What Goes Around Comes Around. Then It Kills You

Well, I guess that takes care of the a la carte cable controversy.

For a couple of decades, various activists have been lobbying hard in Washington to mandate from the likes of Comcast, Time Warner, Cablevision, Cox et al. the option for subscribers to choose their own menu of channels. Some advocate for legislative or regulatory action on the grounds of consumer savings (a dubious argument -- isn't the 14-piece sushi deluxe always cheaper than 8 pieces and a roll checked off individually?).

Others want choice in order to keep porn and violence away from the kids. They pay through the nose every month for 1000 channels, and only about 8 of them are family-friendly.

Big Cable has spent in the neighborhood of $60 quintillion to fight these efforts because obviously, without bundling, its business model is blown to smithereens. Put it this way: in order for sports leagues to gouge ESPN, ESPN has to gouge cable service providers. And in order for ESPN to gouge cable service providers, cable service providers have to gouge subscribers -- who pay $5 or so a month for ESPN whether they watch sports or not.



But if subscribers could opt out of ESPN and regional sports, the a la carte price for sports would, say, triple -- driving demand down and some viewers away altogether. Likewise, subscribers paying through the nose for cable just to get sports would contribute nothing to the 950 other channels, so those channels' per-subscriber fees would jump too -- also driving viewers away.

Then it's just vicious-cycle time to oblivion. So no -- a la carte digitally delivered TV is a non-starter.

Except that it's now here.

Cord-cutters can now have access to almost everything cable offers at much lower cost. With Hulu, Roku, Netflix, iTunes, and Amazon Prime we already had access to many, many programs for free or a nominal streaming/download fee. Major League Baseball, the NBA and the NHL sell direct to the consumer. So what would it take to replace the last of what cable provides? Local channels, with network feeds plus news weather and sports.

Such as Aereo, which harvests local signals by antenna, then retransmits them -- digitally with full DVR functionality for about $12 per month.

Yes, that does sound like theft. After all, cable also scoops up local TV signals, but they are obliged to pay hefty retransmission fees. How can Aereo just wantonly pirate the same goods? The answer is a cunning techo-legal loophole. They use thousands of antennas, each individually assigned to a single user for any given period of retransmission -- so in effect they conform to federal law: an individual getting access to a signal delivered over public airwaves. A federal court has just signed off, and now Aereo is expanded beyond its New York test market.

Bingo. De facto a la carte -- and yes, at less than half the cost of the average monthly cable bill.

It's a bit cumbersome for a user to juggle all the incoming, but less and less so all the time. The result will be an acceleration in cord-cutting, which will drive cable subs still higher. Which means -- oh my -- a vicious cycle toward oblivion.

Hate your cable company? Well, in an abusive relationship and now the licensed airwaves, what goes around comes around. The schadenfreude is about to hit the fan. 

7 comments about "What Goes Around Comes Around. Then It Kills You".
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  1. Irwin Starr from Landings Eagle, April 15, 2013 at 1:15 p.m.

    Looks like the old mantra "let the marketplace do it" may finally be making some progress!

    Add the recent recommendation by John Malone to separate sports into special tiers and the consumer may be making some slow progress.

    Now that broadcasters have such a special interest in being cable casters (since retrans is finally working in their favor) don't expect any support from them.

    Shouldn't we all be prepared for a pay per view model for virtually everything in the more distant future?

  2. Edmund Singleton from Winstion Communications, April 15, 2013 at 3:13 p.m.

    Those of us who love television are being forced into a corner where Aereo lives, and I think we are going to love being there...

  3. Douglas Ferguson from College of Charleston, April 16, 2013 at 8:06 a.m.

    Hell hath no fury as Barry Diller scorned.

  4. Michael Hill from CRS, April 16, 2013 at 11:42 a.m.

    This may be true: (a dubious argument -- isn't the 14-piece sushi deluxe always cheaper than 8 pieces and a roll checked off individually?) but no sushi place forces you to buy stuff you don't want to eat. Bad argument.

  5. John Bjorn from Anne Arundel Broadband, April 16, 2013 at 5:18 p.m.

    Programmers continue to hide behind the cable companies. Cable companies are fighting this legislation not because they don’t want to offer a la carte programing, but because a la carte offers violate the contracts that programmers have forced on cable companies. As a small cable operator, I can assure you that offering only what our customers want to watch or buy would be welcomed. The consumer’s beef is not with the cable companies, but with the programmers who force them to carry unpopular programing and disallow a la carte pricing models.

  6. Cliff Stepp from SteppUp Consulting, April 16, 2013 at 6:38 p.m.

    My favorite part is that the "loophole" that Aero used in court was put into law due to a lobbying effort by the cable industry. Talk about, "What Goes Around!"

  7. Edmund Singleton from Winstion Communications, April 17, 2013 at 4:07 a.m.

    Give me a la carte or give me...

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