[opendtv] Re: Apple, TV Networks Clash Over Size and Makeup of Web TV Bundle | Re/code

  • From: Craig Birkmaier <brewmastercraig@xxxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Sun, 13 Dec 2015 08:13:36 -0500

On Dec 12, 2015, at 6:55 PM, Albert Manfredi <albert.e.manfredi@xxxxxxxxxx>
wrote:


http://www.fool.com/investing/general/2015/01/10/the-walt-disney-company-is-the-real-winner-from-di.aspx

This article was written just after Sling launched and is just cheerleading.
Yes Disney benefits, to what extent is not clear, but the article also notes
other major content providers are participating. And this was written before
Dish signed up additional networks from the other content congloms.

Obviously Sling is "Disney heavy" - it is because it includes the most watched,
most expensive network that lives behind the MVPD pay walls - but it is also
light on other content needed to make the service a success. Hence it is just
an experiment put together by the legacy oligopolies.

And it has been an important experiment. It has tested a number of important
sub-systems, several of which have failed under stress. It has provided useful
feedback, including the reasons people are not subscribing. But the most
important "clue" that this is an experiment, is the "kill clause," which allows
any content owner to withdraw their content if the experiment is too successful.

Duh! But not anymore that content taken from the linear channel. As networks
optimize for IP, the whole approach of "linear streams" changes. For the FCC,
or anyone else, to insist on the "linear stream" being present is simply
retro. It's like insisting that to qualify as "automobile" the contraption
must have crank-lever starting. It's simply silly.

In your opinion only.

Live linear is still the major money maker. It is still the home of first runs
of popular shows, as well as live sports and events. And it is still an
important element of network promotion and consumer discovery.

There is no question that time shifted viewing has become quite popular, even
if most of what is being shifted is the content people are paying the MVPDs
for. The shift to on demand is just the natural evolution of TV based on
enabling technology. Live matters less when a program is not live, but
pre-produced; but that is not going to stop a portion of the audience from
watching the live premiere of their favorite shows.

Repeating the same banalities doesn't change my dozens of previous responses.
Which are that you are missing the point.

No Bert, you are trying to make a point that is illogical. You are trying to
tell an industry to fundamentally change the way it is making money, based only
on the fact that the changes you are suggesting are "possible."

Hanging on to an old model, for as long as luddites are willing to pay into
it, is only good business practice. A stable owner might well have hung on to
caring for horses, as long as there was demand. Doesn't mean he wasn't also
hiring mechanics.

The content owners are hiring "Internet mechanics." They are carefully
experimenting with the technology. You might get a clue by simply reading the
history behind Hulu. This is an industry effort that narrowly borders on a
major anti-trust violation; the ups and downs, on again, off again history of
Hulu tells you everything you need to know about the content oligopoly.

Your problem is simple - you see a trend in small numbers, and want to throw in
the towel and leave big numbers on the table.

Kodak's business model was to sell a consumable item: film. That was a
problem for them ultimately, even though there was a lot of rhetoric just
like yours, Craig, about how digital would never replace film. Well, even if
not exactly 100%, history told that story, eh? Happened very quickly, once
digital photos passed that magical threshold (~10-15 lp/mm).

Nice, but irrelevant analogy. Photography has been transformed in many ways,
yet film is still a viable business for Kodak.

Kodak's big mistake was choosing not to eat itself. It held most of the key
patents for digital photography, yet never got serious about selling digital
cameras in order to protect its legacy.

You can "try" to convince us that the content owners are not getting serious
about protecting their oligopoly, but you keep failing. Why?

Because it is an oligopoly and it not seriously threatened by this technology
shift. Rather, their power is being enhanced by the shift; it provides new ways
to monetize their content, and they have been successful in preventing serious
leaks in the walls they have created, even as they move these walls to a new
pipe.

The FACT that they can prevent Apple and others from creating a better TV
business model speaks volumes. They are firmly in control and willing to play
the long game.

Remember, the reason the DTV process was started, was to protect their
spectrum, and to prevent cable from getting HDTV first. By getting the
government to adopt THEIR DTV standard, the content owners have already
extended their oligopoly by nearly three decades. Along the way they also were
able to create a lucrative second revenue stream and take control of the
(cable) barbarians at the door.

Prove it. Cord shavers, and cord cutters, have most definitely replaced
linear streams with OTT sites. Very few of them use only OTA as replacement,
Craig. As I said, we'll see if the trend is still accelerating, when new data
come out.

Been there and done that.

Cord cutters/shavers represent less than 10% of U.S. homes. Total streaming is
still less than 25%, and that includes all the people who subscribe to both a
MVPD service and Netflix.

Sorry, but you have not proven otherwise.

A CEO who insists on such tunnel vision would only do it at his own peril.
That's silly dogma, Craig. I can tell you that as far as I'm concerned, for
my TV viewing, you're totally wrong. I'm sure I'm not unique.

You certainly are unique, as a person. As far as your viewing behavior, you are
part of a small minority. The CEOs know exactly what they are doing...

Protect and extend.

No, that's also a narrow view. Collusion takes many forms. One of them is
content owners who should be in competition, instead colluding to create
lucrative "bundles" on non-competing distribution media (because they can).

