27 December 2012

Christmas Coal for Independent Channels - Implications

Time Warner Cable and Verizon FiOS have announced plans to drop low-rated independently-owned cable programming services as a means of cutting costs (Los Angeles Times article on these plans).

This is a departure from the usual course of business. Typically it is difficult to get launched on a cable system, but once a service is on it is usually on for good. Why is this changing now?

For the distributor, there are two reasons for the change. First, these channels charge license fees. While the license fees for independent channels are typically modest compared to the big programming services, money is money. If few are watching the channel, even modest fees might represent a poor programming value. Second, is that these channels take up "bandwidth" -- space in the cable "pipe". To the extent a poorly viewed channel is carried, there may not be room for something with more popular appeal (e.g., a HD version of a channel that is only carried in SD, a new foreign language service).

FiOS TV has put Youtoo, Blackbelt TV. Blue Highways and Mav TV on the chopping block. Time Warner Cable has the arts service Ovation in its cross-hairs, as part of its new approach of offering services the choice of carriage with no license fees or no carriage at all (article in the New York Post).





A primer for those unfamiliar with the services:
  • Youtoo is a "social TV" service launched in September 2011, built on the distribution of a service which targeted older viewers (which went through several names over time, most recently AmericanLife, GoodLife, and, originally, Nostalgia).
  • Blackbelt TV is focused on martial arts.
  • Blue Highway TV has programming of interest to rural viewers and those who like American roots music.
  • Mav TV has programming focused on young men (imagine if Maxim magazine had a channel, no shortage of attractive women in bikinis).
  • Ovation is a service with arts-oriented programming (similar to what Bravo once was and what A&E was a long time before that) along with somewhat arty movies and off-network series.
Note that none of these services are owned by one of the major programming companies (Disney/ESPN, Comcast/NBCU, Fox, CBS/Showtime, Time Warner, Discovery Communications, Viacom, A+E Networks, Scripps Networks, Univision and AMC Networks). Almost all of these companies have low-rated networks, but those services aren't candidates to be dropped, because they are bundled together with "must have" channels.

The implication for independent channels is pretty clear: sell out and soon. (Note that this advice does not apply to sports services -- NFL Network is doing fine as an independent.)

The second implication is for the major programmers: this is a good time to get a deal on an independent service with good programming that now looks to be facing a tougher road ahead.

For the distributors, one result of making the road for independent channels more difficult is that instead of creating a more competitive marketplace for programming, with more suppliers, the distributors will end up with a less competitive one. However, in fairness, it has been a long time since a new programming company actually made a difference to the competitive environment. To a large extent, it is the nature of the programming business, it is pretty difficult to substitute one supplier of programming for another, the appeal of each is specific, even within a genre.

Who would buy such a channel? Of course it needs to be an owner that can solve the problem the channel faces -- being dropped. In other words, a strategic buyer, rather than a financial one. That means one of the existing programming companies (all but Univision have a history of swallowing up formerly independent channels and/or smaller programmers -- that's much of how they became giants).

The other set of strategic buyers are major distributors themselves, since they can assure distribution on their own systems and often, through other dealings with other distributors, logroll their channels onto other key distributors.

While many channels have found a new, more prosperous life under a new owner (e.g., Food under Scripps, Family under ABC, Oxygen under NBCU), some independent channels just don't make it. The slighly new-agey Wisdom Channel became Lime TV, but then got out of the cable programming business. Mind Extension University became Knowledge TV before it was shut down. Comcast bought the failing Tech TV to merge it with G4 (which is reportedly about to be rebranded with the Esquire name). NBC shut down Trio, which began life as a US programming service from the Canadian Broadcasting Company.

Sometimes the programming concept is simply not popular enough to justify its position on the dial. With decent distribution agreements but unpopular programming, usually the channel will be rebranded (America's Talking morphed into MSNBC, Discovery Health into the Oprah Winfrey Network). However, sometimes the underlying business arrangements -- in essence, the channel's affiliation agreements with distributors -- are an impediment to success (e.g., the license fees are too low, the carriage is not sufficiently secure). In that case, a new service is better to start fresh than try to build off an unsatisfactory foundation.

Sometimes a drop is a temporary measure (USA, AMC and Lifetime have all been dropped and managed to prosper); sometimes it is the start of a death spiral. We'll see how it works out for these five.

For a terrestrial distributor (i.e., cable and telco, but not DBS) the need to save bandwidth is probably a short-term issue. The conversion of their plant to IPTV should make this bandwidth constraints for cable channels a thing of the past. (In contrast to a typical cable system where all channels are delivered to all households at all times, in an IPTV system, channels are delivered only to the households that are tuned to them -- the bottleneck is the number of channels that can go into the home simultaneously.) The conversion to IPTV has already taken place in many systems for VOD content and its time for linear channels is here already on some systems and on the horizon for most others).

The need to save money is likely the driving factor here. As noted before, the amounts are modest. So why do the distributors bother picking on the dwarves of the cable lineup? Well, you have to start somewhere. It is impossible to take off the low-rated channels from the big programmers if you haven't taken off the low-rated independents (to prove that it is your strategy, not just a negotiating threat).

Another factor is that the cable environment that led to the launch of these channels has changed. Before DVRs and VOD, to get more programming choices onto a system, the distributor needed to add more channels. Adding channels was easy to explain to customers and was valued by them. Cable operators added channels at the time of a rate increase, "a spoonful of sugar" in the words of Mary Poppins.  When the lineup was going from 20 channels to 100 channels and the new additions were the Food Network, Syfy (then Sci-Fi) and TV Land that was a solid strategy.

The returns start diminishing going from 100 channels to 250. The new niches are pretty small (e.g., The Cooking Channel, FearNet, Boomerang) and many consumers probably don't notice or value the additional services -- there are already more channels on the dial than channels whose names they recognize.

Perhaps more importantly, consumer choice has expanded beyond more live channels. If the DVR had been invented a decade earlier, we probably never would have had quite as many channels launching in the first place, consumers would have been better able to utilize their existing array of programming or channels. Of course, this is exactly what consumers are doing -- getting more value out of their favorite channels, they have less need for their secondary choices. VOD has had a similar impact, particularly for the premium channels like HBO and Showtime.

One might assume that the response by the programmers to this approach by the distributors would be to shut down their smaller services, but that's not what I foresee happening. The secondary services provide value to the programmer via advertising and typically cost little to run (The Cooking Channel uses the Food Network's old library, as Boomerang does that of Cartoon Network). The strategy for the programmer might be to bundle the channels even more aggressively. The primary channels will get bigger rate increases (since they "can't" be dropped). The secondary channels can have no license fee at all, particularly if it is offered on a highly penetrated tier (which it now can be since it no longer costs  the distributor extra to carry it broadly). This schema works fine, if there is a primary channel, but that's not the case for a lot of these independents.

