Traditional cable television involve paying for a bundle of channels, which includes some you watch and others you may not. You cannot opt-out of the stations you never use and pay at least a few cents per channel for everything that comes in your package.

That sounds like a bad thing — why should I have to pay for channels I’ll never watch? The reality, however, is that it’s not that simple. You pay a few pennies to support the channels I like and I pay a few pennies to support the ones you want.

It’s not a perfect system, but it supports a diverse array of choices. In a fully a la carte world, all channels would have to charge more per opt-in viewer. ESPN’s suite of channels, for example, costs cable customers roughly $9 a month. If 25% of the audience opted out, Walt Disney (NYSE: DIS) would have to make up that missing money by some combination of raising prices or cutting programming costs. The same dilemma would happen at lesser channels with some of them not having a viable economic path forward.

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Beware of getting what you want

If I can pick and choose my cable lineup opting out of paying for channels I never watch, then that would be fabulous. The problem comes when you get to do the same. I’m totally fine with your favorite channels going away or costing more, but I’m less comfortable with my favorite channels costing more or getting away.

We don’t have true a la carte cable, but cord-cutting has created a scenario that has damaged this mutually supportive model. If I opt for a skinny streaming bundle like a basic Sling TV package along with Disney+ and Netflix (NASDAQ: NFLX), I’m opting out of dozens of relatively well-known cable channels. Should I choose to not even have a live-TV package and opt instead for more streaming services, I’m choosing to only pay for what I want and not support what you watch in any way.

That sounds nice, but it could have unintended consequences. The cable universe has been steadily shrinking. The cable industry closed 2018 with just over 89 million paying customers. That did not include any streaming cable customers (packages that tend to be limited compared to traditional cable or satellite).

At the end of the first quarter of 2021, cable had 78.7 million customers with 6.7 million of those being streaming cable customers. That’s somewhere between 10.3 million and 17 million fewer people paying for traditional cable packages (the variance comes because some, but not most, streaming customers pay for a close-to-traditional package).

Let’s say your favorite niche channel gets $0.10 per cable customer and cable has lost 15 million subscribers. That would cost the channel $1.5 million per month or $18 million a year. That’s a massive amount of money for smaller stations — and the losses will only increase as cord-cutting steadily increases year-over-year.

In getting a variation of an a la carte system, Americans have also gotten the unintended consequence of weakening nearly every channel. That may not be a big blow to stations like ESPN or the Discovery (NASDAQ: DISCA) family of channels that can be sold directly to consumers as streaming channels (ESPN is not sold this way yet, but it’s likely it will be at some point), but it could be a death blow to all sorts of channels that appeal to smaller audiences.

Enter the new cable universe?

Cable channels, at least secondary ones, may be less valuable, but content has never been more valuable. A world where NBC pays over $200 million a year for what used to be the WWE Network — a streaming service that never topped 1.5 million paying customers in the United  States — shows that any content with a built-in audience will fetch a decent price.

ESPN proved the same thing with its UFC deal and the Time Warner/Discovery deal shows that we’re in a golden age of niche content rollups. Discovery has a few premiere stations (Food Network and HGTV) and an awful lot of second-tier niche programming. It would be tough for, say, the Cooking Channel to survive in a shrinking cable universe, but it’s a valuable part of the overall Discovery+ package.

There will be content casualties, but any channel that has a devoted audience will likely survive or even thrive as streaming services look to bulk up their offerings. This could mean whole channels moving to new platforms or, in some cases, popular shows finding new homes.

The reality is that consumers may end up paying more for the channels and shows they actually want to watch. That could still mean a smaller bill if you have very focused content needs. For families, it’s very likely that they’ll be paying the same, if not more, for less (though you may not care as what you don’t get may be things you won’t miss).

Dan Kline is a Lead Advisor at 7investing, a stock recommendation service that encourages individual investors to adopt a long-term mindset. We transparently report the performance of all past and present recommendations. You can see our cumulative, real-time performance at any time, but only subscribers can see the stock-by-stock breakdown.

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