Cable television is kind of a mess when it comes to the fees providers pay for channels. Companies like Verizon, Time Warner and Comcast do pay for the right to broadcast some channels individually, but what happens a lot of times is multiple channels are sold to these providers as “bundles” — for instance, a popular cable channel or two might also be paired with a couple of smaller niche networks that customers may never watch. Add up the costs for individual channels and bundled channels, and add the markup for your cable company, and you have your cable bill.
Verizon isn’t satisfied with this setup.
The company has instead offered a new proposal for dealing with the fees it pays for cable channels — paying based on the channel’s audience size. The system would be based on a “unique viewing” of a channel. If a customer spends just five minutes on a channel per month, it counts as a unique view, and Verizon would then pay for that channel. However, if a customer never watches a channel, or does so for less than five minutes per month, Verizon would not pay.
It is Verizon’s hope that this new way of paying for cable channels could help stem the rising costs of cable channels, forcing it to pay more only for popular channels and less for channels that don’t bring in large audiences.
This plan, which Verizon has only proposed to smaller media companies and not giants like ABC, NBC, CBS and FOX, isn’t quite the a la carte pricing that many customers would like to see. For the end consumer, available cable packages might not look a whole lot different. The changes would take place more on the back end, where Verizon would likely save some money on channels that aren’t watched all that often.
The proposal is promising, though, in that it could get media companies out of the usual way of doing business, and possibly make these companies more receptive to alternative channel pricing in the future. And let’s not forget the impact lower prices could have on a customer’s cable bill. With options like Netflix, Hulu Plus and Amazon Prime offering large libraries of entertainment for small monthly fees, cable bills are looking more bloated than ever.
It’ll be interesting to see how far Verizon gets with this strategy. The companies it is talking to already seem surprised at how disruptive this new model is, but Verizon claims that talks are moving forward nonetheless. We’ll be sure to keep you up to speed on any deals Verizon is able to strike with the media companies that offer the cable channels so many of us watch.