Question for Chicos, others who know.....

[mugrad99]

What happens if after all of this conference realignment, cable companies, as well as satellite providers, go to an a al carte menu for these conference networks?

Will there be another realignment?

[ChicosBailBonds]

What happens if after all of this conference realignment, cable companies, as well as satellite providers, go to an a al carte menu for these conference networks?

Will there be another realignment?

Well, that could happen which is why it's risky for the networks.  Here's an example, the BTN is on a broadly disbursed package right now for almost all providers (Telco, Satellite, Cable) meaning if you get one of the base packages it's included.  That means a ton of customers which those providers need to pay the Big Ten plus the Big Ten can say they have X eyeballs to sell to their advertising buyers.

But, a network like the Mountain which is the Mountain West Conference television package, has limited distribution on higher level base packages (i.e. they're on a sports tier or on a higher priced base package).  That reduces their revenue in both advertising and carriage fees.


Now's where it gets interesting.  Say the next time the BTN deal comes up for renewal and instead of $0.75 (illustrative only) per subscriber, they demand $1.25 per subscriber.  Well, for a MSO like Comcast (23 million subscribers), that's $11.5 million INCREMENTAL hit PER month...or $138 million annualized per year in incremental cost.  That also means they have to pass that on to their customers. 

Comcast might tell the BTN to pound sand, that for that price they will put it on a sports tier that only has  6 million subscribers.  BTN may counter and pull BTN entirely from Comcast in the hopes that fans of BTN leave and go to DISH or DIRECTV or FIOS.   Those are the games that will be played.

Also consider that most if not all of these MSO's are going to demand a MFN (most favored nation) clause so that if the BTN cuts a deal with DISH the other guys don't get screwed with a worse deal.

It will get interesting.  I'd say the BTN has enough clout that they would unlikely be put on a sports tier, though some cable companies and DISH have done it in the past with other similar type programming to make a point (DISH does it with YES Network for example). 

One thing is for sure, these types of deals will guarantee one thing....increased cable, telco and satellite bills in the future.

[Nukem2]

Of course, on an overall basis once expansion is complete, will there be an significant increase in the number or viewers of college FB/BB (other than for any additional conference championship games).....?  I doubt it.  So, the various media outlets are not going to see any real increase in viewers/sponsors/whatever on an aggregate basis.  Over time, the cable and satellite folks are going to be hard pressed to pass on costs to all viewers, many of whom could care less about sports.  Economics over the long haul will be a dimishing factor in most of these rosy outlooks.  in the end, it may well just be a re-distribution of wealth.

[GOO]

Chicos: 
Is some new form of Cable/Satellite distribtion likely in the next 10 years or internet distribution.  E.g. On Demand, more Hulu, or pick and choose your stations...?  I know new TV's can/will be equiped with decent processors and be able to connect directly to the internet.  Could the whole way TV shows are distributed and watched change?  How likely?

[ChicosBailBonds]

Of course, on an overall basis once expansion is complete, will there be an significant increase in the number or viewers of college FB/BB (other than for any additional conference championship games).....?  I doubt it.  So, the various media outlets are not going to see any real increase in viewers/sponsors/whatever on an aggregate basis.  Over time, the cable and satellite folks are going to be hard pressed to pass on costs to all viewers, many of whom could care less about sports.  Economics over the long haul will be a dimishing factor in most of these rosy outlooks.  in the end, it may well just be a re-distribution of wealth.

Well, they will be hard pressed to an extent but they may not have an option.  If not having that channel means a bunch of customers leave the platform and that net loss of revenue is greater than what you're paying, it becomes a no brainer.

That is the problem.  With lesser viewed channels, MSO's can stand tall (like DIRECTV did with Versus for 8 months until recently).  Sure, some customers were angry and a few left for another service, but the benefits outweighed risks by containing costs.  The reason why ESPN and some others get incredible fees per customer is because they can.  If a MSO told ESPN no to some of their increases, then ESPN would just turn off the channel and the MSO would lose customers so fast it wouldn't be worth it.

The number one cost for Telco, Satellite and Cable operators is programming costs.  I'm talking ENORMOUS dollars measured in multiple billions.

