Commentary
Legal Disruption Ahead For TV? Not Just From Aereo, But Network Bundling Cases
- by Wayne Friedman , Staff Writer, June 24, 2014
Cablevision Systems’ “antitrust” case against Viacom -- which started about a year ago -- has moved to its next legal phase. Cablevision claims that Viacom is forcing it to buy Viacom’s full suite of programming channels, some 14 in all.
Cablevision really wants just eight -- some of the bigger name channels like MTV, VH1 and Nickelodeon. It says what Viacom is doing amounts to “antitrust” activities. A U.S. District Court denied Viacom’s recent motion for dismissal of the suit.
Viacom claims Cablevision is just looking pay less for the channels it wants overall.
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If Cablevision wins, many believe it would radically alter the TV business -- just as if Aereo wins in the Supreme Court, it wouldn’t have to pay carriage fees to broadcasters.
If pay TV distributors, cable, satellite, and telco operators, are allowed to pick and choose whatever TV stations and networks are available, we would be headed for a true on-demand marketplace where consumers pay for exactly what they wanted. Much research has shown viewers generally watch anywhere from 7 to 12 core channels.
This isn’t exactly about a la carte programming. Yet detractors would say if Cablevision’s scenario wins out, it could ultimately mean skyrocketing prices for TV consumers -- as traditional TV content providers and their distributors would be asking much more in the way of fees for those individual networks.
True a la carte programming distribution would mean traditional national TV ad dollars would decline substantially, as national U.S. TV distribution for those networks would fall to possibly half their existing levels.
The downside, perhaps irony, is that some traditional TV broadcast networks have already threatened that should Aereo prevail, they claim they will turn into cable TV networks.
So if Cablevision gets its way, that option -- for those owning broadcast networks and cable networks -- will be less promising. Double trouble?
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
If we ever went to true a la carte program distribution, this would spell the demise of virtually all of the smaller, more selectively programmed cable channels as they could not garner enough paying customers to operate at a profit without demanding huge subscription rates from their viewers. In my opinion, that would be a disaster, not only for the viewing public but also for advertisers and program producers/distributors. Who's going to buy all of those off-network syndicated shows? Who's going to fund all of the first run reality and documentary entries?We may complain about the low quality of so many TV shows, but a la carte distribution would give us mainly "mass appeal" programming and that would drive many of us nuts.
I disagree, Ed. Niche programming will survive the same way niche publishing has survived: by convincing advertisers that smaller but dedicated audiences is better than larger but disinterested audiences. It's likely that audiences will shrink, but CPMs will go up, offsetting the trend. Frankly, I think advertisers will welcome knowing that they're actually getting what they're paying.
And doomsday scenarios of total ad revenues dropping by half are nonsense. No one is saying people will watch less television. They'll just spend less time clicking through channels they never watch to get to the ones they do. And for every cable channel that doesn't adapt, there'll be one that will and will thrive.
Off-network syndicated shows? First-run reality and documentary series? Ed, have you ever looked at the weekly schedules of, for example, H2 or MTV2? They're almost all filler repurposed from their brands' flagship networks. These are the extra channels that programmers drag in to inflate subscriber fees and prepare beachheads for new networks such as Esquire or The Hub.
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And how would the slate of networks become somehow more "mass appeal"? Except for Turner Classic Movies (thanks TCM!), every channel has moved away from its founding niche. It's First Rule of Programming: Every pay-TV channel tends to become like every other channel. SyFy adds wrestling. TV Land adds original sitcoms. AMC rejects classic movies. The freakin' Weather Channel is mostly pop documentaries.
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As more individual shows are made available through alternate sources, some kind of a la carte appears inevitable. If programmers insist on all or nothing, they're going to see more viewers cutting the cord, instead picking and choosing what they want over the air and online.
I agree with Michael. I went into my local grocery store to purchase Cream Cheese. Upon arriving at the checkout I was advised in order for me to buy that, I would also be required to purchase hot sauce, stuffed crabs, a head of celery, one gallon of milk, scallions, a bag of potato chips, pickled pigs feet and a half pound of head cheese. Pick any scenario you like but bundling is subsidizing and like government subsidies, it just doesn't make sense.
Sorry, guys, but I'm sticking to my guns on this one. Wayne: every year my company wades through the cable channel program schedules and the ratings to come up with estimates of how much time is spent with various program genres. I agree with you about the rather disappointing quality of much of this fare and the use of excessive reruns---which are essential to the cable business model-----is another sore point. However, we also see how important an aftermarket these channels are for many syndicators of endlessly recycled off-network and made-for-cable programs. As for the question of who would survive---mass or selective programmers-----it seems to me that the former would have a huge leg up in most of the a la carte schemes proposed so far. For example, let's say that the consumer is given a menu of 150 or so channels to choose---each with a price tag. At present these are all bundled together by the cable or direct TV service and offered at a "basic cable" rate of 75$ per month, hypothetically. But now you've got to pay a set price for each channel which, if agreed to for all of the channels would probably total two or, possibly, three times the amount currently charged for the basic cable package, depending, of course, on how much the major "must buy" channels think they can ask. In this regard, they have the broad appeal to lock up 70-95% of the subscribers at almost any sensible price point, leaving not very much for the little guys. As a result, and sadly, most of the selective ones would suddenly find their coverage dropping from 90%+ of U.S. TV homes to 25% or lower and some would have a hard time getting as much as 5%. Since carriage fees probably are the only incomes that make these ventures profitable, how would such channels survive? Could they charge far more than ESPN, CNN, Discovery, etc. to make up for their coverage shortfall? I doubt it. Would advertisers, who now penalize such channels, due to their low ratings, opt to hike their CPMs to triple the levels they pay for the larger channels to help the selective operators remain in business? Again, I doubt it. That's why a la carte worries me. It sounds fine---and very democratic, which I'm all for. But, in reality, it might kill off too many of the special interest channels which, frankly, I, and others, find more interesting.
Ed, you are a wise man. Niche works when production costs are low. TV production is not low cost. Bundled sales mean lower cost per channel but higher overall cost. The trick is in tiered bundling. I saw an interesting video clip the other day, shot at a GOT expo. Virtually everyone was pirating the episodes citing subscription costs as too high. One put the costs at $125 (which was not correct). He then popped into the photo booth for 7 seconds for a photo with one of the characters and paid $70 for the 7-second privilege ... about what you pay for a month's multi-channel subscription.