OT: From Adweek - A la Carte Is the Worst Idea Anyone Has Ever Had

[SUinNYC]

I know there has been a lot talk on this board about the coming changes to the TV world and its impact on league networks.

This article quotes several network CEOs and they don't seem to think it's a good idea for anyone. Granted, this is just one author's opinion, but I know I've discussed a la carte as if it's a foregone conclusion. This article offers an informed counterpoint.

http://m.adweek.com/news/television/la-carte-worst-idea-anyone-has-ever-had-151814

Here's an interesting passage:

But rest assured, if you want to pay for your cable channels individually, you will end up paying a ton more. A report from Needham Insights issued last month suggested that 20 million viewers would pay $30 a month for ESPN, which would give the network the $600 million a month it needs to keep functioning, because that's what it makes today. That's right: you currently pay only $6 a month for ESPN, because you and 100 million other people have the network, and they can afford to take comparatively little from you. Let's say that factor of five holds true across all the networks you watch: suddenly you're paying $6.06 for TNT ($1.21 a month) $4.10 for Fox News ($0.82), and so on down the line. In fact, if you factor in only the top 10 most highly-compensated networks (and ESPN is by far the highest, so they're all south of that $6 figure), you're up to $78 with only ten channels.

 

[PeteCalvin]

I know there has been a lot talk on this board about the coming changes to the TV world and its impact on league networks.

This article quotes several network CEOs and they don't seem to think it's a good idea for anyone. Granted, this is just one author's opinion, but I know I've discussed a la carte as if it's a foregone conclusion. This article offers an informed counterpoint.

http://m.adweek.com/news/television/la-carte-worst-idea-anyone-has-ever-had-151814

Here's an interesting passage:

But rest assured, if you want to pay for your cable channels individually, you will end up paying a ton more. A report from Needham Insights issued last month suggested that 20 million viewers would pay $30 a month for ESPN, which would give the network the $600 million a month it needs to keep functioning, because that's what it makes today. That's right: you currently pay only $6 a month for ESPN, because you and 100 million other people have the network, and they can afford to take comparatively little from you. Let's say that factor of five holds true across all the networks you watch: suddenly you're paying $6.06 for TNT ($1.21 a month) $4.10 for Fox News ($0.82), and so on down the line. In fact, if you factor in only the top 10 most highly-compensated networks (and ESPN is by far the highest, so they're all south of that $6 figure), you're up to $78 with only ten channels.

So if this is the future of cable television, it'll be like we are all in one big Fantasy Football auction league, where you're allowed to select the same guys as other teams, but you still only have that $150 to work with. So for every ESPN you select, you have to offset it with a 5 cent a month QVC, Hallmark channel, or other flyer just to fill out your 600-channel roster. That's very few good channels and lots of crap.

 

[zibby]

I wouldn't be paying anything for Faux News because I wouldn't be forced to pay for garbage I don't want. I also wouldn't pay $6 for TNT. When Time Warner figures out that they'll get more subscribers if they drop their price, then maybe I'll buy their channel.

 

[orange79]

I wouldn't be paying anything for Faux News because I wouldn't be forced to pay for garbage I don't want. I also wouldn't pay $6 for TNT. When Time Warner figures out that they'll get more subscribers if they drop their price, then maybe I'll buy their channel.

Might need TNT (and TBS and TruTV) for the NCAA tournament.

 

[FAL]

Internet programming will bury cable (pun intended) in a few years. F TW.

 

[OttoinGrotto]

Hmm. Key there is "needs to keep functioning."

My guess is ESPN doesn't cease to function if they don't get those numbers, they just have to refigure their programming to bring it inline with their revenue.

 

[NKR1978]

Internet programming will bury cable (pun intended) in a few years.

Wouldn't that increase the monthly internet cost and possibly slow the internet to a crawl? I honestly don't know.

Sent from my HTC6435LVW using Tapatalk 2

 

[KaiserUEO]

a la carte is just dumb.

how do i know i want a channel unless i have it 1st?? and that could change when a new show comes on.

ridiculous.

throw em all together, give me 1 set price...done.

 

[Cuseman78]

But rest assured, if you want to pay for your cable channels individually, you will end up paying a ton more. A report from Needham Insights issued last month suggested that 20 million viewers would pay $30 a month for ESPN, which would give the network the $600 million a month it needs to keep functioning, because that's what it makes today. That's right: you currently pay only $6 a month for ESPN, because you and 100 million other people have the network, and they can afford to take comparatively little from you. Let's say that factor of five holds true across all the networks you watch: suddenly you're paying $6.06 for TNT ($1.21 a month) $4.10 for Fox News ($0.82), and so on down the line. In fact, if you factor in only the top 10 most highly-compensated networks (and ESPN is by far the highest, so they're all south of that $6 figure), you're up to $78 with only ten channels.

That is a huge assumption by the writer. The factor of five would NEVER be across the board. It would be lower for some and higher for others. It would all depend on demand. He is using made up stats here. If ESPN wants to make $600 million, then to set a price per subscriber you need to know how many subscribers will keep ESPN in a la carte. The writer assumes only 20% will keep EPSN which is ludicrous. Out of 100 million households how many would want to keep ESPN? Let's say it is 50% (which still seems way too low), then ESPN would need to charge $12 a month, not the $30 scare tactic the writer uses. If it is 75% then ESPN would cost only $8 a month.

However TNT would likely increase quite a bit. As indicated by the writer, it would cost $6.06 at 20%. But would that many people keep TNT? If only 10% do, then it would cost $12.10 a month. At which point you might have people who want TNT not subscribe because it costs too much. That would put TNT in danger of going out of business. If there is no demand for TNT programming, why should they exist? Why should the majority be subsidizing the station? In a la carte any station that lacks original content would pretty much die out. TV shows in syndication and movies can just be watched on demand. As a TV viewer you don't lose out.

Also this is all assuming you have to choose between the current model or a la carte. Why can't both be offered? Or a hybrid? If person A likes the current model and person B wants a la carte, why can't both be satisfied? Shouldn't we have the option of paying $200 for everything or $50 for a la carte? Why does it have to be one or the other?

BTW HBO seems to survive fine being a subscription channel (and without commercials). These other channels would figure things out.

 

[texascpa]

Hmm. Key there is "needs to keep functioning."

My guess is ESPN doesn't cease to function if they don't get those numbers, they just have to refigure their programming to bring it inline with their revenue.

And maybe fire Stuart Scott.

In any case, Adweek's justification is that one person should subsidize the watching habits of another.

 

[OttoinGrotto]

That is a huge assumption by the writer. The factor of five would NEVER be across the board. It would be lower for some and higher for others. It would all depend on demand. He is using made up stats here. If ESPN wants to make $600 million, then to set a price per subscriber you need to know how many subscribers will keep ESPN in a la carte. The writer assumes only 20% will keep EPSN which is ludicrous. Out of 100 million households how many would want to keep ESPN? Let's say it is 50% (which still seems way too low), then ESPN would need to charge $12 a month, not the $30 scare tactic the writer uses. If it is 75% then ESPN would cost only $8 a month.

However TNT would likely increase quite a bit. As indicated by the writer, it would cost $6.06 at 20%. But would that many people keep TNT? If only 10% do, then it would cost $12.10 a month. At which point you might have people who want TNT not subscribe because it costs too much. That would put TNT in danger of going out of business. If there is no demand for TNT programming, why should they exist? Why should the majority be subsidizing the station? In a la carte any station that lacks original content would pretty much die out. TV shows in syndication and movies can just be watched on demand. As a TV viewer you don't lose out.

Also this is all assuming you have to choose between the current model or a la carte. Why can't both be offered? Or a hybrid? If person A likes the current model and person B wants a la carte, why can't both be satisfied? Shouldn't we have the option of paying $200 for everything or $50 for a la carte? Why does it have to be one or the other?

BTW HBO seems to survive fine being a subscription channel (and without commercials). These other channels would figure things out.

Yep.

 

[sutomcat]

I know there has been a lot talk on this board about the coming changes to the TV world and its impact on league networks.

