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Give cable TV subscribers more freedom of choice

Obama's nominee for FCC chief should work to dismantle the business model that requires viewers to pay for dozens of channels they will never watch.

May 07, 2013|David Lazarus
  • President Obama gets a laugh from his nominee for chairman of the Federal Communications Commission, venture capitalist Tom Wheeler, during the president's announcement of the nomination at the White House.
President Obama gets a laugh from his nominee for chairman of the Federal… (Andrew Harrer, Bloomberg )

President Obama has nominated venture capitalist Tom Wheeler, a former lobbyist for the cable and the wireless industries, to serve as head of the Federal Communications Commission. "Tom knows this stuff inside and out," Obama said.

If that's true, I can only assume that high on Wheeler's to-do list will be a dismantling of the antiquated business model that forces cable and satellite subscribers to pay for dozens of channels they will never watch.

It's also a system that can result in a favorite channel disappearing not because it didn't have an audience but because it didn't generate enough profit for a cable or a satellite provider.

That was apparently the case with Ovation, a Santa Monica arts channel that got the heave-ho from Time Warner Cable in January because of "steeply escalating programming costs."

"Ovation is among the poorest performing networks and is viewed by less than 1% of our customers on any given day," Time Warner said at the time.

I spoke with Chad Gutstein, Ovation's chief operating officer. He said he'd be thrilled with anywhere close to 1% of Time Warner's 12 million video subscribers.

"That's what is known in television as having a '1 share,'" Gutstein said. "A 1 share is considered really good."

He said the real reason Ovation was axed was because it wasn't owned by some media behemoth that could bundle the arts network with other channels and demand that cable and satellite companies carry the whole package.

That's how the likes of Disney, Fox and Viacom foist their channels on pay-TV subscribers, regardless of whether subscribers want them.

By Gutstein's reckoning, Ovation was an easy target for a cable company that was eager to demonstrate to customers and shareholders that it's working to lower costs.

He shared with me a list of almost two dozen other channels that, according to the ratings company Nielsen, attracted fewer viewers than Ovation. They included NBA TV, the Outdoor Channel, VH1 Classic, Fox Business Network, the Golf Channel and ESPN Classic.

"Most of these other channels are owned by a big media company," Gutstein said. "They're part of bundles."

I'll be honest: I hardly ever watched Ovation. It's not that I don't enjoy the sorts of programs it features — music, dance, theater, movies. I like all that.

It's just that I'm like most people, and most people, according to Nielsen, watch only about 17 channels on a regular basis.

But the choice of whether to watch Ovation should be mine to make, not Time Warner's.

Moreover, if I have to pay for more than 100 channels that I have no plans to watch, I'd rather pay a few cents a month for a channel that supports the arts instead of the $5 that I have to pay for ESPN, or the $4 each that I have to pay for Time Warner's own Lakers and Dodgers channels.

Maureen Huff, a Time Warner spokeswoman, said the decision to give Ovation the boot wasn't based solely on the channel's ratings.

"We're also looking at cost and uniqueness of content," she said. "It's a combination of all that."

Well, cost doesn't seem like a big issue, since Time Warner subscribers paid only about 7 cents a month for the channel. And Gutstein said Ovation was seeking only about a 4% increase in payment from Time Warner in its latest contract talks with the cable company.

AMC, of "Walking Dead" and "Mad Men" fame, reportedly sought a pay hike of more than 500% from satellite provider Dish Network in contract negotiations last year. Viacom reportedly wanted a 30% increase from DirecTV for its 26 channels.

As for uniqueness of content, Time Warner criticized Ovation for featuring a lot of PBS reruns and infomercials "that are unrelated to the arts." But Ovation said it aired nearly 420 hours of music documentaries and performances last year and debuted 36 hours of original programming.

This past weekend, the channel showed the movie version of "The Pirates of Penzance," a documentary about the music of Dolly Parton and a BBC documentary about painting, sculpture and architecture from the Baroque period.

Meanwhile, the Outdoor Channel showed "Ted Nugent Spirit of the Wild," in which, according to the online schedule, the 64-year-old rocker could be seen "bowhunting whitetails for his birthday dinner."

Time Warner has decided its customers are more interested in Ted Nugent killing deer than in Baroque art. And it may be right.

But it should be our call, not theirs.

The answer, as I've written before, is a la carte programming, which would allow people to pay only for the channels they desire. Some channels would sink, others would swim. The important thing is that the marketplace would decide winners and losers, not a handful of cable execs.

Critics say a la carte would cause prices to rise and limit consumer choice. I'm not so sure. Seems to me that forcing channels to compete for our business would keep prices down and promote innovation and quality.

I counted more than 100 sports channels on Time Warner's website, including those that run in both standard and high definition. Does anyone really think that with that much competition, these guys would be able to get away with huge price increases?

As head of the FCC, Wheeler could spearhead regulatory efforts to allow the market to function with greater transparency and fairness.

He could end the onerous practice of making cable and satellite customers buy products they don't want — or, as in the case of Ovation, denying people the ability to choose the product they do want.

I suspect a freedom lover like Ted Nugent would support that.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to david.lazarus@latimes.com.

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