The big FCC news today is a Wall Street Journal story reporting that the commission will soon suggest that cable companies offer their channels individually. A recent FCC report says that consumers could save money if they have the ability to choose which channels they want. The FCC is also pushing for themed tiers of channels allowing a customer for example to opt for a family-friendly tier.
Of course the FCC is not able to impose its will on the cable industry but such suggestions could embolden politicians to follow up on these recommendations with laws.
The cable industry argues that if many viewers were to drop channels aimed for example at children, the cost for these channels would have to rise for other consumers. Furthermore it may be possible that less money is available for the programming of such channels.
The problem here is that the channels with less interest are being subsidized by others that people want. Whenever this happens, there is waste that can be squeezed out of the system.
When I hear arguments like this it reminds me of the telecom market and how illogical the pricing structure of the industry has always been. For example having local calls that are usually free, interstate calls that are inexpensive and intrastate calls that are expensive just never made sense.
It just so happened that VoIP was able to take advantage of such screwed up pricing models and use it to its advantage. Now, ILECs have fixed rate pricing for all your calls.
I think the FCC is doing the right thing and it is in the consumer’s best interest to be able to purchase as many or few channels as they like. I also think that we will see more and more broadcasters beginning to stream their channels directly and bypass cable companies altogether.
When you look at the competitive environment, there is satellite, ILECs and the studios themselves. The one advantage the cable companies have is the access to large quantities of programming. In fact ILECs are at a disadvantage when offering programming as they don’t have access to all this content today.
The question is, will offering channels individually bring more business to cable companies or less? The answer may be more. I don’t have reams of research to support my opinion but past experience tells me that consumers given choice become happier with the company they are dealing with.
That is in the short term. In the end the TV distribution companies are going to have to fight it out with the content providers themselves. ESPN for example is in a position to become its own distribution company. Since they are owned by Disney, this is all the more reason for Disney to start dabbling with providing more content direct to consumers.
And herein lies the concern for cable companies. Imagine if the content providers realize customers are willing to pay a certain amount of money each month for their content. They of course may decide to offer the content themselves and eventually bypass cable companies altogether or offer the cable companies the same content at ridiculously low margins.