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DirecTV Disses Broadcasters


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#41 OFFLINE   James Long

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Posted 15 June 2013 - 08:39 PM

This explains the process up to the point where the pile of bits comes out of the production company as finished product.  Let's leave the distribution of the product out of it for a moment.


That is where you make your mistake. My description includes distribution. It is only in distributing the product that most of the players in the game get paid.

It is true that there is bulk distribution via compilations. Grouping songs together for sale has been common long before there were any piles of bits to discuss. But a two sided 45 or an album is not a monthly TV subscription.

The worlds are colliding. People can subscribe monthly to linear music channels that provide access to the songs they want to hear instead of buying the albums (some very specific to the listener). And people can buy television programming by season or by program as an option to watching a linear channel. But to say what works for music MUST work for television and the traditional way of selling TV will die is overly optimistic. Music moving to include channel subscription as a distribution model SUPPORTS television's method of selling content.

TV content producers can use the non-linear model but the real money comes from getting on a channel and getting your show sold to millions of viewers whether or not they want to watch the show. It makes it much easier to be seen by that audience if the content is delivered pre-paid to their homes instead of needing to convince people to pay to watch each program.

As an example, lets look at the 1980's sitcom Alf. If you know you want to watch it you could buy the DVDs. Or you could buy episodes or other subscriptions via a streaming provider. But with a per show price tag for viewing would you buy Alf? If so, great! The owner gets paid! But it is much easier for that owner to offer the program via a linear channel (currently airing on HUB). The owner gets paid based on the millions of people subscribing to Hub and subscribers can watch without rationalizing the individual purchase price for each show. 50c per month to Hub delivers several episodes of Alf plus dozens of similar programs. And Hub can afford to charge only 50c for their network because they have millions of subscribers they can leverage for advertising.

Take a way the bulk purchasing ... take away the advertiser support ... and explain how a content owner makes money without charging a lot more for their product.
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#42 ONLINE   inkahauts

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Posted 15 June 2013 - 08:56 PM

I'm sure a lot of people said the same thing about the record labels, and look where their revenue & profit is now compared to 10 or 15 years ago. The same fate awaits the TV conglomerates. They can either embrace the change and control their future, or push to keep things the way they are now for as long as possible and have the future decided for them.

The constant price increases for cable and satellite are starting to push more and more to cut the cord and create their own a la carte plan by buying access to stuff they want over the internet (Netflix, MLB TV and so on) Especially younger viewers. That's gotta scare the living crap out of these guys, the 18-30 market used to be their biggest target, now it is the one leaving behind traditional cable/satellite in the largest numbers. Why should anyone believe they'll be back when they get older, after they get used to life without traditional TV?


Again, look at the economics of channels and the packages of channels the big companies like Viacom have. They don't want a la cart because it destroy their profits.

MTV would cost as much as espn or more if they where only offered a la cart. Who would buy MTV at that point?

And streaming just isn't viable right now overall. In some areas and some markets, but as a replacement, that's not going to happen for decades, and as it does become more popular its prices will increase to where today's cable prices are now or even higher, for several reasons.

Its all driven by money, and going strait a la cart would be suicide for all channels. They control all the content where as the music industry for a while had lost all control of its content. This means stations will simply raises prices in other areas to make up for losses in fading ones. Music industry had no way todo that when Napster and others came online and destroyed the entire industry and forced it to redo its entire business model, which by the way included massive consolidation, which likely allowed those shareholders to get back to their profits again.

The consolidation happening now in Hollywood is more along the lines of Comcast and universal getting together so they can control the entire chain so that they don't ever come up against the challenges music did.
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#43 OFFLINE   slice1900

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Posted 16 June 2013 - 01:11 AM

That's not true.  Look up Price Maker vs Price Taker.

 

ESPN, by virtue of its dominance, is a price maker.  It's extracting monopoly-like rents from the Pay-Tv consumer.  In fact, over 50% of Disney's market value of 115B is attributable to ESPN.

 

 

Exactly. The problem is, ESPN and other channels that are considered "must have" by a lot of people these days like AMC, can be used as leverage by their owners to extract more money each time they renegotiate with a provider. The provider doesn't have much room to refuse them, what are they going to do, tell their subscribers that they can't watch Monday Night Football or Mad Men? Be a great way to lose a lot of subscribers quickly!

