Sweeney: ABC – Google TV Deal “Not Close”

In an interview with Reuters, Disney TV chief Anne Sweeney said that although they are in discussions with Google and have seen several demonstrations, ABC is "not close" to doing a deal to provide its content to the Google TV platform. This comes on the heels of both CBS and NBC blocking their content from Google TV.

Sweeney mentioned that piracy is one of the primary concerns, going so far as to say that it was unacceptable to ABC that the Google search platform present pirate sites when consumers search for ABC content on the web. Further, Sweeney indicated that ABC's web strategy is to provide limited programming from current seasons with wider access to prior season programming in order to drive value to the programming that is being shown on the broadcast network - moving the content through windows in a similar fashion as feature films.

In an age of instant Internet gratification and with the lesson of Napster fresh in their memories, it is little wonder that piracy is an issue for the broadcasters. They are being pressured by affiliates and cable operators who are telling them that putting content on the Internet lessens its value. Meanwhile, Gen X, Y and Millennial consumers are accustomed to having content served up at their convenience at a time and place and on the device of their choosing. They are less concerned with how it gets to them and not even remotely concerned with the content owners' business model.

Network executive like Sweeney are paid to follow the money. They are not going to jeopardize broadcast and cable dollars for digital pennies. Meanwhile, a significant portion of the Internet generation believes that content wants to be free; an attitude that undermines the business model of the content owners.

For now it looks like Google TV is on the market with only a limited amount of content. Absent providing "one stop shopping" with a line-up of content that more closely mirrors that of cable and satellite providers, Google TV is destined to be a niche curiosity product. Major content owners will not give away their product cheaply and will continue to demand assurances of security. Until Google can address the "fear of Napsterization", the big players will take meeting but won't be signing any deals soon.

Retrans Recap

So, the Retransmission Consent hearings are over (for now) and all of the usual suspects got to have their say on the issue. Keeping to the script, the MSOs asked for some changes in the regime, arguing that Retransmission Consent is another in the long litany of special privileges that broadcasters enjoy. Broadcasters insisted that they need a dual revenue stream to compete. Small programmers argued that the tying involved in many Retransmission Consent agreements makes it difficult for them to gain carriage. For the most part, the hearing was predictable and civil. It was, however, suprising to hear Jay Rockefeller (D WV) rant on the record about the polarizing nature of Fox News and MSNBC and his wish that the FCC could somehow make them go away. It was no suprise either that several Senators suggested the popular notion that the time may have come for the industry to consider a la carte pricing models. Other than that there was not much newsworthy that came of it as John Kerry (D MA) tried to keep the hearing focused on finding a solution to keep broadcast signals on cable systems during retransmission consent negotiations.

It's always easy to tell who benefits the most from the status quo - it's the guy who defends it the most vigorously. That was the role that Chase Carey from Fox played. Carey insisted that taking away the ability to deny carriage strips him of his leverage and eliminates any incentive for a cable operator to get a deal done. He also pointed fingers at Cablevision as the party that used it subscribers to win political gain. Well, there was a hearing after all.

More than a few eyebrows were raised by the fact that different cable providers in the same market can be charged different rates by the same broadcaster for the same signal. In an effort to bring a modicum of transparency to the process, it was suggested that the numbers involved no longer be subject to confidentiality (gasp!).

More than once the lawmakers suggested (or threatened) that if "the market" can't figure things out on their own, then Washington will get involved. With that stance it won't be a suprise that there will be more high profile retransmission consent disputes that result in temporary drops of broadcast feeds. For now it is hard to see what the appetite inside the beltway is for taking another swipe at cable regulation given the much larger problems that the country faces. One thing is for sure, once the ball gets rolling it may be a matter of "being careful what you wish for". Washington is a sausage factory. You can start out with the best of intentions, but along the way it inevitably gets ground up and flavoered beyond all recognition. But for now Retransmission Consent is like the weather, everyone talks about it but nobody does anything about it.

