Collateral Damage

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Patrick

Patrick is a mid-40 year old geek with an undergraduate degree in mathematics and a master's degree in Information Systems. Nothing he says here has anything to do with the official position of his employer or any other institution.

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61 Responses

  1. Avatar Rtod says:

    This was a great post, Pat, and one that has solidified a bunch of stuff that’s been going through my head lately. Like everyone else, I’ve been having to sit through the remarkable ad campaign that AMC and Comedy Cntral have been doing. I’ve never seen anything like it, and I’ve not been sure what to think about it.

    I mean, if I liked Coke and I saw an ad from them saying to let Burger King have it for not stocking coke products, I’d find that to be a bit dickish in a way I don’t quite feel about the cable ads.Report

  2. Avatar Mad Rocket Scientist says:

    The wife & I dumped cable over a year ago. Now we use a Roku. All we miss is PBS.Report

  3. Avatar Chris says:

    I haven’t had cable in years. Does MTV still play music videos except at night? Does Comedy Central still play MST3K at midnight?Report

  4. You just removed the only selling point over going the route of not having a cable provider whatsoever, you made it a pain in the butt.

    I can’t agree that this is Directv’s only selling point, though it surely is the only selling point for most TV services. Sunday Ticket remains a huge selling point; were it not for Sunday Ticket, I’d never have signed on for Directv in the first place, and I’d have cancelled my subscription years ago.

    I expect Directv’s going to win out on this one – with, what 15-20% of the nation’s homes hooked up to it, of which only a minority presumably actually watch Viacom’s programming with any regularity, it seems to me that Viacom needs Directv more than Directv needs Viacom. I suspect this is especially true since it seems like Directv is the one service provider that’s still consistently adding subscribers (thank you Sunday Ticket), so its clout is only increasing, even if that of service providers in general might be going the other direction.

    They’re basically giving Sunday Ticket away at this point, presumably trying to get as many subscribers as possible who will gladly pay a minimum of $60 a month (and usually well above that) for the privilege of getting Sunday Ticket as long as there’s at least some channels for them to lazily and mindlessly watch in the offseason.

    I suspect the that the increase in new subscribers paying $60-$100 a month solely so they can get Sunday Ticket (seemingly about 500,000 new subscriptions a year from what I can tell) will result in more new revenue than the value of subscriptions lost (few, if any, of which will be premium-type subscriptions) less the savings from not having to pay half a billion a year to Viacom.Report

    • Avatar Patrick Cahalan in reply to Mark Thompson says:

      > it seems to me that Viacom needs Directv more than
      > Directv needs Viacom.

      There’s also a built-in problem for Viacom. DirecTV’s customers are on contract for N months. If DirecTV pays Viacom more money, that comes right out of their bottom line, they can’t pass it through to their customers until the contract is up, and if they up contract prices they’ll lose some of those new subscribers they’re adding. All the incentives are for DirecTV to give Viacom the big GFY, unless Viacom can generate enough buzz to get DirecTV to budge.

      I don’t see that happening. AMC has a better chance with Dish.Report

  5. Avatar Kazzy says:

    I have a number of friends who push me to rid myself of cable. “Everything is on the internet!” they say. Not sports! But none of them are sports fans. They also pirate a lot of stuff, something I’m unwilling to do from both a moral and practical standpoint. I also take comfort in the buffet. Will my life be much different if I didn’t watch “Chopped”? No. Not one bit. I don’t even know when it’s on and the concept is so absurd you don’t really learn anything about cooking… But I’m a sucker for competition and I’ll watch it when it’s on. And I like having that option. I’m also a stimulation junky. I *need* stimulation or I’ll drive the wife batty. Something I know I should work on and am sorta kinda trying to… But a reality nonetheless.

