What Would A La Carte Look Like?

from the not-what-you-think dept

In all the recent debates over a la carte programming people always write a comment saying how they think a la carte would be great, because they'd just be able to pick the five channels they want, and pay a tiny fraction of what they're paying now. As has been explained repeatedly, there's a huge fallacy in that assumption: the costs of offering a la carte programming by traditional cable operators makes it impossible. First, cable operators would have to make a lot of changes to their system, and the costs would be passed on to customers. Second, the ongoing maintenance of having so many different customers, each with a completely different package would increase the overhead costs significantly -- and (once again) would get passed on to customers. Tim Lee has been thinking about this debate and thinks a couple steps out to figure out what a la carte programming would really look like, and realizes it's pretty much what we see right now. First, he points out that most of your cable fee isn't for content, but for infrastructure. So, any a la carte offering is going to start with a base fee anyway, and would then let you add channels at some additional fee. However, they might add in some less lucrative channels, like C-SPAN for "free." Already with the bundles that most people get, they end up with a "basic package" of channels, and then the premium channels are additional -- and Lee expects that "a la carte" would actually be quite similar. The big difference would just be that the core set of channels you get for free would be smaller (though, probably still cost a similar amount). So, in some sense, consider the bundle you get now as the base level, and then you get to choose some set of channels above and beyond that for an extra fee -- just like a la carte.

Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Drive up Cable!, Dec 23rd, 2005 @ 2:54am

    Order by Number....

    Yes, I would like the number 5, with a side order of Comedy Central Please. Oh, and make that a large Diet History Channel. No, on second thought, make that a Super Sized Diet History Channel.


    A La Carte will have its place, many years from now, when everything is 100% digital. And you, the customer, can sit down at your own computer, log onto www.yourcablecompany.com/youraccount and click on the channels you want. And instead of the cable company having to send a tech out to change your descramblers, all you'll have to do is click the 'submit' button. Your credit card will credit you back whatever balance is left from your previous configureation plus whatever you owe for your current configuration. Of course, I suspect that by then, the median cable package will be more than double what it is now anyway.


    It is always more expensive (and profitable for a company) for people to order the enchilada than it is to get the whole entre. Back in my table waiting days, it always made me smile when somebody would balk at entre prices, then order everything A La Carte. Most of the time they would end up paying way more than if they would have ordered the entre. But like everything else, there are those who will learn to manage A La Carte, and it will be cheaper for them in the long run.


    It seems like the same thing happens with cell phones. People buy the cheapest plans because they don't think they talk on the phone more than 100 minutes per month. So they get the smaller plan, then use up that 100 minutes in the first few days. They end up being way more profitable per minute for the cell phone company, but then turn around and scorn that company for its greed. Even though that same company's sales rep tried to sell them a plan that was more costly, but fit their phone useage lifestyle better.

     

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  2.  
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    Cable Billing Nightmare, Dec 23rd, 2005 @ 4:24am

    A la carte could promote better billing practices

    Comcast is my cable provider (I've never used anyone else, so I have nothing to compare with). My biggest pet peeve (even beyond the price) is the billing. You would think that a cable bill (like any other utility) would look similar from month to month, and that there would not be much variation in price (assuming no pay-per-view purchases). However, that is definitely not the case with Comcast. Each month my bill varies in amount; sometimes up to $50.00. In addition, when you examine the line-item details from month-to-month, you're never paying for quite the same thing. The only thing that is consistent with the bill is how cryptic the package pricing appears to be.

    I would estimate that atleast 1 out of every 2 months my wife calls Comcast to have a bill explained (usually resulting in an inadequate explanation). I'm not sure that I buy the argument that with a la carte comes move overhead because of all the non-standard packaging. I've heard these support employees fumble with the packages they offer now (and all the promos and added channel packages). I find it hard to believe it will only get worse if they pull up my account and have a list of channels I subscribe to, not a list of packages. Comcast (at the very least) has a LOT of room to improve in the billing area, which should reduce overhead required to constantly answer billing questions, freeing up valuable dollars to help offset a la carte programming.

     

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  3.  
    identicon
    Order By Number!, Dec 23rd, 2005 @ 4:40am

    Re: A la carte could promote better billing practi

    The problem you are talking about has more to do with billing and marketing than it does how cable networks actually operate. Right now, they require hardware, at your home, to be configured to allow channels through. If you want tier one, you get one descrambler that allows you to view the tier one channels. If you want tier two channels, you get another descrambler, tier three, gets you yet another descrambler. If you want movie channels, you get yet another descrambler. Each time you make an adjustment to your services, a tech will visit your house and give you a new descrambler.


    Digital cable is changing that, though only a percentage of the signal is actually digital. Once the system is 100% digital will A La Carte really make any since. However, to get the cable network to that point would require a HEFTY investment. I think the point that Techdirt is trying to make is that IF the FCC were to require by X date, everybody has to have A La Carte programming, the cable companies would be forced into completely redrawing their business models, upgrading their networks, and developing new software and applications to manage that network. Not to mention the fact that every contract they have with the thousdands of production studios would have to be renegotiated.


