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Pay No Heed to John McCain's TV Unbundling Bill

It would be huge if it passed. It won't pass, though.

Ezra Shaw

Arizona senator John McCain made some headlines yesterday when he announced that he will introduce a bill that, among other things, would force pay television providers to offer channels a la carte. This announcement qualifies as news around here now that the SEC is a major partner in a TV network.

Being able to pay only for the channels you want and not those you don't watch is a common dream of cable and satellite subscribers, but the providers offer channels in bundles for a reason. In part, yes, it's to get people to subsidize channels they don't watch. It's also to help keep those channels in business via regular, reliable revenue during times when popular series are not airing new episodes. Providers like Time Warner and Comcast themselves own networks, so they have a powerful incentive to keep this business model going. Hence, McCain feels the need to use legislation to fix what he sees as the problem of bundled channels.

It's well known that sports channels are the most expensive. This chart from 2009 shows average wholesale prices per subscriber for 177 pay TV channels. Seven of the top 10 most expensive aired sports programming at least some of the year in 2009. According to Derek Thompson of the Atlantic, about $30 of a typical $80 cable bill pays directly for programming, and about $12 of the $30 goes to sports. Peter Kafka of All Things D did a quick calculation that said, given ESPN's current $5+ per subscriber fee, the main ESPN channel alone would cost above $20 in an a la carte system to keep its current revenue level. Sports networks charge so much because they can. Live sports are increasingly the only kind of programming that interested viewers choose to watch live every single time rather than record or watch online later. They are the pillar holding up the business model.

It would be an enormous change for the industry if McCain's bill passes. Uncertainly along these lines could easily be a part of why the league reportedly does not own a piece of the SEC Network. However, this bill won't pass.

As both Thompson and Kafka point out, McCain has tried to pass similar legislation before to no avail. Kafka also mentions that McCain is no longer on the Senate Commerce Committee, and, long story shortened and simplified, the bill won't even hit the Senate floor if that committee doesn't sign off on it. The bill would have an easier time of making it through the committee if its sponsor was on it, but alas.

Media companies have tremendous pull in the halls of Congress, which is why pro-Big Content laws pass or come close to passing even when they're deeply unpopular. I can feel that I'm now veering off of the scope of the site, so I'm just going to stop it right here (please no politics in the comments, thanks). McCain's bill is interesting, but it's not going to go anywhere. The pay TV environment that the SEC Network will launch into next year will be the same as the one that existed as ESPN and the conference planned it over the past year or so.