 

However, by driving up the rates that providers must charge, while the owners of ESPN and AMC are making a lot of money today, they are also killing the goose that laid the golden egg, because these continual price increases are why people have started cutting the cord. The price increases will keep coming, and the trickle of cord cutters will become a flood until media conglomerates realize what they've done. The money they make now, or maybe a few years from now, will be the high point of their earnings/profit. At some point the number of people cutting the cord and paying nothing to them will outweigh the extra revenue they get from raising prices on those who stick around. Any attempt to make up for the cord cutters by raising prices more on those left behind will cause even more people to cut the cord.


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#44 ONLINE   inkahauts

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Posted 16 June 2013 - 01:30 AM

Unless cord cutters are no longer watching any TV at all, they will just raise rates for the streaming versions and blu ray series, etc, till they make up their loses form people cutting the cord. That's the missing part of your equation. They control all their contents distribution. Truth is, I expect most companies to get into deals for streaming accessed via providers for fees, as I see the day of free streaming of programs going away very soon. Many need subscriptions now, and I expect someday that to be a separate line item, much like Netflix split its streaming and disc fees. If thy start charging more and more for that, they can ease off increase to tradition distribution. I am sure they plan on balancing those two things out that will result in overall increases of profits. And until providers start seeing regular losses across the board, they won't have the leverage to push back at broadcasters for lower rates unless the government forbids free channels from demanding fees, must carry laws change, and bundling is outlawed. Ok, those gov regulations are dreams...

#45 OFFLINE   n3vino

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Posted 16 June 2013 - 07:01 AM

I've said this for years. It doesn't make sense that providers expose broadcasters to millions of more people than they can reach on their own yet the providers have to pay for the privilege.

That's because subscribers start crying and jumping ship when a provider lets them go dark.   Subscribers are their own worst enemy when it comes to provider fees going up.


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#46 OFFLINE   James Long

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Posted 16 June 2013 - 07:16 AM

Unless cord cutters are no longer watching any TV at all, they will just raise rates for the streaming versions and blu ray series, etc, till they make up their loses form people cutting the cord. That's the missing part of your equation.


Yep ... they will get their money somehow. That is the folly of thinking that a la carte will offer per subscriber costs at the same rates as the content providers charge today.

We're buying in bulk with the buying power of millions ... and even though some are shocked at the $2 and $5 per channel per month price tags for the higher price tier placed channels we only get that rate because we are part of the millions. When we become individuals picking and choosing our content and channels we lose that buying power.
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#47 OFFLINE   slice1900

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Posted 16 June 2013 - 08:25 AM

Unless cord cutters are no longer watching any TV at all, they will just raise rates for the streaming versions and blu ray series, etc, till they make up their loses form people cutting the cord. That's the missing part of your equation. They control all their contents distribution. Truth is, I expect most companies to get into deals for streaming accessed via providers for fees, as I see the day of free streaming of programs going away very soon. Many need subscriptions now, and I expect someday that to be a separate line item, much like Netflix split its streaming and disc fees. If thy start charging more and more for that, they can ease off increase to tradition distribution. I am sure they plan on balancing those two things out that will result in overall increases of profits. And until providers start seeing regular losses across the board, they won't have the leverage to push back at broadcasters for lower rates unless the government forbids free channels from demanding fees, must carry laws change, and bundling is outlawed. Ok, those gov regulations are dreams...

 

 

You're ignoring the basic laws of economics. They can't just raise their prices as much as they want because the more they raise their prices the less demand there will be. Especially for the 98% of programming that is mostly interchangeable with other similar stuff. There aren't very many Mad Men type series out there that people would be willing to pay real money for. Do you really think that they can raise the prices of streaming reality TV? I doubt most people would pay even a penny to watch something like Storage Wars via streaming. Shows like that will have to live and die with advertising sales.


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#48 OFFLINE   unixguru

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Posted 16 June 2013 - 08:28 AM

That is where you make your mistake. My description includes distribution. It is only in distributing the product that most of the players in the game get paid.

It is true that there is bulk distribution via compilations. Grouping songs together for sale has been common long before there were any piles of bits to discuss. But a two sided 45 or an album is not a monthly TV subscription.

