Hopes dashed for a la carte cable
Unbundled from cable subscriptions, the cost of the priciest channels would be spread across fewer subscribers, which would mean far higher prices.
Thu, Jan 10, 2013 at 12:39 PM
LAS VEGAS — TV providers including Verizon, DISH and Starz Media are well aware that many people would like to cut their cable bills and choose just the few channels they like. But that's unlikely to happen over the next five years, representatives of the three companies said in a panel discussion here at the Consumer Electronics Show.
The fact is that two companies account for about 50 percent of the provider's cost for content, according to Dave Shull of DISH. Without naming the priciest media companies, he said one of them has a logo with mouse ears. Unbundled, the cost of the priciest channels would be spread across fewer subscribers, which would mean far higher prices. Mini-packages of related shows such as outdoor sports and family programming that subscribers can pay for on top of basic cable are about as close to a la carte cable as the industry will get.
The panelists agreed that rates for cable can't keep rising at 8 to 9 percent a year. And the number of "cord cutters" and "shavers" (those who are cutting back on services and premium offerings) is growing, particularly among households with net incomes of $55,000 and less. Many are turning to cheaper streaming options such as Netflix, but still can't get all of the content they'd like, such as big budget original shows like HBO's "Game of Thrones."
John Penney, managing director of Starz, said that people have grown accustomed to paying $8 for streaming services, whether it's from Netflix, Hulu Plus or newcomer Verizon Redbox Instant.
"That doesn't leave any room for buying original content, which can cost as much as $4 million an episode to create," he said. At a skimpy $8 per subscriber, there's no room for Netflix and others to license such expensive content.
However, streaming subscribers may see more original programs come to services, but they won't be big-budget series. Rather, shows that are cheap to produce like Make Television, a do-it-yourself series for electronics hobbyists, and performances by comedians such as Ron White will augment the content offerings.
So if there's no real future for a la carte cable, how about making a mobile app such as HBO Go available without a subscription?
"Absolutely not," Penney said. "You have to have a subscription somewhere and that's where we're going to stay."
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