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OT: Unbundling could raise price of cable

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May 15th, 2014 at 5:10 PM
#1
ak47
Joined: 05/05/2011
MGoPoints: 14308
OT: Unbundling could raise price of cable

Thought this was an interesting article.  Some people, including people on the blog have argued that expanding the big ten with a focus on tv markets is dumb because channels will be unbundled in the future.  However this article points to reports that unbundling could cost current cable subscribers more money for less channels.  It also points out that people who watch sports would be hurt the most, having to pay as much as 37$ for sport channels alone. 

I can't say this surprises me and don't actually expext unbundling to happen but thought people might be interested. 

http://www.nytimes.com/2014/05/15/upshot/why-unbundling-cable-would-not-...

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May 15th, 2014 at 5:45 PM
#2
theyellowdart
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Joined: 09/03/2008
MGoPoints: 1188
I don't

I don't believe many people have said it's a dumb idea because of unbundling.  But because of the clear shift to streaming and a lack of purchasing cable TV all together.

Also, and I may be missing something, that article seems to be a little light on facts and a little heavy on assumptions.

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May 15th, 2014 at 5:34 PM
#3
LL Cool Kiff
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I'd gladly pay the $37 for

I'd gladly pay the $37 for the sports channels I want instead of the $125 I currently pay for those channels and a bunch of other ones I do not care to watch. 

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May 15th, 2014 at 7:14 PM
(Reply to #3) #4
joeyb
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I'm not sure where they get

I'm not sure where they get the $37 from. MLB.tv costs $20/month. I've seen estimates that ESPN alone would need to charge $20/month minimum to break even in terms of revenue and that didn't take into account people dropping the channel after the season for their sport of choice is over. 

Also, it's not just the $37 for sports. It's the $30 (rumors from a while back) for HBO and $10 each for FX, AMC, ABC, NBC, Fox, and CBS (or insert whichever channels your favorite TV shows are on) that all add up to $127 while cutting out those other channels that you don't watch. Maybe you don't watch any TV shows, but a majority of people do and they will have a hard time cutting out various stations due to their shows being on them.

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May 15th, 2014 at 7:30 PM
(Reply to #20) #5
LL Cool Kiff
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That's my point though, I

That's my point though, I don't care about HBO* FX or AMC, TLC or CNN etc, so I wouldn't be buying those channels anyway. I refuse to believe that there is no way that my cable bill could costs could be less by subscribing to only 1/10th of the channels in the lineup. 

* well maybe I do care about HBO, but I've gone this far without it, so I'll be ok.

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May 15th, 2014 at 7:58 PM
(Reply to #21) #6
Muttley
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Joined: 07/07/2009
MGoPoints: -74931
I agree w/ ya, Klink*

All things being equal**, for a provider to offer it's service piece by piece, allowing the consumer to choose less, the individual pieces have to cost more for the provider to break even.

The consumer has to push back by consuming less to break even.  (Have access to fewer channels.)

 

*my favorite Colonel.  Although he did start WW2, according to ALF.

**Of course, everything is not  equal, w/ local semi-monopolies and disruptive streaming in the mix.

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May 15th, 2014 at 9:56 PM
(Reply to #21) #7
champswest
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Joined: 10/04/2009
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Some of us actually watch more than

3 TV channels, so I'm not sure how that would work out.

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May 15th, 2014 at 5:38 PM
#8
jwendt
Joined: 09/29/2008
MGoPoints: 187
lots of assumptions

It's an interesting take and I think these economists have some useful theories.  The one glaring omission I saw was anything about competition.  Right now, the competition for everything that's on "standard" cable (think you're typcial package), competes only with the other channels in that lineup for viewers, and hence ad rates.  

If you unbundle, all of those channels will now have to compete to convince you to subscribe before you can watch.  Economic theory would tell us that this would have a positive impact on both quality and price, as one of the ineffeciencies in the market (the bundling of packages) is removed as an obstacle to competition.

You also have ot factor in alternative delivery methods.  What happens to streaming video, netflix, youtube, etc.  Viewers and providers are going to have to consider the benefits and costs of delivering and consuming content in a way other than via cable tv.

