U.S. cable operators want to go ‘a la carte’ by forcing programmers to unbundle

“U.S. cable operators are privately working on a plan to force programmers to unbundle their networks and allow customers to subscribe to channels on an individual basis,” Yinka Adegoke reports for Reuters.

“The plan represents a complete reversal from cable operators’ long-held opposition to what is known as ‘a la carte’ programming,” Adegoke reports. “Over the last decade, the cable industry battled ferociously with regulators to protect the right to bundle programming, arguing it offered customers the best value. But executives now say the change is a necessary response to shifting dynamics such as higher carriage costs and using the Web to watch programs, as well as a weak economic recovery that has forced many consumers to cancel cable television subscriptions.”

Adegoke reports, “Comcast Corp and Time Warner Cable, the two largest operators have lost 1.2 million video customers in the 12 months to June 30… An ‘a la carte’ menu of programming would give consumers who are not sports fans the freedom to drop high cost sports channels such as Walt Disney Co’s ESPN and ESPN 2 from basic packages. At around $4 a subscriber, ESPN is the most expensive channel in the U.S. cable business, according to SNL Kagan.”

“The specter of unbundled programming is likely to encounter fierce resistance from network owners such as Viacom Inc. or Discovery Communications Inc., which are keen to maintain the economics of selling their most popular channels as a package with their smaller, nascent networks,” Adegoke reports. “‘There is a growing recognition that the current model is broken,’ said Craig Moffett, a long-time cable analyst at Bernstein Research.”

“Moffett warned, however, that allowing customers to choose any station they wanted in any package would be economically unfeasible for both the consumer and the cable company,” Adegoke reports. “‘It could be a la carte, but not as people imagine it now,’ he said referring to smaller packs of programming more akin to what Time Warner Cable Inc. has tried. Last November, Time Warner Cable launched a three-city trial of a low cost TV Essentials pack with fewer channels. It now plans to expand that offer to other cities.”

Read more in the full article here.

MacDailyNews Take: The good: Consumer choice. The bad: Stupid consumers.

While we almost always side with consumer choice, everyone knows what would happen if channels were really offered a la carte: Hundreds of “networks” would go dark. In television, the lowest common denominator rules. Just look at what people watch en masse. If you want to go back 30+ years and end up with about thirteen channels, most of which offer vapid crap, one or two (if were lucky) so-called “news” channels, a kids’ channel, a couple sports channels, etc. then go pure a la carte.

Also get ready for thousands of writers, producers, board ops, camera people, etc. to join the unemployment lines, so you’ll still be contributing to their support, just a bit more directly – via your tax dollars instead of your cable bill.

The fact is, some bundling (less than there is now, certainly) is necessary in order for many quality and/or specialized channels to exist. They have to be very careful designing new bundles or risk losing many of the quality channels that have never once been tuned in by the great unwashed on their Blue Light Special TVs.

UPDATE: 10:53am EDT: In response to some of the comments below, some further clarification: We agree with the move towards al la carte, just not all the way to pure a la carte – unless it takes place over an extended period of time, so the industry can properly shake out.

Basically all we’re saying is that care must be taken as the bundles are refined and the shift toward a la carte takes place.

If you want to see what will survive and what won’t, just look at the ratings and remember that it costs much more than most people think to produce even the “cheapest” televisions shows. Only the top programs and top networks would be able to finance their operations within a pure a la carte model. That said, it obviously can be done and done rather well for certain types of programming, at least at the network level, as HBO has already proven.

84 Comments

  1. The real world is a much nicer place than the world shown on the news (which is not saying much). Maybe if more people stopped watching the news, then newscasters would be forced to get real.

  2. I agree with the MDN take completely. It will be nothing but channel after channel of OW My Balls!

    Say goodbye to all the smart channels, or at the very least watch as they devolve into nothing but hollywood gossip, top 10 lists, and some weird hybrid of prison shows and pro wrestling.

    1. A lot of the content available a la carte now is produced with funds available due to bundled pricing. I agree that the amount of quality content will drop for a la carte once those bundled costs are eliminated. Would be interesting to see what can survive without subsidies.

    2. I have been living the unbundled dream with iTunes and Netflix on my AppleTV for months. The business model is not new, and it is working nicely for me.
      I do worry about the lowest common denominator effects on programming, but I think that some shows will do better with direct marketing. That way a show does not need to have enough viewership to support production AND the network besides. Cut out the middle man. That way your favorite writers/directors/actors/etc have a chance to make MORE money, if they can make a product that sells to enough people, not just Nielsen families.
      Also, why should I support an industry that produces stuff I don’t want? It wont be pretty when the companies go under, but the truth is they are artificially kept afloat and will as such eventually die anyway.

  3. Haven’t had cable or sat in years. OTA HD and a little on the computer is plenty. The OTA with all of their sub channels combined with a computer recording the programs I watch adds up to plenty to watch.

