Viacom-DirecTV dispute signals continued cable-satellite TV wars

A DirecTV satellite dish is attached to a

A DirecTV satellite dish is attached to a roof at a home in Palo Alto, Calif. (May 6, 2010) (Credit: AP)

Stas Andrzejewski doesn’t understand why people pay for cable or satellite service.

The 70-year-old Buena Park resident gets dozens of HD channels but doesn’t pay anything for them. Two HD televisions in the house and an older one in the garage pull in ABC, CBS, FOX, NBC and dozens of other over-the-air HD TV stations — all free. He doesn’t watch Comedy Central, Nickelodeon or MTV, a few of the channels recently pulled from DirecTV in a dispute with Viacom, but he watches popular shows like “The Big Bang Theory” and “Two And A Half Men” in perfect high definition and that’s enough for him.

“Why pay anything to view TV that is overloaded with commercials,” he asks.

Andrzejewski’s solution is the nuclear option, the most extreme way customers can save money to get the programming they want for less as carriage disputes, such as the Dish Network fight that pulled AMC off the air and the one between Viacom and DirecTV, aren’t going to stop any time soon.

Why are these disputes happening?

Rapidly changing technology and consumer habits are introducing new kinks to complicated negotiations, according to James Goss, a senior investment analyst focusing on media and entertainment at Barrington Research out of Chicago.

When multi-year contracts to provide TV programming are signed, guesses must be made about how people will be consuming content years from now. These days, technology and people’s habits are changing rapidly. A five-year agreement signed three years ago couldn’t have predicted the iPad, for example, so carriage contracts might not have covered who controls the programming on that screen, according to Goss.

“You have to build some flexibility into the contracts,” he said. “Things constantly have to be re-evaluated. It’s probably important that the contracts get renewed every few years, and it’s good they don’t go through at the same time. Gradually everything gets incorporated into these agreements.”

Can a cable or satellite company stream channels to a tablet or phone? Is that streaming allowed when you’re away from home? Can you watch the content in other ways? Did the service provider pay for exclusive rights to anything? How are the channels packaged into tiers? How do you track how many people watch, and thus the ad rates that can be charged and channels shown on these new devices?

“The dispute might not mean a great monetary value now, but it can have a big monetary value down the road,” Goss said.

Many customers fed up with their provider lament the packaging of channels and dream of “a la carte” freedom, something Goss suggests is a “be careful what you wish for” situation. If you unbundle the stations, then a much smaller group of people must be willing to pay more for that specific programming. In other words, things could get very expensive.

“They might be paying way more than the cable bill, and they won’t have the opportunity to occasionally watch something on the channels they usually don’t want to see,” said Goss. “Anybody can go out and buy an antenna and get the broadcast channels ... or maybe you think you can get (these shows) through Hulu and Netflix.

“A lot of times,” Goss said, “It’s easier just to go and turn on the TV” than it is to try anything new.

Andrzejewski isn’t one of those people. The TVs in the living room and family room share a 30-year-old commercial antenna hooked up to the side of his house pointed just slightly west of north, in the direction of transmitters on Mount Wilson. An amateur radio operator since high school, Andrzejewski’s TV in the garage pulls in stations using an antenna he built after he saw it in a radio magazine.

He points to his daughter, who pays for cable, as an example of someone paying for something he doesn’t understand. Her cable provider essentially pipes two versions, one standard and one HD, of the local over-the-air stations he gets for free.

“She pays extra for that. And I have no idea why,” he says. “It smells like a gimmick to me.”

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