Federal lawsuit on Bundled Channels

Bulldog

SatelliteGuys Pro
Original poster
Jan 22, 2004
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Sorry if this was discussed previously, but I just read that last week, an antitrust lawyer by the name of Maxwell Blecher filed a federal lawsuit that challenges the cable and satellite television industry's practice of selling channels in bundled tiers, rather than offering them on an a la carte basis.

It stated that cable, satellite providers and television studios are violating trade and anti-trust laws.

Very Interesting….
 
I read about that lawsuit myself. I know that some cable systems in rural areas wanted Nickelodeon but did not like being forced to carry MTV or its offshoots.
 
This is NOT directly the fault of DISH Network or DirecTV. This is the fault of the entire system as a whole. As well all know, all TV channels make money by selling advertising space. That's how they can afford to make new shows, buy the rights to rebroadcast movies, and pay their people - from the actors to the janitors. Without advertising there is no more TV, period. Most of your packages from basic all the way to premium have certain channels that have a limited viewing base. These may include channels such as the food channel, military channel, and HGTV, the list oculd go on and on. The programmers that broadcast these channels decide how much to charge advertisers by how many viewers are able to watch them. The more capable viewers, the more valuable a slot on their channel is for someone to advertise on. Notice I didn't say actually watch, but rather have the ability to watch. Meaning that the Food channel says, ok, I have 6 million people who are subscribed to a cable or satellite package that has my channel, so as an advertiser I'm going to charge you X hundred grand for a 30 second spot. Those numbers will vary depending on the number of capable viewers. That doesn't mean that all 6 million people see that spot, only that it's available to be viewed. It's the same with a newspaper. Individuals and businesses pay an amount to advertise in a newspaper regardless of how many subscribers the newspaper has. 10 thousand people buy the newspaper, but only half of that number actually see the ad. It's the basics of advertising. Now consider this - if a channel like that is not included in basic packages and is offered a la carte, then that same spot on that same channel just became worth less money because not enough people have the ability to view it to make it worth the advertisers' while to pay for it. So, the advertisers send their business elsewhere, and the niche channel now doesn't have enough money to even keep the lights on, let alone create new programming or even keep what it has, thereby reducing interest in it's viewers, which would in turn reduce the number of available channels to even HAVE a la carte. It's a two headed monster wielding a double edged sword. On one had, customers would win because they could chose only the channels they want to see, and save money while doing it. On the other hand, in doing so they would be starving the very same channels that they subscribe to, or don't subscribe to, which would then take channels away from someone else.


The FCC came up with the same idea here a couple years ago and took it to the cable and sat providers, and after a good bit of research, they found exactly what I just said here - the system as it currently is won't allow for a la carte programming. The only question is.....how to change it. It won't be easy. And it would most certainly end up with a lot of powerful people in high places losing a lot of money. And if Maxwell Blecher shakes this tree long enough I don't think he'll like what falls on his head. He may as well drink a gallon of gas then go piss on a brush fire.
 
Yeah, this is picking up some steam. I read this somewhere a few days ago and, if I can find the link, will post it on this thread. I would personally be supportive of a la carte programming but I'm not certain how much I would save on a bill from month to month (or year to year). I feel certain that a few of the channels I would definately purchase (such as ESPN or the NFL Network) would be much pricier than the other networks and would essentially push my bill to what I am already paying (or in the same neighborhood anyways). I do think it would be cool if certain channels were split up like Starchoice packages -- maybe you could purchase a basic package and be able to select three or four "tiers" that were included in the price or something. Just a thought... I have heard a lot about this over the past several months, though, so it's picking up steam.

Now, I'm not claiming to be "in the know" about anything DISH Network does nor am I in communication with any of their employees and, in fact, don't even know any unless they are hidden within the population of this message board. However, I can almost swear that I saw on one message board that Echostar was in favor of the switch to A La Carte. Again, if I find that link, I'll post it to this thread.

Cade

EDIT: Here's the link that shows Echostar is supportive of changes to a la carte pricing!!
USATODAY.com - How we pay for cable may be about to change
 
You are correct. DISH is an advocate of a la carte programming. However the programmers that supply DISH with the channels that they retransmit to us would have none of it. They whined and cried for weeks as soon as Charlie mentioned it.
 
You are correct. DISH is an advocate of a la carte programming. However the programmers that supply DISH with the channels that they retransmit to us would have none of it. They whined and cried for weeks as soon as Charlie mentioned it.

Right. And even though it will eventually happen (in my opinion), I won't only be ordering ESPN and ESPN2, but I'll also be getting ABC Family, SOAPNet, and all of the other channel that are extended family members. At least I'd assume that's how it will happen. In other words, you might get Nickelodeon, but you'll probably be getting MTV along with it...