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May 15th, 2014 at 7:01 PM
(Reply to #4) #9
Blue Mike
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Wrong perspective

If channels are unbundled, there won't be any competition. Right now, DirecTV, Comcast, Dish, etc. compete because they all offer the same channels. Unbundling means getting content from the providers, not the middle companies. ESPN doesn't show the same content as NBC; CBS and ABC don't have the same shows either. There isn't competition there, so the demand from consumers four the content would drive prices up or down. Most of your niche channels would disappear overnight.

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May 15th, 2014 at 9:25 PM
(Reply to #18) #10
Seth
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It'll also be harder for ESPN

It'll also be harder for ESPN to maintain a monopoly on being THE sports channel. What I expect will happen is ESPN will try to be a group provider, bundling ESPN and 2 and U and whatever all together. If it's Congress that forces the split, they'll still have to offer each separately and competitively price them. End result should be that ESPN will have to downsize and sell off a lot of its contracts.

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May 16th, 2014 at 1:28 PM
(Reply to #30) #11
I Like Burgers
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No way

Selling off its key contracts is the very last thing ESPN would do. Live events are pretty much the only thing driving ad sales these days and those contracts give ESPN the right to the live events. The day they give those up is the day they cease to exist.

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May 16th, 2014 at 8:00 PM
(Reply to #61) #12
MGoSoftball
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Joined: 10/18/2010
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I would tend

to agree with you here.  ESPN will have a market for live events.  I have always said the bundling is not good.  I pay for shows that I have never watched and never will watch.  My 70 year old mother pays to watch ESPN when she hates sports.

So I agree with the previous poster, unbundling is a good thing in the long run.  The lesser channels will disappear and many obscure political shows will be gone.  Just give me ESPN, BTN and the Weather Channel and I am all good.

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May 16th, 2014 at 1:34 PM
(Reply to #30) #13
I Like Burgers
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One more thing

And one more thing, I think this would push ESPN even more out in front as the only sports channel. The majority of the other networks are subsidized by their parent companies and exist only because it's relatively cheap to throw another channel in the lineup. If they lost the ability to be bundled most of them would all disappear overnight because who is going to pay the $10 a month it would take to keep MLB, NBA, or any of the conference networks going in the offseason?



ESPN on the other hand is worth a ton of money and provides the bulk of the profits for ABC/Disney. I think they would likely double down and try and buy out contracts from other networks and become the only game in town. Because what happens in times of duress? The fat get fatter and the lean get leaner.

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May 16th, 2014 at 9:21 AM
(Reply to #18) #14
jwendt
Joined: 09/29/2008
MGoPoints: 187
There's still competition

That content needs to make into your home somehow.  You have the option of using the internet, but only if the channels choose to distribute that way.  Something tells me if you're paying $37 a month to get ESPN via a cable or satellite provider (and actually choosing to do so as opposed to having little choice), then ESPN won't be likely to stream their content for free.  If the cable/satellite providers are going to remain competitve, they'll have to deliver value adds to differentiate themselves.

Niche channels can still exist as long as they keep their costs down, just like today.  Except, instead of getting $0.03/month from every cable/satellite subscriber, they'll get $1.50/month from the much smaller # of subscribers that choose to pay for them.

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May 16th, 2014 at 3:52 PM
(Reply to #50) #15
ca_prophet
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Joined: 09/07/2010
MGoPoints: 3147
There's no competition for the last mile for cable

... Only for satellite versus cable. Put another way, if Congress forces unbundling of channels, it doesn't affect how many choices you have to get those channels. What it affects are how much those choices (DirectTV, Comcast, etc.) pay for the content, and whether they choose to carry it.

What it mostly does is stop popular expensive channels from carrying their niche siblings along with them. This is not really good or bad across all consumers, because while some will undoubtedly end up with fewer channels and pay less, others will end up paying more or not getting the content they want (because it isn't offered economically or no longer exists).

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May 15th, 2014 at 6:46 PM
(Reply to #5) #16
WolvinLA2
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Joined: 11/13/2009
MGoPoints: 52761
Yes, if you don't like

Yes, if you don't like watching TV, you can save a lot of money on TV. But that's not really a solution. That's like if I asked my friends for a reasonably priced restaurant in the area and one said "Yeah don't go out to eat."

