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This is a fast-growing trend — and a worrisome one for many cable channels at risk of losing viewers, monthly payments from pay TV distributors, and advertising. But cable and satellite companies including Comcast and Time Warner Cable say they have to do something to keep cash-strapped customers from cutting the cord. Cox says that soon all of its markets will offer its TV Economy service tier for about $35 a month, far less than the conventional TV Essential expanded basic package that runs as much as $60. Although pricing and options will vary slightly by market, the discounted service typically will include a mix of standard definition and HD versions of local broadcasters, shopping channels, C-SPAN, and superstation WGN in addition to a lineup with AMC, Animal Planet, BET, Cartoon Network, CNN, Comedy Central, Discovery, Disney Channel, E!, Food, Fox News, FX, Galavision, History Channel, Lifetime, MSNBC, NatGeo, Nickelodeon, TBS, TV Guide, TruTV, The Weather Channel, TV Land, and USA. In order to keep costs down, it won’t have ABC Family, A&E, Bravo, CNBC, ESPN, ESPN2, HGTV, HLN, MTV, regional sports, SyFy, Speed, Spike, TNT, TLC, The Travel Channel, and VH1. Operators pay ESPN about $4.69 per subscriber each month, while TNT costs $1.16, and Disney Channel goes for 94 cents, according to SNL Kagan. Earlier this month Disney CFO Jay Rasulo told analysts that he isn’t concerned that lots of subscribers will accept the sports-less pay TV tiers. “Fans love ESPN,” he said. And since the channel’s fans are more likely than other viewers to subscribe to cable’s broadband and phone services, “I can’t imagine that any (pay TV providers) will want to move their business models to skinnied down packages.”
Cox Scraps ESPN And Other Pricey Channels For New Low-Cost Tier
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Been without cable for over a year, but will definitely consider this new bundle, especially since it comes with AMC. Sorry to disprove your theory, Rasulo.
I have a better idea. How about offering me a package for $29.95 where I get to pick, say, two dozen channels of MY choosing. I never watch Disney or the ESPNs or the music channels, and my subscription dollars should not go to them.
The problem with that is some channels are so pricey for the provider, such as ESPN, that certain channels would likely count as two. From my perspective that would be fine if I could choose the channels I want.
What Writer Bob said. +1
That would work ONLY if ALL channels were priced the same. If they were, this problem would not exist in the first place.
They could always use a point system, where 1 point is approximately 1 dollar. ESPN would be five points, TNT one point, etc. Tack on a reasonable service surcharge and/or have a tiered system with each tier allotting a certain number of points.
Of course, tiny networks/channels that (almost) no one is watching will protest, but possibly they could be bundled for free with certain channels? (Like the current system, really.)
I agree with Writer Bob…let the customer choose for gosh sakes. We know what we want and what we are willing to pay for it. Until cable comes up with something I can agree with I have many other, less costly ways, of getting what I want, when I want it.
Simple solution for both broadcast and satellite/cabel…allow us to select the channels we want to watch and not be told what to watch and you might have something there. On OTA TV, all I see are some church channels, Spanish stations and lifestyle channels.
What about prepaid cable? And like what Writer Bob said, you could choose up to a certain maximum number of channels you’d like to have in your package for a price affordable for everybody.
This is a huge bold move by Cox, often the industry leader even though smaller than TW or Comcast. Disney and Viacom I am sure fought this hard as they want their channels in the lowest level package which is why cable is so expensive (and because cable is used to very high profit margins). Kudos to Cox and their management team.
They need to price each channel accordingly with the appropriate mark up just like going into a store. If the people want ESPN then let them pay the $4.69 plus what ever the mark up that the cable company wants, same for Disney Channel, ABC Family, FOX etc, With a minimum fee each month plus each channel you want.
I have Dish Network and in order to get DIY I have to subscribe to the maximum amount of channels 250, I have never watched sports and never will, and I bet that 25% of my monthly subscription goes towards FOX channels and ESPN channels.
Is this the beginning of the end of the “Sports Tax”?
As pointed out in the New York Times on Dec. 15th, households in America with cable or dish pay, on average, $100 per year for sports programming — whether they watch it or not.
Detailed breakdowns of cable costs, paired with a la carte package creation, would help viewers make more informed choices.
If the Cox Communications situation becomes a trend, the moving of football off of ABC to ESPN to increase revenue becomes futher muted. Apparently, when it comes to finances versus football, Americans are willing to do without cable services. Who knew? The consumers knew.
