Our media-consumption habits have been growing into an "on-demand" lifestyle for a number of years now. We demand to have access to our favorite TV shows, whenever and wherever we want. Through various services, we can have that choice at our fingertips, except in one place: cable TV.
The cable-television industry has a stranglehold on consumers, holding us hostage to an outdated way of gaining access to cable networks, while significantly raising prices every year without fail. The average cable customer in the United States is already paying a monthly cable bill of $84 and faces an average annual price hike of 5 percent.
Enter Sen. John McCain. He recently introduced legislation that would enable consumers to be able to choose and pay for only the cable networks they want.
That sounds like the choice I want.
Choosing and paying for only the cable-TV networks consumers want is the ultimate free-market solution to a problem that was caused by government regulation in the first place.
The dirty little secret that the cable programmers don't want to let consumers in on is that they make millions of dollars from fees collected from "retransmission consent," originally created by the government as a way to help local broadcasters afford local programming. Cable operators must secure permission from local broadcast affiliates to carry the station on the cable system. Permission is tied to compensation. Content providers such as CBS-Viacom, ABC-Disney, NBC-Universal and Fox-News Corp. wield influence over their affiliates and demand a cut of their retransmission-consent revenue. In markets where one of these Big Four networks owns the local station, a favorite form of compensation is, "We'll 'give' you the right to retransmit NBC and Telemundo if you carry not only our 'good stuff' (marquee cable networks), but also all the new or minor networks we have."
These media companies often create niche channels — sometimes just to make additional profit off of old inventory — that only appeal to a fraction of the population. Then they leverage their power to force carriage of these niche networks on cable systems across the country and extract anywhere from 25 cents to a dollar or more per subscriber per month. As a result, even though consumers likely aren't watching more channels than they were a year ago, they are receiving more channels —which they probably don't want — and paying higher monthly cable bills because of it.
As Mr. McCain recently wrote in The Los Angeles Times, "The truth is the government already has its thumb on the scale in favor of industry and against the interests of consumers. It's time for that to end."
Media outlets have reported that the ESPN networks, owned by ABC-Disney and forced onto every subscriber of basic cable, contribute nearly 20 percent of the wholesale cost of programming, yet it reflects only 2 percent of viewership.
Selling cable networks in bundles to consumers is a forced-extortion scheme, causing us to pay for more than we need or want. That is why consumers are cutting the cord at a rapid pace, according to the Leichtman Research Group. Many of those cord-cutters are turning to alternatives such as Netflix, Hulu Plus or Amazon Prime Instant Videos.
Ironically, a number of groups say that a free-market approach to the cable-television industry wouldn't be good for consumers. Frankly, it sounds like the cable industry is providing the talking points to those so-called free-market organizations. They should be the ones leading the charge for cable choice, but they aren't.
With news that cable providers aren't meeting customer expectations because of continuous price hikes and reliability, according to the American Customer Satisfaction Index information sector for 2013, the cable industry would be wise to take heed and provide real choice to consumers.
Tim Winter is the president of the Parents Television Council, a nonpartisan education organization advocating responsible entertainment.