[opendtv] Re: Differing interpretations of the same data

  • From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
  • To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
  • Date: Sat, 8 Nov 2014 08:31:08 -0500

On Nov 7, 2014, at 9:13 PM, Manfredi, Albert E <albert.e.manfredi@xxxxxxxxxx> 
wrote:
> 
> Craig Birkmaier wrote:
> 
>> The disconnect is that the decline for HBO is not being driven by the
>> cord cutting phenomenon. It is being driven by the technology shift
>> from a premium appointment TV service with limited access to content,
>> to a VOD service with access to huge libraries of content.
> 
> *Cannot* be true, Craig. Cable systems also offer HBO as VOD (for a price) 
> these days, so the VOD aspect is *NOT* exclusive to Netflix!! The phenomenon 
> is instead largely caused by cord cutting and cord SHAVING, people who find 
> this low cost and adequate alternative. Example: my own son-in-law.

Not true. They offer HBO Go to those who subscribe to the HBO streaming 
service. The new HBO OTT service is aimed at those who have already cut the 
cord. It will be sold in a package with ISP service.

> 
>> And it is always less than what consumers need to pay for ESPN on MVPDs, 
>> when they add up their monthly bill. Someone who only wants ESPN, and the 
>> broadband connection, could easily come out ahead. The fact that this might 
>> hurt the MVPD bundle does not matter to John Skipper, if it means ESPN ends 
>> up with more money in their own pockets.

Yes Bert, someone who ONLY WANTS one content "bundle" like The ESPN channels 
will come out ahead. But most people want about 10 channels, and in household 
with two parents and kids this could add up to 30 channels or more. That's 
where the ala carte pricing model falls apart.

In order for Skipper to come out ahead, he would need to price an DTC version 
of ESPN at $30/mo or more. I did not make this number up, it was stated in 
articles I have cited. There is no OTT model that would put more money in 
Skipper's pocket than what they get now from the extended basic business model; 
there is significant downside risk that they would make less. And this ignores 
the fact that AeSPN is owned by Disney, which has multiple channels in the 
extended basic bundle that would also be hurt.
> 
> "The bundle" provides the most revenue still, for ESPN, but it has also lost 
> ESPN a lot of potential eyeballs. Cord shaving and cord cutting have had an 
> effect. A negative slope in your subscriber count *cannot* sustain increasing 
> revenues for any length of time.

The number of lost subscribers for ESPN is insignificant. Most of the cord 
cutters and cord shavers did not watch ESPN. They are cutting the cord because 
they do not watch most of this stuff, OR for economic reasons.

> It's not my personal feelings. That's why you have to listen to the content 
> owners. Moonves wants to maximize HIS revenues, without being hampered by the 
> high prices ESPN is charging the MVPDs (not beholden to anyone, he said). 
> Ditto for ESPN, if they see that people bail out of "the bundle" because 
> unrelated channels ask too much, and cause consumers to shave or cut the cord.

They all want their cake and to eat it too. These new OTT plays are designed to 
produce incremental revenue from their content libraries, or to address niche 
market opportunities with customers who are willing to pay more. They are not 
saying they are abandoning the extended basic business model. They are saying 
they will seek growth by using technology to reach those who choose not to buy 
the bundle.
> 
> That's why, whenever you beat the "bundle" drum, you sound like an MVPD 
> marketer. Content owners are only after their own revenues. "The bundle" is 
> causing their revenues to decline now. They have to open up alternative 
> distribution paths.

This is where you completely miss it Bert. The bundle is causing their revenues 
to INCREASE. The small number of people cutting and shaving is not of concern, 
because they are getting more from those who pay for the bundle. Just look at 
the earnings for the content congloms - they are all up significantly, with the 
only negatives coming from the increased cost for sports licensing deals.

>> You are wrong. Bundling maximizes revenues, and spreads the
>> wealth around.
> 
> Once again, "the bundle" is in decline. You won't "maximize revenues" for 
> long, if your model is in decline. "Spreading the wealth around" is only 
> advantageous to the parasitic load, Craig. To those channels that only 
> survive on subsistence.

The decline is still inconsequential. Let me know when it declines below 80%. 
I'm not interested in predictions, only hard numbers.

Regards
Craig
 
 
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