[opendtv] Re: The rationale for retrans consent from local broadcasters

  • From: Craig Birkmaier <brewmastercraig@xxxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Tue, 13 Oct 2015 10:31:40 -0400

On Oct 12, 2015, at 8:48 PM, Manfredi, Albert E
<albert.e.manfredi@xxxxxxxxxx> wrote:

Craig wrote:
You are pretending that stations in local markets have any real power.

No, that's you, Craig. You pretend that local stations own all of the high
value content they air. I never labored under such illusions.

Sorry Bert, you have it exactly backwards. I have consistently said they do not
own the content. The power they have comes from one simple fact: they are the
owners of the distribution pipe that gives the network they are affiliated with
the leverage and second revenue stream from retrans consent.


I've said many, many, many, many times that it is the congloms who have the
power, not the OTA stations. And that it would make more sense if the
congloms paid the broadcasters for their services, rather this pretend game
that reverses the process. The local broadcasters, if anything, are acting as
local representatives (which they could continue doing in the Internet era,
by providing local Internet services too). Local reps should be paid by the
parent company, not vv, IMO.

In the early days of broadcasting the networks did pay the local affiliates. As
the affiliate business became immensely profitable the compensation reversed.

The stations generate their profits by selling advertising in the content they
license, from the affiliated network and syndicators.

So sure, **the congloms** could decide to compete against MVPDs. I already
said that. They can begin by subtracting all of their high value content from
MVPDs. Just don't pin this on broadcasters. Broadcasters are the equivalent
of Arqiva, Craig. Without the content, competing becomes pretense.

Back in the early '90s OTA broadcasting was the only alternative to deliver the
live linear network programming. The Internet could barely handle e-mail.

Today, the content congloms "could" use the Internet to bypass the MVPDs. They
"could" create Virtual MVPDs, although they would need help with customer
service, and the hardware needed to support the service. It appears they are
content to create a new set of Virtual MVPDs who handle the billing and the
hardware. Hence we see Sony Play Station Vue, the rumored Apple service, and
the potential for Roku, Google and Amazon to get into the game.

The congloms could have subtracted their content. The local broadcasters, as
a matter of actual fact, weren't allowed to subtract anything. But for sure,
the congloms could have. I already said that. You'd get this straight if you
quit pretending the OTA broadcasters own the high value content, Craig.

The networks and local broadcasters worked together on the ATSC standard,
although the CE industry did most of the heavy lifting. I attended plenty of
ATSC meeting with representatives of the networks and a few local stations as
well.

Stop the bull about who owns the content - you are up to your old flip-flop
tricks again. The relevant point is that broadcasting is an industry made up of
content owners and stations; the content owners are allowed to own stations
that reach 40% of the population. Thus the content owners hold most of the
power. If they had wanted to compete with cable they had the power to do so.

But they did not want to compete. By 1992, when the DTV process turned digital,
the world changed. Not because of the potential to go digital, but rather
because of the 1992 Cable Act, and the potential to use the MVPDs to regain
control over the cable network upstarts and generate the second revenue stream.

The reality was that the local stations did not believe that they would ever be
forced to upgrade to a new standard, and the networks only went along with the
ATSC standard because they did not want cable to be able to offer HDTV, while
they were limited to NTSC.

Not at all an "unintended consequence." More like, since the actual bundle
rates were not strictly regulated by the FCC or other authority, as is done
for other "natural monopolies" (power, water/sewer), the price hikes were
utterly predictable. Funny thing, Craig, but that's precisely why, back in
the early 1980s, I refused to sign up. I saw this behavior very early on.

Yeah right!

I stand by what I said. The bill was sold as regulation of cable rates, and
government was given the authority to regulate those rates. Unfortunately, the
bill also said that the cable systems could increase rates when they added more
channels. The digital upgrade of cable gave them tons of capacity for new
networks, and together with the content congloms they drove up the prices,
pretending to be adversaries...

Okay, so how is it that you don't see the connection? The congloms are in
*fact* licensing their local affiliate to carry the conglom's content, just
as they license Freeview to carry their content. The congloms should be
directly licensing the MVPDs to carry their content (or not), likewise.

Two words: Retransmission Consent.

Now do you understand what I had written? Look at my quote. And in addition,
OTA also has to prevent co-channel interference, between adjacent markets or
sub-markets, which cable does not need to worry about. So all else equal,
cable had a significant advantage over OTA, for channels they can offer. With
ATSC 1.0, some of the limitations are reduced, e.g. on practical use of
adjacent channels OTA.

Not at that time. They gained the advantage by investing hundreds of billions
in facilities upgrades, while the broadcasters spent $10-15 billion to protect
their spectrum, and take advantage of the investment being made in the MVPD
infrastructures - cable, Fios and DBS.


Regards
Craig

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