Next month, at the behest of the U.S. Congress, the Federal Communications Commission in Washington, D.C. will weigh in on the viability of offering cable channels à la carte, rather than in prescribed bundles. The mere suggestion released a storm of opposition from cable channels, which claimed such a measure would spell their doom. But, as more and more programming is offered on-demand, might à la carte be inevitable?
CEO and founder,
Oxygen Media, U.S.
An à la carte proposition would put us out of business. Because we would have to sell [Oxygen] directly to consumers, we would have to spend most of our money on marketing and not as much on original programming. [About 60% to 70% of Oxygen's programming budget goes to original shows.] We would have to so diminish what we spend on original programming that our product would be diminished. You can’t advertise something and have nothing worth watching, you need both. For the production community, this is truly one of the worst ideas that has come along.
The cost of launching any new network that has a lot of original programming is anywhere from us$300 million to $800 million. Nobody would get financial backers with the uncertainty of an à la carte proposition. We’re a new network that is cash positive, but a slight change in our economic formula throws us back into having to raise more money. Even well-established networks would have to cut back on original programming. And, advertisers have just gotten to the point where they’re giving cable their due. It’s taken us 20 years to change advertisers’ habits.
There’s a group in California that filed pro à la carte that is so naïve. They said Oxygen isn’t really independent and that’s ridiculous. We have no advantages of scale. If they think you can create original content for the new platforms of VOD or digital cable [as an à la carte channel], they’re crazy.
Will channels become obsolete? TV advertising works because it reaches a large number of people. If DVRs get wide distribution… advertisers are going to have to put more money out there, because it’s going to be even more catch is as catch can. They’ll have to do funnier commercials, because that’s all people really want to see, and they’ll have to do better creative. But make no mistake, TV advertising isn’t going away, channels aren’t going away and brands are not going away.
American Cable Association, U.S.
Mandatory à la carte is a diversion to take policy makers’ eyes off the marketplace problems that exist.
Most of the programming we carry is controlled by a few global conglomerates, such as Disney, Fox and Viacom. We are the only industry group being frank about the problems that exist – from the small, independent cable providers’/ distributors’ perspective – with the forced tying and bundling of programming channels by these global media giants. They control the supply, but because they have all of this content, which they can leverage, they also dictate demand. ¿ la carte isn’t the solution; it would basically create bloodshed. But, other things can happen to ensure the free market works better between programmers, cable companies and consumers.
What we advocate is to say to programmers, ‘You can tie and bundle services, but you can’t say to consumers and operators, ‘If you want this one service, you have to take these other 10.” Secondly, don’t allow programmers to demand that services be put on the most basic service. For example, ESPN is the highest cost general programming channel; it’s over $3 per subscriber per month. About 30% of the public gladly pays that, but the other 70%, if they had a choice, might decline the service. If we had a choice, we could create a sports tier. That would give us more leverage on our side, and get us closer to a true supply and demand. MTV and Spike TV – services that are sexual in nature or use profanity – we would carry on a contemporary adult tier.
The technical ability exists to offer more genre-based tiers. It doesn’t exist for à la carte. But in a true digital world, à la carte is going to be possible and even necessary. Even now, as people watch TV using digital video recorders, they’re getting accustomed to watching on a per-program basis rather than a per-channel basis. It might ultimately force these conglomerates to make these changes anyway. Until that happens, they have us over a barrel.