[opendtv] Re: Apple TV: Eddy Cue on streaming video and TV channels - Nov. 6, 2015

  • From: Craig Birkmaier <brewmastercraig@xxxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Tue, 10 Nov 2015 08:23:26 -0500

On Nov 9, 2015, at 9:25 PM, Manfredi, Albert E <albert.e.manfredi@xxxxxxxxxx>
wrote:


You seem to be fixated on "second revenue streams."

Not me dude. The content owners are the ones raking in billions...

The congloms can each create their own separate and competing sites, much
like CBS All Access has done, or HBO Now, and they can decide on the mix of
ad revenue and/or subscription fees.

First, get over the HBO Now thing. They have never been part of "the bundle"
and have never collected a dime in "subscriber fees." They are a premium tier
unto themselves with an itemized monthly fee on the MVPD bill. Nobody is forced
to buy HBO if they get other cable or DBS services. In fact, a few cable
systems are selling HBO Now in a package with broadband (i.e. NO TV bundle).
HBO Now is an additional way to buy the "HBO Bundle," which has more in common
with a service like Netflix than a channel like ESPN.

It is true that the congloms, like CBS, can create their own sites. How's that
work'n out for Les?

Funny, that they are not putting out press releases claiming millions of people
signing up. The broadcast networks need to be available to everyone, just a
click away. That is critical to their business model, as are the subscriber
fees they collect from the MVPDs. No conglom wants to risk not being easily
available to viewers; if they started charging $6/mo each they would see a huge
part of their audience and the associated subscriber fees disappear. It is
unlikely they could make as much going direct to consumers.

This is the same dilemma faced by ESPN; in order to break out of the bundle and
break even in the process, they would need to charge so much that it would be
very difficult to survive.

Bundling is not going away, although the form of bundles is evolving.

You DO NOT need to have bundles of multiple congloms' content, to achieve
this effect. These content owners are using both single and dual revenue
stream models, and no indication this will change.

They DO need bundles to survive. They cannot risk allowing viewers to choose
NOT to pay for their content. Nor can they depend on viewers seeking out ad
supported programs on their .com sites. That requires too much effort, at least
in today's world.

What is going away are all the rerun channels that they have been collecting
subscriber fees for by leveraging the demand for the broadcast network or other
important networks like ESPN, the Disney Channel, A&E and TBS. But they are
getting new revenue streams for their library content by licensing it to the
SVOD bundles like Netflix and Amazon Prime.

You won't like what I am about to say, but it is very important.

When Apple launches their new TV service, each of the congloms needs to have an
app on that screen that is part of the service people are subscribing to. You
can think of this in the same terms as Sling TV, a core bundle of networks that
forms the basis for the service. If Apple is persuasive enough, they may get
some of the second tier services to agree to being sold ala carte. I just don't
see a scenario where every network is sold ala carte, even if Apple acts as the
middleman collecting the subscriber fee.

Regarding HBO:
Nor are they looking for a second revenue stream.

Are you finally waking up from your fifty year nap? They don't need a second
revenue stream from subscribers, because subscribers have always paid a premium
for their service. The first revenue stream is $15/mo.

It's definitely NOT trending to the bundles composed of content from multiple
congloms exclusively, as it HAD to be previously with walled garden
distribution nets. Now both models can coexist. Sling TV vs CBS All Access,
for example. No need to be stuck on the old formula.

Sling IS the old formula, slimmed down a bit and delivered over the Internet.
One of the primary reasons it is not going anywhere is that it is incomplete;
some of the most important content is missing. No broadcast networks. No Fox
News Channel (the top rated cable network when football is not in season).

CBS All Access is an experiment - primarily a VOD play. They can't offer their
most expensive and popular content - The NFL. That being said, it is not
threatening the other ways that CBS relies upon to reach viewers; anything they
get is mostly gravey, once the base cost of operating the service is covered.

We can speculate about how CBS and others may use services like All Access to
sell premium content in the future. If the experiment with Star Trek works, we
may see more content sold this way. Instead of running the best new shows on
the broadcast network, they might offer the teaser episode free, then require a
subscription for the rest. In an App driven world, this might mean subscribing
to All Access, or they could simply create the Star Trek App and sell a season
pass, along with VOD access to the old Star Trek shows.

