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The future of cable?

I've always been under the impression that a la carte cable would be cheaper than the current arrangement, where I pay for several hundred channels I'll never watch. James Surowiecki says that that's just not true:

The simple argument for unbundling is: “If I pay sixty dollars for a hundred channels, I’d pay a fraction of that for sixteen channels.” But that’s not how à-la-carte pricing would work. Instead, the prices for individual channels would soar, and the providers, who wouldn’t be facing any more competition than before, would tweak prices, perhaps on a customer-by-customer basis, to maintain their revenue. That doesn’t necessarily mean that Bravo would suddenly cost fifteen dollars a month, but there’s little evidence to suggest that à-la-carte packages would be generally cheaper than the current bundles. One recent paper on the subject, in fact, estimated the best-case gain to consumers at thirty-five cents a month.

This still seems unsustainable, though. These days, I watch most of my television through Netflix-on-Demand. It's a limited selection, and there are technical glitches, but even with all that, it's already better than cable. Five years from now, I don't see how cable is adding enough value to sustain its business model.

By Ezra Klein  |  February 8, 2010; 9:04 AM ET
 
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Comments

Out here in the hinterlands, TV via cable is the only way to get local news, weather, school closings, etc., because all of the local newspapers are crap and there is no comprehensive coverage on the Web. Remember, the Weather Channel is one of the most watched. Plus, a lot of people will keep the cable just for sports.

Posted by: AuthorEditor | February 8, 2010 9:24 AM | Report abuse

Sports are the only thing I really see keeping cable going. I cancelled years ago, just keeping the networks, and I really haven't missed it at all. I watch things I really want to see on Netflix and Hulu, and I have more time back in my life because I have to be at least a little bit motivated to seek something out to watch and I'm not just flopping on the sofa channel-surfing.

Posted by: Jenn2 | February 8, 2010 9:30 AM | Report abuse

You are correct, sir. But true ala carte just isn't going to come from cable. Already, the cost of cable involves rental fees that wouldn't go away, and those fees would go up, include a basic "carrier" fee just for having an active connection. Add a couple of $1 a month channels, and you're back where you were.

Ala carte is going to come via Netflix, Roku, Hulu, Slingbox, etc. Your carrier fee will be whatever you pay for your internet connection. Current speeds don't really support 4 people watching 4 different shows on 4 different Roku boxes, but they will. But after having gotten a Roku box for Christmas, I've found the combination of Roku and Netflix and irresistible combination. If we want to rent a new movie, we can off Amazon (we never do; we've got hundreds of movie in our Netflix Instant Watch queue).

The wireless in my house is cheap and not particularly impressive, but the Roku box does a great job, all the way across the house. I am impressed, and I can't see how someone who has one of those boxes can't see the eventual end of traditional cable. Netflix has On Demand players for Roku, for most PCs, for Playstation and X-Box (I think those are both done) and one is coming for the Wii this spring. I'm already on the list to get my free Netflix player disc for the Wii. I've just started watching the first season of Lost with my daughter last night--episode 1 on the Roku, episode 2 on her laptop.

The Wii already has free news and weather channels--not serious channels, but still. It's the template for what can happen. Upstart channels that want to make a dent can come in on the Roku or through Hulu and offer content for free. Established channels can charge a nominal fee and gear advertising fees to rock-solid viewer stats.

Posted by: Kevin_Willis | February 8, 2010 9:35 AM | Report abuse

Roku already has Pandora, which is an audio-only template of what may well happen in the future--express your preferences for television and movies, and have a Pandora Video channel that streams out content based on those preferences. It's not just ala carte that's coming down the pike, it's a "build your own television channels" paradigm. I can see a day where you can have Kevin's News Channel, which might have Keith Olberman on right after Bill O'Rielly.

Certainly, there's no reason not to offer up hundreds of thousands of hours of re-run content in channel for via Roku (or something like it). A Golden Age channels that features all the syndicated shows that I grew up with that almost nobody shows any more? I know many old news programs are forever gone, but there are many of them that have been assiduously archived. I've love an old CBS news channel that picked a random episode of the CBS evening news from 1977 for me. Or even let me pick--what was Walter Cronkite talking about on my 5th birthday?

