Fox News Channel Demands Huge Rate Hike; Now Most Expensive Non-Sports Basic Net

[dampier]

Cable operators are beside themselves with concern about News Corporation's demands that cable operators pay more for the right-angled basic news network. Fox News executives say their ratings justify a quadruple rate hike, bringing the wholesale cost of the news channel to $1 per month per subscriber, a price that will be passed on to all cable and satellite customers with the next round of annual rate increases starting in January 2006. CNN, in comparison, asks for 60c per month for its package of news channels.

That makes Fox News Channel the most expensive non-sports basic cable network (ESPN charges $2.60 per month wholesale rate), and will reflect a substantial portion of the average 2-5% increase basic cable and satellite customers will see in their rates in 2006. Many operators are preparing to hit the $50.00 per month enhanced basic rate by 2007.

USA Network has also wrangled its own rate increase - TW systems are now paying 80c per month wholesale for the channel. USA execs justify their own rate increase by saying the network has enhanced its program lineup with more original and exclusive programming specials, series, and sports features.

 

[DeanSB]

> Cable operators are beside themselves with concern about
> News Corporation's demands that cable operators pay more for
> the right-angled basic news network. Fox News executives
> say their ratings justify a quadruple rate hike, bringing
> the wholesale cost of the news channel to $1 per month per
> subscriber, a price that will be passed on to all cable and
> satellite customers with the next round of annual rate
> increases starting in January 2006. CNN, in comparison,
> asks for 60c per month for its package of news channels.
>
> That makes Fox News Channel the most expensive non-sports
> basic cable network (ESPN charges $2.60 per month wholesale
> rate), and will reflect a substantial portion of the average
> 2-5% increase basic cable and satellite customers will see
> in their rates in 2006. Many operators are preparing to hit
> the $50.00 per month enhanced basic rate by 2007.
>
> USA Network has also wrangled its own rate increase - TW
> systems are now paying 80c per month wholesale for the
> channel. USA execs justify their own rate increase by
> saying the network has enhanced its program lineup with more
> original and exclusive programming specials, series, and
> sports features.


This news tells ME that communities across America are ALL in DIRE need of some TRUE competition...NOT just from the satellite providers like DirecTV and DISH Network, but ALSO from a 2nd cable provider, whether that be from phone companies, new communications companies, or from new cable companies!

It's HIGH TIME that the cable networks also should be told that they must STOP being SO GREEDY with their rates that the providers must pay!!

How long do you think it's going to be before consumers EN MASSE will REALLY start to BITTERLY COMPLAIN about their cable rates??

If this kind of thing keeps happening, I don't think it'll be all that long before such a thing happens.

Incumbent monopoly cable operators DO NEED some REAL competition from a 2nd WIRED provider!! Satellite competition won't help all that much, because NOT EVERYONE can get satellite TV service, even WITH the FCC's "OTARD" regulations regarding placement in apartments.

I live in an apartment on a HUD-controlled premises, and its owners will NOT allow me to hook up a satellite system to my place, because of the fear of roof leaks.

It isn't just that either. Not all apartments have windows facing the southern sky. MANY of them ONLY have north-facing windows & doors, making the option of satellite TV for these apartment dwellers unrealistic.

It's time for some REAL CHANGE in the cable television and pay television businesses!!

DeanSB
<P ID="signature">______________
Dance Music RULEZ!! </P>

 

[Joseph_Gallant]

Many cable operators increase subscriber rates twice a year.

That may become more common.

 

[Tom_Desmond]

> This news tells ME that communities across America are ALL
> in DIRE need of some TRUE competition...NOT just from the
> satellite providers like DirecTV and DISH Network, but ALSO
> from a 2nd cable provider, whether that be from phone
> companies, new communications companies, or from new cable
> companies!

A second cable company really won't help here. Since all the cable and satellite companies pay pretty much the same price and they all carry the most popular basic networks, it means that a rate increase from a programmer such as Fox News hits all competitors equally -- which means that everyone will be hit by the same rate increase and will pass it on to their subscribers.

