Cable Costs - From DJN via Medianews

Discussion in 'Visual Arts' started by proufo, May 10, 2003.

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  1. proufo

    proufo Forum Resident Thread Starter

    Interesting situation. Do you agree?

    A La Carte Cable Service Won't Cure Runaway Bills
    By Joe Flint
    Dow Jones Newswires


    A colleague was complaining the other week about her cable bill. Why, she wondered, does she have to pay $60 for 100 channels when she only really watches 20 of them? She wanted to know why she couldn't just pay for the channels she wants and discard the sports channels and other fare that she has never looked at.

    It's a good question -- one that millions of cable subscribers no doubt ask every month when their bill shows up in the mail. Recently, lawmakers have started to wonder the same thing. The cable industry is facing what is sure to be a heated debate over what is known in the industry as a la carte billing, in which subscribers pay only for the channels they want.

    Arizona Republican Sen. John McCain has written to the country's biggest cable operators urging them to give consumers more choice when it comes to channels they receive and how they pay for them. That, he wrote, would be the first step in getting cable prices down. Cable rates went up an average of 6% in the U.S. last year. The senator, who chairs the Commerce Committee, which oversees the cable industry, held a hearing on the issue on Tuesday.

    Sen. McCain isn't the only one urging cable companies to consider some form of a la carte billing. Federal Communications Commissioner Kevin Martin, a Republican appointee, wants cable operators to create a family-friendly group of channels that could be offered on an a la carte basis. Nickelodeon, Cartoon Network and the Hallmark Channel, for example, could be bundled together and sold in a separate package.

    The Best of Intentions

    Supporters of a la carte billing like Sen. McCain and FCC's Mr. Martin are well-intentioned -- they want to lower consumers' cable bills and stop forcing subscribers to pay for services they don't use. While that might sound like a good idea, the reality is such a move likely would have the opposite effect: Cable bills would increase, while programming choices would shrink, hurting both consumers and the industry. That's because pooling a big group of specialty channels into one cable package effectively lowers the cost of offering all the channels.

    To see why that's the case, it's important to understand how the cable industry works. Networks such as MTV, Nickelodeon and CNBC charge cable and satellite distributors like Time Warner and DirecTV a monthly license fee to carry their service. The distributors then pass along those costs to subscribers.

    The fees the networks charge vary tremendously. Walt Disney Co.'s ESPN, for example, comes with the steepest price tag, at about $2 a month per subscriber. At the other end of the spectrum, AOL Time Warner's Cartoon Network costs distributors only 12 cents per subscriber. For cable networks, license fees often account for more than 50% of their total revenue; most of the rest comes from advertising.

    If cable networks saw their revenue from subscriber fees fall, some would be forced to cut back on their programming; others could be driven out of business entirely.

    Take the children's channels Nickelodeon or Cartoon. Not everyone has kids, so many subscribers would opt to drop those services. To make up for the lost revenue, those channels in turn would boost subscriber fees for those who still wanted the service. Advertising dollars would be lost, too, since the channel's potential viewership would drop. The end result would be that many channels would have less to spend on programming.

    Leo Hindery, chairman of the New York Yankees' YES Network, argues an a la carte system would mean only the channels "that appeal to the lowest common denominator would survive." Mr. Hindery readily acknowledges that he doesn't watch Lifetime or a whole lot of C-Span, but he is willing to pay for them.

    It's tempting to think that the fate of the less-watched channels should be left to the marketplace. Except remember that the 10 channels you don't want to pay for won't be the same 10 channels your neighbor doesn't want, which means all programming costs would likely rise, and those increases would be passed on to consumers.

    The Real Culprit

    So if a la carte billing isn't going to lower your monthly cable bill, what will? One solution would be to address the soaring costs of sports programming. Right now, everyone foots the bill for the out-of-whack economics of TV sports. ESPN, whose carriage fees already are among the highest in the industry, recently disclosed plans to jack up distributors' rates by 20% this summer.

