It probably comes as no news to you that the availability and consumption of broadband video has risen dramatically this year. I enjoy using Net-viewing to timeshift or catch up on old episodes of particular shows, as well as watching video that’s exclusive to the Web (I love ill Doctrine, a hip-hop video blog hosted by Jay Smooth).

But there’s been a particular notion that risen as well that fascinates me: the proposition that online video can completely replace regular television. Twice, we’ve addressed the notion that online “a la carte” consumption of content can be a cost-savings measure (here & here).

In recent months, the “cord-cutting” meme has shifted a little bit. Instead of simply focusing on the benefits of online video’s a la carte nature, there have been a series of stories about people canceling cable or other subscriptions in favor of getting all their video from other sources.  There’s even a website dedicated to the idea of No More TV.

For example, here’s an L.A. Times piece on Kevin Rose – co-founder of such start-ups as Revision3, Pownce & Digg – explaining why he canceled his Comcast cable and TiVo subscriptions in favor of getting video from the Internet and his Netflix-Roku box. Note that he says he only watches “a handful of shows and about 10 to 12 hours of programming a week.” As we’ve noted before, Nielsen says the average is 127 hours, 15 minutes per month, or just shy of 32 weekly hours.

Mutichannel News has also examined this idea of dumping cable for the Internet. Note that the first customer interviewed says, “I don’t watch a lot of TV myself.” Here’s an important piece of this movement to cutting cable:

Online fare is skewed toward broadcast content. Full episodes of about 90% of broadcast networks’ primetime shows are available on the Internet, compared with about 20% of cable shows, according to Forrester Research.

So, while some cable programming is available online, much is not. Multichannel talks to another customers who says “the bigger adjustment for him was the lack of cable news programming.” TV Week‘s Daisy Whitney is in the midst of an experiment to see if she can get all her television shows online; this week, she wrote about the difficulty of finding kid-friendly content. Will Richmond discusses the lack of cable programming in more detail.

Now, I know that there are readers who will come to the conclusion that I make these remarks for anti-competitive reasons. Purportedly, cable operators are scared of the competition from online video, which also supposedly explains (NOT) many of our network management policies. But some cable operators are also in the online content business, such as Comcast’s Fancast service. And many of these articles and blog posts on getting video from online sources don’t mention that you still have to have a broadband connection to do so – a service also offered by cable.

I think the growth in video is a terrific thing, but I’m a little skeptical about how fast the “cord-cutter” trend is growing. If this was a real movement, wouldn’t we see multichannel subs going down as broadband video consumption went up?  Instead, the subscription numbers have stayed pretty stable.

This week, Contentinople‘s Eve Bergazyn also noted another trend:

According to The Nielsen Company ’s TV/Internet Convergence Panel, the heaviest users aren’t medium loyal: “the top fifth of Internet users spend more than 250 minutes per day watching television, compared to 220 minutes of television viewing by people who do not use the Internet at all,” the company announced in a press release. The opposite is true too, with lower Internet-usage correlating with less time spent in front of the television.

So, perhaps the roles of television and the Internet are more complementary than it might seem at first glance.

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.

Well, that’s the way it’s being positioned anyway…

The Emmy nominations came out today and the historical part was that, for the first time, two basic cable programs (Mad Men & Damages) were nominated for Outstanding Drama Series, along with Showtime’s Dexter.   (Aaron Barnhart also has a rundown at TV Barn.) HBO got 23 nominations for John Adams.  Fan fave Battlestar Galactica got five.  Check the Emmys site for more.

We say this over and over, but this is part of the cable success story. I recently wrote about how cable became a big player in the summertime, but ratings have been up overall for some time. It was back during the 2001/2002 TV season that cable networks first topped all national broadcast networks collectively in terms of primetime television viewership. It was in 2004 that 11 cable networks collectively garnered 50 awards during the Primetime Emmy Awards, surpassing for the first time broadcast networks, which only earned 37 awards.

This doesn’t just happen by accident. Operators and programmers invest billions in programming – the networks spent $20.32 billion last year in making it and the operators also spent over $23 billion in paying fees to the networks for carriage.

And don’t even get me started about what mandatory a la carte might do to this situation…

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.