[opendtv] Re: Shifting Online, Netflix Faces New Competition

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Wed, 29 Sep 2010 07:27:39 -0400

At 6:30 PM -0500 9/28/10, Manfredi, Albert E wrote:

Craig Birkmaier wrote:


 The Internet is winning because of disintemediation; the ability to cut
 out the middlemen. When producers decide to go direct to the consumer
 we will FINALLY have a real market for content; a market where the
 producer can charge as much as the market will bear.
Which would make it no different from what we have now with the middlemen, as far as consumers go.
If I could buy just the content I want for less than $90 a month I would go there in a heartbeat.
I agree that consumers probably do not care how the content is distributed, UNLESS they are forced to buy a bunch of other stuff, as is the case today with the MVPDs. The cost of bundled services is now high enough that there is enough money on the table to pay the higher ala carte fees via other services such as Apple TV.
One much ask how much higher the MVPDs can push monthly rates before the whole system collapses.
And there's more. For secure distribution of such high value content, you are simply seeing other middlemen being created. Either it's Comcast with its new Internet scheme to its own subscribers, of Netflix and the other "over the top" services, or likely the ISPs themselves, eventually. This happens because the content owners want to keep control of their stuff AND because the ISPs need to manage the much greater bandwidth being requested in their nets.
There are already many secure hosting services with reasonable rates, that are not "visible" to the consumer. You can pay Akamai to host your content, but to the consumer they will be going to YOUR website. If there is a need for a service like this companies will rush in to fill the vacuum.
I just don't see that your favorite independent producers will behave any differently, *IF* their stuff is ever going to be demanded by millions of people. When it gets to big distribution, that's when the middlemen are sought out, by these new content owners. 

They have no choice today.
We face similar situation in Florida with the mandated "three tier" distribution system for beer. We could easily self-distribute in the region within 100 miles of Gainesville. Moving out farther would be more difficult; thus we would probably continue to use distribution for more distant markets.
With digital content, however, we are not moving atoms, we are moving bits. Distance and "shipping costs" are mostly meaningless with Internet distribution of content (I do concede that hosting rates are based on the volume of bits delivered).
One of the major factors that keeps the current content distribution schemes going in the U.S. is the value of secondary distribution in foreign markets, especially to the broadcast distribution pipes in countries where a large percentage of viewers still use OTA services. There is nothing to prevent content owners from developing their own distribution deals for International distribution, rather than selling the content to a conglom, who will then resell it.
Another factor is that the congloms may help independent producers with financing, an issue that is highly relevant in a world where top tier talent can get $1 million for a single program. 

Regards
Craig


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