For some time, I’ve been noting on my Twitter account the rising tide of people who have decided to cut the cord that ties them to servicing their television needs through cable, satellite or other wired means, instead turning to the Internet to be informed and entertained.  The topic is blowing up now, with Washington Post tech columnist Mike Musgrove now examining the issue in his column this past weekend (”TV Breaks Out of the Box“).

And I don’t even really need to respond, because Adam Thierer has given it the one-two punch at Tech Liberation Front.

• Cutting the (Video) Cord, Part 2
• We Don’t Need to Mandate “a la Carte”… It Already Exists

But if you want my take on the cost-savings of broadband video, refer to these earlier posts:

• The Roles of TV and the Internet
• Does A La Carte Always Make Sense?
• More Media Inaccuracies About A La Carte

On a related note, TV Week’s Daisy Whitney writes about using the Boxee service to watch Internet video on her television, as part of a cable-free experiment she’s conducting.

The Golden Swamp blog comments on Musgrove’s column by noting that more people watched Tina Fey’s portrayal of Sarah Palin online than on television, and suggests than one could then unbundle one chunk of content (such as a Palin skit) from an entire television episode (a 90-minute SNL). Judy Breck is using this approach to propose unbundling educational resources; others have applauded the ability of iTunes to allow you to buy just the songs you want instead of the whole album (David Lazarus called it the “iPod factor.”).

But as I have written on this blog in regards to “a la carte,” the economics may not pay off. If you unbundle one cable network from others, the economics change. Unbundle one show from a network, they change again. Unbundle a segment from the show, again.  That’s not to say that cable networks don’t or shouldn’t repurpose content. Comedy Central puts entire episodes of The Daily Show online for free. Some cable networks make content available to mobile subscribers or put clips on their websites. I’m simply offering a reminder that there are different approaches and different business models; not everything you want may be available on the platform you want and in the manner you want.

But things change and nothing is permenant. Stay tuned.

There was a column in the L.A. Times yesterday from David Lazarus entitled: “Let’s pay only for the TV we watch.” So, once again, back we go to the topic of “a la carte” cable service.

I get it. It feels like much of the content world is going to a pay-only-for-what-you-want model. Certainly, it feels right emotionally to only pay for the stuff you’re going to use. But this argument is almost always predicated on one premise: If I could pick and choose, my bill would go down.

Lazarus writes:

The average U.S. home now receives a record 118.6 TV channels, according to a recent report from Nielsen Co. But the dirty little secret of the cable industry is that the average subscriber watches only about 17 channels regularly.

That’s more than 100 channels that most cable subscribers are paying for but seldom if ever watching.

Because of the number of cable systems nationwide, it’s hard to get a fix on the average monthly bill. But many estimates place this figure at $60 to $70.

This means, if all channels cost the same, the typical cable subscriber is spending about $9 a month for the 17 channels he wants to watch and about $55 for the 101 channels he never sees.

There are big problems with the figures here, so let’s break it down.

If you’re getting 118.6 channels, that means you’re getting digital cable service, because analog can’t deliver that many. SNL Kagan estimates that the current average monthly price for digital service is $59.23 (expanded basic is $44.28), which not only provides a wide range of programming but also opens up the door to high-definition and Video on Demand.

The first important point that Lazarus overlooks is that the average cable subscriber has elected to switch from a cheaper level of service with fewer channels, in order to take a more expensive level of service with more options. Perhaps people like the greater choice that comes with digital?

For example, Cablevision recently reported that more than 90% of its video customers subscribe to digital service, which means that 9 out of 10 of its customers want more channels, not fewer. If you look at the largest cable operator, Comcast, you find that 69% of its video customers elect to subscribe to digital service. Industry-wide, approximately 62% of cable’s video customers have made the decision to receive more channels via digital service.

Lazarus continues:

But all channels don’t cost the same amount. By most accounts, the sports channel ESPN is one of the most expensive carried by cable systems, costing by some estimates more than $3 a month per subscriber. Many other channels are said to cost as little as 25 cents monthly.

