Hate Paying for Cable? Here’s Why.
Love grousing about cable TV? Then I’ve got a list for you. It comes from industry analyst SNL Kagan, and I came across it via a research note Barclays Capital’s Anthony DiClemente sent out last week.
DiClemente was arguing that the bundled approach to cable TV–whereby subscribers get dozens or even hundreds of channels for one big fee, no matter how many networks they actually watch–wasn’t going anywhere for quite some time. If ever.
But if you’re the kind of person who thinks we’re headed for an a la carte model in which programmers compete directly for consumer dollars, you can use this as fodder for your argument. Because you can see just how much you’re paying for stuff you don’t want.
Take a look (click to enlarge–or drag the whole image off of the browser and onto your desktop if you want a better view):
Obviously these are wholesale prices, not retail. But this gives you a very good idea of where the money goes–to a lot of channels you likely never, ever, look at.
You’ll find this particularly upsetting if you don’t watch sports. Because sports channels account for about 40 percent of cable fees.
And you’ll also be upset once you realize that the broadcast networks–GE’s (GE) NBC, News Corp.’s (NWS) Fox, Disney’s (DIS) ABC and CBS (CBS)–are going to get added to this list over the next year or so. Even though anyone who doesn’t pay for cable gets them for free.
Hence, last winter’s Fox vs. Time Warner Cable (TWC) standoff, and the Disney vs. Cablevision (CVC) fight that ended in time for the Oscars last night.
As I’ve said before, I think that many cable viewers are probably okay with most of the bundle–or at least unwilling to foot the bill for real a la carte pricing. But maybe if you waved this list in front of them, they might rethink that.
Comments
Thanks for posting this. Maybe we can get a non-sports package. I might be able to live with that.
Posted by RickyF at March 8th, 2010 at 1:13 pmThe most expensive channel on the list that we watch is 26 cents/month.
Posted by davebarnes at March 8th, 2010 at 2:56 pmBring on a la carte pricing.
Again, those are wholesale prices. But here's the cable industry's argument – in an a la carte world, that 26 cents will get much more expensive, because you won't have other channels subsidizing it. Reasonable consumer answer to that argument, just to complete the circle:
Posted by PKafka at March 8th, 2010 at 3:17 pma) Fine. Still better paying more for something I want instead of buying other crap I don't.
b) Programming costs will adjust to the market. If there's less money to make the likes of “Mad Men”, then the people who make “Mad Men” will need to figure out how to make the show for less, just like everyone else does.
Thanks for the evidence that, unless cable/distro companies are stooopid, they're probably getting paid to distribute all these lame, commercial channels. That's because they're NOT commercial free and typically just repeat old programming.
Posted by justau at March 8th, 2010 at 4:42 pmThank you for sharing the wholesale rates by channel. Bundling might have made sense back when we didn't have diversity of programming. Now we have hundreds of channels even though the average household watches 16 or less! Why should we pay for channels we don't watch?
A la carte would enable us to pick our own programming. Moreover, with a la carte, we wouldn't be trapped in the middle of programming wars. The dispute between Cablevision and ABC is emblematic of future problems.
Instead of being a pawn in their game, fight back by supporting the movement to a la carte: simple idea that entertainment should be what we want, when we want it, at a reasonable price.
Posted by KevinSF at March 8th, 2010 at 8:07 pmGreat list. But the retail value of each of these channels is probably 3-5x the price listed. The average TV viewer watches a lot more TV and a lot more TV channels than you probably think. A la carte gets expensive very fast. Further, it's the content programmers and cable channels that have the most to lose from a la carte models. So don't expect the bundle to change anytime soon.
Posted by mikeberkley at March 9th, 2010 at 12:49 amOf course the reason a la carte appeals to consumers – potentially cheaper cable bill – is exactly the reason, as mikeberkley says, it doesn't interest cable companies. Though I'd expect that ultimately, due to pressure from cable cutters and other factors, cable companies will offer a la carte options and/or more value (e.g. TV Everywhere type access) for the same price.
