Court Blocks Maine Attempt To Force Cable Providers To Sell Individual TV Channels

from the Constitutional-right-to-predatory-pricing dept

For the better part of two decades, the cable industry has fought tooth and nail to prevent having to sell cable channels individually (a la carte). Historically, the cable industry's defense of this opposition is that letting consumers buy individual channels would do two things: kill off niche channels, and raise rates on consumers. Granted you're supposed to ignore that both things have been happening anyway. Despite streaming competition, cable rates continue to skyrocket, and cable operators themselves have been dumping less watched channels from their lineups anyway in a bid to shore up tightened margins.

The streaming sector's impact on these issues remains a work in progress. And state or federal efforts to force cable providers to sell channels individually haven't gone particularly well.

Case in point: back in September, Comcast sued the state of Maine for trying to force the company to sell users individual cable channels (LD 832). Comcast lawyers insisted that the new law violated the company's First Amendment rights, and told news outlets the law would "suppress competition and result in higher consumer prices and less program diversity." Historically, "this violates our company's First Amendment rights" is an argument telecom lawyers throw against the wall in every case in a bid to try and see if it sticks.

In this case, it appears to be working. Comcast's argument was twofold: the law violated Comcast's editorial decision making right to require consumers to take bundles of programming, and violates the First Amendment's prohibition on speaker-based regulations -- since the law applies to incumbent cable providers but not other pay TV providers. It's that latter argument that appears to have swayed U.S. District Court Judge Nancy Torresen's decision to impose a preliminary injunction preventing the bill from taking effect. She appeared to be less swayed by Comcast's phony concern that such laws would raise cable TV prices:

"At this initial stage, I cannot conclude that the State has carried its burden of showing that [the law] will, in fact, be likely to reduce prices and increase affordable access to cable," she said. But she also said: "The evidentiary record is weak at this point, but the record does contain evidence that cable pricing has greatly exceeded the pace of inflation over many years. This may provide a separate special characteristic that would support differential treatment of cable operators. Because I ultimately conclude that the State has not met its burden of showing that it is likely to succeed under intermediate scrutiny, I do not need to decide this issue at this time."

At this point it's probably not worth trying to force cable's hand on this subject. In large part because growing competition in the pay TV space should ultimately do the heavy lifting here. Streaming competition is completely restructuring the pay TV landscape, resulting in traditional cable operators (especially those who refuse to compete on bundle flexibility or price) losing millions of pay TV subscribers each year. Even if this law fails, competition should ultimately pressure even Comcast to begin actually listening to consumers if the company wants to remain in the pay TV business.

The real problem remains in broadband, where giants like Comcast have secured a growing monopoly thanks to US telcos that have lost interest in the fixed residential broadband market and refuse to upgrade their networks. As pay TV margins tighten from competition, giants like Comcast and Spectrum will simply raise the price of broadband, most prominently via bullshit usage caps and overage fees. And since we've effectively neutered most federal oversight of the barely competitive US broadband sector, it's a problem that's going to stick around for a while (no, 5G isn't a panacea).

Filed Under: 1st amendment, a la carte, bundles, cable channels, maine
Companies: comcast

Comcast Sues Maine For Demanding It Sell TV Channels À La Carte

from the the-Constitutional-right-to-be-an-ass dept

Over the last few years, telecom giants have increasingly been trying to claim that pretty much any effort to hold them accountable for their terrible service (or anything else) is a violation of their First Amendment rights. Historically that hasn't gone so well. For example, courts generally laughed off ISP lawyer claims that net neutrality violated their free speech rights, quite correctly highlighting that ISPs are simply conduits to information, not acting as editors of available speech through their blocking or filtering of available information.

With the federal government effectively in the cable, telecom, and broadcast sector's back pocket at the moment (aka regulatory capture), the lobbying focus has shifted toward the states, where the industry has similarly tried to claim that holding them accountable for decades of bad service violates their First Amendment rights. For example when it was found that Charter lied about meeting its recent merger conditions and New York tried to hold it accountable, Charter claimed doing so would violate its 1A rights.

The argument popped up again this week in a Comcast lawsuit against the state of Maine, filed because the state passed a law that would force companies like Comcast to sell cable TV channels à la carte:

The companies claim the Maine law—titled "An Act To Expand Options for Consumers of Cable Television in Purchasing Individual Channels and Programs"—is preempted by the First Amendment and federal law. The Maine law is scheduled to take effect on September 19 and says that "a cable system operator shall offer subscribers the option of purchasing access to cable channels, or programs on cable channels, individually." The lawsuit seeks an injunction to prevent the law from being enforced.

