John McCain Makes the Case for A La Carte Cable (Q&A)


Interesting article. He specifically mentions the problem of his 101 year old mother who doesn't want to pay $5 or $6 a month for ESPN.

The impact of a la carte on college football would be huge. Consider how many of the recent additions were made primarily because of television revenue strategies, and that these strategies may be outdated in 5 years if this bill passes. The article provides no details on the bill itself, or why a bill is necessary for a la carte to happen.

Not sure if McConnell will allow this bill out of committee and onto the floor for a vote with Louisville moving to The ACC and its planned network. Would Mitch play politics for the advantage of UofL? He has in the past. Also keep in mind that the cable TV lobby is strong in DC. Strange coalition no doubt. Even if the bill makes it out of committee it might never get voted on under the premise that the Senate has more pressing issues to deal with. It will be interesting to watch.
CJ

Simply put, A la carte cable means that you'll end up paying more for the channels you want. For every cable subscriber who watches ESPN, there are three who do not. So for ESPN to remain revenue neutral in an a la carte world, ESPN subscribers would have to pay four times as much. The ratio is even worse for some other channels. All of that adds up, and likely your cable bill would be higher that it is with bundling.

(09-13-2013 06:23 AM)CommuterBob Wrote:  Simply put, A la carte cable means that you'll end up paying more for the channels you want. For every cable subscriber who watches ESPN, there are three who do not. So for ESPN to remain revenue neutral in an a la carte world, ESPN subscribers would have to pay four times as much. The ratio is even worse for some other channels. All of that adds up, and likely your cable bill would be higher that it is with bundling.

It would be worth the extra money, knowing in my mind, that no percentage of the money I would be paying in a bundled package was lining ESPf'Ns pockets.

(09-13-2013 04:46 AM)Captain Bearcat Wrote:  John McCain Makes the Case for A La Carte Cable (Q&A)


Interesting article. He specifically mentions the problem of his 101 year old mother who doesn't want to pay $5 or $6 a month for ESPN.

Instead, McCain's 101 year old mother is going to pay $100/month and only get the Knitting Channel, for which she will be the only subscriber. Way to go Senator McCain!

(09-13-2013 06:23 AM)CommuterBob Wrote:  Simply put, A la carte cable means that you'll end up paying more for the channels you want. For every cable subscriber who watches ESPN, there are three who do not. So for ESPN to remain revenue neutral in an a la carte world, ESPN subscribers would have to pay four times as much. The ratio is even worse for some other channels. All of that adds up, and likely your cable bill would be higher that it is with bundling.

Bingo

I have no idea why Congress is even involved in this. Cable sprung up because of the pathetically limited selection and censoring practices of the government approved networks. I don't think the free market is the answer to every single thing, but it is the answer to this one.

(09-13-2013 08:11 AM)brista21 Wrote:  

(09-13-2013 06:23 AM)CommuterBob Wrote:  Simply put, A la carte cable means that you'll end up paying more for the channels you want. For every cable subscriber who watches ESPN, there are three who do not. So for ESPN to remain revenue neutral in an a la carte world, ESPN subscribers would have to pay four times as much. The ratio is even worse for some other channels. All of that adds up, and likely your cable bill would be higher that it is with bundling.

Bingo

So that is quite telling then. If 2/3 (or over as I suspect) of US household don't watch ESPN, that is a lot of consumer pressure from a great majority. That puts a lot of political pressure from a larger consumer group than a hard core sports group.

There still will be some bundling of either core channels (local + USA,TBS,TNT + major news channels) and then package similar channels (Food/House channels, Children channels, Trashy E! type channels and all those friggin shopping channels!...etc).

Dish (I've been a customer for over 7 years by the way) has within the past few years I noticed added lower packages (Welcome $20 and Smart $30) and now is offering more package/and a la carte individual channels. They also show free previews of certain channels every month, so you get to view and see if you like the channel. They seem to be trending towards this type of a la carte structure on their own and probably from some of their own customer pressure as more people view shows via the Internet. I know I've been on the fence of 'cutting the cord' and if I see more shows that I'm able to stream....even if they are a day or two behind the live viewing, I'll be more tempted to cut the cord also.

(09-13-2013 06:23 AM)CommuterBob Wrote:  Simply put, A la carte cable means that you'll end up paying more for the channels you want. For every cable subscriber who watches ESPN, there are three who do not. So for ESPN to remain revenue neutral in an a la carte world, ESPN subscribers would have to pay four times as much. The ratio is even worse for some other channels. All of that adds up, and likely your cable bill would be higher that it is with bundling.

I agree.

