3D Spaghetti

A recent interview of ESPN’s tech guru Chuck Pagano by TV Technology Editor-in-Chief Tom Butts had me thinking again about 3DTV. For now, ESPN is the only programmer actively involved in 3D on a regular basis. Although Discovery Communications made an announcement earlier this year, their 3D channel is not slated to launch until early 2011.

Pagano likens current efforts to “throwing 3D spaghetti at the wall to see what sticks” admitting that it is largely an experimental endeavor. With 85 events scheduled for 3D in the first 12 months of the grand experiment, it seems that 3D is mirroring the early days of HDTV – limited content designed to test the waters, make sure the technology is stable, and assess consumer interest. In part, the limited schedule also harkens back to the early days of HD when there were just not enough production trucks. The same may be said for other 3D events such as The Masters and TNT’s plans to broadcast the July 4th weekend NASCAR event in 3D. There is also an element of operating less on a strict 3D business plan than putting forth a PR and branding message that the company is keeping on top of new technologies.

At this point, the limited deployment of 3D sets in the market makes for an environment where it is far too early to project whether this iteration of 3DTV will be a winner or not. But one thing is for sure, 3DTV has had more traction than ever before. Producers, distributors, and consumer electronics manufacturers all seem to be puling together this time. Still, it will be a matter of distributors being able to commit enough bandwidth should mass adoption of 3DTV come to pass. For all the commitment being shown by the likes of DirecTV, Comcast, ESPN, SONY, Discovery and IMAX, in the end there is a great deal of hoping that the consumer isn’t on a low carb diet when the 3D Spaghetti comes to the table.

ABC-Cablevision Retrans Deal Announced

The highly public dispute between ABC Network and New York’s Cablevision was settled at approximately 8:50 last night and signal was restored to Cablevision subscribers shortly after the start of the Oscars broadcast, ending a long running feud that saw the signal of WABC go dark on Cablevision for 21 hours. As expected politicians weighed in including Senators John Kerry and Joe Barton as well as 60 or so New York area politicians who signed a letter urging that the signal not go dark. In keeping with the script, both sides put a positive spin on the resolution. Cablevision thanked it customers for their support while WABC7 announced “an agreement in principle that recognizes the fair value of ABC7.”

According to the Los Angeles Times, after asking for close to $1.00 per subscriber, ABC apparently settled for a monthly per subscriber rate between 27 and 65 cents. Although Verizon mounted a strong acquisition campaign to capitalize on the dispute, there is no word how many defections Cablevision experienced. If anything, the public nature of the feud helped to heighten the issue of retransmission consent among lawmakers and the general public. However, with much larger priorities in Washington, and the deal settled, the issue will likely fade into the background until the next time a deal goes down to the wire, or beyond.

Retrans Redux

Another retrans battle is heating up. This time the battleground is New York and the contestants are Cablevision and WABC-TV 7, an ABC Network O&O station. The stakes: A threat by ABC Disney to pull Cablevision’s retransmission rights on the eve of the Oscar broadcast this weekend. The usual partisan talking points are being bandied about; WABC claiming that Cablevision should “acknowledge the station’s value to their business” and come to a “fair agreement” while Cablevision claims WABC is holding “Cablevision customers hostage by forcing them to pay what amounts to a new TV tax”, while urging ABC Disney to work with them to “reach a fair agreement.”

As is often the case, the truth lies somewhere in the middle. Most interesting in a statement from WABC Pres/GM Rebecca Campbell earlier this week, she referred to the fact the “viewers can watch their favorite ABC7 shows free, over-the-air, or by switching to one of Cablevision's competitors.” No surprise that competitors are mentioned, but to bring up “free over-the-air” to remind customers that ABC is asking Cablevision to pay for what is available free? Most curious.

So the battle lines are drawn and we all wait to see what will happen next. Who will be the first to blink? Will it go down to the wire or beyond? What New York politician will be the first to urge the parties to come to an agreement? One thing is for sure, whether WABC goes dark on Cablevision or not, eventually the parties will work out a deal and both sides will claim victory as if retrans is a zero-sum game. WABC will say the retrans regime is not broken and the market works, and Cablevision will increase its subscription rates to cover the additional cost. It’s like a remake of a movie with a stale plot.

