News From Terre Haute, Indiana

July 7, 2013

FLASHPOINT: Time to stop paying for TV you don’t watch

Jeffrey M. McCall
Special to the Tribune-Star

---- — When you go to a restaurant for a burger and fries, you only pay for the items you order. You don’t pay for the entire menu. If you are a cable television subscriber, however, you are paying for dozens of channels you don’t watch and don’t want. That’s because cable TV giants, such as Comcast and Time Warner, still sell their product in bundles of channels, reaping the benefits of charging consumers for channels that aren’t supported by public demand.

The Government Accounting Office reports cable TV prices have jumped 33 percent in eight years, even though the Consumer Price Index has risen only 15 percent. Projections are that rates will climb at 6 percent each year. The average cable viewer is charged for more than 100 channels delivered by the distributor but watches only about 18 of those channels.

Content providers like Disney and Viacom bundle channels when negotiating carriage agreements with cable companies. Viacom, for example, provides CBS and Nickelodeon content, but bundles less popular channels like VH1 into any sales agreement. Disney bundles ESPN alongside A&E, even though sports fans might never tune to A&E. Cable giants Comcast and Time Warner own many of their channels, so a Comcast subscriber will have to pay for SyFy in order to get MSNBC and other Comcast offerings.

The cable industry has a racket making people pay for products that aren’t wanted. Parents Television Council President Tim Winter calls this method of cable pricing “a forced-extortion scheme.” Law professor Warren Grimes of the Southwestern School of Law has studied this issue and estimates that cable subscribers are overcharged about $34 billion a year paying for channels they don’t watch. Meanwhile, the National Cable and Telecommunications Association spent $18 million last year lobbying and marketing to maintain the status quo.

Sports programming is a major driver of surging cable costs. Rights fees are up as sports channels bid to secure rights to broadcast popular leagues and teams. Estimates are that sports programming accounts for half the cost of pay television, even though 60 percent of all viewers have no interest in sports. Those non-sports viewers, however, are still charged more than $5 monthly on their cable bill for ESPN alone. Cable pioneer and media executive John Malone said in a published report that it is “essentially a high tax on a lot of households that don’t have a lot of interest in sports.”

Public interest groups have become vocal recently, calling for a la carte purchasing of cable channels, a plan that would empower viewers to pay only for the channels they want. The media reform group Free Press along with the Parents Television Council and Consumers Union are among the leading a la carte proponents.

Sen. John McCain of Arizona has introduced a bill in Congress that would bring about a la carte cable and stop the practice of bundling. It is too early to predict if this legislation can get through Congress, but the NCTA has already begun its PR campaign to fight it, saying in a statement that “subscription bundles offer a wider array of viewing options, increased programming diversity and better value than per channel options.” This rhetoric begs the question, of course, because viewers vote with their remote controls as to which channels they like. They don’t care about a “wider array” or “programming diversity.” Further, there is no enhanced value for a viewer who is offended by the drug-saturated and sexually charged programs of MTV when they have to pay for it.

The business model under which cable TV has operated has long been unfair and is now growing old, too. The bubble created by high cable prices can’t continue to grow, and the cable industry would be wise to adjust to the changing market before the bubble bursts. A million American homes cut the cord in the last year, now relying on streaming Internet and over-the-air broadcasts for their video consumption.

The technology for executing a la carte is available, as some cable systems in Canada have already demonstrated. Technology companies like Intel are in design for systems that would deliver a la carte programs over the Internet. The cable industry made mountains of money with an economic model that served it well for years, but consumer awareness and technology changes have arrived. Adaptation now would be more sensible than becoming a business dinosaur.



Jeffrey M. McCall is a professor of communication at DePauw University in Greencastle, and author of “Viewer Discretion Advised: Taking Control of Mass Media Influences.” Contact him at jeffmccall@depauw.edu. On Twitter: @Prof_McCall.