Cade
 
I know this may be off topic. Charlie did say that he wanted to give customers what they wanted???? What about a la carte hd channels Charlie:)
 
They could do it both ways. Tiers like they have now, but every individual channel should also have a price. So I could have AT200 plus DIY if DIY is the only AT250 channel I just gotta have.
 
They could do it both ways. Tiers like they have now, but every individual channel should also have a price. So I could have AT200 plus DIY if DIY is the only AT250 channel I just gotta have.



Now THAT is the smartest way of doing it that I've heard. It makes good sense. So someone could get the Top 100, and then add stuff like Halmark Movie channel and Soap Net.
 
I do belive that it was found by the FCC that a la carte would end up costing most customers more than what they pay now.



That's right. And that goes back to what I was saying before. Since the programmers would lose so many capable viewers by not having their channel in a package, they would have to raise the rates they charge the broadcaster (DISH and DirecTV) to recoupe the losses, which DISH and DirecTV would then have to pass on to the customer.
 
This is NOT directly the fault of DISH Network or DirecTV. This is the fault of the entire system as a whole. As well all know, all TV channels make money by selling advertising space. That's how they can afford to make new shows, buy the rights to rebroadcast movies, and pay their people - from the actors to the janitors. Without advertising there is no more TV, period. Most of your packages from basic all the way to premium have certain channels that have a limited viewing base. These may include channels such as the food channel, military channel, and HGTV, the list oculd go on and on. The programmers that broadcast these channels decide how much to charge advertisers by how many viewers are able to watch them. The more capable viewers, the more valuable a slot on their channel is for someone to advertise on. Notice I didn't say actually watch, but rather have the ability to watch. Meaning that the Food channel says, ok, I have 6 million people who are subscribed to a cable or satellite package that has my channel, so as an advertiser I'm going to charge you X hundred grand for a 30 second spot. Those numbers will vary depending on the number of capable viewers. That doesn't mean that all 6 million people see that spot, only that it's available to be viewed. It's the same with a newspaper. Individuals and businesses pay an amount to advertise in a newspaper regardless of how many subscribers the newspaper has. 10 thousand people buy the newspaper, but only half of that number actually see the ad. It's the basics of advertising. Now consider this - if a channel like that is not included in basic packages and is offered a la carte, then that same spot on that same channel just became worth less money because not enough people have the ability to view it to make it worth the advertisers' while to pay for it. So, the advertisers send their business elsewhere, and the niche channel now doesn't have enough money to even keep the lights on, let alone create new programming or even keep what it has, thereby reducing interest in it's viewers, which would in turn reduce the number of available channels to even HAVE a la carte. It's a two headed monster wielding a double edged sword. On one had, customers would win because they could chose only the channels they want to see, and save money while doing it. On the other hand, in doing so they would be starving the very same channels that they subscribe to, or don't subscribe to, which would then take channels away from someone else.


The FCC came up with the same idea here a couple years ago and took it to the cable and sat providers, and after a good bit of research, they found exactly what I just said here - the system as it currently is won't allow for a la carte programming. The only question is.....how to change it. It won't be easy. And it would most certainly end up with a lot of powerful people in high places losing a lot of money. And if Maxwell Blecher shakes this tree long enough I don't think he'll like what falls on his head. He may as well drink a gallon of gas then go piss on a brush fire.
Is it true that Dish and other providers pay for the channels they carry? I seems to me it should be the other way around. If the Food Channel is not carried by a large provider like Diish, they could not charge as much for there advertising. There should be no tiers. A subcriber should get all the channels for one price, except the premium channels.
 
Hogwash. Programmers expand their channel lineup for one thing...to get more ad revenue. Then they force providers to carry their channels in certain tiers so they maximize carriage fees. It's an all or nothing situation for the consumer because he doesn't have a real choice in the programming he wants. I say let the channels fail because few people probably watch the ones that would fail anyway. I want choice.
 
I am betting that people would not choose ala carte channels if they were offered at a cost that would make the content providers the same amount of money as they would make from the ad revenue that would be lost from not accepting the additional channels. I wonder how many people would chose to pay $25 per month for Nickelodeon as opposed to paying $20 for a package of programming that includes Nickelodeon and a bunch of other channels that generate ad revenue for the content provider?
 
The fcc is also FOR ala carte. They are pushing this too and it might actually become the rule of law before to long. I am for it as well. You should be able to add a channel you want for a price to save you money. THe problem with this is that even though Charlie and DISH say they are for it their actions speak otherwise. IF you don't sub to AEP you get hit by dvr fees of 5.98 per dvr receiver. If you don't sub to hd pack , you get hit by 6.00 per hd receiver. So you could buy programming of 20.00 but get hit be fees out the ass if you did so because of all the fees that DISH charges. So in my case I have 3 hd dvrs. I would sub to maybe say 40.00 worth of programming , but get hit by 2 additional receiver fees of 12.00 . THen I would get hit by 3 dvr fees of 17.94. Then since I wouldn't sub to the whole hd pack but pick and choose what I wanted , I would get hit by 3 hd access fees of 18.00. So in the end I would have :

$40.00 programming
12.00 additional rec
18.00 hd access fees
17.94 dvr fees
------------------------------
$ 87.94


So 47.94 in fees and 40.00 in programming. See the problem? Unless they made the law that the providers couldn't penalize you with excess fees for not bundleing, it wouldn't fix the problems we would still have.
 
If you fail to cover those extra costs with a large enough package fee by paying for programming ala carte, how can you characterize "ala carte" fees as penalty?
 
This Ala carte argument is quite funny.

Dish is for ala carte for ONE reason they will make MORE MONEY.

The Subs will likely pay almost the same they pay now even with ala carte. All MSO's Cable and DBS have to maintain an average subscriber rate of about 55 dollars to remain in the black. Retransmission fees are a VERY SMALL part of their expenses. Ala Carte Honks are always suggesting that HIGH Retransmission fees are the reason we pay so much for Multichannel service, BULLCR*&^.

That argument is BALONEY, the largest expenses are 1) the Capital expenses to setup and Maintain their distribution system, 2) Employee Costs, 3) carrying costs (loans and differed payments) from their Capital expenditures.

All of those costs MUST be covered FIRST before we even get to the actual programing costs, since only about 20 percent of their costs are attributed to the actual programing costs Subscribers will not save much over what they are paying NOW, and this is ASSUMING that retransmission costs stay the same under Ala Carte as they were under the current bundling system which is EXTREMELY UNLIKELY.

Since we mentioned the content delivery companies we will now move on the content owners business model. Under the current model all Content Owners get ad revenue based on Prospect Eyeballs NOT actual Eyeballs a channel that loses large numbers of SUBs will have to make up that revenue in other ways, either Jack up their Ad Rates, which is less likely to work as an advertiser is not going to pay MORE to reach FEWER potential SUBS. The only other way to make up for that revenue loss is to increase their retransmission fees collected directly from SUBSCRIBERS.

Under the current bundling model guaranteed eyeballs make each channel cost much less per subscriber regardless if that or those subs even watch that channels programing.

If Ala Carte is permitted, then we as subscribers can pull our support from channels that do not interest us. We then Pass that burden on to only the subs that want the channel. This sounds great in theory, but what if, what you value not many others do, well then that answer is very simple, the Channel doubles, triples, quadruples or more its retransmission fees. This will have two possibilities Outrageous per channel fees, and not enough subs or if it can't generate enough support to survive and its GONE. Remember Price and perceived value are on a sliding scale. If Price increases fewer subs buy in, as fewer buy in Prices increase, this can spiral into the end of a channel.

In the end we all know which are statistically the most expensive programing, and the most viewed. Generally, Sports is the KILLER APP that drives subscriber growth. Sports has also become the most expensive channels, some of the biggest reasons is the competitive nature of Owners that will spend X Millions in payroll to win, and greed of the players.

In the end it all boils down to MONEY, MSO's are required to provide signals that subscribers want so they are able to collect enough in revenues to cover their costs and make a profit, so are the Content Owners. This will not change.

Whether you think it is fair or not, Bundling is a very efficient model that allows MSO's to carry a VERY WIDE range of Niche Programing that COULD NOT survive with only their small subset of interested subscribers. The bottom line is that we all pay to subsidize others programing interests so all Niche Entertainment can survive, just be glad you are able to get programing that you enjoy at a price you can afford.

In a true Ala carte business model many Niche entertainment channels would cease to exist. Anyway you slice it, they have what you WANT. They (Content Owners, and MSO's) need to make a profit from creating the content and having delivered into your home.

John
 
There was a time when ala carte existed back in the ole' C-Band days. It didn't work. Why? Because after a customer realized that it cost just as much to get 10-15 channels as it did to get around 100 it became a no brainer.

Why will it cost more ala carte? go back and read post #4 by mdwatt.
 
Truthfully, I would happily pay more then I do now. As long as I don't have to flip through the endless HSN and Religious and Jewlery and Sirius and CD01, CD02, CD02...CD999!!!


If all I had were the channels I want. That would be worth 50% more then I am paying now.

the trouble with 'locking' out the channels I don't want, is I won't know if there are new channels I might be interested in. So that doesn't work for me either...
 

Fellow E* Pals....i'm not a traitor

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