Monday, April 10, 2006

A-La-Carte Programming???

April 10, 2006

Satellite Standard Group (SSG) likes to keep up to speed with many issues that that are directly and indirectly involved with the satellite radio sector. Today we are taking a cursory look at A-La-Carte programming, a current hot point with the FCC and the television industry.

Investors and consumers of satellite radio should pay careful attention to this issue. At this point it centers around television, but should it become a mandate, could satellite radio be far behind?

In a nutshell, A-La-Carte means that the television providers (cable and satellite television) could potentially be forced into letting consumers pick and choose the programming content that gets delivered to their home. For example, if a consumer decided that they did not want Nickelodeon, they would not have to get it, nor would they have to pay for it.

The concept seems simple……give the consumers only what they want, and charge them on a per-channel basis. There are however interesting issues that argue against the a-la-carte format. Cable and satellite television providers State that the current format of package deals enables them to deliver a wide variety of programming at a reasonable price, and that the more profitable programming paves the way for the niche programming that many people enjoy.

A potential victim of a-la-carte programming could well be the consumer that the FCC is, in theory, trying to protect. Because each channel would basically need to be self supporting to be viable, channels will be committing substantial dollars to marketing and promoting their brand rather than budgeting that money to new and innovative content. A-La-Carte programming would bring about “survival of the fittest”, bit is the programming of the fittest what consumers want to be limited to?

If we step back and apply this logic to satellite radio, it could get a bit scary. One of the major draws of satellite radio is the commercial free music and variety of music available. With an a-la-carte concept, many current streams would find it difficult to continue operations. The basic business concept of satellite radio is that the subscription fees and advertising revenue of non-music channels finances the programming offerings. A prime example of this can be seen with Sirius Satellite Radio and their deal with Howard Stern. Like him or not, Stern does bring in subscribers, and does bring in advertising revenue. At some point, the subscription revenue and advertising dollars will help pay for the other content offerings of Sirius. Changing that model could be a drastic move for both Sirius and XM.

You can see that there is a potential issue down the road for satellite radio. It begins to hit closer to home when you consider the intended future offerings of Sirius and XM in the video and cell phone arena. Perhaps the next time are listening to the news, and hear about this A-La-Carte issue, you may step back and think about not only the current impacts to the television industry, but also the potential future impact to satellite radio.

The link to this write up is: http://tinyurl.com/fvyrz

4/10/2006 09:18:00 AM

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