[opendtv] Re: FW: Re: Distribution outside the bundle
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Sat, 20 Dec 2014 08:16:37 -0500
> On Dec 19, 2014, at 9:49 PM, Manfredi, Albert E
> <albert.e.manfredi@xxxxxxxxxx> wrote:
> The simple fact was that in your hasty disagreement, you ended up being
> wrong. TVs started to be sold with cable frequencies set by default at about
> the time when ~50 percent of TV buyers had cable.
I never had a set where the analog tuner was set to cable frequencies by
default. That is at least four sets.
> So it's hardly surprising that around that same time, the broadcasters, who
> were providing some of the highest values content for those MVPDs, would get
> serious about being compensated like the lesser channels on the MVPD. If
> anything, one wonders why it took that long.
Some in the broadcast community started asking for compensation by 1980. I have
a very close Chief Engineer friend from the Charlotte area who was adamant
about this. And again, there is no correlation between cable networks and
broadcast networks. If broadcasters wanted to be free from FCC regulation
including content restrictions, and wanted to sell their content via cable,
they had the ability to give back their OTA license.
What really under,ones your position is what happened AFTER they got retrans
consent. The broadcast networks demanded that they negotiate with the cable
systems rather than the licensed affiliates. CBS asked for monetary
compensation. But the rest used the leverage of their popular broadcast content
to demand the carriage of new non-broadcast channels, and the placement of
these channels in the most desirable portion of the system channel line-ups.
Did you notice all of the NBC owned channels that are part of the new NBC
TVEverywhere initiative?
E! Now; USA Now; NBC Entertainment; NBC News, Bravo Now; CNBC; Esquire Now;
Golf Live Extra; MSNBC; NBC Sports Live Extra; Oxygen Now; Sprout Now; Syfy
Now, and Telemundo Now.
MSNBC and CNBC were created as part of this first use of retrans consent. Most
of the others were acquired when Comcast bought NBC Universal. I could provide
lists of the networks created by the other networks, like FX, ABC Family, ESPN,
to name a few.
What does this tell you Bert?
The content congloms were not just looking for compensation for their popular
broadcast networks. The real issue was choice - their four network oligopoly
was dying as people started to subscribe to cable for improved program choice -
not a better "antenna." They transformed their business model from trying to
attract the most eyeballs to one channel, to attracting more targeted
demographic groups across many channels. And through the retrans driven
licensing agreements they put together what is now the extended basic bundle,
and the lucrative second revenue streams from all of these channels.
> We are *not* talking about FOTA TV, Craig.
I was.
> We are talking about MVPDs. The MVPD can charge whatever the consumer will
> pay, and by extension, the content owners can do likewise, for anything
> carried over the medium.
Thank you. This is the essence of what happened to cable. Two oligopolies
working together to maximize revenues for both. By their license agreements
they set the terms and conditions of carriage and the revenue sharing terms.
When they want to make more money they feign conflict, threaten blackouts, use
blackouts to create a public outcry, then sign a new more lucrative license
agreement - for both parties in the faux conflict.
Then DBS became possible - the politicians and regulators saw the opportunity
to create "competition" for the monopoly cable MVPD. But DBS needed access to
the same networks carried by the cable systems. So Congress included this in
the 1992 Cable Act
http://thehill.com/blogs/ballot-box/198250-vertical-integration-stifles-competition
> In 1992, Congress adopted program access rules to protect competition in the
> multichannel video programming distributor (MVPD) marketplace by preventing
> vertically integrated cable operators from disadvantaging rival MVPDs by
> overcharging them.
You might want to read the rest of this blog Bert, as it lays out the history,
AND it explains why the current wave of consolidation between the content and
MVPD oligopolies is causing concern about the vertical integration issue again,
especially as it relates to program access for OTT Internet competitors.
Naturally, the FCC is stepping in to extend non-discriminatory program access
to virtual MVPDs operating on the Internet. In other words, the congloms can
demand the same terms that apply to cable and DBS, and move their lucrative
bundles to the Internet.
>> And that's all that matters. So as long as you and other like-minded
>> subscribers exist, the MVPD has every right to raise its prices, and the
>> owners of content ditto. There is no call for "cable neutrality," so at
>> least as of now, with little competition, the only mechanism to control the
>> price of cable is cable cutting and cable shaving.
To date, cord cutting and shaving have done nothing to control the price of
MVPD bundles. IF, and this is a big IF, enough people cut the cord, the
oligopolies might wake up and stop raising prices. There is nothing to suggest
that we have reached that point yet. There is much to suggest that prices will
keep going up and that VMVPDs will compete with cable and DBS by offering
nearly identical bundles at nearly identical prices.
> That objection was one for 10-15 years ago, Craig. You're a little behind the
> time. ISP nets have been increasing capacity steadily. So instead of vague
> words, explain to us what the limit is, in your mind.
Sorry Bert, but there is nowhere near the capacity needed to support a major
shift to Internet delivery of unicast streams to the masses. Netflix, and its
customers, still complain about rate throttling and buffering delays. We are
nowhere near the point that the cable and DBS companies can turn off all the
live streams that serve the majority of TV viewers; what we are near is enough
bandwidth to make VMPDs a viable competitive alternative.
> Once again, it should be obvious. One single funnel for all content, amount
> of sources limited by bandwidth (because content was always broadcast). The
> MVPD becomes the single gatekeeper, can set rates pretty much wherever they
> want, and the owners of content can take advantage of that too. And Craig
> keeps paying more.
That is not an answer Bert. It is simply recognition of the fact that the
conditions were in place to allow today's oligopolies to be created. This could
not have happened without the complicity of politicians and regulators at ALL
levels of government, as it violates our anti-trust laws and would be shut down
in a minute in other industries.
> As opposed to no single gatekeeper, any number of distributed content storage
> sites available, if one subscription site crops up that asks too much, a
> dozen others will emerge that charge less (or charge nothing), if one show
> costs the consumer too much, a couple of dozen other shows of that same ilk
> can easily emerge. Why do I have to explain this, Craig?
Ain't happening and it ain't gonna happen. You can have an infinite number of
people trying to compete - we agree on that. But you have a finite number of
content suppliers who are regulated and required to sell their content on a non
discriminatory basis to everyone...you can see where that got us.
The ONLY alternative is to create original content, and that is a very
expensive proposition; by no sheer coincidence, the content oligopoly also sets
the stage for what it costs to create high value content. At best we get some
competition for the best talent, be it athletes, actors or the craft industries
that produce this stuff. And that just drives up prices.
Remember The Blair Witch Project? A bunch of kids with cheap camcorders managed
to create a movie that received popular acclaim. The content owners were
"concerned," and even started emulating some of the reality type shooting
techniques.
But Blair Witch was an anomaly. It takes many resources- money, talent,
production resources, promotion and distribution - to create high value
programming that appeals to the masses. The fact that Netflix, Amazon, AMC and
others are spending billions to create original, high value content should tell
you something Bert.
> That's pretty funny, Craig. If the Internet is crammed full of optional
> gatekeepers, I guess that pretty much invalidates any thought of having a
> single, monopolistic one, right? Or is this another one of those trivially
> obvious points that has to be painfully debated for weeks and months?
No Bert. It simply says that the new virtual world plays by pretty much the
same rules as the physical world it is a reflection of. All of these "optional
gatekeepers" are primarily just new middlemen selling the same old stuff.
Regards
Craig
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