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Premium Online Video a la Carte: Be Careful What You Wish For

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Ever since cable TV subscribers first realized they weren’t watching the vast majority of channels they were paying for, consumers have yearned for a la carte cable and satellite subscriptions. Love HBO, Turner Classic Movies, and History Channel, but never watch ESPN? Why shouldn’t you be able to pay only for the channels you watch?

That possibility seemed like a pipe dream in the not-too-distant past, but a handful of announcements in October makes it seem like an a la carte future might not be far off. HBO announced plans to offer a streaming-only option in 2015 to reach what chairman and CEO Richard Pieper called the “80 million homes” that don’t get HBO, though he didn’t unveil any specifics. A few days later, The Wall Street Journal reported that Univision is working on a similar offering, though again there were few details.

In between those two pieces of vague news came the substantive announcement. CBS not only announced but launched CBS All Access, which gives subscribers access to current TV shows (with new episodes available a day after they first air), as well as archived content and, in 14 markets, including Boston, New York City, and Los Angeles, live linear streaming of local CBS affiliates’ programming (including network content, though not NFL football). The service costs $5.99 a month.

That sounds like a bargain, until you realize that, in an a la carte world, that’s just one of several services any given consumer is likely to want. HBO currently costs cable subscribers between $10 and $15 a month, and it’s unlikely the network would offer a standalone streaming service for much less. When you start adding up the four or five services, at a minimum, that most consumers would feel compelled to subscribe to, you start looking at a number that’s not far off from what most cable subscribers already pay for their TV, especially if they get TV service bundled with phone and internet, where it’s usually much cheaper than if they subscribe to TV service alone.

As Joe Marchese wrote on MediaPost, “The economics of the cable bundle does not, despite popular belief, mean that you’re paying for stuff that you don’t watch. Remember, for every channel you don’t watch, there is someone else not watching your favorite channels and paying for those. That means that unbundling will make what you do watch proportionally more expensive.”

So what, you might say. At least you’re only paying for the things you do watch, and you’ve simplified your selection—provided you’re OK with a separate app on your tablet or set-top box for each channel.

That still doesn’t address the underlying economics of the TV business, where syndication of archival content on cable channels has generated revenue streams that have allowed networks such as FX to eventually create the original programs that are now those networks’ flagship offerings. And, let’s face it: Even if you subscribe to Netflix, you’re subsidizing House of Cards by also paying for 9-year-old episodes of The Suite Life of Zack and Cody.

Or at least that’s what the traditional TV business wants you to believe: That you’d never get the top-shelf new content, or the premier networks, if you’re not willing to pay for a bunch of stuff you’ll never watch. What that line of thinking doesn’t acknowledge, though, is the steady growth of cord-nevers, people who have never subscribed to a cable or satellite service and are doing just fine, thank you very much.

For the younger generations, there’s still far more content available than they’ll ever be able to watch, and so what if they can’t see the new season of The Walking Dead as soon as it airs? There’s plenty of other so-called “non-premium” content available on YouTube, and a subscription to a single aggregator such as Netflix or Hulu gives them enough new premium content to keep them happy.

A la carte streaming offerings are likely to give networks such as HBO and CBS some incremental revenue, but they still haven’t figured out how to win in a future where cable TV is something only sports fanatics and your parents ever pay for.

This article appears in the November/December 2014 issue of Streaming Media magazine as "Be Careful What You Ask For."

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