A la carte cable t.v.? Can we afford it?

[techs]

http://www.nytimes.com/2007/11...ss/media/24nocera.html


?What we really need is à la carte cable TV,? wrote a reader named Neal D. Breitenbach. ?That way I can buy what I want rather than what someone forces into my TV. I don?t want to pay a dollar for the NFL Network and I don?t want home shopping or Fox News either. Why can?t I pay for what I want and nothing more??

But wait: how can it be that à la carte will cause cable prices to rise? If you are subscribing to far fewer channels, doesn?t it therefore follow that your bill will be lower? Strange as this may seem, the answer for most people is no.

True, if you decide to take only one or two channels, à la carte pricing will save you money. But how many people are going to limit themselves to one or two channels? In fact, even if you pick as few as a dozen channels, à la carte will almost surely cost more than your current ?exorbitant? cable bill.

The reason is that unmoored from the cable bundle, individual networks would have to charge vastly more money per subscriber. Under the current system, in which cable companies like Comcast pay the networks for carriage ? and then pass on the cost to their customers ? networks get to charge on the basis of everyone who subscribes to cable television, whether they watch the network or not. The system has the effect of generating more money than a network ?deserves? based purely on viewership. Networks also get to charge more for advertising than they would if they were not part of the bundle.

Take, for instance, ESPN, which charges the highest amount of any cable network: $3 per subscriber per month. (I?m borrowing this example from a recent research note by Craig Moffett, the Sanford C. Bernstein cable analyst.) Suppose in an à la carte world, 25 percent of the nation?s cable subscribers take ESPN. If that were the case, the network would have to charge each subscriber not $3, but $12 a month to keep its revenue the same. (And don?t forget: with its $1.1 billion annual bill to the National Football League alone, ESPN is hardly in a position to tolerate declining revenues.)

And that?s one of the most popular channels on cable. What percentage of cable subscribers would take Discovery, or the Food Network, or Oxygen, or Hallmark ? or the many, many more obscure networks that you can now find up and down your cable box? Five percent? Ten percent? According to Mr. Moffett?s analysis, if every African- American family in the country subscribed to the Black Entertainment Network, it would still have to raise its fees by 588 percent. He adds, ?If just half opted in ? still a wildly optimistic scenario ? the price would rise by 1,200 percent.?

And that?s just the effect on fees. Networks would have to charge less for advertising because they would lose the casual viewer ? a k a the channel flipper. Marketing budgets, on the other hand, would skyrocket, because the channels would have to pay huge sums to persuade people to subscribe. ?Identifying everybody who likes the Food Network and getting them to pay for it is hard to do,? says Christopher Yoo, a law professor at the University of Pennsylvania who has studied cable bundling. One of the nice things about the current system is that once a station gets on extended basic, it can be discovered by viewers ? and that wouldn?t happen in an à la carte world.



I was one of the strongest supporters of a la carte cable until I read this.
If a la carte cable were to happen, in my case, I would pay more for less. Just like 98 percent of everyone.
So I am now for more cable competition so that consumer demand determines what channels are included in the packages, unlike now where cable companies seem to take no interest in consumer desired channels.

 

[waggy]

yeah i was a huge supporter of A La Carte until i started reading about what would happen if they actually went to it.

 

[JEDIYoda]

ah...smorgasboard cable...

 

[dougp]

Do the channels actually choose their commercials, or do the cable companies provide them on those channels? Switch the model to a cable company just providing and the actual channels running commercials and then we'll talk about prices.

 

[Eeezee]

Currently, consumer demand does NOT determine what channels are included in the packages. Who seriously watches the home shopping network?

Let me tell you my channel picks:
Sci-Fi
History Channel
Discovery Channel

I would have to pay $20/channel in order for this to match the cable bill I have to pay to get these three channels.

