[opendtv] Re: How the dollars flow

  • From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Sat, 26 Sep 2015 17:28:53 -0400

On Sep 25, 2015, at 8:52 PM, Manfredi, Albert E <albert.e.manfredi@xxxxxxxxxx>
wrote:


Finally. So once again, to the conglom, how "lucrative" retrans consent might
be to local broadcasters is a big who cares. The congloms want their pound of
flesh, they don't need to worry about how lucrative the deal might be for
someone else.
Correct - they only need to focus on how lucrative it has been and continues to
be for THEM!

Retrans consent allowed the networks to negotiate lucrative carriage deals for
their entire bundle of channels, as the article Monty just posted clearly
explains (the review of the book Television is the New Television):

Thanks to these “retrans” fees, you pay eight dollars a month for ESPN
whether you watch sports or not. It’s not the cable operators who are denying
consumers the à la carte option many would prefer. It’s the big five
television companies who refuse to parcel out their offerings—(1) ABC/Disney,
which owns ESPN, A&E, and Lifetime; (2) NBC Universal, which owns USA, Bravo,
and the Weather Channel; (3) Fox, which owns Fox Sports, F/X, and National
Geographic; (4) Viacom, which owns Comedy Central, BET, and MTV; and (5) CBS,
which owns Showtime, the Movie Channel, and the CW. For these companies, the
indirect charges they receive for their content have become the pot of gold
at the end of the advertising rainbow.

Then there is the political reality of preserving FOTA broadcasting AND the
large chunk of audience that the networks would lose if they moved behind the
pay walls.

What the local station gets selling ads could flow direct to the conglom, if
the congloms provided their streams direct to the MVPDs. The more middlemen
there are, Craig, the less the congloms are likely to get, and/or the more
subscribers are likely to pay. You can't escape that. If a middleman makes
tons of money in the deal, but provides no added value, that means that
either the subscriber is paying more (money the MVPD in turns pays for
retrans consent), or it means that the middleman is keeping more of those
retrans consent dollars to themselves, rather than handing them over to the
conglom.

The congloms WANT to work through middlemen. That is how they gain access to
every home in the U.S. And billions in subscriber fees. They would lose a
significant portion of their audience if they went direct with the MVPDs. They
would lose even more audience if they went direct to consumer via the Internet
with a service like CBS All Access. And they would lose political leverage
either way.

You can keep trying to change their business model, but it's obviously working
- the congloms are growing while newspapers and the music Industry were
decimated by the Internet.

Again, finally. And I explained many times how the congloms would support the
FOTA service. Which presumably the congloms want to do, in good part because
MVPD subscriptions are falling steadily.

They support FOTA because it has enabled their oligopoly, protects them from
anti-trust, gives them political leverage, and helps them make billions. It has
noting to do with the small decline in MVPD subscribers. Even if the actual
number was 80% (it's 86%), or 75% or 70%, they will still make billions in
subscriber fees.

The major franchise the congloms are protecting is live TV - 2/3's of their ad
revenue comes from live sports. They are learning how to reach multiple markets
with their episodic content, and making more money in the process.


One reason you've repeated forever is that retrans consent is very lucrative
for local broadcasters. We're talking congloms here. Why should they care?

Because retrans consent allow d the congloms to take control of 90% of the
content delivered by the MVPDs. They make billions on subscriber fees from ALL
of their networks, and use the strength of the broadcast network to negotiate
carriage fees for the entire bundle of channels.

Another reason you give is that the local broadcaster airs political debates
and ads. Well, the national ones are transmitted by the conglom, Craig. Local
poltical ads or debates can be handled separately, as they already are. On
local cable networks (I gave the example of News Channel 8 in this market),
and on subchannels of local OTA stations.

The stations are make a fortune on political advertising. That alone makes they
extremely viable moving forward. From the book review:

Even local broadcast stations remain highly profitable despite the declining
audiences for their core news product, thanks in part to a surge of political
spending following the Citizens United decision in 2010.

Someone who isn't going to pay for broadband these days is likely not going
to pay for MVPD service either. He's going to use FOTA TV. And those who have
access to DSL may only be paying in the $30/mo range, which they can also use
for TV streams.

Do you ever think about what you are saying?

My comment goes back to this statement from you:

CBS and the rest are available FOTI too, Craig. You don't need CBS All
Access, unless you want the library content. Someone who uses FOTA TV can
readily switch to FOTI already, except for live streams. And since the
congloms are well aware of this growing online audience, they can in
principle replace the FOTA service with FOTI, including making live streams
available. It's only their decision to make. (I acknowledge that more
infrastructure is needed, compared with OTA service, with consequences for
reliability of service.)

Even IF the congloms decided to go FOTI, which is not going to happen, those
who now rely on an antenna would need Internet service. DSL is the cheapest
service available that can be used to stream video.

So instead of watching FOTA which only requires the cost of a TV and an
antenna, if FOTA went away they would need either basic cable or broadband and
a device for streaming.

I agree that a significant percentage of those who now rely on an antenna
cannot afford the $30/mo; whether they would choose basic cable or broadband is
irrelevant.

As to broadband households, current numbers are hard to come by. If, at the
beginning of 2014, it was 87%, it's very likely that now the number is over
90%. This projection claims 92.5%:

http://www.statista.com/statistics/183614/us-households-with-broadband-internet-access-since-2009/

It was a forecast from 2011. And the number forecast for 2015 was 92.5 million
homes, not 92.5%. As there are 116.3 million homes that's only 79.5%.

You're really losing credibility with your statically slights of hand.

In any event, you don't need 25 Mb/s, or whatever the FCC decides to define
as broadband, to watch TV. It all depends on the CDNs and what they decide to
accommodate.

Agreed. That's why I asked how much you pay for DSL...

Regards
Craig

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