14 December 2012

Aereo Adds First Cable Channel - Bloomberg TV

Aereo announced today that it has added its first non-broadcast television service, Bloomberg TV, to its multichannel service. This marks an evolution in the Aereo service and a step towards, possibly, becoming a larger competitor to a traditional multichannel subscription from a cable, DBS or telco provider.
For Bloomberg, the attraction of affiliating with Aereo is clear. In a traditional multichannel package, its placement is typically less favorable than Comcast/NBCU's CNBC, the category leader, and, sometimes less favorable than the third entrant, Fox Business. Bloomberg is not only the only business news service on this platform, it is the only 24-hour news service. Bloomberg's carriage vis a vis CNBC is the subject of a continuing dispute with Comcast. New York is Aereo's only current TV market and Bloomberg's most important one. While Aereo likely has a modest number of subscribers, you can be certain that its choices are watched closely by the incumbents with which it competes.
The risk to Bloomberg in stepping out with Aereo is probably smaller than it is for most other cable programmers:

  • Bloomberg is already streamed free on the web at http://www.bloomberg.com/tv/; the service has been available over-the-top for a long time. Few other cable services are. 
  • Bloomberg is sold a la carte by at least one distributor, Dish Network. Few other cable services are.
  • Cable programming represents a very small portion of Bloomberg Media. 85% of its revenue comes from the rental of Bloomberg information "terminals" to financial professionals. The company has annual revenues of about $8 billion. Bloomberg has only one US TV programming service; all the major US programmers operate multiple networks. SNL Kagan estimates Bloomberg TV's 2012  license fee revenue at less than $60 million. The channel draws several times that in advertising, far from the more typical 50/50 license fee/advertising revenue split for a cable network.
  • Most importantly, Bloomberg is not involved in broadcast television (like Disney, Comcast/NBCU, CBS, Fox or Univision), so it is not currently being sued by Aereo. 
The biggest question now is whether any of the more typical cable programmers will follow Bloomberg onto Aereo.

some prior posts about Aereo:
Dog Bites Man - Broadcasters Sue Aereo (2 Mar 2012)
Aereo (Beta) Arrives in NYC - Broadcasters Likely Peeved (15 Feb 2012)


12 December 2012

Google Fiber Debuts at Top of Netflix's ISP Rankings

Netflix announced today on its blog that it will begin monthly rankings of the ISPs who deliver its content to end users. In its first report, new provider Google Fiber, available only in parts of Kansas City right now, topped the charts with a less-than-blistering 2.55 Mbps average speed.
The interesting points to me:

All the cable and telco MSOs Netflix-reported speeds are way below the typically quoted speeds they offer. This is likely a result several factors all related to the fact that it the speed at which content makes it from a server to an end-user is a lot different from the speed at which data travels from the ISP to the end-user's modem. Content can be bogged-down by connections from Netflix to the ISP itself, competition from other content sharing the ISPs connection to your neighborhood, competition from other other content coming down the user's own connection at the same time and on the wifi link within the consumer's home. Also, most ISPs offer multiple tiers of service (my ISP, Time Warner Cable, offers five different tiers of service $85/month for 50 Mbps Ultimate to $20 for 3 Mbps Basic); Verizon wireless offers 4G LTE in some areas, only 3G in others), but Netflix has averaged them all together here.
Google Fiber is the fastest provider, but per Netflix it isn't that much faster than the top performing cable and telco competitors. Google Fiber scores 16% better than Verizon's FiOS (2.19) and 24% better than Suddenlink (2.06), the laggard of that group; 20% or so is a significant difference, but not nearly 100 times faster that Google Fiber was supposed to represent. Perhaps a lot of the early customers for Google Fiber are selecting the "free" 5 Mbps service instead of the $70/month gigabit (1000Mbps) service. Alternately, if the difference between today's Google Fiber and today's cable is only 20%, that's probably a gap the cable guys can meet by methods other than running fiber to the home.

DSL is significantly slower than cable and, on average, traditional mobile is slower still. Clearwire looks like the equivalent of poor DSL by this measure.

I look forward to an interesting report card on ISPs every month. Information is power and facts futher the discussion. Kudos to Netflix in putting this out.

An earlier post on earlier Neflix ISP ratings (from October 2011)

06 December 2012

Disney Takes the Pay TV Window to Netflix

Disney has chosen to sell its movies for the pay TV window to Netflix. Netflix, in effect, replaces Starz, Disney's output home since 1994. While some have described this as a watershed moment for over-the-top or a "game changer", it seems far simpler -- a seller of a product, unhappy with the prices offered by its current buyer, seeks a new buyer.
In 2008, instead of accepting the output terms offered by Showtime, Lion's Gate, Paramount and MGM formed Epix. Epix hasn't been a huge hit with traditional pay TV operators, but had turned a profit on the basis of deals with Netflix and Amazon.

Looking at the dynamic from the other side, why didn't Starz and Showtime pay up to renew these pay TV window theatrical output deals? The short answer is that they see a better return on investments in original programming. Showtime gets a lot more bang from creating a series like Homeland or Dexter or Californication than it gets from airing The Dictator after it is available in theatres, airlines, Blu-Rays, DVDs, iTunes and pay-per-view/on demand. Theatrical movies have value -- subscribers to premium networks watch them and like them -- but theatricals don't build a premium network's brand.

The Disney studio really couldn't care less about Starz except as a source of revenue. After all, in 1994 Disney rejected the more established premium service Showtime to go with Starz, which was the upstart premium service from the company then known as Encore, after its second-run movie service.

It appears that Disney takes little risk in leaving the traditional premium TV buyers. If Disney's movies on Netflix are thinly viewed, that information won't be public and to the extent the movies are not watched that much, presumably they would have more value for Disney's other buyers. If a content provider like the NFL took a package of games to Netflix, if the games were unsuccessful and thinly viewed on the new platform, it could damage the value of the NFL brand when the league returned to its traditional buyers (the networks and the advertisers); at a minimum, it would be in a poorer bargaining position. Major League Baseball experienced this with the ill-fated The Baseball Network.

