How's that Cable / Satellite Bill Doin'?

When my bill for receiving WCPO, WCHS and WSAZ went from $2.00 to $2.25, I was ready to throw in the towel.  Where would it stop.  Fact is there really wasn’t another way to get a signal in that hollow.

So, today, does it bother me that folks paying between $100 and $200 a month are about to get a 5+ percent kick in their backside?  Well, yes.  Of course.  I’m one of them. 

First, full disclosure:  When someone says it’s not about the money, it’s about the money.  So with that out of the way, I’ll go on to say that it really isn’t about the money (see immediately above) but the fact that these guys’ timing is pretty poor.

A look at the landscape:  We still have over-the-air (OTA) television.  We have access to cable, to satellite and to copper-delivered entertainment.  Beyond that, we have IPTV and OTT.  When I talk about IPTV, I mean any system that delivers content using Internet Protocol.  This could be via an infrastructure provider, e.g., a cable provider using Internet Protocol to deliver select content…VOD and live events. 

It also could be via the Internet though that has come to be called “OTT” or Over-the-Top, a term that has become synonymous with Internet delivery.  But it gets narrowed a bit in that it’s usually meant to mean content that doesn’t pass over cable or satellite or copper based services.

Confusing?  You bet.  After all, content comes over cable.  Some people have Internet delivered via cable.  But the nuance is that OTT is delivered via the Internet, itself.  If your cable company provides your Internet, the OTT content comes directly to you via Internet without the cable company “handling” it.¹

Let’s throw another acronym into the mix:  MVPD.  Multichannel Video Programming Distributor.  These are the guys who distribute more than one program source at a time – the cable companies, satellite organizations and telcos who deliver the 30 to 3000 programs to your home

They’re different from the OTT guys like NetFlix and Hulu.  Both of these deliver content to you via the web directly.  Many others are getting into OTT.  As anyone who enjoys multiple types of entertainment knows, all of these acronyms have the nerve to charge something for their service.  Like their employees have to eat or something.

I’ve written a couple of times in the past about distribution and channels (see the blog just below).  Every time I do it is with attention to ever-expanding sources.  And now, the sources are starting to step on one another. 

While it may not have been the first such situation, but arguably the most famous is Sony and the BetaMax.  Sony hardware got a great product to market.  Sony software started yelping.  Now we see cable owning broadcast, broadcast owning cable, most of them providing some type of Internet, satellite, and the Internet, itself, where entrepreneurs are desperately trying to distribute all the other guys’ stuff and make a buck at it.  And it’s like a car keys party of the ‘70’s (so I’ve heard).  Who knows who’s pairing up with whom next. 

The diversity and mix makes it a regulatory free-for-all and it’s dangerous to jump in with laws and rules without realizing that the arena is one big Pillsbury Dough Boy.  You push in over here; something’s going pop out over there.  Unintended consequences hiding in the weeds everywhere and if there’s one thing the government isn’t good at, it’s planning for unintended consequences.  Yeah, oxymoronic, but you get the point.

Speaking of point, let me get to mine, finally.  Rates are going up again.  The primary driver is sports programming.  ESPN is the biggest culprit.  Here’s The Wall Street Journal’s chart developed from SNL Kagan’s numbers.

Secondary Source:  http://blogs.wsj.com/numbers/how-much-cable-subscribers-pay-per-channel-1626/

That’s 2014.  The producers are back seeking another bump.  It’s that 5+ percent I mentioned at the top.  Now, according to Kagan, program costs were up 9.1 percent in 2013 and 8.1 percent in 2014.  I’m saying 5+ percent in 2015 because it’s safe and it’s what some in the industry think will be close to accurate.  Kagan says 8.8 percent but that’s just one source. 

That begs the big question.  How much longer will people pay for things they don’t use?  I know that when I order Buffalo wings I get both ranch and bleu cheese dips.  The bleu cheese gets dumped.  Should I be able to buy the wings for 20¢ less by telling them to keep the bleu?  I don’t use the rear power outlet in the car.  Should I be able to buy it without?

You know where I’m going.  I’m paying for hundreds of channels and watching only a few.  Stop charging me for the bleu cheese and the power outlet. 

I’m not the only one.  Here’s Nielsen’s evaluation:

http://www.nielsen.com/us/en/insights/news/2014/changing-channels-americans-view-just-17-channels-despite-record-number-to-choose-from.html    (2014 not yet available)

Looks like we’re all paying for a lot more than we’re using. 