[Chicago_inferiority_complexes]

Of course, on an overall basis once expansion is complete, will there be an significant increase in the number or viewers of college FB/BB (other than for any additional conference championship games).....?  I doubt it.  So, the various media outlets are not going to see any real increase in viewers/sponsors/whatever on an aggregate basis.  Over time, the cable and satellite folks are going to be hard pressed to pass on costs to all viewers, many of whom could care less about sports.  Economics over the long haul will be a dimishing factor in most of these rosy outlooks.  in the end, it may well just be a re-distribution of wealth.

That's exactly right. They forced the BTN on TWC customers back in Wisconsin, and I can't imagine that more people are suddenly going to watch that were not getting their sports viewing somewhere else. So, the BTN basically wanted to milk the disinterested customers for money via TWC.

Bring on ala carte television and we'll see how many people chose to pay $1.25 per month year after year to watch the BTN.

[ChicosBailBonds]

That's exactly right. They forced the BTN on TWC customers back in Wisconsin, and I can't imagine that more people are suddenly going to watch that were not getting their sports viewing somewhere else. So, the BTN basically wanted to milk the disinterested customers for money via TWC.

Bring on ala carte television and we'll see how many people chose to pay $1.25 per month year after year to watch the BTN.

Bring on a la carte television and you'll go from 300 channel selections to about 50.  Be careful what you wish for.

[chapman]

Bring on a la carte television and you'll go from 300 channel selections to about 50.  Be careful what you wish for.

As long as I can get ESPN and the Weather Channel, it's all good.  Given the poor weather forecasts lately, maybe just ESPN.  And given that they won't stop airing soccer on ESPN, maybe just a Blu-Ray player.

[Chicago_inferiority_complexes]

Bring on a la carte television and you'll go from 300 channel selections to about 50.  Be careful what you wish for.

Where there's a market there's a way. If enough people want to watch a channel, they can pay for it.

200 of those 300 channels are trash or reruns anyway. Let me pay for what I want to pay for, nothing more.

[ChicosBailBonds]

Where there's a market there's a way. If enough people want to watch a channel, they can pay for it.

200 of those 300 channels are trash or reruns anyway. Let me pay for what I want to pay for, nothing more.

Problem is, that your interpretation of "trash" is another person's gold.  Who gets to decide what is trash and what is gold?  What happens, for example, if a channel like Black Entertainment Television now costs $10 a month for just that channel because only 10% of the populace wants it...think Congress is going to go for that?  

Just one of many examples.

ESPN right now costs most people about  $2.50 on their bill each month....about 60% of the populace doesn't want it...yes, you heard that correctly...yet 100% are paying for it and subsidizing it to bring it to $2.50.  If only 40% are willing to pay for it....well you get the idea, your cost per channel that you want will go through the roof.

Look, a la carte sounds wonderful but there is a reason why Congress has played with the idea and killed it each time.  Because they know it means much less choice for customers, not more.  It also means a tremendous amount of channels go bye bye, channels that may not matter to you but do to other constituents.  It means HIGHER rates, less innovation (HD...wouldn't happen....TiVo, unlikely), it's a misuse of bandwidth, plus a number of other reasons.

There are a couple of new services out there right now trying an a la carte approach, like Sezmi.  There's a reason why their selection is so incredibly small and doesn't include things like ESPN....it's a matter of economics and the ability for less desired channels to be viable economically.

It's why the GAO has said, point blank, a la carte would actually RAISE rates because advertisers would not advertise as much, causing rates to go up (less subsidies), fewer networks, fewer NEW NETWORKS would even try to be created, less development by companies (i.e.....why would TiVo ever be created if people only watched 50 channels, HD...what would be the point...etc, etc).   BE CAREFUL WHAT YOU WISH FOR!!

[Chicago_inferiority_complexes]

Please, Chicos, don't let your personal investment in the current situation cloud your otherwise bright understanding of economics. Or maybe I was incorrect to presume you knew economics.

Every single person has a right to determine what is his trash and what is his treasure. Welcome to the free world. I consider the Chevy Cobalt trash. I wouldn't pay $8,000 for it. My cost for the Chevy Cobalt is probably around $4,000. So, why should I have to purchase it at $15,000 if I see less than $15,000? That's the beauty of a free market ... I pay what I see as the value of a product up to the point that the price point overcomes my perception of value.

