[opendtv] Re: Why aren't there more converter boxes?
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: opendtv@xxxxxxxxxxxxx
- Date: Mon, 29 Jan 2007 10:35:03 -0500
At 3:46 PM -0500 1/26/07, Manfredi, Albert E wrote:
Question 1: Why are you constantly telling us how the broadcasting model
is a dying model, if it is so obviously successful (from what you
describe)?
Let's start with the reasons for its historic success.
1. The ability to attract large audiences that historically crossed
demographic lines. When TVs were relatively expensive, families often
gathered around the electronic hearth to watch lowest common
denominator programming with broad appeal.
2. The ability to accumulate large audiences that made it possible to
pay very high rights fees for programming. This is especially true
for sports, where the rights fees could run into billions of dollars.
3. Ane era in which TV news displaced newspapers as the primary means
by which viewers got their daily dose of news and information. Many
local broadcasters were able to build strong local news brands which
adde4d value to their gatekeeper role of the networks.
4. Government protection of the over-the-air franchise, which enabled
the media conglomerates to rebuild their dominance after the
proliferation of special interest cable network, and NOW to enable
broadcasters to generate a second revenue stream from subscriber fees.
Now for the reasons it is a dying franchise.
1. The difficulty in attracting and holding large audiences with
lowest common denominator programming. While there are still a few
hits like American Idol, the audience size for most network
programming has declined to the point where it is difficult to cover
production costs.
2. The proliferation of alternative sources of news. The audience for
local news is dying with "The Greatest Generation. I would also note
that the growing distrust of the "mass media" is a significant factor
(this includes newspapers, TV and news weekly magazines).
3. The inability of local broadcasters to develop viable content
businesses. With a proliferation of alternative delivery channels,
local broadcasters are now just watching their franchises decline in
audience and now revenues (neither the networks nor local stations
can keep pushing up cost per thousand as they did over the past two
decades. In many cases they are now seeing declining ad revenues as
the audience declines.
4. The growing resentment of audiences related to the increasing
bloat of ads in most shows. As consumers discover direct payment
options for content that is largely free of ads, the audience for ad
supported programming is declining.
5. The end of appointment TV except of sports. Viewers are far less
inclines to schedule their lives around TV shows, and to watch shows
that are adjacent to the ones that they like.
Question 2: Just how stupid are these consumers who pay twice when they
don't need to? Really, you cannot expect any business to act
magnanimously toward stupid consumers, can you? Most people would not
expect that. Unless you're calling for the government to step in, let
the market decide. I'll GUARANTEE you that if people quit letting
themselves get raped, the broadcast networks would find very viable
delivery mechanisms for their content. No need to expect the sort of
magnanimous behavior you want.
The problem is the tremendous level of control that the media
conglomerates can exert over distribution and pricing. While there is
the appearance of competition between broadcasters, cable, DBS and
now the Telcos, the reality is that this is a cross industry
oligopoly that controls pricing with few viable alternatives.
The only REAL choice consumers have is to live in the past, viewing a
handful of broadcast channels. If they want to enjoy the present day
variety of content, they must subscribe and pay. And with bundling of
programming tiers, they are forced to pay for all kinds of content
that they do not consume.
I do not expect magnanimous behavior from a government supported
oligopoly, and politicians/regulators who pay lip service to
competition.
But the contrast with what is happening in other parts of the world
is becoming too great to ignore. Consumers are starting to question
why they are being raped, and why they cannot choose and pay for the
programming they want.
Bert is absolutely correct that the content conglomerates have
alternatives for distribution. The one they are most interested in is
direct payment, given the huge profits they realize from direct sales
of movies. So my educated guess is that they will keep pushing the
envelope on pricing until it becomes possible to deliver most content
via direct download for a fee.
At that point, only the few remaining categories of content that can
attract large audiences for a live broadcast are likely to survive
using the current broadcast business model.
I saw an analysis of Internet media services today that was
critical of the fact that they do not generate enough
advertising revenue. This totally misses the point. The public
is sick and tired of advertising bloat, not to mention having
to pay ever higher bills to the cable and DBS companies. We
are reaching the tipping point, where it will be possible to
pay directly for content WITHOUT ADS,
You have missed the trend completely, then. The trend, even in music
distribution, is to make it ad supported and otherwise free. This is
exactly the opposite of what you describe. And by the way, it's about
time someone discovered that Internet advertizing is far less successful
than the hype of the past few years suggests.
We disagree. The revenues generated by direct payment for content
continue to grow each year at a rather brisk rate, while the revenues
for ad supported content are now in decline, both in real terms and
when adjusted for the tremendous growth in the potential audience.
Remember, one of the major reasons that the broadcast model has been
sustainable, is that the potential audience size has DOUBLED in the
last 40 years.
Regards
Craig
Bert
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