Comcast/NBC-U Hearings Post-Game Analysis

The hearings just wrapped up on the hill. Mr. Roberts and Mr. Zucker, for the most part, did a good job presenting their case, despite the flogging Al Franken (D, MN) give Brian on Comcast's seemingly contradictory behavoir on program access and program carriage in the afternoon session.

Kudos to Colleen Abdullah of WOW for patiently, calmly and without hyperbole, explaining the position of the small cable operator/competitor. It took a fair amount of guts for her to sit at the same table with Mr. Roberts and Zucker and point out the issues that the entire industry is dealing with: program carriage demands (including tiering restrictions); retransmission consent; smaller operators paying “up to 20% more” for the same channels as larger operators; the squeezing of margins as a result of programming costs increasing faster than they can raise rates to consumers; and the lack of pricing transparency.

Although he was not a witness at the morning House Communications and Internet Subcommittee hearing, Andy Schartzman from the Media Access Project was on top of the facts and presented his arguments cogently in the afternoon before the Senate Judiciary Antitrust hearing. As usual, Mark Cooper from the Consumer Federation of America was big on sweeping generalities without presenting many numbers to back up his case - kind of scary for a guy with the word “Research” in his title. Additionally, he does not seem to grasp what TV Everywhere is all about – a value-add for video subscribers and not a product designed for cable operators to get into the OTT video business. Cooper even brought up a la carte!

Unfortunately a two to two and a half hour hearing in front of each group with each legislator getting only 5-7 minutes to question the witnesses does not provide the opportunity for the depth of discussion needed to really dig into all of the issues in the matter, while only a few of the legislators seemed to have a really good grasp on the issues. House and Congressional staffers will be working hard to sort though all of the testimony and written follow-ups that were requested. There will definitely be more hearings, and I’ll be staying tuned to see what conditions get placed on the merger.

BTW – For all of you folks at Turner, Senator Arlen Specter (D, PA) loves TCM!

Comcast/GE Head to the Hill

Tomorrow is a big day for Brian Roberts and Jeff Zucker as they head back to Washington to appear at two back-to-back hearings. In the morning they are slated for the House Communications and Internet Subcommittee, while the afternoon is the Senate Judiciary Antitrust Subcommittee. Also slated to testify at both hearings is Colleen Abdoulah President and CEO of WOW (Wide Open West) and Mark Cooper of the Consumer Federation of America. It will be interesting to see if those opposed to the merger get beyond the standard “big is bad” rhetoric that is the standard backbone of their opposition to explain exactly what their issues are.

In a world where the big keep getting bigger in order to “gain scale”, there is no question that it has become increasingly difficult for the small guys to compete. Comcast has been quite public in stating that the reason they are doing the merger is to gain scale in the programming realm. Content is still king, and those who own the content and access to it are in a position to reap the greatest profits.

Perhaps of greatest concern to WOW and other competitors like RCN and Knology, not to mention Dish Network and DirecTV, is how Comcast sets the rates for its own content in terms of the rates that their programming arm charges their cable arm. It is no secret that MFNs for the largest players in the distribution game often dictate higher rates for smaller operators, including competitors. This often leaves smaller companies feeling like they are subsidizing the larger players. A scenario where a programming entity setting their rates based on what their affiliated distribution company (which, by the way, is the largest in the market) agrees pays for that content justifiably raises concerns about the unfairness of an “out of one pocket in into another” arrangement. There is sure to be even more concern now that retransmission consent is involved.

Curiously absent from list of witnesses at tomorrow’s hearings is anyone from the satellite or telephone company community. The NBC broadcast affiliate group has already suggested strings, and there is no doubt that other parties will be joining in as the regulatory approval process proceeds. There may be little doubt that the merger will ultimately be approved. However, the larger question may well be what strings will be attached and, if one is to look at the merged Comcast/GE as Jonathon Swift’s Gulliver, whether the strings will be strong enough to hold the new media giant down for long.

