“A-la-carte” Cable TV Pricing Would Bring “Economic Ruin”
The Federal Communications Commission is considering mandating “a-la-carte” pricing, which would allow consumers to pay for only the individual channels they choose, rather than being required to subscribe to packages of channels. A new study by Yankee Group says such a change would have dire consequences, not just for the cable industry, but also for content producers and viewers.
Certainly, such consumer choice would inject an incredible level of competition into the industry. The report believes this level of capitalism would lead to “economic ruin,” as it predicts the over 500 current video programming services would fall to under thirty.
Prices for individual channels, the report theorizes, would have to double or triple their current costs. The report similarly makes the argument that niche channels would not have an adequate audience to survive.
The study also notes that cable companies will have to improve infrastructure in order to manage the individual packages that each consumer subscribes to.
according to Yanke Group, thhe immediate effect of a-la-carte will be:
- Drop in carriage fees: Under a-la-carte, programmers will lose most of their revenue base. Consumers won’t subscribe to niche networks, such as cooking, healthy living or nature. Surviving networks will be forced charge consumer between $5.00 and $10.00 per channel to overcome the decrease in carriage fees.
- Decrease in advertising revenue: In an a-la-carte world, casual viewers don’t exist, decreasing the number of viewers and consequently advertising revenue. Niche networks won’t have enough reach to survive. Their demise, however, will create TV inventory shortage. The shortage would artificially inflate CPMs, ameliorating the impact on the surviving networks.
- Economic ruin: If the FCC mandates a-la-carte, the 565 national video programming services and networks will dwindle to about 30. The fallout from the job loss will ripple throughout the US economy.
A-la-carte regulation will hurt everyone. It will fail to lower multi-channel video bills, trigger a chain of events that will undermine the existing video ecosystem and lower the quality and quantity of content available to consumers. The effects of a-la-carte
regulation will permeate other mediums, such as online video, by decreasing the amount of professional content available.
The Yankee Group Report A-la-Carte: The Demise of Television as We Know It, includes recommendations for Regulators, Service Providers and Content Owners/Programmers.
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