Stand alone HBO

[ChicosBailBonds]

Great article in the WSJ today on this.....plus the quote I've used around here often...."Be Careful What You Wish For"....cost per channel will go through the roof and the massive variety we have today, hundreds of channels will go away.  Now people usually say "I only watch 10 channels anyway"....problem is the same 10 isn't across the board, so many people will lose out on breadth and depth of programming.  One person's "crap" is another person's "treasure", so niche and unique channels go bye bye. 


"Programmers, meanwhile, are protective of the bundle because it allows for the pairing of weaker channels with strong ones. Content companies often offer discounts to distributors for taking weaker channels along with strong ones.

“All these things are so much more expensive when you separate them out,” said David Bank, an analyst at RBC Capital Markets. “You are going to have to pay more for less choice.”"

http://online.wsj.com/articles/prices-add-up-with-a-la-carte-tv-1413501679


I noticed in this article, they talk about ESPN being $30 a la carte....damn...I would hope a publication like the Wall Street Journal would understand economics and business more.    Cough cough...Chicago Inferiority complex...cough cough


"Sports networks could be most at risk in an unbundled world. About half of the subscriber fees paid each month by consumers go to channels with sports, even though these channels account for less than a quarter of viewership, according to Nielsen data analyzed by Needham.

If ESPN were taken out of the bundle, for example, it might need to cost as much as $30—instead of the roughly $6 per subscriber it currently charges as part of the bundle, according to SNL Kagan—to recoup its losses from reduced distribution and continue to afford its content.

“We believe that only 20 million ‘super fan’ homes would pay $30/month for ESPN’s group of channels”—not enough for ESPN to have a meaningful advertising business, Ms. Martin wrote."

[ChicosBailBonds]

Sucks to be the middle man don't it?

Customers can be dumb, but part of it is because they don't have the information.  They don't know that ESPN accounts for $9 a month of their cable bill.  But as these ala cart services start to "expose" the cost to consumers they'll smarten up.

The change is happening, and while the dumb folks don't understand it....it will change their behavior and content providers and deliverers will have to adapt further as well.  Not sure what the picture will look like 5 years from now but it will be very different from where we are.

Actually, no....it doesn't suck to be the middleman.  I'd recommend reading today's WSJ article.  What sucks is to be a programmer that has really good content but is paid for it by 50% of the people that don't want it, plus having not so great content that is wanted by niche customers that they are also paid on....that's how they get paid.  If they now have to sell it individually, their $$$ will be sucked out so fast it will make their head spin, that's why they don't want to break up the bundle.  The bundle is driven by them, not the middleman.

I'd read the article.....should be required reading of everyone as soon as they mention the word a la carte...should be a primer.

[brandx]

Wait....I never said it wouldn't or couldn't happen.  Seriously, read...it might help you.

Here's a few things I've said about it

"They've been "considering it" for a few years now and the math doesn't work.....
Now, down the road could it change....of course.  But they know for it to change their expenses go through the roof in a way they cannot appreciate."

Also said if they do it, they will have to spend a ton of money to ramp up.....which is now what they have signed up to do.  If rumors are true, can't wait to see the reactions here on the price point.

The backtracking has begun - actually looks like Chicos is racing backward.


Akmarq: Something that has been discussed often here (though usually in relation to sports content). HBO is considering allowing people to pay for HBO GO independent of a cable subscription.
Chicos: They've been "considering it" for a few years now and the math doesn't work.

Quite unequivocal - "THE MATH DOESN'T WORK". Oops.... yes it does.

Now you will use semantics and your carpet bomb approach to convince everyone that you never said what we all know that you did say.

[brandx]

Christ - shoot me in the face if I ever have to work with someone this pompous and in need of approval from a college BBall forum.

+1,000,000

You have to recognize that his heroes are anyone who has power or money. So if any one of those people say it can't be done, Chicos will trumpet from the rooftops that it can't be done. Then, once it happens, he will carpet-bomb the thread denying he ever said what he said.

[brandx]

I understand it fully. 

Trust me, I understand it fully,

I'm paid to understand it

Most of this is the media's fault

This stuff is truly hilarious!! (and that is just from one post).

