The Road to À La Carte Television

It’s a long one, but we’re getting surprisingly far down it.

Here’s a hard truth about the TV industry, one that will inevitably lead us to à la carte TV:

You can’t make consumers pay for channels they don’t want anymore.

The proof is everywhere. We’re in the midst of a consumer exodus from cable television.

I’ve often said that the root cause is price. And while that’s true in some sense, in others, it’s really not. Most cable networks charge less than $1 per subscriber, per month, and consumers aren’t generally disgruntled when those individual trans fees rise by a few pennies.

The real issue that they have is that their bills are ballooning, because rather than paying just for the channels they want, they’re forced to take hundreds or none at all.

As the price of pay-TV skyrockets, consumers are starting to choose none at all, and that’s putting the hurt on cable networks and the entire industry.

Cord Shaving and ‘Skinny Bundles’

In 2014, the Wall Street Journal observed that even consumers who weren’t cutting the cord were cutting back. “Cord-shaving” it was quickly dubbed.

Fast foward 2 years, and a whopping 41% of cable subscribers say they plan to cut or ‘shave’ their pay-TV services.

Popular Skinny Bundles

Virtual pay-TV has also risen to prominence during that time, led by Dish Network’s Sling TV (and to a lesser extent, Playstation Vue). The concept is simple. Delivery method aside, using the internet instead of cable or satellite, what Dish offered in Sling was fewer channels at a lower price.

But what skinny bundles and lower tiers from pay-TV providers have in common is that they’re still not a perfect fit for most consumers. If you want a single channel that’s not in these downsized bundles, you may well find yourself out of luck, forced back to a grande pay-TV package to get them.

Viacom calls for Skinnier Bundles

Few companies have suffered as much in this new TV environment as Viacom. After a boardroom brawl that ousted long time Sumner Redstone confidant Philippe Dauman, new CEO Bob Bakish was tasked with righting the ship.

His first order of business? Snub OTT video in favor of traditional cable relationships.

New Viacom CEO Bob Bakish

Despite the less-than-encouraging start to his tenure, more recently, Bakish said some things that make a lot of sense while speaking at a conference in Boston.

Specifically, that extracting sports from bundles is key to getting TV costs under control and fielding a successful product in the current market.

Along with this pearl of wisdom came the announcement that Viacom was in advanced talks to begin offering a skinny bundle of its own networks, sports-free, for $10 to $20 a month.

A Microcosm of Cable’s Problems

As the saying goes, the road to success is paved with failures. My personal prediction is that Viacom’s skinny bundle is likely to be highly significant, if only as an important cobble on the path to true à la carte television.

Even Viacom’s cheaper, skinnier bundle has the same flaws as the bloated $300 TV packages.

Once again…

You can’t make consumers pay for channels they don’t want anymore.

A bundle of Viacom’s channels would go far in proving this point. The question for consumers will be: are you willing to pay as much as $20 a month to get a dozen channels you don’t want and one or two that you do?

Various Viacom Networks

A cord-cutter wanting to watch MTV or Comedy Central might be willing to pay $2 or $3 a month to do so, more than double those networks’ current retrans fees. Asking $20 a month for access to those the same couple of channels is a far less appealing offer, and the inclusion of TV Land, Nickelodeon, and numerous other channels that will go unwatched doesn’t add anything to the value proposition for most consumers.

The Economics of À La Carte TV

Hard as it may be for an industry that has long enjoyed a blank check in the form of cable revenues, we’re quickly headed towards a world where à la carte TV simply makes more economic sense for the networks.

What was once an asset, consumers being forced to take and pay for channels they didn’t want, putting money into the pockets of network executives from consumers that never tuned to their channels, is now a liability.

Rather than paying for all those channels, even the ones they don’t want, they’re canceling the service that brings them all those channels, even the ones they do!

Suddenly, if you’re a network, you don’t want to be bundled with content that your own audience isn’t going to want to be stuck with the bill for.

Different networks appeal to different audiences. For decades, big media companies hoping to cast the widest possible net have bought or created channels with divergent or mutually-exclusive target audiences: Viacom’s MTV and TV Land, Disney’s (via A&E) Lifetime and ESPN, Time Warner’s CNN and Cartoon Network.

Consumers have shown that they’re willing to do without traditional pay-TV before they pay hundreds of dollars a month for it. What consumers are willing to spend on TV is finite, so networks must jockey for a piece of their entertainment dollars.

The choice for big media companies, who are used to collecting retrans fees on dozens of diverse channels, is now this: do you want to make half of the money that you used to make from each subscriber, or none of it?

Pose the question like that, and the industry will warm up to à la carte television in a hurry.

Thanks for reading!

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