FCC 'Probing' Whether Cable Companies Have Sabotaged Internet Video

from the well,-duh dept

Most people realize that the cable and broadcast industry has worked tirelessly to protect its legacy cash cow from disruption. Dish was forced to make its ad-skipping DVR less useful if it wanted streaming licensing rights. Fox, Disney and Comcast/NBC for years kept Hulu from being too disruptive. ESPN sued Verizon for trying to offer more flexible TV lineups. Apple keeps running face first into broadcasters terrified of real disruption with its own TV plans. That's before you even get to cable companies busy capping and metering usage to hurt streaming services, while zero rating their own services for competitive advantage.

Gosh, it's almost as if there's a broad, coordinated, decade-long effort to keep legacy television expensive, barely-competitive, and shitty.

Enter the FCC, which, according to a Wall Street Journal report (registration required), is "probing" whether there's a coordinated effort by the cable and broadcast industry to keep Internet video from truly taking off. Though there's a number of ways the industry does this, the FCC's latest inquiry is focused on cable companies demanding broadcasters not license content to competing streaming services:

"Some evidence suggests the restrictive clauses may have effectively kept many TV programs off the Internet. Several big tech companies have tried to start Internet TV services, but have found it hard to get programming because of the exclusivity provisions. One new online TV venture, Sling TV, a subsidiary of Dish Network, says it suffered months of delay because of challenges posed by the contract clauses.

“When we launched Sling, one of the toughest things [was that] many of the programmers…had conditions in their programming agreements with other distributors that did restrict them in how they could license content,” Roger Lynch, Sling’s CEO, said in an interview."

So yes, some cable operators have demanded broadcasters intentionally limit who they offer service to, and you'd assume that Dish has forwarded something vaguely-resembling evidence to the FCC.

But the Journal report is oddly myopic in its coverage of the issue, vaguely implying that broadcasters like Disney, Fox, et al aren't also part of the problem. Disney for example owns ESPN, which again sued Verizon for upsetting the status quo of bloated, expensive channel bundles. Comcast/NBC took steps to hinder Hulu's growth despite being theoretically prohibited (via NBC merger condition) from Hulu management. Fox, meanwhile, has sued the hell out of any company attempting to do anything to so much as jostle the traditional TV apple cart.

This all comes up now because the FCC is reviewing Charter's attempted merger of Bright House Networks and Time Warner Cable. The regulator is fielding concerns from numerous companies that the merger will create another Comcast with a vested interest in hurting streaming video. Comcast's attempt to acquire these same companies was blocked, you'll recall, because the combined power of a broadcaster, cable operator and broadband company worried regulators (well, that and Comcast was immeasurably full of shit during its sales pitch).

Charter, by contrast, doesn't have the broadcast power of Comcast. And while Charter's customer service rankings are almost as bad as Comcast's, for whatever reason the company doesn't generate the same negative public sentiment, meaning less political pressure on the FCC to block the deal. To try and seal the deal, Charter has even gone so far as to hire respected neutrality advocate Marvin Ammori to help craft a company promise to avoid usage caps and adhere to net neutrality for (an admittedly unimpressive) three years after the deal is signed.

As such you're likely to see the FCC approve the deal, and the "probe" the Journal references is the regulator feeling out just what the conditions should be. Prohibiting Charter from agreements intentionally designed to sabotage streaming video competition might be a start, but it's not going to hinder the broadband and cable industry's primary avenue attack against Internet video: usage caps and zero rating. And so far, the FCC has been utterly comatose in its response to how Comcast and Verizon are using caps to give their own content a distinct marketplace advantage.

It's all well and good if the FCC wants to aid streaming video competition by opening the set top box or thwarting anti-competitive deals, but if the agency doesn't seriously address broadband competition, usage caps and zero rating, streaming video's just going to find itself choked off on the other end of the line. If the FCC wants to help, it can start by "probing" whether usage caps are necessary, whether the meters being used are accurate, and whether it made a mistake when it decided on net neutrality rules that pussy foot around the obvious problems caused by zero rating.

Historically telecom and cable merger conditions imposed by the FCC are sad, mostly meaningless, restrictions volunteered by the companies themselves (which they still often fail to adhere to). The FCC's going to have to dramatically change this historical narrative if it seriously hopes to keep the cable and broadcast industry from waging all-out-war on disruptive streaming alternatives.

Filed Under: collusion, competition, fcc, internet, internet video
Companies: apple, comcast, disney, espn, fox, hulu, verizon

Years Of Pretending Netflix Cord Cutting Wasn't Real Is Biting The Cable Industry In The Ass

from the monsters-don't-go-away-when-you-ignore-them dept

If you didn't know, Netflix is kind of huge. So huge, in fact, that some new analysis suggests that if Netflix was a Nielsen-rated TV network, the service would, sometime within a year, attain a larger 24-hour audience than ABC, CBS, NBC or Fox. That's something Nielsen itself should probably be tracking, but as we've noted previously, Nielsen has painfully lagged on actually tracking the cord cutting revolution, for fear of upsetting cable and broadcast executives with their heads planted squarely in the sand.

The analysts at FBR Capital Markets note that Netflix served 10 billion hours of internet video content in the first quarter of the year, roughly two hours per subscriber per day. By dividing this two-hour figure by 24 hours, then multiplying it by the number of U.S. Netflix subscribers as a percentage of households, the analysts estimate Netflix would see a Q1 ratings score of 2.6, on par with both ABC and NBC. The difference, of course, is that Netflix is growing quickly while traditional cable broadcasters are losing market share, especially on the kids programming front.

Of course, the fact that Nielsen can't join the modern era and track TV viewing over the internet suggests this isn't quite yet an apples-to-apples comparison:

"One major caveat: Nielsen TV ratings cover, at most, up to seven days of VOD and DVR viewing — and exclude online-video views, which networks say are an increasing part of the pie. Moreover, TV networks provide a different blend of content, such as live sports, that Netflix doesn’t. And anyway, Netflix doesn’t care about “ratings” of individual shows, given that it doesn’t sell ads and has steadfastly refused to disclose anything but general data about viewing."

Except Variety may overstate this, since the cable industry's "TV Everywhere" initiative (which lets users watch cable content on their iPads and other devices in the hopes of keeping them from cutting the cord) is a bit of a dud. Cable video on demand viewing has been in the toilet for some time as well. And while sports is where cable still outshines internet video (for now), the cable and broadcast apparatus isn't helping its case by failing to improve customer service, yet relentlessly driving up rates in the face of this increased competition. As such, people generally like Netflix's value proposition more:

"Another data point called out by FBR’s analysts: When consumers were asked if they had to choose between Netflix and a cable or satellite TV subscription, 57% picked Netflix, with 43% opting for pay TV, according to a survey FBR conducted with ClearVoice Research in April. "Netflix subscribers clearly like it more than pay TV, which we see as arguing for pricing leverage, since pay TV, on average, costs over $80 per month,” the analysts wrote, citing Netflix’s average $8 price point."

And things are going to get worse. Netflix is already leading the charge toward 4K and HDR content, something the cable industry (and especially the telcos using fiber to the node or DSL) won't have the bandwidth to deliver for years. And while the cable industry loses subscribers slowly to cord cutting, Netflix is busy growing internationally, with plans to offer service in 200 different countries by the end of this year. Apparently, burying your head in the sand and pretending cord cutting wasn't real didn't magically stop the future from arriving anyway. Who knew?

