The FCC now thinks that a la carte cable, where you can choose only the channels you want, will save consumers money.
They’re wrong.
download Fei ying Cable channels do not just generate revenue from commercials. Each channel charges cable providers a fee-per-provider, ranging anywhere from below 20 or 30 cents a month (most stations) to around $2.35/month (ESPN early 2005 estimate.) While large cable providers (your Time Warners, Charters, Comcasts, etc.) can negotiate fees, particularly if a media company wants a smaller (or newer) channel carried (especially on valuable analog space,) there’s still a large expense every month just for programming acquistion – a cost that is passed on to the consumer with a la carte.
Not a big deal, you say? Willing to pay $2.35 a month for ESPN, about, let’s say, 35 cents a month for Comedy Central, plus similar “small” fees for a couple other channels? Doesn’t really sound bad.
Except that fees would double.
Disney estimates that ESPN reaches 80 million homes, for a per-month revenue of 188 million dollars. 2.256 billion dollars per year. Imagine that under a la carte ESPN, probably the most wanted network in the cable universe (thus the higher per-month fee,) only loses five million homes. That’s a monthly loss of almost 12 million dollars.
You think ESPN won’t raise fees to about three bucks a month?
The scary thing is what happens to networks that won’t see such a high rate of subscriber retention. How many homes really watch Oxygen? What about the Travel Channel? While the fees for these channels would be miniscule – most likely pennies – a reduction from 40 to 50 million homes down to 5 to 10 million equals a revenue loss of 80 TO 90 PERCENT. They would have to jack fees up to a dollar or two a month, which doesn’t sound like much until you start adding up the ten or twelve channels you want.
But what if you only want one channel, like ESPN? Three dollars per month plus a provider maintenance fee of five to ten dollars each month means you’re paying eight to thirteen bucks just to watch the Worldwide Leader. Not that bad. Unless another channel, like Comedy Central, suddenly has something you want, and then, OOPS, you don’t get it.
That’s the other pressing issue – forget the money; what about the sampling? How does a network make itself valuable – warrant that two or three bucks per month – when no one can decide their programming is worth the expense? Is word of mouth enough? Admittedly, there are new content arenas opening up, like the Internet and iTunes, and a cabler could decide to stream an episode or two online, or even offer a free preview weekend like HBO and Showtime historically have. Still, this involves effort for someone to discover a show or network they don’t traditionally watch, rather than the ability to just flip by a new program and gain interest the old fashioned way.
(Though with this thought, one can wish that a la carte had been the practice in the late nineties. Fox News had to pay cable channels to add the network in its early days, one of the reasons it got a head start over MSNBC. Now, of course, the money flows the opposite direction.)
Gigantic download
A la carte is an interesting idea, but besides the low odds of it being successful, with the increasing fusion of television and the Internet it’s really pointless to discuss. There’ll be a way when you’ll watch ESPN through ESPN.com, not Adelphia cable, so why are we even that worried about this?
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