[opendtv] Re: Differing interpretations of the same data

  • From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
  • To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
  • Date: Wed, 12 Nov 2014 08:10:45 -0500

On Nov 11, 2014, at 10:20 PM, Manfredi, Albert E <albert.e.manfredi@xxxxxxxxxx> 
wrote:
> 
> Over the years, that's certainly what they've been doing. Matter of fact, 
> only now are they discovering that they have to change course, because of 
> *consumer* action. I just read an article dated 24 September 2014, where AT&T 
> is offering a slimmed down $39.99/mo package, with some TV channels, HBO, no 
> ESPN.

You can get a deal similar to the AT&T package from any MVPD - essentially 
basic/lifeline and HBO.

> In another article on this subject, an analyst claims that HBO could make an 
> incremental $600M per year if they went direct to consumer on an OTT site. 
> All of this is driven by cord cutting and cord shaving; i.e. by the consumer. 
> The same applies to ESPN, and is ever more obvious as people get out of your 
> "the bundle."

Not at their current price. You've gotta love analysts. They can make the case 
for almost anything. Unfortunately they are wrong more often than they are 
right. In the case of HBO, I believe there is an upside by evolving into a VOD 
service that can compete with Netflix. As a streaming service I had little 
interest in HBO. At $16/mo I still have no interest in HBO. At $9.99/mo I might 
be interested. 

This is why it is so difficult to analyze changes to business models. The model 
may indicate that if you cut prices demand will increase and you will make more 
money - good ole capitalism at work. But the model may assume more people will 
buy than actually exist at any price point. If it were a science every analyst 
would be wealthy. In reality they can say anything if it generates page hits.

> 
>> As for lowest overhead, the cost to service a customer is largely
>> the same whether they are frugal Lifeline/Basic subscribers or
>> take everything.
> 
> Having to keep track of many more separate packages, and bill accordingly, is 
> still going to create more overhead costs for the MVPD.

No. That's like saying that it is expensive for Netflux to keep track of 50,000 
programs. In reality the differences today are only analog or digital, and this 
is only true for cable, as DBS and the Telcos are all digital now. Digital 
systems rely on computers to deal with the complexity of the bundles. The 
computer signals the STB to enable or disable channels, or your service if you 
don't pay. 

Cable still needs to roll a truck to install the correct filters for different 
analog tiers. And now, they cannot turn off analog cable if you buy only 
broadband. So the wavy consumer can get the analog video tier free if they pay 
for broadband. Does the cable company care? Not really. They still get a check 
every month and do not need to pay subscriber fees to the content congloms, as 
you are officially a cord cutter on the books.

> Craig, no matter what you call it, cable companies were charging something 
> for people to be connected, per month. And yes, it is obvious that ad-free 
> content the cable might carry would also have to get charged somehow, unless 
> it was some sort of public tax-supported service. The original CATV systems 
> may not have charged for the TV stations they carried, but they charged 
> SOMETHING.

Obviously. They have invested billions in infrastructure with multiple rebuilds 
as the moved from 30 to 50 to 70 analog channels then 700 MHz -1 GHz digital. 
And they have done this profitably as a regulated franchise, much like Title II 
for the telcos. 

Let's just get the facts straight - the money collected as subscriber fees goes 
to the content congloms. Since the MVPDs do not have to tell us what these fees 
are, when they raise rates they cover the subscriber fee increases AND add a 
bit for the bottom line.

> The simple fact continues to be that if a monopolistic pipe can charge for a 
> lot of unrequested channels, which they can do when they are monopolies and 
> independent, competitive OTT sites do not exist, that monopolistic pipe will 
> rake in more money.

Exactly. Which is why they will not change the business model.

Now look at your beloved Netflix. Who is making the money with their service?

http://www.theguardian.com/media/2014/feb/05/netflix-spend-3-billion-tv-film-content-2014

> Netflix to spend $3bn on TV and film content in 2014
> Netflix is committed to spending almost $3bn on TV and film content in 2014 
> and more than $6bn over the next three years, as the cost of securing 
> international rights and commissioning new shows continues to mount on the 
> streaming giant's balance sheet.
> 
> The US company also announced this week that it is to raise $400m to help 
> fund this investment in original programming and a major European expansion 
> later this year.
> 
> Its annual report, published this week, shows that at the end of 2013, 
> Netflix had run up $7.3bn in "streaming content obligations", which are 
> incurred when the company signs a licence agreement for programming, up 30% 
> from the $5.6bn owed at the end of 2012.
> 
> The company said it has to pay $2.97bn of that by the end of 2014, with a 
> total of $6.2bn due within three years.
> 
> Netflix made $4.3bn in total revenues last year, a healthy 19% year-on-year 
> rise, growth which has made it a darling of US stock market investors, with 
> its share price surging from $92 to $367 across 2013.
> 
So the content congloms are getting the lion's share of the money I send to 
Netflix each month.

And what do I need to watch Netflix? High speed broadband.

Who gets the money for that? In my case Cox Cable. For Bert it is AT&T or 
Verizon.

Sounds like the oligopolies are really suffering as Netflix et al disrupt their 
business model.

>> It's not that simple. It is important to keep the subscriber
>> paying a monthly fee, rather than paying nothing.
> 
> Important for who, Craig? That might be important **for the MVPD**. What is 
> important for the **content owners** are only THEIR OWN revenues. With a 
> neutral Internet, these content owners couldn't care less about the legacy 
> distribution media, if they have a viable alternative. And the sports leagues 
> are also discovering this.
> 
>>> Not true. Moonves' new All Access is NOT for new, complimentary
>>> distribution. It is for anything CBS transmits, and stuff they
>>> no longer transmit.
>> 
>> Not anything; some of their most valuable programming - live
>> sports - is not available.
> 
> Craig, live sports are not CBS-owned content! And the sports leagues are 
> already selling direct to consumer, via deals with the cellcos. This is all 
> evolving the same way. The owners of content are re-evaluating the middlemen 
> they need, and those middlemen are not just the MVPDs, but also the ESPNs and 
> other TV networks, depending on the situation. If a player is a middleman, 
> then the alternative distribution pipes now available that can reach almost 
> every home become alternatives to the legacy pipes.
> 
> Bert
> 
> 
> 
> ----------------------------------------------------------------------
> You can UNSUBSCRIBE from the OpenDTV list in two ways:
> 
> - Using the UNSUBSCRIBE command in your user configuration settings at 
> FreeLists.org 
> 
> - By sending a message to: opendtv-request@xxxxxxxxxxxxx with the word 
> unsubscribe in the subject line.
> 

Other related posts: