First, before I forget, I owe you a review of the SatHawk / Solomend FTA receiver I’ve been using. (It uses the same innards as the OpenBox S9.) So far, everything is great, and even the DVR is working pretty well. I’ll write much more about it next week.
When Dish Network and Fox couldn’t reach an agreement to renew a bunch of regional sports networks and a couple of other pay-TV channels, Fox yanked them from Dish. Trade publications had a note on it, local newspapers where the sports networks went out mentioned it, and a few perceptive souls noticed that the dispute might spread to include some Fox over-the-air channels in November. Congress and the national media yawned.
But last weekend, when Fox yanked over-the-air channels away from Cablevision, which services New York and Philadelphia, that’s when US Representatives felt moved to act. Or at least talk about acting. In a way that somehow keeps the channels on while allowing the free market to work it out. But which punishes those who bargain in “bad faith”, a determination that courts rarely make.
Long Side Note: Dish and Cablevision often say they’re holding the line to keep customers’ prices low. That’s garbage. They’re holding the line to provide the best return for their investors, as is their duty. The retail cost of anything is set to maximize profit. Set the price too high, and reduced sales drop the total profit. Set it too low, and the thin margins produce a smaller profit.
Here’s a concrete example. Once upon a time, I bought and sold used and collectible books. (I bought them used and sold them collectible.) Suppose that I bought a pile of them at $1 each. Now suppose that the next pile I bought cost $3 each. Would I automatically raise prices by $2/book? Of course not! The price was always set based on demand and competition. Higher costs cut into my profit, but they had no effect on the customer’s price.
When a business has an increased cost, such as a higher wholesale fee for a channel, it merely changes the floor for the minimum price to consumers. And that higher floor only changes whether the business will sell that thing at all; it won’t automatically set a higher price. Back to the books, if demand for those $3 books fell off, the competitive price might drop to $2 or less. I’d sell however many I had left in inventory at below cost, but I’ll know not to buy any more of those at $3.
These rate disputes are all about which company gets to keep more of subscribers’ fees. This talk about protecting consumers from rate increases is hogwash.
Anyway, there’s one painless way to solve all retransmission disputes. It’s used in similar markets, yet I never hear it brought up as a solution to this mess. As personal inspiration and drive-in movie critic Joe Bob Briggs often puts it, “I’m surprised I have to explain these things.”
Get the networks (a handful of companies own most of them) on one side of a bargaining table. Get the cable and satellite companies on the other. Make them work out one national formula for how much any given network is paid per subscriber. Repeat every couple of years or so. Everyone gets a fair shake, and viewers never see holes in their lineup from channel disputes.
Personally, I’d like to see the formula tied to the number of viewers, not subscribers. If your channel adds interesting programs, ratings go up, then you get more money next quarter. If you rerun the same old crud and no one watches, you get less money.
This model works in music. It works for streaming radio stations. In Canada, it works for schools photocopying text and for retransmitting OTA channels. There’s no reason this kind of system couldn’t work here.
Think of all the money this would save these companies. Take the number of channels. Multiply by the number of cable/satellite providers. Multiply by the number of worker-hours (or lawyer-hours) needed to negotiate each carriage agreement. Multiply by the hourly cost of company workers or lawyers. No matter how much a central agreement would cost to negotiate, it would be a lot less than this.
However, without being forced to the table, the channel providers would never agree to this. Disney thinks that ESPN is indispensible (maybe it is), charges almost as much as HBO for it, and demands that it be included in the lowest tier on every system. Other providers also have a long history of winning the big fights like the current dispute. Why be forced to take a standard rate when you have the leverage to demand a premium? But if Congress really wants to build a system that’s fair to everyone, this is it.
Or Congress could mandate a la carte pricing, as supported by Consumers Union. Everyone pays a set amount to connect, then buys each channel separately, so if a channel raises its rate, subscribers can decide whether they’d rather pay extra or drop it. Opponents say a la carte pricing would make users pay more for fewer channels, but have the folks who make Consumer Reports ever been really wrong about anything like that?
Just a couple of quick notes about two streaming TV providers.
