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  • If You Own Google, Watch These 3 Trends [View article]
    Kind of funny. GOOG's Rent-a-Patent strategy to "defend Android's" thievery (where it assigned some patents that it acquired to HTC to countersue against Apple) just got thrown out at the ITC for lacking "standing". So what the hell did Larry really buy with shareholder's $12.5B in cash for MMI? A profitless high cost provider of "me-fifth" smartphones?

    see this: http://bit.ly/MywZBn

    Oh no, when does Larry admit that the emperor's new clothes are illusory and foolish, beside being damn ugly underneath. So do we now write-down the huge amount of goodwill premium paid for MMI or are we going to tax earnings every year by amortizing the "intangibles" acquired?
    Jun 11 01:58 PM | Likes Like |Link to Comment
  • Prepaid iPhone Will Boost Sprint/Virgin Mobile And Leap Wireless [View article]
    yes agreed, I think it more likely for someone to get the subsidized iPhone handset from Leap and activate on either VZW or Sprint. VZW does have much better coverage due to its use of 800mhz spectrum than Sprint (at least currently that is, until Sprint's iDEN 800mhz frequencies are refarmed for use on Sprint's cdma and lte-advanced networks next year).
    Jun 11 12:53 PM | Likes Like |Link to Comment
  • Prepaid iPhone Will Boost Sprint/Virgin Mobile And Leap Wireless [View article]
    you do know I assume that jail-broken "unlocked" iPhones have been selling for over $700 for quite some time, until Apple itself introduced unlocked GSM iPhone. That's how t-mobile has over a million iPhone users on its network despite only supporting 2G data speeds (GPRS) on the 1.9ghz frequencies that iPhone uses.

    In fact, check on eBay now for "unlocked" iPhones, and you will find iPhone 4S in the $600-$800 range depending upon configuration, with cheapre prices for the iPhone 4 and iPhone 3GS.

    "Prepaid" is really two segments, of "pay-as-you-go" and "pay-in-davence", with the latter not that much different than post-paid plans in that they involve monthly buckets, except they offer only no-subsidy or low-subsidy handsets.

    There will be plenty of people that either dont want to or do not otherwise have the credit history to get a post-paid plan, or simply can do the math to figure out that the pay-in-advance option may be considerably cheaper for their needs.

    What will be interesting is that these will offer the first CDMA handsets in iPhone family that are suitable for porting to other networks. I wonder how many people will buy these devices from Leap and/or Virgin and instead will "bring-your-own-phone" over to be activated on Verizon after only 1-2 months on Leap or Virgin.
    Jun 11 10:36 AM | Likes Like |Link to Comment
  • A Proposed New REIT That Promises To Pay Iron Mountain Dividends [View article]
    main advantage is valuation, if you cap expeceted $2-$2.40 pro forma dividend per share post REIT conversion, at anything less than 5% yield, gives you considerable potential lift in IRM shares.
    Jun 11 10:16 AM | Likes Like |Link to Comment
  • Netflix Becomes A Tech Company [View article]
    content aggregation and curation, and underwriting production cost (either pre-production such as original programming or pre-committing to long-term studio output deals) or post-production such as purchasing whole prior seasons, coupled with cost-effective distribution to secure a large subscription paying audience -- that's not a "business model", it's called the media business.

    was eBay simply a "business model" where the network effect of buyers and sellers gathering at the same venue attracted others to do same (i.e. creating an audience for each party intersted in his counterparty) and thus created the power of incumbancy. or Amazon acting Borg-like and adding successive product categories (both with and without it assuming merchandising risk) that leveraged its scale advantages on the front-end (customer/audience aggregation) and logistics back-end, was that simply a "business model". Or BSkyB in the UK, dominating the pay cable movie subscription business by locking up output deals from all six major studios -- is that just a "business model" or did it create a challenging barrier to entry (at least for otehr traditional pay cable networks to do same that relied upon MVPD distribution carriage).

