I think the articles that focus on which streaming box is the most popular are
missing the bigger picture, especially because they make TVE the centerpiece. I
think that this quote from the recent FCC report and order:
http://transition.fcc.gov/Daily_Releases/Daily_Business/2015/db0603/FCC-15-62A1.pdf
"This change is justified by the fact that Direct Broadcast Satellite ('DBS')
service is ubiquitous today and that DBS providers have captured almost 34
percent of multichannel video programming distributor ('MVPD') subscribers."
... also misses the bigger picture. DBS has been providing quasi-ubiquitous
competition to cabled MVPDs for 20 years, for heaven's sake. How old can old
news be?
This very recent article, on the other hand, explains the bigger picture much
better, IMO. Not only why there's lots of competition now, but also why
unwalled and/or at least much more flexible than what used to be walled, is the
future. And why the all-important content owners and developers are the ones
that are making this happen. When they got in on the act is when the revolution
became real.
Like I already suggested, it seems really ironic that Disney, who is taking
active part in this transition by allowing ESPN on Sling TV, and supposedly
also on some Apple offering coming soon, would be down on Verizon for doing
something similar. Verizon knows which way the tide is flowing.
ESPN is an example of a name brand product being offered simultaneously at
multiple local area supermarkets, as opposed to the one local outlet only.
Bert
---------------------------------------------------
http://www.theverge.com/2015/4/22/8466845/cable-tv-unbundling-verizon-espn-apple
Internet upstarts are pushing incumbents to offer more a la carte options
By Ben Popper
on April 22, 2015 10:34 am
Over the last two weeks, Verizon and Disney have been having a public spat
about the future of cable television. Verizon wants to offer its customers a
selection of slim cable bundles with its FIOS service. Disney says it violates
their contract, specifically splitting off ESPN and ESPN 2 into a separate
sports package. Verizon knows that, regardless of what the actual contract
says, publicizing this offering is an easy win, so long as Disney takes the
blame for not letting it happen.
"A way to give consumers what they want."
"I think the right way to answer this without getting too public about our
contractual situations -- look, this is a product that the consumer wants,"
Verizon CFO Fran Shammo said on the company's earnings call. "It's all about
consumer choice. I mean, if you look at the TV bundles today, most people only
on average watch 17 channels. So this a way to give consumers what they want on
a choice basis."
The bigger picture here is that the basic business model of cable, where
consumers buy a giant bundle of channels, most of which they will never watch,
suddenly seems on the verge of extinction. The rise of new options from
Netflix, Amazon, Sling, Sony, and perhaps Apple in the near future has forced
Verizon, typically not a company that rocks the boat, to acknowledge that
consumers are coming to expect a new reality.
A nation of cord cutters waiting for a savior
This tectonic shift in the industry was not always so obvious, even in recent
history. Let's time travel back to November of 2012, when Nilay Patel wrote
about a nation of cord cutters waiting for a savior. We all knew that the old
model was broken. But at the time it seemed things weren't likely to change.
Between 1995 and 2005 the number of channels in the average cable bundle
doubled in size and bills rose three times faster than inflation. FCC chairman
Kevin Martin pointed out that "the average cable subscriber was paying for more
than 85 channels that she didn't watch in order to obtain the approximately 16
channels that she does."
The problem was that the cash cow of cable TV was too good for the big-name
brands like HBO and ESPN to endanger by breaking away, and that meant the
oversized bundle of lesser channels was also here to stay. "We have the rights
to do it and we would do it if we thought it was in our economic best
interest," Jeff Bewkes said on an earnings call back in the spring of 2013, but
the market for a stand-alone HBO streaming service in the US was "not
significantly large enough to be attractive at this point."
As it turned out, the tide had already turned, we just didn't know it yet. 2013
turned out to be a historic inflection point, the first full year in which the
pay-TV industry lost subscribers. The losses widened in 2014. TV viewing, as
measured by Nielsen, has been dropping at around 10 percent a quarter, a
ratings plunge that has advertisers terrified. Not only was the number of
pay-TV subscribers falling, but the customers that stuck around were buying
much slimmer bundles. The end result was that ESPN, the top dog of cable,
reached fewer homes by the end of 2014 than it did in 2010. This was enough
motivation for the companies to finally take the plunge and start experimenting
with streaming-only options.
Cable's reach into American homes has been shrinking
Over the last six months, a flurry of announcements have highlighted the
tectonic changes that are reshaping the industry: HBO introduced a stand-alone
streaming service. ESPN became available without a cable subscription as part
of a slim package on Sling TV. Sony rolled out its Vue service on the
Playstation. Apple is reportedly in the late stages of putting together its own
streaming service that would feature very pared down bundles of premium
channels, including ESPN, at a cost far less than the typical cable package.
"We had been waiting for multiple years for it to happen, but 2015 is finally
the year of the virtual MVPD [multichannel video programming distributor],"
wrote Brandon Ross over at BTIG Research. We won't see many channels beyond HBO
who have the clout and audience to go it alone. But Ross says the market will
increasingly splinter into skinny bundles available to anyone with an internet
connection. "We expect many more to come, targeting different groups and demos,
each with a unique way of packaging its networks."
Networks will need to pick winners and losers
We're not going to get the nirvana of complete a la carte entertainment just
yet. "For the most part the content companies are going to keep bundling up
networks together when they sell them," says Ross. But the bundles will slim
down. "They are going to have to pick winners and losers within their own
portfolio, you've already seen that with Sling. Those that can't make their way
into the smaller bundles will die off. Who needs the military channel at
Discovery?"
As some old cable networks fade, new ones may be born, like Vice, that
originated on the web. The next few years will be a Cambrian explosion of
options for watching TV , with many networks dying out in the process. "We are
at the tip of the iceberg. A lot of the deals you are seeing to make content
available online in more complete and live, or live-like, packages, are laying
the groundwork for a big unbundling," says Daniel Ernst, an analyst with Hudson
Square Research. "There are still risks. This year will prove to be the amoebae
stage. What life forms come out of that, which live and die, we will see
rapidly."
Can Apple accelerate the industry's transformation?
Ernst believes one company in particular could lead the way. "A lot of it
really does depend on Apple and what they are able to put together. We saw a
very similar thing 15 years ago with digital music." It's a company with the
cash and cache among consumers to make a big bet on how we consume TV. It was
the exclusive launch partner for HBO and is now reported to be preparing for a
refresh on its Apple TV hardware. "So far pay-TV has been coming apart slowly,
a little trickle here and there," says Ernst. "We'll see soon if the dam is set
to burst."
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