Time Warner Scales Down

This is big news, folks. Time Warner has announced a new subscription option. For $30 to $40 a month, the cable service will offer a stripped down “basic” plan named “TV Essentials” as a response to subscribers who complain that the monthly fees are just too high. The service will include local channels and 12 of the top-rated cable channels.

The company’s press release indicates that this is in response to the impact of the recession, with many households looking for ways to trim costs from their budgets. The release does not mention that there’s a need to stop the bleeding as subscribers cancel their cable contracts; according to MediaBiz, cable services had a net loss of 641,000 subscribers in the third quarter of this year. Time Warner lost 155,000 of those.

Is this new offering going to make a difference? I doubt it. Subscribers will be paying about $2 to $3 per channel per month (aside from the ones that they could get for free just by sticking up an antenna), and unless these are channels that they love, that doesn’t strike me as a great bargain. The choices for content streamed over the Internet aren’t ready yet to take cable’s place in most households, but they’re getting better every day.

And this offering is getting perilously close to the a la carte pricing that consumers want. Why pay for channels you never watch? Instead of bundling them, why not pay $2 or $3 a month for just the individual networks that you want? The problem is that this approach would drastically reduce the cable companies’ revenues, making it difficult for them to maintain their physical infrastructure. And it certainly would not make the networks happy as they would not be able to count on getting bundled in with a package and their viewer counts will undoubtedly drop.

So Time Warner and the others are going to have to find a way to preserve the bundling concept, and still keep the consumer happy. But as Blockbuster and Netflix have discovered, the old models for distributing video entertainment content are not holding up well, and it looks as though new models are developing whether the cable companies are ready or not.