    Do I think we will get A La Carte programming? Yes. Will it happen quickly? No. There are too many political and technical obsticals to be overcome.

    And if the FCC gets involved by imposing its will on these companies, it will just make the whole project that much more costly for the consumer in the long run.

     

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  4.  
    identicon
    Joshua, Dec 23rd, 2005 @ 6:15am

    Re: A la carte could promote better billing practi

    This will all be moot when people start getting their tv/shows/movies elsewhere. It is already starting to happen. We have CNN live online now, multiple channels. Google Video will soon offer us pay per view on video, as well as their currently free video. Apple offers us all kinds of video choices. We now have media center pcs, movielink and cinemanow, etc.

    The big problem with it all is that there isn't yet a good way that someone can casually consume all of it. It takes real effort to get to the right sites, and click etc. As soon as it is more standard, and someone builds a good interface to choose from all the options, presto.

    At some point all cable is going to be good for is broadband internet and basic tv programming for those that don't want to use online services.

     

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  5.  
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    Format c: v:stupid /q, Dec 23rd, 2005 @ 7:13am

    Re: A la carte could promote better billing practi

    I have to agree with you

     

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  6.  
    identicon
    chaser7016, Dec 23rd, 2005 @ 10:09am

    No Subject Given

    The solution is to have an ISP come along that offers broadband service that mirrors current cell phone bills. You'll have a certain amount of monthly bandwidth and anything over you'll be charged for.

    This will be great for keeping the net as we know it today(net neutrality wouldnt be a congressional issue), as well as paying for what you want to watch and consume. P2P could become legal as monies from our monthly bills can be funneled to big media or to joe making media in his room!

    Can not imagine this not happenning, especially with the Skype's of the world. Id say a wireless ISP will be the first to instill such a plan!

     

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  7.  
    identicon
    Sean Keegan, Dec 23rd, 2005 @ 11:05am

    Paying for cable

    You know, it is already silly that we have to pay for cable at all, I mean besides the premium commercial free chanells, why do we have to pay for something so riddled with commercials?! Of course I understand most of the advertizing is there to pay for the content, not the cable companies, but the amount of commercials we have to sit through makes me furious about how much it costs to have cable. That is why I think the future is an iTunes type of system where you buy individual programs (reasonably priced) rather than an al la carte system of channels.

     

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  8.  
    identicon
    Sean Keegan, Dec 23rd, 2005 @ 11:07am

    Paying for cable (fixed typos was in a hurry hehe)

    You know, it is already silly that we have to pay for cable at all, I mean besides the premium commercial free channels, why do we have to pay for something so riddled with commercials?! Of course I understand most of the advertising is there to pay for the content, not the cable companies, but the amount of commercials we have to sit through makes me furious about how much it costs to have cable. That is why I think the future is an iTunes type of system where you buy individual programs (reasonably priced) rather than an a la carte system of channels.

     

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  9.  
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    Jason (profile), Dec 24th, 2005 @ 7:56am

    Re: Order by Number....

    And instead of the cable company having to send a tech out to change your descramblers
    I haven't had a visit from a Charter Communications tech to change my programming ni 5 years. Any time they've changed my program access (2-3 in the last 3 years alone) its been done remotely. Most cable companies that offer internet service have IP enabled boxes. There is no need to send a tech out unless there is a problem with the box....

     

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  10.  
    identicon
    Steve R., Dec 27th, 2005 @ 10:59am

    It can be done

    One marketing ploy that always amazes me is how the cable and cell phone companies can offer all sorts of "customized" services developed by an army of highly paid marketers and programmers; but then when they are required, by law, to do the very same thing - it is all of a sudden becomes too expensive and onerous for them to implement.

    With the current practice of paying for a suite of programs, I do not appreciate the fact that I am forced to subsidize programming that I do not want or like, the Home Shopping Channel for example. At least alacarte ordering offers the potential to deny revenue to those companies that you do not watch.

    As one other poster pointed out, technology does allow the cable company to remotely control what you can receive. They can offer this service if they want, and that is the real question.

     

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  11.  
    identicon
    Anonymous Coward, Dec 28th, 2005 @ 8:13am

    Re: It can be done

    >> At least alacarte ordering offers the potential to deny revenue to those companies that you do not watch.<< br>
    And that's the whole point. A la carte is not just to give consumers more choices, it's to help regulate cable pricing by allowing the forces of competition to come into play.

    How many customers do you think will drop ESPN when they find out that $5-6 dollars of their $40.00 basic extended bill goes to them? What will ESPN do when this ptactice spreads country wide? They will adjust their price ot get the business back. If HBO can do a commercial free network with major movies, excellent original programming, some major sports produciotns, etc. for $10-11 dollars a month, how can ESPN justify a commercial every 10 minutes and still charge $5-6/month?

    Ohter cable networks will be similarly effected. Some may die completely and disappoint a lot of people, but so be competiton.

     

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