Wednesday, September 26, 2018

Removing Regulatory Barriers

Today, the FCC ruled to reduce LFA time and money constraints that might slow the deployment of infrastructure needed for 5G.  Necessary or a federal overreach?  "Time" will tell!

https://docs.fcc.gov/public/attachments/DOC-354283A1.pdf

Monday, September 24, 2018

Hulu is in Play (Maybe)


Eleven years ago, Hulu was born.  A joint venture among three of the four broadcasters, each with a 30 percent share, and Time Warner.  The JV provided an opportunity among the partners to test the over-the-top (OTT) streaming market without the full commitment of doing it on their own.  While the JV lost money each year, nearly $1 billion in 2017, there were some positives, including:

1)      Learning a lot about the OTT market, including an understanding (with data to back it up) of consumer preferences on what/where/when they watch
2)      A loyal customer base of 20 million and growing who skew much younger than the average TV viewer.
3)      Another distribution platform to license content to (e.g. NBC’s Law and Order episodes)
4)      Investment in award-winning original content (e.g. Handmaid’s Tale)

But, in 2018, a lot has changed that challenges the sustainability of the Hulu business model.  They are:
1)      When Disney finalizes its acquisition of the Fox assets in 2019, it will control 60 percent of Hulu.  Will Disney need/want Hulu when it will have its own direct-to-consumer platforms to distribute and market its content? 
2)      Comcast is behind CBS, Disney, and AT&T/Time Warner in going direct-to-consumer.  But, as the soon-to-be largest international Pay-TV distributor, does it really need to be a minority partner in a streaming service that dwarfs its own reach and that of its largest competitor, Netflix?   

For Comcast, the value of getting Fox’s 39 percent interest in Sky is way greater than keeping its 30 percent interest in Hulu.  But, maybe it can use the Hulu business as a part of payment package to get the rest of Sky.  Will Disney take the bait?  They might, but I’m not sure it is worth it.

Sunday, September 23, 2018

Sky is the Limit


On Saturday, in a one-day, three-round blind auction managed by Britain’s Takeover Panel, Comcast outbid Fox for a controlling interest (61 percent) in Sky, a pay-TV operator with nearly 23 million subscribers spread across six European countries.  In the third and final round of the auction, Comcast bid $39 billion dollars, approximately $3.6 billion more than Fox, the owner of the remaining 39 percent of the shares outstanding.  In the race for global media dominance, the auction outcome is optimal for both parties—a win-win.  Here’s how!

While Bob Iger, CEO of Disney, referred to Sky as Fox’s “crown jewel” and may have considered 100 percent ownership of the pay TV company a good outcome, Disney is better off not owning it.  Disney is a content play that is expanding slowly into distribution using over-the-top technology.  It knows nothing about being a pay TV operator, let alone being one in Europe.  Meanwhile, Comcast’s higher-than-expected bid made the value of Fox’s minority stake in Sky (soon to be Disney’s) more valuable as an asset it retains or possibly sells to Comcast.

For Comcast, the additional 23 million subscribers from Sky double its customer base and expands its geographical footprint to outside of the U.S.  The massive scale increases its leverage in negotiations with suppliers (e.g. for content) and reduces its exposure to the rampant cord-cutting cable operators are experiencing at home.  While the European market may have unique challenges, Comcast knows the pay-TV/broadband business very well.

Wednesday, September 19, 2018

In a Matter of 10 Years


The year 2008 marked the first time that a basic cable program was nominated for an emmy in the best drama category.  (In fact, two cable programs were up for the award – Mad Men (AMC) and Damages (FX)).  Also, in 2008, the broadcast networks garnered 205 nominations between them and HBO, the premium cable channel, earned the most nominations at 85.  Notable in hindsight, streaming services, Netflix, Amazon Prime, and Hulu had no original content to be recognized.

Fast forward ten years to 2018 and Netflix, Amazon Prime, and Hulu earned 161 nominations, two more than the 4 broadcasters combined.  One basic cable channel, FX, had 50 nominations, but 18 of them were for The Assassination of Gianni Versace: American Crime Story produced by Ryan Murphy who is now with Netflix.

But, what really stood out to me (again) when I watched the award ceremony Monday night was how many shows I was unaware of like The Amazing Mrs. Maisel (Amazon), The Americans (FX), Westworld (HBO), and Killing Eve (BBC America).  And, these were the GOOD ones!  Not too long ago, I complained about the hundreds of channels in my cable bundle and the time it took for me to find a program worth watching.  Now, there are even more choices and the search for programs is even more complex and more frustrating than ever.  So, what can I do?  I guess I can check out (and possibly binge watch) the GOOD ones before HBO releases Season 8 of Game of Thrones next year.


2018
2013
2008
STREAMING SERVICE
Netflix
112
14
0
Amazon Prime
22
0
0
Hulu
27
0
0
      SUM
161
14
0
BROADCASTER
  ABC
31
45
76
  CBS
34
53
51
  FOX
16
19
28
  NBC
78
53
50
      SUM
159
170
205
PREMIUM CABLE
HBO
108
111
85
Showtime
21
31
21
      SUM
129
142
106
BASIC CABLE WITH 10 OR MORE NOMINATIONS
FX
50
26
11
Nat'l Geographic
17

VH1
12
CNN
10
AMC

26
20
TNT
10
Comedy Central

16

Lifetime

12
Bravo

11
History
10
Sundance

10

Sunday, September 16, 2018

Preempting the State: Is It Legal?


We will find out!  In California, Senate Bill 822 is awaiting Governor Brown’s signature for its net neutrality legislation to become law.  The law would prevent Internet Service Providers (ISPs) operating in the state from blocking, throttling, and prioritizing traffic over broadband networks.  States, particularly ones with Democratic Governors and/or Attorney Generals, are arguing, that when the FCC went to light-touch regulation of the Internet, changing the broadband classification from common carrier (Title II) to information service (Title I), the FCC gave up its preemptive authority to dictate what they can do.  (Note: Two years prior to the FCC rule change on net neutrality, the U.S. Court of Appeals stated that the FCC does not have the power to preempt state laws that restrict cities from building their own broadband networks.)

But, in this situation, the FCC believes that it can preempt state laws that conflict with its policy because broadband is an interstate service that does not recognize state lines.  Representing the industry, Jonathan Spalter, President and CEO of USTelecom, argues that “The internet must be governed by a single, uniform and consistent national policy framework, not state-by-state piecemeal approaches.”

Who is right?  Or, who will win?  I’m not sure, but the short-term costs of complying with and legally challenging states that have adopted net neutrality laws or executive orders will be very costly for the ISPs.  Of the 22 states with Democrats as Attorney Generals, 12 have Democrats as Governors.  Oregon and Washington were the first two states to pass laws.  As evident by California’s actions, they will not be the last. 

State
Governor
Attorney General
California
X
X
Colorado
X

Connecticut
X
X
Delaware
X
X
Hawaii
X
X
Illinois

X
Iowa

X
Kentucky

X
Louisiana
X

Maine

X
Maryland

X
Massachusetts

X
Minnesota
X
X
Mississippi

X
Montana
X

New Mexico

X
New Jersey
X
X
New York
X
X
North Carolina
X
X
Oregon
X
X
Pennsylvania
X
X
Rhode Island
X
X
Vermont

X
Virginia

X
Washington
X
X
West Virginia
X