Cable Company CEO Calls TV Business A 'Tragedy Of The Commons' That Ends Badly
from the mass-seppuku dept
While larger cable companies have the scale and leverage necessary to negotiate better programming, smaller cable companies are finding themselves facing tighter and tighter margins as broadcasters push for relentless programming increases. As such, many have begun candidly talking about exiting the pay TV sector entirely and focusing on broadband service only. When approached by broadcasters like Viacom about major hikes, some cable operators have simply culled the channels from their lineup permanently and refused to look back.
Not too surprisingly, the narratives being told by these smaller cable companies vary differently from larger cable operators, many of which deny that pay TV is caught in an unsustainable death spiral thanks in part to relentless broadcaster demands. CableOne CEO Thomas Might, for example, candidly declared last week that the traditional cable sector is a “tragedy of the commons” that’s going to end badly for everyone involved:
“The actions of content owners is easily explained by the concept of tragedy of the commons. Once one programmer started taking double-digit rate increases, even in the face of falling ratings, each of the other programming groups felt compelled to do the same. The reason the theory is named “tragedy” is because it is guaranteed to end badly for all in the long run. It appears that long run is finally arriving.”
And again, while large cable operators and broadcasters have denied cord cutting’s very existence — and downplay “cord shaving” (reducing your cable packages or opting for a skinny bundle) at every opportunity, Might states the obvious in noting the kids just aren’t watching regular TV anymore:
“Linear video ratings are plummeting for several reasons. The lower end of the market can no longer afford the big bundle; the number of disruptive OTT technologies and vendors are now multiplying rapidly; and the millennial generation has very limited interest in traditional TV viewing. These patterns will inevitably bring an end to the ubiquitous fat bundle, but only slowly and painfully.”
As we’ve long noted, cable operators could pretty easily defeat cord cutting by competing on price and value. But instead their solution so far has been to raise rates on broadband and TV like it’s going out of style, to impose usage caps to punish cord cutting, and to offer “skinny bundle” packages that give the illusion of value, but saddle users with misleading fees post sale. Only when cord cutting shifts from a trickle to a steady roar will most major cable executives finally change tack, at which point they’ll be surrounded by an ocean of hungrier, leaner companies all doing what cable refused to do for a generation: offer a cheaper, more flexible pay TV product.
Filed Under: cable tv, thomas might, tv
Companies: cableone
Comments on “Cable Company CEO Calls TV Business A 'Tragedy Of The Commons' That Ends Badly”
Government
It’s more apt to call it a regulatory mess created in the 1960s by local government franchising regulations. If govt. gets out of the way innovation will solve this problem.
Re: Government
I believe the modern term is ‘speculative fiction’.
Re: Re: Government
Try “political delusion.” Government doesn’t make regulations, people make regulations. And the people who make the regulations are the people who have the power, the will, and the authority to do so.
If we got rid of government tomorrow we’d have it back within a week because organisations of ten or more people require administration. And the bigger the organisation is, the more efficient the administration has got to be. Anarchy doesn’t scale, people.
Maybe, but they are also competing with video on demand, which allows people to arrange their TV watching around their social life, rather than arranging their social life around the TV schedule.
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Yeah, you can get video on demand with more restrictions for way more money than the competition! Please, don’t shove, maintain an orderly line!
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If you are willing to be at home, within the proper window, and sometimes pay an extra fee.
There are limits coming from cable co’s , production houses, channels each one wants to have its special demands met to keep viewership high when the program airs so they can justify the high prices they get with ratings. The VOD ratings are spread out, so they can’t demand such a high price for those views so they are worthless. Their goal isn’t good programming, its getting high viewership even at the expense of fans who can’t be in front of the tv to catch the show in the approved window.
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It goes further than this… cable operators can’t easily defeat cord cutting by competing on price and value, because as this CEO has stated, the problem starts with the suppliers. Because demand is going down, suppliers are jacking up their prices, which means small CableCo profit margins are shrinking. So they can’t compete on price. Value? Value would be switching content providers so that they provide ISP functionality and a local mirror for streaming services. This would also help the streaming services gain some power when negotiating price and availability of content with the same content suppliers that are pricing the small cable cos out of the market.
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“Because demand is going down, suppliers are jacking up their prices”
I don’t agree with this cause/effect. The evidence indicates steadily climbing rates, long before the OTT video services and cord cutting existed.