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May 15th, 2014 at 10:08 PM
(Reply to #16) #17
Njia
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Joined: 09/15/2009
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Not go out to eat?

Most of Southern California would starve.

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May 15th, 2014 at 10:50 PM
(Reply to #33) #18
WolvinLA2
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Joined: 11/13/2009
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Are you making fun of people

Are you making fun of people from Southern California, or going out to eat?  Because saying we go out to eat isn't exactly a huge insult.  "What's that?  You take your wife out for dinner?  Clown!"

I have two young kids though, so I almost never go out to eat.

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May 15th, 2014 at 10:57 PM
(Reply to #37) #19
WolvinLA2
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Joined: 11/13/2009
MGoPoints: 52761
That's all well and good, but

That's all well and good, but I have young kids.  One of them takes naps like every few hours, so I can't exactly head out for a hike for the afternoon or spend the day on my surf board.  By 8pm, both kids are asleep (or getting there).  From that point until we go to bed, there aren't a ton of things my wife and I can do together, since that's our only time to spend as a couple.  

Not watching TV is obviously an option, but it's not a solution to the problem at hand.  If I said, "I want to become a vegetarian, does anyone have any good recipes for me?"  and you responded with "Just eat some meat" that doesn't exactly solve my problem, does it?  That's what you're doing right now.  You're not a big TV person?  That's fine.  Everyone has different priorities in life.  But that doesn't add much to the thread.

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May 16th, 2014 at 2:09 AM
(Reply to #42) #20
WolvinLA2
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Joined: 11/13/2009
MGoPoints: 52761
Enough with the judgy-ness.

Enough with the judgy-ness. I'll do what I want, you can do what you want. If you don't like TV, don't post in the TV thread.

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May 16th, 2014 at 10:07 AM
(Reply to #49) #21
bigmc6000
Joined: 01/12/2009
MGoPoints: 1949
I'm confused...

So you're ok with sitting next to each other reading a book and not interacting with your wife at all but giving in to the time-sucker TV where you are actually watching the same thing and can talk about what happens that's a bad and wasteful thing?

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May 15th, 2014 at 5:51 PM
#22
Magnum P.I.
Magnum P.I.'s picture
Joined: 07/16/2009
MGoPoints: 11284
Laptop, Netflix, Amazon,

Laptop, Netflix, Amazon, ESPN3, and sports bars for my whole adult life. Baffles me that people pay $2000+ a year for cable television. 

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May 15th, 2014 at 6:02 PM
(Reply to #6) #23
icefins26
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Joined: 02/01/2009
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No kids, I take it? I wish I

No kids, I take it? I wish I could pack up to a sports bar for every game I wanted to watch.

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May 15th, 2014 at 6:09 PM
(Reply to #6) #24
Tate
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HDMI cables do great things.

HDMI cables do great things.

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May 15th, 2014 at 6:47 PM
(Reply to #6) #25
gwkrlghl
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Joined: 04/13/2012
MGoPoints: 71
I know it's not cheap, but

I know it's not cheap, but it's worth it for me to be able to watch almost every single Michigan Hockey game now (from out of state). With all the Fox Sports channels and a few others, I think there were maybe 2-3 games this year I missed. Cable is really nice to have for live sports

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May 16th, 2014 at 10:51 AM
(Reply to #6) #26
danimal1968
Joined: 07/13/2008
MGoPoints: 908
ESPN3

isn't an option without a cable TV subscription. 

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May 15th, 2014 at 6:12 PM
#27
BRBLUE
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Joined: 03/24/2011
MGoPoints: 3496
I pay $16 bucks a month for

I pay $16 bucks a month for Hulu Plus and Netflix both streamed on my PS3. Haven't had cable in two years and its been great.  If I have to watch a football game, I can stream it on some not so legal sites or go to my girlfriend's place.

