Friday, December 21, 2007

"Cable TV may go à la carte"

There's a little surprise for media watchers in today's Advertiser: a media story that appears to have no immediate hook or sensational event to drive it to print. —A media story that seems simply to educate about an issue that consumers care about. And since Lafayette consumers will soon have a say about just how we structure our own cable offerings this is one of the few places where such an education might have practical consequences. Good for the Advertiser.

The issue is à la carte cable programming—the idea that you should be able to choose individual stations from a menu of choices instead of being forced to buy your cable programming in bundles determined by the seller. A short excursion into the phrase "à la carte" should be helpful in giving the cable story some context.




VS




Á la carte comes from the French, and the restaurant trade there. It means "on the card"--on the menu. The contrast is between à la carte and prix fixe. The "fixed price," prix fixe, is a full, usually multi-course, meal. There is no menu of choices. In the pure case all patrons eat the same meal and it is inexpensively priced for the courses offered. Some restaurants only offered fixed price—fixed choice menus. This option is rare in the states. Tujaques in New Orleans serves the same five course meal to all comers and is the only prix fixe restaurant I know of that survives—and it was an old institution when people now old were young. American's don't go for fixed price/choice restaurants when they have a choice. What American restaurants from McDonalds to Galatoire's share is the à la carte menu format.

That contrast makes it easier to see why the current prix fixe cable programming model offends people. And it makes clear why the cable people's objections don't seem very important to most US citizens. Cable providers say, as the story demonstrates, that allowing people to construct their own cable "meal" from a menu of choices might end up causing their customers pay more.

They claim to object to that.
Sharon Kleinpeter, vice president of public relations for Cox Communications' Greater Louisiana Region, says it may do more harm than good in the pocketbooks of cable companies and customers.
While it's pretty much true that an à la carte menu means less income for cable companies like Cox it is also pretty clear that it does NOT mean more costs for most consumers. Fixed price formats make it easy for the seller to minimize the costs for a deluxe meal...you can buy only what materials you need in quantity, and waste, server, and cook time is all minimized. A huge pot of a savory soup costs little to prepare and keep ready. Keeping five soup choices ready for the 5% of people who order is considerably more expensive. Galatoire's is understandably more expensive than Tujacques for the "same" meal.

But we don't all want the same meal.

If we don't want a desert or a soup we don't want to be forced to buy it and watch it go to waste. That is the real trouble with current cable business model and the cable companies are in the position of the old fixed price restaurants. They know that they can't provide the same fare they've been providing without charging more if people are allowed to refuse to pay for the soup or the salad course or the drink. And they can't charge enough more for the main course to make up the loss from selling far fewer high-margin salads and drinks. It is true that a change is not a good deal for those few patrons who continue to order the five course meal; those patrons will pay more. But most, history shows, won't. And the average customer will pay less and cable companies will have less income--and have to work harder to get that income. In fact the average cable customer watches just seventeen channels, according to the FCC, the article says.

What is revealed is that the folks who want to eat cable modestly have been subsidizing the patrons who want the deluxe version. Those who would order all the fancy trimmings get it for the cheapest possible price. But those who only want a quick sandwich at the end of a hard day pay more. The many have been subsidizing the appetites of the few.

Consumer advocates have noticed:

Consumer Federation director of research Mark Cooper points out that the current system forces subscribers to subsidize channels they don't watch.

"The current system requires everyone to subsidize ESPN viewers," points out Mark Cooper, Consumer Federation director of research. "Why is the cable company making these choices for people?"

Well, the short answer to Cooper's question is the same as it is for prix fixe restaurants: They can make more money with less effort off a large volume of business, much of which is low cost, than they can if most of their clientle is transformed into price-conscious consumers of only the products they like best.

The equasion is pretty simple and the same, both for the cable companies and for consumers. Where they differ is in what they want out of the relationship. And in cable, restaurants, and marriage that makes all the difference in the world.

Something for us to think about here in Lafayette where the owners of the restaurant are the customers. How do we want to arrange our video world?



Lagniappe: If you'd like to look at the article in Gannett's "The Tennessean" that apparently inspired this story you'll find some interesting details about federal policy, the role of advertising in this game and other fascinating (to a few) bits and pieces neither I nor our local reporters bothered with.

No comments: