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

From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
Date: Wed, 15 Apr 2015 10:08:45 -0400

On Apr 14, 2015, at 10:19 PM, Manfredi, Albert E
<albert.e.manfredi@xxxxxxxxxx> wrote:

Regards
Craig

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

Irrelevant.

Thank you. It is questionable if these new channels generate any profits at
all. They certainly are not attracting many eyeballs.

The point is that new channels have been added, whereas that would not happen
in an oligopoly.

Oligopoly has nothing to do with it. These multiplexes cost the broadcaster
little in terms of overhead; the main channel is paying the (power) bills. I do
not know what kind of revenue these new "competitive" channels generate - they
are most likely satellite feeds into which the station may insert a few local
commercials. The question is whether they could exist with the "free ride."

In both cases, the problem is the same - appointment TV is dying,

Even more irrelevant.

Hardly. People are not watching these new channels in any significant numbers.
They are not generating any significant revenues. People are time shifting via
DVR or watching delayed VOD streams in rapidly increasing numbers.

I watch programs from the major TV networks all the time, and never "by
appointment," and hardly delayed a few hours at most.

Which means you are primarily using a DVR, and in a few cases watching Hulu or
the network .com sites which are delayed from one to seven days. But thanks for
confirming my point. Appointment TV is dying, except for live events and the
premieres of very popular shows like Game of Thrones.

Your "oligopoly" mantra amounts to conspiracy theory, Craig. If you feel they
are yanking you around by the nose, it's only because of your choice of
distribution medium.

I don't even watch this crap, so I am not getting yanked around. But the fact
remains that the broadcast networks are the core of the content oligopoly, and
the profits being made in local broadcasting are primarily driven by this
content, local news, and a few popular syndicated shows. Broadcasting is still
profitable, especially in major markets, but it is far less competitive today,
as two thirds of the audience has moved on to better alternatives, many
delivered OTT, but most still in the extended basic bundle.

The oligopoly owns Hulu, and made Netflix possible.

So the fact is, that high value content is made available at multiple price
points, on multiple channels, from multiple intermediaries, even direct from
the source. That doesn't sound like any oligopoly to me.

It is when there are only five major content companies that control more than
90% of what we watch.

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

Competition manifests itself in distribution as well as in the content
itself. And absolutely yes, different pricing options are part of it. When
you have a choice of supermarkets, that doesn't mean that only one can carry
Kellogg's products, Craig. It means that the price of Kellogg's products
remains under control, because no one supermarket can mark it up too much.
And then there's the OTHER competition, e.g. from Post, which keeps the
wholesale price that Kellogg's demands also under control. Same with your TV
content, when it's available from competing outlets, and from multiple
competing TV networks.

Yeah right!

The price of cereal remains relatively stable - although it still has a very
large profit margin. There is little driving increased demand, and thus prices
reflect the cost of production. On the other hand, the cost for TV content
keeps increasing at rates significantly higher than inflation. This is possible
because the public puts up with it, and because of the inelasticity of demand
for the most popular content.

No you aren't. You prefer to wax ever more verbose about why unwalled
distribution doesn't work, doesn't save, is technically impossible, and all
manner of other uninformed complaints. Competition always works, if it's
technically feasible.

If technology were the driving factor monopolies would not exist. All the
technology in the world is not creating cost competitive alternatives to fossil
fuels. In part because technology has made it possible to access huge new
reserves of energy.

Monopolies exist because of corporate collusion OR when the government steps in
to regulate industries as natural monopolies. Or worse, when companies pay off
the politicians and regulators to protect them from competition.

From the very beginning, telecommunications, broadcasting, and now MVPD/ISP
systems have been regulated oligopolies. Competition exists only in the
behavior of the consumer - the more people that watch, the more money the
oligopoly can charge.

It is now possible to reach the consumer without having to go through the
traditional gatekeepers, but it is very hard to build large audiences, unless
your cat does something that goes viral.

You claim that technology enables competition. While this may be true, it also
enables the entrenched "competitors." Netflix may be doing well in terms of
subscribers and use of the service, but the content oligopoly is taking the
lions share of the profits - first by selling their libraries of content, and
second by providing the talent pool and resources that Netflix needs to create
original programming that cost hundreds of billions.

Obviously, the technology behind Internet distribution of content
scales well, but is not free.

As opposed to ...?

Buying time on a satellite to distribute your content.

Shipping reels of videotape or film to theaters and TV stations.

Leasing private network bandwidth to transport your bits.

Starting an OTT streaming video portal is expensive. You need business systems
to handle sign-up and billing (like the Sling front end that got overloaded).
You need multiple geographically distributed server farms. You need to buy
backbone transport and make interconnection deals. You may need server
co-location at ISPs. And you need content.

And the last mile does not scale well;

The last mile, and the concurrent improvement of core ISP networks, already
passed the threshold level needed for Internet TV. That's the whole point,
Craig.

Correct. It now handles about 5% of TV viewing. It cannot handle 25%, or 50%,
or the 85% who subscribe to a facilities based MVPD service. To do this major
investments are being made in the last mile; these investments are paralleling
the increase in demand, and mostly keeping up.

we are still beholden to the same old monopolies dressed in a
new suit.

That's why we now need a strong net neutrality mandate. Those local
monopolies that provide broadband (unless/until wireless becomes truly an
alternative) also have that competing business model, and consequent conflict
of interest. Repeating, repeating, repeating.

They are regulated monopolies. The net neutrality regime envisioned by Obama
and the FCC will just entrench these monopolies.

You may be content to consume what they still give away
(with ads), but most Americans are not.

Americans are not the loyalists you are, and want them to be. They are moving
away from your walled up experience. For some reason, you can't grasp this
fact.

Sorry but they are moving to new walled experiences like Netflix, Sling and HBO
Now.

You can't have it both ways Bert. The facts tell us that the public is paying
more than ever for entertainment.

Another obvious thing that Craig can't seem to grasp. People most likely to
be interested in Sling are the (live) sports fans, Craig. That's what makes
it unique. ESPN without MVPD subscription. The rest of the content is more
replaceable, or available elsewhere like Hulu Plus.

How about the cord cutters looking for a better deal?

You claim that people are cutting the cord because they do not want to pay for
ESPN and other high priced MVPD bundles with tons of content they don't watch.
Sling allows the cord cutters to get 20 channels at a fraction of the price of
the fat bundles. Surely some Sling subscribers care about more than ESPN?

I would buy a service like Sling IF IT OFFERED the channels I watch. ESPN is
important at some times of the year, but only a small fraction of what my wife
and I watch. When somebody offers the stuff I want at a better price I will
switch.

Sorry, but the networks are no longer watched more than other
channels.

Wrong. I saw the figures in my recent search for Internet usage. As
individual channels, the TV networks programs are watched way more than other
individual channels. Maybe not as an aggregate, but as individual cannels.

Yes, the broadcast networks still have the majority of the highest rated shows,
although non-broadcast content is gaining, as we see with shows like the
Walking Dead and Game of Thrones. But the highest rated shows now deliver a
fraction of the audience they once did. When I was working in TV stations in
the '70s, the three commercial networks typically reached an average share of
U.S. homes during prime time, in the range of 18 - 21% for each network. That
means around 60-70% of all homes were watching them.

According to Media Ownership and Concentration in America, a book published in
2009, "the original three TV networks share of all TV viewing, according to the
FCC, was only 24.9% in 2002, of about one third of what it used to be; with Fox
added the top four networks' share becomes 35.8%, or 37.8% according to Wall
Street analysts, or 32.1% by our data for 2007."

That decline has continued.

http://tvbythenumbers.zap2it.com/2015/04/07/2014-2015-season-nbc-leads-among-adults-18-49-cbs-tops-total-viewers-through-week-28-ending-april-5-2015/385452/
After twenty-eight weeks of the 2014-15 broadcast television season (through
Sunday, April 5, 2015), NBC is in first place among adults 18-49 with a 2.6
rating average. CBS is second with a 2.4, ABC is third with a 2.2, and FOX is
in fourth with a 2.1. The CW finished fifth with a 0.8 adults 18-49 rating
average.

