After years of successful lobbying against the potential for FCC to mandate an a la carte video offering, wasting countless tax payer dollars and untold millions of cable subscriber fees the business of cable television is supposedly scrambling to recover the costs of dramatically increasing programming costs. One “solution” that has been actively investigated and trialed is to surprisingly, split up the channels (a custom type of a la carte programming).
From all this lobbying, we are supposed to believe that unless cable operators are allowed to package up large groups of channels, it will cost subscribers more than individual channels. Only, Cable now says that unless it divides up channels, the cost of content will be so great that it will be forced to raise television service prices. So what is good for cable profits, cost savings, etc. isn’t good for consumers. The case in point given is ESPN which they claim costs $4 per subscriber in 2012. Well, in 2005 (7 years ago), ESPN cost $2 – and not surprisingly, ESPN is far and away the single most expensive piece of content a cable operator offers. So, what does cable now propose?
Cable proposes that it divide out ESPN to its own premium channel (like they do for other premium channels), then of course, take the other less expensive channels that Cable pays pennies per subscriber for, charge subscribers the same price for those advertisement packed channels, and there you have it… Cable merchandizing. In one quick move, Cable successfully transfers the costs of its most expensive programming onto its customers, while at the same time boosting revenues for its middle tier programming packages which just got a whole lot cheaper to them. Once the transition is complete, cable can continue to raise rates on the remaining channels to boost profits and in the mean time, unload any channel that gets too expensive to be packaged to an a la carte channel.
Wouldn’t it be nice if the FCC actually said NO to something. No to certain mergers, no to raising rates, or even NO to a la carte. Frankly, the best and only possible a la carte should be the Internet. The last thing we need is Cable thinking it can now compete directly with that. FCC needs to let the programming be free – not free in the sense that you don’t pay for it, but free in the sense that it is unrelated with transmission.
One of the biggest issues with Cable in general is it is increasing becoming a complete vertical where transmission companies own the very content (programming) they carry. In this world, such empowered operators can increasingly apply pressure to shut down television stations and force everyone to watch via satellite, cable, or telephone operator (they all offer the same content). These very agreements also place the content that would otherwise be available for providers of Internet programming at odds with cable as it cost them many times more for the content which is owned now by competing cable. So, while cable will be happy to sell its content at a high premium to Internet based delivery companies, they know full well that it costs them a small fraction of that to carry that same content over their own transmission medium – a huge advantage. Also, cable places restrictions on certain programming – like it can only be watched online if that user also has a cable subscription.
In 2005, Comcast tried very hard to buy Disney (the owners of ESPN, among many other hot programming channels). Comcast landing NBCU is just as bad, and the FCC did little but rubber stamp it. In the end, this allows Comcast to sell NBC programming for a profit to other providers (to areas they don’t cover), and yet provide this content to their subscribers at cost – a huge price break for an operator that serves 23 million subscribers. However, since cable doesn’t compete with each other, all this means is the ROI for Comcast on the NBCU purchase is all that more shorten – all the while, the competition no longer can negotiate a competitive rate for the same content.
If content (programming) was actually free of transmission encumbrances or fallout, and any kind of anti competitive measures were outlawed, programming would be able to seek out any and all interested parties without worrying about loosing business. Then, you might see organizations like the BigTenNetwork freely offer the programming over cable, satellite, or other Internet based content delivery networks (CDNs) like Roku, Apple, Amazon or the like. Today you don’t see programming rushing to these CDNs because they are worried about loosing cable subscriptions. This is a big reason why Internet content has been slow to take off and perhaps even why folks like Netflix and Amazon don’t have 50 million subscribers. I’d like to see live TV, live sporting events, live anything – be carried over the Internet and available on whatever box users elect to access Internet content from.
In the years following cable’s lobbying against a la carte, we’ve seen the reverse happen to a la carte (when it comes to Internet), it has got more expensive, more limited – mostly due to unfair competition imposed by inferior cable offerings aimed at preventing these Internet services from taking off. FCC needs to be mindful of allowing the Internet content business to grow and ensure cable networks who own content either sell off those assets – preferably, or require them to open their books to Internet companies wanting to buy this content to ensure their not over paying for the content. Neither of these prospects will sound appealing to cable, but then again, FCC could just say, well, you invented packaged programming, lobbied heavily for it, perhaps you should just stick with that instead of going a la carte.
The best medicine for this dilemma is simply this – read a book, go for a walk, go see a movie at the theater – the key word being “go”. Get out and do something rather than sit at home a watch cable programming. If you do enough “go” -ing you will soon realize there is more to life that what is happening on the latest show who’s sole purpose is to get your attention so that you can be pummeled with ads vying for your hard earned money. Going for a walk doesn’t cost you anything, and arguably it brings you more pleasure.
Interestingly, if cable started losing subscribers it would put pressure on the operators to do what is currently unthinkable – lower prices. Same thing goes for cable programming… If fewer and fewer people watched these programs, supply and demand would rule the day forcing all the economics into a downward spiral.