    So it’s not just laziness in switching, though I’m sure that is part of it. The real issue I see is the near-monopolies companies have. I got the best customer service from DirecTV because I lived in a major city with many competitors and they had to kiss my ass to keep me. I got the worst when living in an apartment complex that signed an exclusive rights deal with Comcast; when I called to complain that their new policy of charging the customer for any hardware failure, even one they caused, was absurd, they hung up. That’s when I called DirecTV. When Fios first appeared, they trumped everyone for quality, in part because they had to because no one wants to change providers. But then they took over certain areas, failed in others, and the status quo remains.

    Increase competition and we’ll all be better off. In fact, one of the damn providers might actualky go a la carte with channels and/or shows, which is really all anyone wants.Report

    • Avatar Patrick Cahalan in reply to Kazzy says:

      > In fact, one of the damn providers might actualky
      > go a la carte with channels and/or shows, which
      > is really all anyone wants.

      This really would be the death of the modern television provider model. Most of the content creators would be forced to just create content, instead of bundling.Report

      • Avatar Kazzy in reply to Patrick Cahalan says:

        Is that a bad thing? Who needs Cablevision? Let Fox, Abc, ESPN, and whomever else just send me whatever I want via the internet to my TV.Report

        • Avatar Patrick Cahalan in reply to Kazzy says:

          The relationship between the customer and Cablevision and Cablevision and Fox and Fox and the independent houses or in-house teams that produce all of the Fox shows enables a lot of bundling, which lowers a lot of risk.

          So Fox contracts for some shows, produces some in-house, arranges them in channels, splits up the betters shows among the multiple channels, and gives rights to those channels to Cablevision, who they charge for “all their productions, plus vig”.

          If Fox had to sell shows a-la carte, they would have… zero?… in-house production, ’cause that’s all risk, with very few winners.

          You’d see more of this, which basically kills off not only Cablevision but… Fox as well.

          Personally, I’m okay with that.Report

          • Avatar Kazzy in reply to Patrick Cahalan says:

            Shows might be a step too far. Maybe even channels. But let me pickup a sports package and movie package and Fox package and decline a news package or science package or what have you. They already sort of do this with premium and upgrade packages… The problem is the base package.Report

            • Avatar Patrick Cahalan in reply to Kazzy says:

              Well, sure.

              Because if I’m a media conglomerate, I don’t want you to buy some of my stuff. I want you to buy *all* of my stuff.

              And I’m going to package my stuff in such a way that you’re maximally likely to buy the maximal amount of my stuff.

              Meaning all of my packages are going to include everything I can reasonably include at the highest possible price point I think I can get you to pay for “the thing you actually want to buy” plus “all the rest of this crap”.Report

              • Avatar Kazzy in reply to Patrick Cahalan says:

                The thing is, I might be willing to pay MORE overall for cable to get less of what I don’t want (and less overall) and more of what I do want.

                So if I could get the whole fleet of ESPN channels for $20, the upgraded sports package for $15, HBO for $15, local channels for $20, I’m already up to $70, am getting more of what I want than before, and paying roughly the same. I’d probably tack on a few more packages for the wife, meaning more money overall but likely fewer overall channel. Unfortunately, this isn’t an option. To get everything I want right now, I’d cost me well over $100, meaning the cable company is only getting about $70/month out of me when they could be getting $85 because they’re holding out to get $100.Report

      • Avatar Mo in reply to Patrick Cahalan says:

        The content creators are trying to bring the same model online. For example, see ESPN and their online ESPN3.Report

    • Avatar James Hanley in reply to Kazzy says:

      Kazzy, you’re friends with non-sports fans? What’s wrong with you?Report

    • Avatar Mark Thompson in reply to Kazzy says:

      One thing that’s interesting about the Directv-Viacom fooferaw is that one of the claims Directv keeps throwing out there is that it has offered a la carte pricing as a compromise but Viacom refuses to even discuss that option. I’ve no idea the extent to which this is true versus a PR lie, but I’d be shocked if Viacom would ever even consider this.