The worlds are colliding. People can subscribe monthly to linear music channels that provide access to the songs they want to hear instead of buying the albums (some very specific to the listener). And people can buy television programming by season or by program as an option to watching a linear channel. But to say what works for music MUST work for television and the traditional way of selling TV will die is overly optimistic. Music moving to include channel subscription as a distribution model SUPPORTS television's method of selling content.

TV content producers can use the non-linear model but the real money comes from getting on a channel and getting your show sold to millions of viewers whether or not they want to watch the show. It makes it much easier to be seen by that audience if the content is delivered pre-paid to their homes instead of needing to convince people to pay to watch each program.

As an example, lets look at the 1980's sitcom Alf. If you know you want to watch it you could buy the DVDs. Or you could buy episodes or other subscriptions via a streaming provider. But with a per show price tag for viewing would you buy Alf? If so, great! The owner gets paid! But it is much easier for that owner to offer the program via a linear channel (currently airing on HUB). The owner gets paid based on the millions of people subscribing to Hub and subscribers can watch without rationalizing the individual purchase price for each show. 50c per month to Hub delivers several episodes of Alf plus dozens of similar programs. And Hub can afford to charge only 50c for their network because they have millions of subscribers they can leverage for advertising.

Take a way the bulk purchasing ... take away the advertiser support ... and explain how a content owner makes money without charging a lot more for their product.

 

Nothing wrong with linear music as an option.  We need the same kind of alternatives for TV.  Let the consumer choose if they want the linear approach or a la carte channels or PPV or any other packaging - even offer the same program with or without ads for different $.

 

Even if Alf cost less than 1c per month the problem remains that the approach multiplies hundreds or thousands of times and then we're talking real money.  Personally, they would have to pay me - a lot - to watch Alf.

 

All-you-can-eat is available in other domains but is a very small factor.  When we go to a Chinese buffet we can only eat so much.  A few dozen things to choose from.  They don't serve expensive steak which would increase the price for everyone - and put them out of business.  Nor do they have 100's of different things to choose from with many that few or nobody would consume causing them to have to throw it away - and increase the price for everyone.

 

I have no problem with a show I pay 1c for now costing a lot more under a different model.  We watch lots of those expensive original series on the pay movie channels - like Game of Thrones.  If the price of those channels rises much more we're going to toss them and buy those series directly (and any movies we want).  There will be a delay and each one will cost a lot more.  What matters is the overall cost for what we watch.  That is what the industry doesn't want to acknowledge.  Nobody goes into an all-you-can-eat buffet and eats 20lbs of food!


Edited by unixguru, 16 June 2013 - 08:33 AM.


#49 OFFLINE   James Long

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Posted 16 June 2013 - 09:57 AM

Nothing wrong with linear music as an option.  We need the same kind of alternatives for TV.  Let the consumer choose if they want the linear approach or a la carte channels or PPV or any other packaging - even offer the same program with or without ads for different $.


How something is sold is up to the owner. Most owners are allowing non-linear channel distribution of their product as sideline - but the successful ones rely on linear channel distribution as the backbone. Most protect their backbone to the point of delaying other distribution until after they have made their money from the linear channels.

When you say "let the consumer choose" the first choice comes from the owner. Are you suggesting that the government should intervene and FORCE content owners to sell their content the way? That is what many a la carte advocates want. I don't like the government telling private businesses how to operate. They rarely get it right.

 

I have no problem with a show I pay 1c for now costing a lot more under a different model.  We watch lots of those expensive original series on the pay movie channels - like Game of Thrones.  If the price of those channels rises much more we're going to toss them and buy those series directly (and any movies we want).  There will be a delay and each one will cost a lot more.  What matters is the overall cost for what we watch.  That is what the industry doesn't want to acknowledge.  Nobody goes into an all-you-can-eat buffet and eats 20lbs of food!


If you watched more of the tier channels the higher price of a la carte would have a greater impact on you.

The tier system isn't perfect ... but it is better than the alternative. Less content at a higher price.
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#50 OFFLINE   unixguru

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Posted 16 June 2013 - 03:44 PM

How something is sold is up to the owner. Most owners are allowing non-linear channel distribution of their product as sideline - but the successful ones rely on linear channel distribution as the backbone. Most protect their backbone to the point of delaying other distribution until after they have made their money from the linear channels.

