Originally Posted by lkrupp
Think about it. Netflix Hulu Plus= $16. Let's add another $10 for HBO. Then let's add some sports channel subscription, and a cooking channel. Get the picture? It doesn't take long for these subscription fees to mount up to the typical cable bill. In fact you could wind up with a bigger bill depending on your appetite. All on top of the of the cost for broadband service too. What about multiple HDTVs in the home? Even more bandwidth needed to increase overall cost. With data caps?
The a la carte model may sound attractive but it starts to add up quickly. Economy of scale and all that jazz. So I kind of chuckle at the "And the future slowly arrives" mindset.
That's the whole package right there. If the industry goes to an a la carte model, then the cost for each channel will skyrocket. For viewers that watch programs on several different channels, it would not take much to wind up paying more for fewer channels.
The economics of the industry are built around bundling on the basic tier, and the carriage fees are based on having those channels available to nearly all subscribers. For example, the carriage fees for ESPN average nearly $5 per cable/satellite subscriber. If ESPN was placed on an a la carte menu, the subscription charge would be a lot higher than $5 a month, since not every subscriber will select ESPN and ESPN would need to price the service such that they can maintain their revenue levels. Same goes for all other basic tier channels.
The prevailing mindset on so many of these so-called cord cutting threads is that if somebody pays for broadband service, then they are somehow entitled to programs for free or for cheap. It doesn't work that way. If someone wants the programming, then it needs to be paid for somewhere along the line -- whether that's with commercials, carriage fees, subscriptions, etc. If it's not paid for, then the programming doesn't get produced or it will need to be cheapened.
But, even broadband service isn't immune from potential carriage fees getting imposed. Take for example, ESPN3.com, which is ESPN's live game streaming service. It's free and it streams over 3,000 live events annually, including hundreds of events that aren't even televised on ESPN's broadcast channels. The catch? In order to access ESPN3.com, you need to get your broadband service from an ISP that already pays ESPN a carriage fee. In other words, if you can access the ESPN3.com website, then the cost for the service has already been bundled into your broadband service. Rather than billing customers directly for access to ESPN3, they decided to go straight to the ISPs. And that's an avenue that remains open for all other highly rated channels.
For now, the carriage fees are very low because the ratings are very low (ESPN estimates that less than 0.1% of their viewing occurs via streaming). Most major ISPs decided to simply pay ESPN rather than risk losing subscribers. But, what will happen if/when ESPN's streaming viewership increases to meaningful levels? How much will they charge per subscriber at that point? And what if other broadcasters follow ESPN's lead and starting demanding carriage fees of their own from the ISPs? In that scenario, the ISP becomes the bill collector for the content providers, serving the role that cable/satellite providers currently have.