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Marianne Paskowski



FCC’s Martin Still Riding A La Carte Horse

June 15, 2007 12:51 PM

Here we go again as FCC Chairman Kevin Martin endorsed a bill yesterday that would force cable ops to offer a family tier (excuse me, but many already or soon will) or let parents, who pay the bills, get rebates for channels they have blocked from their children. In other words, here’s another twist on a la carte.

I can live with family tiers, and so can the cable industry. But letting consumers get rebates on channels in a pre-packaged tier, such as expanded basic, truly opens up a Pandora’s box for all. What’s to stop some enterprising soul like me from saying, “Gee, I find sports programming violent, and no longer want to pay for ESPN?” You know, all that spitting and tobacco chewing, not to mention the violent fights in hockey.

As a consumer, I would love it, never having watched, but paid for ESPN ever since I’ve had cable. But realistically, if a la carte became a reality it would ruin an economic model that pretty much works for everyone, including viewers. If cable subscribers paid for only what they watched they might be surprised how expensive it would be to order, channel by channel off of an la carte menu.

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Comments (25)

Andy Samet:

I couldn't agree more. Viewers, and apparently many politicians and bureaucrats, fail to understand that while their cable fees are supporting other people's favorite channels, the converse is also true: other people's cable fees are supporting THEIR favorites. They all seem to think that in the shakeout of niche channels that would result, it will only be other people's favorite channels that get the axe. Economies of scale would go out the window. And we haven't even mentioned the extra customer service costs that would become necessary in order to administrate such a system. The end result will be a cable universe with fewer choices and less diversity, but at a higher cost.

Marianne Paskowski:

Andy,

Well said.

Thanks for weighing in,
Marianne

From my perspective, this a la carte conversation really has nothing to do with TV programming, but rather has more in common with a Kellogg's variety Pack.

Let me explain.

The Kellogg's Variety Pack is the plastic-wrapped package of 10 individual cereal boxes which offers a choice for everyone in the family.

When I was a kid - - one of 5 in the house - - we had no problem attacking a Variety Pack. But, there was always that ONE box of cereal - -that one single brand, that no one ate - - EVER! No matter how many times my Mom would beg someone to eat it, it never failed to be a left-over. That never stopped us from begging my mom to buy another Variety Pack each week.

So, if the FCC is really serious about refunding monies for un-watched TV channels, I think the FC C also needs to require Kellogg's to refund my mother for thousands of uneaten Special K. I am sure my mom is not alone! Anyone else have a cache of Special k's in their pantry?

Marianne Paskowski:

Hi Joe,

Excellent analogy and thanks for your help in clarifying my point to the folks not in the biz who don't know how package prices on cable really work.

BTW, have Mom write a letter to Kevin Martin. The younster needs an education.

Be Well,
Marianne

Mreposter:

Funny, when I go to the newstand to pick up a copy of Discover magazine they don't require me to buy a copy of Time, Sports Illustrated and Better Homes and Gardens.

The current model might increase program diversity by a small degree but it also incourages dominant programmers to create ever more splinter channels (just how many ESPN's are there these days?) and then use their high-demand channels to force the carriers to distribute them, driving up costs for everyone.

Let the marketplace decide which channels stay and which go - competition and free enterprise are cornerstones of our economy.

Marianne Paskowski:

Well a lot of those splintered new nets are in the digital tier, and consumers don't have to buy it.
mp

Mreposter:

Marianne -
So, if we return to Joe's analogy and I'm the guy who likes Special K, I'm stuck buying the other 9 boxes of cereal I don't want?

Marianne Paskowski:

What is the problem? Buy the 10 pack of cereal, at a bundled discounted rate, eat your Special K, which nobody in Joe's family liked and see if others in your family do, or prefer Fruit Loops. Or pay a lot more for a box of Special K, for yourself. I like your dietary preferances, btw.

m

Andy Samet:

"Funny, when I go to the newstand to pick up a copy of Discover magazine they don't require me to buy a copy of Time, Sports Illustrated and Better Homes and Gardens."

No, but they're all there for the browsing and choosing. If you discover that there's an article in BHG that interests you, you have the option to choose that. When cable goes a la carte, those kinds of choices will become difficult, if not impossible, to exercise. Browsing and impulse viewing will decline. Cross-promotion of channels will become a thing of the past. People's viewing patterns will be locked in at the point when they sign up for service. Such developments would have many negative ramifications for cable providers and viewers, too many to name here.