I could not care less if BET costs $10 a month or if ESPN costs $5 a month. Again, where there are enough consumers interested in paying for a product, a market develops and a product arises. If consumers collectively decide that the free market-derived price for BET is $10, who am I to argue for price controls that keep it at $0.05? When have price controls ever delivered innovation of product?

Why are you desperate get Congress involved? I didn't realize you have such faith in their ability to micromanage people's entertainment choices. I don't want the government to decide what I pay for BET. I want to decide that I don't want BET, but I do want 15 of the most popuplar channels out there, and if I miss 1 of my favorite channels because there aren't enough consumers out there willing to pay for it, I have to either spike my price to meet the value I see in the channel or not see the product.

Everyone wants a free market except when it comes to himself and his industry. If you have faith in your product, there is no need to be so afraid of product delivery innovation, Chicos. More choices are always better for consumers.

[Canned Goods n Ammo]

Problem is, that your interpretation of "trash" is another person's gold.  Who gets to decide what is trash and what is gold?  What happens, for example, if a channel like Black Entertainment Television now costs $10 a month for just that channel because only 10% of the populace wants it...think Congress is going to go for that?  

Just one of many examples.

ESPN right now costs most people about  $2.50 on their bill each month....about 60% of the populace doesn't want it...yes, you heard that correctly...yet 100% are paying for it and subsidizing it to bring it to $2.50.  If only 40% are willing to pay for it....well you get the idea, your cost per channel that you want will go through the roof.

Look, a la carte sounds wonderful but there is a reason why Congress has played with the idea and killed it each time.  Because they know it means much less choice for customers, not more.  It also means a tremendous amount of channels go bye bye, channels that may not matter to you but do to other constituents.  It means HIGHER rates, less innovation (HD...wouldn't happen....TiVo, unlikely), it's a misuse of bandwidth, plus a number of other reasons.

There are a couple of new services out there right now trying an a la carte approach, like Sezmi.  There's a reason why their selection is so incredibly small and doesn't include things like ESPN....it's a matter of economics and the ability for less desired channels to be viable economically.

It's why the GAO has said, point blank, a la carte would actually RAISE rates because advertisers would not advertise as much, causing rates to go up (less subsidies), fewer networks, fewer NEW NETWORKS would even try to be created, less development by companies (i.e.....why would TiVo ever be created if people only watched 50 channels, HD...what would be the point...etc, etc).   BE CAREFUL WHAT YOU WISH FOR!!

Free market brother. Let it happen, let the weak fall to the wayside.

Also, not to sound like an old man, but most people in this country would be better off with less television.

[MU Fan in Connecticut]

It will get interesting.  I'd say the BTN has enough clout that they would unlikely be put on a sports tier, though some cable companies and DISH have done it in the past with other similar type programming to make a point (DISH does it with YES Network for example). 

One thing is for sure, these types of deals will guarantee one thing....increased cable, telco and satellite bills in the future.

That's while I'll never have DISH - no YES network.

[TJ]

Please, Chicos, don't let your personal investment in the current situation cloud your otherwise bright understanding of economics. Or maybe I was incorrect to presume you knew economics.

Every single person has a right to determine what is his trash and what is his treasure. Welcome to the free world. I consider the Chevy Cobalt trash. I wouldn't pay $8,000 for it. My cost for the Chevy Cobalt is probably around $4,000. So, why should I have to purchase it at $15,000 if I see less than $15,000? That's the beauty of a free market ... I pay what I see as the value of a product up to the point that the price point overcomes my perception of value.

I could not care less if BET costs $10 a month or if ESPN costs $5 a month. Again, where there are enough consumers interested in paying for a product, a market develops and a product arises. If consumers collectively decide that the free market-derived price for BET is $10, who am I to argue for price controls that keep it at $0.05? When have price controls ever delivered innovation of product?

Why are you desperate get Congress involved? I didn't realize you have such faith in their ability to micromanage people's entertainment choices. I don't want the government to decide what I pay for BET. I want to decide that I don't want BET, but I do want 15 of the most popuplar channels out there, and if I miss 1 of my favorite channels because there aren't enough consumers out there willing to pay for it, I have to either spike my price to meet the value I see in the channel or not see the product.

Everyone wants a free market except when it comes to himself and his industry. If you have faith in your product, there is no need to be so afraid of product delivery innovation, Chicos. More choices are always better for consumers.

