What I don't understand is how the cable companies and satellite providers ended up paying the broadcasters for content. The cable channels had no way to get their content out without the providers. Viacomm, et al should be paying DTV, Cablevsion, TWC, etc to get access to their households. Let them make their money off the commercial air time they sell. Lord knows the two political parties and their PACs are spending enough.
It is all just a supply chain. The content providers (producers for entertainment, teams, leagues, associations, etc. for sports) are the manufacturers. They make the content we want to see. The broadcasters (both OTA and cable) front the money for the manufacturing process. They then collect all of the resulting product and bundle it for distribution. The cable and satellite operators deliver it to the retail consumer.
In the days before cable, advertisers paid the broadcasters to insert their advertising inside the "desirable" content and the broadcasters delivered it all to the viewers. Cable just added another layer to the supply chain...they and the satellite companies invested the money to build broadband distribution systems that could deliver many more channel choices than OTA broadcasting. To make money, they needed content the viewers could not get elsewhere.
At first, it was exactly as you describe - the viewer paid for the service of multichannel delivery and cable operators simply rebroadcast the channels. Very quickly, however, the broadcasters realized that they had a valuable commodity and, in the free enterprise spirit, demanded to be paid for it. Once viewers had more than one option (i.e. once satellite starting competing with cable) no one could afford to not carry certain channels for fear of viewers switching providers.
So, originally, power was balanced between the broadcasters and the producers. Producers shopped their shows around for the best deal, and broadcasters competed to provide the most desirable (most watched) content, so as to earn the highest ad rates. The multi-channel operators (MCO) unbalanced this equation. They now faced the viewer and the broadcaster became a sort of middleman. They could now get paid directly from both sides...from the advertiser on the front end and the MCO on the back end. They are simply exploiting the market.
The real point is that without the MCOs, we would all still be watching a handful of OTA channels. The 200 plus channel world we live in is a direct result of the same circumstances that allows ESPN to get $4 per subscriber per month. You couldn't have one without the other.
Edited by Diana C, 13 September 2012 - 01:16 PM.
Fixed a bunch of typos
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