[opendtv] Re: Freeview business model
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: opendtv@xxxxxxxxxxxxx
- Date: Wed, 31 Jan 2007 09:37:40 -0500
At 10:38 AM -0500 1/30/07, Manfredi, Albert E wrote:
Bravo. You have just explained why cable systems in the US pay
broadcasters instead of vice versa, as you keep advocating. "It's an
interesting idea, but it's not their business model."
NO BERT. This has NOTHING to do with why cable systems are being
FORCED to pay broadcasters for advertiser supported programming.
ADVERTISING is how commercial broadcasters have been compensated for
more than five decades.
ADVERTISING is how revenues are generated to pay for the content I write.
ADVERTISING is how companies that distribute their content via
Freeview are compensated.
It is NOT the business model of cable to collect subscriber fees for
broadcasters. Yes, they collect these fees for cable networks, but
those cable networks have a working relationship with the cable
companies; the cable companies promote the cable networks and insert
ads into these networks. Cable systems cannot insert ads into
broadcast networks; in some cases they have provided "in-kind
compensation to broadcasters, running promotional ads for broadcast
programming.
A proper analogy would be as follows:
Let's assume that I generate very strong reader interest in BE. Let's
assume that advertisers are requesting position within my columns.
Let's assume that I'm feeling my oats and threaten BE that I will
stop writing for them, IF they do not pay me a portion of the
revenues they generate from the ads within my columns. To continue
carrying my columns BE must decide to:
1. Reduce their profits and share a portion of the ad revenues with me;
2. Increase the ad rate for ads within my column to cover the
additional compensation.
The modern reality is that content producers AND DISTRIBUTORS in the
U.S. expect two forms of compensation for the programming they
produce/carry:
1. Revenues generated by advertising
2. Revenues generated by subscriber fees
This in itself would not be so bad, IF consumers had the ability to
choose the networks to which they subscribe, paying only the
subscriber fees for those that they watch. But the multi-channel
business model forces subscribers to pay for all of the content
within a tier. In other industries this is considered to be "tying"
and is ILLEGAL. IN the U.S. it is a business model that is enforced
by government regulations, despite the fact that the same type of
tying is illegal for most businesses in the U.S.
Here's a good recent example of tying that was legal.
Before Christmas, there was a shortage of several popular game
consoles, the Nintendo Wii and the Sony Playstation 3. Lucky
consumers who were able to get one, were able to re-sell them on
E-Bay and double their money. But retailers are not allowed to mark
up these products and sell to the highest bidder. So they offered
bundles instead. You could go to many websites and buy packages that
included the game console, additional controllers, and EVERY game
available for the console.
This was NOT illegal because consumers had the choice to buy the
bundle or wait until they could find a console at the regular retail
price.
YOU might be inclined to tell us that consumers have the same choice
with multi-channel TV. They can simply choose not to subscribe to
cable, DBS or a Telco video service.
The problem is that they cannot access content that is only available
via one of these services WITHOUT paying for a bundle that includes
content they do not want. They cannot wait until it is in stock at
their local retailers (although in many cases some of this
programming eventually finds its way to DVD).
Let's take this a step further. Let's assume that I put up an antenna
to receive the new DTV broadcasts - that I want the very best quality
HDTV I can get from the broadcast sources and that i do not want to
pay a multi-channel service for this content. Let's ALSO assume that
i do want some of the programming in the extended basic tier such as
ESPN, HGTV, Food Network, Discovery, the History Channel and Fox news
Channel.
Guess what? I am still forced to pay for the limited basic tier that
includes the broadcast stations, and I am still forced to pay the
retransmission consent fees for these stations, even though I am
pulling this content out of the air as you do. That is illegal tying.
No, Craig, you are talking around in circles.
Your question was how come broadcasters in the UK pay millions to
Freeview to carry their content, whereas broadcasters in the US expect
payment from the cable companies to carry their content.
Correct Bert.
You answered your own question. "It's their business model."
Correct again. But you stopped short of the real answer. It is the
business model here because of government gerrymandering with the
normal operation of the market for television programming. Government
regulation has led too the practice of consumers paying fees for
advertiser supported content in the U.S.
It is my contention that in an open marketplace this would not
happen. I support this contention by pointing to Freeview, which does
not charge subscriber fees, but rather, charges content producers for
the right to distribute their content in the free & clear via the
Freeview system.
As to government regulation, you will have to do a lot of mental
gymnastics to prove that govt regulation of TV is more here than it is
in Europe.
I'm quite agile for my age. And my age is certainly a factor, as I
was raised as part of the FIRST television generation. Somehow, TV
broadcasters managed to "survive" with ad revenues alone for more
than four decades. By the fourth decade, most broadcasters were among
the MOST PROFITABLE businesses in the United States. Then they used
their considerable clout with the politicians to further entrench
their oligopoly control of television content creation and
distribution, and in the process to collect huge additional profits
via subscriber fees collected by competitors.
The major difference between what happened in the U.S. versus the
rest of the world, is that virtually everywhere else, the politicians
maintained tight control over TV broadcasting, typically with state
run broadcast organizations. Consumers were spared the intrusion of
ads until recent years, but they paid a dear price in terms of
limited access to content. And virtually everywhere in the world,
outside the U.S., the populations considered TV to be a propaganda
tool for the government.
In the U.S. there was great fanfare about the independence of the
media from government control. The cost of this independence was
watching ads that paid for the programming. In the early years,
government regulation was used to create the illusion of a level
playing field, to counter any notion that TV in the U.S. was a
propaganda tool. We had content restrictions - Ozzie and Harriett
slept in separate beds and we had the seven words you can;t ay on TV.
We had the Fairness Doctrine, making it difficult if not impossible
to use the TV medium to deliver editorial comments, without giving
"Equal Time" to other points-of-view. We had the Syndication rules
that prevented the lucky three commercial networks from having a
financial interest in all of the programming they distributed.
We had a government protected oligopoly with only three major players
(and PBS), creating the illusion that TV in the U.S. was DIFFERENT
than the rest of the world. As a result we have the most potent and
virile propaganda machine in the world. A propaganda machine built
atop a generation long effort to establish trust in this new medium.
And when that trust was established, all of the protections vanished.
TV became an instrument of the oligopoly and the politicians to
influence social change. The puritanical goodness of TV for the first
two decades evolved into a morass of violence, sex and near godlike
worship of athletes, actors and politicians. The Fairness Doctrine
was removed, with the result that it is nearly impossible to find any
real "NEWS" on TV - everything is laced with opinion with the major
media news organizations marching in lockstep with the politicians
who have given them this lucrative franchise. Political theater is
replacing soap operas, with a single purpose - to keep moving the
ball toward the goal of government control over everything we do.
In short, we got the shaft, and the worst TV system in the world.
Go figure, that politicians would actually have the patience to play long...
Regards
Craig
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