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May 15th, 2014 at 6:30 PM
#28
UofM-StL
Joined: 11/21/2011
MGoPoints: 818
These estimations are meaningless

The estimated price of unbundled channels comes from the cable companies themselves, who have an obvious interest in maintaining the status quo as long as possible. So obviously they're going to put out numbers that make it sound like unbundling will drastically increase prices.

See, the numbers they come up with are essentially "How much would we have to charge in order to make the same amount of money?" In actuality, when unbundling does happen out of necessity, the question will be "How much can we charge so that people will still use us at all?" The current structure of TV providers is unmaintainable in the internet age, and cable companies are going to make WAY less money when it does eventually come crashing down.

 

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May 16th, 2014 at 5:18 AM
(Reply to #10) #29
joeyb
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Joined: 10/12/2008
MGoPoints: 14048
Some estimates come from cable companies. Others

Some estimates come from cable companies. Others are calculated. For example, I saw an article a couple of years ago that stated ESPN receives $5 per cable subscription and only 25% of those subscribed actually watched the channel. So, in order ESPN to maintain their current revenue, they'd need to charge $20 and retain all of their viewers. That doesn't account for people who would only get it for the season either. It's tricky to calculate, but I'd imagine that ESPN would go to a more predictable model like PPV. In any event, I think the price of sports channels will go through the roof.

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May 15th, 2014 at 6:33 PM
#30
ChicagoB1GRed
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Joined: 06/10/2010
MGoPoints: 1172
Bundling, Unbundling.....changes nothing

The "good stuff" is expensive to produce if its original content,  or expensive to present if it's popular big time sports. And they know people will pay top prices for it.

Sports fans are getting a fairly good deal with the status quo, as most cable systems make non- fans subsidize sports programming, aka the Rutgers and Maryland business case.

Game of Thrones/Sopranos type content will never be cheap, whether you buy it by the episode or bundle it into a package, because its quality programming that everyone wants to see and can demand a premium price.

So pick your poison. Pay a lot for a packakge or pay a lot per show. Either way, you'll pay. Or you can save money and get Iron Chef and white trash reality shows real cheap.

You can also bundle/unbundle a restaurant meal - pay for a dinner that includes sides, buy ala carte, or prix fixe.  But a good meal will cost you a lot anyway you buy it.

 

 

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May 15th, 2014 at 6:34 PM
(Reply to #11) #31
Gobgoblue
Joined: 07/07/2012
MGoPoints: 14736
Eh, HBOGO is pretty cheap

and you get HBO on TV if you have HBOGO.

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May 16th, 2014 at 10:44 AM
(Reply to #13) #32
ak47
Joined: 05/05/2011
MGoPoints: 14308
You cant get just hbogo

You cant get just hbogo

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May 15th, 2014 at 6:32 PM
#33
Gobgoblue
Joined: 07/07/2012
MGoPoints: 14736
Unbundling more expensive

Well, yeah, isn't that how packages work?  But akin to the above posters, I'd pay for just sports channels and HBOGO.  Pretty much all I use anyway with the occasional Netflix binge.

Seems like it would only be more expensive for families, which is where the money is at anyway.

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May 15th, 2014 at 6:39 PM
(Reply to #12) #34
wile_e8
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Joined: 06/30/2008
MGoPoints: 6033
Families are served pretty

Families are served pretty well by Netflix too, they have lots of streaming kids shows. Even if I had to pay $37 for the sports channels (I doubt that number, at least if they want to keep customers), that plus Netflix would still be way better than what I'm currently paying for DirecTV.

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May 15th, 2014 at 6:59 PM
(Reply to #14) #35
Gobgoblue
Joined: 07/07/2012
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I guess that's true; I didn't think of that

Devils advocate . . .  How do you control what is watched though?  Does Netflix have parental controls?

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May 15th, 2014 at 7:06 PM
(Reply to #17) #36
wile_e8
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They have profiles, I set it

They have profiles, I set it up so her profile has a bunch of her shows on it.

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May 15th, 2014 at 8:09 PM
(Reply to #17) #37
Marley Nowell
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Netflix actually has the best

Netflix actually has the best parental controls of any way to view media (TV, Youtube, etc) because you can select the exact shows children have access to or can choose more broadly based on rating.