    The CDN technology Netflix is attempting to implement to supplement its 3rd party CDN vendors is simply a tool (to lower cost and more importantly to control service delivery) that leverages takes advantage of its scale advantage and creates another economic/service level barrier to entry. There are many aspects of "technology" -- in the user interface, in the personalization algorithm, in the dynamic buffering, in the multiple device and OS interfaces, that makes teh technology invested a differentiator, and many that are still yet defficient. For example, I would love much better segregation for "family plan" to enable better user selectivity for parental controls (so I dont have to worry about my toddlers on their iPads accidentally resuming the Exorcist that I was watching), individual user personalization on the recommendation engine, ability to temporarily cache/download on the device (this is both licensing/DRM and software issue) so that I can download to my iPad on wifi at home and take it on the flight with me (rather than try to stream via gogo at 30,000 ft at 600 kbps) -- the list is endless. For example, little things insoftware development tha taffects teh user experience, I was streaming a film on my Android phone from Epix and every time the cellular network crapped out, I had to re-engage Epix and start the movie from the beginning and then try to jump to the portion in the movie where I last left off. Streaming is not a commodity capability or simple technology but rather has numerous nuances (and software development investment) to design the user experience. When HBO GO first came out, you had to proactively log out of each device, or otherwise it would block your access from another device (they quickly changed the policy to allow 3 simultaneous streams to mimic Netflix's policy and than also added software to detect a session end).

    Anyway, I am actually a user and subscriber to all of them: iTunes, vudu, Netflix, Amazon Prime, HBO Go, MaxGO, Epix HD, Hulu (only on my computer), ... and each has their respective technological quirks. So "technology" is not only in the network (although a lot of stuff goes on in the plumbing that we dont see but simply expect to work), but also how it is deployed to define the user experience.

    Netflix is a media entertainment company that is increasingly becoming more sophisticated in using technology and software to improve teh user experience. After all, that subscriber can cancel at any time -- and evidently 5%-6% do so every month, and if the user experience can be improved to move that 100-200 bps, teh economic effect is very compelling.
    Jun 6 01:13 PM | 1 Like Like |Link to Comment
  • If You Own Google, Watch These 3 Trends [View article]
    RM, the consistent pattern of "Do Only Evil" at Google seems to be a cultural bias that has it genesis from Google's market dominance in search. Google's succes in search breeds unrependent arrogance and instills delusions of immortality, and in the end, will undoubtedly sow the seeds of Google's eventual and ultimate downfall. I certainly agree with your sentiment of needing adult supervision at Google but I don't think that will happen because the corporate goverance structure at Google forces everyone to be locked-in to the Larry and Sergei show, for good or bad. I used to be a fan of Google and its history of innovation but was disgusted by the lack of corporate goveranance restraint that allowed Larry Page to throw away $12.5B of GOOG shareholders' money on MMI. It is a ridiculously stupid investment, and guess what, the shareholders can't do anything about it....other than to sell their shares and tune into a different channel. Such a shame. I've since sold all my GOOG shares and hard for me to see when I can make the case for buying it again because I simply have lost faith in who is driving the car (into the proverbial ditch at some point).
    Jun 5 12:51 PM | 3 Likes Like |Link to Comment
  • 3 New Reasons Netflix Could Shed $10 By 2013 [View article]
    To answer your question, yes, there is a theoretical scenario that a high-volume, low-cost provider such as Netflix can aggregate such distribution strength that it would crowd out the other pay cabel networks. After all, what you describe is exactly BSkyB's position in the UK. But I believe that is unlikely to happen,...because it may not be economically justified.

    First of all, notwithstanding whatever the Warner Bros studio guys want, Bewkes is not going to let Warner Brothers test free-agency and leave HBO for another sugar daddy. Similarly, Paramount is sort of stuck with Epix and with a streaming window hybrid with Netflix (or it could be with somebody else like Hulu for example) that complements Epix, but none of the traditional pay cable networks are going to be willing to take on Paramount as Epix's sloppy seconds (unless they have no other choice-- but in any case they will want to pay less for a "sub-run" which is much cheaper, and Epix itself would not want somebody else such as HBO get Epix's featured studio new release content only 90 days after Epix because that would dilute the exclusivity value of the content to Epix). So in reality, it's only the output deals of 4 major studios that are in play: Disney, Fox, Universal, and Sony, to be bid upon eagerly by at least 4 players (HBO, Showtime, Starz, and Netflix, but maybe other new entrants such as Hulu, Prime, VZ, or somebody new such as YouTube, etc). Whoever wins one major studio output deal, is likely to value the next studio deal somewhat less as it relates to the incremental value that winning a 2nd output deal would bring, while in a bizarre fashion, the ones that lost in the auction for the first exclusive output deal are actually more likely to bid higher on the next one because they become more desperate to have their own anchor studio output deal to secure their existential viability.

