TV Business

A little over a year ago, Verizon did something that flew under the radar, and considering how much their deployment of Fios services has slowed, wasn’t really as important as it should have been. Following ESPN’s lawsuit over its “Custom TV” service, Verizon effectively defanged the service and switched to offering two base packages, one with sports channels and one without, to comply with contracts prohibiting the biggest sports channels from being on an add-on tier. A year later, however, Verizon went to a hybrid of the old and new Custom TV packages. Today’s Custom TV service consists of seven different base packages, only three of which (Sports and News, News and Variety, and Home and Family) contain ESPN and other sports networks. It’s not quite a la carte TV, and the Verizon site gives a list price for Custom TV of $64.99/mo, but that’s for bundles containing it; if you order the slowest Internet speed that can be bundled with Custom TV, the quoted price is exactly the same as the same speed without Custom TV. The fine print indicates that you would take on only $20.88 in set-top-box rental, broadcast, and RSN fees, on par with Sling TV, and presumably the non-sports packages without RSNs would cost nearly $6 less than that. That’s pushing less than half of what streaming cable services like YouTube TV and PlayStation Vue charge.

For that price, you could get most of the most popular cable networks other than sports, news, and Discovery networks on the Action and Entertainment package, or you could regain the mainstream news and Discovery networks while losing more reality-oriented channels on the Infotainment and Drama package. Both of those packages include Disney Channel and other channels owned by the four major companies with investments in sports, so you aren’t limited to channels from a small selection of companies. A truly comprehensive lineup would require upgrading to a more expensive package with sports networks, and some combinations of networks (like both Discovery and History) would require going that route, but Verizon seems to have largely recreated the comprehensive, watch-whatever-you-want feeling cable and satellite companies tried to create in the 80s, 90s, and early 2000s without the downward spiral that created.

What has attracted more attention is Charter’s soft-launch last week of Spectrum Choice, currently being offered only to 100,000 “hand-selected” customers, presumably primarily people who have threatened to cancel their existing Spectrum service and/or as a way to upsell current Internet-only customers. Programming appears to only be available by streaming to Roku or other connected devices (and thus, at least potentially subject to all the delays and problems of streaming), DVR service costs extra and is loaded with restrictions, and there is a confusing maze of restrictions to your ability to watch shows on other devices or outside the home. But once you get past all that, what it offers is remarkable: true a la carte TV. You get all the broadcast networks and Music Choice channels, and then you add any ten channels of your choice. Not all channels are available (and RSNs are among the channels that aren’t), but a sports fan could add ESPN, ESPN2, FS1, NBCSN, NFL Network, and all three channels showing March Madness, and still have two channels left over, having picked up every network showing the most popular national sports events.

But of course, what’s really attractive about this is the ability to stitch together groups of channels with no sports networks whatsoever. Nick Jr. is the most popular primetime network not to be offered, and Disney Junior is still available for families with young children. You could stitch together the most popular general entertainment or reality-oriented channels – USA, HGTV, TBS, TNT, Nickelodeon, Discovery, History, and maybe a handful of others to round it out. Perhaps more to the point, you could join Spectrum Choice with the Philo service, and then use your ten channels on channels not offered by Philo: USA, TBS, TNT, Hallmark, FX, Bravo, Cartoon Network, Freeform, Hallmark Movies and Mysteries, and Syfy, mixing up what channels you order based on what channels have the shows you want and maybe throwing in a news network or two if you want. You’d have access to an incredibly wide variety of entertainment – without any sports-specific networks.

The potential of this is such that to me, the biggest problem with Spectrum Choice is that there is no price feedback to your choices: you pay the same whether you include ESPN or not. This may explain why it costs $25/mo for the first two years and $30/mo thereafter, which makes combining it with Philo non-economical and arguably doesn’t even compete well with other streaming cable providers as is. It smacks of saying “we tried to offer an a la carte offering but no one took it”. Of course, if it did offer ESPN at a different price than other networks, that would smack of offering ESPN separately, as a premium service, which ESPN would probably never stand for, and the other restrictions and constraints might be necessary to appease programmers as well; Verizon may be closer to a more viable approach to shaking up the cable bundle (it’s worth noting that both Verizon’s Action & Entertainment and Lifestyle & Reality packages each contain all but one of the non-Philo networks I listed above, if you’re willing to go without major news networks). The fact that Spectrum Choice is so close to being a true game-changer, however, should not go unnoticed. They may be halting steps, but Charter and Verizon are moving closer and closer to allowing you to watch the programming you want without having to pay the sports tax.

