[opendtv] Re: M/H, Free OTA and Its Programming
- From: "Bob Miller" <robmxa@xxxxxxxxx>
- To: opendtv@xxxxxxxxxxxxx
- Date: Tue, 29 Jul 2008 19:14:37 -0400
Sorry didn't mean to imply that the report said broadcasters lose,
that is my opinion.
The report does imply this. It constantly goads broadcasters to pick
one standard and be ready by next February to wage holy war or else.
The relevant line in the report is " Once a competitor builds out its
network, then the capital spend of the competitor becomes a sunk cost,
and the competitive advantage of broadcasters is reduced
significantly. However, even after the build out, the advantage is not
eliminated since the competitor has a much larger investment upon
which a satisfactory return must be returned (i.e., broadcasters could
price below the competition and still earn their required return on a
much smaller capital investment)."
They correctly make the case that when competitors have sunk cost
broadcasters "advantage of broadcasters is reduced significantly". I
would argue that it is eliminated. In fact I think the new kids on the
block have significant advantages. Their new massive investment is an
incentive not a disadvantage and besides the definition of sunk cost
is that it is GONE never to be seen again. You can try to get a decent
return on it but what you have invested is GONE. You can get a massive
return on it or lose it all, you can sell the resulting assets for 100
times your investment or ZERO.
Broadcasters can lower their prices all they want, the new competitor
will follow, they cannot consider SUNK cost in pricing, they only can
consider one thing, maximizing profits or minimizing losses.
But once you have invested the capital it is SUNK like in a boat. Gone
and no decision about anything you do from that point on is rational
if it looks back at that investment and makes decisions based on SUNK
capital. The phrase good money after bad relates to those who would
make such decisions.
The main advantage of the new comers is that they have a fresh mind
set and no distraction like must carry. They also arrive with new
ideas, massive investments and are not trying to just hold on to a
cash cow or add 10% to last quarters earnings by going with M/H.
IMO content is over rated. Content will be there for those who can deliver.
Of course this is all predicated on the idea that there will be new
age broadcasters. Qualcomm business plan so far disqualifies them IMO.
Dish, AT&T and Verizon maybe but no one knows what they will do. Over
some period of time though I think that the best use will win out.
And as a caveat I must say that I have always underestimated the
advantage all incumbents have because of the almighty inertia.
Telephone companies still have lots of land lines generating income. I
have Vonage, I have MagicJack, I use Skype and I still have a land
line from Verizon. And I hate Verizon for very personal reasons. That
is inertia. If broadcasters survive the coming changes it will be
because of inertia and the living room couch.
Bob Miller
On Tue, Jul 29, 2008 at 3:23 PM, John Willkie <johnwillkie@xxxxxxxxxxxxx> wrote:
> As always, a distorto lens is at work.
>
> The report actually doesn't say that if the interlopers get to the point of
> having sunk costs, then the broadcasters lose. The report says that
> broadcasters will still have advantages, including existing services,
> branding, advertising, sales of advertising, further reach, etc.
>
> So, rock on, Bob.
>
> John Willkie
>
> -----Mensaje original-----
> De: opendtv-bounce@xxxxxxxxxxxxx [mailto:opendtv-bounce@xxxxxxxxxxxxx] En
> nombre de Bob Miller
> Enviado el: Tuesday, July 29, 2008 12:12 PM
> Para: opendtv@xxxxxxxxxxxxx
> Asunto: [opendtv] Re: M/H, Free OTA and Its Programming
>
> Long ago it was suggested that the best use of broadcasters 6 MHz was
> for mobile and portable services and that competition would drive them
> to limit the required NTSC quality program to as few bits as possible
> with the rest being used with the best codec available.
>
> Someone instructed me then that B&W took almost as many bits as color
> and someone contradicted that. Whatever, I expect to see the required
> NTSC program in the free and clear to be a high value community
> service broadcast of weather, traffic etc. delivered in a static
> picture with audio updates of breaking news and local interest items.
>
> Dan, any "contract" between the people and broadcasters is in the
> spirit of the understanding much like the supposed promise to deliver
> HD. In the real world the spirit has left us long ago.
>
> The spirit of legacy receivers that will only receive the required
> NTSC minimal broadcast will live on in the dumpster since they will
> not be able to handle the codecs that will be used on most of the
> spectrum. Didn't we all know this was the way, the truth and the lie
> from the beginning?
