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making the sausage

Polone: I’m Tired of Paying for Cable Channels I Never Watch

Shot of an old/vintage black and white television. The TV is off (blank screen). TV is on a black background.

The Sunday before last, I went to dinner, alone, at the Aria Hotel buffet in Las Vegas. I like buffets and tend to eat at one every day when I’m in Vegas, since it allows me to indulge my picky eating habits without too much explaining to a waiter: I’m a vegetarian who tries to stay away from refined carbohydrates, so piling a plate with salad, stir-fried tofu, and vegetable sushi works well for me, as does any process that limits my interaction with other humans. The Aria’s buffet is probably my second favorite in Vegas (after the Wynn), but this time I didn’t have as pleasant a time as in the past. The problem started when the waiter came up to me and asked if I wanted white or red wine. I didn’t know unlimited wine was included and let her know that I did not drink. She then asked if she should bring me a serving of lobster, which was also included. Again, I declined, as I do not eat crustaceans. After she left, I looked at my receipt and noticed that the price of the buffet was $36.95, six dollars more than it is Monday through Thursday, when they don’t serve unlimited wine and lobster. Since they opened, I'd been happily paying this bill, but the surcharge made me suddenly cognizant of all the other stuff at the buffet that I don't eat: the prime rib, tandoori chicken, Alaskan King Crab, California roll, garlic naan, thai beef salad, mac and cheese, sausage pizza, miso soup, country biscuits, sugar-free apple cobbler, German chocolate cake.

My Las Vegas buffet experience sparked the same exact irritation that I feel about my television content provider. I currently subscribe to Time Warner Cable, and if I want to watch ESPN or FX on my 60-inch HD Plasma, I have no choice but to buy the entire buffet of basic cable channels, including Country Music Television, Logo, OWN, and Discovery Fit & Health: To me, these networks are the televisual equivalent of a carving station, wine list, and lobster pot. But unlike with dining, where I can choose to go to a regular restaurant and order exactly what I like, no TV provider can give me only what I want to consume. If you are thinking, Why does it matter if I don’t watch channels that are included in the price of my cable package? the answer is that you’re paying something for those networks, and if cable didn't charge buffet-style, your bill would probably be a lot less. 

Every channel charges the cable or satellite provider a fee per subscriber, known as an affiliate fee. Affiliate fee revenue in 2011 is estimated to be $26.8 billion this year for basic cable networks versus their $21.6 billion in advertising revenue, so you can see that what you pay for your programming package is a critical part of their profitability. If you don't watch sports, you're really being overcharged, because sports networks command the largest fees from providers: ESPN, the lobster of this cable meal, currently receives $4.69 in affiliate fees for each of their 100 million-plus subscribers (and many fear that number will go up after the network paid $15.2 billion to extend its rights to Monday Night Football). TNT, which broadcasts the NBA, NCAA basketball, NASCAR, and golf, gets $1.16, while the average for all the other networks is 26 cents. The total cost of these fees is estimated to be about $30 to 35 of the $69 I would pay for basic cable in my area. So, if you don’t watch sports, especially football, you are paying a disproportionate share of your monthly cable bill for programming you never watch.

Clearly, this business model isn’t advantageous for the majority of consumers. Though football has a huge audience, more people don’t watch it than do. The reason programming bundles are maintained by satellite and cable providers (otherwise known as multiple system operators, or MSOs), which have near monopolies when it comes to distributing programming, is because historically it has benefited many of them, as well as the companies that own the cable networks. Comcast has distribution to over 22 million households, and they also own a large number of cable networks like USA, E!, and G4. Therefore, they can maintain the viability of their less popular networks and start new ones if they force the consumer to buy them in a bundle. Even the companies that don’t own the pipeline to the homes but do own cable networks benefit from bundling because it gives them the leverage over MSOs when they are negotiating their deals; Discovery Networks can work in more coverage for a newer channel like OWN because of the strength afforded by owning the popular TLC and the Discovery Channel.

The obvious and long-hoped-for solution to this is à la carte billing, in which customers pay only for the channels they want. Advocates of bundling say that doing this will undermine the development of new networks and will disenfranchise those customers who want access to the less popular channels. I’ve also heard analogies made to the destruction of the record companies when iTunes made it possible to only buy the songs you wanted to hear rather than full albums. This is a lot of crap. First, you'd never need to worry about the loss of local stations and public interest channels like C-SPAN, since the government has the right to force the MSOs to carry them because of the providers' near monopoly. As for the music comparison, though the record business may suck compared to twenty years ago, music is still made and enjoyed by the masses. Lady Gaga and Taylor Swift seem to be doing well, and Justin Bieber’s story proves that the Internet allows someone to go from nowhere to superstardom pretty much on their own — so who gives a shit if there is less money available to pay for lines of coke on the desks of A&R executives? 

Fortunately, unbundling is coming. The CEOs of two smaller cable companies, Mediacom and Suddenlink, recently sent letters to the FCC suggesting the government institute a plan for à la carte programming, and DirecTV and TWC have also made moves to try to unbundle the broadcast networks from their parent companies’ other cable assets, meaning the rights to ABC couldn’t be tied into a renegotiation for ESPN and the Disney Channel, all properties of the Walt Disney Company. This change in posture is partly a result of some larger MSOs divesting themselves of programming assets over the last few years (DirecTV untying itself from Fox and Liberty Media, Time Warner and Cablevision spinning off Time Warner Cable and AMC Networks, respectively), resulting in their facing only the downside of increased affiliate fees and being forced to take on less popular networks. And regardless of how the MSOs feel about it, the Internet and its connection to televisions in the home is going to force unbundling, because eventually content providers will start selling product directly to consumers on websites like Hulu or Netflix, or through their own sites, like ESPN360, and the end user will ultimately make the choice about what they want to watch and pay for only that. It can’t be stopped and it shouldn’t be.

Yes, in addition to cost savings, the result of unbundling will be the death of lesser watched networks like Style, Current TV, and even one of my favorites, BBC America. (All of them rated a hash mark in the November Nielsen 24-hour ratings averages, meaning they rated below the 83rd placed network, Discovery Education, which averaged 42,000 viewers, as compared to Nickelodeon’s 1.88 million.) But, ultimately, the marketplace makes its own decisions and that is what our economic system is about. It is right to charge an extra six bucks for lobster on a buffet, since most people think that is a great deal and people like me can go eat elsewhere if we don’t want to pay for it. But charging even an extra 60 cents for chocolate-covered turtle shit and restricting people’s ability to eat anywhere but another restaurant with the exact same fare makes no sense and is un-American.

Gavin Polone is an agent turned manager turned producer. His production company, Pariah, has brought you such movies and TV shows as Panic Room, Zombieland, Gilmore Girls, and Curb Your Enthusiasm. Follow him on Twitter, @gavinpolone.