For all the brouhaha over streaming TV services, for the most part they haven’t offered anything that truly sets them apart from the traditional cable bundle. In the name of trying to get enough programming people want to attract customers, they’ve almost all hitched their wagon to all of the Big Nine cable programmers, throwing away the one thing that could truly set them apart from the cable bundle. Even Sling, with a lower base price point and multiple smaller base packages, doesn’t offer a base package without sports networks. Philo has taken the best available approach to building a truly sports-free package and thus a package with the most potential to strike fear in the heart of ESPN. The question surrounding Philo has been whether it has enough valuable programming to attract customers without networks associated with the sports-heavy companies – without USA, TBS, TNT, FX, or Disney Channel. If the programming you want to watch is associated with those companies, you might be stuck paying the sports tax; if there aren’t enough people satisfied with what Philo offers, sports networks, especially ESPN and regional sports networks, will continue to rule the cable bundle for the foreseeable future, even as people increasingly chafe under their power. That is, assuming Disney’s pending acquisition of a large chunk of Fox, including its regional sports networks, doesn’t end up backfiring on them, as I suspect it might, by centralizing enough of the most expensive cable networks in one place that either cable operators or streaming providers decide it’s finally worth it to go without them.

But if the merger does go the way Disney thinks, then if the likes of Charter and Verizon continue to be allowed to be more flexible with their offerings – allowing people to get FX but not FS1 or Fox News, USA but not NBCSN or MSNBC, Disney Channel but not ESPN – that could finally break the stranglehold sports has on the cable bundle anyway. And in turn, that could ironically result in the collapse of the entire cable bundle if the most high-profile sports decide it’s not worth it to continue to hitch their wagon to the smaller audiences of cable networks and focus more attention on broadcast with a side of streaming, potentially starting a downward spiral of cable subscribers touched off by the departure of those that feel they need cable to watch the College Football Playoff, Final Four, or NBA playoffs, leaving the very cable networks that made it possible to either change their business models or die.

It feels empty, going back to talking about television and the future of video at a time when it feels like, for a young liberal like myself, we might not have a future of any kind at all, but there was some news this week that made me reflect on one of my older posts and how the television landscape is shifting.

In 2012, Comcast was looking for something to do with its ten-year-old video game channel, G4, which had been dropped by DirecTV two years earlier and seemed to be inexorably on the wane. It eventually decided to rebrand it to the Esquire Network, a joint venture with Esquire magazine. Two weeks before the rebrand was to finally take effect, Comcast, now in control of NBC Universal, decided to rebrand the Style network as Esquire instead, figuring that Style’s female-oriented programming was now redundant with Bravo and Oxygen, and giving Esquire a slot that actually had DirecTV carriage. G4 would remain on the air under that name, endlessly rerunning its back library, until its existing carriage agreements ran out, and it was finally taken out of its misery a little over two years ago.

That Comcast was willing to rebrand Style as Esquire Network without having anything else to do with G4’s space was surprising to me, because as I wrote shortly before G4 was put out of its misery, the trend in the cable business seemed to be to constantly rebrand channels until companies found a format that stuck, holding on to established channel space and using whatever channel hadn’t caught on to launch the next format idea that came to the suits. Which brings me to this week, and the news that came out Wednesday that Comcast will be shutting down Esquire Network’s linear feed later this year, converting it to a digital on-demand service. On one level, that Comcast replaced Style, not G4, with the Esquire Network means they have now effectively killed two channels instead of one. But on another level, there’s no guarantee Comcast wouldn’t be shutting down Style now anyway, if they hadn’t already done so. In that sense, Comcast may have simply been ahead of its time, knowing that it might not have any new channel ideas with which to replace either Style or G4 – for both channels, the alternative to giving Esquire Network a try would be a full shutdown.

