[opendtv] Re: News: The Real Fight Over Fake News

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Mon, 9 Jun 2008 09:25:45 -0400

At 8:26 AM -0400 6/9/08, Adam Goldberg wrote:
Trying to be funny, but the message was lost, I guess.

Disclaimer:  I don't necessarily buy the argument, just presenting it.

(to cover costs only) If ESPN costs $1M to produce and Disney Channel costs $100k to produce, then if you bundle them, the total costs are $1.1M and you just force each of your 10M customers to each pay $.11. But if you don't bundle them, every family with kids wants the Disney Channel (say 5M of them), every one of your subs pays $.05 for Disney. But only the sports junkies (100,000 of them) want ESPN, and each would need to pay $10.

(build in some profit) Because Disney costs nearly zero to produce, but it's worth more than $0.05 to consumers, and because ESPN is expensive, but if sold a la carte, fewer would subscribe to it at a high cost (like the premium movie channels). But, if ABC/Disney bundle them together (and don't sell them separately), they can charge $1 per sub for the package. $10M revenue on $1.1M.

(yes I completely made up the numbers, and if you look carefully at them, they don't make sense)

"They pass the savings on to you" translates into if you wanted ESPN, you're paying much less for it than you would have to otherwise. Disney is free(-ish) either way.

The real problem here is ADDICTION.

Using The Disney Channel as an example somewhat complicates the discussion, as it was originally a premium channel and then became a basic cable channel WITHOUT ads. Of course, the whole channel is an AD for Disney, but one can make the argument that this does not create revenue for the operation of the Disney Channel.

ESPN is an entirely different matter, as it is advertiser supported. The revenues for those ads are based (at least loosely) on the number of actual viewers for an event, not the number of total homes that pay the ESPN subscriber fees. This is true for virtually ALL cable channels that collect subscriber fees. It came about in the early days of cable to help new channels survive while they were building up audiences that are salable to advertisers. But these fees did not go away. instead, the congloms saw this as a way to reach directly into our pockets for revenues that are in addition to the ad revenues.

The logical argument for all but the Disney channel is that the ads should pay for the content, as they do on Freeview, on broadcast TV, etc.

IMHO, the use of subscriber fees is just a way to get consumers used to paying directly for content. When the time is right, they will bypass broadcast and multi-channel and go direct.

Regards
Craig



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