Television ala carte

For years now, I have had an on again/off again debate with the head guy at Cablevision-Norwalk, the local office for the main company. I’ve been a long-time proponent of ala carte pricing for cable. Why should I be paying for channels when I could care less?

I’ve always gotten nowhere, but earlier this year the debate started up again when John McCain (the only Republican I would ever consider electing to the White House) brought it up. I immediately sent an endorsement of the notion to my Congressman and two state senators and heard…nothing.

Still, the debate continues and there have been congressional and FCC hearings. Cable insists many channels would fail to even launch without being bundled as part of a tier (i.e. Basic). One channel noted they charge the cable operator something like 50 cents under the current configuration but would have to raise their rate to $3.50 under an ala carte system. There wasn’t a particularly good reason given for such a move although I suspect it has something to do with making up for absent ad revenues given audience attrition.

Having recently completed a book on Darwin, I keep coming back to the notion of survival of the fittest, along with Paul Levitz’s theories on price elasticity. Let’s say the channel above was the Spud Channel. Currently, the Spud Channel is piped into 10 million homes and can charge rates accordingly. Now it’s suddenly ala carte and they find only 500,000 dedicated Spud fans (no doubt confusing potatos with the more adorable Spuds McKenzie). Odds are, they can keep raising their rates from 50 cents to the $3.50 mark and not lose too many of those 500,000 Spud fans. After all, people really like their channel.

A possible mid-ground might be clusters of channels aimed at similar demographics. Many cable operators already do this with Sports so why not others? A Shopping package, a women’s package (We, Lifetime, Oxygen, Soap), a family package (Disney, Nick, USA, TNT, etc.) and many other combinations. And then, for those who really only want, say, C-Span and Court TV, an ala carte menu would exist.

More food for thought can be found here Wired article.

6 comments

  • Brandy

    As you know Bob, I’m well versed in the arguments both pro and con on this issue.

    It’s my personal opinion that a la carte will end up costing most people either the same as they pay now or more for less content. The solution they talk about where they push the individual network signals out to those with digital settop boxes is the one that seems most likely to actually work as far as hardware and infrastructure goes.

    I have a feeling many people will either try a la carte and revert back to a regular package, or never even try it once they sit down and figure out what they’ll be getting for their money. Of course some people will love it, but I don’t think that the majority of viewers will. It’s hard to think of not being able to tune into a network for a single show (like Queer Eye on Bravo, or Monk on USA) whenever I feel like it because I didn’t sub to that network. But then we’re talking about VOD (video on demand) and that’s a whole other kettle of fish, with all the storage and bandwidth issues that come with it.

    If a la carte happens many small nets will indeed go under, and even the bigger ones won’t have as much cash to finance technical innovations (like building HD studios or providing other extras). Like you said though, this is a business and maybe those small nets don’t really deserve to exist in this marketplace. As you can imagine, over here we’re not all that worried about losing subs, but it would be a major shift in how business is conducted.

    You’ll note in the Wired article that they’re already doing it up in Canada and its not working very well for them. But things here are different and they may find a way to make it work.

    If you’re really interested in following this topic or any other mass media issues, check out this site: http://www.mediapost.com/index.cfm. The archives on the bottom are great and contain the stories I get in e-newsletters every day. I’m not sure if you need to pay to sub to those since I get them thru work.

    Brandy

  • Brandy

    Forgot to add something:

    Your guess as to why a net that costs a cable provider $.50 to carry now would go up to $3.50 was dead on. All ads are sold on how many eyeballs can possibly be exposed to it, and if your subs go down you can’t charge as much. I do a monthly report on cable net coverage and it goes out to all the high muckety mucks, and they’re always anxious to see it.

    As for a small net making up the $$ by the diehard fans paying the higher price for it… I dunno. It’ll be a case by case basis on that one. How many people pay to sub to website? Some can get away with charging people and some can’t.

    All of this is of course MHO.
    Brandy

  • Michael

    I can see some validity to not going a la carte.

    Example from my life: Spike TV. When Spike TV was first announced, it sounded like exactly the kind of network I would have no interest in. And in fact, I really don’t care for almost any of their programming.

    But…they’re currently syndicating Star Trek: Deep Space Nine. And so we’ve been grabbing episodes with the TiVo, to give us something entertaining to watch that we already know we’ll enjoy.

    So an a la carte system could prevent you from seeing stuff you actually want…

  • I dropped my cable access altogether when I realized I was paying more for my monthly bill than I was my other utilities combined! Yeeeesh!

  • UncleHenry

    Bob,
    I agree with you completely on the a la carte idea on cable pricing. I also think that satellite customers should be able to purchase signals from far away cities. For example: a customer in New York should be able to pay for the NBC affiliate in Portland Oregon, the ABC affiliate in Dallas and the CBS affiliate in Miami, if they choose to do so. Right now, you aren’t allowed to do this, even though the technology is available.
    By the way, how many Dc staffers like McCain but hate Republicans?

  • Joe Tages

    Out of all my cable channels, I probably tune in to C-SPAN and MSNBC about 75% of the time. I also watch the Sci-Fi channel if they’re running a block of classic TREK episodes, Spike TV if they’re re-running HIGHLANDER, or Bravo whenever there’s an old episode of COLUMBO on that I enjoy. Another example; I would prefer getting Boomerang over Cartoon Network, but it’s not included in my package. Ditto for the VH-1 channel that plays all those old videos. I can understand how I’d miss out on stuff like Monk on USA (which I rarely watch) if I went a la carte, but in the long run, I’d have to vote with my checkbook.