Granted, "You can't do that because it violates our First Amendment rights," is literally the first argument telecom lawyers try whenever anybody tries to hold them accountable for terrible service, unfair bundling, predatory behavior, or anything else. Just like the fifty times before this, the argument is nonsensical, and really just a knee jerk effort to fling some ideas at a wall and see what sticks in a bid to protect the shitty status quo.

Consumers have been begging for the ability to buy individual channels for decades now, and it used to be a pet project of former Senator John McCain. For the entirety of that duration, the cable industry has tried to claim that à la carte television would do two things: raise rates for all consumers, and kill off niche channels, which the industry argued simply couldn't survive outside of the bundle. You're to ignore that these niche channels are being killed off anyway and cable TV prices continue to skyrocket despite the rise of streaming competition.

Undaunted, Comcast continues to claim that bringing flexibility to the cable bundle would raise TV rates (something Comcast is super, authentically worried about, to be sure):

In a statement provided to Ars, Comcast and the TV networks said that "Maine's à la carte mandate is prohibited under federal law and is unconstitutional... the law is not only unnecessary, but also likely to suppress competition and result in higher consumer prices and less program diversity."

On the plus side it's not like any of this is going to matter longer term, and both Comcast and state regulators really are just swimming upstream here. The rise of streaming competition will, sooner or later, force these companies to finally listen to consumers, stop mindlessly raising TV rates, and kill off traditional bundles. Cable TV providers that are tired of the increasingly tight margins in the pay TV sector will simply exit and focus on broadband instead. The rest, like AT&T and Comcast, will spend a few years swimming upstream by suing people, trying to tilt the regulatory playing field, and crying a lot until they realize the shift toward cheaper, more flexible TV bundles is a trend they can no longer ignore.

Filed Under: a la carte, cable channels, laws, maine, state laws, tv bundles
Companies: comcast

The Standalone Streaming Service HBO Didn't Want To Offer Now Has 5 Million Users

from the innovation-trumps-math dept

You might recall that just a few years ago, HBO had to be dragged kicking and screaming into the modern era. For years the company refused to offer a standalone streaming TV service, worried that it would jeopardize the company's cozy promotional relationship with existing cable providers (who often all but give away the channel in promotions). As recently as 2013 Time Warner CEO Jeff Bewkes was claiming that such an offering would make "no economic sense."

Why? Bewkes was worried that offering a standalone option would upset cable partners. At the time, those partners were already offering an HBO streaming app named HBO Go, but only if you signed up for traditional TV. This was art of the industry's walled garden "TV Everywhere" initiative, a misguided attempt at stopping cord cutters by only giving them innovative streaming services -- if they signed up for bloated, traditional television bundles. Bewkes was clearly worried at the time that being too damn innovative would upset industry executives and skew the company's balance sheets:

"And we would do it if we thought it was in our economic best interest. At this point we don’t think it makes sense. We don’t think the target market is sufficiently large to be attractive at this point. So what we’re doing, and we think this is working pretty well — we’re working with the [pay TV operators] to increase the penetration of HBO Go in a mutually beneficial way."

At the time we noted how HBO was letting fear trump innovation. The company was focusing so much on avoiding upsetting cable operators and worrying over the initial impact on the traditional cable TV cash cow, that it forgot that innovation often trumps the math. In reality, the math Bewkes was concerned about were performance and metrics built on a different, changing market that was on the way out. This kind of hesitation was initially great news for Netflix, whose CEO saw all of this coming long before HBO executives did:

"The goal," says Hastings, "is to become HBO faster than HBO can become us."

All the while, HBO and Time Warner's timidity and failure to listen to consumers resulted in many of its shows breaking piracy records. And while HBO couldn't be bothered to offer a legitimate standalone streaming alternative to piracy, it did spend a lot of time and money trying to derail these efforts, including "poisoning" seeded copies of HBO programs on BitTorrent and sending out oodles of nastygrams to ISPs. Other HBO executives, meanwhile, seemed to share the cable industry mindset that this whole cord cutting thing was just a temporary phenomenon that would blow over.

