Posted by Bob Greenberger on July 30, 2004
For years now, I have had an on again/off again debate with the head guy at Cablevision-Norwalk, the local office for the main company. I’ve been a long-time proponent of ala carte pricing for cable. Why should I be paying for channels when I could care less?
I’ve always gotten nowhere, but earlier this year the debate started up again when John McCain (the only Republican I would ever consider electing to the White House) brought it up. I immediately sent an endorsement of the notion to my Congressman and two state senators and heard…nothing.
Still, the debate continues and there have been congressional and FCC hearings. Cable insists many channels would fail to even launch without being bundled as part of a tier (i.e. Basic). One channel noted they charge the cable operator something like 50 cents under the current configuration but would have to raise their rate to $3.50 under an ala carte system. There wasn’t a particularly good reason given for such a move although I suspect it has something to do with making up for absent ad revenues given audience attrition.
Having recently completed a book on Darwin, I keep coming back to the notion of survival of the fittest, along with Paul Levitz’s theories on price elasticity. Let’s say the channel above was the Spud Channel. Currently, the Spud Channel is piped into 10 million homes and can charge rates accordingly. Now it’s suddenly ala carte and they find only 500,000 dedicated Spud fans (no doubt confusing potatos with the more adorable Spuds McKenzie). Odds are, they can keep raising their rates from 50 cents to the $3.50 mark and not lose too many of those 500,000 Spud fans. After all, people really like their channel.
A possible mid-ground might be clusters of channels aimed at similar demographics. Many cable operators already do this with Sports so why not others? A Shopping package, a women’s package (We, Lifetime, Oxygen, Soap), a family package (Disney, Nick, USA, TNT, etc.) and many other combinations. And then, for those who really only want, say, C-Span and Court TV, an ala carte menu would exist.
More food for thought can be found here Wired article.