Commentary
A La Carte Cable Scenario: Pricey, Fewer, And Less-Profitable Channels, Viewer Hunger?
- by Wayne Friedman , Staff Writer, June 25, 2012
In an unbundled, a la carte cable TV world, you are looking at a much smaller selection of cable channels being profitable -- maybe five to 10. This figure is what Laura Martin, media analyst of Needham & Co., estimates.
That's out of some 125 viable cable networks, which would …
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Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
It's hard to comment without reading the original research report, but this smacks of total hysteria and/or willful ignorance.
"...She calculates an aggregate loss of $300 billion in market capitalization [from unbundling]. She estimates that advertising revenue would drop by approximately 75% while subscription revenue would decline 15-20%. "
There's no evidence that going a la carte would cause people to cut the cord; there's as much anecdotal evidence that people would KEEP their cable subscription if they could pick and choose what channels to pay for. And this "analysis" dismisses the impact of advertising, as if cable channels live and die by subscriber fees alone. They don't.
Martin seems to be a big backer of the "free market," but cable is hardly a free market, when a few channels subsidize the rest, and consumers can't decide what they will or won't pay for. Instead of end-of-the-world predictions like a 75% ad revenue fall-off, isn't a more realistic scenario that new channels will rise in their place, properly priced, and with profitable business models? If you can deliver an audience, advertisers will find you.
I've often likened cable channels to magazines. You don't need to sell a million copies to be successful; there are lots of small-circ magazines that do just fine. Heck, newsletters with only a few dozen subscribers make their publishers lots of money.
Finally, there's the rather weird assertion that a million jobs would be lost in the TV industry, and many of these would be located in rural areas with people without college education (as opposed to the tech industry). I worked in the TV business for 20 years, and unless Burbank has suddenly been declared farmland, I have NO idea what she's talking about.
So I'm thinking right now I watch about 13 networks over the course of any given week - 6 of them broadcast. With my DVR and HD package I pay about $53 for the video portion of my triple play package. Does that make these come in around $4 each? And to ME, there is absolutely NO VALUE for the hundreds of other channels I never watch, or am not authorized to watch now. As I surf the channels BEGGING for something worth watching I find myself wondering who the hell watches any of the drivel I see on a typical night?
Maybe it is a GOOD thing to weed out all these channels through natural selection.
I am willing to bet that few, if any, earn even a .01 rating, yet they can still make money with about a million eyeballs. Un-bundling isn't going to change how many viewers they get- so the ad revenue should sustain.
Funny thing is History Channel gets more viewers than Fox News- yet the country keeps making the same old mistakes... HMMM!
$4 per month per viewed channel is still hardly expensive. Maybe a cup of coffee, an iTunes download or two. A-la-carte pricing per channel would have to be at a premium to the bundled price. I know that here in Australia many of my (now) favourite channels are ones I would never have purchased a la carte. I enjoy 'discovering' these gems of programmes and channels and it's well worth the 'all-you-can-eat' bundled price.
Great post, Wayne. I had a Comcast research call come to the house once and they took me through each network asking me how much I would pay for it. My "just bundle it so I have the beauty of all those options" answer wasn't on the researchers list. My prediction: it's going to be far more costly unbundled. The cable infrastructure delivers tremendous value that is highly inexpensive when bundled...but highly expensive when broken apart.