À La Carte Too Rich for Most Consumers
For more than a decade US consumers have been asking for more choice and freedom in selecting their TV content choices. Instead, they have been offered different tiers of programming bundles, with pre-selected channels packaged together, many of which they do not want.
In part, this has resulted in the rise of cord-cutting we have seen in recent years and has presented OTT providers with an opportunity to hoover up pay-TV operators' subscriber base.
So what would happen if consumers were allowed to simply purchase the packages they want? They would jump at the opportunity, right?
Well, yes… and no. According to a new report from Hub Entertainment Research, it's a little more complicated. The company surveyed 1,502 viewers aged 16-74 in January 2017. Each respondent watched at least five hours of TV per week and had a residential broadband connection.
The study found that interest in à la carte was indeed high. Initially respondents were asked to create their own bundles without any costs associated with the à la carte bundle. This resulted in an average of 18.8 or just under 19 programming sources being selected. Once pricing was factored in though, that number dropped to 8.8 programming sources, or less than half. And the mean monthly fee for the selected bundle added up to $66 per month -- not cheap by any means.
The leading options were the top four broadcast networks and Netflix, though interestingly the order was reversed when pricing was factored in: Netflix ranked fifth without cost being factored in but rose to number one when price was included.
Overall the findings support the narrative from TV networks and operators, that à la carte will actually end up limiting consumer options, not adding to them. Naturally, the costs associated with each source is an important component of this. Hub didn't publish these numbers in its report excerpt, but did quote them in a published interview. Broadcast and basic cable networks were priced at $4-$7, premium networks such as HBO, and OTT services such as Netflix, were both priced at $10-$15 and sports networks were priced at $20-$25.
The pricing for premium networks and OTT services seems about right, but the estimates for broadcast and cable networks seem high -- and for sports channels, especially so. However, you have to keep in mind that networks do offer a bundling discount to pay-TV providers today, and rates for à la carte deployment probably will be higher. While $25 sounds extremely high for sports channels, simply adding a package of sports channels to an existing Sky bundle in the UK will cost you an extra £18 ($22.63) per month. So it's not that unreasonable an estimate for a standalone service.
Consumers are always going to want lower prices and more control over their selection of channels, but some of what they don't want might actually subsidize what they do.
Still, what a survey cannot measure is the economic bargaining power of consumers over time: If no one subscribes to a $25 sports channel, I can promise you it will get cheaper. Of course, that might mean having less premium sporting content and therefore less value. Given the number of moving parts involved, whether that results in a better or worse selection of options in the long run is difficult to predict.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation
Contentious issues that are likely to fuel lawsuits and angry blogs in the coming year.
Content producers are unhappy with the advertising approach and revenues they are getting on Facebook Watch.
OTT video usage is driving the penetration of various Internet connected devices to help view online streams on the larger TV screen.
Major Hollywood studio to trial 'virtual' movie theaters using head-mounted displays.
Network technology vendor Sandvine has found that piracy isn't only hurting network operator profits – each pirated set-top box is also using up 1TB per month in 'phantom bandwidth.'
On-the-Air Thursdays Digital Audio
ARCHIVED | December 7, 2017, 12pm EST
Orange has been one of the leading proponents of SDN and NFV. In this Telco Transformation radio show, Orange's John Isch provides some perspective on his company's NFV/SDN journey.
Special Huawei Video
Huawei Network Transformation Seminar The adoption of virtualization technology and cloud architectures by telecom network operators is now well underway but there is still a long way to go before the transition to an era of Network Functions Cloudification (NFC) is complete.
like us on facebook
About Us Contact Us Help Register Twitter Facebook RSS
Copyright © 2023 Light Reading, part of Informa Tech,
in partnership with