July 14, 2009 3:36 PM
Competitive subscription TV providers are, most often, confronted with a blizzard of "no"s, or, even worse, a blizzard of "nose" when they ask if they can buy sports programming in a "high definition" format from the vertically-integrated owner of that local sports programming. Most regional sports programming (most college sports, and all professional sports except football) is owned by a regional programming company that is usually affiliated with a large cable TV company. The vertically-integrated sports programmers (big cable) are always fighting with competitive subscription TV providers (telco--ILEC and CLEC, competitive cable overbuilders, and satellite). The major source of contention is access to the "feeds" of local sports content (both "regular" and "high def"). Incumbent cable operators, who do not compete with one another, routinely make all proprietary programming available to other cable incumbents.
A good example of how vertically-integrated video providers can use their programming market power to reduce consumer welfare is described in the FCC complaint filed last week by Verizon against Madison Square Garden L.P. ("MSG"), and Cablevision. MSG is owned by Cablevision, and MSG owns the exclusive rights to produce and exhibit games of important local sports teams, such as the NY Knicks, NY Rangers, NY Islanders , NJ Devils, and the Buffalo Sabres. Providers of subscription TV in the NY metro area, and upstate and western New York, believe that the high definition feeds of these events are competitively significant. Every provider of subscription TV services that is offered the "high-def" format purchases it, and every other provider of subscription TV services wants to buy it.
In its complaint, Verizon claims that MSG is violating Section 628 of the Communications Act, which prohibits vertically-integrated distributors of satellite programming from acting in an unfair, or anticompetitive manner. Verizon contends that Cablevision is in violation of the Act because it refuses to sell Verizon its "high def" feed for sporting events, for which MSG owns the rights. Cablevision's response is that, because it transmits the "high def" feed to its distribution points via fiber (vs. satellite) transmission, it is not required to deal at all (much less, fairly) with any other programming distributor. This post is NOT about Verizon's complaint at the FCC.
Continue reading The Blizzard of Yaahhhs: Is Aspen Skiing A Lift Ticket To Fair Programming Terms?
March 26, 2009 8:02 PM
OK, yesterday's post was all about the relatively-recent propagation of companies with applications, features, or hardware designed to allow the consumer to bypass traditional subscription TV. Why the effort? Do I have to throw out the purported Willie Sutton quote? Of course, because--at least to many entrepreneurs and large businesses--this is where the money is. But why is the money here? In yesterday's post, I referred to an unsustainable program/programmer-distribution "price spiral." What I was referring to was the "clubby" kind of way in which large programmers, and large distributors of subscription programming (sometimes the same firms), have reinforced a certain mutually-beneficial co-dependence to the detriment of the consumer. It's gotten to the point that even new entry--by a Verizon, an AT&T, or other competitor--doesn't reduce prices as much as you'd think. Why? Because the programming is so darned expensive! Why? Because that's the way the status quo wants it!
The anti-consumer symbiosis goes something like this: programmers insist on price increases--either outright, or through tying more popular to less popular channels. This happens on both the "programmer-to-distributor" level (distributor has to take ESPN Classic if it wants ESPN), and on the "distributor-to-consumer" level (MSOs agree to put each other's programming into "expanded basic tier" regardless of its popularity). Content distributors, led by the regionally-dominant cable MSOs, have been only too happy to oblige with their own price increases, either by reducing the number of channels available on the "basic" tier, or simply by eliminating the basic tier altogether. No doubt, large programmers and distributors would be happy to continue this happy state of economic hegemony indefinitely.
Consumers, on the other hand, have not been so happy. The benefits to the large content providers extend beyond the immediate benefits of higher prices (which are always appreciated), but also have the effect of foreclosing other content competitors, because these same companies--by requiring distributors to carry both the "regular" digital versions of their channels AND the high definition versions, can use the same content to take up at least twice as much bandwidth on the distribution networks. Thus, large programmers protect themselves from competition from small, independent, programming by effectively "crowding out" valuable bandwidth "shelf space." This is yet another reason why the firms mentioned yesterday are trying so hard to bypass subscription TV, and deliver video content over the Internet.
For a really enlightening dialogue on the issue of Internet-distributed television/video content, it's really worth it to take a look at the dialogue between Avner Ronen, Boxee CEO, Mark Cuban of HDNet, a subscription TV channel.
Continue reading How Content Integration Has Produced Consumer Welfare Disintegration . . . or How Come Prices Keep Going Up Even with Telco Video Entry?