Got this WSJ story via the NAB, which obviously supports the opinions expressed in the column, despite the many factual errors that it contains. An analysis of this column follows. Read it first, then read why I believe it to be one of the most hilarious things the NAB has pushed in years...
http://online.wsj.com/article/SB124603687047661927.html?mod=dist_smartbrief Time to Screen Out Unloved Channels By MARTIN PEERS There is only one word for the amount of choice on TV: eye-glazing.As the TV industry tries to come up with a new business model to deal with the challenges posed by online video, it should consider shrinking the number of channels.
It is doubtful viewers want as many as they have. In 2007, the average household tuned into only 16 channels of the 118 channels available, estimates Nielsen.
Indeed, the explosion of channels was driven by cable operators' need for a marketing tool to convince people to pay for more choice, given the presence of free broadcast TV. That gave rise to a system where channels developed for cable are paid affiliate fees by cable and satellite operators. Broadcast networks, which individually draw much bigger audiences, generally don't receive fees.
But what really distorts the picture is the absence of correlation between the size of the fees paid to individual cable channels and their audiences. Viacom's Nickelodeon is the most-watched cable channel, averaging about 1.7 million households a day last year, according to Nielsen. Yet it ranked 10th among cable channels in terms of affiliate fees in 2008, excluding premium channels, estimates SNL Kagan.
Kagan estimates Nickelodeon's annual affiliate revenue was worth $312 a household. In contrast, Discovery Communications' Discovery Kids earned affiliate revenue of $1,871 for each of its 20,000 average daily household viewers last year.
Channels showing live sports, such as Walt Disney's ESPN, draw the most fees per viewer, closely followed by channels owned by cable operators.
The industry can't solve the online-video challenge without dealing with the disparities in these fees. Because broadcasters miss out, cable operators can't stop them offering some of their best shows on the Internet, where they can seek an incremental audience. That has contributed to worries about people turning off their video subscription and using Internet TV instead.
Industry executives like to claim that people watch TV shows online because it is convenient. Maybe so. But some people also want to spend less on their cable bill. And one big factor driving up that bill is programming charges.
A first step toward reinventing the business model would be to link fees paid by TV distributors to viewership, with a minimum audience level set for any fees.
Some niche networks would likely go out of business. That would be a good thing. The TV industry suffers from an excess of supply. Shedding little-watched networks would restore some semblance of economic reason.
Money saved could be returned to customers through lower charges or redirected to broadcasters. That would level the playing field and make it easier for the industry to come up with a coherent approach to the Web.
---------------------------The author, Martin Peers, is a WSJ columnist who covers a wide gamut of tech issues; unfortunately he seems unaware of the tight linkage between the broadcast networks and cable networks, now that a handful of media conglomerates control 90% of everything that is on broadcast TV, cable and DBS.
For example, in this column Peers writes:"That gave rise to a system where channels developed for cable are paid affiliate fees by cable and satellite operators. Broadcast networks, which individually draw much bigger audiences, generally don't receive fees."
This ignores the fact that the networks used re-transmission consent to build up their cable network empires; it also ignores the fact that CBS took money, rather than preferred cable channel placement, when the first round of retrans agreements were negotiated between 1992 and 1995. And it ignores the fact that local broadcasters are now receiving retrans consent payments from the cable companies; this new 'found money" has allowed the networks to virtually eliminate affiliate compensation, and now that the money is pouring in, the networks are actually moving into reverse compensation, especially for sports programming.
Peers seems upset by the fact that there is little correlation between the affiliate fees paid to cable networks and the number of viewers they attract. On the surface, it looks like some of the cable networks negotiate better than others. But when one looks deeper, the reality is that some of the cable networks attract much larger audiences, causing the AVERAGE fee paid per household to be much smaller that the the average for some of the less watched networks. What really matters is the total affiliate fees paid to each network, and what those networks are doing with the money.
For example, ESPN has the highest total affiliate compensation, but they spend a large percentage of these fees to obtain programming rights for the content that draws a large enough audience to make the AVERAGE per household much lower than some of the small niche cable networks.
Peers also seems to believe that ONLY the broadcast networks are streaming the content delivered by local broadcasters on the Internet. The reality is that cable networks have moved to online distribution as well, offering a wide range of searchable content that is available on demand, along with other related resources; for example, you can watch episodes of many Food network programs online, and download the recipes for the dishes that are prepared during these shows.
Peers is correct in relating the concerns of the cable industry that online content could eat into their subscription revenues. But this is not a broadcast versus cable issue, but rather, the reality that many homes are now spending more than $50 per month for cable or DBS. This money would pay for a significant amount of premium content, to augment all of the content that is available free via the Internet, albeit with ads.
His final conclusions are what caused me to post this column and analysis:"A first step toward reinventing the business model would be to link fees paid by TV distributors to viewership, with a minimum audience level set for any fees.
"Some niche networks would likely go out of business. That would be a good thing. The TV industry suffers from an excess of supply. Shedding little-watched networks would restore some semblance of economic reason.
"Money saved could be returned to customers through lower charges or redirected to broadcasters. That would level the playing field and make it easier for the industry to come up with a coherent approach to the Web."
LEVEL THE PLAYING FIELD? No wonder the NAB is distributing this article!The playing field is anything but level today, and broadcasters are in trouble, but reducing content choices and giving the broadcasters the savings is just an outrageous idea. Six companies control 90% of what we watch today - most of the small networks that Peers believes to be unnecessary are part of the 10% that the conglomerates DO NOT control...
How convenient! As for a "coherent approach to the web?" Sound more like code words for,"HOW CAN WE CONTROL WEB DISTRIBUTION TOO!If small networks lost affiliate compensation, they would likely move to the web to distribute their content, as is the case for all kinds of content that is already available only via the web.
No, this is not about leveling the playing field. It is about continuing to control it. The conglomerates should rightly be concerned about the Internet. What would happen if 85-90 million homes were to cancel their cable and DBS subscriptions and spend $50-$100 per month buying the programming they want, rather than having that money spread around a bunch of channels they never watch?
Sound like the beginnings of a real OPEN marketplace for TV content to me... Regards Craig ---------------------------------------------------------------------- You can UNSUBSCRIBE from the OpenDTV list in two ways:- Using the UNSUBSCRIBE command in your user configuration settings at FreeLists.org
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