Reports are that STARZ CEO Chris Albrecht has been tasked with raising $1 Billion of off balance sheet financing for original programming. This is yet another confirmation that original programming will continue to be the tentpole of the premium service business.
In 1975, when HBO launched as the first national premium service, the idea of showing Hollywood titles on a round robin basis made sense. TV viewers had little alternatives other than local broadcast stations and a handful of nascent cable nets. Early VCRs were just starting to come on the market. Fast forward to today and between online viewing, retail and rental; not to mention cable VOD, the consumer has a variety of methods to receive Hollywood titles.
So it is no surprise that premium services continue to stress the importance of original programming, whether it is True Blood on HBO, Dexter and Nurse Jackie on Showtime or the slate of programming that STARZ is looking to produce with the new financing. A large part of the reason STARZ brought Albrecht on broad is as a result of his experience with original programming while he was at HBO.
This latest foray by STARZ is a natural and necessary step in their evolution. Although they have aired some original programming along the way, it was never to the same extent as HBO and Showtime. This is a great opportunity for STARZ to really shine.
Wednesday, July 28, 2010
Thursday, July 15, 2010
Retrans Rhetoric Heating Up
This week sees the formation of the American Television Alliance (ATA), a consortium of multichannel providers with a goal of raising awareness and ultimately changing policy on retransmission consent. Among the “strange bedfellows” in the ATA are Time Warner Cable, Direct TV, Cablevision and AT&T – companies that often compete against each other for multichannel subscribers, and in the case of Cablevision and AT&T, fight over access to and pricing of programming (but that’s for another day). A large part of the argument made by the ATA is that retransmission consent is essentially a consumer issue since any payment made by cable operators to broadcasters are ultimately passed on to the subscriber.
Predictably, the National Association of Broadcasters (NAB) scoffed at the ATA’s consumer rights stance, with an NAB spokesman berating it “as credible as BP executives joining Greenpeace”.
The rhetoric on both sides of the issue is just about as predictable as Keith Olbermann and Glenn Beck discussing the economy. Both sides passionately make valid points filtered through their own lenses. There is no doubt that the broadcast business model is changing and that cable operators have long benefitted from the carriage of local broadcast signals. However, cable operators are increasingly coming under pressure to keep rate increases in check and have even renewed an industry conversation on smaller and cheaper programming packages. All of this comes at a time when viewer options are expanding and much of the broadcast programming is finding its way to the web for free (Hulu’s premium aspirations notwithstanding). However, for the broadcasters to paint the formation of the ATA as an effort to do little more than protect the bottom line of the operators is a bit disingenuous given the boasting that NAB member companies have been doing on their quarterly calls about how much retrans dollars are contributing to their profits.
At the end of the day, retransmission consent is a consumer issue. It is one more cost that cable operators need to either absorb or pass along. Very often, these kinds of disputes turn into high profile corporate pissing contests, where the consumer is the one who ultimately gets soaked.
But really, is it wise for either side to be airing their grievances in public? Do viewers really need or want to peek into the “sausage factory”? I don’t think so. At the end of the day, viewers are not interested in the disagreements of corporate behemoths. Don’t ask them to take sides or get involved in the details or you may find they have little appetite for supporting either company in an argument over money. They just want to turn on their TV to get relevant entertainment and information without having to pay a whole lot of money to be advertised to in the process. But on the other hand, they do have a right to know why they might be losing access to their local news broadcast.
There is no doubt that both sides are preparing the battlefield and oiling the guns for upcoming renewals. The heightened rhetoric by both sides will certainly draw increased scrutiny from Washington should any of the negotiations get close to failing or actually fall apart and result in TV stations going dark on cable systems.
As with anything involving legislation, this is very much a matter of being careful what you wish for. The issues of Retransmission Consent and a la carte programming have been raised by legislators and interest groups in the course of the Comcast-NBCU merger hearings. Granted, what Retransmission Consent has turned into may indeed have been an unintended consequence of the 1992 Cable Act (which, by the way, was the result of Congress overriding a presidential veto), but can you really expect that the people who gave you the problem have any idea of how to fix it?