[asdfasdf]

Chicos - it seems like a lot of the a la carte projections you mention are based on ESPN maintaining their current revenues based on the # of households that are cable subscribers. ie, if everything went a la carte there would be people who drop ESPN in favor of other programming, and therefore ESPN would have to jack up the price in order to break even. Do any of these projections take into account the number of people (which i think is a significant number, particularly in the 20-40 year old generation) who got rid of cable years ago but would happily pay $10-15 for ESPN programming? Those people aren't a part of the current 'cable based' equation, but would become part of the 'a la carte' equation and help balance things out. just a thought.

[mu03eng]

Actually, no....it doesn't suck to be the middleman.  I'd recommend reading today's WSJ article.  What sucks is to be a programmer that has really good content but is paid for it by 50% of the people that don't want it, plus having not so great content that is wanted by niche customers that they are also paid on....that's how they get paid.  If they now have to sell it individually, their $$$ will be sucked out so fast it will make their head spin, that's why they don't want to break up the bundle.  The bundle is driven by them, not the middleman.

I'd read the article.....should be required reading of everyone as soon as they mention the word a la carte...should be a primer.

I've read it, and a lot more on the topic beside.  Don't confuse dissent opinion with ignorance.  While I may not have access to all the data you have, I do understand the metrics, economic levers, and behavioral drivers at work here.  Could your version play out?  It is certainly a possibility, but I think there are a handful of other possibilities that could play out as well and I think them more likely than your scenario.

The cable market is ripe for disruptive change and the lead revenue stream in the current model is likely a risky bubble proposition.  If you look at it from the outside in, I think there are big things a foot that aren't going the direct you think.  Agree to disagree I suppose until one of us is proven right.

[Benny B]

SMH....seriously SMH.  

I hope the Atlantic can get some business sense....they say it would be $30 a month, but you're right.     http://www.theatlantic.com/business/archive/2013/07/how-watching-unbundled-espn-and-amc-could-cost-more-than-your-whole-cable-bill/277916/

Adweek...$30 for ESPN....I sure hope those guys can get away from their "misunderstanding of economics"
http://www.adweek.com/news/television/la-carte-worst-idea-anyone-has-ever-had-151814

Variety...$30 a month for ESPN....they need to do some economics learning.  http://variety.com/2013/biz/news/would-you-pay-30-per-month-for-espn-1200563396/

Analysts say $30 a month...analysts no doubt...send them back to ECON 101.   http://articles.philly.com/2013-07-17/business/40614790_1_sports-channels-la-carte-sports-fans

Four articles and they all say $30.  Coincidence?


Just remember... Nobody in the media prints anything about ESPN without the mouse's permission.

[jesmu84]

Just my two cents...

Everyone clamors about the free market, supply and demand, etc, until it threatens their business/sector/livelihood. As well, many situations are status quo and accepted norms right up to the point until they aren't.

Companies aren't going to ever make changes for the benefit of consumers if it causes them to reduce profits or lose consumers. But, I think, in this situation, there are opportunities for change to occur.

Having said that, it takes a hell of a lot of consumers and a hell of a lot of time to change purchase habits and therefore influence companies to change the way they function.

[brandx]

Four articles and they all say $30.  Coincidence?


Just remember... Nobody in the media prints anything about ESPN without the mouse's permission.

You're right. They are putting it out to gauge reaction. Probably using the highest possible price point.

My guess is that they would like to offer it a la carte for close to double what cable companies are charged. ESPN currently is far and away the biggest recipient - getting a little over $6 per subscriber. That will probably go up a couple bucks over the next 3 years. I think they would really hope to be able to offer it for $16 - $20 a month a la carte.

I would jump at that if some other sports networks also go this route - FS1 and MLB. I only have cable for sports and HBO and would love to pull the plug.

But the fact they are putting any numbers at all out there is an indication that it has been talked about and IS being considered.

[brandx]

Just my two cents...

Everyone clamors about the free market, supply and demand, etc, until it threatens their business/sector/livelihood. As well, many situations are status quo and accepted norms right up to the point until they aren't.

Companies aren't going to ever make changes for the benefit of consumers if it causes them to reduce profits or lose consumers. But, I think, in this situation, there are opportunities for change to occur.

Having said that, it takes a hell of a lot of consumers and a hell of a lot of time to change purchase habits and therefore influence companies to change the way they function.

Well put.

The only change is that I would add "start to" after "a lot of time" in your last paragraph. Change always starts agonizingly slow (see gay marriage) and then tends to take off like a banshee once it reaches a certain point.

