The Myth of ala Carte Cable?

30 Comments

Legislators are busy crafting together a bill that will allow consumers to get ala carte cable – which is to say they can pick and choose what cable channels they want. Cynthia Brumfield has a good overview of the situation and points to two studies, one by the NCTA (download pdf file) and one by Disney. I can try and decode the reports: these two parties with vested interests are saying, well FCC blew it, and the consumers don’t want anything to do with ala carte cable.

Ironically, these unbiased interests might actually be speaking the truth, though I bet that wasn’t their original intention. Leichtman Research Group, did a survey and found that 40% of consumers are initially very interested in being able to choose and pay only for individual channels from cable and satellite TV companies. However when told the whole truth – that is the total number of channels they are likely to get and the equipment requirements of the service – you know the fine print kinda stuff, the interest level dipped to 17%. (Read the research methodology and decide for yourself, if this makes sense.)


“When consumers are informed of the requirements and consequences of receiving a la carte, we find that about one out-of-six consumers are very interested in a la carte as it would appear in reality,” says Bruce Leichtman, the principal at the research firm. Why the dip? “They are in favor when it is asked in an incorrect (biased) fashion, and without the implications,” he wrote back in an email, when I asked him the question.

30 Comments

Rolf Schewe

Why should we be subsidizing channels we don’t watch? Most of our bill is paying to prop up channels that we don’t watch. Let all these channels earn their stay. It’s like corporate welfare for bad TV. Let the marketplace determine what channels should stay or go, not this subsidizing model.

I hardly watch TV, but when I do it is for live events like Yankees games. Most of the time my TV is off. My content intake is mainly from the web.

There is no bill I hate to pay more than cable TV.

I am for a la carte as an option to consumers. People like to throw up the all or nothing strawman. At least give us a choice.

Bob Brown

I don’t have cable or even an antenna connected to my TV. You can download every tv show from pirate bay.

Amanda

You can just keep the cable package you have and program your television to skip certain channels. It’s a built-in feature on most models, not that hard to do. No need to go into the economics of it, when it can be done manually. :)

But aren’t you still paying for the channels you’ve skipped? You know it’s funny because when you think about it, it was the hippie generation that wanted pay tv because they realized that free means commercials. More were willing to pay for no commercials or less.

Eric

You can just keep the cable package you have and program your television to skip certain channels. It’s a built-in feature on most models, not that hard to do. No need to go into the economics of it, when it can be done manually. :)

dina624

The average cable bill is something like 50 to 60 dollars a month, I’m guessing. I don’t see why they can’t let consumers buy say just the 25 (or less if they want…you’d be surprised at how little people want in TV…) channels they want for that price. I would love if I could get cable with NO MTV, NO CNN, only FOX and local channels and NO Disney channel, NO NICK, no LINK……and NO GAY LESBIAN channels…it seems EVERY package contains those channels….plus the thousand and one shopping networks out there…I would be willing to put up with 3 of them…maybe.

We just decided to wean ourselves off TV…next year its out and we are just getting netflix for any movies we might want to watch.

We can watch fox and EWTN on the internet. My husband helps friends figure out how to hook their internet up their TV’s so they can watch ‘tv style’, shows from the internet, by-passing Cable.

dina

JohnK

I’m not as concerned about ala carte vs. pre-packaged as I am for the requirement to use cable boxes (or cable cards). Technologically, a cable company could simply put out digital signals that any digitial-cable TV could play as-is, but the cable companies seem insistant on having us use of their decoder-boxes that they will “conveniently” rent to us, with multiple boxes required for multiple TV sets. I would like to see unscramlbed digital channels provided much as in the same manner as analog channels are provided now. I think the cable companies want the box-requirement so that they can charge more.

Paul Galvanek

One problem with much of the discussion so far. While the impact on cost from ala carte is important it is not the only reason to support ala carte – free speech rights are also a concern here that rarely gets discussed. Look people, as long as anyone is being forced to pay for content they end up feeling a need to block the push for the government to regulate content is going to keep gaining momentum. The idea that anyone could be forced to provide subsidy for material they find morally, philosophically or politically objectionable is at the root f the problem. Ala carte pricing, which does NOT exclude bundling as a option, will make all arguments in favor of regulation obsolete. If you don’t want something, don’t pay for it, if you paid for it’s a matter between yourself and the company you contracted with for the content. The current argument which is essentially if you don’t t like don’t watch it, but we’re still going to make you pay for it and subsidize its production should be an affront to anyone who prizes freedom. I personally would gladly pay a few extra bucks a month if it meant no money was going to some of the content providers currently on my system.