HBO finally did buckle to offering a standalone streaming service (dubbed HBO Now) in 2014. Just a few years later and the service has just breached 5 million subscribers. And oh, the numbers HBO was so worried about are looking solid too, with HBO Now generating $19 million in revenues for the two months it aired of Game of Thrones Season 7. In this case it all worked out well for HBO, but the company could have enjoyed a much healthier head start if it company executives hadn't let fear trump natural evolution.

Filed Under: a la carte, cable, hbo, ott, streaming, streaming tv, tv
Companies: hbo

Streaming Video Competition Slowly Begins Killing The Bloated, Pricey Cable Bundle

from the dead-and-bloated dept

If you recall, the cable industry has spent the better part of the last decade arguing that a la carte television (offering users the ability to buy channels individually instead of in bloated bundles) would do two things: raise rates for all consumers, and kill off niche channels, which the industry argued simply couldn't survive outside of the bundle. The industry repeatedly used this logic to justify its decision to avoid delivering not only a la carte, but cheaper and more flexible channel bundles in general.

Some ten years later, and you'll be shocked to learn that higher cable TV rates and the death of niche channels... are happening anyway. The Wall Street Journal this week penned an interesting look at how cable companies are increasingly culling lesser-viewed channels from the cable lineup, largely to make way for more expensive programming (read: mostly sports). The report notes that while consumers have endlessly decried the high costs and limited flexibility in the channel bundle, the number of channels in the cable bundle has ballooned all the same:

"Since 2008, the average number of channels in U.S. cable bundles has grown from 129 to 199. But people typically watch only about 15 a week, according to Nielsen. Many networks get small audiences. Nearly 70 channels that collect an average of $13 of Americans’ monthly cable bills each accounted for about 0.5% or less of total TV viewing in January, according to a WSJ analysis of Nielsen and Kagan data."

As broadcasters demand more and more money for the same content, cable providers have started either eliminating lesser watched channels from their cable lineup entirely, or shoveling these channels off into higher-priced bundles in a desperate attempt to stave off inevitable evolution.

But the die is already cast. Customers are tired of paying $130 per month for 200 (largey unwatched) channels, and are increasingly fleeing to streaming competitors -- resulting in 2016 seeing the highest cord cutting rates on record. Despite this, broadcasters continue to demand higher and higher rates, resulting in more and more annoying content blackouts and carriage fee disputes. Said disputes, which involve users losing access to content because cable and broadcasters can't agree on new rates, only act to further drive these annoyed customers to streaming alternatives.

And while cable companies have started ejecting lesser-watched niche channels from the lineup (not really as big of a deal as claimed as the PewDiePie era should make clear), consumers are expected to happily continue paying the same amount of money:

"Don’t expect cable-TV prices to fall as channels die: Cable executives say they can’t pass on savings since their programming costs are still rising faster than cable bill increases."

That's of course why many smaller phone and cable companies are getting out of the cable TV game entirely, since their lack of size for leverage in content negotiations means their profit margins are untenable. It's also why giant companies like Comcast and AT&T are increasingly merging, consolidating, and buying content factories like NBC Universal or Time Warner, in the hopes that owning the cow helps them weather the evolutionary shitstorm to come.

The problem of course is that the cable and broadcast industry will eventually have to make less money in the face of streaming competition. It's not really a choice, but it's been marginally entertaining watching the sector try and avoid this reality.

Right now, some companies are offering so-called "skinny bundles" to appease frustrated customers, hoping these customers won't notice caveats, fees and hidden charges make these options as expensive as the traditional bundles they're supposed to supplant. But ultimately the cable and broadcast industry will have to lower traditional cable prices and begin offering more flexibility if they hope to truly compete with the original programming coming from the likes of Amazon, Netflix, YouTube, and eventually, Apple.

You'll know the entire sector has actually learned some sort of lesson when the cost of traditional cable drops. Until then, most of this shuffling around of channels is little more than a superficial, aesthetic attempt to avoid the stark reality that overlarge and overpriced cable TV bundles are doomed by the rise of streaming video competition.

Filed Under: a la carte, cable bundle, competition, streaming video

Canada's Attempt To Force Cheaper, More Flexible Cable Packages Is A Bit Of A Joke

from the the-illusion-of-choice dept

Canada's attempt to force Canadian cable providers to deliver cheaper, more flexible cable TV bundles appears to be a comedy of errors. Last year, driven by user complaints, the CRTC passed rules requiring Canadian cable companies to provide a $25 so-called "skinny bundle" of discounted TV channels starting March 1 of this year, and the option to buy channels individually (a la carte) starting December 1 (aka this week). Companies responded by first pouting, then by offering new "discounted" TV bundles so layered with hidden fees, surcharges, and caveats as to be effectively useless.

