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

  • From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
  • To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
  • Date: Mon, 22 Sep 2014 17:02:41 -0400

> On Sep 21, 2014, at 6:55 PM, "Manfredi, Albert E" 
> <albert.e.manfredi@xxxxxxxxxx> wrote:
>> 
>> 1. Why are they cutting the cord?
> 
> Because the value proposition of the cord is degraded, with the Internet 
> offerings, supplemented by OTA TV for live TV and news.

Perhaps. They are providing everything they always have, PLUS some channels via 
TV Everywhere. That's not degraded! 

Yes there are new competitive options, especially Netflix, which offers shows 
ON DEMAND WITHOUT COMMERCIALS. But the majority of Netflix subscribers ALSO 
subscribe to the bundle.

You fail to mention the reality that unemployment remains high and we have the 
lowest workforce participation rate in recent history. And then there are the 
Millennials. In the article you quoted from Wired, they note that many content 
companies are reluctant to support TV Everywhere because of poor security:

> Don't blame your cable company for its terrible TV Everywhere service. 
> Content companies are hesitant to offer a lot of content because password 
> sharing has become commonplace. It seems like everyone I know has an HBO Go 
> password, but none of them pays for HBO.

The Millennials "get THIS." Just as the previous generation got "MP3 and 
Napster."

>> 2. Are there enough cord cutters to undermine the financial
>> underpinnings of the MVPD business model?
> 
> John Skipper seems to think so.

That's YOUR opinion. The articles you posted stated that he has concerns, but 
none of this gas resulted in any significant changes to their business model. 

> It's a little absurd to ask when 50 percent have cut the cord.

I did not ask that.  I said when on 50% of home still subscribe to the bundle. 

> Only a business fool would hang on and make no changes, until 50 percent of 
> his business has vanished. Like I said, the first derivative is all that 
> really matters here.

Hardly. As I pointed out, everyone has evolved. The networks DID lose more than 
half of their audience. But they are still hanging around.

> According to that recent article I posted, the prediction by its authors was 
> 78 percent use of MVPD subscriptions, by 2019.

WOW!  From ~84% to 78%.  And that is a prediction. No matter, as it still 
leaves a very lucrative second revenue in tact.

> That's more than enough for the congloms and other content owners to be 
> evaluating and testing new distribution options. (I'm sure I've already said 
> all of that. You counter as if there were no erosion in MVPD subscriptions.) 

They already are evaluating, testing, and deploying new distribution options. 
It is the Golden Age of the content conglomerate!

Each new threat turns into new opportunities. That DOES NOT mean that they are 
getting ready to ditch the bundle.
> 
>> 3. Are there any signs that the practice of tying high value
>> content to the bundle is changing?
> 
> Yes, certainly. I picked two long-term MVPD exclusives to prove that point, 
> with more than one article, in recent times: HBO and ESPN. The reason I 
> picked those two is, if these guys are considering their future options, 
> everyone else tied to MVPD distribution is almost certainly doing likewise. 
> You seem to dance around this, but at least you have finally come to accept 
> that ESPN viewership has declined.

HBO is "The Poster Child" for tying original content to their movie service.

Try again. And remember, Netflix and Amazon are spending hundreds of millions 
on exclusive original content.

As for ESPN, those subscriber fees have allowed them to lock up most of the 
most valuable live sports rights in the U.S. Their entire business model is 
built around access to exclusive content.


>> But more important, the availability of content from the bundle
>> via IP streaming is the first step in an inevitable transition
>> for the MVPDs.
> 
> It goes way beyond that, Craig. It goes way beyond "the bundle." **When you 
> have more options** for competing solutions, consumers will demand different 
> solutions from the solution they were forced into, during analog MVPD 
> broadcast times. So smart congloms and smart Internet entrepreneurs will 
> offer people what they actually want, and the laggards will lose out. That's 
> the way competition works.

Yup. Unfortunately, this will mean that the existing congloms will leverage the 
Internet to give people what they want. 

Nothing has changed.

From the Wired blog you linked to:
> A reason to switch
> As Internet-delivered television starts rolling out, consumers will likely 
> question why they should switch. After all, the same company that provides 
> Internet access to their homes offers television service for a marginally 
> tiny price when bundled. It will be next to impossible for these 
> Internet-television services to beat them on price. Additionally, Internet TV 
> isn't getting rid of the cable bundle. At least, not anytime soon.
> 
> 

>> Unlike ESPN, HBO is the victim of rapidly evolving technology.
> 
> I'd say, 50 percent success. It took some doing to have you see how HBO is 
> changing its business model, and now you'll simply have to wait for John 
> Skipper to convince you that he means what he says.

So you say. It took some logical explanation from me to get you to understand 
why their situation is VERY different. Netflix IS real competition to HBO. 
Technology has rendered the practice of making appointments to watch scheduled 
movie streams at home irrelevant. But they still have a valuable franchise - 
enhanced by award winning exclusive content - and can easily move to an 
Internet VOD model.
> 
>> As I have said repeatedly. Please let me know when less than
>> 50% of U.S. Homes subscribe to an MVPD service.
> 
> Ah, yes, the absurd question. That's where I remembered it from.

78% by 2019 Bert. How long till it drops to 50%.

Regards
Craig

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