[opendtv] Re: Migration to virtual MVPDs
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Sun, 6 Jul 2014 11:01:34 -0400
On Jul 5, 2014, at 7:44 PM, Albert Manfredi <albert.e.manfredi@xxxxxxxxxx>
wrote:
>
> Craig Birkmaier wrote:
>
>> But it assumes that someone is willing the break the bundle.
>
> Yes Craig. That's how competition works. One player figures out before the
> others that without the local monopolies, big bucks can be made by offering
> more options than the slow-witted competition, and lo and behold, people come
> flocking to him. From all over the world, potentially.
Competition can only work where there IS COMPETITION. With respect to "the
bundle" there is no meaningful competition - the content owners have things
locked up and have no interest in killing the bundle. Keep in mind that only a
handful of channels in the bundle are critical to its success.
Most smaller cable networks COULD defect and go direct to the consumer via the
Internet, but they would lose the subscriber fee revenue stream. Could they
make more money outside the bundle? Not likely.
> You seem to have trouble understanding these trend lines. Already now, even
> without the existence of true virtual MVPDs, plenty of the younger generation
> (those most coveted by the marketing types) are bailing out. I keep asking
> you, do you really think that ESPN and HBO, and other similar holdouts, are
> deaf and dumb?
You are putting too much faith in trend lines that are far from clear.
Yes many Millennials do not subscribe to a MVPD service. I work with some of
them. There are some good reasons they do not subscribe:
1. No money. We have several employees in their '20s, some with engineer
degrees, some still in college, making less than $12/ hr. Spending >$80/mo is
not in the cards.
2. Many of the "MVPD never's" use their parents, or a friends MVPD logins to
access OTT services like Watch ESPN or HBO Go.
3. Many still live with their parents.
ESPN and HBO are neither deaf nor dumb. They are adapting to a model that
allows them to expand into OTT services WITHOUT, killing the bundle. This
strategy is very popular with a large portion of MVPD subscribers, who like
and are using these expanded options for the new mobile platforms they use.
> Yes, exactly, that is one aspect of this shift. He has also figured out that
> people around the world are into this, quelle surprise, and that "billions
> more viewers" means big bucks. Isn't this what I've been telling you all
> along?
Not really. You've been telling us that the Internet is going to cause the pay
walls to crumble, and increase the number of free (ad supported) services
available.
The reality is that PAID VOD services, like Netflix, are growing rapidly while
the number of cord cutters has stabilized. One can argue with a fair amount of
credibility that most of the decline in MVPD subscribers has been related to
the economy, not competitive options.
Bewkes is correct - OTT services like Netflix are a huge new source of revenue
for the content owners. The big losers in this are the broadcast Networks -
many people are waiting to watch their most valuable serialized shows on
Netflix or other services without the ads.
>
> No, this is where you lose yourself in legacy thinking. The reality is, an
> increasing (not decreasing) number of people are finding it acceptable to
> subscribe to Netflix and other such, **and not** continue the MVPD
> subscription. That's the trend line to look at, Craig. The content owners are
> looking at these trend lines, they aren't stuck in the reality of 1985.
Too bad you are wrong. The trend line is for more people to subscribe to both.
Consider this from an article published a few months ago.
> http://www.techzone360.com/topics/techzone/articles/2014/03/19/373800-what-cord-cutting-ott-multichannel-service-complementary-good.htm
> The survey also uncovered that subscriptions to OTT services, such as Amazon
> Prime and Netflix, are growing, as an adjunct to rather than replacement for
> traditional Pay-TV services. While 67 percent of 18-34 year olds report
> subscribing to OTT services, 80 percent subscribe to a traditional set-top
> box service. Among 35-49 year olds, 55 percent subscribe to OTT services,
> while 87 percent have traditional pay-TV subscriptions.
> The upshot of the research seems to be that cord-cutting isn't happening on a
> large scale. Rather, OTT services are additive, especially for the
> high-value MVPD customers who are also subscribing to premium channels. These
> are also the high-value customers that are interested in downloading content
> to which they subscribe.
>
Read the entire article Bert. You might learn something.
> When you say, "the reality that the majority ...," surely you can see the
> flaw in that logic, no? The only thing that matters is to appreciate how that
> "majority" is changing over time. If that "majority" was 90 percent a couple
> of years ago, and then it becomes 50.00001 percent today, do you not see that
> your analysis of the situation misses the mark?
The reality is that 87% of U.S. Homes subscribed to a MVPD service before the
recession; that number has stabilized above 80%, even as a large percentage of
subscribers add Netflix or other paid OTT services.
> Bewkes seems to get it.
He does. You don't.
Regards
Craig
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