tag:blogger.com,1999:blog-73809527885708673332024-03-05T14:45:57.578-05:00Peter Litmanmedia consulting:cable|online|over-the-topPeter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.comBlogger158125tag:blogger.com,1999:blog-7380952788570867333.post-58656698797065810332024-02-07T17:24:00.007-05:002024-02-20T17:58:08.082-05:00The Disney-Fox-Warner Bros. Streaming Service Is Just Fubo-Lite - An Analysis<p>The <a href="https://www.nexttv.com/news/tv-giants-espn-fox-wbd-team-up-for-sports-comeback-vs-streamers">streaming sports joint venture</a> of Disney, Fox, and Warner Bros. Discovery is a lot less revolutionary than the popular press seems to think. It does sound like something the sports fan might be requesting -- nearly all of the sports on cable, without the non-sports to clutter (and push up the price of) the package.</p><p>Disney brings to the table ESPN and a number of other full-time sports services and ABC. Fox has the Fox broadcast network and Fox Sports 1 (among others). Warner Bros. Discovery brings the general entertainment channels TNT, TBS, and truTV which each carry some sports (truTV only has a sliver of sports -- a few games during March Madness).</p><p>Unlike Netflix or Amazon Prime, this service will not just carry the games, but will also carry all the other stuff on the included channels. So, the experience of watching the NBA on TNT (supplied by WBD) in this service will be the same as watching it on cable. When the game ends, NCIS or Charmed or another entertainment program will follow it.</p><p>The as-yet-unnamed service will be carrying linear channels, much like any other virtual multichannel video programming distributor or MVPD (e.g., YouTube TV, Hulu with Live Channels, Sling). Calling it a "streaming service" is a bit of a misnomer, since that term usually describes a mostly on-demand assortment of programs with a sprinkling of live sports.</p><p>In essence, what this new service will provide is a sports-oriented skinny bundle, which is essentially the part of the market that fuboTV has staked out. The issue for fubo was (and is) that the sellers of the channels with live sports were generally unwilling to sell the sports channels <i>at the time that fubo launched in January 2015</i> without fubo also taking their non-sports channels. For example, Disney would really prefer a distributor to carry the Disney Channel and FX in addition to its suite of ESPN sports services (e.g., ESPN, ESPN2, ESPNews, Longhorn Network). It might not be that Disney would not sell the sports services separately, so much as Disney would make the deal terms far less attractive if the non-sports channels were excluded. So fubo's attempt to super serve sports fans ended up being mostly a replication of the full channel lineup carried by the leading MPVDs, with only a few exclusions (channels from cable programmers without any sports programming like AMC, A&E, and Hallmark).</p><p>Among the three partners, <i>nine years later,</i> they were willing to sacrifice the non-sports services, provided that the other guys did, too. Because the new service is carrying linear channels, there is no new grant of rights needed from the suppliers of the programming -- the sports leagues. To them, this is a new MVPD.</p><p>It is unclear to me if there is much of a market for this service. If it were significantly less expensive than the full cable package, there may very well be. However, each of these programmers is likely selling their channels to the new service at full rate card. The technical costs of streaming the channels to customers costs money as does customer service and processing credit cards. It is unclear if this package can be sustainably much cheaper than cable or a vMVPD. </p><p>What is clear is that the package will be without a bunch of high profile sports -- notably those controlled by NBC and CBS and smaller sports services like Tennis Channel -- and that lacking those and the cable entertainment and news channels, the package might be less-than-satisfactory in meeting the needs of families, where a package that has sports and also has Nickelodeon, Fox News and Lifetime might seem like a better deal, even if it costs a bit more. </p><p>Another ramification is that all of the MVPDs will see this package and ask for similar packaging rights on their systems. The affiliate sales staffs of Disney, Fox and WBD are probably not looking forward to those discussions.</p><p>WBD may be the biggest relative winner among the partners, since this new MVPD will fully distribute most of its costly entertainment programming (which runs on the three included channels), while its Cartoon Network and TCM are on the outside looking in. The sports services from Disney and Fox are pure plays; their entertainment services don't have any sports.</p><p>Update: fuboTV clearly sees the new venture as a threat, as it felt compelled to <a href="https://finance.yahoo.com/news/statement-fubo-regarding-sports-streaming-234500750.html">issue a press release about it</a>.</p><p>Update (16 Feb 2024): The MVPDs' concerns come out in this <a href="https://www.cnbc.com/2024/02/15/pay-tv-distributors-are-confused-concerned-about-sports-joint-venture.html">CNBC story</a> regarding them seeking similar packaging rights for these channels as the the joint venture appears to have.</p><p>Update (20 Feb 2024): fuboTV has sued the joint venture claiming antitrust violations related to less attractive licensing terms for the sports channels. <a href="https://www.businesswire.com/news/home/20240220332523/en/">fuboTV's press release</a> The US Department of Justice is interested in such an argument, <a href="https://www.reuters.com/business/media-telecom/doj-scrutinize-disney-fox-warner-bros-sports-streaming-deal-bloomberg-law-2024-02-15/">per Bloomberg Law via Reuters</a>. Clarifications to the original post were added and are marked with <i>italics</i>.</p><p><br /></p>Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-4027683814560893102023-09-19T15:04:00.006-04:002023-09-19T16:20:27.182-04:00One Good Reason Disney Sacrificed Freeform in its New Charter Deal<p>Disney may have sacrificed carriage of Freeform (nee ABC Family, Fox Family, The Family Channel, CBN, Christian Broadcasting Network) in part because it was easier to give up carriage of a linear channel which had an "ironclad" obligation to carry <i><a href="https://www2.cbn.com/700club">The 700 Club</a></i>, the conservative evangelical Christian talk show for 2 hours every day (<a href="https://www.tvinsider.com/62330/as-abc-family-becomes-freeform-heres-why-its-still-stuck-with-the-700-club">currently 11PM and 9AM ET</a>).</p><p>In the recent past, "shelf space" for fully distributed basic cable TV channels was perhaps the most valuable asset in the media. Basic cable networks with inexpensive programming like MTV, could run at greater than 50% margins. Cable cord cutting has reduced those margins, in some cases pretty dramatically. Programming companies, like Disney, have been prioritizing entertainment investments in growing on-demand services like Disney+ and Hulu over the declining "linear" TV business of 24 hour scheduled channels. Disney CEO Bob Iger has discussed its <a href="https://www.youtube.com/watch?v=c5I8RdlSpoc">options for the linear services in a recent interview on CNBC</a>; they "might not be core to Disney".</p><p>The Disney-Charter deal, which saw the inclusion of Disney+ and ESPN+ in Charter's Spectrum "cable TV" packages, despite the fact that they had not, to date, been considered cable TV services. The services clearly have some attractive programming. Charter had asked for it to be included in its deal for free for Charter customers; <a href="https://www.prnewswire.com/news-releases/the-walt-disney-company-and-charter-communications-announce-transformative-agreement-for-distribution-of-disneys-linear-networks-and-direct-to-consumer-services-301923527.html">the announcement of the deal made it clear that Charter is paying a "wholesale" rate</a> for them. Depending on what that rate is, the inclusion of these services in Spectrum's cable video packages could represent a lot of value to Charter or a lot of value to Disney. Most likely, it is a little bit of both.</p><p>What is clear is that the Disney linear services that were carried by Spectrum systems in its expired deal, but not in the new one (Baby TV, Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild, and Nat Geo Mundo), were no longer growing assets for Disney nor highly valued by Spectrum. </p><p>Cable operators have been pruning their cable lineups to control the cost of their video service which have looked expensive and bloated next to the much cheaper streaming services over the last decade. It was very clear that the streaming services were also getting more and more of the high profile new original programming, because the programming companies had been rewarded by the stock market for the growth of their streaming services, despite the fact that these services were all highly unprofitable.</p><p>Whether these straight-line trends towards streaming and away from cable video will continue now that the fast growth of streaming has ended, investment in streaming programming is being cut back, and streaming retail prices are going up sharply, is less clear.</p><p>I believe consumers' move from cable to streaming was much more about the relative value they offered than the "inevitability" of the newer technology.</p>Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-69317907734457621662023-06-21T18:16:00.005-04:002023-06-22T17:51:48.925-04:00Vegas Golden Knights Switch to Broadcast from RSN for 2023-2024 Season - Implications<p>Shortly after the Phoenix Suns entered into what appeared to be a broadcast TV deal for the rights that they used to sell to RSN Bally Sports Arizona, the NHL Vegas Golden Knights, entered into a true <a href="https://scripps.com/press-releases/vegas-golden-knights-and-scripps-partner-on-multi-year-agreement-to-air-nhl-teams-games/#:~:text=LAS%20VEGAS%20and%20CINCINNATI%20%E2%80%93%20The,within%20the%20team's%20broadcast%20territory.">broadcast TV deal for their regional rights</a>. </p><p>E.W. Scripps is operator of local TV stations mostly affiliated with major networks, including the ABC affiliate in Las Vegas, KTNV (channel 13). In 2020 Scripps acquired Ion Media, which operates the Ion broadcast network which primarily programs off network reruns (e.g., Law & Order SVU). Ion is distributed on a hybrid basis -- its on broadcast stations in most of the country via its owned and operated stations which are in virtually all of the top 20 TV markets and most of the top 75. Ion is distributed via cable, satellite and telco in the places where it does not have a station. ION's affiliate in Las Vegas in KMCC (channel 34) and Scripps' plan is to offload the Ion programming to cable and run the station as an independent television station, including the Vegas Golden Knights games. </p><p>This is a bit of a back to the future moment. Independent broadcast television stations were routinely the local distribution for MLB, NBA, and NHL games prior to the launch of regional sports networks in the 1980s and 1990s. Regional sports networks outbid local TV stations for regional sports rights in that period because of the fees that cable operators were willing to pay for the programming where greater than what the local stations could make selling advertising during those games. </p><p>Now the cable operators are looking at the costs of RSNs and frequently opting to drop them rather than renew when the contracts expire. Altitude Sports, in nearby Denver, has <a href="https://www.westernslopenow.com/news/altitude-lawsuit-settled-but-still-no-games-on-comcast/">not been carried by Comcast, the primarily cable operator in Colorado since 2019, reportedly because of its cost</a>. <a href="https://awfulannouncing.com/dish/dish-has-dropped-nesn-is-now-completely-rsn-free.html">Dish Network has dropped every RSN that it used to carry and it used to carry virtually all of them</a>.</p><p>For their entire existence, the Golden Knights have been distributed by RSN AT&T Sports Rocky Mountain, which also distributes games from the MLB Colorado Rockies and the NBA Utah Jazz. Warner Brothers Discovery, the new parent company of AT&T Sports Rocky Mountain had announced <a href="https://awfulannouncing.com/mlb/warner-bros-discovery-mlb-nearing-deal-to-keep-rsns-running-through-2023-season.html">plans to shut down its handful of RSNs this year</a>.</p><p>How the Golden Knights plan differs from the Phoenix Suns proposed plan is that KMCC is a full power television station, currently carried by all of the major MVPDs. The Suns plan put most of the games on <a href="https://www.peterlitman.com/2023/04/have-phoenix-suns-created-new-model-for.html">a low power television station that was not carried by any of the major MVPDs</a>, it would need to gain carriage -- just like an RSN would. Additionally, the coverage area of KMCC, which has two transmitters, <a href="https://www.rabbitears.info/contour.php?appid=25076ff3884ab89301888bbd2c262bf7">appears to cover a lot of the Las Vegas market for those relying upon an antenna</a> for reception.</p><p>It's unclear when Scripps' deals with the major distributors for the retransmission consent of its stations are up (they may be staggered) and what sort of fees that it will be looking to get. Unlike a stand-alone RSN negotiating on its own, Scripps has the advantage of bringing the programming from ABC to systems in Las Vegas in additional to the Golden Knights and whatever else will surround the games on the new independent station. Generally, MVPDs have come to terms for Big 4 broadcast affiliates in most markets. MVPDs fees for Big 4 network affiliated stations has gone up pretty dramatically in the last decade, after being modest for the first decade or so of retransmission consent.</p><p>However, it is unclear if MVPDs will be willing to pay the same money that they used to pay for RSNs for retransmission consent of the stations now carrying the games. It is possible that MVPDs will start to look at broadcast station retransmission consent costs the way that they now look at RSN fees -- as simply not worth it. Without regional sports, cord cutting has been at higher levels than we saw in the past. Without ABC, CBS, Fox and NBC programming, we might be looking at the demise of cable TV altogether. Ironically, the biggest losers in that case may be the companies, like Scripps, that own the Big 4 affiliates in many markets and have developed substantial revenue streams from retransmission consent fees. The cable operators can, and smaller operators often have, focused on selling Internet access service and <a href="https://cordcuttersnews.com/this-cable-tv-company-is-going-streaming-only-shutting-down-its-traditional-tv-service/">getting out of video altogether</a>. No cable video means no cable retransmission consent fees.</p>Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-48029966113178130932023-06-01T18:17:00.002-04:002023-06-02T16:22:14.319-04:00Value Is the Problem with Current Regional Sports Offerings<p>Consumers are moving to better value services, not away from traditional services. Basic cable TV represented an outstanding value in the 1990s when it cost $20 per month and there was no service like Netflix. </p><p>In the 1990s cable TV competed with free broadcast television and, for those who wanted something more and were willing to pay, video stores. In the 2020s, basic cable TV service costs more like $75 per month. While video stores are no longer significant players, free broadcast television is very much around and there are a number of subscription video services (e.g., Netflix, Disney+, Max, Paramount+) which offer additional entertainment choices for those who want something more and are willing to pay. iTunes and Amazon rentals are the new video stores.</p><p>It was inevitable is that consumers would leave services that seemed to offer less compelling value and move to services that offered better value. Streaming was the technology that enabled these options; it wasn't necessarily that the technology was better (virtually all of the viewing is still at home on a TV; phones and tablets are a small part). </p><p>It is not inevitable that the streaming offerings in the marketplace now (e.g., <a href="https://streamingbetter.com/how-much-bally-sports-plus-costs-location-teams/">Bally Sports+ typically at $20 per month</a>, <a href="https://www.msgentertainment.com/msg-networks-provides-updates-on-new-streaming-initiatives/#:~:text=Fans%20who%20do%20not%20subscribe,Devils%2C%20and%20Sabres%20games%20as">MSG at $30 per month</a>, <a href="https://support.nesn.com/hc/en-us/articles/5873353347995-How-Much-Does-It-Cost-#:~:text=NESN%20360%20is%20available%20either,no%20additional%20cost%20to%20you!">NESN at $30 per month</a>) will be the solution to the regional sports network business going forward. The CEO of Diamond Sports Group, the parent of the Bally Sports RSNs, David Preschlack, is an experienced sports executive with stints at both NBC's regional sports networks and ESPN. Preschlack had to admit yesterday in court, that its over-the-top a la carte subscription service had only <a href="https://www.nexttv.com/news/bally-sports-plus-has-203000-subscribers-only-55-of-diamonds-goal?utm_term=F70FFD47-60F2-45E7-8800-A6AC24C20A67&utm_campaign=C74FC4FA-5D4D-4151-8915-3043BA411DBE&utm_medium=email&utm_content=61C08EE7-B220-4324-A994-E8FD505FDA24&utm_source=SmartBrief">203,000 subscribers after 9 months in the marketplace, a figure is only 55% of the entity's budgeted number</a>. That 203,000 subscriber count works out to an annual revenue "run rate" of only $36 million, which is a fraction of the amount of revenue that Bally's needs to generate to make up for the shortfall it is seeing it its fees from MVPDs, whose customers continue to "cut the cord" in large numbers.