ACA Targets ESPN, Programming Rates

[Steve Mehs]

The American Cable Association (ACA), representing small and
independent cable businesses across the country, targeted ESPN
to voice its concerns about programming price increases.

In a statement released late Thursday, the association asked
the Disney-owned sports network to keep any impending rate
increases close to the rate of inflation, and give cable
operators the right to carry the service on a tier or
single-channel (also known as a la carte) basis.

ACA President Matt Polka said the group's members are bracing
for ESPN’s annual rate-increase announcement, which is
expected at the end of the month. "Our ACA members in smaller
markets and rural areas and all cable operators are doing
their best to keep prices down for our customers in these
difficult times, and we can only hope that ESPN will, for
once, show some restraint in its annual rate adjustment," he
said.

In response, ESPN said in a statement that its rates are "the
product of direct negotiations with our distributors, and we
do not negotiate in the press. ESPN's rate reflects its
enormous value and a la carte would reduce that value and
consumers would pay more for less."

ESPN added that ACA members participate in the NCTC (National
Cable Television Cooperative) deal, which provides discounts.
The net also said it has offered affiliates options to
reduce the previously negotiated rate adjustment through
other proposals, an effort that may be unknown to ACA officials.

ACA has been advocating for new rules in Washington, D.C., that
would allow cable operators to sell high-priced services on
a tier or on a single-channel basis. The ACA said it
represents more than 1,000 companies serving 8 million
subscribers.

From SkyReport (http://www.skyreport.com) (Used with Permission)

[jeffwtux]

They can use whatever justification they want. The bottom line is that they MASSIVELY overpaid for the NBA. The competitive advertising free market valued the NBA TV deal less than what NBC was paying, and ESPN/Disney paid more and expects cable/DBS consumers who have no voice to make up the difference. That's the outrage. It's totally the NBA contract.

[Mike123abc]

If congress ruled that cable companies could "tier" anything they wanted, some channels like ESPN would really suffer. This would be something the "free" OTA stations would love to see pass, then the price of sports that they bid on would go down quite a bit without competition from all the cable RSNs/ESPN being able to bid up the price so high.

[SamC]

ESPN has overbid for every contract with every major sport it is involved in. And it overbid beyond all reason and thought for the NBA. ESPN was a worthy package w/o it, and the NBA had no other place to take its dying niche sport.

That said, small rural cable operator = crook in my book.

[Greg Bimson]

If congress ruled that cable companies could "tier" anything they wanted, some channels like ESPN would really suffer.Cable companies can tier anything they wanted. However, the programmers have demanded where those channels are placed.

The ACA says their members want to offer ESPN on a single-channel basis. I seem to recall that ESPN is about $2.40 a month on basic tier. Does anyone think that the ESPN suite of channels, placed on a single tier, would cost the same as the HBO package?

This is just a ruse. Why should ESPN be treated any differently than say, Discovery or MTV? It isn't the cost, it is the ability to bargain for placement.

The ACA may come after a channel you want, next.

[Mike123abc]

Let the ACA come after a channel I want. If I could pick an choose channels that I wanted in my package and had a provider that only marked them up about 50% - 10% over the cost of the channel I would be 100% better off. If channel prices range from 10 cents to $2.50 then my costs would be 20 cents to $5.00 for a channel.

The original reason channels were bundled together is that they were so cheap that it is not cost effective to charge separate. Who is going to do monthly billing for 25 cents? costs more to sent the bill out.

If they were to have a package for $20 where you got to pick up to $20 worth of programming and you get to pick the channels you wanted in the package, I bet it would be a huge winner. People would love it. They could have a $20, $25, $30, $35... etc tiers where you pick the channels you want.

I do not expect it to come to pass since it would be hard to do billing and people would get upset when a channel went dark all the sudden because it raised its price and priced itself out of their tier, or they were suddenly bumped up a tier. I could see the billing notice going out... warning price of ESPN goes up to $6 next month you will be bumped up a tier.

If it was integrated with the internet, kinda like MP3 where you could go online and add and drop channels on the fly (assuming of course you had to do whole month billing... can not just turn on for a single show) I think it would be insanely popular. Hmmm net network A looks interesting, I will click it on for a month and see, network B turned out to be something I do not want to see, drop it now. When a war in Iraq starts, everyone suddenly subscribes to the extra news stations.

It would reduce the cable channels to pure capitalism. If you offered something people wanted to see your ratings and $$ would go up as people activated you. You go downhill, your ratings and $$ go down right away.

I would also assume that packages would stay together like HBO would be all the channels or none, cannot just pick HBO comedy or HBO-E. The same thing for like Discovery and ESPN. I would also see programming changes being very cheap like $1 over the internet to add drop stations from your account (hopefully all the add/drops in one session are a single charge), and if you have to call in they charge you like $5 for a session.

[Mark Holtz]

I think the biggest problem is that E$PN, R$N, and YE$ (and their likes) have some of the noisiest supporters. Look at the past posts because Dish refuses to carry the YE$ Network or carries half of the F$N Ohio Indians games. How about Cablevision, where the NJ Legislature got involved because Cablevision refused to pay the rates last year?

[SamC]

Originally posted by Mike123abc
If I could pick an choose channels that I wanted in my package and had a provider that only marked them up about 50% - 10% over the cost of the channel I would be 100% better off. If channel prices range from 10 cents to $2.50 then my costs would be 20 cents to $5.00 for a channel.



Not exactly. If, say ESPN is $2.50 a subscriber or MTV is 10c then that is based on their being in the "basic" package and thus getting $2.50 or 10 c from everybody. And, dispite the fact its illogical, advertizers to some degree base ad buys on number of cleared households, rather than ratings.

But, if every channel was "a la carte" the programming costs would remain the same, but the number of people paying would be far less. So the fees would be FAR more.

IMHO, ESPN would be just fine, because sports fans would pay right up. The ESPN group would easily make as much money at $8.00/month from willing subscribers, but how many people will pay even 50c for a lot of the niches? Under an a la carte system, the total number of channels available, IMHO, would be far less, far, far, far, less.

[Mike123abc]

Would it be such a bad thing if the total number of channels was far less if everyone was able to get the channels they wanted and paid a lot less for programming?

[Ken_F]

Mike123abc,

You're not going to pay less, or at least, not much less. You're just going to get fewer channels at much higher rates. Any lost advertising revenue from fewer eyeballs will have to be made up with higher per-channel pricing. And we're not just talking about higher per channel increases from content providers, but higher markups from from DirecTV, Dish, and cable systems too.

Remember, it's not just the channels themselves that lose advertising revenue in an a la carte system. Cable and DBS providers are generally given valuable advertising space on these channels in return for their carriage fee. For example, one of the reasons that DirecTV and others are willing to pay so much for ESPN is because they receive a lot of valuable commercial airtime from Disney; something like 20% of all advertising space on ESPN is allotted to the local cable or satellite provider. I'm sure DirecTv subscribers here have noticed promotional spots for that service on various channels; these advertisements aren't [usually] being run nationally, but rather using some of the free local air time they get in return for the carriage fee.

[SamC]

Originally posted by Mike123abc
Would it be such a bad thing if the total number of channels was far less if everyone was able to get the channels they wanted and paid a lot less for programming? '

I don't think you would pay "a lot less", probably not less at all. But clearly you wouldn't get "the channels you want". Because those channels wouldn't exist. A la carte changes the whole dynamic of the industry, and small fry of the dial currently are not going to attract enough people willing to pay many multiples of the current fee spread across everybody.

IMHO, under a pure a la carte system, there wouldn't be more than 30 channels to choose from. Half of them sports channels.