[opendtv] Re: Broadcasters Lobby FCC for Cross-Ownership and Duopolies

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Thu, 22 Jul 2010 08:59:37 -0400

At 6:49 PM -0500 7/21/10, Manfredi, Albert E wrote:
So presumably, an HBO with commercials would be a complete failure. Right? So why can't station groups try? Why limit them with preconceived notions, as you have done? Never mind DVDs, Craig. Can FOTA station groups air HBO, funded by ad revenues, if they can make the numbers work out? Or any other cable-only channels? Can a station group say, "I'll pay this amount, and you let me air it any way I see fit, as long as I pay you the agreed to amount." 

The simple answer is NO.
We are talking about the way Hollywood maximizes revenues via a series of release windows. Most movies make it to broadcast TV...eventually. Many independent broadcast stations use movies as the backbone of their content offerings. But they cannot afford - as in it is impossible to generate sufficient advertising revenues - to cover the cost of an early release window, such as the one used by HBO and the other premium movie channels.
Remember the Golden Age of television when the networks reigned supreme? One of the big attractions was movies.Each network had at least one night a week where Prime Time was filled with a recent Hollywood release. The networks paid BIG BUCKS for the rights to be the first to show a Hollywood Blockbuster, typically during ratings periods. They typically LOST MONEY when they did this, as they often did with the Olympics and other major content franchises. The theory was that they would make money on the shows around the big event, and/or via promotion of other shows during the event.
Why do you suppose that the broadcast networks no longer run movies in Prime Time? 

Here are a few reasons.
1. The cost - the studios make MORE MONEY by releasing films via premium channels, VOD and then DVD than they did using the Networks for the first major public release.
2. Commercials. Broadcast TVs addiction to commercials worked fine for scripted programs where stations breaks were built into the content. It was quite common for the program to reach some critical point, just before which they would break for a commercial. Movies - at least the made for theater type - do not have these natural breaks built in. The constant interruption of the movie with commercials significantly detracted from the experience.
When it became possible to offer movies WITHOUT commercial interruptions - first via the premium release windows for HBO et al, then later via packaged media release (VHS then DVDs), the market for movies on broadcast TV took a major hit. To further exacerbate the situation a number of cable movie channels popped up offering a wide selection of movies with commercials. These channels typically get movies after the all other channels of distribution have been saturated and most viewers have seen them. At this point the price is cheap enough for commercials to pay for the rights fees. Today many independent stations still run movies, but this is NOT a highly profitable business; these are the stations most likely to return their spectrum for cash.
Simply stated, the cost of a movie when it is in the early release phase where it can be seen on HBO is far too expensive for broadcast. 




 Sinclair COULD create a movie service of their own using their spectrum.
And so could all MVPDs that are not TWC. But they don't have to, so they don't. And they benefit from the economies of scale that exist when multiple distrtibution pipes share the same content.
All MVPDs can offer all of the premium movie service and in fact they do. There is NOTHING exclusive about HBO to TWC. And virtually ALL of the MVPDs now offer movies on demand, which is one release window ahead of the premium channels. In other words they are doing what any broadcasters could do with a premium encrypted service to STBs, like Moviebeam.
You don't seem to understand that all of these premium channels are bidding against one another for new releases and that these new releases are offered in several ways:
1. Via Video On Demand, which is now offered by ALL of the major MSOs and many smaller cable companies. The DBS systems have done very well with Near Video On Demand - the same title runs at scheduled times all day long. 

2. Via premium channels like HBO, Starz, Showtime etc.
And all of this occurs before release on DVD, which supplies both the direct sales and rental markets.
Only AFTER all of these release windows is it possible for broadcasters to afford the rights fees.
So OTA TV, with ~18M OTA-exclusive homes served, by all rights should be allowed to be run by just one organization. So that one organization could benefit from huge economies of scale. OTA-exclusive is in the ballpark of DirecTV and Comcast. Or okay, let's be really scrupulous and split OTA in two. The numbers suggest this should be perfectly fair, Craig.
It is not feasible with an advertiser supported model. Hollywood can make far more money via the current release windows, where advertiser supported versions are delayed until the value of the content has been exhausted.
I disagree. It is the rules under which they operate that limit what business models can be successful. It is very, very easy to level the playing field and find out if this isn't so. The FCC may have "no authority" to regulate MVPDs (I think you're wrong on this), but they certainly do have the authority to change the rules for broadcasters in a way that makes sense today.
If you say so. So they can mandaate that broadcasters buy expensive content and lose money broadcasting it? 

I don't think so.




 Look at -  O&O stations of the four major networks in
 the United States

 Here: http://en.wikipedia.org/wiki/User:Hinto/US_O&Os
Did you read the article? Doesn't give percentages, but it looks like NBC and ABC only own 10 stations each. CBS owns 16, but two were for sale in 2007. Fox had the most, 25, but 8 were for sale. And this wikipedia article applied to 2007, so more may well have been sold by now.
Nope. The number of stations is irrelevant. It is the number of homes that these stations reach that establishes the national cap. And I am not aware of any network that has significantly reduced ownership below the caps. CBS had to sell station because they were above the cap.
If Fox was within the limit at 25 O&Os, which inlude all the major markets, this doesn't add up to anything like "most networks are close to their limit." In any event, this hardly disputes the main point, which was that OTA broadcasters DO NOT, in fact, create most of their content, nor are many of them owned by congloms that do. They should be treated like distribution pipes, not content creators. 

Fox may have more station in smaller markets but they are NOT over the cap.

Stations are treated like licensees of the FCC>

Regards
Craig


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