When you say "let the consumer choose" the first choice comes from the owner. Are you suggesting that the government should intervene and FORCE content owners to sell their content the way? That is what many a la carte advocates want. I don't like the government telling private businesses how to operate. They rarely get it right.

 

The government must intervene and clean out everything that gives unfair anti-competitive favors to some in the current system.  That is how this thread started and clearly DirecTV wants this cleaning to happen.

 

For example, "ESPN" should not be able to force an all or nothing onto distributors and consumers.  As I've said many many times before - that's tying and it's part of antitrust law and it's illegal for most things.

 

Break that and then the consumer can choose which, if any, of the delivery mechanisms (and prices) "ESPN" wishes to use.  The feedback loop of normal markets will then set the value at a balance that both owner and consumer can live with.

 

I recently read that Steven Spielberg warned that movie prices could rise to $25.  That's their right.  It's my right to not pay it and not see the movie.  If enough people won't pay it then they will have to get reasonable.  As it should be.  What a crazy world it would be if I had to swallow that expense because I wanted some other product.  Yet that is how "TV" works today.



#51 OFFLINE   James Long

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Posted 16 June 2013 - 04:09 PM

The government must intervene and clean out everything that gives unfair anti-competitive favors to some in the current system.  That is how this thread started and clearly DirecTV wants this cleaning to happen.


OK ... So the government decides that DBS prices are too high and they mandate that DirecTV can no longer charge any customer more than $100 for a single receiver setup and can charge no more than $5 for each additional receiver regardless of features. Let it be written and let it be done.

Do you think DirecTV would support that law? It is very pro-consumer. Or is government interference in business limited to other people's businesses?

If distributors are doing anything illegal why are they not being prosecuted under current laws? Or is it a case of what they are legally doing being labeled "illegal" by people who simply disagree with the practice?

Bulk discounts ... a provider offering a channel to a carrier at a certain rate provided they deliver that channel to most if not all of their subscribers. Illegal? Package discounts where a provider offers a group of channels at a lesser price when carried together or in some negotiated tier level combination. Illegal?

DirecTV and other carriers live on contracts negotiated with the channels they carry. They include language such as "most favored nation" where no other carrier can get a better price. Collusion? Or just good business?


I would not mind seeing more control over broadcast channels ... they are in a unique position as they have provided broadcast spectrum for their OTA transmissions. But a wholesale change to a la carte? It is not going to happen.
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#52 ONLINE   inkahauts

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Posted 16 June 2013 - 07:41 PM

You're ignoring the basic laws of economics. They can't just raise their prices as much as they want because the more they raise their prices the less demand there will be. Especially for the 98% of programming that is mostly interchangeable with other similar stuff. There aren't very many Mad Men type series out there that people would be willing to pay real money for. Do you really think that they can raise the prices of streaming reality TV? I doubt most people would pay even a penny to watch something like Storage Wars via streaming. Shows like that will have to live and die with advertising sales.



Just look at the movie theater business. That is exactly what they have done after years of decline, and I mean 40+ years of declining attendance. Prices have been going up steadily.

Even in years where the US box office has been down in money and attendance you look at it overall they've managed to use overseas sales to still more than make up for it which is kept them from slowing down or even considering slowing down raising prices of movie theaters.

They are going to continue to do the same thing anyway in shape they can TV business and there's really nothing out there right now it's gonna stop them unfortunately, And all a cart would absolutely make it worse.

#53 OFFLINE   JoeTheDragon

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Posted 16 June 2013 - 10:24 PM

OK ... So the government decides that DBS prices are too high and they mandate that DirecTV can no longer charge any customer more than $100 for a single receiver setup and can charge no more than $5 for each additional receiver regardless of features. Let it be written and let it be done.

Do you think DirecTV would support that law? It is very pro-consumer. Or is government interference in business limited to other people's businesses?

If distributors are doing anything illegal why are they not being prosecuted under current laws? Or is it a case of what they are legally doing being labeled "illegal" by people who simply disagree with the practice?

Bulk discounts ... a provider offering a channel to a carrier at a certain rate provided they deliver that channel to most if not all of their subscribers. Illegal? Package discounts where a provider offers a group of channels at a lesser price when carried together or in some negotiated tier level combination. Illegal?

DirecTV and other carriers live on contracts negotiated with the channels they carry. They include language such as "most favored nation" where no other carrier can get a better price. Collusion? Or just good business?


