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

From: Craig Birkmaier <brewmastercraig@xxxxxxxxxx>
To: opendtv@xxxxxxxxxxxxx
Date: Mon, 12 Oct 2015 08:11:11 -0400

Regards
Craig

On Oct 11, 2015, at 9:43 PM, Manfredi, Albert E
<albert.e.manfredi@xxxxxxxxxx> wrote:

There is no pretense that the OTA transmitter organization owns content,
Craig, in the UK and the rest of Europe.

Really. Who owns Freeview?

Freeview was launched by DTV Services Ltd, a company owned and run by BBC,
Sky, Channel 4, ITV and Arqiva.

The content owners own Freeview, and Sky owns the major paid MVPD competitor.
The difference is they all want to reach viewers any wY possible, and are not
concerned with generating billions in subscriber fees.

Their equivalent of the congloms are the industry. The transmission
infrastructure is run separately. So what you're really saying is that in the
UK, the true owners/rights holders of content agreed to put much of it on
Freeview, whereas in the US, the owners allowed only their main channels OTA
(plus a lot of new subchannel content providers), and their less popular but
more numerous channels only in monopolistic distribution media, on which they
could collude ("take it or leave it" bundles).

That's much closer to the truth. The congloms in the U.S. created a content
oligopoly that works with the MVPD distribution oligopoly to control access to
the pipes and collect billions in carriage fees in addition to the revenues
generated from advertising. The U.K. Industry is content with ad revenues and
TV license fees for their REQUIRED "public" broadcaster.

The local broadcast transmission systems had nothing to do with any of this,
other than transmit the content. Consequently, in the US, the OTA
broadcasters only had a "let's pretend" option of "competing with the MVPDs,"
as you claim. So you're saying, in fact, "I am pretend-imagining that in the
US, the local broadcasters could have competed against the MVPDs." But I
don't "pretend-imagine" things, Craig. I prefer to tell it like it is.

You are pretending that stations in local markets have any real power. They
make real money by delivering the content from the networks and syndicator so
they are affiliated with. They compete with the local MVPD in a very real
sense - both have salesmen on the streets selling ads to local and regional
businesses.

By limiting station ownership to 40% of U.S. homes no station group could
challenge the networks - they are instead dependent on those networks.

That being said, "the industry" could have chosen to compete with cable by
creating a viable alternative to the cabled infrastructure, and withholding
their content from the cable systems.

As for your OTT competition, there is less choice.

Really, Craig? So, you think that online, you have access to fewer than
150-200 sources of TV content?

The quantity is irrelevant. There are hundreds of MVPD channels that hardly
anyone watches.

What matters is whether you can access the programs you want to watch. And for
some of your "Luddites," whether they can watch a live event or the premiere of
an episodic show.

And if the alternative to paying for a MVPD service is to pay for an OTT
service, then the question becomes "do I pay for both," or "is there a viable
OTT alternative to the expensive MVPD bundle?

Just wwitv.com alone gives you in the 1000s. The OTT medium is far less
restricted than the traditional MVPD media. The OTA medium, one set up for
low overhead costs, is more restricted than tradition MVPD media.

Sorry, but the only restrictions on the OTA media are whether they can afford
to pay for the best programming, and whether the owners of highly desired
programming make it available. The REAL power of the content congloms is NOT
collusion over what they charge, but the decision to withhold popular content
from the FOTA medium. They bought or created most of the content delivered by
the MVPD oligopoly, and only make it available from them. That content is NOT
available FOTA, nor is it available FOTI, nor will it be.

The broadcast networks could have worked with their affiliates
and independent stations to offer 30 or more channels FOTA;

Obviously, Craig, but why bother?

Competition. The cable guys had the balls, and the resources, to challenge the
big three broadcast networks. The broadcasters could have pulled their content
and cut the new cable entrepreneurs balls off.

But they chose to use their political clout to take over these new competitors,
and use the paid MVPD business model to generate billions in subscriber fees.