Posted by Phoebe_b at March 9th, 2010 at 12:33 pmI am not sure where they got these “wholesale” rates, but I can assure you this is NOT what we pay, we pay much higher for our programming and most networks require you to “buy” additional networks that we may not want but they are trying to get subs for in order to get the one or two networks that you want.
Posted by Jessie Mason at March 10th, 2010 at 12:32 pmIt really ticks me off that so much of the bill goes towards sports. Hell, they could keep the price the same and just take ESPN's share and give it to The Discovery Channel and I'd feel better about it.
a-la-carte is the only way to go from here …hopefully IPTV and boxes like the Roku will force them to break up their stupid package deals. I'd rather pay Amazon, etc for a season of a specific show than subscribing to a channel anyway. I want my money to support the shows I actually watch!
Posted by zwei at March 10th, 2010 at 7:02 pmThe reason that there is so much money in sports is because of the rates that ESPN, Fox Sports, et.al. can charge everyone regardless of whether they watch. When you see these obscene amounts paid to professional leagues or select college conferences, understand that you the public are paying these people with your cable rates.
I understand the arguments for bundling and think in many ways it is in the consumer's best interests. However, with the lack of real competition in the industry (due to infrastructure, lack of negotiating leverage, local laws, and many other reasons), there isn't really any free-market options for the consumer to choose to PREVENT his monies from going to companies/channels he or she doesn't want to support. As a general rule of thumb I hate government intervention or regulation but I am not opposed to a little more pressure being applied to cable/satellite companies to mandate more choice.
Posted by tominga at March 11th, 2010 at 2:17 amYou folks are living in a dream world if you think ala carte pricing will lower you overall cable bill. The cable companies have an expected level of revenue to sustain their operations, payroll, benefits, and executive compensation. The price to consumers will be adjusted in miscellaneous fees, equipment rental, and installation costs to meet that level.
Posted by melmoy at March 12th, 2010 at 12:52 amWarner Brother offers a la cart in my area, but it is too expensive. and I do not watch any sports either.
Posted by nayyzak at March 12th, 2010 at 1:14 amAt some point, I hope the networks and the cable providers realize there is a whole, untapped market who refuses to subscribe to traditional cable and prefers to watch TV shows a'la carte off the Internet (HDMI!).
I will NEVER subscribe to cable, but I WILL subscribe to the History Channel or HBO… either directly or through a cable company. I would be happy with a live feed or a Hulu style setup where you can watch available programming. I would pay $2.00 a month for each standard channel, and $5.00 a month for each premium channel.
If this kind of service never materializes, despite the emergence of technologies that make it possible, my money will never materialize either. Their loss.
Posted by ShaunReim at March 12th, 2010 at 3:47 amWOW. I wish they would offer a la carte pricing. I think ESPN is crazy if they think a majority of Americans would agree to pay that much more compared to many other channels. I may go months without watching that channel. American deserve the right to choose. I bet ESPN would be cheaper if we had a choice. I watch a lot of tv, but there are times I can go weeks of only watching 10 hours. If I could just pay for what I watch, I bet I would save $50 a month. Time for a cable revolution.
Posted by MrSly at March 12th, 2010 at 4:47 amI'm dying to call AT&T and ask for the “no-sports package.” Maybe the “no Fox News package” too.
Posted by elusis at March 12th, 2010 at 6:16 amin marin county and san francisco, the cable companies buy politicians and get monopoly as far as cable goes. so why would the satellites price their packages any cheaper? if one doesn't care about the sports channels, the best deal is to get the absolute minimum. then one can choose netflix or the library or rentals. i pay just under $17/month, compared to my old rate of $61/mo. there is nothing worth $44 a month on there. if i wanted turner classic movies, i would have to pay a lot more. i could buy the old movies and still save money.
Posted by patersondave at March 12th, 2010 at 2:41 pmYeeesh, I took out the channels I don't watch and my wholesale costs went down by 60.13% !!! That's crazy. A la carte needs to get here.. Nielsen ratings could get a lot more accurate with their estimates if they had generic subscriber information that showed what channels people actually watched. It's a win/win. Certain channels would go up in price as the number of overall subscribers went down until they were out of business because no one watches their junk, or get better to save themselves.
Posted by dmstrat at March 16th, 2010 at 4:38 pm