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Move could hurt sports broadcast industry, weaker channels

It's not just you that's irritated that you're paying for television channels you don't want due to bundling.  Cable service providers are also paying a similar price.  And while some -- like Time Warner Cable Inc. (TWC) -- are affiliated with those who profit off bundling themselves, many of the cable market's new players are purely on the losing end of the equation.

Verizon Communications Inc. (VZ), co-owner of America's largest wireless mobile device service network and the FiOS fiber-optic cable service, is looking to put its foot down and reshape a consumer's cable-shopping experience to a "buffet" of sorts.  Chief programming negotiator at Verizon Terry Denson comments, "We are paying for a customer who never goes to the channel."

In an interview with The Wall Street Journal he explains that Verizon is in negotiations to give customers access to the entire spectrum of cable channels (besides a handful of premium channels).  

Verizon FiOS
Verizon is upset about paying bundlers for content its customers don't necessarily want.
[Image Source: Android Community]

Whenever Verizon's set-top box documents a customer watching a particular channel for more than 5 minutes, Verizon would pay the bundler for that channel, and charge the customer for that channel.  Mr. Denson says the deal would cover a "significant number of channels".  He comments, "If you are willing to give a channel five minutes of your time, the cash register would ring in favor of the programmer"

While the idea of paying based on viewership is relatively old, the mechanism for doing so -- the internet connected set-top box -- is relatively new.  In the past there was no way to collect this kind of real-time viewership information, making viewership based pricing more problematic.

Verizon's initial talks have focused on "midtier and smaller" companies.  The executive said the negotiated deals/service pricing scheme could extend to on-demand viewing and mobile device viewing, as well.

II. Pushback From Broadcast Sports, Big Content Providers

Larger firms like Viacom, Inc. (VIAB) and Walt Disney, Comp. (DIS) may be reticent to sign up for the bundling scheme, though.  They often use bundling to prop up content that has low viewership, but which they deem is important.  As Mr. Denson complains, "It feels like certain content players who have a suite of channels attempt to lever the strong ones to prop up the weak ones…without any empirical data to show that these channels are actually viewed or wanted,"

The industry shift may also upset the big-money professional sports industry.  Much of the money of professional sports comes from broadcast deals, and much of that revenue in turn comes from fees associated with bundled channels.  If fees were solely viewership based, fees could dramatically drop.

NFL postgame
Bundling boosts sporting revenue; eliminating it could hurt professional sports.
[Image Source: U.S. Presswire]

For example market researchers Nielsen Holdings NV (NLSN) report that ESPN (owned by Disney only averaged 1 million viewers for content within the first week of its airing.  By contrast Comcast Corp.'s (CMCSA) USA Network (bundled by subsidiary NBCUniversal) averaged 1.3 million viewers within the first week, on average.  But ESPN cost $5.04 per subscriber, while USA Network only cost $0.68 USD, on average.

Bundling fees don't always line up with viewership. [Image Source: WSJ]

Bringing fees in line with viewship could dramatically cut broadcast sports revenues, and in turn sports owners' profits and athlete salaries.

For those reasons some don't believe the effort will catch on.  One unnamed executive is quoted as saying that the move would be "resisted fiercely", while another unnamed expert suggest this kind of effort had been around for years and never gone anywhere.  The second source suggested that "unless there is a giant seismic shift", the bundling would continue much as it is today.

Source: WSJ

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Its the only way for cable to survive
By Ammohunt on 3/18/2013 5:04:27 PM , Rating: 5
Make channel owners compete for viewers what a novel concept! Consumers want Ala carte period.. also, if i am going to pay to watch go ahead and leave out the commercials otherwise i am happy sticking with streaming or doing without TV completely and saving that $100 bill monthly.

RE: Its the only way for cable to survive
By Argon18 on 3/18/2013 5:19:51 PM , Rating: 5
You hit on a key point here, about the commercials. When you're paying for the content, whether it's radio, web, or TV, it ought to be free of advertising. That's why you're paying for it. Charging you for the content, and then bombarding you with commercials for 22 minutes of every hour is asinine, and is the main reason I dumped cable TV.

RE: Its the only way for cable to survive
By vol7ron on 3/18/2013 5:32:27 PM , Rating: 2
You're paying for cable+commercials. The cost of the content that you are watching is subsidized by those commercials. If you want to watch TV commercial-free (like HBO), you'd have to pay a premium (currently not a live-option, but you could buy it as a DVD or pay for the streamed series).

RE: Its the only way for cable to survive
By Argon18 on 3/18/2013 5:44:11 PM , Rating: 5
They ought to offer the option then. A-la-carte channel selection + commercial free viewing.

Right now $100 gets me 250 channels of crap, with loads of commercials, when there's really only 12 channels I would watch.

