[opendtv] Re: News: Northwest Station Pulls Signal In Retransmission Battle
- From: "John Willkie" <johnwillkie@xxxxxxxxxxxxx>
- To: <opendtv@xxxxxxxxxxxxx>
- Date: Fri, 5 Jan 2007 08:07:44 -0800
Distinction without a difference. Again.
What you need to examine is various surveys where people respond to surveys
asking them what they'd do if cable didn't offer local channels, and how
much they would expect their bills to be reduced. It hovers around 50%.
Somehow, satellite doesn't have this issue -- broadcasters playing their
best cards. It comes down to the simple fact that satellite pays $0.15 per
subscriber per month to local stations. Cable thinks that's too much,
largely because they pay $5.00 or more per month to ESPN (less to others)
for channels that underperform broadcast signals.
Now, I realize that you might have problems parsing the math -- since you
think there is a significant difference between my 50% figure and the 45%
(for prime time only) reported below, but give it a go.
If you lose only 20% of your revenue (after losing local channels), but your
per-subscriber costs remain the same, you are badly screwed on two fronts.
By FCC regulations, you need to reduce your subscriber revenues by more than
$1.00 per channel per month.
It's unlikely that subscribers will think that's a good value, so the churn
rate goes way up, in favor of services that pay broadcasters a per-sub fee
to access to their signals.
Lower per-sub revenues, increased churn, the same costs. Not a path to
success. (I can't say profitability, since cable has never been profitable
on the delivery of tv services since they started paying for content.)
John Willkie
> -----Original Message-----
> From: opendtv-bounce@xxxxxxxxxxxxx [mailto:opendtv-bounce@xxxxxxxxxxxxx]
> On Behalf Of Craig Birkmaier
> Sent: Friday, January 05, 2007 6:00 AM
> To: opendtv@xxxxxxxxxxxxx
> Subject: [opendtv] Re: News: Northwest Station Pulls Signal In
> Retransmission Battle
>
> At 8:55 AM -0800 1/4/07, John Willkie wrote:
> >No, I'm saying that cable folks spend half their time watching broadcast
> tv,
> >and the loss of that would cause them to lose half their revenue. Since
> >they pay little or nothing for what half of their viewers are watching at
> >any one time, they wouldn't lose half their costs. It would
> fundamentally
> >affect their business model.
> >
> >Is my math too fancy for you to parse?
>
> No, it was your use of language that was difficult to parse. As for
> the math, it's just wrong.
>
> Please read the following:
>
> http://www.mediaweek.com/mw/news/media_agencies/article_display.jsp?vnu_co
> ntent_id=1003521968
>
> Report: For Fifth Year, Cable Projected to Beat Out Broadcast in Prime
>
> Anthony Crupi
>
> DECEMBER 14, 2006
>
> For the fifth consecutive year, ad-supported cable is projected to
> beat out the broadcast networks in prime time, boasting a 55.4
> percent household share year-to-date, compared to the six broadcast
> nets' 40.4 share.
>
> According to Nielsen Media Research data crunched by Turner chief
> research officer Jack Wakshlag, while cable's dominance of prime time
> continued in 2006, its growth appears to be leveling off. If the 69
> measured cable nets reach the projected 55.5 share at the end of the
> year, that number represents growth of just one-tenth of one percent
> versus last year's share.
>
> The same principle applies with the adults 18-49 demo. Cable should
> win out in the core demo for the third consecutive year, with a
> projected 44.1 share, a decline of two-tenths of a percentage point.
> Meanwhile, broadcast is projected to post a 36.7 share among adults
> 18-49 in prime, a drop of one-half of a percentage point.
>
> If cable's ratings surge over the last five years--since 2001, its
> share of the 18-49 demo has grown 7 percentage points, or 15.8
> percent, while broadcast has dropped 7 points, or 16 percent--has
> tapered off, that may be a function of prime having reached a
> saturation point. According to Wakshlag, the amount of prime time
> viewership hasn't changed since 2001,
> holding firm at an average 7.5 hours per week per person.
>
> Nor did the ratio of ad sales dollars to share change in 2006. To
> date, cable is getting just 31 percent of advertisers' prime time
> spend, versus the 69 percent that goes over to the broadcast nets.
> Wakshlag reported those same numbers in his year-end ratings
> presentation of Dec. 2005.
>
> Through Sept., the broadcast nets commanded $10.72 billion in ad
> sales, according to Nielsen Adviews, down 7.6 percent from the $11.59
> billion they took in throughout 2001. On the other side of the
> ledger, this year saw cable doing $4.77 billion in ad sales through
> Sept., versus $3.33 billion in 2001, an increase of 30.2 percent.
>
> Of all measured ad-supported cable nets, USA Network is projected to
> sweep the annual prime time ratings competition, finishing first in
> total viewers (2.62 million), as well as among adults 18-49 (1.17
> million), 25-54 (1.19 million) and 18-34 (533,000). TNT, meanwhile,
> will take second among total viewers (2.4 million), and should finish
> second in its delivery of 18-49s
> and 25-54s. Sibling net TBS will end the year in second place among
> adults 18-34, while TNT should take fourth in the demo.
>
> ESPN will end the year in third place in total viewers (2.09
> million), and should land in the same spot in all three core demos.
> Year-to-date, the sports net has hiked its share of 18-49s by 15
> percent, thanks in large part to its acquisition of Monday Night
> Football.
>
> Rounding out the top 10 most-watched cable nets of 2006 are: TBS,
> with 1.62 million total prime time viewers; Lifetime (1.51 million);
> Cartoon Network (1.5 million); Nick-at-Nite (1.49 million); Fox News
> Channel (1.42 million); FX (1.26 million) and Spike TV (1.24 million).
>
> And that's just Prime Time. In total day cable hit 60% last year. For
> week 12 of the current season the total day share for cable was a 57,
> with the broadcast nets at 34, a 23 point spread.
>
> Now to your assertions. What revenues does cable generate from the
> carriage of broadcast stations?
>
> They cannot insert ads into broadcast stations.
>
> Although it is difficult to determine, they do not charge a separate
> fee for local broadcast stations, as do the DBS systems. Tom Barry
> recently noted that Cox limited basic cable costs only $5 per month
> if you have a cable modem, which presumably means that the carriage
> costs are covered by the cable modem fees. From this $5 they must pay
> retrans consent fees to the broadcast stations they carry and other
> subscriber fees (TBS, WGN).
>
> So the only case you can build is that without the broadcast
> stations, people would not subscribe to cable. Then again, you can
> say something similar regarding USDTV - without many of the popular
> cable networks it is difficult for USDTV to capture subscribers. The
> reality is that most people want and expect BOTH.
>
> The other reality is that broadcasters now expect to receive millions
> in retrans consent payments from cable and DBS. If cable stopped
> carrying broadcast stations it is the broadcasters who would now see
> a decline in revenues, not to mention ratings.
>
> What we have today is a symbiotic relationship between the
> broadcasters and the multichannel distribution systems. The
> multichannel systems have become the billing and customer service
> organizations for the broadcasters.
>
> All of this squabbling over retans consent fees is just political
> cover, with the intent to create the impression that cable is trying
> to protect its subscribers from escalating bills. The reality is that
> those bills have grown 95% in the past decade and that the cable/DBS
> systems and broadcasters are laughing all the way to the bank.
>
> Regards
> Craig
>
>
>
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