On Jan 2, 2014, at 7:00 PM, Manfredi, Albert E <albert.e.manfredi@xxxxxxxxxx> wrote: > No question that a two-way medium is more flexible when it comes to VOD, > Craig, but let's not go off on some tangential discussion. The fact remains > that to an OTA TV user, the most important role played by the combination of > local broadcast stations is to deliver content from the TV networks. So in > the context of TV content delivery, this role was replaced by the ISP, when > TV is viewed over the Internet. Sorry Bert, but the analogy is still bad. The ISP is just the last few miles and has NOTHING to do with the content that is being carried. The relevant bits are the servers that actually host the content, which in most cases are operated by the CDNs. > > THE SAME applies to MVPDs. Their most important role is also delivery of > content from the TV networks and other TV content sources. (I know they also > collaborate to produce some content.) MVPDs had to create a labor-intensive > infrastructure to do this job, so they collect the fees for that expensive > system. And since they make money from network TV content, this created a > spiral of greed, where everyone wants to get paid more. With Internet TV, > ISPs take over the MVPD distribution job, along with a whole host of other > communications services for other industries unrelated to TV. The MVPDs fulfill several important roles: 1. They deliver the vast majority of “live TV" today. When I say “live” I do not limit this to live events like sports and reality TV. Like TV stations (which they carry) they deliver hundreds of channels of TV programming that is delivered against a pre-determined schedule. Some of these channels deliver huge audiences - e.g. the most popular broadcast network shows, the ESPN channels, or 7 million people watching an episode of Duck Dynasty on A&E. 2. They maintain the customer relationship and collect the money - for themselves, for the congloms, for local TV stations, and for the local adds they insert in all of this programming. What is critical here is that the vast majority of TV viewers are still watching programs that are scheduled (or time shifting them with a local DVR. These audiences can be served via IP Multicast. They also are able to deliver a significant amount of VOD or Near VOD (DBS) via their video networks. As for your spiral of greed, you can blame the broadcasters. They created a Free to Air service that is advertiser supported, and DOMINATED the delivery of TV programming for four decades. IN the ‘80s the first cable networks began to appear; they had small audiences but large upfront costs to compete with the broadcast networks. To help mitigate this disadvantage they convinced the cable industry to collect subscriber fees for these new channels to help these fledgling networks get established. The broadcasters cried foul, claiming that the cable systems should pay for the SAME signals that anyone could receive for free with an antenna. Never mind the fact that cable systems helped extend the reach of the broadcasters in areas where OTA reception was difficult or impossible. Never mind the fact that broadcasters often helped the cable systems by providing direct feeds of their programming in case the transmitter was temporarily off the air. What mattered was that the 5 channel TV universe suddenly had competition, and the competitor could collect money from everyone who paid for the service. It took only a few years until this issue was resolved. The 1992 Cable Act gave broadcasters a sledge hammer to profit from and take control of the content delivered via the MVPDs. Retransmission consent gave tyne networks and local stations the leverage they needed to regain control of the TV universe. At first retrans consent was used by the congloms to gain carriage for new MVPD only networks (only CBS went for the money, which in the long term turned out to be a bad decision). By the end of the ‘90s, six congloms took control of 90% of the channels, either by creating them or buying them. What’s more, they now had a way to collect a second revenue stream for all of this advertiser supported programming. Over the next decade they all went for the money; local broadcasters got a portion of this new revenue, but they also lost a big chunk of the commercial inventory in network programming, which was by far their largest source of local station revenue. Now you contend that ISPs can play the role of the local TV stations. But who are the ISPs? There are three major broadband ISPs today - most of the older dial up ISPs are now ancient history. 1. Cable systems 2. Wired Telcos (when they deploy fiber they tend to look like and compete with the cable systems) 3. Wireless telcos The third is largely irrelevant to this discussion, as the cost per bit makes it too expensive to use for anything other than short clips or desperation when someone absolutely has to see something and is willing to pay a premium. You are correct that neither 1 or 2 can scale to replace the cable, DBS and local broadcast services that still deliver the vast majority of what we watch. Thus there is a huge economic incentive that is preventing the Internet from simply taking over the delivery of TV content to the masses. Cable systems are in good shape, as they have the tools to gradually increase capacity for broadband by decreasing the number of homes on each branch of their fiber/coax distribution tree. The DSL service from the telcos is a switched service that can scale to add more homes, but the link is barely adequate to support HD streaming. The telco solution is Fiber; where it is deployed the Telcos can compete directly with cable and DBS for both video services and broadband. None of the three broadband services mirror content - they all just connect to the closest CDNs. For example Akamai operates 250,000 servers in 80 countries - they have a mirror site here in Gainesville. And they have plenty of competition, so it is unlikely that we will ever see ISPs get into the CDN business. What is likely is that we will continue to see the growth of Internet streaming and in time we may see real competition for the MVPDs. It is the local broadcaster who may have the ability to help change the current status quo. As mentioned above, telco wireless broadband services are too expensive for widespread video streaming. But broadcasters CAN move to a new transmission infrastructure that can deliver streaming video to the masses, AT LEAST for the most popular content, which can be delivered using IP Multicast via LTE Broadcast. This would give many people a reason to use an antenna to receive this data, not to mention being able to reach more than a billion LTE enabled mobile devices over the next few years. > > Obviously, you can artificially invent reasons to keep the