HBO considering offering HBO GO w/o cable

[ChicosBailBonds]

Next contract announced, $5.2 billion from Rogers to the NHL....huge increase.  Sports rights up up up again....consumers will have to pay for it

[ChicosBailBonds]

“Most channels are owned by the same handful of large media companies that seek to maximize revenue across all of their channels,” says Greg Ireland, a research manager at IDC who follows the industry. “By bundling channels, they’re able to get carriage fees and advertising revenue on channels that perhaps wouldn’t get carriage if offered on their own. This model, while problematic for some consumers (and some pay-TV operators), isn’t broken from the media company perspective and they don’t necessarily want to make changes that upset the current formula.”

Chico's this is the most interesting paragraph to me. Using the record industry again (and I understand it isn't apples to apples) as an example - they felt the exact same way. Their old model represented max profits for them. But it was a combination of new technology and consumer demands that forced the change. No way of knowing how this shakes out price-wise, but the consumer will force changes to the current model of cable TV as well.

Until the consumer realizes they will pay $75 for 25 channels instead of $90 for 150.  That's the other part of the story.  Now, someone will say I only watch 15 channels, while his wife will say the same thing (only they are a different 15 channels) and their kids will watch a different 15 channels, etc, etc.

Wait until the political howling comes into play as well....when a channel targeted for certain groups can't survive without shared distribution.  BET...can it survive where only customers that want it will pay for it?  Not a chance....do you think politicians are going to let BET die....we'll see.

The consumers you talk of want to only pay for the channels they watch, of course they also want great content for which the content companies can't produce without guaranteed revenues which they get from the current model. Take one leg out from the tripod and it collapses.   Fun times.

[Coleman]

Until the consumer realizes they will pay $75 for 25 channels instead of $90 for 150.  That's the other part of the story.  Now, someone will say I only watch 15 channels, while his wife will say the same thing (only they are a different 15 channels) and their kids will watch a different 15 channels, etc, etc.

Wait until the political howling comes into play as well....when a channel targeted for certain groups can't survive without shared distribution.  BET...can it survive where only customers that want it will pay for it?  Not a chance....do you think politicians are going to let BET die....we'll see.

The consumers you talk of want to only pay for the channels they watch, of course they also want great content for which the content companies can't produce without guaranteed revenues which they get from the current model. Take one leg out from the tripod and it collapses.   Fun times.

I totally see what you are saying, but won't you concede it should at least be an option for consumers to pay $75 for 25 channels? Or $50 for 10 channels? I realize the price per channel goes up. But that still might make sense for some people. Not everyone is married. Not everyone has kids. You talk about millenials...millenials are staying single and putting off having kids. 10 might be enough for some people. And they might be willing to pay more per channel to save $30-$40 a month in their overall bill. Why can't this be an option? I honestly probably watch less than 10 channels with any regularity. And they all start with ESP and FS.

[reinko]

Until the consumer realizes they will pay $75 for 25 channels instead of $90 for 150.  That's the other part of the story.  Now, someone will say I only watch 15 channels, while his wife will say the same thing (only they are a different 15 channels) and their kids will watch a different 15 channels, etc, etc.

Wait until the political howling comes into play as well....when a channel targeted for certain groups can't survive without shared distribution.  BET...can it survive where only customers that want it will pay for it?  Not a chance....do you think politicians are going to let BET die....we'll see.

The consumers you talk of want to only pay for the channels they watch, of course they also want great content for which the content companies can't produce without guaranteed revenues which they get from the current model. Take one leg out from the tripod and it collapses.   Fun times.

Nice whistle there using BET as your example,  well played.

[Silkk the Shaka]

Next contract announced, $5.2 billion from Rogers to the NHL....huge increase.  Sports rights up up up again....consumers will have to pay for it

And at the point where consumers say "no mas" to the increases then 1.) the companies inking these long-term deals lose money, and 2.) the next contracts are signed for less money.

It's not a given that it's a one way arrow up forever.

[Canned Goods n Ammo]

And at the point where consumers say "no mas" to the increases then 1.) the companies inking these long-term deals lose money, and 2.) the next contracts are signed for less money.

It's not a given that it's a one way arrow up forever.

I don't believe that sports demand is inelastic, so eventually, there will be a breaking point and the market will adjust.

That breaking point might not come for a while, but at some point people can't or will chose not to pay for expensive sports content.

[ChicosBailBonds]

I totally see what you are saying, but won't you concede it should at least be an option for consumers to pay $75 for 25 channels? Or $50 for 10 channels? I realize the price per channel goes up. But that still might make sense for some people. Not everyone is married. Not everyone has kids. You talk about millenials...millenials are staying single and putting off having kids. 10 might be enough for some people. And they might be willing to pay more per channel to save $30-$40 a month in their overall bill. Why can't this be an option? I honestly probably watch less than 10 channels with any regularity. And they all start with ESP and FS.

