No Shortage of Ways to Bring TV Prices Down

The financial challenges YouTube TV and other “virtual cable” providers face is a good illustration of some points we’ve been making at Public Knowledge for a while. "These streaming services have yet to figure out how to make money. In fact, the more people they sign up, the more money they lose. That’s because the services are paying more for programming than what they’re charging consumers.” Why is this? Basically, the incentives of large content providers and big cable make offering viewers more choice very difficult. Large content providers bundle their programming together and require that cable companies put their channels—even the less popular ones—in lower tiers where they get more subscribers. This ends up costing viewers a lot, but cable companies themselves take a margin on this so they profit, too. It’s a symbiotic relationship. To keep it going, the largest cable companies, in turn, require that content providers (large and small) give them “most favored nation” status, meaning that new entrants can’t get better deals, both in terms of cost but also in terms of on-demand rights and so on. (Some programmers might want to give discounts to new entrants to create more competition.) Some of the large incumbent distributors, such as big cable companies, may also simply pay smaller programmers less, or just drop them, if they make their programming available online in any way.

If policymakers want to ensure that “skinny bundles,” more consumer choice including a la carte options, and other innovative services are available, they should consider changes to the policies that make competing in this space so difficult, and keep prices high even in traditional cable:

• Eliminate basic tier buy-through rules
• Program access for online service
• Allow cable companies to carry signals from out-of-market broadcasters
• Allow set-top box competition
• Block mergers
• Limit most-favored-nation clauses
• À la carte (and pricing transparency)

[John Bergmayer is PK Senior Counsel]