previous middlemen > intact, in the new solution, which adds layers of unessential players. We > could have been forced to pay for stables and stable hands, as well as car > mechanics, after cars replaced horses. Or a few of those stables and stable > hands could morph into garages and mechanics.s The TV business has always had middlemen, at least since the VCR was invented. The congloms business is to maximize the revenues they can generate from every bit of content they produce or buy. It only makes sense to use every delivery medium possible - MVPDs, OTA Broadcast, packaged media, and now Internet streaming - to deliver this content. What does not make sense is for the congloms to run all of these businesses in every market around the planet - they just license the content. > >> The real value of the station is that it brings a bit of the revenue >> from entertainment to local markets, and it provides a vehicle for >> local advertisers to reach local customers. > > You're not seriously suggesting that FOTA users buy TV sets and antennas > PRIMARILY to watch ads, or are you? No. But the FOTA system could not exist without the ads, although the second revenue stream helps. The congloms hold all the cards here: They could bypass the local stations and deal directly with the MVPDs - and they would likely hold onto the second revenue stream, as their bargaining position with the MVPDs would not change. They could even let the MVPDs insert commercials as the local broadcasters do today. But they would lose political leverage, as political candidates still spend most of the money they raise on network and local TV ads broadcasters received more than $2 billion during the last election. And the networks make a bunch of money via their O&O stations. Thus the only change I can sews in this business model is to upgrade the broadcast infrastructure to Broadcast LTE. > To the consumer, the ads are merely a means to an end. The end is to watch TV > network content. The ads are the form of payment. This is the value > proposition for consumers. WAS. The ads were tolerable, at least before they became nearly 1/3 of the programming. But having to pay subscriber fees to see ads is a step too far for some folks, such as yourself. I wrote: >> A MVPD bill has always had multiple components: >> 1. Infrastructure cost >> 2. A Customer service organization including billing >> 3. Pass through charges for premium channels and subscriber fees >> 4. Local franchise fees, and local, state and federal taxes. >> >> Items 3 & 4 are the primary reason the MVPD model is not going away any >> time soon. > > The basic problem with your analysis is, you do not take into account that > the Internet broadband link can do a whole lot more than just deliver TV > content. Your analysis ignores the economies of scale the broadband link > SHOULD BE offering the consumer. You think that the costs of that previous > TV-only medium should be picked up and layered entirely on top of the new > delivery technology. Well in reality, it WAS the TV only medium that enabled cable systems to get into the broadband business. It was a major incentive for more than $100 billion in cable system upgrades over the past 15 years. Yet these same systems are in no hurry to replace the analog tier that eaters up nearly half of the available bandwidth. There are still a huge number of basic tier, and extended basic analog subscribers, many of which are still using old NTSC TVs. I have no quibble about all the other things a broadband link can do. That is a major benefit. Video streaming is just now becoming a major consideration. > Your 4 bullets: > > 1. The ISP worries about infrastructure costs. > 2. The ISP bills the customer for infrastructure use. You, just like a wired phone bill - they are common carriers of bits. > 3. Pass-through charges for premium content may be managed by *any* OTT site Correct, but NOT by the ISP. > 4. Fees, taxes, etc. can be applied to OTT sites or directly the networks' > own sites. The OTT sites pay for carriage - both to the bulk wide area backbone providers, and the CDNs who host, mirror and deliver most of the bits. I’m sure the government collects taxes on these services, just as they do on the ISP services. > > So, the cost structure for this new role of TV content through Internet > SHOULD BE entirely different from what MVPDs did previously. The FOTA model > can translate *directly* to FOTI, most likely benefitting the TV networks. Not a chance. The only way they could go back to a single ad driven revenue stream would be to charge enough for the ads to replace the second revenue stream they receive today. They could make some of this up by not having affiliates who get a portion of the commercial inventory and retrains consent fees. But they would face another huge problem. The Internet can tell them, and the advertisers how many people are watching, and in most cases, who they are. The how many part is primarily BAD NEWS, as existing ratings systems generally overestimate the audience size, and advertisers are already paying a premium for large audiences. The who part could be the big break thru, but only if they can sell each viewer at a significant premium, jun return for less ad clutter. Another alternative is for the viewer to just pay a fair price for the content WITHOUT ads. Given the fact that most U.S. homes spend more than $100/mo for entertainment, this is my preferred choice. > The pay-TV model can be managed by OTT sites, without all the infrastructure > costs that are currently folded, explicitly or less obviously, into your MVPD > bill. So the cable and telco broadband infrastructure just goes away? The reality is that we will just pay for this infrastructure via the broadband bill, and pay the rest to the Internet sites from which we buy content premium content. And folks like you will get by with the stuff the congloms are willing to offer in the free and clear, AFTER they get their money from the people who are willing to pay. > Which is exactly why Internet TV users shouldn't be burdened with MVPD fees!! > I can use the networks' own sites, presumably contracted out by the networks > to whoever they prefer, or I can use OTT sites or other portals. Bottom line, the congloms are not going to accept a decline in revenues. IF they choose to move exclusively to Internet distribution they will make certain that there is no loss in revenues. Maybe you should look at it this way Bert. The Congloms used FOTA TV to get the population hooked on the drug they sell. Now they have raised the price. There ain’T no going back to the good old days when TV was (almost free) and actually worth watching. Regards Craig ---------------------------------------------------------------------- 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.