Do you believe in “conventional wisdom?”
Sean Payton, the head coach of the New Orleans Saints, evidently does not. The Saints were the first team ever to attempt an onside kick in the SuperBowl before the end of the fourth quarter. The gambit came up spades… or in this case, fleurs-de-lis, as the Saints recovered, scored the go-ahead TD and the Colts were never the same. Sean Payton broke with so-called conventional wisdom and won the world championship.
In the TV industry, the conventional wisdom is that a switch to “a la carte” programming won’t save you any money. You see, if ESPN becomes a la carte and only one out of three households decide to purchase, then they will have to charge 3x the cost for the channel to remain revenue neutral. (Actually, they’d have to charge a little bit more to offset the loss of putative ad revenue from the loss in viewership.)
Take, for instance, ESPN, which charges the highest amount of any cable network: $3 per subscriber per month. [now over $4 per subscriber] Suppose in an à la carte world, 25 percent of the nation’s cable subscribers take ESPN. If that were the case, the network would have to charge each subscriber not $3, but $12 a month to keep its revenue the same. (And don’t forget: with its $1.1 billion annual bill to the National Football League alone, ESPN is hardly in a position to tolerate declining revenues.)
And that’s one of the most popular channels on cable. What percentage of cable subscribers would take Discovery, or the Food Network, or Oxygen, or Hallmark — or the many, many more obscure networks that you can now find up and down your cable box? Five percent? Ten percent? According to Mr. Moffett’s analysis, if every African- American family in the country subscribed to the Black Entertainment Network, it would still have to raise its fees by 588 percent. He adds, “If just half opted in — still a wildly optimistic scenario — the price would rise by 1,200 percent.”
But did you notice the non sequitur? The mathematics might be correct, but the logic is not. ESPN might charge 3x… or 10x… or they might even DROP the rate. Why? The cost for the channel should maximize their profits. Why doesn’t McDonald’s charge $10 for a Big Mac? Because they probably would no longer be serving “billions and billions.”
Right now, the channel affiliate fees are a black science. How are rates determined? Back room games of poker? Tarot cards? A splattering of goat entrails?
Perhaps, a better way would be returning transparency to the marketplace. A la carte allows us consumers to exert competitive pressures on TV stations and cable operators. We should be able to pay for our own programming, not our neighbor’s… or worse, that fat ass on the couch who watches over 14 hours of television each day.
Source:
Bland Menu if Cable Goes à la Carte
Joe Nocera
New York Times, November 24, 2007
We are gaining momentum!
Today, we had a very nice write-up in the SkyReport from MediaBiz. A few days ago, journalist Evie Haskell kicked off the topic of programming wars and how this bickering between the channels and cable operators will probably only increase with time. Her solution?
So here’s an idea: A la carte.
Yeah, I know it’s anathema in the U.S. And I sure don’t want any hate mail about this. But outside this country, many very successful subscription TV services (think BSkyB for one, are you listening DIRECT and DISH?) are working off something very close to the a la carte model.
Yes, that can be tough on small programmers and public-service type channels. But it’s already mighty tough on those channels in this country. Just like it’s mighty tough on consumers. So maybe, just maybe, it’s time to start thinking about package options, even the dreaded a la carte.
Although she is just dipping her toe in the water… yes, a la carte is a touchy subject given the extreme interests at stake. Yet, this is simply the beginning.
This morning, SkyReport publish the response endorsing TV A La Carte for “folks who realize that they are probably part of the majority who are subsidizing the rest of the country. ”
We are so glad to have all the new supporters! Please continue to share with friends and neighbors… at least the ones who aren’t watching 100+ channels.
Source:
SkyReport: Been Rolled?
Evie Haskell
February 1, 2010
SkyReport: More On A La Carte
Evie Haskell
February 3, 2010
The momentum for a la carte continues to grow!
Fox Business recently jumped on the bandwagon. Ben Hooks, CEO Buford Media Group, reveals in the interview that smaller cable operators are being squeezed out by Big Cable. But, there’s an opportunity for smaller cable operators to provide additional consumer surplus in switching the program packaging.