The only way these programming increases will come under control will be if a sizeable number of people cancel their subscriptions completely and go to OTA-only for their television (or to "lifeline basic" cable that doesn't offer much other than local stations and public access).

 

[radiolives]

How about cable companies just drop FOX News instead of making us pay more. They shouldn't just make us pay more because they got better ratings then MSNBC, CNBC, CNN, CNN Headline News.

As for USA Network I don't really see a need to increase just because they got WWE from Spike TV. But what is the amount for USA Network right now anyway?

 

[rugrats1]

> How about cable companies just drop FOX News instead of
> making us pay more.

Easier said than done these days -- if they drop FNC, they would also have to drop the local Fox affiliate, and perhaps FX and FSN too. Since those channels are owned by Fox, some Fox stations (especially the O&Os) require cable companies to carry them, as a condition to carry the local Fox station.

 

[KML0224]

Yep! My Comcast cable bill this month is $85.03 damn dollars. I have their Digital Silver plex with the HBO package and 40-some channels of Music Choice plus On Demand. My antenna selection around here is quite weak without cable and my grandmother, who owns our house, isn't too keen on having a dish installed on the house. Why should I have to pay more for a cable "news" channel which I refuse to watch at all now?

 

[EricStein]

> How about cable companies just drop FOX News instead of
> making us pay more. They shouldn't just make us pay more
> because they got better ratings then MSNBC, CNBC, CNN, CNN
> Headline News.

The difference between Fox News and the other cable news networks is that Fox has a core group of viewers that refuse to watch the other channels. If cable companies and Dish Network pull them, then there will be some protest from its viewers. They'll probably be persuaded to get DirecTV, which I suspect will be getting some kind of discount for being in the News Corp. family.

 

[TXengineer]

> Cable operators are beside themselves with concern about
> News Corporation's demands that cable operators pay more for
> the right-angled basic news network. CNN, in comparison,
> asks for 60c per month for its package of news channels.
>

You forgot to say "left-angled" package of news channels for CNN.

 

[Markxxx]

> > How about cable companies just drop FOX News instead of
> > making us pay more.
>
> Easier said than done these days -- if they drop FNC, they
> would also have to drop the local Fox affiliate, and perhaps
> FX and FSN too. Since those channels are owned by Fox, some
> Fox stations (especially the O&Os) require cable companies
> to carry them, as a condition to carry the local Fox
> station.
>
Thank you...

You just hit upon the real reason. You are NOT simply paying for one channel. With media consolidation you have basically killed competition.

For example the original intent behind a duopoly was to allow a station that was struggling and possibly failing to be picked up and saved. However this intent was quickly lost. All one has to do is look at WWOR, or KCAL to know neither station would have died.

When you pay for your local CBS affiliate you also pay for all the cable channel Viacom owns. Same for Fox. Same for NBC-Universal. When negotiating for carrying, Fox or CBS or whoever says if you don't take "FOXNews," Or You don't take ALL THREE MTVs on your non-digital tier, you won't get the FOX or CBS O&O station.

My breaking point with Comcast came last January when my basic digital went to $70/month. And Comcast sent out a letter saying the rate hike was do to VAST imporovments in VOP and Broadband. So bascially I a cable user am paying more so that Comcast can improve phone and internet service. Two things of which I don't USE from Comcast.

This is all do to consolidation. Putting too much in to few hands. And it just isn't TV.

In the beginning of the 1900 Standard Oil was broken up, today we find the largest Petrol Company ExxonMobil. That used to be Standard Oil of NJ(Exxon) and Standard Oil of New York (Mobil). Ma Bell was broken up in the 80s now we find the "Baby Bells" are being reunited. SBC the biggest appetite of them all.

Until people protest with their pocketbook, there is little you can do. I shut off my cable and don't miss it.

 

[network]

> Easier said than done these days -- if they drop FNC, they
> would also have to drop the local Fox affiliate, and perhaps
> FX and FSN too. Since those channels are owned by Fox, some
> Fox stations (especially the O&Os) require cable companies
> to carry them, as a condition to carry the local Fox
> station.

You just hit the nail on the head. What will happen is News Corp will say "OK, you won't carry FNC on this tier, then you can't have FX and FSN either." Of all of the cable/sattelite providers ou there, you will probably see DISH Network fight against this rate hike among the other providers.

 

[network]

It's More Than WWE

> As for USA Network I don't really see a need to increase
> just because they got WWE from Spike TV. But what is the
> amount for USA Network right now anyway?

Umm...where does it say ANYWHERE that USA is raising their rates because of WWE. You obviously don't watch USA. It's not a secret they have quite a few original programs. Ever hear of "Monk"? Then there's "The 4400" and "The Dead Zone." USA, overall, has good product and at least they're doing something with the $$$.

Unlike NewsCorp that is just being greedy.

 

[mwebster]

WRITE YOUR CONGRESSMAN

News Corp/Fox is not the only one to play this game. All the big media companies do it.

Non-premium channels sell advertising. The more viewers the more ads they sell and the more they charge for those ads. So they require cable/satellite systems to put a given channel on basic cable, which all subscribers can receive. No problem so far. But they want it both ways. They force the cable system to pay a per-subscriber fee for each channel. More advertising revenue and more subscription fees. They blackmail cable/satellite systems (as has been pointed out) by threatening to withhold co-owned broadcast network channels or popular cable channels. Cable/satellite system operators go "what the ___" and pass these fees onto subscribers, who pay for channels they may or may not ever watch.

One suggestion already made is allow competing cable systems in each area. Ten or 15 years ago when most markets were a patchwork of cable systems owned by different companies, that might have worked. Just allow cable systems to expand (at their own expense) into adjoining territories. But after a series of swaps and mergers, in most markets one company controls almost all the cable systems. So a new competitor would have to enter a market and start mostly from scratch (except for the phone company, which might be feasible). Still, you've got local politicians in the picture who have been pocketing money for local cable franchises from day one. They are going to want graft and they are going to likely protect existing franchises.

The rules need to be changed. Write your congressman.

1. Carriage agreements for broadcast and cable channels must be negotiated separately. No package deals. No withholding one channel to get terms for another.
2. No fees for advertiser-supported channels. Channels with ads don't charge fees; channels that charge fees don't sell ads.
3. For any channel with fees, a la cart pricing must be offered. A la carte prices can not be more than 10% more than package prices.
4. Regulation of cable system goes completely to state authorities. No more local franchises.
5. Open entry for cable systems. If somebody wants to build a cable system with their own money, they can. This would include systems using new technology (like wi-fi) to distribute programming.
6. Telephone companies also allowed to provide cable and on-demand audio/video services. Telcos "strongly encouraged" to upgrade all residential lines to fiber optics.
7. Telephone and cable systems must be open to other "programming re-sellers" (in the same way telephone companies allow DSL access for other Internet service providers).

In return, I would allow broadcast of major sports events on PPV or premium channels. And I would do away with the requirement that cable/telco systems provide government, municipal and public access channels. However, I would require cable/telco systems to also carry ALL licensed AM and FM radio stations assigned to the MSA in which a subscriber is located (including any digital channels).

 

[rugrats1]

> Ma Bell was broken up in the 80s now we find
> the "Baby Bells" are being reunited. SBC the biggest
> appetite of them all.

And ironically, SBC (which is the united Southwestern Bell, Pacific Bell, Ameritech and SNET, and the smaller Bell companies within) recently acquired AT&T. Plus, they choose to keep the AT&T name instead of using the SBC brand.

Looks like Ma Bell's coming back from the dead.

 

[KMRichards]

There is a potential major flaw ...

> 2. No fees for advertiser-supported channels. Channels with
> ads don't charge fees; channels that charge fees don't sell
> ads.
>
> 3. For any channel with fees, a la cart pricing must be
> offered. A la carte prices can not be more than 10% more
> than package prices.