    Therefore, what I think will result is that those with relative more economic power (based upon their network's sub count and realized ARPU yield) are likely to win more output deals or to win those output deals with studios that are relatively more attractive. But I am not convinced that one pay channel will be able to monopolize all 4 output deals that will be in play BECAUSE i believe that the pay service will start seeing diminishing returns (at least to justify continued premium pricing on the subsequent content licenses), at least for sure after deals with 3 major studios. Frankly, you want some of your competitors to sap up their licensing budget as well, so that they have less budget to compete with you elsewhere, such as in originals or in long-form television series.

    Regarding Time-Warner Cable, it is now a pure play cable network operator and has shown no interest to get into the programming network biz as it is not its core competency. I see no reason why TWC would go into the content underwriting business to start another pay cable network, when it can probably distribute Netflix and Hulu for maybe a 25%-30% revenue cut on a risk less basis instead. With respect to Comcast's Streampix, or for Comcast itself to create its own pay cable network to compete against HBO, Showtime, Starz, Epix, Netflix, etc, it's theoretically possible, but not likely IMO because it simply doesn't justify the risk reward from where Comcast sits. This is mainly because Comcast will either view it from the MVPD perspective, which currently has a riskless rev-share biz model by distributing all the premium pay channels, and if it really wished to build the 6th pay cable network, it would have to convince the other MVPD's not under its control the merits of granting Comcast carriage (and they would say either "sure for 60% rev-share cut like we currently get from Epix", or "why would we want to dilute our market efforts and add another confusing pay cable brand to the mix").

    Comcast's Streampix largely aggregates its existing on-demand library and leverages its existing server farm infrastructure, and perhaps some catalog content or one-off non-exclusive library deals that it negotiates with content owners, in order to simulate a me-too service as a retention tool to avoid those revenue dollars leaking off-net. you'll note that it is being distributed to only its existing subscriber base and only "on-net" (i.e. only to the subscriber's home) (because it doesn't have the licensing rights beyond the Comcast footprint).

    Anyway, we should find the next NFLX blog post as the new venue to continue this dialogue.
    Jun 5 12:46 AM | Likes Like |Link to Comment
  • Can Windows Slam The Shutters On Google? [View article]
    How about new forms of search -- particularly as traffic migrates to mobile en masse.

    Try http://www.qwiki.com and get a sense of new technologies that may change from what we know of as classical search. Ever hear of a gal named Siri? How does Google Search fit into that new paradigm?
    Jun 2 10:37 PM | Likes Like |Link to Comment
  • Can Windows Slam The Shutters On Google? [View article]
    GOOG/MMI and Samsung are the only ones seeking injunctions for Standards Essential Patents against infringers. Microsoft, along with Apple, (and I think Cisco) have all stated public policy statements that they will uphold fRAND principles and will not pursue injunctive relief on SEP, and each of Apple and Microsoft also stated that they would require the same for any assignees of their SEP's. This is far different than the tactic that GOOG/MMI is pursuing that has found it in the crosshairs of EU Competition review.

    FMueller points out that GOOG itself assigned some patents to Mosaid (http://bit.ly/KjwQaf) so this is funny that GOOG would complain about NOK and MSFT doing same.

    It is only going to be a matter of months before GOOG/MMI gets its hand slapped hard on abusing SEPs (Western District, EU, FTC intervention at ITC) . Then the fun will begin. AAPL, MSFT, RIMM, and NOK dont seem to have a problem not suing each other (at least AAPL and NOK settled with each other since 2010 with mutual detente bi-lateral licensing); why do you suppose it's only Android devices that have bore the brunt of the industry's wrath. I guess the boys from Googleplex never memorized the commandments that said "thou shall not steal" before their "Do Only Evil" motto.
    Jun 1 06:22 PM | 3 Likes Like |Link to Comment
  • Fat Lady Yet To Sing In Oracle Vs. Google [View article]
    Dana, just to clarify. "he specifically told the jury to assume Google had violated the copyrights"

    I believe that Judge Alsup actually told the jury to assume that the API and SSO were "copyrightable" in determining whether Google had infringed, but Judge Alsup has YET to formally rule on the "copyrightable" issue as a matter of law. The jury then decided that Google had indeed infringed on Oracle's copyrights on the API, but not on copying the source code on 8 Java files, and also hung on the issue of whether Google's copyright infringement was covered under "fair use". Judge Alsup then over-ruled the jury and issued judgment as a matter of law regarding the 8 decompiled Java files (which were copied verbatim by Google) and found instead that Google had infringed copyrights on that code.