The notion of “cable network musical chairs” was from the start rooted in one of the dynamics captured in my book, The Game to Show the Games. As described in Chapter 7, for many years the Big Nine companies that control most of the channels on your cable lineup were able to use their popular channels to bully cable operators into carrying less popular channels. By about ten years ago, it became nearly impossible to launch a new channel from scratch unless you could convince cable operators it would have a built-in audience from the start, and since then the only channels the Big Nine have attempted to launch from scratch have been regional and college-conference-affiliated sports networks. But outright closing a network and giving up its channel space was unheard of. Until G4, the only truly national cable networks to completely shut down since the 2004 closure of CNNfn and TechTV were ABC News Now, which had highly limited distribution to begin with, and SoapNet, which only survived the launch of Disney Junior because of Disney’s inability to get cable operators to swap one out with the other. It made sense to keep a channel around, just to squat on the space, until you came up with a new idea for what to do with it, knowing that unless things became truly dire cable operators would continue to carry it.

Of course, the same phenomenon that keeps companies from launching new channels from scratch also makes it difficult to relaunch existing channels and attract enough of an audience to make up from the audience lost from the old format, especially in the age of cord-cutting where starting up a new linear network seems like a decidedly outmoded, foolish proposition, if you don’t have any of the live events that are the main purpose of linear television going forward, or any established shows moved from other networks. It’s become decidedly obvious to all parties involved that the cable network landscape is badly oversaturated, but I felt that, without cord-cutting accelerating substantially, no one had any incentive to shrink it – so long as the Big Nine could still get cable companies to carry them, they had no reason to shutter any of them and deprive themselves of a revenue stream. Rerunning old content over and over would still bring in more money than losing the space without being able to get it back if you had a better programming idea.

There is some evidence, though, that cable companies are getting more and more empowered to at least try to dump networks they see as worthless, as they look for ways to shrink their packages to deliver more value and more reason for people to sign up for them. As much as online pay-TV services like Sling TV and PlayStation Vue have failed to live up to their promise of slimmed-down channel lineups, instead carrying most of the Big Nine’s entire portfolios, they’ve still placed some pressure on the Big Nine to shrink down what they have to carry, especially coupled with traditional cable companies’ efforts to create truly “skinny bundles”.

It’s hard to say what the tipping point was. By the time A&E Networks followed through with its announced replacement of H2 with the Viceland network in February, it was already widely ridiculed despite the head of Vice boasting that it would “return millennials to cable TV”. The general consensus was that Vice had no illusions of reaching “millennials” by any means other than online, and a linear network would simply broaden who it could reach at very little cost to Vice itself with the potential to bring in additional ad revenue. Al Jazeera America shut down two months later without replacement, despite the efforts of OneAmerica News Network to take over the space, in part because it wasn’t backed by any of the Big Nine. The same goes for the October shutdown of the Pivot network, itself already a merger of the Documentary Channel and Halogen network. The shutdown of Esquire, triggered by both AT&T and Charter looking to dump it, suggests the Big Nine’s bundling practices won’t insulate them from having to cut down on their networks.

To be sure, the Big Nine will continue to play musical chairs for as long as they can – Comcast is reportedly also looking into converting Oxygen into an outlet for crime dramas – but if the shutdown of Esquire is any indication, we may finally be about to see a market correction as the cable network landscape contracts to just those networks that are absolutely necessary, or at least sustainable. Losing Esquire on its own won’t cause anyone to dump cable, but if the trend accelerates fast enough, as more networks shut down there will be less of a reason for those subscribers that remain to keep their cable subscription, and eventually we should reach an equilibrium where cable is priced low enough to actually be worth the cost for those subscribed to it, while the migration of the “lost” content to the Internet, heralded by Esquire’s conversion to a digital platform tied to the Esquire magazine web site, will minimize the damage from the contraction and increase the value of cord-cutting. We could be seeing the start of the formation of the video landscape of the future. Again, assuming there is a future.

Ever since the Aereo controversy caused broadcast networks to threaten to pull their signals from the free airwaves, I’ve long accused broadcasters as a whole of being led by retransmission consent to disdain their own nominal medium. But it’s not a coincidence that ground zero of the Aereo controversy was New York, the single largest market in the nation where most of the biggest stations are owned and operated by their networks. The networks are on the front lines of fighting with cable networks for sports and other content, and are deeply aware of the advantages of the cable business model. Many of them have substantial investments in cable networks themselves or would like to have them.