When does that stop?  A number of factors come into play.  First:  Channels (wrote about it last time).  When folks go to a provider directly, voila.  They’ll pay.  But they’ll be the only ones paying.  You think content providers aren’t scared of this?  No?  Think again.  Second, when subscribers start demanding a la carte from operators.  Some folks equate tiers with a la carte.  Not the case. 

The tiers are stacked to pack in channels you don’t necessarily want with those you do – amortizing the per-sub costs for the operator.  A la carte will mean you choose – not from column A or B but from the entire list.  It’ll have the about the same effect as going directly to the provider.  Maybe better since Disney may well try to package all the Disney/ABC/ESPN/History/A&E/so on networks for one price.  And it’ll be up to the consumer to decide. 

The third factor is third party OTT where a Hulu manages separate streams for content providers.  Oh, wait.  Who owns about a third of Hulu?  Right.  That would be Disney.

The important thing is that some sort of a la carte is heading our way.  Most of the financial guys on the supplier side don’t see it.  They don’t want to.  Think of the dominoes that will fall.  With sports, if non-sports folks aren’t subsidizing the sports lovers with their cable/satellite bills, what happens to rights fees?  And, if rights fees fall, what happens to pro sports leagues?  And if the leagues have their revenues cut, where do those poor players turn?

Does it matter?

As an example, Thursday Night Football moves from CBS to The NFL Network after a few games.  CBS continues to produce – and to weaken its Thursday night lineup with non-sports fans – the games for the NFL.  And how long does that go on?  When does the NFL really start producing their own games, on their own budget and distribute directly at a profit.  Are there enough Thursday Night Football fans around willing to make it profitable for the NFL?

Does that matter?

If, tomorrow, the Lorre Channel launches as the only outlet for all of Chuck Lorre Productions’ fare, are CBS and all those rerunning the series in trouble?²  

Tomorrow?  No.  Next Tuesday?  Keep driving those prices up and maybe.  At a buck a show, I can watch 140 programs a month that I want and come out better than I am now.

¹ Watch out here!  That pesky “net neutrality” provision could change this completely.

² Yeah, yeah, I know, existing contracts, blah, blah.  It’s an example.

Mommy, What's a Channel?

Mommy, what’s a channel?

The question probably won’t be as common as one about the birds and bees but sometime in the not-too-distant future, you’re going to refer to a TV, satellite, or cable channel, or to a “network” and your young kid is going to ask.

Why, you say?  Hwhy?  Because the basic need for a channel – its raison d'être¹ – is as a mechanism for containing programming in order to deliver it to a viewer.  And now, with new technologies, they’re really no longer necessary.

I’ll give you an example.  Cable systems are trying to figure out ways to not have to deliver “ordinary” television.  The reason is simple:  they profit very little from it and that real estate (bandwidth) used by the “channels” occupied by standard commercial television is extremely valuable.

The value realization has already changed the topology of cable delivery.  You may remember when that piece of coax carried every channel all the way from the head end to your home.  Through lots of amplifiers and nodes and splitters along the way, but if you tapped into the cable at any point, everything was right there.  Now, systems are adopting the same technology that the copper twisted pair (AT&T, etc.) use where only the channels you select get forwarded to you.  That opens up a truckload of bandwidth to sell you other things – VOIP, Internet, VOD – ooooohhhhh do they love VOD!

So if cable wants out of basic program delivery, how are you going to watch your favorite NCIS series (how many are there now?).  You immediately jump to “over the air.”  Why’s that?  Because you know that CBS distributes the franchise and it’s that CBS channel that delivers the show to you – even though your local cable system is picking it up locally and passing it along.

That should tell you that there’ll still be a channel.  Maybe.  Maybe not.

First, let’s better define a channel.  Some would call it a distribution medium which gets content from one place to another.  In the past, that’s involved dedicated radio frequency spectrum, about 6 Megahertz worth.²  By dedicated, it meant, for example, the band of frequencies between 54 and 60 MHz for TV channel 2.  That band channeled the programming from the transmitter high atop something to homes in the signal area.  Did you care?  My favorite line is, “Nobody cares about what kind of car delivers their pizza.  They just care about the taste of the pizza.”

