[opendtv] Re: DTT in the US

  • From: "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
  • To: <opendtv@xxxxxxxxxxxxx>
  • Date: Thu, 12 Jan 2006 12:21:12 -0500

Craig Birkmaier wrote:

> No. The reference to mobility was at the HEART
> of the thread.

It was *my* bleeping thread, Craig. I ought to know
what was at the heart of it!

> The reality is that both the content providers
> and the distributors of that content know that
> they can keep pushing up the prices because there
> is no competition - when a network increases
> their subscriber fees, the cable and DBS companies
> pass the increased cost along and add a little
> more to enhance their revenues too.

It's odd that you single out the broadcast industry.
I simply disgree with this recurring thread of yours.
The congloms, the top MSOs, PC companies, auto
companies, cleaning supply companies, soft drink
companies, they all fit this description. There is
hardly a large industry in the industrialized world
that doesn't fit this description.

> Channel 4 makes money the same way that advertiser
> supported broadcasts have made money for nearly a
> century. They charge advertisers for the numbers
> of people who are watching. They may also make
> money from the syndication of any programming that
> they create for Channel 4. For this discussion
> however, the answer is simple: Channel 4 will gain
> enough new viewers via carriage by Freeview to
> offset the carriage costs.
> Now explain to me why U.S. broadcasters need to be
> compensated for carriage of their signals when in
> reality that carriage is allowing the broadcasters
> to charge more for their ads?

Who gets the ad revenue? That's what all of this
revolves around.

If a US cable company is paid by ABC to carry ABC
content, then I would fully expect ABC to get *all*
the ad revenue. If ABC also transmits that content
through its O&Os, of course ABC would also get all
the ad revenue. If ABC transmits that content OTA
via affiliated stations, then those affiliated
stations could be compensated much like the cable
company -- they could be compensated by ABC, and
then all the ad revenue goes to ABC, for that ABC
content. I think this might be the cleanest model.

If ABC distributes Warner Brothers content, then I
would expect ABC to have made an arrangement with WB.
ABC would be compensated as always, but they would
then turn over a portion of the profits to WB.

I see nothing preventing this model from being used
in the US? And this seems to be the way Channel 4
works with respect to Freeview. This is how a conglom
would see the most direct benefit of using the OTA
distribution medium, either its own O&Os, affiliates,
or even independents.

On the other hand, if the MSO gets some or all of the
ad revenue, then obviously money has to be transferred
differently. If ABC allows the MSO to collect ad
revenue while airing ABC content, some of that ad
revenue MUST go to ABC.

So as I said, one can make a perfectly valid case for
the MSO paying the conglomerate, or the conglom paying
the MSO. I favor the first approach, where the conglom
gets the revenues and in turn compensates the
different distribution chains.

BUT I also understand that "distribution chains" like
cable and DBS see themselves as media companies. They
want to appeal directly to potential subscribers. And
in order to achieve this mass appeal, THEY have to seek
out the best content, rather than passively sitting by
waiting for the congloms to come looking for them. So
these MSOs likely prefer to control matters, by paying
the congloms rather than vv. And there you have it. Of
course, now the congloms have leverage to demand a
piece of the MSO action, and things get complicated.

This is what I see you missing. If there's anything
less than competitive, it is the existence of very
few competing local distribution companies, and the
fact that 80 to 85 percent of households gladly let
themselves get sucked in. But let the prices keep
rising, and the appeal of a freeview in the US will

> What would happen if the broadcasters - not the
> media conglomerates with which they are affiliated -
> decided to compete with cable and work together to
> create a service similar to Freeview, with 30 or more
> of the most popular channels that are available via
> both FOTA and subscriptions services?

You mean, if broadcasters formed an alliance and
created top-notch content that could compete with the
major conglomerates? That would be great, but it would
simply result in a new conglomerate. I have no problem
at all with the five congloms competing against each
other. I doubt that broadcasters could individually
develop content to compete with the sheer volume of
material from the five congloms, 24 hours a day. It's
all about scale. This is a mass medium.

I think a good way to make OTA work is to work toward
a model where the content creator gets the revenues, and
then if it uses distribution media other than its own
OTA network, it compensates these other media with part
of those revenues.

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