Wholesale prices for channels

[FTA Michael]

Peter Kafka at All Things Digital snagged a list second- or third-hand that supposedly lists all of the prices that multichannel providers (cable and satellite) pay for the "basic" cable channels in 2009. Full story here: http://mediamemo.allthingsd.com/20100308/hate-paying-for-cable-heres-the-reason-why/

I figured I'd upload a copy here for reference next time someone wonders how much a particular channel is getting paid.

Highlights:
ESPN $4.08
TNT $0.99
Disney $0.88
...
Travel $0.08 (I thought it used to be free)
C-SPAN $0.05
Hallmark Movie $0.03

[Davenlr]

Cool. I watch $12.15 worth of channels, and have to pay $61.99 a month. If the channels charged DOUBLE what they are charging DirecTv, It would still be 1/3 of what I am paying now. Wish someone would start an ala-carte KU band subscription service using off the shelf FTA receivers/cam cards.

[Stewart Vernon]

It just doesn't work like people want to think it would with a la carte.

IF we ever got true a la carte back... any surviving channel would go up a lot more than the current rates. Meanwhile lots of other channels would go away because not enough people would buy them.

The reason why many per-channel rates are low is because of bundles (like Disney bundling a bunch of its channels together) and because of the tier/packages that result in a lot more people subscribing.

IF I thought my bill would truly go down AND I'd get to watch all the channels I like... then I'd be in favor of a la carte too.

But I feel certain that a la carte would result in me paying essentially the same as I am right now, but with far fewer channels... and I can't count that as a win.

[Davenlr]

lots of other channels would go away because not enough people would buy them.


So, maybe we should pay $50,000 for an entry level auto, so Saturn, and Pontiac, and Hudson can hang around too?
If the channel sucks, and not enough people watch it to sustain it, it SHOULD go away. The good channels will get more money, hence better programming, and less commercials.

Add together the cost of the channels DirecTv is charging us $5 a month for Ala Carte in the HD Extra Pack...

[Jon Ellis]

Previous posts are correct, the reason the cost for some channels is so low is that they are bundled with other channels. If a provider is paying 10 cents a month per subscriber to deliver Oxygen to a million households, they're paying $100,000. If they go a la carte and only 50,000 of those households actually want Oxygen, those households are going to have to pay $2 a month for Oxygen to make the same amount of money. And don't think Oxygen is just going to take a loss.

Cable/satellite companies are not going to do anything that will result in making less money, either. If you pay $60/month now, you'd still be paying $60/month under a la carte, except you'd get a few dozen channels instead of a few hundred.

Also, it's important to note that broadcast channels typically get paid about a nickel or dime per subscriber, despite the fact that their ratings are higher than any of the channels on the list.

The best option is for providers to offer a variety of package options. In the satellite business, DISH Network offers a lot more choice than DirecTV. DirecTV is similar to cable in that all of the main channels are part of one huge package, and there are a few extra add-ons for other minor channels.

[P Smith]

I'm pretty sure the 4th grade math doesn't applicable here.

You need to start from source - ask how much profit included in that asked total price [10c x 1,000,000] ?

[Stewart Vernon]

So, maybe we should pay $50,000 for an entry level auto, so Saturn, and Pontiac, and Hudson can hang around too?

No... but that's not what is at stake here. I can't even think of a way in which your car example applies here. Cars are already a la carte by nature and there isn't much choice.

What if you could buy two cars for $50,000 instead of just one car for $50,000? Would you rather have 1 car or 2 cars? IF everyone bought cars 2 at a time, the prices might come down and that could be a reality.

But this analogy really doesn't work.

If the channel sucks, and not enough people watch it to sustain it, it SHOULD go away. The good channels will get more money, hence better programming, and less commercials.

Which is pretty much exactly what I said. All the lower popularity channels would go away, and the remaining popular channels would cost more... and in the end we'd end up paying the same bill for less.

Do you want a large fry for $2 or a small fry for $2? I'd rather have a large fry for $2 even if I can't eat it all right now.

People keep assuming that the bulk-discount price from package tiers OR bundling OR the large number of subscribers due to those packages would apply to a la carte pricing. I can't think of a single time in history where any bundled product cost the same as an individual item as it did when discounted with additional purchases.

[SayWhat?]

If the channel sucks, and not enough people watch it to sustain it, it SHOULD go away. The good channels will get more money, hence better programming, and less commercials.

Value, better, best, sucks are all opinions. To me, ESPN is worthless and should go away. All it does is consume bandwidth that could be better used for other useful programming.

Give me more science, history, real news (not gossip, opinion or tabloid), classic movies, retro-TV and so on.

[joshjr]

Value, better, best, sucks are all opinions. To me, ESPN is worthless and should go away. All it does is consume bandwidth that could be better used for other useful programming.

