Old Debates Over "A La Carte" Might Not be Relevant in Future

An economist might say the typical video bundle works because it allows distributors to apply scale and scope economics.

 
The corollary is that most networks, which are advertising supported, want to be part of a "no choice" basic tier for business reasons of their own, namely the ability to better sell the advertising that underpins their business models.

According to some studies, relatively few networks actually make a $100 million or more in annual ad revenue, though.

When multichannel video distributors say a bundled approach creates economics that favor smaller, niche networks to thrive, they are right.

Deprived of carriage on a broad "enhanced basic" tier, perhaps 60 percent of networks might find themselves immediately imperiled, as going concerns.

An end to bundling would likely decimate most smaller, more-lightly-viewed networks. To the extent that content and program diversity is a desired end user benefit, "choice" in all likelihood would decline in a full a la carte environment, because most people would not buy most channels.

The possible advent of over-the-top TV viewing worries most in the current ecosystem for one compelling reason: "households view less than one quarter of the networks they are forced to buy in the bundle," the Consumers Union noted in an past analysis assuming a 50-channel offering. Even today, with hundreds of available channels, end user behavior does not seem to have changed much.

Most people watch a dozen or so channels on a regular basis.

Cable operators have argued that end-user costs might actually climb in an a la carte environment, for a number of reasons. Higher customer care costs, operating and marketing are likely, cable operators have argued. Part of the argument has been based on the need to supply new decoders to customers who did not previously need them. That is likely not much of an issue these days, as cable operators convert to largely-digital or all-digital services where customers already must be provided set-top boxes.

So perhaps some of the historic objections from a distributor point of view have eroded.

Separate studies by the Federal Communications Commission seem to have concluded that unbundling could save money, or wouldn't save money. See this study. One of the studies suggested “consumers that purchase at least nine networks would likely face an increase in their monthly bills" when buying a la carte.

Likewise, one of the studies suggested bill increases ranging from 14 percent to 30 percent under a la carte, while the other suggests a consumer purchasing 11 cable channels would face a change of bill ranging from a 13 percent decrease to a four percent increase, with a decrease in three out of four cases.

The point is that it is very hard to tell, conslusively, what might happen if providers shifted to a la carte viewing. With online delivery coming to the fore, it might not ultimately matter. A la carte might happen, but on the Internet.