It has been proven that many of the more marginal networks would not be able to survive without the broad carriage on tiered service. However, given that your model would appear to exempt ad-supported networks from a la carte (correcting the spelling), this *might* work. One potential problem is that some specialty nets depend on both fees and ad revenue to survive, so this might actually result in there being fewer narrowcast channels. Maybe you and I don't care about HGTV and DIY (as examples) but they do have their fans, even if there aren't enough of them to justify charging ad rates that make up for lost carriage fees.

Realistically, proposal #2 makes #3 unworkable, as there would be very few "unbundled" channels under your proposal to qualify for a la carte. Virtually all basic channels have ad revenue and would therefore be exempted. The only exception I can think of, among non-premium channels, is C-SPAN.

In effect, implementing both #2 and #3 fixes absolutely nothing.

More importantly, this model does not allow for the multicast premium services. How many people would subscribe separately to "MoreMax" (as an example) if it wasn't bundled with the parent channel?

Your approach, I fear, is too simplistic to work. The major flaw is that you are trying to accomplish too many "fixes" to the system at once, so nothing really gets fixed.

However, in the context of this thread, I find #1 to be a reasonable concept to write your Congressmember about. What we are seeing with Fox is a "Catch-22" in that a cable system that doesn't feel the rate increase is justified is held hostage by not being allowed to carry F/X, Fox Sports, Fox Movie Channel, or a Fox broadcast affiliate if they refuse to carry Fox News Channel.

The same thing -- as you correctly point out in your first sentence -- applies to Disney/ABC (ESPN, Disney Channel), CBS (Spike, MTV), and NBC (USA, MSNBC).<P ID="signature">______________


</P>

 

[KMRichards]

> Looks like Ma Bell's coming back from the dead.

Let's not wander so far off-topic, please.<P ID="signature">______________


</P>

 

[dampier]

Re: WRITE YOUR CONGRESSMAN

> News Corp/Fox is not the only one to play this game. All
> the big media companies do it.

With sports programming, they can get away with it, but cable operators -will- drop cable nets that get too greedy (and coincidentally aren't owned by the same parent company that owns their cable system). Cablevision has felt the wrath when it got too greedy over MSG and Rainbow Program Holdings (AMC, Romance, etc.) Their channels were dropped until the rates came down.

When it comes to sports, it's apparently the holy grail to cable execs. They'll take ESPN's $2.60 a month rate card and say "can I have more, please." Only Fox Sports and some of the other regional sports channels aren't immune to this - many of them are now in digital mini-pay tiers.

> Non-premium channels sell advertising. The more viewers the
> more ads they sell and the more they charge for those ads.
> So they require cable/satellite systems to put a given
> channel on basic cable, which all subscribers can receive.

Yes, most cable contracts for major and legacy basic cable nets have clauses requiring placement on analog tiers. Newer niche and diginet channels are on digital tiers and they're glad to get that. Some contracts even require placement on lower channel numbers so they don't end up on Channel Siberia in the 80s or 90s.

> No problem so far. But they want it both ways. They force
> the cable system to pay a per-subscriber fee for each
> channel. More advertising revenue and more subscription
> fees. They blackmail cable/satellite systems (as has been
> pointed out) by threatening to withhold co-owned broadcast
> network channels or popular cable channels. Cable/satellite
> system operators go "what the ___" and pass these fees onto
> subscribers, who pay for channels they may or may not ever
> watch.

This is a more recent phenomenon triggered by retransmission consent. The network O&O affiliates have the biggest leverage and ABC rammed Soapnet and ABC Family down the throats of many cable operators who didn't clamor for either.

Fox News is a case of greed coming back to haunt cable operators. Fox News Channel made trade headlines when it launched to about as many viewers as Trio has now. NOBODY wanted Fox News Channel, not subscribers, and not cable execs who were still fuming over MSNBC (cable operators even had contract provisions forbidding NBC from launching a news channel when they were suspicious NBC was planning to convert CNBC to news - they didn't want competition for CNN).