</p><p>Sports fans still want to watch their local teams' games. It appears to me that the fundamental problem here is that customers don't think that the value of these streaming services is attractive. Consumers see the same problem that caused them to drop cable TV in the first place. </p><p>The other streaming services, all of which have a monthly ticket cost of less than $20/month, are perceived by customers as a reasonable value (if not quite as attractive a value as they were a few years ago). </p><p>The contrast between a pro game every day or two on Bally Sports+ in a given month for $20 and <a href="https://www.thewrap.com/max-streaming-service-price-list-2023/">Max at $16 (or less with ads)</a>, for a content library with hundreds of high-profile hours does not flatter the sports service. From a content standpoint, Bally Sports matches up more favorably with a service like <a href="https://www.techradar.com/deals/apple-tv-plus-cost">Apple TV+, which retails for only $6.99/month</a>. Like Bally's, Apple TV+ is a service focused on new programming; it doesn't have a large valuable library of popular older content.</p><p>Regional sports networks are not required to sell themselves on a monthly subscription basis. All of the services I have mentioned in this post also provide an annual subscription with an effective discount for those who purchase it (for Bally it's $190 annually, a savings of 20%). In addition to cutting the monthly rate, the services might also experiment with selling single games or other lower-priced offerings. Ultimately the rights holders should be flexible in considering how they might entice fans to want to buy in. Running a sports service is a fixed cost business and the games can't be sold after they are played. In this way, the business is much like an airline. Airline-style "yield management" might make a good deal of sense to maximize each service's revenue.</p><p>The RSNs are not alone in the annals of communication in finding their historical business model does not seem to be holding up in today's world. A similar situation is playing out in audio, as <a href="https://jacobsmedia.com/is-there-bedrock-down-there/">FM radio continues to hemorrhage listeners</a>. Unlike cable TV, FM radio listening is free and the streaming solutions for music (e.g., Spotify, Apple Music) generally have a monthly subscription fee. FM represents a poor value for music listeners is because of the high <a href="https://www.nytimes.com/2008/11/26/business/media/26adco.html">commercial advertising load on such stations</a>. FM became a lousy listener experience at some point and eventually services emerged as alternatives (first Sirius XM, later Internet delivered services). Music fans are willing to pay for Spotify to avoid the high commercial load on FM (Ad-supported Spotify has a much lower ad load than commercial FM stations). Also those who don't subscribe to a streaming music service can easily put together hours of their own audio programming via free podcasts and collections of music they have assembled on their phones and can easily play in their cars.</p><p><br /></p>Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-82821882356178578782023-05-15T23:22:00.001-04:002023-05-15T23:22:14.535-04:00NFL Network Gets New Deal with Comcast; Peacock Gets Exclusive NFL Playoff Game<p>Today news broke that the NFL had agreed to sell the <a href="https://www.espn.com/nfl/story/_/id/37657287/peacock-exclusively-carry-nfl-playoff-game">rights to a playoff game</a> to Comcast's past-nascent-but-not-yet-well-established Peacock streaming service. This is quite a coup for Peacock. Generally, the NFL, as the purveyor of the most popular sports programming sticks to leading television services for their marquee events. Amazon Prime Video, after all, started with a package of <a href="https://www.outkick.com/nfl-to-exclusively-stream-wild-card-playoff-game-on-peacock/">often-lackluster Thursday night regular season games</a> in its first NFL season.</p><p>Close observers will note that less than two weeks ago, on May 2, 2023, <a href="https://awfulannouncing.com/league-networks/comcast-nfl-network-brian-roberts-roger-goodell.html">NFL chief Roger Goodell and Comcast leader Brian Roberts</a> were personally involved in negotiating <a href="https://tvanswerman.com/2023/05/02/comcast-vs-nfl-network-why-comcast-said-no-thanks/">a new agreement for NFL Network and NFL Red Zone</a>, restoring the service to the systems of nation's largest cable operator after they had been dropped a day earlier.</p><p>It appears the parties recognized that each had something the other really wanted.</p><p><br /></p><p><br /></p><p><br /></p>Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-42831635064254491522023-04-28T17:46:00.007-04:002023-05-12T23:26:52.787-04:00Have the Phoenix Suns Created a New Model for Regional Sports Networks?<p>The first new model deal to replace an RSN appeared in Arizona on April 28. The NBA Phoenix Suns, along with the WNBA Phoenix Mercury, agreed with a local broadcaster (Gray Television) to move <a href="https://www.azfamily.com/2023/04/28/arizonas-family-announces-transformative-broadcast-partnership-with-phoenix-suns-phoenix-mercury/">all of their games to free-to-air television, along with a separate direct-to-consumer offering</a>. This deal, with respect to the Suns, would begin this fall, as the rest of the Suns' games this year are post-season games that will be carried by national services like ESPN, TNT, and ABC. The first regular season game for the Mercury that will be <a href="https://cordcuttersnews.com/bally-sports-loses-rights-to-phoenix-suns-nba-games-as-fans-can-now-watch-the-suns-for-free-on-broadcast-tv/">part of this deal is set for May 25</a>.</p><p>There are a few wrinkles here worth noting. </p><div>First is that in-bankruptcy Diamond Sports Group, which carried the Suns' games this season on its Bally Sports Arizona RSN, is <a href="https://barrettsportsmedia.com/2023/04/28/bally-sports-arizona-threatens-legal-action-over-new-phoenix-suns-tv-deal/">threatening to sue the teams for breaching their contract</a> which they claim provides the RSN to match any new offer the team might receive. Additionally, if the Suns are relying upon the right to terminate the contract because Diamond declared bankruptcy, while it may be a surprise to non-lawyers, <a href="https://www.morganlewis.com/blogs/sourcingatmorganlewis/2019/05/termination-in-the-event-of-bankruptcy-clauses-are-generally-unenforceable">those provisions are usually unenforceable</a>. Companies in bankruptcy, in some respects, have a more favorable position than those that are not. For example, Diamond's failure to make a rights fee payment might give the Suns a basis for termination. Once Diamond has the protection of bankruptcy, the court typically wouldn't allow them to do so, as it would look at the Suns' rights agreement as a crucial asset of the business that might be needed to help pay off Diamond's creditors.</div><div><br /></div><div>Update: On May 10, 2023, the <a href="https://www.espn.com/nba/story/_/id/37597916/us-bankruptcy-judge-blocks-phoenix-suns-new-tv-deal">US bankruptcy court blocked the Suns move</a> to enter into this new agreement, saying that it violated Diamond's contractual rights, notably its right to match any deal for the Suns renewal. Recall the Diamond-Suns deal only ran through the 2022-2023 regular season. As the Mercury were not carried on Bally Sports Arizona, their portion of the Gray deal was unaffected.</div><div><br /></div><div>Second is that of the 70 regular season games in the typical RSN season, 40 or so are planned for Gray's full power TV station, independent KTVK, channel 3, and the rest will be on a co-owned low-power TV station KPHE-LD, channel 44. The distinction between full power and low power stations is important for two reasons. For those receiving the station via an antenna, low power stations, as their name would suggest, do not cover as large an area as a full power TV station does. </div><div><br /></div><div>For those receiving a station via a cable, DBS or similar distributor, low power stations are not always carried by those distributors, full power stations almost always are. KPHE <a href="https://www.lyngsat.com/uslocal/Arizona.html">does not appear to be carried by either Dish Network or DirecTV</a>, at least not yet. Gray may need to negotiate a new deal to get KPHE carried on the systems of many, possibly all, distributors. </div><div><br /></div><div>Considering KPHE as a broadcast station may be technically true. However, if most of that station's value is in the Suns programming, it is, from the perspective of a distributor, effectively an RSN -- a channel that needs cable carriage to reach customers save for those in its <a href="https://www.rabbitears.info/contour.php?appid=3ad6ea5748e94d23b7f9cf6212b6c0ea&site=1">over-the-air footprint</a> (note the linked map doesn't show any area where the station can be received with an indoor antenna). Depending on the retransmission consent fee that Gray/KPHE might request, that might be a tough sell to Dish <a href="https://awfulannouncing.com/dish/dish-has-dropped-nesn-is-now-completely-rsn-free.html">which has dropped the RSNs in every market</a>. KPHE is also branded like a cable channel, using the slogan Arizona's Family Sports and Entertainment Network; big TV stations typically include their channel number as part of their branding (as KTVK 3 and KPHO 5 do). Note also that none of the games are scheduled to be carried on Gray's most viewed Arizona TV station, CBS affiliate KPHO, channel 5.</div><div><br /></div><div>Third is that the television deal is non-exclusive, unlike most RSN TV rights deals. The Suns also entered into an agreement with <a href="https://en.wikipedia.org/wiki/Kiswe_(company)">Kiswe</a>, a streaming video technology company. It looks like the streaming concept is that the Suns (and Mercury) would be the face of the streaming service containing the programming. Kiswe would be the technical backend to that streaming service, not the name visible to consumers. Having a different media rights holders is not unusual in that teams typically have a television deal with one company and a radio deal with another. <a href="https://www.audacy.com/stations/arizonasports">KMVP-FM is the radio rights holder for the Phoenix Suns</a>; it is owned by the radio giant Audacy. However, for streaming vs. traditional TV, this may be a new precedent.</div><div><br /></div><div>Updated: 5/11/23 to add bankruptcy court ruling and streaming plan</div><div>Updated: 5/12/23 to add KPHE signal map, branding information</div><div><br /></div><p></p>Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-40046513550764264652022-05-06T23:32:00.004-04:002022-05-06T23:32:28.575-04:00Dish Network Subscriber Count Falls Below 8 Million<p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjK62j9cQgO59NZz9ob6J0LPt7XPsQ8kS8bU_Avkp-rIzxAy50O2WNUyQoi7TNTSnwJjiFWAd8ylswYZxJHbR6GUjW5JdWhV98-V7tZJyZwox1ldOZ_K5DxPgsXQuaqTjcYD4B36nzdSzpcVOY_LeL3gUJmNi146LKLA5i3C9FmJfHiZG1OdIKepD3_fg/s253/imgres-4.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="199" data-original-width="253" height="199" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjK62j9cQgO59NZz9ob6J0LPt7XPsQ8kS8bU_Avkp-rIzxAy50O2WNUyQoi7TNTSnwJjiFWAd8ylswYZxJHbR6GUjW5JdWhV98-V7tZJyZwox1ldOZ_K5DxPgsXQuaqTjcYD4B36nzdSzpcVOY_LeL3gUJmNi146LKLA5i3C9FmJfHiZG1OdIKepD3_fg/s1600/imgres-4.jpeg" width="253" /></a></div>Dish Network reported that it had 7.993 million subscribers to its DBS service at the end of the first quarter of 2022. The last time the count was below 8 million subscribers was nearly twenty years ago, at the end of the third quarter of 2002. Dish's highest quarterly DBS subscriber count was nine years ago, at the end of the first quarter of 2013, when it stood at 14.092 million. Things go up; things come down.<br /><p></p>Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-59756568736065285812020-12-12T22:02:00.003-05:002020-12-17T13:32:38.043-05:00HBO Max and Warner Brothers Collapsing the Theatrical Window<p>The big recent development in the media and entertainment world was the December 3 announcement by Warner Media that the Warner Brothers Studios' entire 2021 theatrical slate, 17 movies, would be <a href="https://www.hollywoodreporter.com/news/warner-bros-smashes-box-office-windows-will-send-2021-slate-to-hbo-max-and-theaters">released simultaneously on HBO Max and in movie theaters</a>. Typically theatrical movies play in cinemas on an exclusive basis for a period of thirty to ninety days, then enter other "windows" of exhibition -- pay-per-view, premium television (e.g., HBO, Showtime, Starz), broadcast television, basic cable, etc. The metaphor used to describe this financial system is a "waterfall" -- from the highest price/best viewer experience ($12+ ticket, uncut, no commercials, giant screen and multi-speaker audio) down to "free" media with smaller screens, edited to be advertiser friendly, and interrupted by commercials. </p><div class="separator" style="clear: both; text-align: center;"><a href="https://hbomax-images.warnermediacdn.com/2020-05/square%20social%20logo%20400%20x%20400_0.png" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="400" data-original-width="400" src="https://hbomax-images.warnermediacdn.com/2020-05/square%20social%20logo%20400%20x%20400_0.png" /></a></div><p>The reaction from the people who worked on these movies was quick and unfavorable: the <a href="https://variety.com/2020/film/news/dune-denis-villeneuve-blasts-warner-bros-1234851270/">director of the upcoming <i>Dune</i> hated it</a>, the <a href="https://deadline.com/2020/12/christopher-nolan-slams-warner-bros-hbo-max-theatrical-windows-tenet-1234651892/">director of the recent theatrical pandemic release <i>Tenet</i> hated it</a>, the <a href="https://deadline.com/2020/12/caa-richard-lovett-rebuke-warnermedia-jason-kilar-hbo-max-deal-blindside-unacceptable-to-caa-clients-1234654147/">head of a huge talent agency hated it</a>, the <a href="https://deadline.com/2020/12/dga-hbo-max-warner-bros-movies-unacceptable-1234654391/">union of directors hated it</a>, and the <a href="https://deadline.com/2020/12/wme-patrick-whitesell-warnermedia-hbo-max-move-blatant-attempt-to-self-deal-use-our-clients-work-to-build-their-hbo-max-streaming-service-1234655268/">head of another huge talent agency hated it</a>. </p><p>To my eye, there are six issues that have been raised:</p><p></p><ol style="text-align: left;"><li>Movies are meant to be seen first in theaters on the big screen. These movies are meant to be enjoyed first that way and only that way.</li><li>This is a poor strategy financially, as it devalues the first tier on the waterfall, and that may devalue the subsequent tiers, and the value of these movie franchises in the future.</li><li>The compensation that participants will receive will be lower with this approach.</li><li>We were not consulted about this change; it was presented to us without our participation and that shows a lack of respect.</li><li>The contracts that we have give us approval rights on distribution strategy and choices and you have ignored those rights.</li><li>By selling the movies to your co-owned HBO Max you have engaged in self-dealing, rather than seeking out whether other streaming services might be willing to pay more for those rights.</li></ol><p></p><p>The first concern is the easiest one to dismiss. All of these movies are being released to theaters, so those who want the full cinematic experience can get it. A movie doesn't play any differently to a moviegoer in the theater because it is on a streaming service on the same day.</p><p>Whether the second concern is true seems to depend on how things actually play out. One thing is certain, if these movies were released with exclusive theatrical exhibition windows, there is little chance that they would attract cinema audiences the same size as they might have absent the pandemic. A movie available on HBO Max at the same time it is available in the cinema might be expected to be less of a draw at the box office, although one notes that's not true of professional sports -- TV exposure seems to promote the live event business. Depending on how and how much these movies are promoted in the media, they might do more or less business than they would as exclusives. </p><p>As to the third point and the subsequent points, the compensation of the participants is not a matter on which this writer can opine with public data available. If the participants will be getting less pie -- because the pie is smaller -- and the contracts they signed permit the studio to do this (which no one has contested yet), it seems like that's one of the issues talent face about having revenue or profit participation in the first place. If you don't want that kind of deal, negotiate for a flat fee. </p><p>I do understand that scoring things are more complicated without apples-to-apples theatrical grosses to look at. To that I can only say, welcome to the new digital world, movies -- Netflix shows don't get apples-to-apples Nielsen ratings with cable and cable Nielsen numbers aren't 100% comparable with broadcast numbers...and everyone in the ecosystem has figured out a way to work together without relying on the historical currency. </p><p>One participant beef that I am quite sympathetic to is that all of these arrangements contemplated a world where both sides had an incentive to maximize the theatrical window revenue. To the extent that Warners is now generating value for itself (via its ownership of the presumably more valuable HBO Max) and the talent don't get a piece of that, they have a fair concern, even if they may not have legal recourse via their contract (shame on their lawyers if the big fish didn't have it). The record labels shared the benefits they got in Spotify stock with their artists, whose work they licensed at lower prices than that work probably would have fetched without that "equity kicker".