The Tube: The Price of Choice

In the first installment of a two-part series on a la carte television, A.C. Hawley asks if viewers can expect
to save money by moving away from traditional cable packages and toward purchasing individual channels online.

At the beginning of this year, Internet and business circles buzzed with discussion about a new television project being spearheaded by computer chip maker Intel. Currently known as Intel TV, users would buy a unit that would hook up to their television and stream Internet-based content from sites like Netflix and Hulu.

The difference between Intel TV and other streaming boxes, like Apple TV, is that the system aims to enable subscriptions to specific channels. Networks—often more accurately described as media conglomerates—are accustomed to selling all of their channels, not just one, to known and ready buyers, like Mediacom and Direct TV. Selling these channels directly to viewers and navigating the new industrial landscape of Internet-based content delivery would represent a major shift in how business is done at the networks. Still, despite decades of inertia pushing against it, the idea of “a la carte television” is gaining steam in the popular imagination.

Imagine being able to subscribe only to the channels you choose and no longer being subjected to those that only feature Suzanne Somers selling her self-branded exercise equipment. I personally will never understand how someone could resist the allure of movies such as Sexting in Suburbia and The Pregnancy Pact, but imagine having the power to keep the Lifetime Movie Network out your televisual realm, completely.

A la carte television gives you that power. Sounds awesome, right? In a theoretical world, it is. But, as things stand right now, a la carte television would financially penalize everyone from the upstanding citizen who pays full price for premium cable to the bootlegger who downloads their favorite shows from BitTorrent sites.

Let’s begin with those who believe they would benefit most from a la carte television: the boutique viewers. The boutique viewer is one that does not watch a lot of television and tends to watch higher budget, shorter run television shows like “Game of Thrones,” “Mad Men,” “Breaking Bad” and “Homeland.” If they were to have an a la carte subscription, they would only have somewhere between four and eight channels in their package. If you are thinking that four to eight channels wouldn’t be that expensive, you’re wrong. Let’s take AMC, the home of “Breaking Bad” and “Mad Men,” as an example. These two shows have production budgets of nearly $80 million per year. A lot of this cost is subsidized by advertising. Currently, cable subscribers are paying less than a dollar a month to subscribe to AMC due to the fact that there are advertisers, it is packaged with IFC, Sundance and WE tv and it uses the current distribution systems provided by cable and satellite providers around the country to disseminate its content.

So, who is going to foot the bill for these changes? Most likely, a la carte will follow the model that exists now for subscription channels like Cinemax and Starz, where viewers pay a premium for a particular channel and have no extra advertisements as a benefit. The same rationale is in play when one uses an on-demand service to buy a television show. Remember how AMC cost $1 a month in the bundle? The current iTunes price for the ad-free version of “Mad Men” is $2.99-$5.99 per episode. It is safe to assume that with a la carte, the cost to subscribe to channels like AMC will go up to at least $10 a month, and that’s probably being frugal.

I also want to point out that AMC is a basic cable network. HBO prices, which are already around $15 per month, will certainly jump to at least $30, more likely $40 per month, as its programs are more expensive to produce. This means that four to eight channels will still cost around $80, which is the average monthly price for a cable subscription. If viewers have favorite programs across a number of channels, a la carte could easily cost them more than a current subscription.

Sports fans will suffer the most under the new system. One of the most expensive cable channels is ESPN at more than $5 per subscriber per month in a bundled package. If ESPN were to switch to a pure, ad-free a la carte system, the cost of the channel would skyrocket to at least $25 per month as costs are shifted to the viewers. For an example in the sports realm, there is a subscription-only channel called Fox Soccer Plus. It shows soccer matches from the English Premier League, Scottish Premier League and Australian A-League, and also some European rugby. The channel costs $15 a month. If this is the price for less popular sports in the bundled system, can you imagine how much ESPN would charge for people to watch the NFL and NBA a la carte? The more popular the channel, the higher the price; and with nearly double the ratings of the number two cable network, ESPN is the most popular cable channel out there. If you like watching it, you better get ready to pay for it.

Internet streamers might be coyly smiling, thinking that none of this applies to them. It does. When the a la carte system sets in, it will affect Internet users in two ways. The first is that it will limit the amount of content available. If everything goes a la carte, aggregate sites like Hulu will cease to exist. Instead, programming for one channel will only be available through its own, self-run service. This may or may not be included with the price of your television subscription and might be equally expensive if not. It’s basically a question of how much the channels you like hate you.

If you illegally stream or download everything, you’ll get taxed in a second way: your Internet bill will go through the roof. Anyone who watches television over the Internet is using a considerable amount of bandwidth. Bandwidth is expensive for service providers, especially when they can’t offset its high cost with cable service. While many have tried to escape the grasp of cable by going to the Internet, they might soon find themselves paying more for that Internet service as well as the content.

Before everyone starts losing hope, I don’t think that a la carte television is impossible. It represents a rather drastic paradigm shift for content providers, service providers and viewers, and it will also require a whole lot of money. But if viewers accept that they will have to foot the real bill for the programs that they want, or if networks and service providers can find a way to profit from their viewership (think datamining), a la carte programming could take off and grow rapidly. The same conclusion can be reached if providers understand that their audience wants a choice to watch or not to watch Tim and Tickle on “Moonshiners,” or Honey Boo Boo Chile in whatever format they want. When will this moment come? I have no idea, but the current system is okay with me. I like watching Lifetime movies.

A.C. Hawley has a deep running affection for Rod Serling.

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