Tuesday, January 23, 2018
Business

David Lazarus: A la carte channels looking more likely

If you talk to pay-TV insiders and analysts, the buzz these days is about so-called skinny bundles. With fewer channels and lower monthly costs, almost every pay-TV provider is cooking up a skinny bundle as a way to remain in the bundled-programming business.

But the times are changing, and probably a whole lot faster than the pay-TV industry would like. Soon, even the thinnest bundles may be a thing of the past.

"Skinny bundles are simply a placeholder for a la carte," said Greg Ireland, an analyst at market researcher IDC. "Consumers really want a la carte, so it's hard to imagine we won't get there."

Some of the biggest names in broadcasting already are experimenting with a la carte services abroad, where they're less beholden to the whims of cable and satellite companies. Viacom and Disney are among those giving overseas viewers a taste of the future with online streaming services.

In this country, the pay-TV industry has been insisting for years that a la carte is a nonstarter. It would cause the price of individual channels to skyrocket, industry execs have said, wiping out less popular channels with relatively small audiences.

Those are possibilities, although I suspect a new breed of programming entrepreneurs would emerge and find ways to thrive in this more competitive environment.

What a la carte really would do is put consumers in control of the pay-TV market, ending an oligopoly that for too long has resulted in people being forced to purchase products they don't want.

What a la carte would do is make pay-TV channels work a whole lot harder to attract and hang on to viewers. And from where I sit, that's not the worst thing that could happen. Seems like a surefire way to get better programming.

Nearly half of U.S. pay-TV subscribers would prefer a la carte channels, according to a recent survey by the accounting firm PricewaterhouseCoopers. Pay-TV subscribers are getting so fed up, with about 20 percent saying they'll cut the cable cord this year.

IDC found in a recent survey that 86 percent of cord cutters subscribe to Net- flix, compared with 39 percent who pick Amazon Prime and 30 percent who join Hulu Plus. Each service, for roughly $10 a month, offers a variety of viewing options, including movies, TV shows and original content.

The heavyweight among over-the-top services is HBO Now, which costs $15 a month and provides full access to the cable channel's content. Other premium channels, including Showtime and Starz, are available for closer to $9 monthly.

In Canada, they've just gotten started with a government-mandated system called "pick and pay." Canadian pay-TV providers now must offer a base package of local and educational channels for $25 a month (about $20 in U.S. currency). Beyond that, they have to offer individual channels on an a la carte basis or skinny bundles of as many as 10 channels.

By year's end, every Canadian provider will have to offer skinny bundles and a la carte channels. Current pricing suggests many channels will run about $3 each, and many bundles cost between $10 and $20.

IDC's Ireland has his doubts that a government-mandated a la carte system would fly here. "Programmers would kick and scream," he said.

But he thinks U.S. pay-TV companies eventually will find their way to a similar place, with skinny bundles existing alongside popular a la carte channels.

Thus, sports fans will be able to buy a sports bundle, or entertainment-focused viewers will be able to purchase a bundle containing TNT and TBS. Meanwhile, people with more limited viewing needs could get by with, say, HBO and Amazon Prime, plus an indoor antenna for picking up local channels.

The exciting thing is that, after declaring over and over that there was no way we'd ever see an end to expensive bundles of hundreds of channels, the pay-TV industry is moving toward a new business model based on giving people what they want.

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