Cat

What I think the cable companies should do is offer a cable package, BUT let the consumer choose the channels. Perhaps a basic cable package of 20 channels at $19.99 but let us pick what channels.

I don’t mind paying for a package, but what I hate is that I’ll get Court TV and HGTV (The two channels I love) but then get a crap load of sports channels and tons of news channels that show all the same junk.

This way, the cable companies still get their package price income, yet the consumer can pick and choose. Wouldn’t this be a good compromise?

Katie

I don’t have cable and I don’t have dish, the only channels I have are the ones I can get with an antenna. I am personally waiting for ala carte cable because the main reason I don’t have cable or dish now is that I don’t want the 300 channels with nothing on for $100/month (I can do without 47 channels of CNN/CSpan. etc, and 50 ESPN channels I don’t watch them). For the channels I would watch I can’t justify the expense. I don’t watch that much TV and I don’t want to take 20 minutes to scan through the channels to find what I want to watch. I want the channels I get with my antenna and about 10 other channels. Until then I will stick with the free channels and if the government passes the regulation so that I can no longer get any TV with an antenna then I guess I will have to just stick with watching DVDs.

Raphy

We don’t need an a la carte cable system. As a society we’re already moving in this direction — and iPods are certainly speeding up this process. People are already paying $2 per episode for “Lost.” But the difference is that people are paying a la carte per show, not per channels. The reality is that few people would save substantive money.
And what would we give up? How often do you hear about a show on a channel you rarely watch and start to watch it? Just a year ago I got hooked on The Daily Show. Before that I almost never watched Comedy Central, and if it was on an a la carte strutcture would not have paid for it.

Dennis Evans

One problem is there are 66 million subs but only half have convertors and many of them have 3 TV sets or more.
The Industry will need to buy 60-120 [nodody knows the exact number] million more convertors to give every set alacarte digital for every channel…the new cheapo digitals are $50 each if the customer can install them. That’s 3-6 Billion for no increase in Revenue. Add another $10 per sub CAPEX to convert all the analog videos [local, public access, garbage channels, etc] to digital…3.5-6.5 Billion.

Then the problem of CableCards and the mandate to remove convertors – downloadable security.

Victor Blake

The problem isn’t the cable companies (yes I do work for one). And it’s isn’t the line up. I think one thing that would satisfy a lot of consumer’s needs would be to have customizeable directory services (where the channels are entries in the directory). Directory services that provided the kind of capability we all have come to know and love one our “Links” or “Favorite” menus in our browsers. The ability to customize, add icons (ala Sling Box client), to incorporate parental-controls, aliases, and basically create taxonomies at will. We all like having lots of choices. It just gets tedious to find that one movie you know is on at 9:30pm when you have 600 to 900 channels (including the VoD channels).

There are clearly “more” channels on the Internet than on any cable station, but the ability to organize them in a browser, and the freedom from a remote — makes it easier online.

I’m waiting for a “guide” that I can customize from a browser interface and push to my set-top box or television.

mull

The people in the world of hurt right now are the content providers. Content used to be supported by advertising, but guess what, with 450 channels, kind of hard to target your message to such a fractured marketplace. Throw in VCR’s, DVR’s and the like where no one watches your commercials, guess what? Content goes down the tubes because nothing is paying for it. You think they produce reality shows by the dozens because the public actually wants to watch it? Its really really cheap to produce those types of programs.

Until somehow good content can find a way to make money, it will continue to be crap. Forget a la carte, wait until they just start charging for individual programs. I do not think that the costs to the consumer will go down, even though everyone seems to want to get something for free, but good quality programming costs money. Good writers cost money, good directors costs money.

One other comment on this topic, and that is I doubt that most of the people that read this blog or post on this blog is in the MSO’s, RBOC’s or content owners target marketplace anyway. Most of us typically don’t watch a whole lot of TV anyway, and the truth is, they really don’t care about that type of person. Their target is the person that would be willing to spend $100-200 a month on their programming.

