Commentary
Cable Operators, Who Once Railed About A La Carte Programming, May Need To Go On A Diet
- by Wayne Friedman , Staff Writer, October 18, 2011
All roads are heading toward a very busy entertainment financial intersection of rising cable program costs meeting networks and content providers always searching for the next big thing.
The thing: distribution.
A big example is the almost 75% increase ESPN paid for "Monday Night Football," the best-rated program of any kind on cable. So up comes the discussion -- once again -- of a la carte programming. The difference this time is that the concept seems to be gaining some value from cable operators.
The discussion isn't totally about viewers picking and choosing from hundreds of networks, but more about putting networks on different pricing “tiers” -- especially sports programming. Operators don't want to foot the bill for big cable networks, with ESPN now commanding the highest fees of about $4 a month per subscriber. And that could go higher.
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At the same time, a number of networks have been looking to run programming on digital sites like Hulu, or via mobile apps. Cable operators want a piece of this as well -- to protect what's left of a traditional television business that is at best "mature."
Operators have long argued that a la carte programming would mean higher costs for consumers. The operators themselves get cost benefits from big media groups that sell them many channels at the same time. But might this change.
Research shows that typical consumers watching an average core of five to nine channels. With hundreds of channels available – and the continued strength of Netflix and growing use of Hulu, where viewers get to pick and choose -- you can see where this is going.
Cable operators like Comcast, Time Warner and Cablevision have been looking to offer their own digital programming apps and services. Whether networks want this to happen long term is still undecided.
Right now, sports programming is a big issue. But what about scripted shows? News programming? Will they be the next genres subject of "tiering"?
And is full-scale "tiering" just a transitional move to a la carte programming? Some say it's only a matter of time before viewers will get exactly what they want – and that, if the technology exists for them to do that, media businesses need to adjust.
No wants wants to eat a full, perhaps gluttonous, meal anymore.
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
I was once called by a research company looking at this issue on behalf of a cable company.
After the interview, it was clear to me: I don't want ala carte AT ALL. Tiering is nice - packages make the most sense. But as a consumer, ala carte is a silly concept because it's really quite difficult.
An although I watch primarily a core set of networks, I also periodically (2 or 3 time per week?) browse other things that I don't watch. Or catch something based on someone else's recommendation.
Certainly don't want that taken away from me. We're losing (have lost) well reported news. Let's not lose our flexibility for entertainment.
$4.00? Try $4.69, maybe $4.76. That's the answer if you Google: SNL Kagan ESPN per subscriber
I for one can't wait for either a la carte pricing, micro-finance pay-per-view (get charged a few cents for watching each show on cable) or even more realistic tiers. I don't watch sports on cable; why should I have to foot the bill for ESPN's ridiculous NFL contract?
The argument that consumers would have to pay more for a la carte pricing is disingenuous. The argument that we'd see a lot fewer cable channels survive, on the other hand, is probably true. To which I say, let the strong survive, and let networks offer real value to consumers and see who's willing to pay up.
Think of cable television as a newsstand. You have the option of buying a single issue (a pay-per-view approach, if all I want to watch on AMC is The Walking Dead), or subscribing to a year's worth of issues at an extraordinary discount (buying the whole channel, or a whole season's worth of shows).
The subscription approach allows the intriguing possibility of side-stepping the networks -- any network -- altogether. Cult shows like Friday Night Lights, Arrested Development, Battlestar Galactica would never be cancelled, as long as the creators had stories worth telling and the marketers could get enough "subscribers" to pay.
Do the math:
A million viewers, paying $10 a season, is enough to completely finance six or eight original hours of dramatic programming. And that's commercial-free. Add in advertising, and you'd only have to pay half, I'd imagine. Throw in a boxed DVD set for subscribers for only $5 extra (actual cost?) and -- BOOM! -- you suddenly have a new financial model for the industry.
Personally, I can't wait.