So let's see...

I could pay $50-60 per month now for all the channels,

or I could pay per month:
$5 for ESPN
$5 for Comedy Central
$5 for Comcast/Fox Sports
$5 for the Travel Channel
$5 for the Food Network
$5 for Versus
$5 for USA
$5 for FX
$5 for SyFy
$5 for TNT
and get 10 channels for the same price!  Wow, sounds like a great deal.  Maybe if I'm lucky that $5 will actually include ESPN2, ESPNU, ESPN Classic, and ESPN News, but I doubt it would be more than just ESPN & ESPN2.

Obviously, just plugging in $5 per channel is false, but I bet it would be higher than you think, and we would get a whole lot less for our money than we do now.

[Chicago_inferiority_complexes]

There is, or at least should be, no reason companies can't still package all those channels you like into one package, and even add on another 1000 you want to pay for without watching.

But there is also no reason to fear the advent of companies offering individual channels by themselves, or much smaller packages of channels (10-30, etc.) as an alternative to giant packages of channels the consumer doesn't want or doesn't need.

[TJ]

There is, or at least should be, no reason companies can't still package all those channels you like into one package, and even add on another 1000 you want to pay for without watching.

But there is also no reason to fear the advent of companies offering individual channels by themselves, or much smaller packages of channels (10-30, etc.) as an alternative to giant packages of channels the consumer doesn't want or doesn't need.

Or you could look at it like music.  Every CD costs approx. the same; but they obviously make more money from a big popular act than they do from a niche artist.  The popular act is subsidizing the industry and allowing for more choices; allowing for them to take chances on some artists and they either lose money or find the next big thing.

Also, people want the popular stuff anyway.  If CD's were priced to make back the money spent on each release, the less popular stuff would cost way more and there would be less of it, and the popular stuff would cost the same, because people are willing to pay it.

[Chicago_inferiority_complexes]

I don't know about subsidizing within the music industry ... something tells me that music labels are pretty greedy about keeping the return from their publication without sharing it with others. Studio heads probably decide to take on artists based on a perception that that artist or group will have a positive return to them.

I'm not sure there is a lot of charity in the sense of studio heads deciding to take on XYZ unknown band that won't bring in a positive return on investment because ABC known band is feeling generous about the returns from their own music. At most, a studio might take on an unknown band with the belief that they will make them money down the road.

As to your second scenario, if it were accurate, and I have no idea whether it is because I don't buy a lot of CDs, I would have no problem with it. Let people pay for something based on their value of it.

In fact, my guess is that just like many other products, a new or cheap or 'niche' product will be offered at a discount to bring in new customers. Higher demand is typically a chief driver of higher prices anyway.

[ChicosBailBonds]

Please, Chicos, don't let your personal investment in the current situation cloud your otherwise bright understanding of economics. Or maybe I was incorrect to presume you knew economics.

Every single person has a right to determine what is his trash and what is his treasure. Welcome to the free world. I consider the Chevy Cobalt trash. I wouldn't pay $8,000 for it. My cost for the Chevy Cobalt is probably around $4,000. So, why should I have to purchase it at $15,000 if I see less than $15,000? That's the beauty of a free market ... I pay what I see as the value of a product up to the point that the price point overcomes my perception of value.

I could not care less if BET costs $10 a month or if ESPN costs $5 a month. Again, where there are enough consumers interested in paying for a product, a market develops and a product arises. If consumers collectively decide that the free market-derived price for BET is $10, who am I to argue for price controls that keep it at $0.05? When have price controls ever delivered innovation of product?

Why are you desperate get Congress involved? I didn't realize you have such faith in their ability to micromanage people's entertainment choices. I don't want the government to decide what I pay for BET. I want to decide that I don't want BET, but I do want 15 of the most popuplar channels out there, and if I miss 1 of my favorite channels because there aren't enough consumers out there willing to pay for it, I have to either spike my price to meet the value I see in the channel or not see the product.

Everyone wants a free market except when it comes to himself and his industry. If you have faith in your product, there is no need to be so afraid of product delivery innovation, Chicos. More choices are always better for consumers.