This is great. Two observations:
1) I think the comments are correct that Jay Rasulo is in for a big surprise. He lives in the ESPN bubble, and isn’t aware of how many people aren’t interested in sports — and confuses the interest in things like the Superbowl with hard-core fans. (Sort of like thinking that because everyone talks about the Oscars, everyone is going to movies.)
2) The danger with these lower tiers is that you’re going to see the end of lots of channels. When you read that something like AMC costs only $1.00 a month, the carriage rate is predicated on AMC being carried on the lowest tier and being paid $1.00 per subscriber. Once this stuff goes ala carte, the numbers don’t work. (Several years ago, Lifetime did some research, surveying “likely subscribers” if they went ala carte. They determined that the rate of subscription was so low that they’d have to reprice the channel to something like $7.00 a month in order to make up for the loss from passive subscribers – meaning people who wouldn’t subscribe at all, if it wasn’t in a tier that was forced on them.) They used this research to argue against ala carte, decrying that that AMC, Spike, Lifetime, BET and many others would no longer be economically viable. And the Hollywood Unions backed them on this, citing “diversity” as the reason to reject ala carte, and force everyone to pay for this channels.
Personally, I’m for ala carte. Let channels that can’t make it without taxing everyone die. But the notion that you’re only going to pay $1.00 for some channels is wrong. And this is why Hollywood has always argued that ala cart will make cable more expensive, not less.
excellent points. The other thing that no one is mentioning about ESPN is that it comes with multiple channels at that price too (ESPN, ESPN2, ESPN news, ESPN Classic, ESPNU, and ESPN Deportes)so it averages less than $1 per channel. Some people may still not want them, but the price to value ratio isn’t as skewed as it may seem on the surface.
That’s actually not true. Separate fees are needed to carry ESPN NEWS, ESPN Classic and ESPN2. Each a different price.
I have Cox, and their customer service is fantastic. I’m not surprised they’re doing thish, because they are customer-oriented (and they of course don’t want to lose any either). That said, I have wanted some form of a la carte cable service for years. ESPN is arrogantly driving costs through the roof, and it’s not surprising there’s a backlash. I just hate to see other channels that people may want pay part of the price for it. Surely there’s some way to give the customers what they want in terms of channel choice…
Right on Jane Elliot (and Bob)! I have hundreds of channels available that I’ve never watched. For example, shouldn’t the Spanish/foreign language channels only be available to those who want them? I have more than 100 of them. Really? I’m glad they are out there, but I have no use for them.
We have an even lower package with Cox about 20 channels for about 30 per month and have Netflix streaming. Between those and time spent online, no time left over for pricey channels so why have them. I used to work for a Cox competitor and it was incredibly hard not to giggle when customers on the phone would tell me “I like Cox”.
I worked for a cable company years ago. I said then and I will say it now: “ESPN Should be a Premium Pay Chanel like HBO”. “Why should everybody pay for ESPN”!
Now alll these years later I feel the same!
I also think we should make all the Foreign speaking chanels Premium Chanels and make the people that want them pay for them.
The first cable company in L.A. that does this will get my business immediately.
(So either Time-Warner or AT&T-Uverse, as I believe those are the only options in the city.)
It’s about time.
This is THE topic for television.
Great data from new York media person.
Maybe it’s time to let all channels stand on their own. Let customers choose. Charge the new real price and see what happens. Subsidizing channels obviously can’t work forever.
Does anyone know what the data shows about the newer outlets, iPhones, iPads etc…, and how this might effect pricing?
Or how many different channels customers actually watch per week? I’m trying to do a study of one, me, on this. I think the width of channels I watch is very small. So in theory I might buy only 8-10 channels. Or if I really boil it down, 13 ish shows. Could we move to pay per show? What would that do for the model?
Great topic.
You can find figures on this on the internet; last time I looked, I think the average subscriber watched 12 channels, max. (So your guesstimate is pretty good!)
Fact: Espn ALONE is 4.69 ! The others, Espn2 etc. are priced separately and much cheaper because they lack
the bloated cost of Monday Night Football and College Bowl games.
It started with TimeWarner standing firm against MSG and now Cox cable has started a trend because basic channels such as ESPN and FX have gone on a wild spending spree with football and superhero movies. They are in the throws of the final death rattle of forced subscription and have decided to make themselves more appealing. But the growth of streaming TV’s that serve a la carte internet offerings with Netflix, Amazon, and Apple TV will make them less and less relevant.
