Continuing the theme of the inter-relatedness of all things telecom and content, we received these thoughts about the impact of the FCC's a la carte proposals, from a knowledgeable industry exec:

One of the major problems with the FCC's proposal is that they haven't really thought it through. The a la carte proposal would be a giant experimental intervention in one of the country's biggest economic sectors. And all because some people would like the government to regulate indecency and are unhappy that the First Amendment prevents that.

There are very credible studies that show that prices for most consumers would rise. The FCC has some arguments about why there might be a small price decrease. Whomever you believe, the FCC's analysis doesn't begin to address all the dislocations that would be caused by this massive intervention.

Just some examples:

Motion Picture and Television Production: Motion picture and television producers will have fewer secondary outlets for their programming. If revenue goes down for broadcast television shows in a second or third cycle, or for movies, broadcast networks and motion picture theaters will need to pay more or buy less or lower the quality of what they buy. If revenue or output or quality declines what does that do to motion picture and television production jobs? To independent voices in the motion picture business? To independent television production companies? For that matter, to independent television stations which rely on off-network programming? To the economy of Southern California? To international currency flows given that entertainment product is a substantial contributor to America's balance of trade?

Cable Advertising: What about the small business that relies on cable advertising? When there are fewer channels and less ad inventory, surely prices will rise. Maybe to levels beyond what these businesses can afford to pay.

Niche Channels and Voices: What about the impact on channels that serve niche audiences like African-Americans, or women, or people who speak different languages? These networks may be unable to survive if they need to market nationally to find their narrow, but passionate, audiences. What about the outlets and jobs they provide to minority producers, actors, and others? What about the efficient advertising outlets they provide for businesses trying to reach these audiences in an efficient way?

Multiple Systems Operator (MSO)/Cable Channel Relationships: What would a la carte do to the balance of power between MSOs and cable programmers? If MSOs gain leverage in programming negotiations, that will further reduce affiliate revenue, particularly to independent programmers, further burdening the ability of such programmers to purchase the programming they need to attract audiences. That in turn will tend to increase the ability of these companies to give preferences to the cable programming that they own. The FCC has devoted hundreds of thousands of pages to analysis of the MSO/cable programmer interaction and doesn't devote any real analysis to it.

Competitive Markets: What happens to the MSO if viewership moves online, where there is no regulation? What happens to the change in equilibrium in the market for Cable, DSL, Wi-MAX, Cellular?

A la carte regulation touches on all of these markets, and a substantial intervention in the cable programming market will have unpredictable effects on all of them.

posted by James DeLong @ 10:18 AM |

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