Disney has some special value to Netflix versus its value to Starz. Netflix gets more value out of children's library programming than a cable premium service does (in fact, Starz might not have had such rights from Disney and Starz faces an increasingly crowded cable TV shelf which often also offers the subscription video on demand service Disney Family Movies). For Netflix the deal has obvious benefits. This Disney deal replaces much of the high value content that Netflix was getting from Disney via Netflix's since expired Starz deal. Losing the Starz brand means little in Netflix's environment -- where the title of the movie is the brand in the mind of the consumer and the only prominent exception to that is when Disney or Disney-owned Pixar's name is attached to a movie for children. If this deal is a game changer, it is hard to see what has materially changed from the perspective of Netflix subscribers.

The change, if anything, is to the mindset of the movie studios -- there's another way to play the pay TV window. Going direct to a distributor to end-users like Netflix also allows Disney a more direct path to negotiate how its content is displayed to end users. Disney was not happy when Starz did a year-long "free preview" with Dish Network.

Netflix is the 800-pound gorilla of over-the-top services, right now, and getting high profile content on an exclusive basis creates less short-term opportunity for its competitors, be they Amazon Instant Video/Prime or the launching-in-2013, clumsily named Redbox Instant by Verizon. From a business strategy standpoint, Netflix's primary advantage is that it is the first-mover in OTT. Making entry into the market much more expensive for a joint venture like Redbox-Verizon's is a great business strategy -- 50/50 partners are never as committed to a new venture. (Ted Turner pulled this trick on the ABC-Westinghouse Broadcasting joint venture Satellite News Channel in the earliest days of CNN by creating Headline News and giving it to operators for free with CNN.)

So, what's not to like if you are Netflix? Potentially, the price. More than one analyst has looked at Netflix's content payment obligations and not liked what he has seen. Netflix may need to continue very strong subscriber growth to makes this and its other expensive content deals pay off for its investors.

Updated (6 December 2012): Ted Sarandos, Netflix's Chief Content Officer said yesterday that he has no intention of releasing any numbers for the viewing of Netflix's original shows. "It's really an irrelevant number" for a subscription service. It's a slightly different context, but it is consistent with the "no publicity" benefit of the deal to Disney. Note the argument that subscription services don't care about ratings, they care about satisfaction, is an old one -- originally cable TV operators and programmers identified it as a reason that they would triumph over broadcasters.

Related post: Starz Walks Away from Netflix

05 December 2012

The Problem with "Just Drop the Channels"

Glenn Britt, the CEO of Time Warner Cable, announced his strategy to deal with rising programming costs at the UBS conference on Monday -- simply drop the poorly viewed channels.
If it were only so easy.

The fact is that the vast majority of the cable operator's programming dollars are going to a handful, or so, of major programming companies which bundle their channels together in one form or another.

CNBC is an interesting, relatively thinly-viewed niche service (how many outside of the 1% are interested in financial news?). However, if Time Warner Cable were to drop CNBC over its costs, it might have a "challenge" getting a favorable renewal on the other channels in the NBC Universal portfolio (to name a few: USA, Syfy, E!, Bravo, Oxygen, Style, NBC Sports Network, The Weather Channel, Golf and regional sports networks in Chicago, New England, Philadelphia and the Bay Area and the NBC and Telemundo affiliates in New York, Los Angeles, Chicago and a handful of other major markets).

ESPN Classic is an interesting, relatively thinly-viewed niche service (how many outside of serious, older sports fans are interested in replays of events?). However, if Time Warner Cable were to drop ESPN Classic over its costs, it might have a "challenge" getting a favorable renewal on the other channels in the ESPN/Disney portfolio (to name a few: Disney Channel, ESPN, ABC Family, ESPN2, Disney XD, Disney Jr., ESPN U, ESPN News and the ABC affiliates in New York, Los Angeles, Chicago and a handful of other major markets).

Fox Soccer Channel is an interesting, relatively thinly-viewed niche service (how many soccer fans are there in the US?). However, if Time Warner Cable were to drop Fox Soccer Channel over its costs, it might have a "challenge" getting a favorable renewal on the other channels in the Fox portfolio (to name a few: Fox News, FX, and regional sports networks in Los Angeles, Detroit and Houston and the Fox affiliates in New York, Los Angeles and Chicago and a few handfuls of other markets).

See a pattern here?

The other major cable programming companies account for almost all of the rest of the license fees paid by cable operators.
  • Time Warner: HBO, CNN, TBS, TNT, Cartoon, TruTV, Cinemax, TCM, Headline News
  • CBS: Showtime, CBS Sports Network, CBS and CW affiliates in many markets
  • Discovery Communications: Discovery, TLC, Animal Planet, Investigation Discovery, OWN
  • A&E Networks: History, A&E, Lifetime, Lifetime Movie Network, Bio
  • Scripps Networks: HGTV, Food, DIY, Cooking, Travel, Great American Country
  • AMC Networks: AMC, WE, IFC, Sundance
Which channels are not part of the major programming companies: Starz, Hallmark, Bloomberg, NFL Network, MLB Network, Tennis Channel, and it moves down from there.

The sad fact for Time Warner Cable is that there is precious little programming expense with the independent channels that can be dropped without having an impact on the deal for another channel, a fact of which I am 100% certain he is aware. I should note that Time Warner Cable recently agreed to a deal to carry the NFL Network, so clearly that's not (a) part of the problem that Glenn Britt is describing or (b) leaving TWC anytime soon.

The ecosystem of programming is paid for by fees paid by the distributor (what the cable networks call license fees) and fees paid by advertisers (advertising, naturally). It seems only logical that the way for the distributors to pay less for programming is if they can help the networks get more money from advertisers. The usual way this is done is by getting a break on the license fee for one channel by agreeing to a broad roll out a new service, but there are other possible options as well (involving shifts of advertising inventory, use of dynamic ad insertion).

Time Warner CEO Jeff Bewkes (Glenn Britt's former boss when TWC was a subsidiary of Time Warner Inc.) noted later at the same conference, the pay-TV system is robust and can take the price hikes: "Other than the concentrated viewing and cost of sports, the rest of the bundle is a better value than ever." The programmers's proposed solution is to raise license fees and add value to the subscription via TV Everywhere. There is a logic to that approach and it is consistent with the higher-fees-more-value history of cable programming. Until the system breaks -- material declines in multichannel penetration would be a symptom -- it is hard to imagine the managers changing the playbook.

The lingering question to me is why was Glenn Britt staking out this public position?
  • a PR salvo to lay some groundwork for future short-term channel drops during heated negotiations?
  • a cry to regulators to get involved?
  • something else? 



