Is This the Cable Industry's Magic Bullet?

Anders Bylund (TMF Zahrim), The Motley Fool
Updated

It's been a long time coming with plenty of kicking, screaming, and heel-dragging along the way. But now TV service operators from Comcast (NAS: CMCSA) and Time Warner Cable to DirecTV (NAS: DTV) and DISH Network (NAS: DISH) finally want to try their hands at so-called a la carte programming.

Reuters reports that a gaggle of cable and satellite broadcasters are working behind closed doors to make this consumer-friendly change happen. Giving customers the right to pick exactly which channels to include or exclude when choosing a programming package just might be the magic bullet that turns the tide of fleeing subscribers: Comcast and Time Warner combined to lose 1.2 million customers over the last four reported quarters.

But the content creators don't like this idea at all. If Time Warner (NYS: TWX) can force the cable guys to bundle unpopular material like truTV with must-have channels such as CNN and Cartoon Network, it gives those lesser lights a second lease on life. Take that bundling away, and niche channels could run out of second chances very quickly.

But if you don't like sports, why would you want to pay as much as $4 extra to have access to ESPN channels you won't watch? Without young children in the house, why would you pay for Cartoon Network, Nickelodeon, or anything from Walt Disney (NYS: DIS) that doesn't include cleats and Plays of the Week? This play just might work.

It's not the only weapon available to the cable and satellite industry. DISH, for example, is ripping pages from the Netflix (NAS: NFLX) and Verizon (NYS: VZ) playbooks by launching a Blockbuster-branded video-streaming service and planning a 4G wireless network. Those are probably smart moves, because Netflix and Verizon are among the very enemies that are killing traditional broadcasters today. Keep your friends close and your enemies in your shirt pocket.

I can't wait to see Comcast or DirecTV firing the first shot with some bastardized version of a la carte service, to the acclaim of consumers and vitriol of content providers. Grab a snack and pull up a chair, because this will be fun to watch with the help of our Foolish watchlist tool:

At the time thisarticle was published Fool contributorAnders Bylundowns shares of Netflix but holdsno other position in any of the companies discussed here.Motley Fool newsletter serviceshave recommended buying shares of Walt Disney and Netflix and creating a bear put spread position in Netflix. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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