[opendtv] Re: Is 'Fair Use' in Peril?

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Sat, 4 Dec 2004 09:03:45 -0500

At 4:59 PM -0500 12/3/04, Manfredi, Albert E wrote:
>Craig Birkmaier wrote:
>>  Bottom line, it is EASY to demonstrate that direct
>>  sales revenues are already far, far greater than
>>  the revenues after the direct sales period for
>>  theatrical and certain kinds of TV releases (e.g
>>  the episodic programs created for paid services
>>  like HBO and Showtime.
>Sure, for certain types of content, as you list. But
>not for typical broadcast fare, I wouldn't think.
>For example, are direct DVD sales of West Wing
>making NBC more revenue than the weekly broadcasts
>do? I expect not.

Correct. For these kinds of programs direct sales are still a less 
important factor that revenues from syndication, which typically are 
larger than the revenues generated from the network runs. Of course, 
this may not be true for series that flop, and thus are not 
attractive to the syndication market - these are just money losers.

>I understand your idea of the waterfall (from
>direct sales to broadcast distribution, in that
>order of precedence). But that doesn't really change
>anything about whether Congress should or should not
>allow wholesale zapping of ads.

Your premise in this discussion was in essence: "if paying for 
programming by inserting commercials becomes ineffective due to 
commercial zapping, how will the content be paid for?"

The point of my responses is that alternatives to advertiser 
supported programming are already commonplace; consumers have 
demonstrated their disdain for commercials by paying directly for 
content. If you doubt this, just add up the revenues from 
subscriptions to multi-channel services and packaged media. The total 
is significantly larger than the combined revenues of U.S. networks 
and broadcasters, which account for just a bit more than 25% of the 
money consumers spend on theatrical and television entertainment 

Here is a source for the revenues I am using to come up with this statistic.


Broadcast radio - $14.87B
Broadcast TV - $37B
Cable subscriptions including PPV and Premium - $43.5B
Theatrical Box office - $9.3B
Sales and rentals of packaged TV/Film programming - $23.8B
Sales of packaged audio - $9.1B
Concert revenues - $2.5B

Total revenues ~$140B

As this relates to potential Congressional action regarding 
commercial zapping, it is clear that this would not have a huge 
impact on the market; we have already established the fact that only 
a small percentage of commercials are zapped. Forcing people to watch 
commercials is not likely to drive more revenue into this channel of 
distribution. Just the opposite could be true if consumers react by 
moving their entertainment expenditures to alternatives that are not 
filled with commercials.

I think it far more likely that advertisers will be the ones calling 
the shots here. I would also note from the source cited above that 
total annual advertising expenditures are about $266B, thus ad 
supported TV represents only about 14% of total advertising 
expenditures.  Advertisers will move their money where it provides 
the best return on investment. As this relates to this thread, I 
believe that the PVR and related technologies will cause advertising 
to change. The money will move to new forms of ads that are less 
intrusive, while simultaneously being more targeted to the needs of 
the viewer.

Congress does not need to mess with this - but they may try. This is 
a classic case of a new technology causing disruption of a legacy 
market. The marketplace will deal with this.


>>  I think this has already happened Bert. There are
>>  MANY ways to buy content directly today. 85% of
>>  the country pays for a multichannel advertiser
>>  supported TV service, and about 30 % pay for premium
>>  channels.
>>  Now people are paying about $10/month for satellite
>>  radio. The PRIMARY motivation to date has been to
>>  avoid ads.
>That won't last. Just as cable TV had to add ever more
>ads, to show an increase in revenues without simply
>jacking up monthly fees, I will predict the same will
>happen to satellite radio.
>What matters in all of this is that *even* for
>subscription media, the advertizing model has to work.
>I don't expect that Congress would allow people to
>create ways to bypass the checkout counter in your
>local Giant Food supermarket. *Even if* the
>supermarket were on the decline as a way of selling
>food, I seriously doubt Congress would permit people
>to develop ways of walking out without paying. (Please,
>no outbursts about food stamps.)
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