DirectTV subscribers are scheduled to lose their News Corp.-owned Fox TV channels on November 1 and as you might imagine, the PR war leading up to the event has been ferocious. Both sides have bombarded the press with statements and talking points and Fox has upped the ante by launching the web site keepmynets.com to help argue its case.
This week also brought an attack on DirectTV from Sons Of Anarchy creator Kurt Sutter, who has been very vocal on the subject. He cut a commercial that ran on FX along with the newest episode of his show this week, in which he called on the audience to let DirecTV know how they felt. (Sutter and I also got into a bit of a “who’s bigger” battle, but that’s another story).
But what are the real facts? Both sides have their point of view, but there are a few facts you should know before you make up your mind.
1) It’s only partly about the money
DirectTV claims Fox is asking for an increase of about 40% and it’s not clear how accurate that figure might be. Based on rate increases Fox has negotiated with other companies in the recent past, it’s likely the figure is closer to 30%, but there’s no way to know for sure. A person familiar with the terms of the negotiation told me on Thursday the 40% figure includes the expected costs for things such as Fox’s agreement to allow DirectTV to stream its channels as part of its new iPad App. Fox hasn’t publicly disputed the figure, but has stated they are asking for an amount similar to what DirectTV’s competitors are paying.
2) While DirectTV stupidly isn’t selling the story this way, it’s also about choice.
For at least the past twenty years, negotiations between the companies who own the TV channels and those who own distribution has gone like this. The media company asks for a lot more money. The cable company or satellite TV provider balks, and the media company eventually says “Well, we can give you a bit of a break on the cost if you agree to carry (fill in some new cable channel with a niche audience). Both sides agree, and the ultimate consequence is that the customer pays more and ends up with new cable channels that may or may not be of interest. The cycle repeats every few years and that brings us to this particular battle.
DirectTV’s argument this time around is that if it’s forced to pay a lot more money, they want the ability only carry the most popular Fox channels. So while you won’t lost FX or Fox News, a smaller niche channel such as Fuse would go away. They would also like to bundle Fox Sports channels in a way that would only make them available who really want them (and who are willing to pay extra). This is a battle DirectTV has been waging for awhile with all of its content providers. It is trying to cut costs, hoping to pass at least part of the savings along to its customers. It’s biggest expense is programming, and the only way sustainable way to slow the cost of programming is by shaving the number of channels it offers.
As you might imagine, Fox doesn’t agree with this approach, although they’re smart enough not to make the argument “Don’t let them take your Fuse.” Fox argues that DirectTV wants to “take away your favorite TV channels,” bringing us back to the Kurt Sutter commercial.
3) DirectTV isn’t innocent in this battle
While it might seem as if I’m taking DirectTV’s side in this, there is plenty of blame to go around. The previous Fox/DirectTV deal has already expired and DirectTV picked the November 1 date as a way to inflict the most pressure on Fox. It is betting that a bunch if unhappy viewers will force both sides to make a deal and it’s hoping the eventual deal will be under more favorable terms.
4) There is a lot more at stake than just the right to carry some TV channels
Negotiations between the content and distribution sides of television have never been more complex. It’s not just about how much it’s going to cost for the the ability to carry the TV channels. There are retransmission issues, discussions about streaming to notebooks and how each side can use new technology to connect directly to their customers. Each new technology brings a new set of issues. And there has been a lot of new technology in the past five years.
5) Despite what both sides claim, the concerns of the viewers are a lot less important than the bottom line
What gets lost in these types of battles is that the ultimate costs for these expensive deals is paid for by the customers of both companies. Increased programming costs lead to higher carriage fees which lead to higher monthly bills for viewers. You don’t hear executives from either side suggesting that a slow on the growth of programming costs would be good for customers who are struggling to make ends meet in a difficult economy.
Both sides are aware that in the end, viewers have few options. Either pay monthly fees that are rising every year, or go back to watching a few over-the-air local TV channels.
6) Both sides are petrified viewers may increasingly decide to “cut the cord”
Both the media companies and the cable/satellite companies are increasingly concerned that viewers will drop cable entirely. But rather than working on ways to cut monthly fees or allow customers to pick and choose which channels they want, both sides seem locked in this death grip. Both sides know this type of negotiation battle isn’t good for business and won’t solve any of the underlying revenue problems. Yet like a drunken couple who can’t muster the strength to get divorced, everyone seems locked into the cycle of negotiating angst.
So what can you do as a viewer? Truthfully, not a lot.
You can contact both sides and tell them to get their act together. Tell them you’re tired of being used like a pawn. Tell them you want the ability to pay for just the channels you want. Tell them you want to be able to watch your favorite shows on a tablet without jumping through hoops or paying extra for the privilege.
I’m not sure that they’ll care in the short-term, but the only way to prompt a change in behavior by both sides is to try and force them into it. Ultimately, they can’t succeed without us. Even if they do forget that fact a lot of the time.