In the first salvo of what will likely be an epic battle between the U.S. Congress and cable companies, Senator John McCain introduced the TV Consumer Freedom Act of 2013, a bill that will seek to free channels from the burden of bundles, allowing cable customers to pick and choose which channels they subscribe to.
So why should we care? Well, if the bill passes, it could conceivably reward customers with a lower cable bill, but the effects that such a massive change would have on broadcasters and cable companies cannot be underestimated – and they could be good or bad for all of us.
Right now, cable companies make their money by charging customers for these flush channel packages that (surely) include many channels that we don’t watch. The companies behind those channels get paid a licensing fee by those cable companies based – in part – on how many subscribers will have a chance to see that channel.
That business model isn’t exclusive to cable channels either. Though the signal for broadcast networks like ABC, CBS, FOX and NBC goes out over the public airwaves, they too get paid something like a licensing fee because about 90% of households do not receive their TV over the air anymore – they get their TV from the cable company. How does the cable company thank those networks? A money basket. The cable companies collectively paid out an estimated $2.36 billion in re-transmission fees to those networks and their affiliates last year, and that could jump to $6 billion dollars by 2018.
Unfortunately for those networks, a new competitor has emerged in the form of Aereo. Aereo is a company that is owned by Barry Diller, and essentially, it seeks to deliver that over the air signal to its own subscribers with the help of extremely small antennas that (while avoiding those re-transmission fees).
As you can imagine, there is presently a court fight underway to stop them and some network executives have threatened to pull their networks off the public airwaves, putting them onto cable and into square competition with other cable networks while also escaping Aereo’s grasp.
Senator McCain is seeking to drop the hammer on those broadcast networks with this bill as well, should they ever leave for cable – a fantastic way to kill Aereo, but a risky proposition in that people could conceivably opt out of their channels, too, thus limiting their licensing booty.
As previously stated, passage of this bill could mean a lighter cable bill, but we may also have a bit to gain as fans of good TV if the bill passes and networks have to fight with each other to woo us.
Why? Well, the present system gives the people behind these cable channels a disincentive, allowing them to be risk averse when it comes to programming because they already have a guaranteed pay day since they are – in many cases – always going to be a part of a basic cable package.
These networks still need to compete against each other and the broadcast networks for ratings and advertising revenue, but forcing them to earn that huge chunk of subscription money might actually push them to invest more heavily in becoming attractive to consumers. That could mean competitive pricing, but it could also mean a more robust lineup that works hard to stand out above the competition.
On the other hand, if the bill fails and these networks do move off the public airwaves, we could see the loss of public service content, markets that would no longer get local TV news, and there’s also that (not insignificant) number of people who would lose their TV altogether.
Beyond that, yes, we’d also have to skip past a bunch of channels that we don’t watch but do pay for, but we could also see some benefit, as broadcast networks would be free to air edgier programming that could more easily compete with cable offerings.
Having said all that, one has to wonder if this matters in the long run.
Everyone is yelling about the possible virtues of ‘a la carte’ programming, but what is viewed as possible is already here.
If you want to eschew your cable company right now, you really can. Get your local news from the web or the radio, watch most broadcast and a lot of basic cable offerings on Hulu and watch the rest by buying single episodes or a show’s season pass on Amazon or iTunes.
Cord cutting isn’t just an option for the extremely connected either. In the first quarter of this year, Time Warner – the 2nd largest cable company in the US – lost more than 117,000 subscribers.
It’s impossible to prove where those people went, but it is also impossible to deny that many of those decamping subscribers either gravitated toward the Hulus of the world, embraced satellite TV, or got their TV in a less than upright manner.
An exodus like that cannot be ignored, but it also may be impossible to stop, meaning that as the cable companies and broadcasters gear up for battle against Aereo and Congress, they may already be losing the war versus irrelevancy.
For more updates on this bill, keep an eye on Screen Rant.