Is the FCC Redefining Television

The Federal Communications Commission is preparing a proposal which could help the fledgling OTT industry by treating certain online video services like cable and satellite TV providers. The move would help the online services gain cheaper access to major network programming and could allow them to become stronger competitors to the dominant pay-TV providers like Comcast.  Gaining rights to popular channels has been a major hurdle for online TV services. Sony Corp. and Dish Network (as previously reported here) are among the companies considering Web-based services to compete with traditional cable and satellite operators. The big issue and cause for some OTT failures like Intel’s exit from its “OnCue” service, is in securing highly coveted programming from ESPN, NBCU, AMC and others is that the networks typically are owned/controlled by the larger MVPD’s (Comcast, Time Warner, Cablevision).

FCC Chairman Tom Wheeler was asked about the matter yesterday and stated that a proposal is circulating among commissioners “is probably a bit of an overstatement.” Nonetheless the industry analysts are buzzing. “This is a very big deal,” said Richard Greenfield, an analyst for BTIG. “It could pose very significant challenges to the traditional cable TV bundle.” Paul Gallant, with Guggenheim Securities, said in a note today, that broadcasters such as CBS Corp. and 21st Century Fox Inc. would potentially benefit from having more buyers for their programming.

According to an unknown source by Bloomberg, the change would affect online video providers that offer a cable-like programming service on a schedule, and not on-demand services like Netflix, which allows subscribers to watch videos whenever they want. But it could revive the controversial online video service Aereo, which allowed subscribers to watch broadcast TV channels on their computers and Internet connected-TVs.

 

Although for now this may just be chalked up as a rumor, it is one that would have a broad impact on the business as it is today, a  move which could significantly broaden competition in the MVPD market. More: FierceCable 09/30/14 - Rumor mill:Aereo-like platforms may be given program licensing rights by FCC and/or Variety.com09/29/14 - FCC Wants Some Online Providers to be Treated as Cable Operators

AT&T takes aim at Comcast with Direc TV Acquisition

AT+T may be on the verge of buying DirecTV for $50 million, which would be the largest in years and reshape the television business at a time of rapid change in the industry. Reports of rumors on the acquisition appeared all over the blogosphere today an a official announcement may be just weeks away. The Wall Street Journal, citing unnamed sources familiar with the matter, reports the two companies are discussing a deal that would involve a mix of cash and AT&T stock. A combined AT&T-DirecTV would hold a vast swath of wireless spectrum, the public radio signals that make smartphones and tablets work and would also be better positioned to compete against the proposed Comcast/Time Warner combined entity.  The pact would be a way to expand its video offerings, which is similar to how the Comcast and Time Warner Cable deal could deliver. AT+T currently provides pay-TV service through its U-Verse brand. MORE: WSJ - 05/12/2014 -

AT&T Could Strike $50 Billion Deal for DirecTV, or

Bloomberg - 05/13/2014 - AT&T in Talks to Buy DirecTV for About $50 Billion

Cord Swapping replaces Cord Cutting

Interesting data has been made public in the FCC’s annual video competition report released this past Monday.  Comcast, Time Warner Cable and other cable operators lost about 2.5 million video subscribers between 2010 and 2012. As anticipated the Satellite and Telco side of the industry are still in the growth mode for the most part.  AT&T's U-verse TV posted the biggest video subscriber gain, growing its subscription base from 3 million to 4.1 million during the same period. Verizon's FiOS TV expanded from 3.5 million to 4.5 million subscribers during the same period while DirecTV Inc. grew its subscriber base by 700,000 to 19.9 million during the same period, and Dish Network  remained flat at 14.1 million.

Total gain of 2.8 million reflects a modest net gain of 300K for the overall industry, so is it safe to assume that the feared cord cutting rumor is untrue and frankly should be renamed cord swapping.

Other note worthy items listed in the report:

•  The FCC said cable operators installed 38,000 CableCARDs in retail devices such as TiVo DVRs and connected TVs in 2012.

•  The number of households that rely solely on over-the-air antennas to watch TV remained flat at 11.1 million in 2012.

•  Deployments of DVRs in pay TV homes increased to 50.3 million in 2012, up from 46.3 million in 2011. DVR penetration in TV homes has increased to 43.8 percent.

 More on this topic: See the FCC Report.

DirecTV considers OTA to reduce Programming costs

In 2008 the Sezmi Flexcast video distribution technology was being tested. It's design was revolutionary at the time because of it's combination of the use of antenna and a broadband connection to receive content. The antenna captures the digital signals from the major networks broadcast publicly over the air for free. Unfortunately for the company it never really gained any traction and eventually was purchased by KIT Digital. Interesting news surfaced earlier this week when DirecTV announced that it is considering testing a new set-top that incorporates an antenna allowing customers to pull over-the-air (OTA) broadcast signals, which could allow the satellite giant to avoid paying millions of dollars per year in retransmission consent fees. Patrick Doyle the company's CFO stated that they had used the integrated antenna solution early in its history, before it began offering local broadcast channels via satellite. Once the satellite giant began offering local-into-local broadcast signals on a wide scale basis, the antenna solution didn’t make economic sense.

Business evolves and the economics are changing. Companies like Aereo and look a like Aereo Killer are challenging the broadcasters traditional business model and traditional Satellite & Cable providers are seriously weighing their options. For the past several years retransmission consent and the huge fees that some broadcasters charge have been a growing concern multichannel video programming distributors (MVPD). NBC alone expects to see a 400 percent rise in retransmission revenue this year, which translates into steep cost increases for pay-TV providers, and subsequently their subscribers. According to SNL Kagan, retrans fees could top $6 billion annually by 2018.

DirecTV is not alone in their quest to rein in explosive programming cost increases. Time Warner Cable's CEO recently stated publically that they were diligently watching the Aereo legal challenge and perhaps they would also invest in a technology that could eliminate retrains fee's. At this point it's not clear just how many other MVPD's, are considering options like these. According to an article in Light Reading Cable's 05/16 issue - DirecTV Weighs OTA Tuners. They state that one industry source has only heard similar discussions in international markets, while a second confirms there have been some domestic conversations, but nothing suggesting any near-term action.
 
In any case, no matter which side of the fence you stand on retransmission consent and the revenue stream/programming expense issue, it is rapidly coming to a head.

Time Warner Cable adds Live Programming to TV Everywhere App

Following the lead of rivals Comcast and DIRECTV, Time Warner Cable has announced that today it is adding live programming to its TWC TV app.  Currently content is only available to subscribers who own Apple tablets or smartphones but they will introduce the new programming to other platforms later this year. As of today the live channels include; the Big Ten Network, the Pac-12 Network, BBC America, beIN Sports,  FearNet, GMC and some local outlets.

 
Time Warner Cable COO Rob Marcus told analysts on an earnings call in January that Time Warner was working on signing deals with programmers that include rights to out-of-home viewing. He said the TWC TV app generated more than 750,000 unique users in December. Many of the largest programmers, including Walt Disney Co. and TWC sister company Turner Networks, have not made agreements yet which include content streaming however as content deals come up for renewal this cable-industry shift toward "TV Everywhere" will prevail as the MVPD's push the content providers for broader carriage deals. MORE - 04/17/13 Rapid TV News - Time Warner Cable adds out-of-home access to TV everywhere app