[opendtv] Re: The rationale for retrans consent from local broadcasters

  • From: Craig Birkmaier <brewmastercraig@xxxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Sat, 10 Oct 2015 10:50:56 -0400

On Oct 9, 2015, at 9:27 PM, Manfredi, Albert E <albert.e.manfredi@xxxxxxxxxx>
wrote:


USDTV was not freeview. It was, instead, another subscription service.

As was OnDigital when the service launched in the U.K. On Digital was doing
quite well in terms of subscribers, but overbid for an exclusive U.K. sports
franchise, which ultimately caused the service to go bankrupt.

The BBC and commercial broadcasters stepped it to save the service, delivering
a highly viable MVPD service to TV antennas, in the clear. Depending on where
you live in the UK you can receive 60 SD and 12 HD channels. Their current
website says they offer "90% of the top channels in the UK."

What is relevant to his discussion is that Freeview has 50% market share in the
UK, while 50% pay for a premium MVPD service. It is also worth noting that
everyone pays for TV in the UK - the annual license fee for a TV is £149.5,
about $229 at current exchange rates.

USDTV cost about $20/mo, but did not offer the most popular channels that drive
viewers in the U.S. to the MVPD services.

What Bert is missing completely is that U.S. broadcasters had the opportunity
to compete with the rapidly growing cable industry in the early '90s rather
than choosing to join, then take over the MVPD industry using retransmission
consent.

Bert talks about how important the programming delivered by the broadcast
networks is to the MVPDs. But he lacks IMAGINATION.

IMAGINE what could have happened if U.S. Broadcasters had decided to withhold
their content from the cable industry and developed/purchased all the channels
they now own - i.e. 90% of what we watch in the U.S.

What if each of the six U.S. media conglomerates had worked together to offer a
hybrid free + subscription OTA service. What if each conglom got $6/mo for the
paid tier. At $36/mo, that would be less than half of what most MVPD
subscribers are paying.

And what would this have done for the in-home equipment side of the business,
which would have been driven by competition among the consumer electronics
industry instead of the captive MVPD STB suppliers?

Imagine that Bert!

That is what real competition MIGHT have done. Instead we pay monopoly prices
for our entertainment content.

Do you honestly expect the Internet to change the tactics the media
conglomerates have used to maximize their profits?

You have very poor retention. I've already listed the channels, and how many
are local, and that number is still well above 30. And, again around and
around, you are mixing two different discussions. One is the technical
discussion, whether ATSC can provide this service or not, and the other is
your personal preferences discussion, which is utterly beside the point. Your
ideas about reception robustness have never moved beyond the state of the
ATSC reception art, ca. 2001. So those ideas are simply not valid.

In light of what I wrote above, it should be obvious that broadcasters COULD
have developed a new digital transmission infrastructure that would have been
competitive with cable. Instead they chose a placeholder standard designed to
drive viewers to the MVPDs.

The only statistic that matters is the percentage of homes that still use FOTA
TV - about 10%.

You CHOOSE not to pay for the content

Just like users of Freeview. That's why it's called Freeview.

If you call $229/year FREE.

Unfortunately, YOUR FREE TV only delivers about 30% of the content that most of
us watch.

The point is that content, not technology drives this stuff.

Ah, okay, that's fine with me. I was responding only to your technology
questions. You need to be consistent with your threads.

As I outlined above, the technology was available to compete with cable.
Instead most of our content has moved behind the pay walls.

The U.S. Broadcasters decided to punt on the technology

See what I mean? You're back on the other thread. You must be distracted.
ATSC does a decent job with our version of Freeview, and is gaining
customers. The biggest drawback now, IMO, and in the O of the millennials too
no doubt, is its limitation to linear streams.

Not even close. Not close in the percentage of homes using the service. Not
close in the percentage of popular content available. And not close in terms of
ease of reception compared with DVB-T.

We are awash in content today.

But not awash in competitive distribution options (well, many luddites are
slow at change, so the new options take some time to become adopted in a big
way).

And for some strange reason you believe that the Internet is going to change
this situation?