[The Lens]

If you're interested and have 30 minutes, John Skipper talks somewhat openly about a stand alone ESPN product, cord-cutting, Google and more:

http://recode.net/2014/10/05/why-espn-thinks-it-can-sell-nba-games-on-the-web-without-breaking-up-its-pay-tv-bundle/?utm_source=newsletter#038;utm_medium=email&038;utm_campaign=rc_email_daily&038;utm_content=why-espn-thinks-it-can-sell-nba-games-on-the-web-without-breaking-up-its-pay-tv-bundle

Scroll down to bottom for video.

[ChicosBailBonds]

If you're interested and have 30 minutes, John Skipper talks somewhat openly about a stand alone ESPN product, cord-cutting, Google and more:

http://recode.net/2014/10/05/why-espn-thinks-it-can-sell-nba-games-on-the-web-without-breaking-up-its-pay-tv-bundle/?utm_source=newsletter#038;utm_medium=email&038;utm_campaign=rc_email_daily&038;utm_content=why-espn-thinks-it-can-sell-nba-games-on-the-web-without-breaking-up-its-pay-tv-bundle

Scroll down to bottom for video.

Skipper is an interesting guy, though the problem I have with John is he says one thing and does something totally different.  Their new deal with DISH and capping it is exhibit 1A, of course 99.9% of the people out there have no idea what they have done in that deal with the ESPN cap.  But he's smart enough to know who pays his bills, and it isn't going to be a la carte anytime before I retire. 

[Benny B]

Skipper is an interesting guy, though the problem I have with John is he says one thing and does something totally different.  Their new deal with DISH and capping it is exhibit 1A, of course 99.9% of the people out there have no idea what they have done in that deal with the ESPN cap.  But he's smart enough to know who pays his bills, and it isn't going to be a la carte anytime before I retire. 

I suppose technically, you can't retire if you get laid off first because DTV failed to adapt to the new model.

So with that said, +1.

[mu-rara]

There are huge numbers of consumers looking to spend less on TV.  As soon as that option becomes available, ESPN needs to change their MO.

I think their are significant numbers of viewers that would pay ala carte for ESPN.  I don't think ESPN revenue would be as high as it is now.

Lower player salaries?

[reinko]

There are huge numbers of consumers looking to spend less on TV.  As soon as that option becomes available, ESPN needs to change their MO.

I think their are significant numbers of viewers that would pay ala carte for ESPN.  I don't think ESPN revenue would be as high as it is now.

Lower player salaries?

This is quite possibly one of the dumbest things I have ever read on this board.  First off, does nothing about college athletes.  Secondly, the inference that players should have lower salaries so you can have a cheaper cable bill is laughable.  If owners and GM want to stack their rosters with minimum pay level guys, that's on them.  If we sheep want to pay big bad cable company lots of $ for sports, that's on us.  But put the onus on players?

[mu-rara]

This is quite possibly one of the dumbest things I have ever read on this board.  First off, does nothing about college athletes.  Secondly, the inference that players should have lower salaries so you can have a cheaper cable bill is laughable.  If owners and GM want to stack their rosters with minimum pay level guys, that's on them.  If we sheep want to pay big bad cable company lots of $ for sports, that's on us.  But put the onus on players?

wtf?

Not sure what you're issue is, but you need some meds.

Player salaries are driven, in large part by TV revenue.  If sports programming revenue ( I used ESPN specifically, but all sports revenue would be affected) is reduced, it logically follows that it will affect player salaries.  Players have negotiated a % of team revenue for salaries.  Team Revenue Lower = Player Salary Lower.  Anyone with a basic understanding of economic principles should follow that.

I used the form of a question at the end so this could be discussed.  I wasn't making a statement.  How you jumped to your conclusion is lost on me. 

I'm sorry your ignorance of basic economic principles did not allow you to discuss rationally.

[Canned Goods n Ammo]

We've (my old gig) been approaching it from the consumer side for a long time as well.  It is why we get into so many fights with Disney, AMC, Viacom, Fox, etc.  Because #1, most consumers aren't intelligent enough (sorry, that's just the truth) to understand where the costs are coming from and they blame it on the distributor...people aren't out there saying @#$#@ ESPN, they're saying @#$#@ Time Warner, but it's ESPN holding Time Warner over the coals with insane pricing.  So the distributors totally get the argument.

