The subject of “à la carte” cable pricing has attracted renewed attention since John McCain proposed federal legislation to force cable operators to shift to that model, and it’s important to understand anyway because the long-term evolution of streaming video strongly militates toward unbundling. Laura Martin, a pay TV analyst with Needham & Co. in Boston, recently came out with an analysis concluding that an à la carte ESPN would charge about $30 a month to extract revenue out of big-time sports fans rather than subsisting on the single digit carriage fees it currently obtains from all cable subscribers.
Another way of thinking about it is that if ESPN started offering a paid standalone Watch ESPN app rather than making it a free throw-in for cable subscribers, they’d probably charge $30 a month.
This is a reminder that though à la carte pricing would definitely help some consumers it’ll hurt many others and certainly won’t fix what’s annoying about the industry which comes down to the basic lack of competition in utility sectors. The profit-maximizing price for ESPN is quite high, and would end up pricing a lot of more casual sports fans out of the market entirely. On the other hand, a really hard-core sports fan could probably save money by ditching non-sports channels and also would find that at the higher price point the new ESPN needs to try harder to serve exactly his needs. The big losers if the diverse cable bundles went away would be classic families—mom, dad, and a couple of kids are a diverse bundle of consumers who benefit enormously from bundling.
