[opendtv] Re: STB hunting

  • From: Craig Birkmaier <craig@xxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Tue, 24 Jan 2006 09:37:26 -0500

At 10:44 AM -0500 1/23/06, Manfredi, Albert E wrote:
>I suppose this is as believable as the theory that cable
>and DBS are conspiring to kill off OTA, by paying off CE
>vendors and retailers. It makes a good story, but the facts
>don't completely line up, Cliff.

One more time Bert. There is no conspiracy here.

This is simply an issue of business models and the realities of how 
you get CE retailers to promote your products.

The reality is that there is a small degree of competition among the 
multi-channel service providers. And they have chosen to use 
subsidies (both for consumers and for the CE retailers) to market 
their services.

>The FCC receiver mandate still holds, has been set at March
>2007 for all TV sets and recording devices, and these built
>in receivers are reportedly of good quality. So that would
>certainly contradict any notion the government is secretly
>trying to kill off OTA. They could have said "let the market
>decide," which is what they do when truly not interested
>(e.g. analog stereo AM radio). *That's* the kiss of death.

I agree that there is no evidence that the government is trying to 
kill off OTA broadcasting. But there is overwhelming evidence that 
the politicians want to recover some of the broadcast spectrum so 
they can auction it off to help balance the budget.

Governments, at all levels WANT to maintain the status quo. They have 
become dependent on the revenues from franchise fees, excise taxes, 
and the rest of the crap that comes with political gerrymandering. 
Any effort to make the marketplace more competitive, especially as it 
relates to services that the politicians cannot tax, will be opposed 
by governments at some level.

For example, local governments have been desperately trying to figure 
out how to tax DBS services, as these services are taking away market 
share from cable, for which they get significant revenues at the 
local level. Los Angeles tried to tax DirecTV because they had some 
earth stations in the LA market.

As for the receiver mandate, Mark accurately portrayed the reality. 
The marketplace is moving to monitors, in large part because 
consumers are not buying integrated receivers. This is especially 
true for the smaller LCD panels that are rapidly taking over the 
market once dominated by direct-view CRT displays.

But the real reason that the CE industry is not pushing ATSC STBs is 
because there is no market and the broadcasters have no interest in 
developing this market, or the market for integrated receivers for 
that matter.

You continue to ignore the reality that what the broadcasters really 
want is to keep those oil wells pumping. Thye are more than happy to 
maintain the status quo, as cable and DBS are now starting to replace 
the revenues that they once received from the networks in the form of 
affiliate compensation.

Yesterday Nexstar announced that it has completed retransmission 
consent agreements with more than 140 cable systems that carry their 
stations. Nexstar has about 46 mid-sized stations that they own or 
operate under marketing agreements. The deals they just negotiate 
will provide about $40 MILLION in revenues to Nexstar over the next 
3-5 years. You are going to see dozens of similar stories over the 
next few years as old agreements expire and new deals are cut that 
use the cable and DBS operators to collect revenues from their 

NOw, given this reality, WHY would broadcasters want to compete with 
cable and DBS? Can Nexstar make 40 million in NET PROFITS, by filling 
their DTV multiplexes with content that they must pay for? Content 
that may draw viewers away from their primary programming?

You are NOT going to see any significant changes in the status quo, 
because it is working for everyone involved, and the public will 
tolerate rate increases at 2-3 times the inflation rate.

>>  Why else have none of the manufacturers spent much effort
>>  developing and *marketing* OTA STBs like they are in the
>>  rest of the world?
>I think there are more credible reasons. For example, since
>broadcasters are spending no effort to make their digital
>tier particularly attractive, e.g. by offering some added
>programs that would encourage people to buy into DTT, the
>vendors are waiting for the analog cutoff date to make STBs.
>After all, they do have to build in receivers into 100
>percent of their TV sets anyway, well before any analog
>cutoff date, so what's the rush?

First. they DO NOT need to put receivers into monitors. Monitors 
represent the largest portion of DTV sales.

Second, there is no viable market for ATSC STBs. Retailers cannot 
make a profit selling them and the volumes are too small to be of 
interest to the manufacturers.

It is not even clear that a $1.5 BILLION government subsidy is going 
to change this. The reasons that STBs are selling in other parts of 
the world have little to do with technology. They are selling because 
of the broadcast business models in those countries.

The one thing we do agree about is that changing modulation schemes 
without changing the business model of U.S. broadcasters is unlikely 
to change a thing.

>Imagine what would happen if broadcasters made it so people
>would rush to stores to get DTT reception. You know, offer
>something interesting over their new subchannels. There are
>so many possibilities.

You mean like offering the content that is now available only to 
subscribers of multi-channel services?

Great idea Bert. Now who is going to pay for it?

We already have adequate evidence that a pared down multi-channel 
service at say $20/mo is a non starter. So how do you offer all of 
this programming that people want without charging subscriber fees?

They are doing it with Freeview. And the revenues are coming from advertising.

So once again I will ask:

What would Nexstar need to do in terms of building DTV multiplexes,to 
generate an additional $40 million in net revenues over a 3-5 year 
time frame?

>  > Why is DTV mostly advertised as available over satellite
>>  and cable? Why don't any of the sales people at the
>>  consumer electronics stores know you can receive DTV OTA?
>Because they're stupid? The guy I talked to at Circuit City
>seemed to know. So while this is the impression one gets,
>it's not necessarily 100 percent true. Retail clerks in all
>industries have a special way of being clueless.

Perhaps they are concerned that they might come across as being 
clueless, if they promote OTA DTV?

A bit of television archaeology.

I am now installing drainage in preparation for the building of an 
elaborate deck on the home I have been remodeling for the past year. 
Near a corner of the house (built about 1956) there were three metal 
pipes coming out of the ground forming a equilateral triangle. 
Unfortunately they were right in the path of the drainage system. I 
started digging, only to find about a cubic yard of concrete under 
the posts, which were welded to a metal plate. At first we though it 
was part of an old irrigation system, but the portion of the pipes 
above the plate had holes through them.

After scratching my head for a moment the picture became clear. This 
was the mounting base for a steel TV antenna tower. Back in the '50s 
there was only one TV station in Gainesville (channel 5/PBS). To 
receive the commercial networks you needed a tall tower (30-50 feet) 
with a rotor. Before I moved to Californai in 1981 I had to build a 
similar set-up because we lived out in the country where there was no 
cable service.

So here's another question for you Bert. What do you think the 
average Gainesville consumer today would think of a CE salesperson 
who suggests that they invest hundreds of dollars in a 30-50 foot 
tower to receive DTV broadcasts? By the way, there are now two DTV 
stations on the air in Gainesville, and the Fox affiliate may get on 
the air eventually.

The reality is that most consumers would think that a CE salesperson 
suggesting that they choose OTA DTV versus cable or DBS would be 
considered to be COMPLETELY CLUELESS.

>The US likes to do its own thing. This one is not a big deal.
>A simple change of *one* component, the demod, makes a DVB-T
>box into an ATSC box. Big whoop. Besides which, it's not all
>bad. I've already reported that I seem to get solid
>reception whenever the SNR stays above 15.1 dB or so. This is
>very, very repeatable. Compare that with COFDM. Not all bad.

Forget the technical arguments Bert.

You are correct. The U.S. does like to do its own thing. We have 
nearly a century of history behind the current telecommunication 
infrastructure in the U.S. A century dominated by political 
gerrymandering and a VERY PROSPEROUS run for every company that plays 
by the political rules.

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