It has nothing to do with my position, it has to do with reality.  You are not looking at the big picture.  If there were only 40 or 50 viable channels, do you think HD would exist?  Do you think there would be any innovation to produce 3D television?  Do you think anyone would have bothered to create TiVo or a DVR?  Of course not.  That's just the tip of the iceberg.

Look, you don't have to listen to me, here are some great studies that tell you exactly why it wouldn't work and what would happen if you did it....HIGHER prices, less choices, less innovation, etc.

Faith in the product has nothing to do with it....do you think I would like to spend about $13 billion less in programming costs?  You bet your arse I would, but that's not the point.  It's about the bigger picture...better content, more choices, etc.  I like things like ESPNU...would ESPN have ever created ESPNU if only 40 or 50 channels existed....hell no they wouldn't have.  Because people would have to pay more than $10 or $15 per month for it.  The investment on there end never would have happened.

Laws of unintended consequences...THINK!  People would be bitching a storm so fast if this went into effect...ESPNU...gone.  CNN Headline News...gone.  Most of your local RSNs....gone.  Niche channels...gone.   Higher prices...GUARANTEED


http://www.alec.org/am/pdf/ALEC-State-Factor-Telecom.pdf


http://www.gao.gov/new.items/d048.pdf


http://cei.org/gencon/016,03728.cfm

http://www.tvweek.com/news/2008/04/tv_executives_warn_fcc_against.php


This isn't hard stuff.

[ChicosBailBonds]

There is, or at least should be, no reason companies can't still package all those channels you like into one package, and even add on another 1000 you want to pay for without watching.

But there is also no reason to fear the advent of companies offering individual channels by themselves, or much smaller packages of channels (10-30, etc.) as an alternative to giant packages of channels the consumer doesn't want or doesn't need.

Warrior, with all due respect, you have no idea what you are talking about.  There is plenty of reasons why they couldn't package those channels.....COST!!!!  Do you know how much it costs to create content, deliver those channels, etc.  Do you know how much the operating costs for ESPNU alone are?  This is not hard stuff, you're thinking with your heart right now and not with your brain.

[ChicosBailBonds]

Or you could look at it like music.  Every CD costs approx. the same; but they obviously make more money from a big popular act than they do from a niche artist.  The popular act is subsidizing the industry and allowing for more choices; allowing for them to take chances on some artists and they either lose money or find the next big thing.

Also, people want the popular stuff anyway.  If CD's were priced to make back the money spent on each release, the less popular stuff would cost way more and there would be less of it, and the popular stuff would cost the same, because people are willing to pay it.

That's exactly right...the new bands wouldn't exist because there would be no reason to try and develop them, since customers wouldn't know them and labels wouldn't put any money into creating them.  Same as my ESPNU example...there would be ZERO incentive for ESPN to create ESPNU under this scenario...NONE.  ESPN was subsidized on the backs of their other programming.  You can say the same thing about many other channels.  History International...gone.  Some of the Discovery networks...gone.  The Regional Sports Networks in Wisconsin, Florida, Colorado, etc...gone (that's because the big boys in LA, NY, Chicago make enough money to subsidize the little RSNs in the other networks).  Imagine the squealing from fans when their local RSN goes bye bye.  Would NFL Network ever been created...hell no.  Would things like NFL Sunday Ticket...no, why would anyone put the resources into developing it?

People fall in love with a la carte and don't think at all about the big picture and how we got to 300 to 500 channels to begin with.

Here's a quote for you to ponder from  2006.  "From a business standpoint, not so much. Many cable companies buy content in packages (MTV, for example, might come with VH1, BET, and Spike), so if you could pick only what you wanted, providers would be stuck paying for a lot of unused programming. They would likely have to raise fees to maintain their revenue. In 2006, the FCC explored à la carte programming and found that customers would be able to get only 20 channels before they saw hikes in their bills. And niche networks would likely fall by the wayside."

[Marquette84]

Why are you desperate get Congress involved? I didn't realize you have such faith in their ability to micromanage people's entertainment choices. . . . Everyone wants a free market except when it comes to himself and his industry. If you have faith in your product, there is no need to be so afraid of product delivery innovation, Chicos. More choices are always better for consumers.

I think he's essentially making the same points you are--the unelected FCC wants to force ala carte pricing on the cable firms.

Congress needs to get involved to STOP that from happening.  

