[opendtv] Re: Retransmission Letters Fly on Capitol Hill

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Mon, 2 Aug 2010 07:41:42 -0400

At 6:13 PM -0500 8/1/10, Manfredi, Albert E wrote:
I guess I understand the part about the MVPD gets no ad slots, because those presumably go to the OTA broadcast station and to the conglom. But the cable company does get most (I assume) of the subscription fee for the basic tier, not to mention all the other fees they charge for providing the connection.

You are correct that the broadcasters signals are simply passed through by the MVPD. I would add that there are some market research applications where stations allow a an MVPD to insert different versions of commercials for certain neighborhoods. But this is via a separate contract for research purposes, as the station must send the same commercial to everyone in the market.

You are incorrect about the part that the MVPD gets most of the fees paid by their customers. I would estimate that for the typical extended basic analog tier the MVPD keeps less than half, as the rest is the subscriber fees for individual networks which the MVPD collects for the content owners.

The reason cable rates have soared, even after re-regulation in 1992, is that they are allowed to increase rates to pay for the subscriber fees for new channels they add, and for the fee increases that are typical when retrans and non-broadcast contracts are renewed.

The portion of the bill that covers the infrastructure and operating costs for the MVPD is regulated by the franchising authority for cable, and by "competition" for DBS. By competition I mean that the regulates cable systems tend to set the average rate for the service, and the DBS companies tend to match (or slightly undercut) these average rates. TTHis is typical for any market controlled by an oligopoply.


And don't forget the subject line here. The MVPD depends on that conglom content to keep their customers happy. They periodically jack up the basic fee, and their customers habitually cave in. So it's not like the MVPD is a loser in any of this.

Everyone but the consumer is the winner in this. The congloms, the MVPDs, and now the broadcasters. The consumer is the loser.


 The notion that people subscribed to cable to get the broadcast stations
 in their market was ONLY TRUE for those who could not receive good
 quality signals off the air.

Actually, that might have been true only for a tiny minority. It's a convenience thing, plus the fact that in the analog OTA TV days, it was very rare that all of the OTA channels came in equally well.

Sorry, but it only became a convenience thing AFTER there was also an expanded choice thing going on as well. Cable systems only began their meteoric growth AFTER they started to offer their own content in addition to the local broadcast signals.

Usually there were a couple, maybe three, that came in great, and the rest all had some sort of issues. And the vast majority of households were too incompetent to even get that much right. So cable systems, which spoon-feed their subscribers, get people hooked long term. It made sense to get people to have NO REASON for the antenna. The better to make them dependent. I saw this happening right at the start, but I've always resisted any walled garden business model.

There may be a few cases like this, as was probably true for the Gainesville market. You could get two stations easily via antenna, but you needed cable to import the rest from other markets. In Gainesville this meant far more than putting an antenna up on a big stick; here they built expensive microwave links from Jacksonville and Orlando to get the signals to Gainesville.

People in markets where they could receive all of the broadcast networks did not start to use cable until the mid to late '80s, when the new cable networks started to pop up.

 > Cable and broadcast helped each other, until more people started
 watching the cable content than the broadcast content. So now
 broadcasters want the second revenue stream too...

 SO THEY CAN SURVIVE.

Of course, every business looks to maximize its profits. And when they get used to the extra revenues, it's hard to go back. Governments have the same problem.

Governments ARE the problem, when business can use them to avoid real competition.


Assume the model where all OTA nets are nationwide O&Os. Whatever compensation goes from MVPD to the "broadcaster" is actually going to the content owner, more like any other content provider to MVPDs. The existence of the OTA station is a decision only for the conglom to make. The advantage to the conglom is simply to get a bit of his content out to those, like me, who resists being suckered into walled garden business models. Ad slots would go to the conglom and to the MVPD. OTA stations could be operated very efficiently, remotely, similar to the Euro system.

The existing system already does this. Allowing the congloms to own all of the broadcast stations would not change anything that the viewer would notice but it would eliminate thousands of local jobs as the congloms migrated to a few regional operation centers.


This could happen, if Congress stopped assuming that OTA stations themselves today create the content they air.

Congress NEVER assumed that TV stations created much content. They knew going in that the stations would be affiliated with a few national networks. But they also knew that each market would have some local content, especially the all important news casts that provide them face time at home. And they knew that a market based structure would allow them to buy ads in their districts, rather than having to compete for a limited number of national or regional ads.

The reason the politicians want more TV spectrum back is that they now have equal or better ways to reach their constituents, and they want to spend the money that alternative uses of that spectrum represent.


 It has everything to do with the deal between the government and the
 broadcasters. Content was and IS the product that causes people to use
 the service. For decades broadcast was the ONLY viable way to deliver
 content to the public, and the politicians protected this business
 because it was ALSO the best way for them to get face time with the
 public.

Not very convincing. Politicians may have a deal with broadcasters, but the OTA aspect is mostly immaterial. Politicians in reality have a deal with a few of the MVPD content providers. If that OTA station disappeared, the poltician could tie the requirement onto DBS providers, and get to cable that way. Or even force cable providers to carry important political events, using some sort of eminent domain clause. Besisdes which, the majority of MVPD subscribers would want that content ANYWAY.

Pay attention Bert. You are saying what I am saying. When broadcasting was the only channel of distribution the politician protected it. Now that they have better ways to reach the public AND the potential to raise money from the broadcast spectrum, they are going to consolidate it, keeping a degree of regulatory control over the congloms.

Regards
Craig


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