News Analysis
Cable a la Carte? No Way!
By Swanni

Washington, D.C. (September 28, 2011) -- Thanks to a Reuters article, the industry is buzzing this morning about cable operators shifting course and adopting 'a la carte' pricing so consumers can choose which channels they want to buy.

But the headline for the Reuters article, which is causing the buzz, is misleading at best and factually wrong at worst. The headline reads, "In Switch, Cable Operators Want to Go A La Carte."

Actually, cable operators have no intention of offering a la carte pricing, or at least the way a la carte has come to be known.

A la carte is the term that has been used over the years to describe how consumers could pay for their cable and satellite bills by only paying for certain channels -- the ones they wanted to watch. Instead of being forced to pay for a large bundle of channels, consumers could choose, let's say, just 10 favorite channels and pay perhaps less than $40 a month.

However, as the Reuters article explains, albeit several paragraphs from the misleading headline, the cable operators actually want to force programmers to allow them to offer certain expensive channels a la carte. For instance, instead of a cable operator paying ESPN a huge fee to include it in a basic cable package, the cable operator might offer ESPN as a standalone channel much like HBO. The consumer could choose to order it by paying $10 a month.

The cable operators would like to do this with channels like ESPN because it has become so costly to include them in those large bundled packages. (ESPN can charge more if it's in the large bundled package because more cable subscribers would get the channel; it can still charge a high fee to be a standalone channel, but the cable operator could recoup those fees by charging more to watch it. ESPN doesn't like this concept because it means ultimately that fewer people would wind up watching the channel.)

Time Warner is now experimenting with this modified 'a la carte' approach. The cable operator has assembled a basic package of roughly 30-40 channels (minus ESPN) and it plans to offer in some markets for $30 or $40 a month. By stripping ESPN from the package, Time Warner can afford to offer the plan at those prices.

(For background, cable still clings to the bundled package concept because true a la carte would dramatically reduce its revenues, making it difficult to survive at all. Plus, if people only ordered the channels they watch, the cable and satellite ops could not afford to carry the less popular, niche channels. You might say that's okay, but everyone's list of their 10 favorite channels probably includes at least one of those niche channels.)

However, this is not true a la carte, is it? The consumer can not choose which channels he or she wants. But he can choose whether he wants ESPN or not.

So, no, a la carte is not coming to a cable bill near you. But your cable bill may see some new creative offerings in the near future.