It’s simpler than cause/effect. It’s a cash grab in the “boil a frog” model.
Here’s a price graph from the FCC
http://s1.ibtimes.com/sites/www.ibtimes.com/files/styles/embed/public/2014/05/20/cablehike.png
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I don’t think cable operators can “defeat” cord-cutting, and certainly not “easily”. Even if the operators stop their price-gouging, the “content owners” (networks) won’t want to stop. And if they stop, “the millennial generation has very limited interest in traditional TV viewing”.
On the rare occasions I encounter cable-TV, it’s an all-around bad experience. The TV no longer has control—you have to use some cable box, probably with its own (poorly-designed) remote. The box is invariably horrible, with slow response times, an awful on-screen guide where you have to scroll through 50-100 pages, etc. And then you have to wait for the thing you want to watch to be “aired” (or maybe to have previously been aired, if you set up a recording ahead of time), and have have to wait through ads or start with a 15-minute delay to avoid them (except when they pop up on top of the show).
A computer with a 8TB hard drive, by contrast, can bring up any program it contains (unmolested) within 100 ms of selecting it. I won’t watch cable-TV for free unless I’m somewhere where I don’t have a lot of stored things with me and don’t have a good internet connection (or am too lazy to go to Youtube or whereever).
Sound more like the tragedy of the market
Reminds me of pro sports team owners who go bankrupt over paying for players
Re: Sound more like the tragedy of the market
Reminds you or the sports player’s salaries?
It IS that. Here’s why:
Sports player 1 wants more money, gets it. Sports player 2 scores baskets, demands equal pay. Gets it. Team payroll too high, demand ESPN pay more, get it. ESPN costs too high, demand Cable cos pay more. They do. Cable co passes costs on to consumers.
Some say, “I don’t watch ESPN”, but ESPN deal with cableco says, you MUST sell ESPN in the bundle to all your subscribers, so they do. ESPN is $6/mo of your cable bill, it is the biggest individual channel cost in the mandatory bundle.
So, it’s not pro sports owners who go bankrupt over paying for players. Instead, they force each of US to pay for it, but it’s a little pain shared over millions of people, so they hope we don’t notice.
Source:
http://www.recode.net/2016/1/22/11588996/would-you-pay-36-a-month-for-espn
Re: Re: Sound more like the tragedy of the market
Lets not even mention all of those stadiums that needed public funds & tax breaks for the poor put upon millionaires to be happy.
Re: Sound more like the tragedy of the market
Also, like sports broadcast networks (ESPN) that pay big bucks to sports leagues (NFL, NBA) for broadcast rights, then increasing subscriber fees to cable companies to cover these costs, resulting in cable companies increasing fees while people drop the more expensive packages containing sports networks producing major layoffs of sports broadcast personalities. Not sure this is a tragedy of the commons but it could be the tragedy of expensive cable programming and sports broadcast celebrities going away.
Ouch
Really doesn’t sound too good – I bet someone was in trouble when they got called into their boss’ office the next day!
Partial Credit.
I use the Tragedy of the Commons frequently to explain lots of different situations (maybe too many). The commonality is in entities overindulging in a shared limited resource because they assume others would do so if they didn’t. The old “I got mine” mentality.
The only way I can conform that to this situation is if we, the paying cable customers, are the limited resource. He’s upset because competitors are overgrazing their sheep and killing the grass… aka jacking up the rates too fast and driving customers away from broadcast tv.
This interpretation pisses me off. First it lays blame on exploitative grazing and not on the fact that the grass realized it had better shit to do than wait around and get chomped. He thinks if only they weren’t quite so abusive their captive market would be safe and we’d be consuming like we did in the 70’s; they had a system to bleed us slow dammit, what was wrong with that?
And second it casts consumers as a passive resource with no choice but to be overgrazed upon. In reality a competitive market would see consumers being overcharged and respond with competition not equal price hikes across the board. But the content companies thought they had the market locked down, that the grass had nowhere to go, so they grazed and charged and shot themselves in the foot.
So I’ll agree they’ve got a tragedy on their hands, but I don’t think it’s of the commons. If anything this seems more like a King Lear or Oedipus Rex style tragedy in the “went crazy and ruined your empire/ killed your family and blinded yourself” sense.