Now, I do think there's a lot of posturing on both sides. There's too much focus on individual channel rates as opposed to where the real price gouging is with channel bundling by the cable networks (which is different than bundling by cable carriers, which I'll get to in a moment). We talk about ESPN's $5 subscriber fee a lot, but a widely watched network like ESPN (or TNT or USA) that garners a high rate really isn't the problem in terms of the high costs. The reason why they're able to charge so much is that those are the types channels where people would just drop cable altogether if they're not included: they're as basic these days as having ABC/CBS/NBC/Fox. At the same time, that $5 per month for ESPN translates into $60 per year. Think about how much you get in terms of high profile sports per year for a price that's less than what you'd be paying for the Mayweather fight tomorrow for a couple of hours. Further, think about how much more popular the top NFL, NBA, MLB and college football games are compared to boxing and what you'd have to pay if you had to watch them on pay-per-view. ESPN alone is an excellent deal when you consider how much high profile programming they provide.

What isn't a good deal is the NETWORK BUNDLING. And I don't mean the bundling in terms of us not being able to buy channels a la carte, but rather that Disney refuses to deal with any cable carrier that doesn't buy its ENTIRE suite of channels. Dish Network and virtually every other carrier would sign up for *just* ESPN at $5 or $6 per month within two seconds. What really gives them heartburn is that they can't just buy ESPN alone - they don't have any access to ESPN unless they also buy ESPN2, ESPNU, ESPN Classic, ESPN Deportes, multiple Disney channels, ABC Family and several other networks. All of the other major cable network owners (Turner, Fox, Viacom, etc.) take the exact same tactics. This means that Disney can charge subscriber rates for its lesser-watched channels at levels that are higher than what they would be in an unbundled free market because having access to ESPN is so important.

A total change to a la carte would result in both higher prices overall and simply killing off all of the channels that would make a la carte worth it in the first place. A la carte is useless when all that survives is the basic cable channel lineup that we had in 1990 (ESPN, MTV, USA, TBS), which is effectively what will happen because only the very strongest, richest and broadest vanilla audience channels will survive in that environment. What McCain ought to be arguing for is that ESPN shouldn't be tying access to its product to other Disney channels and that each network in the Disney family should be able to stand alone in cable carrier negotiations. The only type of bundling that should exist is "good" bundling where cable networks give a price *discount* if a carrier buys an entire suite of channels, as opposed to what's happening now where bundling is forcing carriers to pay above market value for a lot of low-watched channels.

So let's say ESPN/ESPN2 can be chosen a la carte. It would then cost $60+ a month just for those 2 channels?

(09-13-2013 09:22 AM)NIU007 Wrote:  So let's say ESPN/ESPN2 can be chosen a la carte. It would then cost $60+ a month just for those 2 channels?

That could easily be the case. The Mayweather-Canelo fight tomorrow costs around $70 for a 2 hour program on pay-per-view and that's for a niche sport like boxing. A single run-of-the-mill Monday Night Football game is worth much more than even the most high profile fights from a TV perspective. ESPN and ESPN2 carry dozens of events that draw more national sports interest than the Mayweather-Canelo fight every month.

(09-13-2013 09:29 AM)Frank the Tank Wrote:  

(09-13-2013 09:22 AM)NIU007 Wrote:  So let's say ESPN/ESPN2 can be chosen a la carte. It would then cost $60+ a month just for those 2 channels?

That could easily be the case. The Mayweather-Canelo fight tomorrow costs around $70 for a 2 hour program on pay-per-view and that's for a niche sport like boxing. A single run-of-the-mill Monday Night Football game is worth much more than even the most high profile fights from a TV perspective. ESPN and ESPN2 carry dozens of events that draw more national sports interest than the Mayweather-Canelo fight every month.

I don't think boxing is a good example, there aren't many big fights so people will pay a lot for what is basically a 1-time event.

I predict McCain will be as successful with this bill as he was with his Presidential campaign...

Are you guys forgetting that the market sets the prices? If a la carte is available and the costs per customer are so high that no one is buying it, those channels will do one of two things: They will either negotiate lower contracts for live games, thus lowering the price, or they decide a $100 ESPN package is suitable and it cuts out a large portion of the population from viewing it at home. Guess what? Someone will make a killing by hosting viewing parties, just like every sports bar does in America on Saturday nights for PPV fights. Some sports would become niche, and we would move on to some other form of entertainment. ESPN/NFL/NBA/College Football will simply have to decide what they want to become.

(09-13-2013 09:29 AM)Frank the Tank Wrote:  

(09-13-2013 09:22 AM)NIU007 Wrote:  So let's say ESPN/ESPN2 can be chosen a la carte. It would then cost $60+ a month just for those 2 channels?

That could easily be the case. The Mayweather-Canelo fight tomorrow costs around $70 for a 2 hour program on pay-per-view and that's for a niche sport like boxing. A single run-of-the-mill Monday Night Football game is worth much more than even the most high profile fights from a TV perspective. ESPN and ESPN2 carry dozens of events that draw more national sports interest than the Mayweather-Canelo fight every month.