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May 15th, 2014 at 8:15 PM
#38
HAIL-YEA
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Joined: 07/15/2009
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I get

why people want channels unbundled, but people always exaggerate cable costs so much its rediculous. Either that or you are paying for a bunch of extra boxes and dvrs or something if your bill is 135 a month just for cable. If that bill is for cable and internet like mine then thats a pretty good deal if you ask me. Even if I ditched the cable, I would still be paying a steep price for 50 mbs internet service. And comcast xfiniy streaming service is about 1000x better then netflix and its free with your subscription. If I dropped cable and paid about 65 bucks a month for internet..I dont think id come close to the value of the cable service I am getting for 70 bucks of unbundled channels, not to mention the free streaming service. Lastly I will point out that streaming sports ove the internet stinks. Yes you can watch the game but when you could be watching in hd.. streaming is a crap substitute to save a few bucks imo

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May 15th, 2014 at 8:25 PM
#39
chatster
Joined: 09/14/2010
MGoPoints: 14992
The "Free Market" In A La Carte Nation -- Money, Money, Money!
I’m old enough to recall watching seven channels of broadcast TV on a bulky furniture box with a small black and white screen.  Late-night viewing then was test patterns.
 
And now we’ve advanced to watching hundreds of TV channels on lightweight flat-panel sets with high-definition color . . . and it costs as much every year to pay for that luxury as it cost in the early days of broadcast television to buy a new car every year.
 
Just as the airlines have evolved from short waits, uncrowded flights with lots of seating options, meals in flight, no baggage charges and friendly service. to eking every last penny out of us for long delays at the gate and on the tarmac, over-booked flights, checking baggage, choosing seat locations, dining in flight and not-so-friendly flight attendants . . . so are the cable companies evolving.
 
You love MSNBC and CNBC, but couldn’t care less about Championship Sunday in the Barclays Premier League or the NHL playoffs or college hockey? Sorry; we’ll charge you more for MSNBC and CNBC alone than you would’ve paid for the “bundle.”  You hate MSNBC and CNBC, but are passionate about Championship Sunday in the Barclays Premier League, the NHL playoffs and college hockey?  Sorry; we’ll charge you more in total for each of those sports channels alone than you’d pay if you’d bundled them with MSNBC and CNBC.
 
You hate Fox News and Fox Business and watch none of the Fox TV shows (except the new “24" series), but you love baseball, the NFL and college sports?  Sorry;  we’ll charge you more in total for each of those Fox Sports channels alone than you would’ve paid for the “bundle.”  AND, you won’t be getting ALL the Fox Sports channels, just the one in the region where you live.  AND, by the way, the Big Ten Network is available only when you also buy Fox News and Fox Business.
 
You just want to watch updates on the search for Malaysian Airlines Flight 870 and hate the cooking and eating competition shows?  Sorry; if you want CNN, then you’ll have to pay for “Diners, Drive-Ins and Dives” and “Top Chef” too.
 
You want any ESPN channel other than The Ocho?  We’re charging by the hour for each ESPN channel that you’d like to buy.  (Talk about plunder the lox.)  And if you want clear reception, you’ll have to be watching in a van down by the river.

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May 15th, 2014 at 8:37 PM
#40
Zone Left
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Unbundled TV would probably

Unbundled TV would probably be much higher quality. You couldn't produce a bunch of low rent reality shows and get people to pay for them individually.

It will happen eventually and will crush the BTN model. I'm not paying for BTN now. I'll get it again a week prior to Michigan's first game on the channel and cancel after its last game.

Most of BTN's money is made from subscribers who rarely if ever watch it. They won't pay if cable's unbundled and the costs will soar for fans. A lot of them won't pay the hiked fees. BW3 will do well though.

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May 15th, 2014 at 10:46 PM
(Reply to #26) #41
WolvinLA2
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I wouldn't be surprised if

I wouldn't be surprised if you choose your channels for a year at a time to keep that kind of stuff from happening (though I doubt you would really do that unless you don't like watching Michigan basketball).  But it would be difficult for the providers if you could sign up for and cancel every channel at any point you wanted to.  Or it's possible the pricing is different if you buy it for the year or pay monthly, etc.  If I were BTN, I would set my prices so they were something along the lines of 5 bucks a month or 30 bucks for the year, something like that.  