But Murdoch knew cash talks and they paid HUGE launch bonuses of $5.00+ per subscriber to get Fox News on the channel lineup in many markets along with contract terms that virtually gave the channel away. We've since come to learn the agenda-driven news channel felt it was well worth buying its way onto systems so it would have access into homes when it began turning into newschat a few years in. In some markets, legal disputes (such as in NYC) got Fox News a home on the lineup.

Now cable operators will be more than paying back those launch bonuses as Fox demands more dollars from an industry that is slowly starting to get serious about limiting rate hikes.

> One suggestion already made is allow competing cable systems
> in each area. Ten or 15 years ago when most markets were a
> patchwork of cable systems owned by different companies,
> that might have worked. Just allow cable systems to expand
> (at their own expense) into adjoining territories. But
> after a series of swaps and mergers, in most markets one
> company controls almost all the cable systems.

This is not a local politician problem, despite propaganda from cable operators to the contrary. The major cable MSOs have had a "gentlemen's agreement" for more than two decades now that states they will not overbuild into each other's service areas. In fact, they're building mega clusters by swapping systems with each other. If you're a competing wired operator, what venture capital firm is going to give you money to enter an arena that requires massive investment in infrastructure and legal hurdles thrown up by the incumbent operator (as well as gaining favorable access to programming at reasonable rates). That's the reason virtually all of America is served by one wired operator. Telcos are the biggest fear to cable, but they were unwilling to make the investment until very recently unless they could make ratepayers carry the wiring costs, something Congress balked at. Satellite has several drawbacks making them a reasonable, but not equal competitor.

> 1. Carriage agreements for broadcast and cable channels
> must be negotiated separately. No package deals. No
> withholding one channel to get terms for another.

Tried and failed. The courts recognize corporate rights just as they do individual rights, and freedom from regulation on this level has kept discounting and contract negotiations status quo. However, a programmer cannot outright deny access to a channel under any terms, as they tried to do before cable was reregulated the first time.

> 2. No fees for advertiser-supported channels. Channels
> with ads don't charge fees; channels that charge fees don't
> sell ads.

Ad revenue makes up a tiny portion of the bottom line of virtually all cable nets. They live or die on subscriber fees so this is not feasible.

> 3. For any channel with fees, a la cart pricing must be
> offered. A la carte prices can not be more than 10% more
> than package prices.

A la carte would likely drive up programming costs considerably. For many people, they'll realize little, if any savings, and end up with fewer channels. C band dishowners have a-la carte available for many mini-bundles and individual channels. Most can pay $5-15 per year for just a single channel or mini-bundle from a programmer (AMC + Rainbow or Food + Fine Living + HGTV).

I like the concept of a-la carte myself, but without strict oversight, cable companies and programmers will set the rates too high to have it make sense.

> 4. Regulation of cable system goes completely to state
> authorities. No more local franchises.

That would be a disaster in many hands-off red states where state utility commissions rubber stamp industry requests now. In NY, regulation would be more intense, but probably not much more so than local authorities do now under the limited regulatory powers they receive under federal law.

> 5. Open entry for cable systems. If somebody wants to
> build a cable system with their own money, they can. This
> would include systems using new technology (like wi-fi) to
> distribute programming.

There is little/no restriction from this happening now. But we saw wireless cable become irrelevent because of technological limitations a decade ago. Infrastructure costs for a wired system mean small players will never apply. Telcos are the best hope for wired competition.

> 6. Telephone companies also allowed to provide cable and
> on-demand audio/video services. Telcos "strongly
> encouraged" to upgrade all residential lines to fiber
> optics.

Their lobbyists will equate "strongly encouraged" with "ratepayers will pay for it." They have before. Why should telco ratepayers subsidize wiring costs for video programming delivery if they don't want it?

> 7. Telephone and cable systems must be open to other
> "programming re-sellers" (in the same way telephone
> companies allow DSL access for other Internet service
> providers).

The courts and the FCC see it the other way. Competing broadband providers hopping a ride on cable lines are already being told to take a hike in some cases.

