I got this headline from a friend of mine this morning
Charter Starts Itemizing Retrans Bucks In Taxes/Fees Portion Of Cable Bills
The full article is here
This is a complete asshat move by a company out of touch with its consumers.
Nobody likes higher rates: not consumers, and certainly not middlemen – and the cable companies are middlemen pure and simple. They are necessary middlemen, but make no mistake about it – they produce nothing with their cable plant and they have competitors – so they could be disintermediated.
Television networks have traditionally been free to those getting their signals with rabbit ears – and the cable networks have passed along their signals without compensating the networks. Recently, as the proliferation of cable channels has abated, the networks and local broadcasters have started asking the cable channels to provide compensation for the programming that drives the majority of the viewing on the system – particularly when some cable systems (most notably the satellite companies) have been charging directly for these signals.
The cable companies, who see programming expenses eating up between 30% and 40% of their video revenue, have pushed back hard – but can’t really win the fight – as consumers care only about the programming – and not the cable providers margins.
By starting to itemize these retrans fees, Charter is heading down a slippery slope – opening itself up to questions it doesn’t want to answer.
For example – if you are making 40% margins on your video business, why, as a consumer, should I be supportive of your fight against the networks? Are you entitled to a 40% margin by divine right? Why shouldn’t you have much lower margins like everyone else in the world – and make up the difference in lower prices to me?
If you are going to itemize, why not go the whole distance – and start showing line item by line item what you pay for each and every channel on the dial. Maybe people don’t know that they are paying over $4 per month to have ESPN. Or almost $1 per month for TBS, TNT and Fox News. In fact, as a consumer, you are paying a lot per month for programming you have no interest in watching.
Everyone argues that ala carte pricing in cable would be a disaster for programming diversity – and it might – but why should I have to subsidize any programming I don’t want to watch. Particularly in these days of IP Video (think Hulu, YouTube, TV.com etc…) – programming can find a niche audience anywhere, anytime. Perhaps people are just worried that most of the programming is not what people want to watch.
Cable could go even further and explain why they make 85% margins on broadband – amazing considering that the US broadband product is generally considered far inferior to most of the rest of the world.
Or they can explain the 95% margins on VOIP telephony.
Charter can demonize the networks all they want – but at their best networks make something like a 20% margin – and never consistently – as shows go in and out of favor. CBS, which is pretty much the best network in the US and has been for a while will likely make an 11.5% margin this year (including syndication of its hit shows). Of course a lot of retrans $’s go to the station group – so if I include this number in the total – the margin rises to 17.5% including high margin radio stations (they are grouped together) and about 15% without these.
In my opinion, Charter should keep its bills simple – instead of opening itself up to questions that it doesn’t want to answer.