Walking The Thinnest Tightrope, Balancing OTT A La Carte Vs. Cannibalization

Digital over-the-top distributors of TV channels and content may be able to please even more consumers by catering to their a la carte desires.

“If I could just cherry-pick AMC, FX and not have to pay for Nickelodeon and not have to pay for all the other stuff, you might get there,” said Mike White, chairman/chief executive officer of DirecTV, at a MoffettNathanson Research event.

It probably won’t happen, though. It wouldn’t be simple for the likes of Disney to partner with Dish Network to start an OTT service. Instead, White believes, Disney and others will do all they can to package in as many channels as possible. Because they are big diversified TV/media companies, they will use their leverage to get the most bang for their buck, defeating what price-sensitive TV consumers ideally seek -- to spend less on TV by signing up for just the handful of channels they want to watch.



White said even a $35 or $40 a month TV package isn’t cheap enough, that more than $12 a month turns off these consumers.

The likes of Aereo, at just under $10 a month, may a good idea for a cheaper product. But Aereo’s viability is still up in the air, with the Supreme Court expected to rule on it sometime in the middle of next month.

Even then, getting content owners to sell their channels on a selective, individual basis to a DirecTV, Dish or Comcast for a slimmed-down OTT service would be tricky. That’s because big media-content producers also want to continue selling their usual bundle of networks to TV distributors for those all-inclusive, high-priced, all-you-can-eat services.

What would make a true OTT a la carte service work? The answer: incremental revenue for all parties -- and savings for consumers. That’s a floss-thin tightrope. White says these new-type of OTT services might just “cannibalize” the old ones.

“Cannibalization” and “a la carte”: Words to be entertained by.

4 comments about "Walking The Thinnest Tightrope, Balancing OTT A La Carte Vs. Cannibalization".
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  1. Clifton Chadwick from Comunicaciones Kokopele, May 16, 2014 at 3:38 p.m.

    So, again our neighbors are being regarded as "consumers to be exploited" rather than citizens to be informed and entertained. If there were legitimate value to these huge packages there wouldn't be an issue, and if there were legitimate value in the programs then the producers wouldn't be afraid of a la carte. Imagine being able to sell the paid subscribers of a given show - wouldn't that make the CPMs higher?

  2. Jim Rice from Piiku, May 16, 2014 at 4:24 p.m.

    The reality is that the cat is out of the bag with Roku's 1,200 channels and Apple TV. Disaggregation will favor (provide more money) to desirable content and less to undesirable less popular content. Yes, there will be cannibalization. Unpopular content will lose. However, good content will thrive. As in music, those who don't add value in the value chain, get cut out and rightly so. With the Internet changing access, particularly with OTT, its a new distribution model that needs to evolve and actually is as we speak. In my view, the tipping point is 2014 and cord-cutting will begin to accelerate in 2015 / 2016. As I said, the cat's out of the bag and that is why we have observed so many announcements in the 1st qtr of this year of major companies jumping into the OTT game.

  3. Michael Kaplan from Blue Sky Creative, May 16, 2014 at 4:52 p.m.

    For starters, how about an option NOT to pay for ESPN and the other sports channels if we don't want to. I'm tired of dishing out (no pun intended) between $5 and $10 a month to help pay for outrageous sports packages that help pay for outrageous sports salaries. Sports fans aren't forced to pay HBO for original movies every month. Why should I have to pay for ESPN on virtually every cable package there is?

  4. Edmund Singleton from Winstion Communications, May 19, 2014 at 7:06 a.m.

    I recently gave up my DirecTV subscription because I will be moving soon, at first it was hard to do, got use to the 'all you can eat' programing. Now, after a few weeks and the saving of a lot of dollars and time, glad to have done it. Got over the missed stations and found other interests. May not continue with DirecTV after the move, but more likely would if not having to pay for a lot channels not/never watched...

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