I never watch ESPN. When I watch TV, it’s usually CNN, CNBC or a movie channel. On an a la carte basis, I could probably get the handful of channels I like for pocket change.

That, of course, is not what the cable industry wants.

Lazarus leaves out all of the relevant content here. Those figures he cites are carriage fees that cable operators pay programmers in order to carry those services and offer them to their customers (The real rates are found in private contracts; actual figures will vary by company and circumstances). It’s not what those networks “cost” and it’s not a reflection of what you would be charged in an a la carte world.

He also writes:

According to the FCC, average cable rates nationwide more than doubled over the last 10 years.

In fact, the FCC has not released any reports containing this information. There have been statements in the media to this effect, but the Commission has not released any reports to back up this assertion. It is irrelevant to compare today’s rates to the rates from more than ten years ago, since the nature and value of that service has changed over that same time-frame, but it is worth noting that over the last several years, the increases in cable rates have actually lagged behind inflation rates.

Read this post for the financial details, but the short version is that if each network lost the carriage they have now and then had to market and sell the channel to individual consumers, revenue goes down, operating costs go up and programming quality probably also goes down.  And the price you think you’ll pay for individual channels on an a la carte basis? You’re probably grossly underestimating it. The reason why you should pay for more than you watch is that it beats paying more to have fewer options.

Lazarus writes that cable needs to be brought “in line with the wholesale shift in how consumers now approach entertainment.” But different distribution outlets have different pricing models. If you saw Iron Man in the theaters, you probably paid ten bucks. The DVD is probably $20. Buy it on iTunes for $15 or watch it on VOD for $5. As I’ve written previously, different businesses operate on different models and it’s a mistake to assume they should all be the same.

Lazarus makes a comment early on about knowing “as a newspaperman” a little something about “outdated business model[s].” The print edition of his newspaper, the Los Angeles Times, is not sold on an a la carte basis, with the option of buying just the sports section or the business section. They did experiment a few years ago with putting their online entertainment section behind a wall and then charging a subscription fee for access. They later ended the experiment. The New York Times did something similar with its TimesSelect service. In these instances, the free market determined their actions, not regulation. Business models change over time and the models of the cable industry will undoubtedly do so as well.

If you look at the comments of this column, you’ll find some other reasons given why mandatory a la carte would probably be problematic. You could also check out some of Mike Masnick’s posts at Techdirt, such as here, here or here.

We can only repeat ourselves on a la carte so many times before our heads burst in frustration. I think we’re one or two posts away from that point, so this may be my last word on the subject.

But first, let me explain the reason for my frustration. Rob Pegoraro, the gadget guy at the Washington Post, has an article up about beating the high costs of high tech in a slow economy.  In it he extols what he believes to be the virtues of a) Internet video and b) a la carte TV.

You can also turn your broadband connection into your TV service. The networks offer free streaming video of most shows at their own sites and such third-party portals as Hulu, and you can buy shows at Amazon’s upgraded video-on-demand service and Apple’s iTunes Store.

You may find that these options permit you to chop down your TV service to a cheaper bundle — or, if your tastes line up, drop it entirely in favor of free, over-the-air digital broadcasts. The Web can become the a la carte programming bundle that TV service providers refuse to sell you, greatly reducing your monthly costs. And in the process, you can help teach the cable and satellite folks that we’d like that choice.

Pegoraro deserves credit for trying to help consumers manage their pocketbook in tough economic times, but a la carte is one idea that makes a good bumper sticker slogan (after all, who isn’t for more choice?) but actually would end up costing most consumers more.

First, Pegoraro suggests that you get your broadcast programming online via video portals.  This is impractical on a number of fronts not the least of which is the fact that broadcast television is free over the air.  Suggesting that you pay for broadband service to watch free TV is sort of odd – especially in an article about cutting costs.

