Hot Spots ... Put These on Your Radar
One helpful thing about the media biz (at least for those of us who write about it) ... it never lacks for controversy, speculation and rumor. Or, of course, change.
To keep up, and keep your business on track, you need a score card. Here's the latest from The BRIDGE
... Online TV
: This one is so obvious we're almost embarrassed to include it. But it affects everybody ... and nobody really knows quite where it's going.
Some observers (primarily those hailing from the Silicon Valley or current or wanna-be non-traditional services) insist that online TV is poised to gobble the traditional pay model. Just witness, they say, Netflix
's 49.1% boost in unique paying subscribers (to year-long average of near 22M) across the past year. And this despite a widely publicized pricing debacle. Or consider the gains made by Hulu Plus
(much to the horror of some of its backers) 1.5 million paid subscribers in 2011. And noted Hulu boss Jason Kilar
in a blog, "We are attracting more than 2x the number of subscribers each day when compared to this time last year."
On the other side of the equation, however, the numbers show that, far from declining, traditional TV moving is actually growing: According to Nielsen
, primetime households using television bumped up by 2% in 2011; meanwhile, despite its hefty customer rolls, Netflix streaming accounted for only 2% of average total TV minutes. In addition, recently released numbers from SNL Kagan
show that, after several quarters of loss, premium pay services recorded nearly 2.2M subscriber gains in the fourth quarter.
At this point, the traditional model clearly isn't dead ... or even very sick especially as a host of contracts between programmers and providers continue to insulate the traditional model from the type of havoc which digital services wrecked on audio.
Noted Bernstein Research
analyst Todd Juenger
in a very informative conference call on pay video: "The video entertainment system will not be blown apart... The content owners (have) successfully resisted the temptation to enable that."Programming Costs:
Okay, we know ... this one is also a "duh." But it is a very, very big "duh" when it comes to pay TV bottom lines.
Note this from Vijay Jayant
and Judah Rifkin
: "Programming costs are rising faster than they ever have." This year, the two say, will likely be the peak ... but 2013 and 2014 will be no picnic. For its part, DIRECTV
expects the already hefty price tag ($11.7B for 2011) to rise by 10% this year; the ISI analysts are pegging a boost of 8.6%.
Of course, any talk about programming costs has to include Disney
sports juggernaut ESPN
. The high-price grumbling has always been there but after Liberty
's Greg Maffei
labeled ESPN's monthly sub fees "a tax on every American household," the grumbling crescendoed. (Although, to be fair, the problem is not ESPN's alone. Sports costs, including those of regional sports nets, are soaring all over.)
Today several pay TV ops offer low-cost programming packages without ESPN or pricey regional sports nets. Don't expect those packages to take off though. By contract, they can't. In early February, Disney CFO Jay Rosulo
told investors that ESPN's contract with operators require that it be placed on the "first or second most popular tier" offered by carriers. In short, if those low-price packages become too popular ... presto! chango! ... ESPN jumps in and prices jump up.
Don't expect this one to end easily though. Consumer groups continue to grumble and, unless the economy picks up considerably, consumers will continue to seek lower prices. Plus, a word of caution: In Portugal, where the economy continues to swoon, ZON
CEO Rodrigo Costa
notes that sports packages have been among the casualties of consumer belt-tightening.
Also on the programming costs plate is the perennial favorite of retransmission costs. For now it appears that the broadcasters' lobbying prowess is keeping the status quo static ... but the battle continues to get hotter. As ACA
Chairwoman (and WOW!
CEO) Colleen Abdoulah
claimed at the group's annual meet in Washington, there is "overwhelming evidence that broadcasters are abusing their market power" and plenty of small and large pay TV providers intend to keep hammering this point home. Spectrum Wars
: The LightSquared
play has been gutted by GPS worries; Charlie Ergen'
s DISH Network
wireless ambitions have been put on hold by FCC
rule making; competitors are howling about the billions which several cable companies stand to gain by selling their wireless holdings to Verizon Wireless
to say nothing of their cross-promotion marketing deal ... and, while moving like a somnolent snail, the FCC insists that we need more, more, MORE for a wireless broadband future.
How much more? No one really knows, of course. But recently the chairman of the Mobile Future
group, Jonathan Spalter
, estimated that the nation will hit “spectrum exhaust” in major markets in 2014.
Anyone with a stake in the media businesses should be watching for pitched battles in this space including those mentioned above (LightSquared, DISH Network spectrum battles, plus Verizon Wireless and the cable cos) plus a whole host of issues surrounding streaming video, new devices, emergency services and on and on. Broadband Pricing
: Anyone who's been watching growth in broadband usage – and who believes, even halfway, in projections for its growth – will tell you that current pricing schemes cannot last. Video streaming gobbles up a disproportionate share of bandwidth and somehow operators will need to charge the biggest users lest networks become as crowded, and as fast, as LA freeways.
Enter usage based pricing. Operators have been tippy toeing their way toward it for quite some time and, after previous failed experiments, Time Warner Cable
is making another attempt The company introduced an "essentials broadband" plan in some south Texas with prices set at $5 below standard broadband tiers and usage limited to 5 GM/month after which overage charges kick in.
Will it work this time?
Maybe not, but watch this as an essential (pun intended) trend for the future. As Bernstein Research'
s Craig Moffett
commented, "The "most important aspect of the plan is that it familiarizes ALL users with the UBP concept."•