Last night while watching the news on KABC, Channel 7 in Los Angeles, the brief ad appeared. I learned that on September 2, KABC along with all ESPN channels, Disney, ABC Family may be pulled from Time Warner Cable because of a dispute over what Time Warner should pay ABC to carry those stations. I get TV programming here in the desert from Time Warner. So I could be impacted. And it gripes me. Here's why.
In the early days, cable existed mostly to bring broadcast stations from larger cities to viewers in rural areas who were so far away, they couldn't pick up the channels with an antenna. It was a low priced service (I paid $5 a month when I lived in Quincy to get about 12 stations from Sacramento, Chico, Redding, and San Francisco). It helped provide TV entertainment and news to remote regions, and it helped the broadcasters extend their reach. Obviously, the cable TV model has changed drastically since then.
Cable companies no longer view their primary roll as one of offering local stations to distant communities. Now, they produce and sell their own products, act as a conduit for their own programs, and provide hundreds of channels with niche programs. They also provide Internet and phone service. They primarily serve large metropolitan areas now, not remote communities. In essence, they are now competing with the local broadcast stations
The cable companies also carry those local broadcast stations, and for good reason. That's because the vast majority of cable subscribers still watch local broadcast stations (ABC, CBS, NBC, Fox) more than anything else on cable. The cable companies know that the broadcast stations carry a lot of value to their customers, and the broadcast stations know it as well. As such, several years back, broadcasters began demanding that cable companies pay them for the right to carry their programming. And that's where the problem is.
Cable companies argued that since the broadcast stations provided their signal for free, over the air, cable companies shouldn't have to pay for it. Broadcasters told the cable companies that's fine, then don't carry our stations and see how many of your customers still want to pay $60 a month for TV and not receive their local stations. Agreements were eventually reached, but as those contracts expire now, broadcasters want more money for their product, cable companies don't want to pay it.
The solution is fairly simple, but one that the cable companies have vigorously fought. That is, turn cable into an a la carte system where cable customers can pick and choose what stations they want. The satellite service that we have in Mexico works pretty much that way.
You could go online to the cable provider for your area. See a list of all the channels they offer along with the price per channel. You simply check off those you are willing to pay for. For example, if KABC wanted to charge the cable company 50 cents per month per subscriber, the cable company could in turn offer it to its customers for 75 cents (hey, they've got to make a profit). If you have an antenna and can get KABC or other local stations over the air for free, no need to pay the 75 cents to the cable company. If CNN charged the cable company 30 cents per subscriber, the cable company could offer it for 40 cents. If you never watch news, don't pay the 40 cents for CNN. If you don't watch sports, no need to pay for ESPN or the other channels. You can judge for yourself if the benefits outweigh the costs. It should be no different than when you go to a grocery store or department store. If you want to buy oranges, Safeway doesn't make you also buy apples you don't want them. If you want to buy shoes, Macy's doesn't force you to pay extra to buy a sweater as well. Why should I have to pay for the Cartoon Network when all I want is MSNBC?
The cable companies don't like this model for several reasons. For one, if you live in a metropolitan area and can receive local stations over the air, the cable company would lose money because you don't need to pay them for something you already receive. That's fair for consumers, right? But the other problem is ... remember I mentioned that cable companies produce some of their own content and own several of their own stations. Many of those stations are the ones that you probably rarely watch, and may not want to pay for them if you had the choice. By giving you the option not to have to pay for them, the cable companies risk losing potential viewers that they now count on for advertising on those channels. For example, Comcast Sports Net (CSN) is owned by Comcast cable. Right now, CSN is on most of Comcast's systems. Comcast also sells the channel to satellite systems and other cable systems. So let's say that in any given town, right now, CSN is available to one million subscribers. If half of those subscribers aren't sports fans and decide they don't want to pay for CSN, the potential number of viewers drops to a half million. And for advertisers, that means that CSN is no longer worth what it was before.
The cable industry is huge (as is the broadcast industry, in which I worked for more than three decades). They have very powerful lobbyists who have thwarted efforts to make the cable system more equitable for the customers. That's why the a la carte approach, which favors the consumers and not the corporate giants, has never been allowed to progress. The cable companies have lost some battles (such as when DirectTV and DishNetwork were allowed to compete in markets where cable had exclusive distribution rights). And that may be the solution. Already, KABC is running ads telling its viewers that now may be the time to switch to satellite or buy and antenna before KABC is removed from Time Warner. Time Warner is running an Internet campaign blasting those greedy broadcasters. The way it is now, it is a no win situation for consumers. But, if Time Warner and ABC fail to reach agreement and the ABC stations are pulled from Time Warner, even for a day, it will likely turn into a no win for the cable company, which would find customers like me defecting to satellite faster than you can say "Don't touch that dial."
1 comment:
Hey Dan. The other issue the cable companies bring up that makes sense is a lot of the "secondary" niche cable channels would go away under the a la carte model. Since all subscribers pay a little for each one, there's enough money to maintain the channel. But if only those who want the indoor gardening channel have to pay for it, the cost to provide that channel per subscriber would go through the roof.
You'd even see that impact with the big channels. Say ESPN charges $3 per customer on a system, in an a la carte world maybe only 25 percent of the customers would want it -- so the cost would go up to $12 a customer. The cable industry maintains that because of this, cable bills would actually go UP for a lot of people under a la carte.
No, I'm no shrill for the cable industry... just bringing up the arguments.
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