[opendtv] Re: Internet pay-TV is coming. Will you care?

  • From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
  • To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
  • Date: Sat, 1 Feb 2014 07:29:23 -0500

> On Jan 31, 2014, at 9:29 PM, "Manfredi, Albert E" 
> <albert.e.manfredi@xxxxxxxxxx> wrote:
> I think this article gets one thing right for sure:
> "Though the eventual effects of a virtual pay-TV service could be good for 
> consumers, content companies are the clearest, biggest beneficiaries, with 
> more buyers of their programming entering the market. It explains why media 
> companies like Discovery, Disney, and Viacom are so convinced that the dawn 
> of Internet pay-TV is upon us -- they have the most to gain."
> If they can't gain, it won't happen.

Thanks Bert! 

You finally understand why the media congloms operate their business the way 
they do. You have argued time and again that the congloms can get rid of the 
middlemen and go direct to the viewer. This article rather convincingly argues 
that the congloms will benefit from MORE middlemen. 

Truth is, the viewers have never been "the customers" of the congloms; they are 
customers of middlemen who all offer essentially the same content. Walled 
garden subscribers are far more valuable to the congloms than services that 
only have one revenue stream from ads. By keeping the best stuff inside the 
garden walls, the highly profitable bundling tactics assure a very high 
percentage of viewers will pay; as the article suggests, new OTT services will 
have no choice but to do the same.

So the congloms cannot lose, as the middlemen drive up the price of popular 
programming as one after another cave in retrans/subscriber negotiations. And 
bundling allow the congloms to profit from less valuable content, which in turn 
clogs the arteries of the distribution pipes, effectively keeping new content 
providers at bay, and forcing program producers to sell to the gate keepers if 
they want to "play in the gardens."

All that matters is that the viewer must subscribe to a walled garden service 
in order to access the most valuable content, and now to benefit from "TV 
Everywhere." So bring on new OTT competitors! We will just make a little more 
per subscriber?

> But I don't understand why journalists are so insistent that "net neutrality" 
> was struck down by the courts. It sounds like their proclivity for hyperbole 
> just won't give up. The ONLY thing the courts struck down was the idea that 
> bandwidth usage had to have no impact on prices, at least from the point of 
> view of the content source. That's all. Net neutrality would truly have been 
> in jeopardy, if the courts allowed ISP/MVPD combination services to block the 
> IP content of their programs, or the IP streams from competing content 
> owners. 

Journalism started to decay back in the era when The Golden Age of TV gave way 
to hundreds of channels. The Internet put the final nail in the coffin, 
allowing any hack to express an opinion. We no longer report the story, we 
analyze it to death from every possible point of view. Every story has a range 
of potential meanings/outcomes, with multiple best case/worst case scenarios.

The Net Neutrality story is still playing out. Nobody really knows what will 
happen. But the article you posted provides many significant clues. The obvious 
take away is that the content and MVPD/ISP oligopolies are not going to allow 
some upstart competitor to tear down the garden walls.

As I said before, the only strategy that has a chance, is for someone with very 
deep pockets to provide a service "below cost," in hopes they can make money in 
a related business. Amazon has used this tactic to bring "retail" to its knees. 
Google has managed to get the majority of manufacturers of smartphones to 
operate with negative profit margins, while they profit from the ads that 
mobile users see. Even Apple may not have deep enough pockets to take on the TV 
oligopolies, not that they would ever use these loss leader tactics to take 
down an industry.

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