The American Cable Association has recently filed public comments with the FCC alleging that Conglomerated Media uses two primary practices to restrict how channels are packaged, offered, and priced at retail:
- Tying and bundling;
- Tiering and distribution obligations; and
What is Tying and Bundling?
Tying and Bundling is the process by which Conglomerated Media gets us to pay for all those channels we don’t want. For example, when Disney is negotiating carriage rights with a cable operator, they come to the bargaining table in a very strong position to demand what they want. As you’ll see in the charts below, Disney owns multiple local OTA ABC stations, ESPN, ESPN2 and the Disney Channel. That’s one of the four major networks and three of the top eight costliest cable channels.
| Network | Cost Per Channel Per Month | Big Media Owner |
|---|---|---|
| ESPN | $3.80/mo. | Disney |
| ESPN2 | $1.05/mo. | Disney |
| Disney | $0.95/mo. | Disney |
| ABC Family | $0.75/mo. | Disney |
| E! | $0.50/mo. | Comcast/Disney |
| Lifetime | $0.40/mo. | Lifetime/Hearst/Disney |
| A&E | $0.40/mo. | A&E with NBC and Disney |
Those four channels allow Disney to wield enormous power when negotiating deals. Following standard industry practice, Disney has taken to “tying and bundling” these channels with other, less desirable channels. If a cable operator wants to carry the Disney Channel, they have to also carry ABC Family, SoapNeta and Toon Disney. Want to carry ESPN? Then you also need to carry ESPN2, ESPN News, ESPN Classic, ESPN 360 (Internet) and ESPNU.
Programmers and broadcasters “routinely require the carriage of affiliated channels through tying and bundling.” In fact, in order to have the right to distribute the 13 most wanted channels, or their HD counterparts, the ACA members are generally required to distribute at least 60 other channels.
| Owner | Desired Channel | Tied/Bundled Channels | Owner | Desired Channel | Tied/Bundled Channels |
|---|---|---|---|---|---|
| Disney | Disney Channel | ABC Family SoapNet Toon Disney ESPN Channels |
NBC Universal |
USA | MSNBC CNBC Sci Fi Comedy Central Bravo Olympics surcharge |
| Disney | ESPN | ESPN2 ESPN News ESPN Classic ESPN 360 (Internet) ESPNU |
NBC Universal |
USA HD | Chiller Sleuth |
| Disney | Disney Channel HD | ABC Family HD Toon Disney HD ESPN News HD |
News Corp. | Fox Sports | National Geographic Fox Soccer Fox Business Fox Sports College Fox Reality Fuel Big 10 Network Fox Movie Channel |
| Disney | ESPN2 | ESPN News ESPN Classic |
Scripps | Food Channel | HGTV DIY Fine Living |
| Disney | ESPN2HD | ESPNU | Time Warner | CNN | Headline News TBS TNT WTBS |
| Disney/Hearst | Lifetime | Lifetime Real Women Lifetime Movies |
Time Warner | TNT HD | Court TV Boomerang |
| Disney/Hearst /NBC Universal |
A&E | History Channel Biography History International Military Channel |
Viacom | MTV | TV Land CMT VH1 Nickelodeon Noggin VH1 Soul CMT Pure Country MTV Jam |
| Liberty Media | Discovery | FitTV Animal Planet TLC Travel BBC America Discovery Kids Science Channel Discovery Channel Discovery Health Discovery Home |
Viacom | Nickelodeon | TV Land CMT MTV VH1 Spike Noggin GAS NickToons TV MTV2 MTV Hits VH1 Classic |
| Liberty Media | Animal Planet | TLC |
ACA members are also subject to tying and bundling demands in order to retransmit the major OTA networks via cable if those local networks are owned by Conglomerated Media.
