Episode 691: The Great Unbundling : Planet Money There's a revolution underway in the world of cable TV--more and more people are getting rid of it. And there are some unforeseen consequences when we cut the cord and go our separate ways.
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Episode 691: The Great Unbundling

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Episode 691: The Great Unbundling

Episode 691: The Great Unbundling

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STACEY VANEK SMITH, HOST:

Not that long ago, I did something that a lot of people are doing right now. I canceled my cable TV subscription. I was fed up with my cable company. I felt like I was paying for all these hundreds of channels that I was never watching. So I called them up, and I said, I'm done. And it felt so good.

DAVID KESTENBAUM, HOST:

But?

VANEK SMITH: But what I didn't realize was that in doing that, I was messing with this whole ecosystem. There were consequences to my cord-cutting that I did not realize.

KESTENBAUM: Sometime after you did that, hundreds of miles away on a horse farm in Middleburg, Va., Michelle Lane Smithwick was sitting down to turn on her television to watch her favorite channel, RFD-TV.

MICHELLE LANE SMITHWICK: They had a lot of the training shows about horses, horses that wouldn't get on trailers, for instance.

VANEK SMITH: Oh, like, how to handle a horse that won't get on a trailer?

SMITHWICK: Exactly, yeah.

VANEK SMITH: Apparently, getting a horse into a horse trailer is like getting a cat into a pet carrier times a thousand.

SMITHWICK: It's nice to sit and watch something that, you know, you really love, like animals, and see nice things on television instead of, like, those goofy real housewives.

KESTENBAUM: RFD-TV has shows about farming equipment.

(SOUNDBITE OF TV SHOW, "MACHINERY SHOW")

DAVE MOWIS: Hello, I'm Dave Mowis (ph) with Successful Farming Magazine, and welcome to the "Machinery Show."

VANEK SMITH: Rodeos.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MAN: And there is Trevor Brazil, 23 times the world champion, competing here in the tie-down roping and the team roping.

KESTENBAUM: Just a few months ago, Michelle turned on her TV, and she could not find the station.

SMITHWICK: So I was surfing, looking for it. And it was always, you know, easy to find because it would be the, you know, it would be the one with the animals. And then I never found it. It was gone.

VANEK SMITH: Michelle's cable company, Verizon, had dropped RFD-TV. Other channels were gone, too, The Weather Channel and the Outdoor Channel.

KESTENBAUM: For years, if you were watching TV on cable or by satellite, you were doing more than watching TV. You were part of this big, communal experiment. We all paid our cable bills of $100 or whatever a month. And in exchange, we got hundreds of channels, the ones we wanted and the ones we just did not care about at all.

VANEK SMITH: But there is a television revolution happening right now. The system of us all paying for each other's channels is breaking down because of people like me who are choosing what we want.

KESTENBAUM: Or what you think you want. There are consequences, consequences for Michelle and consequences for you.

(SOUNDBITE OF MUSIC)

KESTENBAUM: Hello, and welcome to PLANET MONEY. I'm David Kestenbaum.

VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, the great unbundling, what happens if we all cut the cord and go our separate ways.

(SOUNDBITE OF MUSIC)

KESTENBAUM: The story of this one channel explains the whole monumental shift going on right now in cable and TV in general. RFD-TV was started by this man, Patrick Gottsch.

PATRICK GOTTSCH: Patrick Gottsch rhymes with scotch.

VANEK SMITH: Patrick started this channel 15 years ago. And at this time, cable was really taking off, and Patrick got a job installing satellite dishes in rural Nebraska.

GOTTSCH: The big ugly 10-foot satellite dishes.

VANEK SMITH: (Laughter) I remember those.

GOTTSCH: And I put in a lot of dishes. I mean, that's when back when satellite dishes were three, $4,000.

VANEK SMITH: Patrick said he would always do a little follow-up call with people a couple weeks after he'd install the dish, and they always said, I love having all these channels.

GOTTSCH: But they always said, but wasn't there a network for farming and ranching and the rodeo and for rural America, and just heard that over and over and over again.

KESTENBAUM: So, Patrick thought, I'll do it. I'll make a channel for ranchers and farmers. And where today you would give your channel some name, like the horse channel or something or rural life, he went with something totally cryptic, RFD-TV, which stands for...

VANEK SMITH: Rural free delivery, it's actually not that cryptic. If you live in the country, you've probably heard of it. It was a mandate by Congress to make sure that the postal service would deliver mail everywhere, even to really remote parts of the country.

KESTENBAUM: In that sense, it was perfect. And one day, the Dish Network called him and said, listen, channel 9,409 is open. It's yours if you want it.

GOTTSCH: And got word on November 15, they contacted me and said, you've been accepted. Can you launch by December 15?

VANEK SMITH: (Laughter).

GOTTSCH: And of course, I said, oh, yeah, you bet, no problem.

KESTENBAUM: Actually, there was a problem. He didn't have any programming. He had no equipment, nothing.

VANEK SMITH: So, Patrick started calling up everyone he knew who had anything that resembled programming. There was this horse trainer he knew who made these instructional videos. He got those. Another friend of his had a country news show in Texas on the local station. He got that.

GOTTSCH: There was a gentleman in Omaha, Neb., that did polka music shows on the local CBS affiliate, the "Big Joe Polka Show."

(SOUNDBITE OF TV SHOW, "BIG JOE POLKA SHOW")

UNIDENTIFIED MUSICAL GROUP: (Singing) Hooray for Jolly Joe. He's welcome everywhere. Rain or snow, he sings and doesn't care.

GOTTSCH: And I said, you have tapes of your old shows? Can we put them on? And that's what we used for programming.

KESTENBAUM: You know, my grandfather used to have a show on New York cable.

VANEK SMITH: Really, about what?

KESTENBAUM: Yeah, he would just like - about the information telecommunications revolution or something. He called it another sort of terrible name. He would just drag in people. He dragged in me once...

VANEK SMITH: Really?

KESTENBAUM: ...As, like, a 12-year-old and interviewed me about the computers at my school, yeah.

VANEK SMITH: (Laughter) You were an early TV star.

KESTENBAUM: I was an early TV star.

VANEK SMITH: You could've had a show.

KESTENBAUM: These were the early days of cable. You know, for Patrick, people just gave him these VHS tapes of their local shows of, like, horse training videos or cattle auctions.

VANEK SMITH: And then Patrick took all of his savings, and he bought a computer, and he edited all of these videos down into a five-hour chunk, and he sent it to Dish to run on a loop for a week.

Where were you running the station out of or where was - I mean...

GOTTSCH: My living room.

VANEK SMITH: You were running the station out of your living room?

GOTTSCH: Yeah.

VANEK SMITH: How did you do that?

GOTTSCH: We didn't have any money, and it was just myself and my 12-year-old and 9-year-old daughter at the time that were recording these shows on a hard drive and sending them to Dish. So it cost us $28 a week...

VANEK SMITH: (Laughter).

GOTTSCH: ...To launch this network. And that's what it cost to send a hard drive by FedEx overnight from Fort Worth, Texas, to Cheyenne, Wyo.

VANEK SMITH: On December 15 at 1 p.m., Patrick and his two girls sat in a row on the white couch in their living room, turned the TV to channel 9,409, and they watched RFD-TV, this channel that they had made, come to life.

GOTTSCH: You know, we jumped up and down and big smiles on her face and, you know, kind of, like, one of those we did it moments.

KESTENBAUM: People liked it. Two years later, Patrick got a call from DIRECTV, saying they wanted to carry his channel because so many people had called in to request it. This is the nice thing about the community model of cable where everybody gets lots of channels. It gives lots of channels a chance.

VANEK SMITH: The cable companies loved it. They got to say, hey, we've got hundreds of channels for you to choose from.

KESTENBAUM: And it didn't really cost them anything extra to give you, say, RFD-TV because once the channel already existed, you know, and you already had the cable or the satellite in your home, all they had to do was tap keys, and then there you go, one more channel.

VANEK SMITH: And over the next 15 years, RFD-TV grew into a legit channel. They added news, a lot of commodities news about corn prices, wheat prices. They started broadcasting all the rodeos. The channel was picked up by Optimum, Time Warner, Verizon. And a lot of people were watching, during prime time, over 100,000 people. It's not as big as a channel like CNN - those get up to a million - but still, very respectable.

