Cable TV bundles may slowly come undone Ordering fewer channels might not please all
9:04 PM, Oct. 10, 2011 Written by Thomas Nord The Louisville [KY] Courier-Journal http://www.courier-journal.com/article/20111010/BUSINESS/310110033/Cable-TV-bundles-may-slowly-come-undone When she gets home from a long day working and attending graduate school, Tricia Cooper is likely to plop down on the couch, grab the remote and start scanning the tube for her favorite channels, including Comedy Central, History Channel, Food Network and A&E. She pays Insight Communications $62 a month for basic cable television and Internet service, but usually breezes right past most channels, including, she says, Fox News, CNN, ESPN, “church channels” and the local TV stations. “I really don't understand why I have over 100 channels to choose from,” Cooper said. “Most of them are horrid.” Customers such as Cooper have been demanding more control since the early days of cable TV, and for decades cable providers have resisted. But a shift may be occurring, opening the door for so-called “a la carte” cable, where viewers can create the exact lineup they want — or at least, smaller bundles that better reflect their watching habits. Up to now, the industry standard has been to rely on a system of tiers offering a mix of entertainment, news, sports and lifestyle channels. But two regional cable providers, Suddenlink Communications and Mediacom Communications, made news recently when they hinted at a move toward “unbundling” channels and giving consumers more control. In a letter to the Federal Communications Commission, Mediacom CEO Rocco Commisso said “a carefully designed a la carte system” would give cable subscribers more control over what they watch and pay for. Mediacom provides cable TV to about 1.2 million subscribers in the midwest and southern U.S. Suddenlink has about 1.2 million customers in the south and southwestern U.S. Like so many media stories these days, the Internet is a major player in this tale. With a significant number of people cutting their cable and watching TV on the Web, cable providers are feeling pressure to adapt. In the second quarter of 2011, Comcast, the nation’s biggest cable provider, lost 238,000 TV subscribers, followed by No. 2 Time Warner Cable, which saw 130,000 customers drop their TV service, according to USA Today. (Page 2 of 4) With the economy still in a rut and the Web, with such services as Hulu and Netflix, offering more and more TV content, cable companies are under pressure to keep people from migrating away. “There are some progressing views at how we would look at a la carte cable as the market changes,” said Jason Keller, director of public affairs for Insight Communications, which serves 775,000 customers in Kentucky, Indiana and Ohio. “There has been a shift in perspective within the industry.” Keller said Insight, which is being purchased by Time Warner Cable for $3 billion, isn’t planning to offer a la carte cable, but is exploring the idea of offering genre-based bundles, such as one that groups the various ESPN channels, Fox Sports Net and Versus together. “It’s essentially conjecture at this point,” Keller said. “It needs a great deal more study.” Neither is AT&T U-verse, which entered the Louisville cable TV market in 2009 and serves an undisclosed number of customers, planning to offer a la carte service. “Not at this time,” said Cathy Lewandowski, a spokeswoman with AT&T Strategic Communications in Nashville, Tenn. Piggyback channels With a la carte cable, the devil is in the details. Under the current business model, offering cable channels in tiers obscures what they truly cost cable providers such as Insight. ESPN, for example, is among the most expensive channels to carry, said Vince Vittore, a principal analyst with the Yankee Group, a Boston-based market research firm that tracks the cable TV business. Bundling it with cheaper channels allows cable providers to offer a wide selection of programming at a somewhat reasonable price, and it allows niche programmers to piggyback on the popularity of more widely viewed channels. Here’s where it gets dicey for those niche channels: Were ESPN priced more like a premium channel such as HBO or Showtime, millions of sports-crazy viewers would probably still fork over the cash, only to drop lesser-viewed channels so they could keep their monthly bill under control. (Page 3 of 4) “On the surface, it sounds very appealing: Why should I pay for 500 channels when I only watch 10 or 12?” Vittore said. “The big problem is that without that cross-subsidization model, a lot of these channels would go away. BET would have to survive on its own. History Channel would have to survive on its own. ... Once you’re past the top 10 or 12 channels, the number of viewers drops off severely.” At the same time, media giants such as Viacom and Disney aren’t crazy about the idea of a la carte cable, Vittore said, because their channels are in millions of homes they might otherwise lose were everything unbundled. Nor are such major cable providers as Time Warner Cable and Comcast rushing to disrupt a business model that, while flawed, has been in place for years. An a la carte system would threaten the volume discounts cable companies get from the cable channels in exchange for being in bundled packages. More than likely, though, something is going to have to give, Vittore said. With the cost of providing such channels as ESPN growing, cable providers might turn to some form of a la carte cable as a more direct way to pass the cost along to consumers. Lawmakers also could step in and force cable providers to give consumers more control over the channels they buy. Although Insight’s franchise agreement with Louisville is up for renewal, a la carte cable has not been an issue yet, said Metro Councilman Kevin Kramer, a Republican who represents District 11 and who on the National League of Cities Information, Technology, and Communications Steering Committee. “It’s never been discussed at the Metro Council level,” Kramer said. “It is certainly not something that there has been a lot of public outcry for.” Smaller packages Although Time Warner Cable chairman and CEO Glenn Britt is opposed to a la carte cable, he said the company is open to offering cheaper cable packages with fewer channels. In response to a reporter’s inquiry, a Time Warner Cable spokesman in New York emailed comments Britt made late last year at the UBS Global Media and Communications Conference. (Page 4 of 4) “We think, as I said, we need to start segmenting the market. We also think that, as I said here last year, some consumers want more choice, meaning they want smaller packages. I don’t think people really want a la carte; that was a thing people talked about a few years ago. The idea of somebody trying to figure out hundreds of channels of programming one by one is just clearly not practical,” Britt said. “But people would like to know that they have some kind of choice, so I think it’s important for this industry, collectively, not just us but we and the programmers, to figure out how to give consumers what they want.” Vittore said Time Warner Cable has been testing a concept in New York and Ohio called TV Essentials, which is a $30 package of channels that does not include ESPN. New York-based Time Warner Cable has about 12 million cable customers in 28 states. “It’s been successful enough that they are going to expand it,” he said. Complicating matters is the cable companies’ generally negative standing with the public. Year after year of rate increases and a lack of transparency about what they pay for programming have soured many people, Vittore said. “The industry has done a terrible job explaining exactly why your rates are going up,” he said. Even if a la carte cable did come to Louisville, it might be too late for viewers such as Cooper. Asked for her dream lineup, Cooper listed BBC America, OWN (Oprah’s new gig), FX, A&E, Science and Comedy Central, among others, but said she would not pay more than $3 per channel per month. “I’m cheap,” said Cooper, 33, of Butchertown. What if she were offered a cable package that, say, gave her 20 channels of her choice for $100 per month? “Hell no,” she said. “I can, and do, watch most of the things I want to watch on the Internet.” -- ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Mail: antunes at uh dot edu University of Houston Houston, TX 77204-3011 _______________________________________________ Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
