[opendtv] Re: News: The Internet revolution is about to be televised

At 2:34 PM -0600 2/22/05, John McClenny wrote:
>No one is going to implement the system without walls without being
>able to capture the same profit as a walled system.  How much more are
>people willing to pay for a naked high bandwidth/high volume network
>connection?
>

They may have no choice.

In reality, cable MSOs are undermining their own walled gardens as 
they improve the bandwidth of the cable modem services that ride on 
the same wires. Once you have 5 Mbps, you are able to deliver almost 
any content in real-time -and anything in non real time.

A 10 Mbps telco broadband service is relatively easy to achieve, and 
with fiber to the curb that could be 50 Mbps.

The real issue here is carriage versus content. Today the money we 
sent to cable and DBS covers both - we just don't know how this money 
is split between the content conglomerates and the carriage 
conglomerates. And we don't know how much revenue is generated above 
and beyond the stuff covered by subscription fees - how much revenue 
is generated via VOD, ad insertions, VoIP and other services that are 
not part of those subscriber fees.

What IS relevant is that most consumers now spend a bunch of money for content;

1. Subscriber fees for a multi-channel TV service;
2. VOD and NVOD fees;
3. Rental fees for programming via VHS or DVD, or video games.
4. Direct purchases of TV and Music content and games;
5. Subscription fees for music services (Satellite radio, Napster et al).

On top of this are the capital investments in products that are 
needed to consume all of the above.

The reality is that with sufficient bandwidth you can deliver or sell 
everything on the list above. In some cases a service may be 
delivered via multiple media, as is the case for satellite radio, 
which is also being delivered via the Internet and Dish networks. And 
in some cases content may be moved among a variety of devices for 
consumption - like an iPOD.

So the real question becomes one of the relative costs of buying 
bundled packages versus buying stuff ala carte. The politicians and 
regulators would have us believe that ala carte pricing will be much 
more expensive. But this fails to account for the bloated prices we 
are paying for may of the bundled services.  And it fails to account 
for the actions of a real marketplace, if one were allowed to exist.

For example, would a browser channel that now receives say  5 cents 
per month per subscriber, risk losing two thirds of its audience by 
continuing to charge that subscriber fee? Or would consumers 
willingly pay 25 cents for a program without ads. Or would someone 
else pay that quarter if you spent two minutes learning about their 
product or service?

I do not think that the walled gardens are going away any time soon. 
I do believe that subscribers may benefit from the ability to pay 
only for the channels they want. And I believe that there will be a 
significant shift toward the direct sales of popular content via the 
Internet.

You can buy multiple episodes of many popular TV shows on DVD today - 
I ate at a Cracker Barrel last night. In the store they were selling 
DVDs with Bonanza, Andy Griffis, and other old shows for $5.99. I can 
easily imagine subscribing to a popular TV show directly, rather than 
getting it via a walled garden. These shows may have content that is 
not in the version that is edited for content and stuffed with 
commercials.  In other words, this is not a total change in the old 
business models, but an evolutionary change based on the ability to 
market directly to individual and homes, including the advertising 
side of the equation.

I suspect that the telcos may adopt some kind of hybrid. Enough 
bandwidth to buy services from outside their walled garden, alongside 
the traditional walled garden services that will be sold ala carte or 
in tiers. The real value of any distribution infrastructure will NOT 
come from pushing bits to the masses. The real value will come from 
pushing localized and personalized bits to subscribers.

This is a classic Catch 22 situation. You cannot compete unless you 
can offer a viable broadband service, and that automatically means 
that you cannot build walls around the service, despite the fact that 
you may be offering walled garden services.

Regards
Craig





 
 
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