I would gladly pay the same $100 for 12 commercial-free hand picked channels. But since that isn't an option, I'll continue to enjoy saving $100 a month, and be content with the free over-the-air broadcast channels. Sorry Cable Company, if you want my $$$, you gotta give me what I want.

RE: Its the only way for cable to survive
By bodar on 3/18/2013 10:17:46 PM , Rating: 1
It's not ideal, but you can pay an extra $10/month for a DVR and fast-forward through all the commercials on pre-recorded shows. I don't watch commercials anymore, because I time-shift everything and watch it when I feel like it. It's a compromise for sure, but one I'm willing to live with, for now at least. If I could get everything I want to watch online, I would cut the cord in a heartbeat.

RE: Its the only way for cable to survive
By danjw1 on 3/19/2013 10:51:31 AM , Rating: 2
Or a bit more and use are TiVo which is far better than any cable companies DVRs. Cable companies are required to support CableCard devices like the TiVo. So no need to give that money to the man.

By tastyratz on 3/19/2013 1:30:08 PM , Rating: 2
or a bit more than that in true dailytech spirit and do what i did: ditch the tivo and build a windows media center home theater dvr device. The monthly tivo fee is unreasonable for cablecard use when you could just as easily do as much/more with an hd homerun device

By bodar on 3/19/2013 6:17:48 PM , Rating: 2
Believe me, I considered it (and the HTPC route), but I have Time Warner and I've heard that the required switched digital video adapters are garbage.

RE: Its the only way for cable to survive
By vol7ron on 3/19/2013 9:34:24 AM , Rating: 2
I'm with you, but I also feel that internet speed and quota is overpriced.

It shouldn't cost ~$2000/yr to watch 6-10 channels for only a couple hours a day.

By Ammohunt on 3/19/2013 11:03:28 AM , Rating: 2
I need an internet connection anyway for work and gaming. so as i see it i am just maximizing that $100 a month investment quota whats that?

By Reclaimer77 on 3/18/2013 8:02:58 PM , Rating: 2
The cost of the content that you are watching is subsidized by those commercials.

That's increasingly becoming a false economy. They better modernize television and soon.

By Jeffk464 on 3/18/2013 9:42:32 PM , Rating: 2
Yup, I buy the got to have em HBO shows this way. They rip you off on a per episode basis but its still cheaper than paying for cable.

By Uncle on 3/19/2013 7:06:07 PM , Rating: 2
If you live in a house in the city,you put up an antenna, and get the programming free, paid for by the commercials,as a was told years ago. They strung up cable charged me and still I was fed commercials,cause I was paying for the cable, as I was told. Forty yrs later I was (past tense)still paying for that dam cable, twice the amount of commercials, must be made of gold. Same reason I bought a larger then life TV to watch "Try before you buy" movies, because I paid to see a movie in a theater minus commercials. I don't know who the cable companies Marketing people are, but they sure haven't talked to me. I hope this catches on, because as it is now They don't get a penny from me for tv cable, and as I told my provider wouldn't you rather get 10 or 20 dollars extra from me then none ,as it is now. The company I get my entertainment from lost 39,000 cable subscribers last year, and when you look at what is on TV, I just shake my head. Seems the cable companies make more money from infomercials, because they sure do occupy a lot of channels that consumers pay for.

By GotThumbs on 3/19/2013 10:56:19 AM , Rating: 2
Same here.

I dumped my cable over 3 years ago now. Just have internet through Comcast and get my content from Hulu(not plus), over the air local HDTV and stream content from my home-server. This provides plenty of content for my limited viewing needs.

Over time, you learn that you CAN live without cable tv. Something that cable companies are seeing as a growing trend.

I believe this is why Verizon is looking at this change.

RE: Its the only way for cable to survive
By FITCamaro on 3/19/2013 3:31:11 PM , Rating: 2
Yeah because even $5/subscriber comes anywhere close to paying the fees associated with running a TV channel and producing content.

No. Everyone complains about the crap that is on TV. Why do you think reality and music shows are so big? Because they're insanely cheap to produce. No extremely expensive cast. No expensive writers. Just some slubs looking for their 5 minutes of fame, some prizes, and one or a few hosts/judges.

I have no issue with commercials. I just ask for a solid 22-25 minute episode with a good story. I have a DVR but I still rarely fast forward through commercials.

By FITCamaro on 3/19/2013 3:35:25 PM , Rating: 2
Oh and I plan to dump satellite again. I did for a few months, but then I needed my football. Now it seems that ESPN3 has improved to where if it ain't on network, its on ESPN3. And I also didn't hear until too late that Sunday Ticket was being renewed through the PS3. They won't fool me again.

By Reclaimer77 on 3/18/2013 5:35:08 PM , Rating: 3
Exactly. It's 2013 and there's this thing called Netflix and online media, cable companies, maybe you've heard of it?

