The Media Drop: Is making cable "A La Carte" a smart move?

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July 22, 2004

Is making cable "A La Carte" a smart move?

On Wednesday, MediaChannel.org's Jonathan Rintels shared his thoughts on why cable television operators should offer up so-called "a la carte" pricing for their customers. To support his argument, Rintels states that "these take-it-or-leave-it cable network bundles are shaped not by consumer and audience choice, but by the demands of media conglomerates and cable operators who have a chokehold over cable carriage." And he's probably right about that. But on July 18th, USA Today reported that a recent study done by Booz Allen Hamilton for the National Cable & Telecommunications Association showed "dire" results if a la carte pricing were put in effect. Not only is there a massive cost for the cable companies themselves, but monthly rates would go up a minimum of about $12/month, and that costs for individual channels would grow almost ten times, from $.38 to $3.39. I think it's tough to make his argument without looking at this side of the issue.

While the costs quoted are one side of this topic, there is also the issue of how the companies do business in general. Many people do have concerns that cable companies give preference to channels that they own/create themselves over ones put together by outside production companies. I understand the argument that groups like Consumers Union make about this, there is still one small thing involved here - capitalism. The cablecos are perfectly right in their creation of networks to put forth programming across both their own - and other methods - of television distribution. If a company's "cost per channel" is lower based on doing their own programming, is that such a bad thing?

One of the other points of contention that Rintels makes is that "networks targeting women, minorities, seniors, and other demographics less desirable to advertisers are in extremely short supply." Again, he may - and probably is - dead on about this. The thing is, you can't force programming to be created, especially paid television programming. You can certainly state your case to production companies and television networks about their lack of shows focused on these groups, but you can't force the bust-up of channels because of it.

My conclusion? As much as I've had my own concerns in the past about how cablecos do business, leave channels out, and have pricing changes that seem outrageous - I don't believe that this is a reason to force a la carte pricing.

Posted by Tom at July 22, 2004 8:54 PM | TrackBack | IM This

Comments

Tom, thanks for citing my article. I'd like to comment on a few of your points:

1. It's false that a la carte will cause the cost of cable to skyrocket. In Montreal, where a la carte is a reality today, and a subscriber can take 20 channels from a large a la carte menu for $20C, their costs for cable are less than in the US, not more.

2. An a la carte option does not interfere with "capitalism". If there were competition in the creation of these packages, there would be an a la carte option already, since consumers so vastly prefer it. The problem is that since the broadcasters and the cable operators are both oligopolies, they can make packages mandatory, despite the consumers' preference for a la carte. I wish this were a free market, but it's not. So, while we all believe in capitalism, this is a case of "market failure" and that's when regulators need to step in on behalf of the public interest. In short, a la carte promotes capitalism, it doesn't inhibit it.

3. You write that "The thing is, you can't force programming to be created, especially paid television programming." No, but you can force programming to NOT be created -- which is what mandatory packages do. Programming desired by consumers, particularly underserved audiences such as minorities, women, and seniors, CANNOT be created because there is no opportunity for cable carriage, thanks to mandatory packages. Creating programming for an audience that you can't reach is financial suicide. Several proposed cable networks that have targeted underserved audiences have not gotten off the ground because they couldn't break into the package on their own and refused to sell big chunks of themselves to the cable operator to break into the package, as TV One and Oxygen have done.

4. No one is saying packages should be illegal -- they just shouldn't be mandatory. A la carte would only be an added option that would have to be offered by the cable companies. So, if you want a package, you'll still be able to get it. However, those consumers who don't want the package, or are offended by some of the networks in it, don't have to take it, as they must today.

Many thanks for opening a dialogue on this important topic.

Jon Rintels
Center for Creative Voices in Media

Posted by: Jonathan Rintels at August 6, 2004 8:56 PM

I can't believe "a la carte" would in any way hinder capitalism, in fact, it would help it. Under the current system, channels are just there. the major down-side being, that while there are many channels, there isn't alot of programming. Most channels repeat the same few shows ad nauseum.

If customers were able to choose their channels in tiered packaging, those who fail to provide stimulating programming would see their revenues drop, and would move to alter their downward trajectory. THIS is capitalism, and while it shouldn't cost any more, it would make cable more worth the price. I've been considering getting cable (for the first time since moving to LA 4 years ago), and the prices for so-so programming just aren't justified. It's too bad, because there are a number of shows I'd like to see, but in order to see the shows I really want, I'd have to spend nearly $100/month, and I'd be loaded with dozens of channels I'd never watch once!

Posted by: James Mercel at August 11, 2004 8:51 PM