SNI vs. CVC Follow-up

OK. So hours after I predicted the Cablevision-SNI battle would be likely to be protracted, the two sides settled and Scripps programming was reinstated to Cablevision subscribers. I was wrong. I thought that if Cablevision had denied Yankees fans the YES network for over a year, they would have no problem stringing Long Island foodies along for a few months. Maybe there should be a seven day waiting period for bloggers too!

One of my readers raised an interesting question. As Scripps was airing their programming on broadcast TV, what was the reaction from other affiliates? I’m sure calls were placed to Knoxville about this by other cable ops in the NY DMA. Also, you probably recall that last week Cablevision CEO James Dolan was making some very public statements that maybe the bundled programming model was outmoded. Almost certainly it was a public statement made to illustrate and protest the carriage requirements in the SNI Agreement. Chances are that Food Network and HGTV will likely to continue to be carried on Expanded Basic. Cable operators are no closer to a la carte or themed tiers than they were before. As far as the big question, “Did Scripps get the “fair value” they were seeking; the 200% increase that CVC said that SNI wanted?” All the press statements say are that the “terms of the deal were not disclosed”.

While I’ve made notes to deal with programming bundling in a later post, I’m not even going to touch the question of whether New York’s foodies scare CVC more than Yankees fans. I guess all I can say is, “Hey Comcast, want me to do a post on the stalemate between Versus and DirecTV?”

Are Food Network’s Moves Getting Hard for Cablevision to Digest?

The carriage dispute between Cablevision and Scripps Networks Interactive (SNI) is continuing into its third week. Food Network and HGTV went dark on Cablevision’s systems on New Years Day when the carriage agreement expired. Since then, the battle has gone public. Cablevision is accusing SNI of being the ones that pulled the plug on the programming and asking for a 200% increase in license fees upon renewal. For its part, SNI maintains they are asking for “fair value” for their programming.

Since going dark on the Cablevision systems, SNI has been making some of their popular programming, like Food Network’s Iron Chef America, available on local NY stations WWOR and WPIX. Is seems that Cablevision is little impressed by SNI’s recent moves. Cablevision CEO James Dolan has proved to have an iron stomach when it comes to his appetite for tough, drawn out programming negotiations. Consider that Cablevision was the last cable operator in the New York market to launch the YES Network – and that when he was dealing with Yankees fans! Dolan’s critics (and the public posture of SNI) will say that the second generation cable mogul cares little about his customers and is just trying to cut the best business deal possible, while holding those customers hostage in the negotiations. Well, yes and no.

It may be sour table grapes on SNI’s part and the unwillingness of Dolan’s critics to forgive cable operators in general for years of rate increases in excess of inflation, but one must consider that one of the primary goals for the operator in driving the best business deal is to keep their costs low, enabling them to keep the rates to the consumer at a competitive level while still making a profit acceptable to its shareholders. You see, the free market is much more complicated than the simplistic public “he says, she says” finger pointing that often accompany these types of carriage battles. Dolan is taking a “get tough” stance, as a majority of Time Warner Cable subscribers encouraged their cable operator to do in its year end retransmission consent negotiations with FOX. The thing is, Jimmy Dolan is doing it without a website. It is likely that we will see many more of these battles as cable operators look to maintain a reasonable level of programming costs in the face of retransmission consent payments to broadcasters, but that’s a subject for another post. Unfortunately, it is the customer/viewer that invariably gets caught in the middle of these battles. Cablevision does not necessarily mean to “hold them hostage”. It’s just that cable subscribers happen to be part of the currency that video distributors trade in when negotiating with programmers.

While one would think that there is a propensity for consumer to switch to another provider (Verizon, DirecTV, Echostar’s Dish Network, etc.), such thinking ignores the power of the bundle. When a consumer is locked into a bundle of services that includes voice, video and data, the attraction of the “all for one low price” proposition makes each individual channel less important, especially the marginal “niche” channels. This is even more difficult if the customer is locked into a contract.

Chances are that MFNs (so called “most favored nations” clause that requires a programmer to offer lower rates to larger operators if they are give to smaller operators) are standing in the way of Cablevision getting the rates they want for the services. That being the case, Cablevision customers can expect the negotiations to drag on for some time unless both parties can find a creative solution to work around the MFNs. Until then, many CVC subscribers who are Food Network fans are going to wish they had packed a lunch.