They had well-trained people, such as yourself, who were happy to spend
higher and higher rates for their monopoly pipe, with enforced bundles of
channels. And worse, proud of it. But at least you understand that this has
nothing to do with broadcasters, and everything to do with the congloms.
"Broadcast networks" are not "broadcasters," Craig. You'd be better off
calling them "TV networks."

For many years the value of the cable bundle was well worth the price. The only
real complaint was the pathetic customer service. It was only after the content
congloms started driving the price of the bundle up that it became obvious that
monopoly tactics were being used to increase prices and their profits.

Keep in mind that the 1992 Cable Act was sold to the public as re-regulation of
a monopoly with the goal of stopping or at least limiting the annual -higher
than inflation - price increases. The unintended consequence was that the rate
of rate increases INCREASED.

Here, take a look.

https://en.wikipedia.org/wiki/List_of_digital_terrestrial_television_channels_(UK)

You'll see a lot of familiar US conglom channels on Freeview, Craig. Although
I'm sure they wish they had more well-trained pay-TV subscribers, over there.

Content owners are in the business of licensing popular content. That is how
they can afford to spend so much to produce popular high quality content.
Outside of the U.S. there are other market opportunities. The content congloms
DO license content that they keep behind the pay walls in the U.S. to free
services in other countries. They want the money and they want the reach.

To reach viewers in the U.K. they must license to both the Freeviews (yes there
are two - the terrestrial and the DBS versions), and to the paid MVPDs. So in
the U.K. you will find some of the networks that can only be accessed via paid
MVPDs in the U.S. on Freeview, and others that are only available via the paid
MVPDs. Obviously the networks behind the pay walls charge more for the
exclusivity.

Sorry, nothing has changed. The congloms are more profitable
than ever, and firmly in control.

And they are starting to compete over OTT sites too, e.g. CBS All Access and
Sling TV. No collusion, or far, far less collusion, Craig. Everything is
changing.

Nothing has changed in terms of access to exclusive content; just a new pipe to
exploit.

Actually the way we consume TV is changing because of the technical
capabilities of the new pipe. As you love to point out, for some content, on
demand is replacing appointment TV for a large portion of the audience.

So the content owners are making more money licensing their libraries to new
SVOD services and trying to figure out how to best monetize and control this
new pipe.

In 1992 most cable systems has about 30 channels.

I don't know if that's true, but even if it is, with analog TV (1992), even
big markets had way fewer than 30 channels. Cable allows use of adjacent
channels, taboo channels, and frequencies from adjacent markets, which OTA
can't do.

A bit of cable industry history from Wiki:

Originally, only a maximum of seven channels could be carried, using 2, 4, 5
or 6, 7, 9, 11 and 13, as the equipment was unable to confine the signal
discretely within the assigned channel bandwidth. As equipment improved, all
twelve channels could be utilized, except where a local VHF television
station broadcast. Local broadcast channels were not usable for signals that
regulators deemed to be priority, but technology allowed low-priority signals
to be placed on such channels using a synchronization system. Similarly, a
local VHF station could not be carried on its broadcast channel as the
signals would arrive at the TV set slightly separated in time, causing
"ghosting". The bandwidth of the coaxial cable also was limited, meaning
frequencies over 250 MHz were difficult to transmit to distant portions of
the coaxial network, and UHF channels could not be used at all. To expand
beyond 12 channels, non-standard channels had to be used, located between the
FM band and Channel 7, or beyond Channel 13 up to about 300 MHz; these
channels initially were only accessible using separate tuner boxes that sent
the chosen channel into the TV set on Channel 2, 3 or 4.

It cost the cable industry hundreds of billions to upgrade their infrastructure
to increase capacity. They did it multiple times, financing the upgrades with
junk bonds in the '80s. The last analog upgrade was to 400 MHz. The first
digital systems were typically 700 MHz. The most advanced systems today are 1
GHz. Since 1996 the industry has spent $200 billion on upgrades and is
investing about $10 billion a year, mostly to reduce the number of homes per
neighborhood node to improve the broadband side of the house.

