There's been a lot of talk lately about a la carte television which seems like it might soon be a reality. New offerings from
But the economics of the unbundled world are still a bit unclear. Each new streaming player is coming up with its own valuation for the channels it offers. Sling TV, from Dish Network, costs $20 per month for a suite of channels that includes Disney's
Most services that are hitting the market are actually small bundles. The exception is something like HBO Now, which will cost $15 per month. Which raises the question -- how much would individual networks cost in a truly unbundled world?
Michael Nathanson, of MoffettNathanson Research crunched the numbers to see how much it would really cost to create an a la carte world where consumers only had to pay for the stations they wanted to watch. Looking at "reach" (defined here as the percentage of U.S. viewers watching an individual channel over a finite period of time) and subscriber fees (the price per subscriber a company like
Of course ESPN is an outlier. With a $6.10 subscriber fee (paid by cable companies) ESPN is far and away the most expensive network.
But even less expensive networks like TNT, Disney Channel and USA would be pricey on an a la carte basis.TNT would cost $8.95 per month, Disney Channel would cost $8.25 and USA would cost $5.45 per month.
Those number are, of course, ridiculously high and they're even worse when you look at what people believe they should be able to pay for something like ESPN a la carte. Beta Research found that the perceived value of ESPN to viewers is $1.45 per month -- a $34.85 difference between what they would actually be asked to pay.
Prices become a bit more reasonable if you look at offering consumers all of the stations within a given group. So for example a Disney bundle would include ABC, all the ESPN channels and all of the Disney channels. Nathanson estimates the price for an a la carte Disney bundle would be $17.79 per month. However, that still leaves a ton of channels off of your television screen. From Nathanson:
Our takeaways here is pretty straightforward, the interests and economics of the industry make a la carte a virtually impossible task. Going further, any bundle that tries to unbundle the unique offerings of one individual content owner will likely force that content owner to seek an affiliate rate card that is at least equivalent to their current MVPD economics.
In other words, don't expect an a la carte world anytime soon. Instead, we'll continue to see bundles like the offerings from Dish, Sony and Apple that are currently hitting the market.
It remains to be seen whether these will ultimately offers viewers a better bargain than an old-fashioned cable subscription and if these new companies will be able to keep their prices so low. Nathanson points out that at $20 per month, Sling TV is only throwing off about $4 per month after content costs and when you consider customer acquisition, technology and hosting costs, there's very little potential for profit.