[opendtv] Re: Migration to virtual MVPDs
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Sat, 5 Jul 2014 11:13:58 -0400
On Jul 3, 2014, at 8:40 PM, "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
wrote:
>
> When you create "virtual MVPDs," you don't get "another player," as you
> state. You get a kozillion other players, potentially. And changing your
> favorite portal, or adding a new one while retaining the old one, becomes
> very easy to do. The only obstacle to any of this is non-neutral ISPs. Which
> is why it's important for Wheeler to get this right.
This is YOUR assumption, which is VERY optimistic. If it were true, there would
already be a "kozillion" Netflix, Amazon and iTunes services and there would be
intense price competition.
In order to create an IPTV service you have limited choices:
1. License the content you will stream to subscribers (Hulu, Apple, Amazon,
Netflix, HBO)
2. Create the content you will stream to subscribers (HBO, Netflix, Amazon)
3. Let consumers create the content (You Tube, Vimeo)
Clearly some services do more than one of these. It is also clear that you need
big bucks to do 1 & 2. And there is the "minor" matter of building a critical
mass of subscribers.
Let's assume that Congress DOES pass legislation extending the compulsory
license to the Internet. What happens next?
First, the established players will try to negotiate licenses for the content
that is currently ONLY AVAILABLE via the MVPD bundle - the content that keeps
more than 80% of U.S. homes subscribed to a MVPD service. You could expect the
following to seek licenses: Apple, Google, Amazon, Netflix, and Verizon (they
bought Intel Media).
You might also see some other companies with deep pockets make a run at it.
Who wins?
The content owners.
Who make the rules?
The content owners.
The compulsory license only opens the door. It does not set the price. It does
not prevent tying. It does not prevent a requirement that the content be sold
as part of a bundle. All of this is part of the negotiation for the licenses
you will need to create a virtual MVPD.
To make this situation even more problematic, there is little incentive for
individual content owners to abandon the bundle. If I own content that is
currently only available in the bundle - I'm talking about the current live
network streams, not VOD archives - and I decide to make it available WITHOUT
THE BUNDLE, i.e. ala carte, why would I license it to a virtual MVPD?
It would probably make more sense to create my own portal, and get 100% of
whatever I can charge subscribers.
You may well claim that this is the expected end game - as content owners go it
alone, there will be a "kozillion" options.
Then again, how do people find you when there are a "kozillion" options?
Perhaps the answer is: a virtual ala carte MVPD. If this is the case, one or
more of the already entrenched players mentioned previously would have a huge
advantage.
But it assumes that someone is willing the break the bundle.
> The increase in competition would be huge. Hardly just adding one player.
> This has already started to happen. Even for FOTA TV, people like me depended
> on the local broadcasters, much like you depend on Cox cable. Now I'm less
> limited. The same increase in options is also available for pay-TV, and
> there's no reason to think this trend will screech to a halt!
You are less limited because of the shift to VOD for the consumption of
episodic TV programming. Jeff Bewkes of Time Warner just pointed out the
importance of this shift:
> “You have demand for the programming beginning on demand, not just here but
> around the world, which is bringing billions more viewers into the process,”
> said Jeff Bewkes, who has served as CEO of the media conglomerate for about
> six years. “It is absolutely the golden age of video programming.”
>
http://variety.com/2014/biz/news/time-warner-ceo-on-demand-to-fuel-tvs-fortunes-1201256123/
The trend is real and growing - just look at the growth of subscribers at
Netflix. Then consider the reality that the majority of these subscribers ALSO
subscribe to a MVPD service for the live stuff.
I wrote:
>> I base this on the assumption that the licenses that a new virtual MVPD
>> would need, would require them to protect "the bundle."
>
> That's not how competition works.
We are not talking about a competitive market. We are talking about powerful
oligopolies propped up by the regulators and politicians they support.
> Already now, people are cutting the cord, and/or young people never getting
> the cord. The more online options people are given, the more they will
> continue to opt out of the cord. This is not lost to the content owners. You
> seem to assume the content owners won't change the way they operate with
> third party distribution media, but they already are! Different virtual MVPDs
> will offer different bundles, to compete, or even a la carte. The content
> owners will become obliged to play along. In fact, some of these content
> owners may even run their own for-pay portals, as they are now running their
> own FOTI portals, just to get back some of the cord cutters.
Your optimism is unparalleled!
Still waiting to see the first meaningful defection from the bundle.
>
>> The content owners DO NOT want competition
>
> Not this again. Content owners hold more sway than distribution media,
> perhaps, but the consumer has the last word. The more competing portals there
> are, the more demand elasticity the content owners will perceive. When the
> congloms notice consumers dropping their bundles today, perhaps moving to
> Netflix or even FOTI portals, they perceive this as increased demand
> elasticity. With new virtual MVPDs, the effect is multiplied.
The content owners are making more money than ever. Bewkes has it right:
> “You have demand for the programming beginning on demand, not just here but
> around the world, which is bringing billions more viewers into the process,”
>
And billions more dollars to their bottom lines.
> Content owners won't have a choice, if they want to stay in business!
Yeah right.
;-(
Regards
Craig
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