25 November 2012

My Experience Buying a Cable Modem with Time Warner Cable

On 15 October 2012, Time Warner Cable started charging a separate rental fee for its cable modems of $3.95 per month. Prior to that date, the cable modem fee was bundled into the cost of the service, providing a customer with little reason to purchase a modem on his or her own.
TWC's terse little message about the fee was sent on a postcard
Time Warner Cable deploys 40+ different modems, but is authorizing only 5 for my level of service. The modem that they supplied me, a Turbo customer, was the Thomson/RCA DCM425. This is a DOCSIS 2.0 unit which retails for about $50. At that purchase price, the breakeven on $3.95 per month savings in rental fees is just over 12 months -- a hell of a return (a simple IRR about 87% annually if the modem has a 4-year life -- actually better than that since the savings on the modem are doled out each month rather than at the end of each year and better still if the rental price of the equipment goes up, which would not be without precedent in the annals of the cable industry -- IRR calculations are available here).
Thomson/RCA DCM425, prefers to be horizontal
However, the least expensive modem that they will authorize for my level of serviceis a Motorola SB6141. This modem meets the DOCSIS 3.0 spec and represents the latest commercially available cable modem technology. This modem would cost about $115. That return is about 23% annually if the modem has a problem-free 4-year life.
Motorola SB6141, jauntily vertical
I also learned from TWC tech support that the "Turbo" service, while not requiring a DOCSIS 3.0 modem will actually work faster with such a modem. The DOCSIS 3.0 modem would also work with any higher speed service which is something I have considered getting. The differences between the DOCSIS specs mainly boils down to the fact that the 3.0 modem is more future-proof than the 2.0 modem.

Hmmm, what one would really want is for TWC to rent the DOCSIS 3.0 modem for $3.95. I went to their store and asked for just that. No dice. TWC's rep would only give me a new version of the same Thomson/RCA modem I had. When I got it home, it worked exactly the same way the old one did. About 16 Mbps downstream and 0.7 Mbps upstream.

I did like the idea of faster service and, 19% annually is a lot better than my portfolio typically yields.

After waiting for the early purchasers to get through the system, I found a new Motorola SB6141 from a well-regarded eBay seller which I won at auction for $97.50.

I connected it and got it authorized by TWC over the phone in about 5 minutes on a Saturday morning. I did have to wait about 40 minutes to return my old modem to TWC at their store. Going to their store at 11AM on a Saturday is not recommended.

Bottom line: My downstream speed is now about 19 Mbps (a figure I got on occasion before, but not regularly) and my upstream speed is now about 2 Mbps (a figure way better than I ever got before). If my modem lasts 4 years, it will give me a return of about 33% annually and provide performance call it safely ~10%+ better than I was getting. That's a good deal provided that the risk of failure of the modem is modest.

How did TWC do? On the downside: TWC sprung a fee on their customers on 2-weeks notice, they required the purchase of more expensive equipment than they provide themselves and made me wait 40 minutes simply to return something to them. On the plus side, the authorization couldn't have been easier. It wasn't the greatest performance by a cable operator, but it was adequate.

More resources: stories in Multichannel News and New York Times Bits Blog

02 November 2012

AMC's Big Benefits from the Voom Settlement with Dish

I thought that I would put a bit of a finer point on the benefits to AMC in the Dish settlement over the Voom matter. Rich Greenfield of BTIG Research did a nice job on his blog of breaking down some of the carriage benefits that AMC Networks gained (reg. req'd), I wanted to take his analysis a step further.
Relevant facts:

When the Dish affiliation agreement with AMC Networks expired on 30 June 2012, Dish dropped AMC, Independent Film Channel (IFC) and WeTV. At the end of 2Q12, Dish reported that it had a total of 14.061 million subscribers. Making some very broad assumptions:

  • 10% of its subscribers essentially get only foreign language programming, therefore
  • 90% of its subscribers get its most highly penetrated basic package, America's Top 120 (AT120) ~12.7 million subscribers
  • 2/3 of those subscribers (or 60% of the total) get its second most highly penetrated basic package, America's Top 200 which is a subset of AT120 ~8.4 million subscribers
  • 1/3 of AT120 subscribers (or 30% of the total) get its third most highly penetrated basic package, America's Top 250 which is a subset of AT250 ~4.2 million subscribers
Based on my experience, the middle package probably does better than 2/3 and the bottom package does worse than 1/3, but I'll use these figures to keep the analysis simple.
When the services were dropped, AMC, IFC and WeTV were all carried in AT200. The services were all relaunched in AT120. A service like AMC which is fully distributed across the multichannel universe, is typically valued at $25 per subscriber; less-than-ubiquitous services like IFC and We TV valuations are typically lower, say $15 per subscriber. In aggregate, the asset value increase in distribution could be worth ~$230 million to AMC Networks.

Additionally, Dish agreed to launch Sundance Channel, which Dish previously only carried on a likely-thinly-penetrated Blockbuster-branded Internet-delivered package, on AT250. Throwing that in at $15 per subscriber adds another $60 million or so in value.

Additionally, Dish agreed to launch Fuse, a service not owned by AMC Networks, but by the commonly controlled Madison Square Garden Company (MSG), in AT120. Fuse, for those unfamiliar with it, is a not-very-highly-rated music service comparable to MTV before it was remade as a reality service. Dish had a bit of a tortured history with Fuse, having dropped the channel in July 2010. Valuing this distribution at $15 per subscriber, there is another $190 million in value. 

That is not the end of the benefits that MSG got in the deal as Dish also dropped its FCC program access complaint against MSG regarding the MSG and MSG Plus regional sports networks (which control the local rights to the NBA's New York Knicks and the NHL's New York Rangers, New York Islanders, New Jersey Devils and Buffalo Sabres). This complaint dated back to September 2010. It is difficult to put a price tag on making this complaint go away. but it is certainly a benefit to MSG. While it would have been a better outcome for MSG to regain the distribution of its regional sports networks, eliminating the risk of an unfavorable program access complaint has value in reduced legal fees and eliminating a potentially damaging precedent that could be cited by other distributors.

It will be interesting to see how much MSG's shareholders are compensating AMC's shareholders for these benefits; that disclosure should make it into the companies's annual reports, since the benefits fall in the fourth quarter.

Beyond the analysis I have done here ($480 million+ for those keeping score at home), this is a highly unusual settlement for Dish Network. Dish, more than most other distributors. tries to push services into its higher level tiers (to reduce costs and/or increase ARPU -- average revenue per unit). For example, AT200 includes the following services which are rarely carried in anything but expanded basic level on cable (and all are carried in DirecTV's Choice package, as of today):

  • Animal Planet
  • BET
  • Bravo
  • Golf
  • Hallmark
  • MSNBC
  • National Geographic
  • Tru TV
  • Turner Classic Movies
  • source for this list (retrieved 2 November 2012) 
In short, IFC, WeTV and Fuse would never have ended up in Dish's AT120 in the ordinary course of business. Given the acrimony between the companies, it is also far from the ordinary course of Dish's business to launch Sundance and Fuse.