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May 16th, 2014 at 10:46 AM
(Reply to #26) #42
ak47
Joined: 05/05/2011
MGoPoints: 14308
low rent reality tv shows are

low rent reality tv shows are cheap to produce and get more viewers than most sports so chances are you would see more of that,  not less.

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May 15th, 2014 at 8:40 PM
#43
Avant's Hands
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Joined: 10/22/2011
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My questions is what counts

My questions is what counts as a sports channel? A whole lot of sports happen on basic cable channels. College football games happen on fx now. Fox sports carries a lot of regional stuff. What about the nbc channels for hockey? TNT for the nba? Tbs for baseball? Does espnu and espn classic get included? How much extra is nfl network, etc. It seems like if you really like to watch a lot of different sports it is going to be cheaper to keep cable bundled.

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May 15th, 2014 at 8:42 PM
#44
77bleedblue72
Joined: 12/13/2013
MGoPoints: 18
As an owner of a cable system

As an owner of a cable system these weekly threads about cable is getting pretty annoying.

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May 15th, 2014 at 10:02 PM
(Reply to #28) #45
Njia
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Joined: 09/15/2009
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Here's a potentially helpful remedy

Serve customers more, gouge them less, and recommend to your competitors to do likewise. Oh, and convince the municipalities (where I live in Michigan, anyway) to encourage competition by offering more than one vendor: Comcast.

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May 15th, 2014 at 9:18 PM
#46
Seth
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It's utter bullshit. The

It's utter bullshit. The report is based on what the channels are charging the cable operators, not what their value would be on the open market. The cost of BTN is what people are willing to pay for BTN. If they make it too much people won't get it.

The whole point of unbundling is they're using bundling to way overdrive prices for channels people don't want. Severe downsizing is bound to happen because they can't go on living like they are.

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May 15th, 2014 at 10:38 PM
(Reply to #29) #47
JayMo4
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Joined: 04/19/2013
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Thank you. This is the same

Thank you.

This is the same scare tactic the cable companies have been using for years, every time this topic comes up.

These channels, when broken free from packages, have to actively compete against each other and against internet downloading/streaming services, not to mention video games and just a generally expanding list of entertainment choices as technology continues to grow.

No one is paying $10 a month for FX plus another $10 for AMC and another $10 for Comedy Central etc etc when they can get hulu+ or netflix or whatever for the price of one of those.

Cable is already losing customers to the net.  They're acting like the record companies were a decade ago and trying to fight the technology or rig it in their favor (tearing down net neutrality,) when they ought to be working on finding sensible ways to diversify their services and take advantage of the options technology gives them.

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May 15th, 2014 at 11:09 PM
(Reply to #29) #48
bluesalt
Joined: 11/02/2011
MGoPoints: 4198
I highly doubt it

If you think you can get a better price from BTN or ESPN than Comcast has to pay those stations, you're kidding yourself. At best you'll get the same price. More likely the price will be higher. Why? Because ESPN is on virtually every cable package in the country at this point, and there's certainly some discount because both Comcast and ESPN know that not every household watches. But if you get a la carte pricing, ESPN will no longer price to account for the people who have no interest in their product, and will instead set its price to maximize revenue for the people who want their product. And that price won't be any lower than what Comcast pays, and will likely be higher.

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May 15th, 2014 at 11:17 PM
(Reply to #40) #49
WolvinLA2
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Joined: 11/13/2009
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I agree.  People are going to

I agree.  People are going to have a lot fewer options, or their bills are going to be through the roof.  if you have a household that only watches a handful of channels, this will benefit you.  But if you have a bigger family with distinct tastes, you'll be fitting a big bill.  

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May 16th, 2014 at 12:36 AM
(Reply to #41) #50
Clarence Beeks
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Joined: 09/06/2008
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That's kind of the point,

That's kind of the point, though. Right now, the people who only watch a handful of channels (that'd be me; I might watch 6 cable channels) are subsidizing the ones who watch many channels. Every bit of research shows, though, that the average consumer is more like me. The idea that the cost will go up for the average individual is ludicrous. The cost for the average person will go down (because even if the channel cost goes up, they will be paying for less channels), but the average overall cost could go up (for the reason that you identified).