ESPN’s real fear is that they will only get big subscriptions during football season and struggle for the other half of the year. They have begun pricing themselves out of the mainstream market and are getting closer to Premium status like HBO without long term profits from shrinking subscibers. Oh well, they still have 2012 to keep gouging the basic subscribers, but I am sure Cox has started a popular option to have very basic cable supplemented by individual premium show or movie purchases streamed a la carte.
Can someone please explain to me how bundling and the use of tiers is not anticompetitive and an illegal restraint of trade? If I want to see MSNBC or Fox News, why do I have to pay for ESPN?
Back in the Reagan Administration, the absence of a la carte was explained away as a necessary incubator to nourish a baby industry: cable channels. Now, those babies have grown up, gone to Harvard and are earning billions as MBAs.
The sports tax is ridiculous. The only thing worse than a forced government tax is a forced private bailout enforced by the giant companies that are extorting billions from us.
There actually is a law against this, but it’s not enforced. It goes back to anti-bundling laws used against the railroad consortiums in the late 19th Century.
And by the way: The last time this came up in Congress and was looked at by the FCC, during the Clinton Administration, it was the Democrats who quashed a move to Cable Ala Carte, in something that is very similar to the current SOPA debacle. The Republicans wanted ala carte, but Hollywood money bought the Dems, who sided with the studios. (They pushed the ‘diversity’ angle, with regard to the Black Entertainment Network, and Lifetime, for women.)
I cut the cable/satellite cord this past December and went to the Roku device. I only subscribe to HuluPlus, but with that and all the other channels, I feel like I have more variety and less clutter than I did with satellite. Hulu has far, far fewer commercials than any cable or network channel, so that’s also a plus. I don’t pay for anything I don’t want. My entire bill for the year will be less than what I was paying for one month of satellite–and I don’t feel annoyed every time I turn on the TV to find all these channels I resent paying for. I suspect the internet will eventually be the delivery system anyway, so I think I’m ahead of the game.
I’m also crossing my fingers and waiting patiently for cable channels to be available ala carte. I’d certainly pay for them individually if need be, because there’s really only a handful that I watch with any kind of regularity. I like being able to channel surf, but it really is pointless when there’s nothing on anywhere.
I can tell it’s HBO mid-season.
I cut cable TV service two years ago and saved $90 per month, although the cable company gets $50 per month out of me for my high speed cable modem. I get 50 channels free over the air, mostly hi-def channels. I pay $8 per month for Netflix streaming with a huge library to choose from. I have Google TV and surf anywhere on the web through my TV. If I want to watch live ESPN sports I turn on Google TV and go to http://www.watchESPN.com for live streaming sports. Except for no commercial breaks, you would think your watching ESPN over cable. Go to any cable network’s website and you have access to their program library, right on your television. I have no more need for cable TV.
The problem with any cable company offering a pick and choose model for the internet is the company that owns the channel. Look at ABC, Guess who they own? ESPN. So, ABC makes the cable companies carry several other of the channels they own. VIACOM owns 17 channels that cox offers. And they are a package deal.
So I don’t see a pick and choose model. It would be sadly, too expensive.
Channel obesity is an epidemic that is finally getting the attention it deserves. Too many channels are just chafe from a popular channel like NatGeo trying to sell NatGeoWild by sacrificing the Dog Whisperer, pathetically desperate. Cable operators are now listening to their ultimate boss, the consumer.
Packages are broken up all the time, case in point, you can get ABC family channel and still avoid ESPN despite both being owned by Disney. A la carte is already a reality with the purchase of individual shows on Amazon, Itunes etc. MSO’s like Cox Cable are just getting ahead of the other tone deaf MSO’s to keep their customers, and overpriced ESPN can suck it.
Adios to Channel Obesity, hello slimmer prices and bundles.
One major mistake in this story: TBS is no longer a superstation — it’s been a basic cable channel since the fall of 2008.
This is wonderful news! Verizon – pay attention and get in line! Ala-carte levels the field and saves money. I’m on the verge of canceling my fios because of the high cost and rising taxes in Maryland. Hey, I’d love to own a cable channel, but I actually work for a living. If a channel can’t attract enough viewers to pay for itself it’s not a business, it’s a hobby. I shouldn’t have to pay for someone else’s hobby. Nor am I interested in the overblown opinions, or humorless wit of the baloney sports experts on ESPN 1, 2, or whatever. Dump ESPN, weed out the weak channels, and make cable affordable. Otherwise all I can afford will be OTA!