Cable
operators moving to a la carte pricing would leave a massive financial hole in the TV business, according to a new report. Needham analyst Laura Martin estimates that so-called unbundling would remove
50% of total revenue for the industry at large, which comes out to about $70 billion.
Also, fewer than 20 channels would make it if consumers paid network-by-network carriage fees as ad
dollars would crater, Martin says. Advertising accounts for about 50% of total content costs.
With ESPN costing operators so much, there have been suggestions about putting it on a sports
tier, but Martin indicated that widespread sports tiering -- she did not cite ESPN by name -- would cost the TV ecosystem $13 billion.
A la carte is constantly talked about in Congress --
where Sen. John McCain (R-AZ) is a proponent -- and elsewhere, but few material steps are taken.
In her “Future of TV Report,” Martin restates the argument that bundling brings
a sort of shared sacrifice. Those who subscribe to a cable package largely because of sports help fund carriage of networks such as Bravo, A&E and Food Network -- and vice versa.
Martin
offered networks some encouragement to find more ways to drum up video-on-demand viewing. Notably because fast-forwarding is disabled in many VOD fields and could bring more ad viewing.
Addressing cord-cutting, Martin attempts to place a value on lost revenue for the TV ecosystem when a 24-year-old goes without a pay-TV subscription: some $40,000 over a lifetime. That’s $70 a
month in subscription fees for his/her household for 50 years. However, TV Everywhere could allow the industry to hold on to some potentially lost dollars.
Martin writes that if the
opportunity to watch on digital devices keeps 5% of TV homes a year from dropping a subscription, that would save the industry $4.2 billion a year.
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