I would not mind seeing more control over broadcast channels ... they are in a unique position as they have provided broadcast spectrum for their OTA transmissions. But a wholesale change to a la carte? It is not going to happen.

Well I think a few small things can help.

 

Like copy Canadian way of being able to buy the box with no mirroring / outlet / drv fees.  Receiver Warranty fees are ok.

 

MLB blackout lawsuit end up with smaller team areas so RSN's are covering less outer rings. and less multi RSN areas.

 

Why not have a split sports package? maybe even have so you just buy sports + some of basic channels like TNT / TBS that do show sports quite a bit.

 

have a directv entertainment package with no ESPN no RSN's no fox sports ect but all of the other channels in choice extra classic.

 

add a choice ultimate package with no movie channels but with all the NON RSN sports pack stuff and maybe even dump NHL net from the choice ultimate package out now. Give people a 1 time shot who have choice ultimate package now to switch to choice extra classic that will keep NHL only but have no other sports pack only Non RSN stuff.


Edited by JoeTheDragon, 16 June 2013 - 10:35 PM.

I want CLTV / CLTV HD on direct tv.

#54 OFFLINE   unixguru

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Posted 17 June 2013 - 08:17 AM



OK ... So the government decides that DBS prices are too high and they mandate that DirecTV can no longer charge any customer more than $100 for a single receiver setup and can charge no more than $5 for each additional receiver regardless of features. Let it be written and let it be done.

 

I don't know how you got to that based on what I said.

 

The article referred to by the OP is about DirecTV (exec VP) testimony before congress.

 

He said

 

    Broadcast television has gotten far too expensive.

    Customers are forced to buy unwanted programming to get it

    special privileges for broadcasters

    Congress must address the imbalance created by decades of regulatory underbrush clogging the video marketplace

    [I]f the media conglomerates continue to reject calls for packaging flexibility, then they leave us no option but to support government  

        intervention. The status quo is simply unacceptable

 

On a simple read it sounds like he is talking about OTA broadcast.  In the last quote he says media conglomerates - does that not cover a much broader realm (including ESPN/Disney)?

 

Your don't touch business viewpoint is counter to DirecTV.

 

As for legal/illegal... see http://en.wikipedia....ying_(commerce).  Prove that cable/sat are not tying.

 

You're right that consumer vs business isn't going to have much chance of changing the law.  This is becoming business vs business and that has a history of changing law.



#55 OFFLINE   unixguru

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Posted 17 June 2013 - 08:38 AM

Just look at the movie theater business. That is exactly what they have done after years of decline, and I mean 40+ years of declining attendance. Prices have been going up steadily.

Even in years where the US box office has been down in money and attendance you look at it overall they've managed to use overseas sales to still more than make up for it which is kept them from slowing down or even considering slowing down raising prices of movie theaters.

They are going to continue to do the same thing anyway in shape they can TV business and there's really nothing out there right now it's gonna stop them unfortunately, And all a cart would absolutely make it worse.

 

Movie theaters are just in the death-throws of an obsolete medium.  People didn't decide they didn't want to watch movies anymore.  They decided that other distribution methods - DVD/Blu-Ray/PPV/internet/... - were more desirable.

 

The implication that this shift somehow made it more expensive for us to see movies is just plain wrong.  DirecTV PPV movie is $5.99.  Matinee around here is $7.  If I don't want to pay $6 for something and I'm willing to have less convenience, I can drive down to a neighborhood RedBox and rent a Blu-Ray for $1.50.

 

Likewise I could go to a pro sports game if I wanted to.  Their prices passed obscene long ago.  I might watch a local team's game if it is free (OTA).  That's the value I place.  Obviously there are others who are willing to spend a small fortune on their sports.

 

If Speilberg's threat of $25 movies comes to pass then so be it.  As with sports I'll choose not to.  If it is never available at the value I place on it then I won't see it.

 

That's the way the world works in most things.

 

Except TV... that has to be different  :nono2:



#56 OFFLINE   pdxBeav

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Posted 17 June 2013 - 08:49 AM

I'm assuming by programmer you mean something like the group of ESPN channels?

 

Are you saying that the price ESPN could get would be the same if it was offered a la carte as it is bundled with a tier?  How is that possible?  Lots of people could care less about ESPN and surely wouldn't pay for it - via their tier - if they didn't have to.  But if they don't have any choice - other than not having lots of other programming - then they will grudgingly pay for it.  For now anyway.

