Actually, the idea that you could pay for only the TV channels you actually watch, not a bundle of channels determined by cable executives behind closed doors, is a dream for a lot of consumers. But this one guy especially.
Kevin Friedman, who makes a living running Mister Archer, an insider’s guide to San Francisco, is disgusted by the power of Big Cable. He hates that he must pay for all sorts of TV channels that he does not watch in order to have access to the channels that he actually does want. To fulfill his dream of an unbundled system—in which you only pay for the TV channels you want to pay for—he created another website at the beginning of 2010: tvalacarte.org, where you can learn that since 1996, cable rates have climbed 59% (three times the rate of inflation), and where you take the pledge:
I am fed up with my cable provider force-feeding me unwatchable programming, then raising my rates without notice. I am sick of complaining and I want action. I am hopeful that by joining this movement, together, we will combine our buying power to restore transparency and competition into the cable industry.
No longer will Big Cable pick my programming, I will!
In the Q&A to follow, Friedman answered my questions about his noble mission, his frustrations with cable providers, the idea of cutting the cable cord entirely, and how he sees the future of TV programming playing out down the line.
What drove you to create the website and start a movement of sorts, and what are you hoping to achieve?
Kevin Friedman: For the Big Game [Stanford vs. Cal.], we had planned an epic 48 hour tailgate right next to the stadium. Winnebago, BBQ, trip tip, ladder golf… even the Batter Blaster with spicy Bloody Mary’s. The most critical element of the weekend tailgate though is to broadcast the game live on an 42″ HD screen. We had the entire setup including the portable DirecTV satellite receiver. The one issue… DirecTV stopped carrying Versus — the channel with the broadcasting rights. At first, our frustrations were directed at DirecTV for being cheap. But after spending countless hours researching, we discovered a new culprit. Comcast.
The skinny is Comcast purchased the Versus TV channel. After the acquisition, they attempted to jack the affiliate rates (the amount charged by the channel per subscriber to month back to the cable/satellite provider) purportedly by 20% to up to 50%. DirecTV balked at the incredible jump in rates and posted this note to their consumers.
Although, we didn’t know it at the time, this dispute marked the beginning of the “Programming Wars.”
In thinking through this situation, Comcast could win either way. Either DirecTV pays the rate hike, generating more revenue per subscriber leading to a very profitable acquisition. Or, DirecTV refuses to pay the increase and loses broadcast rights on the channel. Comcast has a long history of investing in sports. Why? Because, sports fans have inelastic demand. Stated differently, there are many avid fans willing to pay almost anything to watch their home teams. If I love NHL hockey and Versus broadcasts the Stanley Cup. I HAVE TO leave DirecTV to find another cable/satellite provider. More often than not, these customers turn to Comcast.
What cable services have you used over the years, and what kinds of things have they done to drive you crazy?
KF: I’ve used Comcast and DirecTV. Both options have major drawbacks. The Comcast DVR is fraught with so many bugs that time shifting causes whiplash. Oh, how I miss my TiVo! The DirecTV offering is pretty darn good… except the signal sometimes gets “snowy” in weather and it is a bit frustrating to add-on the broadband line. I’ve finally decided to cut the cord. Initially, I thought I was going to miss a few shows (Mad Men, Sportscenter, Jersey Shore). Not so! Instead, when I want to watch TV, I’ve rented some highly recommend series from past seasons. Arrested Development was excellent and I’m excited to watch both The Wire and Lost down the road.
What are the big forces out there that ensuring limited competition among cable providers and satellite TV providers, and that foster an environment that a la carte TV isn’t offered?
KF: For the big cable providers like Comcast and Time Warner, there is so much money to potentially lose with a switch to offering a la carte. Why? If their subscribers on average receive 200 channels, but only watch 15 of them, then a switch to a la carte would reduce their revenue.
A New Yorker story recently reported that most people who get pay TV wouldn’t save much money if the model switched from the bundle to a la carte. Any truth to that? What’s your response?
KF: If the consumer wouldn’t save money, the implication is the cable provider would then be receiving the same revenue as before. Even better, since their customers are ordering less channels, the cost to the cable provider would then drop! Hmm… same revenue, lower cost. Then we should see every cable provider immediately offering their customers a la carte. But unfortunately, we don’t because they apparently do not believe their own words.
I share a few more thoughts about the conventional wisdom of a la carte here.
Of course the cable providers want to stick with the bundled TV package. But what about the individual channels? Do you get the sense that some of the channels would prefer to deal directly with the consumer? Or do the channels also tend to prefer the bundle?
This is a bit of a generalization, but the channels also tend to prefer the bundles. For example, Disney owns 20 channels including the ESPN stable. I’ve heard that part of their negotiation strategy with the cable/satellite provider includes bundling their proprietary channels as a package deal creating an incentive for the providers to in turn bundle these channels to their subscribers.
Like in tech in ’00 and real estate in the last few years, I think there is a bubble in entertainment. We are creating way too much content, and overpaying for the creation. But the inefficiencies are hidden by the industry structure. A move to a la carte would provide more competition and transparency to the channels. My gut is that a majority would have to cut costs to stay competitive, some might even go out of business. But the best channels will have the opportunity to drive more revenue. In so doing, more money will go to the most competitive channels financing further development. This would be wonderful since the focus would turn to quality, not quantity of programming.
What are your thoughts about consumers who have cut the cable cord, and who now only watch TV and movies via Hulu, Netflix, and other online services?
KF: Cord cutters are pioneers! Instead of kowtowing to Big Cable, they have made a sacrifice. Awesome! This helps even non cord cutters because the cable providers, even when facing little to no competition, still have to price their offering somewhat competitively or else more people are at risk for cutting the cable. That said, there are no great statistics on this phenomenon.
But if you are one of the cord cutters, be careful! If the Comcast acquisition of NBC Universal is completed, then Comcast would control a 30% stake in Hulu. Do you think Comcast will continue to invest in this service if Hulu is the primary crutch for cord cutters? If you had 25 million subscribers on average paying $115.27 per month, do you think you would invest heavily into a technology that increased the likelihood of subscriber attrition?
Do you think a la carte TV programming is inevitable? What has to happen for a la carte TV to be a reality? And what do you think the first step will be?
If we live in a capitalist society, TV A LA Carte is inevitable. It is not simply to save money. I’ve heard from some people who, on principal, demand a la carte. I found this fascinating… they want to subscribe to a programming package; however it must NOT include Fox News. They refuse to, even indirectly, pay for Glenn Back, Sarah Palin, Sean Hannity and Bill O’Reilly. Likewise, I’m quite certain that there are just as many people who would cringe at the thought of supporting Keith Olbermann or Rachel Maddow.
Recently, a Canadian cable provider Bell TV began to offer a la carte to subscribers in Quebec. “Monthly rates for the Bell TV a la carte channels are 15 channels for $15, 20 channels for $19 or 30 channels for $22, the company said. Beyond that individual channels can be purchased for $2 each or another 20 popular channels can get tacked on for $5.
I’ve seen firsthand this consumer movement. There is a different kind of energy.
TV À La Carte is a simple idea that entertainment should be what we want, when we want it, at a reasonable price. How American is that?