Programmers Seek Increases, Higher Cable Rates to Follow

An adage in investigative journalism was made popular during the heyday of the Watergate investigation; “Follow the Money”. Nowadays it seems you can follow the money spent for your cable or satellite service right back to the big media companies. Bob Iger at Disney is pointing to ABC Network taking a higher share of its broadcast affiliates retransmission consent fees, while Chase Carey over at Fox is telling his investors that National Geographic Channel and FX network should be receiving higher license fees from cable operators. Meanwhile, independent programmers like Hallmark Channel are seeing themselves dropped from line-up as providers like AT&T seek ways to reduce programming costs.

Guess what going to happen to your cable bill as ABC, FOX and others continue to demand increases in their license fees? That’s right; those increases are going to be passed directly on to the consumer. Anyone who thinks different or is of the belief that cable operators should absorb the increases should refer back to their Business 101 textbook. After all, Comcast, Time Warner Cable and all the rest have investors to answer to as well. With programming costs being one of the biggest line-items that cable operators have to deal with, what else would you expect?

Meanwhile cable operators seem to be whistling past the graveyard while they are losing subscribers and insisting that cord-cutting has nothing to do with it. All the while they are rolling out their own “TV Everywhere” services, providing a collection of video to their customers in a “walled garden” fashion.

Where does that leave the multichannel industry? Is cable dying a slow death, choking on ever increasing fees and programmer demands to carry a plethora of new channels that seem to come about with every contract renewal while customers are warming to the idea of program-by-program a la carte on line? Recent reports suggest that the industry is at the precipice of a long, slow decline. This isn’t the first time that the cable industry has seemingly stood at the edge of the abyss. No doubt the cable industry will find a way to survive this too.

Is Ivi DOA?

So there is another start-up with a great idea. It goes like this, “Let’s be disruptive and pull TV signals off-air, stream them on the internet and charge a fee to subscribers to watch them.” Seattle based Ivi thinks they have a solid business case and an iron-clad legal argument that permits them to do this. However, broadcasters and other content owners think differently and have quickly slapped them with Cease and Desist letters.

Here’s the crux of the matter, Ivi argues that proposed payment to the Copyright Royalty Tribunal (CRT) obviate the need to pay stations directly or to even have an agreement in place with the broadcasters. However, it seems that Ivi’s logic is a bit clouded. They are leaning on payment to the CRT arguing that they are operating just as any other cable operator, but are ignoring retransmission consent saying that they are not a cable operator. Seemingly, Ivi wants it both ways.

For a start-up with less than $1 million in financing, it looks like Ivi will be spending all of their seed money on lawyers. They’ve already countersued the broadcasters and rights holders that have taken action against them; asking the local district court in Seattle to issue a declaratory ruling in their favor.

It seems to me that if you could lean on payments to the CRT to avoid negotiating retransmission consent, the cable guys would have done so long ago and live internet streaming of broadcast TV would be the norm. Along with the rest of the industry, I’ll be keeping an eye on this. For now it seems that the cards are stacked against Ivi.

CableLabs 3D Specs Paves One More Lane on the Road to Mass Adoption

Multichannel video providers have been dabbling in 3D programming for the past few months in order to prove the technology, test the waters with their consumers and enhance the perception that they are keeping up with new technologies. All of the 3D programming aired to date has been event driven content. With the adoption of 3D specs, CableLabs has taken the first step in paving the way for mass adoption of 3DTV.

In a way, as with HDTV 3D is a “chicken and egg” proposition. Is it that readily available 3D content will drive purchases of sets, or will content providers wait until there is a “critical mass” of 3D sets in homes before making the content available? ESPN and Discovery (who were both early movers in the HD) have already made their bets. As with any new technology, multiple specs lead to consumer confusion, which results in the delaying of a purchasing decision. Now that CableLabs has written 3DTV specs, it seems that there is one more lane of certainty on the road to mass adoption of 3DTV.

As is always the case on cable systems, it comes down to bandwidth. Fortunately, the move to all digital, switched digital, and ultimately IPTV systems will alleviate bandwidth problems for cable operators. The other pieces that still need to be understood are consumer appetite and elasticity of demand, programmer willingness to create content, the carriage/distribution deal and how operators will charge to recover the costs of 3DTV programming. Hey, we’re just getting started, folks!