You can take your pick about which partner–DirecTV or Viacom–has more leverage in the programming dispute that has taken all the Viacom channels off DirecTV, at least temporarily.
Some might argue it is a mistake for DirecTV to risk consumer irritation when some popular channels “go dark,” the theory being that it is the programming people pay for, so one distributor risks losing customers, eventually, should a major network such as Viacom be dropped on a permanent basis.
Some might argue that no matter the outcome, the whole video ecosystem is becoming unworkable. That, at least, was what Robert Johnson, founder of the BET cable channel, recently warned.
Johnson argued that cable operators “cannot continue to pass onto consumers 10 percent increases in programming costs.”
“Something is going to give,” he said.
Strategically, no matter how the dispute is resolved, the growing problem for distributors and programming networks alike is that costs are growing beyond what most consumers consider reasonable value, even if that is hard to substantiate.
Some 86 percent of U.S. households continue to subscribe to a video entertainment service, a number that hasn’t changed much in decades, except in a more-positive direction, for the most part. But there are growing tensions.
At least some consumers are finding they don’t value subscription video as much as they used to. In other cases, especially with a growing percentage of Millennials, the value isn’t high enough to convince them to subscribe, even when those consumers can afford to do so.
But affordability is a growing problem. Bernstein Research Senior Analyst Craig Moffett has argued that “after the necessities of food, shelter, transportation and healthcare each month, the bottom 40 percent of U.S. households have already exhausted all of their disposable income.”
“There is,” he says. “nothing left for clothing, for debt service, for cable or for phone.”
That will put increasing pressure on service providers to hold the line on retail pricing or even reduce it. That will require any number of changes. Service providers can try to create modified and cheaper tiers of service, can drop whole channels, pay programmers less or cut some expenses.
Even the alternative of “adding value” won’t work so well if the basic problem is “cost.”
Read More About: Carrier Evolution