Unbundled Cable Will Never Work

A la carte cable – where you pay only for the channels you want – sounds like a great idea. But, as I’ve been saying for years, it’ll never happen, because that’s not how cable TV works.

Right now, anything from 2¢ to $6 of your cable bill goes to each channel per month. Syfy, for instance, costs 27¢ per subscriber per month. But if people could drop Syfy, how many people would, and how much would Syfy need to charge remaining subscribers? Example: under the current system, if Time Warner Cable has 20m subscribers and Syfy’s carriage fee is 27¢/month, TWC pays Syfy $5,400,000 per month. But if TWC went a la carte and 90% of TWC households dropped Syfy, Syfy would only get $540,000/month at the current rate. Syfy would have to charge their remaining subscribers $2.70/month just to get the same amount of revenue from TWC as before. But every increase they make will surely drop the total number of overall viewers: how many people out there love Syfy so much that they’d pay $5.99/month for it? $8.99/month? $10.99/month? $15.99/month? So Syfy gets caught in a death spiral of needing more money per subscriber, but being unable to raise their subscription fee because they’ll lose subscribers. And while going from 27¢ to $2.70/month doesn’t sound like a big increase, keep in mind that it’s going to happen to EVERY CHANNEL ON YOUR CABLE LINEUP. This might not be a big deal for single people, or couples with very narrow interests. But for a family of four – where Dad wants ESPN and NBC Sports, Mom wants HGTV and Food Network, Teenage Daughter wants E! and MTV, and Junior wants Nick and Disney – it quickly adds up. 

So you, the consumer, will get screwed over in the end, ‘cos you’ll end up paying almost as much for a la carte as you do now, only now you’d get 17 channels instead of 200+ channels. Don’t believe me? CNBC ran the numbers; and found that a 17 channel bundle of cable networks could cost anywhere from $16 to $248 per month. And that’s not including broadcast networks, which are a double-whammy for cable providers: providers like Comcast and Time Warner Cable are required by law to carry local networks, but since 1992’s  Cable Television Consumer Protection and Competition Act, networks can require payment to rebroadcast that programming. In most a la carte scenarios I’ve seen, cable customers would have to buy a basic “network package” for $25 to $35 a month, then pay anywhere from $2 to $25 per month for each additional cable channel. So a package with just your local broadcast networks and ESPN could cost around $60/month. That’s about the base fee most people pay for their cable now (not including taxes, fees, and equipment charges). And that’s just ESPN – it doesn’t include all of its related networks like ESPN 2 or ESPN U or ESPN Classic. If you included all those, your cable bill would be $112.52/month… just in channel fees. Of course, none of this includes taxes, fees, equipment rental fees, program guide fees, Internet service or home phone service.

And that, my friends, is why a la carte cable simply won’t work.

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