Go to an a la carte pricing I can put my consumer in charge of the value the product what they’re willing to to buy. You know if you talk the average consumer there six to twelve channels that they predominantly watch and that they’d like to purchase. And so many times the price of getting 50 to 100 channels is pretty exorbitant and I would like to give my customers more choice particularly since I can’t compete on attractive price.”
His remarks suggest that there would be a marketplace adjustment… yes, competition returning to the industry might place more pressure on lesser stations to deliver better programming. But he says it simply isn’t right for customers paying for the more compelling programming to “support less attractive programming the are forced to watch.”
Source:
Should Cable Be A La Carte?
Friday, January 29, 2010
Fox Business
Dear Loyal Reader,
Do you enjoy being on the frontier? Yep, simply by considering the possibilities that something might be better than the status quo makes you a pioneer. In fact, the New Yorker just published an article on the cable industry and the Programming Wars (although they didn’t term it as such). The narrative tracked to present day with a slight foreshadowing of what might to expect next.
The New Yorker’s point: all major cable providers offer bundle programming. However, the recent tiffs between them and the content owners might portend a less rosy future. Unbundling might lead to consumer savings… although in aggregate they will be slight. However, they don’t go one step further which is although the overall average savings might be small to consumers, on an individual by individual basis the savings could be enormous. For a household watching less than 15 channels or one which forgoes sport channels the savings could be huge. If I decide to skip the fries and soda at the burger joint, I’m not paying for the next guy’s. Why should cable programming be any different?
The New Yorker article continues by upbraiding the cable and networks execs for engaging in public spats over their wholesale pricing. Why?
This ought to mean that cable providers and TV networks have little to worry about. But their reasonably stable world could easily be upended. Successful bundling depends on the idea that what you’re paying for is “cable television,” rather than merely a collection of channels. Public fights over programming costs disrupt that idea. When HGTV says it wants more money for its programming, it makes people who don’t watch HGTV wonder why they should pay anything for it at all. And, as these fights raise the cost of programming, the bundle looks less like a bargain, and the appeal of à la carte grows.
Expect in the next few months for a larger audience to join with us, the early evangelists, in a consumer-led movement to bring back transparency and competition to the cable industry.
Source:
Bundles of Cable
James Surowiecki
January 25, 2010, The New Yorker
You’ve seen Office Space… you remember the perfect crime? Where they plot to steal pennies, well, fractions of pennies a few million times. Ingenious, right? Who balances their checkbook any longer? and to the nearest penny?
Well, Big Cable is doing something like that. Except instead of just a few million times; they do it almost 100 million times (the number of households with cable). And instead of pennies, they are charging dollars. By force feeding their subscribers channels that they don’t watch, they are able to charge them for those channels in the bundled package. They might as well be selling air!
And this happens every single month!
This article reminded me of the “perfect crime.” The story of a California hacker caught stealing $50k penny by penny. The FBI caught him.
If they ever make Office Space 2, hopefully, they’ll have the protagonists work at a Big Cable company. Oh, oh, and I almost forgot. Ahh, I’m also gonna need you to go ahead and come in on Sunday, too… mmm kay?
It would be wrong to blame just Big Cable and only Big Cable for the issues in the cable industry. To take one small step toward casting at least one operator in a different light, Cablevision and CEO Jim Dolan admitted on an investor conference call that the traditional TV bundled package has become passe and “inefficient.”
“It was set up originally because of a technology that we needed to bundle things in order to offer them. We really don’t need to do that anymore,” revealed Dolan.
Things have changed in the past few decades. In particular, the technology is much better enabling customization of programming packages without much cost. Also, we have gone from receiving a handful of channels to hundreds of channels… even though our attention span and capacity hasn’t changed much. (We still have two eyes last time I checked.)
Yes, 2010 will mark the year of the programming wars—the divisive battle pitting cable operators against channels with you, the consumer, stuck in the middle. I know, all you want to do is to be able to watch those few shows. It is time for Big Cable to rightfully accept their role as the intermediary… purely the pipes porting the content into our homes. However, the money for creating local monopolies dominating the delivery and creation of the channels is so great that most operators are quite reluctant to step into this independent role.
As the consumer rebellion grows, the opportunity for a new providers increases. Who will be the first to step into this position?
