With lots of activity happening in the media and entertainment sectors in 2010, we’ve recently seen several stories about the carriage of programming services by cable and other video providers. This coverage has been partly driven by negotiations between programmers and operators about carriage fees, partly by retransmission consent disputes, partly by the growing prevalence of online video.
Many of the news stories and blog coverage have attacked the business model of multichannel video providers (which includes cable, DirecTV & DISH, AT&T’s U-verse & Verizon’s FiOS). Such arguments invariably lead reporters and bloggers to one of two conclusions: We need à la carte or all video should be available online to all consumers.
Over at AllThingsD, Peter Kafka revealed a rate card from an unknown cable operator that reveals what said operator pays each programmer for the right to carry their signals. Kafka thinks that the hidden cost of programming is the problem.
As I’ve said before, I think that many cable viewers are probably okay with most of the bundle–or at least unwilling to foot the bill for real a la carte pricing. But maybe if you waved this list in front of them, they might rethink that.
Of course, there are a few problems with this. First, there’s no way of knowing what these prices really mean. Could this be the same rate that all companies pay? After all, Wal-Mart doesn’t pay the same price for product as another retailer might. In addition, the “wholesale” price that a video distributor pays (or any business for that matter) isn’t the same price that a consumer pays, especially if you purchased channels on an individual basis versus the savings of a bundle.
At the Atlantic, Derek Thompson points out more problems:
Monthly cable bills are about $50, [Kafka] says. An American’s average monthly TV time is 150 hours (via Nielsen). So today we pay about 30 cents per hour of TV, right? Not exactly. Monthly cable bills are by household. Monthly TV hours are by individual. I live with two roommates. I pay $17 for cable and consume 150 hours of television. My TV experience costs more like 11 cents per hour.
Thompson also points out how a la carte would affect advertising and notes that this analysis doesn’t reflect how people watch TV in the real world.
…a great deal of TV time is spent “surfing” for nothing in particular, or watching shows to which we ascribe no real monetary value but we watch anyway because we’ve already paid the monthly access bill.
Eduardo Porter, in the New York Times, also argues that Americans might be more likely to pay for content if they knew what they were paying for, even suggesting that a coin slot attached to the TV or PayPal account would enable purchase of individual shows, regardless of which network they are on. But all Porter has to do is look at the cost of pay-per-view to realize this is a much more expensive way to watch your favorite shows.
We’ve covered the topic of a la carte several times before, but the point is that cable networks will lose the broad carriage they have now and be forced to spend considerable money to market and sell the channel to individual consumers. Revenue goes down, operating costs go up. Programming will be impacted.
There’s usually a conclusion to all these “analyses,” even if they don’t say it flat-out: “If you would only move to à la carte or some kind of metered plan – then consumers would pay less.”
Except, perhaps, they wouldn’t.