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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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WHAAA - sports salaries might get cut?...ROFL
By TheJian on 3/19/2013 5:40:25 AM , Rating: 2
Too bad, you're over paid and under-worked. I shouldn't have to pay for ANYTHING I don't watch.

But I quit cable a long time ago because of this (whole family has, 3 houses)...LOL. Netflix, Antenna and Roku (with playon and plex) killed any idea of going back unless they offered my favorite 10 channels for say $15. I may add that to what I have now, but doubtful. I live without commercials 95% of the time these days. I haven't watched a sport show in years that didn't come over the antenna (which of course gets fox, abc, nbc, cbs, etc).

They screwed themselves already. I have no need for cable or any tv with commercials. It's very rare when I have the time to watch OTA stuff as there is so much other crap to watch. I will never be able to watch all the TV shows on netflix. There are just too many complete shows to watch. Like 5-10 seasons of dozens of popular shows that aren't on now - for instance One Tree Hill, Merlin, Alias, Heroes, Prison Break, Weeds etc etc. And tons more shows that are one but just don't have the current season (they add it every year, like weeds s8 just got added as the show ended).

Cable TV providers can just die as far as I'm concerned. Then actors can follow sports salaries down to EARTH again. Nobody should be paid $1mil per episode. I might still be watching seinfeld if they hadn't been getting 6mil/ep. The show died when they all got it in the last season (all but jerry got 1mil until they found out...LOL). Hollywood and sports salaries need to come back to earth :) The internet is allowing us to revolt :) IF we all dump cable they'll have to work cheaper like it or not. I LIKE IT.

By blppt on 3/19/2013 11:01:06 AM , Rating: 2
Funny thing about that---NBC would probably BEG to double or triple that $6 mil per episode right now with their atrocious ratings nowadays (if Jerry would get the gang back together). It would be an instant #1 in the ratings, at least for a little while, unless the writing stunk.

For a guarantee like that, NBC execs might even sell their firstborn =)

By Skywalker123 on 3/19/2013 2:21:03 PM , Rating: 2
The show didnt die because of huge salaries, Jerry quit, the network offered him tons of money to go on but he refused.

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