Their affiliates are a lot harder to read. On the one hand, many affiliate owners were pursuing cash in retransmission consent negotiations even before the networks got in on it. The National Association of Broadcasters, which is supposed to represent broadcasters as a whole, has fought hard to preserve the retransmission consent system as it is and to weaken ownership restrictions so station owners can get more leverage at the expense of the overall viability of broadcasting. And certainly affiliated stations aren’t falling over themselves to improve their coverage areas any more than their networks are. So it’s pretty clear that affiliate groups, like their networks, staunchly try to preserve their retransmission consent revenue against forces trying to disrupt it. But are they willing to go so far as to give up their identity the way the networks are?

On the surface, there is reason to think they wouldn’t, simply because if the networks went cable-only they would effectively shut the affiliates out entirely, but during the Aereo affair Fox only threatened to take away the most valuable programming that seemed to most need retransmission consent to support it, and pretty much seemed set to simply insert their programming into affiliates’ feeds they sent to cable companies, allowing them to keep the affiliates in the process, and they seemed fine with that. More tellingly, I don’t think any broadcasters, no matter how small, vouched for Aereo’s argument that they were simply broadening broadcast stations’ reach, nor did affiliates indicate that they were in any way resisting the moves their networks seemed to be making to undermine broadcasting except insofar as it undermined their own access to top-tier programming, and even then in utterly ineffectual ways; certainly keeping the CW and MyNetworkTV alive in their current forms suggested they had no ambitions to improve the relevance of broadcasting as a whole. So my assumption was that the affiliates understood the perceived importance of retransmission consent to their business and to their networks’ ability to compete with cable networks, and so wouldn’t do anything to make broadcast more viable and would present a united front to preserve retrans and keep people tied to the cable bundle, with some potentially bailing in the incentive auction out of a belief that broadcasting isn’t viable on its own (and certainly the fact the FCC’s initial clearing target is the maximum possible suggests broadcasting is being as undervalued as I’ve long feared).

But there was always reason to think the networks were overselling the importance of retrans and their signal-pulling threat had more to do with their cable-network offerings than any actual importance of retrans; after all, contrary to popular belief advertising is sufficient to pay broadcast networks’ NFL rights fees and even Fox’s deal with the BCS, the one it ended up losing to ESPN because they couldn’t pay enough to make up ESPN’s subscription fee advantage and kicking off the retrans mania to begin with, actually made money for them without needing to be a loss leader. At the same time, someone was leading the charge to develop ATSC M/H and ATSC 3.0, technologies that hold (or held) the promise to increase the usefulness and viability of broadcasting as a technology without, by themselves, changing the economic incentives favoring cable, and while the networks seemed reticent to lend their full support behind ATSC 3.0, the largest non-network station groups were pretty much staunchly behind it, and while they’ve never quite fought the forces undermining their industry as strenuously as I might like (and in some cases have doubled down on them), the NAB and several other groups representing broadcasters have made many of the same pro-broadcasting arguments that I’ve made on this blog, even if they’ve come across as more self-serving lip service than actually being reflected in their actual policy recommendations, which suggest they’re more interested in protecting incumbents than in the actual overall relevance of broadcasting. And while they never quite addressed the question, reading between the lines of their FCC filings, by and large station owners seemed fine with over-the-top providers omitting broadcast stations from their offerings.

Which brings me to what really has me scratching my head: TV Everywhere. In the wake of the Aereo affair, the Big Four networks have all rolled out apps allowing you to access their programming and a live feed of your local station, so long as you “authenticate” with a cable or satellite provider. In theory, these apps are a centralized clearinghouse to watch any station associated with the network, regardless of who owns them, and have been explicitly pitched to affiliates this way, with CBS All Access offering most of its affiliates through the service. The ABC and NBC apps, however, still only include their respective owned-and-operated stations, with CBS reaching an agreement with Cablevision for authenticated access to their O&Os a few months ago and Fox offering no stream of any of its stations through the app. The only markets where all the Big Four stations are owned-and-operated are New York, Los Angeles, Chicago, Philadelphia, and the Bay Area, so as a result of this, among other things, those markets plus Dallas and Miami were the only ones PlayStation Vue was operating in. This despite Hearst being announced as a partner with Watch ABC pretty much as soon as the app itself was announced, yet their stations remain absent nearly three years later – supposedly because of the need to reach agreements with the cable companies, but if Hearst was in charge of that there’s little reason for that to be a problem if they were as into it as ABC itself was, and if ABC was in charge of that you’d think they’d have already struck those agreements to begin with, and in any case there’s not much reason to announce Hearst jumping on board if it wasn’t going to actually smooth out the negotiations with cable companies. It does suggest that, on the surface, it’s understandable that three-way negotiations between network, affiliate, and cable company would be difficult to make work, and ABC just announced a “clearinghouse” intended to make it easier for stations to latch on to their existing agreements with DirecTV and PlayStation Vue for streaming, with Hearst stated to be taking part with the former. But other recent developments suggest it may be too late.