    If Judge Alsup issues a ruling against Oracle on copyrightability of teh 37 API, the jury finding of infringement is moot. If Judge Alsup finds for Oracle on API copyrightability, then he has to make a determination whether to rule on fair use, or to allow the parties to retry that specific part of the case with a different jury. Also it's not clear to me how Alsup's JMOL finding of infringement on the source code files would be affected by his pending decision on API copyrightability (presumably they are unrelated), and so the whole copyright case will still have to hang on the resolution/applicability of the "fair use" doctrine.

    The risk to Google is less so over jury determined damages, although presumably Oracle can be bought off at some $ amount. The more important issue for Google comes down to whether Oracle can demand a remedy where Google is forced to take a Java license, and it's really the provisions in such Java license which would limit Google's ability to "fork" Java into a separate Android branch that makes it potentially problematic for Google (and which presumably affords Oracle its desired leverage).

    I agree with you, I do not believe that the Fat Lady has sung yet, although not clear that Judge Willaim Alsup would like to be refered to either as "fat" or a "lady".
    May 24 02:13 PM | Likes Like |Link to Comment
  • Why The FCC Chose To Believe A Lie [View article]
    Notwithstanding I agree that the MVPD's may also have certain conflicts that affects their motivations, I dont fully agree with your premise.

    The network providers do in fact have real costs, and they are defined around cost of capacity to deliver during peak times. So I don't know the 5ยข per movie cited is based upon peak hour usage or averaged across the day, and that is material.

    The wireless industry do not have the same conflict that you cite for the cable operators, but yet they wish to charge for usage-sensitive price tiers and overages. To date, until somebody does it again, they have not bifurcated usage for peak and off-peak. Remember the good ole days of actually being billed for voice usage. Voice usage however has different peak patterns than data usage. Voice has a bi-modal peak pattern during the day mostly during the work week. That's why cellular "off-peak" periods are 7pm-7am and durign weekends. Data usage however has entirely different peak patterns because it is largely dictated by video entertainment consumption -- at least until usage demand for two-way video as communications medium becomes predominant. Thus, maybe pricing tiers will evolve in teh future where you are only charged for data usage (or only then do they count) during data peak hours which may be 7pm-midnight, and not counted otherwise. I'm sure that the benefits of competition will create many attempts to create different pricing plans.

    This will also create innovation in CPE devices where people can shave the load off the peaks by choosing to stream-to-storage (your Netflix viewing "queue") perhaps durign off-peak hours where this isn't even counted in your data allotment.

    It is entirely a different issue whether the 90%+ margin that the cable operator aleady enjoys (although that is EBITDA and before depreciation, where the real capital cost of providing capacity resides) for broadband adequately compensates him for streaming usage. Frankly, the real issue is competition. If we had truly 4-6 high bandwidth broadband (exceeding 25 Mbps delivered service) providers competing against each other, then the market will sort it out. But at this time, except in cases where the telco has over-built with fiber, we really have only one serious wired broadband provider which is the cable operator. Wireless doesn't come close in offering sufficient alternative broadband capacity. So at best a duopoly with carriers that have traditionally acted as monopolists -- thus we need regulatory intervention to limit the economic power of the incumbant broadband operator to tax its users.

    That at least is the bull case for cable which is notwithstanding its margin squeeze from increasing content costs in its video distribution business, it has plenty of room for margin expansion to milk from its broadband plant to meet this tsunami of video over IP demand. It's just another way of implementing price increases but not necessarily having to blame ESPN -- now just blame Hulu, Netflix, and iTunes instead.
    May 24 12:12 PM | 2 Likes Like |Link to Comment
  • Microsoft (MSFT) has won a German injunction on the sale of Motorola Mobility (GOOG) Android devices, after a court ruled Motorola is infringing a patent related to the brilliant innovation of breaking up and reassembling a text message. The ruling comes after the ITC banned the U.S. import of Motorola devices infringing another Microsoft patent, and suggested (pending a final ruling) the Xbox 360 should face an import ban for violating Motorola patents.  [View news story]
    the difference is that Motorola is winning with FRAND-encumbered patents, where there is preliminary injunction outstanding in Western District preventing Motorola from enforcing any injunction from FRAND-encumbered patents until that case is adjudicated. Microsoft is attacking with patents that are not standards essential and therefor do not have FRAND commitments and thus in a position to enforce injunctions. However, because Microsoft's patents in-suit are not standards essential patents, technical work-arounds are possible in order for MMI to side-step a Microsoft patent injunction. Since all these cases are really where Android is the ultimate culprit, it really requires a modification to Android in order to implement a work-around. At least plenty to keep GOOG busy.

