Cable: Make People Happy. It’s Not Too Late.

September 3, 2013

Kevin Harris Pic

By Kevin Harris, Marketing

 

It’s been a while since I flipped on GSN, TruTV, CMT, QVC, Oxygen, VH1, or HGTV. In fact, I’m not sure if I’ve ever watched any of these channels, let alone dozens of others my cable company provides. So, if I’m never watching them, why should I have to pay for them?

 

The month-long feud between Time Warner Cable and CBS finally came to an end very early this morning after sparking weeks of heated debate about the future of cable TV. While the two companies were eventually able to settle on an undisclosed agreement for how much Time Warner would pay CBS in retransmission fees, one controversial idea failed to get the serious attention it deserves. In early August, Time Warner Cable CEO Glenn Britt proposed ending the black out of CBS stations affecting more than 3 million subscribers, by offering to sell CBS à la carte to viewers. No longer would CBS be bundled with all the dozens of other channels TWC sold and CBS would even get to keep all the profits.

 

Cbs-time-warner-cable-logosAccording to Britt at the time, the plan “would allow customers to decide for themselves how much value they ascribe to CBS programming.” But less than a day later, CBS’s CEO Leslie Moonves laughed off the idea insisting “the economics and structure of the cable industry have created a certain way that content is distributed and compensated.” Little did he realize, CBS and TWC both could have benefited.

 

While the companies may not be ready for an à la carte model because it could radically turn the cable business model on its head, consumers would surely welcome the concept. Sen. John McCain (R-Ariz.) and Sen. Richard Blumenthal (D-Conn.) are prepared to co-sponsor the Television Consumer Freedom Act, which would get rid of the compulsory programming license from cable and satellite companies and urge pay-TV providers to offer channels on an individual subscription basis. Calling the current all-or-nothing cable packages “antiquated” and anti-democratic,” Blumenthal published a statement demanding greater consumer control. “Consumers should not have to pay for programming they don’t want or watch,” he said.

 

Maybe it’s too idealistic to hope for complete freedom in choosing which channels I subscribe to, but at the very least it’s time for cable providers like Time Warner Cable to offer lots of smaller bundles of networks, rather than the entire smörgåsbord. Don’t get me wrong, many cable providers already have a handful of varying packages, but they don’t go far enough in providing flexibility for consumers. DIRECTV has five different options but even the cheapest one gives you more than a 140 channels! Why not package small bundles of channels by genre? With a sports bundle, a children’s bundle, a lifestyle bundle, and a few others, viewers could self-select what type of programming they’re interested in and still have a variety of channel choices for a low price. This hybrid model might be the most realistic option in the short term as we await the adaption of à la carte, however subscribers would also welcome the ability to easily turn their programming on and off by season. If you’re only interested in watching Suits on USA or Pawn Stars on the History Channel, A-la-carte-channels-headerhaving the option to turn those channels off during seasons when your favorite shows aren’t airing, would be a huge win for consumers. Or better yet, let’s switch from a fixed recurring model to a usage plan where customers are only charged for the shows they watch or the channels they use. While changes like these may seem radical, they actually represent a unique opportunity for cable companies to adapt to a changing consumer culture. In the Subscription Economy, it’s essential for companies to develop relationships with customers and keep them happy in order to maximize their lifetime value.

 

In Taiwan, a recent survey showed 61 percent of respondents support a new à la carte cable TV pricing model, while just 25 percent are opposed. In fact, a majority (56 percent) of respondents voiced their dissatisfaction with the current cable model, which like US packages, provides consumers with almost a hundred channels for one steep price.

 

Add me to the list of supporters as well – even if I don’t live in Taiwan. Like many regular TV viewers, I can’t wait for the day when we can get rid of the middle man and dump nonessential channels. Family groups support the change as they note families wouldn’t be forced to subscribe to channels with inappropriate content in order to view programs they like. “Why must families be forced to subsidize MTV or any other network with their cable bills? It’s time for consumers to be able to choose and pay for only the cable networks they want,” Dan Isett, director of public policy for the Parents Television Council said following Miley Cryus’ controversial performance at the VMAs.

 

Even the FCC supports the à la carte model, as evidenced by a 2005 report. Selling individual channels “could be economically feasible and in consumers’ best interests,” former FCC Chairman Kevin Martin explained at the time.

 

If you’re not a sports fan (this would definitely not include me), you shouldn’t have to pay the extra $5.54 for ESPN in your monthly cable bill if you’re never going to watch it. What happened to the good-ole-days of $40 monthly cable bills in the U.S.? Today average prices sit around $90 and according to research firm NPD Group, are expected to rise to more than $200 by 2020.

 

With a plethora of viewing options now available, these current prices have skyrocketed out of control and only increase popular sentiment for “cutting the cord.” After all, more and more consumers are finding online and streaming options (i.e. Hulu, Netflix, and Amazon Instant Video) incredibly, making cable companies less essential. With Apple, Intel, and Google all scheduled to join the online TV market, it seems like only a matter of time before viewers won’t have to pay for the large channel bundles. DISH has already recognized the array of choices and taken a small step by offering FLEX TV, a package that comes with no contract or hassle.

 

If more players don’t recognize the shifting landscape and offer more flexibility, I might as well just watch everything I like online for a much cheaper rate. Who needs the big bundle packages, when I can watch original programming like House of Cards or Orange is the New Black on Netflix? The key to retaining clients and running a successful subscription model is listening to consumers and giving them multiple pricing and packaging options. “The audience wants the control. They want the freedom,” Oscar-winner Kevin Spacey said at the Edinburgh Television Festival, while referencing Netflix’s unique distribution style of releasing entire seasons all at once. “Give people what they want, when they want it, in the form they want it in, at a reasonable price, and they’ll more likely pay for it rather than steal it,” he went on to say.

 

Unfortunately with the NFL season looming, CBS and Time Warner Cable eventually decided to stick with a traditional model. Moonves and other industry executives remain fearful of a dramatic change, pointing to the impracticality, loss of niche channels, and possibility of higher prices. While no one’s ready for a complete overhaul yet, I believe the recent blackout helped at least start a conversation about smaller bundles and the future of cable TV. An à la carte model is “a very remote possibility at this point. [However] It’s not something I think is anywhere near in the future even though it’s a little bit in the news these days,” said Ken Lowe, the CEO of Scripps Network Interactive. “This is an issue that will play out over the next 10-plus years, not the next three years,” 21st Century Fox president Chase Carey added.

 

ExternFor now, it looks like we have no choice but to sit back in our big reclining chairs, cross our fingers McCain’s and Blumenthal’s bill gains traction in Congress, and wait for the entertainment industry to finally understand the new Subscription Economy is based on customer choice. By separating cable content and finally delivering it in a way customers want to consume it, cable companies and will not only ensure they’re able to compete with the growth of internet programming, but will also be able to grow their current subscriber bases and maximize revenue. In the meantime, I guess I might as well check out Lizard Lick Towing on TruTV, considering I’m already paying for it – like it or not.