[opendtv] Re: Techhive: Pay TV as we know it will be dead by 2025, and this is how it will happen

  • From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
  • To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
  • Date: Tue, 30 Sep 2014 08:25:57 -0400

Whoops - hit send before completiion.

> On Sep 29, 2014, at 9:22 PM, Manfredi, Albert E 
> <albert.e.manfredi@xxxxxxxxxx> wrote:
> This piece starts out sounding a bit like Regards
> Craig

Thanks for finding this piece Bert. It does more to confirm everything I've 
been saying than anything I have read. It's not surprising that you cherry 
picked a few paragraphs to try and make your point. And it's not surprising 
that you ignored the VERY CLEAR words that confirm what I have been saying.

> Here are a few meaningful quotes:
> "These days a production company, rather than a talent shop, is often 
> responsible for assembling such packages. So if a writer and her agent can't 
> sell a concept directly to a network, they may go directly to a production 
> company like Sony TriStar. If the people at the production company like the 
> idea (and have relationships with other talent who would be good for the 
> project), they may put money behind it, and try to sell it to a network.

There is no question that there is new competition for original content. When 
companies like Netflix or Amazon start spending hundreds of millions to 
underwrite new original programming, the creative community pays attention. 
There is nothing new here.

The traditional television networks, which have become media conglomerates via 
acquisitions, left the door wide open for others to follow. The success of HBO 
with original content, was based in part on the fact that the traditional 
networks reduced the amount of scripted program production as the competition 
from cable decimated their audiences and ratings. It was also based in part on 
the content restrictions placed on broadcasters, which limited their ability to 
compete. HBO was free to deliver nudity, profanity, sex and violence; the 
alphabet soup networks got their hands slapped when a breast appeared during 
the SuperBowl.

As the article points out, the emergence of new players is not the real threat 
to traditional models. It is the shift from program guide driven program 
streaming, to consumption on demand that is changing the landscape.
> "Or in the more modern version of the story, they'll pitch it to a Netflix, 
> Amazon, or YouTube."
> And they have, as the article points out.

Yup. And if anything, this article is somewhat behind the curve in terms of 
predicting changes that in fact have already happened. As is obvious in the 
following quote:
> "The beginning of the end for linear, scheduled TV will come when the 
> Internet players have too many subscribers for the content rights holders to 
> ignore, Lai says. When that happens-and it may happen more quickly than many 
> people expect-the content owners will begin to break their exclusive content 
> agreements with the pay TV carriers. Instead, they'll begin streaming their 
> shows on their own websites, on video services like Amazon and Netflix, and 
> via apps on platforms like Roku and Apple TV."

This paragraph is half right. The Internet players already have enough 
subscribers to bring about the changes we are seeing. But the second part has 
not happened, nor is it likely to. Content has always moved through a waterfall 
like food chain. Programs have always moved into syndication and side 
distribution as the value of exclusivity has been exhausted.

Keep in mind, that Netflix and Amazon, and HBO for that matter, still rely upon 
the large libraries of "used" content that they license. This article focuses 
on the use of new exclusive content to bring new subscribers to these services. 
Nothing has changed here, and the author confirms that nothing is likely to 
change moving forward. Exclusive content is a major factor in selling 

> And:
> "Right now, the old deals are still in place: Content owners are honoring 
> their exclusivity agreements with pay TV operators. Sure, you can watch lots 
> of HBO video on mobile devices using the HBO Go app, but not before showing 
> proof that you've already paid your cable company for HBO service. However, 
> content owners, led by sports leagues, are starting to flirt with models that 
> dismantle the fortresses built by cable and broadcast TV companies."

Flirt is an interesting word. They are playing around the edges, looking for 
ways to create new revenue streams without killing the cash cows. There is 
little evidence that the old models are being dismantled, or are even 
threatened. The usual players keep bidding up the price for the rights to 
exclusive sports programming. And these rights help protect the bundling that 
has proven so lucrative with dual revenue streams. Adding other exclusive 
services, like the Verizon NFL cellular broadcasts just adds new revenue 
streams via another exclusive deal; it does not undercut the massive 
"broadcast" rights packages.