The pendulum has swung so many times that Foucault (I’m on a French kick. Maybe I need to surrender to someone) is dizzy.

But there’s a new direction…that of streaming.  Wait.  Why is that a new direction?  The world has been “streaming” since little Sammy Morse sent his dits and dahs through a pair of wires form one place to another.  Probably because just about any individual can access content around the world and can receive it, save it and/or switch to something else instantly, and all on a pair of wires or even over the air. 

What does that have to do with channels?  Well, from my vantage point, everything.  In the linear world of broadcast, someone’s pushing information to you through a dedicated pipeline.  It may be a 6 Megahertz collection of frequencies in the air or over a cable but that content is being pushed in the order and at the time the “owner” chose.  You have to take it that way.  Sure, now you can now DVR it but it’s still coming to you in a specific order at a predetermined time – through a channel.

Streaming can certainly be thought of that way – as a channel – but the difference is that everyone has his/her own, instantly.  And, more importantly, they can open that “channel” to all of the content available to them.

So, a content provider could provide an opening – go ahead, you know the word, a channel – directly to you.  Bellisario Online could offer NCIS, LA, NO, Boise, whatever directly to you.  First run³.  If you think DVRs make it easy, a well-constructed VOD service blows DVRs back to the days of cave paintings.  Yes, I know.  If you’re reading this, you know that already.  But when the Bellisarios of the world start doing that, the middle person won’t be needed.  If you can connect your device directly to the content provider, who needs Channel 2 – or 3 or 4 or whatever?  Who needs a transmitter sucking power and a channel hogging spectrum or a cable [satellite] delivering you specific programming.  It just ain’t necessary.  Forget the fight for ala carte cable.  It’s moot.

Back in the early eighties, a major CBS executive predicted that cable viewing would never cume to more than 1 percent of total sets in use.  It didn’t work out that way.  Looks like we’re in for a similar evolution away from channels altogether.

What’s in the way of it all?  Only a couple of minor hurdles.

First, promoting whatever new content is being offered.  Networks and stations can self-promote.  In fact, tune-in advertising is hard to escape, even in a dark, quiet scene of White Collar when USA Network pops a big, fat, bright, animated lower-third on the screen.  That, however, is changing, too.  Notice how CBS still promoted Thursday Night Football on NFL Network even after CBS had run its measly games?  Tell me that wasn’t part of the negotiation.

So, slowly, networks will, either obsequiously or by force, bite their collective backsides out of business.

Second, Net Neutrality.  The gummint is still trying to sort things out.  It’s a tough topic to discuss but I still think the marketplace can manage it.  Well, with a little antitrust “guidance” from that same gummint.

Third, Private Enterprise.  About that antitrust issue, if a single company owns broadcast, cable, development, production, online and streaming services, isn’t that getting a little close to the edge?  Now factor in the PCS folks like Verizon, Deutsche Telecom, Vodaphone and others, the pressure to give up channels becomes immense.

Anyone remember when the DC guys discovered that Eastman Kodak owned its own silver mines and paper mills?  The justice department got interested.  It’s possible that with a significant number of these so-called conglomerates offering these broad services, they’ll keep one another in check. 

Sure.  The media oligopoly will police itself.  One raises rates and the others will lower theirs to steal more business.  Ya think?  Not gonna happen.  But fewer and fewer entities are controlling more and more of the media world.  And it’s not just controlling a corner, but from creative thought to viewer delivery.  I’m not being political when I say the following:  That kind of control is dangerous.  Both content and pricing run amok.

But given the tenor of those involved – corporations battling for control and profit, gummint pushing for control and taxes, PCS folks screaming for bandwidth, and people having a “pay for it only if I can’t download it for free” mentality, it’s likely that channels will disappear.  Some of us may become frustrated.  Others, unemployed.  But for a lot of “channel” jobs currently in existence, there’ll be lots more in the streaming world.  It’s OK.  Go to the light.

Now, quick.  Teach your kids what a channel is, before they’re extinct. 

¹  I structured the whole sentence just so I could use that little bit of French.  I can’t say which is more silly – the phrase or me using it.

²  In the good old days, broadcasters and cable operators used the whole 6 MHz for a single program; 8VSB digital made room for a lot more in that same channel over the air.  Other compression like QAM on cable reduced bandwidth even further.

³  Which only means originally making it available.  It doesn’t “run” until you “run” it.