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A la Carte Cable TV Could Cost Consumers More

Stocks in this article: AAPL TWC CMCSA

NEW YORK (TheStreet) -- This week I have published two articles at TheStreet detailing where I think the cable industry will head after the Time Warner Cable (TWC)/Comcast (CMCSA) merger.

In Cable TV Will Soon Resemble A Sushi Menu and When Will Cable TV Go a la Carte?, I argue that, in some fashion, consumers will be able to purchase a basic bundle from TWC/CMCSA and proceed to complement/supplement it with individual options.

It should come as no surprise that readers have responded with a resounding Marv Albert-style "YESSSS!" to my speculation.

There's probably nothing more popular than the notion of a la carte pricing from cable (or satellite). In fact, there's so much consensus that a la carte is righteous and cable companies are evil for not providing it that you really can't be against it. Being against a la carte pricing is akin to being for cancer or child abuse.

What kind of sick bastard doesn't enthusiastically subscribe to the intuition that I'm a) being ripped off because ...

... everybody now ... and with feeling ...

I'm paying for a bunch of channels I don't even watch and b) I should be able to pick and choose only the stations I actually want to watch!?

Those lines have been repeated so many times -- often with unbridled passion -- that we have come to accept them as undisputed fact. However, as I indicated on my Twitter feed Wednesday, I'm not so sure:

It's apropos to start with Apple (AAPL).

Every once in a while I go into my App Store account settings and check my subscriptions. That's usually triggered by a notification from Apple that some recurring subscription I have -- to a magazine or newspaper or service such as Evernote -- is set to charge or renew. I often end up canceling subscriptions for things I never or rarely use.

Additionally, the $0.99 and $1.99 and $2.99 and $4.99 dings from Apple's iTunes or Amazon.com (AMZN) Instant Video. These things also add up.

Apple offers a la carte. Amazon offers a la carte. That's what we want. Apple, for instance, doesn't make you buy a package of core apps or something of the sort. It's choose what you use. And, while it makes perfect sense for the circumstances, it's not like it's all that sexy.

Because Amazon doesn't really reveal numbers with respect to this area of the business, we can't be sure how well it does. However Apple's numbers in the App Store continue to grow. And, while iTunes downloads aren't what they used to be, they're no spit in the bucket.

A chart I included in January's Proof iTunes is Dead nicely illustrates this point.

Want a raw number? We have those as well, via Apple's most recent quarterly report. The company generated more than $4 billion in sales via iTunes, The App Store and other software and services. Not bad.

And how much of that money is a nickel and dime here and a nickel and dime there from Joe consumer like you and me? Unsuspecting iPhone and iPad users who tap, reenter their password and consume away.

All of this to say, I expect a similar dynamic to unfold if we ever see a la carte pricing from cable. However, it won't end quite the same way, primarily because you'll get a bill every month itemizing your expenses. It doesn't happen quite that way when you buy stuff from Apple (or Amazon). You pay and receive a receipt as you go, which means there's different psychology at play.

But with cable ... it could prove to be a rude awakening for plenty of subscribers.

You get your bento box base package of basic Internet, basic television stations, ESPN and HBO for, let's say, $50 a month. That's cool.

Just like you do when you track your expenses, list everything else you would subscribe to, directly through cable or elsewhere, and estimate what it might cost you per month. I guaran-stinking-tee most of you will pay the same as you're paying now -- or more -- but receive less. 

No more randomness that today's prescribed cable packages provide. Like stumbling upon "Risky Business" on TBS or something. You can no longer access TBS unless you pay $1.50 a month or whatever it'll be. It will be like eating dinner at Morton's every night of the week. 

I could go on, but you get the point. You'll over-consume. You'll say, well that station only costs two bucks a month and they carry "Family Ties" reruns. And just like apps and music downloads from Apple, that junk will add up. And the total will balloon much like your bill does after a side of asparagus and an oversized baked potato. 

There's this misnomer that cable companies don't want to offer a la carte pricing. Historically and at the moment, they haven't and don't. But that's because there's been no need to mess with a very lucrative business model. However, when a company as massive as TWC/CMCSA emerges, the game changes.

First, as noted in this week's two previous articles, they'll have unprecedented leverage over the programmers. But, more than that, they'll be able to market themselves -- cable -- as the good guy for like the first time in the history of the world. But they'll still be as sneaky and greedy as ever. Because they know as well as I do that, given choice, for every person who controls him or herself and spends less on cable than they do now, there will be the (undisciplined) heavy users who will more than compensate for the cheapskates. 

Size matters in America. And loads of people will have trouble settling for less. They'll make the inverse complaint of the one they float now. They'll look in their basket and be like, Damn, this is all I got! What a ripoff.

And it will dawn on them that maybe the old way of having a bunch of channels you never watch was more efficient and consumer friendly than they thought it was as they were campaigning for the coveted privilege of a la carte cable.  

--Written by Rocco Pendola in Santa Monica, Calif.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks. Rocco Pendola is a columnist for TheStreet. Whenever possible, Pendola uses hockey, Springsteen or Southern California references in his work. He lives in Santa Monica.

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