[opendtv] Re: I meant ESPN, not HBO

From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
Date: Wed, 22 Oct 2014 08:01:03 -0400
On Oct 21, 2014, at 5:42 PM, Manfredi, Albert E <albert.e.manfredi@xxxxxxxxxx> 
wrote:
> 
> Craig Birkmaier wrote:
> 
>> Cable companies do not mark up the extended basic tier, at least not
>> very much.
> 
> Well, what I read says they do. About as much as I claimed. Which is why 
> going direct to consumer would easily put more money in the ESPN pockets, for 
> a given number of subscribers, than what they get now, for the same number of 
> subscribers. The difference is, of course, that as of today, ESPN has a whole 
> lot more subscribers in the old school business model. But that is changing.

What MVPD service costs, and who gets what continues to be shrouded in mystery.

Obviously cable and DBS systems make a profit on each of the programming tiers 
they sell. And the contents of the tiers vary from system to system, so it is 
very difficult to compare the bundle offers. Add to this local franchise fees, 
taxes, and add ons for rented equipment, and it is nearly impossible to know 
where all the money goes.

The limited information I have seen over the years suggests that somewhere 
between $30-40/mo of the typical cable bill (with the extended basic tier) goes 
to the content conglomerates. I have never seen any information suggesting that 
there is a revenue sharing split for the extended basic channels as there is 
for the premium tier movie channels like HBO. When content in the extended 
basic tier comes up for renewal, there are negotiations, blackmail (i.e. 
blackouts like Turner just did with Dish), and capitulation. The terms of the 
deals are never made public.

I would add that it is nearly impossible to create special promotional deals 
with a single conglom, for a bundle that may contain more than 100 channels. 
That would get dangerously close to an ala carte offer. And when channels go 
dark in the bundle it is extremely rare for the MVPD to provide a credit on 
your bill.

The game that the congloms play is to add channels to the extended basic bundle 
each time the rate increases. This allows the MVPD to evade local franchise 
authority control - i.e. "we are not raising the price for the existing 
service, we are adding channels and charging more."

IMHO, the best way to kill the extended basic bundle would be to require MVPDs 
to break out on the bill, or a periodic programming statement, the actual 
subscriber fee paid for every channel. 

As for ESPN, the issue is quite straight forward. They get at least $5/mo for 
every extended basic subscriber. And Disney gets subscriber fees for the Disney 
channel, ABC Family, and the rest of the Disney owned cable networks. When 
someone cuts the cord Disney takes a hit in multiple areas. So it is not a 
simple case of pricing one service like ESPN for a direct-to-consumer play. 

And it is not possible to say that ESPN would make more money with a 
direct-to-consumer play. This would depend on the price they charge, and the 
number of homes they would reach. 

The only thing we can agree on is that when you assume that content and 
carriage are completely separated, we can begin to create a real competitive 
marketplace. We can know what we are paying for Internet access, and what we 
are paying for each content bundle we subscribe to. We may be moving in that 
direction, but we have a very long way to go to get there.  Meanwhile, the 
major players like ESPN keep locking up ever more rights to sports programming, 
assuming that the existing extended basic bundle model will still be around a 
decade from now.



> 
>> Sorry about that, but if you offer channels in the extended basic
>> bundle ala carte, you kill the bundle. And Disney has many channels in
>> the extended basic bundle that would suffer.
> 
> Only if you don't think ahead. Like I already said, just as ESPN can make out 
> by going direct to consumer, so can the rest of Disney. As to the bundle, who 
> cares? You keep moaning about the owner of those stables, Craig, after the 
> car era began. The MVPDs might care, but even the MVPDs have figured out that 
> they need to get more in the network infrastructure end of things.

Think ahead? Is it realistic to "think" that an all ala carte world will be 
cheaper than a bundle with a few MVPDs handling customers service and billing? 
Only if people CHOOSE not to subscribe to most of the stuff in the bundle; and 
if this happens, some of the channels will be hurt severely.

That being said, I believe that many of the marginal channels that are only 
getting say 10 cents a month, would drop subscriber fees altogether, and make 
their content available in the basic/lifeline tier.

It all comes down to what we are willing to pay for our entertainment fixes. 
The total pie is huge; how it is divided is controlled mostly by the 
oligopolies, not the consumer.


>> One more time:
>> 
>> Only a small percentage of MVPD subscribers are cutting the cord.
> 
> One more time: even John Skipper said that a small percentage is enough to 
> create big changes in the distribution model. Dropping from ~90 percent to 
> ~78 percent, in a matter of 7 years, is not such an insignificant drop, 
> especially because there's no obvious end in sight.

It never reached 90%, and 78% is a PREDICTION for 2019. Even at 78% the 
extended basic bundle survives.


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.
References:
- [opendtv] Re: I meant ESPN, not HBO
  - From: Manfredi, Albert E
[opendtv] Re: I meant ESPN, not HBO

Other related posts:
