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Cable Technology Feature Article

January 24, 2012

Cox to Sell a Stripped Down, No-Sports Tier

By Gary Kim, Contributing Editor

Cox Communications is introducing a new economy tier of service costing about $35 a month. The "TV Economy" tier includes local broadcast networks and about 20 expanded basic channels, including Discovery Channel and Nickelodeon, but does not include ESPN, the most expensive channel. 

The omission of sports channels is the biggest decision Cox has made in crafting the channel line-up. ESPN always is considered a "must have" channel by video distributors, so its absence represents a major change in thinking, at least for a tier expected to appeal to only a subset of potential and current customers.

The price also includes a rental fee for one standard-definition set-top.

The move follows the launch or trial of similar video packages from Comcast Corp. and Time Warner (News - Alert) Cable.

Cable operators are hoping the lower-cost packages will help slow the flow of departing customers looking for less expensive TV alternatives. To be sure, cable operators long have offered inexpensive “lifeline” services featuring broadcast TV channels, local origination and shopping channels.

The latest moves, though, attempt to bundle just enough additional programming to create value at a lower recurring cost. Distributors big enough to qualify for volume discounts s pay ESPN about $4.69 per subscriber each month, while TNT costs $1.16, and Disney (News - Alert) Channel goes for 94 cents, according to SNL Kagan.

The biggest decision was the omission of ESPN and regional sports networks.  Distributors have been complaining about the ever-growing costs of acquiring programming, especially the costs of sports programming. The new packages might or might not work, but will be possible only if most consumers do not buy them, as programming contracts frequently require carriage on the “most popular” tiers of service.

The new tier will cost about $60 a month less than the “TV Essentials” or “basic” service Cox has been offering. But many consumers will find themselves paying more than $35 from the start. Note that many of the channels are “high definition,” and will require rental of a high-definition decoder. Also, the quoted $35 monthly price includes only a single decoder. Customers who want to watch on additional outlets will need decoders for those outlets as well.

Although pricing and options will vary slightly by market, the discounted service typically will include a mix of standard definition and high-definition versions of local broadcasters, shopping channels, C-SPAN, and superstations (WGN and TBS) in addition to a lineup with AMC, Animal Planet, BET (News - Alert), Cartoon Network, CNN, Comedy Central, Discovery, Disney Channel, E!, Food, Fox News, Galavision, History Channel, Lifetime, MSNBC, Nickelodeon, TV Guide, TruTV, The Weather Channel, TV Land, and USA.

In order to keep costs down, it won’t have ABC Family, A&E, Bravo, CNBC, ESPN, ESPN2, FX, HGTV, HLN, MTV, regional sports, SyFy, Speed, Spike, TNT, TLC, The Travel Channel, and VH1, for example.

Many observers think uptake of the stripped-down tier will be modest. Both programmers and distributors hope that will be the case. Too much demand will slice subscription and ad revenues. More important, should the “Economy” tier become the most popular, Cox won’t even be able to offer it due to programming contract clauses.


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Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Rich Steeves