[opendtv] Re: Analysis: The Ala Carte Part

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Wed, 25 Apr 2007 07:01:37 -0400

At 11:57 PM -0400 4/24/07, Richard C. Ramsden wrote:
If ala carte is actually regulated. Most carry contracts will either be exposed to the public, or voided. Neither benefits the content providers. Given the Rat's ability to manipulate congress count on neither happening.

It's NOT the cable companies that are fighting ala carte.

Richard is on the right track here. The real issue is whether content producers can live WITHOUT subscriber fees for advertiser supported channels.

We already know that OTA broadcasters can do it, as they are only now getting this extra revenue over the transom. The whole concept of subscriber fees was introduced by the cable industry to help them launch cable only networks - back in the early days they could not generate enough advertising revenue to survive, so they went direct to the consumer to get additional revenues. Unfortunately the consumer did not know this, as the fees were buried in their cable bills. Most of these networks are now sustainable without the fees, as are the OTA channels.

The threat with ala carte is that people will choose only the channels they watch, and not pay the fees for the channels they do not watch. If this happens there are four possibilities:

1. Subscriber fees go UP to compensate for the lost revenue - this will in turn cause more people to drop that channel causing fees to spiral upwards out of control.

2. Subscriber fees are dropped, as channels fear that they will lose their existing audience. Any channel that depends on channel surfers will likely drop their fees so that they will not be dropped from the line-up by consumers. Some channels that are in high demand by a core audience, like ESPN, may retain or even increase fees, knowing that the core audience will pay, and that the rest don't ever watch.

3. Hybrid channel packages may be created with one in the free and clear to promote the content on the other channels that one must pay a fee for.

4. Some networks move to a "commercial free," subscriber fee basis like HBO.Thiis assumes that consumers will pay more to buy content WITHOUT commercials.

The bottom line is that FREE TV exists in most parts of the world based entirely on the revenues that are generated from advertising. These subscriber fees are somewhat unique to the USA, and only exist today because most people don't even realize they are paying them. COngress does not need to legislate ala carte. All they need to do is to legislate DISCLOSURE, If consumers know what they are paying, the uproar will be deafening and the double dipping will likely come to an end.


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