21st Century Fox Boss: A La Carte 'Total Fantasy'
"A La Carte is a fantasy," declared 21st Century Fox president Chase Carey this week during the company's investor day this week
, responding to increased pressure of late
for cable operators and broadcasters to expand and improve the options made available to consumers.
Like any good legacy industry executive, Carey made sure to put his head in the sand when to comes to industry evolution, threats and his need to adapt, not only denying cord cutting, but insisting viewers don't want a la carte options anyway:
..."this is an issue that will play out over the next 10-plus years, not the next three years." For now, he said, “there isn’t an alternative today, or even on the horizon. We see no meaningful cord-cutting activity. "In fact, given the opportunity for a la carte, Carey asserted, viewers would reject it — provided the TV services on offer are tailored smartly enough. "Consumers actually want the bundle; they just want a different bundle," he said.
The problem is, the options being given consumers really aren't much different or smarter than they were ten years ago, thanks in large part to guys like Carey. That was the last time consumer pressure for broadcasters to offer a la carte was at a fevered pitch. Carey and others shot it down
, claiming that a la carte would raise rates and kill niche programming (that wound up happening anyway
). Carey and most broadcast executives have historically fought against the kind of "smartly tailored" new options, a la carte or otherwise.
As for cord cutting, many of the concept's fiercest deniers are now clearly acknowledging it's a real trend
, and Carey likely has less time than he thinks to start adapting.
Re: The money will flow no matter what Netflix is $7.99 by itself. How are you spending that other $2 exactly?
Carey swerves into the truth, somewhat... From a recent Seeking Alpha Market Current entitled, "Putting a number to cord-cutting" (»seekingalpha.com/currents/post/1197642), it's interesting to note that while cable companies have lost 3.2% of their Q2 subscribers while satellite (+0.2%) and telcos (+16.4%) have increased during the same period, Mr. Carey isn't completely wrong regarding the concept of people wanting different types of packages.
However, something that the telcos can offer (with dramatically lower latency than satellite and, likely, cable cos) that the other companies cannot is higher-speed Internet. I think that helps to explain the significant quarterly shift of subscribers from cable to especially telcos. After all, most cable/sat/telco companies offer essentially the same channel packages, so that cannot be a materially significant difference between them all to justify the subscriber shift.
To me, the real issue is that folks are moving to receiving their content via different modes of delivery (e.g.: streaming on a non-TV device). Will a la carte be a subsequent step? Eventually, but it's going to take the likes of Apple TV, Intel's STB, Aereo or something similar to be willing to go to trial with enough separate a la carte channels on top of an existing package (or allow packages to be personalized) to see if a la carte is truly a workable alternative.
Re: Carey swerves into the truth, somewhat... At the outset, I had mentioned latency first and then speed second. For sats, the latency is atrocious. For cable, while the speeds you quoted are in some cases theoretical, their topologies fundamentally share the same bandwidth which (again, in theory) isn't necessarily the case with DSL (U-verse) or VZ's FiOS service.
However, that wasn't the main point. The main point is the absolute marked shift in subscribers away from cable cos to telcos.
Something besides a content subscription has to rationally explain that, as all cos carry effectively the same video packages for essentially the same price points.
And I think that's worth paying attention to, because that's where Carey fears the numbers, per his rhetoric.
Santa Monica, CA
·Time Warner Cable
Who knows consumers best? Fox, et al, are in the business of marketing their content to the public.
They know our viewing habits, tastes, and spending limits.
To date, content bundling, resulting in the average household base pay-tv bill exceeding $65, is endorsed by the overwhelming majority of consumers.
Ala-carte offerings will only be endorsed by industry, if they result in greater revenues. In other words, ala-carte will cost the average household more, not less, than their current subscription - and thus, will fail.
So unfortunately, it is quite fair for Fox to characterize ala carte as "fantasy".
Santa Monica, CA
·Time Warner Cable
Re: Who knows consumers best?
said by Skippy25:Nope. Ala-carte will never be offered the way you, Karl, or the populists and "consumer" advocates wish - and by the way I'm with you in that desire. But absent legislation - which I would generally oppose, I don't see how the content industry is going to take "less" (their math) in exchange for more headaches, nor are they going to burn the last-mile companies, despite their public fights. said by elray:
In other words, ala-carte will cost the average household more, not less, than their current subscription - and thus, will fail.
You can keep repeating that just as I will keep repeating the opposite, which does not make either correct.
With that, a la carte will save a vast majority of all homes substantial money.
Who is right? We wont know until it happens, but I am betting on me.
The majority of homes buy bundles - because they have diverse viewing habits, which bundles address. While a few savvy consumers have determined that they can cord-cut, while entertaining their preschoolers with DVD material or Netflix (not exactly cord-cutting, but I digress), over 100 million households continue to subscribe to pay-tv in its current form, and that simply isn't going to give way in a country where the couch is the most common place of refuge.
Buying channels discretely incurs a whole new administrative nightmare and overhead expense. While you and I might be able and willing to subscribe via a pick-list on a web order form and pay online, the aforementioned 100 million will want to call someone (that eliminates Google) to address their concerns; I spend at least an hour per year per household on the phone with CableCo under the current model; with ala-carte, I would expect that to double or triple. Industry doesn't want the customer outrage that will happen with such a transition, nor do they want schizophrenic income to replace what is effectively consistent annual revenue from packaged subscriptions and bundles.
Your dreams of $2/channel charges - for only the channels you want, simply doesn't pencil out. There would be a connection/account charge, and a minimum number of channels required, and the per-channel rates would vary based on popularity - perhaps $30 for the "basic broadcast tier" (hookup fee), plus a minimum of 15 channels from the "basic cable" tier, "as low as $2/month" - for channels you don't watch, while the ones you do are from the "entertainment" catalog, "as low as $3/month".
After you try to do the math and explain it to your wife and kids, and you've encountered enough on-screen prompts to "add this channel to your lineup", and you get enough grief because you omitted the 50ShadesofGrey 4K Movie Channel and the GrrrlllPower Network, you will shrug, and buy the $70/month "Super Deluxe Basic Plus Variety Pack", which includes 85% of the channels you would have picked, and 30 extras you didn't plan on, but find something within to watch.
I'll take that bet.