Commentary

A la Carte Cable TV May Spell Disaster For Networks, Customers Alike

by Wayne Friedman , Staff Writer, December 26, 2019

And you thought recent cord-cutting is a problem.

Sure, those average 3% declines in subscribers every year for many traditional cable TV networks are worrisome -- especially those big media companies that don’t own broadcast TV stations or have sports franchises attached to their networks.

But what about the more drastic issue of nationwide “a la carte” unbundling of traditional cable, satellite or telco services? Earlier this year, Maine approved an “a la carte” law giving consumers the right to buy networks individually in pay TV packages.

Imagine, every month, if all U.S.customers were offered an option to pick and choose only the networks they wanted, That would cause major disruption.

If pay TV services like DirecTV, Dish TV, Comcast’s Xfinity, Charters’ Spectrum gave customers the option to pick and choose, it would be catastrophic, according to analysts, in terms of advertising and carriage revenue.

Maybe you now know why some streaming services have been looked upon as saviors. Welcome to the ease of the monthly, always ready to add or delete new streamer services, based on the whims of consumer behavior. See Netflix, Hulu, Disney+, Apple TV+, and others for details.

TV and media analysts have warned that if true a la carte became available across the U.S., cable TV networks that currently have 70% to 80% coverage of U.S. TV homes might immediately drop to 30% to 35% for some large, midsize and small cable networks owned by say ViacomCBS, Discovery, AMC Networks, or even Walt Disney.

For the traditional pay TV industry, this would mean the sky, in real industry terms, would be falling. With football-size hail. National TV advertising sales -- and worse still, overall carriage fees -- will crumble.

What would happen then? Big pay TV distribution companies -- cable, satellite, telco -- have warned consumers that a full-scale “a la carte” process would force them to dramatically raise prices pay TV packages.

For example, a $90 to $100/month price for 200 to 300 cable TV networks and broadcast stations might double. Alternatively, those who only want some 50 cable networks/stations might still have to pay $90 to $100 a month.

Some good news for media networks and distributors: Recently, a Maine federal judge issued a preliminary injunction stopping the state's recently enacted "à la carte" law -- because it likely violated the First Amendment rights of Comcast, ViacomCBS, Discovery and Disney, which filed a lawsuit against the law.

Media distributors -- and cable networks owners -- might now be thinking, some holiday gifts come late. But wait ... what’s the return policy if that business security system stops working?

cord-cutting, legal, trends, tv

10 comments about "A la Carte Cable TV May Spell Disaster For Networks, Customers Alike".

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Mark Laurence from Greater Media, December 26, 2019 at 2:33 p.m.
Eliminating half the channels would just bring things back to a more sensible level, the way things were a decade or so ago. Most "new" channels are totally unneeded brand extensions. MTV grew to MTV 2, then MTV Hits, then MTV Classics, and on and on. Then one channel ends up showing all-day, endless repeats of "Ridiculousness." The number of channels that strip the same shows for hours is, well, ridiculous. I have absolutely no idea how "à la carte" violates anybody's First Amendment rights. Comcast has no constitutional freedom-of-speech right to force me to pay for 500 basic TV channels I don't want.
Reply

brian ring from ring digital llc, December 26, 2019 at 2:58 p.m.

Wayne, great job, another mind-blowing post. I love your work. You dive into what might seem like a back-burner issue, and you put it out there in readable, sticky terms. And in this case, for RSNs like Altitude Sports in Colorado, it's not some "future" scenario at all -- it's happening right now, in the battle DISH -v- RSNs. And there's no question but that a new set of winners & losers will emerge. My own personal & commercial bias is that most channels are going to have to "up" their content-value-creation game, and big time. Good news! There's more than enough mind-blowing video tech to provide the solution!

Jane Nibmasp from Coolant Media, December 27, 2019 at 4:59 a.m.

They may raise prices by 200%, but not because they have to - it would be because they think they are entitled to current revenue regardless of how well their services meet the needs or wants of their customers. until recently, if you wanted any cable or dish services, you simply didn't have any other options. Now that that's changing,T they are desperately consolidating and merging to make sure they can limit consumer choice in the next generation as well. If ever there was an industry deserving of disruption.... they don't price compete or innovate, they monopolize and lobby for legislative protection while simultaneously complaining about the onerous, crushing weight of any government regulation whatsoever.

They are an industry which long ago lost their hunger to innovate - they're just old dogs growling at anyone who approaches their bone. The only thing that really needs to happen is to regulate them more and increase scrutiny and regulation of media consolidation, which is the real threat we're all facing as advertisers in the digital age.

It's like when Google eliminates or makes harder broad exclusion mechanisms - they do this not to simplify anything, an insulting claim they always use to explain away their otherwise inexcusable, anti consumer, anti advertiser policies, they do this to increase their revenue and coerce advertisers into using ad inventory that would otherwise go unsold. Same thing with the cable companies. Make everyone subsidize the things they don't want or approve of to get the few things they do. It creates an inflated perception of value which doesn't match the reality.