I don't think anyone has ever said it is inelastic, but the math is the math.  If you can get 100 million homes to pay $100 a month of television but when you go to $120, you have 10 million say that's it, I've had it.  The industry is going to take it every time.

100M * $100 = $10,000,000,000 a month

90M * $120 = $10,800,000,000 a month

10% loss in customers, but a huge gain in overall revenue.  That's how they look at it and until that 10% loss in customers goes down to 40%, 50%, etc, things aren't changing and that is why Disney and Turner write a $25 billion check to the NBA.  That is why AMC is playing games right now with various distributors trying to capitalize on their one hit, Walking Dead.  So on and so forth.

Now, what to do with that 10%...which will grow....they bring in OTT products for Cord Nevers and Cord Shavers, but they do it as an accretive offering, not a cannibalistic one.  That's at least the attempt.  They don't want to exchange out dollars for digital dimes.  If that starts to happen, they'll make the OTT offering weaker, or jack up the prices to stop the cannibalization.

Look at what your cell phone bill is like today vs 5 years ago.   How about PC video games, which is a much better comparison than the one people trot out each year to compare video to the song download industry.  PC Video games can be bought directly over the internet, just download and go...no need to go to Best Buy or Gamestop.  Prices are still $60 a game, despite the "delivery" system being more efficient.  Difference is they can also discount old games and still monetize them, much like video is today with old stuff on Netflix, Hulu, CBS All Access...new products coming out from Directv, Dish, etc.

What you're suggesting is a premium or super-premium pricing model/strategy. It clearly works for some brands and products. Apple, BMW, Cadillac, Marlboro to name a few.

Big picture, the risk is this:

If "traditional" cable moves to a premium pricing model (with less penetration, but better profit per customer), it creates a gap in the marketplace.

Examples:
- iphone is a great product that has high demand, and people are willing to pay a premium. However, if you look at marketshare, Apple left a hole at the middle/bottom end of the global market, and Android and google filled it with more reasonably priced products.
- BMW makes a fantastic car, but Toyota and Honda sell waaaaay more cars in the mid and bottom tiers.
- "traditional" video games are sold for a premium price (takes a lot of overhead to develop a game), but games like "Angry Birds" are far more popular and are profitable for their developers.

So, I think you are probably correct, "traditional cable" is not going to go away, but you might see far less market penetration at a premium pricing model, which would ultimately hurt ratings and/or ad revenue, as well as leave a pretty big hole at the bottom of the marketplace for cheaper/alternate content creators as well as alternate providers.  

[Chicos' Buzz Scandal Countdown]

Lord shoot me in the chest if I ever have to go on a website and say "but blah blah blah said it wouldn't happen" when the person I was trying to be a dick too never said what I claimed him to say, but  I was hopeful I could get my pud flying at half staff to prove a point that ultimately I didn't prove because the guy I was trying to zing never actually said what I was trying to zing him with".....all so I could score points on a college BBall forum.

Nobody is trying to zing you as hard as you think they are. It's light teasing. Relax. I still don't believe you're very good at your job or enjoyable to be around.

And please God, shoot me in both balls if I ever change my username after a 17 year old kid in the hopes that he comes to my school...maybe he'll read my username and come here because of me.  You call someone out for being condescending when all you were from the start of this thread is be condescending ....when someone returns serve you get upset.

I changed my handle after HE had already committed. Mind paying as close attention to my MUSCOOP activity as you expect from me?

[Chicos' Buzz Scandal Countdown]

Just my two cents...

Everyone clamors about the free market, supply and demand, etc, until it threatens their business/sector/livelihood. As well, many situations are status quo and accepted norms right up to the point until they aren't.

I have no idea what this means? Clamoring about the free market? Are you trying to say that people like it when they're making money and don't when they aren't? I'd agree with that.

Well put.

The only change is that I would add "start to" after "a lot of time" in your last paragraph. Change always starts agonizingly slow (see gay marriage) and then tends to take off like a banshee once it reaches a certain point.

Gay marriage isn't really a market topic... It was brought up earlier, but Uber is a great example of fast change taking a huge chunk of revenue from established players. Same with the iPhone (RIM), or Netflix (Blockbuster).

