Friday, October 28, 2011

What the Heck is Going On Between DirecTV and Fox?

Posted By on Fri, Oct 28, 2011 at 2:23 PM

Rich Guy versus Rich Guy - Its like the NFL lockout all over again!
  • Rich Guy versus Rich Guy - It's like the NFL lockout all over again!

It all began when Kurt Sutter, creator and showrunner of "Sons of Anarchy," which airs on FX, started talking about DirecTV dropping Fox and affiliated networks. "Wait, wait" I thought to myself. This sounds familiar. In fact, one year ago, Fox had the same issue with Dish Network, resulting in a stalemate (a blackout for viewers) and eventually a new negotiation. Many subscribers fled Dish for DirecTV, only to find that they are now going through the same issues.

So what exactly is is the issue here? Rick Ellis over at All Your TV puts it in the most succinct terms I could find in his piece about the struggle:

"For at least the past twenty years, negotiations between the companies who own the TV channels and those who own distribution has gone like this. The media company asks for a lot more money. The cable company or satellite TV provider balks, and the media company eventually says "Well, we can give you a bit of a break on the cost if you agree to carry (fill in some new cable channel with a niche audience). Both sides agree, and the ultimate consequence is that the customer pays more and ends up with new cable channels that may or may not be of interest. The cycle repeats every few years and that brings us to this particular battle."

Ellis closes his piece by saying that, in the end, there's not a lot that the customer can do. Cut the cord? Hardly so simple when you're locked into a multi-year contract deal that will cost hundreds to extract yourself from. Both sides are shouting at each other, and you, and all you want is to sit down and be able to watch shows you like. And that brings me to the next point that friends and I have been carping about for years - why can't you just order channels, heck, shows à la carte?

The answer is in a nifty little article by The New Yorker contributor James Surowiecki about why cable companies bundle. Regarding à la carte pricing:

"The simple argument for unbundling is: “If I pay sixty dollars for a hundred channels, I’d pay a fraction of that for sixteen channels.” But that’s not how à-la-carte pricing would work. Instead, the prices for individual channels would soar, and the providers, who wouldn’t be facing any more competition than before, would tweak prices, perhaps on a customer-by-customer basis, to maintain their revenue. That doesn’t necessarily mean that Bravo would suddenly cost fifteen dollars a month, but there’s little evidence to suggest that à-la-carte packages would be generally cheaper than the current bundles. One recent paper on the subject, in fact, estimated the best-case gain to consumers at thirty-five cents a month. But even if it wasn’t a boon to consumers an à-la-carte system would inject huge uncertainty into the cable business, and many cable networks wouldn’t get enough subscribers to survive. That’s a future that the industry would like to avoid."

Surowiecki goes on to say that in the long-term, the strategy for our best interest likely lies in downsizing. Even though I constantly repeat to friends and strangers that we are in a Second Golden Age of Television, I'll also admit that we don't need 300 channels that carry 95% crap. But without the flush revenues of Reality TV shows, networks may not pay for and take risks with expensive and daring programming with questionable ratings that critics go wild for.

Clearly, it's a deeply complicated issue without a winner. Not the cable companies, not the networks and certainly not the viewers and customers. Where do you stand, readers? Do you have DirecTV? Did you go through this with Dish? Or are you blissfully unplugged? (and stealing shows online - use an alias!)

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