The average cost per station for the ATSC upgrade was about $5 million - some
stations spent more, some less. And the transition delay from 2006 to 2009
helped many smaller stations, who benefitted from the significant cost
reductions for digital production during the transition.

That put the cost of the DTV transition at about $8 billion, with the
government spending another $1.9 billion for the "government cheese" set top
converter program. I have seen estimates from the NAB as high as $15 billion,
but the number still pales in comparison to what the cabled MVPDs spent, and
the tens of billions it took to build the DBS systems.

This is yet another reason that the broadcasters chose the least expensive
upgrade path. Why compete, when your "friends" will invest hundreds of billions
and send you huge checks for your content.

Just words Bert. They had enough spectrum to do it 1992. They did
not need anything better than DVB-T.

So I repeat: I get more than 50 channels OTA now, with lots of HDTV in the
mix and still plenty of spare capacity. That's as good as Freeview. And even
more, in the UK, where the infrastructure is deployed to provide optimal
coverage (as opposed to insisting on "local broadcast stations"), two markets
such a Balt and Wash could have made better use of their allocated
frequencies. So, ATSC 1.0 can easily provide as many channels as Freeview, if
it wants to, and that includes HDTV channels.

Big difference is Freeview works reliably for more than 97% of U.K homes.

And once again, the number of channels is not the issue. What you can watch on
those channels us the issue.

Actually they are already using the Internet to stay competitive
- it's called TV Everywhere.

You're still stuck in the past. Think more in terms of Sling TV. Not
walled-in local monopolies.

Sling TV also offers TV Everywhere Bert; it is part of the bundle you pay for.
TVE is the future for the MVPDs. When all of the channels in the bundles of the
future are available as TVE Apps they can turn off the in-band video service
and recover that spectrum for broadband.

You've been telling us that more than half of all TV viewing
is over the Internet.

That's because you are so befuddled by numbers that you don't even read what
I write. I said that certainly more than 50% of all daily video consumption,
including all kinds, is over the Internet, yes.

Not even close. 23% at best.

And on more than one occasion, I showed you the numbers. Some of this video
may not necessarily be called "TV." Some of it is YouTube, for example.
Actual TV viewing, as of earlier this year, the number is over 30% through
the Internet, easily.

And I have showed you multiple reports that say it is 23% or less.

In the US, the MAJORITY of TV content is already being watched
on demand, and whether you like it or not, the fraction of this
on demand viewing is rapidly going to online. If DVRs are still
used a lot, it's simply because THESE FACILITIES HAVE ALREADY
EXISTED. They are in place today. In time, rapidly, the trends
are too obvious to miss.

Sorry but you are wrong. I have provided numerous stats that say
more than half of all TV is viewed live,

Completely wrong, Craig, **again**. Whoa, Craig! Get this straight, will you?
*Less* than half is viewed live, as of some months ago. Once again:

http://www.mediapost.com/publications/article/247581/time-shifted-tv-is-the-default.html

"The average viewer says that 47% of the TV shows they watch are live and 53%
are time-shifted."

http://petedeutschman.com/2015/01/27/linear-tv-dips-below-half-of-us-viewers/

Sorry, I may have flipped those numbers. So what?

That still means that about 77% is being deliver as live linear streams.

Is there something unclear about "because that's the way they are set up
now," rather than because they prefer it this way?

Is there something unclear about the fact that the Millennials fully understand
they can watch their favorite shows live, time shifted, or on demand, yet about
half choose live?

Do you really think that if people had a choice, they would insist on sitting
down in front of the set at exactly 9:00 PM, for that new show, instead of,
say, 9:07 PM, 9:42 PM, or whenever they finished the dinner dishes?

Yes. It is both habit and tradition. But more important, Prime Time is when
most people sit down to watch TV. If what they want to watch is live and they
are sitting in front of the TV, they are likely to watch it, as 47% do.

Regards
Craig

References:
- [opendtv] Re: The rationale for retrans consent from local broadcasters
  - From: Manfredi, Albert E

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

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