à la Carte TV Channels Agitate Fox Executive

On May 6, 21st Century Fox COO Chase Carey told analysts that customers don't want à la Carte TV channels. If you believe that, you live in another galaxy far, far away.

21st Century Fox COO Chase Carey

When experienced executives make a pronouncement, it's designed to protect the interests of their company. This art, which Apple executes so well, must suggest that the interests of the customers are the same as Apple's. They both benefit.

Alas, if only Mr. Carey had the same skills as Apple executives. Of course, his task isn't easy. Apple makes products that people appreciate, even love. The networks and their partners, the cable and dish providers, have a handsome business going. But they're often despised for deceptive contracts with customers, poor customer service and ever increasing prices.

That business consists of, often, highly motivated advertisers who fund the network's particular political viewpoint in its news, be it conservative or liberal. The networks also extract ever increasing revenues to license content, carriage agreements, under strict rules, to the cable and dish providers. In turn, the larger the bundle of TV programming sold to the customer, the more money the provider can pull off the top. It's quite a scheme when you think about it.

Content providers want increasing revenues to demonstrate growth, and they squabble with providers over carriage fees so often that, from time to time, a channel will go off the air until the tussle is resolved. Providers, in turn, create artificial growth with ever increasing monthly fees, often over $100, that the shrinking middle class can no longer afford.

It all works out very nicely for everyone but the consumer. And if the customer tries to economize but cutting back, it proves to be impossible. Or entails costly termination fees. As a result, tastes become eclectic when household budgets shrink—or were never big to start with. The Internet affords the ability of customers to create their own bundles.

That Nasty Internet

Before the public Internet as we know it came along in May 1995, all we had was roof-top antennas and/or a coaxial cable for TV coming our homes. As Internet technologies and speeds matured, it became possible to deliver streaming video on demand to any one subscriber. The Apple TV (along with other similar products) has proven remarkably popular because people can pay for what they want, when they want it.

This is an emerging trend. While older viewers tend to watch TV in more traditional ways, there is no escaping the movement by younger people towards mobility, à la carte viewing, binge viewing, budget management and a focus on content without interruptions. Here's just one of many research results: "5 charts: The shifting landscape of digital video consumption." This is a serious threat to the traditional business model described above.

The specter of the next generation moving towards selected on-demand, streaming content on the Internet has networks executives like Mr. Carey in a tizzy. For example, when Verizon tried to offer a less expensive package with ESPN to cost-conscious customers, they were met with a lawsuit. "Verizon picks a fight with ESPN over unbundled cable TV."

Bundling is out. Canodle is in.

My oh My, What Posturing

Home Media Magazine reported Mr. Carey's remarks:

“I don’t think [consumers] want to buy à la carte. We continue to believe that the vast majority of subs will continue to want a bundle of channels that is priced appropriately as opposed to a limited number of premium-priced channels.

Has there ever been a less candid statement about modern TV? But if Mr. Carey's company can grab some incremental revenue from Hulu Plus, which Fox is a partner in, he'll take that too. Under controlled contract conditions suitable to his company. Of course.

Disintermediation is the name of the game on the Internet. Original content providers, like Netflix and AmazonStudios, have figured out how to go direct to customers and cut out the middlemen. It's a trend that will be unstoppable because it offers customers the chance to economically choose with no strings attached. The entity that gets smarter faster will survive.

The big numbers remain with the status quo right now, but it's easy to see the emerging trends. And that's what has executives like Mr. Carey trying to hold onto the golden goose as long as possible. Even if that means sounding silly to the rest of us.