If the U.S. government mandated that TV channels be sold individually, only five to 10 traditional TV networks would survive, destroying up to $300 billion of value, endangering some one million jobs and curtailing consumers’ video choices, according to an analysis by Needham & Co.
Of course, the issue is that most people who watch TV say they want a la carte access. About 92 percent of consumers want some type of a la carte programming offering from their video subscription providers, but they’re not willing to pay much for it, according to RBC Capital Markets.
About 92 percent of respondents said they would be at least “somewhat likely” to switch to a full a la carte option, the RBC Capital survey of more than 1,000 consumers found.
Some 82 percent said they would subscribe to at least 11 channels and 40 percent indicated they would subscribe to more than 20 channels, with a weighted average of about 19 channels.
Of the respondents who would prefer a la carte service, and would pay for the services, about 51 percent said they would pay at least $1 per month per channel, with the weighted average being $1.47 per month.
That works out to about $28.50 per month, or about a third the average monthly video subscription bill. Some programmers might be able to build a business case on an a la carte basis, but most likely would not fare as well.
Without the ability to sell TV channels in a bundle to consumers, just five to 10 “hit channels” would be profitable enough to survive unbundling, suggesting at least 125 channels would become non-viable, the report essentially suggests.
According to Needham’s analysis, with unbundling, TV subscription revenue would decline 15 percent to 20 percent and ad revenue would plummet 75 percent. Meanwhile, if content companies delivered content directly to consumers, they would incur customer service costs estimated at $50 per customer per year, or $5 billion nationally.
Not having access to all the assumptions made as part of the study, it is difficult to assess the particular findings, though one would be hard pressed to find an informed observer who really believes the general statement–that niche channels would flounder–is incorrect.
But it is getting harder every year to deflect the notion that change will come, eventually. Programming costs simply cannot keep increasing at rates higher than inflation, indefinitely, at a time when younger consumers increasingly question whether today’s cable TV style subscriptions are necessary, or even desirable.