What 'A La Carte' TV Would Mean For Advertisers

No matter how many arguments are made against a la carte as a remedy for the broken pay-TV model, the idea just won't die. While TV networks are staunchly against the idea, fearing consumers wouldn't pay for their smaller or mid-sized networks, advertisers could also suffer if cable bundles break up and smaller channels thin in number, because more viewers would go to the bigger networks, effectively driving up prices for advertisers to reach a mass audience.

Marketers don't typically buy advertising on networks that reach fewer than 25 million homes, and Amy Sotiridy, senior VP-director of national broadcast at Initiative, said for many of her clients the threshold is 50 million. This would in turn make it difficult for niche networks to survive. Meanwhile, media buyers are supportive of new networks entering the ecosystem since they increase competition and negotiating power. But a la carte would make it nearly impossible for a new network to launch, Sotiridy said. Why would a consumer pay for a channel that isn't proven, and how does a network develop cachet unless it has carriage? Ultimately, this could make advertising on online platforms like Hulu and AOL even more attractive and help speed the shift of dollars out of TV and into digital.

If a la carte did materialize, Needham analyst Laura Martin estimates 50%, or $70 billion, would evaporate from the TV ecosystem (half coming from subscriber fees and the other half from advertising) and fewer than 20 channels would attract enough subscribers to survive.