Marianne Paskowski:

Andy,
You've got my head spinning: Are you in favor of a la carte or not? You must be a Gemini, like me.
Thanks for keeping it lively,
Marianne

mreposter:

Andy, you say there are a large number of negatives for ala carte yet the only one you detail is the inability of entertainment conglomerates to cross-promote (ie; force feed) new content to their customers. Oh the horror.

When Time Warner wants to launch a new magazine what do they do? Run ads in other mags, mail promos to subscribers of other TW mags, run TV ads, etc. etc. When Time Warner wants to pump up HBO subscriptions they do something similar, or run free preview weekends. There are plenty of ways to promote content other than bundling it.

Jeff Mulligan:

Marianne,

Looks like you're a bit off base on this one. Not that I want to give Kevin Martin credit for having common sense, I nonetheless believe that, in terms of non-essential, discretionary spending, the marketplace should give consumers a reasonable choice of cable access options. To argue otherwise and to claim that tiering is the only sensible business model for cable companies and viewers alike is to take the cable industry's side uncrticially.

We're no longer at the stage where cable is emerging from its technologically primitive CATV origins; the industry's menu of clever service merchandising options grows each year. So, I imagine that cable companies could offer both the current tiering model as well as a stright a la carte option. The "reasonable choice" would include per channel pricing that matches the same profit margins as each cable company earn on its tiered packages.

Consumers would probably opt for the tiers; bundling succeeds in most markets because it's good for the buyer as well as the seller. No one sweats the leftover Special K. If the leftovers include whatever a parent considers verbotten programming, let parents program that V chip.

Insisting on tiering only is a reaction that, to me, is motivated by industry unwillingness to change its business model and think creatively. At least we can hope that market competition--do I hear FIOS in the wind?--will force more creativity from industry strategists.

Jeff

Marianne Paskowski:

mreposter,
Ok. I hear you. So how would you handle the billing? Let's say we go a la carte. One month I decide, I'll buy 5 channels (presumably in addition to the mandated basic only). And then in each subsequent month, I get bored, and add or drop? Can almost predict what you're gonna say, how easy it is to drop the premiums like HBO, a service that has the churn of a digestive system in constant acid reflux.

Like I said earlier, I hate paying for ESPN, but it's part of the deal.

Marianne

Marianne Paskowski:

Jeff,
I like your solution, offer both. But let's get off the Special K for a sec and look at restaurant pricing.

On a smaller scale, you can order the three course "special" dinner, starter, entre and desert. But I seldom like that option. So I graze, and tend to order several starters and take it from there. But I pay out of the nose for eating only what I want to eat. And that my fellow posters is what a la carte is all about.

Marianne"

Cruiser:

Yo, Blondie --

I'm sitting here on the beach, Wi-Fi humming and margarita in hand, and you and your correspondents are ordering Fruit Loops a la carte in a restaurant!

Get real. A la carte won't work for most viewers. They have enough trouble figuring out what tier combos to order when the cable guy shows up at the door. And why should ordering cable TV service be a science project in the first place? Because some right wing twits in D.C. pander to their base and promise to protect them from the mind-polluting evil liberals tuck into those deceptively innocent tiers?

All this regulatory bluster from a government that tries to privatize and marketize everything in sight? What a bunch of hypocritical politicians without the guts to go after the real bad guys: broadcasters getting rich off free us of the public's spectrum.

Cruisin not bruisin

Marianne Paskowski:

Hello Cruiser,

Well, hope you have sunscreen on and a designated driver. But this morality play at the FCC is, I suspect, a placebo, and only that, to right wing conservatives.

But there is more at stake here, like freedom of choice and how to put a price tag on it. Children, well, that's another issue, but easily resolved.

Blondie

Gonzoguy:

The problem is that the cable business model is flawed and unstable, an outdated artifact of earlier times in technology and competition.

Your earlier reader responses equating cable channel choices to magazine newsstand choices are spot on: We've reached the stage where content quality, not forced viewership or weak sisters in the bundle, should determine a cable subscriber's choice.

The cable industry is afraid of a la carte for good reason. Only channels with value for a large enough audience to interest advertisers, or an audience rich enough or passionate enough to pay a steep subscriber fee, should survive.

The magazine industry went through that "content is everyting" shakeout in the 60's through the 80s, and now it's as creative and diverse as ever. With the internet and mobile media drawing ever more users because it works for them, cable nets have to recognize that they compete in the same
arena: Content that cnnot stand on its own has to find an appropriate medium elsewhere. Not good enough for cable? Try selling your programs via DVD's advertised in special interest magazines. Get the point?