KESTENBAUM: Advertisers came on board, John Deere and Dodge. And then just a few months ago on Christmas Eve, Patrick checked his email - and he had a lot of email - from viewers, including from Michelle, the horse farm owner, all saying basically the same thing, where did you go?

GOTTSCH: I started getting emails from Verizon subscribers saying, why is Verizon dropping you? And I had no idea what they were talking about. And that's how we found out.

VANEK SMITH: The world of cable was changing.

KESTENBAUM: If you were someone like Michelle who loved this channel, you were happy it was there in your giant bundle. But if you were like me, I don't think I would ever stop on this channel, I mean, maybe if I happened upon the scene with people trying to get the horse into the trailer or something.

VANEK SMITH: (Laughter).

KESTENBAUM: But otherwise, my reaction would be, why do I have to pay for this channel? I mean, it's like going into a grocery store to buy an apple, and they're like, sure, you can have the apple, but you also have to buy a kiwi and a pear and a pineapple. And you're like, I just want the apple.

VANEK SMITH: The cable company started hearing a lot of this and seeing it. All of these people started canceling their cable subscription and instead watching Netflix and Hulu and Amazon. So, Verizon said, OK, customers, you do not have to buy our huge bundles, which had over 400 channels. We will offer these little skinny bundles with, like, 50 channels. And then if you want extra stuff, you can add on little custom packages, like sports or movies or kids entertainment. This is, like, kind of a more tailored package.

KESTENBAUM: Nowhere in there, though, was there an option to get RFD-TV. Just like that, overnight, RFD-TV lost about 17 percent of its viewers. Patrick Gottsch says when he first saw the new viewership numbers, felt terrible.

GOTTSCH: Very depressed, we'd worked so hard for so many years, where ratings just kept going up and distribution just kept going up. This is a new deal for us. We - no one's really dropped us like this before.

VANEK SMITH: Patrick was not about to take this lying down.

GOTTSCH: Our attitude is with Verizon, we can do this the easy way or the hard way, your choice. Right now, we've got to do it the hard way.

VANEK SMITH: OK, that sounds just like right out of a western.

GOTTSCH: (Laughter).

KESTENBAUM: He took out ads in The New York Times and the Washington Post aimed at Verizon with a kind of awesome headline in red.

GOTTSCH: The headline said, drop us, drop you.

KESTENBAUM: The ad encouraged cable customers to drop Verizon.

VANEK SMITH: So this was a full-page ad. That's a...

GOTTSCH: Full-page ad.

VANEK SMITH: ...A big font (laughter).

GOTTSCH: Yup, yeah, well, I designed the ad myself. I still do all that.

VANEK SMITH: I called up Verizon, and a spokesman told me, listen, we dropped a lot of channels. It just doesn't make sense to carry RFD-TV anymore.

KESTENBAUM: We have talked here on PLANET MONEY about the day that the bundle world would start to break down, and it looks like it is happening now. We are entering this world where, a lot of times, we can pay for just the thing we want.

VANEK SMITH: Which feels like more choice, but it's also in a way less choice. If you are Michelle, the horse farm owner, your favorite channel is now gone. You can't get it.

KESTENBAUM: And there is a big debate out there. Is this a better world or a worse world?

ROBERT THOMPSON: Well, that's a hard question.

VANEK SMITH: This is Robert Thompson. He teaches about the business of television at Syracuse University.

THOMPSON: I think a lot of rational human beings think that what makes sense is, why don't I pay for what I watch? You simply put a price tag on every single one of these channels and that's what you pay for. However, in many ways, they don't realize what might happen if we go complete - if we get rid of bundles entirely.

VANEK SMITH: Here is the case for bundling. For a lot of people, it's a really good deal. Imagine a world without bundling. Everybody just picks whatever channels they really love, and they pay for those separately. But now every channel has fewer viewers. So they have to charge those viewers more money, say, $10 a month. If you pick eight or nine channels, you are paying $80 or $90 a month, which is pretty much what you'd be paying for 400-plus channels in a big bundle.