This article quotes several network CEOs and they don't seem to think it's a good idea for anyone. Granted, this is just one author's opinion, but I know I've discussed a la carte as if it's a foregone conclusion. This article offers an informed counterpoint.

http://m.adweek.com/news/television/la-carte-worst-idea-anyone-has-ever-had-151814

Here's an interesting passage:

But rest assured, if you want to pay for your cable channels individually, you will end up paying a ton more. A report from Needham Insights issued last month suggested that 20 million viewers would pay $30 a month for ESPN, which would give the network the $600 million a month it needs to keep functioning, because that's what it makes today. That's right: you currently pay only $6 a month for ESPN, because you and 100 million other people have the network, and they can afford to take comparatively little from you. Let's say that factor of five holds true across all the networks you watch: suddenly you're paying $6.06 for TNT ($1.21 a month) $4.10 for Fox News ($0.82), and so on down the line. In fact, if you factor in only the top 10 most highly-compensated networks (and ESPN is by far the highest, so they're all south of that $6 figure), you're up to $78 with only ten channels.

If I were a network CEO of a network that created nothing of value, say a network that shows exclusively re-runs and informercials, I would think ala carte is bad too.

The CEOs of the companies that sold whale oil for lamps thought electricity was a bad idea too.

 

[OttoinGrotto]

The CEOs of the companies that sold whale oil for lamps thought electricity was a bad idea too.

Nailed it.

 

[upperdeck]

if we go to ala carte we will be back to what we had 40 years ago. 4-5 OTA channels.

as much as people complain and say they only watch a few channels we still all channel surf and find things. we all watch ESPN but I go days without watching it at all out of football/basketball season.

and people complain about commercials now. wait until more sites try to go internet only.. you wont be able to skip thru them, they can easily make it impossible to record if they want to. and what is the pay mechanism for internet only tv.. you pay comcast/TW/Directv one bill and done. who do you pay then. A dozen bills, two dozen bills?

its going to take a huge internet upgrade for most places to work if people are all streaming HD Tv.

 

[FAL]

Wouldn't that increase the monthly internet cost and possibly slow the internet to a crawl? I honestly don't know.

Sent from my HTC6435LVW using Tapatalk 2

For those of us who can still remember party telephone lines (party in the sense that you could pick up your telephone and hear your neighbor talking, where upon you would ask them to get off the phone if you needed to make an important call) and over-the-air black and white TV with only 2 or 3 stations, the progress in communication technology over the past 10 or 20 years is truly mind-boggling! You 20, 30, and 40-somethings take this all for granted. If anything, the technology is only accelerating, and in a relatively short period of time, I expect the issues you address will evolve into non-issues. I have kissed cable/dish good-bye and am perfectly happy with my Netflix and Amazon subscriptions, even over the marginally acceptable internet service Windstream provides. The only thing I really miss is getting games over the internet, but I am confident that issue will be resolved in short order. Again, F TW-- throw Dish Network and the other satellite providers in there as well.

 

[Scooch]

The future of video will be incredibly complicated and confusing. There will be multiple business models and multiple choices for the consumer to receive video content on their various media devices.

Some of those options may provide price relief, most likely in exchange for less choice and/or more intrusive ad experiences. Others may be significantly more expensive when one factors in the total cost.

Everyone should pray the government does not get involved. No matter what "side" you are on, they will make things much worse, you can count on that.

Advancing technology wins, choice is a good thing, and the strong will survive.

 

[PeteCalvin]

If I were a network CEO of a network that created nothing of value, say a network that shows exclusively re-runs and informercials, I would think ala carte is bad too.

The CEOs of the companies that sold whale oil for lamps thought electricity was a bad idea too.

But the whales loved electricity. The Whale Lobby was a big supporter of Edison.

 

[Scooch]

If I were a network CEO of a network that created nothing of value, say a network that shows exclusively re-runs and informercials, I would think ala carte is bad too.

The CEOs of the companies that sold whale oil for lamps thought electricity was a bad idea too.

Just to be clear, there is no "network CEO" of that kind of network.

Almost every channel on TV is owned by one of a handful of media corporations.

Not that they don't have skin in this game, but it's not like the Re-Run Channel "President" holds much sway on this topic.

 

[Moontan]

That would put TNT in danger of going out of business. If there is no demand for TNT programming, why should they exist?

In the years that they have rights to the Final Four, a March-only subscription could be quite pricey. There's also the NBA playoffs, etc..

I have a hard time believing that TNT/TBS/Cartoon Network will disappear... they may need to tweak some things, but I doubt that they'll just disappear. As someone who enjoys some of their original programming, as well as their sports coverage, I'll be subscribing... one way or another.