Re: Agree. This is NOT A Tragedy of the Commons
While it is a tragedy that:
– cable TV content rates have steadily climbed
– broadcasters can bully cable cos into giving them more money, over and over
– cable cos simply pass on the costs to us
– in a world where “cable TV” was supposed to mean that a company used big antennas to gather up a bunch of FREE TO AIR tv signals, and deliver them to our homes, and we paid for the clear signals, that model was perverted beyond recognition to one where we are paying for the content…but where that content is still rife with ads. Double dipping!
A “tragedy of the commons” implies over-use of a free and shared resource. That is completely unrelated to this case. If “customer’s dollars” are the resource they are over-using, it was never a free resource to us!! My money is not “the commons”.
Only cable cos, who have been passing these costs on to us for decades, would look at our money as a “price free resource”.
His use of the wrong term is not a mistake…it is how Cable Cos actually see the world.
Re: Partial Credit.
“it’s more like a King Lear or Oedipus Rex style tragedy…ruined your empire/ killed your family and blinded yourself” sense”
…and bang your mom. How could you dis-include “bang your mom”. That’s like the “must carry” requirement of any Oedipus reference.
Cord cutting more feasible every day
Story about a new (not quite active yet) TV streaming service being developed by Bittorrrent, Inc.:
http://arstechnica.com/information-technology/2016/05/bittorrent-inc-announces-live-streaming-tv-service-powered-by-p2p/
Re: Cord cutting more feasible every day
Which would be cool if not for the “proprietary, patented” parted. BitTorrent being open helped make it popular. It doesn’t seem that complicated to use BitTorrent for streaming anyway. You could modify the .torrent file to allow new chunks to be appended dynamically, and the clients could stream the .torrent over HTTP and handle the new chunks as they appear. (It might be a minute or two of delay, rather than seconds, which would be fine in most cases.)
Illusion of 'Free'
We keep hearing of ‘cutting the cord’, but you can’t really give any examples of ‘free programming’ that are worthwhile. ‘Free online TV’ is like saying ‘basic cable package’ anymore, with offerings that crush you into ‘reality programs’, ’30-second comedies’ and ‘2-minute teasers’. ‘Cutting-the-Cord’ and ‘Free’ are NOT synonymous. Netflix is $10 a month, minimum. Amazon Prime is $100 a year. Hulu quit being ‘Free forever’ about 5-years ago. Cut-the-cord and go ‘free online’ will lead to a bill as large as a decent cable package, and you STILL have to pay for internet access, anyway!
The ‘fortunate mega-urbanites’ don’t realize, that as their ‘taste-for-cable-cutting’ is based on the assumed ‘free-high-speed-access’ they get in the big cities, that this is driving suburbanites and ruralites into ‘choosing-the-adversary’ of cable; and thus, causing the ultimate game to be played against us all. Prices keep going up on ALL SERVICES while we are yet-again divided against ourselves – those who think they are saving by cutting the cord, and those who don’t have the infrastructure to cut the cord. This guarantees all of us, there is no end to this in the future.
Think you aren’t being played? Think again.
Re: Illusion of 'Free'
1) Have you heard of books? I’ve seen a lot of cord cutters claim to either reduce or eliminate their amount of screen time consumed.
2) Cord cutters can still find the transition worth while because they can choose the terms of their entertainment (what, where, when) even if it isn’t less expensive.
The issue isn’t just that it’s getting more expensive, it’s more expensive for something they don’t want. That’s a problem with broadcast entertainment. Paying for 500 channels is crazy. I only need one channel if it’s always showing exactly what I want.
Re: Illusion of 'Free'
Speak for yourself. Just this morning, I watched the new episodes of Person of Interest and The Flash online, streamed for free from their respective broadcasters’ sites. Heck, The CW’s streaming system doesn’t even care if I use Adblock!
Re: Illusion of 'Free'
If the normal rules applied, channels that do not get subscribers would go out of business, and the cable companies would save the cost of buying and delivering content that nobody watches. Trying to force people to pay for something that they do not want along with something they want starts to fall apart when what they do not want makes the price for what they want excessive, and they decide to do without.
By the way those of us who do not have the infrastructure to cut the cord do not have a cord to cut, and have to (in the UK) rely on DSL. (works fine for watching YouTube).
Re: Illusion of 'Free'
“‘Cutting-the-Cord’ and ‘Free’ are NOT synonymous.”