    May 24 11:13 AM | Likes Like |Link to Comment
  • Google's $12 Billion Motorola Gamble: The Reasons Why It Will Pay Off [View article]
    Motorola doesn't compete with Apple. It barely competes with LG, HTC, and RIMM for table scraps after Apple and Samsung have eaten. Motorola is a profit-less 2nd tier vendor who has long outlived its glory days of the RAZR and Star-Tac.

    I totally disagree with you. As a GOOG shareholder, I would rather they distribute the $12.5 billion to GOOG shareholders directly so that we can make a more intelligent investment decision rather than flushing it down the toilet by overpaying so much that Icahn and other MMI shareholders can enjoy a windfall. Jha so ripped off Page on this deal that the guy is doing cartwheels celebrating how he played poor Larry.

    GOOG has a great core search business -- one of the best inventions by man in terms of pure profit-making capacity, but this arrogant foray into a business via a non-viable and non-competitive platform (i.e. MMI) is simply dumb and will mark Page's own Waterloo or Vietnam, as a step gone too far.
    May 23 02:30 PM | Likes Like |Link to Comment
  • 3 New Reasons Netflix Could Shed $10 By 2013 [View article]
    What you suggest is exactly what happened when TCI (John Malone) formed Starz/Encore back in 1992, because he wasn't happy with the cut he was getting from HBO and Showtime. In the beginning, Starz couldn't get carriage except on TCI systems. It then began cutting output deals by outbidding existing pay channels first with Universal (who later HBO stole away a decade later), and then added independents such as Carolco and New Line, and then stole the Disney Studios (Miramax, Touchstone, Hollywood) from Showtime in 1997. I think it took like 7-8 years before Starz finally broke-even -- it eventually won a long-term output deal with Sony-Columbia as well. Today I think it gets carriage on pretty much all MVPD's. It eventually got spun off to Liberty shareholders and is independent Liberty Starz run by HBO veteran Chris Albrecht -- this is also entity that own's Liberty's interest in Sirius XM by the way. Recently Starz cut a deal with Lionsgate to get that studio's output deal once LGF's commitment with Epix ends (remember LGF is a partner in Epix).

    I tell you this 20 year history of Starz to prove a point -- the studios are like strippers chasing benjamins; whoever has more to spend is their new best friend.

    Today, the big 6 studios have output deals where HBO has 3, Starz has 2, and Epix has one. Showtime got left out of the majors so it has a portfolio of output deals with the independents (Summit, Weinstein, Miramax (including Dimension Films), DreamWorks (live action via Touchstone), and instead also rely on "sub-run" rights to MGM, Sony, Paramount, and Disney, and beginning june 2012, also Universal, to fillout its channel guide. "Sub-run" rights means that it doesn't have exclusive pay cable 1 but rather Showtime will get a later run after their initial run on pay cable 1 on another pay channel is completed. Showtime, after losing its big studio deals (actually even before hand), also started to mimic HBO's strategy of original programming by increasing Showtime's own produced/funded/developed original television shows such as Dexter, Weeds, Californication, The L Word, United States of Tara, The Tudors, Queer as Folk, Nurse Jackie, Dead Like Me, Secret Diary of a Call Girl and even softcore erotica such as Beach Heat: Miami.

    So in the recent release (remember this is AFTER the DVD and PPV, or Pay To Own window) movie broadcast business, it is split among the 4 major pay channels, with now Netflix aspiring to be a fifth (just like Starz's model 20 years ago). No one feels that they need to have a monopoly on all the studio output, and instead rely on a mix of original programming to differentiate their network from other pay cable networks (with HBO and Showtime having the most history of accomplishment and Starz only starting in past couple of years to increase this spend). In that sense, Netflix is really only copycatting a well-worn path in the pay channel business that have been previously proven out by Starz/HBO/Showtime: compete to get a critical mass of recent release output deals, fill in with catalog and sub-run product, add a dash of original programming to further differentiate. That's why Netflix's Orange is the New Black (writer/producer team that did Weeds on Showtime) or David Fincher (Social Network) and Kevin Spacey's new House of Cards, or another revival season of Arrested Development, etc. is sort of a proven strategy of supplementing recent release movie content. Here's a good background on pay cable channel industry (http://bit.ly/JxJTF2).