Predictably, the National Association of Broadcasters (NAB) scoffed at the ATA’s consumer rights stance, with an NAB spokesman berating it “as credible as BP executives joining Greenpeace”.
The rhetoric on both sides of the issue is just about as predictable as Keith Olbermann and Glenn Beck discussing the economy. Both sides passionately make valid points filtered through their own lenses. There is no doubt that the broadcast business model is changing and that cable operators have long benefitted from the carriage of local broadcast signals. However, cable operators are increasingly coming under pressure to keep rate increases in check and have even renewed an industry conversation on smaller and cheaper programming packages. All of this comes at a time when viewer options are expanding and much of the broadcast programming is finding its way to the web for free (Hulu’s premium aspirations notwithstanding). However, for the broadcasters to paint the formation of the ATA as an effort to do little more than protect the bottom line of the operators is a bit disingenuous given the boasting that NAB member companies have been doing on their quarterly calls about how much retrans dollars are contributing to their profits.
At the end of the day, retransmission consent is a consumer issue. It is one more cost that cable operators need to either absorb or pass along. Very often, these kinds of disputes turn into high profile corporate pissing contests, where the consumer is the one who ultimately gets soaked.
But really, is it wise for either side to be airing their grievances in public? Do viewers really need or want to peek into the “sausage factory”? I don’t think so. At the end of the day, viewers are not interested in the disagreements of corporate behemoths. Don’t ask them to take sides or get involved in the details or you may find they have little appetite for supporting either company in an argument over money. They just want to turn on their TV to get relevant entertainment and information without having to pay a whole lot of money to be advertised to in the process. But on the other hand, they do have a right to know why they might be losing access to their local news broadcast.
There is no doubt that both sides are preparing the battlefield and oiling the guns for upcoming renewals. The heightened rhetoric by both sides will certainly draw increased scrutiny from Washington should any of the negotiations get close to failing or actually fall apart and result in TV stations going dark on cable systems.
As with anything involving legislation, this is very much a matter of being careful what you wish for. The issues of Retransmission Consent and a la carte programming have been raised by legislators and interest groups in the course of the Comcast-NBCU merger hearings. Granted, what Retransmission Consent has turned into may indeed have been an unintended consequence of the 1992 Cable Act (which, by the way, was the result of Congress overriding a presidential veto), but can you really expect that the people who gave you the problem have any idea of how to fix it?
Wednesday, July 14, 2010
Is it Time for Cable MSOs to Think Small?
The coverage continues to fly about Time Warner Cable CEO Glenn Britt’s comments about the possibility of smaller packages of cable programming at a lower price. While not going so far as to endorse a la carte carriage of cable services, Britt’s comments does point towards a package of programming made up of 40 or 50 channels. The tricky part will be what gets put in the package and what gets left out.
Industry research shows that the average cable viewer watches only between 10 and 17 networks on their service on a regular basis. However, each individual cable subscriber has a different list of favorite channels. The issue is compounded even more in households where mom, dad and each of the kids all have a different list.
While Glenn Britt should be applauded for moving the conversation forward, we have yet to hear from the content providers (one wonders if Mr. Britt would have made these types of comments before Time Warner Cable was spun off by its parent company). In the final analysis, the cable operators can only do what the programmers will allow. There is an expectation that smaller operators with no programming interests would love to get in on this plan. The stumbling block in the plan is that most of the programmers currently in the large “expanded basic” package likely require broad penetration as a condition of carriage. Even networks with limited appeal like Food Network and Versus could have these kinds of packaging requirements. I ask you, what network owned by a major media company will be the first to step up and permit a cable operator to reduce their distribution by putting them on a lower penetrated tier?