This week's deadline to offer a la carte TV channels doesn't appear to be going much better. Companies like Rogers, Shaw, and Bell are now allowing users the option to buy TV channels individually -- but they've again priced each channel high enough to make the option completely pointless. Under this new pricing paradigm, buying individual channels can cost you anything from $6 to $20 per channel. After having a little time to crunch the numbers, consumers were quick to complain to the BBC about the absurdity of the entire effort:

"Turns out, to add CNN and CP24 individually, Spitz would pay $14 a month instead of $15. That's only a $1 savings, and her mother would lose a handful of extra channels included in the theme packs.

"That's ludicrous; that's ridiculous," said Spitz.

But some industry experts are not surprised by the pick and pay prices. That's because, they say, TV providers are for-profit companies, and their main objective is to protect the bottom line.

"What did you really expect?" says telecom expert Gerry Wall.

Incumbent Canadian TV providers, as you also might expect, insist that offering "discounted" service that really doesn't provide any discount is the height of value, and that the way they've always done things (read: offering you a bloated, expensive bundle of channels you don't actually watch) is the best way to continue to do things:

"Rogers told CBC News that adding individual channels to a plan won't benefit everyone and that most customers instead opt for its bigger TV packages "which offer great value." It said the cable company's standalone channel pricing is "reasonable and competitive."

Part of the problem is that the CRTC doesn't really have the authority or willingness to fully regulate rates, so it's demanding less expensive options for consumers -- but isn't really willing (or in some instances able) to hold companies accountable when they tap dance around the requirements. In a March interview with The Globe and Mail, CRTC boss Jean-Pierre Blais tried to downplay public criticism of the effort (and the CRTC's unwillingness to follow through) by claiming the goal was never to lower soaring cable bills:

"People may have thought, mistakenly, that the CRTC was going to reduce everybody’s cable bills – that’s not what we promised. We said we’re going to give you more choice,” Jean-Pierre Blais, chairman of the Canadian Radio-television and Telecommunications Commission, said in an interview."

But what people actually got was the illusion of more choice under what appears to just be regulation theater. Given the fact that streaming video competition (and by proxy lower prices and more choices) will be arriving whether these cable companies like it or not, the CRTC's effort could just be a giant waste of time. A better tack for regulators would be to focus not on trying to drag legacy TV kicking and screaming into the modern era, but to focus on improving broadband competition and obstacles (usage caps) to the rise of cheaper, better, and more flexible streaming TV alternatives.

Filed Under: a la carte, canada, crtc, tv

Canadian Cable Companies Make A Mockery Of Government's Push For Cheaper TV

from the forced-innovation dept

So far, the Canadian government's attempt to force innovation and lower prices on the Canadian TV industry doesn't appear to be going so well. As previously noted, the government has demanded that all Canadian cable TV operators begin offering a so-called "skinny" bundles of smaller, cheaper channels starting this month, and the option to buy channels "a la carte" starting in December. But this being the cable industry, companies are finding all manner of ways to tap dance over, under and around the requirements.

Bell's solution is to offer a skinny bundle, but hide it from the company's customers. And while most Canadian operators last week unveiled discounted base bundles starting at around $25, they've saddled the options with all manner of fees to ensure that once a customer actually gets their bill, their prices remain as high as always. DVR rental fees, home gateway rental fees, HD fees, "digital service fees," fees for additional channel packs (since the core pack is intentionally left sparse), and installation fees all quickly demolish any proposed savings.

And companies like Rogers have generously gotten ahead of the December requirement for individual channel purchases, by offering sports channels a la carte -- but at the rock-bottom price of $18 a piece:

Ahead of the Canadian rollout, major cable operator Rogers Communications began offering two sports add-ons — TSN and Sportsnet — at $18 each, bringing a sports fan's bill to a minimum $61 a month, not much below the $66 a month for a similar sports-included package that has 230 more channels.

The same thing is happening over at Shaw, where customers will be paying a pretty penny to nab the channels they actually want:

Prices for Shaw’s pick-and-pay channels, which include A&E, CNBC and Fox News among others, range between $3 and $5 per month. More popular channels, like AMC, Bravo and CNN, are only available if you purchase them in $6-$8 channel bundles. Premium movie channels, meanwhile, are priced at $18 per month.

