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 Viacom. Show all posts
Showing posts with label Viacom. Show all posts
Saturday, October 25, 2014
Tuesday, February 26, 2013
Why the status quo in the U.S. cable business can't hold
The more that I look at the U.S. cable, satellite and IPTV business, the more I realize that "business as usual" is eventually doomed. Cable companies' core business for more than 50 years has been to sell access to bundles of broadcast and cable-only channels, which are accessed through the use of proprietary set-top boxes, to consumers. Starting in the late 1990s, cable operators started adding access to high-speed Internet services, which ride in and out of consumers' homes on available bandwidth not used for video. A few years later, cable operators added Voice over IP telephony services, which use the same bandwidth as high-speed Internet. IPTV companies offer the same service, but in the reverse order: First came analog voice telephony, more than 100 years ago. Then, DSL came in the 1990s for high-speed Internet service, and finally, AT&T, Verizon and others added broadcast and cable-only television channels, accessible through proprietary set-top boxes.
Today's cable and IPTV operators look very similar so far as consumers are concerned, and they both face the same business challenges: Retransmission and carriage fees. Retransmission fees are intended to compensate broadcasters for the use of their programming by video operators. Carriage fees provide compensation to cable network operators. It used to be that some cable networks would pay video operators to carry their programming, in order to sell advertising that would reach the widest possible audiences. Today, however, almost all cable networks charge video operators to supply their programming to consumers.
Until 2008's Great Recession, broadcasters and cable networks got most of their revenues from advertising. Broadcasters kept their retransmission fees low, or waived them altogether if video operators agreed to carry cable channels provided by the broadcasters' parent companies. Cable networks generally also kept their carriage fees relatively low, in order to get into the widest possible number of households. After 2008, however, all that changed. Broadcasters' advertising revenues dropped (in some cases, dramatically,) so they needed to make up for lost income. In addition, broadcast networks, which had been paying television stations to carry their programming, began charging stations for programming or demanded a portion of the stations' retransmission fees. Similarly, cable networks started increasing their carriage fees to replace lost advertising revenues.
Early on, video operators absorbed the price increases from content providers as best they could, knowing that they couldn't pass the increases on to customers in the form of higher rates during a recession. Now, however, not a week goes by where a video operator isn't threatening to drop a broadcast station or cable network because it's too expensive, or a broadcaster or cable network isn't threatening to cut off a video operator. Video operators are trying to disguise consumer rate increases as things like "concierge" services, where they charge for services that consumers used to get for free. And today, Cablevision filed an antitrust lawsuit against Viacom, charging the company with forcing cable operators to license a bundle of 14 unpopular cable networks in order to get access to popular ones such as Comedy Central and Nickelodeon.
This situation can't persist for much longer. In many markets, subscription prices have reached the maximum that consumers are willing to pay, and consumers have gotten wise to video operators' pricing tactics: Offer low "teaser" rates to get consumers to switch, and then start raising rates frequently, and often silently, once their introductory deals expire. Consumers respond by cancelling services, switching video operators, and in the worst case, dropping video services altogether and switching to over-the-air broadcasts and over-the-top Internet video.
Within a decade, I believe that most cable and IPTV companies will be well on the way to dropping their video services. Consumers will purchase their own set-top boxes, and similar functionality will be built directly into new televisions. Some set-top box vendors will also aggregate content. Rather than the plethora of formats for publishing video that work on set-top boxes from Apple, Google, Intel, Roku, etc., a single standard protocol will enable content providers to publish channels and on-demand video that will work with most set-top boxes, and will show up in the devices' program guides. Cable and IPTV companies are likely to partner with set-top box vendors and receive a portion of their revenue from consumer subscriptions.
Consumers would get the "a la carte" cable channel choices that they've been asking for--but at a price. For example, Disney's ESPN might make its primary ESPN channel available by itself to subscribers for $6.95/month--but price the entire ESPN channel lineup at $12.95/month, thus making it more attractive to pay more but get everything. This strategy would work for the rest of Disney, as well as Viacom, CBS, Discovery, Fox, NBC Universal and others.
The cable and IPTV operators would compete on other services and benefits--who offers the fastest and most reliable high-speed Internet service, the simplest and most useful home networking, the best home automation and security packages, etc. All of these would be services that the cable and IPTV operators would provide themselves--thus, they wouldn't be subject to ever-increasing financial demands from cable networks and broadcasters. By literally wiring their services deep into households, it would be much harder for consumers to switch from one service provider to another, which should decrease churn levels.
The war among video operators, broadcasters and cable networks, with consumers in the middle and paying the bills, can't go on for much longer. At some point, a critical mass of consumers will stop paying the bills, and video operators will have no choice but to spin off their video services.
