Like any business, cable channels have operating costs for obtaining and distrbuting programming. The current model ensures diversity because it allows new networks to develop an audience by letting larger established channels share the costs. Programmers typically package new channels with more popular existing channels until the new channel can develop a following. It, in turn, may become the anchor of it’s own package.

In an a la carte model, packaging channels together isn’t an option and channels would have to account for those costs via subscribers or via advertising.

Advertising is based on the size of the viewing audience. If the viewing audience is small, advertisers would be unwilling to pay a high price for ads, leading to higher prices per subscribers to offset ad revenues.

New channels and channels with small, but dedicated audiences would be unable to charge much for advertising, so they would have to charge higher subscription prices. That creates a demand curve with fewer people willing to pay as the cost rises.

This is where your question comes in. You would be under no obligation to guarantee that any channel is profitable, but there would also be no guarantee that the channels you watch now would even be available.

If you would pick ESPN and FX, maybe you would be fine. If you’re a NASCAR fan and would pick Speed, a sportsman and would pick Versus, or a gamer and would pick G4, you may find yourself forced to pick ESPN or FX because niche channels may become unsustainable in an a la carte model.

“Take, for instance, ESPN, which charges the highest amount of any cable network: $3 per subscriber per month. (I’m borrowing this example from a recent research note by Craig Moffett, the Sanford C. Bernstein cable analyst.) Suppose in an à la carte world, 25 percent of the nation’s cable subscribers take ESPN. If that were the case, the network would have to charge each subscriber not $3, but $12 a month to keep its revenue the same. (And don’t forget: with its $1.1 billion annual bill to the National Football League alone, ESPN is hardly in a position to tolerate declining revenues.) ”

The price would go up for those that watch ESPN, why because their revenue base has changed. Instead of all cable viewers paying $3 to see ESPN, the number of viewers have changed thus making ESPN adjust its price in order to keep its “revenue the same”. Since when is it the consumer’s duty to keep the profits/revenues of an organization in the positive? I must have missed that in my 8 years of college.

I also don’t see how this article is evidence that a la carte is more expensive. ESPN was given as an example, but what is the research and methodology behind the numbers?

Thanks for responding, usually people post to blogs and never hear anything back from the blogger.

Then the price metric would surely go down and the price consumers pay for cable might as well.

The evidence doesn’t back you up. I refer you to this NY Times article:

Yet as appealing as the idea might seem at first glance, there is a reason that Congress has not taken the bait and passed an à la carte law. À la carte would be a consumer disaster. For those of you who yearn for it, this is a classic case of “be careful what you wish for.”

True, if you decide to take only one or two channels, à la carte pricing will save you money. But how many people are going to limit themselves to one or two channels? In fact, even if you pick as few as a dozen channels, à la carte will almost surely cost more than your current “exorbitant” cable bill.

The reason is that unmoored from the cable bundle, individual networks would have to charge vastly more money per subscriber.

It goes on, with some specific calculations.

The obvious solution is to allow customers to pay for what they want and not subsidize channels they do not watch. Then the price metric would surely go down and the price consumers pay for cable might as well.