The case for too many cable channels

Joe Nocera had a quite interesting column in the NYT over the weekend, on the subject of cable channel choice. Specifically, he looked at the argument that most cable consumers would be happier if they didn’t have to pay for a huge bundle of channels, just to get the handful they really want.

I know this is something I’ve long believed. And earlier this year, a Nielsen study concluded that the average American household gets 104 channels — but watches only about 15 of them with any regularity. That number, 15, has held steady as the number of choices has climbed. So wouldn’t we be better off if we didn’t have to pay for scores of extra channels that seem to exist only so that we can flip past them?

But Nocera’s counter-argument is pretty interesting: Basically, he contends that an a la carte scenario would cost consumers more, and would end up limiting choice.

Take, for instance, ESPN, which charges the highest amount of any cable network: $3 per subscriber per month. … Suppose in an à la carte world, 25 percent of the nation’s cable subscribers take ESPN. If that were the case, the network would have to charge each subscriber not $3, but $12 a month to keep its revenue the same….

And that’s one of the most popular channels on cable….

For smaller networks, the cost per subscriber would be far higher. This would drive up the channels’ own promotional expenses, and (Nocera contends) force them to lower the price of admission to advertisers, as they would have smaller audiences and “lose the casual viewer — a.k.a. the channel flipper.” Many would likely fail.

So we’d end up with fewer overall choices — and probably higher cable bills anyway.

I found this surprisingly convincing.

But on the other hand … if it’s really true that lots of cable channels would die out if they weren’t buffered from the actual marketplace by cable-company bundling, well then, why shouldn’t we just let that happen? Why should this form of business get special treatment? It’s not like the Speed Channel or whatever is performing some kind of public service. The massive number of choices available to us on the cable dial implies significant niche-level demand — but maybe that’s not really the case. (In a related point, the variety disguises the fact that five or six huge companies control almost every single channel, and they all use their popular offerings as leverage to get their more dubious ones into cable packages.)

I also wonder if it necessarily follows that advertising rates would fall. Don’t advertisers balance the desire for a large audience against the desire for specific, targeted audiences? Isn’t that the whole payoff of cable advertising? How much do they really want channel flippers? Seems like those channels that really did have enough of a consumer following, when exposed to the actual marketplace, would be attractive to advertisers for precisely that reason.

Having thought about all this for a day or two, I still wonder if there isn’t some other solution that would involve giving the consumer more of a choice about which channels they’re paying for — maybe a bundle of 20 channels would cost $X, and 50 would cost $Y, but there would be flexibility about which 20 channels. (This could be tweaked so that something really popular like ESPN would count twice or something.)

It would be interesting to see what people would pick, and how much it might turn out that some might value the feeling of lots of choice (100 channels) even if they don’t actually exercise a lot of choice (that is, they still watch 15). There is that “you never know” factor — maybe there will be something great on the Speed Channel some day! Although the more we use DVRs, the less that’s really relevant, right?

Anyway, on those occasions when I do find myself flipping past the surprising number of televised poker matches and whatnot, I do find myself thinking that cable could use some Darwinian competition.