While many believed AMC Networks did not do well in the Voom settlement because they had requested $2.5 billion in damages, the trial appeared to be going all AMC's way and the settlement payment of $700 million was below the $1 billion expectations, perhaps the financial analysts should take a closer look at the details. 

Given the very favorable (for AMC) settlement of the services's packaging, it is my opinion that AMC probably did pretty well on the license fees for the services as well. These precedents add value to AMC Networks directly, but also create precedents that AMC can use to demand more from smaller multichannel distributors, and everyone but Comcast and DirecTV is smaller than Dish.

There can be tremendous value in favorable cable network distribution agreements.

Updated 6 November 2012: Dish released its 3Q12 10-Q today which contained this disclosure about the Voom settlement
Since the Voom Settlement Agreement and the multi-year affiliation agreement were entered into contemporaneously, we accounted for all components of both agreements at fair value in the context of the Voom Settlement Agreement.  We have determined the fair value of the multi-year affiliation agreement and the MVDDS Licenses using a market-based approach and a probability-weighted discounted cash flow analysis, respectively.  Based on market data and similar agreements we have with other content providers, we allocated $54 million of the payments under the multi-year affiliation agreement to the fair value of the Voom Settlement Agreement.  Evaluating all potential uses for the MVDDS Licenses, we assessed their fair value at $24 million.  The fair value of the MVDDS Licenses will be recorded during the fourth quarter 2012.  The Voom Settlement Agreement is considered a Type I subsequent event and our $730 million estimated fair value of this settlement is recorded as “Litigation expense” on our Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2012.  Additionally, $676 million and $54 million are recorded on our Condensed Consolidated Balance Sheets as “Litigation accrual” and “Accrued Programming,” respectively.  The resulting liability related to the multi-year affiliation agreement will be amortized as contra “Subscriber-related expenses” on a straight-line basis over the term of the agreement.
What I think this means is that Dish thinks its aggregate license fee payments for the services (AMC, IFC, WeTV, Sundance and Fuse) in the affiliation agreements are going to be $54 million higher than fair market value over the term of those agreements. Typically channels are paid for on a per-subscriber basis. Dish might see its rates as higher-than-market and/or its carriage requirements as higher-than-market (the latter leading to higher license fee payments because of a greater number of service subscribers). I strongly suspect the interpretation than Dish is taking is that its rates alone are higher-than-market. If we knew the length of the term of the affiliation agreement, it might be possible to estimate the rate premium that Dish has accepted here. The $54 accrued programming liability is equal to about $4.11 per my estimate of the AT120 subs (90% of Dish's 3Q12 end of period total subscribers of 14.052 million). Here's the premium on a per-AT120 sub-per-month basis for various terms:

  • 1 year: $0.342
  • 2 years: $0.172
  • 3 years: $0.114
  • 4 years: $0.086
  • 5 years: $0.068
  • 6 years: $0.057
  • 7 years: $0.049
  • 8 years: $0.043
  • 9 years: $0.038
  • 10 years: $0.034

The rates in the middle of this list are not far from the market rates for Fuse. Perhaps Dish is looking at the Fuse agreement alone as the source of this "excess payment". Note that in its disclosure of the settlement, AMC referred to the affiliation agreement as "long term". By the standards of the cable TV industry, that suggests a term of at least five years. Given the very favorable carriage of the AMC networks (and Fuse), a long term commitment for that carriage would be more valuable to the programmer than a rate premium.

Updated 8 November 2012: AMC Networks reported its 3Q12 results today. In its press release, there is no mention that AMC received any consideration from MSG for AMC's part in gaining carriage on Dish for MSG's Fuse service as part of the Voom settlement.

Updated 7 December 2012: The Madison Square Garden Company reported its 3Q12 results on 2 November 2012. In its 10-Q, there is a single sentence on page 22 about Fuse: "Dish Network LLC resumed carriage of Fuse on November 1, 2012 pursuant to a long-term affiliation agreement." There is no mention that MSG provided any consideration for AMC's part in gaining carriage on Dish for Fuse service or that such carriage was part of the Voom settlement. It seems that the MSGC shareholders got this benefit from the AMCN shareholders at no cost, which doesn't seem quite right.

26 October 2012

The Future of Current

The New York Post reports today that Current TV, the network best known as the brief post-CNBC home of available-now Keith Olbermann, is on the block.
A 60-million subscriber network is usually worth at least $15 per subscriber or $750 million, sometimes considerably more. However, one wonders what, exactly, is the programming opportunity for Current. Fox News is the news service on the right, MSNBC is the news service on the left and CNN is the news service in the middle. Not that Current is, strictly speaking, a news service, being more about talk shows than newscasts. Headline News has also morphed from a news service into a talk show channel.

Despite the attractive qualities of news programming (original, live and essentially DVR-proof), there is little evidence to suggest that television distributors are looking for more news channels. CNBC, Bloomberg, Fox Business, Weather Channel and C-SPAN's services also cover the news in various ways, as well as every major broadcaster. If distributors want another news channel, there are many to be had, particularly international services like BBC World News (which Comcast has rolled out in a big way, in the aftermath of its acquisition of NBC), France 24 (an English-language service widely carried by Time Warner Cable in New York), RT (the former Russia Today, with the Russian perspective on the news, also in English) and, Al Jazeera English.

That said, Current's "shelf space" has value. If Current were to be acquired by an existing US programmer, it could be bundled with their existing portfolio of channels and rebranded. Perhaps the best fit of all would be for Disney/ABC and Univision to acquire Current to jumpstart the distribution of their new English-language, Latino-targeted news service. That service current-ly exists as a website, but is planned to launch for cable distribution in 2013 from a base in Miami.

Another take: USA Today's Michael Wolff sees Current going into the hands of an online media company like Huffington Post or TMZ

25 October 2012

The Bullied Becomes the Bully

Stop me if you think you've heard this one before. Someone pays a lot for the local sports rights to a professional team and starts a new regional sports network. The cable operators (and other distributors like DirecTV, Dish Network, AT&T U-Verse and Verizon) complain that the channel is too expensive and that they can't possibly pass through this increase to their customers and they should be able to carry the new channel on a secondary tier, a sports tier or on an a la carte basis.
Today's example is the new regional sports network featuring the Los Angeles Lakers of the NBA. In a twist on the usual Time Warner Cable, the largest cable operator in the Los Angeles DMA is the owner of the rights. Cox, the largest cable operator in the San Diego DMA is complaining about the cost.