Today's cable and IPTV operators look very similar so far as consumers are concerned, and they both face the same business challenges: Retransmission and carriage fees. Retransmission fees are intended to compensate broadcasters for the use of their programming by video operators. Carriage fees provide compensation to cable network operators. It used to be that some cable networks would pay video operators to carry their programming, in order to sell advertising that would reach the widest possible audiences. Today, however, almost all cable networks charge video operators to supply their programming to consumers.
Until 2008's Great Recession, broadcasters and cable networks got most of their revenues from advertising. Broadcasters kept their retransmission fees low, or waived them altogether if video operators agreed to carry cable channels provided by the broadcasters' parent companies. Cable networks generally also kept their carriage fees relatively low, in order to get into the widest possible number of households. After 2008, however, all that changed. Broadcasters' advertising revenues dropped (in some cases, dramatically,) so they needed to make up for lost income. In addition, broadcast networks, which had been paying television stations to carry their programming, began charging stations for programming or demanded a portion of the stations' retransmission fees. Similarly, cable networks started increasing their carriage fees to replace lost advertising revenues.
Early on, video operators absorbed the price increases from content providers as best they could, knowing that they couldn't pass the increases on to customers in the form of higher rates during a recession. Now, however, not a week goes by where a video operator isn't threatening to drop a broadcast station or cable network because it's too expensive, or a broadcaster or cable network isn't threatening to cut off a video operator. Video operators are trying to disguise consumer rate increases as things like "concierge" services, where they charge for services that consumers used to get for free. And today, Cablevision filed an antitrust lawsuit against Viacom, charging the company with forcing cable operators to license a bundle of 14 unpopular cable networks in order to get access to popular ones such as Comedy Central and Nickelodeon.
This situation can't persist for much longer. In many markets, subscription prices have reached the maximum that consumers are willing to pay, and consumers have gotten wise to video operators' pricing tactics: Offer low "teaser" rates to get consumers to switch, and then start raising rates frequently, and often silently, once their introductory deals expire. Consumers respond by cancelling services, switching video operators, and in the worst case, dropping video services altogether and switching to over-the-air broadcasts and over-the-top Internet video.
Within a decade, I believe that most cable and IPTV companies will be well on the way to dropping their video services. Consumers will purchase their own set-top boxes, and similar functionality will be built directly into new televisions. Some set-top box vendors will also aggregate content. Rather than the plethora of formats for publishing video that work on set-top boxes from Apple, Google, Intel, Roku, etc., a single standard protocol will enable content providers to publish channels and on-demand video that will work with most set-top boxes, and will show up in the devices' program guides. Cable and IPTV companies are likely to partner with set-top box vendors and receive a portion of their revenue from consumer subscriptions.
Consumers would get the "a la carte" cable channel choices that they've been asking for--but at a price. For example, Disney's ESPN might make its primary ESPN channel available by itself to subscribers for $6.95/month--but price the entire ESPN channel lineup at $12.95/month, thus making it more attractive to pay more but get everything. This strategy would work for the rest of Disney, as well as Viacom, CBS, Discovery, Fox, NBC Universal and others.
The cable and IPTV operators would compete on other services and benefits--who offers the fastest and most reliable high-speed Internet service, the simplest and most useful home networking, the best home automation and security packages, etc. All of these would be services that the cable and IPTV operators would provide themselves--thus, they wouldn't be subject to ever-increasing financial demands from cable networks and broadcasters. By literally wiring their services deep into households, it would be much harder for consumers to switch from one service provider to another, which should decrease churn levels.
The war among video operators, broadcasters and cable networks, with consumers in the middle and paying the bills, can't go on for much longer. At some point, a critical mass of consumers will stop paying the bills, and video operators will have no choice but to spin off their video services.
Wednesday, June 23, 2010
Google wins summary judgment against Viacom in YouTube case
(Disclaimer: I'm not a lawyer, this isn't legal advice and your mileage may vary.) Google and Viacom have been embroiled in a copyright suit for several years over YouTube. Viacom charged that Google and YouTube knowingly violated copyrights for its video content, and asked for damages of $1 billion. However, earlier today, Judge Louis Stanton of the U.S. District Court in New York ruled that Google is entitled to protection under the "Safe Harbor" provisions of the Digital Millenium Copyright Act (DMCA) and is not liable to Viacom for any copyright infringement.
The court ruled that Google/YouTube abided by all the requirements of the DMCA, and Viacom was, and is, required to state with specificity which content it believes to infringe its copyrights. The court said that Google/YouTube went beyond legal requirements by implementing a system for automatically scanning uploaded content and comparing it with a database of known copyrighted works in order to identify and take down infringing content without having to receive a DMCA notice.
The court also ruled that it's not enough for Google/YouTube to have known that there was some infringing content in its system--it's up to Viacom (or any other copyright holder) to specify the content that infringes its copyrights. When Viacom did provide specific information to Google/YouTube, the company took the content down within 24 hours in virtually every case. In short, Google has won, and Viacom is not entitled to any compensation. Viacom will undoubtedly appeal.
