HDTV Almanac - Cable and Satellite Ask FCC for Help

[alfredpoor]

A group of subscription television providers — both cable and satellite – have petitioned the FCC for some protection against networks pulling the plug on their program as part of licensing negotiations. The most recent round of brinkmanship was between Cablevision and Disney leading up to the Academy Awards coverage, but we’ve also seen other [...]

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[jerfilm]

Or what? Don't the networks have almost as much to lose as the cable/satellite providers?? Have they forgotten that there are still hundreds of thousands of households in America that have no access to OTA broadcasts? Why is it that folks no longer can see things in the light of "mutual" benefit? Greed, perhaps?

[alfredpoor]

The subscription TV market is Balkanized. Even the big cable companies like Comcast have their franchises fragmented and scattered all over the map. The satellite services have blanket coverage, but still have relatively small shares of the pie. On the other hand, there are only a handful of big networks, and when one negotiates a higher licensing rate with one piece of the subscription service market, they expect to get the same sort of deal from the rest. If one of the rest puts up a fight (because they're in enough trouble with subscribers already due to their steadily increasing subscription fees), then the networks can pick them off one at a time by withholding their content. How long would the subscribers let their cable or satellite company go without showing CBS or ABC content?

So it looks to me as though the networks have all the leverage here.

As for the question of "greed", that's hard to define. If I put up 90% of the capital required to make a product, do I deserve 90% of the profit? What is a "fair" return on investment, and does that change if the other side is making a much larger return on their investment thanks to my work? Or if the other side is running at a loss and will fold if the economics don't shift some in their favor?

The networks are making less on advertising, thanks to DVRs (many of which the cable and satellite companies make money from), so it's natural for them to look for other sources to make up the difference. If the networks make any less money than they do now, we may be stuck with nothing but "reality" programming and other stuff that's cheap to produce.

Alfred

[akirby]

The real problem is we don't pay the networks directly. If we subscribed to ABC, then cable and satellite companies could just pass those fees on. Networks get paid by advertising and cable/satellite broadcast rights. Consumers buy bundles of channels. There is almost no way to account for the costs of one specific network (like Versus or FX). Life was a lot simpler before cable and satellite when everything was free.

[jerfilm]

But I guess the networks have forgotten that before the cable and satellite sweetheart deals (for them, at least) came along, we all got their content FREE. And we still all could. Yes, they'd still have the viewers but they sure as hell would lose a lot of revenue.

And I for one wouldn't have a huge problem doing that. Already have OTA (and at least 2 channel choices for every network where I live). I'm sick of paying $150 a month and seldom watching anything but cable news and an occasional network show. I'd almost be relieved to see the cable and satellite folks price themselves out of business. I wonder how this recession has affected them??

[alfredpoor]

If some folks had their way, you would pay the cable and satellite services for only those channels you wanted to get. I think it would be a disaster, as a lot of low-revenue channels would disappear overnight. They only exist to boost the total channel count for the subscription services, but few people actually watch them. And people would end up paying a lot for the networks that they want, I suspect.

Now that the DVR Pandora has unleashed commercial-skipping, the major source of network revenues (as it was in the good old days) is getting nipped in the bud. The networks have to find some way to replace that "lost" income if they are to continue to pay for the current level of content development. (Keep in mind that a lot of it is produced on spec by independent producers, and the networks are just the aggregators and publishers of that content, so it's more complex than just one monolithic studio being responsible for a network's programming.)

Alfred

[fsense]

Seems like only yesterday that DirecTV pulled the plug on Versus because they were unable to negotiate a favorable fee. We were with DirecTV solely for the Versus coverage of bicycle racing, plus the news channels. DirecTV had no interest in reducing my monthly rate, or in allowing me to cancel my one year agreement with them. Instead, they told me about how much I should appreciate their new hockey coverage! Maybe they could afford to carry Versus if they didn't use up so much of their bandwidth carrying all the religious channels and all the other things I'm not interested in. It's time for them to step up and figure out how to do a la carte subscriptions where the subscriber pays for only the channels he wants to see. Then they'd know what users are willing to pay for and could likely drop half of their channels.

We switched to Dish and got a 100% HD package that included Versus for less money than we were paying for non-HD service from DirecTV. Anyway, it's time for the satellite providers to pay a bit more attention to the consequences that their actions have upon the subscribers. It's the subscribers who need the protection, not the satellite companies.

[alfredpoor]

Contrary to the old saying, the size of the dog is what counts here. CBS has a lot more leverage than Versus. Switchboards will flood when there's a problem with Academy Award coverage, but the Tour de France does not command the same audience.

I'm glad that you were able to get the content you want from Dish, and at a savings, but I believe that satellite and cable can't survive on the reduced revenues that will come from a la carte pricing. Instead, it will drive all the viewers of the "small" programming choices like Versus to the Internet, where they'll stream the content directy to their TVs. And the advertisers will be able to target you individually with commercials that will interest you because they're related to your specific interests.

We're going through the rough transition stages for the next five or ten years, but the change is coming and we're all going to be a lot happier with the available choices when we come out the other side. At least, that's how I believe it will work out.

Alfred

[jerfilm]

That's an interesting thought about the internet. Maybe that will be the way that the smaller, niche channels will distributer their content. You subscribe directly, download it and send it to your Tv. Then you get your OTA antenna working again and say screw the satellite and cable folks.

I've always liked the idea of ala carte. But agree that it would not be good for the providers. Even if they'd put together packages, like a History, Discovery, TLC, etc. type of package. A religious package. Others. Dish already does it with HD. And sports packages. Why not other combinations? Not exactly a la carte but at least then you can pick what you watch most and not subscribe to the ones you never watch.

[alfredpoor]

Physical stuff is expensive to put in place, and even more expensive to maintain. The cable companies are saddled with an expensive infrastructure that is difficult to upgrade as the demands for bandwidth increase. That's why the images are so crappy; they have to overcompress the signal more and more in order to make room for more channels and more HD. The satellite companies don't have it much better; they "only" have to put the birds up in the sky, but those are crazy expensive and rather difficult to fix if something breaks.

Internet delivery has almost no infrastructure: just a giant server farm that is all under one roof (or a few roofs at worst). You pay for the pipe connecting you to the Internet, but maintaining that pipe and everything beyond the connection at your wall is someone else's problem. Much simpler. And so scaling and load leveling becomes much easier, because all your hardware is in one place and it's easy to add more servers as demand grows.. You don't have to deliver all the content all the time to all your possible viewers the way cable and satellite have to. Instead, you just send a stream to each one as needed. Much more efficient use of your bandwidth, with a fraction of the maintenance headaches.

Alfred