Monday, May 13, 2013

Cord Cutting or A La' Carte, in the End it's All the Same

Article first published as Cord Cutting or A La' Carte, in the End it's All the Same on Technorati.

Last week Senator John McCain (R-AZ) took to the Senate floor with a proposal that seeks to lower your cable TV bill.   His proposal is to allow anyone who has cable or satellite television service to do something previously unheard of in the industry.  That is, only pay for what they want to watch.

A belief shared by McCain's colleague across the aisle, Senator Jay Rocefeller (D- VA)

"...rather than being able to pick smaller packages or choose the channels they want, consumers are still forced to purchase larger and larger packages of channels no matter how few they actually watch. This says to me that the market isn't working."

The Senate Commerce committee is scheduled to take up McCain's bill in a hearing on Tuesday (5-14.)

McCain's assertion is based on a solid premise.  Look at any cable or satellite TV provider and you find that all their programming is bundled into packages or tiers.  The only a la' carte options you have are for the so-called premium stations like HBO or Showtime which by themselves can cost an additional $10 a month or more and in some cases also come as part of a bundle.

Gone are the days of $20/mo basic cable.  A subscriber can easily find a bill of $50 or more per month with no premium channels.   Add HBO and a few HD channels and that bill is closer to $125.

In the end you ultimately end up subsidizing channels you don't watch.  That's because providers negotiate not with HBO or AMC but rather their parent companies like Viacom and Time Warner.  It's an all or nothing deal that can cause a disagreement over licensing fees on one channel to affect a dozen others.  That's why a tiff between a service like DirectTV and Viacom leaves subscribers with multiple blank channels instead of content. 

Cable industry lobbyists are against McCain's proposal claiming it's a "lose-lose" for both customers and providers as evidenced in an official statement from the National Cable and Telecommunications Association.

"As countless studies have demonstrated, subscription bundles offer a wider array of viewing options, increased programming diversity and better value than per channel options,"

Of course that assumes that the "wider array" is something you actually care to watch.  Even if you don't,  you're going to pay for it anyway and that's the logic of their claimed "win-win."

This is the rationale that's led to cord cutters who've turned primarily to online media sources like NetFlix and Hulu.  Unfortunately, legitimate online sources still can only offer a fraction of the content enjoyed by the traditional delivery model.  Unless you've got an HBO subscription, for example, you're not going to see "Game of Thrones" on the same day it airs unless you turn to illegitimate sources.

That's due to a reluctance of channel owners like Viacom to embrace online options that would lead to greater consumer choice but a less predictable revenue model.    It's flawed logic, however.
If you're a cord cutter it's probably not of any great consequence to you  about what happens to pay TV subscription rates but you're going to be affected all the same.   

With online bellwethers like YouTube launching paid channels it may seem like online TV options are poised to offer what traditional pay TV won't.    If the industry is forced into the a la' carte model, however, online TV will soon end up looking like it's broadcast predecessor.

You may be able to pick and choose from a few sources but likely run headlong into the same bundling schemes as traditional pay TV.  That's because the channels don't own the content, their parent company does and it's up to them to decide how it gets distributed. 

Add in the more targeted paid online options and soon you'll be paying as much if not more than if you'd never cut that cable.  Lest we forget data caps imposed by most Internet providers that could result in a nasty surprise in that bill if you enjoy HD content.

In short, the old guard of broadcast television has nothing to fear as one way or another we'll still end up paying more no matter how we choose to view their content.