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Programmers Challenge FCC Chairman

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
4/16/2008
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Top execs from five major cable programmers blasted Federal Communications Commission (FCC) chairman Kevin Martin over a recent proposal linked to one of his most favorite subjects -- à la carte programming.

Earlier this month, Martin, a vocal advocate for an à la carte regime, is taking another stab at it, reportedly suggesting that operators should be allowed to strip from expanded basic tier any network that required a monthly carriage fee of 75 cents per sub or greater. If adopted, such a regulation could affect some of the most popular networks on the cable dial.

In an ex parte filing dated April 15, execs from ESPN, Universal Television, Turner Broadcasting, MTV Networks, Fox Networks Group, and Disney-ABC, argued that such a move would be harmful to consumers.

"Leaving aside the Commission's complete lack of legal authority to impose à la carte or price controls, and the fact that Congress has rejected such proposals on a bipartisan basis and expressly asked the Commission to focus on the DTV transition instead of distractions like à la carte, what is most troubling about your proposal is how devastating it would be to consumers," the group wrote in its challenge of Martin's plan.

They claimed that stripping "popular networks" from the expanded basic service would force consumers to pay extra to view them. "Moreover, the perverse result of your proposal is that the most successful and most watched programs and networks -- typically those that invest the most in quality programming -- would be penalized for their popularity to the detriment of consumers."

They also noted that studies have shown that only in rare instances would consumers end up paying less under an à la carte model than they are today for the channels presently offered in basic and expanded basic packages.

"If your plan is ever adopted, consumers will be outraged," the programmers insisted.

Well, perhaps not all of them. Survey results from Forrester Research Inc. published last year revealed that 53 percent of consumers would be interested in getting their cable programming via à la carte. But there was a significant disconnect on the perceived value of such an option. Forrester said those surveyed (in 2006) were willing to spend an average of $24 per month for 26 channels -- 53 percent less than they paid at the time to get just one-fourth the number of channels. (See Survey: à la Carte Value Vexes Consumers.)

The cable industry has also argued that à la carte would harm programmers and kill off networks that focus on niche subjects. A recent study from Yankee Group Research Inc. backed up that notion, finding that a pick-what-you-want TV model would create "economic ruin" for programmers, and cause the number of national video programming networks to be cut from 565 to about 30.

― Jeff Baumgartner, Site Editor, Cable Digital News

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FbytF
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FbytF,
User Rank: Light Sabre
12/5/2012 | 3:43:12 PM
re: Programmers Challenge FCC Chairman
If the programmers are complaining, Martin must be right. All you have to do is look at the crap on any cable line-up and then realize your paying for it to see Martin is right. Let the free market work, channels no one watches will go away, and no one will miss them. HBO & Showtime have been premium channels forever that have to be purchased separately, they seem to prove the point, if its worth watching its worth paying for.
rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 3:43:09 PM
re: Programmers Challenge FCC Chairman
I believe the argument is that a la carte will force a revenue shift away from advertisers. To make up for it either the consumer will have to pay higher prices or the prices paid to content producers will need to be reduced. Considering that consumers have yet to show any strong inclination to pay for intellectual property it suggests to me the quality of product will get even worse (as if that were possible.) Anybody that grew up reading a daily newspaper can see how this has happened as advertising revenue that was paying journalists' salaries has decreased significantly.
Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 3:43:09 PM
re: Programmers Challenge FCC Chairman
Well, looking on the bright side, trimming down the number of linear, niche channels with little viewrship would free up some capacity for Docsis 3.0 and more HD and video-on-demand HD feeds. Of course, that's not exactly a silver lining for programmers that ended up getting pinched in this theoretical situation.
rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 3:43:08 PM
re: Programmers Challenge FCC Chairman
Agreed. The fundamental problem is that consumers have to be weaned off of socialistic systems where they expect things to be provided for free. Martin's a la carte is really an ideological play in this direction.

One challenge is that increasing open access bw doesn't change these behaviors and beliefs but it does enable the free loaders to pirate, making things even worse. The market becomes more dysfunctional. I think the dysfunction is worth it in the long run. But I also understand the status quo wanting to protect themselves from the anarchy.
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