So a move that the CRTC insisted would usher in an "era of choice for Canadian television viewers," appears to be doing nothing of the sort, with most of the bundles designed specifically to make them as unappealing as possible. One Bell employee tells the CBC the company's intentionally making the new bundles "unbuyable," while "just sort of giving the CRTC the finger." And while Canadian Law Professor remains optimistic that the CRTC's gambit will work, it remains unclear precisely when or how this is supposed to happen.

Granted it's early, but whether or not the CRTC's push for flexible options actually works will depend largely on whether the regulator is willing to call the industry's bluff on below-the-line fee shenanigans, something North American regulators as a whole aren't known for. And as with the attempt to disrupt the lowly cable box here in the States, one's left wondering if it doesn't make more sense for regulators to give up on trying to "fix" a TV model that's slowly-but surely dying, and focus any serious regulatory efforts on making sure there's broadband competition so that these same companies can't use usage caps to hinder Internet video competition.

Filed Under: a la carte, canada, hidden, tv
Companies: bell, rogers, shaw

Canada Forcing Cheaper, More Flexible Pricing On TV Industry March 1. Will It Work?

from the innovation-at-gunpoint dept

Starting next week, Canadian cable providers will be forced by the government to do something inherently and violently foreign to them: offer cheaper, more flexible cable bundles. In March of last year, Canadian regulator CRTC announced it would be combating high TV prices by forcing cable operators to offer cable channels a la carte, or so-called "skinny bundles" of cheaper cable channels, by December 2016. The CRTC's full ruling declared that by March 2016, all Canadian TV providers must at least provide a $25, discounted skinny bundle, letting users pick and choose individual channels beyond that.

Not too surprisingly, most cable operators in Canada haven't been particularly eager to reveal what these plans will look like, lest they give them any more media attention than absolutely necessary. The CRTC sent out a memo last week reminding companies of the deadline, and agency boss Jean-Pierre Blais warned the cable industry to avoid getting too clever in terms of the upcoming packages:

"Cable and satellite companies should not view this change as an opportunity to replace business practices designed to maximize profits from captive customers with newer forms of anti-consumer behaviour," he said in a speech to the Canadian Club of Toronto on Thursday. "Instead, I urge them to make the products they sell even better for Canadians."

Needless to say, Canadian cable operators didn't respond well to the CRTC's demands, with one Bell exec even going so far as to refuse to show Blais' face on TV after the ruling. And while only one major cable provider has detailed their skinny bundle plans, new tricks may still be an uphill climb for old dogs. Shaw's new Limited TV skinny bundle provides 40 cable channels (more than a few of which are junk) for $25 a month. Of course, if viewers want HD they'll need to pay $5 per month for an HD box. If you want a DVR (which most people do), you need to pay $15 a month.

Theme packs to get the channels users actually want are another $6 per month. And this is all before you tack on the inevitable below-the-line "insert completely made up justification here" fees, which means that once the bill actually comes -- users won't be seeing much of anything resembling a real value. Perhaps Canada's foray into forced a la carte will provide something more (r)evolutionary later in the year.

Whether you can actually force the cable industry to evolve on pricing has been hotly debated. Here in the States, our brief obsession with forcing cable operators to offer a la carte channels (spearheaded at times by John McCain) ultimately died after industry claims that such a forced model would destroy niche programming and raise consumer rates became crowd wisdom. Of course prices have gone up regardless, and cable providers themselves have actually started pushing niche channels (and even less relevant content like The Weather Channel) off their networks to save money for sports programming.

And while US providers are also exploring skinny bundles to fend off cord cutting, like the Canadian implementation, these offerings tend to quickly lose value thanks to buried fees.

Regulators are then put in the position of needing to address misleading fees as a form of false advertising, something neither the FCC nor CRTC have been willing to do. And as TV providers lose income on the television side, their first instinct is to look to recoup those losses elsewhere -- generally in the form of broadband usage caps and overage fees. So, as with the FCC's new set top box push to Canada's south, it's relatively easy to be left wondering if regulators should be focused on the future (broadband) instead of the past (legacy television).

So the fundamental question remains: do you wait for Internet video to disrupt and dismantle the TV industry naturally, or do regulators try to force the issue with rules mandating lower prices and more flexibility? Whether you support the idea or not, Canada's about to show us if the latter is worth the time and effort.