    It's not clear to me why one needs to monopolize all the movie output deals (although that is exactly where BSkyB Movies currently sits in the UK see here: http://bit.ly/KgcQlz). For example, if you were HBO, if at the end of your Universal deal, which you had previously taken from Starz, do you decide to pay Universal $150MM more per year, and if so, will your subscribers base grow another 2mm subs in order just to pay for it, or will you be able to raise prices to recover that additional outlay, or do you just suck it up and pay-to-win and simply make less money (last choice, brush up the resume in order to find new job). More likely, you make a calculated choice of do I increase my original programming budget from what I would save, spend that else where buying more indepedent studio output, go after Starz on its deals -- in the end it's not clear how thigns will turn out. One difference I have with you is that you define the world as the "movie business" -- I think it's already proven that the pay channel business has long evolved away from movies to include a broad array of television entertainment defined as "Not Otherwise Available on Broadcast Television", meaning more adult themes that permits profanity, nudity, violence, or otherwise controversial subject matter (like Big Love, about a polygamist, on HBO, or Hung, a comedy-drama about a male high school coach that discovers he has a certain asset that can help pay the bills, also on HBO). The point is that what people want from television is simply choice of entertainment. 20 episodes of a serialized drama is either a 20-hour movie, or a movie franchise with 9 sequels. And a 20-episode season of Game of Thrones may only cost you $3MM an episode (made up by me based upon watching the show and estimating the production values), or $60MM in total, while it cost Disney $300MM to produced and market John Carter (before discovering it's a flop). So television entertainment is a lot more bang for your buck in terms of dollars per hour. Here, Netflix has an advantage than the other pay cable channels, partly out of necessity since the major output deals were locked up, since as an on-demand content library with unlimited channel slots (as opposed to the linear programming universe of the traditional pay channels with their multiplex brands), Netflix can feature a broad library of content that allows it to narrowcast to their subscribers diverse needs. My wife and I watched all 4 seasons of Greek, previously on ABC Family, and I enjoyed discovering the one-and only season of Surface, originally on Syfy -- we would have never found these shows on their original runs, and while they were "reruns", they were "new releases" to us and easily justified the value proposition of the $8/mo that we pay. So most pundits criticize Netflix Streaming because of "weak" content -- mainly because they are defining their expectations around the availability of recent movies (which is what they remember as the predominant part of Netflix's DVD-by-mail business), but yet have they seen what's on Showtime or The Movie Channel as well (hardly any of the "recent" movies that they would expect). The reality is that by the time of the exclusive pay cable 1 window, most films have already gone through broad theatrical release, PPV(rental), PTO(ownership of digital rights), DVD, airplane venue, etc. and are already no longer "recent" -- usually about 9 mo after initial theatrical release.