Last month, PlayStation Vue, evidently fed up with the slow progress of reaching agreements with non-owned-and-operated stations, rolled out its service nationwide (and to devices other than the PlayStation itself), omitting broadcast networks entirely in the new markets with “Slim” options $10 cheaper than the equivalent full-service options, but not giving customers in its existing markets the ability to sign up for the “slim” packages. This raises the prospect the networks feared with Aereo: people paying for cable channels including ESPN but watching broadcast networks without paying for them if they can get them with an antenna, outside of markets where PS Vue was already offering them. Then, a couple weeks ago, rival Sling TV made that prospect explicit by reportedly introducing a new “AirTV” box that enables broadcast content received over-the-air to be integrated with Sling’s own offerings in Sling’s programming guide, regardless of whether Sling has an agreement with the station or even the network in question. I’m not sure I agree with the implied notion of continuing to treat linear television as something special and separate regardless of its nature, putting all linear television into a single, separate app as though linear television itself is the product, and as such Sling isn’t really doing anything it wasn’t already doing by its own nature, but integration of OTA content on streaming boxes can be hit-or-miss enough that AirTV can still encourage people to pick up broadcast stations over-the-air without paying for them, if they can. More to the point, it sounds like Sling can then deliver the broadcast content to any device, like a legitimate use of what Aereo was doing, actually providing some usefulness to the product.

To put this in perspective, last week Dish and Viacom avoided a potentially nasty and damaging carriage dispute with an agreement that will put Viacom’s channels on SlingTV, to the confusion and disappointment of analysts who felt Dish “caved” in not standing up to a Viacom that Suddenlink and Cable One have already seemed to do well enough without. Coupled with the inclusion of Fox in the new multi-screen bundle and the mutual interest on both sides to add ESPN and the other Disney networks to it as well, explicitly hiking the price and obviating everything I said about its potential impact, it seems like Sling TV is coming awfully close to recreating the entire bloated cable bundle just like PS Vue, putting the lie to all the public statements Dish made at its launch about wanting to keep it slimmed down to provide maximum value, and making me wonder, if they really did mean those things, if the Dish-Viacom deal pointed to ESPN acting as the Godfather of the cable bundle in keeping it together at all costs, certainly in keeping Viacom dependent on it. Putting aside anything else, if Sling TV and PS Vue weren’t going to actually provide anything different from the existing cable bundles, it would seem that the cable companies could pretty easily put them out of business, even without shady tactics, by lowering their prices to make a cable/internet bundle competitive with internet plus Sling or Vue and/or making it easier to watch their linear television content on a streaming device… that is, if they weren’t hamstrung by the need to charge retransmission consent to all their customers. Sling TV and PS Vue’s ability to offer broadcast stations separately or not at all, allowing people to rely on an antenna to receive them, could well be their one major, vital advantage over traditional cable television, what allows them to continue providing value even with a traditional bloated cable bundle. I didn’t agree with Rich Greenfield that retransmission consent was the major factor causing the cable bundle to lose its perceived value, but if Sling TV and PS Vue can continue making it optional, it may well prove to be traditional cable’s fatal flaw.

The funny thing about this is that other companies have felt that finding a way to untangle the thicket of broadcast stations was so vital that Apple outright gave up on creating its own Apple TV service when it couldn’t negotiate with broadcast stations. Indeed, PS Vue itself not only offered broadcast stations in its launch markets but included them in its base packages, forcing everyone to pay for them, and showed every indication of applying the same to any market it expanded to. PS Vue wanted to play by broadcasters’ rules, yet when the affiliates couldn’t get their act together, leaving the service still stuck with just the O&Os, PS Vue decided “screw it” and took its service nationwide without broadcast stations, effectively costing the affiliates their opportunity to make OTT work for them and not against them. If Sling TV and PS Vue prove successful enough without broadcast stations, Apple and other companies that felt they had to offer them may decide that, at the very least, they’re not worth the hassle, and broadcasters will have completely missed the boat, left to see the gap between them and cable networks widen again, and seeing cable operators redouble their efforts to undo or shake up retrans.