Give me more science, history, real news (not gossip, opinion or tabloid), classic movies, retro-TV and so on.

See I would say the exact opposite. I could care less about science, history, or news channels but do watch the sports channels. I say do away with National geo, History, CSPN 1 & 2, CNN, FOX News, MSNBC, Discovery Science, Discovery, etc. I dont watch them.

[catnapped]

See I would say the exact opposite. I could care less about science, history, or news channels but do watch the sports channels. I say do away with National geo, History, CSPN 1 & 2, CNN, FOX News, MSNBC, Discovery Science, Discovery, etc. I dont watch them.

Yeah, but we're not paying FOUR BUCKS a piece for that. You want the sports, YOU pay the four bucks a month and let me have my four bucks back.

[joshjr]

Yeah, but we're not paying FOUR BUCKS a piece for that. You want the sports, YOU pay the four bucks a month and let me have my four bucks back.

Im sure I pay alot for all the stations I dont want as they add up alot of the ones I am not interested in. That being said I still like the way it is now and dont mind helping out the next guy that does enjoy them.

[oldschoolecw]

This is nice I pay $4.99 for the DIRECTV® HD EXTRA PACK includes a special group of six channels that broadcast only in HD. They include Crime & Investigation Network HD, HDNet Movies, MGM HD, Palladia, Smithsonian Channel HD and Universal HD. These channels are available only with DIRECTV HD EXTRA PACK. Requires HD Access. And it costs $1.60:nono2::)

[lwilli201]

It is coming to the point where all sat and cable companies are going to have to pick and chose that they carry. The cost of carrying everything will soon be prohibitive. They will only carry those that are free and those that have hugh ratings. Those in the middle will die.

[Jon Ellis]

I'm pretty sure the 4th grade math doesn't applicable here.

You need to start from source - ask how much profit included in that asked total price [10c x 1,000,000] ?

Of course, I understand that it's a lot more complicated than basic math. My point is that the wholesale price is not anywhere close to what the a la carte price would be.

Profits are what's left over after you subtract operating costs from revenues, but costs wouldn't change much even if the number of households reached fell drastically (the cost of buying programs would go down, but other technical and staffing costs would stay the same). So, revenues would need to remain about the same to make the same level of profit. The price per channel would have to go way up.

[P Smith]

Major point is freedom of choice; what is abused in such business.

[Jon Ellis]

If you want to look at it as if you're being forced to pay for channels you don't want, you are free do do so. You still have the freedom to not subscribe at all, or choose a programming provider/package that best suits your needs (and I do think providers should offer more package options).

Also, I forgot to mention that the channels set their advertising rates partially on how many households they reach. If the number of households goes down, so do advertising revenues, and they've got to jack up the a la carte rate even more to make up for that.

[Luck255]

I'm not sure where the whole "Sports subscribers bring cost up" arguement comes from. I basically watch ONLY sports and my cost for every channel is $9.52.

ESPN 4.08
Fox Sports Net 2.37
NFL Network .75
ESPN2 .55
MLB Network .24
NBA TV .22
ESPN News .17
ESPNU .16
(not included: Altitude and local Fox, NBC, ABC and CBS stations)
Total $9.52

Most of my cost comes from the extra sports packages NBA LP, NHL CI, NFL ST, MLB EI which I pay DEARLY for.

[Stewart Vernon]

What I always find interesting... is that many folks who want a la carte and who ask for it based on the "I only want to pay for what I watch" mantra... are people vehemently against their ISP charging them for bandwidth rather than having a flat fee for "unlimited" internet.

Wouldn't it be the same argument that you should only pay for the internet you use? And why is everyone so sure (correctly I might add) that they'd pay more for internet usage with metered billing BUT somehow think they would save money with a la carte channels?

[TerryGM65]

I do wonder whose price list this is? I would really like to find out how much Verus channel is supposed to cost DTV. If is price on list DTV really messed up.

[Upstream]

Even if you watch every single channel on that list, the total wholesale price is only about $35.

[Shades228]

Comparing wholesale price to what you would pay is not something you can do.

The wholesale price is based on the providers knowing how many millions of customers they will get paid for every month. If they cannot determine that then they would have to use a ratings model to project the average estimate for subscribers and price it accordingly to generate that revenue.

Also people are assuming that companies like Disney would sell ESPN single and not make a Disney pack where you get tons of crap you don't want if you just wanted ESPN.

Smaller networks would be bought out or let fold and the situation would worsen more than it is already. 5 years ago AMC would have been in this bracket. Now they have one of the most popular shows on TV. So becareful what you wish for. By removing these "worthless" channels all you're doing is justifying the cost increases for popular channels like ESPN.

[SayWhat?]