Second, he suggests you may greatly “reduce your monthly costs”.  But is that true? For most consumers, probably not.  Let’s assume you are what Nielsen describes as a “TV user”.  On average, TV users watch a bit more than 127 hours of TV per month.  Most television programs sold through iTunes or Amazon’s Unbox run $1.99 per program whether it’s a 30 minute or a one hour program.  If your tastes run to sit-coms or home improvement shows, you’ll be paying about $4 an hour.  If you’re the TV user consuming 127 hours a month, your bill just jumped to more than $500.

If your thing is one-hour dramas, you can cut that down to about $250.

Your monthly expanded basic cable package runs you about $60.

Think of it this way:  If you’re a single person living alone, and you don’t watch all that much TV, web content in a consumption-based billing model may work for you and save a few dollars.  If you’re married, and have to worry about what two people watch, your costs start to rise dramatically.  He’s watching episodes of Eureka and Battlestar Galactica.  She’s watching Miami Ink and The Daily Show.  They both watch Deadliest Catch and South Park.  Those are just the cable favorites.  Throw in Chuck, Dirty Sexy Money, CSI and Law and Order (all 94 different versions) and you’re talking a lot of scratch for even a handful of individual programs.  Now add in a couple of kids, and you’re off to the races.

Also, Pegoraro’s piece assumes that programs would cost the same in an a la carte world as they do now.  This ignores basic market forces.  The reason your program costs $1.99 the day (or the season) after its original air date is because the network made most of the production costs back on advertising during the original airing.

If people were to totally disconnect their TVs, and only consume on demand through iTunes and Unbox, programmers would still need to make up the money they lost with no advertising during the original run.  That $2 program today may become a $5 (or more) program tomorrow.  When you’re suddenly paying $100 or more for a season of your favorite show, it might lose its luster.

The fact is a la carte has been weighed, measured, and come up wanting.  Study after study has determined that for most people costs go up, not down, in an a la carte model.  If you watch very little TV, you might see some reduction.  But based on Nielsen’s numbers, people are watching more, not less, TV.

In the last few months, a number of blogs have written about “a la carte” consumption of content as a cost-savings measure. In these tough economic times, managing your entertainment and information budget is certainly a good idea. But much of the discussion I’ve seen fails to note that this approach isn’t going to work for everyone.

For example, in early June the I Will Teach You To Be Rich blog argued in favor of cutting down on unneeded subscriptions: “Instead of paying for a ton of channels you never watch on cable, buy only the episodes you watch for $1.99 each off iTunes.” (Also see the discussion of this tactic on Lifehacker.) You also often see people talking about how little cable television they watch.

• The Short Bus: “After all, I only watch about 5 or 6 channels - none of them are a major network.”
• jetdawgg at Leatherneck.com forum: “Frankly, the only Time-Warner channel I REALLY want is Turner Classic Movies. Maybe a couple others.”

I’ve also seen people argue that they only watch a couple of cable series. And if you’re a low-level consumer of such content, perhaps this makes sense. More and more television programming is available online, either as free streaming video or available for purchase on an a la carte basis via services such as iTunes or Unbox. Some have asked if Apple TV could be a replacement. As the supply of broadband video grows, the theory goes, consumers can turn to an online supply of a la carte video to satisfy their needs, saving money at the same time.

So, let’s run some numbers. According to estimates from SNL Kagan, the Average Monthly Price for Expanded Basic Programming Packages (2007 estimate) was $42.76. You can buy some television programs on iTunes for $1.99. Once you’ve purchased 21 or so shows at two bucks a pop, you’ve now matched the price of expanded basic cable service. At that rate, you could watch one show each weekday night, but you’ll have to take the weekends off. But if you want to watch more than that, then subscribing to cable makes more sense.

Another measurement is to take the average basic cable rates from SNL Kagan and divide it by average basic cable network viewing time from the Cabletelevision Advertising Bureau to obtain the Average Price Per Viewing Hour, which was 24.5 cents in 2006 (see an explanation of PPVH here). Since a typical hour drama can be purchased on iTunes for $1.99 - which makes their Price Per Viewing Hour about 8 times more. Keep in mind that a half-hour show also costs $1.99, making the PPVH for fare like Family Guy and South Park even higher.

