HOW COMPANIES COMPETE By MIKE McDANIEL Houston Chronicle
April 23, 2006 http://www.chron.com/disp/story.mpl/ent/tv/3813839.html Here, simply, is how economics works in the world of cable: Cable companies (such as Time Warner) pay cable networks (HBO, Discovery, etc.) a per-subscriber fee based on the network's tier, popularity and reach. Other factors: whether the cable company owns a piece of the network; whether the network is presented as one of a package of channels (such as ESPN, ESPN2, etc.). The companies bundle the networks with other channels. The more popular the bundle, the more penetration into the market, the more a network can charge for ads. Ron McMillan, president of Time Warner Houston, says that as telephone companies get into the TV-delivery business, they will not break rank and offer a la carte as an inducement to switch program providers. "(Telephone companies) will have the same issues we have when they start negotiating contracts with suppliers," he said. "They're either going to pay a really high price per channel or they're going to have to commit to offering those channels as part of tiers, and I suspect the latter will be where they go." Not everyone is so sure about that. "Clearly if there's more competition in that marketplace, it makes it more likely that consumer demand for channel choice will be met," said Dan Isett, director of corporate and government affairs for the Parents Television Council. AT&T has been forthcoming that it would love to offer a la carte if it were able to buy their programming that way. McMillan points out that satellite TV providers DirecTV and EchoStar are in a better position to offer a la carte than cable, "and yet both have elected not to, for the same reasons we have." Unlike cable, satellite is 100 percent digital and all of its channels are scrambled; a box is necessary at every outlet, and content use can be easily identified. In Houston, McMillan says 6 of 10 cable subscribers have a digital set-top box. That's 10 percent more than the national average but a long way from total saturation. Since 40 percent of subscribers get analog TV (or have digital in one room and analog in another), they have no box and, hence, cannot receive a la carte programming. ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