Again, it’s possible the affiliates just didn’t grasp the importance of getting some deal, any deal done before Sony decided to go without them… but this has me wondering whether the affiliates deliberately dragged their feet as part of a larger effort to make broadcast the center of the broadcast industry again. Perhaps the affiliates really don’t want to be as dependent on cable-style bundles as their networks want them to be, and recognize that it is killing broadcasting as a medium and that nurturing the creation of a large base of people aware of and exploiting broadcasters’ free over-the-air signals is vital to broadcasting’s long-term survival (even if it might hit their pocketbooks in the short-term), by creating a group of people interested in the fate of the medium and ultimately providing motivation for broadcasters to actually invest in their signals and in technology to make them easier to access on a wider variety of devices. Perhaps they felt all along that they preferred to rely on ATSC 3.0 as their ticket to reach mobile devices and that there was no reason for cord-cutting to work to its detriment rather than its benefit. Or perhaps it’s a combination of both and they haven’t yet grasped that Sling TV and PS Vue haven’t been the threats to the cable bundle they thought they would be (not helped by uncritical media coverage that has treated them as “a boon to cord-cutters” without questioning whether someone signing up to either service is truly living up to the spirit of cord-cutting), or just didn’t anticipate “cable minus broadcast” being the niche “skinny bundles” would occupy so early, before “cable minus sports” or something else that would actually deconstruct the cable bundle… or maybe they don’t even care about that and care more about getting broadcast out of its cable-imposed ghetto.

By goading PS Vue into encouraging customers to pick up broadcast stations with an antenna while still delivering them cable channels, broadcasters may have dealt themselves a fatal blow. But if Sling TV and PS Vue have the effect of encouraging widespread antenna adoption, it may well prove the best thing to happen to broadcasting as a whole.

“Skinny bundles” have long been an overhyped disappointment. Cable companies offering sports-free packages have been hamstrung by contractural provisions and legal threats from offering them all that widely, when they’ve bothered to promote them at all. And efforts to create over-the-top offerings, like Sling TV, have kept most of the most expsnsive channels, including ESPN, thus preserving, not undermining, the worst parts of the cable bundle.

Last week Sling TV unveiled a new “beta” multi-screen offering, allowing customers to stream Sling TV content on up to three screens, rather than the single screen their existing offering was limited to. But that’s not the only difference between the multi-screen and single-screen offerings. For the first time, the multi-screen offering provides access to the Fox networks, including FX, FS1, and Fox’s RSNs. And perhaps more to the point, the multi-screen offering does not include ESPN or the other Disney networks. For the first time, there is a widely-available linear TV service that can actually free you from paying the ESPN tax.

The new multi-screen offering is not perfect; for one thing, Fox is nearly as much of a contributor to the high price of the cable bundle as ESPN, through FS1 and especially its regional sports networks, though Sling does not appear to be offering Fox News. So subscribers to the new package may not be subsidizing ESPN, but if they have no interest in sports they’re still subsidizing expensive regional sports networks, and unlike with the single-stream product broadcast networks are included so you’re paying retransmission consent (or at least making up Fox’s share of it) even if you can get Fox with an antenna. Sports fans are still hitched to the entire cable bundle, and FS1 offers few sports whose fans can go without ESPN or other sports networks (basically the UFC, NHRA, and that’s it). As a result of Fox’s own high price, the new service’s $20 price tag offers no savings over the single-screen product, so it might seem like someone would only switch to it if they’ve read my book and are dropping ESPN out of principle, especially since the Discovery networks are also missing so anyone who wants any of them will be stuck with the single-stream offering and paying the ESPN tax.

