March 2, 2006

THE BUBBLE FINALLY BURSTS!:

How we pay for cable may be about to change (Leslie Cauley, 3/01/06, USA TODAY)

Cable TV companies have long said the "expanded-basic" package of channels that most viewers choose is a bargain. For about $41 a month, they note, you can see scores of channels, including CNN and ESPN.

Most of us, though, typically watch only 15 to 17 channels a month, according to industry estimates. Yet expanded basic continues to swell like a hot-air balloon — and so has its price. A few years ago, expanded basic offered about 35 channels; today, 200 to 300 channels are common. The price of expanded basic has jumped more than 40% in five years. In that time, overall prices for goods and services are up just 12%.

Now, thanks to new technology, shifting sentiment in Washington and deep-pocketed rivals such as AT&T and Verizon, the expanded-basic balloon might be about to pop.


Nothing costs more than it used to...

Posted by Orrin Judd at March 2, 2006 8:08 AM
Comments

Down here we can't wait for Verizon to flip the switch on for their tv service. Verizon's package is roughly 20% less expensive than Comcast's. Between high-speed internet and basic digital cable, your monthly bill with comcast tops triple digits. And that's without any "premium" channels.

Posted by: mc at March 2, 2006 8:42 AM

If they do this, I'm (finally) in.

Posted by: Rick T. at March 2, 2006 8:44 AM

Very timely. Bright House just raised rates again and we were just debating last night whether we would go back to the basic package.

To give them credit, service has improved and the cable hasn't gone out since they took over from Times-Warner a couple of years ago.

Posted by: erp at March 2, 2006 8:55 AM

Makes me wish Qwest, in my area, would decide to ramp up their Qwest ChoiceTV product they have. Instead, Qwest insists on pushing DirecTV, in the HQ city of Dish Network!

Posted by: Brad S at March 2, 2006 9:13 AM

It will be interesting to see how this plays out in terms of "marginal" channels, since so many of the cable networks have spun off niche channels to capture ever-smaller shares of the pie, especially since the advent of digital cable.

Posted by: John at March 2, 2006 9:16 AM

Here in Nebraska, we have Cox. Several years ago Cox had several different packages. Now they only have a couple. We have the cheapest, it is approximately $14 a month; however, we only get TBS (Braves baseball & The Shawshank Redemption looped), WGN (Cubs), Lifetime (chick stuff), TLC (What Not to Wear & looped ghastly remodelling shows), C-SPAN 1 & 2, 3 PBS stations, 4 religious stations, the four major free networks, and 1 "I hate Whitey" channel. We do not get such things as ESPN, CNN or FoxNews. The next package includes this but it is $60+. I don't get that because I don't want my kids having access (or the temptation) to the garbage on television (MTV and just about everything else). However, I would like an ala carte type deal where I can pick and choose my stations (I'd pick Turner Classic Movies in a nanosecond).

Posted by: pchuck at March 2, 2006 1:06 PM

It'll be interesting to see what happens to the shopping channels. Do people actually, voluntarily watch any of them? I've heard they are always included because of either "must carry" rules, or because the are part of a package where the cable company has to carry all or nothing to get the one channel people actually want. And what will happen to all the gov't and public access channels.? (Including CSPAN, that's all of them in 20s, and some in the 70s, on my local Comcast system. And like the shopping channels, all of which I've blocked so as to not interrupt my channel surfing pleasure...)

One thing I remember, back before the pay channels went digital, were things like "free weekends", where you could watch Showtime or HBO channel(s) in order to get you to order. I would assume that we'd see the same sort of things again, to get people to look into those channels they may not be subscribed to and so may not even realize are of interest.

Posted by: Raoul Ortega at March 2, 2006 2:10 PM

Hope this happens very soon. It galls me that a small slice of my cable bill goes into the pocket of
Mr R. Redford and his Sundance channel, but the wife wants the Sopranos and I want FX so Redford gets in danegeld.

Posted by: Alan Anderson at March 2, 2006 2:54 PM

Yes, people actually watch the shopping channels.

They started on UHF broadcast channels, and were so successful that cable picked 'em up.
While they're definitely "niche" content, they're more-watched than The Science Channel, for example.

Premium channels still offer free weekends, especially Starz. (Which I recommend over HBO or Showtime).

Posted by: Noam Chomsky at March 2, 2006 3:23 PM

I used to live in West Chester, PA where QVC is located. They used to have a local merchant hour once a month and mechants from SE Pennsylvania & Delaeware were invited on and they'd sell a year's worth of wares in 5 minutes. It was amazing.

I found this in the Dayton Business Journal:

QVC reaches about 96 percent of all U.S. homes with cable television as well as more than 21.4 million homes with satellite television. In 2004, the shopping network recorded $5.4 billion in sales.

Man, those are some gaudy numbers.

Posted by: pchuck at March 2, 2006 5:23 PM

I could've told you that about QVC. Or rather, my boss, the "QVC Queen!" could've spelled it out even better for you.

Posted by: Brad S at March 2, 2006 7:32 PM

I'll bet OJ buys stuff on QVC or HSN (and just imagine if there were a book shopping network).

Posted by: ratbert at March 2, 2006 7:58 PM

That is scary. Does that mean even under this new fee schedule QVC & co would appear as "free", or just tacked on even when I don't want them cluttering up my dial? Or would people actually pay for the privilege of continuous commercials?

Posted by: Raoul Ortega at March 2, 2006 9:01 PM

I block out the channels because they're so annoying. Never buy new junk.

Posted by: oj at March 2, 2006 9:12 PM

a couple of observations (from a network TV person):

1) Home shopping channels are not subject to "must carry" rules, which apply to full power over-the-air stations in the cable company's area of operation (that is, if the local station so elects, the cable company must carry that channel)

2) In a more competitive market, unbundling channels and giving consumers more choice in selcting their own "bouquet" of channels would be great. The problem, as John hinted at, is that the major cable companies (Time Warner, Comcast, Cablevision, etc.) own (or are joint venturers in) their own channels, to which they will give preference (either by including their proprietary channels automatically in their now stripped-down "basic" package or by offering their channels at better prices vis a vis the channels they don't own). My own gut reaction is that if you're a subscriber of one of the major operators, you'll probably end up paying just as much as you are now to put together the package you want.

Now, there are a few checks on this dreary outcome: first, all cable concessions are granted, on a monopoly basis, by local governments in the towns/counties where they operate. The political bodies have the right to approve packages/prices, etc., but they rarely exercise it. Second, cable has real competition from the satellite providers now in most places (but in big cities or places without a clear view to the south, you can't always "see" the satellite). So, the threat of DirecTV or Echostar stealing customers puts some brakes on the cable companies.

Finally, the real solution is that in the not too distant future, you will be able to get whatever shows you want either on your computer or your iPod, so new technology will break the cable guys' strangle hold.

Posted by: Foos at March 2, 2006 10:35 PM

It would be nice, but I fear that this will destroy niche channels. A big cable package is like the internet, you're not necessarily going to use it all, but when you want it, it's there. That or the total cost might actually go up if individual rates are raised to compensate.

Posted by: RC at March 3, 2006 6:38 AM
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