| Owner | Desired Channel | Tied/Bundled Channels | Owner | Desired Channel | Tied/Bundled Channels |
|---|---|---|---|---|---|
| Disney | ABC O&O | ESPN2 HD ESPN News ESPN Classic ESPN 360 (Internet) ESPNU ABC Broadband Disney Channel Toon Soapnet ABC News Now |
News Corp. | Fox O&O | Speed Nat Geo Fox News Fox Soccer Fox Business Fox Sports College Fox Reality Fuel Big 10 Network Fox Movie Channel MyNetworkTV |
| NBC Universal |
USA | MSNBC CNBC Sci Fi Comedy Central Bravo Olympics surcharge |
Scripps | ABC NBC |
GAC Fine Living |
| Hearst-Argyle | ABC NBC CBS |
Lifetime Real Women Lifetime Movies |
CBS | CBS O&O | CSTV CW |
The ACA summarizes the tying and bundling issue this way:
on average, 30% of channels carried on expanded basic and 45% of channels carried on digital tiers are carried under tying or bundling arrangements…. The expanded basic tier is the most obvious example of a service tier overloaded with channels and costs from wholesale tying and bundling. But it has not stopped there. Programmers and broadcasters have extended their tying and bundling practices to digital tiers, HD tiers, and VOD content.
Tiering and Distribution Obligations
Conglomerated Media also imposes conditions upon the distribution of the channels which forces the cable companies to place the channels on the basic tier. “This means that to obtain the right to distribute a channel to any customer, the cable operator must distribute the channel to nearly all customers.”
As more channels are forced into the basic tier, the price can only go up. Individual cable operators have little ability to fight for channel choice because ownership is concentrated in so few hands.
The Majority of the Top 50 Cable Channels are Owned by Just Seven Companies
| Owner | Channel | Owner | Channel |
|---|---|---|---|
| Disney | Disney Channel | Viacom | MTV |
| Disney | ESPN | Viacom | Nickelodeon |
| Disney | ESPN 2 | Viacom | Spike |
| Disney | ABC Family | Viacom | TV Land |
| Disney/Hearst | Lifetime | Viacom | VH1 |
| Disney/Hearst/NBCU | A&E | Viacom | Comedy Central |
| Disney/Hearst/ NBCU/News Corp. |
History | Viacom | BET |
| NBC Universal | CNBC | Viacom | CMT |
| NBC Universal | MSNBC | Liberty Media | Animal Planet |
| NBC Universal | Sci fi | Liberty Media | Discovery |
| NBC Universal | USA | Liberty Media | TLC |
| NBC Universal | Bravo | Comcast | Golf |
| NBC Universal | Oxygen | Comcast | Versus |
| News Corp. | Fox News | Comcast | E! |
| News Corp. | Fox Sports | Comcast | QVC |
| News Corp. | FX | Scripps | HGTV |
| News Corp. | Speed | Scripps | Food |
| News Corp. | TV Guide | Rainbow | AMC |
| Time Warner | CNN | Tribune | WGN |
| Time Warner | Headline News | NCS Corp. | C-Span I |
| Time Warner | TBS | NCS Corp. | C-Span II |
| Time Warner | TOON | Crown Media | Hallmark |
| Time Warner | Court TV | Landmark Comm. | The Weather Channel |
| Time Warner | TCM | IAC | HSN |
| Time Warner | TNT | Cox | Travel |
The ACA’s Conclusion
“The wholesale programming and retransmission consent practices described above harm the public interest and conflict with key communications policy goals in aleast four ways: (i) reducing choice and program diversity; (ii) increasing costs for cable;(iii) reducing competition; and (iv) impeding broadband deployment.”
The ACA’s Proposals
The ACA proposes that the FCC take regulatory action. The proposed regulations have three main components:
- Programmers and broadcasters would be obligated to offer channels on a standalone basis on reasonable rates, terms and conditions. This would not prohibit programmers and broadcasters from selling channels in bundles; they would just need to offer channels individually too.
- Programmers and broadcasters could not condition access to any channel on the obligation to distribute the channel on a specific tier or to a required percentage of subscribers. This would not prohibit programmers and broadcasters from offering incentives for wider distribution, so long as differences in rates, terms and conditions were reasonable.
- Aggrieved MVPDs could seek redress through the existing program access and retransmission consent complaint processes. Programmers and broadcasters could not unilaterally withdraw a channel while a complaint is pending. Additional procedural rules would apply for small and medium-sized cable companies.
