December 25, 2024

The Media Equation: More Cracks In TV’s Business Model

People were free to shop for what they wanted, as long as they were willing to buy a bunch of other stuff they did not. The box score last night for your home team? It was wrapped inside a bundle of paper that included everything from foreign news to ads for lingerie. If you liked a song, you generally had to buy an album full of others to get the goods.

As for advertisers, the audience they wanted was bundled inside a much larger audience of people they did not. To get at the milk, both consumers and businesses had to buy the cow.

Television has thrived on this kind of systematic stacking, but though bundles may be a handy way of protecting things, they also tend to obscure the weaknesses within. Those flaws are becoming more apparent as the practice of bundling comes under attack.

Networks are stepping up the fight against Dish Network’s Hopper, which automatically skips the commercials in network programming. Aereo won a court decision on April 1, letting it continue its rollout of a service through which consumers can access broadcast signals online without Aereo paying any of the estimated $3 billion that broadcasters will take in from retransmission fees by 2015.

And tellingly, there has been some breaking of ranks between the companies that make content and the people who send it through the pipes to consumers. Most notably, Cablevision filed an antitrust suit against Viacom challenging its requirement that the cable company carry rarely viewed channels to get access to Viacom’s more popular ones. (Verizon did not join the lawsuit, but is also asking for less bundling and more options.)

Finally, there is the success of Netflix’s “House of Cards,” original programming delivered over the Internet, with no cable required. The company announced on Facebook that customers had watched four billion hours of streaming video in the first three months of the year. As Peter Kafka pointed out in AllThingsD, Richard Greenfield of BTIG Research calculated that eye-popping number would make it the most-watched cable television network. Except it isn’t on cable, isn’t on television and isn’t a network.

Those initiatives represent assaults on different parts of the business, but each is an attack on the bundle, and the legacy industry is reacting ferociously. Aereo is a finger in the eye of broadcasters, prompting some to suggest they might turn off their broadcast signals and become cable channels — as Fox threatened last week. (The biggest losers in that situation would be the more than 11 million cable-less households that still depend on antennas.)

Charles Ergen, the chairman of Dish Network, was recently called the “most hated man in Hollywood” by The Hollywood Reporter because he dared to give consumers the ability to unbundle advertising and programming with a touch of a button using Hopper. It brings to mind the scene from Ken Auletta’s book “Googled,” when Mel Karmazin, then chief executive of Viacom, visited Google and saw a demonstration of the company’s ability to target ads. He declared that the company was, um, messing “with the magic.”

That’s because media companies have another word for those consumer inefficiencies: profits.

“The bundle is the Gibraltar of the media business,” said Tim Wu, the author of “The Master Switch,” a history of media revolutions. “It keeps the entire ecosystem alive, which is why it is so heavily and successfully defended. But there are hairline fractures beginning to appear, and you are seeing alliances shift.”

Historically, once the consumer decides, it doesn’t matter what stakeholders want. They can’t stop what’s coming.

The advent of the Internet presented an existential challenge to bundles. Once consumers got their hands on the mouse and a programmable remote, they began to attack the inefficiencies of the system. When seeking information, they sought relevant links, not media brands. And DVRs put them in the control room of their own viewing universe.

Susan Crawford, a professor at the Benjamin N. Cardozo School of Law and the author of “Captive Audience,” says she thinks television bundles will be with us for a while — six to eight years — regardless of what the consumer wants.

“It’s like the picked-on kid who tries to get home to his front porch; he has to make it past all the bullies first,” she said. “We have a heavily defended, heavily concentrated programming industry and a monopoly in distribution, with none of the big players willing to act like a maverick. No one wants to break ranks because the current system has been so lucrative.”

Of course, the government could get involved, as it did in breaking up Hollywood’s closed system of production and distribution in the 1930s and ’40s. The result was a lot of disruption, a blossoming of cinema in the ’60s and ’70s, and by the way, a movie industry that still has scale and profits.

