"Is Cable's Business Model Kaput?"--that's the headline of sharp piece by Eric Jhonsa, appearing in The Motley Fool, the popular investment site.
Reviewing the fight between News Corp. and Time Warner Cable, and adding in other feuds, such as Scripps Howard vs. Cablevision (over carriage for HGTV and the Food Network), Jhonsa concludes that the cable carriers might yet be forced to go to "an a la carte sales approach, in which consumers individually subscribe to cable and satellite channels." And he continues:
The historical opposition shown by Comcast and other providers to a la carte programming is easy to understand: Given the chance, many consumers would subscribe to a relatively small number of channels, rather than paying an average of $75/month for a "package" of hundreds of them.
And he concludes with grim warning:
A transition to a la carte would definitely be a gut-wrenching change for cable and satellite providers. But maintaining the extortionist status quo could easily be worse over the long haul. Between video games, DVD rental services such as Netflix, and most importantly, the Internet and its growing repository of online video, consumers now have no shortage of digital entertainment options. And with the transition to digital broadcasts now complete, they can also get HD feeds of the major networks for free. As their cable and satellite bills keep climbing, it's easy to see a growing number of consumers deciding to spend their entertainment dollars elsewhere.
That is, unless the industry's business model gets a major overhaul, and introduces some rational pricing into a market that's seemed decidedly irrational as of late.
No wonder Comcast--which years ago wanted to buy Disney--is looking now to buy NBC-Universal.
The cable business model is, indeed, falling down.