THOMPSON: It was kind of the idea of the golden age of the shopping mall, where you go into one of these big shopping malls, and likely, you're only going to go to six or seven of the 150 stores there. But your six or seven is going to be different than anybody else's six or seven. "Saturday Night Live," I remember, did that classic sketch where there was a store in a shopping mall that sold nothing but Scotch tape.

KESTENBAUM: But here is the argument on the other side, all right, the argument that says the unbundled world is better. In an unbundled world, everyone picks exactly what they want to watch. And so those channels, they have to work really hard to be something that people want to watch at a good price. So maybe, in an unbundled world, ESPN would have to look at its coverage of football games and say, you know what? Maybe we shouldn't have quite so many cameras. We can do it with, like, a little bit of a scaled back production. And maybe that would make it cheaper to buy ESPN. Maybe RFD-TV would not exist. But, you know, too bad, maybe they should offer it streaming online. If people want it, they can pay for it.

Also in unbundled world, there's this huge incentive for stations to come up with really, really excellent shows that people are willing to just go pay and download and binge watch. Like, I just paid for the second season of "The Leftovers." You know, I was super happy to shell out 20 bucks because it's just so good, and I really, really wanted to watch it. I'd be happy in a world where there are just three or four super awesome shows to watch every year, and that'll carry me through the year.

VANEK SMITH: Listen, David. That is the world that I jumped into. I completely got rid of my cable. I sold my television.

KESTENBAUM: (Laughter) You did?

VANEK SMITH: I hated my cable company so much I, like, plowed salt into the earth of my cable subscription. I thought, I'm just going to watch everything a la carte. And I have to say, there a lot of things about it that I really don't like. For one thing, it's just wildly expensive. I have a Netflix account, but it seems like everything I want to watch is never on Netflix, so I have to end up paying separately for it, which just adds up to be a lot of money. The other thing is I just miss the discovery of the old cable model. I learned how to cook because I would happen to be flipping through channels, and I saw "The Barefoot Contessa" on and also used to love watching all of these shows about astronomy, like "Introduction To Neptune" and things like that. I mean, that's not a destination show I would seek out, but I miss those shows. Like, I miss the discovery of the old model of cable, and I'm not spending any less money. Also I'm stealing a lot of it.

KESTENBAUM: (Laughter) That's a lot of talk. Would you really go back?

VANEK SMITH: Oh.

KESTENBAUM: Come on, you haven't, right?

VANEK SMITH: I...

KESTENBAUM: You say you like it, but you haven't gone back.

VANEK SMITH: OK, so I sold my TV...

KESTENBAUM: (Laughter).

VANEK SMITH: ...And I had a terrible relationship with my cable company. I don't want to give them the satisfaction.

KESTENBAUM: The truth is I think the bundle is not totally going away. Like, Netflix is a kind of bundle. Hulu is also a kind of bundle, right? You're paying, and you're getting a whole bunch of programming. There clearly is an advantage to the bundle, and some people like it.

VANEK SMITH: Actually, a lot of people like it. When I called up Verizon and talked with their spokesman, John O'Malley, he told me those skinny bundles that customers were wanting, once they got them, they just seemed so skinny. So he says Verizon has made its skinny bundles bigger.

JOHN O'MALLEY: The ones that came out about a year ago had 50-some odd channels, and the new ones have each, you know, well, over a hundred. That's the feedback we got from our customers, that they wanted to - they liked the skinnier bundles, but they wanted to have more content included.

VANEK SMITH: OK, so they wanted fatter skinny bundles?

O'MALLEY: Yeah, exactly (laughter).

KESTENBAUM: Still no RFD-TV, though, sorry, Michelle.

VANEK SMITH: What are you watching instead?

SMITHWICK: Right now I just have Animal Planet. I'll watch...

VANEK SMITH: Yeah, it's not the same.

(SOUNDBITE OF MUSIC)

VANEK SMITH: I talked to Patrick Gottsch, the president of RFD-TV. He says they are working on new ways to reach customers like Michelle, things like streaming, Apple TV and Roku, but no deals yet.

KESTENBAUM: You can send us email. We're planetmoney@npr.org. Our show today was produced by Jess Jiang.