</p><p>That <a href="https://deadline.com/2020/12/warnermedia-legendary-challenge-dune-godzilla-vs-kong-streamer-battles-looming-1234651283/">Neflix offered a big price for Dune</a>, perhaps larger than what HBO Max will pay, is, to be charitable, not a good look for Warner Brothers living up to its fiduciary duty to its partners.</p><p>Regarding the lack of respect of unilaterally making such a change on their professional partners, I do understand it. Given that Warners probably knew this move would be controversial, they might have figured out that they had more chance to make such a bold move work this way than by having a lot of private conversations that would leak out. This follows the strategy of "better to ask forgiveness than permission", especially if you aren't going to be given permission. That said, I have little faith that AT&T is a particularly savvy understanding of Hollywood relationships or the value of distribution, given their substantial <a href="https://www.forbes.com/sites/greatspeculations/2019/08/09/was-atts-acquisition-of-directv-a-mistake/?sh=2066edf147d3">overpay for DirecTV</a>.</p><p>The reaction to this news on the tech side was <a href="https://www.nytimes.com/2020/12/04/opinion/warner-hbo-movies-theaters.html">a lot more favorable</a>. In its usual fashion, anything "disruptive" to "the old way of doing business" is good. I find that simplistic. Certainly, the movie studios didn't fully see Netflix streaming business model coming on as fast as it did. However, these studios aren't run by dopes. The system of windows that they have constructed may be frustrating to a viewer (where is that movie playing?), but it probably does a good job of maximizing revenue from the available buyers in the world of yesterday. If it didn't, it would have been jettisoned long ago as too complicated. That said, I'm less certain that's true for the world of tomorrow.</p><p>There are not a lot of other media products like big Hollywood movies. TV shows are windowed -- fetching one price for their initial network runs, then fetching another price in syndication. Most high profile books are windowed, released first in hardcover and later in less expensive paperbacks, but that's about it. Amazon doesn't complain that books are available free in public libraries. There have been a few examples of music that was released exclusively to one platform for a short amount of time, but generally that doesn't work well -- the industry is built around non-exclusive listening as a shared experience. </p><p>The film business has mistaken the future engine of growth for an existential threat before.</p><blockquote style="border: none; margin: 0px 0px 0px 40px; padding: 0px; text-align: left;">"'I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone.' Jack Valenti [then head of the Motion Picture Association of America] said this in <a href="https://news.slashdot.org/story/02/05/31/1622232/valentis-boston-strangler-testimony">1982 in testimony to the House of Representatives on why the VCR should be illegal</a>. He also called the VCR an "avalanche" and a "tidal wave", and said it would make the film industry "bleed and bleed and hemorrhage". </blockquote><p></p><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0zZS8Lx6hAjE_9dqvFdD0zKX71K2uMu5iqRUoS0Ctfp2mrCLtR5Q3ATuerSDTmeG_LpDom-WRXiR1xgCY4xjf1NvKnzq8kErG3VgLTHCSENur0ttjtq8xlWQZ0gmWFkX2GZl2YBM7u33D/s1600/s-l1600.jpg" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1600" data-original-width="1600" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg0zZS8Lx6hAjE_9dqvFdD0zKX71K2uMu5iqRUoS0Ctfp2mrCLtR5Q3ATuerSDTmeG_LpDom-WRXiR1xgCY4xjf1NvKnzq8kErG3VgLTHCSENur0ttjtq8xlWQZ0gmWFkX2GZl2YBM7u33D/w320-h320/s-l1600.jpg" title="VHS cassettes!" width="320" /></a></div><br /><div class="separator" style="clear: both; text-align: left;">The winner in this is HBO Max. It has a lot of high profile content to attract viewers that it wouldn't otherwise have (or even be able to make given the way the pandemic shut down movie and TV production). Even if this year's slate is not very strong, it probably has some significant hits. If this moves HBO Max closer to being Netflix, that's a pretty important strategic step for the company to take.</div><p></p><p>It's not clear to me that the participants are going to be losers in this ultimately. First, it looks like the discussion about money hasn't happened yet and the participants have some cards to play in that negotiation. Second, it is unclear if the exposure the work will get via this release pattern will be better or worse than what would have happened otherwise. Some film franchises started on TV -- like <i>Star Trek</i>. If the participants in the theatrical revenue have the basis to make a legal claim (or lean on the relationship), they might get a bit more consideration than the minimum Warners might be able to get away with paying. It is often said that Hollywood is a relationship business. If that's still true, Warners will have to pay something more to fix/maintain/replace the talent relationships they have clearly injured.</p><p>Similarly, I'm not sure it is clear that the movie theaters are the losers with this change even though <a href="https://variety.com/2020/film/news/independent-cinema-alliance-warner-bros-hbo-max-1234848342/">they think that they are</a> and <a href="https://variety.com/2020/film/news/theater-stocks-warner-bros-hbo-max-matrix-4-dune-1234845702/">so does Wall Street</a>. I'm not sure there were going to be any big movies for these theaters to show anytime soon, so they now have "access to product" and that's a plus at getting someone to come out of the house. And the cinemas are likely to get much more favorable splits of the COVID-diminished box office receipts because they don't have an exclusive window on these movies. With the growing competition from in-home entertainment options in general, the movie theater business looked challenging before "losing" its exclusive window...which is another way of saying that it was probably going to lose its exclusive window anyway. And, if theatrical exhibition exclusivity clearly makes the studios more money -- for example, if the vaccines are a success and everyone celebrates by going to the movies -- well, the empire can strike back as quickly as AT&T can fire its Warner Media executives (which it has already <a href="https://deadline.com/2020/08/warnermedia-shakeup-bob-greenblatt-kevin-reilly-keith-cocozza-out-ann-sarnoff-casey-bloys-upped-1203007672/">done a few times</a>). </p><p>The big loser in this are the ones not being written about in the press coverage. The more attractive streaming services like HBO Max become, the worse basic cable TV packages look. Basic cable used to be a great consumer value for in-home entertainment -- it offered more choices and quality content that broadcasters didn't provide at a reasonable price. But has cable prices have risen over the last four decades, now the value isn't so great. The significant innovations of the DVR and HD are effectively replicated by streaming platforms at a far lower starting ticket price. The cable resisters of the 1990s were older people; the non-cabled households of today are young people. </p><p>Even before Warner Brothers' move, programming investment has been leaving the cable ecosystem for the streaming video ecosystem -- Disney has shifted programming investment from Disney Channel, ABC, and Freeform to Disney+ and so have all of the other big players in cable programming (NBC Universal to Peacock, Discovery to discovery+). If basic cable TV subscriptions are a declining business -- which they are, and have been for several years -- the basic cable TV channels could, probably will, become hollowed out services with less and less marquee original programming and more and more reruns (because they still have 168 hours to fill every week). Higher prices and less value could spell a death spiral.</p>Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-27822997237396932482020-05-20T16:21:00.001-04:002020-05-20T16:21:19.007-04:00Since we were so rudely interrupted, a summary of the last year's developmentsThe impact of the coronavirus and the changes to daily life in response to trying to slow the spread of it need no further discussion from me, hence a short list:<br />
<ul>
<li>movie theatres closed</li>
<li>sports suspended at all levels</li>
<li>lots of people at home</li>
<li>much more online shopping</li>
<li>nearly complete shutdown of typical professional television and movie production</li>
</ul>
In my professional neck-of-the-woods, there's three big things to talk about:<br /><div>
<br />
<ol>
<li>The continued ascension of non-linear Internet-delivered video</li>
<li>The resultant continued demise of "cable TV" (a/k/a "pay TV" or multichannel subscription video) be it delivered by a cable, satellite, telco or "non-facilities-based" provider like Sling TV</li>
<li>Perhaps the most interesting -- how the coronavirus lockdown has forced experimentation with new forms of video production</li>
</ol>
<br />
Streaming video</div>
<div>
<br /></div>
<div>
<div>
These last fourteen months have shown continued big subscriber growth by Netflix, and <a href="https://www.forbes.com/sites/greatspeculations/2020/04/28/netflix-subscriber-growth-2x-expectations-good-news-or-peak/#71fd55373ea1">much bigger growth since the pandemic was declared</a>, but that's just the start of the streaming video developments.</div>
<div>
<br /></div>
<div>
Disney+ launched on <a href="https://variety.com/2019/digital/news/disney-plus-streaming-launch-date-pricing-1203187007/">November 12, 2019</a> at a price of $6.99 per month (less than Netflix's cheapest plan) and showed better-than-expected take-up right away. Disney programmed the new streaming service aggressively. Its billion dollar first year original programming budget is considerably more than an entertainment basic cable network would spent. And that expenditure showed up right away to consumers in the form of Star Wars spin-off <i>The Mandalorian</i>, a project that in earlier times would have found its way to theatres or home video or ABC. Disney+ was marketed aggressively as was expected. The consumer take-up with strong right out-of-the-box with <a href="https://techcrunch.com/2020/02/04/disney-plus-subscribers/">26.5 million subscribers by December 28</a>. Less expected was the Black Friday discount offer $60 for one year. </div>
<div>
<br /></div>
<div>
The quick take-up of Disney+ thoroughly demolished the theory that streaming is a special business that the incumbents cannot be competitive in. In retrospect, perhaps it shouldn't have been a surprise -- none of the tactics that Disney employed were significantly outside its core competence in marketing movies and cable TV networks.<br />
<br /></div>
<div>
Hulu joined Disney with a very aggressive Black Friday discount offer -- $<a href="https://www.businessinsider.com/hulu-black-friday-deal">1.99 per month for 12 months (versus regular retail of $4.99 per month)</a>.</div>
<div>
<br />
AT&T saw Disney's successful launch of Disney+ and looks to be following its playbook. It started with aggressive pre-launch pricing by <a href="https://www.hbomax.com/">HBO Max</a> -- $11.99 per month for 12 months (versus typical retail of $14.99 per month for HBO alone). As noted in <i>Multichannel News</i>, <a href="https://www.multichannel.com/news/hbo-max-undercuts-netflix-with-20-percent-discount">this is $1 per month less than the most popular Netflix service package</a>. It probably puts a lot of pressure on incumbent cable operators, as it offers more content than the cable version of HBO at what is in most cases a lower retail price. As we get closer to HBO Max's launch on May 27, we'll see if AT&T manages a programming splash as big as <i>The Mandalorian</i>. It doesn't look like <a href="https://www.cnet.com/news/hbo-max-discounts-launch-date-free-prices-snyder-cut-shows-movies-free-upgrades/">any of their launch shows have that kind of profile</a> and the shutdown of production due to the pandemic is probably part of that.</div>
<div>
<br />
Part of the success of Netflix is that it has expanded the range of its offerings. It has had significant success expanding into <a href="https://digiday.com/future-of-tv/future-tv-will-lot-reality-tv/">unscripted entertainment</a> - lowbrow, middlebrow, and high(ish)brow: <a href="https://www.cnn.com/2020/03/20/entertainment/tiger-king-review/index.html">Tiger King</a>, <a href="https://www.newsweek.com/no-town-safe-marie-kondo-her-new-netflix-series-sparking-joy-marie-kondo-1494012">Tidying Up with Marie Kondo</a>, <a href="https://www.npr.org/sections/thesalt/2018/12/06/674116242/on-netflix-chef-samin-nosrat-goes-global-to-demystify-salt-fat-acid-heat">Salt, Fat, Acid, Heat</a>. As a Netflix subscription is a household subscription, having a greater variety of programming should lower churn, as dropping the service affects more people in the household (and/or the <a href="https://qz.com/639726/the-complete-guide-to-netflix-password-sharing-etiquette/">children away at college who use the household login</a>).<br />
<br /></div>
<div>
Amazon made its number of Prime subscribers public in 2018 (<a href="https://www.theverge.com/2018/4/18/17254388/jeff-bezos-amazon-prime-100-million-subscribers-announcement">100 million! considerably more than analysts had estimated</a>) and <a href="https://www.theverge.com/2020/1/30/21115823/amazon-q4-19-earnings-prime-membership-fresh-one-day-shipping">by year end 2019 it was over 150 million</a>. At a retail of $119 annually, that's an annual revenue stream of nearly $19 billion dollars. By media standards that's a lot of money, even if most of its value for customers is in free shipping, rather than video. However, for some perspective, <a href="https://www.cmcsa.com/news-releases/news-release-details/comcast-reports-4th-quarter-and-full-year-2019-results">in 2019, Comcast's cable unit had just over $22 billion in video revenue</a>, and that represented a slight decline from the prior year.</div>
<div>
<br /></div>
<div>
Pulling back, the big advantage that Netflix and similar streaming services have with consumers relative to cable TV is that they are, still, much, much less expensive than the incumbent service. The big basic cable package provides good value to a household that wants and uses all of that programming, but at $75 or so, it's price dwarfs Netflix at $8 (for a single person household). No one has time to watch all of the programming on Netflix, so the greater volume and variety of basic cable is simply expensive overkill for many households, particularly those of young people, who, at least in the recent past, go out a lot. Add in an antenna (or <a href="http://locast.org/">Locast)</a> to get the major broadcasters and that's a very attractive offering for young adults or households that don't highly value cable exclusive national and regional sports services like ESPN/Fox Sports 1/NBCSN and YES/NESN/MASN.</div>
<div>
<br /></div>
<div>
It's unclear if the availability of these streaming services on computers, tablets, and phones is a big deal or not, but it is certainly a plus.</div>
<div>
<br /></div>
<div>
The Achilles heel of these services was thought to be bandwidth caps from Internet Service Providers (typically the cable operator), but these haven't shown up that widely or onerously. As the cable operators know better than anyone, steaming video helps sell a fast Internet connection and their business delivering that service is far more valuable than the legacy business of delivering packaged video services as it has both faster growth and higher margins.</div>
<div>
<br />
Changes with cable TV subscriptions<br />
<br />
Continued video subscriber losses by MVPDs (multichannel video programming distributors a/k/a cable and satellite TV providers). <a href="https://variety.com/2020/biz/news/cable-satellite-tv-2019-cord-cutting-6-million-1203507695/">It is ugly</a>. vMVPDs <a href="https://www.fiercevideo.com/operators/u-s-vmvpd-market-nears-10m-total-subscribers-analyst-says">growth slows, then the leaders, DirecTV and Dish's Sling start losing subscribers</a>. One analyst described the possibility of <a href="https://deadline.com/2020/05/pay-tv-risk-penetration-falls-vmvpd-collapsed-1202929737/">"a rapid death spiral for the category"</a>, with the category being "linear subscription TV".<br />
<div>
<br /></div>
<div>
Given that people are spending much more time at home and are bored, these should be the best of times for cable TV. So, why the potential death spiral? Cable TV has always been positioned in the market as a premium product -- something you buy if you want more/better than what you can get free over-the-air. Now, it is considerably less premium on two fronts:</div>
<div>
<br /></div>
<div>
First, new high-profile programming by cable networks is being cut back (because of declining numbers of cable subscribers) and a lot of those marquee new shows are...going to streaming instead. Television producers see streaming providers (Netflix, Amazon Prime, Apple TV+, <a href="http://hbomax.com/">HBO Max</a>) as a more attractive destination for a new show than cable network -- they may pay more in license fees and they definitely support the shows with a lot of off-air promotion (e.g., billboards in NYC). </div>
<div>
<br /></div>
<div>
