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

At 3:46 PM -0500 1/26/07, Manfredi, Albert E wrote:

Question 1: Why are you constantly telling us how the broadcasting model
is a dying model, if it is so obviously successful (from what you
describe)?


Let's start with the reasons for its historic success.
1. The ability to attract large audiences that historically crossed demographic lines. When TVs were relatively expensive, families often gathered around the electronic hearth to watch lowest common denominator programming with broad appeal.
2. The ability to accumulate large audiences that made it possible to pay very high rights fees for programming. This is especially true for sports, where the rights fees could run into billions of dollars.
3. Ane era in which TV news displaced newspapers as the primary means by which viewers got their daily dose of news and information. Many local broadcasters were able to build strong local news brands which adde4d value to their gatekeeper role of the networks.
4. Government protection of the over-the-air franchise, which enabled the media conglomerates to rebuild their dominance after the proliferation of special interest cable network, and NOW to enable broadcasters to generate a second revenue stream from subscriber fees. 

Now for the reasons it is a dying franchise.
1. The difficulty in attracting and holding large audiences with lowest common denominator programming. While there are still a few hits like American Idol, the audience size for most network programming has declined to the point where it is difficult to cover production costs.
2. The proliferation of alternative sources of news. The audience for local news is dying with "The Greatest Generation. I would also note that the growing distrust of the "mass media" is a significant factor (this includes newspapers, TV and news weekly magazines).
3. The inability of local broadcasters to develop viable content businesses. With a proliferation of alternative delivery channels, local broadcasters are now just watching their franchises decline in audience and now revenues (neither the networks nor local stations can keep pushing up cost per thousand as they did over the past two decades. In many cases they are now seeing declining ad revenues as the audience declines.
4. The growing resentment of audiences related to the increasing bloat of ads in most shows. As consumers discover direct payment options for content that is largely free of ads, the audience for ad supported programming is declining.
5. The end of appointment TV except of sports. Viewers are far less inclines to schedule their lives around TV shows, and to watch shows that are adjacent to the ones that they like. 


Question 2: Just how stupid are these consumers who pay twice when they
don't need to? Really, you cannot expect any business to act
magnanimously toward stupid consumers, can you? Most people would not
expect that. Unless you're calling for the government to step in, let
the market decide. I'll GUARANTEE you that if people quit letting
themselves get raped, the broadcast networks would find very viable
delivery mechanisms for their content. No need to expect the sort of
magnanimous behavior you want.
The problem is the tremendous level of control that the media conglomerates can exert over distribution and pricing. While there is the appearance of competition between broadcasters, cable, DBS and now the Telcos, the reality is that this is a cross industry oligopoly that controls pricing with few viable alternatives.
The only REAL choice consumers have is to live in the past, viewing a handful of broadcast channels. If they want to enjoy the present day variety of content, they must subscribe and pay. And with bundling of programming tiers, they are forced to pay for all kinds of content that they do not consume.
I do not expect magnanimous behavior from a government supported oligopoly, and politicians/regulators who pay lip service to competition.
But the contrast with what is happening in other parts of the world is becoming too great to ignore. Consumers are starting to question why they are being raped, and why they cannot choose and pay for the programming they want.
Bert is absolutely correct that the content conglomerates have alternatives for distribution. The one they are most interested in is direct payment, given the huge profits they realize from direct sales of movies. So my educated guess is that they will keep pushing the envelope on pricing until it becomes possible to deliver most content via direct download for a fee.
At that point, only the few remaining categories of content that can attract large audiences for a live broadcast are likely to survive using the current broadcast business model. 




 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,


You have missed the trend completely, then. The trend, even in music
distribution, is to make it ad supported and otherwise free. This is
exactly the opposite of what you describe. And by the way, it's about
time someone discovered that Internet advertizing is far less successful
than the hype of the past few years suggests.
We disagree. The revenues generated by direct payment for content continue to grow each year at a rather brisk rate, while the revenues for ad supported content are now in decline, both in real terms and when adjusted for the tremendous growth in the potential audience.
Remember, one of the major reasons that the broadcast model has been sustainable, is that the potential audience size has DOUBLED in the last 40 years. 

Regards
Craig



Bert


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