Source:
Cable fee battles point to smaller TV bundles
We are a bellicose nation, but this year will mark the rise of the Programming Wars. Last week, the VC-backed Tennis channel filed a lawsuit against Comcast. Why?
Because unlike the other niche programming channels which Comcast owns (like the Golf channel and Versus), the Tennis channel as an independent is carried on the premium sports tier. Instead of netting almost 25 million Comcast subscribers, they are relegated to just a small fraction willing to purchase the most expensive tier of sports programming.
The Tennis Channel, seeking a wider audience, said Comcast offers its tennis programs on the premium tier of sports shows which is watched by a small fraction of Comcast subscribers instead of the basic tier available to subscribers.
The channel said Comcast offers its programming such as the Golf Channel and Versus to all of its 23.8 million subscribers, while the Tennis Channel reaches only 2.6 million homes.
As both cable providers and networks scramble to increase their profits, we will begin to see more and more programming wars. The real solution? a la carte programming because then consumers directly select their own programming without the backroom politics of Big Cable (e.g., Comcast and Time Warner) conflicting with independent channels (e.g., Tennis, MLB NEtwork, Comedy Central, MSNBC). Let consumers picks what they want to watch and what they will pay for.
Source:
VC Backed Tennis Channel Files Complaint Against Comcast
peHub
January 7, 2010
http://www.pehub.com/60097/vc-backed-tennis-channel-files-complaint-against-comcast/
The Consumer Electronics Show in Vegas always brings quite the fanfare to new technology and devices. However, with all the fireworks about HD-TV and 3-D colliding, another heavily-hyphened innovation seems to lack the sensationalism. But large companies and powerful interests are starting to develop and capitalize on the wave of cord-cutting. Although there are no great statistics about cord-cutting… Comcast and Time Warner would probably have the best stats although they’re reticent to release… a Google Trends search reveals that the term is growing in popularity.
But as Paul Sweeting rhetorically questions, what would you need to cut the cord? Most consumers would require some form of entertainment streamed into their set top TV box.
In other words, TV sets, if not becoming genuine multipurpose devices, are rapidly evolving into multi-platform devices, capable of accessing video content from the web as easily as they can from a cable or satellite service. Over time, that could work profound changes in how consumers access TV content and shift the balance of power in unpredictable ways among set-makers, service providers and programmers.
However, after recently spending upwards of $1,000 or more on an HD-TV, it is unclear whether consumers will be raedy to invest in another expensive hardware device. Perhaps, as an interim step, a TV a la carte service would bridge the gap by utilizing existing technologies and maintaining access to some of the best programming while sacrificing the rest.
Source:
With TV Apps, Over-the-Top Video Gets New Backers
Paul Sweeting
GigaOm, January 12, 2009
Yep, that last friend who had been dragging their feet for years must have finally purchased their HD-TV. Why? Because the manufacturers are about to release the newest, whiz bang technology… TV 3-D. Those HD screens might become as obsolete as rabbit ears come June. That’s when ESPN and a host of others might start broadcasting in the new technology.
Leading the charge to television, the pioneering sports network ESPN said it would show at least 85 live events on a 3-D channel starting in June. “The sports genre is probably the best suited to exploit this technology,” said Sean Bratches, an executive vice president at ESPN. The company has held preliminary talks with Comcast and other operators about gaining distribution; the 3-D channel could come at an added cost to subscribers. It will go dark when not showing live events.
Not everyone is impressed. 3-D could flop… just like the mini disc player collecting dust in my closet. Stay tuned!
Source:
Television Begins a Push Into the 3rd Dimension
Brian Stelter and Brad Stone
NY Times, January 5, 2010
http://www.nytimes.com/2010/01/06/business/media/06tele.html?em
There are a lot of people who stand to benefit if they could switch to an à la carte cable plan. However, the ultimate couch potato is probably better off sticking with the old model.
“It’s all about determination,” said Miller, who displayed incredible inertia in listlessly viewing massive television screens for 72 straight, sleepless hours.
Although does this guy really watch the Oxygen, Lifetime, or Nickelodeon?
Source:
Chicago man breaks Guinness World Record for competitive sitting
Chris McNamara
Chicago Tribune, January 5, 2010
http://www.chicagotribune.com/features/chi-talk-competitive-sittingjan05,0,5803318.story
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