The a la Carte Conundrum: How Much Would You Pay for These Channels?

Over three-quarters of Americans want a la carte TV. Are they ready to pay the price? Source: Flickr/Jason Rosenberg

It should be no surprise that most Americans say they would prefer to create their own television bundle by picking and choosing which networks are included from an a la carte menu. A recent poll from Reuters/Ipsos found that 77% of Americans would like "a la carte pricing." The 23% minority is probably concerned that the price for individual channels would rise too high for their wallets.

Fortunately, the pollsters were also curious to see how much people would be willing to pay for certain networks individually. Surprisingly, many respondents understood just how much it would cost for their favorite channels in an a la carte model. In fact, based on the poll results, a certain subset of networks could be better off going a la carte: cable news networks such as Time Warner's (TWX) CNN, Twenty-First Century Fox's (FOX) (FOXA) Fox News, and Comcast (CMCSA 1.85%) subsidiary NBC/Universal's MSNBC.

How much would you pay?
The Reuters/Ipsos poll found that 46% of respondents would spend as much as $10 per month for these three networks. That is a pretty significant jump from the rates the companies currently charge cable companies to carry their channels to all 100 million or so pay-TV subscribers.

Fox News recently increased its rate to $1.50 per subscriber when it finally came to an agreement with DISH Network in January after a monthlong blackout. That is significantly higher than CNN and MSNBC, which charge $0.61 and $0.30 per subscriber, respectively, according to MoffetNathanson.

And Fox has every right to charge that much, considering it dominates the ratings for cable news networks. On any given night, Fox News takes about a two-thirds share of cable news viewers. CNN takes another 20%, while MSNBC enjoys most of the remainder.

If we apply those percentages to the 46% who said they would be interested in subscribing to a cable news network a la carte, we get the following figures:

Based on $8 a month per channel and 100 million current cable subscribers.

Each network would likely increase its revenue in an a la carte world, even charging subscribers less than the $10 they indicated they would pay. However, it would be difficult for the networks to justify taking on the risk, since there are other costs involved in delivering live streams over the Internet, especially without the support of cable companies.

Nonetheless, if the U.S. eventually shifts to an a la carte model, these networks will help offset lost revenue at other networks for their parent companies.

What about ESPN?
Disney (DIS -0.04%) is largely absent from the cable news market, unless you are talking about sports news. ESPN is the crown jewel of its portfolio, and it commands a huge premium over other networks when it comes to carriage fees. ESPN charges approximately $6.10 per cable subscriber whether you watch it or not.

Just 4% of respondents said they would pay up to $30 for ESPN, but that is about how much it would actually cost to persuade ESPN to go a la carte. A recent analysis from MoffetNathanson pegs the price ESPN would have to charge at $36.30, assuming everyone the network currently reaches would subscribe at that rate -- which this recent poll proves is false. In fact, just 40% of respondents to the Reuters/Ipsos poll said they would pay up to $10 for ESPN, which is not a very good deal for Disney. The network would immediately lose revenue switching to an a la carte model. Add in the impact from fewer subscribers to other ESPN networks, as well as the other channels Disney is able to squeeze into the bundle thanks to ESPN, and that is a huge loss for the House of Mouse.

It is simply unrealistic to expect ESPN to perform better in an a la carte model than it does with the bundle.

Disney does have several properties that may be able to help subsidize the loss, kids programming for example, but it is likely to suffer a big hit if there is a mandated shift to the a la carte model.