[opendtv] News: Cable CEOs Downplay Reg Risk
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Tue, 4 May 2004 10:11:40 -0400
Cable CEOs Downplay Reg Risk
By John Higgins -- Broadcasting & Cable, 5/3/2004 5:34:00 PM
With critics aiming two major regulatory missles at the industry, the
chiefs of the three largest cable operators said they see little risk
of new, dramatic pricing and indecency restrictions actually passing
Congress.
Critics of cable's high rates are trying to force cable operators to
sell all programming on an a
la carte basis, one channel at a time.
A separate group of critics of television content want to see tough
rules restricting cable's raunchiest content. Some of them are also
championing a la carte, allowing consumers who object to a channel to
drop it without being forced to keep paying for it.
At the opening general session of the National Cable Show in New
Orleans, Comcast CEO Brian Roberts questioned whether the indecency
restriction push is "a legitimate debate or an election-year debate".
Time Warner CEO Richard Parsons noted that "The indecency issue is
as old as our democracy." But "I don't think it's going to be a
significant issue for our industry." He said that media companies may
tone things down a little, but ultimately "you run your business the
way your customers tell you to run your business."
As for a la carte pricing regulations, the executives, including
Charter Communications CEO Paul Allen, asserted that it would destroy
the economics of ad-suppoerted basic cable networks, which rely on a
lot of casual grazers to stop in.
Roberts compared basic channels to boutiques that would flop as
stand-alone stores but thrive in a mall where they deliver traffic to
each other. "That collectivism is what has allowed the advertisers to
come to cable," Roberts said.
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ANALYSIS
Collectivism?
Sounds more like socialism or communism. "Forget the marketplace;
make people buy what we want them to see, and don't EVER tell them
how much they are paying for what."
As we have seen several times in recent weeks, the big media
conglomerates use retransmission consent or in the case of Turner,
negotiated carriage, to force the cable companies to take the entire
package of channels that each of the big five are pushing. "You can't
have the stuff that most consumers WANT, without also taking - and
making customers pay for - the stuff that they might otherwise refuse
to pay for.
This doesn't sound much like a Mall to me. In a Mall, the retailers
PAY a premium to have exposure to the "audience" that the Mall
attracts. They not only pay rent, but in most cases they pay a
percentage of sales as well.
As a retailer I would love for the Mall to pay me to locate my store there...
What would the likely outcome of a la carte pricing really be?
For the most popular channels the price would likely increase, given
the likely outcome that a percentage of the total audience that now
pays for a channel like ESPN would choose not to subscribe. So
instead of everyone paying $3/mo for the ESPN channels, those who
really want these channels would probably be forced to pay $5-10/mo;
competition with other sports networks (like Fox) might keep the
prices down in the long term, but sports junkies are the biggest
spenders for premium tiers from the multi-channel distributors.
For the special interest channels, in the short term they might be
able to keep charging the 20-50 cents per month they currently
receive; but it would be harder to raise the fees to compensate for
those who would choose not to take these channels.
And the general interest browser channels would face the greatest
challenge. They need to be in every home to generate enough audience
to sell commercials. Subscriber fees would be counter productive to
this goal.
So what would really happen?
The browser channels would quickly drop the small subscription fees
they receive today, in return for continued distribution to every
home in a market. In short order, these channels would form a basic
tier of Free TV channels, which would most likely be included in the
lifeline tier offered by cable systems today.
The DBS operators most likely would put these channels into a FREE
TIER. If you buy your DBS STB you would get these channels for free,
much like the USDTV STBs , which receive local broadcast channels
without a subscription or conditional access card. If you subscribe
to paid channels, you might get a subsidy for the STB, and you would
have access to all channels on an a la carte basis.
In other words we would have essentially Free TV once again, which
would be used as the bait to draw people into a service where they
could buy additional channels on an a la carte basis.
The channels that charge subscriber fees would likely be the first to
move to more targeted forms of advertising - they would need to do
something to justify the fact that subscribers are paying for
advertiser supported programming. And some would evolve into pure
premium channels without ads.
So, is this an accurate analysis or just a pipe dream?
Regards
Craig
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