However, unless ESPN isn't going to have commercials, then it'll be nowhere at that rate. Pay-per-views are high because there is no revenue from commercials.

(09-13-2013 09:36 AM)bigblueblindness Wrote:  Are you guys forgetting that the market sets the prices? If a la carte is available and the costs per customer are so high that no one is buying it, those channels will do one of two things: They will either negotiate lower contracts for live games, thus lowering the price, or they decide a $100 ESPN package is suitable and it cuts out a large portion of the population from viewing it at home. Guess what? Someone will make a killing by hosting viewing parties, just like every sports bar does in America on Saturday nights for PPV fights. Some sports would become niche, and we would move on to some other form of entertainment. ESPN/NFL/NBA/College Football will simply have to decide what they want to become.

What I'm saying is that there's a balance. Pure a la carte kills off so many channels that it destroys the entire attraction of a la carte in the first place. People aren't going to be able to choose among the 200-plus channels that are out there now. Instead, people will be choosing among only 10 or so surviving channels that have a lot more pricing power. You'd essentially have the equivalent of the department store industry for TV - there's Wal-Mart and Target that are strong and then everyone else is wheezing along. This isn't what consumers really want from a la carte. What they're *hoping* for (that they can pick and choose among 200 options) would never be able to happen, which is something that these politicians either aren't understanding or are ignoring.

The real subversion of the free market is the tying arrangements that cable networks have. Repeat: ESPN alone isn't what's expensive - $5 per subscriber per month is an accurate reflection of its true market value. The problem is the 20 other channels that a cable carrier has to buy just to get ESPN and having to pay above market value for those extraneous networks. That's the main reason why your cable bill is so high. Disney leverages ESPN to sell 20 other channels, Viacom leverages Comedy Central and MTV to sell 20 other channels, Comcast leverages USA to sell 20 other channels, Fox leverages Fox News and FX to sell 20 other channels, etc.

(09-13-2013 09:36 AM)bigblueblindness Wrote:  Are you guys forgetting that the market sets the prices? If a la carte is available and the costs per customer are so high that no one is buying it, those channels will do one of two things: They will either negotiate lower contracts for live games, thus lowering the price, or they decide a $100 ESPN package is suitable and it cuts out a large portion of the population from viewing it at home. Guess what? Someone will make a killing by hosting viewing parties, just like every sports bar does in America on Saturday nights for PPV fights. Some sports would become niche, and we would move on to some other form of entertainment. ESPN/NFL/NBA/College Football will simply have to decide what they want to become.

No, I am not forgetting about the market forces. I don't really think ESPN would really offer their package at $20/mo instead of the $5/mo they get now. But you can sure bet that they'll offer it for much more than $5/mo. They know a good chunk of their viewers will likely pay whatever they charge. ESPN would lose revenue in an a la carte model and they know it. The question really becomes: is Disney is willing to suck up that lost revenue in hopes that they can make it up on other channels?

And don't forget that there are many channels in your spectrum that you aren't paying for because of bundling. They're throw-ins to get the providers to carry them.

(09-13-2013 09:13 AM)Frank the Tank Wrote:  This means that Disney can charge subscriber rates for its lesser-watched channels at levels that are higher than what they would be in an unbundled free market because having access to ESPN is so important.

Well, ESPN is no. 1 in prime time during the fall, true. But, Disney is a ratings powerhouse, drawing many more people during the day and holding its own at night. For example, Tangled outdrew both the Florida-Miami game and the Florida State-Pitt game last week. The Princess and the Frog, a box office flop, also finished in the top 10. In fact, a second airing of Tangled finished right behind the FSU-Pitt game.

When it was in its heyday, SpongeBob would hold as many as 8 of the top 10 spots.

Look, I can see what you are saying. There are lots of networks I don't really care about, including TNT and TBS, which have high ratings. Bundling is a pain. However, as a sports fan, if you ask me what network is more important in my house, ESPN or Disney, its Disney, by far. But for a few must see games a year, I put ESPN on just because there is a game and its habit. I could just as easily put on FOX or NBC Sports.

What if they just had an ala carte sports package, an ala carte movie package, ala carte cartoon package, etc. Right now some of those are built on top of all the other channels you don't want.

(09-13-2013 09:59 AM)NIU007 Wrote:  What if they just had an ala carte sports package, an ala carte movie package, ala carte cartoon package, etc. Right now some of those are built on top of all the other channels you don't want.

If this bill goes through as expected on a provider basis, it will probably be more likely that the bundles are based on those networks, so you'll have a Disney/ABC bundle, A Viacom Bundle, A Turner bundle, etc.