    So going back to your question of the MVPD's strategies, again you are defining the MVPD's and the incumbant pay cable channels as "theirs", while in reality they are fighting with each other all the time. It's only this past month that Time-Warner Cable finally agreed to allow HBO Go (http://bit.ly/JxJTF4) becaus eit was fighting with its prior corporate sibling over how much it would pay HBO for the additional functionality. The fact of the matter is, that the existing pay channels don't "belong" to the cable industry (after all, they also distribute to satellite and the telco's video platforms too) and each is out to secure their own economic advantage and causing periodic squables (http://bit.ly/KgcQBW), but currently are "frienemies" because they are partners with each other, but that will change as at some point some MVPD (such as Charter, TWC, or Suddenlink) will say, "well why don't I distribute Nteflix and Hulu too and get a revenue cut, and use it to promote my higher bandwidth pipe". The problem with the strategy of "the MVPD's getting into the movie pay channel business" is that you need somebody with sufficient scale to underwrite distribution (that's probably only 2-3), then you have to convince those subscribers to actually pay to subscribe to the new channel, and you have to front the content spend to lock up exclusives when they come up for renewal by outbidding the incumbant pay channel networks. Of course, Starz is exhibit #1 that it can be done, but it took 8-9 years of operating losses and 20 years to get to its current ~20 million subs (http://bit.ly/JxJTF6) that nets ONLY the low $2/mo per subscriber. Epix was a new launch in 2008 unaffiliated with any MVPD's, but it had locked in output deals with its founding partners Paramount, Lionsgate, and MGM,...and guess what, a channel that was starved for distribution, promotion, and paying subscribers, it cuts a 5 year deal with Netflix (who does have distribution, promotion, and paying subscribers) worth up to $1B to sub-license, i.e. "white-label", the content to Netflix's subscribers. So if a MVPD, or even if you get two of them to get together and actually agree on something, decide tomorrow to start up their own movie channel business, where would they go to get the content. They can license the same old catalog stuff (Tom Hank's Big, or another showing of A Few Good Men - loved Nicholson in that film) that each of Amazon Prime and Netflix have, but the recent film releases in the pay cable 1 window and even some of the sub-runs are already EXCLUSIVELY contracted for under existing contracts. So they can bid along with all the players as these output deals come up for renewal but in the mean time, nada. But you had frame the hypothetical that if a disruptor such as Netflix (you can substitute another disruptor-wanna-be such as Verizon/Redbox) were to out bid and lock up these content output deals (ranges between 5 and 10 years), then the MVPD's will then have to react. Do you see the logic failure at that point --- because the MVPD's can't then "react" by creating its own movie pay channel because by definition it is reacting a causal event that precludes it from reacting-- i.e. the movie output deals will have already been pre-committed. In other words, in order for the MVPD to establish his own pay cable channel, he has to act PRE-EMPTIVELY to bid for these exclusive output deals (against HBO, Starz, Showtime, Netflix), before he has any paying subscribers for the new service. If you were Charter or Time-Warner Cable, or Suddenlink, do you think that your shareholders and bondholders will allow you to enter a business model that involves probably 8 years of losses (the last time that TCI did it with Starz), or maybe you just ask yourself, hey I only get $2 bucks per sub distributing Starz, why don't I get $2/mo distributing Netflix too, and increase my broadband ARPU by $5 (pure margin) if I can then get half by base to upgrade to $10 higher broadband speeds. MVPD's, except one guy called Comcast, are all distributors trying to increase the yield on their pipe investment -- which one do you think will be willing to burn a hole through their cash flow statement for an extended period of time (many years) to build another de novo movie pay cable network just because maybe he loses some of his $2/sub margin dollars if Starz happens to lose 10%-20% of its sub base, and if he were Cablevision, and Comcast started a service, do you think either of them will cut each one a break in order to be friends at the NCTA convention?

    Anyway, sorry to be so long-winded, but I do enjoy our discourse (despite your extended expression of negative views about Netflix I discern at least some willingness to dig deeper to understand). Most people, and certainly most reporters who write or most of the "tech" analysts that cover Netflix (why they don't have their media analysts cover the name I will never know -- only because it's IP-delivered?) really have no clue how the media industry works or how content is licensed and the different players in the value-chain and what their economic motives are. Just to be clear, I believe that Netflix has a lot of challenges to come, and treacherous waters yet to navigate, but the oft-stated opinion that Hollywood don't want to license content to Netflix (as if strippers didn't want to dance for dollars), is patently silly, or that Hollywood will want to dictate Netflix pays more in the future (it's the bid of the second highest bidder who lost the auction that informs what the winner pays) is even more naive.
    May 23 11:44 AM | 1 Like Like |Link to Comment
  • Apple TV Will Revolutionize Content Delivery And Advertising [View article]
    bobbobwhite -- you described Google TV exactly and why it was a failed user experience (well unless you count the 20 people that bought it, excluding Googler employees, a raging success).

    the other problem the author doesn't realize is that the reason that cable channels are not offered ala carte is that the programming networks themselves don't want it. their busienss model is largely driven by advertising and selling access to eyeballs. allowing user selectivity and turning everything to a user selected subscription model will mean the inability for large portions of the media world to find any audience of sufficient scale (or that it will be so expensive to achieve that it will limit new content) if they can't accidentally be found when someone is channel surfing (I'm thinking the bikini travel shows on HD Net, or the reality TV shows on Bravo). But then, come to think about it, maybe that's a very good thing.
    May 21 03:54 PM | 4 Likes Like |Link to Comment
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