In a world where pay television and online TV services are demanding an ever-larger slice of your wallet or purse, one complaint rings more loudly than all others: “Why can’t I just buy the channels I like?”
There are up to 113 billion reasons why, according to US media analyst Laura Martin.
A television industry built on “a la carte” channel choices would shed 124 channels, 1.4 million jobs and some $US45 billion ($A49.78 billion) in advertising revenue in the United States alone.
Unwanted options: A large portion of the channels on our Pay TV subscription are ignored by the average viewer. Photo: Supplied
“Our calculations conclude that $US80 billion to $US113 billion of US consumer value would be destroyed by this shrinking channel choice,” Martin said.
According to the report by investment banking and asset management firm Needham & Co., the typical US family only watches between 16 and 20 channels, even though they have access to an average of 180.
Although Australia’s principal pay TV provider Foxtel offers a smaller number of channels compared to its US or UK equivalents, Australian viewers mostly consume a similarly small fraction of what is available.
As a result, “why can’t I just buy the channels I like?” is a common complaint from consumers.
The reason why they can’t, Martin says, is to be found in the complex financial model on which the hundreds of smaller channels are built.
The average US entertainment channel costs around $US280 million to operate, including staff, programming and transmission costs. Based on those numbers, each channel requires 165,000 viewers over the course of one year to break even.
In Australia, the shares are roughly the same, though the overall volumes are smaller.
By spreading their content and carriage costs across a larger number of viewers — even viewers who do not actually watch their channels, but subscribe to the packages and platforms where the channels are grouped — cable and pay channels can flatten their costs across the board.
If a channel’s reach was dramatically reduced only to homes which specifically requested that channel, the per channel cost to each household would rise sharply.
The net result is that a cable TV bill based on “a la carte” channel choices would not necessarily be lower than it currently is.
And if consumers could pick and choose channels, weaker channels that are carried by the strength of the platform overall would be lost, according to Martin.
Of the average package of 180 channels, 56 would survive and 124 would be culled.
The report has been published as the US media sector faces pressure to “unbundle” its cable TV content so that consumers can opt for “a la carte” programming.
Compounding the pressure is the rise of “over the top” television services, which bypass traditional delivery frameworks — studios, broadcasters and cable or satellite TV platforms — to deliver content directly to consumers via the internet.
A number of high-profile OTT services in the US, such as Netflix, Amazon Prime, Blockbuster on Demand, Hulu and Hulu Plus, iTunes and Vudu, have made “a la carte” TV consumption preferable for many viewers.
In Australia, the key players include EzyFlix, Foxtel Play, Fetch TV, Quickflix, BigPond Movies, Playstation Netwok and XBox Live. Foxtel has also recently launched a standalone on-demand movie service, Presto.