Peter Kafka

Recent Posts by Peter Kafka

Can Congress Blow Up the TV Bundle? John McCain Is Going to Try — Again.

Lots of people say they want to break up the bundle — the economic model that keeps the TV Industrial Complex intact — but no one has been able to do it. Can Congress?

Senator John McCain is going to try, via legislation he is set to introduce soon, perhaps today. McCain’s office has given a sneak preview to some TV industry officials, and while reports about what’s actually in it are still a bit hazy, here are the broad strokes:

  • McCain wants to force pay TV operators to break up the programming bundles, by offering channels in smaller groups or on an individual basis.
  • He wants to penalize programmers who move their most valuable shows from broadcast networks, which are theoretically free, to paid cable networks.
  • He also wants to change the FCC’s rules about sports “blackouts,” which currently prohibit cable channels from carrying NFL games if the local broadcasters don’t air them because the tickets to the games aren’t sold out.

Before you go any further, note that McCain has pushed for similar changes before, without success. And while the Arizona Republican used to be on the Senate Commerce Committee, which oversees the FCC and has a lot of impact on the U.S. media business, he isn’t anymore. So any discussion of what McCain’s bill could mean for TV-land might be completely moot.

That said!

If McCain got his way, and truly forced the TV business to unbundle, you’d see a dramatic shift in the way the industry works. And while you can’t exactly predict how that shift would play out, you can make a couple guesses: Prices for individual networks would increase,  and programming costs would come down.

For instance: Pay TV providers currently pay ESPN, the king of the cable networks, more than $5 per month for each subscriber that gets the service. But, by some accounts, only 25 percent of pay TV customers actually watch ESPN.

So, in an a la carte world, if 75 percent of ESPN’s subscribers melted away, it would need to charge more than $20 per month (wholesale) just to keep its revenue steady. Of course, ESPN is certain to turn around and tell the sports leagues it does business with that it can no longer pay billions to show their games — or at least not as many billions. Imagine that same scenario playing out with all kinds of programming.

As for the broadcast-to-cable component of McCain’s bill, which everyone is describing as “pro Aereo”: Hard to see how McCain would be able to describe exactly which programs, or how much programming, couldn’t move from broadcast to cable.

And as we’ve pointed out before, that’s already been happening for a while, particularly with big-time sports.

So would McCain require Disney to move “Monday Night Football” back to ABC from ESPN? And, in any case, note that threats about the networks moving all their shows from broadcast to cable if Aereo wins all its court battles are just that — threats, which are hard to take seriously. Even News Corp. COO Chase Carey, who first floated that balloon last month, tried to deflate it yesterday during News Corp.’s earnings call. (News Corp. also owns this website.)

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