Cablevision vs. FOX: The Good, The Bad and The Ugly

October is winding down, trees are ablaze in orange and red, football season is in full swing while baseball season has boiled down to two teams, but it seems like everyone’s attention is held by the animosity and accusations that are being flung like so much mess in the primate house. No, I’m not talking about the waning days of highly contentious mid-term elections; I’m talking about the very public dispute between Fox and Cablevision.

It’s a week after local Fox stations going dark on Cablevision systems and the rhetoric is getting even hotter. Politicians ranging from NJ Governor Chris Christie and MA Senator John Kerry have weighed in. Meanwhile, Cablevision subscribers have been without the post season play of their beloved New York Yankees and may soon miss out on the World Series. I don’t think this is what Washington had in mind when the retrans rules were written. They expected reasonable people to come to a business agreement. Instead, what they are seeing are media moguls tussling over money while the consumer is held hostage.

Now the latest developments have both sides crying foul and hitting the press with both guns blazing; Cablevision accusing Fox of not negotiating in good faith by making “take it or leave it” offers and Fox accusing Cablevision of asking for preferential treatment (don’t get me started on MFNs) and manipulating the whole process to bring about a political resolution and a change in the law. Cablevision is making hay of Fox’s refusal to submit to binding arbitration. There was even a point where Cablevision subscribers were denied access to Fox programming on the internet. Now Fox is threatening to sue Cablevision, asserting that the MSOs phone reps are telling subscribers they can get their favorite Fox programming by accessing pirate websites. While there may be a grain of truth to each of the accusations, the amplification of the distortions makes each side’s argument look like signs at a Tea Party rally. There seems to be no end to the lengths that both parties will go to make their respective points. Jimmy Dolan even suggested a meeting be held with himself, FOX CEO Chase Carey and the FCC to hammer out a deal.

So there you have it. Another carriage dispute made very public as the cable and broadcast industry both air some very dirty laundry. Who’s right? Who’s wrong? How long will it go on? Who knows? Programming deals are never easy, and retrans deals are probably the toughest of all. While there may be something for the cable guys to gain by making the process political theater, in the short them the only thing to be had is consumer disgust. In the mean time Dolan watching continues to be one of the industry’s favorite spectator sports.

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!

Comcast - CBS Deal Completed Above the Fray

The announcement is out that Comcast and CBS have entered into a 10 year distribution deal that covers retransmission consent of CBS O&O stations as well as carriage of Showtime, Smithsonian Channel and the CBS College Sports Network and On Demand and online rights for certain CBS owned programming. This deal is notable for several reasons

First off is the term of the deal. Rather than keep the term to 3 years in order to mirror the usual retransmission consent election cycle, the deal has a 10 year term which is rather long by industry standards. As noted by CBS CEO Les Moonves, “There is a lot of flexibility built in”. I certainly hope so given the speed at which things change in the industry.

Secondly, the agreement encompasses more than just retransmission consent. Comcast was smart to tackle all of the networks at once. Strategically, it allowed them the ability to do some good old fashioned “horse trading”. As any negotiator and chess player knows, the more pieces you have to move around on the board, the better deal you are able to craft. There is no word whether CBS College Sports will be moved from the poorly penetrated Comcast sports tier to a more penetrated “digital basic” or “expanded basic”. Of course, it doesn’t hurt that Comcast is the largest player in the game either.

Lastly, the agreement was hammered out behind closed doors. Unlike recent negotiations between other cable operators and broadcasters, there were no public theatrics or threats of pulling the stations off the cable systems. Not that I expect this to change the very public way in which Time Warner Cable and The Walt Dinsey Co. are engaging over ESPN and ABC. To be sure, Comcast has traditionally handled their negotiations without high public drama. Even more so lately as the last thing that Comcast needs is a high profile struggle with a broadcaster at the same time that their deal to acquire GE’s NBC-Universal is under review. Perhaps CBS knew that and played it to their advantage.

As if to underline the nature of Comcast’s negotiation style, there was little chest thumping by CBS. While neither party disclosed the financial terms of the deal, there was no grand statement by CBS that the deal is proof that the "marketplace works". That pronouncement will be left to the NAB. However Moonves did say that Comcast negotiated in good faith and “kept their word” – just what Comcast needs the regulators to hear.