 

[OttosBestFriend]

BTW HBO seems to survive fine being a subscription channel (and without commercials). These other channels would figure things out.

HBO is only in about 30% of all TV households. To make up for that low percentage, it's insanely expensive when compared to the carriage fees of the "basic" cable nets being discussed in this a la carte debate - More than twice as much as ESPN charges its carriers.

Also, history shows that about 1/3 of all HBO subscribers cancel the service every year with the number one reason given for opting out being "price."

These lost customers are replaced with new subscribers who get HBO as a "freebie" or as part of a "deeply discounted" short term package when switching services (i.e. from Time Warner to DirecTV)

So in theory, only about 20% of all TV households are paying full price for HBO.

Subscriptions can work for HBO because they are one of the very few nets that were designed, built, and maintained with this blueprint. (Showtime, Cinemax, Starz, Encore, and The Movie Channel being a few of the others)

But it when 120+ basic cable nets have to do it, many will go bankrupt.

And your bill will skyrocket.

 

[Legendof44]

For those of us who can still remember party telephone lines (party in the sense that you could pick up your telephone and hear your neighbor talking, where upon you would ask them to get off the phone if you needed to make an important call) and over-the-air black and white TV with only 2 or 3 stations, the progress in communication technology over the past 10 or 20 years is truly mind-boggling! You 20, 30, and 40-somethings take this all for granted. If anything, the technology is only accelerating, and in a relatively short period of time, I expect the issues you address will evolve into non-issues. I have kissed cable/dish good-bye and am perfectly happy with my Netflix and Amazon subscriptions, even over the marginally acceptable internet service Windstream provides. The only thing I really miss is getting games over the internet, but I am confident that issue will be resolved in short order. Again, F TW-- throw Dish Network and the other satellite providers in there as well.

the party line!

 

[WickedOrange]

A report from Needham Insights issued last month suggested that 20 million viewers would pay $30 a month for ESPN, which would give the network the $600 million a month it needs to keep functioning, because that's what it makes today. That's right: you currently pay only $6 a month for ESPN, because you and 100 million other people have the network, and they can afford to take comparatively little from you.

Maybe ESPN only charges $5 a month and has a whole lot less money to throw at content.

http://www.whatyoupayforsports.com/2013/04/could-espn-weather-a-growth-in-cord-cutting/

God forbid the dollars being thrown at pro and "amateur" sports declines.

 

[Lou_C]

A la carte is only going to benefit people that want literally one to three channels, and want to pay half their bill for them. I could live on ESPN only. I'd be willing to pay $25, instead of $100.

But once you add up the channels you, and your wife, and your kids need, most people are going to be very unhappy with a la carte.

I agree they should allow both. Let me buy ESPN for $25 and maybe AMC for $10 and be done with it.

The vast majority will stick with a full cable slate though. This idea that people will be able to buy the "15 channels they want" for a couple bucks each is pure fantasy.

And you better hope that none of the channels you watch are "niche" channels, because would go away immediately.

I don't disagree that the cable model is majorly messed up. But it actually does work.

 

[WickedOrange]

Contracts aside, in an a la cart model why do we even need the ESPN channel. Leagues/conferences could provide their content direct to the consumer.

 

[supp]

If I were a network CEO of a network that created nothing of value, say a network that shows exclusively re-runs and informercials, I would think ala carte is bad too.

The CEOs of the companies that sold whale oil for lamps thought electricity was a bad idea too.

I'm assuming AdWeek is a industry magazine for the ad agencies? I'm sure they're a bit worried too about what a la carte might do to advertising dollars. What goes unmentioned here is that cable networks not only currently depend on carriage fees for revenues but also have a second major revenue stream from ad money. The only exceptions are the premium networks like HBO, which are already a la carte. No doubt that the ad world is comfortable with the current arrangement and fearful of what a la carte might do to the tv advertising model.

Lots of different ways this could go but the pricing structure for a la carte channels will be affected by allowing for commercials or not. Sports on tv are largely organized around commercials (e.g. commercial break every 4 minutes of playing time in college basketball). Hard to see them going away and now networks can have even more targeted advertising because they know exactly who's watching. Rights fees for various sports will be calibrated better with this info in hand too. Win-win for everyone.