E-mail: carr@nytimes.com;

twitter.com/carr2n

Article source: http://www.nytimes.com/2013/04/15/business/media/more-cracks-in-televisions-business-model.html?partner=rss&emc=rss

G.O.P. Balks at Plan to Add Airwaves for Mobile Internet and Wi-Fi

The remarks, which came at a House communications subcommittee hearing, took aim at one of the top priorities of Julius Genachowski, the F.C.C. chairman: to make available more unlicensed airwaves, or spectrum, to open congested mobile broadband networks and to use in Wi-Fi hot spots.

In September, the F.C.C. proposed freeing 12 to 20 megahertz of spectrum for those unlicensed uses. The unlicensed space on the electromagnetic spectrum would also be used as “guard bands.” Those are areas that border segments of airwaves that are used by cellphone companies, broadcasters and other communications entities; their purpose is to limit interference from transmissions on nearby airwaves.

Mr. Genachowski defended the commission’s plans. “Unlicensed spectrum has a powerful record of driving innovation, investment and economic growth — hundreds of billions of dollars of value creation for our economy and consumers,” he told the committee on Wednesday.

He pointed to Wi-Fi networks, which operate on unlicensed airwaves on the electromagnetic spectrum, as an example of innovation that has generated “hundreds of billions in tax revenues” and made the United States a leader in the use of unlicensed airwaves.

But Representative Greg Walden, an Oregon Republican, who is chairman of the panel, said the law that gave the F.C.C. the ability to conduct “incentive auctions” of newly available spectrum required “maximizing the proceeds from the auction.”

For the F.C.C. to obtain the highest price for the spectrum it sells, it should limit the size of guard bands, Mr. Walden said; he said the six-megahertz minimum size proposed by the F.C.C. was unnecessarily fat.

Up to $7 billion of auction proceeds is earmarked to help build a nationwide public safety communications network for first responders. The spectrum for the auctions is supposed to come from television broadcasters who voluntarily give it up or move their position on the airwaves in exchange for some of the auction proceeds.

“I support the use of unlicensed spectrum to foster innovation” for relief of congested broadband, Mr. Walden said. “What I cannot support,” he added, “is the unnecessary expansion of unlicensed spectrum in other bands needed for licensed services, especially at the expense of funding for public safety.”

The F.C.C.’s five commissioners, who all testified before the subcommittee on Wednesday, are split 3-2 along party lines over the issue of unlicensed spectrum.

Commissioner Robert M. McDowell, a Republican, said it would be premature for the commission to reserve newly available airwaves for unlicensed use.

Instead, the commission should set aside the “white spaces” between broadcast television channels for unlicensed use, he said. White spaces are similar, but smaller, guard bands in the part of the spectrum dedicated to broadcast television that are intended to minimize interference between stations.

“At this early stage in the incentive auction process,” Mr. McDowell said, “it is not apparent that we should stop the progress well under way in the TV white spaces arena to create a solution for a problem — an alleged shortage of unlicensed spectrum in lower spectrum bands — that may never exist.”

The F.C.C.’s plans for unlicensed spectrum received support from Democrats on the subcommittee, including Representative Henry A. Waxman of California. Mr. Waxman said the way unlicensed spectrum would be set aside and used were settled in negotiations on the Public Safety and Spectrum Act, which was enacted this year.

“I am troubled by attempts by some to relitigate issues that were resolved earlier this year, when the bill passed Congress with widespread support,” Mr. Waxman said.

Republicans on the subcommittee also sparred with Mr. Genachowski over whether the F.C.C. should limit the amount of spectrum any one company could own. That would limit the potential buyers of some spectrum to be auctioned. Supporters of restrictions say they are one of a few ways to give smaller cellphone companies the ability to build nationwide networks.

Separately, the F.C.C. said late Wednesday that it had agreed to allow Dish, the satellite television company, to use spectrum that it controled for mobile broadband; previously, the airwaves were to be used only for satellite transmissions. The change, which was expected, greatly expands the value of the spectrum and could allow Dish to enter a mobile broadband partnership with another wireless company.

Article source: http://www.nytimes.com/2012/12/13/business/republicans-tell-fcc-not-to-give-away-airwaves.html?partner=rss&emc=rss