Second, losing sports is painful. It is a key driver of the cable bundle's value and there may be no good programming substitute. We'll see how the <a href="https://www.espn.com/mlb/story/_/id/29136672/kbo-espn-schedule-how-watch-teams-korea-baseball-league-more">Korean Baseball Organization fares on ESPN</a>. Even if the games are compelling, it's hard to imagine there's a way to instantly have a country develop a rooting interest in the Korean teams. Baseball, among all major sports, is the one whose interest falls off the most below the top professional level. College football is nearly as popular as the NFL. College basketball and the NBA have a similar relationship, but that's far from the relative popularity of college baseball or minor league baseball relative to MLB.</div>
<br />
What have we learned?<br />
<ul>
<li>Stock market valuations of streaming (i.e., Netflix) created huge economic incentive for Disney and others to get into streaming, even if it will cost significant short term profitability, the public markets will reward it. </li>
<li>It is unlikely that net-net that Disney will come out ahead during this crisis since coronavirus may have a great negative impact on so many of its lines of business (<a href="https://www.bbc.com/news/business-52553003">theme parks, movies in cinemas, sports, and advertising</a>). No other media and entertainment company may be <a href="https://www.cnbc.com/2020/05/05/lightsheds-rich-greenfield-downgrades-disney-to-sell-ahead-of-second-quarter-earnings.html">hit on so many fronts</a>, as Rich Greenfield of LightShed describes very well.</li>
<li>Retransmission consent fees <a href="https://www.rbr.com/retransmission-consent-revenue-an-11-growth-engine/">may be going up dramatically</a> -- mostly from deals negotiated over the preceding years, but the decline in multichannel subs is a threat to that revenue stream</li>
<li>Locast's free broadcast TV service is still operating and has <a href="https://www.cordcuttersnews.com/locasts-ceo-wants-to-expand-its-free-streaming-service-into-rural-america/">expanded into new markets</a>. It has also finally been <a href="https://deadline.com/2019/12/locast-chief-david-goodfriend-says-big-4-broadcasters-waited-too-long-to-sue-1202800460/">sued by broadcasters and sued back</a>. Its existential question remains: will it win its case or lose and <a href="https://techcrunch.com/2014/11/21/aereo-files-for-chapter-11-bankruptcy/">suffer the fate of Aereo</a>?</li>
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Changes in video production</div>
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To me the most interesting development in the TV industry in the last fourteen months is less what we don't have, than the new things that we have gotten. We've had a crash course in new ways of producing television (at home instead of on a set in a studio, using a webcam or phone in lieu of a multiple pro camera setup) and most of it is pretty OK. Local news doesn't seem to suffer a lot by having their anchors at home instead of bantering at a desk. And <a href="https://www.vogue.com/article/news-anchors-broadcasting-from-home-bookshelves-flowers-coronavirus">that's also revealing</a> -- making a more personal relationship between viewer and "talent", as noted in <i>Vogue</i> (with its first link from this blog).<br />
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The NFL draft, which for years has been in a dogged pursuit to amp up its production values -- <a href="https://www.businessinsider.com/nfl-draft-2020-las-vegas-boats-bellagio-fountains-2020-1">they were planning to use boats to ferry the picks to the stage this year, really</a> -- actually got some great reviews of its home-based draft this year, probably in part to the fact that the stars of that show are regular people (as far as TV skills go) and seeing them in a home environment made them more relatable to the audience, especially NFL Commissioner <a href="https://sportsnaut.com/2020/04/roger-goodell-praised-for-handling-of-all-virtual-nfl-draft/">Roger Goodell who appeared largely human</a>. This fascinating <a href="https://www.forbes.com/sites/howardhomonoff/2020/04/30/how-2020-nfl-draft-gave-us-a-window-into-future-of-tv-production/#406b2d3033d1">Forbes article</a>, by my friend and former colleague Howard Homonoff, describes the very interesting and innovative video production tech the NFL used.</div>
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Seeing musicians perform at home had much that same charm, irrespective of the genre of the music. Billie Eilish in her bedroom with her brother from iHeart's concert of pop stars to a show tune reconceived for Zoom in broadway.com's Sondheim concert.<br />
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<iframe allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/O5eAraqIYRU" width="560"></iframe></ul>
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<ul>full clip of Billie's performance is no longer available on YouTube, sadly</ul>
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<iframe allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/-PNX9PPCEls" width="560"></iframe></ul>
<ul>full disclosure: that's my office chair that <a href="https://en.wikipedia.org/wiki/Ann_Harada">Ann Harada</a> is sitting on in this clip</ul>
The music videos produced during this period -- I'd put forward CHVRCHES "Forever" (Separate but Together) as an archetype -- remind me of the simple and fun music videos of the early video age...and we get to see the artists in their homes (or something like it) and that's often fun.<br />
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<iframe allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/rPM0XL-ccVY" width="560"></iframe><br />
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There will be a huge impact on commercial production as well. Given the upheaval in consumer's lives, the advertising messages suitable for before the coronavirus are often ill suited to our lives now (<a href="https://www.cnbc.com/2020/03/17/kfc-ad-showing-finger-licking-put-on-hold-due-to-coronavirus.html">sometimes frighteningly so</a>).<br />
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Producing new commercials without the usual camera and sound crew creates new challenges. One actor of my acquaintance shared that she was being asked to film herself at home -- for a national commercial with a DSLR or other similar high end, but decidedly consumer video equipment. (Having the performer supply more of the <a href="https://en.wikipedia.org/wiki/Means_of_production">means of production</a>, apologies to Karl Marx is nothing new -- newspaper reporters don't have to go into the office to type up their stories on the newsroom computer system, and many, perhaps most, audio books are made by voice artists working in home studios. The costs are much lower and the quality difference is much smaller than it once was. Workers' might be a step closer to...emancipation with this ownership.)<br />
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So, what's new with you?<br />
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Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-57048939156866773882019-04-29T16:09:00.000-04:002019-04-29T16:09:02.915-04:00Financial Reporting Changes for AT&T, Comcast 1Q19One of the little joys -- at least one of my little joys -- of reading the earning releases of the pay TV companies is watching when the metrics change (and how precious little reporting there is of it in the trade press).<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
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<tr><td class="tr-caption" style="text-align: center;">No longer U-Verse and DirecTV subscribers, they are now "Entertainment Group premium TV" subscribers</td></tr>
</tbody></table>
Starting with this quarter, AT&T decided not to report separately the number of DirecTV and U-Verse video subscribers, despite the fact that the platforms are entirely different in terms of technology, programming, relationship to a broadband service, ARPU, and just about everything else. It did report that <a href="https://about.att.com/story/2019/att_first_quarter_earnings_2019.html">it lost 544,000 "premium TV" subscribers</a>, but did not feel a need to break those out between the platforms, both of which have long operating histories. It did feel a need to provide that detail for its DirecTV Now business (lost 83,000 subscribers), although its ARPU is lower, its operating history is much shorter period, and its results are much more erratic. What does this lack of information mean mean? Lack of detail usually means that the story is not good. For the curious, <a href="https://seekingalpha.com/article/4256385-t-inc-t-ceo-randall-stephenson-q1-2019-results-earnings-call-transcript?part=single">AT&T's earnings call</a> shed no light on this topic. Also, premium TV is usually the term of art for another offering of the multichannel landscape, the category led by another AT&T unit, HBO.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEih2X0Q-hUjFcbD7QqKPxUHG1tuIt9rR0a04LMANQ-lAHJQ1NUhfeN9UG2vHcP9XorjuVhTwwqXNKwnPURI9EWUmUQxqq360Q1FNRkOM4ZyX97Jzg385bDpAycmSwgaUtoen5G1cBMpLUE7/s1600/comcast_official_logo_2012.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="71" data-original-width="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEih2X0Q-hUjFcbD7QqKPxUHG1tuIt9rR0a04LMANQ-lAHJQ1NUhfeN9UG2vHcP9XorjuVhTwwqXNKwnPURI9EWUmUQxqq360Q1FNRkOM4ZyX97Jzg385bDpAycmSwgaUtoen5G1cBMpLUE7/s1600/comcast_official_logo_2012.jpg" /></a></div>
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Comcast also eliminated one of its usually-reported cable video metrics this quarter. Alone among cable operators, Comcast reported "Advanced Services Customers" -- customers which had either an HD set-top box or a DVR or both. At least, Comcast had reported this number, which represented 70.4% of video subscribers at year end 2018. <a href="http://cmcsa.com/news-releases/news-release-details/comcast-reports-1st-quarter-2019-results">For 1Q19, this number is gone</a>. Unlike the AT&T story, the Comcast change more likely highlights that the concept that HD is an "advanced service" is, to be kind, a little outdated and with the likes of <a href="https://www.lightreading.com/video/video-services/youtube-tv-unshackles-its-cloud-dvr--/d/d-id/746621">YouTube TV bundling a somewhat-constrained DVR in its base consumer offering</a>, a Comcast DVR is looking a lot less "advanced" than it once was.<br />
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<br />Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-20975866177282353132019-02-09T15:25:00.000-05:002019-04-02T13:39:26.302-04:00Google Fiber RetrenchesWith the <a href="https://fiber.googleblog.com/2019/02/louisville_7.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+blogspot%2FoObXp+%28%C2%A0Google+Fiber+Blog%29">recent announcement</a> that it was pulling out of its latest market, Louisville, Kentucky, it seems that Google Fiber has learned what anyone in the cable business already knew, delivering this kind of service in the real world is difficult.<br />
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There was great hope for what Google Fiber might do to the residential broadband business when it launched in 2012. The cable business had a less-than-stellar reputation for customer service. The marketplace for better-than-DSL Internet speeds was not very competitive. Broadband service was more penetrated among the wealthy, giving rise to the digital divide. </div>
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Even leaving aside its groundbreaking search service, Google had been audacious and truly innovative in a number of areas. In the virtual world, its Gmail, Maps, and News services were huge improvements over the incumbent providers of such services at the time of their launch. In the physical world, its approach to data centers exhibited what one hoped to see from Google Fiber. The conventional wisdom was that data centers needed reliable (and expensive) chips, but instead it used <a href="https://www.cnet.com/news/google-spotlights-data-center-inner-workings/">more-failure-prone cheap hardware combined with custom software that handled errors better</a>. It set up data centers in <a href="https://www.wsj.com/articles/SB10001424053111904836104576560551005570810">places with cold outside air</a> which eliminated the need for as much air conditioning. It aggressively pursuing <a href="https://www.theregister.co.uk/2016/05/12/power_in_a_cold_climate/">cheap electricity when siting data centers</a>. There was hope that it could bring that level of innovation to providing cable services.</div>
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My experience in the cable business showed me that the folks who run cable television systems are smart and entrepreneurial. Providing service to thousands of communities meant that they learned to overcome millions of obstacles and had the opportunity to run many experiments with different approaches. Compared to the phone companies that had to navigate similar circumstances, there was no pricing regulations that guaranteed a return. The companies were built with mountains of high-interest debt, there was not much margin for error. And cable television was competing with a free service, broadcast television. If it wasn't worth buying, people wouldn't. Google may have underestimated its competition.</div>
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Cable operators had local franchises and had worked through local political issues. They couldn't redline a big city and only serve the most profitable customers, to get a city franchise they would have to build out every neighborhood.</div>
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Alas, Google Fiber's service delivery innovations may not have been that innovative. By "auctioning" off providing service to the "fiberhoods" where the most people signed up, <a href="http://www.phillytrib.com/commentary/google-s-broadband-war-redlining-black-communities/article_78510d50-d377-59ef-8032-2db568d647c4.html">Google <i>de facto</i> redlined</a>. Its experiments with <a href="https://www.fiercewireless.com/wireless/google-fiber-s-fixed-wireless-service-webpass-closes-boston-operation">fixed wireless</a> to avoid the costly build from the street to the home turned out to be, at best, an idea before its time. In Louisville, its innovation -- microtrenching -- shallow trenches to hold the street-to-home fibers -- doesn't sound like something that the cable incumbents would not have tried and utilized, if they worked. However, <a href="https://potsandpansbyccg.com/2017/03/31/the-pros-and-cons-of-microtrenching/">microtrenching has its problems</a> and as it <a href="https://www.wdrb.com/news/google-fiber-announces-plan-to-fix-exposed-fiber-lines-in/article_fbc678c3-66ef-5d5b-860c-2156bc2f0f0c.html">proved in Louisville</a>.</div>
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Google Fiber may not have generated <a href="https://www.recode.net/2019/1/10/18175869/susan-crawford-fiber-book-internet-access-comcast-verizon-google-peter-kafka-media-podcast">much of a return for Alphabet shareholders</a>, but the impact of the gigabit per second speed offering and the attention on it on the incumbent providers, certainly was a benefit to the consumer internet access marketplace. By that standard, it was <a href="https://hbr.org/2018/09/why-google-fiber-is-high-speed-internets-most-successful-failure">a very successful failure</a>. Still one thinks of what might have been had Google Fiber been able to create the kind of competition that it set off in a few markets in many more markets across the country.</div>
Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-46219859135525452552018-06-23T13:38:00.003-04:002018-06-23T13:38:46.075-04:00What ESPN+ Says About the Multichannel FutureOn April 12, 2018, ESPN <a href="https://techcrunch.com/2018/04/02/espns-streaming-service-espn-to-launch-april-12/">launched its thoroughly pre-announced subscription video over-the-top service, ESPN+</a>. The service is notable for ESPN trying to establish a beachhead in the direct-to-consumer video business and not distributing a video service primarily through MVPDs. It is a watershed for the most important programmer in basic cable.<br />
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It is not hard to see why. after decades if growth, ESPN has <a href="http://www.businessinsider.com/espn-losing-subscribers-not-ratings-viewers-2017-9">lost household reach for many years</a> from its peak in 2011,<br />
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<a href="http://time.com/money/4227133/cable-price-four-times-inflation/">driven by higher basic cable prices</a> and over-the-top video services, led by Netflix, have had tremendous growth during the same period.<br />
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To remain "The Worldwide Leader in Sports" ESPN has to follow the people.<br />
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ESPN has had an over-the-top video service before, <a href="https://en.wikipedia.org/wiki/ESPN3">ESPN3</a> provides additional games and other comments to authenticated ESPN subscribers. That service is distributed in coordination with its distributors: facilities-based MVPDs (<a href="https://www.fiercecable.com/cable/top-7-cable-satellite-and-telco-pay-tv-operators-q4-2018-ranking-comcast-directv-charter-and">multichannel video programming distributors</a> - cable, DBS, telco - e.g., DirecTV, Comcast, Verizon FiOS) and, later, <a href="https://www.multichannel.com/news/virtual-mvpds-ended-2017-53m-subs-study-418107">virtual MVPDs</a> (e.g., Sling, DirecTV Now).<br />
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ESPN had <b>never</b> created a service to address the non-MVPD marketplace. Instead of addressing this growing market directly, they looked to support what the MVPDs were doing to improve the value of the multichannel video subscription as its <a href="https://www.leichtmanresearch.com/82-of-tv-households-subscribe-to-a-pay-tv-service/">retail price kept rising</a>. This lead to <a href="https://www.multichannel.com/news/espn-mobile-app-stitches-watchespn-395678">WatchESPN</a> (its app which distributed its TV Everywhere service ESPN3), <a href="https://www.multichannel.com/news/espn-tips-hd-vod-147928">ESPN video-on-demand</a>, the short-lived <a href="https://www.hollywoodreporter.com/behind-screen/future-3d-tv-why-espn-568445">ESPN 3D</a>, etc. That strategy made a lot of sense for a long time.<br />