Let them try raising the prices - let's see how the free market really reacts when given an actual choice and not force fed a tier of batched programming from the regional cable monopoly.

In other words - screw'em. They've been screwing all of us for long enough. I have zero sympathy for them. The tone of this article is a little hard to stomach given its contentions are premised on the honesty of the industry and equates of the cuff industry threats of price gouging with inescapable market forces.

Jane Nibmasp from Coolant Media, December 27, 2019 at 5:03 a.m.

Oh no! Not disaster for everyone! Quick, everyone stop trying to protect consumers or combat monopolistic or deceptive practices by the cable industry! If we insist on fairness or genuine competition, who knows what might happen to us! Every one,ust j back away, open your wallets, and pay your protection money ou5t someone might get hurt.

The title of this article is insulting and ridiculous. Give me a break.

scott meyer from innovative systems, December 27, 2019 at 9:03 a.m.

It is interesting to note that Canada has had ala carte for years and guess what? The operators of Canadian pay TV are still alive and well. This whole 1st amendment defense is sketchy at best. Think about it, most of the broadcasters have their own ala carte streaming product that they have or will soon launch which is in direct competition with pay tv providers. To make matters worse, they are getting a free ride to retransmit their ala carte streaming product on the pay tv providers' internet pipe.

The broadcasters are in essence using the law to hide behind their real agenda.

Ed Papazian from Media Dynamics Inc, December 27, 2019 at 9:28 a.m.

The average cable-satellite subscriber who gets 180 channels all bundled together pays about 50 cents per month per channel. If cable went a la carte the result would be a huge decline in the number of channels available and the survivors---all biggies, most likely----would probably charge $6-10 per month each. So if a household, after considering the interests of the kiddies as well as the male and female heads of house sunscribed to , say, 20 channels to satisfy the entire household's needs its cost would be 75-100% higher than it is now under bundling. It's all well and good for light viewing folks to complain about being forced to pay for channels they don't want-----but be careful what you wish for. At the end, with three or four SVOD services plus a la carte cable you will probably be paying much more for your TV content than you realize. Freedom has its price.

Mark Laurence from Greater Media replied, December 27, 2019 at 7:28 p.m.

Few people would pay $6 a month for any basic cable channel...maybe a sports channel or two, the political junkies would pay for the news channel of their choice, and a family would pay for one kid channel. Most of the channels would go out of business. Boo-hoo. There would be a lot fewer players conducting bidding wars for programming, using consumer dollars to up the price. Broadcast TV ratings would go up and the ad dollars would sustain them even if their exhorbitant retransmission fees dried up. I'll take it.

Ed Papazian from Media Dynamics Inc, December 27, 2019 at 8:01 p.m.

Mark, in your a la carte world, you would have to decide whether you bought each of the broadcast networks individually, probably at $10 each---maybe more.. What about PBS would you buy that, too?I would. And when it came to cable, I'm afraid that you would see quite a few channels--ESPN, Weather, Discovery, History, A&E, Comedy Central, TLC, Lifetime, Nickelodeon, FoX News, CNN, MSNBC, HGTV, Hallmark, etc. that would command a stiff price for subscribers. Sure, none of these channels would have the reach it once had with bundling, but they, not the consumer, would be in the driver's seat when it came to pricing. As for broadcast ratings, you are probably right---they would increase---or cease their sharp declines---but the core of the financial support for all of the a la carte channels would be the heavy viewer who watches 7-8 hours a day, not the light viewer who watches 1 hour a day. Those folks need TV---even if much of what they watch is, by some standards, crap.

The way things now stand, the broadcast TV networks make virtually all of their fairly sizeable profits from retransmission fees, digital sales and partnership deals with producers when the shows go into syndication. I don't see this changing as the a la carte sources---with some exceptions--- are pretty likely to be sustained---even if increases begin to taper off----primarily by charging fewer subs much higher prices.

We can speculate all we want, and I may well be wrong, but one thing is clear. With TV moving into SVOD/AVOD big time, we are going to see a lot of new business plans tried out. Some will work, others wont. It will be interesting to see how it all plays out.

Paula Lynn from Who Else Unlimited, December 27, 2019 at 9:09 p.m.

1st amendment rights ? Really ? That is what they are hanging their usaristic hats on ? That just says they fear regulations which they are trying to cut off at the pass and they have nothing else. They are looking for their own deal to support the ivory towers' 5th home and 3rd yatch, not to mention not letting the genie out of the bottle. More interesting battles to come.

Ed Papazian from Media Dynamics Inc, January 17, 2020 at 1:49 a.m.

Very true, Wayne and obvious to all who take a moment to think things out. Where is it written that there are too many cable channels or, for that matter, too many "scripted" original TV shows. That's for the marketplace to decide and we are a big country with many divergent tastes and user needs, not a light viewing, elitist, monolith which only cares about paying less and less. In reality, a true a la carte system would cost us far more--even with many fewer channels surviving. More important, it would disrupt advertising, itself, with terrible consequences for our economy.