a la carte Cable?

Every so often I see a post on a message board wondering whatever happened to a la carte cable – the ability to pick and choose which cable channels you want instead of having to buy “packages” from your cable provider. A la carte cable will never happen, in my opinion, and for two reasons, both of which involve money.

The first has to do with “contracts of carriage”, the agreements between individual cable networks (like Bravo) and your cable provider (like Comcast or Time Warner). Almost all of the carriage contracts currently in place in the United States are based on the total number of subscribers per cable operator. For example, Bravo might let Time Warner carry their programming on its cable network for 50¢/household/month. So if Time Warner has 20 million subscribers, they’ll have to pay Bravo $10 million/month. Time Warner could, at any time, decide to switch over to a la carte programming, but their carriage contract with Bravo would still require them to pay $10/million a month. If only 200,000 households sign up for Bravo under the new plan (giving Time Warner $100,000/month in revenue), then Time Warner will have to make up the $900,000/month difference somehow. Now it’s entirely possible that Time Warner and Bravo could reach some agreement on an a la carte model when negotiating their next carriage contract (such contracts typically last 1-5 years), but guess what? Time Warner would still have to deal with all the other networks and their carriage contracts, all of which might end at different times. It’s a financial and logistical nightmare for cable companies, to say nothing of the fact that many of cable networks are bundled together.

The second reason is related to the first. Let’s say that Time Warner does go with an a la carte lineup. And let’s further say that only 200,000 subscribers opt to receive Bravo. Under the previous carriage contract (50¢/household/month), Bravo would now get $100,000 a month from Time Warner instead of $10 million a month. I’ll admit that 50¢/household/month is an unrealistically low fee for carrying Bravo… but if only 200,000 households sign up for the channel, Bravo would have to charge each subscriber $50/household/month to get the same amount of money that they got under the old contract, and that’s just not realistic, either. And that’s the worry: that smaller, “fringe” cable networks would either disappear completely, or at least have their budgets slashed, if a la carte cable were to happen.

Remember, a la carte cable was championed by the FCC of the previous administration as a way of having “family-friendly” cable lineups. Instead of having to figure out that insanely complicated V-chip (sarcasm), families could just sign up for whatever channels they wanted. “Saving money” never entered into it. And many believe that going a la carte will not only not save consumers money, it would actually reduce choice, too. While it’s unlikely that Bravo would charge $50/month under an a la carte model, it’s very likely to charge $5 – $10 a month.

So let’s say that Time Warner’s a la carte model begins with a “broadcast package” of all the local broadcast networks for $25/month. Sounds good so far, right? Now let’s say that Dad wants ESPN and ESPN2 for $10/month each. Mom wants HGTV and Food Network, both of which are $5/month. The eldest child can’t live without The Hills and Keeping Up With The Kardashians, so let’s throw in MTV for $10/month and E! for $5/month. And let’s not forget the toddler: no one wants to live with a toddler that doesn’t have Nick and the Cartoon Network, so let’s add those in for $5/month, too. So you’re now paying $80/month (as much as you paid before) but now you’re only getting your local broadcast channels plus 8 additional channels, which is far less than you got before.

Sounds like a great plan for consumers, right? And that’s why a la carte won’t happen any time soon.

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