More on the pay TV landscape (previous): Any change away from the model of forcing consumers to...


More on the pay TV landscape (previous): Any change away from the model of forcing consumers to buy TV packages with hundreds of channels in favor of picking their options a la carte could help Dish Network (DISH +0.7%) and DirecTV (DTV -0.2%) - while pinching carriage fees for providers such as Scripps Networks Interactive (SNI -0.7%), AMC Networks (AMCX -4.3%) and even Disney (DIS +0.6%) with ESPN a major profit driver for the media giant. Though high-profile blackouts have hurt both sides, analysts think its the media companies that are starting to lose the PR battle with consumers.

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  • James Sands
    , contributor
    Comments (2641) | Send Message
     
    I disagree. In the short-term of a scenario like this it would be good for all distribution platforms. But any distribution platform would then need to spend more money to better understand content and determine what they would be willing to commit with. Also, if a company becomes part of the a la carte world, why do they need a platform? They can develop their own platform and use their subscription sales to generate more content. This is more risky, but for big companies it might actually be worth the risk.

     

    Over time in the short-term, contract agreements would continue to increase for the most valuable content. Eventually the need for distribution through a third-party would no longer be needed. Plus I think this model works best through the Internet/mobile rather than a conventional cable/satellite distribution platform.

     

    The shift is occurring on the Internet/mobile already too with Netflix and Hulu, MLB.com, and NBA.com, NFL.com soon to follow as far as a la carte. So cable and satellite are behind as platforms, and are playing catch-up, ironically using the same competitive platforms as Netflix and Hulu.

     

    The key is, who owns all of the fiber optic lines forming the infrastructure, they will not be lost in the platform battle.

     

    There is an advantage to the subscription model for individual companies like Discovery, Scripps Networks, ESPN, AMC, etc. For instance a company like Discovery with such a large international subscriber reach could potentially generate more sales with a subscription model than their current model, assuming their content is worth $4-9 per month. Discovery purchased a small company called Revision3, which generates online content. I believe that it is not a far cry to think that Discovery could eventually produce all of its content from this platform.

     

    The risk for all involved content/media companies is that they will truly have to compete and the best content/media will actually win out. The packaged model through ratings does not allow for flexibility, 7 year contracts are pretty steep. Plus the NFL has contracts that are long-term as well, so there would have to be multiple companies attempting to divert for a movement to occur.

     

    The current structure works well for everyone at the moment, and the biggest risk at stake are the advertising sales. However, I think that potential big subscription winners will be willing to take this risk over time, and find ways to generate adequate advertising sales long-term.

     

    Also, advertising is currently in an adjustment faze itself. More and more advertisers are using the Internet for video advertising and this will be a strong model moving forward.

     

    In the end the these shifts will correspond with increases/decreases in viewing and subscriber numbers by platforms, as households decrease cable/satellite use (but will still need to rely on DSL for something). From here on out the a la carte model will take more form.
    26 Feb 2013, 03:00 PM Reply Like
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