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As the most expensive service by far in basic cable multichannel video, ESPN is the biggest beneficiary of the basic cable TV bundle. The primary benefits of being part of the basic cable package are (1) distribution to consumers and (2) low marketing costs. With the MVPD as the primary marketer of basic cable video subscriptions, ESPN gets a largely free ride. For a cable network, this greatly simplifies the sales process, one needed/needs to get a few dozen key distributors to roll out the network, not millions of individual consumers to buy. Distributors also were keenly focused on selling it. Until the past decade, basic cable was the most compelling offering from cable providers. Now it is not the first priority, <a href="https://www.marketwatch.com/story/comcast-is-making-internet-a-centerpiece-as-cable-tv-continues-to-decline-2018-01-24">eclipsed for cable operators by cable Internet service</a>. [And slightly <a href="https://www.theringer.com/2017/6/8/16036586/tv-skinny-bundle-netflix-hulu-youtube-google-amazon-cbfdf153bddc">marginalized by "skinny bundles" of channels that lack ESPN</a>.]<br />
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ESPN+ allows ESPN to establish its a direct-to-consumer distribution and is starting from scratch on marketing a video service to consumers. [ESPN does have direct-to-consumer marketing experience with <i>ESPN The Magazine</i>.] There are product, price, promotion, packaging, and distribution issues to sort out. Given its strategic importance, it is not surprising that ESPN decided to go aggressive on price -- at $4.99 per month ESPN+ is materially less expensive than Netflix and Hulu.<br />
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The other priority for ESPN is to keep the positive relationships with the MVPDs, because the amount of money coming in via basic cable distribution -- both in affiliate fees and advertising on the TV services -- will likely dwarf the amount of money coming in on ESPN+ for quite a while.<br />
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During ESPN's long growth period, adding value for the cable operators was very important. ESPN's affiliate fees, for a long time, increased by an astounding 20% per year. Now, with more typical single-digit rates of increase on affiliate fees, the MVPDs cannot reasonably have the same expectations for added value in ESPN3/WatchESPN.<br />
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ESPN has always heavily invested in sports content and then figured out a way to best utilize it to enhance the value of the business. In the 1990s, when ESPN faced little immediate competition on the cable dial and there was no direct-to-consumer Internet video business, ESPN would buy up rights to college football and air few of the games, instead <a href="https://www.sportsbusinessdaily.com/Journal/Issues/2013/03/04/Media/ESPN-Fox">"warehousing" them</a>. The benefit to ESPN was protecting the franchise by not allowing a would-be sports competitor to use this programming to launch or enhance its network. Later, ESPN used additional games to support the TV Everywhere effort -- instead of letting Tennis Channel license extra early round matches of the US Open, ESPN would put them on ESPN3. Now, the best business use of those "extra rights" -- rights not needed to program ESPN, ESPN2, ESPNU, or ESPN's other cable services -- is to build out the appeal of ESPN+.<br />
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ESPN going direct-to-consumers is a difficult thing for the MVPD to swallow. MVPDs are used to being the 800 pound gorillas of TV distribution and dictating the key business terms. Historically, the MVPD's only real beef in their dealings with ESPN was its high price -- few questioned its programming or alignment with MVPD objectives. However, all around the multichannel industry, the groundwork has been laid for this moment. Three key over-the-top subscription service launches have led this change.<br />
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Starting around 2012, WWE <a href="https://nypost.com/2012/03/02/wwe-smackdown/">planned to launch a basic cable network, but found little interest from cable operators for more channels for their digital packages</a>. So it launched over-the-top, on February 24, 2017. For WWE, this was, if not a bet-the-company move, something close to it. At first the new network got a tepid response and looked like it might be a disaster -- <a href="http://www.wrestling-online.com/wwe/directv-not-carrying-wrestlemania-34-on-traditional-pay-per-view/">alienating distributors, like DirecTV, who did not like the impact of this new distribution on their lucrative pay-per-view event busines</a>. Now it is clear that WWE Network was not wrong, and it wasn't even particularly early. The WWE network is clearly <a href="http://money.cnn.com/2018/02/07/news/companies/wwe-vince-mcmahon-wrestling/index.html">an economic success</a> and many of the distributors, like Dish, have found a way to make peace with it.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9xC6zz2DgthvJ4xlPxES4XoK2QpDFDnHYhLYOfKq_GSpf3pndSz8hoEwKTcXjWYVfKnjOBtcllTVjV9BPr-MPa3MgIltC0JBcfvwo7FrPX3F4Owj4gs6OtGaV1kNNqHDdRQVkG8dtDWoJ/s1600/472957-cbs-all-access-logo.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="245" data-original-width="333" height="235" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9xC6zz2DgthvJ4xlPxES4XoK2QpDFDnHYhLYOfKq_GSpf3pndSz8hoEwKTcXjWYVfKnjOBtcllTVjV9BPr-MPa3MgIltC0JBcfvwo7FrPX3F4Owj4gs6OtGaV1kNNqHDdRQVkG8dtDWoJ/s320/472957-cbs-all-access-logo.png" width="320" /></a></div>
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CBS All Access launched eight months later, on October 28, 2014. Unlike the WWE Network, this was a much less risky endeavor; CBS didn't need the MVPDs in the same way -- its flagship channel's distribution was secure. CBS did need to figure out <a href="https://www.cordcuttersnews.com/cbs-access-now-174-live-local-affiliates/">how to work with its affiliated stations</a>, but both parties had a lot of motivation to sort that out and their interests were basically aligned. All Access turned out to be a brilliant strategic move by CBS to establish its own revenue stream and its own direct-to-consumer distribution. It also works well as <a href="http://www.tvgrimreaper.com/2017/09/19/cbs-access-isnt-real-business-negotiating-leverage/2983/">a demonstration of the value of the network for retransmission consent negotiations</a> with MVPDs. After all, if consumers are willing to pay $5.99 per month retail for CBS, it is hard for the cable operator to argue that CBS is not worth $1 or $2 or $4 on a wholesale basis. To further support the service, <a href="https://techcrunch.com/2018/03/07/cbs-all-access-is-doubling-down-on-originals-planning-expansion-to-canada-and-australia/">CBS spent money on additional unique promotable content to create some additional reasons for people to subscribe</a> (e.g., its first, <a href="https://variety.com/2018/tv/news/good-fight-renewed-season-3-cbs-all-access-1202794898/"><i>The Good Wife</i> spinoff <i>The Good Fight</i></a>, and <a href="https://www.wired.com/2017/12/geeks-guide-star-trek-discovery/" style="font-style: italic;">Star Trek: Discovery</a> -- both <a href="https://digiday.com/media/entertainment-news-and-now-sports-inside-cbss-efforts-to-go-over-the-top/">targeted to superfans</a>).<br />
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Since CBS All Access is completely under CBS's control, it does not need to work with joint venture partners to make changes to the service or experiment with it, <a href="http://articles.latimes.com/2011/apr/12/business/la-fi-ct-hulu-20110412">as Hulu does</a>. All Access can be expanded with additional programming and marketing if there is a return; can be scaled back or shut down if it is more profitable to distribute content through MVPDs or other distributors (e.g, Facebook, Apple). It can <a href="https://deadline.com/2018/01/cbs-all-access-joins-amazon-channels-with9-99-a-month-ad-free-version-1202236252/">distribute a version through Amazon with no advertising</a>. All Access is not yet financially material to CBS's business as a whole, but has significant strategic value in establishing a direct-to-consumer business and sorting out the technological, billing, marketing and other issues necessary to run that business should it be the horse that CBS wants to ride over the long haul.<br />
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HBO Now was the last big domino to fall when it launched six months after CBS All Access. More like ESPN, HBO's history was synonymous with the growth of early cable. WWE didn't have many direct relationships with MVPDs and CBS, had mostly contentious ones related to retransmission consent pricing. HBO, like ESPN, was a trusted vendor to MVPDs. However, after many fits and starts trying to find a way to l<a href="https://www.multichannel.com/news/hbo-now-goes-live-389517">aunch its service OTT without alienating MVPDs</a>, eventually it just moved ahead, the opportunity was too compelling. And this time, distributors also found a way to make peace with it relatively quickly, which they had to because is has become <a href="https://www.multichannel.com/news/hbo-streams-past-5m-ott-subscribers-reports-417885">a material business for HBO</a> it is not going away.</div>
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What these three offerings had in common (and how they are all different from ESPN), is that none of them were part of the basic cable bundle. HBO was always available on-top-of basic cable as an <i>a la carte</i> add-on. CBS was always available for free over-the-air. WWE Network was not an established, profitable basic cable channel; it was an aspiring new basic cable channel.</div>
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Direct-to-consumer video streaming is the new world, but what does this mean for the basic cable bundle? The conventional wisdom is that sports is the only thing keeping the basic cable bundle afloat, the sports represents unique content that drives all households to subscribe. I'm not sure that is the whole truth.</div>
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It has been well documented that core sports fans represent about one-third of cable subscribers, the other two-thirds is casual fans and non-fans. In the UK, where most of the high value sports programming -- Premier League soccer -- is available in a separate subscription, about one-third of customers sign up for it. When NESN, the regional sports network owned by the Boston Red Sox and Boston Bruins, was distributed as an a la carte premium channel, its subscription levels were in the same ballpark (moving up and down with team performance as well).<br />
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With the rise of virtual MVPDs, some of the underserved market segments may get services better tailored to their needs. The households with little or no interest in sports are one of them. Historically, there was great fear among distributors in not offering ESPN -- it has been the goose that laid the golden egg. To my knowledge the <a href="https://www.digitaltrends.com/home-theater/philo-tv-channels-pricing-features/">virtual MVPD Philo TV</a> is the first mainstream service to launch without any major sports. It is a very small player, 50,000 subs at year end 2017 or about 1% of the still modestly-sized virtual MVPD marketplace.<br />
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Sports is unique relative to other programming. It is live, unlike most entertainment programs, so it is usually watched live. Unlike the other big category of live programming, news, it is not a commodity -- the audience that watches the NFL does not accept other sports, like soccer or Ivy League football, as a pretty good substitute.<br />
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Should MVPDs look on ESPN+ as an existential threat? Will it increase the attrition of basic cable subscribers? From a content perspective, it seems unlikely -- the best sports events are not available on ESPN+ and are only on ESPN and ESPN2. However, if ESPN+ does get established, ESPN will then have another significant outlet and could/likely will, over time, decide to make available some of its programming on ESPN+ in addition to ESPN and ESPN2, later, it might actually take content off the cable channels, in favor of putting it on ESPN+. It is unclear to me if ESPN has already moved content from ESPN3 to ESPN+, but it is clear that it has acquired new content exclusively for ESPN+ like the <a href="https://variety.com/2018/tv/news/espn-adds-30-fights-to-ufc-tv-rights-deal-reaching-1-5-billion-value-exclusive-1202819447/">UFC</a>.<br />
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Only a growing market can support additional programming investment. Programming investment is moving off of linear television, which cannot support the cost. The market for basic cable video subscriptions is declining and the market for television advertising is not growing any faster than inflation. We've seen this impact already at ESPN, it is rarely the first choice of TV executives to <a href="http://www.sportingnews.com/other-sports/news/list-of-biggest-names-laid-off-at-espn-updates-ed-werder-john-buccigross/eyf1kwjj6gpt10erj8ke3n1tp">lay off high profile talent</a>.<br />
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Fundamentally, ESPN+ is the hedge to protect Disney for the future in the event that the multichannel bundle declines or collapses. Philosophically, Disney has always been platform agnostic. It has never been allied with an MVPD and would take its high quality content wherever the market led it be that DVD or PPV or something else. Disney sees that it is a strategic priority to develop a direct-to-consumer streaming video platform and is investing heavily to do so. Whether or not it makes a ton of money in the short term does not matter (<a href="https://www.nasdaq.com/article/should-disney-investors-worry-as-espn-plus-underwhelms-cm948621">and it looks like it is not making a ton</a>). That's what a hedge is. Like CBS All Access, ESPN+ is offering more for superfans, but unlike CBS All Access, it isn't offering the the main course. As currently structured, ESPN+ is a complement to getting ESPN in a basic cable subscription, but a poor substitute for it.<br />
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My view is that ESPN+ will not be a big success until it is a closer substitute for ESPN and ESPN2 via basic cable.<br />
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It is clear that ESPN needs to rationalize its business for the current and future video marketplace. ESPN+ is a shot across the bow of the MVPDs, but the multichannel television business has been under attack for many years now. It would be unreasonable for MVPDs to expect ESPN to go down with the ship. All that said, the ESPN business that comes out of this may not be nearly as profitable a franchise as the one powered by the economics of the basic cable bundle.<br />
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<br />Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-66704578048256535742018-01-23T10:21:00.002-05:002018-01-23T12:20:55.749-05:00Starz Dropped from Altice - Premium Channels Not on ConsignmentIn one of the first cable programming outages of 2018, the channels of premium TV provider Starz are no longer carried on the cable systems of Altice. Many cable programming affiliation agreements expire at year end and the one between Starz and Altice (the owner of the former Cablevision/Optimum and Suddenlink cable systems) is one such deal. What caught my eye about this dispute was <a href="http://deadline.com/2018/01/starz-networks-altice-negotiations-distribution-agreement-outlander-power-american-gods-1202233872/">a quote from Altice</a>, emphasis added.<br />
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Given that Starz is available to all consumers directly through Starz's own over-the-top streaming service, we don't believe it makes sense to charge all of our customers for Starz programming, particularly when their viewership is declining and the majority of our customers don't watch Starz,” Altice said in its statement. “We believe it is in the best interest of all our customers to replace Starz and StarzEncore programming with alternative entertainment channels that will provide a robust content experience at a great value.</blockquote>
Of course, all Altice customers do not pay for Starz. Starz is a premium channel and is usually sold a la carte or in higher level cable programming packages. It is not provided to all cable TV customers like a broadcast channel (e.g., ABC, PBS) or virtually all customers like a widely-distributed basic cable channel (e.g., CNN, USA, ESPN). So, Altice customers do not all pay for Starz.<br />
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What this means however, is that Starz licenses its channels to Altice on a per-basic-subscriber basis, not on a per-Starz-subscriber basis. Starz doesn't share in the revenue that Altice generates from its service; it has effectively a marketing guarantee from Altice, which then can package the service in the way that it feels most benefits Altice's business.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZYtr4gmNjxuL0T8sRdHLWiZZYXEG70fU4owyrAjXoB-GUhSBMr25rHwW5K43PVunQ_CdjKZiZlYa_X-RAFlGhMXBTBEglCoZSkBHZJzhLxzOORy4hyphenhyphen0UFI-8EItEKv-b817018frxtDx4/s1600/stz_2016_bk_rgb.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="242" data-original-width="903" height="85" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZYtr4gmNjxuL0T8sRdHLWiZZYXEG70fU4owyrAjXoB-GUhSBMr25rHwW5K43PVunQ_CdjKZiZlYa_X-RAFlGhMXBTBEglCoZSkBHZJzhLxzOORy4hyphenhyphen0UFI-8EItEKv-b817018frxtDx4/s320/stz_2016_bk_rgb.png" width="320" /></a></div>
