[opendtv] Re: Apple's Move Into TV Relies on Cooperation With Industry Leaders

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Fri, 19 Jul 2013 09:50:07 -0400

On Jul 18, 2013, at 1:57 PM, "Manfredi, Albert E" 
<albert.e.manfredi@xxxxxxxxxx> wrote:

> When Apple invented the iPhone, they didn't have a cell network of their own. 
> Ideally, they would have simply created a generic smartphone that could run 
> on any cell network, without need for collusion. But they couldn't, the way 
> cellcos operate. Unfortunately, in the US, that's how this still works for 
> wireless telephony (although no longer for wired telephony - anyone can make 
> telephones for the wired telcos).

What an amazing re-write of history. 

If ever there was a walled garden it is the U.S> telephone industry. Prior to 
the introduction of the iPhone, the telcos had exclusive control over anything 
you could do with a phone, regardless of who designed and manufactured it.

Want to play music on your phone? AT&T or Verizon would gladly sell you a music 
service with a monthly fee.   Want to watch TV, Qualcomm and Verizon were more 
than happy for you to subscribe to FloTV.

Apple convinced AT&T to change the business model. The premise was simple: if 
you open up the market for mobile devices and let third parties develop 
innovative "apps" for these devices you will benefit by selling data services 
alongside your traditional voice and messaging services. 

This bit of "collusion" fundamentally changed the mobile telephony market, 
almost overnight, and not just in the U.S. 

By the way, anyone can make a phone that works with the wireless telco 
networks. Getting the telcos to sell it is another issue. I believe in Europe 
this is no more complicated than buying a Sim for a specific carrier and 
inserting it in the phone.

> Apple chose to go this same route for AppleTV, colluding with the MVPDs. 
> Google and Intel are instead trying to go directly to the source, the content 
> owners, same as Netflix, Amazon, and Hulu, essentially re-creating an MVPD 
> online. Of course, AppleTV can also access other pay-TV sites like Netflix 
> and Hulu, but then again, how is that remotely interesting? Anyone can. And 
> "anyone" can also access any number of online sites that AppleTV cannot.

Apple also deals directly with the content providers. iTunes sells and rents 
music, movies and TV shows, making them one of the largest resellers of content 
in the world. 

The important take away here is that EVERYONE is negotiating with the content 
owners in an attempt to bring some real competition to the TV business, much as 
we are now seeing with the mobile telephony business. 

> Do the content owners care whether only established MVPDs are able to 
> distribute the owner's content? I don't see why they should. The content 
> owners want so much for their content, depending on type of content, and it 
> makes no sense for them to insist only on using established MVPDs. In spite 
> of Craig's circular arguments, if the owner of the content can get $x per 
> individual access for the content, it should not matter whether that $x comes 
> from an existing MVPD or from a new online site. Even for sports. And this 
> time, I said $x per *individual access*, rather than per subscriber, because 
> from the owner's point of view, the same applies to ad-supported material. 
> They want their money, that's all.

With the exception of live programming, there are multiple ways to access 
content on demand, all the result of negotiations with the content owners. You 
can subscribe to a service like Hulu or Netflix; watch the content that Bert 
watches that is ad supported FOTI; or pay directly for the content, either in 
the form of packaged media (Amazon, Walmart, Target et al), web download (i.e. 
sale); or web rental (i.e. streaming).

Why do the content owners care about the MVPD bundles?

1. That's where most viewing takes place;
2. They get a subscriber fee from everyone, not just those willing to pay for 
that channel;
3. They are guaranteed that people can watch their channels - without the 
bundles people could choose NOT to  pay for those channels.

> Now here's something that shows how absurd the state of television is. 
> Quoting from the bottom of the article:
> "Last month, in a little-noticed move, the company [Apple] approved an app 
> for Sky News, the British-based cable news channel. Sky could already be 
> streamed live free on the Web, but by creating an app for Apple TV, the 
> channel gained access to the television sets in 13 million homes without the 
> need for complex negotiations with cable companies."
> Why should anyone need "complex negotiations with cable companies" to get 
> FOTI content on TV sets? Why would anyone need Apple for that generic task? 
> The only thing anyone needs is for CE companies to make sensible connected TV 
> products. Without thinking they need to collude with anyone, to this end.

Wrong question Bert. The correct question is:

Why should anyone need "complex negotiations with MVPD companies" to get their 
content included in the channel lineup of the extended basic bundles these 
companies offer to subscribers.

Bert has a point, that thew Sky content was already available over the 
Internet. But it is not available, for example, on my Cox Cable bundle. Sky 
could build their business by promoting the idea of hooking up a computer to 
your TV. Working with Apple to create this app, however, gives them access to 
13 million homes for what amounts to a trivial investment. 

Apparently 13 million people think Apple TV is a sensible connected TV product. 
Maybe this is why Samsung just bought Boxee.


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