 

No, not at all. I'm just saying that the price will be determined by what the subscribers are willing to pay. I keep hearing the argument that if a channel is offered a la carte then the programmer will just raise their rates to whatever level which ensure the same revenue/profit. I'm saying it doesn't work that way. They can only do that if the consumer is willing to pay that much.

 

If ESPN was a la carte then a couple of things are obvious. 1. They would have fewer subscribers. 2. They would charge more per subscriber then they do now because a lot of people must have ESPN, but their overall revenue would depend on how many customers are willing to pay more. It could very well be less than what they get now. I guess it's possible the number of subs paying more could make up the entire difference, but the consumers determine that.



#57 OFFLINE   joshjr

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Posted 17 June 2013 - 09:16 AM

No, not at all. I'm just saying that the price will be determined by what the subscribers are willing to pay. I keep hearing the argument that if a channel is offered a la carte then the programmer will just raise their rates to whatever level which ensure the same revenue/profit. I'm saying it doesn't work that way. They can only do that if the consumer is willing to pay that much.

 

If ESPN was a la carte then a couple of things are obvious. 1. They would have fewer subscribers. 2. They would charge more per subscriber then they do now because a lot of people must have ESPN, but their overall revenue would depend on how many customers are willing to pay more. It could very well be less than what they get now. I guess it's possible the number of subs paying more could make up the entire difference, but the consumers determine that.

 

If you think ESPN would take less then they are now and less subs, you are out of your mind.  They would have to be forced into it.  Do you really think any cable channel can take the hit with a la carte and survive?  There are other issues to consider.  I could see subs adding and removing a channel weekly as well.  Say AMC for example, add it the day of Breaking bad and remove it later that day till the next week.  I am not sure the current phone support staff is enough to compensate for people adding and removing channels like that.

 

In the end, are you willing to pay the same price you are now and just have the 15 channels you want?  Also, under the a la carte model, how do you propose new stations ever get started?  Which channels do you watch would you fear could not make it in this model?


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#58 OFFLINE   pdxBeav

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Posted 17 June 2013 - 10:07 AM

If you think ESPN would take less then they are now and less subs, you are out of your mind.  They would have to be forced into it.  Do you really think any cable channel can take the hit with a la carte and survive?  There are other issues to consider.  I could see subs adding and removing a channel weekly as well.  Say AMC for example, add it the day of Breaking bad and remove it later that day till the next week.  I am not sure the current phone support staff is enough to compensate for people adding and removing channels like that.

 

In the end, are you willing to pay the same price you are now and just have the 15 channels you want?  Also, under the a la carte model, how do you propose new stations ever get started?  Which channels do you watch would you fear could not make it in this model?

 

Or course ESPN won't go a la carte voluntarily. Why would they give up their cash cow? Nobody said they would do it on their own. They have a good gig going and won't give it up easily.

 

You say I would pay the same price for 15 channels, but what price data is that based on? It's just a guess. There's a reason why the programmers don't want a la carte and it's not because they're looking out for the viewer.



#59 OFFLINE   joshjr

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Posted 17 June 2013 - 10:10 AM

Or course ESPN won't go a la carte voluntarily. Why would they give up their cash cow? Nobody said they would do it on their own. They have a good gig going and won't give it up easily.

 

You say I would pay the same price for 15 channels, but what price data is that based on? It's just a guess. There's a reason why the programmers don't want a la carte and it's not because they're looking out for the viewer.

 

No its for reasons like losing subs & not being able to force crappy stations on people they don't want.  You keep on thinking a la carte can be as cheap as the channels are now.  You should look into the few channels DirecTV offers a la carte like the outdoor channel or what ever it is.  Its not pennies on the dollar.


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#60 OFFLINE   pdxBeav

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Posted 17 June 2013 - 10:52 AM

No its for reasons like losing subs & not being able to force crappy stations on people they don't want.  You keep on thinking a la carte can be as cheap as the channels are now.  You should look into the few channels DirecTV offers a la carte like the outdoor channel or what ever it is.  Its not pennies on the dollar.

 

I have never thought each channel would be as cheap with a la carte. Not sure where you got that from. My monthly programming bill would be cheaper with a la carte.






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