Study - "a la carte" cable will hurt consumers

from tv week

Wayward a la Carte
Kagan Study Says Platform Pricing Not in Best Interest of Consumers
By Chuck Ross

Goro...

*snip*

I'd rather have multiple cable providers in my area than have mandated
A La Carte. With proper competition, a decent A La Carte system would
probably appear.

rgorman...

The inconvenience involved in getting a new cable put in is a strong
disincentive to switching service providers. That means the simple
existence of multiple cable providers won't much increase real
competition

-goro-
(or there would be collusion, which is the more likely case! :P )

akjack...

After a number of years with competition between two satellite service
providers, they have yet to offer a la carte channels.

Don't look for cable competition, the local franchise grantors aren't
likely to authorize more than one cable service.

As cable operators scramble to offer family-friendly tiers to ward off
a government-mandated a la carte system of delivering channels to
customers, it's become clear that consumers' best interests are not
really what's being served.

Ppffhhtt...

I still don't know what this fear and dread is over a la carte. They
make it sound like it's an al-Qaeda plot or something. Here where I
get a la carte in Canada it's only available if you subscribe to the
digital service. The regular analog cable service is still available,

David...

Well that's Canada for you. Of course what works in Canada isn't what
they're planning to implement here.

it doesn't go away. So it's basically a choice between sticking with
one or going with the other, it's up to you, it's called choice. The
cable company doesn't seem to be losing money on it and if it is, it's
offset by the majority of subscribers who still prefer the regular
analog cable service. As for cost, I don't know how much more U.S.
cable channels can charge than a Canadian one does for the same
channel. If I wanted to order an additional channel like Fox Sports
World, that would just be an extra $1.50 to my bill per month. Take
the exchange rate into consideration and it shouldn't cost you more
than $1.20 in the U.S. If cable companies threaten to charge three or
four times that, then you know there's good old-fashioned American
price gouging going on. As for a la carte being government-mandated, I
think that just means you'll be given an additional choice as to how
you want your TV, not that a la carte is going to replace what you get
already. So settle down, it's only TV. And it's not like there's that
much worth watching on it anyway, especially on the dozens of extra
channels you get now but never tune into.

That's the conclusion to be drawn from Kagan Research's latest look at
the economics of the situation.

The problem is that the underlying conclusion that set off this latest
round of discussions is based on a false premise, according to Kagan.
That premise, as articulated by Federal Communications Commission
Chairman Kevin Martin and based on a yet-to-be released FCC report, is
that a la carte is in the best interests of the consumer.

"It's typically not understood that expenses for TV channel platforms
would rise with a la carte," Kagan said in a release last Friday.

Stan Brown...

Just as I said, more than a week ago.

ANIM8Rfsk...

Sure, but under what set of circumstances will Cable TV prices NOT rise?

KoshN...

Greater than the rate of inflation? No set of circumstances.

Obveeus...

The expansion of 'streaming video' over the internet?

ANIM8Rfsk...

No, that will 'cause Cable TV prices to rise because of competition and lost
viewership -- "We have to charge more now"

KoshN...

...plus they'll raise the prices of their broadband internet access.
"Our costs have gone up. We have to charge more, now."

KoshN - Cable, we have you coming and going.

On average, Kagan reports, cable subscribers pay about $1.49 per day
for a bundled package of 64 channels, about 7 cents a day more than
they paid per day last year, when they received four fewer channels.
On an average per-hour-watched basis, subscribers pay 15 to 20 cents.
To beat the bundle price on an a la carte basis, subscribers would
have to choose no more than nine channels, Kagan said.

David...

That's not what they're saying at all. The over-the-air networks aren't
being included as part of the 9 channels.

KoshN...

"To beat the bundle price on an a la carte basis, subscribers would
have to choose no more than nine channels, Kagan said."

How do you *know* that over-the-air networks *aren't* being included as
part of the 9 channels?

This analysis assumes that most subscribers, in an a la carte pricing
system, would tend to order channels such as Discovery and ESPN "that
are also the most expensive," Kagan said.

"Those who want to rush to a la carte pricing are thinking too
simplistic and are not thinking through the implications," Kagan
Senior Analyst Derek Baine told TelevisionWeek.

Daniel Damouth...

I'm not so sure. I'm getting the feeling that the real motivation of
the people most in favor of a la carte pricing isn't money; it's that
they don't want anyone watching some of the channels. It's not enough
to be able to block any channel they want to their own TVs. They want
to be able to block what other people see.

