[opendtv] Re: TV Programmers Put Subscriber Caps on Skinny Bundles | Media - Advertising Age

  • From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
  • To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
  • Date: Tue, 14 Apr 2015 09:23:29 -0400


On Apr 13, 2015, at 10:33 PM, Manfredi, Albert E
<albert.e.manfredi@xxxxxxxxxx> wrote:

I don't even know what you define as oligopoly anymore, then.

You never did. You thought broadcasters competed with one another...

The oligopoly is related to the access to potential viewers, and the
protections they receive that assure their signals are carried, and paid for,
by MVPDs. Content exclusivity is protected at the market level for both network
and syndicated programming.

The availability of more OTA channels, with DTT, spawned a bunch of new
content sources, like GetTV, ThisTV, Movies!, Bounce, and so on.

Wow!

And how are these new channels doing in terms of audience and commercial
viability?

I could say the same thing about the MVPDs - the shift to digital spawned
dozens, make that hundreds, of new channels that add bloat to the extended
basic bundle and add on bundles.

In both cases, the problem is the same - appointment TV is dying, with the
exception of very high value, first run content. None of these new channels
offer high value content that people make plans to watch. At best they may
capture a few of the people who still surf the airwaves or MVPD nets.

Internet TV spawned the likes of Netflix and Hulu. Somehow or other, your
supposed "oligopoly" allowed this new competition to happen, Regards
Craig



The oligopoly owns Hulu, and made Netflix possible. The vast majority of
Netflix content is off network shows that are sold in syndication. The same is
true for Amazon Prime. Nothing new here, just more middlemen. What is new, and
adds a hint of competition, is that Netflix and Amazon are now able to put up
the billions it takes to create high value, first run content. And just like
the established content oligopoly, they use this exclusive content to drive
subscriptions to their services.

But the trend is still toward more content moving behind pay
walls.

That's probably not even true. But even if it were true, if you have many
options of pay walls, each one has to compete.

It is true. It has been going on for years and continues. The only key
franchises left for OTA broadcasters are the NFL and the Olympics, and both of
these have expanded into paid Internet options, or MVPD distribution - the
Olympics had more hours on MVPD systems than OTA, and almost all of the OTT
access required authentication of an MVPD subscription.

You define competition as repackaging, with a slightly lower price that you are
not willing to pay.

The reality is that most Netflix subscribers are also MVPD subscribers - we are
paying MORE.

No doubt someone (Apple?) will convince the oligopoly to start making better
deals that allow consumers to customize the packages they pay for. But the
reality is that content is a product that is expensive to produce, and most
Americans are willing to pay for it.

http://www.airlockalpha.com/node/9860/how-americans-spend-their-entertainment-budget.html

The average American spent $2,605 on entertainment in 2012, up from $2,504 in
2010, according to findings from the Bureau of Labor Statistics.

Of the many entertainment segments, digital and interactive media garner a
greater share of the entertainment budget than print media. Typically,
Americans spent the most on Internet access, television, movies and gaming.

The oligopoly is doing VERY WELL!

When you only have one option, they can pretty much set whatever rates they
want. That's why the rates are going up faster than inflation, for old school
bundling.

They are going up faster than inflation for all forms of entertainment. There
is always change, be it caused by technology or human behavior. With the rising
cost of going to the theater, more people watch movies at home. The theater
owners may be suffering, but the companies making the movies are making more
than ever...

Having any number of pay walls available only aggravates the
situation.

Not if you have lots of options. If you focus on only the channels you want,
open competition says that some clever site out there will create a bundle
that's way more in line with your tastes, for much less money than you're
paying now.

I'm eagerly awaiting this possibility.

And if you insist on a huge assortment, there will be a site that offers that
too. When these sites can be used by anyone throughout the US, they can all
achieve economies of scale.

Economies of scale is not the issue. Obviously, the technology behind Internet
distribution of content scales well, but is not free. And the last mile does
not scale well; we are still beholden to the same old monopolies dressed in a
new suit. The cost for a good broadband service that can support HDTV streaming
is $30-40 month - more than cable cost when it challenged the OTA monopoly. And
this does not include anything for the content you want to watch.

You keep looking at this as a sea change that is going to give back what the
content oligopoly has taken away from you. The era when the "Best of TV," was
available via an antenna for nothing more than the increased cost of products
at the store are long gone. You may be content to consume what they still give
away (with ads), but most Americans are not.

Not true. Sling's raison d'être is cord cutters, primarily
Millennials.

Sorry Craig. Lots of sites go after cord cutters and cord shavers. Sling's
highest value content is live sports. Just use the numbers, Craig.