Who said they were? Although they can be. I know a number of people (primarily twentysomethings) who cut the cord and replaced their TV viewing with nothing outside of YouTube and such.
The point of cutting the cord is usually not to get something for free, but to stop paying insane amounts of money for stuff you don’t even want.
Re: Illusion of 'Free'
So, you’re telling us that there’s no such thing as “free”?
Huh, there never has been nor will there ever be such a thing.
That said, if you don’t consider the cost of a monitor, electricity, a relatively weather proof vessel (a house, apt etc) then you can grab OTA TV channels “for free” but there is additional outlay (an antenna at a minimum)…
Re: Illusion of 'Free'
For those of us who don’t live in Hooterville there’s no scheduling constraints, and…
Free = (Kodi + 1Channel) x Deluge x (72 channels of HD Over-the-Air Broadcast TV)
…for about $90/month.
Re: Illusion of 'Free'
Hmmm. In aggregate, do people spend any time watching Youtube? That’s free content (ad supported).
I’m pretty sure there are other legal sources, too. And some illegal.
And books, and other activities that compete for time with cable tv.
Re: Illusion of 'Free' - not an illusion
“We keep hearing of ‘cutting the cord’, but you can’t really give any examples of ‘free programming’ that are worthwhile.”
Yeah I can – its called Youtube for one.
“‘Free online TV’ is like saying ‘basic cable package’ anymore, with offerings that crush you into ‘reality programs’, ’30-second comedies’ and ‘2-minute teasers’. ‘Cutting-the-Cord’ and ‘Free’ are NOT synonymous. Netflix is $10 a month, minimum. Amazon Prime is $100 a year. Hulu quit being ‘Free forever’ about 5-years ago. Cut-the-cord and go ‘free online’ will lead to a bill as large as a decent cable package, and you STILL have to pay for internet access, anyway!”
Not true at all. First, since the digital splitting of the traditional off-the-air there is actually quite a bit more content there. Cable and sat companies just do not offer access to most of that content. Off the point I know. Not online services.
Second, again there are Hitbox, Twitch, and YouTube style online offerings that offers interesting content if you are willing to look for it. Not your “Game of Thrones” fix but streaming games, movie shorts, and many more things. The trick is locating interesting things – no menu to select programs from. Your search engine can be your friend locating interesting stuff.
Maybe your interests just do not match the cord cutting world yet. That’s OK-stick with something that works for you.
Re: Illusion of 'Free'
@Skeeter LOL, oh man my sides!
You do realize the only thing a lot of people still use their TV sets for is as a secondary PC display, right?
You do realize that the alternative to “Mindless Drivel TV” is not necessarily “Mindless Drivel Online”, right?
You do realize that sites like arstechnica, techdirt, kotaku, etc. are free to use, right (sustained by ads)?
You do realize many modern audiences have traded some of their “TV time” for “book time” or “gaming time” or “outside time”, right?
For paid content, people will gravitate to packages and shows that they like and fell are worthwhile paying for.
As a Long Time Cord Cutter...
I fear that we will be trading one onerous rent collector for another. Broadband providers will really start turning the screws once everyone sees the writing on the wall for the traditional TV subscription bundle. Think usage caps are low and tiered bandwidth priced too high? Just wait. Until real broadband competition emerges, US consumers should be prepared to keep over-paying.
Won’t anyone think of the children!!!!
They may be forced to read a book and visit their local library
As we’ve long noted, cable operators could pretty easily defeat cord cutting by competing on price and value.
It’s very rare I defend the cable industry, but in this context, I believe it’s important to do so.
I’ve said for many years our cable industry isn’t the problem. Hollywood is the problem and until this monopoly is shattered, every other business pays for it.
Myth: Cable companies force people to bundle
Not true. Hollywood forces cable companies to bundle, and most do so via blackmail. It’s well known many of the top viewed channels come straddled with east/west coast channels (which simply redistribute the same shows but for different time zones) or “sister” channels no one wants or uses (Viacom forces cable stations to pick up VH1 and/or MTV if they want the popular Nickelodeon)
Myth: Prices increase because cable companies say “Why not”
There is more proof to show prices go up after contract negotiations than we can store in a 100 PB database yet this common knowledge is ignored because “It’s Comcast”. While I certainly won’t disagree there are shady price increases on things like hardware, the reality remains that it’s Hollywood demanding more money, not the cable companies.
