1. Arts & Entertainment

How to profit from the cable TV wars

Published Jul. 16, 2012

It all comes down to the bundle.

Want to know why DirecTV pulled 26 Viacom-owned cable channels last week, including Nickelodeon, BET, Comedy Central and VH1?

Unsure how Hearst got so steamed at Time Warner Cable and Bright House Networks that it yanked its broadcast stations late Tuesday, including WMOR-Ch. 32 in Tampa and WESH-TV in Orlando? Wondering why AMC, IFC and WE tv haven't been seen on Dish Networks since July 1?

Except for the AMC/Dish tiff, where the two sides disagree on why they're on the outs, every one of these fights comes down to the fees paid for channels "bundled" together into packages.

The people who provide the programs want more money for collections of channels; the people who bring the programs into your homes don't want to pay the new rate demanded.

Experts say this is a historic transition. Even as those who make TV shows try to wring more money out of cable and satellite TV systems, there have never been more ways to get their programs elsewhere.

The best bits from Viacom's Daily Show are on dozens of websites each morning. Old seasons of Breaking Bad and Storage Wars are easily accessible through Netflix's online streaming video service.

Technology and consumer demand are pressing for less bundling — driving toward models where people access the shows they want the way they want for a specific, targeted fee.

But the business model for cable and satellite TV works differently, taking fees to provide an array of channels, some popular and others less so.

No one knows what may happen if that model falls apart.

"The reason these (arguments) are going to the brink and past it, is because each side wants to see who has the market power in this changing environment," said Marc Cooper, director of research for the Consumer Federation of America. "Until you see what the other guy's got, you're not sure whether he's bluffing."

So you, Mr. and Mrs. Consumer, may have more power than you realize. The side you punish most with your anger and withdrawn patronage is the one likely to lose this fight.

There's a lot at stake. In 2009, cable systems paid an estimated $25-billion in retransmission fees, twice what broadcasters earned in advertising revenue. That averaged about $1,500 per viewer over the previous three years, according to an analysis by Barclay's Capital.

That's why there's a sense here of a different, more permanent conflict. In the past, such disagreements might be resolved within days, timed around big TV events to ratchet up pressure for a quick solution.

These outages, which are falling in the middle of summer when many viewers are on vacation, snowbirds are up north and the networks are in reruns, give the sense of deeper lines drawn.

Viacom has pulled online episodes of shows from websites. Bright House is airing an NBC affiliate from Pennsylvania in Orlando (to replace WESH) and has used HBO Family to sub for WMOR's diet of Jerry Springer and Big Bang Theory episodes.

On its website providing information on the dispute with Hearst, Bright House advised consumers on how to access shows broadcast on WMOR online — running the risk of teaching viewers to skip their cable service altogether.

And the war of TV commercials, onscreen messages, press releases and websites for each side has made these fights more public than ever.

Some experts wonder if the cable industry is trying to stoke customer anger enough to push Congress into rewriting laws. But if legislators make it easier for cable systems to buy popular cable channels and avoid unpopular ones, won't subscribers demand the same choice, unraveling the cable/satellite business model, too?

Parul Desai, communications policy counsel for Consumers Union, the non-profit publisher of Consumer Reports, said consumers are likely to get the stick's short end, regardless of what happens.

"Consumers complain about cable bills, but no one seems to do anything about it," said Desai, who also worried some cable companies' monopoly on broadband services might make it tough for consumers to save money by dropping cable TV for online video alone. "They won't get repayment for lost channels and when they come back, they're likely to be charged more."

Or, as a friend of mine put it recently, seeing onscreen messages saying Viacom wanted $1 billion more for their channels just reminds him how much DirecTV is saving during this outage — money customers aren't getting back.

My advice: Call your cable or satellite provider every time channels disappear and push for a discount or special deal. And keep an eye on whether it makes more sense to pare back your account to bare-bones service and access shows on Netflix or Apple TV.

Because, in the end, the only person looking out for you in this scenario is looking back at you from the mirror.