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May 16th, 2014 at 10:48 AM
(Reply to #45) #51
ak47
Joined: 05/05/2011
MGoPoints: 14308
The point is it depends on

The point is it depends on the 6 channels you watch.  If all you watch is abc, nbc, and fox your prices will probably go down.  If you watch espn, or tnt, or usa your prices could go up.  Want to watch march madness games? time to get trutv which will cost a ton because nobody watches it.

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May 15th, 2014 at 11:44 PM
(Reply to #40) #52
wile_e8
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Joined: 06/30/2008
MGoPoints: 6033
Sports channels like ESPN and

Sports channels like ESPN and BTN might be able to use team allegiances to raise rates, but all the other channels are going to have to compete with the likes of Netflix and Amazon. People aren't going to need that many unlimited steaming services, especially if they plan on using the sports packages they pay $37 for. Given how many arms and legs cable companies are currently charging, consumers will still come out ahead, even if they are sports fans. 

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May 16th, 2014 at 12:55 AM
(Reply to #43) #53
bluesalt
Joined: 11/02/2011
MGoPoints: 4198
Some consumers may come out ahead

But those consumers are already pulling the cord.



Some consumers completely lose, because they like relatively unpopular channels that won't survive. They may end up with more cash in their pockets, but their welfare has gone down.



Some consumers will lose because they will either spend more for the same or less, or the spend the same for less. These consumers likely have multiple viewers with very different preferences, and acquiring the same bundle of stations that they currently watch will cost more than their current rate. They will re-optimize, and forego some channels which either they prefer less or cost too much, but they will be worse off.



Don't forget, as the article correctly states, you're still going to have to pay Comcast a delivery fee. That will be just like your gas bill. How much will that be? Probably $10-$15, based on the standard "having an account" rates charged by energy companies. Perhaps Comcast may start charging for hours of use, which would now make your monthly bill variable, which people don't like. It's not just channels that are bundles in your service, it's the cost of transmission that is included too.



The point is, prices for stations will certainly rise, as they will now price themselves towards consumers who really want them, and not for access on a cable providers most-watched tiers. I think the welfare would shift from the cable companies to the stations, but not the consumers. Maybe you'd rather ESPN have more of your money than Comcast, and that's fine. But this isn't a winning issue for most consumers now that so much content is available over the internet, and more of it will continue to head that way. Consumers who want a different choice already have it for most shows.



As an economist in the telecommunications sector (but one who does not work for a cable company), I do have some expertise.

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May 16th, 2014 at 10:01 AM
(Reply to #46) #54
Blueph
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Joined: 07/08/2008
MGoPoints: 12756
Question

You seem to know what you're talking about.  So here's a question: what is to stop cable channels from unbundling themselves?  If ESPN wanted to offer a subscription that permitted subscribers to stream any of the ESPN channels live for, say, $10/month, then ESPN would not only earn those subscriber fees, but would also earn ad revenue and wouldn't need to share either of those with the cable company.

You mention delivery fees, but for this system, you're already paying for the delivery fee - the cost of high speed internet paid to your ISP.

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May 16th, 2014 at 11:05 AM
(Reply to #51) #55
bluesalt
Joined: 11/02/2011
MGoPoints: 4198
ESPN could do that

My feeling is that ESPN, as part of Disney, cross-subsidizes some of their other stations. So ESPN gets Disney channel on lower tiers (I remember when Disney used to be a premium channel like HBO), which allows Disney to obtain more viewership, and move those viewers into the lucrative movie and merch revenue streams. There's also a political aspect -- since a lot of sports are publicly subsidized, there is a public trust aspect of keeping the major sports leagues on highly accessed TV. That used to be broadcast TV, but now that ESPN has such huge penetration, they can fill that role. If they went premium, they may lose their league contracts for that reason, and also because the leagues want viewers to develop merch and game attendance revenues. Now, if it's a la carte, that prohibition is dropped, because it's not ESPN's problem if people don't sign up, and their competitors for broadcasting rights will be in the same boat.



