Time Warner offers to ‘unbundle’ CBS channels

Robert Marcus, the incoming CEO Time Warner Cable offered to “unbundle” CBS programming as a way to get the network back on the cable system. Time Warner blocked CBS programs in New York, Los Angeles, Dallas and in parts of a number of other markets in a dispute over the cable company’s rights to carry CBS’ programs.

Until now, the battle has affected only CBS-owned stations serving customers also served by Time Warner.  But now, Time Warner is opening the door to an idea that until now, cable companies have vigorously resisted.

The offer, in a letter from Marcus to CBS, would allow customers to decide if they wanted CBS programming and if so, they would pay specifically for that.

In other words, the new offer includes allowing Time Warner Cable customers to choose a plan that includes CBS or not.
CBS has responded to the news, saying the proposal is a “sham” and “a public relations vehicle designed to distract from the fact that Time Warner Cable is not negotiating in good faith,” Variety’s Todd Spangler reports. CBS goes on to say:

Anyone familiar with the entertainment business knows that the economics and structure of the cable industry doesn’t work that way and isn’t likely to for quite some time. In short, this was an empty gesture from a company that is expert at them.

Consumer groups have pressed for a la carte cable choices for years, arguing that customers are stuck paying for channels they never watch.  But some industry experts argue that “unbundling” would not likely save most customers much money. CNN Money’s Julianne Pepitone used ESPN as one example of a network that would be heavily affected by unbundling.

“ESPN currently gets about $6 a month from 100 million homes, but only 20 million of those households are heavy sports watchers. In order to keep revenue steady, then, ESPN would have to charge those heavy viewers at least $30 per month.”

Marcus, speaking on CNBC Monday afternoon, said, “There has been a fair amount of debate over how exactly much customers value individual programming, so rather than us debate it with CBS, we thought the most sensible thing to do would be to offer CBS programming on an a la carte basis. CBS can choose the terms and the price and we would agree that 100 percent of that whatever was charged and pay for by customers would be paid over to CBS so that we would not profit at all from the sale of that product.  And then customers could decide for themselves exactly how much they want to pay to acquire CBS programming.”

CBS has not responded to the Time Warner offer.

Cable experts have said for years that in an a la carte system, dozens of less popular channels would not survive. Kevin Martin, the former head of the Federal Communication Commission, is one who favored a la carte cable. In fact, when he left office, he said “unbundling” was one one thing he wish he could have achieved in his term. For years, Martin argued that allowing people to just pay for the channels they want would lower cable bills. But but some estimates, unbundling might save customers 35 cents a month.

Another former FCC chairman, Michael Powell, is now the CEO of the National Cable and Telecommunications Association. Bundles, he said, NCTA said, “offer a wider array of viewing options, increased programming diversity and better value than per channel options.”

Senator John McCain is an unbundling advocate and introduced legislation in May to give “regulatory incentives” to companies that tried it. But even McCain said the idea has little chance in Congress.

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