The Wrap reports that the Federal Communications Commission has put its review of the Comcast-Time Warner Cable merger on hold for the second time. This time, the delay is due to the refusal by ABC, CBS, NBC, Fox, Viacom and Discovery to supply the agency with details of their retransmission agreements with cable, satellite and IPTV operators. The reason that the FCC wants the retransmission information in the first place is that opponents of the merger have charged that the combined company would have too much power over program suppliers (including the broadcast and cable networks.) The networks have agreed to provide the U.S. Justice Department with the data because it will be kept confidential, but FCC rules require that the data be made available to both supporters and opponents of the Comcast-TWC deal, so that they can use it in their briefs. Only the general public is prohibited from seeing the data.
The six networks have very good reasons for wanting to keep their contracts secret, because once buyers of their content learn how much other companies are paying, they'll want to renegotiate their contracts down to the lowest price. On the other hand, four of the six companies (ABC, CBS, Fox and NBC) are granted licenses by the FCC to broadcast over-the-air. Unlike mobile carriers such as AT&T, Sprint, T-Mobile and Verizon, television broadcasters get their spectrum for free. So, they are in essence underwritten by U.S. taxpayers for the multi-billion dollar value of their airspace. (Update, November 5, 2014: The FCC has released a "price list" in conjunction with its plan to get broadcasters to relinquish their spectrum so that it can be used for other applications. The FCC values the nationwide recovery of as much as 126 MHz of spectrum at a maximum of $38 billion dollars.) In addition, whenever a retransmission dispute between a broadcaster and a cable, satellite or IPTV operator results in the broadcaster removing their signals from the video operator, the public is stuck in the middle. Therefore, I believe that there's a strong argument for public disclosure of broadcast retransmission deals, above and beyond the Comcast-Time Warner Cable case.
My suggestion is that, if broadcasters want to prohibit anyone outside a handful of government employees from seeing their retransmission deals, they should be forced to pay the full market value for their bandwidth, just as mobile operators do. If they don't want to do that, they always have the option of relinquishing their frequencies and feeding their programs directly to service providers and to consumers over the Internet. CBS threatened to do exactly that if the Supreme Court ruled against it in the Aereo case, so it's clearly an option that's been considered by broadcast networks. If they want to operate in secret using the public's airwaves, they should pay for the privilege.
Showing posts with label Comcast. Show all posts
Showing posts with label Comcast. Show all posts
Saturday, October 25, 2014
Thursday, September 25, 2014
Comcast-Time Warner Cable: Would it really be anti-competitive?
As you probably know, Comcast and Time Warner Cable have agreed to merge. Many consumer groups and some of the companies' content providers and competitors are opposing the merger, while it's hard to find proponents that aren't either getting funding from one of the two companies or are "Astroturf" organizations created to support the merger. However, is the Comcast-TWC merger really anticompetitive? A big part of the answer depends on whether you're looking at the multichannel video services market today, or a few years from now.
If you look at the situation today, whether or not the merger is anticompetitive depends on who you are. If you're another cable company, it's not anticompetitive at all. The reason is that cable operators all have local franchises to be the exclusive cable supplier in the areas they serve. So, Comcast doesn't compete with TWC, which doesn't compete with Cox, which doesn't compete with Charter, etc. The reason for exclusivity is that it was so expensive for a cable operator to lay the wires, put in the plant and equipment, and service customers, that it was uneconomical to do so unless they could serve all the customers in an area without competition.
If you look at Comcast's and TWC's non-cable competitors, the merger is likely to have a modest impact at most. Existing Comcast and TWC customers will still be customers of the merged company, and can switch to a competitor if they want to. It's likely that Comcast will improve TWC's plant and equipment, and improve its cable and Internet services, which would make the combined company a stronger competitor in TWC markets. If you're an existing Comcast or TWC customer, your competitive situation isn't likely to change much, either. The new company will still supply your cable service, most likely your wireline Internet service, and possibly your phone service as well. The same competitors you could switch to will still be there.
However, if you're a program supplier to Comcast and TWC, your situation is likely to change substantially. The reason is that the merged company will have around 30 million subscribers and will be by far the biggest cable and Internet provider in the U.S. (If the AT&T acquisition of DirecTV is approved, that company will have at least as many video subscribers as Comcast-TWC, but DirecTV, which has the lion's share of subscribers, doesn't provide its own Internet service--it resells services from local Internet Service Providers.) The merged company will be the only way for program suppliers (television and cable networks, and movie distributors offering titles for Video on Demand (VOD)) to reach about 1/3rd of all U.S. households. That will give the new company enormous power to negotiate preferential licensing and retransmission fees, and will also give it additional power to negotiate non-fee terms and conditions, such as limitations on content providers' ability to license their content to other service providers. In addition, given that Comcast owns NBC Universal, it can give preferential treatment to NBCs broadcast and cable networks and Universal's movies and television shows similar treatment in its VOD systems, which would put other content providers at a competitive disadvantage.
If you're an Internet content provider, such as Netflix, the merged company will be by far the biggest single provider of ISP services to your customers in the U.S. There's strong evidence that Comcast was throttling the bandwidth available to Netflix subscribers until Netflix agreed to pay for a peering agreement with Comcast. The combined company would have even more power to extract payments from Internet companies.
That's today's situation, but what about tomorrow? Netflix is a nationwide (now also international) service; it can reach everyone in the U.S. who has either wired or wireless high-speed Internet access. Roku, Apple, Sony and others sell set-top boxes and devices that offer similar access to video over the Internet. Verizon, which has long operated its FiOS IPTV service which offers a cable-like video service and high-speed Internet, recently acquired Intel's OnCue Over-The-Top (OTT) Internet video platform. Verizon is expected to use OnCue as the basis of a nationwide video service that will operate over its wireless network, and possibly over the Internet as well. That would give Verizon a nationwide footprint, and would enable it to offer video services in almost every U.S. market. Sony and Dish are also rumored to be in the planning stages for a similar Internet service. Intel's attempt to launch OnCue was stymied by pressure from the cable industry to prevent its program suppliers from licensing their content to Intel, and the same pressure is suspected as the reason why Apple has not yet launched its long-rumored HDTV and video service.
What happens if OTT service and program suppliers find a way to launch viable services that can compete with cable? The video services market could change radically. Instead of today's three or four competitors (the incumbent cable operator, DirecTV, Dish, and depending on where you live, either Verizon or AT&T,) there could be many more:
If you look at the situation today, whether or not the merger is anticompetitive depends on who you are. If you're another cable company, it's not anticompetitive at all. The reason is that cable operators all have local franchises to be the exclusive cable supplier in the areas they serve. So, Comcast doesn't compete with TWC, which doesn't compete with Cox, which doesn't compete with Charter, etc. The reason for exclusivity is that it was so expensive for a cable operator to lay the wires, put in the plant and equipment, and service customers, that it was uneconomical to do so unless they could serve all the customers in an area without competition.
If you look at Comcast's and TWC's non-cable competitors, the merger is likely to have a modest impact at most. Existing Comcast and TWC customers will still be customers of the merged company, and can switch to a competitor if they want to. It's likely that Comcast will improve TWC's plant and equipment, and improve its cable and Internet services, which would make the combined company a stronger competitor in TWC markets. If you're an existing Comcast or TWC customer, your competitive situation isn't likely to change much, either. The new company will still supply your cable service, most likely your wireline Internet service, and possibly your phone service as well. The same competitors you could switch to will still be there.
However, if you're a program supplier to Comcast and TWC, your situation is likely to change substantially. The reason is that the merged company will have around 30 million subscribers and will be by far the biggest cable and Internet provider in the U.S. (If the AT&T acquisition of DirecTV is approved, that company will have at least as many video subscribers as Comcast-TWC, but DirecTV, which has the lion's share of subscribers, doesn't provide its own Internet service--it resells services from local Internet Service Providers.) The merged company will be the only way for program suppliers (television and cable networks, and movie distributors offering titles for Video on Demand (VOD)) to reach about 1/3rd of all U.S. households. That will give the new company enormous power to negotiate preferential licensing and retransmission fees, and will also give it additional power to negotiate non-fee terms and conditions, such as limitations on content providers' ability to license their content to other service providers. In addition, given that Comcast owns NBC Universal, it can give preferential treatment to NBCs broadcast and cable networks and Universal's movies and television shows similar treatment in its VOD systems, which would put other content providers at a competitive disadvantage.
If you're an Internet content provider, such as Netflix, the merged company will be by far the biggest single provider of ISP services to your customers in the U.S. There's strong evidence that Comcast was throttling the bandwidth available to Netflix subscribers until Netflix agreed to pay for a peering agreement with Comcast. The combined company would have even more power to extract payments from Internet companies.
That's today's situation, but what about tomorrow? Netflix is a nationwide (now also international) service; it can reach everyone in the U.S. who has either wired or wireless high-speed Internet access. Roku, Apple, Sony and others sell set-top boxes and devices that offer similar access to video over the Internet. Verizon, which has long operated its FiOS IPTV service which offers a cable-like video service and high-speed Internet, recently acquired Intel's OnCue Over-The-Top (OTT) Internet video platform. Verizon is expected to use OnCue as the basis of a nationwide video service that will operate over its wireless network, and possibly over the Internet as well. That would give Verizon a nationwide footprint, and would enable it to offer video services in almost every U.S. market. Sony and Dish are also rumored to be in the planning stages for a similar Internet service. Intel's attempt to launch OnCue was stymied by pressure from the cable industry to prevent its program suppliers from licensing their content to Intel, and the same pressure is suspected as the reason why Apple has not yet launched its long-rumored HDTV and video service.
What happens if OTT service and program suppliers find a way to launch viable services that can compete with cable? The video services market could change radically. Instead of today's three or four competitors (the incumbent cable operator, DirecTV, Dish, and depending on where you live, either Verizon or AT&T,) there could be many more:
- T-Mobile and Sprint could use their networks to deliver video to households.
- I've written that there's evidence that Netflix is planning to offer live programming in addition to its VOD offerings; they could expand into a full cable competitor.
- Sony and Apple could offer their own services.
- The existing cable operators could directly compete with each other for subscribers using OTT.
With the exception of Verizon, Sprint, T-Mobile and (if it doesn't acquire DirecTV,) AT&T, all of the other new competitors will have to go through telco ISPs or cable operators in order to get to consumers' homes. If cable operators set prices and/or terms & conditions that make servicing their customers with OTT video unprofitable or too complex, these new competitors could be killed in the womb. That's why I suggest that regulators set and enforce two conditions on both the Comcast-TWC and AT&T-DirecTV deals:
- Both combined companies must offer all OTT services access to their Internet networks and subscribers under fair, reasonable and non-discriminatory (FRAND) terms.
- Both combined companies must remove all clauses in their contracts with program suppliers that prohibit them from licensing their content to competitors, or that place significant restrictions on such licenses. In addition, they're prohibited from signing contracts with any such clauses in the future, and from using their influence and market power to informally persuade program suppliers not to deal with competitors.
Both conditions would last for five years from the day that each combined company finalizes its merger and begins operating as a single company. That would give competitors enough time to build their market presence and establish viable businesses, and also give the telecom industry five years to develop new ways for the OTT services to reach consumers without having to go through the incumbent cable operators.
Tuesday, May 20, 2014
We're doing it for consumers (not)
Last February, Comcast announced that it had agreed to acquire Time Warner Cable for a bit over $45 billion. The Comcast press release announcing the deal had the sub-head "Transaction Creates Multiple Pro-Consumer and Pro-Competitive Benefits, Including for Small and Medium-Sized Businesses." The press release had three discussions of the benefits that the merger would bring to consumers, and in subsequent Congressional hearings, both Comcast and Time Warner Cable executives have touted how their merger will benefit consumers.
Last Sunday, AT&T announced that it has agreed to acquire DirecTV for $49 billion. The joint AT&T/DIRECTV press release mentioned consumer benefits twelve times, including this quote from DIRECTV President and CEO Mike White: “This compelling and complementary combination will bring significant benefits to all consumers, shareholders and DIRECTV employees."
Earlier today, the National Association of Broadcasters, which represents the major broadcast networks, as well as radio and television station owners, issued its own press release questioning the consumer benefits of the AT&T/DirecTV deal, while emphasizing its own interest in looking out for consumers. NAB executive VP Dennis Wharton was quoted as saying “AT&T’s proposed merger with DirecTV demands a hard look in an increasingly consolidated broadband and pay television marketplace. It is hard to see how decreasing competitors in the pay TV marketplace – while increasing regulatory restraints on local TV stations – truly benefits consumers.”
Let's be clear: AT&T, Comcast, DIRECTV, the National Association of Broadcasters and Time Warner Cable couldn't give a damn about consumers. They're saying what they think they need to say in order to get the appropriate governmental agencies to approve or block the mergers. Let's look at what the parties really want or are afraid could happen:
Last Sunday, AT&T announced that it has agreed to acquire DirecTV for $49 billion. The joint AT&T/DIRECTV press release mentioned consumer benefits twelve times, including this quote from DIRECTV President and CEO Mike White: “This compelling and complementary combination will bring significant benefits to all consumers, shareholders and DIRECTV employees."
Earlier today, the National Association of Broadcasters, which represents the major broadcast networks, as well as radio and television station owners, issued its own press release questioning the consumer benefits of the AT&T/DirecTV deal, while emphasizing its own interest in looking out for consumers. NAB executive VP Dennis Wharton was quoted as saying “AT&T’s proposed merger with DirecTV demands a hard look in an increasingly consolidated broadband and pay television marketplace. It is hard to see how decreasing competitors in the pay TV marketplace – while increasing regulatory restraints on local TV stations – truly benefits consumers.”
Let's be clear: AT&T, Comcast, DIRECTV, the National Association of Broadcasters and Time Warner Cable couldn't give a damn about consumers. They're saying what they think they need to say in order to get the appropriate governmental agencies to approve or block the mergers. Let's look at what the parties really want or are afraid could happen:
- Comcast wants Time Warner Cable's subscribers in order to increase its subscriber count to 30 million households, or about a third of all households in the U.S. that watch television. The merger will increase Comcast's revenues and profits dramatically, after years of little or no subscriber growth. It will also make it much riskier for broadcast and basic cable networks to threaten to black Comcast's channels out during retransmission negotiations, because losing Comcast's households would mean immediately losing a third of their viewers, and substantially more than that from major markets controlled by Comcast. That would directly impact ratings and force networks to make up the lost viewership to advertisers.
- AT&T gets a national footprint by acquiring DIRECTV. It will be able to sell TV service, and to bundle mobile and TV service, anywhere in the U.S. It will be able to sell DIRECTV out of every AT&T mobile retail store. The merged company will have roughly 26 million subscribers--second only to the merged Comcast/Time Warner Cable. That will give AT&T the same leverage in retransmission negotiations that Comcast will have. AT&T also gets access to DIRECTV's unique programming, including NFL Sunday Ticket, which generates $300 of revenue per subscribing household each year.
- The National Association of Broadcasters fears its members' loss of leverage in retransmission negotiations as much as Comcast and AT&T are looking forward to it. Instead of negotiating with ten big cable operators, two big satellite providers and two big IPTV providers (AT&T and Verizon,) broadcasters' negotiating partners are going to be Comcast, AT&T and everyone else. Broadcasters are afraid that Comcast and AT&T will squelch their ability to raise retransmission fees, and may even be able to lower them.
- Smaller cable operators (represented by the American Cable Association) are concerned that if the broadcast and basic cable networks can't get the money they're looking for from Comcast and AT&T, they'll try to get it from the smaller cable operators, which have far less negotiating leverage.
None of this has anything to do with improving service or lowering costs for consumers. As Bloomberg Television pointed out yesterday, Comcast and AT&T could do something that would be of great benefit to consumers: For far less than the $45 to $49 billion that each merger will cost, they could dramatically increase consumers' Internet speeds to 1 Gigabit per second. That would give customers near-instantaneous access to Internet content and services. However, Comcast and AT&T are only planning to offer 1 Gigabit service in those markets where Google Fiber either already offers it or plans to offer it in the future.
Wednesday, April 03, 2013
A psychic predicts the future of The Tonight Show
Earlier today, NBC announced that Jimmy Fallon will officially take over The Tonight Show from Jay Leno next April. Shortly after the announcement, I received an email from Ms. Rosa Conjunctivitis, who claims to be a psychic. She sent me a timeline for the future of NBC's late night schedule, and gave me permission to share it with you.
April 2014:
April 2014:
- Jimmy Fallon takes over The Tonight Show.
- Seth Meyers takes over Late Night.
- Jay Leno goes back to doing stand-up full-time.
October 2014:
- In an emergency move to shore up poor ratings before the November sweeps, NBC brings back Jay Leno to replace Jimmy Fallon.
- Jimmy Fallon gets a $20 million bonus to leave the show. His bonus is paid for by a $1 charge added to the bill of every Comcast subscriber.
January 2015:
- Jimmy Fallon begins hosting a new six-hour-long late night show for Fox titled "Jimmy FallON All Night."
January 2019:
- Although Jay Leno's Tonight Show remains the #1 late night talk show, the average age of its viewers has increased to 69, so NBC replaces Jay Leno with Seth Meyers. Comcast adds another $2 to all of its subscribers' bills to pay for NBC's settlement with Jay Leno.
- NBC names Funnybot 3000, an android, to be the new host of Late Night.
- Jay Leno goes back to doing stand-up full-time.
August 2019:
- Faced with a mass revolt by its remaining 46 affiliates, all of which are owned by one 69-year-old man, Jay Leno returns to host The Tonight Show. Comcast adds another $4 to the bills of all of its subscribers in order to pay Meyers and Leno.
- Leno purchases the former Mall of America and turns it into a garage for his car collection.
January 2020:
- Seth Meyers becomes the host of a nightly combination talk show and clearance sale on QVC titled Wholesale After Dark with Seth Meyers.
June 2024:
- NBC announces plans to replace Jay Leno on The Tonight Show with Funnybot 3000. However, NBC's four remaining affiliates threaten to switch to QVC, so NBC keeps Leno as the host.
March 2046:
- Jay Leno passes away at age 95 while doing weekend stand-up at the "Komedy Kabana" in Elkhart, Indiana.
April 2046:
- The Tonight Show's new format consists of an hour-long broadcast of Jay Leno's embalmed body from a glass-walled sarcophagus built where the ice skating rink used to stand in Rockefeller Center. A drummer plays a rimshot every three minutes.
Tuesday, March 26, 2013
Hulu: Here we go again
You may recall that in June of last year, Hulu put itself up for sale, in part because of strategic disagreements between joint venture partners Disney and News Corp. (NBCUniversal, the third partner in Hulu, is prevented from taking an active management role as part of the terms of Comcast's deal to acquire NBCUniversal.) In October, Hulu's owners cancelled the sale because of "disappointingly low offers." That didn't solve the strategic differences between the partners, however. Today, All Things Digital reported that Guggenheim Partners, Yahoo and Amazon, possibly among others, are considering making offers to acquire Hulu--even though the partners haven't announced that it's for sale. The smell of blood in the water is just too strong.
I'll keep this brief: The reason that the offers for Hulu were disappointingly low last year was that the partners were unwilling to offer Hulu's buyers long-term access to their content. Exactly the same issue will arise if Hulu is put up for sale again. Hulu is effectively worthless without its content. With the exception of Guggenheim Partners, all of the potential bidders already have their own video infrastructure, players and apps. There was a time when Hulu's player was head and shoulders above anyone else's, but that's simply not the case anymore.
The purchase price of Hulu will have to include three to five years' of the partners' content, along with assurances that their content will continue to be available after that time at a price that Hulu's buyer can afford. If the content isn't there, any potential deal will fall apart.
This could turn into the Mergers & Acquisitions equivalent of Lucy pulling the football away from Charlie Brown at the last minute every year. Fox Sports could broadcast "Who Wants To Buy Hulu?"--just put Cleatus the robot into an Armani pinstripe suit, give the play-by-play to Fox Business, and you're all set. For now, all we can do is sit back and watch the action.
I'll keep this brief: The reason that the offers for Hulu were disappointingly low last year was that the partners were unwilling to offer Hulu's buyers long-term access to their content. Exactly the same issue will arise if Hulu is put up for sale again. Hulu is effectively worthless without its content. With the exception of Guggenheim Partners, all of the potential bidders already have their own video infrastructure, players and apps. There was a time when Hulu's player was head and shoulders above anyone else's, but that's simply not the case anymore.
The purchase price of Hulu will have to include three to five years' of the partners' content, along with assurances that their content will continue to be available after that time at a price that Hulu's buyer can afford. If the content isn't there, any potential deal will fall apart.
This could turn into the Mergers & Acquisitions equivalent of Lucy pulling the football away from Charlie Brown at the last minute every year. Fox Sports could broadcast "Who Wants To Buy Hulu?"--just put Cleatus the robot into an Armani pinstripe suit, give the play-by-play to Fox Business, and you're all set. For now, all we can do is sit back and watch the action.
Friday, January 04, 2013
Intel's "virtual cable" service: A "cable killer" one week, on life support the next
Two weeks ago, news about a new "virtual cable" service developed by Intel leaked to several outlets. The service was said to use Intel-designed set-top boxes and software to deliver broadcast and cable networks, along with video-on-demand, to televisions and mobile devices via consumers' existing high-speed Internet connections. It would also feature something called "perceptual computing," which would use face and voice recognition as part of the system's user interface. (One possibility is that the system would use a camera to identify the family members in front of the television or mobile device, and automatically select their favorite channels.) The Intel system was to be announced as early as next week's Consumer Electronics Show, and was to be rolled out on a city-by-city basis.
Blogs and websites published breathless stories about how Intel was going to "destroy the cable industry." However, the cablepocalypse lasted only until The Wall Street Journal reported that Intel is delaying the announcement of its virtual cable service for several months, if not indefinitely, because it can't get access to sufficient content. No one should be shocked or surprised that Intel can't get the content it needs; after all, it was widely reported last year that Apple was working on a very similar service, which it too had to rein back because it couldn't get enough content to make it a viable competitor to cable, satellite and IPTV services.
From one perspective, Intel's proposed system is very similar to satellite TV--it would eventually cover the entire country, and I assume that Intel plans to offer local broadcast stations, as Dish and DirecTV do in the U.S. However, there's no legal requirement that broadcasters, cable networks or movie studios do business with Intel. Comcast owns NBC, several cable networks and Universal Studios; it's required to offer its content on reasonable terms to other cable, satellite and IPTV operators, but it has no such requirement to do business with Intel. Cable and satellite operators have made equity investments in some other cable networks over the years; they can influence who the networks license their content to (or don't license it to, as the case may be.) The remaining cable networks and studios have to weigh the revenues they could get from Intel with how Intel might impact their revenues from other distributors. In addition, we don't know what financial terms Intel wants. For example, Intel may want to pay for content as it adds subscribers, while content providers may want Intel to pay a base fee covering millions of subscribers, even if the company might not be able get that many subscribers for years.
In any event, Intel's "cable killer" is apparently on life support, at least for now. Eventually, someone is going to figure out how to get enough content to make an over-the-top Internet video service competitive with cable and satellite. It might be Intel, Apple, Aereo, FilmOn, or a company that doesn't even exist yet. It might require Federal legislation. But, it will happen eventually.
Blogs and websites published breathless stories about how Intel was going to "destroy the cable industry." However, the cablepocalypse lasted only until The Wall Street Journal reported that Intel is delaying the announcement of its virtual cable service for several months, if not indefinitely, because it can't get access to sufficient content. No one should be shocked or surprised that Intel can't get the content it needs; after all, it was widely reported last year that Apple was working on a very similar service, which it too had to rein back because it couldn't get enough content to make it a viable competitor to cable, satellite and IPTV services.
From one perspective, Intel's proposed system is very similar to satellite TV--it would eventually cover the entire country, and I assume that Intel plans to offer local broadcast stations, as Dish and DirecTV do in the U.S. However, there's no legal requirement that broadcasters, cable networks or movie studios do business with Intel. Comcast owns NBC, several cable networks and Universal Studios; it's required to offer its content on reasonable terms to other cable, satellite and IPTV operators, but it has no such requirement to do business with Intel. Cable and satellite operators have made equity investments in some other cable networks over the years; they can influence who the networks license their content to (or don't license it to, as the case may be.) The remaining cable networks and studios have to weigh the revenues they could get from Intel with how Intel might impact their revenues from other distributors. In addition, we don't know what financial terms Intel wants. For example, Intel may want to pay for content as it adds subscribers, while content providers may want Intel to pay a base fee covering millions of subscribers, even if the company might not be able get that many subscribers for years.
In any event, Intel's "cable killer" is apparently on life support, at least for now. Eventually, someone is going to figure out how to get enough content to make an over-the-top Internet video service competitive with cable and satellite. It might be Intel, Apple, Aereo, FilmOn, or a company that doesn't even exist yet. It might require Federal legislation. But, it will happen eventually.
Monday, July 30, 2012
NBC's 48-year-old Olympic playbook
Comcast division NBC is being blasted for how it's broadcasting the 2012 London Summer Olympics. Despite broadcasting events on NBC and its Spanish-language Telemundo broadcast network, cable networks NBC Sports Network, MSNBC, CNBC, Bravo and two networks started specifically for the Olympics, as well as online, NBC couldn't find any place to show the opening ceremonies live as they happened. Instead, they were delayed by three hours for broadcast in the U.S.'s Eastern and Central time zones--and the events that U.S. viewers saw were edited. Viewers on the Pacific Coast were forced to wait another three hours to see the ceremonies.
NBC is tape-delaying its coverage of most events that it thinks U.S. viewers will be interested in to "prime time" hours, in order to maximize advertising revenues. That decision, along with an almost total focus on U.S. athletes, has led to an initial barrage of complaints by viewers on Twitter, followed by similar complaints on websites and in newspapers. NBC spokespeople and executives have either dismissed the complaints or pedantically reminded commenters that most events are being streamed live on the Internet. And yes, the events are covered live on the web, as long as you can prove that you subscribe to a participating cable, satellite or IPTV video service provider, and providing that the stream doesn't freeze up mid-event. NBC lards the web streams with plenty of commercials, so it can't claim that it has to limit viewership to only those who subscribe to a multichannel video service. (Or, perhaps being owned by Comcast has something to do with it.)
Now, a U.S. editor for the U.K.'s Independent newspaper has been banned from Twitter, ostensibly because he tweeted the email address of an NBC executive. NBC admitted that it filed the complaint against the editor, Guy Adams, although anyone with an IQ above breathing can figure out the email address for any NBCUniversal employee through Google. I can just imagine the drone in NBC's corporate communications department saying "Now we've got 'em!" after seeing the tweet go out. (Update, August 1, 2012: It was actually a drone at Twitter who found the tweet, contacted NBC and told them how to file the complaint. Then, the mindless drone at NBC filed the complaint and rubbed their hands in glee. I made up the part about rubbing their hands in glee.) The only problem is that, as Reuters' Felix Salmon pointed out, that the Twitter rule covers "non-public, personal email addresses," neither of which applies to the address that Guy Adams tweeted--it's a corporate, public email address.
NBC's response to the fracas has been uninformed, manipulative and dismissive--but that's just a knee-jerk reaction, not the real problem. The real problem is the game book that NBC's playing with, a game book written by Roone Arledge in 1964 when ABC first broadcast the Innsbruck, Austria Winter Olympics. Tape and film from that first ABC Olympics had to be flown to New York for broadcast. Over the 20 years that ABC held rights to the Olympics, Arledge introduced the policy of tape-delaying and editing opening and closing ceremonies. Even after it was possible to broadcast live from anywhere in the world, Arledge continued to tape-delay events and ceremonies for broadcast in prime time. To attract more female viewers, he came up with the "up close and personal" concept of taped background packages on selected athletes designed to generate human interest. Event coverage focused on the performance of U.S. athletes, and created controversies even when none existed.
I'm not dumping on Arledge: He's one of the fathers of American sports broadcasting, and ABC's coverage of the kidnapping of Israeli athletes at the 1972 Munich Summer Olympic games, most of which was reported by ABC's sportscasters, not newspeople, was the birth of American television sports journalism and one of the most honored events in American television history. What Arledge did was right for the available technology and the times. The problem is that Arledge stopped running ABC Sports in 1986. The Internet didn't exist as anything but an academic curiosity when he retired, but with the exception of offering real-time event video streaming, NBC is doing the same things that Arledge did in 1964--just more of it, on more channels.
Roone Arledge died in 2002 at the age of 71. If he were still alive today, I think that he's tell NBC's management the following: "Times have changed, and so should you."
Wednesday, June 13, 2012
Justice Department investigates cable and online video companies
According to The Wall Street Journal, the U.S. Justice Department has launched an investigation of the online video market. Justice Department officials have spoken to representatives from Netflix
and Hulu, as well as Comcast, Time Warner Cable and other cable
operators, about whether the cable companies are acting illegally to limit
the access of online video companies to content, limit consumers' access to online video content, and limit the bandwidth
that consumers need to access that content.
According to the article, online video services have expressed concern that data caps imposed by cable operators will give those operators an unfair advantage, a fear reinforced when Comcast announced in March that data used by its own Xfinity app running on Xbox 360s wouldn't count toward subscribers' data caps. Netflix's Reed Hastings accused Comcast of trying to skirt FCC rules that prevent Internet Service Providers from giving preferential access to their own content.
The Wall Street Journal's sources say that the Justice Department is examining whether Comcast is violating the legal agreements that it agreed to in order to get permission to acquire NBCUniversal in 2011. It's also looking into whether the TV Everywhere initiative first developed by Comcast and Time Warner is illegally requiring consumers to have a cable subscription in order to access some online programming.
Another area of investigation is the distribution contracts that programming providers sign with cable operators. These contracts usually include "most favored nation" clauses that require programming providers to give the top cable operators the lowest price and best terms and conditions that they give to any of their other customers. The Justice Department is looking into whether there are valid business reasons for these clauses, or whether they're intended to prevent programming suppliers from dealing with over-the-top video providers.
Most favored nation clauses are also part of the Justice Department's case against Apple and five of the Big 6 book publishers. In that case, those clauses were used to insure that all eBook resellers sold eBooks from the publishers under investigation at the same price.
According to the article, online video services have expressed concern that data caps imposed by cable operators will give those operators an unfair advantage, a fear reinforced when Comcast announced in March that data used by its own Xfinity app running on Xbox 360s wouldn't count toward subscribers' data caps. Netflix's Reed Hastings accused Comcast of trying to skirt FCC rules that prevent Internet Service Providers from giving preferential access to their own content.
The Wall Street Journal's sources say that the Justice Department is examining whether Comcast is violating the legal agreements that it agreed to in order to get permission to acquire NBCUniversal in 2011. It's also looking into whether the TV Everywhere initiative first developed by Comcast and Time Warner is illegally requiring consumers to have a cable subscription in order to access some online programming.
Another area of investigation is the distribution contracts that programming providers sign with cable operators. These contracts usually include "most favored nation" clauses that require programming providers to give the top cable operators the lowest price and best terms and conditions that they give to any of their other customers. The Justice Department is looking into whether there are valid business reasons for these clauses, or whether they're intended to prevent programming suppliers from dealing with over-the-top video providers.
Most favored nation clauses are also part of the Justice Department's case against Apple and five of the Big 6 book publishers. In that case, those clauses were used to insure that all eBook resellers sold eBooks from the publishers under investigation at the same price.
It's important to remember that an investigation doesn't necessarily mean that the Justice Department will prosecute anyone. In some cases, the companies under investigation voluntarily change their practices in order to forestall prosecution.
Tuesday, October 11, 2011
Intel surrenders in the set-top box war
NewTeeVee reports that Intel has shut down its its Digital Home Group, which was working on chips including Atom-based CE media processors for Internet-based set-top boxes, including Google TV and the Boxee Box. The Digital Home Group team has been reassigned to tablet development. Some work will continue on devices for cable and IPTV set-top boxes, such as the processor that Pace is using in the Xfinity set-top box that it developed for Comcast.
Intel was a partner in Google TV's development, and Intel's involvement was partially responsible for the failure of the first-generation product. The reason was that only Intel processors could be used in Google TV devices, and the cost of Intel's Atom processor made the price of products such as the Logitech Revue uncompetitive. The Revue was launched at $299, then dropped to $250 and now sells for $99. The price of Intel's processors wasn't the only problem, of course; poorly-designed software, inscrutable remote controls and a lack of support from content providers didn't help.
Now, processors based on ARM look like they have the upper hand in future Internet set-top box development. ARM-based processors are less expensive than Intel's Atom, and potential set-top box makers such as Samsung already manufacture them. Apple's A-series of processors is based on ARM. Now, it appears that both Google TV and Boxee will go with ARM for their next-generation products.
Intel was a partner in Google TV's development, and Intel's involvement was partially responsible for the failure of the first-generation product. The reason was that only Intel processors could be used in Google TV devices, and the cost of Intel's Atom processor made the price of products such as the Logitech Revue uncompetitive. The Revue was launched at $299, then dropped to $250 and now sells for $99. The price of Intel's processors wasn't the only problem, of course; poorly-designed software, inscrutable remote controls and a lack of support from content providers didn't help.
Now, processors based on ARM look like they have the upper hand in future Internet set-top box development. ARM-based processors are less expensive than Intel's Atom, and potential set-top box makers such as Samsung already manufacture them. Apple's A-series of processors is based on ARM. Now, it appears that both Google TV and Boxee will go with ARM for their next-generation products.
Thursday, October 06, 2011
A $60 Video-on-Demand Movie? It's Comcastic!
Fierce Cable reports that Comcast, and its Universal Studios subsidiary, will test releasing a movie to Video-on-Demand (VOD) just three weeks after it opens in theaters. The movie is "Tower Heist", starring Ben Stiller and Eddie Murphy, which opens November 4th, and Comcast will run the test in Atlanta and Portland, OR. And the price? $59.95, for which you get to watch the movie once.
(Update--October 13, 2011: Home Media Magazine reports that Universal and Comcast have cancelled their plans to release "Tower Heist" on VOD after two theater chains, Cinemark and National Amusements, said that they wouldn't show the movie if the companies went through with their plans.)
DirecTV already has a program in place with multiple movie studios to show VOD movies 60 days after they open in theaters for $29.95. Comcast's argument is that large families can save money by watching the movie at home instead of buying movie tickets, food and drink. My counterargument is that a family that's looking to save money will wait a few more weeks and get the movie from Redbox for $1, and a family that has to see the movie as soon as it comes out vs. paying $60 to see it at home will go to the theater.
The movie studios are getting more and more desperate to replace the income they're losing from the decline in DVD revenues, and Comcast is trying to fight off Netflix and Amazon by offering movies and television shows sooner than the over-the-top video providers can. However, the value proposition for a $60 VOD movie that's already been in theaters for three weeks is extremely hard to make.
(Update--October 13, 2011: Home Media Magazine reports that Universal and Comcast have cancelled their plans to release "Tower Heist" on VOD after two theater chains, Cinemark and National Amusements, said that they wouldn't show the movie if the companies went through with their plans.)
DirecTV already has a program in place with multiple movie studios to show VOD movies 60 days after they open in theaters for $29.95. Comcast's argument is that large families can save money by watching the movie at home instead of buying movie tickets, food and drink. My counterargument is that a family that's looking to save money will wait a few more weeks and get the movie from Redbox for $1, and a family that has to see the movie as soon as it comes out vs. paying $60 to see it at home will go to the theater.
The movie studios are getting more and more desperate to replace the income they're losing from the decline in DVD revenues, and Comcast is trying to fight off Netflix and Amazon by offering movies and television shows sooner than the over-the-top video providers can. However, the value proposition for a $60 VOD movie that's already been in theaters for three weeks is extremely hard to make.
Tuesday, September 27, 2011
Who buys Hulu? Most likely, no one
Silicon Alley Insider is reporting that, now that Hulu's auction is completed, the company's owners have some hard decisions to make. Comcast, News Corporation, Disney and Providence Equity Partners were looking for well north of $2 billion for Hulu, but they didn't get it. More accurately, they got it, but not in the way they wanted.
(Update, October 13, 2011: AllThingsD has reported that Hulu's owners have called off the company's sale and will continue to manage it themselves.)
The top bidder for Hulu was Dish Network, which bid around $1.9 billion dollars, more than either Yahoo or Amazon. Google apparently offered far more--around $4 billion--but the company wanted guaranteed access to Hulu's owners' content for much longer than the two to three years that had been offered. Without that kind of concession, the Hulu deal is really a two to three-year non-exclusive license to its content, not an "acquisition" in any real sense.
That's why Dish, Yahoo and Amazon weren't willing to spend even $2 billion for the company. Hulu's partners could more than double Dish's bid overnight by accepting Google's terms, but I don't think they will. They believe that their content, and the investment they've made in the Hulu platform, is worth more than $1.9 billion, and they're not willing to extend longer terms, given the rate of change in the online content market. Therefore, it's most likely that they'll cancel the auction and keep Hulu themselves.
(Update, October 13, 2011: AllThingsD has reported that Hulu's owners have called off the company's sale and will continue to manage it themselves.)
The top bidder for Hulu was Dish Network, which bid around $1.9 billion dollars, more than either Yahoo or Amazon. Google apparently offered far more--around $4 billion--but the company wanted guaranteed access to Hulu's owners' content for much longer than the two to three years that had been offered. Without that kind of concession, the Hulu deal is really a two to three-year non-exclusive license to its content, not an "acquisition" in any real sense.
That's why Dish, Yahoo and Amazon weren't willing to spend even $2 billion for the company. Hulu's partners could more than double Dish's bid overnight by accepting Google's terms, but I don't think they will. They believe that their content, and the investment they've made in the Hulu platform, is worth more than $1.9 billion, and they're not willing to extend longer terms, given the rate of change in the online content market. Therefore, it's most likely that they'll cancel the auction and keep Hulu themselves.
Friday, July 01, 2011
Google (plus Microsoft, Yahoo, Wendy's, Pep Boys, etc.) are in talks to buy Hulu
The Los Angeles Times reported today that Google is in preliminary talks to buy Hulu. More precisely, as the newspaper reported in the very next sentence, Hulu's investment advisors have arranged to make presentations to Google, Microsoft and Yahoo, and probably any other company that has money in the bank. Whether Google is seriously interested, or is simply "kicking the tires", remains to be seen.
Hulu has a very nice technical platform and semi-exclusive distribution rights from its existing owners (Comcast, News Corporation and Disney), but it doesn't own any content. It has no permanent exclusive rights to anything, but it recently renewed its distribution rights with News Corp. and Disney. Comcast, which acquired part of Hulu when it acquired majority control of NBCUniversal, is prohibited by the terms of that acquisition from exercising any control over Hulu, so it's required to license its content to Hulu on the same terms and conditions as its other partners.
For Hulu to have any real value to Google or anyone else, the buyer will have to get Hulu's existing partners to grant semi-exclusive rights for much longer than three years. Most buyers would settle for a ten-year deal, but if Hulu's existing owners could take back the rights after just a few years, the company would have almost no value to an unaffiliated buyer.
If Hulu's current owners are willing to grant long-term distribution rights, an acquisition could happen fairly quickly. However, if, as reported elsewhere, Hulu's current owners and content partners are demanding that the company's distribution rights be renegotiated after the acquisition, it makes little sense for anyone to bid.
Hulu has a very nice technical platform and semi-exclusive distribution rights from its existing owners (Comcast, News Corporation and Disney), but it doesn't own any content. It has no permanent exclusive rights to anything, but it recently renewed its distribution rights with News Corp. and Disney. Comcast, which acquired part of Hulu when it acquired majority control of NBCUniversal, is prohibited by the terms of that acquisition from exercising any control over Hulu, so it's required to license its content to Hulu on the same terms and conditions as its other partners.
For Hulu to have any real value to Google or anyone else, the buyer will have to get Hulu's existing partners to grant semi-exclusive rights for much longer than three years. Most buyers would settle for a ten-year deal, but if Hulu's existing owners could take back the rights after just a few years, the company would have almost no value to an unaffiliated buyer.
If Hulu's current owners are willing to grant long-term distribution rights, an acquisition could happen fairly quickly. However, if, as reported elsewhere, Hulu's current owners and content partners are demanding that the company's distribution rights be renegotiated after the acquisition, it makes little sense for anyone to bid.
Monday, April 04, 2011
Theater owners' true concern about Premium VOD
Fox, Warner Bros., Universal and Sony found themselves at the center of a firestorm last week when word got out that they had agreed to make some motion pictures available to DirectTV, Comcast and VUDU (an over-the-top Internet video service owned by Walmart) for premium VOD play 60 days after they premiere in theaters. Subscribers to those services would pay $30 per movie and would have 48 hours to watch them from when they purchase.
The National Association of Theater Owners protested the studios' decisions, saying that making movies available at home so soon after they open in theaters will "...fundamentally alter the economic relationship between exhibitors, filmmakers and producers, and the studios." On Sunday, the Chairman of Fox Filmed Entertainment replied, saying that only a small number of titles, primarily those that "don't realize their full potential in theaters", will be made available for early VOD.
Here's the underlying issue that theater owners are really concerned about: Their share of ticket sales from films increases the longer that a movie stays in theaters. The first week that a movie opens in a theater, the studio gets 80% to 90% of the boxoffice. In six weeks or so, the theater and studio are splitting the boxoffice receipts 50/50. If a movie stays in a theater for several months, the theater can take 80% of the boxoffice for itself.
Neither movie studios nor theater owners are concerned about true "bombs" going to premium VOD. What theater owners are truly concerned about is that movie studios will make titles that could last for months in theaters available through premium VOD, thus decreasing theater owners' opportunity for profit. If premium VOD becomes very popular, theater owners are concerned that they'll lose their exclusives on all profitable films after 60 days.
My personal opinion is that the premium VOD option may be a mirage. The premium VOD offering appeals to people who really don't want to go to a theater but are willing to pay a fairly huge premium in order to see a movie at home, perhaps two months before they can buy it on DVD or Blu-Ray for the same or less money, and 90 days before they can get it for $1.00 at Redbox or from Netflix. So, the theater owners and studios may end up fighting over nothing, but don't be surprised to hear and see a lot about this over the next few months.
The National Association of Theater Owners protested the studios' decisions, saying that making movies available at home so soon after they open in theaters will "...fundamentally alter the economic relationship between exhibitors, filmmakers and producers, and the studios." On Sunday, the Chairman of Fox Filmed Entertainment replied, saying that only a small number of titles, primarily those that "don't realize their full potential in theaters", will be made available for early VOD.
Here's the underlying issue that theater owners are really concerned about: Their share of ticket sales from films increases the longer that a movie stays in theaters. The first week that a movie opens in a theater, the studio gets 80% to 90% of the boxoffice. In six weeks or so, the theater and studio are splitting the boxoffice receipts 50/50. If a movie stays in a theater for several months, the theater can take 80% of the boxoffice for itself.
Neither movie studios nor theater owners are concerned about true "bombs" going to premium VOD. What theater owners are truly concerned about is that movie studios will make titles that could last for months in theaters available through premium VOD, thus decreasing theater owners' opportunity for profit. If premium VOD becomes very popular, theater owners are concerned that they'll lose their exclusives on all profitable films after 60 days.
My personal opinion is that the premium VOD option may be a mirage. The premium VOD offering appeals to people who really don't want to go to a theater but are willing to pay a fairly huge premium in order to see a movie at home, perhaps two months before they can buy it on DVD or Blu-Ray for the same or less money, and 90 days before they can get it for $1.00 at Redbox or from Netflix. So, the theater owners and studios may end up fighting over nothing, but don't be surprised to hear and see a lot about this over the next few months.
Wednesday, January 26, 2011
TWiT, Revision 3 and...Keith Olbermann? Television networks on the cheap
Update, February 8, 2011: In a teleconference this morning, Keith Olbermann and Current TV announced that Olbermann will do a nightly news and commentary show on Current beginning in Spring 2011, become the company's Chief News Officer and have an equity stake in Current Media.
Update, February 2, 2011: I fixed all of the capitalization errors for Leo Laporte's name (it's Laporte, not LaPorte, although he's known as "The Door" to his friends). In addition, NewTeeVee reported today that Revision3 reached profitability in the last quarter of 2010 and claims that it's the number one "over the top" television network in terms of viewers.
Last week, TWiT Network owner Leo Laporte signed a lease to move his operations from his farmhouse in Petaluma, CA to a 9,400 square foot building formerly occupied by the audio software company Bias. TWiT will turn it into multiple television studios, a radio studio and business offices. The TWiT Network is entirely Internet-based, although Laporte also does conventional radio and television shows for other outlets.
TWiT didn't arise out of a vacuum. Laporte was one of the central figures in the creation of ZDTV, which originally started by producing programming for MSNBC and became a 24-hour cable network focused on technology news and information in 1998. ZDTV immediately ran into problems getting (and paying for) cable carriage, as well as advertising, and in 2000, it sold out to Paul Allen's Vulcan Ventures and changed its name to TechTV.
Allen and the programming team he put in place at TechTV tried a variety of programming approaches, but nothing worked to make the business profitable (and no one approach stayed in place long enough to build and sustain an audience). In 2004, Allen sold TechTV to Comcast, which merged the channel with its G4 games-oriented cable network and renamed or eliminated most of TechTV's programs. Today, only two of TechTV's on-air hosts remains at G4.
Laporte didn't make the move to G4; he stayed in Northern California and started the "This Week in Tech" podcast, from which TWiT gets its name. Laporte added more podcasts, then began simulcasting some of the podcasts with video, and eventually added some video-only shows. Last August, the Los Angeles Times reported that TWiT's revenues were $2.25 million in 2009 and were on track to reach $3 million in 2010, with 10 full-time employees and 30 to 40 contractors. Not a huge business, but profitable, according to LaPorte.
One key to TWiT's success is that Laporte has scaled its growth to fit its revenues. He still runs it out of his Petaluma farmhouse, and he's kept the operation "bare-bones". Even with the move to a larger facility and Laporte's intention to eventually offer programming 24/7, it's still operating on a much smaller scale than ZDTV or TechTV ever did, and that's essential to its success.
Another ZDTV veteran, Jim Louderback, runs Revision3, a spin-off of Digg (which was co-founded by yet another TechTV survivor, Kevin Rose). Revision3 is also an Internet-based news and entertainment video network, and in addition to his duties there, Louderback is a columnist for Advertising Age. He recently wrote about cable network WealthTV's decision to create a channel for the Roku set-top box, and in a follow-up article, suggested that cable networks that have been unable to get much carriage from U.S. cable, IPTV and satellite operators could follow WealthTV and create their own over-the-top Internet video channels.
The problem for these cable networks (Louderback calls them "zombies") is that the can't simply move their operations to the Internet and hope for a better outcome. Instead, they have to scale their operations to the revenues that they can generate from the Internet. They don't have to pay for carriage, but they're going to have an uphill climb to earn any significant subscription revenue. (TWiT gets the vast majority of its revenue from advertising.) That means that they're going to have to dramatically lower both their costs and their expectations.
That brings us to Keith Olbermann. Keith Olbermann? U.S. readers probably know that Olbermann anchored the most popular program on MSNBC, "Countdown with Keith Olbermann", until last Friday. Initially, it was thought that NBC, the owner of MSNBC, fired Olbermann, or that Comcast, the soon-to-be owner of NBC Universal, had played a role in the decision. However, it now appears that Olbermann wanted to leave the network and NBC wanted to get rid of him, so they worked out a mutually-convenient settlement.
Olbermann spent eight years at MSNBC, but he's bounced around among many networks for years, including CNN, ESPN, Fox Sports and a short previous stint at MSNBC. The only option he's had over the years has been to go to work for a different network, but the Internet offers him another option. The Huffington Post and The Daily Beast have both built large, profitable audiences on the Internet from nothing in just a few years (The Huffington Post, in less than six years, and a little over two years for The Daily Beast). Olbermann could create his own Internet video network, operating at low cost (like TWiT) while providing a forum for a variety of outside contributors (like the Huffington Post). Whether it would make enough money to keep Olbermann interested is a separate issue, but it would enable him to work as he wants without answering to a phalanx of corporate management.
The wheels keep turning: Dan Rather went to HDNet and Conan went to TBS. Could Olbermann go to the Internet?
Update, February 2, 2011: I fixed all of the capitalization errors for Leo Laporte's name (it's Laporte, not LaPorte, although he's known as "The Door" to his friends). In addition, NewTeeVee reported today that Revision3 reached profitability in the last quarter of 2010 and claims that it's the number one "over the top" television network in terms of viewers.
Last week, TWiT Network owner Leo Laporte signed a lease to move his operations from his farmhouse in Petaluma, CA to a 9,400 square foot building formerly occupied by the audio software company Bias. TWiT will turn it into multiple television studios, a radio studio and business offices. The TWiT Network is entirely Internet-based, although Laporte also does conventional radio and television shows for other outlets.
TWiT didn't arise out of a vacuum. Laporte was one of the central figures in the creation of ZDTV, which originally started by producing programming for MSNBC and became a 24-hour cable network focused on technology news and information in 1998. ZDTV immediately ran into problems getting (and paying for) cable carriage, as well as advertising, and in 2000, it sold out to Paul Allen's Vulcan Ventures and changed its name to TechTV.
Allen and the programming team he put in place at TechTV tried a variety of programming approaches, but nothing worked to make the business profitable (and no one approach stayed in place long enough to build and sustain an audience). In 2004, Allen sold TechTV to Comcast, which merged the channel with its G4 games-oriented cable network and renamed or eliminated most of TechTV's programs. Today, only two of TechTV's on-air hosts remains at G4.
Laporte didn't make the move to G4; he stayed in Northern California and started the "This Week in Tech" podcast, from which TWiT gets its name. Laporte added more podcasts, then began simulcasting some of the podcasts with video, and eventually added some video-only shows. Last August, the Los Angeles Times reported that TWiT's revenues were $2.25 million in 2009 and were on track to reach $3 million in 2010, with 10 full-time employees and 30 to 40 contractors. Not a huge business, but profitable, according to LaPorte.
One key to TWiT's success is that Laporte has scaled its growth to fit its revenues. He still runs it out of his Petaluma farmhouse, and he's kept the operation "bare-bones". Even with the move to a larger facility and Laporte's intention to eventually offer programming 24/7, it's still operating on a much smaller scale than ZDTV or TechTV ever did, and that's essential to its success.
Another ZDTV veteran, Jim Louderback, runs Revision3, a spin-off of Digg (which was co-founded by yet another TechTV survivor, Kevin Rose). Revision3 is also an Internet-based news and entertainment video network, and in addition to his duties there, Louderback is a columnist for Advertising Age. He recently wrote about cable network WealthTV's decision to create a channel for the Roku set-top box, and in a follow-up article, suggested that cable networks that have been unable to get much carriage from U.S. cable, IPTV and satellite operators could follow WealthTV and create their own over-the-top Internet video channels.
The problem for these cable networks (Louderback calls them "zombies") is that the can't simply move their operations to the Internet and hope for a better outcome. Instead, they have to scale their operations to the revenues that they can generate from the Internet. They don't have to pay for carriage, but they're going to have an uphill climb to earn any significant subscription revenue. (TWiT gets the vast majority of its revenue from advertising.) That means that they're going to have to dramatically lower both their costs and their expectations.
That brings us to Keith Olbermann. Keith Olbermann? U.S. readers probably know that Olbermann anchored the most popular program on MSNBC, "Countdown with Keith Olbermann", until last Friday. Initially, it was thought that NBC, the owner of MSNBC, fired Olbermann, or that Comcast, the soon-to-be owner of NBC Universal, had played a role in the decision. However, it now appears that Olbermann wanted to leave the network and NBC wanted to get rid of him, so they worked out a mutually-convenient settlement.
Olbermann spent eight years at MSNBC, but he's bounced around among many networks for years, including CNN, ESPN, Fox Sports and a short previous stint at MSNBC. The only option he's had over the years has been to go to work for a different network, but the Internet offers him another option. The Huffington Post and The Daily Beast have both built large, profitable audiences on the Internet from nothing in just a few years (The Huffington Post, in less than six years, and a little over two years for The Daily Beast). Olbermann could create his own Internet video network, operating at low cost (like TWiT) while providing a forum for a variety of outside contributors (like the Huffington Post). Whether it would make enough money to keep Olbermann interested is a separate issue, but it would enable him to work as he wants without answering to a phalanx of corporate management.
The wheels keep turning: Dan Rather went to HDNet and Conan went to TBS. Could Olbermann go to the Internet?
Wednesday, January 19, 2011
Does Comcast-NBC Universal matter?
Now that both the U.S. Federal Communications Commission and Justice Department have approved Comcast's acquisition of 51% of NBC Universal, observers of the deal have broken into two camps:
Now that the deal is done, I find myself in a third camp--the "It doesn't matter" camp. At the end of the day, I think that this deal is going to harm Comcast more than anyone else. Here's why:
I'd be willing to lay odds that within five years, Comcast will either divest itself of everything but NBC Universal's cable channels, or failing that, will divest the entire company to another acquirer who's foolhardy enough to think that it can turn things around.
- The deal will benefit consumers (this camp is very small)
- The deal will concentrate power and harm consumers (most observers fall into this camp)
Now that the deal is done, I find myself in a third camp--the "It doesn't matter" camp. At the end of the day, I think that this deal is going to harm Comcast more than anyone else. Here's why:
- Comcast is getting control of the NBC television network after years of mismanagement that have driven it into fourth place out of four major commercial broadcast networks in the U.S. The broadcast networks' share of the television audience has been shrinking for years, so even if Comcast manages to dramatically improve NBC's programming, it's still an asset with a declining value over time.
- If Comcast tries to move NBC's premier sports programming (primarily the Olympics and NFL football) to cable, NBC's affiliates will go to the U.S. Congress and FCC to force Comcast to prevent the move.
- Universal Pictures has been floundering without direction for years. Comcast will be the studio's sixth owner in 20 years (MCA, Panasonic, Seagram's, Vivendi and General Electric). The studio has been in the "second tier" of the Big 6 U.S. movie studios since its game of ownership "hot potato" started in 1990. It's unlikely that Comcast is going to bring anything to Universal that will change the situation.
- Comcast is acquiring a strong set of cable channels, but it can't deny them to its IPTV or satellite competitors.
- Comcast can't shut down Hulu or turn it into a "TV Everywhere" service.
- Comcast faces the same problem that the last four owners of Universal didn't deal with: What should it do with its theme parks? Panasonic, Seagram's, Vivendi and GE didn't want to be in the theme park business, but they didn't do anything about it. Now, Comcast has to decide whether to invest in the parks or sell them off.
I'd be willing to lay odds that within five years, Comcast will either divest itself of everything but NBC Universal's cable channels, or failing that, will divest the entire company to another acquirer who's foolhardy enough to think that it can turn things around.
Tuesday, January 04, 2011
Comcast out, AT&T's U-Verse in
Yesterday, after years of getting video and high-speed Internet service from Comcast in California and Illinois, I switched to AT&T's U-verse IPTV service. There were two big reasons for making the switch:
A few observations from very early use of U-verse:
- Cost: Even with HD service to only a single television, no premium channels (HBO, Showtime, etc), moderate Internet speeds and domestic phone service, I was paying almost $200/month with my most recent price increase. This is the same service that I paid around $120/month for two years ago with "teaser" rates. The U-verse service is around $150/month, with more channels (including premium channels) and faster Internet speeds. I could have gotten an even better rate had I been willing to commit to 12 months of service.
- Quality: Some channels (for example, the local CBS station) were so compressed and filled with errors that audio would frequently drop out and video would freeze. I initially thought that the problem was with the television station itself, but watching the same station on U-Verse was a revelation: Not a single audio dropout or video freeze in hours.
A few observations from very early use of U-verse:
- Even though I was supposed to be getting around 12mbps down from my Comcast service, I measured the speed before AT&T started its installation and only got around 8mbps down. The U-verse service measures a true 12mbps down.
- AT&T really, really wants you to use their 2Wire gateway for everything related to the Internet, but even though I got the very latest 2Wire model, it still only had 802.11 b/g wireless, not 802.11n.
- I received what appear to be Cisco's latest set-top boxes. Compared to the elderly behemoth Motorola box that Comcast used, they're much smaller and more modern, with a far more attractive user interface and electronic program guide.
- One thing I miss from the Comcast system is that the AT&T remotes lack a "Favorite" button to take me immediately to my list of favorite channels. Instead, I have to navigate the set-top box's menu tree to reach the favorite list.
- I don't at all miss the never-ending parade of commercials that Comcast runs on its own systems disparaging its competitors. If Comcast could sell that commercial inventory, they'd have enough money to buy NBC Universal twice over.
Sunday, January 02, 2011
Pay more, get less
Two stories broke late last year that were seemingly unrelated, but in fact are closely related once you think about them. Last November, industry research company SNL Kagan announced that in Q3 2010, U.S. cable subscribers declined by their greatest amount, 741,000, since Kagan first started tracking the industry in 1980. Even with subscriber increases for IPTV and satellite television providers, the multichannel video provider industry as a whole lost 119,000 subscribers.
Cable prices have been going up for years, and IPTV prices, which had been kept lower than cable to provide an incentive for cable subscribers to switch, have also begun to rise. Plans by Time Warner Cable to increase its rates in 2011 first leaked in late November, and after a 2010 rate increase in most markets, Comcast announced late last year that it will raise rates again in 2011, by an average of 4.6%. On December 29th, AT&T announced that it would increase rates in 2011 for its U-Verse IPTV service from 2.4% to 10.2%, effective February 1, 2011.
Now, let's turn to another business--motion pictures. On December 29th, Hollywood.com projected that total theatrical ticket sales revenues would be slightly lower than last year, but that the number of tickets sold would be down by 5.36%, the second-biggest drop in the decade. The only reason that revenues were as good as they were was the inflated price of 3-D tickets. According to the Los Angeles Times, 8% of ticket revenues in 2010, or $850 million, came from the $3 to $4 premium charged for 3D tickets. Without that premium, revenues would also have been down more than 8% year-over-year. Like the cable industry, ticket prices have been going up for years, and attendance has been in a long-term decline.
So, in both the cable and theatrical motion picture businesses, we have prices going up and the number of actual customers going down. No one is arguing that subscribers or moviegoers are getting more for their money--they're simply being forced to pay more for the same content and service. Time Warner, Comcast and AT&T have all essentially said that they're fine with that, and they'll raise prices even more. The LA Times quotes Jeff Blake, vice chairman of Sony Pictures, as saying: "Focusing purely on headcount is nice if you don't want to accept money. But if money goes up while bodies go down, I'm not sure it's necessarily a bad thing." (Can you show me ONE Sony division that knows what it's doing?)
So, Mr. Blake and the executives at the cable and IPTV operators, here's the problem: Price elasticity of demand. There's now a significant body of evidence that demand for both multichannel video services and theatrical motion picture tickets has become elastic, which means that price changes have a disproportionate effect on demand. So, as prices go up, an even higher percentage of cable subscribers will switch to alternatives, and an even greater number of consumers will wait to see movies via Redbox, Netflix, Amazon, Apple, cable, satellite, IPTV, etc. HDTVs bring the big-screen experience into the living room, and 3D HDTVs will eventually eliminate 3D as a big reason to go to the theater.
One other thing that Mr. Blake doesn't seem to understand: Theaters make most of their money not from tickets, but from sales of food and drinks at their concession stands. If 5.36% fewer people go to the theaters, that's 5.36% fewer people buying food. If ticket prices are inflated, that's less money that consumers will be willing to spend on food. Mr. Blake might not care if he's making the same money from fewer people, but theaters care greatly, and if price increases cause further concentration of the theater business, it will give the remaining theaters much more negotiating power against the movie studios.
Both the cable operators and the movie studios seem to think of their services and products as essential goods without reasonable substitutes; in other words, consumers have to purchase them, no matter what the price. Even before the Great Recession, evidence was mounting that the "essential goods" designation was wrong. Consumers do have substitutes: They can replace cable with satellite or IPTV, or even with over-the-air broadcasts that are, in many cases, of significantly higher quality than the signals provided by the multichannel video operators. They can replace a $10 movie ticket with a $1 DVD rental at Redbox. They can replace both cable and movie theaters with streamed movies and television shows from Netflix, Amazon and Apple.
It's clear that both the cable and motion picture industries will stay on their present courses. They'll continue to raise prices and lose customers, until they reach the point where they're no longer profitable, and even then, they'll stay on course while they expect things to "go back to normal." The problem is that there's no more "normal" to go back to. The "new normal" may very well turn into the worst nightmare of the cable and motion picture industries.
Cable prices have been going up for years, and IPTV prices, which had been kept lower than cable to provide an incentive for cable subscribers to switch, have also begun to rise. Plans by Time Warner Cable to increase its rates in 2011 first leaked in late November, and after a 2010 rate increase in most markets, Comcast announced late last year that it will raise rates again in 2011, by an average of 4.6%. On December 29th, AT&T announced that it would increase rates in 2011 for its U-Verse IPTV service from 2.4% to 10.2%, effective February 1, 2011.
Now, let's turn to another business--motion pictures. On December 29th, Hollywood.com projected that total theatrical ticket sales revenues would be slightly lower than last year, but that the number of tickets sold would be down by 5.36%, the second-biggest drop in the decade. The only reason that revenues were as good as they were was the inflated price of 3-D tickets. According to the Los Angeles Times, 8% of ticket revenues in 2010, or $850 million, came from the $3 to $4 premium charged for 3D tickets. Without that premium, revenues would also have been down more than 8% year-over-year. Like the cable industry, ticket prices have been going up for years, and attendance has been in a long-term decline.
So, in both the cable and theatrical motion picture businesses, we have prices going up and the number of actual customers going down. No one is arguing that subscribers or moviegoers are getting more for their money--they're simply being forced to pay more for the same content and service. Time Warner, Comcast and AT&T have all essentially said that they're fine with that, and they'll raise prices even more. The LA Times quotes Jeff Blake, vice chairman of Sony Pictures, as saying: "Focusing purely on headcount is nice if you don't want to accept money. But if money goes up while bodies go down, I'm not sure it's necessarily a bad thing." (Can you show me ONE Sony division that knows what it's doing?)
So, Mr. Blake and the executives at the cable and IPTV operators, here's the problem: Price elasticity of demand. There's now a significant body of evidence that demand for both multichannel video services and theatrical motion picture tickets has become elastic, which means that price changes have a disproportionate effect on demand. So, as prices go up, an even higher percentage of cable subscribers will switch to alternatives, and an even greater number of consumers will wait to see movies via Redbox, Netflix, Amazon, Apple, cable, satellite, IPTV, etc. HDTVs bring the big-screen experience into the living room, and 3D HDTVs will eventually eliminate 3D as a big reason to go to the theater.
One other thing that Mr. Blake doesn't seem to understand: Theaters make most of their money not from tickets, but from sales of food and drinks at their concession stands. If 5.36% fewer people go to the theaters, that's 5.36% fewer people buying food. If ticket prices are inflated, that's less money that consumers will be willing to spend on food. Mr. Blake might not care if he's making the same money from fewer people, but theaters care greatly, and if price increases cause further concentration of the theater business, it will give the remaining theaters much more negotiating power against the movie studios.
Both the cable operators and the movie studios seem to think of their services and products as essential goods without reasonable substitutes; in other words, consumers have to purchase them, no matter what the price. Even before the Great Recession, evidence was mounting that the "essential goods" designation was wrong. Consumers do have substitutes: They can replace cable with satellite or IPTV, or even with over-the-air broadcasts that are, in many cases, of significantly higher quality than the signals provided by the multichannel video operators. They can replace a $10 movie ticket with a $1 DVD rental at Redbox. They can replace both cable and movie theaters with streamed movies and television shows from Netflix, Amazon and Apple.
It's clear that both the cable and motion picture industries will stay on their present courses. They'll continue to raise prices and lose customers, until they reach the point where they're no longer profitable, and even then, they'll stay on course while they expect things to "go back to normal." The problem is that there's no more "normal" to go back to. The "new normal" may very well turn into the worst nightmare of the cable and motion picture industries.
Tuesday, December 14, 2010
Comcast's Xcalibur: Another race back to the past?
Light Reading has published an article about Comcast's new Xcalibur service, which is in an early test in Augusta, GA. The details of the service are still sketchy, but it appears to be a hybrid web-to-TV set-top box codenamed "Parker", possibly the one under development in Comcast's Seattle labs that I wrote about last year. According to Light Reading's sources, Xcalibur is a "managed over-the-top" video service that's designed to compete with offerings such as Apple TV, Boxee, Roku and Google TV while keeping subscribers inside the Comcast tent.
Xcalibur is said to offer a limited, hand-picked selection of websites and video services. It's yet another "walled garden" approach, and it's very likely that you won't find any content on Xcalibur that's competitive with any of Comcast's existing services.
It's true that the other over-the-top video services are also walled gardens to some extent, but with the exception of Apple TV, that's not because they're deliberately closed off. It requires some development work, but anyone can make their video content available on Boxee, Roku or Google TV. In the case of Boxee and Google TV, they want to offer even more web video content but are actively being blocked.
If you want to envision what Comcast could be doing, consider France's Free. Earlier today, Engadget wrote an article about a new over-the-top IPTV set-top box that's been launched by France's Free (Iliad) Internet service, the Freebox 6. Here's what the box has:
- 250GB hard drive
- Blu-Ray drive
- 802.11n WiFi adapter
- HDMI output
- 3D support
- Built-in DECT adapter for wireless telephones
- Web browser
- Motion-sensing remote
- Joystick
- Two powerline Ethernet adapters
Comcast, and virtually every other U.S. multichannel video service provider, is driving to the future while staring in the rear-view mirror. A walled garden approach won't fly, but you wouldn't expect anything more from a company whose most exciting recent development is an app that turns an iPad into a remote control.
Sunday, December 05, 2010
Episode 5 of the Feldman File videoblog is live!
This week's episode of the Feldman File videoblog is live on YouTube! If you can't see it here, click here to view it in your browser. Here are the stories in this week's show:
- Google's $6 billion offer for Groupon is rejected, but it acquires DRM specialist Widevine
- Verizon Wireless fires up its LTE broadband network and launches its first devices
- Comcast extends its agreement to acquire NBC Universal and contends with complaints from Level 3 and Zoom Telephonics
- Adobe releases the first beta of Flash Player 10.2
- The U.S. Justice Department is forced to drop charges against an accused Xbox 360 modder
- Flipboard adds HTML5 support and advertising
Monday, September 27, 2010
Who's afraid of the big, fat pipe?
Cable, satellite and IPTV services all do the same thing: They distribute video content to set-top boxes in consumers' homes, where the content is watched on televisions. If you suggested to them on the record that they get rid of the content, get rid of the set-top boxes and simply allow consumers to get content from wherever they want, their heads would explode like they did in David Cronenberg's "Scanners".
Last week, however, Ivan Seidenberg, the chairman of Verizon, suggested that the future of video is over-the-top content at a Goldman Sachs conference in New York last week, and that a transition from Verizon selling the content to consumers getting content from their own sources is inevitable. Service providers would offer very fast Internet service (100Mbps or more--some Asian service providers are offering 1Gbps), thanks in part to not having to reserve so much bandwidth for video, and would act as common carriers--their pipes would carry just about anything. The service providers would make money on the connectivity, not the content. Set-top boxes and a whole lot of infrastructure and truck rolls would go away.
One enormous thing that goes away in the common carrier model is the need for service providers to negotiate for and license content. Most cable operators would tell you privately that they'd rather have a colonoscopy without sedatives than negotiate with Disney for retransmission rights. Disney's ESPN is the "900-pound gorilla" of cable channels, and Disney uses it like a hammer to get concessions from service providers, from paying to retransmit their local ABC owned-and-operated stations to carrying all of Disney's sports and children's networks. And Disney is only one player: There's CBS, NBC Universal, News Corporation/Fox, Time Warner and many others, all demanding their own share of operator revenues and priority positions in bundles.
There are only two service providers in the U.S. with their own large stables of content: Comcast, which owns E! Entertainment, Versus, The Golf Channel and G4, along with regional cable networks across the country, and Cablevision, whose Rainbow Media subsidiary owns AMC, IFC, The Sundance Channel ad WeTV. (Since 2008, Time Warner Cable has been independent of Time Warner, which owns HBO, TNT, CNN, HLN, TCM and many other cable networks, as well as Warner Brothers.) Comcast, of course, is trying to get government approval to acquire NBC Universal, which will give it NBC, Telemundo, USA Network, MSNBC, CNBC, Bravo, Lifetime, SyFy, The Weather Channel, Mun2 and other wholly- and partially-owned cable networks, as well as Universal Studios.
Comcast and Cablevision can make money by licensing their content to other service providers. They sell themselves the content they need for their own cable systems through what's called "transfer pricing"--essentially, the money goes from one pocket to another. Thus, they have lower content acquisition costs and more control over their future outlook than other service providers.
But what if some of the larger service providers decide to go the common carrier route, or pursue a hybrid strategy of offering only local broadcast stations and a small number of national cable networks, with subscribers free to get anything else they want from anyone they want? To date, no one in the U.S. has had that option (legally), but it could happen. If it did, there would be a lot of cable and IPTV service provider executives who would sleep much better at night.
Last week, however, Ivan Seidenberg, the chairman of Verizon, suggested that the future of video is over-the-top content at a Goldman Sachs conference in New York last week, and that a transition from Verizon selling the content to consumers getting content from their own sources is inevitable. Service providers would offer very fast Internet service (100Mbps or more--some Asian service providers are offering 1Gbps), thanks in part to not having to reserve so much bandwidth for video, and would act as common carriers--their pipes would carry just about anything. The service providers would make money on the connectivity, not the content. Set-top boxes and a whole lot of infrastructure and truck rolls would go away.
One enormous thing that goes away in the common carrier model is the need for service providers to negotiate for and license content. Most cable operators would tell you privately that they'd rather have a colonoscopy without sedatives than negotiate with Disney for retransmission rights. Disney's ESPN is the "900-pound gorilla" of cable channels, and Disney uses it like a hammer to get concessions from service providers, from paying to retransmit their local ABC owned-and-operated stations to carrying all of Disney's sports and children's networks. And Disney is only one player: There's CBS, NBC Universal, News Corporation/Fox, Time Warner and many others, all demanding their own share of operator revenues and priority positions in bundles.
There are only two service providers in the U.S. with their own large stables of content: Comcast, which owns E! Entertainment, Versus, The Golf Channel and G4, along with regional cable networks across the country, and Cablevision, whose Rainbow Media subsidiary owns AMC, IFC, The Sundance Channel ad WeTV. (Since 2008, Time Warner Cable has been independent of Time Warner, which owns HBO, TNT, CNN, HLN, TCM and many other cable networks, as well as Warner Brothers.) Comcast, of course, is trying to get government approval to acquire NBC Universal, which will give it NBC, Telemundo, USA Network, MSNBC, CNBC, Bravo, Lifetime, SyFy, The Weather Channel, Mun2 and other wholly- and partially-owned cable networks, as well as Universal Studios.
Comcast and Cablevision can make money by licensing their content to other service providers. They sell themselves the content they need for their own cable systems through what's called "transfer pricing"--essentially, the money goes from one pocket to another. Thus, they have lower content acquisition costs and more control over their future outlook than other service providers.
But what if some of the larger service providers decide to go the common carrier route, or pursue a hybrid strategy of offering only local broadcast stations and a small number of national cable networks, with subscribers free to get anything else they want from anyone they want? To date, no one in the U.S. has had that option (legally), but it could happen. If it did, there would be a lot of cable and IPTV service provider executives who would sleep much better at night.
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