Sure....convince Disney, Fox, A&E, Rainbow, Viacom, etc to do that.  Convince them that they will allow the distributors to sell their channels in this manner and allow us to do the same.  Good luck with it.

[ChicosBailBonds]

Nice whistle there using BET as your example,  well played.

I'm giving you the most obvious example, one that has been used in the industry many times.  Their ratings are not good, they primarily serve a small audience, they cannot survive on their own.

I could give other examples, but that one is the one that resonates with politicians pretty quickly. 

[ChicosBailBonds]

I don't believe that sports demand is inelastic, so eventually, there will be a breaking point and the market will adjust.

That breaking point might not come for a while, but at some point people can't or will chose not to pay for expensive sports content.

Yup....of course we have been hearing this argument for the last 15 years, ever since I got into this business and it hasn't come close to even slowing, let alone going the other way. 

I'll believe it when I see it.  Not saying it won't happen or can't happen, but I haven't seen it.  Today's Rogers contract with the NHL is just another example of how far it is still going the other way.  With FS1 here in the states, it will only drive UP sports rights even more in the coming years, not down.

[Coleman]

Sure....convince Disney, Fox, A&E, Rainbow, Viacom, etc to do that.  Convince them that they will allow the distributors to sell their channels in this manner and allow us to do the same.  Good luck with it.

You previously said it was impossible because consumers would not accept it. Are you at least now conceding that they might?

[ChicosBailBonds]

You previously said it was impossible because consumers would not accept it. Are you at least now conceding that they might?

Today, the way the contracts are written and the economics that are in place, it is not possible.   I also said that consumers are not going to accept the reality of it.  We test this stuff all the time, we would LOVE to offer a la carte.  Believe me, if we didn't have to carry some of these channels we are forced to carry, we wouldn't but we have no choice.   

Here is usually how the research and focus groups go.

Customer:  I want to pay only for the channels that I watch.

TV Distributor:  Great.  So today you are paying $80 for 145 channels.  How much would you like to pay?

Customer:  I want to pay $45 a month.

TV Distributor:  OK, what channels are important to you and your family?  How many do you care about?

Customer:  I only care about 10 or so, but my husband really likes ESPN even though I hate sports.  My kids watch Nick at night and Cartoon Network and MTV.   So I guess if we add it all up about 40 channels

TV Distributor:  OK, well for $45 you will be able to get about 10 of those channels.  Unless you don't want ESPN, then you can probably get about 20, would that be ok with your husband?

Customer:  Well no.  I don't understand.  If I get 145 channels for $80, isn't that less than $2 per channel?  Shouldn't I be able to get about 80 channels for $45?

TV Distributor:  I'm sorry maam, but that's the benefit of bundling because those content companies are spreading out their costs over multiple channels.  ESPN is about $5 for us because we can guarantee them 15 million subscribers.  If those numbers aren't guaranteed to them, they have to charge $20 or so for ESPN, maybe more.  So you can lower your bill, but you will get a lot less and it sounds like you won't be able to get the channels your family watches.  Do you still want to do this?

Customer:  Well I don't like this one bit.   



You get the idea.   It sounds so simple, until the pesky details come out and it falls apart time after time after time.  But believe me, we would LOVE it.  We will spend over $10 BILLION in programming costs this year.  Many of those channels are bundled in and we (plus everyone else) has no choice, but to carry it.  If you want ESPN, you MUST carry ESPN Classic, and Longhorn, etc, etc.  You want to carry MTV, you MUST carry Palladia.  So on so forth.

 

[jesmu84]

Chicos, I definitely understand the situation. And it sucks that consumers all attack the distributors, because that's not the problem. It's the whole system. You need system-wide changes. Sports, TV, entertainment, etc are all way too expensive. When I think about athletes making 10 million a year, it's so ridiculous. And the examples go on and on. Prices/salaries/whatever need to come down across the board. It just doesn't seem like a sustainable situation long-term.

[Coleman]

Today, the way the contracts are written and the economics that are in place, it is not possible.   I also said that consumers are not going to accept the reality of it.  We test this stuff all the time, we would LOVE to offer a la carte.  Believe me, if we didn't have to carry some of these channels we are forced to carry, we wouldn't but we have no choice.   

Here is usually how the research and focus groups go.

Customer:  I want to pay only for the channels that I watch.

TV Distributor:  Great.  So today you are paying $80 for 145 channels.  How much would you like to pay?

Customer:  I want to pay $45 a month.

TV Distributor:  OK, what channels are important to you and your family?  How many do you care about?