And because it is highly profitable. They spent decades building these content
castles, getting the legislative and regulatory support to create and maintain
their oligopoly. They can and will continue to run this little thiefdom.

Another is equipment makers colluding with content owners, to make that
content available on proprietary protocols.

You mean like cable and DBS.

That's been pretty sweet for both oligopolies.

But you can be pretty sure that when a content owner distributes his stuff
using standard protocols, and over neutral media, he won't need to collude
with anyone. And the congloms are doing this, OTA and on the Internet.

You can be 100% sure that the content owners will not give up the benefits of
collusion to go direct. It may work in certain limited areas, like HBO Now and
Netflix, but it does not translate into success for mass media like the
broadcast networks. They gain leverage when they can force carriage of lesser
properties in order to gain access to the popular properties, and get two
revenue streams for all.

Netflix buys content from all of them, and still spends billions on exclusive
content to attract subscribers. Once inside the Netflix walls, programs are no
longer attached to networks or channels - you don't search for "old CBS shows,"
you search for CSI or Star Trek.

Seems like you don't know the meaning of the term. An entity selling directly
to a consumer is not colluding with anyone. If you already have a neutral
pipe available, you may not need any separate "distributor." CBS All Access
is an example.

Exactly. So the inverse - we won't sell individual networks to anyone is by
definition collusion.

CBS All access is not collusion. It is a pure direct to consumer play with a
ridiculous price tag that threatens no one. CBS is more than happy to let Apple
offer All Access on Apple TV, but they don't let Apple sell the subscription.
They give away apps that attempt to up sell you to All Access. Netflix is the
same - a free App that requires authentication that you are paying Netflix
directly for the service.

Is Apple colluding with CBS and Netflix? They are not getting 30% of the
subscription fees. But Apple does sell HBO Now, and gets a portion of the
subscriber fees, as do HBOs cable and DBS partners.

Or they can use third parties. But if this distributor third party is not a
local monopoly, then collusion among content owners becomes more problematic.
I repeat: the Apple story here was no surprise to me.

So think for a minute Bert. Why is dealing with Apple or Sony, or Amazon more
problematic?

Would it be problematic if Apple agreed to sell a 100 channel bundle for $75/mo
like cable and DBS?

Would it be problematic if Apple agreed to pay more than the legacy MVPDs for
the same content?

Maybe it is problematic because the content owners know that if they allow ANY
distributor to pick just the channels they want the whole business model falls
apart...

No one gives a cr*p about "channels," Craig. People buy content, not
"channels."

Sorry, they still buy channels Bert. The Fox sports networks have plenty of
live sports, but not the games licensed by ESPN. People watch Fox News Channel,
A&E, TNT, and other channels with original content.

The economics of what you pay for what you get will obviously work itself out
over time.

Obviously not. We've been paying for entertainment this way for nearly
40 years. The price keeps going up. For most of those years people have been
paying for additional choice delivered by packaged media, Pay per view, and now
SVOD services.

NONE of your OTT services have changed the economics of TV a bit. Most of what
you watch OTT has always been, and still is available free (ad supported). It's
just a bit more convenient now.

Meanwhile, get off this old school reasoning. Content can all become
available over *one* so-called "channel" to your household: the broadband
channel. People buy content, not 1920-era delivery techniques. CBS All Access
has enough content to fill any huge number of "channels," if it had to be
distributed in a by-appointment scheme.

It's just another pipe filled with stores...

Can you buy the TVE options sold by Comcast and TWC, Craig? No. That's why
it's different from an OTT site with authentication.

No Bert. Comcast and TWC do not sell TVE. Nobody sells TVE.

TVE is operated by the content owners to provide more access to the content
people are paying for via MVPD bundles. Authentication is used to verify you
are paying someone for the live linear network(s) associated with the TVE site.
It does not matter who you buy the MVPD service from.

Paid OTT sites also require authentication. The only difference is you pay the
site rather than a middleman. Oh wait...that's not true anymore.

Many cable and DBS services are bundling Netflix. So Netflix must now also
support their authentication servers. And several cable systems are selling HBO
Now as part of broadband bundles.

As the old saw goes...

"Oh what an evil web we weave."

And you still need broadband, which still requires truck rolls in many
cases,
not to mention long term contracts.

One neutral service, which so far I got with no need for appointments, truck
rolls, or new cable installations indoors, gets me instant access to a
humongous number of web sites, Craig. I won't waste more time belaboring the
obvious.

But it does not get you instant access to the content 80 million U.S. homes are
paying for Bert.

You should have said, the pathetically tiny set of options are different in
every market, whereas the tremendous set of options on the web are the same
in every market (barring a content owner himself, not a middleman, imposing
geo restrictions).

Welcome to the million channel universe!

987,453,629 channels, and still nothing to watch!

So what exactly has changed Bert?

- Instant access to any pre-produced program someone can justify putting up on
an Internet server. Many business models for selling legacy content, both paid
and ad/service supported.

- anywhere access across multiple screens (smartphones, tablets, PCs, TVs)

- limited options for live linear TV
Live network and local station streams are very limited - Aereo decision.
Rights are a major issue - everything tied up in contracts

- Lots of experiments


Regards
Craig

Other related posts:

  1. Home
  2. opendtv
  3. Archive
  4. 12-2015