In February, Time Warner Cable was making the exact same complaints about the cost of MSG Network, the home of the disappointingly short-lived Linsanity-era New York Knicks.

There are three ways these disputes end. The most common is that the distributor agrees to carry the new sports channel on basic, possibly getting some sort of price break, sometimes after a long hold out (e.g., YES Network on Cablevision). Less commonly, the distributor decides not to carry the channel at all (but a critical mass of other distributors do agree to carry it -- the YES Network has never been carried on Dish Network). Still even less commonly, the new rightsholder throws in the towel and sells the rights to someone else (e.g., Victory Sports One, a venture of the Minnesota Twins).

So it goes.

22 October 2012

Implications of the Evolution to High Definition

After a rocky start -- I recall Steve Martin hosting the 2003 Oscars giving a shout-out to the HD viewers, all three of whom he said were "watching at Circuit City" -- High Definition is the New Normal, per Nielsen.
The logo of Circuit City, the late electronics chain

Nielsen's findings:
  • "more than three quarters" on US households have an HD set; up 14 points from last year
  • 61% of prime time viewing is done on an HD set
  • 29% of English-language broadcast prime viewing is in true HD
  • 25% of cable prime viewing is in true HD
Why do people watch SD programming on an HD set? Three things come to mind:
  • The programming they want to watch is only available in SD.
  • The programming they want to watch is available in HD, but they do not have an HD box.
  • The programming they want to watch is available in HD, they have an HD box, but they are not tuned to the HD channel.
The marketplace has taken care of the first point, every one of the top 25 cable networks has an HD feed, as well as all of the major broadcasters. Nick Jr.Teen Nick, and Nicktoons are about the most prominent channel that is not in HD (children's services were/are generally HD laggards; sports services are HD leaders). Current TV may be the most prominent SD-only service that is not targeted at children, which is not exactly a distinction one would want.

The second point is a real one. In some places the TV provider charges extra for an HD box or "technology fee" (for example, DirecTV's $10 "Advanced Receiver Service-HD") . For some viewers, they got an HD set to get a sleek flat screen, not because they were hankering for a sharper picture.

The third point is one a distributor can and should fix since it leads to a suboptimal consumer experience. For years, Cablevision followed a strategy of always tuning an HD box connected to an HD set to the HD feed, irrespective of the channel tuned by the consumer (e.g., if NBC is on channel 4 and NBC HD is on channel 704, the HD box would display the HD feed even if the consumer tuned to channel 4; note the HD logos on the low channels on its Woodbury, N.Y. channel lineup). Lately, I have noticed that Time Warner Cable in Manhattan is doing the same thing with respect to at least some of the channels (e.g., NBC, Fox, ABC, Syfy, FX, but not MSNBC or Oxygen).

Providing the HD feed to customers watching the "SD" channel numbers is a start on addressing the remaining SD legacy issue -- the HD channels are up in the ozone while the SD channels are at the bottom of the dial. Someday the incumbent providers will invert the practice. In the short term, it represents an opportunity for an existing player or new entrant to reposition itself with consumers.

28 September 2012

Fewer US TV Households Because of Fewer Used TV Sets

Nielsen recently announced that the universe of US TV households would be reduced for the 2012-2013 television season by 500,000. TV set penetration is now 96.7% of US households, down from 98.9% the prior year.

The company attributed the decline to 3 factors:

  1. Digital Transition: The summer of 2009 marked a significant milestone with a shift from analog to digital broadcasting. Following the transition, consumers were only able to view digital broadcasts via a set with a built-in digital tuner (i.e., a newer TV set) or an analog TV set connected to a digital-to-analog converter box, cable or satellite. TV penetration first dipped after this transition; the permanence of this trend was acknowledged in 2010 after the number of TV households did not rebound over time.
  2. Economics: As with previous periods of belt-tightening, the cost of owning a TV is a factor in this UE decline; TV penetration first saw sustained decreases in second quarter 2009. Lower-income, rural homes were particularly affected.
  3. Multiple Platforms: Nielsen data demonstrates that consumers are viewing more video content across all platforms—rather than replacing one medium with another. However, a small subset of younger, urban consumers are going without paid TV subscriptions. Long-term effects of this are unclear, as it’s undetermined if this is also an economic issue, with these individuals entering the TV marketplace once they have the means, or the beginning of a larger shift to viewing online and on mobile devices.

This is a TV set.
The first two factors also combine in another way. Many (probably most) of the TV sets in households prior to the digital transition were analog sets. Unless they are connected to a converter box (or cable or DBS receiver), they are no longer TV sets, because they can't be used to watch...TV. The cost of a usable television set has effectively gone up, since there are no cheap, old, working digital sets to be handed down to friends and family or found at the thrift store.
This is no longer a TV set.
While the penetration of TV sets will likely drift up over the next few years as digital sets trickle down, the matter of TV set penetration may no longer be significant. A person watching, say, ABC programming on a laptop or tablet is watching television for all practical purposes and Nielsen will inevitably address this reality in their universe estimates and ratings in the near future.

27 September 2012

OTT Growing or Not Growing?

A recent study by the NPD Group bore the headline that "nearly half of all paid VOD movie rental orders generated by cable companies". There's no great shock there, after all, cable VOD is widely available. What is surprising is that NPD found that cable movie rental VOD is taking share from Internet-delivered movie rental VOD. Cable movie rental VOD increased by 24% since last year while Internet-delivered movie rental VOD (e.g., iTunes, Amazon Instant, Vudu) increased by only 15% (measuring first half 2012 versus first half 2011, to be precise).
Far more intuivitively, a few days later the same group noted that TVs are becoming the primary screen for home viewing of online video. This would appear to be a strong sign for the growth of over-the-top video.

What could account for relative strength of cable movie rental VOD in the face of greater over-the-top presence on TV sets?

The first NPD study is movie rental only. It does not include movies watched as part of an SVOD service like Netflix or Amazon Prime. (It also does not include movies purchased, rather than rented, but cable operators rarely sell movies and iTunes et al do, so movie purchases can't be tipping the scale in cable's  favor). If the number of movies rented were going down, then Netflix streaming could have been a factor, but that was not the case -- both cable and Internet movie rental VOD showed double digit growth.

Interestingly, an earlier NPD study about VOD movie rental (the subject of my prior post here) found that pay-TV VOD declined by 12% from the prior year (August 2011 versus August 2010 to be precise) among users of Internet-delivered VOD.

While all of these studies are measured slightly different things, perhaps the pay-TV providers have improved their promotion of movie rental VOD or have improved the navigation of the choices or have streamlined the buying process. Whatever they have done, it seems to be working, and far more successfully than I would have imagined possible.

