McCain recently introduced a bill that would encourage cable providers to offer consumers the option of purchasing channels individually, rather than being forced to subscribe to a package of channels, or bundle.
But cable and satellite companies, especially the independent providers represented by the American Cable Association, argue it’s the programmers driving the practice of bundling, not them. ACA President Matthew Polka said his member companies have no way to offer a la carte options to consumers without the cooperation of the six major media conglomerates that control roughly 90 percent of the TV market: Comcast/NBCUniversal, The Walt Disney Co., News Corp., Time Warner, Viacom Inc. and CBS Corp.
“What they’re selling is their big bundle of programming. In many cases, it comes down to take it or leave it,” Polka said. “Not one of these [cable and satellite] providers wants to be without [channels] carried by their competitors. Consequently, because of the competitive threat we face, we all agree to pay for the bundle.”
Polka agreed that sports programming has helped propel the cost increase but hesitated to place all the blame with ESPN. He acknowledged Disney has been especially successful at bundling ESPN along with other channels but said other major media companies such as Fox and NBC are planning to follow suit by creating national sports networks, which would only exacerbate the problem.
“The model that’s been created by ESPN is now being replicated by other programmers. Meaning the problem is only going to get worse as each one of these companies compete for sports right to carry programming,” Polka said. “I see price of sports skyrocketing with Fox and NBC competitors to ESPN.”
While advocacy groups including Consumers Union and Public Knowledge have thrown their support behind McCain’s bill, they see it as a first step rather than a panacea for the problems facing the TV industry.
Public Knowledge Senior Vice President Harold Feld said the TV market has been distorted by consolidation, which has resulted in companies like Comcast and Time Warner that have significant interests in both programming and transmission. He said those companies only negotiate with other huge players like DISH Network, and have little incentive to break up their products for smaller competitors.
“It’s a dysfunctional market,” Feld said. “You have a few very large players on content side and cable side that negotiate contracts. The way that these things work, with most-favored nation clauses, there’s no room for any variation by anybody else.”
Whether a la carte programming would actually result in lower prices for basic cable customers also remains in doubt. Michael Powell, president of the National Cable and Telecommunications Association and a former FCC chairman, was skeptical at the Senate hearing that eliminating bundling would reduce costs for consumers, arguing that high-demand programming such as ESPN often subsidizes the cost of less-popular offerings that are expensive to produce.
“It’s not a good deal for consumers if you pay $10 for 10 channels, and you were paying $10 for 100, and I think that there’s been some quite serious academic work that that’s a possibly, a very likely possibility,” Powell told lawmakers. “And so while the concern is respectable and noble, and one that we should continue to work on, I think we have our profound doubts that a la carte would actually deliver a lower-cost product to the American consumer.”