If it is truly a matter of controlling costs, then logic would dictate that the networks with the highest license fees would be the first to go. While some subscribers may be indifferent to the loss of highly priced sports services like ESPN and the local regional sports networks (which are typically owned by cable operators like Comcast and Cox) in return for a reduction of their cable bill, other subscribers will certainly not be happy. Of course, all it would take to derail the plan by Time Warner would be a competitor like Verizon, AT&T, DISH or DirecTV committing to keeping these services on their expanded basic service.
An alternate strategy of placing a bunch of inexpensive and relatively low viewed services like home shopping and religious networks services on a low cost introductory tier and bundling the popular services like Discovery, Disney Channel, Nickelodeon and TNT on a more expensive tier will do nothing to truly address the issue and will further damage the low reputation that cable providers tend to have among the public.
While many cable subscribers intuitively like the idea of a la carte, the average consumer’s concept of how it would likely operate is ill informed at best. Subscribers currently now getting 100 channels for $50, will not be able to simply choose any twenty channels and only pay $10. It’s not going to work that way, as cable networks will need to increase their per subscriber rate as they lose subscribers in order to be kept whole, especially taking into account the resulting loss of advertising dollars.
At the end of the day it’s all about total revenues for the programmers with the operators increasingly feeling like collection agencies for the networks. Something tells me that we haven’t seen the last of this kind of talk. If anything, the operator/programmer relationships will continue to be thorny. Networks continue to insist on wider distribution for their new and emerging services and operators of all sizes continue to find their margins squeezed by an increasingly frugal subscriber base that is beginning to look at other options for video.
Industry research shows that the average cable viewer watches only between 10 and 17 networks on their service on a regular basis. However, each individual cable subscriber has a different list of favorite channels. The issue is compounded even more in households where mom, dad and each of the kids all have a different list.
While Glenn Britt should be applauded for moving the conversation forward, we have yet to hear from the content providers (one wonders if Mr. Britt would have made these types of comments before Time Warner Cable was spun off by its parent company). In the final analysis, the cable operators can only do what the programmers will allow. There is an expectation that smaller operators with no programming interests would love to get in on this plan. The stumbling block in the plan is that most of the programmers currently in the large “expanded basic” package likely require broad penetration as a condition of carriage. Even networks with limited appeal like Food Network and Versus could have these kinds of packaging requirements. I ask you, what network owned by a major media company will be the first to step up and permit a cable operator to reduce their distribution by putting them on a lower penetrated tier?
If it is truly a matter of controlling costs, then logic would dictate that the networks with the highest license fees would be the first to go. While some subscribers may be indifferent to the loss of highly priced sports services like ESPN and the local regional sports networks (which are typically owned by cable operators like Comcast and Cox) in return for a reduction of their cable bill, other subscribers will certainly not be happy. Of course, all it would take to derail the plan by Time Warner would be a competitor like Verizon, AT&T, DISH or DirecTV committing to keeping these services on their expanded basic service.
An alternate strategy of placing a bunch of inexpensive and relatively low viewed services like home shopping and religious networks services on a low cost introductory tier and bundling the popular services like Discovery, Disney Channel, Nickelodeon and TNT on a more expensive tier will do nothing to truly address the issue and will further damage the low reputation that cable providers tend to have among the public.
While many cable subscribers intuitively like the idea of a la carte, the average consumer’s concept of how it would likely operate is ill informed at best. Subscribers currently now getting 100 channels for $50, will not be able to simply choose any twenty channels and only pay $10. It’s not going to work that way, as cable networks will need to increase their per subscriber rate as they lose subscribers in order to be kept whole, especially taking into account the resulting loss of advertising dollars.
At the end of the day it’s all about total revenues for the programmers with the operators increasingly feeling like collection agencies for the networks. Something tells me that we haven’t seen the last of this kind of talk. If anything, the operator/programmer relationships will continue to be thorny. Networks continue to insist on wider distribution for their new and emerging services and operators of all sizes continue to find their margins squeezed by an increasingly frugal subscriber base that is beginning to look at other options for video.
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