A La Carte Cable Programming Would Carry Fat Price Tag

Cable networks in a fully a la carte programming TV world would need big price gains from consumers to meet their revenue needs.

ESPN -- given its 16.8% reach of all U.S. TV viewers -- would have to charge $36.30 to consumers per month in an a la carte TV world: one where customer pick and choose the networks they want, estimates MoffettNathanson Research. ESPN currently gets around $6.10 per subscriber per month from pay TV providers.

TNT would need to charge $8.95. It has a 16.8% reach and currently gets $1.50 from pay TV providers. Disney would need about the same $8.25 -- this against a current $1.27 number and a reach of 15.4%. USA would be estimated to get $5.45 versus its $0.92 price, considering its 16.9% reach.

“While we clearly believe ESPN should be the most valuable standalone network, a price above $36 per month would limit even the most die-hard sports fans from signing up,” writes Moffett Nathanson.

“Similarly, we think most householders would be unlikely to pay between $5-$9 per month for USA, Disney Channel or TNT. Why? Well, at a similar price, consumers can buy Netflix which offers all this type of content and more.”



4 comments about "A La Carte Cable Programming Would Carry Fat Price Tag".
Check to receive email when comments are posted.
  1. Douglas Ferguson from College of Charleston, March 26, 2015 at 2:49 p.m.

    In other words, the relative few who watch ESPN frequently are subsidized by those who never ever watch.

  2. Ed Papazian from Media Dynamics Inc, March 26, 2015 at 4:17 p.m.

    In a fully a la carte cable world, you would probably have only a third as many programmed channels as are now available, with most of the more selectively themed ones eliminated because they couldn't get enough paid subscribers to drive meaningful ad revenues. Those who would be left would probably be ESPN, Fox News, CNN, MTV, TNT, USA, TWC, Discovery, and a number of other broader based channels, plus Bravo, Food Network and some others. What's more, the result would be a boon for the broadcast TV networks as they would now be competing for viewers against many fewer channels than before. The SVOD folks would also benefit greatly. As for estimating the per-subscriber fees for each channel, I think that's a futile exercise and some of the numbers cited----like the "reach" of some cable channels----- look rather dubious to me. Are we talking about weekly reach? Or monthly reach? Or yearly reach? And how do we know that the entire reach---when translated into households, not viewers----would subscribe?

  3. John Grono from GAP Research, March 27, 2015 at 9:25 a.m.

    Ed, do you think a la carte would work if there was a base 'service provision fee' (say $10 a month to cover the cable cost, admin etc.) then a 'per channel' fee? We have a base fee of around $25 and you get 45 broad channels (plus free re-transmission of the free-to-air channels ... with their ads intact). You can then add on 'bundles'. 9 movie channels for $20 per month. 6 drama channels for $20 per month. 9 sports channels for $25 per month. 6 kids channels for $10 a month. 6 documentary channels for $10 a month. 6 general entertainment for $10 per month. That is, the add-ons are around $1.67 to $3.88 per month but still have to be purchased in bundles and not as individual channels. And not surprisingly, it works out cheaper per channel if you buy the lot (but definitely not cheap).

  4. Ed Papazian from Media Dynamics Inc, March 27, 2015 at 11:40 a.m.

    That's a difficult question to answer, John. Whatever the solution, I believe that the cable services and satellite distributors will have to come up with a number of "basic" packages that encompass up to 50 ad-supported cable channels, much as they do now. All of the packages would include the major services---ESPN, Fox News, CNN, Weather Channel, Discovery, Turner, etc. up to about 35-40 channels. Then it would become more selective, with one "basic" package slanted more heavily male by adding in the secondary ESPN and other sport channels, more news outlets, etc. while another tilts more to womens' tastes, a third goes more upscale, a forth is heavily "ethnic, etc. As for pricing, in order to pay the cable programmers their carriage fees, the systems would have to charge a lot more than $25 per month. Most likely their typical fee would be on the order of $50-60 per month, perhaps more, as the marketplace dictates. This is where the stand alone services come in. Beyond the basic package that subscribers are obliged to take they could pick and choose from all of the other options, not as is done now, by accepting bundled groupings which often include program content they don't care about. Instead, each add-on would be priced separately, offering a far greater choice than "pay" customers get now. The problem with the dream of totally unbundled program services is complex and involves multiple revenue sources, not the least of which is advertising. The only way that a new stand alone can get significant ad revenue is by garnering a significant subscriber base---one that pays for the service, specifically, hence actually watches it. Without ad revenues, the stand alone service may find it too difficult to develop a subscriber base and turn a profit. Once this becomes evident, the inclination will be to cut back on program costs ( quality ), employ scads of reruns, etc. which, in turn, will cause subscriber defections.

Next story loading loading..