Such per-basic licensing of premium channels is hardly new to the pay TV business; I first saw such a deal in the early 1990s. Such deals can benefit the cable operator -- instead of having a $10 premium channel subscribed to by only 10% of customers for which it pays 50% of revenue ($5 wholesale), and generates $0.50/basic subscriber in margin, the MSO can provide this "$10 retail value service" in lots of packages for effectively a lot less than $10 -- it can provide more value to more consumers with that kind of packaging flexibility and upside.<br />
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However, the revenue upside of earlier cable is well in the rearview mirror now. Cable programming at the retail level is too expensive in today's competitive world.<br />
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That the third-tier premium provider (Starz is well behind HBO/Cinemax and Showtime/The Movie Channel/Flix in market share; this is not a commentary on the quality of its programming) is licensing its content on a per-basic guarantee really shows how inverted the pay TV business has become. With the competition among distributors, the winners have been the programmers who can require terms of the MSOs that they cannot get in the over-the-top world (when the programmers sell direct, they don't get a revenue guarantee). <a href="https://www.mediapost.com/publications/article/308678/new-linear-tv-packages-wont-carry-a-la-carte-netw.html">In the over-the-top world</a>, the programmer has greater costs to market the service themselves, not via the cable operator, and greater control (uniform national pricing) but in that distribution channel, the programmer keeps the retail revenue, not just the wholesale, and also has control of the packaging -- no leaving the smaller channels out..<br />
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<b>Update:</b> Starz asks FCC to intervene in its dispute with Altice (Sara Fischer <a href="https://www.axios.com/starz-asks-fcc-to-step-in-amid-altic-1516373962-2ecebacd-5bca-4f53-8a43-2081ad8937d0.html">article</a> at Axios)Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com1tag:blogger.com,1999:blog-7380952788570867333.post-33985322534133570892017-10-08T00:09:00.001-04:002017-10-08T00:09:28.497-04:00Google Fiber Launching Without TVGoogle Fiber isn't dead yet, but as yet another sign that its strategy at launch was, if not fundamentally flawed, at least, not where the market was going. Fiber's next cities, Louisville and San Antonio, are not getting the Internet and TV service, but <a href="https://fiber.googleblog.com/2017/10/coming-soon-new-approach-in-louisville.html">only its Internet service</a>. It turns out, cable TV is a hard business.<br />
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Google notes that there are now a wealth of over-the-top "cable TV" services that can ride over its laudable gigabit connections, and that is true. Its own <a href="https://tv.youtube.com/welcome/">YouTube TV</a> is one of them.Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com2tag:blogger.com,1999:blog-7380952788570867333.post-25195029192352349552017-09-04T14:48:00.001-04:002017-09-04T14:48:06.077-04:00Google Fiber Stalled Out in KCIt is not exactly new news, but Google Fiber, which hoped to jolt the Internet access business with its signature $70 per month, 1 gig service, <a href="https://motherboard.vice.com/amp/en_us/article/xwwmp3/kansas-city-was-first-to-embrace-google-fiber-now-its-broadband-future-is-tbd">has hit the wall </a>in Kansas City.<br />
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I have been involved in the cable TV industry for a long time and can safely say that it is exceedingly complex. The vast majority of cable operator employees do things like installations and customer service, which is really outside of Google's core competency. The packaging of programming involves business relationships with a handful of key suppliers (e.g., Disney, Comcast/NBC Universal, Fox, Discovery, CBS, AMC, A&E Networks) for whom there are typically no good substitutes. The business structure of the industry developed as a local monopoly (via exclusive franchises granted community-by-community). The early cable technology was very one-size fits all, not easily addressable to an individual house, which led to the big "basic cable" bundle. Despite all its assets, Google couldn't remake the television programmer-operator relationship with its small scale.<br />
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As an Internet access business, at $70 per month, it was simply a lot more expensive and powerful than a typical cable Internet service and naturally appealed to well-heeled early adopters, despite <a href="https://www.dailydot.com/layer8/google-fiber-untangle-america-digital-divide/">sincere efforts by Google to sell the benefits of high speed interest to less-well-off people</a>. The analogy that comes to mind is selling higher-priced organic food to people who cannot afford it without sacrificing something else that they already buy -- not easy.<br />
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Google Fiber never made it to NYC, I would have liked to try it.<br />
<br />Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-7068172074158135432017-03-29T19:32:00.002-04:002017-03-30T17:15:46.317-04:00AT&T's U-verse Withers Because of Physics When I wrote this <a href="http://www.peterlitman.com/2014/05/directv-is-to-at-as-hits-was-to-tci.html">post (DirecTV is to AT&T as HITS Was to TCI</a>) it was pure speculation.<br />
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When AT&T launched U-verse, which attempted to provide TV, Internet and phone service without a fat pipe (i.e., cable or fibre) into the household, I recalled that cable engineers said that it wouldn't work. I recall the quote from one. He described the problem as: "physics".<br />
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For a few years, however, it did. AT&T could provide TV, Internet and phone service via twisted pair (traditional telephone wiring), provided the Internet speeds were not too fast and the household was not watching or recording too many HD programs at the same time. Until a 2010 upgrade, <a href="http://www.fiercecable.com/cable/u-verse-customers-getting-upgrade-to-4-simultaneous-hd-streams">a household could not watch more than 2 HD programs at the same time</a>.<br />
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However, now the writing is on the wall. Since AT&T acquired DirecTV in July 2015, it has steadily deemphasized its newer U-verse offering (launched 2006) in favor of expanding DirecTV (launched 1990). U-verse lost 1.36 million video customers in 2016, while DirecTV added 1.23 million subscribers. Since the multichannel television market is not growing, but Internet access is, clearly moving customers off of U-verse TV service (and shutting it down) will allow AT&T to devote that bandwidth to offer faster Internet speeds on such systems without a complete rebuild. Reason: physics.<br />
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Today brings <a href="http://www.fiercecable.com/cable/at-t-may-shutter-u-verse-website-report-says">an article about the likelihood of shutting down the U-Verse website on which it markets the triple play</a>.<br />
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<br />Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-6401084252387534322016-11-29T16:51:00.001-05:002016-11-30T21:09:43.600-05:00DirecTV Now Renames DirecTV's DBS PackagesUnnoticed in <a href="http://www.theverge.com/2016/11/28/13766274/att-directv-now-streaming-tv-service-announced-release-date">the hubbub over its debut yesterday</a>, DirecTV Now, the new over-the-top video service from AT&T, shares its basic packaging scheme with DirecTV's core DBS service.<br />
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<ul>
<li>"Live a Little" is based on Entertainment</li>
<li>"Just Right" is based on Choice</li>
<li>"Go Big" is based on Xtra</li>
<li>"Gotta Have It!" is based on Ultimate (apparently only spending $70 per month warrants an exclamation point)</li>
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<tr><td class="tr-caption" style="text-align: center;">Original marketing piece for DirecTV Now did not include many channels</td></tr>
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There are some exceptions as noted in white (Crime & Investigation and FX Movie Channel do not appear to be in any DirecTV DBS packages) or blueberry (in the case of FXX, which is in the DirecTV DBS package "Xtra", not "Entertainment" as one would have expected) or light blue (in the case of Justice Central which is in the DBS package "Choice"). Source for the channel lineup list was <a href="http://variety.com/2016/digital/news/directv-now-full-channel-lineups-1201930124/">Todd Spangler's article in Variety</a>. The prices at the top of this chart are the expected retail; as per the marketing piece above, there is a $35 introductory rate for "Go Big" for the first 3 months.<br />
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There are some channels in DirecTV's DBS packages that are not in the corresponding DirecTV Now package. Among the more conspicuous absences: Aspire, INSP, ION, Mav TV, Ovation, Reelz, and the shopping services like QVC and HSN. All are independent programmers.</div>
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[Many of the channels are public interest channels, which DirecTV is required to provide space for on DBS by law (there is no similar law for over-the-top). Examples of public interest channels are BYU TV, Free Speech TV, and NASA TV; they are all non-commercial services.]</div>
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One note on the apparent loss-leader nature of parts of the offer: Prepaying $105 (3 months of Go Big at the $35 introductory rate and getting a free $150 Apple TV) is a good deal <a href="http://appleinsider.com/articles/16/11/28/att-launches-directtv-now-streaming-service-with-free-apple-tv-offer">even if you don't want DirecTV Now</a>. $105 is even less than the <a href="http://www.apple.com/shop/product/FGY52LL/A/Refurbished-Apple-TV-4th-generation-32GB">$129 that Apple charges for a refurbished unit</a>.</div>
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<b>Another take:</b> Peter Kafka at Recode sees this is as <a href="http://www.recode.net/2016/11/29/13772672/directv-now-streaming-tv-competition">"a national competitor" to the "regional fiefdoms" of cable operators with "more to come"</a>.</div>
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<b>Another take:</b> Todd Spangler at Variety quotes analysts saying <a href="http://variety.com/2016/digital/news/directv-now-att-lose-money-ott-bundles-1201928892/">DirecTV Now's most attractive package is a money loser</a>. Earlier <a href="http://variety.com/2016/tv/features/att-directv-now-pay-tv-1201918857/">he wrote about skinny bundles potentially killing to pay TV ecosystem</a>, back when he thought DirecTV Now was a skinny bundle.</div>
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Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-3707844721944403502016-09-15T22:57:00.000-04:002018-03-12T19:05:26.830-04:00The Essential Truth of Licensing Cable TV Networks<div class="tr_bq">
Steve Burke, CEO of NBCUniversal, made <a href="http://www.multichannel.com/news/finance/burke-nbc-retrans-reach-800m-2016/407771">a simple statement</a> yesterday that underlies the future of multichannel competition.</div>
<blockquote>
“Our job at NBCUniversal is to license our products and maximize the cash flow of our individual channels. If people are interested in putting together OTT businesses, like Sling or the Hulu product or Sony or others, we are going to sell to those suppliers. <b>We want to make sure that we make as much or more selling to an over the top supplier as we do selling to an MVPD.</b>” (emphasis added)</blockquote>
The implication is clear and Burke's view is no different from that of the leaders of Fox, Disney, CBS, etc. Apple is not going to get to carry and pay for NBCU's popular channels, they are going to have to take the whole bundle or pay a premium for taking less. That's what Sony is looking at with PlayStation Vue.<br />
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Maybe Sling TV isn't taking the whole bundle, but thinking about it more broadly. If Dish Network rolls out a secondary Disney channel a bit more broadly to its 13 million DBS subscribers, Disney will certainly be willing to give up not getting the full bundle onto Dish's Sling TV service with its less than 1 million subscribers.<br />
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There is no good reason for the owners of the must-have content to support new competitors who give them worse economics than they get from the incumbents. New entrants to the market always pay more for the must-have programming. DBS paid more than cable. Telcos paid more than DBS.<br />
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If the incumbent's business is declining and the upstarts are growing there is even more reason to insist on the same or better terms. Unless somehow an upstart grows without must-have programming. At that point, it is no longer must-have content, of course.<br />
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Burke was speaking at the Bank of America Merrill Lynch Media, Communications & Entertainment conference in Los Angeles.<br />
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A previous post: <a href="http://www.peterlitman.com/2014/04/getting-content-for-dishs-ott-service.html">Getting Content for Dish's OTT Service</a>Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-64455703052242860942016-08-12T17:45:00.002-04:002016-08-12T17:49:15.303-04:00Hulu Puts Down Its Free Service - The Evolution of Broadcaster StreamingWord came last week that Hulu is dropping its free service of fresh off-broadcast programs. It is hard to overstate how big a change this is.<br />
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The change has not gone unnoticed. When <i>Seventeen</i> magazine publishes a story "<a href="http://www.seventeen.com/life/tech-social-media/news/a42174/hulu-is-getting-rid-of-its-free-streaming-option/" target="_blank">Hulu is Getting Rid of the One Thing You Love About Hulu</a>"...well, having multichannel business issues show up in <i>Seventeen</i>...that isn't something this blog has ever seen before.<br />
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What it means to me is that the original motivation for the formation of Hulu by NBC and Fox (later joined by ABC and recently by <a href="http://www.hollywoodreporter.com/news/hulu-end-free-tv-service-917917" target="_blank">Time Warner</a>) -- the fear of piracy is now much less of a concern for these companies and the potential of creating a subscription revenue business is a much greater one.<br />
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At the time of Hulu's launch, it solved a few problems for its owners:<br />
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<ul>
<li>legitimate alternative to piracy (which was a growing problem and <a href="http://money.cnn.com/2010/02/02/news/companies/napster_music_industry/" target="_blank">decimated the music business which ignored it</a> and was <a href="https://techcrunch.com/2009/12/02/streaming-vs-piracy-research/" target="_blank">well addressed by streaming</a>)</li>
<li>allowed them to share the cost of the technical platform and advertising sales force (and avoid competing with each other for developers, etc.)</li>
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Because they controlled Hulu, they had opportunity to revise program licensing terms (if business conditions change/require it). Because the partners were all in the same business, they knew that they were all facing the same types of issues.<br />
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In the event there was a business in this, that would play out over time and the big networks didn't have to worry about valuation issues since they were equal partners (and were licensing programs to Hulu on similar terms).<br />
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Hulu <a href="http://www.forbes.com/2009/01/22/hulu-amazon-newscorp_leadership_clayton_in_rc_0121claytonchristensen_inl.html" target="_blank">launched to the public in March 2008 and was rightly declared a success within a year</a> per Forbes. The successful launch decimated the market for pirating the programs available on Hulu.<br />
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And then the business evolved...<br />
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In 2009, Fox CEO Chase Carey said Hulu <a href="http://www.cbsnews.com/news/hulu-you-absolutely-need-to-start-charging-users-or-why-news-corp-is-right/" target="_blank">would need start charging for some content</a>. Presumably there wasn't enough ad support to be attractive. Hulu Plus <a href="http://mediadecoder.blogs.nytimes.com/2010/11/17/hulu-drops-prices-to-compete-with-netflix/?_r=0" target="_blank">(a service at the time without ads) launched in 2010</a>; Netflix was on the radar screen.<br />
