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.
- 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.