McCain vs. Cable leaders: 'A la carte' sparks debate

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The growing trend to offer cable sports networks to consumers on an "a la carte" basis could spell disaster for advertising on all cable networks, according to top media agency executives.

Time Warner Cable recently announced it will start selling the YES Network, an advertising- and subscription-supported network that airs Yankee and New Jersey Nets games, by allowing subscribers to choose the network on their own rather than being forced to take it with a host of other networks. The move closely follows a similar shift at Cablevision, which is allowing customers to subscribe to sports networks MSG Net and Fox Sports New York (both owned by Cablevision) and YES as a package or as a la carte options at individual monthly rates.

"The logic of it seems right for consumers," said a cable channel executive who requested anonymity. "If I have 100 channels and my bill is $100 a month, and I only watch 20 channels, why don't I identify the 20 and send them a check for $20 a month? But, unfortunately, subscriber fees alone would put most cable programming out of business."

monitoring costs

Sen. John McCain, R-Ariz., in his role as chairman of the Committee on Commerce, Science and Transportation has been monitoring the rising cost of cable subscriptions and praised Cablevision's approach during a March hearing in Washington. "Although not a complete solution to the problem of skyrocketing rates, this agreement seems to be an important first step to lowering cable rates by providing consumers with more choice," he said.

But Joe Uva, CEO of Omnicom Group's OMD, addressing a recent National Cable Television Association conference in Chicago, said "a la carte" would deprive many networks of reach that attracts advertisers. He said most ad-supported cable networks depend on a berth as part of a carrier's menu of networks to gain household share and establish Nielsen Media Research numbers. Also, being part of a menu of networks promotes drop-ins from casual viewers, also attractive to advertisers.

"Revenue will go right out the door," said Mr. Uva. Clients will spend their money on print, outdoor, Internet. It will hurt all of TV."

Bob Flood, exec VP-director of national electronic media at Publicis Groupe's Optimedia USA, said multiple system operators can also lose out. "If we move to the model of an a la carte orientation, it will require a lot more evaluation in terms of how the [operators] are going to make money and be able to support the infrastructure that they've put in place."

Some media executives are less pessimistic. "This is a brushfire that is limited to the preserve of sports rights at the moment," said Tim Hanlon, director-emerging contacts at Publicis' Starcom Media Worldwide, however, adding, "that doesn't mean that other networks and other TV fare will not get there eventually. There is more of a sea change going on."

According to Mr. Hanlon, the argument against "a la carte" comes mainly from an old-school advertising philosophy in which TV is considered a reach and frequency medium. Mr. Hanlon suggested that instead, TV today is actually a strong niche medium, with many different channels catering to different interests, which advertisers can use to target consumers more efficiently.

"The issue is," said Mr. Hanlon, "can broad-based cable networks and advertisers get used to the idea of giving up some of the broad-reach penetration in exchange for a more concentrated, lower reach but more passionate audience?"

Still, others believe that there are so many channels that it is impossible to make a choice, and full menus are needed to show what's available.

"Nobody has really proven that the a la carte model works," said Leo Hindery, chairman-CEO of YES Network. "The more channels you have, the more choices you have to parse out. I have seen eight significant studies that looked into what would happen if services were offered a la carte, and it's breathtaking. There would be no Discovery, CNN, Fox News, C-Span. There is very little but sports.... I am absolutely convinced that an a la carte environment will fail and will eliminate choice."

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