5 years ago AMC would have been in this bracket. Now they have one of the most popular shows on TV.

I stopped watching AMC and deleted them from my channel scan when they started running commercials. And since they're supposed to be a MOVIE channel, why would they have a SHOW?

[Shades228]

I stopped watching AMC and deleted them from my channel scan when they started running commercials. And since they're supposed to be a MOVIE channel, why would they have a SHOW?

To stay in business?

[say-what]

Cool. I watch $12.15 worth of channels, and have to pay $61.99 a month. If the channels charged DOUBLE what they are charging DirecTv, It would still be 1/3 of what I am paying now. Wish someone would start an ala-carte KU band subscription service using off the shelf FTA receivers/cam cards.

You still need to account for DirecTV's overhead and profit margin. Those satellites, control rooms, uplink facilities, etc. aren't free.

[BattleZone]

You still need to account for DirecTV's overhead and profit margin. Those satellites, control rooms, uplink facilities, etc. aren't free.

Neither are all of the support costs (how many salaries and benefits for all of the CSRs, managers, etc.?), R&D, advertising, installation costs, and financing all of your/our equipment, which DirecTV has to pay for up-front.

The pizza you buy for $20 is probably $3 worth of food ingredients, but if you try to pay $3 for a pizza, you're gonna get laughed at, because the food cost is only a small portion of the pizza joint's expenses to make that pizza for you.

[Doug Higley]

Do you go onto a $12 Buffet and complain about all the food choices even though you only want the Macaroni and Cheese and Sliced Ham that day?

[space86]

Do you go onto a $12 Buffet and complain about all the food choices even though you only want the Macaroni and Cheese and Sliced Ham that day?

LOL

[BenJF3]

Do you go onto a $12 Buffet and complain about all the food choices even though you only want the Macaroni and Cheese and Sliced Ham that day?

That analogy is bunk because you can go elsewhere and get the items Mac&Cheese + Ham) individually if you choose. You can't do that with cable content. It's like the cereal analogy Sinclair used a while back about pricing and supermarkets. While I agree that infrastructure (labor, equipment, advertising etc.) is a significant factor in your cable bill, one must admit that programming costs are getting out of control. You NEVER used to hear about retrans spats, now they are a quarterly occurrence. Citadel is now in a battle with DirecTV over networks in three states and they finally settled with Comcast not long ago. Sports is the main culprit - $110 Million for NFL Network? Ridiculous! I see why Time Warner told them to go punt.

[Nick]

I'm pretty sure the 4th grade math doesn't applicable here...Neither are 8th grade English applicable! :lol:

[Stewart Vernon]

That analogy is bunk because you can go elsewhere and get the items Mac&Cheese + Ham) individually if you choose.

Yeah, but you don't get to pay the wholesale prices for that mac&cheese.

IF the buffet is $12 and there are 100 items on the buffet... you can't divide $12 by 100 and expect to pay 12 cents for mac & cheese somewhere.

Odds are that mac&cheese by itself costs you at least $3 elsewhere.

Now, if all you ever want to eat is mac&cheese AND other people feel the same, then you'll save $9 and get to eat mac&cheese the rest of your life.

But if not enough people want that, then the price goes up... or mac&cheese goes away because it can't sustain itself alone.

And if you want mac&cheese + a hamburger + some pizza, then you might shoot past that original $12 buffet price that had 100 choices.

[James Long]

Even if you watch every single channel on that list, the total wholesale price is only about $35.
Sadly, I find myself watching the local channels more often than anything else. I really don't want to know how little of my "subscription" package is actually used.

Do you go onto a $12 Buffet and complain about all the food choices even though you only want the Macaroni and Cheese and Sliced Ham that day?
I rarely go to the buffet. I'd rather order a la carte at a restaurant and pay for what I get than pay for choices I don't want. Any time I pay more than $5 for a meal out I feel like I paid too much. I'll pay $10 for a little atmosphere if there is a special occasion.

(That being said, I went to a buffet for a birthday dinner yesterday and it cost me - with tip - $13.50 per person. It also cost me about $50 in gas to drive there. The things we do for our spouses.)

[Upstream]

(That being said, I went to a buffet for a birthday dinner yesterday and it cost me - with tip - $13.50 per person. It also cost me about $50 in gas to drive there. The things we do for our spouses.)

At 20 miles per gallon, and $3 per gallon, that's 333 miles round-trip. Couldn't you find a lousy restaurant closer to home?

[James Long]

At 20 miles per gallon, and $3 per gallon, that's 333 miles round-trip. Couldn't you find a lousy restaurant closer to home?
It wasn't a lousy restaurant and I didn't choose the location. My father in law invited us all to the restaurant for my mother in law's birthday. I just happen to be 200 miles away from where he wanted to go.