But if you’re someone who’s interested in Sling TV for reasons other than ESPN, if your interest revolves around the AMC, A&E, and Scripps networks (and Turner as well), you’re going to gravitate to the service that actually allows you to stream the content on multiple screens. And for sports fans, local sports is arguably more of a motivator to remain signed up for cable than ESPN is, and while fans of local teams can’t necessarily go without ESPN entirely, since ESPN has a significant number of exclusive baseball and basketball games including Sunday Night Baseball, one baseball wild-card game, and one of the NBA’s Conference Finals, fans of teams on Fox networks can still watch most of their games without paying the ESPN tax, especially if the teams aren’t that good.

A part of me thinks that Disney and Discovery are just the only two companies that haven’t given Dish the right to offer their content on multiple screens and this is just Dish’s way of pushing them to re-do their deal, meaning ESPN will be there to inflate the price of the offering and keep people paying the ESPN tax soon enough (as Disney seemed to imply in a statement), making this not that different from when PlayStation Vue didn’t include ESPN until earlier this year. But Sling is a lot more visible, and provides more cost savings over a more traditional bundle, than PS Vue ever did, and it’s not exactly obvious that ESPN will eventually join the multi-screen offering. Unless and until it does or Dish ends up nerfing it in other ways, people looking to save money on their cable subscriptions now have a viable option that deprives ESPN of their revenue stream and broad reach that allows them to keep high-profile sports hostage to the cable bundle. And if AMC and Scripps find the multi-screen offering attractive enough, they may just decide they don’t need to be propped up by sports networks at all – and that’s when the real threat to ESPN’s business model begins.

I’ve heard it suggested that “recent high school and college graduates“, or just members of the generation uncreatively and corporately termed “millennials”, absolutely cannot fathom why the cable bundle even exists, yet I’m only 27 going on 28 and I remember when cable was an absolutely huge deal, an almost mandatory step up from relying on an antenna, and remained so right straight through the 90s and into the new millennium. (During my lifetime, my family never relied on an antenna except when the cable was out.) Cable was the gateway to an explosion of new options far beyond the limited experience (and chintzy reception) of broadcast, where all the cool channels like MTV, ESPN, and Nickelodeon were. This is what the cable industry tries to evoke when it claims that the cable bundle is the best value in entertainment and expresses confidence that cord-cutting isn’t really that big a problem in the long term and those people that have cut the cord will inevitably come crawling back. What has changed to make what once was cable’s key selling point – the relative smorgasbord of channels it made available – into its biggest liability?

Last Monday BTIG’s Rich Greenfield, whose doomsaying on the state of the TV industry I’ve written about before, gave a presentation at an FCC panel on the shifting video marketplace, where among other things he presented his reasons for the decline of the TV industry, especially that of the “price/value equation” of the traditional cable bundle. You can see the entire four-and-a-half-hour workshop here; his presentation begins at the 30-minute mark, which the link should take you directly to, but what I want to focus on is that, rather than simply pointing to shifting consumer behavior or the shortfalls of the cable bundle and leaving it at that, he looked at how the perceived value of cable has actually gone down since those heady days of the 90s and what forces, specifically the inaction of both government and players in the industry, led to that point. As such, he touches on some of the themes I talk about in my book and on other posts on this site, but in my view, he doesn’t go far enough to the degree I talk about them, and ends up pointing the finger at some inappropriate culprits as a result.

Greenfield claims that retransmission consent is “the chief culprit that has ruined the price value of the bundle”, evolving from the system envisioned by the 1992 Cable Act, where a single station in a market negotiates with a single cable provider, into one where a station group controlling multiple network affiliations in a market, and potentially cable networks besides, is negotiating not only with a cable provider, but with satellite and telco providers as well – a familiar story the cable industry likes to repeat and that I touch on in the book, but not the whole story. He also targets retrans as the ultimate culprit to the bundling issue, claiming that it’s the power of retrans, specifically the earliest period where companies used retrans as leverage to carry cable networks rather than demanding cash payments, that allows the major media conglomerates to demand that cable companies deliver all their channels in inflexible bundles, before admitting that companies that don’t own broadcast stations engage in the same practice and, implicitly, that ESPN is at least as much a driver of Disney’s bundle as ABC. Greenfield also blames pay-TV companies for negotiating clauses into contracts that hinder programmers’ ability to move to online distribution and that prevent programmers from collecting different amounts of money from different distributors, resulting in a situation where everyone is too invested in the traditional, bloated bundle, and takes steps to ensure that none of the others can do anything to distance themselves from it, keeping everyone tied in to the bundle and in turn keeping consumers ensnared in it – so long as a Netflix doesn’t come along to provide an alternative.

