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  • Will Nasty Fee Fights Fuel Consumers' Cord-Cutting Interest?

    Another weekend, another high-stakes fee fight between a multi-billion dollar media company and a multi-billion dollar cable operator. This time around it was Disney's WABC station in the New York City market in a standoff with Cablevision, which has 3.3 million subscribers there, with the Oscars broadcast the main hostage (WABC, which was pulled late Saturday night, came back on the air at 8:44pm subject to an initial agreement between the companies).

    This fight, like recent ones between Time Warner Cable and News Corp, Cablevision and Scripps, plus others, is a no win PR situation for its combatants, and in my mind will lead to one inevitable result - heightened consumer disgust with the hyper-corporatized TV business, where CEOs who are paid tens of millions of dollars per year accuse each other of not being sufficiently focused on satisfying their customers. Inevitably, consumers' disgust will translate into interest in finding alternatives, particularly those that are cheaper. While the WABC/Cablevision brought out switching enticements from Verizon, the real competition is increasingly going to be "cutting the cord" and getting programming from online-only sources.

    Generally I don't believe that there's latent cord-cutting interest waiting to explode (even as monthly subscription fees have grown and the amount paid to cable networks is readily available). The fact is that popular cable programs are so diffused across so many channels - and that most of these programs are not available online (the very issue TV Everywhere aims to address) - that cutting the cord is a practical impossibility in most American homes. Sports alone is the ultimate firewall in a huge percentage of homes. How many sports fans would willingly say goodbye to ESPN, Fox Sports or TNT?

    That said, more fee fights, affecting more consumers, are certainly in the offing. While fee fights in the past have focused on amounts paid for cable networks, future fee fights are more likely to look like the WABC-Cablevision one - squabbles over how much cable operators should pay for broadcast stations. These fights are related to "retransmission consent" payments and reflect a very different dynamic unfolding between broadcast stations and cable operators.

    In the past broadcast stations were plenty happy to have cable operators take in their feed directly, and then position the station on a low channel number, enhancing visibility. Now, however, with broadcast economics under extreme pressure, and intense broadcaster envy for cable networks' dual revenue model (monthly fees + advertising), monthly retransmission fee payments are the new normal. Never mentioned in broadcasters payment demands is the fact that they still have government-granted access to free broadcast spectrum which should likely be returned to the government if they want to operate more like cable networks. To the contrary, in fact broadcasters are arguing that government efforts to reclaim the spectrum for higher value mobile data uses are off-base. But that's a subject for another day.

    Even as big media companies and cable operators are poised for future skirmishes, the online universe marches on. Convergence devices that bridge broadband to the TV are gaining further traction. And services like Netflix, iTunes, MLB and others are increasing consumers' expectations for what's expected and possible. As I've pointed out before, big media companies and cable operators have a mutually shared interest in defending the current subscription-based model. Nonetheless, how that model's riches are apportioned between the parties is what's being hotly contested. As they do this though, they risk killing the golden goose.

    What do you think? Post a comment now (no sign-in required).
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