Customer:  I only care about 10 or so, but my husband really likes ESPN even though I hate sports.  My kids watch Nick at night and Cartoon Network and MTV.   So I guess if we add it all up about 40 channels

TV Distributor:  OK, well for $45 you will be able to get about 10 of those channels.  Unless you don't want ESPN, then you can probably get about 20, would that be ok with your husband?

Customer:  Well no.  I don't understand.  If I get 145 channels for $80, isn't that less than $2 per channel?  Shouldn't I be able to get about 80 channels for $45?

TV Distributor:  I'm sorry maam, but that's the benefit of bundling because those content companies are spreading out their costs over multiple channels.  ESPN is about $5 for us because we can guarantee them 15 million subscribers.  If those numbers aren't guaranteed to them, they have to charge $20 or so for ESPN, maybe more.  So you can lower your bill, but you will get a lot less and it sounds like you won't be able to get the channels your family watches.  Do you still want to do this?

Customer:  Well I don't like this one bit.   



You get the idea.   It sounds so simple, until the pesky details come out and it falls apart time after time after time.  But believe me, we would LOVE it.  We will spend over $10 BILLION in programming costs this year.  Many of those channels are bundled in and we (plus everyone else) has no choice, but to carry it.  If you want ESPN, you MUST carry ESPN Classic, and Longhorn, etc, etc.  You want to carry MTV, you MUST carry Palladia.  So on so forth.

 

Fair enough. Maybe my situation is rare, I'm just saying that I personally would be willing to pay for just sports programming. And enough to cover the costs and maintain margins for the cable providers. I know that ESPN is the most expensive channel on the planet. I would gladly pay $10 per channel for the channels I want. Because my bill would still be cut in half. But I recognize maybe most people don't think like I do.

[Chicago_inferiority_complexes]

Until the consumer realizes they will pay $75 for 25 channels instead of $90 for 150.  That's the other part of the story.  Now, someone will say I only watch 15 channels, while his wife will say the same thing (only they are a different 15 channels) and their kids will watch a different 15 channels, etc, etc.

You keep using these examples, but right now your industry is getting $0 for 0 channels from a LOT of millennials and a lot of Gen-Xers. If I had to buy 20 different fruits just to get an orange at the grocery store, I would buy nothing. You can either create more marketable options, or get nothing.

[brandx]

Chicos, I definitely understand the situation. And it sucks that consumers all attack the distributors, because that's not the problem. It's the whole system. You need system-wide changes. Sports, TV, entertainment, etc are all way too expensive. When I think about athletes making 10 million a year, it's so ridiculous. And the examples go on and on. Prices/salaries/whatever need to come down across the board. It just doesn't seem like a sustain't I dimble situation long-term.

Customers will have the final say - just takes a few years. Happened in music, movies, even TV shows are distributed differently. It will happen to cable TV as well.

What we don't know yet is the form it will take. Cable subscriptions are on a downward trend, viewership (on TV) is declining. So things will change. When and how are to be determined.

[brandx]

Fair enough. Maybe my situation is rare, I'm just saying that I personally would be willing to pay for just sports programming. And enough to cover the costs and maintain margins for the cable providers. I know that ESPN is the most expensive channel on the planet. I would gladly pay $10 per channel for the channels I want. Because my bill would still be cut in half. But I recognize maybe most people don't think like I do.

Many of us are in the same boat. I watch sports, HBO, Showtime and MSNBC. Very little else. Any series that I watch are on Roku -  and Netlix and HuluPlus are a lot cheaper than paying for all of the unwanted channels.

[Canned Goods n Ammo]

Yup....of course we have been hearing this argument for the last 15 years, ever since I got into this business and it hasn't come close to even slowing, let alone going the other way. 

I'll believe it when I see it.  Not saying it won't happen or can't happen, but I haven't seen it.  Today's Rogers contract with the NHL is just another example of how far it is still going the other way.  With FS1 here in the states, it will only drive UP sports rights even more in the coming years, not down.

You're right. I can't pretend to know sports television well enough to predict the ultimate market correction. It might not occur for a long time.

I'm merely looking at it from an economics 101 standpoint. Some products are very inelastic, but EVERY product has a breaking point.

ANNNND if you really want to go down the wormhole, if traditional professional sports become "expensive", it does open up the marketplace for cheaper alternatives and/or alternate delivery mechanisms. It's basic economics.

[brandx]

You're right. I can't pretend to know sports television well enough to predict the ultimate market correction. It might not occur for a long time.

I'm merely looking at it from an economics 101 standpoint. Some products are very inelastic, but EVERY product has a breaking point.