Naturally, there are a couple of built-in assumptions to the a la carte argument: how little TV you will watch and how much cable programming you can get online. A recent Nielsen report on TV, Internet and Mobile usage found that the average American is watching 127 hours, 15 minutes per month. To watch that amount of video at $1.99 per hour would cost more than $250 per month. And if half of those shows were half-hour sitcoms (also at $1.99) the monthly bill would come in at $380. The people above who are quoted as watching so little television fall well below the average.

What’s interesting about the discussion of this topic is that there’s an assumption of how much video is watched online by consumers. Sure, there are certain groups who watch a ton of video online and watch little, if any, cable TV. But that Nielsen study found that Americans are not only using the Internet more, but are watching even more television. You might think this doesn’t apply to young people, but the Nielsen study says that 18-24 year olds are watching over 103 hours a month, and a recent study from Alloy Media + Marketing found that 38% of college students aren’t watching online video at all.

This is not to say that there’s not growth in broadband video. For example, 37 million episodes were watched on ABC.com’s video player during the month of May, or a total of 815 million minutes of full-length content.. There’s a good deal of broadcast programming online. But your local news isn’t available online. And while some cable programming is available, much of it is not. Will Richmond explored this issue and explained the importance of cable programmer’s dual revenue model.

Finally, the study of economics demonstrates that people’s mental states can affect their perception of this equation. You may think a subscription makes more sense because you pay once and get a lot. If you consume less than you think, a subscription approach might not be right for you. But when it comes to consuming television, consider your cell phone.

Remember a few years ago when cell phones were new? You got one and selected a simple plan, because you were only going to use the phone for emergencies. And then you got in the habit of using the device, because it’s so convenient, and then your bill went through the roof. Today, it’s smart to get a plan with a lot of hours or unlimited texting or some other pricing system that’s economical. Similarly, if you truly only watch a very small amount of cable TV, and if your favorite program is available in some other form, then it might make sense to purchase your video programming by episode. But if you watch an average amount of television, which is more than 4 hours a day according to Nielsen, then one of cable’s various packages (basic, expanded basic, digital, etc.) definitely makes more sense.

UPDATE:  I just noticed that this January post during CES touches on many of these same issues.

Given the FCC approval of the XM – Sirius merger, and the release of the “voluntary commitments and other conditions” that sealed the deal, one natural question that has arisen is “If satellite radio can do a la carte, why can’t cable providers do it?”

The answer, of course, is buried in the details.

To understand the answer, you need to understand several major differences between cable providers and satellite radio.  Some of these include:

• Ownership of content
• Advertising support and business models
• Delivery and ease of reproduction/pricing

Most XM/Sirius channels are produced and owned by XM/Sirius so they do not compete with each other for listeners or access to the satellite radio lineup because the company only produces channels that they launch.  In the video world, most channels are not owned by the distributor so they compete against each other for access to viewers, ratings and advertising dollars.  In an a la carte world, this competition would require each video channel to spend significantly more money on marketing and promotional costs to attract viewers, driving up the cost of that programming to the subscriber.

In addition, satellite radio was founded on the notion that most of its channels would be commercial free or have very limited advertising.  Unlike video programming which relies heavily on commercial advertising, XM/Sirius programming is supported almost entirely by subscriber fees.  So with each channel relying on little or no advertising support, applying an a la carte model to satellite radio would not require each channel to boost its price (or reduce its quality) to make up for lost advertising revenues.  In the video world, that is exactly what would happen.

You also must consider the programming.  While satellite radio does have a respectable diversity of programming, each of the channels is essentially a technical reproduction of the other and the cost of production (which largely consists of recorded music and other material) is lower than video production and generally does not vary widely. Obviously attracting well known personalities like Howard Stern can affect costs (including potential litigation costs), but generally speaking, music and talk programming are fairly consistent.

