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Saturday, December 20, 2014

How you contribute to Alabama, Oregon, FSU, and Ohio State

Time Warner Cable in Raleigh-Durham announced a price increase. It happens every year. What's new is an explicit $2.75 per month for "sports programming", a fee that cannot be opted out of. DirecTV has a similar fee. It's their attempt to make a price increase palatable by pointing the finger elsewhere. Follow the money.

ESPN and ESPN2, which are 80% owned by Disney, charge $6.80 per household per month all across America. You don't pay it directly, but your cable provider does on your behalf. Never watch those channels? You pay anyway. Some consumers argue for "à la carte pricing" whereby every channel becomes an optional choice and you pay only for what you might watch. ESPN does not want à la carte because it would put them into the situation that every CEO rightfully fears: high fixed costs and variable revenues. Those fixed costs are, increasingly, payments to sports leagues — and the most recent jump in those payments has been college football.

A significant part of the incremental $2.75 I'll pay every month will be distributed to large universities such as Alabama, Oregon, FSU, and Ohio State (the four who happen to be competing this year for the national championship). Thirty years ago when truly big money was beginning to pour into college football, it came voluntarily from alumni. TV was merely the means to stimulate alumni contributions. The universities and the entertainment companies noticed, however, that the revenue model reached only the diehards. Why not change the model so that every household is tapped into? And they did. TV became the largest source of money for college football programs. Advertising remains part of the revenue mix, but direct flow from households is the mother lode — and of course, we consumers eventually pay for the advertising, too. This fall I noticed that as many as six college football games would be on cable simultaneously.

My readers are thinking, here I go again with another tirade on college football. Guilty. But I'm hopeful that as the public comes to understand what is happening, they will resist. I have been reluctant to endorse à la carte pricing for cable because I feared it would destroy good programming like C-SPAN. Also, I don't want to kill all sports on cable because I watch hockey. Turner Classic Movies and hockey are the only reasons I keep cable, other than Internet access. If TCM ever unbundles for "over the top" delivery, then I could fulfill my desires by signing up for NHL GameCenter. Forget à la carte; I could drop off entirely — and I wouldn't be paying a monthly tax to college football.