ANNNND if you really want to go down the wormhole, if traditional professional sports become "expensive", it does open up the marketplace for cheaper alternatives and/or alternate delivery mechanisms. It's basic economics.

Like the growth of the X-games. I'd venture to guess that more kids play on their bikes and boards than play baseball. During the summer it's easy to find kids doing this, but go to any park and the diamonds are empty.

[ZiggysFryBoy]

We need the ATA (Affordable TV Act) to solve the problem.

(no politics.)

[reinko]

People will go on there computer to rent movies?   Nerds.

Best regards,
Blockbuster and Planet Video

/Jim Rome'ed

[ChicosBailBonds]

You keep using these examples, but right now your industry is getting $0 for 0 channels from a LOT of millennials and a lot of Gen-Xers. If I had to buy 20 different fruits just to get an orange at the grocery store, I would buy nothing. You can either create more marketable options, or get nothing.

It's cute, but your examples aren't the same.  To produce that orange is a lot different than producing television content or sports content, and that's what those making the content will argue every day.

As for the millennials, yup but that begs another question that our industry and many others are sorting through.  They don't have much money PERIOD, so what is it that they are willing to pay for when so many of them think the world runs on pixie dust?     There are some that are willing to pay, as I mentioned in the recent study I was involved in, but the question is it worth going down that path.  That is why what happens in the economy in the next 10 years will drive much of this.

[ChicosBailBonds]

Customers will have the final say - just takes a few years. Happened in music, movies, even TV shows are distributed differently. It will happen to cable TV as well.

What we don't know yet is the form it will take. Cable subscriptions are on a downward trend, viewership (on TV) is declining. So things will change. When and how are to be determined.

Cable down, satellite up, Telco up...you forgot that part.  Cable has been down for a decade.

Using music is a fool's argument, I don't know why you go there.

Movies, another wrong argument.  The movies are going to be made either way, because they are made for the movie theater first, then EST (electronic sell thru)...they have a monetization path setup.  Renting movies on Netflix or Redbox or DISH isn't changing any of that...it's just a different delivery system.

What you guys are ignoring, time and time again is sports and non-movies. That is the key.  For sports to work, they have to have dedicated revenues, which a la carte CANNOT deliver.  The math does not work.  For every day television, they are in the same boat, though not exactly the same, but because their model is based on subscription revenue and advertising revenue, both from NUMBERS OF EYEBALLS, they can't make the math work on a la carte model.  Not today.  Maybe someday, but not even close today.  Sell it a la carte, all the distributors say BYE BYE to that programming and they lose 80 million to 100 million eyeballs...there goes their ad revenue and their subscription revenue. 

You need to solve for that first before you get want you are looking for.  Plenty of very smart people have tried to solve that and failed.  Apple, Intel, Google, HBO, etc, etc, etc...all have failed.  These aren't stupid people or stupid companies.

[ChicosBailBonds]

Like the growth of the X-games. I'd venture to guess that more kids play on their bikes and boards than play baseball. During the summer it's easy to find kids doing this, but go to any park and the diamonds are empty.

Not here in So. Cal, the diamonds are used often.  But let's say we use your example, go to the soccer fields and the soccer fields are PACKED all the time and have been for several decades so surely soccer is the most popular sports in the USA now.......

[ChicosBailBonds]

Many of us are in the same boat. I watch sports, HBO, Showtime and MSNBC. Very little else. Any series that I watch are on Roku -  and Netlix and HuluPlus are a lot cheaper than paying for all of the unwanted channels.

MSNBC......




Um, you do realize that those shows you watch on Roku are subsidized by the current model....right? I hope you do, but I sense you don't.  In other words, they have been monetized through the process already to whether they get to Netflix, etc, they sold off cheaply.  Now, what's going to happen in the coming years is Netflix is going to have to charge a TON more for those shows because the revenue windows are shifting and as they shift, the content producers are going to get their dollars from someone.

[brandx]

Um, you do realize that those shows you watch on Roku are subsidized by the current model....right? I hope you do, but I sense you don't.  In other words, they have been monetized through the process already to whether they get to Netflix, etc, they sold off cheaply.  Now, what's going to happen in the coming years is Netflix is going to have to charge a TON more for those shows because the revenue windows are shifting and as they shift, the content producers are going to get their dollars from someone.

We are going in circles. I am in total agreement that the revenue windows are shifting. But you seem to believe (correct me if I am wrong) that the new model will look very much like the old. That is really the one point where we differ.

And as much as you don't want to look at the music industry, it is similar as to the company/s plan of attack. Which is that they will drive the decision. Well they didn't see Shawn Fanning coming. And they under-estimated the public's hunger for change.

Yes the cable and satellite companies will still get there money - but anyone that says they know how things are going to shake out is fooling themselves.