US cable TV mulls a la carte channel bundling

Michelle Clancy ęRapidTVNews | 29-09-2011

US MSOs look set to embark on a programme that would let customers to subscribe to channels individually and offer a range in terms of payment spectrum.
Recognising the "affordability" gap between those that can't or would rather not pay the ever-higher cable subscription rates and premium customers, the cablecos are questing to implement a lower-cost, personalisable ad-hoc TV strategy within their service packages. The aim, according to Reuters, is to help stem the flow of subscribers to over the top (OTT) and IPTV/satellite alternatives: the sector has seen unprecedented subscriber churn quarter after quarter as the economy continues to waffle.

Mediacom, an MSO with 1.2 million subscribers, has recently urged regulator the FCC to consider "instituting a carefully designed a la carte system, so that decisions about what video services are bought are made by consumers themselves, rather than by content owners."
This so-called a la carte programming directive also could help in lowering the cost of licensing content, which has been escalating and leading to carriage fee disputes that have threatened blackouts and infuriated customers.
An ad hoc strategy could help with both issues. Consider ESPN, for instance, which is included in basic cable packages around the country. And yet the cost of carrying it is hardly basic: the sports channel costs about $4 a subscriber, the dearest channel in the industry, according to SNL Kagan. An a la carte strategy would allow a viewer to opt out of having to pay the premium and drop the channel, should he not be a sports fan. And a cableco could pay ESPN parent Disney less.
Such radical thinking is becoming necessary, some argue. "We're in an environment where programming costs are rising at well above inflation and well above what I think consumers are willing to pay," said DirecTV CEO Mike White at a recent investor conference.
It is unlikely that media companies would like to see their distribution dwindle in such a way-- right now the bundled strategy in place means that if cablecos want popular channels like Discovery, they also have to carry less popular networks like Discovery Fit & Health, thus giving them exposure despite lower ratings.
With the "retrans season" starting soon, carriage fees are set again to give rise to potential black-out situations, these conversations are sure to percolate further.