> Content owners are doing this, because they see that consumers are demanding 
> it, Craig. Nothing to do with the FCC forcing any business model on anyone, 
> Craig. The FCC can no more force a TV content distribution model on the 
> owners of content than they can force people to subscribe to MVPD bundles.
The ONLY real power the FCC has had is their ability to restrict the content 
that broadcasters could offer via the public airwaves. This has allowed 
non-broadcast competitors to offer content that cannot be broadcast, which in 
turn provides subscription services a marketable advantage.

The other area where the FCC has had a major impact is in the rules that have 
allowed cable competitors access to the exclusive bundled content on a non 
discriminatory basis. This allowed the DBS systems to offer the bundle. It 
allowed Verizon and AT&T to offer the bundle. It allowed Google to offer the 
bundle via Google Fiber, and it looks like it will allow OVD services to join 
the fray.

Nobody forces anyone to subscribe to a TV service. Bert is living proof of this.

These services thrive because of the exclusive content they offer. 

Bert failed to provide any quotes from the end of the article, which tells a 
much different story than the one Bert is pitching. Let's look at the authors 

> Have the streaming content companies proved anything other than that they can 
> outbid traditional networks for hot shows? Is there something about Internet 
> TV that both consumers and the Hollywood establishment prefer over the 
> scheduled TV we're used to getting from broadcast and cable networks? The 
> numbers seem to suggest so.
> "Over-the-top video is not small anymore," says Brightcove's Lai. "Netflix 
> has 100 million subscribers, 38 million of those are [U.S.] streaming 
> customers. Apple has sold 13 million Apple TV devices. Compare that to the 
> cable operators. The biggest of them, Comcast, has no more than 22 million 
> subscribers. All the pay TV operators combined have about 95 million 
> subscribers."
I have characterized this as "the Golden Age" of the content conglomerates. The 
old model may be losing a small percentage of subscribers, but in total, 
consumers are spending more than ever for AtV content, and the predictions are 
that this will continue.

> Absent their traditional monopoly on premium TV content, cable and satellite 
> companies won't have much left to entice new subscribers or retain existing 
> ones with. Content costs are high, and companies like Comcast and Time Warner 
> Cable must pass those costs on to customers to earn a profit. When consumers 
> can get much of the same content on the Web à la carte, the sound of cords 
> being cut should begin to get very loud.

The last sentence is HUGE. It uses the term that to the content congloms fear 
like a vampire fears sunlight and wood end stakes...

à la carte

But the author got this part wrong. Customers can get "used" content à la 
carte, on demand, without commercials. And they are lining up to pay for it.

But they still need the bundle for other exclusive content they want. 

So the issue here is the same one that we keep dancing around. Is someone going 
to break away from the bundle and drive a stake through it's heart?

What does the author say about this?

> TV's migration to the Internet is ultimately a matter of evolution, not 
> revolution. There will be no explosions, no network chiefs diving out of 
> windows onto Wilshire Boulevard. That's because the TV content 
> owners-networks like NBC and HBO, big studios like Sony TriStar, and cable 
> network conglomerates like Viacom-hold the cards today, and they will still 
> hold the cards when Internet TV becomes the norm.
> They own the TV shows. Everything else is just distribution.
> Content owners were terrified by the gutting of the music industry by Steve 
> Jobs and the Internet during the 1990s and 2000s, and they will make sure the 
> same thing doesn't happen to video. Content owners will continue to nervously 
> restrict the ways TV content can be distributed and consumed-until it makes 
> financial sense not to.
> Content owners and their exclusive distributors (cable, satellite, and telco 
> TV) have carved out a big slice of our monthly paychecks for themselves-$86 a 
> month on average, according to NPD Group, though NPD says the number could 
> reach $200 per month by 2020 due to the rising cost of content (and that's 
> $200 just for video content, without broadband or phone service). Over the 
> next decade, as TV distribution moves from traditional platforms to streaming 
> platforms, content owners will make sure they get their usual share of that 
> money.

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