Re: Cable TV Races to Keep Up With Consumers

Slotting fees? That's news to me. Can you provide some more

> information, or perhaps cite a source to back up that statement?

"Slotting Fees" is a term from the grocery industry, where manufacturers or distributors pay the grocery store to put their product on the aisle endcap. Those fees can take the form of cash, extra product to sell at a future date, advertising support, etc., but the most common is a cold hard cash payment to the store or chain, based on the number of days the product is displayed on the end cap.

In the case of cable or satellite TV (known as a MSO), the most common example of this are the so called shopping channels. While I can't provide any direct links at the moment, its been widely reported that those channels pay a fee/percentage of the channel's gross sales to the cable company. How they handle a situation where both cable and satellite carry the same channel in the same zip code, I don't know. Maybe they ask the buyer what channel number they are watching.

In addition to that, its not unusual for a new channel to offer cash to an MSO in order to get picked up and distributed. These payments can go on for years until the channel either gets a large enough audience to exist on ad revenue and popular enough to extract a per subscriber fee from the MSO, or the channel gets dropped. This by the way, is a major reason why it is so hard for a new channel to launch in today's bundled environment and why the theory that niche channels will disppear if ala carte were implemented is specious.

Finally, most ad supported channels provide what are called local insert ad slots. These are preemptable ads that the MSO can replace with their own ads. Think "Boflex", "Pseudo Viagra" and all those goofy "Fat Burner" ads, with the MSO keeping all the advertising revenue.

All of these revenue sources for the MSO disappear when the business model for programs is direct sale from the producer or content owner.

The problem is obvious, when you have a system where the pipe is controlled by someone who has a financial interest in providing content over that pipe, what happens? We learned this lesson when oil companies owned pipelines and most retail stations and movie studios owned the theaters. Guess what will happen this time around?

Reply to
Clark W. Griswold, Jr.
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