VANEK SMITH: And if you're looking for another show to try, check out the Ted Radio Hour with Guy Raz. The show covers big ideas and looks at new approaches to solve old problems. Find the Ted Radio Hour at npr.org/podcasts and on the NPR One app.

KESTENBAUM: I'm David Kestenbaum.

VANEK SMITH: And I'm Stacey Vanek Smith. Thanks for listening.

KESTENBAUM: Oh, one more thing, here is ten minutes of how to get a horse into a trailer. It's from a show called "Advantage Horsemanship."

(SOUNDBITE OF TV SHOW, "ADVANTAGE HORSEMANSHIP")

SCOTT PURDUM: Around here now with Heather (ph) and her horse, Sonny (ph). Heather, thanks for being on the show.

HEATHER: Thanks for having me.

PURDUM: Why don't you tell me a little bit about your horse here, how old he is? What are some of the problems that you've been having?

HEATHER: Sonny is a six-year-old quarter horse.

PURDUM: OK, how long have you had him?

HEATHER: I've had him two years.

PURDUM: OK, and the problems you've been having, obviously, we have a trailer behind us, so it's a trailer loading issue.

HEATHER: Yes.

PURDUM: What are some of the things that you've been struggling with?

HEATHER: Scott, my problem is when I go to load him, I have a hard time right now. I normally pull him, and I have somebody behind me pushing.

PURDUM: Pushing, OK, this exercise is really good to teach him how to move away from pressure and get over things on his own. See, what happens is, Heather, like, when you're leading him up onto the trailer, it's probably easy - easier because you're a visual to him. A lot of times, when a horse is afraid of something and you're on the ground, what do you do, Heather? Do you get down and kind of lead him over to it to sniff it? You ever done that before?

OK, well, a lot of times, have you ever noticed, like, when lead a horse over to something to sniff and investigate, a lot of times, that horse might get over it while you're standing right next to him, right? If there is something scary right here, you say, hey, come here. Why don't you sniff this right here? Well, the problem is when you get back on, Heather, have you ever noticed that when you get back on that the horse isn't actually unafraid of it anymore? A lot of times, they're still spooking at it, OK? And the reason being is because the horse - a horse looks at us on the ground as a visual, and - back up. There we go. The horse looks at us on the ground as a visual, and when we're on them, it's a whole another story.

So whether we're doing trailer loading or we're trying to get him over a tarp or trying to get him over a door or a rock, whatever it is, I'm going to use this exercise on the ground because it takes away the visual. See, if I can get this horse away from me, he's more thinking on his own. Does that makes sense? He's more thinking on his own when he's farther away from me. So that's what this guiding exercise is designed to do. When he comes up to the trailer and you start doing the guiding kind of around the trailer, what I'd like you to do is let him investigate it, OK?

Let him sniff it. The more he investigates it, the more he's going to want to go towards it. So just like I said, when they have an attitude and they're looking away, looking backwards, that's where they're going to go. In this case, what we want to do is if he's looking towards it, he'll go towards it, OK? So your whole goal is to just get him to look at this trailer, whether it's looking at this door, whether it's looking on the other side, whether it's looking on this side, OK? So we're just wanting him to look. If he wants to look at the floor here, let him do it, all right? Don't try and push him over here just yet, but just see if you can get the exercise kind of around this trailer, OK? I'm going to come over to the side here, and I'll come in and help you if I need to.

Good, that's it, good. You could've backed him up there, but you're - next time, just remember that and back him up anyway. Keep that. Keep loose on that right hand. There you go. Now stop him. Stop him. Be more forceful when you stop him, just kind of bump a little harder, OK? Now go ahead up on the trailer. Good, now ask him to come over. Push his - that's it. Shorten on your line. Good, two feet, now stop. Stop. That's it. Easy, now - good, now rub him. Let go of him. There you go. Let him be the one to stand there, want to stand there. Good, that's it. Now back him off. Good, good, now ask him to come back forward again.

