Study: À la Carte Won't Work
Forrester says pay per channel won't protect kids from cable-TV sex and violence, isn't profitable
By John Eggerton -- Broadcasting & Cable, 6/3/2007 8:00:00 PM
Selling cable TV per channel, or à la carte, won't necessarily shield kids from violent or sexual content and wouldn't generate enough money for the cable industry to make the numbers work.
That's the conclusion of a study performed by Forrester Research, slated for release June 4. It also suggests that better bundling of channels may be the answer for both cable operators and the FCC.
Although FCC Chairman Kevin Martin has recommended à la carte as one way to give parents the ability to not include, or
pay for, channels they don't want in their home, the study suggests households that regularly tune to fare like SpongeBob SquarePants are also particular fans of racy fare like The Sopranos. “Even if these homes are offered à la carte pricing,” the study concludes, “their appetite for adult-targeted programming means that many families would not choose to be more protected than they are today.”
And the study found that a little over half (53%) of 2,895 cable homes polled are interested in à la carte. However, they are not interested in paying more than $24 for a “simulated” bundle of 26 channels they picked themselves, or about half of what they pay for bundled cable service now.
It also works out that subscribers would pay about a dime per hour for cable programming, a model that is not sustainable, says James McQuivey, who prepared the Forrester report.
One question the study fails to ask cable subscribers: What would they spend based on a cable operator's actual pricing of such channels? Few consumers could fairly price any good they consume in a similar context.
This study was actually conducted last year, when Sen. John McCain (R-Ariz.) was pushing hard for à la carte, but was put on the back burner when McCain backed off a bit, says McQuivey. It was revived after the FCC released a TV-violence report in April that included a pitch for à la carte, which Martin calls the least intrusive method of content control of the wired medium.
But the Forrester report found that households regularly watching Disney and Nickelodeon were also “much more” likely to be watching channels like HBO, Comedy Central and Spike TV, more so than the average cable household. For example, 42% of those that regularly watched Nickelodeon also watched Comedy Central, and 39% also watched Spike TV. Almost a third (30%) also took HBO.
Broadcasters will be happy to learn that, when cable subscribers were asked how much they would pay for each service in their simulated bundle, “local channels” topped the list at $2.42, with HBO's seven channels coming in second at $2.37, which would be a price break from the current fee.
All this, McQuivey says, suggests that viewers aren't being realistic about cable pricing: “The FCC is saying, if we just let people choose, it will all work itself out, but the fact is, [subscribers] have no idea how to value what it is they are getting.”
Whether or not cable networks would agree with that assessment probably depends on where they ranked in the price hierarchy. For example, according to the survey, subscribers would be willing to pay an average of $1.06 for the NFL Network, but only 98¢ for ESPN.
Instead of à la carte, which McQuivey concludes would do more harm than good, the report advises that the industry could offer “smarter” bundling of family, sports and news to help appease the FCC and Congress.
The FCC chairman's office had not commented on the report at press time, but Martin has suggested options beyond à la carte, including the kind of themed tiers Forrester recommends.
Even the cable industry has conceded that the world of “where you want it, when you want it” media may require it to build in more programming flexibility, but it continues to reject government attempts to mandate its business model.
NCTA President Kyle McSlarrow declined to comment on the report. He has said that the marketplace may drive cable toward an à la carte model but the federal government has no business telling companies how to sell TV. He has also called à la carte a “poor answer” to controlling content that comes into the home.
