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The Ugly Numbers Behind Unbundled Cable TV

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cable televisionIf you’re a cable TV subscriber who grumbles about paying for dozens of channels your family never watches, a media analyst has a message: That cable bundle carries all sorts of unseen benefits.

In a report that attempts to quantify the costs of an à la carte pricing for cable television, Needham & Co.’s Laura Martin estimates that $45 billion of TV advertising would be at risk under such a change, along with 1.4 million jobs, $20 billion in taxes paid by such cable operators as Comcast (CMCSA) and Time Warner Cable (TWC), and $117 billion in market capitalization. And maybe you wouldn’t miss the Christian-themed Smile of a Child channel or Jewelry Television, but if you love any of those niche networks you could almost certainly kiss them goodbye for lack of financial support.

The notion of “unbundling” cable television packages and allowing consumers to choose only those channels they want has long tantalized frustrated subscribers, who pay about $720 per year in the U.S. for an average of 180 channels. The average viewer watches somewhere from 16 to 20 of those, according to Needham, and the gap infuriates millions as they write monthly checks to cable companies.

Martin argues in her report this week that à la carte pricing would lead to higher TV bills: “The notion of creating value through unbundling may be a laudable goal from a public policy point of view, but the world this premise describes can never exist.” That’s mainly because for every $1 of subscriber revenue, advertisers pay $1.24. Those payments totaled $101 billion last year, and $56 billion came from advertisers.

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