COMMENTARY

Don't Count on Viewers Being Good Sports

• by Karlene Lukovitz  @KLmarketdaily, 57 minutes ago

This week brought multiple developments that underscore the growing chasm between the entertainment industry and the consumers it purports to serve.

The one generating the most headlines is the stalemate between Disney and Charter Communications. In the short term, this most visible in a long string of carriage disputes that deny duly paid-for services to subscribers promises at minimum to magnify consumers’ already mounting distrust and frustration with both their traditional and streaming options.

Some Charter Spectrum subscribers have already filed a class-action suit against the company. These consumers — led by but not limited to fans of the Florida Gators, who missed the college team’s kickoff game thanks to Charter’s blackout of ESPN and 25 other Disney channels — charge that they were used as pawns in a “clear money grab” by Charter, which subjected them to a “Lucy taking the football away from Charlie Brown” moment.

The lawsuit also makes it clear that Charter’s messaging to its subscribers blaming Disney for the debacle only served to further infuriate these supposedly valued customers. As in all blackout scenarios, subscribers basically don’t give a damn about why these big corporations are duking it out. Nor should they, however many legal loopholes the subscriber contract may include.

The fact that Charter is grudgingly giving $10 to $15 per-month rebates only to subscribers who proactively call customer service and sit through reportedly long wait times is another proverbial slap in the face. Charter’s lame response: a promise to address rebates at a future date if the dispute is prolonged. (“We’re going to do what’s not only required, but what’s fair to our customers over time,” stated Charter CEO Chris Winfrey.)

But as all businesses should certainly know by now, a timely, as well as fair, response to valid (or even questionable) customer complaints is a foundation of long-term success, enabling smart companies to turn customer anger and threatened cancellations into enhanced loyalty and higher retention rates, lifetime value and profitability.  

And by the way, Charter’s inaction isn’t good enough for government representatives, either.

Today, New York Governor Kathy Hochul directed the state’s Department of Public Service to ensure that nearly 1.5 million Spectrum cable TV subscribers in the state receive refunds for the loss of the Disney channels during the dispute. “It’s simple: if you pay your cable bill, you deserve to get the services you pay for,” Hochul said in a statement. “An ongoing corporate dispute is forcing customers to miss some of the highest-profile televised events of the year. The least these companies can do is provide a refund.”

Earlier this week, New York Sen. Jeremy Cooney asked the Public Service Commission to investigate why refunds weren’t being issued. My guess is that distributors already squeezed by the industry’s changing dynamics would not welcome the not-impossible prospect of retroactive scrutiny of how all of these blackouts have been playing out for consumers.

But putting aside the rebate issue and the heightened consumer distrust of the whole entertainment system that can only serve to exacerbate not only cord cutting but even streaming service churn rates  (due to greater cynicism/reduced loyalty) in the near term, Charter’s apparently adamant stance in the Disney carriage dispute could serve to hasten the shakeup playing out as streaming supercedes the traditional television industry structure.  

And that might not be a bad thing for consumers.

Charter has been frank about its overriding concern for building its internet connectivity business, and appears ready to pull the plug on Disney if Disney refuses to accede to Charter’s demand for flexibility to offer cable subscribers who aren’t into live sports lower-cost packages that do not include the high fees built in to accommodate the soaring costs of sports rights for ESPN and other channels.

“We have always thought of video as being an asset to our broadband connectivity business, but it’s on the verge of flipping and becoming a liability,” Charter's Winfrey summed up during a Goldman Sachs conference this week. “In an alternative world, if you had an environment where you don't carry Disney content, what sports content would be left? The answer would be very little, but we could deliver smaller packages at a much better price.”

The reality is that while both streaming and traditional TV platforms have opened massive content options, neither offers particularly attractive options in terms of reasonably priced service plans.

The exodus from cable reflects consumers’ unwillingness to put up with paying outrageous and continually mounting monthly fees that are pumped up not only by costs for sports and other channels that many do not want, but charges for cable boxes and extraneous, mysterious “taxes and fees.” (The average per-month fees I see reported for cable in the U.S. look good next to what Optimum is gouging its Connecticut customers for: nearly $130 for a less-than-top-tier plan, plus $28 for taxes and fees, plus $13 per cable box — totaling nearly $175, assuming just one cable box and no “premium” channel add-ons.)

But nearly all major streaming services, along with virtual MVPDs, are also hiking their fees. And for many, trying to replace cable with streaming-only, while realizing any meaningful cost saving, requires giving up some channels important to them. Also, while cable frequently goes down during storms (with no rebates for this frustrating, sometimes business-threatening experience), streamed channels — including the $15.99-per-month Max channel — are also unreliable through the cable connection, even when there’s no weather event.

The same is true for the increasingly popular FAST channels: Even leading ones like Pluto TV are wont to unacceptable levels of buffering or total inaccessibility far too frequently, in my experience. Not to mention that rampant redundancy makes the advertising experience on FAST channels in general far inferior to what was delivered to viewers on free broadcast network TV going back at least as far as the 1960s.

In other words, while consumers initially benefitted from the streaming revolution, their practical options now are far less than ideal. If distributors like Charter can offer more, lower-cost options to cable subscribers in the short term, more power to them.

But as they face off against one another, and focus on their own financial interests, all of these players seem not to be sufficiently factoring in the limits of consumers’ patience — perhaps signaled by the class action against Charter.

Cable subscribers may benefit for a time if Charter cracks the bundling stranglehold. But all concerned would do well to remember that younger generations of consumers are more assertive about finding alternatives when they feel they’re paying too much for whatever is being delivered. Does the industry want them to move even further toward free, user-generated content a la YouTube, become even more inclined to drop and re-subscribe to paid streaming services based on a specific series or movie, or otherwise evade being charged more and more for content they don't perceive as worth the cost?

In the absence of cooperation among industry players that makes consumers' experience more affordable, as well as more user-friendly, it looks like more, potentially brutal, consolidation -- which unfortunately, may also end up working against consumers -- is in the forecast.