      By chance, I happened to read the Newsweek piece on ESPN from January this morning, and about how ESPN (and, increasingly Disney more generally) is able to command absolutely exorbitant fees from carriers (like thrice the next most expensive provider) by virtue of its stranglehold on live sporting events, which in turn amounts to a pretty sizable stranglehold on live TV more generally. In addition to the fees they command, though, they’re also able to force carriers to put all of the ESPN channels in their basic package while also forcing those carriers to buy up all of the Disney channels as well; if they don’t get what they want, they’re able to credibly threaten to walk away, taking the Disney Channel along with them. None of the providers can afford to give up live events, especially with the rise of internet content, so they’ll pay whatever they need to.

      Here, it seems like Viacom is trying a similar strategy, except they don’t have the live events to offer as leverage, and there’s no shortage of competition for Viacom’s flagship stations. MTV and VH1 are just reality show channels at this point, competing with the likes of Bravo, TLC, etc. Nick is obviously competing with PBS-owned Sprout and Disney. I suppose Comedy Central doesn’t have much in the way of competition, but that’s not a lot of leverage when people can just pay a couple extra bucks to watch online, especially for something of a niche channel.

      Since, due to that whole “needing live events thing,” carriers have to pay for the likes of Disney (and presumably NBC-owned Bravo as well) anyhow, and PBS-owned Sprout (and, for that matter, Discovery-owned TLC) can’t possibly be very expensive, I can’t imagine there’s much incentive to pay boatloads for Nick and MTV just to keep Comedy Central. We reached a point where there’s so many “I’m lazy and there’s nothing else on” channels that not a lot of people will really care much about losing some of them.

      I half expect that at some point Disney will buy all of the Discovery-owned channels, jack its rates up even further through the roof, and basically put carriers in a position where it makes no economic sense to carry any channels other than those owned by Disney.Report

      • Avatar MikeSchilling in reply to Mark Thompson says:

        One interesting thing about ESPN.com is that more and more of the content other than scores and stats is going behind the paywall. They’re the only web site I know of that seem able to do this.Report

        • Avatar Kazzy in reply to MikeSchilling says:

          Thr Mag subscription offers free insider. You can find online deals for less than $10/year.

          Really, they just buy up all the talent. As soon as someone gets a following, they bring them on and, if the readership follows, they go behind the wall.Report

        • Their most valuable commodity though is free (ish).

          The live streams are almost all available if your ISP provides WatchESPN, up to and including marquee MLB and NBA streams.

          It’s kind of crazy.Report

          • Avatar Kazzy in reply to Nob Akimoto says:

            I don’t mind paying for premium live sports. I don’t mind paying for online content. I don’t even mind when a free ESPN writer suddenly goes behind the paywall. I do get a bit pissy when a free non-ESPN writer suddenly becomes a paywalled ESPN writer.

            Another little known facet of this is the ownership of stats, which you wouldn’t think could be owned, but absolutely are. I believe ESPN now owns the Elias Sports Bureau. From reading over at the former Baseball-Reference blog, this was not insignificant for those doing statistical analysis, though I don’t know exactly how it works.Report

          • Avatar Mo in reply to Nob Akimoto says:

            Saying that the live streams are free if your ISP provides WatchESPN is like saying that ESPN is free if your cable provider provides ESPN. Both are true, but you are paying for the fees that the ISP/cable company are paying Disney for WatchESPN/ESPN.Report

  6. Avatar Jaybird says:

    Also, Use Your Illusion I & II are both pretty interesting.Report

    • Avatar Patrick Cahalan in reply to Jaybird says:

      No religion!

      Wait, we’re not on MD.

      Okay…

      You’re crazy!Report

      • While changing the subject might be a favored tactic of Rush fans, I’d like to point out that UYI1 has, as its only weak songs, Dust N’ Bones, Bad Obsession, and maybe Bad Apples. UYI2 has… what? 14 years and maybe Shotgun Blues?

        Everything else on those two albums range from guilty pleasure to pretty good to “Holy Crap, this is *AMAZING*” (Coma still blows me away).