[Chicos' Buzz Scandal Countdown]

What you're suggesting is a premium or super-premium pricing model/strategy. It clearly works for some brands and products. Apple, BMW, Cadillac, Marlboro to name a few.

Big picture, the risk is this:

If "traditional" cable moves to a premium pricing model (with less penetration, but better profit per customer), it creates a gap in the marketplace.

Examples:
- iphone is a great product that has high demand, and people are willing to pay a premium. However, if you look at marketshare, Apple left a hole at the middle/bottom end of the global market, and Android and google filled it with more reasonably priced products.
- BMW makes a fantastic car, but Toyota and Honda sell waaaaay more cars in the mid and bottom tiers.
- "traditional" video games are sold for a premium price (takes a lot of overhead to develop a game), but games like "Angry Birds" are far more popular and are profitable for their developers.

So, I think you are probably correct, "traditional cable" is not going to go away, but you might see far less market penetration at a premium pricing model, which would ultimately hurt ratings and/or ad revenue, as well as leave a pretty big hole at the bottom of the marketplace for cheaper/alternate content creators as well as alternate providers.  

I agree this is likely for cable to move along the cost curve.... I, for one, watch way less TV than I did in college. I'll catch 30-60min per week, if at all.

It just doesn't make sense for me to pay for 200 channels (144,000 hours of content per month) for ~$100. While that's a great "deal" at effectively <$0.01 per hour of content, I only watch 4 hours per month... that comes to $25 per hour.

However, if I can get just that content that I really want to watch a la carte, for $5/hour (for example), that's a great value. Someone will come into the marketplace to grab that opportunity to grab more cash.

I am not unique - more entertainment options are grabbing leisure hours, and TV is less and less of the equation for many younger than 35.

This may not be the death blow, but cable subscriptions make no sense to either the content provider or consumer, and will eventually  be phased out.

[Canned Goods n Ammo]

I agree this is likely for cable to move along the cost curve.... I, for one, watch way less TV than I did in college. I'll catch 30-60min per week, if at all.

It just doesn't make sense for me to pay for 200 channels (144,000 hours of content per month) for ~$100. While that's a great "deal" at effectively <$0.01 per hour of content, I only watch 4 hours per month... that comes to $25 per hour.

However, if I can get just that content that I really want to watch a la carte, for $5/hour (for example), that's a great value. Someone will come into the marketplace to grab that opportunity to grab more cash.

I am not unique - more entertainment options are grabbing leisure hours, and TV is less and less of the equation for many younger than 35.

This may not be the death blow, but cable subscriptions make no sense to either the content provider or consumer, and will eventually  be phased out.

Right.

As it stand, cable is priced for the masses, but if that $ continues to inflate, it will open up a hole for a lower cost alternative option.

Also, if you really want to extrapolate it, you might find content creators who feel they can create and even distribute content more efficiently than the current model. It's the "angry birds" effect. Could the next "Seinfeld" be developed and distributed via a cheap app, instead of somebody paying $X to a provider, studio, producer and distributor to get a bunch of content they don't actually use?

[mu03eng]

Right.

As it stand, cable is priced for the masses, but if that $ continues to inflate, it will open up a hole for a lower cost alternative option.

Also, if you really want to extrapolate it, you might find content creators who feel they can create and even distribute content more efficiently than the current model. It's the "angry birds" effect. Could the next "Seinfeld" be developed and distributed via a cheap app, instead of somebody paying $X to a provider, studio, producer and distributor to get a bunch of content they don't actually use?

That is essentially under way.

http://www.businessweek.com/articles/2014-08-28/youtube-hollywoods-hit-factory-for-teen-entertainment

Content creation and distribution is getting less expensive and more accessible every year.

[Chicos' Buzz Scandal Countdown]

Content creation and distribution is getting less expensive and more accessible every year.

[chapman]

That is essentially under way.

http://www.businessweek.com/articles/2014-08-28/youtube-hollywoods-hit-factory-for-teen-entertainment

Content creation and distribution is getting less expensive and more accessible every year.

Another interesting one, Pluto.TV.  As someone who viewed almost all of my channels as filler garbage that I only cycled through when terribly bored, it's basically a free replacement of 100 of them.


http://www.forbes.com/sites/jjcolao/2014/03/31/hey-cord-cutters-pluto-tv-launches-with-85-channels-of-free-tv-style-internet-video/