Monopolies, Retransmission Fees, and Screwing Customers

There's been a battle going on between the "broadcast" TV networks and the cable networks over something called "retransmission fees." Cable networks have traditionally paid for "cable network programming" but not "over the air programming." But that is changing and the broadcast TV networks are demanding these retransmission fees from the cable companies.

At the end of last year, there was a fight between Fox and Time Warner Cable that made some headlines. It was settled on new year's day.

The latest spat is between ABC/Disney and Cablevision and it has turned personal, pitting Disney's chief Bob Iger against Cablevision's chief James Dolan. 

Of course, the losers in all of these spats are the consumers who get jerked around and risk missing things they love like the college bowl games or the Oscars. Most of these spats get settled at the last minute, but the whole exercise gives everyone a black eye.

The reason we have to put up with nonsense like this is that cable providers are still operating near monopolies. There are other options like satellite TV or services like Verizon FIOS. But most consumers get their video services from the incumbent cable provider.

And when a content provider, like ABC or Fox, wants to get more money for its programming and the cable company balks, it is the cable company's customers who are stuck.

There's a better way and we'll have it someday, but not soon enough for me. We'll go "over the top" for our video programming, getting it via a broadband connection to the Internet. Content owners like Fox and ABC will negotiate distribution deals with dozens, maybe hundreds of providers. And we'll be able to subscribe to one or more of those providers over the internet through platforms like Apple TV, our portfolio company Boxee, and many others.

When ABC wants more money from it's distribution partners in this scenario, some will pay up and others will not. And if you want to watch the Oscars, you'll simply be able to drop your subscription to one provider, light up another, and/or possibly get it directly from ABC if you want to.

Most industries work that way today. Walmart might stop carrying Puma Sneakers but you can certainly find them in hundreds of other physical and online stores if you want a sweet pair of Clydes. A three tier distribution model from the manufacturer to the distributor to the retailer works very well to insure that there is always product available in the market to customers who want it. And I believe we are going to see that model develop in the TV (and Film) business soon.