        I mean, yeah, I don’t listen to them every day but, dang, there aren’t a whole lot of FF buttons on those two discs.Report

        • Avatar Patrick Cahalan in reply to Jaybird says:

          > While changing the subject might be a favored tactic of Rush fans

          Was that a dig? That was a dig, wasn’t it?

          Okay, I’ll tell you what. I will assume that my original and secondary (and… well, several other attempts to get into UYI) were flawed. I’ll try again.

          And if I feel the same way about it after attempt number N+1, I’m gonna hafta post a new Wrong post.Report

          • Eh, it’s not like there’s any arguing matters of taste. I will say that 2 has aged better than 1 but the best song on either album is on 1 (Coma).

            I could put together more than one album by taking everything “good” and better from the two albums. An album and an EP, maybe.

            Right Next Door To Hell
            Live and Let Die
            Don’t Cry (original Version)
            You Ain’t The First
            Novermber Rain
            The Garden
            Dead Horse
            Coma

            Civil War
            Yesterdays
            Knockin’ on Heaven’s Door
            Get in the Ring (the song isn’t a tenth as good as Axl’s rant, but that rant…)
            Pretty Tied Up
            Locomotive
            Estranged
            You Could Be Mine
            Don’t Cry (Alternate Lyrics)Report

        • Avatar Liam Cahalan in reply to Jaybird says:

          UYI1&2 are both good. Lies is still better than both of them combined, though.Report

  7. Avatar Patrick Cahalan says:

    You know what’s the best thing to do during a battle for public relations? Make yourself look horrible…

    http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-viacom-20120711,0,3984016.storyReport

  8. Avatar Will Truman says:

    Dish Network got into it with Fox last year, right during the football season, negating any reason I had for one of my sports packages right when I needed it most.

    I agree on the self-destructive nature on this, but somebody has to flinch. It’s hard to be cooperative when your cooperativeness is used as leverage against you.

    In the end, I don’t know what can be done. As inconvenient as it is, there’s no way to cut the cord without Missing Something, and nobody wants to Miss Something. Few are going to go the route of Pat, I think. More likely, we’ll continue to grin and bear it because the content-owners will – as Viacom just demonstrated – cut off other legal options.Report

    • Avatar Patrick Cahalan in reply to Will Truman says:

      The grin and bear it generation is dying.

      The young just shrug and continue on downloading .torrents.Report

      • Doesn’t work for sporting events. A lot of people won’t do it due to the liabilities (I have a friend who did it regularly until the “We know what you did” warnings started going out). A lot of people will, of course, do it and keep doing it. I don’t think it’ll ever be what music was in the days of Napster, though.Report

        • I don’t think it’ll ever be what music was in the days of Napster, though.

          Actually, I’m not sure if I believe that or not. The contrarian in me poking its head. Catch me on a different day and I’ll be talking about what a post-profit Hollywood might look like (not that there wouldn’t really be profits, but that it’d be… different… if they couldn’t rely on their basic sticker price to pay for the sorts of things we’re seeing now).Report

          • Avatar Kazzy in reply to Will Truman says:

            I don’t know that it will work for live sports. We tried that once… bad quality, sound was off, skips and buffering… Perhaps there are or will be better ways, but sports fans are a picky bunch.Report

            • Avatar Patrick Cahalan in reply to Kazzy says:

              I’ll say this.

              Cablevision. Time Warner. DirecTV. Dish. Comcast. Cox. Charter.

              Disney. Newscorp. Time Warner again. Sony. NBC Universal.

              That’s a lot of providers to duke it out over 3.5 major sports in the U.S.

              That ain’t gonna pull weight.Report

              • Avatar Kazzy in reply to Patrick Cahalan says:

                I’m sorry, I meant that .torrenting or whatever live sports likely will never work for the vast majority of sports fans.Report

              • Pat, No one wants to write off sports fans, though, because while they aren’t everybody, they are distributed between households. You’re not just waving off sports fans, but you’re waving off households with sports fans (or a sports fan) in them. That’s a pretty big deal.