In the video world, however, the cost of producing channels varies greatly and the cost gaps continue to widen with the growth of high-definition and more and more original programming. For instance, it costs more to produce an episode of Burn Notice than it costs to produce How Do I Look? So, while XM/Sirius may be able to offer customers the opportunity to purchase any fifty of its music channels at the same per-channel price, it is impossible for cable operators to offer video channels in this manner.

Finally, aside from the structural business issues mentioned above, it’s also important to understand that what Sirius-XM has agreed to is not actually ”a la carte”. Despite the marketability of attaching the words “a la carte” to their new options, according to their channel lineup and pricing document, XM and Sirius are offering consumers the opportunity to purchase smaller bundles.  You can choose either 50 channels from ONLY one provider (out of a total of 100 possible choices) or 100 channels combined from both.

The pricing document makes it clear that the “a la carte” option will not be available for a year, and will require new equipment.

A la carte programming will be available beginning within one year following the merger, and the other programming options will be available beginning within six months following the merger… A la carte programming will only be available for subscribers using new radios, which will be developed following approval of the merger.

There is no opportunity to buy only 1, 3, 5 or 6 channels.  You have to start with at least 50 channels.  That’s not what most people describe when they talk about a la carte.

There’s no comparison between cable’s business model of delivering ad-supported television purchased from multiple competing providers and satellite radio’s model of delivering ad-free content of their own design.  People may try to make such a comparison in order to argue that since XM and Sirius have agreed to provide “a la carte,” cable must be able to do it, too.    Unfortunately, as study after study has shown, the facts just don’t support the fiction.

It’s worth revisiting a topic that never goes off the radar: Concern about content. Everybody can agree that cable transformed the television landscape by vastly expanding viewing choices, but not every viewing option is to everybody’s taste.

But the important point to remember that what cable delivers is choice. You get a ton of options and then you pick out the ones that appeal to you. Spouses, partners, kids, friends and neighbors all are likely to make different choices. But by starting with a wide initial set of options, everybody can have a better chance of being satisfied.

Some people are very concerned about certain programs. This is very understandable, because not all programming is appropriate for all ages. Some content may not be to your taste or may even offend you. Fortunately, there is a solution: parental control features.

You can find out more at our website Control Your TV or from a report prepared by the Progress & Freedom Foundation’s Adam Thierer. Suffice it to say that between your television’s V-chip controls and those of cable’s digital set-top boxes, you have the ability to block by channel, rating or show. (Also, read this chronology to see how long the cable industry has been addressing this issue.)

Philosophical argument #1: I don’t like a piece of content, so it ought to be stopped. The problem with this approach is that what’s a problem for you may not be a problem for me and vice versa. The best solution is not to ban, but to allow me to choose that content and allow you to block it out.

Philosophical argument #2: That piece of content is so offensive that it’s wrong that I’m “forced to subsidize it” with my cable subscription. Currently, the best and most economically efficient way to deliver a broad array of viewing options is through bundles of channels. You may feel like you’re “subsidizing” the channels you don’t watch, but your fellow subscribers who don’t watch your favorites may be “subsidizing” yours. There is plenty of evidence to show that a mandatory a la carte system would lead to fewer viewing options, less diversity of content, and higher prices overall.

The issue of mandatory “a la carte” for cable television service continues to be a hot topic. This is actually a pretty broad and complex topic, so I’d like to break it down a bit.

For some people, when they think of “a la carte,” they simply mean, “I feel that my cable bill is too high and I’d like to pay less.” Just remember than any discussion of price ought to include an examination of value. Is the product or service delivering value in proportion to its price? (For more on the relationship of value to price, see this earlier post.)

But, let’s accept the premise for a second. You think your cable bill is “too high.” Many fans of a la carte are making this calculation.

• Average Monthly Price for Expanded Basic Programming Packages: $42.76
• Average Number of Channels in Expanded Basic Package: 80
• Average U.S. Household Tunes to Channels per Month: 15.7

“So, wait,” the thought goes. “If I pay 43 bucks for 80 channels, but I’m only looking at 15 of them, than the other 65 are wasted. There are channels I never look at. Why am I paying for them? If only I could pay for exactly what I want and nothing more, surely I would pay less.”