The court ruled that Google/YouTube abided by all the requirements of the DMCA, and Viacom was, and is, required to state with specificity which content it believes to infringe its copyrights. The court said that Google/YouTube went beyond legal requirements by implementing a system for automatically scanning uploaded content and comparing it with a database of known copyrighted works in order to identify and take down infringing content without having to receive a DMCA notice.
The court also ruled that it's not enough for Google/YouTube to have known that there was some infringing content in its system--it's up to Viacom (or any other copyright holder) to specify the content that infringes its copyrights. When Viacom did provide specific information to Google/YouTube, the company took the content down within 24 hours in virtually every case. In short, Google has won, and Viacom is not entitled to any compensation. Viacom will undoubtedly appeal.
Tuesday, March 02, 2010
The Content Paradox
The "old media" Goliaths like News Corporation, Viacom, CBS, Disney, NBC Universal and Time Warner are often said to be doomed to extinction by the Internet, yet it's content produced and owned by those same companies that's the most popular on the Internet. Those of us in the U.S. may complain about Hulu's limited selection of and time limits on access to content, yet Hulu is envied by content consumers around the world. YouTube would never have gotten to where it is today without all the "old media" content that was (and still is) uploaded for free consumption. If YouTube had depended totally on user-generated content, it never would have reached critical mass.
We may not like the restrictions and limitations that the old media companies put on usage of their content, but they own it, and they have the right (subject to "first sale" rules and other restrictions in the U.S.) to control how it's sold and distributed.
No Internet "new media" companies have content that's in the same popularity class as the old media companies. Producer/Distributors such as Revision3 and TWiT have built very solid businesses. TWiT, Leo Laporte's company, is attracting bigger audiences than TechTV ever did, and judging from Laporte's own comments, it's making a nice profit. However, the audience for all of TWiT's programming is tiny compared to any of the old media sites. Thus the paradox: The Internet relies on old media to drive traffic to new media sites, but the vast majority of original new media properties can't find big enough audiences to sustain themselves financially.
The Internet has lowered the barriers to entry for content producers and distributors down to almost nothing, but making the content available and getting people to read or watch it are two very different things. Building a big enough audience that your content or site becomes attractive to advertisers is much more difficult, and getting people to pay to access the content is even yet more difficult. The old media companies have at least solved the problem of getting people to watch or read their content, but the new media companies all have to start from scratch to build an audience.
Old media isn't having that much easier a time of it on the Internet--just today, for example, Hulu announced that Viacom's Comedy Central is withdrawing its programming at midnight on March 10th, thus removing some of the most topical and popular content from the site. Hulu is widely believed to be unprofitable, and rumors have been flying for months that its parent companies (News Corporation, NBC Universal, Disney and Providence Equity Partners) have been pushing it to adopt a pay model in addition to its existing advertising-supported model. So, simply bringing old media content to the Internet isn't a formula for financial success.
This argument is going to continue until someone releases a breakout hit on the Internet, figures out how to make money with it and builds a profitable, growing media business. Until that happens, the Internet will remain primarily a distribution channel for old media, rather than a viable channel for launching new media.
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We may not like the restrictions and limitations that the old media companies put on usage of their content, but they own it, and they have the right (subject to "first sale" rules and other restrictions in the U.S.) to control how it's sold and distributed.
No Internet "new media" companies have content that's in the same popularity class as the old media companies. Producer/Distributors such as Revision3 and TWiT have built very solid businesses. TWiT, Leo Laporte's company, is attracting bigger audiences than TechTV ever did, and judging from Laporte's own comments, it's making a nice profit. However, the audience for all of TWiT's programming is tiny compared to any of the old media sites. Thus the paradox: The Internet relies on old media to drive traffic to new media sites, but the vast majority of original new media properties can't find big enough audiences to sustain themselves financially.
The Internet has lowered the barriers to entry for content producers and distributors down to almost nothing, but making the content available and getting people to read or watch it are two very different things. Building a big enough audience that your content or site becomes attractive to advertisers is much more difficult, and getting people to pay to access the content is even yet more difficult. The old media companies have at least solved the problem of getting people to watch or read their content, but the new media companies all have to start from scratch to build an audience.
Old media isn't having that much easier a time of it on the Internet--just today, for example, Hulu announced that Viacom's Comedy Central is withdrawing its programming at midnight on March 10th, thus removing some of the most topical and popular content from the site. Hulu is widely believed to be unprofitable, and rumors have been flying for months that its parent companies (News Corporation, NBC Universal, Disney and Providence Equity Partners) have been pushing it to adopt a pay model in addition to its existing advertising-supported model. So, simply bringing old media content to the Internet isn't a formula for financial success.
This argument is going to continue until someone releases a breakout hit on the Internet, figures out how to make money with it and builds a profitable, growing media business. Until that happens, the Internet will remain primarily a distribution channel for old media, rather than a viable channel for launching new media.
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