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When Hulu launched retransmission consent revenues were a small part of the business of most broadcasters. When that revenue stream started growing, the multichannel providers (cable, satellite and telco) wanted something in exchange for their higher payments. Since the broadcasters couldn't shut off over-the-air access to their shows, they offered the multichannel operators a "window" of exclusivity in online access to their shows. If a viewer wanted to watch the program online during the week after it aired, the viewer would need to "authenticate" that he or she had a multichannel subscription.<br />
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Comcast <a href="http://corporate.comcast.com/news-information/nbcuniversal-transaction" target="_blank">bought control of NBC in 2011</a>. Part of what made NBC attractive to Comcast was the growing retransmission consent revenue stream for the broadcast network.<br />
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In 2011, Fox changed its Hulu policy to push its most recent episodes of its network series behind the paywall for one week after airing. The impact on piracy was swift and dramatic. According to TorrentFreak <a href="https://torrentfreak.com/foxs-8-day-delay-on-hulu-triggers-piracy-surge-110822/" target="_blank">pirate downloads of two representative Fox shows went up over 100% following the change</a>.<br />
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When Hulu launched on the Apple TV in 2012, there was no free service <a href="http://www.macworld.com/article/1167964/hulu_plus_now_available_on_apple_tv.html" target="_blank">only Hulu Plus was available</a>.<br />
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As <a href="http://money.cnn.com/2013/04/22/technology/netflix-earnings/" target="_blank">Netflix's growth exploded</a> and its valuation followed, Hulu's owners saw the market making the investor case for a video streaming subscription service. Being ad-supported had become passé.<br />
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Some might see the change at Hulu cynically. Recode's Peter Kafka <a href="http://www.recode.net/2016/8/8/12402802/hulu-turns-off-free-site" target="_blank">writes</a> that Hulu's network owners "have been uncomfortable with the notion of putting all their stuff up for free on the web. And they’ve been trying to back away from it for many years." To my eye, the story is a bit more nuanced. The owners were always looking for the money and didn't have any idea where it was at first. Since they found the money, they have been following it.<br />
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In some ways, this latest change -- to exit free -- may be all about branding. As <i>Seventeen</i> notes, free streaming from Hulu will still exist, but not on hulu.com. The new streaming service will be called <a href="http://view.yahoo.com/" target="_blank">Yahoo View</a>. I supposed branding a free service as from Yahoo is as good a way to kill it as any other.<br />
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<br />Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com1tag:blogger.com,1999:blog-7380952788570867333.post-67850944614870648632016-07-06T17:39:00.000-04:002016-07-08T18:36:17.631-04:00Opening Up the Set-Top BoxWith yesterday's announcement of <a href="http://www.recode.net/2016/7/5/12096380/comcast-to-let-netflix-onto-its-x1-platform-which-is-a-very-big-deal">an agreement between Comcast and Netflix</a> to make the leading SVOD service available on the largest cable operator's set-top boxes, we are starting to see the regulatory "sausage get made".<br />
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<tr><td class="tr-caption" style="text-align: center;">Ma Bell would rent you a Princess phone</td></tr>
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As you may recall, in late January FCC Chairman Tom Wheeler <a href="http://www.recode.net/2016/1/27/11589108/its-time-to-unlock-the-set-top-box-market">announced a plan to open up the cable set-top box marketplace</a>, drawing an analogy to an earlier time when the FCC opened up consumers' ability to use their own phones on Ma Bell's telephone network. It is not a terrible analogy, although the actual proposal <a href="http://www.newsmax.com/Newsfront/fcc-set-top-proposal/2016/02/16/id/714634/">may not have been the most well thought through idea</a> with National Cable Telecommunications Association CEO Michael Powell, himself a former FCC Chairman, leading the chorus of boos and the cable industry responded by saying the proposal was <a href="http://deadline.com/2016/05/fcc-tom-wheeler-opponents-set-top-box-rules-inventing-imaginary-horribles-1201759686/">ridiculous or worse</a>. </div>
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No, it doesn't make sense that a third party can reconfigure a "cable TV package" for which it has not negotiated without the permission of the programmers (who own the channels) or the distributor (which licenses them and delivers them to consumers). Also <a href="http://www.wired.com/2016/02/fcc-set-top-box-rules/">a third party shouldn't be able to insert its own ads into such programming either</a>. As I said, it wasn't the most well thought through idea.</div>
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Wheeler's own comments at the NCTA's annual convention in May <a href="http://www.broadcastingcable.com/news/washington/intx-2016-wheeler-calls-regulatory-assault-charge-lobbying-tactic/156618">suggested that he was willing to negotiate, as long as the cable industry didn't think "no" was going to work as its final answer</a>.</div>
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In early June, the cable industry put together its own proposal to address the issues raised by the FCC - "<a href="http://www.broadcastingcable.com/news/washington/ncta-pitches-ditch-box-set-top-proposal/157372">Ditch the Box</a>". While that <a href="http://hothardware.com/news/google-and-amazon-call-bs-on-cable-tv-industrys-ditch-the-box-campaign">didn't make everybody happy</a>, it was clearly a step towards what Wheeler had laid out as goals.</div>
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With Comcast's agreement with Netflix, the cable industry is providing an example that it can and will work with over-the-top programming sources. Would Comcast had done this without the threat of Wheeler's proposal? Maybe not.</div>
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Having seen <a href="http://marginalrevolution.com/marginalrevolution/2016/06/regulation-and-rents.html">deeply stupid cable regulatory schemes in the past</a>, from this observer's view, it looks like there is something to be said for this process this time. Let's see how this plays out.<br />
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<b>Update</b> (8 July 2016): It looks like <a href="http://www.multichannel.com/news/fcc/fcc-probes-cable-ops-ditch-box-effort/406193">the FCC is receptive to some parts of the cable operators' proposal</a>. The process is moving along.</div>
Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-47353301061416757242016-05-02T20:01:00.001-04:002016-05-02T20:09:03.603-04:00Revisiting The Innovator's Dilemma and OTT Competition with CableOver two years ago, in November 2013, I wrote one of the most popular posts on this site, <a href="http://www.peterlitman.com/2013/11/over-top-video-and-innovators-dilemma.html">Over-the-Top Video and The Innovator's Dilemma</a>. In the wake of a <i>Wall Street Journal</i> article on <a href="http://www.wsj.com/articles/hulu-is-developing-a-cable-style-online-tv-service-1462150982">Hulu's plans to offer a cable competitor service with live streams of certain channels controlled by its owners</a>, Disney and Fox, I thought it worth revisiting that post. Where was the analysis on target and where did it miss? More importantly, what really changed?<br />
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What Changed?<br />
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<ul>
<li>In terms of the players in the market, the biggest change was the exit of Aereo. What might have been a leading company in over-the-top video ended up in bankruptcy after a loss at <a href="http://www.slate.com/articles/technology/future_tense/2014/06/abc_v_aereo_ruling_the_supreme_court_s_terrible_technological_analogies.html">the Supreme Court that invalidated its business model</a>.<div class="separator" style="clear: both; text-align: center;">
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</li>
<li>The impact on cable, DBS and telco multichannel subscribers played out almost exactly as I had predicted -- in a gradual attrition. The <a href="http://www.leichtmanresearch.com/press/031016release.html">big multichannel providers lost 385,000 subscribers in 2015</a>, about 0.4%. Cable One, a small cable operator who <a href="http://www.cableone.net/AAU/pressrelease/Pages/ViacomChannelsRemovedfromCableONELine-Up.aspx">dropped Viacom's channels</a> after a pricing dispute, <a href="http://www.fiercecable.com/story/cable-one-reports-narrow-revenue-and-hsd-gains-continues-ditch-video-and-em/2016-03-03">saw its video subscriber base decline in 2015 by 19%</a>, as it "pivoted" away from video to focus on high speed Internet service. One of the strategies related to this pivot was <a href="http://www.fiercecable.com/story/cable-one-reports-narrow-revenue-and-hsd-gains-continues-ditch-video-and-em/2016-03-03">raising video prices by $10</a>. None of the largest cable TV operators are following Cable One's strategy.<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9ZPcN_BGiI4x-YAArxXMuLLcScRU2mM1IJOFeW2ACq1OAhyphenhyphenhJNI4L8Qn27ohk41DbOp2EMArOeFRFsQxcgQyXCBgbXL7k3oRiSDjgOKEohh04AhL18_6u7MkF_X0kQqFuj-vSBm3mFFJ-/s1600/Header_Logo.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="73" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9ZPcN_BGiI4x-YAArxXMuLLcScRU2mM1IJOFeW2ACq1OAhyphenhyphenhJNI4L8Qn27ohk41DbOp2EMArOeFRFsQxcgQyXCBgbXL7k3oRiSDjgOKEohh04AhL18_6u7MkF_X0kQqFuj-vSBm3mFFJ-/s320/Header_Logo.gif" width="320" /></a></div>
</li>
<li>The decline in cable TV subscribers is showed up in a bigger way on the programmer's side. <a href="http://www.foxsports.com/college-football/outkick-the-coverage/espn-has-lost-7-million-subscribers-the-past-two-years-112515">ESPN's Nielsen subscriber count declined by 7 million in the last 2 years</a> which <a href="http://www.businessinsider.com/disney-ceo-bob-iger-on-espn-2015-8">did not go unnoticed by the investment community</a>. ESPN's numbers are tied up in a few issues, falling cable TV subscribers are one part, <a href="http://www.dslreports.com/shownews/Time-Warner-Cable-CEO-Says-Skinny-Bundles-the-Future-136863">"skinny" packages which don't include ESPN are another</a>, and the biggest one may be that <a href="http://nypost.com/2016/01/30/nielsen-revises-viewing-numbers-to-help-espn/">Nielsen's own estimates of cable household counts may have been too high in the past</a>.</li>
</ul>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRCyzpU56D1ZnO4zB70biHLk0vXD5hj4BWe0AoqcS81TXoPMnBlEiL52MOgPwn0SlJ_9YyMpLg0f144iabn3YLzUXxmzbyJptGgEni287Uuowb7M7oaJNFn6fuG1_4fnpXs86jZWMeY0CF/s1600/espn-logo.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="80" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRCyzpU56D1ZnO4zB70biHLk0vXD5hj4BWe0AoqcS81TXoPMnBlEiL52MOgPwn0SlJ_9YyMpLg0f144iabn3YLzUXxmzbyJptGgEni287Uuowb7M7oaJNFn6fuG1_4fnpXs86jZWMeY0CF/s320/espn-logo.jpg" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
<br /></div>
The Hits<br />
<br />
<ul>
<li>The technical quality of over-the-top streaming has continued to improve. LTE has become widespread and 5G wireless is on the way. 802.11ac wifi is far more common. Gigabit ethernet to the home has also become more common, although it is hardly ubiquitous. Gigabit is coming from <a href="http://www.wired.com/2016/04/comcast-offers-fiber-speeds-coax-thanks-new-modem/">Comcast</a> and <a href="http://about.att.com/story/plans_to_reach_38_more_metros_blazing_internet_speeds.html">AT&T</a>, as well as <a href="http://www.ajc.com/news/business/gigabit-services-taking-root-prices-dropping/nqJTc/">pioneer Google Fiber</a> (pioneer, that is, if you don't live in <a href="http://chattanoogagig.com/">Chattanooga</a>)</li>
<li>The quality of the over-the-top content has continued to improve. <a href="http://www.dailydot.com/entertainment/emmys-2015-winners-amazon-netflix/">Netflix and Amazon were winners at the Emmy Awards in September 2015</a> garnering kudos for <i>House of Cards</i> and <i>Transparent</i>, as well as a decent collection of other shows. <i><a href="http://www.broadcastingcable.com/">Broadcasting & Cable</a></i> described a the television production boom triggered by the success of the streaming outlets as creating "a run on talent" in a recent cover story (but put the story itself behind its paywall).</li>
<li>The availability of over-the-top services would expand. They did, and in ways that I had not described -- <a href="http://www.adweek.com/news/television/starz-plans-its-own-stand-alone-service-compete-hbo-and-showtime-168924">HBO, Showtime, and Starz all went direct-to-consumer</a> (not too suprising a development) and Amazon embraced a <a href="https://www.strategyanalytics.com/strategy-analytics/blogs/media-services/app-stores/digital-media/2015/12/31/amazon-seeks-to-become-a-hub-for-ott-video#.VyfWMhWDFBc">model to bundle individual OTT services with its Streaming Partner Program</a> (a development that was non-obvious).</li>
</ul>
<br />
<br />
<div>
The Miss</div>
<div>
<ul>
<li>The availability of over-the-top services didn't happen in one form that I expected -- the roll out of Aereo to additional markets. </li>
<li>I made no mention that over-the top services would expand, but they have. <a href="https://www.playstation.com/en-us/network/vue/#1">PlayStation Vue</a>, Sony's over-the-top service, not mentioned in the original post, launched in a handful of markets, <a href="http://blog.us.playstation.com/2016/03/14/playstation-vue-goes-nationwide-starting-at-29-99-in-new-markets/">then went national this year</a>. Hulu's build-out of a service with streams of linear channels would be another expansion geared to the mass market. There have also been all manner of <a href="http://tvrev.com/the-rise-of-the-niche-svod-service/#.VyfXmxWDFBc">subscription video on demand services for niches</a> by major companies like NBC Universal's <a href="https://www.seeso.com/">Seeso</a>, <a href="http://www.ooyala.com/videomind/blog/wwe-hits-1m-subs-it-moves-month-month-plan-q4">World Wrestling Entertainment</a>), and Crunchyroll for Japanese anime (<a href="http://www.crunchyroll.com/en/about">its backers</a>). In an earlier time, each of these would have been a cable program service.</li>
</ul>
</div>
<br />
<div>
<ul></ul>
</div>
<br />
<div>
Unclear</div>
<br />
<br />
<ul>
<li>YouTube's stopped highlighting its original content channels <a href="http://www.tubefilter.com/2013/11/12/youtube-original-channels-initiative-experiment-end/">on the same day as my original post</a>, although its <a href="http://fortune.com/2016/02/10/youtube-originals-release/">interest in originals morphed into content for YouTube Red</a>. YouTube isn't following the big name Hollywood path to video competition, it is carving out a different one. This strategy is a bit harder to evaluate -- the proof would be in YouTube's views and advertising sales. The former are transparent, but not easy to interpret, and the latter are not visible at all.</li>
<li>I forecast that the convenience of OTT service would improve based on better interfaces, DVR in the cloud, better recommendation engines. There have probably been some incremental improvements here, but nothing that seems to have changed the nature of competition in a big way. <a href="http://www.cnet.com/products/sony-playstation-vue/">PlayStation Vue reviews praise its more Netflix-like interface</a>, but it isn't clear if this is driving its adoption. Meanwhile, <a href="http://www.multichannel.com/news/content/cox-inks-national-x1-deal-comcast/395239">Comcast has licensed its cloud-based X1 navigation software</a> to Cox and others, improving some cable interfaces faster than OTT interfaces, in those places that actually got it.</li>
</ul>
<div>
<i>The Innovator's Dilemma</i> continues to be a useful lens through which to look at the development of over-the-top video, finding its purchase in markets/use cases not central to the big screen at home. Unlike other innovations, however, the role of content makes the video distribution system unique. Some holders of high profile content can make more money going direct to consumers than through the cable bundle -- adult video made the leap a long time ago. The next ones to prosper over-the-top are the new services that probably couldn't get carried by distributor's protecting their margins (Crunchyroll, WWE), followed closely by those that are already sold <i>a la carte</i> (HBO, Showtime, and Starz). Those left are the basic cable channels, whose play in over-the-top is focused on their library content (like <a href="http://www.digitaltrends.com/movies/lifetime-bets-you-will-pay-3-99-a-month-to-watch-sappy-movies/">Lifetime Movie Club</a>) and may be for a long time.</div>
Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-19442430866011512292016-04-13T11:00:00.001-04:002016-09-15T23:42:42.545-04:00Ultra HD Content Is ComingWith yesterday's announcement that <a href="http://variety.com/2016/digital/news/directv-mlb-4k-ultra-hd-1201751249/">DirecTV will carry 25 MLB Network games in Ultra HD</a> (also known as 4K), it might be time to evaluate whether this format will be a paradigm shift (as was high definition) or not (as was 3D).<br />
<br />
HD benefited from the following:<br />
<br />
<ul>
<li>Clearly better pictures</li>