John Thacker

It’s not particularly obvious offhand why a la carte pricing would reduce prices for the average consumer. It could go either way.

People with unusual tastes could certainly have their prices raised or lowered. Disney gets a HUGE price for ESPN and its channels; people who don’t like sports could probably save a lot.

It’s not even clear whether a la carte pricing would help the CableCos or the content providers more. The content providers are responsible for a lot of the bundling as it is now, or at least big fans of it– “take our less popular channels if you want the more popular ones.”

Competition will make a lot of these things clearer. Verizon’s FiOSTV, for example, is very interesting.

Charlie Sierra

Om, and everybody else on this thread should be ashamed of yourselves.

The “ala-carte is bad” bullshit, is just too funny to watch and keep a straight face.

Hello??? is everybody else here completely clueless as to NOT listen to a word these exec’s say, but watch WHAT THEY DO!!!

Viacom is in the lead with their own “ala-freakin’-carte” system called OVERDRIVE, and every other cable channel is working on similar (or even better) offerings RSN. Hey, ESPN is so ala-carte, they’ll sell ya a mobile phone that only gets their sports news.

But whats even better than that, are the hundreds of NEW “ala-carte” only micro/niche IP-TV channels.

This whole mess is the usual regulatory stall tactic. Ur sorry, the “four-corners” drill, it is March Madness.

The dance is purely about how different industry groups focus ALL their competitive strategy on romancing the regulators, when they should focus on the customer.

The Heisenberg Principal anyone?

The real driver right now are the RBOCs.

We all know they what to eventually attempt to charge ESPN/MTV a carriage fee, but they also want to get good short-term IP-video carriage deals. So first, just let the FCC and pundits everywhere soften them up. Very smart, plus we already know the RBOCs own the FCC, lock, stock, and barrel.

Furthermore, listen to what the exec’s are really saying when they whine about losing their business-model. Which is that the exec’s are NOT qualified to really run their business’, without a governmental crutch.

So, if the current business is fundamentally depended upon governmental fiat, then why on god’s-green-earth are we paying these bozo’s tens of millions of dollars a year?

Bottomline: the cable channels need viewers alot more than we need them, and that my friends will be reflected in the new economic realities of an ala-carte system, where most channels will either be FREE or ignored, just like WEBSITES!!!

PS. I’m willing to bet some channels will even try to pay viewers.
There’s always one in every crowd. tic.

PSS. Has anybody seen Joe lately? Thats right Joseph Schumpeter.

wireless

This whole debate is frustrating because multichannel video is a VERY COMPETITVE market. If there was a viable business model for delivering a la cart channels, then Directv, Dish, Voom (when it existed) or any number of overbuilders over the years would have done it. These companies have invested billions in infrastructures and have horrible returns on assets. Companies that have actual market power DO NOT have these kinds of economics.

The product is the product – if you don’t like it don’t buy it but complaining that the government should FORCE the MSOs to offer a different, less economically beneficial product is absurd.

Eric

A La Carte, let me think about it…

I can pay $50 a month (actually more), which is $600 a year, to get cable, chock full of stuff I hardly care about.

Or – I can spend $50 a peice for the 4 or 5 shows that I actually watch (on iTunes, DVD, or other), drop cable, and spend half as much as I do annually.

A La Carte Cable, even if they do make it palatable and cheaper, is already too little too late.

Dean Johnson

As I understand it, a large part of the non-premium channel bundle cost is in the sports channels. That makes sense to me because the TV deals seem to be a big chunk of the ever more greedy sports teams revenue. I would be happy with unbundling because I could get rid of all the useless ESPN variants. In fact, they are even manually taken off the Tivo channel list and haven’t been missed, like the shopping channels. I’m not interested in indirectly subsidizing those ungrateful bastards.

