[opendtv] Re: News: The death of Cable TV

  • From: "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
  • To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
  • Date: Sun, 31 Oct 2010 19:37:20 -0500

Craig Birkmaier wrote:

> In a world where subscriber fees are a given for non broadcast
> networks, any broadcaster would have to match the dual revenues
> these networks are getting today. This is what the congloms are
> relying on; they can retain complete control as long as they can
> force people to pay for bundles of content, with many networks
> they DO NOT watch.
> In a world where viewers could choose whether to pay or not, I
> believe many of these networks would drop subscriber fees to stay
> on a basic free tier. And if they dropped their subscriber fees,
> broadcasters would be in a very good position to compete for the
> right to carry these networks.
> SO yes, I believe that with ala carte, we would see many programs
> that are exclusive to the MVPDs today become available in
> broadcast multiplexes.

That could be an interesting turn of events. What you are arguing here is that 
these cable nets are demanding whatever they can get away with, which does make 
sense in our economy, and that in reality they don't need any of the 
subscription fee. It's just a matter of "hey, if you pay x for the Food 
Network, I certainly deserve at least y (much greater than x)." So these 
negotiations spiral out of control. Presumably, the cable networks could stay 
afloat with ad revenues alone, as the "main" programming from the major 
networks has been doing until just now.

Maybe. Having so many people dependent of the umbillical certainly does bring 
that risk with it. Whatever the details are, my bet is that the unpopular 
programming would become a lot lower quality with a la carte, assuming it 
survives at all, because they would no longer benefit from the subcription fee 
marxism they enjoy now.

> It is very easy to use scare tactics to block changes to a highly
> profitable business model. One must ask what the MVPDs are afraid
> of. I believe they are afraid that ala carte would SIGNIFICANTLY
> reduce the amount paid by each subscriber each month...

Of course! MVPDs will lose a huge amount of revenue. But the cable systems, 
which are now mostly also broadband providers, can recover quite nicely. The 
FCC does allow for ISPs to prioritize traffic, as long as it's not part of 
customers' two-way broadband pipe traffic.

Here's an article that explains how everything would "change" with Internet 
distribution. As far as the article's explanation goes, the role of the MVPD 
will disappear and Internet TV aggregation sites will take over that role. Not 
a big difference for consumers, if you ask me. Just look at how Hulu is 
planning to operate, for example.

BUT ...

My prediction is, the major congloms don't want or need to replicate the "being 
dependent on a middleman" model, so they will retain their own separate web 
sites. Okay, so the Hulus won't have the power of the MVPDs today, right?

Not so fast. The MVPD-morphed-into-just-ISP may just reinvent itself as an IP 
delivery MVPD. For Internet delivery, EVERYONE has to depend on the ISPs. Why 
won't they play exactly the same subscription fee games they are playing now, 
bundles and all? If you take into account the large investments ISPs will have 
to make, to deliver TV quality programming on that large scale, I would not be 
a bit surprised to see this re-happening.

That's what will keep OTA delivery unique. No dependency on the two-way 
umbillical. No problem with multiple distribution pipes sharing the same real 
estate. In theory, wireless broadband could compete in this. In practice, 
people won't be able to afford multiple wireless broadband providers.



Hulu's Reported Subscription Plans Portend Cable Showdown

By Eliot Van Buskirk  April 22, 2010  |  4:22 pm  |  Categories: Media

Along with long-format television shows also found on cable and satellite 
services, Hulu offers web-only content like my interview of Nick Cave.
Subscriptions are by far the most popular way to watch television in this 
country, where most households pay for cable or satellite programming. But 
nowhere is it written in stone that they'll continue to pay cable or satellite 
television companies, because those are merely the delivery mechanisms, and the 
studios now have a more direct route into our homes.

Hulu, a billion-dollar company owned mostly by Disney (ABC, ESPN, Disney), 
General Electric (NBC/Universal) and News Corp. (Fox), serves up some of the 
same programming available on cable and satellite for free, on an on-demand 
basis. Now, it plans to offer a $10 per month subscription for select shows, 
according to sources cited by the Los Angeles Times.

This may seem like an inconsequential move at the moment, but it paves the way 
for an eventual showdown between television studios and cable companies, whose 
relationship, until now, has been mutually lucrative on a massive scale.

Starting in May, according to the report, you'll be able to watch the five most 
recent episodes of certain shows on Hulu for free, but you'll have to pay for 
the subscription to access older episodes. Hulu declined to confirm the LA 
Times story or whether it plans to offer a service that can work with the iPad, 
which doesn't support Flash, rendering Hulu currently unplayable on all iPhone 
OS devices. But details that have emerged about this so far indicate that the 
Hulu subscription will offer a bundle of content, rather than individual shows.

In other words, people won't subscribe just to Saturday Night Live; they'll 
subscribe to everything Hulu offers.

Remind you of anything? This is how cable and satellite operate, although they 
bundle programming on a much larger scale.

The argument for bundling shows, the way cable and satellite providers do, is 
that it funds niche content that otherwise would not be produced. According to 
this way of thinking, there aren't enough college lacrosse fans out there to 
make it worthwhile for ESPN2 to air it, or enough quilters or bass anglers out 
there willing to watch videos on those topics, for those programs to be funded 
on an individual basis. By bundling them together, cable and satellite 
companies say they are able to fund a wider range of content than if everyone 
just paid for the stuff they personally want to watch.

However, as Hulu's reported plans demonstrate, television studios are now 
capable of offering this bundling approach online, without ceding a cut of the 
profits to cable or satellite providers. And the fact that it's a website 
without a set number of channels means it can offer even smaller-niche content 
than cable or satellite, including web-only exclusives. So much for cable and 
satellite providers' argument that only they can afford to distribute niche 

Already, as of last year (according to the Convergence Consulting Group 
viaTechCrunch), an estimated 800,000 households had "cut the cord" by switching 
to internet-only television using Hulu and other services (including, we 
assume, BitTorrent).

As Hulu, YouTube, white-label online video rental services and other licensed 
services offer more television programming online, and inexpensive set-top 
boxes like the upcoming models from from Boxee and popbox make it easier for 
nongeeks to watch internet-delivered programs on their televisions, it seems 
all but inevitable that the internet will drive a wedge between two old 
friends: cable companies and television studios.

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