behind the streams: transmission interrupted
  • FRIDAY, OCTOBER 15, 2010

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The Coming Earthquake

The current Fox/Cablevision retransmission argument in NYC is infuriating. Each side is using their own media muscle to negotiate in public over the dollars involved. Each is framing the other as the greedy big media company. This is completely disingenuous posturing that the viewing public in Cablevision's market pays for no matter which way you slice the pie.

Fox is demanding that Cablevision pay for the right to carry an esstentially free-to-air station, e.g. in NYC, Channel 5. Cablevision's argument is that the channel is broadcast "free" to the consumer under a federal broadcast monopoly and that it shouldn't have to pay for re-transmission because it is otherwise available. Pseudo-complicated stuff, but the jumble of positioning is a symptom of a system running out of control.

Media in America has always needed to pay for itself by selling advertising. Look at any newspaper though our history and you will see this. As media technology evolved this model grew along with it. Radio was advertising and sponsorship driven. Television created the implied social contract that if you sit still through the commercials that they won't feel the need to go to government to make you pay an annual license fee to support the medium (think Europe). Cable came along as a way to bring television to homes that were outside traditional broadcaster's reach. Cable of course evolved into a superior way to deliver programming into the home, regardless of location, people were willing to pay a monthly fee to get a better signal and more channels. The media social contract remained the same but then consumers were also paying for better service and quality. HBO changed all this with the simple idea that people would pay more to be entertained commercial free. The model in recent times has evolved even further; in the last twenty years networks like Discovery emerged that were only on cable and contained advertising. The media social contract was then re-shaped. Consumer's cable bills grew as these new networks successfully made the argument that they existed only on cable and the operators should pay them for the right to carry these channels and the viewer pays twice — once in their cable bill and once sitting through the heavy commercial load to watch their shows. Broadcasters have been jealous of this "double dip" for years and through the recent downturn this has helped the cable programmers while broadcasters — not getting paid for re-transmission — have suffered from the deep slump in their advertising lifeblood. These are the seeds of the current dispute between Fox and Cablevision. Fundamentally it's about who gets to be the bad guy and charge the consumer more. If Fox wins the battle, Cablevision charges its viewers each a few pennies more a month. If Cablevision wins, its viewers might suffer the loss of the NFL on Fox 5 and Newscorp's shareholders may not get an increase in earnings. Quite frankly I think that broadcast networks getting paid for retransmission should give up their federally granted broadcast spectrum monopolies in their markets. How much to you think this spectrum would be worth if someone actually paid for the right to use it?

Oh my God this is a music video site what is this guy talking about and what's the point?

A couple of years ago I renovated my two older daughter's bedrooms. In the renovation I had coaxial cable installed in each room and wifi throughout the house. I didn't give them televisions in their rooms because I wanted to have a fatherly discussion about responsible time management and not getting sucked into inappropriate reality trash on television. Do my daughters really need the empowering role models of the Kardashian sisters examining and talking about waxing their privates? The television request never came from either daughter so one night I sauntered by their rooms' hoping for the Daddy moment and I found each of them sitting on their beds with their laptops happily watching inappropriate trash over the house's wifi. I got the quote from each of them "Dad we don't need TV's because we get everything we want to watch off the Web." I am sure hundreds of big media executives have had the same conversation with their teen children and left the room feeling like vomiting.

I hated the wild eye web evangelists in '98 who were saying that the Internet changed everything. I hated their early fanaticism but they were right. The web is now about to sweep though Big Television / Media and forever change the landscape, making it all significantly smaller.

Today's innovators are bringing the internet to your living room television faster and simpler than ever before. Devices and boxes from companies like Roku, Boxee, Apple, Google, and more, over the next two years, are going to turn this media world on its head. Video sites like ours will be in your living room, with no whining or threatening to pull the service over retransmission. MTV won't be there but VEVO will be (happily getting payback on Viacom). Advertiser's most coveted demographic is going to start pulling the plug on cable and much more quickly than most people think. As these devices gain traction, the fall off in the younger demographic is going to be massive. Paying $40 per month with cable subscription vs. a single payment of up to $300 (i.e. Google TV) is going to be an obvious trade-off. The payback on a low end Roku box will be just over two months in this model. The implied social contract of sitting through commercials will again be the lynch pin. Valid media models never go away.

Looking even more deeply into my crystal ball, secure peering for internet video delivery will be widely available in a couple of years, so the cost of delivery of video like ours to potentially millions of homes will fall to near zero. No need for satellites or expensive transmitters, just a series of origin servers.

If I were twenty four right now I would have a killer television with an HD antenna and one of these new boxes hooked up to a data source — whatever is fastest and cheapest. -david moffly

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