A little over one-half of consumers surveyed by Forrester Research in 2006 support a la carte pricing of cable programming but have unrealistic expectations of what it would cost for the privilege of picking only the channels they want to watch.
Respondents indicated that they’d pick a package of 26 channels for which they’d like to pay $24 per month. That’s about 53% of what they currently pay for only one-quarter of the channels in a typical expanded-basic package. And it computes to about 10 cents per viewing hour per week -- economics that would not financially support program development or delivery, according to the report.
Cable viewers currently spend about 22 cents per viewing hour, according to Forrester.
The research was conducted in 2006, questioning 5,000 consumers about their attitudes on a la carte, which channels they’d most likely pick and the desired price points for those channels.
Forrester analyst James McQuivey noted that Federal Communications Commission chairman Kevin Martin spoke of his support for a la carte at last month’s Cable Show ’07 convention.
Martin has stated that a la carte pricing would help parents to edit violent content out of their homes and would save consumers money. An April FCC report, Violent TV Programming and Its Impact on Children, also asserted that a la carte programming options would help protect children.
But McQuivey said the survey results don’t support that claim.
Viewers who identified their households as heavy watchers of Disney Channel and Nickelodeon, family-friendly fare, were also shown to be heavy users of channels with adult content such as Spike TV or Comedy Central, the analyst said.
In fact, the Disney/Nick-heavy households overindexed in their viewing of those adult channels compared with the general viewing public. A total of 19% of respondents said they watch Spike, for instance, but in heavy Disney-viewing households, that number was 39%, McQuivey noted.
“Even if they were offered a la carte, they’d choose channels cited as problems. So using violence as a pretext [for a la carte pricing] doesn’t hold water,” he added.
Researchers tried hard to pose questions in an unbiased way, asking consumers if they supported a la carte without offering much explanation of the pricing method or the purported economic impact of placing channels on their own to live or die.
Consumers weren’t asked why they’d like a la carte, such as the desire for control or specific price savings.
Left to their own devices, consumer responses on pricing “were all over the map,” the analyst said. The suggested pricing by consumers does not reflect real-world pricing, where, by comparison, advertisers pay 60 cents per eyeball to support broadcast programming or consumers readily pay the equivalent of $2 per viewing hour when they buy a first-run theatrical on DVD.
“Without a lot of consumer education, we won’t see the benefits the FCC is describing,” McQuivey said. Consumers are “not prepared to understand why a la carte may or may not be good for them.”
If ala carte pricing were implemented, the burden would fall to providers to explain its impact to consumers, such as the higher price per channel than consumers expect and the disappearance of niche channels, the analyst added.
Based on consumer responses, Forrester recommends that program providers avoid using cultural diversity as an argument against a la carte. That strategy did not prevent the homogenization of AM radio, the report indicated.
Instead, operators should consider offering smaller, thematic tiers or packages, perhaps at a price point of $10 each for family-friendly, education and sports-themed tiers.
Also, video-on-demand could be better used to provide mature content desired by parents in a way to discourage viewing by children, the report concluded.