Vegas Golden Knights Switch to Broadcast from RSN for 2023-2024 Season - Implications

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 broadcast TV deal for their regional rights. 

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. 

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. 

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 not been carried by Comcast, the primarily cable operator in Colorado since 2019, reportedly because of its cost. Dish Network has dropped every RSN that it used to carry and it used to carry virtually all of them.

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 plans to shut down its handful of RSNs this year.

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 low power television station that was not carried by any of the major MVPDs, it would need to gain carriage -- just like an RSN would. Additionally, the coverage area of KMCC, which has two transmitters, appears to cover a lot of the Las Vegas market for those relying upon an antenna for reception.

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.

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 getting out of video altogether. No cable video means no cable retransmission consent fees.

Financial Reporting Changes for AT&T, Comcast 1Q19

One 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).

No longer U-Verse and DirecTV subscribers, they are now "Entertainment Group premium TV" subscribers

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 it lost 544,000 "premium TV" subscribers, 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, AT&T's earnings call 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.

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. For 1Q19, this number is gone. 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 YouTube TV bundling a somewhat-constrained DVR in its base consumer offering, a Comcast DVR is looking a lot less "advanced" than it once was.

AT&T's U-verse Withers Because of Physics

When I wrote this post (DirecTV is to AT&T as HITS Was to TCI) it was pure speculation.

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".

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 household could not watch more than 2 HD programs at the same time.

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.

Today brings an article about the likelihood of shutting down the U-Verse website on which it markets the triple play.

DirecTV Now Renames DirecTV's DBS Packages

Unnoticed in the hubbub over its debut yesterday, DirecTV Now, the new over-the-top video service from AT&T, shares its basic packaging scheme with DirecTV's core DBS service.

• "Live a Little" is based on Entertainment
• "Just Right" is based on Choice
• "Go Big" is based on Xtra
• "Gotta Have It!" is based on Ultimate (apparently only spending $70 per month warrants an exclamation point)

Original marketing piece for DirecTV Now did not include many channels

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 Todd Spangler's article in Variety. 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.

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.

[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.]

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 even if you don't want DirecTV Now. $105 is even less than the $129 that Apple charges for a refurbished unit.

Another take: Peter Kafka at Recode sees this is as "a national competitor" to the "regional fiefdoms" of cable operators with "more to come".

Another take: Todd Spangler at Variety quotes analysts saying DirecTV Now's most attractive package is a money loser. Earlier he wrote about skinny bundles potentially killing to pay TV ecosystem, back when he thought DirecTV Now was a skinny bundle.

DirecTV Is to AT&T as HITS Was to TCI?

AT&T's U-Verse versus Verizon's FiOS is an interesting study in contrasts and those differences might be behind AT&T's recent offer to purchase DirecTV.

Both U-Verse and FiOS run fiber down the middle of your street. Fiber is the highest capacity wires for communications of any sort and, if new wires need to be run, they are always fiber. Cable operators also run fiber down the middle of the street for the same reason. The cost of running wires into each individual home is an incredibly costly endeavor and that cost is the labor to install it -- the wire itself, even fiber, is cheap.

Verizon's FiOS built a state-of-the-art fiber-to-the-home (FTTH, also known as FTTP for "premises") network, using the latest technology available and at a princely price. Specifically, this means that Verizon ran fiber from the middle of the street into the house of each FiOS subscriber. The alternative would have been to use its existing wiring into the home, the thin, low-capacity copper wires known as "twisted pair". (Cable operators, in contrast, run coaxial cable into the home, which has less capacity than fiber, but far, far more than twisted pair).  

Historically (and culturally) Verizon is used to competing on the quality of its network. This is the positioning that has made it a leader in the cellphone market. Verizon's wireless business represents a far greater portion of its value than its wireline business (comprised of the not-profitable FiOS and the declining twisted-pair business). It is perhaps not a coincidence that Verizon operates in the densely populated East Coast. The economics of building these networks are far less attractive when the population density is low.

Verizon deployed FiOS before AT&T launched U-Verse and, by going early, chose to deploy its video service using QAM, the same technology as cable uses, rather than the still-developing video-over-IP, the way that Internet video is delivered. I don't think this is a matter of vision, everyone probably saw that IP video was coming, but, again, an issue of quality. Everyone knew that QAM worked; Verizon didn't want to take the risk that it would build this state-of-the-art network and not be able to deliver top-notch service.

AT&T took a different approach and used its twisted pair wires into the home. The advantages of this approach is a much lower cost of deployment and a quicker deployment, since new wires do not need to be run.

At the time of its launch, there were skeptics that AT&T's approach would work -- that is, provide service of an acceptable quality. One of the limitations of U-Verse via twisted pair was that it could only deliver 3 HD signals into a house simultaneously. Another is that Internet speeds for its fastest level of service are 24 Mbits/sec, modest compared to the gigabit speeds that cable can deliver and Google Fiber is delivering but perfectly competitive versus today's average cable modem offerings.

AT&T didn't build U-Verse for the future, they built it for the present. If demand for faster Internet speeds (or more HD) didn't materialize, they were fine. When demand did materialize perhaps they would be saved by some superior compression technology (that could squeeze more bits through the twisted pair) or they would actually run fiber-to-the-home then or some hybrid system using wireless spectrum or...something else.

Perhaps DirecTV is the something else.

So here's the potential magic of AT&T's DirecTV purchase. If AT&T can take video off of U-Verse, then there is more capacity for broadband Internet traffic on that plant. Because U-Verse is IPTV, it is not a simple as saying that the capacity devoted to video could be redeployed to provide faster Internet service. To the extent that U-Verse is not providing video service, presumably all the bandwidth would be available for Internet access 24/7. Currently, even if the bandwidth is dynamically allocated between TV and Internet access, since the TV is on so many hours of the day, presumably the bandwidth being used to deliver ESPN HD live while recording AMC HD and HBO HD is coming at the cost of less-than-screaming Internet service. Of course, this is the exact opposite of what AT&T needs to say (and is saying) to get regulatory approval for the deal. Regulators do not look favorably upon removing a choice from the marketplace (see AT&T's failed acquisition of T-Mobile which, given T-Mobile's revival regulators must see as a success). Bear in mind, migrating U-Verse video subs to DirecTV would be a 5-years-out strategic move, not a near-term strategic move. (AT&T CFO John Stephens "This transaction is not based on freeing up any of the wired capacity.")

This is why buying DirecTV is may be a good strategy for AT&T, but buying Dish may not be necessary or desirable for Verizon.

This break seems analogous to one-time cable giant Tele-Communications, Inc., better known as TCI, and its decision two decades ago to start the Headend in the Sky (HITS, now part of the Comcast Media Center) to be able to provide hundreds of digital channels cheaply on its scores of small rural cable systems where there would be no positive returns on the capital required to rebuild them to the standards used in more densely populated urban and suburban areas (known as HFC for "hybrid fiber coax"). HITS was a cheaper alternative to a rebuild.

AT&T Buys DirecTV: Some Macro and Micro Thoughts

A few thoughts on the day after the big merger announcement:

Unlike the Comcast-Time Warner Cable-Charter proposed deal, AT&T's purchase of DirecTV "would eliminate a choice for pay-TV customers in some markets." In those areas where AT&T offers U-Verse service, a consumer likely has a choice of four competitive providers: the incumbent cable operator, Dish Network, DirecTV, and AT&T. If this merger goes through, the four choices go down to three and the new company includes one of the giant providers (as opposed to a combination of two of the smaller ones). While antitrust is far from my area of expertise, it appears that this is exactly the same outcome that doomed AT&T's attempted acquisition of T-Mobile.

While having AT&T and DirecTV under the same ownership would appear to facilitate bundling services for consumers (e.g., in non-U-Verse areas the combined company could offer phone plus DSL plus DBS plus cellphone), unless the DirecTV brand goes away, it would still appear to be the sort of shot-gun marriage that all current and prior telco-DBS "synthetic bundles" are and have been. It's not an elegant solution and "people are abandoning DSL in droves, and buying cable broadband".

When I've read of DirecTV's strong cash flow, but otherwise difficult strategic position (a TV-only provider in an increasingly bundled bustiness) and how AT&T could really use the DirecTV cash to fund its dividend, the story sounded suspiciously like Viacom's 1994 acquisition of Blockbuster to fund the acquisition it really wanted, Paramount Pictures. How did that one work out? Not that well.

Would AT&T apply the DirecTV brand to U-Verse video offering? Maybe that's a better idea. As AT&T's press release on the deal states: DirecTV is "the premier pay TV brand with the best content". The U-Verse brand is probably meaningless. Why anyone has a brand with a hyphen in it is beyond me. It is clunky and not web-friendly (the URL for the service is uverseonline.att.net, although u-verse.com does redirect to it -- why have consumers wonder if they include the hyphen or not. DirecTV's URL is simply directv.com).

This deal should seem like a homecoming for Dan York, DirecTV's chief content acquisition executive. It was just 2 years ago that he left that same role at AT&T.

Programming savings will not be as easy to come by as they are in a typical cable acquisition. DirecTV's distribution rights may be limited to its single DBS system and, if that's the case, would not have the right to simply add AT&T's systems to its affiliation agreements (and take advantage of DirecTV's greater purchasing power). Comcast, by comparison, would very likely have the right to do exactly that with the Time Warner Cable systems. It is always simpler if one does not have to negotiate. DirecTV already has relatively low programming costs as it is a giant pay-TV distributor; the programming cost savings would largely come for the much smaller base of AT&T U-Verse customers.

Could the NFL allow DirecTV to sell Sunday Ticket on U-Verse as well as DBS, but not provide it to other distributors? That could be interesting, but it would have to be negotiated. It is very unlikely that DirecTV would have the right to extend Sunday Ticket to additional platforms under its current (and expiring) deal. Would give U-Verse a leg up that it has never had before, but only a limited footprint in which it could take advantage of it. It would be an odd decision for the NFL: Sunday Ticket would be available from two providers in a minority of the country and one provider in the vast majority of the country. That's not an obvious thing to explain to consumers.

NFL Sunday Ticket is clearly on AT&T's mind. From its 8K filing about the deal: "The parties also have agreed that in the event that DIRECTV’s agreement for the 'NFL Sunday Ticket' service is not renewed substantially on the terms discussed between the parties, the Company may elect not to consummate the Merger, but the Company will not have a damages claim arising out of such failure so long as DIRECTV used its reasonable best efforts to obtain such renewal."

Packaging differences: Would DirecTV try to make the DBS and U-Verse packages of services more similar. Or would the combined company enjoy the dealmaking flexibility of having good-better-best on 2 different platforms and now have more ways to split the baby. In any event, the companies say they don't plan any large packaging changes.

Other perspectives:

• VideoNuze's Will Richmond is not a fan of the backward-looking deal.
• Howard Homonoff sees more work for the federal communications bar.
• Multichannel News's Mike Farrell sees 5 reasons the merger might not fly.
• The Diffusion Group's Joel Espelien thinks that AT&T needs DirecTV to have TV Everywhere video content for its wireless and broadband customers. I think he's totally off-base. TVE is a small portion of video content online and not even used by most pay-TV customers.
• Deadline's David Lieberman thinks Peter Chernin and over-the-top video is the key to the deal. I would tend to doubt that.

Now AT&T Wants to Drop AMC's Networks

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

The AT&T* U-verse® TV contract with AMC Networks for channels including AMC, IFC and WE tv, expires at 11:59 p.m. EST on June 30. AT&T issued the following statement:

We are making every effort to reach a fair agreement and continue providing these channels to our customers. Frankly, we’re disappointed AMC Networks has decided to take its negotiations public, instead of working with us in good faith, especially since we’re still actively in negotiations. We’ve been in ongoing negotiations to renew this agreement, but AMC Networks is seeking an excessive rate increase in our overall fees for the right to deliver these channels. AMC Networks is asking thatAT&T pay what we believe is nearly double what other competitors pay - including a smaller-sized competitor. We believe the rates they are seeking are disproportionate compared to the viewership we see across their channels. We don’t think that’s reasonable, especially in these economic times, and we will continue to work toward a fair deal.

There’s an ongoing industry trend in which an increasing number of content providers seek unreasonable price increases from their service providers as those contracts expire. If we accept this cost increase from AMC Networks, it could result in higher prices for customers, and would only encourage other content providers to make similar demands. We don’t want customers to lose these channels, but we need to take a stand now to keep costs down while continuing to provide the quality programming customers want and deserve.

Observers of the industry know that this statement suggests a desire, on the part of AT&T, for Most Favored Nation treatment with respect to its rates for the AMC Networks services and that AT&T has passed AMC's former parent, Cablevision, in terms of basic cable subscribers, per the National Cable Television Association. The merits of AT&T's position can be debated and I suspect are not relevant at all to consumers. Fundamentally, AT&T is making a wise move if the AMC channels are not bringing benefits to their customers equal to their prices. Analyses of channel value are often pretty hard to do, except at the extremes -- the channels that are worth little are usually not difficult to negotiate and those worth a lot are generally well understood. The interesting part of AT&T's negotiation is the opportunity that presented itself to AT&T -- to pick a second fight with a programmer already fighting one battle. As any general knows, it is nice when the opponent's army is divided. One thing that I do know, no customer subscribes to cable TV to NOT get the channels they want. Typically settlements of these disputes are reached in a modest amount of time. A key date for this one is 15 July 2012, the date of the season premiere of AMC's acclaimed drama Breaking Bad.


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

Intel-evision?

According to an article in the Wall Street Journal, Intel is looking to develop at web-based video service to compete with cable and satellite. Intel's plan is to create a virtual MSO, a business idea that many have been kicking around in one form or another.

Consumers would welcome another choice of video provider. As one measure of customer satisfaction, Consumerist's cheeky "Worst Company in America" 2012 bracket features eight providers of multichannel television (Comcast, DirecTV, Dish, Time Warner Cable, Charter, Verizon, AT&T and CenturyLink), among its 32 "contestants".

However, facts are stubborn things (hat tip, John Adams). Multichannel penetration is very high ~90% -- there are relatively few households who do not see it  as a worthwhile purchase, despite the fact that subscription prices increase every year. That suggests that the customer satisfaction issue is likely less the service itself (not that it doesn't have its frustrations - long times on hold, among them), than frustration with the price and general lack of choice. (If it didn't, Charter wouldn't be doing things like this.)

If Intel were to offer a me-too service (i.e., a comparable package of services) at a lower price, it would likely attract some customers. However, multichannel providers are already cutting prices in a de facto way, as they offer sweetheart deals for new customers, particularly in areas of high competition. It isn't easy to compete on the low end with customers churning through the introductory offers in search of the best deal.

The me-too offering would have a competitive advantage if its operating cost of delivering the service were lower than the incumbents. It won't be because of lower programming costs. A new entrant into the market, like Intel, can expect to pay 20% or more greater programming costs than the incumbents. Intel wouldn't have to build the expensive distribution system (laying cable, launching satellites) that the incumbents did, but would be on the hook for the variable cost of delivering bits to its customers. The jury is still out on how much less expensive that would be. However, that does make Intel, like Netflix, highly dependent on the ISPs (who are the cable and telephone companies) to continue to provide unlimited service to their customers.

There are alternatives to a me-too service, of course. A la carte offerings of channels is a popular request, but one that it is hard to imagine the programming community embracing. (LA Times: Don't hold your breath for a la carte cable -- is that clear enough?) Given the high penetration of multichannel television, there isn't much reason for the programmers to look at a different, potentially less lucrative business model, unless they have to do so (as the music industry had to, after rampant piracy ended their chokehold on packaging and pricing). However, the multichannel subscription television market probably has less piracy today than it did in the past, due to the changeover from less-secure analog systems to more-secure digital ones). So, it won't be driven by piracy, at least not today's piracy, but maybe tomorrow's.

This is not the first Intel over-the-top story. GigaOm reported earlier this year that Intel was "in talks to buy Roku". BTW, Roku is now looking to raise some $50 million to expand...hmmm.

It is always interesting to see new entrants to an industry as that's often the origin of the new ideas that shake things up (Walt Disney's theme parks, Apple's iPod, iPhone and iPad). If Intel has that sort of idea, there will be a place in the market for them. There is certainly room for innovation in the distribution of television.

A Modest Proposal to Fix TV Navigation

Given that TV households represent 96.7% of total households and that multichannel households represent about 85% of TV households, satisfaction with television by the most reasonable measure is pretty high. However, there are still some TV problems to solve and today I put forward a modest proposal that eschews cannibalism and would dramatically improve things with respect to one problem:  navigating the hundreds of channels on digital cable.

Here's the model of how to dramatically improve the live TV viewing experience.

Yes, it is straight out of the 1960s. You can freely tune any channel on the dial, but you can pre-set buttons for easy access to your favorites and you can pick which button has which station.

How this would work for multichannel television:  Let me organize my channel lineup so that the channels that I watch the most are at the start of the dial. If the average household watches only 16 channels, those 16 channels would be the first 16 on the dial, irrespective of where the cable operator has chosen to place them on the dial.

For the occasional viewing of the other channels, those could be in numerical or alphabetical order above the "first 16".

The first 16 could be set in a few ways. The default mechanism based on the most viewed 16 channels in the household after a period of a few weeks of startup data collection (you do know the set-top box knows what you are watching, don't you?). Before there is sufficient data, during that first few weeks, the 16 could be based on the top channels in the DMA or the zip code. This default list would be customized for those with HD sets, naturally.

And of course, for those so inclined, these settings could be tweaked by the user at his or her computer (including the setting the top group to be more or fewer than 16 channels).

For Internet stream of a 24-hour channel (e.g., a feed received by a Roku), that URL could be added as well. (The issue of switching between the cable box and the Roku is, alas a thornier problem -- see below). The feed for a single game from something like the Internet-delivered version of MLB Extra Innings may be a bit tougher, but, theoretically, MLB could create a single URL for each team's live game (actually, more likely, two, another for the Spanish audio feed).

The great news about this approach, if you are a multichannel provider, is that you alone can provide this functionality.

The great news about this approach if you are an end-user is that, if your provider does not, hopefully soon you might have some choices in TV navigation, as the multichannel providers move to virtual boxes (Comcast's Xfinity TV, AT&T's U-Verse and Verizon's FiOS are already on/coming to Xbox). Perhaps then we'll get the implementation of television navigation the way we really want it: with a smart switcher box that seamlessly incorporates live and on-demand programming from a variety of sources, organized the way the user desires.

Netflix Streaming Performance by ISP

Today Netflix posted an update on its "tech" blog on the average streaming performance for its customers using various ISPs.

For the first time, Netflix broke out Verizon's FiOS internet service from its DSL offering and AT&T's U-Verse internet service from its DSL. Here's the takeways, none of which is a surprise to those familiar with consumer internet service:

1. Verizon and AT&T's fiber-based services are significantly faster than their DSL services.
2. Verizon FiOS was the top performer with an average speed slightly above 2,500 kB/sec.
3. Places 2-7 were held by cable ISPs, with Charter leading the way.
4. AT&T's U-Verse service scored above all the DSL providers, but behind all but one of the cable modem services (that would be Suddenlink)
5. Clearwire's mobile broadband service had an average speed materially below that of the poorest performing DSL service (Verizon).

It is my understanding that Netflix is looking at this from the basis of the average streaming customer irrespective of the level of internet service which the subscriber gets. At this point most of these providers are offering several levels of broadband service (e.g., Time Warner Cable in NYC has Basic, Standard, Turbo and Wideband with significant price and performance differences between them), so differences between the cable providers might be more reflective of the mix of internet service levels Netflix subscribers are taking than differences in what each ISP is capable of providing.

Netflix first posted a similar report in January 2011 where they described the methodology employed to come up with these figures.

Bandwidth Caps and Over-the-Top Video

Todd Spanger of Multichannel News noted in a blog post today that a Morgan Stanley analyst estimated that a typical household watching HDTV exclusively delivered over-the-top would use 600 GB of data per month and a heavy viewer might use a bit over 2 times that amount 1.4 TB (that's terabytes).  Comcast's cap is 250GB per month; AT&T's is the same for U-Verse, less for DSL customers.

The part of the posting that got me was this:  "The bottom line is that none of the broadband access networks were engineered to absorb this much per-subscriber usage. You can’t efficiently move 18 lanes of traffic down a four-lane highway."

GB per month is not really the capacity problem; the issue is peak time demand.

However, everything in my limited knowledge of cable plant design points to the fact that the engineers were always thinking about how consumer usage would grow over time and what infrastructure could be scaled up to meet that demand.  The concept of a fixed capacity infrastructure as a long term solution doesn't seem like anything any good engineer would have believed would be adequate given the explosive growth of Internet traffic BEFORE HDTV took off and over-the-top existed in any meaningful way.

It seems inevitable that consumers will have very fast pipes in their homes in the not-too-distant future and, if history holds, the unlimited, fixed price plan will be the way that consumers want to buy it.  If the cable operator doesn't provide it, a telco will, or a wireless company will or broadband over powerline (BPL) or someone or something else will.

Delivering HDTV to Typical Household Entirely Over-the-Top... (Multichannel News)

Customer Satisfaction - Verizon still on top

Verizon FiOS had the best scores, but interesting to me is that "All Others" -- namely smaller companies which are probably not as well known -- scored second.  Maybe the better known your cable company is, the worse you think it is.  AT&T U-verse and Dish Network both fell by 4 points.  According to ACSI researchers, U-verse was hurt by an increase in customer complaints about picture quality, particularly on HD channels.  Perhaps there are some limits to pushing a lot of video down a regular phone line.

American Customer Satisfaction Index - Subscription Television Service

Crown Media 1Q11

Hallmark Channel's ratings rank decline from 22nd total day/21st prime time to 30th total day and 29th in prime time (versus 1Q10), yet advertising revenues were up 8.5%.  That's a better advertising market for you. (Note the revenues include ad sales on the much less distributed Hallmark Movie Channel, too).

One of the issues for a public company with a single network is the materiality of an agreement with any major multichannel distributor.  Note the following disclosures about its relationship with Cox:

"A distribution agreement with Cox ended on December 31, 2010.  Our Channels continue to be distributed by Cox under the terms of the expired agreement through four extensions to that agreement that expired on April 30, 2011, while renewal negotiations continue.  The Cox distribution agreement covers approximately 5% of our subscribers for the Hallmark Channel and 2% of our subscribers for the Hallmark Movie Channel."

Crown did not mention that negotiations were continuing with AT&T, which dropped Hallmark Channel and Hallmark Movie Channel last September.


Crown Media 10-Q