An addition: Perhaps cable has been a bigger beneficiary than Internet-delivery from the demise of bricks-and-mortar movie rental places.

11 September 2012

What Have We Learned About Over-the-Top Video and What We Can Expect To See



The fragmentation of over-the-top devices is a tremendous pain for programmers. Not only do Roku, Samsung Blu-ray players, Sony TVs, XBoxes and iPhones require separately produced apps, they often require separately encoded video. The implication is that only the most ubiquitous programmers (e.g., Netflix) will find it worthwhile to be on every platform and that the smaller programmers will go to the most open ("small" here, means, in part "can't afford the risk of having my app be rejected") and popular platform, which is probably very good news for Roku. This area of the business is bound for a shakeout.

Over-the-top programming is already very competitive with cable offerings in a few small areas of the business: new hit movies (can be rented from iTunes as easily as cable VOD), out-of-market sports packages other than the DirecTV-exclusive NFL Sunday Ticket (e.g., MLB Extra Innings) and adult video (see prior post on this topic). Over-the-top is least competitive with cable in offering basic and premium cable networks. Aereo, if it survives the legal challenges it faces, represents a portion of the package, for those who can not or do not want to use their own antenna to pick up free broadcast television.

It is difficult to imagine that over-the-top video will have the same access to "cable" content in the future than it had in the past. Cable programmers make too much money selling their services to multichannel distributors (and the advertising on such services to major national advertisers). Starz walking away from renewing a deal Netflix is the best example of this. As noted in a New York Times article about the 2012 DirecTV-Viacom deal "free access to people who don’t subscribe to DirecTV or another similar distributor is likely to become more restrictive, thereby fortifying the existing model of TV distribution." Someday over-the-top providers might be able to provide some programmers with enough money to make it worth their while to jeopardize their relationships with traditional multichannel distributors, but that day does not appear to be in the next year or two. Nothing -- short of new governmental regulation, that is -- can force a critical mass of cable programmers to sell to the potential disruptors of the multichannel ecosystem.

Over-the-top programming often requires juggling multiple devices and subscriptions. The most satisfying way to "replace" a multichannel subscription probably involves a combination of Netflix, Hulu Plus, iTunes rentals, Aereo, Roku services, over-the-air broadcast signals, etc. and none of them are available on any one device. (Although apps like Fanhattan could help consumer's manage the juggling).

Over-the-top content providers can and will develop their own original content, but it is unclear if this content will be a suitable replacement for a multichannel subscription. Netflix with its original content initiative and YouTube with its investment in original channels are pouring resources into original programming. If there is a return on this investment and it continues, it will make over-the-top more attractive. On some level it does not matter if the new content is a good substitute for what comes with a multichannel subscription, programming is rarely a zero-sum game. The growth of VHS rental didn't hamper the growth of cable subscriptions, but it did destroy the repertory movie house. One notes that the last attempt to enter the multichannel business head-on with original content was Cablevision's Voom and that didn't work out very well.

The rising price of a multichannel video subscription is the one given. With more distributor competition (hello, Google Fiber), the programmers are in a strong position to raise prices. Even Viacom (which "lost" the PR battle in its standoff with DirecTV), still managed to get a 20% price increase -- not bad for a losing effort, if not the 30% they had sought initially.

The distributors, resigned to paying more for content, are seeing what they CAN get at the negotiating table. Two things come to mind: greater TV Everywhere rights (an interesting #1 on this list) and greater restrictions on the amount and quality of content that cable programmers can put online for free or sell to over-the-top providers. Given the small incremental cost of the former and the relatively small revenue contribution over-the-top sources are providing today, these tradeoffs are not that difficult for cable programmers to accept.
The metaphorical "pricing umbrella"

As multichannel prices rise, to the extent that TV Everywhere is very valuable to the consumer, he or she will be content. To the extent that it isn't that valuable, he or she is a loser. However, the consumer facing a higher multichannel bill now has more incentive (and more money) to consider alternatives. In other words, the higher multichannel bill creates a pricing umbrella for over-the-top video.
This is NOT what I mean by over-the-top video

29 June 2012

Now AT&T Wants to Drop AMC's Networks

It looks like AMC Networks is heading for two showdowns tomorrow, as AT&T has joined Dish in threatening to yank the programmer's channels. While the cover story is the same for both distributors -- the proposed rates for AMC's channels are too high and represent a poor value -- the story is more credible for AT&T. Dish, after all, is facing what appears to be the losing end of a lawsuit with AMC Networks over the defunct Voom networks and, if dropping the AMC services can improve the terms of that settlement, that's pretty rational behavior (my prior post on this subject). AT&T has no such issue. The following statement is on AT&T's web site for program disputes:  att.com/fighting4you (obviously, AT&T is planning to have more similar disputes). Knowing how these sort of things are often taken down after a settlement, I am reposting it here for posterity:

The AT&T* U-verse® TV contract with AMC Networks for channels including AMCIFC and WE tv, expires at 11:59 p.m. EST on June 30. AT&T issued the following statement:
We are making every effort to reach a fair agreement and continue providing these channels to our customers. Frankly, we’re disappointed AMC Networks has decided to take its negotiations public, instead of working with us in good faith, especially since we’re still actively in negotiations. We’ve been in ongoing negotiations to renew this agreement, but AMC Networks is seeking an excessive rate increase in our overall fees for the right to deliver these channels. AMC Networks is asking thatAT&T pay what we believe is nearly double what other competitors pay - including a smaller-sized competitor. We believe the rates they are seeking are disproportionate compared to the viewership we see across their channels. We don’t think that’s reasonable, especially in these economic times, and we will continue to work toward a fair deal.
There’s an ongoing industry trend in which an increasing number of content providers seek unreasonable price increases from their service providers as those contracts expire. If we accept this cost increase from AMC Networks, it could result in higher prices for customers, and would only encourage other content providers to make similar demands. We don’t want customers to lose these channels, but we need to take a stand now to keep costs down while continuing to provide the quality programming customers want and deserve.
Observers of the industry know that this statement suggests a desire, on the part of AT&T, for Most Favored Nation treatment with respect to its rates for the AMC Networks services and that AT&T has passed AMC's former parent, Cablevision, in terms of basic cable subscribers, per the National Cable Television Association. The merits of AT&T's position can be debated and I suspect are not relevant at all to consumers. Fundamentally, AT&T is making a wise move if the AMC channels are not bringing benefits to their customers equal to their prices. Analyses of channel value are often pretty hard to do, except at the extremes -- the channels that are worth little are usually not difficult to negotiate and those worth a lot are generally well understood. The interesting part of AT&T's negotiation is the opportunity that presented itself to AT&T -- to pick a second fight with a programmer already fighting one battle. As any general knows, it is nice when the opponent's army is divided. One thing that I do know, no customer subscribes to cable TV to NOT get the channels they want. Typically settlements of these disputes are reached in a modest amount of time. A key date for this one is 15 July 2012, the date of the season premiere of AMC's acclaimed drama Breaking Bad.