<li>Development of flat panel set technology allowing for big screens without the big bulk of earlier HD sets (rear projection or very heavy tubes)</li>
<li>Digital transition, requiring stations to stop broadcasting analog signals in July 2009 and greatly increasing the amount of high profile native widescreen HD programming</li>
</ul>
<div>
HD was no more convenient to use than standard definition television before that.</div>
<div>
<br /></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjD9roclwSPix9adRN0CuA_Y_yr1cEXmLDC4u6TN5pPldnEd_HeBDrgPkfhZ4tCIJofnvVs3GGCssoLS_eDhLGVTVMp_cJXzCZdZpgXCoXVk6nhmRek5cpgqlP3T5st5lKe1Gf68HpeBvnX/s1600/Collectorsvault.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="269" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjD9roclwSPix9adRN0CuA_Y_yr1cEXmLDC4u6TN5pPldnEd_HeBDrgPkfhZ4tCIJofnvVs3GGCssoLS_eDhLGVTVMp_cJXzCZdZpgXCoXVk6nhmRek5cpgqlP3T5st5lKe1Gf68HpeBvnX/s320/Collectorsvault.png" width="320" /></a></div>
<div>
<br /></div>
<div>
3D, it is clear in retrospect, was more of a mixed-to-bad bag. The 3D effect could be compelling at times (like in <i>Avatar</i>), but, 3D had some considerable negatives:</div>
<div>
<ul>
<li>3D effect did not work for many people or actually gave them headaches</li>
<li>Glasses required for 3D made it less convenient to view</li>
<li>No new desirable set technology was associated with 3D</li>
<li>3D content did not benefit by a change in the law regarding television broadcasting</li>
<li>3D content was difficult to produce -- it required more than simply higher resolution cameras and other equipment</li>
</ul>
</div>
<div>
Ultra HD avoids the 3D negatives. However, it is less than clear that Ultra HD's benefits are worth the cost to consumers. To a significant extent, all new television formats face an uphill climb. It is a very rare consumer who wants the obligation to buy a new set or other equipment.</div>
<div>
<br /></div>
<div>
Ultra HD feels more like the transition from DVDs to Blu-Ray discs, a technically better format that consumers are willing to buy as long as there is little cost premium associated with it. If Ultra HD catches on, expect a much slower adoption curve.</div>
<div>
<br /></div>
<div>
In contrast, <a href="http://www.cnet.com/news/3d-tv-is-now-more-dead-than-ever/">the push for "smart TVs" with Internet connections to make it more convenient to get content is going strong</a>.</div>
<div>
<br /></div>
<div>
Early HD sets:</div>
<div>
</div>
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilLqRDr2fToqWoPRiCvJS20nIJcRPvMoaz9k5Ebp1hPM2d7OfQUS0IcYxOj4TjOiUwIRbROnArGCRVaHuWqpRAlJn-IbSShDq6ro7kg7ZJ109_NxJEfmbnBXPAWCRB7YftlLZ9qlO1Kb3l/s1600/Early_HDTV_setup%252C_mid_2000s_tech-1.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="361" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEilLqRDr2fToqWoPRiCvJS20nIJcRPvMoaz9k5Ebp1hPM2d7OfQUS0IcYxOj4TjOiUwIRbROnArGCRVaHuWqpRAlJn-IbSShDq6ro7kg7ZJ109_NxJEfmbnBXPAWCRB7YftlLZ9qlO1Kb3l/s400/Early_HDTV_setup%252C_mid_2000s_tech-1.jpg" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">2004 65 inch Sony rear projection HDTV set is 27 inches deep</td></tr>
</tbody></table>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhe0umzwBJueDFW09JP8qVw8efPQZavH061Xtubwjg62gzI4iUIUqUsGv6YnCgxTpM2Ynj7F7b5eOz6xDvXJt8-MC7qs_Z388iwzcA_3GwR2-Q3jlhiM40Sj49doI89FP9d-X8VZdFadcrD/s1600/51C9SX2GZ5L.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhe0umzwBJueDFW09JP8qVw8efPQZavH061Xtubwjg62gzI4iUIUqUsGv6YnCgxTpM2Ynj7F7b5eOz6xDvXJt8-MC7qs_Z388iwzcA_3GwR2-Q3jlhiM40Sj49doI89FP9d-X8VZdFadcrD/s320/51C9SX2GZ5L.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Sony KV-40XBR800 FD Trinitron - weighs 325 pounds</td></tr>
</tbody></table>
<b>Update</b> (25 May 2016): <a href="http://www.forbes.com/sites/johnarcher/2016/05/25/4k-tvs-explode-new-research-shows-massive-sales-surge/#3fff295c15f5">This report from John Archer on forbes.com</a> notes that Ultra HD sets have become the <i>de facto</i> standard for 50+ inch TVs, more because manufacturers are not making non-Ultra HD sets in that size, rather than consumers paying a premium to get UHD sets.Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-22360649223691765602016-02-11T18:53:00.003-05:002016-02-11T20:27:00.431-05:00Fox Breaks Dish's Auto-HopToday Fox and Dish announced the <a href="http://www.reuters.com/article/us-dish-network-twenty-first-fox-idUSKCN0VK27E">settlement of Fox's lawsuit over Dish's Hopper</a> which dates back to late 2012. The Hopper, for those whose memories have faded since 2012, is a DVR with two main features:<br />
<ol>
<li>It automatically records all of the Big-4 networks' prime time programs; and</li>
<li>with a single selection by a home user, can automatically skip over all of the commercials in the recorded shows. Dish calls this feature "Auto-Hop".</li>
</ol>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYPNsDv9xePqxAB0d3EziLw5-t_2qw7XvMyEmELAHD3PbuZATb2ok2Y6YWrESauLNEw5u9AWEA-gsLa6McC4bx7Az8FHwG155OdiTzURUeBOiPZL2Moc8R0f7vufj70pzbha2J-9pAhFhZ/s1600/imgres-1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYPNsDv9xePqxAB0d3EziLw5-t_2qw7XvMyEmELAHD3PbuZATb2ok2Y6YWrESauLNEw5u9AWEA-gsLa6McC4bx7Az8FHwG155OdiTzURUeBOiPZL2Moc8R0f7vufj70pzbha2J-9pAhFhZ/s1600/imgres-1.jpg" /></a></div>
<div>
Parsing the features, the first, automatically recording a program, is only a negative to the network in the event that not having the recording makes the home viewer more likely to watch the show (and the commercials within it) on a live basis. I don't think most networks are fighting that fight.</div>
<div>
<br /></div>
<div>
The second, however, is the real fight and the basis of the settlement. Dish agreed to disable the Auto-Hop functionality for the first seven days after a program is recorded. This preserves the "<a href="http://www.mediapost.com/publications/article/245539/c3-or-c7-does-it-really-matter.html">C7 Rating</a>" for Fox -- the measure of how many viewers watch a commercial within the first 7 days that a program airs. C7 is a bit of an aspirational goal for the networks; the most common currency is C3 rating -- viewership in the first 3 days after airing. (<a href="http://deadline.com/2014/12/deal-cbs-dish-network-hopper-autohop-1201312196/">CBS settled its complaint against Auto-Hop similarly in December 2014</a>).</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPCxaEyRIK_IY1tjnOEHrt3wON2qxKECv5d7AmN1yIl3jf_7vz2ac1e3W7JNQTwhA-OLCkQs9_L1YSMPsH3zi25DBIGPjLnsmLBCzWQR7PeEG8nj3eYYh2b047ltRCTnNfKZhCTgWoPd49/s1600/images.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPCxaEyRIK_IY1tjnOEHrt3wON2qxKECv5d7AmN1yIl3jf_7vz2ac1e3W7JNQTwhA-OLCkQs9_L1YSMPsH3zi25DBIGPjLnsmLBCzWQR7PeEG8nj3eYYh2b047ltRCTnNfKZhCTgWoPd49/s1600/images.jpg" /></a></div>
<div>
Fox is certainly a winner here, negotiating for something that has some clear economic value. More precisely, Fox was able to to stop a feature that might have threatened the advertising business model more than the DVR fast-forward button does. (Note that when networks license content to MVPDs for VOD services, they often insist that fast-forwarding is disabled altogether -- that's the power of being able to withhold your content.)</div>
<div>
<br /></div>
<div>
Dish is also a winner here in that they were able to survive the challenge to the automatic recording complaint, although, it sure seems to this analyst that Fox may have been on thin legal ground trying to stop a feature that simply put, simplified DVR recording.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjgt3vLE-3hMBWyucgpCa3MvnPTL6EclxzF4srGOjFryKodLRuaImVm7H3ZKQ6nGFA4yFJ4FRs0bHC0hAN7siU4doLK9mfxMJALpNFZNtYZ6QGsMobnek_jhDL-O6tTjb9TU8-nJfI5eA1J/s1600/girl-kitten-watching-tv-4427739.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="226" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjgt3vLE-3hMBWyucgpCa3MvnPTL6EclxzF4srGOjFryKodLRuaImVm7H3ZKQ6nGFA4yFJ4FRs0bHC0hAN7siU4doLK9mfxMJALpNFZNtYZ6QGsMobnek_jhDL-O6tTjb9TU8-nJfI5eA1J/s320/girl-kitten-watching-tv-4427739.jpg" width="320" /></a></div>
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<br /></div>
<div>
The loser, naturally, is the viewer who loses some convenient functionality. On the bright side, she gains additional exercise for the finger pushing the fast-forward button (unless the cat knows how).<br />
<br />
Previously on peterlitman.com: <a href="http://www.peterlitman.com/2013/01/cbs-hates-on-hopper-some-more-claims.html">CBS Hates on the Hopper Some More, Claims Fraud</a> (25 January 2013)</div>
<div>
<br /></div>
<div>
<br /></div>
Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-43404636758283314502016-02-04T15:03:00.000-05:002016-02-04T15:03:28.404-05:00Charter Switches from EBUs to Billables for Subscriber ReportingClose observers of cable MSO financials noted a significant change stuck in the footnotes of <a href="http://phx.corporate-ir.net/phoenix.zhtml?c=112298&p=irol-newsArticle&ID=2135690">Charter's 4Q15 and year end financial statements</a>:<br />
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(e) Charter revised its methodology for counting customers who reside in residential multiple dwelling units ("MDUs") that are billed under bulk contracts. Beginning in the fourth quarter of 2015, we count and report customers based on the number of billed units within each bulk MDU, <i>similar to recent reporting changes at our peers</i> and reflecting the completion of all-digital which requires a direct billing relationship for all units which receive a set-top box. Previously, our methodology for reporting residential customers generally excluded units under bulk arrangements, unless those units had a direct billing relationship. Prior year information has been revised to reflect our revised methodology.<br />
<br />
<i>emphasis added</i> to highlight the following: The use of billable subscriber counts -- <a href="http://www.peterlitman.com/2013/05/counting-bulks-with-comcasts-brian.html">pioneered by Comcast in 1Q2013</a> -- leads to generally higher numbers than EBU counts. It is a rosier picture to investors.<br />
<div>
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The corresponding footnote in <a href="http://phx.corporate-ir.net/phoenix.zhtml?c=112298&p=irol-newsArticle&ID=2104101">3Q15</a> read as follows:<br />
(h) Included within commercial video customers are those in commercial structures, which are calculated on an equivalent bulk unit ("EBU") basis. We calculate EBUs by dividing the bulk price charged to accounts in an area by the published rate charged to non-bulk residential customers in that market for the comparable tier of service. This EBU method of estimating video customers is consistent with the methodology used in determining costs paid to programmers and is consistent with the methodology used by other multiple system operators. As we increase our published video rates to residential customers without a corresponding increase in the prices charged to commercial service customers, our EBU count will decline even if there is no real loss in commercial service customers.<br />
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Charter reported residential basics 4,322,000 up from 4,293,000 at year end 2014 under the billable methodology. However, at year end 2014, Charter reported only 4,160,000 EBUs, so the Residential Basic subscriber count for billable subs was 3.2% higher than for EBUs. That seems a bit odd. Residential subscribers shouldn't vary much from EBUs. The reason that comes to mind of why residential billables would be higher than residential EBUs is if a material portion of the residential subscribers are seasonal accounts who pay a much lower rate in the off-season. However, Charter isn't in most of the big seasonal markets (e.g., Florida with its snowbirds).<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1J86qIB2rg8VHLayqfTVvMNDiarmMm7as2w0Qv0-JkqlgR_fGLxYTcBwuNByo964i7t34nS_zjEQWhNIXFf1J41umXyBK84BOM6y55KOuIuj-rXaXuU6sUYL6YOyuW8nxUhB1DnKPQsGc/s1600/4efc7d9d934611229201184757.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="162" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1J86qIB2rg8VHLayqfTVvMNDiarmMm7as2w0Qv0-JkqlgR_fGLxYTcBwuNByo964i7t34nS_zjEQWhNIXFf1J41umXyBK84BOM6y55KOuIuj-rXaXuU6sUYL6YOyuW8nxUhB1DnKPQsGc/s320/4efc7d9d934611229201184757.jpg" width="320" /></a></div>
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Commercial basics were 108,000 up from 104,000 at year end 2014 under the billable methodology. At year end 2014, Charter reported 133,000 commercial video EBUs, so the billable subscriber count was 21.8% lower than the EBU count, which makes sense, since commercial accounts include multiple dwelling units and those typically get a "bulk discount". [In a bulk arrangement, 100% of a building's units get the service -- usually billed through their maintenance -- so that there is no reason for a unit to turn down the service and little churn for the cable company. For that benefit, the cable company provides a price break over the cost of all of those units subscribing independently, and potentially disconnecting.]<br />
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As Charter pointed out in 3Q15 "As we increase our published video rates to residential customers without a corresponding increase in the prices charged to commercial service customers, our EBU count will decline even if there is no real loss in commercial service customers." Looking at it from the other side, when bulk rates decline (due to furious price competition from DBS and telcos for these MDU accounts) EBU counts go down even if the MSO holds onto the business.<br />
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There is no misleading going on here. The revenues of the companies are not affected by this subscriber-counting change. This is investor spin. As there has historically been so much focus on subscriber growth, it isn't entirely surprising that the biggest MSOs have decided to deploy a measurement system that paints their results in a better light than the one that they used historically (and is still the one that they prefer to use when <a href="http://consumerist.com/2014/08/05/espn-accounts-for-more-than-6-of-your-cable-bill-could-soon-top-8/">paying programmers like ESPN</a> and <a href="http://www.wsj.com/articles/SB1034633409532587876">was part of a joint industry consensus in 2002</a> -- clearly another time).<br />
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<br />Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0tag:blogger.com,1999:blog-7380952788570867333.post-76001536202525180482016-01-13T18:59:00.002-05:002016-01-13T18:59:26.856-05:00File Under "Duh"The surprise is not really that <a href="https://theintercept.com/2016/01/13/al-jazeera-america-terminates-all-tv-and-digital-operations/">Al Jazeera America is shutting down</a> (my link is the Glenn Greenwald's excellent and extensively linked-out article), but that it ever existed in the first place. The multichannel TV dial has a number of fully distributed news services of one flavor or another:<br />
<ul>
<li><a href="http://www.cnn.com/">CNN</a></li>
<li><a href="http://www.msnbc.com/">MSNBC</a></li>
<li><a href="http://www.foxnews.com/">Fox News</a></li>
<li><a href="http://www.hlntv.com/">HLN</a></li>
<li><a href="http://www.cnbc.com/">CNBC</a></li>
<li><a href="http://www.weather.com/">The Weather Channel</a></li>
</ul>
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As well as less-than-fully distributed channels like:</div>
<ul>
<li><a href="http://bloomberg.com/">Bloomberg TV</a></li>
<li><a href="http://www.cnbc.com/global-television-shows/">CNBC World</a></li>
<li><a href="http://foxbusiness.com/">Fox Business</a></li>
<li><a href="http://www.bbc.com/news/world_radio_and_tv">BBC World News</a></li>
<li><a href="http://www.france24.com/en/livefeed">France 24</a></li>
<li><a href="https://www.rt.com/on-air/rt-america-air/">RT</a></li>
<li><a href="http://fusion.net/">Fusion</a></li>
<li><a href="http://www.oann.com/">One America</a></li>
<li><a href="http://www.newsmaxtv.com/">Newsmax</a></li>
<li><a href="http://www.accuweather.com/">Accuweather</a></li>
<li><a href="http://weathernationtv.com/">WeatherNation</a></li>
<li><a href="http://www.theblaze.com/tv/">The Blaze</a></li>
<li><a href="https://www.freespeech.org/">Free Speech TV</a></li>
<li><a href="http://www.univision.com/noticias">Univision Noticias</a></li>
<li><a href="http://cnnespanol.cnn.com/">CNN en Español</a></li>
</ul>
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An Internet-distributed news channel:</div>
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<ul>
<li><a href="http://www.cbsnews.com/live/">CBSN</a></li>
</ul>
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And lots of regional news networks like:<br />
<br />
<ul>
<li><a href="http://www.ny1.com/nyc/all-boroughs.html">NY1</a></li>
<li><a href="http://longisland.news12.com/">News 12 Long Island</a></li>
<li><a href="http://necn.com/">NECN</a></li>
</ul>
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In short, this isn't a market segment with a lack of programming.</div>
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It is also hard to imagine that branding the channel "Al Jazeera America" was what US news consumers wanted. Irrespective of the quality of the programming on the channel (which I thought was good, from the little I saw, if somewhat stilted in a PBS/BBC kind of way), the name "Al Jazeera" was most closely associated with the co-owned Arabic-language Al Jazeera news service made famous as the preferred outlet for Osama bin Laden's videos during the post-9/11 era. As the proud possessor of a marketing degree from arguably <a href="http://www.kellogg.northwestern.edu/departments/marketing.aspx">the finest school for brand managers</a>, I believe that's too much to overcome.</div>
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Peter Litmanhttp://www.blogger.com/profile/09293835248987804628noreply@blogger.com0