[opendtv] Re: Sony To Take Viacom Over-The-Top | Multichannel

  • From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
  • To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
  • Date: Fri, 19 Sep 2014 09:41:17 -0400

On Sep 18, 2014, at 9:34 PM, "Manfredi, Albert E" 
<albert.e.manfredi@xxxxxxxxxx> wrote:
>>> So, you're satisfied with half measures.
>> Satisfied?
> Of course you are, or you wouldn't stay stuck with it. Cord cutters exist, 
> and yet you insist that adding IP streaming to the bundling model of MVPDs is 
> "enhancing" something. Not for the cord cutters, right? Marketing babble.

Yes cord cutters exist Bert. Nobody is claiming otherwise.

There are several important questions to ask with respect this phenomenon.

1. Why are they cutting the cord?
2. Are there enough cord cutters to undermine the financial underpinnings of 
the MVPD business model?
3. Are there any signs that the practice of tying high value content to the 
bundle is changing?

And yes, adding IP streaming to the bundling model is clearly enhancing the 
service offering. How much value subscribers place on this new capability can 
certainly be questioned... "Your mileage may vary."

But more important, the availability of content from the bundle via IP 
streaming is the first step in an inevitable transition for the MVPDs. Consider 
the following:

1. Viewing behavior WRT pre produced content is fundamentally changing. People 
do not make appointments to watch this stuff; they are increasingly expecting 
to access it on demand. This will inevitably lead to IP delivery as the MVPDs 
make BOTH live streams and network libraries available for VOD consumption.

2. Consumers now own tens of millions of second screens capable of viewing TV 
content via IP networks RATHER THAN a MVPD set top box. The MVPDs are embracing 
this, both the cable AND the DBS operators. The cable MVPDs are well positioned 
to migrate their customers to IP video delivery, as they are the dominant 
provider of high speed broadband. While some customers may be cutting the cord 
on the video side, there is significant growth in broadband subscribers.

3. The cable industry is deploying hundreds of thousands of WiFi hot spots to 
allow their subscribers to access the Internet when they are away from home. 
This supports the TV Everywhere initiative, and is ultimately going to lead to 
direct competition with the telcos for voice and messaging services.

>> Pay attention Bert.
>> HBO IS NOT part of the bundle.
> Sorry, you're right. I had misread that, because in my book, HBO IS part of 
> an MVPD bundle, and yes, as you say, it is adapting. HBO is adapting because 
> it too, like ESPN, has been LOSING VIEWERSHIP.

Unlike ESPN, HBO is the victim of rapidly evolving technology.

When the service started, it was appointment theater. This came in parallel 
with VHS release of movies, for which you had to drive to a store to buy or 
rent the movie. It had the additional advantage that new movies were released 
on HBO before they were released on tape. With the proliferation of DVRs it 
became possible to record desired movies and watch them on demand. This was 
good for "planners," but no help for spontaneous viewing.  Adding to their 
woes, DBS duplicated their appointment model with pay per view movies, and 
cable soon followed.

The salvation for HBO was their entry into original programming, which provided 
the same incentive to subscribe to HBO that sports fans have for subscribing to 
the bundle to get ESPN.

Now viewers expect to be able to access movies and TV programs on demand via IP 
streaming. Netflix changed the landscape - they even buy older content from 

HBO must move to a IP streaming model to survive. They no longer get an 
advantage from their MVPD affiliation OTHER THAN having the MVPD collect the 
monthly subscriber fee. This is now easy to do via a web portal and the 
customers credit card.

As I noted yesterday, ESPN may be losing viewership for many reasons. 
Competition is certainly a factor as Fox and NBC are investing heavily in their 
own sports networks. Seasonality and periodic events like the Olympics and 
World Cup are also a factor. 

For many viewers, however, ESPN the primary reason they subscribe to the 
bundle, especially this time of year. News is probably next. The sticky part 
can be described in one word...  


Their service is growing in value to advertisers, who are seeing the declining 
effectiveness of ad supported content, which can now be accessed on demand...


>> But the pace of cord cutting IS not accelerating.
> Because Craig said so. Even if it remains steady, it accumulates over time, 
> Craig.

As I have said repeatedly. Please let me know when less than 50% of U.S. Homes 
subscribe to an MVPD service.

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