Filed Under: a la carte, canada, crtc, pricing, tv

Cable Execs Refuse To Offer Better TV Bundle Options Because Consumers Already Enjoy All The 'Value' They Can Handle

from the head-in-sand dept

Consumers have been clamoring for better cable TV pricing and more flexible channel options for the better part of the last decade, and for most of that time the broadcast and cable industry has been willfully -- almost gleefully -- ignoring them under the mistaken belief that the cable TV cash cow will live forever. With 2015 giving rise to a number of more flexible Internet video options, the conversation has heated up once again, leading to a very small number of companies (like Verizon) experimenting with modestly more flexible channel bundle packages where costly sports programming is broken out into its own tier.

However, the majority of cable TV executives remain with their heads planted squarely in the sand. When pressed on whether it would try to offer more consumer-friendly "skinny" channel bundles in response to consumer-driven industry trends, Time Warner Cable execs informed analysts recently that it would just be too confusing:

"There’s a lot of attraction in the press about skinny packages," echoed Dinesh C. Jain, chief operating officer of Time Warner Cable. “I think a lot of the times, customers don’t want to get bogged down in a lot of choices to make on those kinds of things. There’s a lot of value in our triple-play packaging right now and it’s a simpler sale."

Yes, you wouldn't want to confuse the consumer by offering them something more competitive than you do now. And when calculating "value," surely Time Warner Cable is including its excellent customer service, ranked worse than any other U.S. company in any industry? Time Warner Cable has been paying lip service to more flexible options since 2010 or before, yet they never seem to materialize. That's in part thanks to broadcasters, whose programming rates continue to sail skyward utterly untethered from reason. But cable companies aren't faultless; they raise rates wherever and whenever they can as well, whether that's for DVR rentals, extra fees just to pay your bill in person, or sneaky below the line charges to covertly drive up the advertised rate.

At the cable industry's Internet & Television Expo last week, cable executives again proclaimed they didn't see the need for more flexible, cost-conscious cable lineups, because customers already get way more value than they can possibly handle:

"People have always had choice in what they buy in their subscription package,” declared Charter Communications CEO Tom Rutledge. "The vast majority of customers tend to take the larger bundle, and the reason is, it’s a damn good value,” said Time Warner Cable CEO Rob Marcus after allowing that “More flexibility is better."

In other words, there's no need to offer greater choice or value because we're already really incredible at doing that. Except data across the board suggests that they aren't.

A Reuters/Ipsos poll released concurrently with these execs' comments found that 77% of U.S. adults say they'd prefer a la carte cable programming, a shift the industry has fought off for years by arguing it would kill niche channels (something that's happening anyway) and raise rates (something that's happening anyway). But it's not just a la carte the cable industry has been resistant to; it's any shift toward more compelling programming tiers. That same poll also found that 54% of consumers would like to be able to buy a core cable bundle that doesn't include ESPN, and 47% don't want cable news networks.

The cable and broadcast industry could work together to get out ahead of Internet video, but they're absolutely terrified of offering any products that would cannibalize their traditional cable TV subscriber bases. They're comforted by the fact that so many subscribers continue to pay an arm and a leg for bloated, expensive cable bundles, and believe that the giant pay TV fortress they've built will survive indefinitely. So like so many legacy industries, instead of meaningful, pre-emptive adaptation, the cable sector stands in the middle of the highway with a glassy eyed stare, confident in its resilience against the eighteen wheeler that bears down upon it.

Filed Under: a la carte, bundles, cable, skinny bundles, tv
Companies: charter communications, comcast, time warner cable, verizon

Verizon Responds To Internet Video Competition With More Flexible Cable TV Packages, ESPN Immediately Whines

from the the-worldwide-leader-in-crying dept

Thanks to loosening broadcaster licensing restrictions, 2015 is birthing a number of more interesting Internet video platforms, including Sony's Playstation Vue and Dish's Sling TV. The latter has glacially moved the industry needle toward marginally-more-flexible cable TV pricing options, offering users a $20 base TV package that can be complemented with a variety of additional $5 "channel packs." Users are tired of bi-annual rate hikes for bloated channel budgets, and these services are only just giving an early glimpse into the more flexible programming options that will be the TV industry norm within a decade.

