• by Wayne Friedman , December 19, 2005

Cable consumers will need to make do with as few as six to nine cable channels in a world that allows them to pick and choose cable networks, says Kagan Research.

That would be about one-sixth to one-tenth of the average 64 cable networks they currently receive. Kagan says the number of networks would narrow because people would gravitate to the well-known networks such as ESPN, Discovery, and TNT.

But consumers would pay a price for this. Derek Baine, senior analyst at Kagan Research, said in a report released yesterday: "Popular basic cable networks could be $4-$6 per month a la carte." At the high, a consumer bill would amount to $36 to $54 a month. The current average monthly cable bill is $45.40 for a big basic package of networks--up slightly from $43.17 a year ago. While six to nine channels seems light, a number of research reports from media buying agencies have suggested that consumers really watch 9 channels at most--and that most have five "core" networks.

Kagan's analysis comes a day after Time Warner Cable announced a family tier package of 15 channels, called "Family Choice," with a retail price of $12.99. But this would be after cable consumers bought a bare-bones cable package--mostly over-the-air channels--and after a Time Warner digital set top box fee of 40 cents a day. All this would come to around $40 to $45 a month, say executives.

Kagan Research went on to say that each channel has an effective cost to consumers of 71 cents a month, and that retail price could rise by four times to consumers on an a la carte basis.

Cable networks are nervous at the prospect of a la carte cable packaging--something that would hurt their advertising sales. If cable networks were to lose half their subscribers due to a la carte packaging, for example, Kagan says channel carriage fees could rise by 400 percent.

Currently, the average wholesale price for each channel paid by cable operators comes to 21 cents a month. Cable operators are concerned as well over a la carte packaging--believing that they could lose overall revenue from customer business as they pick and choose specific networks.

Basic cable networks, on average, receive 52 percent of revenue coming from carriage fees, 44 percent from advertising sales, and the remaining 4 percent from miscellaneous activities, according to Kagan Research.