    ESPN and other, regional sports programmers defend the rate increases, saying they reflect high viewer demand and the hefty prices the sports leagues themselves charge the networks to show their games. ESPN is one of the most profitable cable networks, but that is little relief for the distributors or the consumers who are footing the bill.

    Many cable operators want to put all sports channels on a special tier so not every subscriber has to pay for it. But special rules can't be put in place for one group of programming and not for others. Just as the nonsports fan doesn't want to pay for ESPN, the sports fan may not want to buy Discovery or Bravo.

    Instead of offering sports or any other type of programming as a separate package, the cable industry needs to tackle the real issue and confront the sports leagues. Prices continue to skyrocket for TV deals, even for sports like baseball and hockey, whose ratings are in decline.

    General Electric's NBC, which has said no to most professional sports, is now the most profitable broadcast network. It is time for other networks to draw a line in the sand. But opening the door to a la carte billing won't solve the real problem.
  2. Evan L

    Evan L Beatologist

    Two words: Satellite dish. Thank you.
  3. Dave

    Dave Esoteric Audio Research Specialistâ„¢

    Better words...Stop watching tv for six months and live a little. If every N. American person would do this then all of those outrageous athlete's salaries that we're footing the bill for, would have to come down along with our cable prices.:) If I were to make, in my lifetime, what some of these atheletes make in one season...I'd be a happy man.
  4. sgb

    sgb Senior Member

    Baton Rouge
    I say, make the guys who want the cable channels PAY for them, and give the rest of us a break. I know two guys (only) who want the sports channels, and they're both rich enough to pay $50 extra for them. Since the sports channels appear to be what's causing the skyrocketing cable bills, I'd be happy to forego ESPN on basic service (which is what I have). That was once $18.95, now it's almost $50. The only reason I have cable TV is to watch Good Eats, Fox news and Kudlow & Kramer on CNBC.
  5. mudbone

    mudbone Gort Annaologist

    Canada, O!
    Dave, we could split it and BOTH be happy!

  6. Dave

    Dave Esoteric Audio Research Specialistâ„¢

    After realizing that if I'm a lucky guy I'll make approx. a mill. over 40 years, I would agree with you mud.:agree:
  7. clayton

    clayton Senior Member

    minneapolis mn
    Best think I did was disconnect cable, 45 buck for "57 channels and nothing on" plus I dont have to monitor my kids tv viewing as much.
  8. ATR

    ATR Senior Member

    Hey, now you know three guys who watch sports on cable. I hadn't been paying attention until bicycling season started, when I found out my OLN had disappeared. Now I would have to both 1) pay an additional $17 monthly to upgrade to the 'digital platinum' package and 2) accept the presence of a dreaded cable box that would make it impossible to record one channel while watching another. The solution? I'm sticking with what I have and going to to follow the races. I got Complete Miles Davis at Montreux for the money I saved, and I ride the bike myself instead of watching the pros.
  9. Drew

    Drew Senior Member

    Grand Junction, CO
    6 1/2 years without a TV and counting! woohoo!

    I can be dangerous not owning a TV though if you see something out of context. I was strolling through the local Best Buy store and I saw flashes of current TV and for the next 3 days I'm making a fool of myself trying to convince everyone that Martin Sheen was the President. :laugh:
  10. chrischross

    chrischross New Member

    Vancouver, WA
    I got rid of Expanded Basic as I was getting tired of the 12-15% annual rate increases. Basic cable charges are regulated by your Local Franchising Authority and will generally track inflation at most.

    I do miss the basketball playoffs -- but I have so much more time left in a day. Maybe the cable TV folks should be worried about cable internet, as I'm just plain losing the cable TV habit.

    Luckily for me, I'm a C-SPAN junky and I'm keeping abreast of the McCain hearings. This is about more than just ala carte --- what you have here is the FCC deciding on removing restrictions on concentration of media ownership, and McCain and others are looking for any way they can to get some leverage over the out of control FCC. How does the idea of Clear Channel running your local newspaper grab you??? They've done such an excellent job with radio -- let's have them run your newspaper into the ground.
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