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

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Sun, 21 Jul 2013 12:57:27 -0400

On Jul 19, 2013, at 1:50 PM, "Manfredi, Albert E" 
<albert.e.manfredi@xxxxxxxxxx> wrote:

> Thank you for restating what I just said. (What an amazing lack of reading 
> comprehension.)

I did not, actually, but I think I now understand what you were saying. You 
were talking about how different modulation standards helped to lock 
subscribers into various telco systems. We agree, and it is still not clear 
whether the move to LTE is going to eliminate that barrier. But the good news, 
is that unlike feature phones, smart phones appear to retain commercial value, 
so it is easy to sell or trade in a handset and change carriers.

But I was not talking about technical lock in, I was talking about the way the 
market has been opened up to third party devices and software. And it was 
Apple, using their market clout, that forced this change, with the result, that 
there is now a multibillion dollar app economy.
> 
>> Apple convinced AT&T to change the business model.
> 
> Like I just finished saying (above), ideally Apple and anyone else could have 
> designed generic smartphones that could be used on any network, just like we 
> can now buy generic land line phones to use on any telco RJ-11 jack. So Apple 
> is playing the same collusion game with MVPDs that it previously played with 
> the AT&T cellco. To the consumer, it's more of the same. Collusion between 
> hardware maker and service provider. The name "Apple" does not change 
> anything in this regard.

Apples and oranges…

You are equating a single point wireline standard that had not changed in 
years, with a rapidly evolving marketplace where both hardware and software 
standards have changed yearly. One of the keys to market success, is the timing 
of support for new standards. Being first, when only a few markets have the 
latest modulation upgrade, and the silicon is in beta or first generation, is 
not of great value to the customer. For the consumer, however, there have been 
good reasons to upgrade as the technologies have matured, just as was the case 
in the early years of PCs. 

Apple offered the opportunity for an exclusive deal to everyone, but the change 
in business model was more than most carriers were willing to accept. History 
will note that AT&T chose wisely. 

Now you could say that what Apple did is little different than an MVPD signing 
an expensive deal for an exclusive content franchise, as was the case with 
DirecTV and the NFL, for Sunday Ticket. 

History will also note that Steve Jobs' decision to buy Pixar and support that 
team as it rewrote the book on animated movies, paid huge dividends when Jobs 
started negotiating for access to media content - first music and later movies, 
TV shows, books and magazines. 

Perhaps we are nearing the point where the content distribution business will 
undergo the same kind of disruption as other industries that were overtaken by 
technology. But the reality on the ground today is that to build something new, 
you still have to deal with the people who control what you hope to replace, or 
sat least re-imagine.


>> 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.
> 
> Overstated, Craig. The companies **hosting content** have to deal with 
> content owners (and rightfully so). The companies developing the devices to 
> watch TV *DO NOT NEED* to collude with anyone. All they need to do is to meet 
> the interface standards.

Clearly the barrier to companies developing smartphones and tablets has been 
relatively low. These devices leverage many industry standards and there are 
many manufacturers of the core components. The biggest minefield is IP - not 
the Internet Protocol, but rather the Intellectual Property rights to use the 
standards and "clone" the most successful products.

It is equally clear that the ecosystems around these products is where much of 
the real value is found. 

Perhaps the real question that Bert and all the financial analysts should be 
asking, is whether Apple will make more money developing vertically integrated  
hardware and a curated ecosystem, or licensing its IP, including iOS and 
providing access to the Apple ecosystem for any licensee. There are rumblings 
that Apple and Samsung are having settlement talks again...

> This same story has been out a long time now. Apple is simply trying to horn 
> in on the proprietary, non-interoperable STB game, outdoing the incumbent 
> proprietary, non-interoperable STB makers, nothing more and nothing less. For 
> the consumer, it's the same old game. One more box to prop up the aging MVPD 
> model. Just like I said at the top of my first reply ("Same-o same-o").

Now you are overstating the case. Apple has about 54% of the market for OTT 
devices, with more than 13 million Apple TV devices NOT hooked up to any MVPD 
umbilical, OTHER THAN their broadband service.

If Apple DOES get into bed with Time Warner or Comcast, I am willing to bet 
that you will be able to buy the required device from Apple, Best Buy or the 
MVPD; there WILL NOT be a monthly lease, although we could see financing, 
paralleling what Sprint is doing rather than the subsidized/post paid business 
model. 

If you are an MVPD subscriber and are willing to pay to access their content, 
you will have an improved UI, AND access to content outside the MVPD walled 
garden. IF you don't want to pay for MVPD content, the existing Apple TV device 
already provides access to OTT services.

> The only reason you think this is different, Craig, is that you're an Apple 
> acolyte. But to the non-zealot consumer, whether Apple or Scientific Atlanta 
> make the non-standard box, big whoop.

Sorry Bert, but this is a big whoop. We are talking about fundamental changes 
to the TV industry business model, and the way viewers will consume content and 
the myriad of services that will be enabled. 

> Repeating myself: all the content owner wants is revenue. If some other 
> distribution system can create the same or more revenue for the content 
> owner, using either some different bundling scheme or whatever other means, 
> the content owner has no reason to insist on the *incumbent* MVPDs.

AGREED!  I believe I suggested as much in recent discussions about the FCC 
expanding the equal access rules to new Internet providers. To coin a popular 
cliche', What dIfference does it make, if you are buying your content bundle 
from a cable company, a telco, a DBS service, Intel or Google?

I've never said that the content conglomerate will not deal at every 
opportunity. What I have said is that the content oligopoly is not willing to 
move away from the content bundling model for the core content that brings 
customers to their door. They are unwilling to give up the subscriber fees, or 
risk the chance that a viewer might not pay for their channels via an unbundled 
(ala carte) service.

>> 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.
> 
> It's available over your Cox broadband service or it's available over your 
> DSL broadband service, AND it's also available to any WiFi hotspot you might 
> use on the run. So it's already available to any media you might need. The 
> ONLY technically valid question is, why are the dunderhead TV appliance 
> makers not making this easy for your TV set to capture?

Uhhhhh Bert…

Apple just did.

> 
> This is supposed to be a technical forum? The technically meaningful question 
> is, why can't TV sets capture these FOTI streams? It's ridiculous to pretend 
> that Apple is required to solve this "intractable" problem.

Many smart TVs can…

Unfortunately, the real issues are not technology; The real issue is 
maintaining control over a business that generates hundred of billions each 
year globally; and preventing other industries from eating their lunch.

Regards
Craig

Who would have thought that Disney would need to buy Pixar to protect its dying 
animation business…

 
 
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