More and more podcast content is on the way for Roku and Tivo playback. Future Blu-Ray players may include similar functionality, allowing the Blu-Ray you're already going to buy to also stream movies from Netflix, TV shows from Hulu, and podcast content from TWiT TV and Mevio.

The only reason I keep cable is that, for a pretty robust set up (and one, unlike satellite, I can still put splitters on and feed to the crazy TV-for-every-room ethos we have at my house), it doesn't cost that much more than internet service alone from Comcast would cost me. But I can see a day, 5 years from now, where even that's not a good enough argument to keep cable.

Posted by: Kevin_Willis | February 8, 2010 9:38 AM | Report abuse

"Five years from now, I don't see how cable is adding enough value to sustain its business model."

Spoken like a true non-sports fan. Comcast could keep 80-90% of their customers just on ESPN alone. Its the most sustainable business model in all of media, because nobody wants to watch the Super Bowl this morning.

Live event sports programming is a piece of content that people will be paying for in some fashion forever, which is why Comcast blew it buying NBC as opposed to ABC/ESPN.

Posted by: zeppelin003 | February 8, 2010 9:43 AM | Report abuse

It'd be really nice to be able to pay per live sportscast. I'd love to be able to pay for only the live sporting events I want. A pay-by-team would also be nice, or even pay-by-sport. I wish I could buy MASN separate so I could watch Nats games, for example, but I don't really want ESPN etc. except on very rare occasions.

MLB.com is a nice idea, except all it does is allow me to watch any baseball game except the one I want. Lovely.

Posted by: cassander | February 8, 2010 9:54 AM | Report abuse

MLB has it's own Roku channel. Wouldn't surprise me to see similar channels (at some point) for the NFL and the NBA.

Of course, I could care less about ESPN, so I may be off on the sustainability. I can at least just it's likely sustainability in my household.

Posted by: Kevin_Willis | February 8, 2010 10:05 AM | Report abuse

I think the "adults" are really underestimating the extent to which TV watching habits among young adults has already changed.

My apartment of five recent college grads does not have a TV, not to mention cable, though we were sure to immediately get wireless Internet. We use Hulu and network websites to watch TV shows when they're available free online - and if not, we find other sources. We stream the SOTU. We have basically no incentive to get a TV.

Though I haven't seen any extensive surveys of it, my anecdotal evidence is pretty strong. All of my current college grad friends are either living with their parents, or don't have a TV.

A few years out, as more of individuals from my demographic graduate college, I see this trend suddenly surprising a lot of the clueless TV execs.

Posted by: madjoy | February 8, 2010 10:21 AM | Report abuse

One big reason a la carte would cost so much is that most of those little, useless, "no one ever watches" channels are owned by the same big media companies who own the ones people do watch. And when they negotiate the rates for the desirable networks with the cable companies, very often manditory carrying of the minor channels is part of it. So if by going a la carte you take away millions of households from the small channels, the cost of the big ones will go up. The media companies aren't going to lose revenue.

Posted by: ScottKP | February 8, 2010 10:27 AM | Report abuse

I second madjoy's comment. The only people I know who have a TV at this point are those who watch a lot of sports and/or a LOT of TV (seriously, nonstop TV watching). I could see the sports one dying off, especially if espn360 gets any better.

Posted by: goinupnup | February 8, 2010 10:49 AM | Report abuse

I can understand ditching cable, but how does a person play their Xbox, PS3, or Wii without a TV? (Well, you could play it on a monitor, but that's not very exciting)

Posted by: MosBen | February 8, 2010 11:50 AM | Report abuse

Cable is easy. The biggest advantage is laziness.

Plus I don't see the options as mutually exclusive. Right now you can do pay-per-view and cable. But pay-per-view is the less popular option.

Posted by: zosima | February 9, 2010 2:17 AM | Report abuse

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