    Only thing I really miss is Monday night football.

  4. ok- I’m not a sports fan- so getting rid of ESPN channels and saving money is a thrill .I like the idea of picking – I get HBO- Showtime & Starz and have to admit- I watch these more than I do regular tv.. I wish we could get British cable over here. bbc America.has some good programing when they are showing old American Star trek shows

  5. This is a good thing. If many channels go dark…well AWESOME! There is so much crap on TV that needs to go away. Catch-22 isn’t it? Don’t offer ‘a la carte’ and suffer a hemorrhage of the masses leaving the service, or survival of the fittest by producing worth while viewing. If this brings it down to 30 GREAT channels – PERFECT! The other crap can be streamed on Netflix, YouTube or their own site.

    If anything it gets those channels motivated to start producing good stuff.

    Look on the bright side, if a channel is failing, but has one great show, than it can fold into another channel that is doing well. The good wipes out the crap and that becomes GREAT!

  6. Let them go dark or better yet, here’s an alternative. Sell the programming to PBS with no commercials, then if you really liked a show, contribute to PBS to keep it going. Democracy in action.

  7. I disagree with MDN on this one. Let market forces dictate where consumers choose to go. A la carte may kill off some channels and some popular shows, but so what. What will we miss? More crappy reality shows showing us people doing odd or weird things and jobs? No great loss. As for people being put out of work, it’s like any other vocation in the digital age, you better be prepared to retrain or move into a more viable field. Gone are the days of just one field or job per person’s lifetime. Technology is moving us far to fast for that kind of thinking. Why should broadcast TV be immune to the same kinds of market and technology introduced disruptions as other industries. In fact, I’d claim that broadcast TV has been at probably the greatest risk of rapid change since around the year 2000 when Apple revolutionized digital content distribution through iTunes.

  8. Who stole the guy who writes MDN. The thought that we need big organizations like Comcast (or the government) to make decisions for us is bullshit.

    Unbundle the freakin’ programs. If some go dark then they deserve to go dark. if crap like Jersey Shore survives, great. If quality TV like Breaking Bad fails, tough luck. That’s the true free market–let it work.

  9. I’ve tried to explain this many times and I appreciate MDN’s take.

    First, it most likely will not be cheaper.
    Many smaller networks will go dark.
    Internet access will go up in price (and, speed, of course).
    NetFlix fees will continue to rise.

    Oddly enough, the best example I can give of the current pricing in cable is to imagine the difference between a 7-11 and a Wal-Mart Supercenter (or local supermarket of choice).

    The 7-11 is more likely to have what you need most of the time without having to go through all the aisle of crap that you didn’t go there for.
    But because of overhead, distribution, and marketing, the same items cost more than at a supermarket.

    It’s free-market with a little bit of socialism sprinkled in, because you are helping subsidize channels that others may enjoy in smaller numbers than you, but that price to sustain them is negligible.

    1. Not only will it most likely not be cheaper, it will most likely become more expensive… and there will be fewer choices, channel-wise.

      Why do you think the cable operators are now all for unbundling? They think it will make them more money.

      However, like Deus Ex Technica notes below, bundling and ala-cart are not mutually exclusive.

      IMO, cable operators will continue to offer bundles. Just not the same way they do now, and while the cost per channel will be lower than ala-cart, the cost for the bundle will be more… compared to what consumers pay now.

      The end result? Regardless of whether you’re for ala-cart or bundling, cable/satellite bills are going to increase and there will be fewer choices.

  10. Why should everyone need to subsidize ESPN and Disney? We would NEVER watch those channels. It might make some sense to offer some bundles such as a cooking bundle, travel bundle, history, etc, but why should EVERYONE have to pay for certain channels?

    FWIW, we found it more economical to buy the shows we want from Amazon, iTunes, or on DVD and cancelled cable some years ago. We don’t miss it. The cable companies want to do this because people like us have already found a way to get what we want “a la carte.”

  11. I think MDN has built too many assumptions into their conclusion:

    1) Bundling and a-la-cart offerings are not mutually exclusive. The cable companies can offer both.

    2) Bundling doesn’t have to happen just at the cable-provider level. Imagine the cable company offering only one Disney channel, but subscribers to that channel getting access to all six (I’m guessing the real number) via a Disney channel App.

    3) If a small cable channel like, say TBS, were offered a-la-carte, subscriptions wouldn’t be the only source of revenue. There is still advertising, which still can be sold across a group of channels (ex: Time Warner sells ad time to Nike for a advert which will appear across a number of their channels).

    MDN’s basic point that a strict a-la-carte model would cause some channels to “go dark” has merit, it’s just that it is very unlikely that we would see a strict a-la-cart emerge if cable operators experiment with unbundling.

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