Frustation fueled as operators pass on sports costs

Let’s face it: If you are a cable subscriber, once again alarmed as your bill heads further into the triple digits, you may think of taking drastic action, but chances are still pretty good that you won’t cut the cord.

Convenience, comfort and lack of true competition are what have allowed cable operators to raise rates on their customers, even when they’ll be paying more for the same, or shelling out substantial monthly fees for a whole plethora of programming they will never watch or even find.

This certainly was on the minds in the past week as Time Warner Cable announced a new long-term deal for a Dodgers regional sports network, reportedly at a cost of $7 billion. At the same time, they’ve raised rates on Los Angeles customers, hikes blamed on the higher costs of programming, with the monthly cost of basic cable rising 8.2%, to $72.50, and the price to get local channels going up almost 18%, to $20. Its DVR rental fee rose to $12.99 per month, from $10.95.

Several weeks ago, TWC also announced that it was dropping Ovation, the arts channel, because of low viewership, as it scours other smaller networks to drop to pay for programming elsewhere. Ovation executives cried foul, not only noting their Nielsen gains over the past year but that they are independently owned, easy targets in a cable universe dominated by conglomerates with leverage. Given that sports rights are driving the higher programming costs, it was as if a school board chose funding the football team over the much-less visible arts courses.

“They are bullying the small, independent businesses at the expense of consumers,” said Chad Gutstein, Ovation’s chief operating officer.

In their defense, TWC says that it has added other channels, like the NFL Network and Pac 12 Network, as well as HD options, and they are not the only cable or satellite operator raising rates. A spokesman for Time Warner Cable also said that the average increase for L.A. customers will be 3.5%, and some 68% won’t see any increase because they are in bundles or on promotions. Its CEO, Glenn Britt, has touted the Dodgers deal as beneficial to controlling costs in the long run, even as there’s been plenty of grousing in the cable business that it may have the impact of further escalating sports rights in Los Angeles and across the country.

Moreover, as much as cable TV may seem like a utility, customers always have the option of canceling. Some have, apparently, as TWC’s most recent quarterly results showed that it lost 129,000 video subscribers.

Mark Cooper, research director at the Consumer Federation of America, argues that going to satellite providers Dish or DirecTV really won’t save consumers that much, if at all, as they will still be faced with paying for similar bundles and similar programming costs.

“When you have got only two competitors, it’s easy to look over your shoulder and recognizing that you have an interest in not really competing,” he said.

Yes, the Internet is offering more options, he noted, but TWC, Comcast and others are also among the largest broadband providers, too. There, too, there is friction: Some customers, frustrated by fee increases, filed class action lawsuits against TWC in November when they started charging for modems they previously offered for free. There’s also ample wariness that more widespread usage-based pricing, particularly with the growth of streaming video services, is just around the corner.

Cooper has long been a champion of cable going (or forced to go) ala carte, giving consumers the option of picking and choosing which channels they really want. That sends shudders through the cable content business, as some channels won’t make it in such a survival of the fittest, and even he acknowledges that the debate in D.C. over such an option has gone on for what seems like forever, as the cable business has exerted its political influence.

“This is a stalemate that will never go away,” he said.

He thinks an easier option is to untangle sports — the well-watched channels along with the specialized ones — into their own bundle, as that is what is the primary driver of programming costs. After all, the Dodgers have averaged about 108,000 households per game last year, suggesting that there’s a significant chunk that is willing to pay up for a package, but also plenty that probably wouldn’t even be watching for free.

There’s also another option: If bandwith costs force Internet providers into more usage-based pricing, why not apply it to TV too? You don’t select the channels you get but at least pay for how much you watch — a reminder of the coin-operated sets that used to be staples of airports and cheap motels. But pay-as-you go would certainly tame consumer frustration — they would have no one but themselves to blame for their high bills — and maybe remind many a couch potato that hey, it’s just TV.

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