Chris Westerkamp: I Just Wanted To Watch Fargo

Wednesday, May 07, 2014

Guest MINDSETTER™ Chris Westerkamp

As I write this, the Supreme Court is considering arguments about a company that is aiming to disrupt the delivery of broadcast television networks to consumers in a handful of states. The company, Aereo plan is to take the free over the air signals from local stations and deliver them to viewers on their computers at a greatly reduced cost to what consumer are paying for cable. In addition they allow their clients to record and view shows at their convenience, much as they would with a DVR. The problem is that Aero claims that they do not have to pay for retransmission fees to broadcasters because the signals are already free to consumers and they claim not to be a programming or cable company, rather a technology company with a superior antenna system.

This of course is a similar argument that cable companies used for years before congress passed a law that required them to negotiate and pay local stations for carrying their programming.

As a veteran TV broadcast executive, my first instinct is that Aereo is just looking to exploit a loophole in copyright laws, to take advantage of broadcasters the way cable companies used to do, but because of my recent experience as a consumer I’m a little conflicted.

A couple of weeks ago I saw some promos for the new series “Fargo” on the FX channel. I loved the original movie by the Coen brothers and more so having lived in Minneapolis. The reviews were positive and the cast of Billy Bob Thornton and Martin Freeman made me want to see the program all the more.

Because the FX channel was not on my current Dish Network lineup (In this context I consider cable and satellite providers to be the same) I called to see what it would take to add it. I have a very basic programming package plus two premium channels and I’m not a sports fan. So I pay considerably less than the average cable/satellite customer. I found out that to add FX I’d have to buy a package to nearly quadruple my basic monthly bill from $20 to $79.

To begin with, I don’t need or want or watch 75% of the channels I already have on my basic Dish package. I don’t want shopping channels, religious, or sports channels or with all due respect Oprah’s channel. The big con with satellite and cable companies is they pretend that they are designing programming packages for the benefit of the customer, when the opposite is true. If you like food shows, there’s one in the basic package but the others come only with the next package of 200 more channels for a lot more money. They are not packaged to satisfy the consumers’ preferences, they are designed to move you up to the more expensive package.

The cable and satellite companies have long resisted offering an a la carte menu of programs, claiming that it required expensive technology that the customer would not pay for. The simple fact is if they can deliver a movie on pay per view, they can deliver an a la carte menu to consumers. It’s just a matter of computer code.

Aside from their notoriously bad customer service, Cable’s biggest competitive threat is the Internet. Consumers are abandoning cable service as more discover how to access their favorite programs online, on Netflix, Hulu, XBOX or Apple TV. Bloomberg reported recently that Time Warner Cable lost more than 800,000 customers in 2013.

Over the last twelve years this same shift has played out in the music business with the advent of iTunes. Music a la carte allowed consumers to download individual songs from ITunes vs. having to buy an entire CD’s just to get the few songs they really wanted. Record companies were no longer in control. iTunes and the iPod revived and sinking music business with more musicians and earning more revenue through a customer focused and democratic business model.

Once you are able to select just the programs you are interested in, it becomes pretty clear that Comcast, Time Warner, Cox and Verizon and their satellite brethren have become expert at running a programming three card monte.

The cable business is anything but democratic or I wouldn’t be faced with paying $79 vs. $20 a month just to add one channel to my line up to watch “Fargo” on FX. It’s not technology causing this problem its cable company monkey business.

Comcast, which consumers rank at the bottom of the customer service heap in America is trying to merge with Time Warner Cable, which ranks 2nd worst. The FCC and justice department are evaluating the merits and possible pitfalls of such a marriage. While they don’t compete with one another in any market the combined companies would have more leverage to negotiate with program suppliers and broadcasters for retransmission fees. They would have a larger voice in refusing to make changes to meet customer needs such as offering a la carte programming.

Now with all this as a background, consider the proposed changes to regulating the Internet from FCC Commissioner and former cable industry executive Tom Wheeler. He thinks that it’s okay for broadband providers, which are almost exclusively cable and Telcom companies, to be able to offer different tiers of access to consumers according to Internet speed. The fastest service would be most expensive and of course the fastest speed is critical for watching video from cable’s nemesis, web based program providers like Netflix, Hulu, Amazon, etc.

If Tom Wheeler were a character in Fargo, he’d be the guy feeding the American consumers into a wood chipper.

So cable companies would be able to frustrate consumers with Internet offerings just like they do with convoluted programming packages. No one has really expressed what possible advantage consumers would get from slower Internet service, especially when video is exploding on all online content providers. This is a plan completely contrived to suppress competition and stuff the coffers of broadband providers. There is absolutely nothing in these discussions about service for consumers.

Net Neutrality is not dead yet. The real decisions are in the future. There are hearings scheduled. The FCC has set a preliminary vote for May 15th. Franken is leading the charge in congress to make broadband providers agnostic regarding what is being provided over the web.

(One negative sign is that Netflix made an agreement to insure its’ access to Internet speed with Comcast in January.)

Twenty years ago the anti trust alarms would be going off with such an obvious evidence of conflict of interest, especially in and industry where there is so little competition. The fact of life in Washington D.C. today is that massive campaign contributions have dulled the governments’ ability to act when anti-competitive forces join to the detriment of consumers. Cable companies and Telcoms rank near the top when it comes to deploying political contributions and armies of lobbyists.

At the risk of being completely naïve, isn’t the FCC supposed to represent American consumers first?

For any consumers hoping for some positive disruption in an industry they hold in low regard it’s a pivotal time. Given the culture in Washington D.C., it’s hard to be optimistic that the winds will blow in the consumers’ direction. I’ll probably have to wait to see the new “Fargo” until some time next year, probably on Netflix.

Chris is a 35-year career in media and strategic management, operating, TV stations and sales divisions for ABC, CBS, Belo and McGraw-Hill. He is a Principal in four Internet start-ups in San Francisco, LA and Denver including Third Age Media and Active Youth Network. Resides in Cranston, Rhode Island.

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Chris Westerkamp: I Just Wanted To Watch Fargo

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