Also, way to choose a truly manipulative article. Let's break down the facts

1) ESPN charges the most out of any other cable company, at $3/user
2) Other "more obscure" channels charge considerably less
3) ESPN would have to quadruple its rates with a la carte (assuming everyone is forced into a la carte; it is likely most people will remain in packaged service)
4) Other channels would have to multiply its rates by considerably higher factors. BET by "588 percent." But if BET only charges $1/user now (a hypothetical guess), that's only $6.88 per subscriber (increased by implies $1 + $5.88). Even if it were $3 (it's not), that's $20.64, essentially placing a theoretical price ceiling on how much a channel could possibly cost to keep revenue the same.

How about the channels that few people even have access to? The independent film channel, for example, must have very few viewers because it is on one of the most exclusive cable tiers. However, they are clearly below the ESPN value of $3/user. To keep their revenue the same, such a channel wouldn't charge much more at all. And at this point we're talking a huge cable bill; $80-$100 or more.

If you just use your head and do the math, it becomes clear that the majority of people under a la carte will actually benefit from it, even if every channel increases rates to match current revenue. Only minimal marketing campaigns would be necessary, thereby barely driving up prices at all; most people already know the channels they like and are unlikely to be convinced no matter how many ads you spray at them.

Do you, OP, watch even a dozen different channels of cable television? You can't include the networks that broadcast over the air; those are "free" in the sense that you don't need to pay a subscription fee. I can't even think of a dozen cable channels that I'd be willing to subscribe to (even watching them once per month).

 

[JS80]

I would rather pay $10/month for Fox News than get paid $10/month to watch CommunistNN/MSNBC

 

[Dirigible]

I am for a la carte.

Supply and demand and the free market would work everything out nicely. I would only pay if I thought a channel was worth it. A cable channel pricing itself too high would lose out. If a channel charges "vastly" more money, they had better be pretty good or they'll go out of business. If the business model won't work in a free market, my default is to let the business model die.

I will go farther, and say I not only want a la carte choice of channels, but a la carte choice of shows. I think we'll see an acceleration of content delivered over the internet, where you pay for each show. Instead of a competition between channels, each show would compete on its own. Good shows would be rewarded with an audience. Bad shows would disappear. Networks and channels would likely disappear.

 

[Linflas]

Originally posted by: Eeezee
Currently, consumer demand does NOT determine what channels are included in the packages. Who seriously watches the home shopping network?

With 2006 sales reported at $3.29 billion obviously somebody watches it.

 

[FoBoT]

yes, it is like insurance

if you don't get insurance on your car (i.e. a la carte), then you get to pay for the whole thing when you smash it up

 

[waggy]

Originally posted by: Linflas

Originally posted by: Eeezee
Currently, consumer demand does NOT determine what channels are included in the packages. Who seriously watches the home shopping network?

With 2006 sales reported at $3.29 billion obviously somebody watches it.

one of the home shopping channels (we have 3 of them) has a knife show. they have some insane deals and some really nice knives

 

[Pabster]

Originally posted by: JS80
I would rather pay $10/month for Fox News than get paid $10/month to watch CommunistNN/MSNBC

It'll probably be more like $20, but I agree with the general premise.

 

[zinfamous]

Originally posted by: JS80
I would rather pay $10/month for Fox News than get paid $10/month to watch CommunistNN/MSNBC

damn facts having a liberal bias :|

 

[da loser]

all they're basically saying is some people are subsidizing others. which is exactly what a la carte eliminates.

the argument is flawed though because it assumes pricing is based upon cost. it's based upon what they can charge. if it even approaches cost, then a)there will be a trickle down effect onto actors/players, etc. b)the channel will go out of business.

 

[nakedfrog]

So we can pretty much all agree that the article is FUD?

 

[The Boston Dangler]

the article is absolutely correct. if people get a la carte service, they are in for a rude awakening.

