I have a hard time believing that I'm being subsidized for my lack of a cable bill. Could AMC really be getting more from me with transmission fees and ads than the $3.99 I pay (gladly, btw) for _each_ episode of Mad Med or Breaking Bad? If everyone cut their cable, that would be a lot of new $3-$4 purchases.
The last episode of Breaking Bad had 6 million live viewers. Assume that everyone cuts their cable, and only half buy the finale for the average price of $3.5. Also assume that prior to this no one is buying it at all. Yank the standard Apple-style 30% and that's still almost 15 million dollars. That's real money right there.
The Average american family spends 34 hours a week [1] watching TV, break that in half for shits and giggles and you're now at 17 hours per week or roughly 68 hours a month. At your $3.5 per hour of TV rate the average household is now paying $238 bucks a month ala-carte.
Want to charge less per episode? Breaking Bad's last season cost $3.5M per episode to produce just to break even on production costs they'd need to charge just over a buck per episode (3M paid) and you'd still be charging that household $68 bucks a month. That still real money right there.
Unlike OP, Breaking Bad for me (on Amazon Instant) is $1.99 or $2.99 depending upon if I want SD or HD, and the SD streams are actually quite good quality-wise, certainly good enough for the masses who like to stretch letterboxed content so their screen isn't "wasted".
But that aside, The 34 hours a week includes a lot of advertisement watching too, so I'm sure there are hybrid models that could be explored where you get a good discount on streaming for choosing to watch some ads inserted into the middle of the show, say $1.99 for the SD show without commercials or heavy discount (maybe even free) if you choose the ads, and then the higher end $2.99 for people who really insist on "HD".
Also, I'm sure not all of that 34 hours per week the average person watches is Breaking Bad quality, presumably a lot of it is filler that would be valued far less by the watcher and thus have to be priced far less, which is one of the real benefits of ala carte. When I was a cable subscriber I felt like I was subsidizing a lot of really shitty networks churning out really shitty programs. I'm perfectly happy to pay the same amount per month (or even a bit more!) but with all my money going to programs of a high enough quality that I choose to pay to watch them specifically.
AMC Networks (AMC's parent company) made $1.35 billion in 2012, about 58% of which came from cable and other distribution fees, of which 10% came from Comcast and DirecTV combined. [Source: AMC Networks, Inc. Form 10-K, Year End 2012]
Let's be super conservative and take just that 10% into consideration. That's still $78.3 million a year from the Comcast and DirecTV accounts. If we take all cable fees into consideration, the number climbs to somewhere closer to $400-$600 million a year.
That's a pretty big chunk of change to sacrifice, especially very suddenly. If the CEO of AMC Networks "cut cable" out of his model in the course of a year, the company's stock price would collapse, and he'd be out of a job in record time.
No question that there's a lot of money to be made from VOD licensing and a la carte purchases. But we need to be realistic about how companies like AMC are going to get there. It's going to be a slow transition, not a sudden one.
Assuming that everyone cuts their cable and half of the 6 million people who watched the Breaking Bad series finale pay the $3.50 to watch it, that's $10,500,000. Less Apple's 30%, that's $7,350,000 in revenue left.
Bear in mind two things:
1) It reportedly costs $3M to $3.5M to make an episode of Breaking Bad.
2) The average viewership per episode in the last couple of seasons was substantially less than 6 million viewers.
Let's not forget how many millions it takes to write, develop, and throw away pilots until you get a series that works with the viewers.
AMC would never have had the money to do this and Mad Men without the subsidy of cable bundles funding them during the early years. If AMC was an ala-carte channel in 2005, none of this would have happened.
You're absolutely right. The majority* of people on HN seem to have no clue how TV and Film is actually paid for, how the content ecosystem itself works. They just see the end product.
To flip the tables a bit, here is the same logic being applied to tech, instead of TV/Film:
First, lets get rid of these incubators, angels, VCs, and IPOs pumping money into the system up front. Surely, the $30 million spent to start Foobr.com could easily be paid by the users, right?
Second, instead...sell time on Foobr.com at $2.99/day a la carte. Multiple by the 1 million users that the $30 million pre-funded Foobr.com has today, and Boom! Foobr.com can clearly exist (in the same form, too!) if we got rid of incubators, VCs, IPOs, aquihires, and all the rest.
Third, gloat on HN, in blogs, podcasts, and on Twitter. It's math, dude! Bask in my brilliant economic analysis of the startup ecosystem. You people working at Ycombinator and VCs, and buying stock at IPOs? Chumps, all of you! You're just subsidizing my usage. I get for free what you pay billions for. Idiots.
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This analogy (if you don't know TV and Film is funded) is much stronger than you'd think. It's amazing how similar the two are in terms of funding.
And hopefully everyone can agree that removing literally all of the up front funding channels for tech startups, and instead moving to a la carte pricing on the final product, is not a workable plan. The same is true of TV and Film. You cannot simply move it to a la carte pricing and expect the exact same things to be available, and at the same quality level.
There are very strong reasons why the Film/TV ecosystem is the way it is that are not immediately obvious to people outside of it. If you want to disrupt it, you'll first need to understand it.
The last episode of Breaking Bad had 6 million live viewers. Assume that everyone cuts their cable, and only half buy the finale for the average price of $3.5. Also assume that prior to this no one is buying it at all. Yank the standard Apple-style 30% and that's still almost 15 million dollars. That's real money right there.