[opendtv] Re: Cablevision to offer HBO Now streaming service - MarketWatch

  • From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
  • To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
  • Date: Tue, 24 Mar 2015 09:06:33 -0400

On Mar 23, 2015, at 8:39 PM, Manfredi, Albert E <albert.e.manfredi@xxxxxxxxxx> 
wrote:
> 
> Craig Birkmaier wrote:
>> 
>> 
>> First, the service does not start until April - you can't block
>> something that does not exist yet.
> 
> The service may not exist yet, sure, but the mere fact that HBO has to bend 
> over backwards to convince these ISPs is proof enough. With Title II, it 
> would be a much simpler matter. It would only be a matter of defining "fair 
> and equitable" terms, in comparison to similar services like YouTube, Hulu, 
> Netflix, Facebook, and so on.

Proof of what?

HBO has been, and will continue to do the majority of its business with the 
MVPDs. HBO Now is targeted at cord cutters and cord never's. Title II has 
nothing to do with this. The MVPDs have no obligation to sell HBO Now, as HBO 
is signing up new middlemen to offer the service; first Apple, then Sony, Roku, 
Google, Amazon etc. 

The only relationship to Net Neutrality is that HBO Now will be delivered over 
ISP pipes, the majority of which are owned by the wire/fiber MVPDs. If they 
blocked or throttled these bits it would be a Net Neutrality issue. But they 
are not that stupid.

The MVPDs are in a good position to use HBO Now as part of their migration 
strategy to an all IP infrastructure. First by offering it in a bundle with 
broadband, then as a service they will sell alongside whatever replaces today's 
extended basic bundle. I believe this is where you suffer from a major 
disconnect. The MVPDs will not sit idly by and let Dish Sling, Sony Play 
Station Vue and Apple TV siphon off their video subscribers. Already you can 
call your MVPD and say you want to cut the cord; they will then pull out the 
unpublished price list and start dealing. 

The MVPDs have used HBO as an enticement. For years. Most of the promotional 
bundles include HBO for free for three months - they hope you will get hooked 
and keep paying for it. They can afford to do this because of the 50% revenue 
split with HBO. In recent weeks, several MVPDs have dropped the price of HBO to 
$10/mo. This was published before the HBO/Apple announcement.

http://consumerist.com/2015/01/30/are-cable-companies-lowering-hbo-rates-in-advance-of-standalone-hbo-go/

> This is according to TVpredictions.com, which reports that Comcast recently 
> dropped its standard HBO subscription rate from $18.95 to $15, which just 
> happens to be the number that most — including Consumerist readers — are 
> predicting for the HBO streaming service.
> What’s more, Comcast is apparently offering a promotion that cuts the monthly 
> rate to $10 for people who order online.


With the 50% split for the traditional streaming version of HBO the MVPDs have 
some room to deal. Their cost for HBO is probably about $7.50/mo, although HBO 
may give them even more leverage with special promotions. Their cost for HBO 
Now will be $10.50/mo given the 70/30 split HBO is seeking for the new service. 
So they can decide whether it is worth it to offer HBO Now, or just let Apple, 
et al go after the cord cutters. 
> 
>> The onLy change is that this service does not require a
>> subscription to a MVPD bundle as well.
> 
> The "only" change is that the entire model is different, Craig. It makes HBO 
> equivalent to your lawn service web site, as far as the ISP is concerned.
> 
> Would it not seem plain flat wrong, if your ISP denied access to ABC Lawn 
> Service, because it didn't want competition against DEF Lawn Service? That's 
> exactly what they are doing, when they resist allowing access to HBO Now. I 
> don't think ANYONE would accept such behavior from their ISP, for access to 
> their favorite lawn service, and yet you seem to think it's perfectly okay 
> for a movie site.

Stop it Bert. As long as HBO Now is available nationally from one or more 
companies like Apple, the MVPDs are under no obligation to sell the service; 
they can keep selling the linear service with HBO Go and take their chances 
with the cord cutters. Your obsession with the idea that they will block others 
from delivering the bits is unfounded. 
> 
>> Yes, there was a time when many systems only offered HBO as a
>> premium add on to other video services. That has not been the
>> case for more than a year
> 
> Months in most cases, not over a year. Exactly, Craig. HBO saw that the 
> middleman was becoming an obstacle for their continued success, so they 
> started taking action. These changes, from the slimmed down new MVPD bundle 
> to the unwalled HBO option, are a direct result of competition **from the 
> unwalled Internet**. No reason to think otherwise. As I said, you need only 
> pay attention to what the owners of content are saying. Doesn't matter what 
> different ideas the MVPDs or even the FCC might have. 

