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TWC's Dodgers channel dispute a case for a la carte pricing

Via @Davidlaz: The dispute over the Dodgers channel could be a turning point in the a la carte pricing debate
Non-sports fans' cable bills could drop by a third if sports channels were sold a la carte, @Davidlaz writes

Time Warner Cable was patting itself on the back this week after saying it was willing to have a federal arbitrator step in to resolve its long-running dispute with other pay-TV companies over the cost of the new Dodgers channel.

"We prefer to reach agreements through private business negotiations," the cable giant said in a statement, "but given the current circumstance, we are willing to agree to binding arbitration."

What a swell bunch of guys. And what a curveball for consumers.

All Time Warner Cable is doing is attempting to make every pay-TV customer in Southern California shell out at least something for SportsNet LA, the Dodgers channel that the company paid more than $8 billion to exclusively distribute — and that no other major pay-TV company went along with.

Time Warner Cable's kumbaya gambit shows that the company knows its previous take-it-leave-it stance on SportsNet LA was a non-starter with the rest of the pay-TV industry, which says it's unfair to make non-sports fans pony up for yet another sports channel.

It also underlines that the dispute over the Dodgers channel could be a turning point for an industry that has long gouged consumers by charging them for dozens if not hundreds of channels they never watch.

Time Warner Cable on Thursday reported pocketing almost $500 million in profit over the last three months — despite losing an additional 152,000 TV customers.

Pay-TV viewers have long called for an a la carte system under which they'd pay only for the channels they wanted. Although that's still probably a long way off, breaking off sports channels from current programming packages would be a big step in the right direction.

Derek Baine, research director for SNL Kagan, a media-industry consulting firm, said sports channels account for about 37% of the average pay-TV bill.

In other words, the bills of non-sports fans would drop by more than a third if these channels were unbundled from programming packages and offered only to those who wanted them.

Steve Lawrence is one such TV viewer. The Mar Vista resident is sick of paying for channels that he never watches.

"I don't watch any of the Spanish channels," Lawrence, 67, told me. "But I still have to pay for them. Why?"

Well, there's a good answer to that: He has to pay for unwanted channels because lawmakers allow the pay-TV industry to get away with ripping people off. There's no other U.S. industry that, month after month, makes consumers buy products they don't want.

But that could be changing.

Baine said the situation with the Dodgers channel makes it more likely that programmers and distributors would be willing to rewrite existing contracts to unbundle sports channels — rather than face the regulatory wrath of increasingly impatient lawmakers.

"It's getting pretty intense," he said.

Time Warner Cable's sudden embrace of arbitration came after a half-dozen Democratic members of Congress, led by Rep. Brad Sherman (D-Sherman Oaks), sent a letter suggesting the move to Time Warner Cable Chief Executive Rob Marcus and DirecTV CEO Michael White.

"We urge that Time Warner Cable, DirecTV and all other TV providers enter into binding arbitration, so that a neutral third party can determine the right price and terms for the Dodgers network," the letter said.

DirecTV wasted no time in slapping down that idea.

"Rather than force everyone to bail Time Warner Cable out, the simplest solution is to enable only those who want to pay to see the remaining Dodgers games to do so at the price Time Warner Cable wants to set," said Robert Mercer, a DirecTV spokesman.

Spokespeople for Verizon Communications and AT&T declined to comment on their companies' willingness to arbitrate with Time Warner Cable. No one at Dish Network responded to my emails.

These companies should hold firm. They've long said that they don't want to bill customers for unwanted channels but are forced to do so by greedy program suppliers that require them to accept weaker channels as part of the price for getting good ones.

For example, many consumers may be happy receiving Comedy Central and MTV from Viacom, but they also may have to fork over cash each month for the CMT country-music channel and TeenNick.

Arbitration with Time Warner Cable over the Dodgers channel would only perpetuate this corrupt system.

On the other hand, offering SportsNet LA only to those who want it — as DirecTV and other pay-TV companies have proposed — would almost certainly prompt demands for all sports channels to be offered a la carte.

Then it would be just a matter of time before other programming tiers — movies, news, religious and foreign-language shows — are similarly unbundled.

And before long, we'll arrive at the only reasonable destination: allowing consumers to pick their channels in the same way they decide all other purchases: based on their individual wants and not on the demands of some broadcasting executive in New York.

To all those who say a la carte programming would lead to higher prices or fewer choices, I say let's see. It could just as easily lead to a more competitive programming landscape that results in lower prices and greater diversity.

Perhaps the most encouraging sign this week came from the chairman of the Federal Communications Commission, Tom Wheeler, who made the highly unusual move of writing directly to the head of Time Warner Cable and holding him accountable for the Dodgers standoff.

"I am troubled by the negative impact that your apparent actions are having on consumers and the overall video marketplace," Wheeler wrote. "The FCC will continue to monitor this dispute closely and will intervene ... to bring relief to consumers."

If that's not a warning shot across the pay-TV industry's bow, I don't know what is.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.

Copyright © 2014, The Baltimore Sun
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