OTA's highest value content is live sports. But live sports does not make up
all of the five hours that the average American watches TV each day. Saying
that Sling's highest value content is sports is like saying we all need oxygen
to live. It is the highest value content because people are willing to pay for
it. But that does not mean the other content is worthless, or less important.
It just cannot demand the same price.

How much do all those other channels ask, per sub per month? Sling doesn't
even carry the main networks, which are still viewed individually a lot more
hours than any other channel.

Sorry, but the networks are no longer watched more than other channels. A few
shows still draw large audiences, but the networks now struggle to deliver 40%
of the audience in prime time. People DO watch other channels...a lot.

Sling's ace in the hole, which no other OTT site has, is live sports.

What about the sites operated by MLB, the NFL, the NBA, and the NHL, not to
mention the fact that the WWE has moved from cable to OTT for its very popular
pay per view wrestling events? And how about all of the College sports sites
that are popping up. ESPN does not have and exclusive, they just have the most
valuable franchises, which in turn makes it the most expensive service. Yes,
ESPN may be the flagship for the core Sling bundle, but the ship us still
mostly empty. Only 100,000 subscribers, and people bringing the system to its
knees signing up, then canceling to watch two basketball games on TBS, not ESPN.




They are slowly migrating to all streaming. This is an ongoing process, and
that's been the trend. The content owners are aware of this, as they always
are Craig, so you can bet that as the popularity of DVDs declines, Netflix
will get the rights to stream more content.

The oligopoly will gladly sell you their content for the right price. The fact
is that While Netflix may be winding down their DVD rental service, they are
not buying the rights to stream movies that are being released on DVD. They are
expensive, which is one of the main reasons that HBO Now costs $14.99/mo versus
$8.99/mo for Netflix. The Netflix streaming service is focused on episodic
television, and movies that have been available previously on DVD and HBO (i.e.
Movies they can get at lower cost).

Netflix is already raising prices (I'm grandfathered in at $7.99/mo for now).
But it is expected that they will keep raising prices. If they go after the
current movies that HBO offers, they will probably have to charge as much as
HBO.

I said far more competitive. Whether they will ultimately be successful is
another matter, although obviously, Netflix sure is, and HBO sure was not.
Losing subscribers is not being successful, Craig. Steady decline is not
success.

HBO never had more than 30% of U.S. homes, and now has about 28%. All of the
premium movie channels suffered declines during the economic downturn.

According to the Chicago Tribune:

Total U.S. households that subscribe to HBO, Showtime, Starz and other
premium TV channels declined by 6 percentage points over an 18-month span,
from 38% in March 2012 to 32% in August 2013, according to a report from
research firm NPD Group.

The article went on to say that all of the premium services have started to add
subscribers once again.

All I know is that this VOD of all manner of cable channels has been
available here for many years - much longer than HBO Go.

How do you know this? Word of mouth?

I'd be very surprised if Cox down in Florida hasn't carried it for eons,
Craig.

Cox has had all kinds of VOD for years, but the availability varies by market.
Some markets got it a decade ago. Gainesville just got it in the past year.
It's that infrastructure thing ya know.

And my point is that there have been any number of VOD options for cable
subscribers, which easily predate Netflix streaming. So sure, VOD is a good
thing. But Netflix online did NOT introduce that feature. People were
watching cable channels VOD when Netflix customers were still watching DVDs
only.


Yup. Now everyone expects to watch this kind of content on demand.
Maybe not. You need to verify your claims, Craig. Those numbers were from
2012 and 2013, and tablets, in case you haven't been following this, are not
gaining so much popularity, after the initial hype.

Tablets are the new TV for kids. They are very popular for watching OTT
content. The popularity of tablets was not overhyped. They are among the most
successful consumer electronics products in history. It took only three years
to sell 40 million in the U.S., ten years to reach that point with smartphones.
The problem with tablets, not unlike PCs is that they do their job very well -
the replacement cycle is stretching out, and nobody knows what it will be
moving forward. I'm quite happy with my 4th generation iPAD, now 2.5 years old.
The only thing that might get me to upgrade is a larger screen.

Tablets now outsell PCs, with more than 200 million units a year. Gartner
projects this will increase to 350 million a year by 2017. Not too shabby!

Let me know when less than 70% of U.S. Households subscribe
to an MVPD bundle.

That's funny, right? It went from asking about 85% to 70%, in a matter of
very few months, and it went from "the bundle" to "a bundle," in that amount
of time. It seems that Craig has to keep moving the goal posts!

I never asked you when subscriptions would drop to 85%. I have consistently
asked you to let me know when the number reaches 70%. By the way, the number is
still above 85%. And if my terminology has changes it is only to reflect the
reality that there are now slim bundles available from VMVPD services like
Sling. They still count as part of the 85% or whatever you thing the right
number is. What it IS NOT is 70%.

Regards
Craig

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