Myth: Cable companies can do whatever they want to the shows they offer
THE FUCK THEY DO. Yeah, I capitalized it and screamed the f-word, but as you’ve just read, Cable companies cannot innovate because they don’t own the content.
Don’t believe this? Stop and ask yourself this: What does your cable company actually offer you if it’s not for the shows you want to see?
Bzzz. Time’s up!
The mere fact cable companies are trying pushing their own “hulu/netflix/prime” isn’t because they can do so, it’s that Hollywood has finally given them the rights to do it.
Oh, and Hollywood will be taking a cut of of the profits as generated by… the cable bill. You know, the very same cable bill we’re already paying for the exact same content but delivered on a station, not a website.
There’s a very good reason why many cable companies bought distributors over the past decade: it’s the only way to keep the licensing costs down.
Myth: Stations own the shows they air
Rarely does this happen. Most people forget how TV shows and movies are made, but the gist is this:
Producers invest in a script and try to sell the script to the studio. For TV, this usually means a pilot episode.
If the show is greenlit, production is started. Contracts are signed where the show is distributed to the network. However, the station does not own the show.
When the initial airing is over, the production company which owns the show can then license it for further distribution, such as online sites or syndication.
This market is why prices for cable is atrocious because many people are paying for the exact same content despite being on several networks.
Cable companies cannot control this. To re-iterate: Cable companies have never been able to control this.
This will be the only time you see me defend cable companies. As Tom Wheeler mentioned many times, the cable industry used to be the disruptive force in entertainment.
Now, their world is being disrupted by the very cancer that makes it impossible for them to compete or innovate: monopoly licensing of content distribution.
Hope is on the horizon, but it’s going to get worse before it gets better.
Many new partners are entering the scene were content isn’t owned by a network or Hollywood, but rather Hulu, Netflix, or Amazon.
Great, until you realize how we get to those sites: through the cable company.
Take away cable’s primary source of revenue, content, and what’s left: a wire that costs consumers $100+/mo.
Who is going to manage that $100+/mo wire when the cable companies fold because of Hollywood bullshit.
It’s going to get far, far worse before it ever gets better.
Re: Re:
It’s going to get far, far worse before it ever gets better.
And the government is the enabler.
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Anarchy doesn’t scale. Remember, these people have got their tentacles into government, they’re not virginal innocents being taken advantage of.
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At best you can say “not entirely true”. Sometimes one channel is in the same bundle as another because of contractual requirements, but most bundles go well beyond what contracts require.
It’s not fair to say cable companies aren’t responsible while admitting they have “shady price increases”. Cable TV is a cashgrab for everyone involved (except the consumers obviously).
Not watching TV is not a “millennial thing”. TV is mostly crap these days–not worth watching… by anyone. Nobody wants to pay for crap.
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TV-the-service (networks, cable companies, etc.) is awful and not likely to improve, but TV shows have improved greatly in the last decade. (Or at least the best TV shows now are much better than the best of 10-20 years ago, even if the worst have gotten worse.) You just need to get them while bypassing the service, like by downloading them.
Re: Re: Re:
I guess TV has improved, but (admittedly from the outside, hearing people talk) it appears that there are still just a small handful of high quality shows. Throughout most of commercial TV history there have always been a small handful of high quality shows.
But since I’ve not seen any of them, this is just speculation based on stuff I hear.
I will admit that my expectation has been that the high quality TV shows are about equivalent to movies these days. Modern movies are generally only high quality if what you enjoy is special-effect-heavy action movies or family-oriented cartoons.
Re: Re:
Yup. I was born a few decades too soon to be a millenial, but I gave up on cable many years ago for exactly this reason. I simply wasn’t watching it.
Wait. . .
One of the claimed benefits of actually paying for tv, when it was freely available, was that you would get more programming and less advertising?
when i look at my tv guide there is so much paid programming that all i can think is, yes i paid, so where my programming. . . If you like spending 3 hours watching a movie that’s runs 95 minutes, then cable is for you.
cablization of the Internet
From the original article:
“Might: The ACA refers to that as the “cablization” of Internet service, and that is not our current plan. We do not want our HSD cost structure to start looking like our video cost structure”
Wow. A CLUE! “cablization of the Internet”, is an oxymoron. What the ACA means is “killing the Internet”. Internet is a content agnostic transmission medium. Devoid of the latter it is no longer the former.