Frankly I don't think I can go back to cable now even with this change. After firing my cable company and going with Netflix and other sources, I don't think I can come back to commercial TV. I just LOVE not having to deal with commercials, or those goddamn cable company overlays with huge ass network icons. Or even the goddamn storm alerts or whatever. Commercial TV is too annoying!

RE: Its the only way for cable to survive
By tayb on 3/18/2013 5:50:20 PM , Rating: 2
Did you know that Hulu Plus has commercials? I signed up for a 2 week free trial and I couldn't believe there were commercials. At least 6 minutes of commercials per 40 minute television program. No way! If it wasn't free I would demand a refund.

I went online to preemptively cancel and they gave me an extra month free to try and retain me. Ended up with 6 weeks free so I'll go ahead and use it and bail before the trial is up. Absolutely 0% chance I'm going to pay ANYONE to watch commercials. Yeah that includes cable.

RE: Its the only way for cable to survive
By Reclaimer77 on 3/18/2013 5:55:32 PM , Rating: 2
Did you know that Hulu Plus has commercials?

Yup. That's what shocked me years ago when they switched to a paid service, yet still retained the commercials. WTF would I pay money for a service yet STILL have the commercials that free accounts have?

Amazon Prime Streaming is commercial free, but I have to be honest, I absolutely HATE the service. They sucker you in with a seemingly large catalog, until you realize 90% of it is pay-to-rent ON TOP of your subscription fee. Honestly what MORON thinks someone is going to pay $35+ to "rent" a stream of a season of a TV show?? Just one season!!! Wtf? Also it seems like half the content they have for free streaming, is already on Netflix anyway.

I hope Netflix can continue forever. There is no option even close!

By Jeffk464 on 3/18/2013 9:46:27 PM , Rating: 2
I pay that much for Game of Thrones, but thats a pretty extreme case. I wouldn't pay that much for anything else on TV.

By TheJian on 3/19/2013 5:49:33 AM , Rating: 2
I cancelled during the trial. Playon lets you get all their free stuff anyway (since it streams as if you are on the PC). No point in paying for commercials. This happened because they signed bad contracts early on, hopefully they'll fix it one day. But netflix is so far ahead of them I think they're going to die soon.

Of the top 200 shows on IMDB, netflix has all, where amazon, hulu, vudu barely had half together. Amazon had 75 though far above the other two. Still miles short of Netflix not to mention 700+ channels they have. I can barely stand OTA TV these days as commercials get on my nerves in under 15 minutes and I bounce back to roku etc...LOL

By Solandri on 3/18/2013 6:39:39 PM , Rating: 2
Make channel owners compete for viewers what a novel concept! Consumers want Ala carte period..

I wouldn't quite say that. I think most customers actually prefer package pricing. The problem is the packages just suck. To inflate the number of HD channels in their sales brochure, the cable companies stick in all sorts of channels most people would never watch.

While the marginal cost for a single one of those channels is not much, it adds up when you get to several dozen of them. Resulting in customers feeling like they're paying for a bunch of channels they don't want, and a la carte pricing seemingly the only way to escape it.

If they took a poll of 10,000 customers asking which channels they wanted most, and put together packages based on that, I'm pretty sure most customers would love those packages.

RE: Its the only way for cable to survive
By Jeffk464 on 3/18/2013 9:36:11 PM , Rating: 2
This is a step in the right direction but viewers want a netflix like service that includes cable TV.

RE: Its the only way for cable to survive
By Jeffk464 on 3/18/2013 9:39:49 PM , Rating: 2
It's not just you that's irritated that you're paying for television channels you don't want due to bundling.

What really irritates me is the fact that cable companies keep making bigger and bigger contracts with sports franchising and then jacking the rates up on everyone to pay for it. I don't watch sports and find this to be the biggest irritant of all.

PS I know shocking a guy on a tech sight isn't into sports. :)

By kattanna on 3/19/2013 10:48:53 AM , Rating: 2
PS I know shocking a guy on a tech sight isn't into sports. :)

LOL.. same here. would love to not have to scroll through all the sports, and other unwanted channels.

By inperfectdarkness on 3/19/2013 9:23:14 AM , Rating: 2
Eventually it must dawn on people that ESPN is what drives the cost up more than anything. I can live without ESPN. In fact, based on the "per subscriber costs" currently listed, the channels that I'd pay for would collectively set me back $15 a month. I'd happily pay $40 if I got them commercial-free.

By Dr of crap on 3/21/2013 12:35:49 PM , Rating: 2
If they offered that model they MIGHT get more buyers - think about that!
BUT they wouldn't even think of such nonsense, more subscribers - HA!

"This is from the It's a science website." -- Rush Limbaugh

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