Bruce Braun

I worked in cable beginning with launching MTV. I served on the board of our state’s cable TV association. Beleive me, bundling and packaging are a crock. As a boss of mine said at the time, bundling/packaging without real options is like going into a grocery store for a loaf of bread and then being required to buy a bottle of ketchup in order to get the bread. This is not a complicated subject. Chuck Dolan of Cablevision Systems came up with the whole idea of packaging back in 1982-83. The idea, which after the success Dolan achieved was copied by all of the MSO’s was to raise prices, lock subscribers into packages that were impossible to split out or reduce and in the end, have a high revenue per subscriber yield. There has not been one new cable network launched in the past 20 years that did not have to give up major equity stakes to the MSO’s for coverage. “Unrestricked Marketing support” or slotting fees are common-place with the MSO’s. The Disney’s of the world know that their revenue would plummet if consumers were allowed to opt out of channels they had no interest in. The extra equipment arguement is also a joke. All cable systems today are addressable with channel delivery done with the click of a mouse button.

ant

Forget ala Carte cable, we’re close to ala Carte shows. No that lots of people have DVRs, we’re not interested in watching WHOLE CHANNELS. We only have enough time to watch what we want, everything else is a waste of time. The viewing public’s patience just got alot shorter.

Jon Gales

In reality wouldn’t the cable companies love it if everyone had a set top box? That’s when they go all digital and use the bandwidth not being sucked up by analog to pump in more HD and on demand content.

I read an arguement against a la carte the other day from a Latino cable exec. He said that a few channels in his sector would probably have to close down because they can’t survive without the revenue from people who go a la carte and won’t choose the spanish channels. If a network can’t survive based on its actual viewership, then it really should go away.

Scott

I would love it, Cablevision basically forces you into a 65 US$ / month package if you want digital cable. I have to have separate set-top boxes for each TV anyway, so that is not an issue. I watch about 8 to 10% of the channels that I have. If I could pay 50% less for those channels I would be happy.

But as noted by Google’s Andrew Mclaughlin, “The FCC sucks,” between them and our wonderful congress, we the consumer will end up with little or nothing. Competition is the only thing that will eliminate the inefficiencies in the market.

Weili

I don’t see how consumers are “force-fed” anything just because all cable channels are made available for us even though most of us only watch a handful of them.

Like you said yourself, we can block certain channels and we can simply choose not to view them, so how is that force-feed? Does your local cable guy come to your house, point a gun at your head and make you watch channels you don’t want to? If yes then you have a whole different issue…

In any case, a la carte cable is only good for consumers if we actually pay less but that won’t be the case as cable companies won’t simply give up their current income.

George

The cable companies and networks are trying to scare people into thinking this will be bad for the consumers and cost more, when it would actually mean more competition. (Can you imagine if the networks had to improve the quality of their programming to get people to order adn watch their channels?)

I would LOVE to get less channels, if they were the ones I actually WANTED to watch. Right now, I get hundreds of channels, but regularly watch maybe less than 20 of them (if that). And, I know there are channels that are not in my package that I would love to have. (I’m not talking premium channels here, either, just regular ones that for some reason are only in certain packages.)

Poopmaster

It’s obvious. The cable companies are unhappy with change. The consumers (at least a vocal percentage of them) do not want certain channels in their home. Yes, we can block them; yes, we can choose not to go there; but the point is, we’re being force-fed things we don’t want. I know people who would be willing to pay more for less because they get their way. And in the end, the cost of changing hardware/software on the cable company’s end is just a one-time hit. Prices should go up and then they’ll go back down. The power behind the throne in this case is the channels themselves. MTV knows that they will face a huge drop in viewers if people have to choose their channel individually — and they’re not the only one. Oxygen vs. Lifetime — would people really choose both if they had to? The status quo is simply a payola scheme, where advertisers prop up worthless channels, which in turn pay the cable guys to force-feed customers channels they don’t want. Ever wonder why there are 300 channels and nothing to watch? Because the channels that are there are not facing true competition for your attention.

wireless

If congress mandates a la carte then cable operators will price their product so that they are no worse off than they were before. What that means is that no one is going to be getting any dream deals (my favorite 5 channels for $10/month!). This is clearly not what congress wants, so in order for them to get their desired outcome they would have to specifically legislate lower prices, which is a slippery slope if I’ve ever seen one.

Ken Purcell

In my area the cable companies would allow a la carte service. But they structured their pricing tiers to discourage it though.

Movie Channel Package with HBO, HBO2, Stars, etc. : $9
HBO only a la carte: $9

See you could get it but why not go for the tier when you get more.

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