Filed Under: cord cutting, internet, internet video, measurement, video on demand
Companies: netflix, nielsen

TiVo Plans To Bring Aereo Back From The Dead

from the corpse-reanimation-never-works-well dept

Back in March, TiVo purchased Aereo's trademarks and customer rosters for around $1 million at auction, after Aereo's disruption efforts and clever legal arguments imploded spectacularly last November. Details are incredibly vague, but TiVo appears interested in resurrecting the Aereo service in some capacity, offering an improved -- and legal -- version of the controversial internet video service. Early details are spectacularly vague, but TiVo appears interested in marketing something to cable partners that will help them target cord cutters:

"It’s one helluva cheap way for cable operators to have an OTA/OTT device that says, ‘Satellite cord-cutter, I have a broadband package for you with a video component,'" (TiVo CEO Tom) Rogers said. "I think it allows them [the cable operator] to own the low-end and win over satellite subscribers."

The problem is that many cable operators don't want to make any truly disruptive over-the-top plays, since any value-oriented, disruptive internet video offering is going to cannibalize existing pay TV subscribers. That's why the cable and broadcast industry's Hulu has remained a dull, glorified ad for traditional cable TV. There has been some traction made on this front (Cablevision offering free antennas with broadband, for example), but by and large, cable execs remain terrified of upsetting the Apple cart. Rogers admits there's still a question as to how to make cable partnerships work:

"TiVo reasons that OTA, combined with broadband-fueled over-the-top services, presents an opportunity to help its cable partners target a small but growing number of cord cutters who are seeking less-expensive video and TV alternatives but who are also willing to create their own bundles. "The question is, how do you do that?” Tom Rogers, TiVo’s CEO and president, said during an interview last week at the INTX show in Chicago. “To us, the answer is pretty clear — it’s kind of the Aereo model, done legally and better."

The problem is, by the time TiVo's internet video offering arrives, it will be joining a crowded market saturated with services from the likes of Verizon, Dish (Sling TV), Sony and Apple. It's unclear how TiVo intends to truly differentiate itself from the pack, and the TiVo and Aereo brand may not be enough. Aereo's draw predominantly was its low $8 a month price tag, which was made possible because the company wasn't paying retransmission fees. Aereo's entire technical model of leasing customers micro-antennas and cloud DVR space was based on its legal efforts to tap dance around having to pay such fees. A legal version of Aereo couldn't offer the kind of disruption Aereo was capable of, because the courts have declared Aereo's particular brand of innovation to be illegal.

In other words, TiVo's version of Aereo will belatedly join a crowded field of over-the-top services, and while the brand name will provide some traction, the end product is likely to only share a passing resemblance to the Aereo people knew.

Filed Under: internet video, over the top, tv
Companies: aereo, tivo

Verizon Responds To Internet Video Competition With More Flexible Cable TV Packages, ESPN Immediately Whines

from the the-worldwide-leader-in-crying dept

Thanks to loosening broadcaster licensing restrictions, 2015 is birthing a number of more interesting Internet video platforms, including Sony's Playstation Vue and Dish's Sling TV. The latter has glacially moved the industry needle toward marginally-more-flexible cable TV pricing options, offering users a $20 base TV package that can be complemented with a variety of additional $5 "channel packs." Users are tired of bi-annual rate hikes for bloated channel budgets, and these services are only just giving an early glimpse into the more flexible programming options that will be the TV industry norm within a decade.

Better yet, they're actually forcing some pay TV companies to adapt. Verizon, for example, last week announced that the company would be offering up a variety of new channel packs and add ons that bring a little more flexibility to the telco's traditionally rigid bundles. Mirroring the Sling TV approach, Verizon now says the company will be offering users the option to buy a base TV package starting at $55 a month, after which users can tack on extra channel packs for $10 each. Here's a better idea of what it looks like:Verizon executives have traditionally been a little more progressively-minded about cord cutting than its industry counterparts (as in, actually occasionally admitting it exists), and this is a pretty clear play to not only cash in on cable companies' inflexibility, but try and prevent cord cutting. Since you usually can't see the true cost of a cable subscription until after you've gotten your bill (and seen all of the fees and obnoxious surcharges and caveats layered upon it), it's probably premature to call Verizon's effort revolutionary. But it's at least a start for an industry that has been swimming upstream and ignoring consumer demands for more than a decade.