Better yet, they're actually forcing some pay TV companies to adapt. Verizon, for example, last week announced that the company would be offering up a variety of new channel packs and add ons that bring a little more flexibility to the telco's traditionally rigid bundles. Mirroring the Sling TV approach, Verizon now says the company will be offering users the option to buy a base TV package starting at $55 a month, after which users can tack on extra channel packs for $10 each. Here's a better idea of what it looks like:Verizon executives have traditionally been a little more progressively-minded about cord cutting than its industry counterparts (as in, actually occasionally admitting it exists), and this is a pretty clear play to not only cash in on cable companies' inflexibility, but try and prevent cord cutting. Since you usually can't see the true cost of a cable subscription until after you've gotten your bill (and seen all of the fees and obnoxious surcharges and caveats layered upon it), it's probably premature to call Verizon's effort revolutionary. But it's at least a start for an industry that has been swimming upstream and ignoring consumer demands for more than a decade.

Interestingly, it looks like Verizon didn't bother to tell any of its broadcast partners about its plans. Those partners, notably Disney and ESPN, immediately cried foul over the plans, claiming that Verizon's offers violate existing contracts:

"Media reports about Verizon’s new contemplated bundles describe packages that would not be authorized by our existing agreements. Among other issues, our contracts clearly provide that neither ESPN nor ESPN2 may be distributed in a separate sports package."...ESPN’s statement — which complains specifically about having its networks relegated to an optional sports tier, instead of being included in the base package — suggests that Verizon never got an agreement from the programmer before it announced its plan. A person familiar with another programmer included in Verizon’s offering said that programmer hadn’t signed off on Verizon’s plan either. That person suggested that Verizon thought its agreements allowed it to try different offerings as a limited test."

The bloated cost of sports programming is one of the biggest reasons for soaring cable bills (as if either broadcasters and cable operators need reasons at this point), and Verizon's clearly firing a warning shot over the broadcasters' bow in regards to being able to shift these costly options into add-on tiers. That's great for consumers, but it obviously lessens ESPN's out-front consumer-facing power and overall reach. ESPN would love things to remain status quo indefinitely, but that's clearly not a sustainable position. The traditional cable bundle is a burning, Hindenburg-esque cash cow that's destined to crash, and the "worldwide leader in sports" would probably be better off accelerating its adaptation to the new paradigm.

Of course that's not going to happen. Customers who don't care about sports are first in line to cut the cord, and as those users refuse to subsidize everybody else, ESPN's first impulse will be to raise rates on customers that do watch sports in order to keep the current cash cow afloat. Simultaneously you can be sure that ESPN's lawyers are huddled around the conference table as we speak, contemplating a lawsuit they believe will magically freeze time indefinitely. But if Verizon doesn't help blow up the bundle somebody else will, whether that's Internet video (where ESPN at least still gets paid) or increased sporting event piracy.

Whatever ESPN's approach (and you'd hope it would be more progressively minded), this is definitely the opening salvo in a much broader -- and necessary -- cable and broadcast industry war over breaking up the traditional cable bundle.

Filed Under: a la carte, internet video, over the top
Companies: disney, espn, verizon

Canada Forces A La Carte Rules On Cable Industry, Bell Pouts By Refusing To Show Regulator On Television

from the flexible-pricing-packages-are-the-devil dept

For years, the United States has had an on again off again love affair with the idea of a la carte television -- or the ability to purchase only the channels you want to watch. After a ten-year debate, "common wisdom" appears to have largely decided against the idea, the public buying into the cable industry's argument that selling channels individually would: a) kill niche television channels and b) drive up the cost of cable. Of course, the cost of cable TV is climbing skyward anyway, and the Internet has become the perfect place for those niche channels to flee to. Frankly, I've always wondered why there's any hesitation when it comes to blowing up a sector in such dire need of meaningful disruption.

Thankfully, Canada has decided to go ahead and play the guinea pig for us in terms of exploring what an a la carte future would look like. After holding fifteen months of consumer hearings and waiting for years unsuccessfully for more flexible pricing options, Canadian regulatory agency the CRTC has decided to force the issue. The CRTC this week issued a ruling requiring not only that Canadian cable operators provide a discount $25 entry level core TV tier, but that above that, users are allowed to pick channels a la carte. In a statement, the CRTC explained it this way:

"Canadians, who choose to do so, will be able to supplement the entry-level television service by buying individual channels that will be available either on a pick-and-pay basis or through small, reasonably priced packages. If they so choose, they will have the option of selecting theme-based packages—such as sports, lifestyle or comedy—offered by their service providers. By December 2016, Canadians will be able to subscribe to channels on a pick-and-pay basis, as well as in small packages. In addition, Canadians will have the choice of keeping their current television services without making any changes, if these continue to meet their needs and budgets."

