When my bill for receiving WCPO, WCHS and WSAZ went from $2.00 to $2.25, I was ready to throw in the towel. Where would it stop. Fact is there really wasn’t another way to get a signal in that hollow.
So, today, does it bother me that folks paying between $100 and $200 a month are about to get a 5+ percent kick in their backside? Well, yes. Of course. I’m one of them.
First, full disclosure: When someone says it’s not about the money, it’s about the money. So with that out of the way, I’ll go on to say that it really isn’t about the money (see immediately above) but the fact that these guys’ timing is pretty poor.
A look at the landscape: We still have over-the-air (OTA) television. We have access to cable, to satellite and to copper-delivered entertainment. Beyond that, we have IPTV and OTT. When I talk about IPTV, I mean any system that delivers content using Internet Protocol. This could be via an infrastructure provider, e.g., a cable provider using Internet Protocol to deliver select content…VOD and live events.
It also could be via the Internet though that has come to be called “OTT” or Over-the-Top, a term that has become synonymous with Internet delivery. But it gets narrowed a bit in that it’s usually meant to mean content that doesn’t pass over cable or satellite or copper based services.
Confusing? You bet. After all, content comes over cable. Some people have Internet delivered via cable. But the nuance is that OTT is delivered via the Internet, itself. If your cable company provides your Internet, the OTT content comes directly to you via Internet without the cable company “handling” it.1
Let’s throw another acronym into the mix: MVPD. Multichannel Video Programming Distributor. These are the guys who distribute more than one program source at a time – the cable companies, satellite organizations and telcos who deliver the 30 to 3000 programs to your home
They’re different from the OTT guys like NetFlix and Hulu. Both of these deliver content to you via the web directly. Many others are getting into OTT. As anyone who enjoys multiple types of entertainment knows, all of these acronyms have the nerve to charge something for their service. Like their employees have to eat or something.
I’ve written a couple of times in the past about distribution and channels (see the blog just below). Every time I do it is with attention to ever-expanding sources. And now, the sources are starting to step on one another.
While it may not have been the first such situation, but arguably the most famous is Sony and the BetaMax. Sony hardware got a great product to market. Sony software started yelping. Now we see cable owning broadcast, broadcast owning cable, most of them providing some type of Internet, satellite, and the Internet, itself, where entrepreneurs are desperately trying to distribute all the other guys’ stuff and make a buck at it. And it’s like a car keys party of the ‘70’s (so I’ve heard). Who knows who’s pairing up with whom next.
The diversity and mix makes it a regulatory free-for-all and it’s dangerous to jump in with laws and rules without realizing that the arena is one big Pillsbury Dough Boy. You push in over here; something’s going pop out over there. Unintended consequences hiding in the weeds everywhere and if there’s one thing the government isn’t good at, it’s planning for unintended consequences. Yeah, oxymoronic, but you get the point.
Speaking of point, let me get to mine, finally. Rates are going up again. The primary driver is sports programming. ESPN is the biggest culprit. Here’s The Wall Street Journal’s chart developed from SNL Kagan’s numbers.
That’s 2014. The producers are back seeking another bump. It’s that 5+ percent I mentioned at the top. Now, according to Kagan, program costs were up 9.1 percent in 2013 and 8.1 percent in 2014. I’m saying 5+ percent in 2015 because it’s safe and it’s what some in the industry think will be close to accurate. Kagan says 8.8 percent but that’s just one source.
That begs the big question. How much longer will people pay for things they don’t use? I know that when I order Buffalo wings I get both ranch and bleu cheese dips. The bleu cheese gets dumped. Should I be able to buy the wings for 20¢ less by telling them to keep the bleu? I don’t use the rear power outlet in the car. Should I be able to buy it without?
You know where I’m going. I’m paying for hundreds of channels and watching only a few. Stop charging me for the bleu cheese and the power outlet.
I’m not the only one. Here’s Nielsen’s evaluation:
http://www.nielsen.com/us/en/insights/news/2014/changing-channels-americans-view-just-17-channels-despite-record-number-to-choose-from.html (2014 not yet available)
Looks like we’re all paying for a lot more than we’re using.
When does that stop? A number of factors come into play. First: Channels (wrote about it last time). When folks go to a provider directly, voila. They’ll pay. But they’ll be the only ones paying. You think content providers aren’t scared of this? No? Think again. Second, when subscribers start demanding a la carte from operators. Some folks equate tiers with a la carte. Not the case.
The tiers are stacked to pack in channels you don’t necessarily want with those you do – amortizing the per-sub costs for the operator. A la carte will mean you choose – not from column A or B but from the entire list. It’ll have the about the same effect as going directly to the provider. Maybe better since Disney may well try to package all the Disney/ABC/ESPN/History/A&E/so on networks for one price. And it’ll be up to the consumer to decide.
The third factor is third party OTT where a Hulu manages separate streams for content providers. Oh, wait. Who owns about a third of Hulu? Right. That would be Disney.
The important thing is that some sort of a la carte is heading our way. Most of the financial guys on the supplier side don’t see it. They don’t want to. Think of the dominoes that will fall. With sports, if non-sports folks aren’t subsidizing the sports lovers with their cable/satellite bills, what happens to rights fees? And, if rights fees fall, what happens to pro sports leagues? And if the leagues have their revenues cut, where do those poor players turn?
Does it matter?
As an example, Thursday Night Football moves from CBS to The NFL Network after a few games. CBS continues to produce – and to weaken its Thursday night lineup with non-sports fans – the games for the NFL. And how long does that go on? When does the NFL really start producing their own games, on their own budget and distribute directly at a profit. Are there enough Thursday Night Football fans around willing to make it profitable for the NFL?
Does that matter?
If, tomorrow, the Lorre Channel launches as the only outlet for all of Chuck Lorre Productions’ fare, are CBS and all those rerunning the series in trouble?2
Tomorrow? No. Next Tuesday? Keep driving those prices up and maybe. At a buck a show, I can watch 140 programs a month that I want and come out better than I am now.
1 Watch out here! That pesky “net neutrality” provision could change this completely.
2 Yeah, yeah, I know, existing contracts, blah, blah. It’s an example.