I have to add, however, that it's remarkable to see a decent idea come out of a Bushie like Kevin Martin.

GonzoGuy

Marianne Paskowski:

Oy, Gonzo,

The cable nets are doing all of the things you suggested, DVD's steaming video, mobisodes, bla bla bla, but it's all an experimental splintered audience with no clear revenue stream. For now. I spend most of my working hours online. But I know the diference. If I want to "lean in" I watch on line, if I want to "lean back" it's the TV set.

And that's about as simple as it gets. I think I'm gonna lean back for now. Thanks for posting.

Marianne

Mr. Abernathy:

Dear Ms. Paskowski:

Your online column inspired me to run some interesting mathematical projection models using about 20 terabytes of audience data detail, run over this weekend on my personal Cray. The secret to superior ratings, hence a tier worth selling and buying at prices attractive to all transactors, is combining the appeal driving cable TV's (hence, all TV's) bimodel audience distribution.

It turns out that the most popular and profitable tier would combine Celebrity Bowling with C-SPAN's Book Notes programming.

There is a close second, combining elements of the Cartoon Network, Disney Channel, and Fox News Channel. Bill O'Reilly interviewing Minnie Mouse about the anti-Hillary Clinton female vote would be a sure winner with the viewers Kevin Martin cares about most.

Isn't cross-median logit analysis wonderful?

Yours truly,

Mr, Abernathy

Marianne Paskowski:

Hello Mr. Abernathy,

Yep, I guess cross-median logic analysis is wonderful, whatever that means. Howwever, personally, I have no interest, whatsoever in the shows that you included in your model.Do you live in an Ivory Tower? This is not what the world wants.

For now,
Marianne

mreposter:

Marianne - your suggestion for a combination of options - bundle or ala carte is an excellent one, and could be taken further to mini channel packs (sports pack, family pack, lifestyle pack, etc.)

What really urks me about the present system is that major content providers can leverage their popular channels to force more and more splinter channels on us and force cable/sat companies to carry them to all subscribers. In a free and open marketplace channels like ESPN Classic or Lifetime Real Women would have much small distributions.

In the end, I think video on demand and internet video delivery is going to force the industry's hand. If cable companies won't give people choices, the people will find new ways to find their entertainment.

Marianne Paskowski:

Hi meposter,

Well you know the deal. Now that I've moved to the spit of sand, I no longer buy the whole nine yards. I'm cable expanded basic only and it's good enough for me.I also don't buy into cable's triple play, digital vieo, voice (VOIP) and Internet. I love Verion, my internet and phone provider. And frankly I could care a flying Wallenda about the stuff on the digital cable offerings, like you. Have no intentions to upgrade, at least for now.Been there, done that, no more.

Time to take the puppy out,
Marianne

Andy Samet:

"Andy,
You've got my head spinning: Are you in favor of a la carte or not? You must be a Gemini, like me."

Actually, funnily enough, I'm a Pisces. But there shouldn't be any doubt about my stance on a la carte cable. I think I made it pretty clear that I'm against it. It's not that I think cable is perfect and couldn't do a better job of being responsive to customer demands, but my experience in the business and my observations of the results of politically-imposed solutions tell me that if Congress gets involved in this issue, they'll only make things worse for the consumer.

GonzoGuy unwittingly agrees with me:

"The cable industry is afraid of a la carte for good reason. Only channels with value for a large enough audience to interest advertisers, or an audience rich enough or passionate enough to pay a steep subscriber fee, should survive."

He admits that a la carte will result in fewer choices and less diversity, but apparently he thinks that's a good thing. He'd like to see cable become more like the broadcast networks, consisting of a few general-service channels that differ only incrementally. Whatever niche channels that remain would become the province of the wealthy. That's certainly a Bush-worthy concept.

Marianne Paskowski:

Andy,

I am a no-go on a la carte. Gonzo said it right, destrys the economic model. Liked Jeff's comments more: offer both, my take like a restaurant.

Marianne

Stephen Zimmett:

I believe that customers should have a choice on which channels to buy be it cable or satellite.
I believe that satellite should say charge $20.00 for basic service hookup then perhaps $1.00 for each channel you wish to receive. The average viewer watches between 15 and 20 channels.
I currently have Directv and pay some $56.00 for about 115 channels. I believe that I would drop some 80 channels if I could go ala carte.
Otherwise the only thing that a parent could do is block the channels he does not wish his kids to watch. Blocking has been around for some time.
I recently wrote to Directv about this and claimed that their subscriber base would increase two or three fold if they offered this to customers. Lets see what happens.

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