I can agree for the most part with the competition argument. Clearly the 
Internet is the future and we are beginning to see new options that did not 
exist last year. If Apple offers the networks I watch at a lower price I will 
drop the extended basic bundle and use only the ISP service from Cox. HBO is 
irrelevant to me as I have never subscribed and have no interest in pay $15/mo 
for it.

The owners of content want one thing - to maximize their profits. They will 
play both sides against each other as Time Warner has done with HBO Now. But 
the vast majority of their revenues come from the extended basic bundle 
delivered by the MVPDs, and most likely will for at least another decade. Don't 
forget that cord cutters and cord never's are only 10% of the market, and only 
a small percentage of these people will subscribe to HBO Now or a slimmed down 
TV bundle from Dish,  Apple or Sony. The larger threat is that people like me 
will defect to Sling or Apple TV - so the MVPDs are going to have to fight to 
hang onto their customers; and they will, by lowering prices and offering their 
own slimmed down bundles.

Hopefully you won't disagree with this, as it is YOUR mantra. Competition is 
good!
> 
> 
>> Because they are not blocking anything.
> 
> Oh, okay, so provide evidence that Comcast, Cox, TWC, and others, are all 
> allowing their broadband subscribers access to HBO Now. Blocking is blocking, 
> Craig.

Provide evidence that they intend to block me from getting HBO Now from Apple 
when it launches next month?

The analysts have been all over the board on this; many have been completely 
wrong. The only holding back among MVPDs is related to whether they will sell 
HBO Now too. I have explained this previously and in this post. It is a 
business decision and has NOTHING to do with net neutrality.
> 
>> Yes, HBO Now is targeted at Cord Cutters. But you are incorrect that
>> these people represent lost HBO subscribers.
> 
> Irrelevant. HBO wants to compete in the Internet era, on their own terms, 
> begging permission from no middleman they don't need, and most of the ISPs 
> won't let them.

Begging permission Rome middlemen they don't need? 

Who?

HBO teamed up with Apple for very good business reasons, and gets more money to 
boot. You can expect most of the MVPDs to follow Cablevision and offer HBO Now 
with their ISP service.

No ISP is going to block HBO bits given the high visibility of net neutrality, 
with or without Title II regulation. As I pointed out before, the only blocking 
that has taken place is by the content owners, who have blocked bits to some 
devices. Too bad the FCC has not gone after them.

But this discussion does bring up an interesting issue. Previously we have 
talked about the early Internet walled gardens like AOL, which offered both 
"content and carriage." Thanks to the web, content and carriage evolved into 
separate services. When we subscribe to an ISP service we do not expect them to 
offer us content too.

But those lines are blurring. We now expect our MVPD video bundle to give us 
access to TV Everywhere sites like Watch ESPN and HBO Go (if we pay for HBO). 
And now Cablevision will offer HBO Now along with ISP Service. 

This all comes back to who is responsible for customer service and billing. The 
MVPDs are good at this (at least the billing part), which has made life easy 
for the content owners, who just get big checks from the MVPDs. HBO decided to 
work with Apple based on two major reasons:
1. They were already selling tons of HBO shows via iTunes;
2. Apple has a huge base of devices including iPhones, iPads, and Apple TVs, 
and 400,000,000 customer credit cards set up to collect the monthly fees,

Flash forward to 2020, when analog cable is set to disappear, and VMVPD bundles 
and ala carte OTT sites will be commonplace. Will Joe Sixpack sign up for 10 or 
more subscription services all hitting his credit card, or will he choose 
bundles that are better optimized for the content he wants? Or will something 
entirely new emerge, like access to everything with micro payments for the 
shows you actually watch?

We can logically assume that the MVPD/ISP services will try to bundle content 
with their broadband service, just as they did decades ago with their "CATV" 
service.

As you frequently state - correctly IMHO - the content owners are in the 
drivers seat. They will have no problem selling popular networks, but hundreds 
of rerun channels are likely to disappear, unless they choose to offer them for 
free (with ads). Even this is questionable, as consumers are showing a 
preference for VOD. 

So the reality is that everyone is experimenting and learning, and analysts are 
just guessing at the outcome, which is what they get paid to do.

> Again, you feel obliged to couch everything in walled garden terms. The 
> "other options" you listed were merely to expand the 40 year old cable TV 
> business model with one extra channel, when consumers are bailing out of that 
> now-anachronistic model. HBO wants to be accessible to anyone with a standard 
> box of their own, Craig.

I was merely pointing out that this option exists. It goes along with the 
experimentation.

Yes HBO wants to be available to everyone. But they have shown no sign of 
wanting to deal with customer service and payments, much less actually selling 
boxes to get HBO Now on your TV.

 Sometimes I wonder where you come up with this stuff...


Regards
Craig

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