[opendtv] Re: Why aren't there more converter boxes?

At 4:41 PM -0800 1/25/07, Dale Kelly wrote:

Let me *again* remind you that one size does not fit all when referring to
broadcasters, as you continue to do while sounding like a broken record.
I agree that one size does not fit all. But the reality is that half of the revenues from OTA broadcasting come from the stations - In excess of $15 Billion per year. Admittedly some of this revenue goes to the network O&Os; perhaps as much as 35%. 

That still leaves many billions for the rest.


"Broadcasters" fitting your model are actually the Networks, who are the
Major Media companies (who have the billions) and who own only a relatively
small percentage of the nations broadcast stations (less than 10% IIRC). The
second tier in that group, IMO, consists of the top thirty markets non
network 0wned affiliates, who might have millions, though they do pay for
the networks programming.
The profit margins for network affiliated stations in the top 30 market are in the range of 25 to 35%, with duopolies achieving as much as 50% profit margins. In the top fifty markets the average profit margin is above 25%. Even in the rest of the top 100 markets the profit margins are above the average for most businesses ( the big oil companies average in the range of 8-10%.
I am not saying that everyone is rolling in money, certainly not the independents, but things are not nearly as bad as you portray.
My point is that there has been plenty of revenue available to re-invest in a new business model. It might take some cooperation among the survivors, just as there was cooperation in the early days of TV when Network compensation was a necessity to enable TV to reach smaller markets. And I would also point out, that my Utility idea is based in the concept that revenues for the larger markets are used to help build and operate the infrastructure in the smaller markets.
What is even more relevant, is that if broadcasters would compete in the multi-channel TV business, rather than relying on cable and DBS, they could generate significant new revenues from premium services. it's all about the business model and using the spectrum to provide competitive services. 

There are many other lower tier broadcasters who actually own the majority
of stations and where profits are from moderate to non existent.
I don't believe this, unless you are talking about independents and LPTV stations. 


Those
Broadcasters have very little in common with the Media Networks and those
who are the Network affiliates also pay the networks for the use of their
programming; in past years networks actually paid the station owners
compensation to carry there programs. And, don't forget the PBS network, a
completely different model.
Yes, I am aware of network compensation. it was very important in its day. Then virtually all stations began to operate profitably in the mid to late 80s. One could make an analogy to the early days of cable, when the collection of subscriber fees for cable networks was critical to industry growth, as ad revenues were not sufficient to cover the startup and operating costs of these new networks. 

That was then.
Today virtually all of these networks could survive without the subscriber fees, just as broadcasters can survive without retransmission consent payments. But the precedent was set, and now the consumer pays twice, via their cable DBS bills and at the checkout counter.
I saw an analysis of Internet media services today that was critical of the fact that they do not generate enough advertising revenue. This totally misses the point. The public is sick and tired of advertising bloat, not to mention having to pay ever higher bills to the cable and DBS companies. We are reaching the tipping point, where it will be possible to pay directly for content WITHOUT ADS, instead of the monthly fees for content that we don't even watch that is full of ads. I watched several episodes of 24. The ad pods are almost as long as the program segments. I'll try to record and count the ad minutes next week, but I suspect it is approaching 25 minutes per hour.
As for PBS, it has a different, and apparently sustainable business model. And multicasting is a key component of their model for the future. 



As an aside: IMHO there is nothing improper about passing a share of these
Network programming costs on to the Cable companies in the Transmission
Consent negotiations.
Your statement sounds a bit like a popular cliche that makes the rounds on talk radio. 

"Businesses do not pay taxes."
The reality is that businesses just collect taxes, which are incorporated into the cost of the products we buy. In the end, ONLY CONSUMERS PAY TAXES.
In the multichannel TV business ONLY CONSUMERS PAY FOR PROGRAMMING COSTS. The cable and DBS system simply collect the fees and send the checks to the programmers. This is why cable rates keep going up every year at rates that are 2-3 times the inflation rate. In the next few years these bills will go up at least $5 per month to pay for broadcasters retransmission consent fees.
Your case MIGHT be more believable, if not for the fact that in the UK, cable networks and broadcasters are PAYING for the right to deliver their programming via Freeview, which does not charge a dime in subscriber fees. 

Go figure.

Regards
Craig


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