> In return, I would allow broadcast of major sports events on
> PPV or premium channels.

Cable operators are terrified of the wrath of the male sports enthusiast which is why this will never happen. If they tried it, the industry would be reregulated tomorrow. There is a reason operators will pay $3 a month per subscriber just to carry a network like YES (Yankees) upon launch.

> And I would do away with the
> requirement that cable/telco systems provide government,
> municipal and public access channels.

The costs to do this are very minimal and, in fact, the PEG channels are actually becoming a marketing tool for cable over satellite! You can't watch your town board meeting on DISH!

> However, I would
> require cable/telco systems to also carry ALL licensed AM
> and FM radio stations assigned to the MSA in which a
> subscriber is located (including any digital channels).

Must carry for radio? Cable FM was dead 15 years ago. They have Music Choice and other services that people enjoy more.

I appreciate your ideas mwebster. They remind me of the ideas I used to see back when I hosted a two hour radio program on satellite radio back during the late 1980s and early-mid 1990s. My listeners were mostly angry dishowners ticked off about the cable industry. Most of these ideas have been around for decades now.

I think the best answer remains robust competition and strong regulation where competition does not exist. Tax credits and incentives for telco fiber deployment while protecting ratepayers is the best option for now. Competition will be the best way to moderate rate hikes.

 

[Les]

The greater flaw

> However, in the context of this thread, I find #1 to be a
> reasonable concept to write your Congressmember about. What
> we are seeing with Fox is a "Catch-22" in that a cable
> system that doesn't feel the rate increase is justified is
> held hostage by not being allowed to carry F/X, Fox Sports,
> Fox Movie Channel, or a Fox broadcast affiliate if they
> refuse to carry Fox News Channel.

While writing your Congressmember (wow, PC run amok!) might
relieve stress and frustration for a minute or two it presumes
two things that are, at best, questionable:

1. That your Congressmember knows how to read anything other
than political contribution checks.

2. That your Congressmember has any interest in anything you
might have to say.

BIG, BIG assumptions!

The worst factor in high cable pricing is that local communities
are allowed under state and federal law to "license" monopolies
for provision of TV programming. There was one attempt in New
England a couple of years ago to heavily tax satellite TV services
so as to favor the "local" cable companies. It was knocked down
in court. Still, there are enough captive customers (apartments,
etc.) that even growing satellite competition hasn't been strong
enough to have any effect on cable pricing...hence NO incentive
for cable companies to push back against greedy providers. DISH
tried it a year or so ago but got to much heat from end-users
that they relented and hiked rates across the board.

The only effective retaliation I've found is to carefully consider
your viewing habits and, if the summer programming doldrums mean
you really don't use the TV very much, go on "vacation hold" for
a few months and slash your ANNUAL programming cost. DISH will
do it for $5.00/month for up to six months. I did it myself
between June and October.

If you really wanna put time and effort into writing folks who
don't pay attention, at least include in your letter a desire
to see mandatory competition thorugh eliminating the ability of
localities to issue "exclusive" licenses/permits, etc. <P ID="signature">______________
"If at first you don't succeed, try again. Then quit. There's no use being a damn fool about it."
--W.C. Fields</P>

 

[dampier]

> You forgot to say "left-angled" package of news channels for
> CNN.

No I didn't. Advocacy journalism and angry chat shows that tilt to the right are a staple for Fox. CNN has Larry King, and he'll lob softball questions to anyone regardless of political persuasion. The rest is news, except for the technical glitz that happens when someone watches too much West Wing and decides Confus-o-vision on the Situation Room would be a good idea.

 

[Les]

> Why should I have to
> pay more for a cable "news" channel which I refuse to watch
> at all now?

Because you don't like the alternatives and are therefore
willing to be screwed over. Life is hard and then we die.
But cable rate hikes are as inevitable as taxes.
<P ID="signature">______________
"If at first you don't succeed, try again. Then quit. There's no use being a damn fool about it."
--W.C. Fields</P>