Let’s also accept another premise. You like some cable channels. You probably don’t watch them all, and there may be a few you actively hate. But if you get some kind of multichannel video service, it’s because there are channels you enjoy and want to see continue and prosper. So, while you might want to pay less, you don’t want that to happen at the expense of the viewing choices you now enjoy.

There’s the conundrum. Mandatory a la carte won’t satisfy either of these desires. You probably won’t end up paying less and you’ll also endanger the economics of the channels you love.

The Yankee Group recently issued a report entitled “A-la-Carte: The Demise of Television as We Know It.” The Research Recap blog has highlights of the report. It’s important to remember that most cable networks - except for premium services such as HBO, Showtime and Starz - have multiple revenue streams. They make money from cable operators for allowing them to carry the service (i.e., to deliver it to you in your home) and they also get advertising revenue. Both of these revenue streams rely on being in as many households as possible, even separate from the issue of ratings.

If I am the president of the Fly Sneaker Channel, in an a la carte world, I now have to market to each household individually to convince you to buy my channel. So, my marketing costs go up. Plus, I won’t make my advertising revenue, because now I’m in zero households to start and I’ll probably never build up to a very large number except very slowly. You might like my channel; you might want to skim it occasionally to check it or there might be a positive review that makes you want to see a particular program. But because it’s not on your lineup unless you choose to subscribe to it, that won’t happen.

Now read the recap of the Yankee Group’s analysis.

• Under a la carte, programmers will lose their current economic model. Surviving networks will have to charge consumers between $5.00 and $10.00 per channel to overcome the decrease in carriage fees.
• With a la carte, casual viewers go away, decreasing both viewers and advertising revenue. Niche networks won’t have enough reach to survive.
• With mandatory a la carte, the 565 national video programming services and networks will dwindle.

Some networks will not be able to financially survive. Before you say “Good riddance,” don’t assume your favorites will survive. Many networks may not have the money to invest in new and innovative programming, so you may have to kiss your favorite shows goodbye as well. The networks that do survive may have to charge several bucks a month for subscription fees. Odds are you could select very few channels before you’re right back up to the price you’re paying now.

There are any number of issues that come up all the time in the cable business. And one of them is the pay-per-channel scheme known as “a la carte.” Sure, it sounds attractive. But when people describe what they think they will get under a mandatory a la carte plan, it doesn’t match reality.

It came up last week when NCTA’s Kyle McSlarrow was on a panel; it comes up all the time. Steve Jobs just gave his yearly Sermon on the Mount (a.k.a, his Macworld keynote) and he announced movie rentals on iTunes and an overhaul of Apple TV. This led to the Bad Luck City blog’s headline: Apple TV and iTunes video rental: Bye Bye Netflix and Cable.

What this means is that I may be able to cancel my Netflix account and rely on Apple for my movies on demand. Why send bits of data on a envelope through snail-mail when I can do it over my Internet connection?

As you know, I ditched cable for OTA television long ago, but now everyone else can do the same, at least until the cable industry offers programming a la carte.

Of course, Netflix already offers online movie viewing and they just lifted time restrictions, so that their customers can watch all they want. And cable customers get a lot more viewing options (especially if you’ve got digital cable with VOD) than someone getting DTV over-the-air.

Here’s another example in a blog post about the satellite radio business:

Sirius’ CEO Mel Karmazin has promised the FCC to allow a la carte programming for a cheaper price if the merger goes through. This way customers can pick and choose what they want to listen to. Chairman Martin of the FCC has tried to get the cable companies to allow a la carte programming, but to no avail, so he may see the Satrad merger as a precedent for a la carte options.

I’m going to keep referring people to this great column by the NY Times‘ Joe Nocera about why a la carte means fewer choices and higher prices. Maybe the message will get through.