At best we are likely to see a 30-50% drop in the cost of MVPD services, due
mostly to the monopoly pricing of MVPD STBs and the glut of channels we pay for
but do not watch. There may be a reduction in the taxes paid to all levels of
government too, at least until they figure out how to tax Internet services.

The article

http://www.nytimes.com/2015/10/07/business/media/doubts-circle-viacom-vanguard-of-yesteryear.html?_r=0

makes that very specific point. The prices are driven down by this, not up.

If you say so. Viacom keeps getting higher subscriber fees...

And you are focusing on a few channels that have not been managed well.

For what it's worth, ratings are the only real competition among the companies
that control the content oligopoly.

Yes, true. MTV was a perfect example of a linear "channel" used for something
that would have been much better distributed on demand. But that linear
channel was the only game in town, when MTV began. The same holds true for a
huge amount of TV content, and it especially holds true for the way the
younger generations expect to consume this content.

Exactly as I have been saying. The bloated extended basic bundle is going to
slim down. Anything that can be placed on an Internet server and accessed on
demand will have a huge advantage over appointment/rerun channels offering the
same content.

Some of these Internet services will be ad supported, but most will be SVOD
services. So at least a portion of what we may save on the MVPD bundle will be
spent on SVOD bundles.

I can't count the number of times I have said that channels filled
with reruns are going to die, replaced by SVOD services.

But okay, since you keep insisting on this one. "Filled with reruns" is NOT a
differentiator. Linear "channels" filled with **ANYTHING** that is best
consumed not-by-appointment are going to steadily become superfluous. That's
why I keep ignoring this point you insist on making. Aside from **some**
sports, just about anything else is best viewed when the consumer feels like
it. Even the news, the very vast majority of which is recorded anyway, even
if delivered as a linear stream.

This is where we disagree, and the stats support my arguments. Live/linear TV
is not dying; It competes with "demand based" viewing, as it has since the
arrival of the VCR. Note that the VCR was not "on demand," but delivered
programming choice in addition to appointment TV.

More than half of all TV viewing is still live/linear. Much more if you take
into consideration how much live/linear viewing is time shifted with DVRs.
Social networking is keeping people, especially Millennials, connected to live
linear TV.

Bottom line, there is plenty of room for both.

But ESPN is still a cash cow, and the rest of the content congloms
are building sports networks to compete with ESPN.

And that will put DOWNWARD pressure on the price people are willing to pay
for ESPN.

Why?

They get more each time they cut a new subscriber fee deal.

It MAY put upward pressure on the cost of MVPD bundles...

Oh wait. That's exactly what has been happening!

People who watch sports are more than willing to pay.

For those who are not willing to pay it is likely there will be some less
expensive skinny bundles. Time will tell.

That's the way the market works, Craig. Prices flatten or DROP with
competition. This is not a sign that the product is dying. It is, instead,
the natural regulatory mechanism our economy has, doing its job.

That may be true for competitive markets. Unfortunately TV is not a competitive
market. It is controlled by oligopolies.

You're sounding so very naïve, Craig. The reason they run these ads is, now
that competition from Internet TV content exists, they have started to
listen. As opposed to ignoring their customers, because their customers had
become hopeless addicts anyway.

I would agree that they face the very real prospect of losing a significant
share of their video subscribers to Virtual MVPDs that use their broadband to
deliver the bits. Then again, the MVPDs have the ability to compete, which is
obvious if you call and threaten to cut the cord. If they want to stay in the
video game they must improve their consumer satisfaction ratings and eliminate
some of the bloat that has driven up the cost of the MVPD bundle.

It is easier to cut profit margins a bit than it is to develop new competitive
distribution services with thin profit margins. The content owners win either
way.

BUT, why do you not get that without a neutrality mandate, these same
companies would just as easily revert to their previous habits? They were
starting to, and they would have continued to. Your "trust me, this won't
happen" sounds a bit ridiculous. It happened for decades, and it was starting
to all over again.

Only in your mind. The reality was quite different, as I pointed out.

What the FCC has done with Title II assures the cabled broadband providers a
lucrative future.

Regards
Craig


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