When I'm referring to delivery fees, I mean Comcast's cable connection that they're providing for you to receive your a la carte pricing, and not their internet service if you choose to watch your tv over net feeds only. You'd probably pay Comcast the full price of watching ESPN, and an extra fee for being able to watch anything at all, because Comcast needs money for keeping the network working, the same as the gas company gets to charge for the gas you use, but also separately for getting it to you.

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May 16th, 2014 at 10:12 AM
(Reply to #46) #56
wile_e8
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Joined: 06/30/2008
MGoPoints: 6033
I guess this might be a

I guess this might be a problem for people who can't get/don't want internet streaming services and want to get all their TV through cable/satellite. But I think those people are going to be in a shrinking minority, and for everyone else most of the problems you listed won't be an issue. Netflix and Amazon and the like provide tons of content for the entire family, even obscure content. Even if there is a connection fee on top of the channel fees, cable channels are going to have to price relative to streaming competition, and I think that will be a win for most consumers.

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May 16th, 2014 at 10:50 AM
(Reply to #43) #57
ak47
Joined: 05/05/2011
MGoPoints: 14308
Netflix has to pay channels

Netflix has to pay channels right now for rights.  abc, nbc and the others can jake up rates causing netflix to have to raise prices or drop shows.  I don't know why people think netflix will change the balance of power.  The cable companies can pull all of their shows to force subscribers which is why there isn't any deals between netflix or hulu and hbo or starz to show recent seasons.

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May 16th, 2014 at 11:13 AM
(Reply to #57) #58
bluesalt
Joined: 11/02/2011
MGoPoints: 4198
They have to be careful on that

Comcast, which controls NBC's entire portfolio, will run into trouble if they play too much hardball with their content. Netflix will need to pay fairly for it, but Comcast has to keep an eye on antitrust regulations, especially if they successfully get Time Warner. The DOJ, FTC, and FCC all have some authority if Netflix feels like launching a complaint.



That said, this is why Netflix has started to create their own content, like House of Cards. Don't be surprised to see that on Xfinity or On Demand at some point, as the content rights negotiations start going two ways.

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May 15th, 2014 at 10:15 PM
#59
Njia
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Joined: 09/15/2009
MGoPoints: 26791
Net Neutrality Changes the Game

Because most internet broadband in the U.S. is now delivered via the cable companies, Net Neutrality rules make it unlikely that unbundling in favor of Netflix, et al, would create much of a price incentive for the consumer. Quite the opposite, actually, as those streaming video services can now pay the carriers to carve out bandwidth in their favor, leading to higher consumer rates.

At the end of the day, the carriers own both the infrastructure AND the content, or at least have the ability to control it at their will. They're not doing this as a free public service, and they're going to make their money somehow. The FCC's new rules only make it more likely, not less.

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May 16th, 2014 at 12:21 AM
(Reply to #34) #60
bluesalt
Joined: 11/02/2011
MGoPoints: 4198
FCC's new rules

Sorry, I need to correct this because of all the misinformation out there -- there ARE NO NEW RULES! The media completely botched its coverage of this issue. What passed today was called a Notice of Proposed Rulemaking. It begins an official period of public discussion lasting no fewer than 120 days, and more likely at least 6 months given the FCC's typical pace. Today's NPRM merely set a very basic and broad outline of what might be considered, but was nothing resembling actual rules. Currently, there are no rules at all since the DC Circuit Court struck down the old rules in January. That's why the NPRM was released.



In actuality, it is likely that most or all of what people define as Net Neutrality will be preserved. The two Republican Commissioners will refuse to vote on any form of regulation (they said as much today, and that has been their modus operandi in general). That will leave the three Democratic Commissioners to negotiate it out amongst themselves. Two of them are very in favor of strong net neutrality regulation. The third, Chairman Wheeler, is less in favor of absolute net neutrality, but wants something more than nothing. He's a skilled negotiator, so he may get his way, but right now he's outnumbered.



Of course, Verizon and/or Comcast is likely to challenge this in the courts again, where they've been successful in the past, so who knows how this will end.

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