Pay-TV execs warn action on high cost of programming

Michelle Clancy | 04-12-2012

In an era where AMC Networks has become the testing ground for the worth of basic cable nets (DISH dropped the channels for weeks earlier in the year, refusing to pay its carriage fees despite the flagship network's Mad Men and The Walking Dead hits), the heads of Time Warner Cable and Liberty Media have been talking up the high cost of programming.

Sports costs are one area that's top of mind for pay-TV execs. "We've got runaway sports rights, runaway sports salaries and what is essentially a high tax on a lot of households that don't have a lot of interest in sports," said John Malone, chairman of cable company Liberty Media, speaking to the LA Times. Sports rights contribute to about half the cost of the subscription. "The consumer is really getting squeezed, as is the cable operator."

Meanwhile, Time Warner CEO Glenn Britt warned that he could drop pricey but low-rated channels from the TWC lineup. Speaking at a UBS investor conference, he said that he plans to take a "hard look" at programming contracts, evaluating channels that "cost too much relative to the value of the service," according to the Wall Street Journal.

Low-rated nets will from now on see a "different kind of conversation...than we had with them five, six or 10 years ago," he said, because programming is "just starting to cost too much."

Pay-TV operators have increasingly complained about the practice of bundling networks—media companies ask for a bundled fee to cover a wanted, high-rated channel, but often insist that distributors also take—and pay for—lesser-known, less popularchannels. And example would be AMC Networks, which bundles the popular AMC network with others, like the Sundance Channel, that are more niche plays.

Instead, an a la carte approach would allow them to be more flexible in their subscription bundling and pricing, generating positives for consumers in terms of choice and cost, they argue.