisions. The cost of providing high-definition service to those screens – not to mention providing a solution for the personal entertainment systems integrated with fitness equipment – can be significant, but is often overlooked. Unless explicitly included in the contract, many services can cost in excess of $125 per TV per month for a commercial high-definition video account. A system to feed video signals to personal entertainment systems can cost more than $7,000. Estimating these costs can be very confusing as every video provider poses unique challenges for amenity areas. However, identifying and addressing these costs up front is a necessity in the negotiation process.