You go ahead, get up in the trailer. There you go. See, you using that stick is you becoming a wall. Now just two steps, I don't want him to jump. See, easy, keep his head straight. Keep the stick down. You're doing good. One step, two steps and yes, now rub. Let go of him. There you go. You can keep his head straight. You can pull his head straight, but I just don't want you to hold him still. Does that make sense? The more you hold him, the more trapped he could feel. So I just want you to kind of keep loose on his face. That's all. Excellent, now go ahead and back him off. Let's do this a couple more times, Heather. Let's see if we can get him - good, that's good. Go back on. Let's see if we can get him a little bit more solid with going up there. See how he still wants to come over here? That's it. That's it, easy, good. Now one thing, Heather. You're kind of getting anxious every time he takes that one step up. I need you to just be more relaxed.

I need you to kind of just calm down about it. And what I mean by that is every time he takes those two steps, I see his, like, hesitation, the same that I see - can kind of see you be a little bit anxious about it. So what I'd like you to do is just as you ask him to come on, just be a little more smooth with saying, OK, now I want you to stop. Don't change your energy level at all, OK? Because he reads that. The more high up you are, the more high up you're going to make him, all right? Now go ahead and ask him to back off. Keep his head straight. Now you stay on the trailer. Stay right there. Now ask him to come back on. Get him over. That's it. Get him over. Get him over. Good, good, ask him to come up. Shorten on your rope a little bit. Tap if you can't get him to go. That's all right. Just stop and stay right there, OK? I didn't want that to happen, but we'll just do it again.

That's OK. Let him relax. Because we want to teach him to trailer load, OK? So we're going to have to let him relax up there, realize that the trailer's not a bad place to be. And like you said, we're not really getting that bad of a problem right now. We're just getting one that doesn't necessarily always want to listen to you, you know? He's being pretty darn good right now and I'm sure probably better than what he normally is for this. But what do you feel? How do you feel with these exercises? You know, these - they're designed to kind of help you get this horse on more of a self-load. Does it feel like that's what it's doing?

HEATHER: Yeah.

PURDUM: Good, all right, let's go ahead and back him off, nice and gently. Let's see how he backs off this time. Good, slow, keep it nice and slow. Good, get a step, and you can stop there. That's fine. He's unsure. That's good. That was better. Go ahead. Back up. Back up. Get him - that second step off. Good, good (laughter), now even though that wasn't perfect, that was actually better than the last one because that time, he did get a little tense, but he didn't, like, shoot back up, OK? So what I need you to do to help with the backing, number one, try and keep him straighter, really try and help him stay straight. Back him up. Back him up.

You didn't tell him to go forward. OK, stay there. Now gather up your lead rope so it's not so - back him up. You still did not ask him to go forward. There, stay there. OK, now gather up your lead rope here. Good, gather it up, there. Now go ahead and come back on the trailer here. You're going to have to shorten up on that lead rope. There, get back in there. Push him over right now. Push him over, over first, over first. That's it. Now one step, then two steps. That's it. Now just back up and have him - good. Wasn't the most flowing, but he did it better, didn't he?

HEATHER: Yeah.

PURDUM: OK, all right, one last time, come on all the way off here, and you're just going to walk him on, and let's see what we have, and we'll quit on that. Back him off, slow, slow, slow, back, back, slow, that's it. Keep backing. Back up about 20 feet there. OK, now get about two foot down on the rope itself. You got it. Now start walking up to it. Get on the side. Guide him in, nice and slowly, though. So let's see if you can self-load him. Yes, all right, that was better. Give him a rub. Now, Heather, do you feel confident that you can do this yourself?

HEATHER: Yeah.

PURDUM: Really good, you excited?

HEATHER: Yes.

PURDUM: You're not showing it as - enough (laughter).

HEATHER: (Laughter) No, I know. I'm excited.

PURDUM: Really good, really good, all right.

HEATHER: Now I don't have to run around the barn and find somebody to come help me load.

PURDUM: That's right, very good. Now let's go ahead and bring him back off. Don't let him turn his head. There you go, slowly, slowly, nicely done, good. That's what I want to see. Keep going, beautiful, excellent, excellent. All right, Heather, go ahead and just kind of turn him around here so he can face the camera, no eating after all that. All right, very good. Stop there, good. Well, Heather, you did a great job. I'd like to thank you for being on the show. I hope you learned a lot. And I hope our viewers at home learned a lot as well. If you have any questions or any...

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