Video services

Downsizing Cable

4:00 PM -- Given the state of the economy and the increasing pressure for an à la carte-esque service model, there appears to be pressure mounting on cable to at least trim down the size of its subscription TV packages.

That idea bubbled to the surface again when Time Warner Cable Inc. (NYSE: TWC) CEO Glenn Britt suggested at the recent Allen & Co. media conference in Sun Valley, Idaho, that it "would be a good thing if we could all figure out a way to have one or more smaller packages that would be attractive to people who can't afford bigger ones, especially if we could do it in a way that the entertainment companies are still able to finance the product."

He didn't offer any specific ways on how that could be done. Seems he wanted to float the idea with the caveat that it can't break the business model and plug the flow of high-end content.

The Gerson Lehrman Group took that idea a step further, noting that Britt's comments point toward a package of programming made up of 40 or 50 channels. "The tricky part will be what gets put in the package and what gets left out," the firm said, pointing out that the average cable viewer watches only 10 to 17 networks on a regular basis. And the people in a given household may have a different slate of favorite channels.

Switched multicast and unicast may help solve the technical angle, but the analysis also factors in another important factor: Will the major network and content owners even accept a model that could end up reducing the distribution reach of some of their channels if they end up getting put on a different tier? Probably not anytime soon if the dual revenue stream of subscriptions and advertising continue to rule how things are done.

"At the end of the day it's all about total revenues for the programmers with the operators increasingly feeling like collection agencies for the networks," the report adds. "If anything, the operator/programmer relationships will continue to be thorny."

But cable operators can't ignore the idea despite the challenges, particularly in the presence of broadcast/broadband hybrid services like Sezmi Corp. and rumored subscription packages from Apple Inc. (Nasdaq: AAPL) that aim to slim down the amount of channels and content that's available. (See Sezmi Goes Retail With Best Buy.)

— Jeff Baumgartner, Site Editor, Light Reading Cable

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