A la Carte Video Services – possible in the future?
After the departure of Kevin Martin from the FCC, the general consensus seems to be that a la carte video services will be on the back burner in the US. In the past few years, this is a concept that has been widely sought, analyzed, debated, reported and vilified. As is to be expected, there are diametrically opposite positions taken by Consumers and Service Providers (Operators & Networks).
Consumers, of course, consistently love a la carte. Why not? Pick and choose, watch whatever you want to, and pay only that much. “Why should I subsidize expensive channels for others” is a pertinent question raised by consumers. Apart from saving on their video service bills, one of the other major reasons mentioned by consumers is avoiding channels which you don’t want in your house (channels with excessive violence and sexual content).
Service Providers (Operators & Networks) are united in their stand against a la carte. They feel that it will actually push up the average consumer’s bill significantly. Today, there is a situation where many channels are subsidized by others. So, even if the overall video bill is high, the per-channel delivered cost is very low. In the case of a la carte, prices would be determined by market forces leading to some channels becoming expensive, and others becoming unviable to operate. This would lead to loss of diversity in Video programming.
The regulator in the US (FCC) has published a few reports on this topic. An earlier study (in 2004-05) agreed with the Service Providers that a la carte would push up the consumer’s bill, while a later study (in 2005-06) disagrees. The FCC has no power to mandate a change on this subject – this will require the passage of a law in Congress.
In India, the regulator (TRAI) – has published clear guidelines for a la carte services in the Conditional Access Enabled Cable providers, but no such guidelines for the Direct To Home (DTH) Satellite providers. For a typical selection of channels in India, a la carte digital cable works out to be about 50% cheaper than bundled digital satellite. Of course, the pricing here is not driven purely by market forces – there is a regulation on the maximum rate that can be charged. A detailed study is needed to understand how the economics works out for the service providers.
I feel the world is moving towards a “consumer chooses” option anyway – Video On Demand, DVR, Online Video – there is a generational shift in Video viewership that is only bound to increase. The next generation is more used to time-shifted video – watching video when they want to. This entire discussion could become largely irrelevant once this share increases.
Don’t you think Video viewing today is becoming a personal rather than a family experience? Many households have separate televisions for children. Choosing the bundles needed for an entire family is not an easy task – and becomes an expensive proposition. I feel the family may be better off with a la carte choices for each television.
Networks would benefit by getting a proper count & identity of their subscribers, and will be able to implement better Advertising and Customer Relationship Management (CRM) practices. From the operator’s perspective, advancement in video delivery technologies (switched video) is an enabler.
Any movement towards a la carte can be successful only if regulators, networks & operators jointly think through and make it work. Especially, the consumer cost per channel and potential loss of niche channels are issues to be carefully managed. A gradual transition is possibly the best way ahead.
I have found mixed reports on a la carte video services in Hong Kong, Canada and some parts of Europe. I request people on this forum to give their views on a la carte video services and instances of successful implementations anywhere in the world.
Comments
A la carte video services will definitely reduce individual bill. It may also lead to shutting down of "Low Quality Channels". The effect of that would be "Less Advertisement Cost" for advertisers (because they don't have to spend their money for all the channels) and may benefit the consumers indirectly. All non-premium channels may then become available 100% free of cost to all consumers through FTA telecast satellites. Along with TV, people at the bottom of the pyramid will buy this "Special Dish Antenna" and view all FTA channels FREE for life-time. Maybe this is the reason why the operators are against a la carte
Thanks for your article and analysis. As an entrepreneur, I'm thinking of finding an opportunityin this area.
Posted by: Virupakshan K | April 22, 2009 03:38 PM
Interesting topic and debate that has been going on for a long time as mentioned by the writer. I agree with the point that a la carte implementation in India for Cable has worked out very positive for consumers. It is because of the package that is being offered where almost all prime channels are offered on basic cable package and people can choose their favourite which is often very minimum channels (like sports) through a la carte. Question - Will the new service model of TV/ Video content being made available through online stores (Disney, Amazon) have an influence on introducing a la carte services in regions like US and other parts of the world?
Posted by: M.Balasubramanian | April 25, 2009 12:25 PM
A well written article - kudos to Narayan Balasubramanian! As rightly pointed out, the success of TiVO and other digital PVRs (Personal Video Recorders), which provide ad-free, time shifted viewing experience to consumers have influenced video programming heavily. Additionally, many TV programs are available to be watched over Internet, and iPODs any time. These unconventional delivery channels provide a choice of a la carte programs in addition to the choice of a la carte channels.
Posted by: Piram Manickam | April 27, 2009 05:11 AM
Hi Virupakshan,
Thanks for your comments and viewpoint that advertising costs will go down since channels may reduce.
The operators' viewpoint is that this would reduce diversity of programming and advertisement costs will actually increase. Today, people get many channels as part of a bundle/bouquet, and become aware of them via browsing. In the case of a la carte, more advertising may be needed to promote awareness of channels.
Posted by: Narayan Balasubramanian | April 27, 2009 10:27 AM
Hi Bala,
Thanks for your comments.
You are right. Online video is definitely having an impact on the television viewing habits. While the percentage of online video is low, I feel the newer generation is gravitating towards this.
Posted by: Narayan B | April 27, 2009 10:34 AM
Hi Piram,
Thanks for your comments and positive feedback.
You are right. Today, viewers are getting more choice in the manner in which they want to receive video.
Posted by: Narayan Balasubramanian | April 27, 2009 10:39 AM
Nice article NB! In fact, with all the content/videos going online, I believe the IPTV is the future - which inherently is a-la-carte.
It's kind of already begun to happen isn't it so?
An example: lots of people watched the Obama swearing in on Facebook, together, commenting to each other as they watched (but I believe there were some streaming/technical snags) - Tech crunch covered it.
Posted by: Khushnood Naqvi | May 4, 2009 12:31 PM
Hi Naqvi,
Thanks for your comments.
Yes - you are right - Online or Internet Video viewership is increasing - even though it is still a small percentage of the overall Video viewership. The younger generation for sure is hooked to Online Video - and social networking sites are on their way to enable this as well.
The service providers are well aware of this - Comcast has its own Online Video site - Fancast.
Posted by: Narayan Balasubramanian | May 6, 2009 02:12 PM