UPDATE: And here’s another one. Diane Keaton drops an F-Bomb on Good Morning America and a Wednesday evening panel grapples with the effects. Tim Winter, President of the Parents Television Council, and Shawn Ryan, creator of FX’s The Shield, got into a tiff:

The evening’s hottest moment flared between Winter and Ryan over a PTC-supported proposal to offer consumers a la carte cable choices. Instead of having to buy multiple channels bundled in one package, the PTC supports legislation that would allow consumers to cherry-pick and pay for only the channels they want to watch.

“Why should I have to pay for FX when all I want is the Disney Channel?” argued Winter.

But Ryan, whose award-winning, gritty cop drama “The Shield” broke new ground for language and violence on basic cable, said that proposal would stifle creativity.

“I’d prefer you be honest about this,” Ryan said to Winter, whose nonprofit group originally referred to “The Shield” as “filthy trash” when it debuted. The a-la-carte proposal is a “backdoor way to censor shows and networks,” Ryan added.

On the one hand, you have mandatory a la carte leading to less diversity in programming, which could lead to fewer family-friendly viewing options. And on the other hand, cable has a better solution for content that you may be concerned about: parental controls. Everyone has different opinions about what they might block and cable’s controls let you decide. Check out our Control Your TV website or this report from PFF’s Adam Thierer.

Today, there was a SuperSession run by CNET entitled “Next Big Thing,” in which CNET editors set out to reveal what’s coming in three key areas: automobiles, personal handhelds and television. We here at CableTechTalk were keenly interested in the third of these topics, not just because it’s a key part of our business, but because our Fearless Leader Kyle McSlarrow was appearing on the panel

There were some interesting tidbits to be heard. For example, there are GPS systems that will search for local businesses as you travel from Point A to Point B and the #1 search is for “pizza.” The audience was polled throughout the session and most people indicated that they were not prepared to ditch their PC for a handheld device that could (supposedly) do it all.

Then Molly Wood, Executive editor, CNET.com, led a discussion with Patrick Norton of Revision3 (pictured at left), NCTA President & CEO Kyle McSlarrow (center) and George Kliavkoff of NBC Universal (on the right). Norton indicated an interest, as have others on the bleeding edge, to ditch traditional delivery methods of television and get all his viewing accomplished online through streaming and downloads. McSlarrow indicated that online content is a great complement to cable, but didn’t express concern that the cable industry should feel threatened right now. A poll of the audience confirmed that the vast majority did not intend to drop their cable or satellite service in favor on online viewing. Curiously, for what one would expect would be a tech-savvy group, about a third of the audience said they didn’t watch any online video at all.

McSlarrow acknowledged how complex the evolving business model for video is, but asked for that business to be allowed to develop without regulatory intervention. He added, “It tells you something about the economics of a la carte. There is enormous value in paying 50-60 bucks a month to watch eight hours a day, selected from hundreds of channels and large VOD libraries. Is that the right model? Let the marketplace decide.”

Kliavkoff also mentioned that NBC Universal’s new video service Hulu replicates what cable and satellite have “done well,” which is to act as an aggregator. He did say that there will be an incremental approach, due to existing contracts, but predicted that contractual issues will change over time.

Norton, formerly of TechTV, took a few shots at cable over the course of the panel and closed with a pitch for a la carte. As part of his rationale for this position, he said that he got hundreds of channels that he didn’t watch, that viewers only looked at about 20 channels over the course of a year and only really watched six of those channels regularly. Of course, as with most people who make this argument, he overlooked the fact that not everyone in a household watches the same six channels and every individual household also differs in terms of their preferences.

McSlarrow noted the attractiveness of an a la carte system, but asked if it seemed as attractive in light of abundant evidence that your new smaller package of cable channels would actually cost you more.

(I refer you to this recent column by the NY Times‘ Joe Nocera which examined the issue of a la carte and stated that “When we pay for the cable bundle we are, in effect, subsidizing those channels for everybody — including ourselves.”)