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. I still think we are going to see Apps enabled on Apple TV. Then we will see Apps for each channel we want to subscribe to, Dicovery, Science, HGTV etc. Just dropped my $90 a month DirecTV. I get 18 OTA channels in the Southern MN area with my $10 homemade Gray-Hoverman antenna (5 more than my neighbor with a $300 commercial antenna!)

  2. I’m not necessarily opposed to bundles, per se, but the current structure of bundles provided by most operators must change. I couldn’t possibly care less about sports if a gun was held to my head. I do care about learning-type channels (Discovery, Science, etc.). I’m currently a Comcast subscriber. I’m forced to have my channel line-up cluttered with sports channels I’ll never watch, and if I want the Science Channel, I’m forced to move up to the next bundle tier which would blow my monthly budget.

    Give me a total sports bundle to which I can choose not to subscribe, and a learning/information bundle, and never the twain shall meet.

  3. MDN crossed the line when it called consumers stupid. If MDN worries too much about network employees to be out of a job, why didn’t it worry about newspaper employees that are already or going to be out of a job because of news websites such as MDN itself?

    I like my mailman but why would I send a check via mail and spend $0.44 to pay a bill when my bank account lets me send it for free? Thousands of postal workers will be out of a job but how the society evolves.

    Like others already said, hundreds of TV channels are currently full of craps, why do I have to pay for them? If only 20 channels survive and they have good programs, what is wrong with that?

  4. You all are missing the big picture….. The Cable Companies are NOT your friend. They would only be considering this if they were going to make more cash, and alot of it.

    Say you pay $80 right now for 200 channels. Thats about .40 per channel. Say you watch around 20 channels regularly. If the Cable Company charges you $5-6 a channel for custom program bundle, your bill went from $80 to $100-120, and you lost the ability to browse the little watched channels when nothing in on your a la carte list.

    The cable and satellite companies are NOT going to give up the $50-$120 per bundle subscriber for $20-$40 per subscriber.

    little content producers, filling niche and specialty subject/content areas are very likely to go away.

    Not a good deal at all.

  5. MDN is 100% wrong on this one.

    We don’t need ANY channels any more.

    Why can’t producers sell subscriptions to individual shows or sports events?

    Why do we need to pay an overhead charge to the “bundlers” of multiple shows or sports events?

    Anyone with a server and Internet service can stream content these days. And software makes it easy for consumers to select and record content.

    MDN is thinking like its 1969.

    Join the rest of us in 2011 MDN. Think Different.

    P.S. Death to the 100+ channels I never watch!

    1. Sorry dude, but you don’t have the first clue as to why that model won’t work.

      Here’s an example-The NFL is not going to sell retransmission of the Super Bowl as if it were a prize fight. They need the guaranteed money up front from a network.

      Take that example and apply it to other sports, movies and sitcoms.

      The networks are a go between. They lay out the big money and hope to make a return on it. So does NetFlix.

      So for now, yes, we DO need an intermediary.

  6. I don’t give a damn about the NFL business model and whether it requires an intermediary. I am not going to pay for ESPN, Disney, or the rest of that special interest stuff that doesn’t interest me. If people want a la carte, they will have it, if that means dropping cable and watching hulu, going to the Redbox, etc. The solution to an ever-rising cable bill is to drop cable, it’s not a necessity. The solution to people dropping cable, is to give them what they want.

  7. What I find interesting about this “bundle” debate is that as commenters, we are missing the technology side.

    Specifically, consider a channel being streamed to our home. That’s a certain amount of bandwidth consumption. If there’s two TVs in the house, its twice as much, etc.

    Here’s a key question: how much more bandwidth (in MB/sec) does it take for that streaming channel to be HBO versus “The Fishing Lure Channel”?

    -hh

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