Interestingly, it looks like Verizon didn't bother to tell any of its broadcast partners about its plans. Those partners, notably Disney and ESPN, immediately cried foul over the plans, claiming that Verizon's offers violate existing contracts:

"Media reports about Verizon’s new contemplated bundles describe packages that would not be authorized by our existing agreements. Among other issues, our contracts clearly provide that neither ESPN nor ESPN2 may be distributed in a separate sports package."...ESPN’s statement — which complains specifically about having its networks relegated to an optional sports tier, instead of being included in the base package — suggests that Verizon never got an agreement from the programmer before it announced its plan. A person familiar with another programmer included in Verizon’s offering said that programmer hadn’t signed off on Verizon’s plan either. That person suggested that Verizon thought its agreements allowed it to try different offerings as a limited test."

The bloated cost of sports programming is one of the biggest reasons for soaring cable bills (as if either broadcasters and cable operators need reasons at this point), and Verizon's clearly firing a warning shot over the broadcasters' bow in regards to being able to shift these costly options into add-on tiers. That's great for consumers, but it obviously lessens ESPN's out-front consumer-facing power and overall reach. ESPN would love things to remain status quo indefinitely, but that's clearly not a sustainable position. The traditional cable bundle is a burning, Hindenburg-esque cash cow that's destined to crash, and the "worldwide leader in sports" would probably be better off accelerating its adaptation to the new paradigm.

Of course that's not going to happen. Customers who don't care about sports are first in line to cut the cord, and as those users refuse to subsidize everybody else, ESPN's first impulse will be to raise rates on customers that do watch sports in order to keep the current cash cow afloat. Simultaneously you can be sure that ESPN's lawyers are huddled around the conference table as we speak, contemplating a lawsuit they believe will magically freeze time indefinitely. But if Verizon doesn't help blow up the bundle somebody else will, whether that's Internet video (where ESPN at least still gets paid) or increased sporting event piracy.

Whatever ESPN's approach (and you'd hope it would be more progressively minded), this is definitely the opening salvo in a much broader -- and necessary -- cable and broadcast industry war over breaking up the traditional cable bundle.

Filed Under: a la carte, internet video, over the top
Companies: disney, espn, verizon

New Legislation May Open The Door For FCC Regulatory Power Over Internet Content

from the not-a-good-thing dept

We're all for making content better accessible for the disabled -- but we ought to be careful when it comes to mandating it and potentially opening up internet content to the regulatory control of the FCC. A new bit of legislation being introduced by Rep. Ed Markey would (among other things) give the FCC regulatory power to mandate that internet video providers provide captions and a "video description" for the disabled. Basically, it would require "closed captioning" services for "major" video providers. On the face of it, this sounds well-meaning, but it's troublesome to suddenly give the FCC any sort of regulatory say over internet videos. The FCC's mandate is supposed to be over scarce spectrum -- which is (or is supposed to be) managed as a public good. It's not supposed to have regulatory power over much beyond that -- though, obviously, things have changed over the years.

Giving regulatory power over internet video, even for a seemingly "good cause," opens up all sorts of questions -- both legal and technical. Most worrisome, though, is conceptually, that this would open the door to making internet content open to government regulation. While there have been many attempts to regulate the internet over the years, for the most part, the government has seen fit to keep its hands out of regulating most internet content. Opening up internet video to certain requirements is a troublesome "nose in the tent" sort of situation. Rep. Markey, of course, is also well known for his proposed net neutrality bill -- and it's for the very same reason that I'm skeptical of legislating net neutrality. I'm a huge supporter of the concept of net neutrality -- and I believe strongly in exposing any provider who breaks neutrality. But once you open the door to the government regulating the internet, they're only going to regulate more and more and more. And, if you don't think that process won't be abused by entrenched interests, you haven't been paying attention to our legal system lately. Good intentioned laws for the internet will almost certainly have bad unintended consequences.

Filed Under: closed captioning, disability, ed markey, internet video, regulation