Cox vs. Nexstar & CBS: Everyone Loses

Here in Las Vegas, Cox has gotten into a fight with Nexstar, owners of our local CBS Affiliate, KLAS. It’s the usual content-provider-versus-carrier argument: KLAS wants more money, Cox doesn’t want to pay it. KLAS says they’re just asking for the same amount paid by Dish, DirecTV, and CenturyLink. Cox says they’re trying to rip off the 50+% of Las Vegas customers who are on Cox. Right now, they’re in a blackout, meaning CBS’ advertisers are losing over half the Vegas eyeballs. The ones that don’t just fast-forward through ads on their DVRs, of course.

At the heart of this, which nobody wants to mention, is the fact that KLAS essentially operates under a government monopoly. Back in the broadcast days, this made sense; today, it’s almost utterly meaningless.

Nexstar has been playing the usual game content providers play, running ads telling people that they’re missing Big Bang Theory, NCIS, and oh – the Super Bowl. All because of Cox’ greed. Cox, for their part, has been running ads on the now-dark channel, showing the name and email address of KLAS’ general manager, urging viewers to contact the station and protest the blackout.

And it’s all disingenuous.

Here’s the thing about Nexstar and KLAS: they aren’t CBS. They don’t produce any of the shows we want to watch. Yeah, they have local news programs – but they’ve even dumbed those down, firing much of the on-air talent, discontinuing the helicopter service, etc. And honestly, a market the size of Las Vegas (under 1.5M residents) doesn’t need a local news show from ABC, NBC, Fox, and CBS, on top of coverage from MSNBC, CNN, and Fox national. Nexstar is at this point nothing more than a middleman that adds little to nothing of value. Cox should be able to contract directly with CBS to carry its content. If Nexstar thinks there’s still a business in the broadcast world, they can continue to carry CBS and put it on the air. Yes, they’d probably go out of business, because even in rural areas, satellite provides a better option than over-the-air. And true, poorer people in rural areas, who couldn’t afford satellite, might get screwed – but Nexstar is currently resting on an entirely outdated business model.

And here’s the thing about Cox: they’re a dumb pipe. Yes, they and other carriers get totally screwed by the content companies. Like Disney, who charges a market-leading rate for ESPN, but will only sell it to you if you also carry Disney Channel, Disney Channel 2, Disney XD, and God knows how many other channels. The fact the Microsoft was under Justice Department oversight from 2000 to 2010 because they bundled a web browser with Windows is astonishing, in light of the fact that content providers can bundle these channels when selling to carriers. Cox deserves whatever income they make that’s directly related to their infrastructure costs – wires in the ground – and that’s about it.

And here’s the thing about CBS, which is what makes this whole situation all the more irritating. Now, they’re not actively involved in the dispute, but obviously they have a stake, since Nexstar doubtless passes along much of their income to the network. CBS is the only one of the four or five major networks who hasn’t opted into Netflix or Hulu or Amazon Prime; instead, they have their own app for streaming CBS content, and they charge a pretty penny for it. Nearly as much as an entire Hulu subscription, in fact. And ordinarily, I’d say, “great! If the market will pay it, charge it!” but CBS isn’t even being upright about their app. You can’t stream entire past seasons – only the current season, for some shows, or maybe one season past. That’s because CBS is also protecting their DVD/Blu-Ray revenue stream, another outdated form of revenue. So CBS – the one company who actually deserves some revenue, here, because they’re the ones actually paying to produce the content – makes it as difficult as possible for you to get the programming you want. They’re protecting every dying form of revenue they can, while failing to acknowledge what is clearly the way forward.

So everyone loses, here, including the consumer.

CBS’ rationale for running their own app, versus joining Hulu (where you can only watch older CBS “library” shows like I Love Lucy), is interesting. NBC, ABC, and the other Hulu players probably make a penny or so every time someone watches one of their shows on Hulu. I doubt they make $10 if I binge watch an entire season of a show – versus the $20-$40 DVD box set I’d have otherwise had to buy. So there’s a strong argument that Netflix, Amazon, and Hulu are devaluing video entertainment, in much the same way that Amazon’s Kindle Unlimited program devalues the written word.

But here’s the thing about that. Perhaps video entertainment has been wildly over valued. Million-dollar-per-episode celebrity salaries, multimillion-dollar production budgets, extensive industry unionization – there’s an entire universe that has been sucking at the teat of massive revenues for a long, long time. And while the production values have been climbing steadily, that has the unfortunate side effect of blocking out small players. Maybe if video entertainment were de-valued a bit, productions would trim their budgets a bit, making shows less expensive to produce, and more profitable at pennies-per-view. Those lowered expenses might lower production standards a bit, but that would open up the door to a wider variety of independent content producers. It’d level the playing field a bit, in other words, opening the door to more diversity, more creativity, and so on. And yes, possibly at the expense of high production values.

But honestly, the old 1960s Doctor Who episodes – with their cheesy productions – are still as much fun to watch as the modern, CGI-enhanced episodes, right?

Anyway, like music before it – and with much higher stakes – television is clearly an industry struggling to find its relevance in the modern world. The old trifecta of network, affiliate, and carrier is finally breaking down, the ugly seams showing. Producers are casting about, trying to find a way to keep alive while their age-old business model crumbles around them. And, while they struggle, it’s the actual consumers who get shafted, while everyone else stands around pointing the finger at each other.