Cable operators face a la carte pressures
The US cable TV industry is like a restaurant with certain levels of prix fixe dining. In other words, you can't pick and choose between cable offerings, especially at the basic level. You may want ESPN at your house and not want Nickelodeon, love the Nature Channel but loathe MTV and VH1.
Nevertheless, you get served the full cable package from soup to nuts. And you subsidize those who want to watch the hockey games on ESPN2 or the chef shows on the Cooking Channel, whatever your preferences are. Even a restaurant doesn't force you to pay for filet mignon even if you are a vegetarian.
This bundling of channels is the unwritten law in the local monopolies of the cable companies. And its becoming more and more of an issue, especially since ESPN, a staple of most cable line-ups, keeps getting more and more expensive for the cable companies to carry, costs they pass on to subscribers. Cable TV rates have jumped over 30% in the last few years, in large measure because of the costs of these channels.
The cable network make you pay extra for some channels, such as Showtime, the Playboy Channel. or HBO, so it's not as if it's impossible to do. And it all makes sense – except to the cable oligopoly. A story in the Wall Street Journal (“Should Cable be a la Carte, Not Flat Rate?” 3/26/04), quotes one researcher from Consumers Union as sreportng “The average household watches no more than a dozen to 17 channels.”
The cable operators claim their business would be ruined if they are forced to sell TV channel by channel, and the Journal quotes industry figures claiming any change would “have a dire impact on our ability to generate original programming” [what original programming?] and “could destroy a business that is monumentally successful.” They claim it would cost too much and hamper their plans to offer new services like video-on-demand or HDTV.
Even more than the cable providers, the cable channel producers (Disney, Fox, Viacom, etc.) are anxious to keep cable bundling the way it is. A Christian Science Monitor article (“Cable channles a la carte”, 11/6/2003) illustrates the prerssures between the two industries by citing the example of cable provider Cox Communications and ABC's ESPN.
Cox says ESPN has steadily increased its prices to the tune of some 20 percent per year over the past five years. It also says ESPN serves only 8 percent of its basic-cable viewers (ESPN is part of Cox's basic cable package) and that it cannot afford to keep passing those costs on to subscribers.
Cox says it might bump ESPN into its expensive package to help pay for it. But ESPN could just turn around and promote the fact that its programs are available on satellite TV
Of course, that's one of the reasons cable-provider Comcast wants to buy Disney and why Comcast, Cox, and other cable companies have bought up or started their own cable networks.
In other words, the cable companies and the big media companies are making out like bandits and don't want Congress and the FCC to change the rules of the game. You can be sure that some of those extra “monumental” dollars will find their way into “persuading” Congress and the administration ot see things from their point of view, and not from their customers'. [Oligopoly Watch]