But the congloms were streaming before Hulu came to be, certainly by 2005. I
was watching back then, occasionally, and they were using Windows Media and
Real Media at the time. Flash was a big improvement, and it appeared in 2005.

You are getting a bit ahead of yourself. We were all playing with Internet
video back in 2005. But few were actually watching program length video
streams; if you wanted to enjoy a movie or TV show you downloaded it first. If
you don't believe me, look at the FCCs 2005 video competition report.

You Tube launched in 2005. The networks had web sites that featured some video
clips, but not full length programs. CBS was offering some news clips.

The "modern age" of OTT video began around 2007 when modern streaming protocols
using adaptive bit rate via HTTP began to emerge. Protocols like Adobe's RTSP
and Apple's HLS made OTT streaming a viable business, along with the growth of
CDNs like Akamai.

OTT did not become a significant competitive "threat" until at least 2010, if
not later.

http://www.theguardian.com/media-network/media-network-blog/2013/mar/01/history-streaming-future-connected-tv

http://www.streamingmedia.com/Articles/ReadArticle.aspx?ArticleID=74052

Funny, I found the first article while writing the paragraphs above. You
should read it, as it confirms what I wrote above. We were all playing, and
suffering through the early developments that led to the development of viable
OTT streaming services like Netflix.

What a blind spot you have, Craig. These limited use boxes are attempting to
create their own walled up ecosystems, having to make the same types of deals
that MVPDs were making previously with the content owners.

Please read what you just wrote, put it in bold italics, and burn it into your
memory.

Who is controlling these deals Bert?

It is not the box providers, just it was not the cable STBs that drove the
unending increases in the price of the MVPD bundles. The content oligopoly is
driving this, controlling the shift to Internet delivery so as to maintain the
lucrative profits they are making by working together as a "legal" oligopoly.

Notice even the mention of "original content for Apple TV," for example, in
that article. Amazing how you miss this. All of this, when the content owners
have been using Internet streaming already, for a decade or more, with no
under-the-table collusion necessary. Yes, at least there are competing
proprietary ecosystems that anyone can use, in a any location, with these
limited boxes.

Not even close to reality.

The first major content deal was between Apple and Disney in 2005, bringing ABC
shows and Disney movies to iTunes for paid downloads. Hulu came in 2007 and
Netflix in 2008.

The fact that the networks provide FOTI streams of some of their shows is
irrelevant to this discussion. Those shows are FREE from broadcasters and
required for any cable or Fios service; the local station package is an add on
for DBS. By the way, I now get a "broadcast fee" surcharge on my cable bill to
help pay those retrans consent fees.

It seems that nobody cares about access to the broadcast networks but you. The
vast majority of U.S. TV viewers care about the content behind the pay walls,
both the live linear services from the MVPDs and the SVOD services from Netflix
and now Amazon. Even the Millennials watch this stuff...

with borrowed authentication passwords.

The ecosystems built around these "limited-use" boxes are evidence of real
market competition. Yes, we are seeing limited exclusive windows, as was the
case with Apple and HBO Now. And we will continue to see exclusive licensing
deals, like the older shows from HBO on Amazon Prime. Exclusive content is what
sells bundles - like the billions Netflix is spending on original content to
sell its SVOD service.

You are stuck in the past with the network.com services for browsers. All of
these services are now available as apps on the limited use boxes. That is
where the next stage of competition will take place.

The new Apple TV goes well beyond these boxes; with the ability
to support Apps it will allow ANY content owner to offer content
to those in the Apple ecosystem

And my PC, with a single browser app, can do this and a whole lot more. Can
AppleTV shop at Amazon, even while watching movies?

Must be a lousy movie...

More importantly, because clearly Apple TV *could* do that, *why* isn't it
being allowed to?

That's not up to Apple. If Amazon wants to sell stuff through Apple TV they can
create a app for their stores.

They WON'T, because Apple will ask for a share of the revenues from that App.
So we will continue to use our iPads to shop while watching Apple TV, and if we
want to share something we are considering buying we can put the web page up on
the TV with Air Play.

This is no different than Amazon choosing to stop selling Apple TV boxes and
not creating a free Amazon Prime app for Apple TV; but they do offer a free App
for Amazon Prime for the iPad and iPhone.

It's the nasty world of competition Bert, something completely lacking with
those limited-use cable boxes.

Regards
Craig

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