-Dan Damouth

The entire push for a la carte is based on flawed thinking at an even
more basic level, Mr. Baine said. "Most ironically, what started all
of this was the uproar about indecency that started with the Janet
Jackson incident at the Super Bowl. You hear the argument that if
there was a la carte choices or family tiers, many of us would not
have seen that," he said, adding that the incident with Ms. Jackson

David...

The FCC, which is coming up with this "a la carte" solution as a way to
protect kids.

KoshN...

NO, the FCC is NOT presenting "a la carte" as a solution that would
have protected kids from the Janet Jackson "wardrobe malfunction."

happened during the Super Bowl over mainstream broadcast television
and would not have been blocked in any homes by family tiers or an a
la carte system.

If only half a cable operator's subscribers migrate from a basic
bundle to an a la carte model, "TV channel operators would need to
raise per-capita channel carriage fees by a multiple of four," Kagan
said in its release.

Currently, on average, basic cable networks derive about half their
revenue from fees they get from cable operators, about 44 percent of
their revenue from ad sales and the rest from "miscellaneous
activities," according to Kagan.

"If we went to a la carte, niche channels with small audiences would
never get off the ground," Mr. Baine said. "Take the Food Network, for

David...

And are you the last word on which channels are worthless?

KoshN...

I'm saying if the Basket Weaving Network does not have enough
subscribers (warm bodies who want to watch it) to justify its
existence, then it should be dropped/go out of business.

example. If the industry had been on an a la carte model when it
wanted to launch, it would simply have never got off the ground. But
because it was part of a basic bundle, it was able to find an audience
and it prospers."

David...

The "free market way" isn't always the best. Obviously there are some
industries, with cable being one of them, where it wouldn't be in the
best interest of the consumers.

KoshN...

If it was "best" in the electric utility industry, with the resultant
mergers/downsizings ("You lost your job? Oh, too bad." Meanwhile the
bosses get a raise/bonus for downsizing and making fewer people do
more work with each merger/downsizing cycle.), it's good enough for
cable companies and TV networks. ;-) I was doing 2.5 peoples' jobs
before getting downsized. Evidently, that was not enough. So, you'll
forgive me if I don't feel sorry for TV network people whose jobs are
subsidized by people who have no interest in watching their TV network.

It's not in the best interest of THIS consumer for Comcast to increase
my cable bill 43% by moving one basic channel to an upper tier. I had
no say in that. With "a la carte" I'd be able to put that channel back
in my lineup without subscribing to the 2nd highest tier Comcast has.

Ppffhhtt...

Not only that, but you'd be able to add and remove channels at a whim,
if it turns out to be anything like here in Canada. Can't get that
upper tier channel anymore on basic? No problem with digital a la
carte, just order it and it's done same day, often within the hour in
fact. Don't like that channel anymore after you've ordered it? No
problem, exchange it for another the following month. With a
20-channel package one can actually get to watch two to three times as
many over the course of a year. How? Just through channel exchanges.
The first half of a TV season you can watch one set of channels and
then when all the reruns kick in, like in the month after a Sweeps
period, or in the summer, you just switch them for other channels, and
then back again when you're done with those. You can only switch once
a month, but it could be as many channels as you want. The flexibility
is great and it doesn't cost any extra for the switchover, unless it's
some unique or pay channel you want to get. I just don't know why U.S.
cable companies make it all out to be so impossible to do. Isn't
America supposed to be a Can Do country? No, I guess that's Can Do
Canada.

Taylor...

You're right. Having theme packs are good, but you each channel in that
package should be a la carte so you can do what you said-- remove it at
a whim.

A la carte is, quite simply, "a bad consumer idea," said Brad Siegel,
a cable programming veteran who is vice chairman of the 14-month old
Gospel Music Channel. It "could cost the consumer so much more money
to get so much less," he added. "Anyone who advocates [a la carte]
doesn't understand what the impact would be for the consumers and the
financial model of the business as a whole."

However, others argue that the fact cable operators are now saying
they can come up with family tiers argues for going to an a la carte
system. That Time Warner Cable, for example, has said it now has a
plan for a family tier "demonstrates that the cable industry does have
the ability to offer options, when they've been claiming for many
months that they can't," said Lanier Swann, director of government
relations for Concerned Women for America.

Doug Halonen and Jon Lafayette contributed to this report.