[Josh] According to the Journal, “Federal regulators are on the verge of suggesting that cable companies could best serve consumers by letting them subscribe to individual channels instead of offering only prepackaged bundles.”
At the risk of sounding like a cable industry stooge, this is the nuclear option for television subscriptions.
If cable channels were a la carte, most people would only pick a few (read Barry Schwartz’ “The Paradox of Choice” for an eloquent description of why.) Few women would choose SpikeTV, almost no men would pick Lifetime. I personally wouldn’t pay for MTV. Putting aside the administrative cost of keeping track of who gets what channels (and cable operators already have trouble with that in a much simpler world), this would significantly reduce the audience for these channels – the woman who doesn’t sign up for ESPN isn’t able to see it, even if she’s got a passing interest the local football team, for example. The cable channels would get hit twice – fewer per subscriber payments, and less ad revenue.
And don’t forget what this means for niche channels. How can a channel like OLN build an audience, or sign a big hockey contract, when most people will have chosen never to see it?
How did we get here? The cable industry has now raised rates to the point where, according to our consumer data, 80% of consumers aren’t satisfied with the price of cable service. The main reason people switch to satellite now is to save money. And among those consumers unsatisfied with cable prices are a few, like Senator John McCain, that can cause big trouble for cable by pushing a la carte.
Like any nuclear option, the move towards a la carte is a threat. Better for cable to take action rather than experience nuclear disaster. This is especially true for Comcast, which has made its success on higher-priced, more comprehensive packages.
It’s time to back down some. Create a wider variety of tiers and packages, instead of just Silver, Gold, and Platinum with/without HBO. (Some of us don’t want whitewall tires on our car just because we asked for the CD player option.) Use the FCC threat to break a few dozen networks out of the “gotta be on the standard tier” contracts that are bloating up our cable bills. There’s a lot of room for more choices without going to a channel-by-channel opt-in. And cable has to make it a lot easier for people to opt in and out of these packages, on the TV screen or online. Do this, and Congress will back off, the networks will survive, and consumers will get marginally happier with the choices in their cable service.
It’s better than the nuclear option.
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