The problem with this narrative is that the problems that have developed in the retransmission consent landscape are a reaction to and symptom of the larger bundling issue, not the other way around, and cannot be looked at in isolation, separate from the larger issue of pay-TV programming fees. It’s true that the introduction of satellite and telco providers have tipped the leverage balance towards broadcasters, but what has motivated them to take advantage of that imbalance, to the point of threatening to abandon broadcast entirely if they didn’t get their way with Aereo, is the much larger imbalance between broadcasters and the subscription fees collected by cable networks, the problem that retransmission consent was intended to fix in the first place. If you look at retransmission consent as merely a subset of the larger cable programming marketplace, many of the “imbalances” tipping the scale towards broadcast stations are really just ways to give broadcasters the same tools as cable channels, or ways to keep broadcasters from losing leverage or potential revenue as a result of offering their wares over the air, and in that view retransmission consent has been working exactly as intended, preventing the broadcast industry from losing all their most valuable content to cable networks that charge high prices and muscle their way into the vast majority of homes.

In particular, Fox explicitly cited the desire to keep from losing sports to cable outlets like ESPN and Turner when it began to make a harder push on the retransmission consent issue in 2009 and 2010, shortly after ESPN took the Bowl Championship Series away from it and moved it to cable. Right now the most expensive cable networks by a mile are ESPN and regional sports networks in some order. Other than those, the next biggest contributors to your high cable bill, at least nominally, include TNT, the Disney Channel, and NFL Network, then Fox News, USA, and FS1, then TBS and ESPN2. On a per-station basis for the major networks, broadcast retransmission fees are probably on the low end of the TNT/Disney/NFLN group, so before you get to retransmission consent’s impact on prices you have to go through all the much more expensive RSNs, plus four national cable networks, three of which have substantial investments in sports that both motivate and fuel those high prices. But broadcast stations are in that same exact category, in that like ESPN, TNT, and regional sports networks, it is the need and desire for sports content that drives broadcast stations to set and keep retransmission fees high and to fight tooth and nail against anything that might break up the cable bundle.

More than anything else, it is sports that is driving the high cost of the cable bundle; between highly-distributed national sports networks, regional sports networks, and the major broadcast networks, probably at least $20 of your over-$100 cable bill is ultimately paying for sports. That’s because everyone vying for sports rights knows that nothing motivates people to sign up for and remain signed up for cable like sports, and absolutely nothing motivates people to sit through commercials like live sports. So more networks come along looking for their own piece of the sports pie, passing that cost along to cable companies, and bidding the cost of sports ever higher and passing that along to cable companies and their customers. Add all of that to the non-sports component of the bundle, and you have a recipe for a cable bundle that once brought consumers unprecedented choice and value now being too highly priced to serve anyone well.

The FCC can’t get a good idea of what undermined the value of the cable bundle from a 12-minute presentation, certainly not without appreciating the factors that led the industry’s actors to behave the way they did; for that, they’ll need to read my book, which will help them appreciate not only the plight of broadcasters but why it’s so important to get this issue right. At the end of the panel, at about the hour-53 mark, Greenfield proclaims that he believes the entire medium of linear TV is dying, that what will end up complementing on-demand services like Netflix will be services that offer “live on-demand”. I still have my doubts that the Internet will ever be able to deliver the Super Bowl to 50 million households, or even that it’ll do that well at delivering a regular-season NFL game to 15 million, especially as higher-quality technologies like 4K become the norm, and especially especially to mobile devices with higher bandwidth and spectrum constraints. Linear TV will not die, but only if it recognizes that it is transitioning into a specialized service, one that efficiently delivers content to the largest audiences, especially live content that, precisely because of its unique ability to attract eyeballs to commercials, is most able to be monetized without need to charge subscription fees. That is what the commission needs to keep an eye on going forward: not merely the transition from a video landscape rooted in linear TV to one based in online streaming, but linear television’s own ability to change its role in response to that, without people being blinded by the present-day depredations of the cable bundle to what that role is and how it’s already filling it, and whether broadcast television will survive to take its place as the area of linear TV where that role is most needed without being undermined by its own actions or those of the commission.