 

[oogabooga]

I think they are saying that most people expect their cable bill to dramatically drop. example: because I pay 40 bucks for 60 channels, if I want just 3 it can't cost more than a couple bucks. But in reality the article is saying that every channel would have to charge such a larger fee to watch that it essentially doesn't make sense in the long run. 1 channel (hoping it's popular among other viewers) and you might save money, but really it will take just 5 or 6 to total what you're already paying for so many more.

Obviously business model would have to change if they were to go to a la carte pricing and they wouldn't be able to sustain cost exactly the way they do now, plus cable companies currently get charged for every viewer, fewer viewers = fewer fees which help offset the difference. Having 10 million people paying 5 bucks for ESPN probably adds up to the same as getting a buck per subscriber with 50 million people paying for it. But without having more specific numbers for every channel I don't think this in and of itself says that a la carte won't work.

I don't want exact a la carte, but I'd prefer some choice. IE let me buy a package of 30 channels for 30 a month, and let me select what channels I want, etc. Maybe even have individual station pricing (IE espn=$5, CNN=$3, NFL network=$3) etc that will be low enough where the people who literally only need 1 channel can save a ton of money but anyone picking up more would have incentive to get a package. Then maybe channels can charge the station a flat rate just to have their station, and then a per viewer that's drastically lower so that they can still get revenue even if they have fewer viewers on the station.

That said, I'm pretty full from lunch so I may not be thinking straight.

 

[SSSnail]

Originally posted by: Pabster

Originally posted by: JS80
I would rather pay $10/month for Fox News than get paid $10/month to watch CommunistNN/MSNBC

It'll probably be more like $20, but I agree with the general premise.

LOL, thanks guys, I haven't laughed this hard in WEEKS.

 

[DrPizza]

Advertisers would pay less because they lose the casual viewer? I disagree, unless you believe that with a la carte, people will spend less time watching television.

Presumably, people would have fewer channels. Therefore, the people in your demographic would be MORE likely to be tuned into the channel you're advertising on. Let's suppose someone has ESPN, and Fat Head advertises on ESPN. They're now getting more bang for their buck. Grandma who just flipped the channel over to ESPN isn't going to decorate her sewing room with a Terrell Owens poster. However, Bob won't be tuned in elsewhere watching the Home and Garden network either. If he pays for ESPN, he's more likely to want to purchase your product, AND he's no more likely to be tuned in.

In fact, you have more of a captive audience. When I do watch tv, I don't watch commercials. When a commercial starts on one channel, I watch a different channel. On some of the horrible channels (TBS, etc.) if they have a couple movies on at the same time, I can usually watch 2 movies and miss very little. (I can't remember which two channels, TBS and some other channel seem to have their commercials staggered.)

Think about it though. Let's say you want to advertise some sort of cooking related item. Would you rather advertise to the people with enough of an interest in cooking that it's one of the 15 channels they get?

 

[DrPizza]

Here's a perfect analogy for those who claim advertisers would pay less because they're reaching fewer homes:

Newspapers vs. Pennysaver newspaper.

Newspaper: you advertise in the specific section you want. i.e. if you're selling a business related product, you advertise in the business section. Or, you can advertise in the most read sections.

Pennysaver: reaches every home. Lines a lot of bird cages. Not a lot of people read it. Ads in it are cheaper, although it reaches more homes. Not the other way around as the a la carte opponents would claim.

 

[dullard]

Exactly. Just like at McDonald's (or other restaurants) we should stop ordering just the food we want. It would be cheaper for them to serve us one of every item on their menu each time we enter the establishment.

But wait: how can it be that forced unwanted purchases will cause food prices to fall? If you are eating far more burgers, fries, and shakes, doesn't it therefore follow that your food bill will be higher? Strange as this may seem, the answer for most people is no.

True, if you decide to eat only what you want to eat, a la carte pricing will save you money. But how many people want less than the entire McDonald's menu? If fact, even if you pick as few as a dozen food items per person per meal (salads, burgers, big breakfasts, shakes, etc), a la carte will almost surely cost more than this proposed forced food items bill.