Among total viewers, CBS is ahead for the season averaging 11.4 million
viewers. NBC is second with 9.0 million, followed by ABC with 7.9 million, FOX
with 6.1 million, and CW with 2.1 million.

Each adults 18-49 rating point is a percentage of the adults 18-49 US TV
population and equals 1.2698 million adults 18-49. The season-to-date numbers
are "Most Current" ratings, which are Live+7 Day for all but the two most
recent weeks and Live+ Same Day for the two most recent weeks.

The four major networks are attracting about 34 million viewers during prime
time or a bit more than 10% of the 318 million people in the U.S.

Meanwhile, in February, the Fox News Network was the most watched cable network
during Prime Time.

http://deadline.com/2015/03/fox-news-cable-victory-bill-oreilly-1201389905/

FNC had 1.934 million viewers on average between 8 PM and 11 PM during the
March 2 – 8 frame. That’s 9% ahead of the number #2 ranker of TBS, which had
1.767 million. The top five were rounded out by The Walking Dead broadcaster
AMC (1.745 million), USA (1.742 million) and Discovery (1.524 million).

These numbers may seem small compared to the four networks, but there are
dozens of networks delivering an audience of a million viewers or more. And
this does not reflect the homes watching Netflix and other Some OTT services -
the numbers for the four major networks DO REFLECT delayed viewing via Hulu and
the network sites.

What about the sites operated by MLB, the NFL, the NBA, and
the NHL,

I don't enjoy going around in circles as much as Craig does, clearly. We
already discussed how those other sports have unwalled themselves, and more
than once. That's OLD NEWS, Craig. ESPN unwalling itself is NEW NEWS.

Uhhhh Bert. All of those services are behind pay walls. They are not unwalled,
just new walls.

I wonder how many years after the downturn Craig will be using that excuse.
The simple fact is, in 2013, Netflix surpassed HBO. That was during the
downturn, I suppose you might say, so your old excuse does not work. HBO has
to compete better now. And is starting to.

Netflix only surpassed HBO in U.S. subscribers. HBO has 110 million subscribers
globally. Bert forgets that the pay walls exist everywhere in the world.

We won't really know how the economy has impacted pay TV subscribers until we
have an economic UPTURN, if that ever happens again. What would happen if we
saw an actual INCREASE in incomes for the U.S. Middle class?

Outsell evidently does not mean that people don't use PCs. It only means that
people already have their PCs. PCs used to watch TV may very well be laptops,
among other reasons, because they don't depend on special "apps" to do so.
Trade scribes tend to focus on hype only, and when a new product creates big
sales, that's perfect recipe for hype.

http://www.digitaltrends.com/mobile/15-percent-of-tv-viewing-takes-place-on-tablets-says-new-study/

Have tablets already eclipsed PCs as the second most popular way to watch
television? A new study funded by Viacom says yes, tablets already have the
silver medal. While watching full-length shows on an HDTV remains the most
popular way to view, tablet viewing now accounts for 15 percent of the pie,
according to the study. This is, of course, if you trust a study called
“Tapping Into Tabletomics” funded by Viacom, a huge corporation that owns
several TV networks including Comedy Central, MTV, BET, Nickelodeon, Spike,
VH1, and, of course, Paramount Pictures.
Still, if we are to believe the study, which surveyed “more than 2,500 people
ages 8-54″ and performed “in-depth interviews with dedicated tablet users in
New York and Los Angeles,” in two years time, tablets have gone from relative
non-existence to completely dominating the entertainment habits of those who
watch media on anything besides a TV.

Regards
Craig

References:
- [opendtv] Re: TV Programmers Put Subscriber Caps on Skinny Bundles | Media - Advertising Age
  - From: Manfredi, Albert E

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

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