A la carte a losing proposition for everyone

Viewpoint: A la carte would fail to reduce viewers' monthly cable bills and harm advertisers.

By Published on .

'a la carte' is a flawed model with potentially serious consequences for advertisers and the consumer.

In theory, U.S. viewers would benefit in an a la carte world; their monthly cable bills reduced. Viewer election would produce lower costs that would trump corporate concerns.

Then a not-so-funny thing would occur.

In practice, the ripple effect a la carte would create would be analogous to dropping a boulder into a shallow pond. It would fail to cut monthly costs for most viewers while hurting thousands of U.S. TV advertisers in significant ways, such as: increasing TV advertising costs, exponentially increasing advertisers' marketing costs, reducing TV programming investment and weakening the targeting abilities critical to advertiser efficiency.

In recent years, the a la carte push has been characterized by defeats, reversal and resurrections that at best produce a weakened mandate in the eyes of the casual observer. However, there was no confusion in the findings of the U.S. General Accounting Office that show a la carte distribution won't work, or in the Federal Communications Commission's November 2004 report, which concluded "associated costs to both networks and operators from requiring cable operators to offer cable networks on an a la carte basis (or in small themed tiers) would likely result in higher subscriber fees and fewer programming choices."

Studies by Bear Stearns, Booz Allen Hamilton and Kagan Research concur on the lack of consumer cost benefits. (Editors' note: the National Cable & Telecommunications Association commissioned the Booz Allen study, which was conducted independently. )

In fact, the benefits to consumers of the a la carte model have become so unclear that those pushing for the legislation needed to affix the argument of "decency" to their crusade. The politically charged indecency argument-that pay-per-channel regulations would make content more family friendly- must have seemed like a better bet for rationalizing the unintended results of a la carte distribution in Washington.

The harm a la carte perpetrates to advertisers is both easy to understand and exponentially negative; it also sheds light on why national TV continues to work as well as it does.

The reason is simple-broadcast TV has lost more than half of its audience over the last 15 years, while its ad costs skyrocketed. At the same time, cable's audience share doubled; yet cable's prices stayed fixed at roughly half the cost per thousand of broadcast. The a la carte model puts the ability of the U.S. marketer to efficiently reach their target consumer squarely at risk.

At the very least, lost audience coverage (via reduced distribution) would cut the supply of salable ratings points and raise the cost of the remaining supply of rating points.

Moreover, ad-supported cable networks depend on ad dollars as a source of revenue for new programming investment. A loss in any given network's distribution would force a correction in one of two ways-either the imposition of higher advertising rates, or in a reduction in the commitment to programming expenditures. Either way, the TV advertiser and marketer ultimately loses.

In an a la carte model, the scale of the loss in ad efficiency would be profound. New pressures within an advertiser's balance sheet would create the need to offset the substantially higher TV marketing cost of goods. It's the proverbial "something has to give."

Ironically, it is those end consumers for whom a la carte was purportedly offering a price break, who would end up paying more for everything from cars to cola. In an a la carte world, advertisers, operators, programmers, and consumer would all pay more. In the end a la carte is a clean sweep-everybody loses.
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