The reason is that individual food items cost vastly more per eater. Under the current system, where you pay per food item, a Bacon ranch salad without chicken costs $3. But if 100% of the people entering were forced to get that salad, it will cost just 1 penny. Thus, when you get one of every food item on the menu, your total bill will be less than $3.

And that is just the effect on prices. Marketing budgets will plummet since McDonald's no longer has to convince you to try the Sausage McMuffin.



The key is that people agreeing with the anti-ala carte scheme have no idea that the revenues aren't fixed (ie ESPN won't have the same income before and after the change). They have no idea that costs per food item (or TV channel) cannot change much (violates supply/demand). Etc. They just like fuzzy sounding reports with no proof and they exclude studies that show ala carte TV would be cheaper for the vast majority of viewers. Sure, we'd lose the channels that you hate to watch. But why should we be forced to subsidize unwanted channels. Ditch the unwanted channels, and we all come out ahead.

Lets try some math. Everyone likes channel X and Y, but no one watches channel Z. Channel X and Y are $4/month, and Channel Z is $2/month. Go to ala carte, everyone buys X and Y and pays $8/month. Their bill dropped to $8. The channels X and Y got the same amount of money, the customers paid less in total. The only loser is channel Z.

Want something more sophisticated? Lets say 50% watch only channel X at $4/month, 50% watch only channel Y at $3/month, and 0.1% watch channel Z at $2/month. Total cost: $9/month. Lets say you only buy the channel you watch. Lets pretend that channel X and Y could double the price (won't happen, but lets just pretend like the article above does). Thus, people who watch channel X now pay $8/month and channel X has the SAME revenue. People who watch channel Y now pay $6/month and channel Y has the SAME revenue. Bingo, everyone pays less. X watchers went from $9/month to $8/month. Y watchers went from $9/month to $6/month. Even Z watchers pay less as their bill goes from $9/month to $0/month as Z goes out of business. In reality, the prices won't change that much. X may go to $4.50/month and Y may go to $3.50/month. Thus, X watchers pay $4.50, Y watchers pay ($3.50), people who buy both channels pay $8 ($4.50 + $3.50). Still, everyone pays less. Even if everyone bought both channels and if the channel prices went up.

 

[puffff]

i dont need a la carte pricing. but the monthly bill needs to be about 25% less than what it is now.

 

[techs]

Originally posted by: dullard
Exactly. Just like at McDonald's (or other restaurants) we should stop ordering just the food we want. It would be cheaper for them to serve us one of every item on their menu each time we enter the establishment.

But wait: how can it be that forced unwanted purchases will cause food prices to fall? If you are eating far more burgers, fries, and shakes, doesn't it therefore follow that your food bill will be higher? Strange as this may seem, the answer for most people is no.

True, if you decide to eat only what you want to eat, a la carte pricing will save you money. But how many people want less than the entire McDonald's menu? If fact, even if you pick as few as a dozen food items per person per meal (salads, burgers, big breakfasts, shakes, etc), a la carte will almost surely cost more than this proposed forced food items bill.

The reason is that individual food items cost vastly more per eater. Under the current system, where you pay per food item, a Bacon ranch salad without chicken costs $3. But if 100% of the people entering were forced to get that salad, it will cost just 1 penny. Thus, when you get one of every food item on the menu, your total bill will be less than $3.

And that is just the effect on prices. Marketing budgets will plummet since McDonald's no longer has to convince you to try the Sausage McMuffin.

The key is that people agreeing with the anti-ala carte scheme have no idea that the revenues aren't fixed (ie ESPN won't have the same income before and after the change). They have no idea that costs per food item (or TV channel) cannot change much (violates supply/demand). Etc. They just like fuzzy sounding reports with no proof and they exclude studies that show ala carte TV would be cheaper for the vast majority of viewers. Sure, we'd lose the channels that you hate to watch. But why should we be forced to subsidize unwanted channels. Ditch the unwanted channels, and we all come out ahead.

I mostly disagree. In fact, the big question never answered in every study is how many people who would want a lot of channels will not be able to afford them under a la carte? Every study assumes that people who say they watch x number of channels under the current system will purchase them a la carte. But they won't because few people are willing or can afford to pay 800 or 900 a month for all the current channels the cable company provides.
Also, if we are being "forced" to pay more and we as a whole pay less under a la carte, the fixed costs of the cable company get higher.
Plus, the studies don't figure in what happens when only the most popular 10-12 channels are all that are left in business.
The outcome of a la carte is a very small number of channels that in effect can start raising rates once the competition is eliminated.
No, the real problem is lack of competition over the telephone pole. Let different programming companies vie to offer better packages and better prices and THAT will lower prices and spur improvement.

btw your food analogy means McDonalds should offer plain hamburgers and everyone should get to pay for onions, pickle, lettuce etc separately. So your analogy fails.

 

[dullard]

Originally posted by: techs
I mostly disagree. In fact, the big question never answered in every study is how many people who would want a lot of channels will not be able to afford them under a la carte? Every study assumes that people who say they watch x number of channels under the current system will purchase them a la carte. But they won't because few people are willing or can afford to pay 800 or 900 a month for all the current channels the cable company provides.
Also, if we are being "forced" to pay more and we as a whole pay less under a la carte, the fixed costs of the cable company get higher.
Plus, the studies don't figure in what happens when only the most popular 10-12 channels are all that are left in business.
The outcome of a la carte is a very small number of channels that in effect can start raising rates once the competition is eliminated.

Read my last paragraph (edited in). Most people will buy most channels, most channels will stay the same price, raise a bit, or be forced to drop their prices due to the new competition. In the end, most people pay less. The only difference is that you aren't paying for the channels that no one watches.

 

[techs]

Originally posted by: dullard

Originally posted by: techs
I mostly disagree. In fact, the big question never answered in every study is how many people who would want a lot of channels will not be able to afford them under a la carte? Every study assumes that people who say they watch x number of channels under the current system will purchase them a la carte. But they won't because few people are willing or can afford to pay 800 or 900 a month for all the current channels the cable company provides.
Also, if we are being "forced" to pay more and we as a whole pay less under a la carte, the fixed costs of the cable company get higher.
Plus, the studies don't figure in what happens when only the most popular 10-12 channels are all that are left in business.
The outcome of a la carte is a very small number of channels that in effect can start raising rates once the competition is eliminated.

Read my last paragraph (edited in). Most people will buy most channels, most channels will stay the same price, raise a bit, or be forced to drop their prices due to the new competition. In the end, most people pay less. The only difference is that you aren't paying for the channels that no one watches.

What "new" competition?
And yes, some people might save a very small amount. And go from 200 channels to 12.
Until the 12 channels have killed off the smaller ones. Then they can raise their prices.

 

[dullard]

Originally posted by: techs
And yes, people might save very small amount. And go from 200 channels to 12.

I'd be quite happy with that (as would many other people). Why? I would love it since I save money, since I get the channels I want, since I don't have to flip through tons of useless channels, since the TV guide gets that much smaller, since the channels will drop prices to get me to buy them, since with more viewers per channel TV ads will pay for everything instead of charging customers, since TV shows MUST be good to keep viewers, since reruns would be virtually ended, etc.

What "new" competition? New competition is all the channels trying to get you to buy them. Now MSNBC must compete with FOX who competes with CNN, etc. If one raises the prices, the viewers will switch to the other news. Thus, they CAN'T raise prices much if at all. In fact, they may have to lower prices to keep customers.

By your logic, everyone should be forced to buy Arab TV, India TV, every tiny town's public TV channel, and every other channel on the planet since then our cable/satellite bills will drop to nearly $0 from all the savings. :roll:


As for me, I dropped all TV about a year ago, except for a little bit of TV I get from an antenna. Too expensive. The day they get ala carte, I'll buy back in.