Verizon Proposes to Pay for Channels Based on Audience

Verizon Communications wants to switch up the way things work in the pay TV industry. Presently, the provider pays fees in order to carry various TV channels, but the company is proposing to tie those fees directly to how many viewers actually watch the channels. Verizon, whose FiOS TV is the sixth-largest pay TV provider in the nation, has begun talks with several smaller media companies about the prospect.

Verizon wants to pay these media companies “for their channels based on audience size, according to Terry Denson, the phone company’s chief programming negotiator,” reports the Wall Street Journal. He would not identify any of the media companies.

“Under existing arrangements, distributors like cable and satellite operators pay a monthly, per-subscriber fee to carry channels based on the number of homes in which they agree to make the channels available, regardless of how many people watch those channels,” explains the article. According to Denson, that means the company is “paying for a customer who never goes to the channel.”

Instead, Verizon would like to offer broad distribution of a “significant number of channels,” with each channel being paid according to how many subscribers actually tuned in each month for a “unique view,” which is a minimum of five minutes. That viewership would be measured by Verizon’s set-top box data.

If put into practice, the proposal would not mean anything for subscribers’ cable bills, explained Denson. But over time, he said, he hopes the shift would “stabilize retail prices for consumers,” unless more people started watching smaller and midsize channels. If retail prices increase, “it would be due to consumer consumption,” he said.

“In the process, it could make the pay TV industry a more interesting place for the kind of entrepreneurs that currently gravitate to the Web,” notes WSJ in a follow-up piece. While the proposed model is disruptive, it is “also one that would sound pretty familiar to almost all new Internet-based media companies: cheap access to a distribution platform, with revenue coming in based on how many users you can attract.”

The follow-up suggests that it “sounds like a pretty good recipe for startup TV channels, particularly ones built on the same assumptions that drive Web-native media companies: start small, keep costs under control, and grow alongside your audience. The current model requires almost the exact opposite — and that goes a long way to explaining why genuinely offbeat or innovative little start-up TV channels on cable are so few and far between.”

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