Will the Next Broadcast/Cable System Negotiations Result in A La Carte Packaging?
Cable TV has been an extraordinary industry. From modest, rural roots planted in the late 1940s and 1950s, this business has grown consistently over most of those years, with multichannel video program distributors in the U.S. generating tens of billions of dollars in revenue and profits each year. They are one of the few media-related businesses to generate revenue from both advertisers and users.
But, is the cable TV subscription -- or satellite or teleco TV subscription -- business ready to break? Most think it can't keep growing unchecked. Will Internet-driven Web video bypass and kill cable? Will connected, smart TVs do it? Many think it might. Will a double-dip recession cut into viewers' ability to pay those growing monthly bills? Will Netflix (or a similar player) break its back? Some think so.
Another possibility that might break the stranglehold these companies have over studio-produced TV shows and networks is the potential of viewers able to purchase a la carte subscriptions to their favorite TV networks and stop paying for the hundreds of channels they get but never watch. For example, they could pay a fee only for a CBS, HBO, ESPN and Turner Networks custom package, which would be significantly less than what they're paying today.
Yesterday, at the Paley Center's International Council in L.A., I heard what might be the factor that could break the multichannel subscription package, and it wasn't one of those I mentioned earlier.
In an on-stage interview, IAC's Barry Diller decried what he called the "false counting systems" of fees paid by cable operators to some cable networks that were once popular, but are no more, and the relatively small fees paid in retransmission for broadcast network programming that is much more popular. Diller predicted that when the current three-year deals between the big networks and operators are up for renegotiation, the networks are certain to demand much higher fees -- likely double what they get now -- and the operators are likely to have a tough time paying them.
Diller seemed to suggest that we could see an irresolvable stand-off. This could be the straw that finally breaks the camel's back and causes both sides to recognize that a one-size-fits-all TV package is no longer sustainable, with programmers and operators breaking their bundles and creating a la carte offerings.
I think that Barry Diller is right. I think that the next phase of transmission fees is likely to break the cable TV world as we know it. What do you think?