>
> Sooner than expected I expect that broadcasters will be using most of
> their spectrum for mobile, fixed and portable delivery with advanced
> codecs delivered to receivers that can handle most of the worlds
> modulations and codecs. They may have to if we see AT&T, Verizon, Dish
> and Qualcomm get wise to what the best use of their combined 700 MHz
> spectrum is. Hint, it is not to use it with ATSC M/H.
>
> To read that NAB pdf is to hear the anguished collective scream of all
> the dinosaurs caught in the same tar pit convinced that their content
> will save them. At least they are all together now unlike back in
> 2000. They seem to think that mobile and portable is all about added
> revenue, adding a twinky for desert, when I believe it is really about
> their lunch. The new broadcasters, possibly in multiple forms, will be
> focused on the broadcasters lunch IMO, not the twinky.
>
> The time frame for the broadcasters is to so dominate fixed, portable
> and mobile broadcasting that the interlopers retreat in despair. If as
> the pdf says, the interlopers get to that point of no return with sunk
> cost, then broadcasters lose. The interlopers have better tools, don't
> have to pay 5% of revenues and will then have a lot of money on the
> line and supposedly they will be committed to OTA.
>
> I have little faith that broadcasters will be committed or even see
> the opportunity. Hint, the opportunity is to stay in business.
>
> Take a look at what some broadcasters have done recently. Last fall
> Lin Broadcasting called me to sell their 700 MHz licenses only months
> before Auction 73. It was strongly hinted to me that they would sell
> for a Million a license. Talk about second chances. I went nuts trying
> to raise some money to buy their licenses but Aloha got them for
> around $31.5 million or a million a license. I was screaming to anyone
> that would listen that they were worth $300 million and that Auction
> 73 would prove it.
>
> Long story short. AT&T, a possible new age broadcaster as the pdf
> alludes to, paid $319 million for Lin Broadcasting's 31 licenses only
> months after Lin sold them for $31.5 million. That is AT&T paid $2.5
> Billion for licenses from Aloha that included those 31 licenses and
> then paid $319 Million for the mirror image of those 31 licenses in
> the auction. Buying the same licenses in 53 and 58 in Auction 73 as
> they purchased from Aloha with 54 and 59.
>
> I think 54 and 59 are worth more than 53 and 58 because AT&T can use
> more power, 50 kW, and can take more time to build out using 54 and
> 59. So the value of the Lin licenses is more to AT%T than the $319
> million they paid for 53 and 58.
>
> Personally I think the 31 Lin licenses are worth more like $1.3
> billion, AT& T just didn't have to pay that much since no one was
> bidding them higher. If you don't think they are worth that much try
> to buy them from AT&T for $2 Billion today. I doubt that they would
> sell them for $2 Billion today.
>
> Lin sold them for $31.5 million last fall!!!!
>
> That in a nutshell is the difference between broadcasters and what is
> about to hit them.
>
> Bob Miller
>
>
>
> On Tue, Jul 29, 2008 at 11:55 AM, <dan.grimes@xxxxxxxx> wrote:
>>
>> Clearly, broadcasters are looking to M/H as a viable market for fee based
>> offerings. It is currently my understanding that FOTA must be provided by
> a
>> broadcaster, although this only needs to be one programming stream and the
>> quality is not regulated. (I say "my understanding" because many things
> that
>> I thought were true have been effectively countered on this forum.)
>>
>> If M/H for a fee happens on OTA broadcasts, I am betting that the free
>> portion becomes nothing more than an infomercial channel with ads, promos
>> and possibly some news (it is largely that today). There might be some
>> programming but most programming is already laden with over 20% of the
> time
>> spent in commercials. And the quality will become little more than a
>> thumbnail's version. No, once broadcasters get the taste of income from
>> fees for their broadcast, there will be very little incentive to keep the
>> quality of FOTA up.
>>
>> Now, I'm not saying this is good or bad, I just think it will effectively
> be
>> the end of FOTA. I also think that the contract between the
> citizen/people
>> and the broadcaster (FCC/broadcaster) will effectively be forgotten,
> whereby
>> the OTA broadcaster will not provide the programming promised in exchange
>> for the frequency spectrum. (Of course, this is all predicated on my
> belief
>> that there is a contract between the people and the broadcaster, which
> many
>> will probably argue does not exist.)
>>
>> While I would be tempted to rally the citizens to file complaints against
>> the broadcaster to go back to providing what they owe the community, I
> doubt
>> it would do much good. No, the less than 14% of us that use FOTA services
>> will largely be forgotten or overridden in the society that is driven by
> and
>> considerably controlled by money.
>>
>> Just my opinion, which is certainly not based on a deep understanding of
> the
>> broadcaster's political environment.
>>
>> Dan
>>
>
>
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