                Kazzy, I will watch games online sometimes, but generally speaking, the unauthorized stuff tends to be particularly bad. So I agree, sports is a problem.Report

              • Avatar Kazzy in reply to Will Truman says:

                Good point on the authorized vs. unauthorized steaming. I don’t doubt that there already exists the technology to effectively stream sports. It’s just not in place to do so without authorization.Report

              • Avatar Patrick Cahalan in reply to Patrick Cahalan says:

                Let me put it to you this way: right now, the three big leagues (baseball, basketball, and football) don’t have enough content to drive 100 for-pay channels. Maybe three.

                Mark’s point about Disney having the ESPN hammer is a good one, but the ESPN hammer is only as effective as its contracts with those big three leagues are. And unlike other actual contract content creators, the NBA, the NFL, and MLB all don’t sign exclusivity contracts like that.

                The funny thing to me is that, say, NFL Sunday ticket is attractive because there’s so many city ex-pats in the country who really want to watch the Bills but live in Texas, or really want to watch the 49ers but live in Maine. But most of the NFL Sunday ticket consumers don’t want to watch *all* the games (although they certainly do, given the chance), they just want to watch *their* teams’ games. Given the choice between NFL Sunday Ticket with DirecTV and $80/month for a package plus $N for the games or whatever, I’d hazard a guess they’d rather pay $N/year for a flat subscription to “All the 49er games on Hulu”.

                Now, Football is communist, so most of the money goes into the system and then gets spread around to everybody. But Baseball is decidedly less communist. Why the Giants don’t have a channel on Hulu is beyond me.Report

              • Why would, or should, the leagues let you follow a single team when they can make you go with the whole caboose. You may be only interested in watching the Bills, but that doesn’t mean that you will not also watch the other games. They want you to watch the games, they want you to buy the games. Whether they bundle them to a single source, or sell them to many sources, they own the content and I don’t see any particular reason that they should be generous about letting people purchase only what they want.

                One of my big things is ESPN3. I can’t get it. I would pay for it, but I can’t get it. Why would they not let me pay $15 a month to watch games over the Internet? Because if they let me do that, they lose leverage trying to extort my ISP into carrying it and charging a few cents for every Internet subscriber.

                It’s their content and they can do with it what they want. I can argue to the high heavens about how much I hate ESPN3’s model, but it’s their legal right to do so. For things to change, you’d have to change their legal rights. I don’t think the market will do it.Report

  9. Avatar Anderson says:

    I know myself and many others in my generation (college-age) always talk about the two things we’ll never have in our first house that we had growing up: home phone and cable tv. Everything I would want to watch I can find on the internet for a small price (ala Netflix, HBO Go, iTunes, Hulu, Google Play, shared files) and then connect the ol’ HDMI. Soon enough, I can imagine the TV will connect directly to the interwebs and the HDMI cord will become obsolete too. Obviously sports is the kicker here, but usually the basic public channels have sufficed for my hometown teams.Report

    • Avatar Will Truman in reply to Anderson says:

      If the entertainment suppliers lose the revenue from cable subscribers, what do you think is going to happen to the prices and availability of the services you will be relying on (or the shows themselves)? I could be wrong, but I think a lot of these things lean on the revenues from carriage fees.Report

      • Avatar Anderson in reply to Will Truman says:

        That’s a good point, though, for myself, most of favorite TV shows come from premium channels and not basic cable. The television industry will have to adopt just like the music industry. With the rise of clever business models like iTunes, Spotify, Rhapsody, and Pandora, piracy has gone down in the U.S. without forcing people to keep buying CDs (http://mashable.com/2011/03/25/internet-music-piracy-study/)….As long as we all still choose to pay–rather than torrent-entertainment will survive. Alot of the free-loading shows on those channels that nobody watches (or even the channels themselves on the cable packages) will have to be ditched.Report

  10. Avatar Jesse Ewiak says:

    Here’s the thing about ala carte pricing. The truth is, ala carte pricing for cable channels would likely send a lot of cable channels into the ether and it wouldn’t be the ones we would want to be sent into the ether.

