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Pay-Through-The-Nose TV

Aug. 21, 2013
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Blackouts of popular TV shows and events on cable and satellite television during contract negotiations have become so common, we were starting to get used to them.

Then, suddenly, we were shocked to find something really vital—watching the start of the Green Bay Packers season in Wisconsin—was in peril. The horror! The horror!

Actually, the current dispute between Time Warner Cable and the Journal Broadcast Group not only could block real season Packers games from cable in Milwaukee and Green Bay, but it could have an even more profound effect on how we watch TV and how much we have to pay for it.

But don’t expect the wealthy corporations on either side to tell you the truth about what’s going on. They’re too busy filling their own pockets as fast as they can before an absurdly overpriced system comes crashing down.

Remember when television used to be free? You bought a television set and watched whatever was broadcast on three channels—NBC, CBS and ABC. How quaint.

I worked in a small-town movie theater in high school in an age when movie theaters felt threatened by the rapidly growing competition from television.

Mrs. Sink, my boss, who could be pretty scary anyway, had an apocalyptic vision of something most people could scarcely imagine called Pay TV. After everyone was hooked, she warned, somehow we’d all end up paying through the nose. 

It took decades, but not even Mrs. Sink could envision the incredible amounts of money viewers ultimately would be persuaded to pay to watch their own televisions.

Today we don’t just have Pay TV. We really do have Pay-Through-The-Nose TV.


Breaking the Pay TV Business Model

Families pay hundreds of dollars a month to cable and satellite systems that broadcast hundreds of television channels into their homes, most of which they never watch.

Even though local stations still send their signals out over the air for free to anyone who has an antenna, 85% of television viewers now watch television through a Pay TV provider.

But, it’s starting to look as if the greed of local station operators—not only the Journal Broadcast Group, which owns WTMJ-TV in Milwaukee and WGBA-TV in Green Bay, but also CBS-owned stations across the country also currently blacked out by Time Warner during negotiations—may have pushed the current Pay TV business model to its breaking point.

The American Television Alliance, representing Pay TV distributors, says a record 79 television markets in the U.S. are now being affected by blackouts because cable and satellite systems are refusing to pay large fee increases demanded by local stations.

What are all these negotiations about? 

Under the 1992 Cable Act, local TV stations can either force Pay TV systems to carry their signals for free or bargain to be paid retransmission fees. In negotiations, local stations have won whopping rate increases because Pay TV providers feared losing network content on local stations would drive customers to competing systems.

How does this affect us personally?

We ultimately pay those whopping rates, of course. The increases have been passed directly to us by the Pay TV systems. That’s one of the primary reasons monthly cable bills are now in the hundreds of dollars.

In fact, Pay TV companies say those bills are already so high they’re beginning to drive away their customers. In just the last quarter, Time Warner Cable lost 191,000 subscribers nationally.

Company officials say they can no longer pass exorbitant rate increases along to their customers without accelerating those losses. That’s why they’re taking a stand.

Even one of Time Warner’s strongest competitors, DirecTV, which used to relish cable blackouts as an opportunity to poach customers, is standing in solidarity, saying, “All Pay TV customers are feeling trapped and helpless” by “ridiculous” rate increases demanded by local stations.

So is this really the beginning of the end for the outrageously overpriced Pay TV business model? The end could come quicker than anyone realizes as a result of emerging technology.

The powerful forces transforming home television viewing are the same ones that completely upended the music industry—tech-savvy youth and computers.

The dumbest thing most of us still pay for are hundreds of TV channels we never watch. These include scores of movie channels constantly broadcasting movies we never watch.

Guess what? Young people have figured out you don’t have to pay for anything you don’t watch. Through low-cost Internet services connected directly to their televisions, they can download pretty much any TV show or movie that has ever existed, not what some network or channel decides to broadcast at some specific time.

Television is well on its way to becoming an on-demand, online product we can individually customize to our own tastes at a fraction of the cost we’re now paying.

That’s great news for us. For price-gouging Pay TV companies and local stations, not so much.


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