1. Business

Verizon takes lead in move to a la carte pay-TV pricing

David Lazarus   (Katy Raddatz/The Chronicle) **
David Lazarus (Katy Raddatz/The Chronicle) **
Published Oct. 3, 2014

As more people abandon pricey cable and satellite services, the pay-TV industry may be finally waking up to the reality that if it wants to survive, it's going to have to give consumers what they desire.

And that's a la carte programming: paying only for the channels you watch.

Lowell McAdam, chief executive of Verizon Communications, recently signaled his company's acceptance of a la carte by announcing the launch of an Internet-based TV service that would offer greater programming flexibility than any other pay-TV provider.

"No one wants to have 300 channels on your wireless," he said at an investor conference. "Everyone understands it will go to a la carte. The question is: What does that transition look like?"

In Verizon's eyes, that transition looks like a base package that includes the major networks and a collection of "custom channels" from which subscribers could pick and choose, McAdam said.

Verizon's service apparently will be separate from Verizon's FiOS pay-TV service, which offers cablelike programming in 20 cities nationwide.

When the company rolls out its Internet service by the middle of next year, American consumers will have their first chance to select their own pay-TV channels from a major telecom provider rather than resign themselves to bundles of channels foisted on them by the company.

Verizon's move comes at a time when online services such as Netflix and Hulu are increasingly attracting younger viewers. It also comes as heavyweight networks such as HBO are pondering the possibility of offering their programs directly to subscribers over the Internet.

The pay-TV industry for years has said a la carte programming would be a disaster for consumers. Industry executives have argued that abandoning bundled channels would result in higher prices for viewers and fewer channels to choose from.

McAdam had some harsh words for telecom companies that refuse to accept changing times. They're "the ones who'll be left behind," he said.

It's not much of a stretch to think that the combination of smaller, cheaper bundles with a modicum of a la carte flexibility would appeal to U.S. pay-TV customers who are sick of cable bills topping $100 a month.

The typical American watches only about 17 channels regularly, the Nielsen company says.

I asked representatives of other pay-TV companies in the United States if they were planning to follow Verizon's a la carte lead. None said it was cooking up something similar.

What it shows, I think, is that Verizon is further along than others in reading the writing on the wall. The days of bundled pay-TV plans are numbered. The future belongs to Internet service providers that can also deliver TV content at reasonable prices.

Along those lines, content companies such as Disney, Fox and Viacom will have to adapt to a world in which they can't continue forcing pay-TV customers to take all channels. That would mean making all channels more affordable.

Depending on how you look at it, that's either a very scary or a very attractive proposition.