[opendtv] Re: Cord Cutters Are Few, But Tons of Us Are Streaming Video | Fox News

From: Craig Birkmaier <brewmastercraig@xxxxxxxxxx>
To: opendtv@xxxxxxxxxxxxx
Date: Sun, 24 Apr 2016 10:21:10 -0400

On Apr 23, 2016, at 7:57 PM, Manfredi, Albert E
<albert.e.manfredi@xxxxxxxxxx> wrote:

Virtually everyone is Bert. Netflix is a walled garden.

Disingenuous again, Craig. We are talking about walled in local monopolies.

No Bert. We are talking about trends in TV viewing and how the congloms are
moving content to the Internet while maintaining the traditional MVPD
ecosystems.

The walled in local monopolies are a fact of life - they will continue to
thrive thanks to their partnership with politicians at all levels of government
and their competitive advantage with high speed broadband.

As the Consumer Reports article points out, cord cutting is bottoming out.
Their numbers are lower than most, but as we have seen many times, you can find
surveys that place the number of cable subscribers anywhere from Consumer
Reports 68%, all the way up to 85%.

Portals that anyone can access, for a fee or free, cannot be considered local
monopolies. They compete against one another, nationwide. Just like
supermarkets do in your town. Walled gardens keep people in, as well as
others out.

So what? The marketplace includes your local monopolies and national services
including DISH, DirecTV, Sling, Sony Play Station Vue, Hulu Plus, Netflix,
Amazon Prime Video, et al. You now have 6 choices for traditional MVPD service
in your market, and all of the national SVOD services. There is plenty of
competition, but the local cable and FTTH companies have a significant
advantage with the ability to bundle MVPD and Broadband services (and
telephone).

Yes walled gardens are designed to keep people in. Nothing new there. It is
true for cable, DBS , Netflix, HBO, Hulu Plus, Amazon Prime Video, and any
other service that offers exclusive content to attract subscribers. This is NOT
going to change.

No doubt ESPN could offer direct access, but at what price?

Doesn't matter to me. They will set whatever price will stop the decline in
viewership. Like all of the others have to do, or soon will have to do.

Wrong. Did you even read the Fox Sports article I posted?

They cannot price a direct service to stop the decline in viewership. That
would require a low price that would undermine the lucrative goldmine they have
with the extended basic bundle, where 44 million subscribers pay for but rarely
watch ESPN. One more time:

That means every month ESPN is pocketing $290 million off cable and satellite
subscribers who don't watch the channel. Over the course of a year ESPN makes
over $3 billion a year off consumers who don't watch ESPN.

They cannot afford to undercut the MVPDs. And they will not get many
subscribers if they price the service over $20/month, as you can subscribe to
Sling for $20/mo.

And as Consumer Reports points out, cord cutting is stabilizing, not to mention
the fact that ESPN grew again last fall during their "Prime Season."

And for those of you who say that ESPN should go over the top direct
to consumers -- first, they lack the contractual ability to do so
without losing their existing subscribers

I think this is nonsense. ESPN already went to Sling, without any apocalypse.
Other channels have done the same thing, without the sky falling. Contracts
are written on paper. They can be rewritten. ESPN gets to decide what makes
sense. ESPN presumably wants to stay in business, and they have the content
that the middlemen want to distribute.

This is not nonsense. It is what makes the glue work. Sling is a Slimmed down
MVPD bundle offered by a long time partner - Dish Networks. It is ALSO an
experiment, with very limited feedback about subscriber levels. Now Sony Play
Station Vue offers ESPN, and it is likely that other Virtual MVPD services will
soon follow.

The only real issue is price, as it is for a direct ESPN service.

When there are competitive bundles around the $40/mo price point you will see
stability in MVPD subscriber levels...

Maybe even growth again.

-- second, how many die hard sports fans are there who would pay
for ESPN standing alone?

Wrong question.

Why won't Bert pay for TV.

Same question.

Everyone has a price at which they can be bought. I subscribed to Netflix
because it was priced at a comfortable level - less than a movie ticket.

ESPN would need to charge $25/mo to protect the MVPD cash cow. At that price
there are not many potential subscribers unwilling to buy one of the extended
basic bundles.

The correct question is, how many customers are you going to allow to slip
away, only because you feel some illogical loyalty to a business model that
only made sense with 40 year old technology?

Let me know when we reach 50% Bert.

They can afford to play around the edges, adding new Virtual MVPD partners to
play with different price points.

And of course, if the executives feel that there are many out there, fiercely
loyal to the old school methods, willing to keep forking out more and more
money to prove their loyalty, they can always retain the old school method in
addition to more flexible new options.

This comes closer to the real issues in play here.

Consumers are fed up with the endless rate increases and paying for hundreds of
re-run channels. The legacy MVPD business model is changing, thanks in part to
competition from the Internet. But the congloms are firmly in control.

They must decide how much further they can push up subscriber fees. Another way
of looking at this is that they have the power to limit cord cutting.

One way to do this is to focus on the networks that provide real value, and
eliminate the networks that are being rendered meaningless by ad supported VOD
and paid SVOD services.

The Sling bundle is proving to be TOO limited, especially with the lack of
access to local networks. Play Station Vue is not differentiated enough in
price to attract people away from the bundles they are buying from cable, DBS
or the telcos. The fertile ground appears to be in the $35-40/ month range with
local channels and the top 20-30 networks. Ironically, this is much like the
old 400 MHz cable systems with 40-50 channels.

They would need to price a direct service so high that it is a
non starter.

No need to get lost in rhetoric. Here's a fundamental point people seem to
miss: competition does not mean that your margins **MUST** remain the same.
It's exactly the opposite. Competition is the great equalizer. When your
margins were absurd yesterday, without competition, they most likely CANNOT
remain high with competition.

See above. Clearly the extended basic bundle is going to change.

The alternative is simply, you go out of business. The truism about ESPN
being "glue" that holds together an old business model is simply passé. the
evidence seems to show that glue is not strong enough.

Wrong.

Regards
Craig

References:
- [opendtv] Re: Cord Cutters Are Few, But Tons of Us Are Streaming Video | Fox News
  - From: Manfredi, Albert E

[opendtv] Re: Cord Cutters Are Few, But Tons of Us Are Streaming Video | Fox News

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