    For example, take AMC. According to a WSJ report, it brought in $326 million in revenue (now, it entire network did, but the rest of it’s network [Sundance, IFC, etc.] is negligible). According to an Internet report from two years ago, AMC cost cable companies .23 per subscriber. Multiple the number of cable and dish subscribers (75% of 130 million households – so let’s say 91 million). That’s about $20 million in revenue just from fees from the networks.

    Now, you do the quick math in your head about Walking Dead numbers (10 million) and say, “OK, I’d spend 2.50 a month to watch AMC every month.” But, you wouldn’t pay $2.50. Because if General Mills and Chevy know only subscribers will see their ads and not random people sucked into a showing of Space Cowboys, their ad rates go down. Throw in the fact that probably only half to two-thirds of the Walking Dead cares enough about the show to pay for it and all of the sudden you’re paying seven or eight bucks a month for AMC.

    Now, you may say that’s a fair deal. But, here’s the thing. AMC’s a relatively successful network. Let’s look at other channels lower down the list. For instance, the Food Network gets .06 per subscriber. So, using the same basic extrapolation and you get about three or four bucks for the Food Channel.

    I’m not even getting into places like ESPN, HBO, or such that can really afford to raise rates in an ala carte world. Or that with media consolidation, no large multinational corporations is going to let you just buy one channel. You’re buying five channels and that’s that.

    I’m not saying cable pricing could be better. But, the idea that an ala carte world would lead to all of us having $40 dollar cable bills is as likely as Jessica Alba being in my bed when I wake up in the morning.Report

    • This is a first: Jesse Ewiak taking the words right out of my mouth.

      We can legislatively force the networks to unbundle, but we still run into the same dynamics that Jesse refers to here.

      At the end of the day, the networks are going to get their money. Or, if they don’t get their money, expenditures are going to be a lot more conservative. Fewer of those cable originals that we all love so much, more reality shows and low-rent syndication programs. If we pay less, we’re very likely going to be getting less.

      People keep imagining that if they just limited cable to the channels we watched, it would slash their bill. It would, for some, but it’s going to be calibrated to the average viewer. So you don’t have to watch a fraction of what you have in order to save money, but you would have to watch a fraction of what the next guy is watching.

      I say this as a guy who, in the football off-season, watches maybe 5 channels (excluding local channels) that I might subscribe to in an a la carte model. I might save money with a la carte, or I might actually be rather typical – in which case, the networks are going to be needing to extract all of their money from comparatively few people.Report

  11. Avatar BlaiseP says:

    Inevitably, what happened to music will happen to video. Hollywood’s lost its mind. They’re still clinging to the old revenue models established back when anyone with a television set could tune in the Big Three. The cablecos are trying to horn into a model which wasn’t created around them. It’s never going to work. Yeah, it’s a lot of trouble to switch, but ultimately, the pipe is fungible.

    Outfits like HBO and Showtime are doing fine. They were set up around cable distribution. Nobody’s going to screw with them: they don’t come with “basic” cable anyway.

    The problem is that they’re eating their young. See, the youngsters nowadays get their television shows a la carte on their mobile devices. They’re paying a premium for it, but in the long run shelling out $20 for the entire season of The Walking Dead, which I then can own and watch whenever, is preferable to spending $80/month on a buffet table.

    Unless the buffet table is zero effort.

    The buffet table at a cheap Chinese joint, where the shrimps are doing a better disappearing act than Sasquatch hiding out in the forests of Washington State. I have Rhapsody for my music and I’d love to find the video equivalent, something a little nicer than Netflix, which I do have, but I’m getting a little weary of the earnest TED talks and retreads from the Hitler Channel.

    Sport? Concerts? Broadway shows? All these are perfect models for one-off subscriptions. We already have working pay-per-view. The corporations who invested all that money to put in the last-mile light fibre could agree on a common set-top box to carry everyone’s content and make a killing. The carriers could work distribution between themselves but they’re all too stupid and greedy to work out how.
    Report