Of course, the ruling is being met with all manner of hand-wringing from opponents of a la carte and the cable industry about how this is going to "destroy television as we know it." Canadian media has been flooded all week with stories about how this will only drive up costs, confuse consumers, harm the TV industry, result in cats and dogs sleeping together, and generally just wreak havoc on the TV ecosystem. Except, Canadian law professor Michael Geist points out that if you look past this breathy doomsday analysis in the press and actually ask real analysts, they point out the idea will probably save consumers money:

"Maher Yaghi of Desjardins Capital Markets says the changes could “lead to a reduction of $5 to $10 in monthly [revenue per user] as customers get the option to choose the channels they want to watch and move discretionary money toward OTT (over-the-top) services such as Netflix." Canaccord Genuity analyst Dvai Ghose suggests even bigger declines of $9 to $21 for some customers. In fact, Ghose notes that “current entry-level TV monthly prices for the large BDUs are as follows: Bell Fibe TV $45.95, Rogers Cable $40.48, Shaw $39.90 and Videotron $38.00 and Telus $34.00 ($29.00 if bundled).” A $25 service is obviously going to result in reduced spending for those consumers."

So yes, the claim that we should avoid a la carte TV because it will make TV bundles -- already seeing hikes many times the rate of inflation -- more expensive is just silly. So are the claims that forcing more flexible channel bundles on cable operators will somehow destroy quality television ("people will stop creating art if you don't help prop up our failing business model" has long been an entertainment industry rallying cry). While there are a few folks in the media who seem to get it, there's been a strange, overarching gushing adoration of the much-hated channel bundle in the media that's rather inexplicable, and in no way really tied to what consumers actually want. "Be careful what you wish for," the media logic seems to go, "or you'll pay a lot of money for cable television!" they bizarrely warn.

Canadian cable operators obviously weren't happy with the decision, but Canadian telco Bell apparently thought it would be a really good idea to ignore its editorial firewall, and "punish" the CRTC by pettily refusing to show CRTC chief Jean-Pierre Blais on bell-owned CTV:

"Mr. Crull became angry with the CRTC’s so-called pick-and-pay decision last week.According to sources close to the network who spoke on condition of anonymity, Mr. Crull directed senior news staff at CTV, the country’s largest private broadcaster, to exclude Mr. Blais from coverage of the story on Bell-owned networks. The ruling will give consumers more freedom to choose individual TV channels as part of cable and satellite subscriptions, but it could also affect Bell’s bottom line."

After taking a media beating, Bell Media President Kevin Crull was forced to issue a mealy mouthed mea culpa stating he'd "learned a valuable lesson" about editorial control and really dumb decisions. Of course, Bell continues to insist the CRTC's move will only raise rates for consumers. Because, you know, cable TV rates weren't increasing under the current pay TV bundle model -- and keeping consumer prices low is every giant cable operator's top priority.

Meanwhile, those who've been claiming that a la carte TV will somehow destroy television as we know it now have an interesting petri dish to keep an eye on in Canada. Of course it's very possible the regulations are awful or at the very least accomplish nothing. I think one fair point made is the people most attracted to this "skinny bundle" may have already moved on to cheaper streaming options. Still, the CRTC has made it clear that after fifteen months of public hearings, this is what Canadian consumers have told them they want.

With consumers facing bi-annual rate hikes for an abysmal assortment of mediocre content and awful customer service -- isn't it time to at least start experimenting? I've always been confused by the hand wringing over consumer interest in a la carte, as if it's the consumer's job to somehow ensure that cable companies continue to make the sort of bloated profits they've long grown used to. Their only job is to demand quality product at a reasonable price, something cable companies across North America have been failing spectacularly at for more than a decade as they grow ever larger, consolidate, and then jack up programming rates as if it's going out of style.

Refusing to explore a la carte TV solely because we're worried it might harm the bloated profits of an apathetic TV industry makes little to no sense to me. These companies, in the U.S. and Canada alike, had a decade to adapt and have fought pricing and package evolution (not just a la carte but any package flexibility) tooth and nail every step of the way. Why not try something different? And if the cable companies and their 300-channel bundles of reality television dreck struggle to adapt to the one-two punch of regulatory intervention and competition from Internet video? Just maybe it was time for their ungracefully-aging business model to sail quietly into the sunset instead of pouting like a chubby, petulant child.

Filed Under: a la carte, cable tv, canada, crtc, jean-pierre blais, kevin crull, petty, regulators
Companies: bell canada