BTW, if you think that's bad, you need to look at what the FTC is proposing.  They are upset that consumers are abandoning traditional media like newspapers and networks and are proposing ways to stop that from happening.  If you wade through their 43 pages of bureaucratic prose, they are essentially suggesting that new media sources of information like MU Scoop should be taxed and/or restricted in order to subsidize and protect traditional media like the Journal-Sentinel.

[Chicago_inferiority_complexes]

THINK! Chicos.

You have so little faith in your product that you really believe all these channels will disappear if they aren't being subsidized by people who don't want to pay for them. I bet a lot of them will continue to exist, and they will exist with a lot fewer bloated budgets, all the way from cable/satellite companies to the studios and actors themselves.

People are not going to pay for things they are not interested in paying. Massive overhead, channels with few or no viewers. Yes, a lot of stuff will be cut. Absolutely. But a lot of things were cut when the Model T was created. It's called creative destruction. Better get ready for it in the entertainment industry, because its coming.

Yes, the channels people want to actually pay for will go up, because the people who don't want to pay for them will no longer be subsidizing them. Horror of horrors. People will also have the option to NOT subsidize the 100's of channels they have zero interest in. Instead, they will have the option to more closely match their perceived value in a channel with the cost of offering it.

And overall, the amount they will pay for entertainment will decrease because individuals will pay for what they want and very little more.

Please don't quote to me government studies. I am not interested in hearing what Congress thinks something costs. I can't believe you find them interesting or credible. What would you like to have happen, Chicos? Have government ban television options except for giant TV packages? This stuff is coming, whether you or I like it or not.

Besides, if no one actually wants this type of option, there is nothing to worry about, right? You yourself posted an example of some company failing to provide quality ala carte. What are you worried about?

BTW -- CNN Headline News? What will I ever do without it? And honestly, that's what 95% of consumers are going to say as soon as they have the ability to select exactly what they want for channels and nothing else.

[Chicago_inferiority_complexes]

"Same as my ESPNU example...there would be ZERO incentive for ESPN to create ESPNU under this scenario...NONE.  ESPN was subsidized on the backs of their other programming.  You can say the same thing about many other channels.  History International...gone.  Some of the Discovery networks...gone.  The Regional Sports Networks in Wisconsin, Florida, Colorado, etc...gone"

So what you are essentially saying is that each of these channels give no value to the consumer and the consumer would easily cut them out if given the chance. Nice commentary on their value. I disagree with you. I find value in each of them and I would probably pay for them if given the option (up to a certain price point, of course).

[Chicago_inferiority_complexes]

I think he's essentially making the same points you are--the unelected FCC wants to force ala carte pricing on the cable firms.

Congress needs to get involved to STOP that from happening.  

I'm not familiar with any new regulations from the FCC, though yes forcing a company to do anything is a bad idea for consumers and the market. I think we should dissolve the FCC.

[ChicosBailBonds]

"Same as my ESPNU example...there would be ZERO incentive for ESPN to create ESPNU under this scenario...NONE.  ESPN was subsidized on the backs of their other programming.  You can say the same thing about many other channels.  History International...gone.  Some of the Discovery networks...gone.  The Regional Sports Networks in Wisconsin, Florida, Colorado, etc...gone"

So what you are essentially saying is that each of these channels give no value to the consumer and the consumer would easily cut them out if given the chance. Nice commentary on their value. I disagree with you. I find value in each of them and I would probably pay for them if given the option (up to a certain price point, of course).

I'm saying the investment those providers would have to make to create them knowing only 20% or 30% of the nation would be paying for them would kill it on arrival.  That's the reality.

Should I only have to pay half price for my Windows 7 because I won't use all the features?  Should we make every road in America a toll road because there are some roads I will never use or don't want to use? 

Look, the evidence is overwhelming, I'm not going to argue with you.  If you want only a few channels and want to pay only a few dollars, then get an off air antenna or try something like Hulu.  Content is incredibly expensive to produce and distribute....it's not run on pixie dust.  If this was such a great idea, it would have happened by now on any number of levels.  Gov't, private industry, etc.   Sign up for Sezme, you can get their 30 channels or whatever it is at a really low price.  They can't get any of the other channels for a reason, because the cost to run ESPN, ESPN2, HBO, etc is extremely high.

Take care, it's nothing personal but you really need to do your research on this one, and you haven't.