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Pay-per-channel could help save cable firms

As they face greater competition from the Web for viewers of TV shows and movies, companies have a chance to remake themselves in the iTunes mold and charge for only the channels a subscriber wants.

August 26, 2011|David Lazarus
  • Time Warner Cable, Southern Californias biggest cable provider, lost about 124,000 residential video subscribers in the most recent quarter.
Time Warner Cable, Southern Californias biggest cable provider, lost… (Kevork Djansezian, Getty…)

As a newspaper employee, I know a thing or two about the Internet eating your lunch. So I can say with complete sincerity: I feel Time Warner Cable's pain.

Southern California's biggest cable provider lost about 124,000 residential video subscribers in the most recent quarter — part of a broader industry shakeout that's resulted in more than 2 million households cutting the cable cord in the last year alone.

Part of the reason for that is the rough economy. Many TV viewers simply can't afford an average $75 monthly cable bill. Many others are finding it's cheaper and easier to download movies and TV programs from online services like Netflix and Hulu.

Time Warner, for one, sees the writing on the wall. The company's chief executive, Glenn Britt, told the Wall Street Journal the other day that with video subscribers declining, "broadband clearly is becoming the anchor service" for the company.

I say this: Don't throw in the towel. Before cable providers give themselves over to becoming little more than turbocharged Internet service providers, there's an opportunity to remake themselves in the iTunes mold and give video subscribers exactly what they want.

That is, cable companies could charge people for only the channels they watch, rather than the hundreds that they don't. The typical cable customer regularly watches only about 17 channels, according to Nielsen Co.

Into films? You might spend a buck or so per month for AMC or Turner Classic Movies. Not into golf, or religious programs, or Spanish-language shows? Cross those channels off your list.

"This would give people control over the content they allow into their homes," said John Bergmayer, senior staff attorney with Public Knowledge, a Washington-based digital rights organization. "It's the way people want to watch TV."

The notion of so-called a la carte cable programming has been around for a while. I've written about it more than a few times. The Federal Communications Commission has considered — and backed off from — the idea of having people pay only for the channels they want.

But current viewing and technological trends make the case for a la carte more compelling than ever before.

"The rise of online video has really pushed the envelope," said Corie Wright, policy counsel with the advocacy group Free Press. "People are really cutting the cord now that more programming is available on demand."

A switch to a la carte wouldn't solve the cable industry's problems, just as doing away with newsprint and going exclusively digital wouldn't fix the newspaper industry overnight.

Moreover, it's not something the cable companies could do on their own. Without the cooperation of content providers like ABC and Fox that frequently demand inclusion of multiple channels in cable packages, a la carte wouldn't fly.

Critics of a la carte pricing make two arguments. First, they say it would reduce the diversity of programming available to viewers. Smaller niche channels, they say, would have a harder time finding an audience.

That's probably true. On the other hand, it could be argued that the marketplace should have the last word on which channels survive. If relatively few people tune into a fishing channel, say, that's probably not the best use of available bandwidth.

Critics also contend that costs for consumers would rise under a la carte. That's debatable. Although the cost of some individual channels might go up, the fact that people would pay only for the channels they want probably would reduce overall cable bills.

Alex Dudley, a Time Warner spokesman, said the entire industry would need to be in accord if a la carte were to become a reality, and many companies would be reluctant to play ball.

"The content providers in particular have a vested interest in not doing business that way," he said.

But Dudley acknowledged that the industry is in flux, with most customers now saying that broadband Internet access is their primary interest.

"For a company like ours that grew up on video, that's a big change," he said.

Although Dudley said that Time Warner is already experimenting with smaller and cheaper cable packages, he declined to say whether the company would be willing to take a leadership position in seeking a change to a la carte programming.

I can understand that. Nobody wants to be first to rock the boat, especially with more than $93 billion in annual industry revenue on the line, according to market researcher SNL Kagan.

But, like newspapers, this business will implode if it doesn't adapt to changing times. And that means doing away with bloated packages of channels that most people don't even watch, and instead having people pay only for the services they desire.

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