Updated (3 July 2012): AT&T and AMC Networks settled shortly after the old deal's midnight expiration without any inconvenience to AT&T subscribers. As is usual, the financial details were not disclosed.

15 June 2012

More on the Ikea TV

While the focus of my work (and this site) is the business of television, especially its distribution, I have become enchanted with the concept of a simpler TV experience. Navigation could be a whole lot better (both within the channel guide and between the different possible sources of material) and someone, someday, will do something about the multitude of wires (that is someone other than a custom A/V installer).

I wrote about the Ikea TV (product name Uppleva) in an earlier post. At the time it was little more than a press release, but a new article reveals a lot more about the product (which is due to be released in Italy, France, Germany, Poland, and, natch, Sweden, later this month) and the concept is growing on me the more I read about it.
What I like about the Ikea offering is that it appears to have done a very nice job of addressing the input issues (i.e., switching among them) and the wiring issues (i.e., having to look at them). If the screen and speakers they use are good, this might actually be something that I would recommend to others. If the screen and speakers they use are not-so-good, but easily replaceable, it might be something I'd consider, despite a deep-seated aversion to particle board. 

The Uppleva is due to arrive Stateside in April 2013.

04 June 2012

Dish-AMC Fight Breaks Out on a New Front -- Channel Placement

According to deadline.com, last night Dish escalated its fight with AMC Networks by relocating several of its channels from their usual places on the dial to the television equivalent of Siberia. While distributors typically have the right to determine the placement of a channel on their lineups, the point is often negotiated and I don't recall ever seeing this sort of move used as a negotiating tactic.


  • AMC moved from channel 130 to channel 9609 (SD) and 9610 (HD)
  • WeTV moved from channel 128 to channel 9608
  • IFC moved from channel 393 to channel 9607


To complete the picture:

Before:
127 Oxygen
128 WeTV
129 Bravo
130 AMC
131 IFC
132 Turner Classic Movies
133 Fox Movie Channel

After:
127 Oxygen
128 Style
129 Bravo
130 HDNet
131 Indieplex
132 Turner Classic Movies
133 Fox Movie Channel

As far as I can best tell, the AMC Networks channels' new neighbors are:

9414 V-me
9415 Free Speech TV
9417 EWTN
9607 IFC
9608 WeTV
9609 AMC
9610 AMC HD
9701 Racetrack Television Network

As a negotiating tactic for Dish, its got its advantages. Moving a channel to a less trafficked neighborhood should reduce live viewing and, to the extent that Dish's DVRs don't keep up with the change, it could reduce DVR viewing as well. The substitution of Style in WeTV's slot makes some sense; Style is now between its corporate siblings which cross-promote each other. Style is a nationally rated network with a defined niche. Content-wise Indieplex is somewhat similar to IFC, but with much less of a profile (for those unfamiliar, it has indie and art movies from the Starz and Encore libraries). Mark Cuban's HDNet is not at all like AMC, nor is it nearly as well known (and it will get less well known when it rebrands as AXS TV during the summer). Generally speaking, subscribers never like channel lineup changes -- change is disruptive and typically offers no apparent benefit, so Dish didn't do this to make its customers happier. As for Dish's explanation of the reason for the change "the new positions better reflect the channels' ratings", to be charitable, that seems most unlikely.

Added commentary on the matter, courtesy of Louis Peitzman of Jezebel: "In the ultimate dick move, Dish responded by relocating AMC to channel 9069 — right in the middle of a broadcast of The Killing." Nice turn of phrase.


09 May 2012

TV is the Dominant Platform for Watching TV

The Nielsen Company has released its annual The Cross-Platform Report for 4Q11 (registration required) and it contains some interesting bits, none more interesting to me than this chart.

The thing that jumps out to me, is that for all the talk in the multichannel industry about TV Everywhere -- watching what you want, when you want and where you want -- the dominant way to watch video is on TV.

Even in the groups that watch the most video on phones and on computers, such viewing is a small fraction of the total. This is a developing area and viewing will increase as more people have video-enabled phones. Also, demographic forces are pretty clearly going to increase online viewing as these 65+ people in this chart become a smaller part of the mix ("die off" sounds a bit harsh) and are replaced by today's younger people who will probably continue to use online video they way they have been (in other words, more than today's older people do).

What one always wonders about trends is whether this will transform the industry or effectively obliterate it? In other words, is the impact "DVR on the TV business" or "computer on the typewriter business"?
Making TV more convenient to view with result in more viewing. Convenience adds to consumption. Robert Woodruff, Coca-Cola's president, expressed his goal of putting the drink "within an arm's reach of desire" in 1923. That worked out pretty well for increasing the consumption of Coca-Cola.

However, portable TV is not an entirely new concept. I remember fondly receiving this as a gift in my early days in the television business.

Sony FDL-22 handheld television (1998) for more info
In its day, it was a pretty exotic piece of kit, but eventually languished for all of the now-obvious practical reasons. We didn't want a separate device just for watching TV on the go.

The mobile part of TV Everywhere sure looks like added value to the multichannel subscription rather than a separate video subscription. Verizon V-Cast, MobiTV and Media Flo have all found that they are either out of the mobile video business or have morphed the sale or sales pitch to be an adjunct to the sale of a mobile data plan. We didn't want a separate subscription just for watching TV on the go.

If there is any company that knows the value of TV Everywhere it is Netflix, since it is on virtually every possible video-viewing platform, but look at the breakdown of its usage...
click here for the Nielsen blog post from which this chart came
For clarity, this is a chart of how many users use the platform for watching Netflix (or Hulu), not how much they watch on the platform, but it is pretty clear that iPad and mobile phone usage are pretty far down the list and fit better into the concept of special use cases than primary usage. As regards watching long form video on a computer, I think most everyone has enough experience with that experience to draw their own conclusion on the attractiveness and/or use cases versus watching video on a television.

TV is the dominant platform for watching TV and likely will be for a long time. TV Everywhere is well worth providing, but strictly added value to the core usage.

Now, if someone delivers a quality service to your mobile phone and then you can painlessly send it to your big TV in high quality (like via AirPlay using an Apple TV)...that's a whole different competitive dynamic.